Chapter 10 Run

The increase or decrease of capital profits, like the increase or decrease of labor wages, also depends on the increase or decrease of social wealth.But the impact of wealth status on the two is quite different. The increase of capital, which raises wages, tends to lower profits.In the same trade, where the capital is invested by many wealthy merchants, their mutual competition will naturally tend to reduce the profit of that trade; and if the capitals of all trades in the same society are all increased alike, the same competition must be produced on all trades. same result. It has already been said that it is not easy to fix even the average wages of labor at a given place and at a given time.Moreover, what can be determined is only the most ordinary wages.But of the profits of stock we are seldom certain of even the most common profits.Profit is so variable that it is not always possible for a man in a particular trade to be able to tell what his average annual profit is.His profits are affected not only by changes in the prices of the commodities in which he deals, but also by the luck of his competitors and customers, and by the many accidents which may be encountered by his commodities in transport by land or sea, or even in warehouses. Impact.The rate of profit therefore varies not only from year to year, but from day to day, and even from hour to hour.It must be more difficult to ascertain the average profits of various trades in a large country; and it must be quite impossible to ascertain past or present profits with any degree of exactness.

It is impossible, however, for us to ascertain with some degree of exactness the average profit of stock, past or present, but we may get a rough idea of ​​it from the interest of money.It may be put forward as a principle that more is generally paid for the use of money where more is gained from its use; less is usually paid for its use where it is less earned from its use.We are thus convinced that the general profits of a stock in a country must vary with the general rate of interest in its market.As the rate of interest falls, profits must fall; as the rate of interest rises, profits must rise.The changes in interest, therefore, give us some idea of ​​the changes in profits.

In the thirty-seventh year of Henry VIII, he declared by decree that all interest shall not exceed 10%.It can be seen that the previous interest rate was sometimes above 10%.Later, Edward VI, who was passionate about religion, was influenced by religion and forbade all interest.But this prohibition, like others of the same nature, is said to have produced no effect, and the evil of usury, instead of diminishing, had increased.The decree of Henry VIII, therefore, came into force again by virtue of the eighth clause of the statute of Queen Elizabeth's thirteenth year.Thereafter, ten per cent was often the legal rate of interest, and it was not until the twenty-first year of James I that it was limited to eight per cent.Shortly after the Restoration the rate of interest was reduced to six per cent.In the twelfth year of Queen Anne, it was further reduced to five percent.All these provisions of the law appear to be most appropriate.They were made after, not ahead of, changes in the market rate of interest, that is, the rate at which people of good credit usually borrow.The five per cent. rate of interest, since Queen Anne's time, seems to have been more than the market rate, not less.Before the late war, the government used to borrow at three per cent; and in the capital of the kingdom, and in many other places, people of good credit at three and a half, four, four and a half per cent. Equal interest rate loans.

The wealth and revenues of our country since Henry VIII have been continually increasing, and in the process of progress the rate seems to have been increasing rather than decreasing.Not only is it progressing day by day, but it is progressing faster and faster.During this period the wages of labor have continually increased, while the profits of stock in the greater part of manufactures and commerce have been diminished. To carry on a trade in a metropolis, often requires a greater capital than in a country.The large size of the capital employed in every trade, and the large number of wealthy competitors, are the causes of the generally lower rate of profit in towns than in country stock.However, labor wages in urban areas are generally higher than those in rural areas.In prosperous towns, those who possess a great deal of productive capital, cannot often employ as many laborers as they require, so they compete with one another, and thus raise the wages of labour, and lower the profits of stock.In remote places, where there is not sufficient capital to employ all the laborers, the common people compete with one another for employment, so that the wages of labor fall, and the profits of stock rise.

Though the statutory rate of interest in Scotland is the same as in England, the market rate of interest is higher.A person of good credit in that place cannot usually borrow at less than five per cent.Even the private banks of Edinburgh pay four per cent interest on all or part of promissory notes at any time.Private banks in London do not pay interest on deposited funds.Almost all trades are carried on in Scotland with less capital than in England.The common rate of profit, therefore, is somewhat higher in Scotland than in England.The wages of labour, it has been said, are lower in Scotland than in England.Moreover, Scotland was not only much poorer than England, it was advancing much more slowly, though it was clearly advancing.

The French statutory rate of interest, during this century, has not always been governed by the market rate of interest.In 1720, the statutory rate of interest fell from one-twentieth to one-fiftieth, that is, from five per cent to two per cent.In 1724, one-thirtieth was mentioned, which meant 3.3 percent.In 1725, one twentieth was mentioned again, that is, five per cent.In 1766, under Lafferty's administration, it was reduced to one twenty-fifth, or four percent.Later, Father Trey came to power and returned to the original 5%.The purpose of this forcible restraint of the statutory rate of interest is generally supposed to be a preparation for the reduction of that of the public debt; and this purpose has sometimes been sufficed.Right now, France may not be as rich as England.The statutory interest rate in France is generally lower than that in England, while the market interest rate is generally higher than in England.This is because France, like other countries, has very safe and easy ways of getting around the law.According to the English merchants who traded in France and England, the commercial profits of France are higher than those of England;Salaries are lower in France than in England.If you go from Scotland to England, the difference in the dress and countenance of the common people you see in the two places will fully express the difference in the social conditions of the two places.However, if you come back to England from France, the contrast is even more stark.France is undoubtedly richer than Scotland, but it does not seem to be advancing as rapidly as Scotland.There is a general, or even widespread, view of Scotland that it is regressing; this opinion, even of France, is unfounded; would have that opinion about it.

On the other hand, Holland is richer than England in proportion to its size and population.The Dutch government borrows at two per cent, and the people of good credit at three per cent.The wages of labor are said to be higher in Holland than in England.It is also well known that the Dutch make less profit from their business than any other country in Europe.Some say that business in Holland is now in decline.In some branches of commerce this may be true.But the above-mentioned symptoms seem to indicate that there is no general decline in the country's commerce.When profits dwindle, merchants often complain that commerce is declining; but dwindling profits are the natural consequence of prosperity, or of investing more capital than before.In the recent Anglo-French war, the Dutch took the opportunity to obtain all the French transportation business, and until now, some of them are in the hands of the Dutch.The national debt of Britain and France has become a large property of the Dutch.It is said that, in England alone, there are about forty million pounds (but I think this is an exaggeration).In addition, the Dutch loaned huge sums of money to foreign private individuals at higher interest rates than their own.These facts, no doubt, indicate an excess of their capital, or that their capital has increased to such an extent that it cannot be invested with any appreciable profit in the proper production of the country, but they do not indicate a decline in commerce.The private capital acquired by carrying on a particular trade, though it has increased to such an extent that it cannot be invested in it, still continues to increase; and this may be the case with the capitals of great nations.

In our North American and West Indies colonies, the wages of labour, the interest on money, and the profits of stock are all higher than in England.The legal and market rates of interest in the colonies range from 6% to 8%.The concomitant existence, however, of high wages of labor and high profits of stock, is peculiar to the peculiar conditions of the new colonies, and is rarely seen elsewhere.In a new colony the ratio of capital to territory, and population to capital, must for a certain period be lower than in most countries.They own more land than their capital can cultivate, and they invest it only in the most fertile and best situated, that is, along the sea-coasts and along the navigable rivers.Moreover, such land is often purchased at a price below the value of its natural produce.The capital invested in the purchase and improvement of such lands necessarily yields such great profits, that it enables them to pay very high interest.The rapid accumulation of capital, which is invested in this advantageous employment, soon increases the number of workmen who can be employed by the plantation owners to such an extent that the new colonies cannot supply them.Thus they were able to find in the new colonies an extremely well-paid laborer's wages.But as the colony extended, the profits of capital gradually diminished.The most fertile and best-placed land being fully occupied, the less profitable the cultivation of the worse soil and better-placed land, the capital employed in it yields but a lower interest.During the present century the statutory and market rates of interest have thus been greatly reduced in most of our colonies.As wealth, improved employment, and population increased, interest fell.The wages of labor do not fall with the profits of capital.The demand for labor increases with the increase of capital, whatever may be the profit of stock.Notwithstanding the decrease in profits, capital not only continued to increase, but increased more rapidly than before.In this respect, industrious nations are as much as industrious individuals.Large capitals generally increase more rapidly, though their profits are low, than small capitals with high profits.As the saying goes, money begets money.Having achieved a little, worry about not being able to achieve more.The most difficult thing is this little acquisition.I have already partly explained the relation between the increase of capital and the increase of business, that is, the increase of capital and the increase of the demand for useful labour, and I shall explain it in detail later when I treat the accumulation of capital.

The acquisition of new territories, or the opening of new trades, even in countries where wealth is rapidly increasing, augments the profits of stock, and thus the interest of money.As the capital of the country is insufficient to meet all the business which this new acquisition or development will bring to every individual, it is invested only in those trades which will afford the greatest profit.Some of the capital previously invested in other industries must be withdrawn and transferred to new, more profitable ones.In those old trades, therefore, there was less competition, and the market was less supplied with all kinds of goods.With fewer goods, prices must rise more or less, which affords greater profits to the dealers, who can borrow money at a higher rate of interest than before.Shortly after the end of the recent war, individuals of good credit, and even some of the largest London firms, generally borrowed money at five per cent.Before the war they usually paid no more than 4 per cent or 4.5 per cent.This is sufficiently explained by the fact that our occupation of North America and the West Indies has increased our territory and commerce, without it being necessary to suppose that our resources have diminished.Such an increase in the business to be carried on by the old capital must necessarily reduce the stock of capital in many trades, and consequently, in these trades, as the competition has been lessened, the profits must increase.The great expense of the late wars, I believe, have not diminished the means of Britain, for reasons which I shall hereafter show.

But the diminishment of the stock of society, that is, the funds with which industry is maintained, lowers the wages of labour, and consequently increases the profits of stock and the interest of money.With the lower wages of labour, the owners of the capital which is left in the society, can afford to supply the market for their goods at less cost than before; goods.They spend less and earn more, and their profits increase in two ways, so they can pay high interest.The fact that great property was so quickly and easily acquired in Bengal and the other British colonies of the East Indies is evidence of the very low wages of labor and the very high profits of stock in these poor places.The interest rate on its currency is correspondingly very high.Bangladeshi farmers often borrow funds at 40, 50 or 60 percent interest, with the next harvest as collateral.The profit which can afford such high interest must necessarily usurp almost all the rent of the landlord, and such high interest must also usurp the greater part of the profit.Before the fall of the Roman Republic, the interest seemed to have been equally high everywhere under the tyranny of the satraps.From the Tablets of Cicero we know that the virtuous Brutus also borrowed money on the island of Cyprus at forty-eight percent interest.

When a nation has acquired wealth to the extent that its soil, climate, and position with respect to other nations permit, so that no further progress is possible, but no regression has been made, its Labor wages and capital profits may be very low.When the population of a country has been multiplied to such an extent that its territory can sustain it, or its capital can employ it, the competition in employment must, in this state, be so severe that the wages of labor will be so low as to maintain the existing labour. the number of victims, and since the population is already very dense, it is impossible to increase it.When the capital of a country is saturated in proportion to the capital required of the various trades which must be carried on in the country, the various trades will employ as much capital as the nature and extent of the trades permit.Thus the competition of the localities cannot be greater, and the common profits too small. However, perhaps no country has ever reached this level of wealth.China seems to have been long at rest, and its wealth may have long ago been fully as far as the legal system of that country would have allowed, but if it were otherwise regulated, the soil, climate, and position of the country would probably have been greater than the above-mentioned limits. The limits are much greater.A nation which ignores or despises foreign commerce, and admits only one or two ports to foreign ships, cannot conduct as many transactions as it could under a different system of laws.Moreover, in countries where the rich or the great capitalists enjoy a great degree of security, while the poor or small capitalists not only have no security, but are at any moment liable to be robbed by inferior magistrates under the pretext of enforcing the laws, the various trades carried on in the country cannot Invest as much capital as the nature and extent of the various trades will accommodate.In every trade, the oppression of the poor necessarily institutionalizes the monopoly of the rich.If the rich monopolize the industry, they can make huge profits.The ordinary rate of interest in China, therefore, is said to be twelve per cent, and the ordinary profits of stock must be sufficient to bear this high interest. The defects of the laws of a country sometimes cause the rate of interest to be raised far beyond what its state of wealth or poverty requires.Its laws, if they do not compel men to perform their contracts, place all borrowers in a position not far removed from that of the bankrupt or of bad credit in a country where the rule of law is established.The uncertainty of the lender's recovery makes him demand as much interest as a bankrupt usually charges when he borrows money.Among the uncivilized peoples who invaded the western parts of the Roman Empire, for a long time, the performance of the contract depended only on the faith of the parties involved, and the tribunal of their dynasty rarely intervened in this matter.I am afraid that this was partly responsible for the high rate of interest at that time. Nor would it have any effect if the statute forbade interest altogether.Many are obliged to borrow funds; and the lender requires a considerable reward not only for the employment of the funds, but also for avoiding the difficulties and dangers of the law.Montesquieu says that the rate of interest is high in all countries not entirely because they are poor, but partly because the law prohibits interest, and partly because the loan is difficult to recover. The lowest ordinary rate of profit must have a surplus more than adequate to compensate for the accidental losses to which an investment is liable.Only this surplus is pure profit or net profit.What is commonly called gross profit includes, besides this surplus, what is reserved to compensate for accidental losses.The interest that the borrower can pay is only proportional to the net profit. Lending funds, even if you are very cautious, may suffer accidental losses.The lowest ordinary rate of interest, therefore, as well as the lowest ordinary rate of profit, must have a surplus, besides compensating the accidental losses to which lending and borrowing are liable.If there is no such remnant, then the motives for not lending funds can only be charity or friendship. In countries where wealth has been extreme, and capital employed in every kind of trade has been maximized, the ordinary rate of net profit is low, and the ordinary market rate of interest which this profit can afford is also low; No one, except the rich, can live on the interest of money.Both the small and middle property owners are obliged to supervise the employment of their own capital.Almost everyone has to be an industrialist, has the necessity of being in some kind of industry.The situation in the Netherlands seems to be similar to this.There, if you are not a businessman, you are not a fashionable person.Necessity makes it habitual for almost everyone to be in a certain trade.Custom again governs fashion everywhere.If you don't wear the same clothes as others, you will be a laughing stock; if you don't do the same business as others, you will also be a laughing stock.An idle idler is as embarrassed, even despised, among industrialists as among civil servants and armies. The highest ordinary rate of profit is, perhaps, that rate of profit which, taking up the whole of that part of the prices of most commodities which is due to rent, leaves only enough to pay the minimum wages of the labor necessary to produce them and bring them to market, that is, just enough A living wage.While laborers were at work, something had to be done to feed them, but the landlord didn't necessarily have to pay everything.The profits of the East India Company clerks in their trade in Bengal are not, I am afraid, not very far from this highest rate. The general rate of profit must always vary with the rise and fall of profits.English merchants regard a profit equal to twice the interest as a moderate and reasonable profit.I think this so-called moderate and reasonable profit is nothing more than ordinary profit.In a country where the common rate of net profit is eight or ten per cent, it may be reasonable, perhaps, for those who borrow funds to carry on their business, to receive as interest one-half of the profits they make.The capital is at the risk of the borrower, who, as it were, insures the lender; and in most trades four or five per cent are either a sufficient compensation for the risk of such insurance, or a measure of laborious employment of the sum. Adequate return on capital.In countries, however, where the ordinary rate of profit is much lower, or much higher, such a proportion of interest to net profit as has been aforesaid is impossible.At a much lower rate of profit, it may not be possible to pay half as interest; at a much higher rate of profit, more than half may be given as interest. Countries rapidly increasing in wealth can compensate high wages of labour, in the price of many commodities, by low profits, so that their commodities can be sold as cheaply as those of their less prosperous neighbors, who have lower wages of labour. Priced to sell. In fact, high profits have a much greater tendency to raise the prices of produce than high wages.If, for instance, the wages of the various labourers, the carders, spinners, weavers, etc., of the linen-manufacturer, were increased by twopence a day, the price of a piece of linen would have to be raised only by an amount equal to the cost of producing it. The number of workmen employed, multiplied by the number of working days it took them to produce the bolt of linen, multiplied by twopence.The part of the price of commodities which is attributable to wages increases in arithmetical progression during all stages of manufacture.But if the profits of all the employers who employed these laborers were raised by five per cent, the part of the price of commodities which goes to profit would increase exponentially in all stages of manufacture.That is to say, the employer of the hemp comber, when he sells the hemp, requires the full value of the material and wages of the workers advanced by him, plus five per cent.Likewise, the employer of the spinner requires the full value of the advances of the flax and the spinner's wages, plus five per cent.By extension, the employers of the weavers likewise demand an additional five per cent.Increases in wages, therefore, do to raise the prices of commodities, as simple interest does to the accumulation of debts.The effect of increasing profits is like compound interest.The merchants and manufacturers of our country complain a great deal about the evil effect of high wages on raising prices, thereby reducing the market at home and abroad; but they say nothing about the evil effect of high profits.They are silent about the evil results of their own gain.They yell only at the consequences of the benefit of others.Chapter X On Wages and