An Inquiry into the Nature and Causes of the Wealth of NationsSmith, Adam
History
An Inquiry into the Nature and Causes of the Wealth of Nations
Smith, Adam
Economics
The highest ordinary rate of profit may be such as, in the price of the
greater part of commodities, eats up the whole of what should go to the
rent of the land, and leaves only what is sufficient to pay the labour of
preparing and bringing them to market, according to the lowest rate at
which labour can anywhere be paid, the bare subsistence of the labourer.
The workman must always have been fed in some way or other while he was
about the work, but the landlord may not always have been paid. The
profits of the trade which the servants of the East India Company carry on
in Bengal may not, perhaps, be very far from this rate.
The proportion which the usual market rate of interest ought to bear to
the ordinary rate of clear profit, necessarily varies as profit rises or
falls. Double interest is in Great Britain reckoned what the merchants
call a good, moderate, reasonable profit; terms which, I apprehend, mean
no more than a common and usual profit. In a country where the ordinary
rate of clear profit is eight or ten per cent. it may be reasonable that
one half of it should go to interest, wherever business is carried on with
borrowed money. The stock is at the risk of the borrower, who, as it were,
insures it to the lender; and four or five per cent. may, in the greater
part of trades, be both a sufficient profit upon the risk of this
insurance, and a sufficient recompence for the trouble of employing the
stock. But the proportion between interest and clear profit might not be
the same in countries where the ordinary rate of profit was either a good
deal lower, or a good deal higher. If it were a good deal lower, one half
of it, perhaps, could not be afforded for interest; and more might be
afforded if it were a good deal higher.
In countries which are fast advancing to riches, the low rate of profit
may, in the price of many commodities, compensate the high wages of
labour, and enable those countries to sell as cheap as their less thriving
neighbours, among whom the wages of labour may be lower.
Public-domain text, read in full here on John Shaqi.
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