In a country which had acquired its full complement of riches, where in every particular branch of business there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money.All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks.It would be necessary that almost every man should be a man of business, or engage in some sort of trade.The province of Holland seems to be approaching near to this state.It is there unfashionable not to be a man of business.Necessity makes it usual for almost every man to be so, and custom everywhere regulates fashion.As it is ridiculous not to dress, so is it, in some measure, not to be employed, like other people.As a man of a civil profession seems awkward in a camp or a garrison, and is even in some danger of being despised there, so does an idle man among men of business.
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 recompense 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.
In reality high profits tend much more to raise the price of work than high wages.If in the linen manufacture, for example, the wages of the different working people, the flax-dressers, the spinners, the weavers, etc., should, all of them, be advanced twopence a day; it would be necessary to heighten the price of a piece of linen only by a number of twopences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been so employed.That part of the price of the commodity which resolved itself into wages would, through all the different stages of the manufacture, rise only in arithmetical proportion to this rise of wages.But if the profits of all the different employers of those working people should be raised five per cent, that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit.The employer of the flaxdressers would in selling his flax require an additional five per cent upon the whole value of the materials and wages which he advanced to his workmen.The employer of the spinners would require an additional five per cent both upon the advanced price of the flax and upon the wages of the spinners.And the employer of the weavers would require a like five per cent both upon the advanced price of the linen yarn and upon the wages of the weavers.In raising the price of commodities the rise of wages operates in the same manner as simple interest does in the accumulation of debt.The rise of profit operates like compound interest.Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad.They say nothing concerning the bad effects of high profits.They are silent with regard to the pernicious effects of their own gains.
They complain only of those of other people.
CHAPTER X
