The Wealth of Nations

Contents

1. Introduction and Plan of the Work 7 min 7

   Smith defines a nation’s wealth as the annual produce of its labour, measured against the number who consume it. That supply depends on two things: the skill with which labour is applied, and the proportion of people in useful work. He sets out the plan of the five books: the productive powers of labour and the distribution of its produce; capital and its accumulation; the different progress of town and country in Europe; the mercantile and agricultural systems of political economy; and the revenue, expenses and debts of the sovereign.

2. I.1 Of the Division of Labour 22 min 9

   The division of labour is the main source of rising productivity. In the famous pin factory, ten workers dividing about eighteen operations make some 48,000 pins a day, where each alone could make perhaps twenty. Smith gives three reasons: greater dexterity, time saved in moving between tasks, and the invention of machines by specialised workers, makers and philosophers. Agriculture admits less division than manufacture. In a well-governed society the multiplied product spreads plenty to all ranks, as the many trades behind a labourer’s woollen coat show.

3. I.2 Of the Principle Which Gives Occasion to the Division of Labour 10 min 6

   The division of labour was never planned. It grows from a human propensity to truck, barter and exchange, which no other animal shows. Because people need the cooperation of multitudes, they appeal to one another’s self-interest: we expect our dinner not from the benevolence of the butcher, the brewer or the baker but from their regard to their own interest. Exchange lets individuals specialise, and the differences of talent between a philosopher and a street porter are more the effect of the division of labour than its cause.

4. I.3 That the Division of Labour Is Limited by the Extent of the Market 12 min 3

   Since exchange gives rise to the division of labour, the extent of the market limits it. A porter or a nailer can live only in a large town; in the Scottish Highlands every family must do its own work. Water carriage opens far wider markets than land carriage, so industry first develops on sea coasts and navigable rivers, as in the Mediterranean, Egypt, Bengal and eastern China. Inland Africa and Tartary, without such waterways, remained undeveloped.

5. I.4 Of the Origin and Use of Money 17 min 7

   Once labour is divided, everyone lives by exchanging, and barter’s inconveniences lead people to keep some commodity that others will accept. Cattle, salt, shells and nails have served, but metals prevail because they are durable and divisible. Stamped coins spare the trouble of weighing and assaying, but princes have repeatedly debased them, defrauding creditors. Smith then distinguishes value in use from value in exchange, with the paradox of water and diamonds, and announces the next three chapters on the measure, components and natural level of price.

6. I.5 Of the Real and Nominal Price of Commodities, or of Their Price in Labour, and Their Price in Money 45 min 9

   Labour is the real measure of exchangeable value: a thing is worth the labour it saves its owner or lets him command, and labour was the first price paid for all things. Because labour is hard to compare, values are usually reckoned in money, but gold and silver vary in value, as the American mines showed. Corn is a steadier measure over centuries, money from year to year. The rest of the chapter treats the English coinage, the gold and silver ratio, mint prices and seignorage.

7. I.6 Of the Component Part of the Price of Commodities 19 min 11

   In the rude state before capital and landed property, goods exchange by the labour needed to obtain them: if a beaver takes twice the labour of a deer, it is worth two deer. Once stock is accumulated, part of what labour adds goes to profit, which Smith distinguishes from wages of management; once land is private, landlords take rent. Every price, and the whole annual produce, resolves into wages, profit and rent, the three original sources of all revenue, though they are often confused when one person receives more than one.

8. I.7 Of the Natural and Market Price of Commodities 23 min 5

   Every place has ordinary or natural rates of wages, profit and rent. A commodity selling at a price that pays them all is sold at its natural price; its actual market price depends on the supply brought to market relative to effectual demand. Competition makes market prices gravitate toward the natural price, though secrets in trade, rare natural conditions, monopolies and corporation laws can hold them above it for long periods. The price of monopoly is the highest that can be got, the natural price the lowest for any length of time.

9. I.8 Of the Wages of Labour 1 h 1 min 14

   Wages are set by a contract between masters and workers whose interests conflict, and masters usually win, since they are fewer, can combine freely and can hold out longer. Wages cannot fall below what lets a worker raise a family, and they rise where national wealth is growing, as in North America, are low where it is stationary, as in China, and collapse where it declines, as in Bengal. British wages were above subsistence. The liberal reward of labour is both the effect of growing wealth and a spur to population and industry.

10. I.9 Of the Profits of Stock 28 min 8

    Profits rise and fall with the state of society, but unlike wages they fall as capital grows, because competition among capitals lowers them. Since profit is hard to measure, Smith uses interest rates, tracing their fall in England since Henry VIII and comparing Scotland, France, Holland, the colonies, Bengal and China. Net profit must exceed the risk of loss, and interest is commonly about half of it. High profits raise prices more than high wages, compounding through each stage, though merchants complain only of wages.

11. I.10 Of Wages and Profit in the Different Employments of Labour and Stock 53 min 13

    Smith argues that, under perfect liberty, the whole advantages of different employments tend to equality, even though money wages and profits differ widely. Five circumstances account for the differences in wages: the agreeableness of the work, the cost of learning it, the constancy of employment, the trust placed in the worker, and the probability of success. Only agreeableness and risk affect profits. His examples include colliers, lawyers, actors, soldiers and lotteries. Much apparent profit, as with apothecaries and grocers, is really wages. Equality also requires employments that are long established, in their ordinary state, and the main occupation of those who follow them.

12. I.10 Part II. Inequalities Occasioned by the Policy of Europe 1 h 5 min 17

    The second part turns to the 'policy of Europe', which creates larger inequalities than nature. Corporations and the Statute of Apprenticeship restrict competition, raise prices and give the town an advantage over the country. In this context Smith makes his remark that 'people of the same trade seldom meet together' without conspiring against the public. Bursaries and church charities overcrowd the learned professions and depress the pay of curates and men of letters. The apprenticeship laws and, above all, the English settlement laws obstruct the movement of labour. He ends by noting that wage regulation by Parliament always favours the masters.

13. I.11 Of the Rent of Land 47 min 15

    Smith defines rent as the price paid for the use of land, the most the tenant can afford, and therefore 'naturally a monopoly price'. Unlike wages and profit, rent is the effect, not the cause, of high or low prices. Land producing human food always affords some rent, and the rent varies with fertility and situation. Smith traces how cattle, grass, gardens, vineyards, sugar and tobacco land come to be regulated by the rent of corn land, except where special soils or monopolies keep supply short. He closes by speculating that rice or potatoes, as a staple food, would support more people and higher rents.

14. I.11 Part II. Of the Produce of Land, Which Sometimes Does, and Sometimes Does Not, Afford Rent 36 min 8

    Produce other than food, such as materials for clothing and lodging, minerals, metals and precious stones, sometimes affords rent and sometimes does not. Its value comes from the surplus food that improved agriculture makes available to buy it. Coal mines pay rent according to their fertility and situation. The price of metals, which have a world market, is regulated by the most fertile mine. Rent forms a small part of the price of tin, silver and gold. Smith ascribes the demand for precious metals to utility, beauty and scarcity. He contrasts mines, whose rent depends on their relative fertility, with land, whose rent depends on its absolute fertility.

15. I.11 Part III. Of the Variations in the Proportion Between the Respective Values of That Sort of Produce Which Always Affords Rent, and of That Which Sometimes Does, and Sometimes Does Not, Afford Rent 5 min 2

    This short opening to Part III notes that, as improvement advances, produce that only sometimes affords rent should grow dearer relative to food. Silver is the important exception, because it sells in a world market: its value depends on world supply and demand, not on the progress of one country. Smith sets out three cases, with silver's value rising, falling or holding steady against corn. He claims that all three occurred in turn over the previous four centuries, which leads into the long digression on silver.

16. I.11 Digression Concerning the Variations in the Value of Silver During the Course of the Four Last Centuries 3 h 0 min 34

    Smith’s long digression traces the value of silver, measured in corn, over four centuries. From 1350 to about 1570 silver grew dearer; from 1570 to about 1640 the mines of America, above all Potosí, cut its value to a third or a quarter; since then it has held steady or risen slightly. Corn is his yardstick because it most nearly represents equal quantities of labour. Along the way he rejects the notion that wealth makes silver cheap, traces American silver to India and China, and argues that cattle, poultry and other produce grow really dearer as cultivation advances. Spain, Portugal and Poland show that silver is not wealth.

17. I.11 Effects of the Progress of Improvement upon the Real Price of Manufactures 22 min 12

    Improvement lowers the real price of manufactures, through better machinery, skill and division of labour, as Smith shows from watches, hardware and cloth since the fifteenth century. The chapter then concludes: every improvement raises the real rent of land. Rent, wages and profit are the revenues of the three great orders of society. Landlords’ and labourers’ interests rise and fall with society’s, though neither order understands its interest well. Merchants and master manufacturers understand theirs too well: they gain by narrowing competition, and their proposals deserve the most suspicious attention.

18. I.11 Prices of Wheat 1 min

    Smith’s appendix of wheat prices: Fleetwood’s collection from 1202 to 1601, in twelve-year averages, and the Eton College accounts of Windsor market from 1595 to 1764, the evidence behind the digression on silver.

19. II Introduction 5 min 3

    Book II turns from the division of labour to stock. In a rude state each person meets his own wants, and no stock is needed. Once labour is divided, a weaver must be maintained and supplied with materials until his cloth is sold, so stock must be accumulated beforehand, and the division of labour can advance only as stock grows. The employer of stock also organises work and buys machines. Smith outlines the five chapters to come: the divisions of stock, money, capital lent at interest, and the employments of capital.

20. II.1 Of the Division of Stock 21 min 6

    Smith divides a person’s stock into the part kept for consumption and the capital that yields a revenue. Capital is circulating when it earns profit by changing hands, as with a merchant’s goods, and fixed when it earns by staying with its owner, as with machines, buildings, land improvements and acquired skills. The stock of society divides the same way: a consumption fund, fixed capital, and circulating capital of money, provisions, materials and finished goods. Fixed capital depends on circulating capital, and both exist to supply consumption. Where property is insecure, people bury their stock instead of employing it.

21. II.2 Of Money, Considered as a Particular Branch of the General Stock of the Society, or of the Expense of Maintaining the National Capital 2 h 3 min 28

    Smith separates a nation's gross revenue (its whole annual product) from its neat revenue (what remains after maintaining fixed capital and money). Money, "the great wheel of circulation", is a costly instrument that forms no part of revenue. Paper money is a cheaper wheel: replacing gold with bank notes frees capital to employ industry. Drawing on Scotland's banks, he explains cash accounts, the limit on paper issue, the real-bills rule, and the ruinous practice of drawing and redrawing. He recounts the collapse of an unnamed bank (the Ayr Bank, 1772), John Law's schemes, and the history of the Bank of England, and proposes a £5 minimum note.

22. II.3 Of the Accumulation of Capital, or of Productive and Unproductive Labour 52 min 16

    Smith distinguishes productive labour, which adds value to materials and is fixed in a saleable commodity, from unproductive labour such as that of menial servants, and also of the sovereign, the army, churchmen and players. The proportion between capital and revenue governs that between industry and idleness. Capitals grow by parsimony and shrink by prodigality and misconduct. What is saved is consumed by productive workers. Private frugality, driven by the desire of bettering our condition, has outweighed the extravagance of governments, the greatest spendthrifts. Spending on durable goods favours accumulation more than lavish hospitality does.

23. II.4 Of Stock Lent at Interest 22 min 7

    Stock lent at interest is mostly used as capital, not for consumption. Since lenders really assign a share of the annual produce, money is only the "deed of assignment", and the same coins can serve for many loans. Interest falls as capital accumulates and competition lowers profits, not because silver has become plentiful, as Locke, Law and Montesquieu supposed. Prohibiting interest worsens usury. Smith defends a legal maximum slightly above the lowest market rate, to keep capital away from prodigals and projectors, and notes that land prices move inversely with interest.

24. II.5 Of the Different Employments of Capitals 42 min 12

    Capital is employed in agriculture, manufactures, wholesale trade or retail trade. All four are productive, but equal capitals set different amounts of domestic labour in motion. Agriculture ranks first, because nature labours alongside man, then manufactures, then trade. Within wholesale trade, the home trade supports more domestic industry than the foreign trade of consumption, and that more than the carrying trade, which is the symptom of great wealth, not its cause. Smith defends shopkeepers, advises the American colonies to stay agricultural, and observes that private profit, not social benefit, decides how capital is employed.

25. III.1 Of the Natural Progress of Opulence 13 min 5

    Book III opens with the commerce between town and country, which Smith calls mutually beneficial: the town lives on the country’s surplus and gives it manufactures and a market in return. He sets out a “natural” order of investment, first agriculture, then manufactures, then foreign trade, grounded in the security and pleasures of owning land, and illustrated by North America, where artisans become planters. In modern Europe, he concludes, feudal institutions turned this order into an “unnatural and retrograde” one.

26. III.2 Of the Discouragement of Agriculture in the Ancient State of Europe, After the Fall of the Roman Empire 31 min 9

    After Rome fell, the barbarian chiefs engrossed the land, and primogeniture and entail kept the great estates whole. These laws made sense when land meant power, but Smith calls them absurd once the law protects every owner. Great proprietors rarely improve their land, and serfs, who can own nothing, never do. Smith follows the slow succession of slaves, métayers and farmers with leases, praising English security of tenure. Arbitrary services, purveyance, the taille and restraints on the corn trade added to the discouragement of agriculture.

27. III.3 Of the Rise and Progress of Cities and Towns, After the Fall of the Roman Empire 28 min 13

    The early medieval townsmen were poor and almost servile, but they won freedom sooner than the country people. Kings let them farm their own dues and then granted the farm in perpetuity, with magistrates, walls and militias, because burghers and crown shared an enemy in the barons. In Italy and Switzerland towns became republics; elsewhere they won representation in the estates. Secure property drew stock into the towns. Commerce, helped by the crusades, introduced manufactures for distant sale, either imitated by merchants or grown from rural industry.

28. III.4 How the Commerce of Towns Contributed to the Improvement of the Country 34 min 9

    Towns improved the country by providing a market, by merchants buying and improving land, and above all by introducing order and liberty. Where there was nothing to buy, a great lord could spend his surplus only on retainers and dependent tenants, which made him a petty sovereign. Once luxuries were available he spent it on himself, dismissed his followers and gave long leases, and so traded his power for “a pair of diamond buckles”. This revolution was unintended by everyone. Smith concludes that such commerce-led growth is slow and precarious compared with agriculture.

29. IV Introduction 1 min 2

    A two-paragraph introduction to Book IV. Smith defines political economy as a branch of the statesman’s science with two aims: to enable the people to provide themselves with a plentiful revenue, and to provide the state with a revenue for public services. He announces that he will examine the two systems that have claimed to enrich the people, the system of commerce (the mercantile system) and the system of agriculture (the Physiocrats), beginning with the first.

30. IV.1 Of the Principle of the Commercial or Mercantile System 1 h 0 min 8

    Smith examines the popular notion that wealth consists in money. Merchants persuaded governments to drop bans on exporting bullion and to watch the balance of trade instead, citing Mun, but this was equally fruitless: gold and silver, like wine or pots and pans, will always come where there is demand and the means to pay. Wars are paid for with commodities, not treasure. America and the Cape route enriched Europe by widening markets. He ends by listing the six instruments of the mercantile system examined in the following chapters.

31. IV.2 Of Restraints upon Importation from Foreign Countries of Such Goods as Can Be Produced at Home 53 min 12

    Restraints on imports give domestic producers a monopoly of the home market but cannot increase total industry, which is limited by capital. Each investor, preferring domestic industry and the most valuable produce, is “led by an invisible hand” to serve the public. Smith allows two exceptions: industries needed for defence, which justify the Navigation Act, and taxes matching domestic excises. He doubts retaliation except as a bargaining tool, urges a gradual return to free trade, and doubts it will ever be fully restored against the manufacturers’ interests.

32. IV.3 Of the Extraordinary Restraints upon the Importation of Goods of Almost All Kinds, from Those Countries with Which the Balance Is Supposed to Be Disadvantageous 17 min 7

    Smith turns to the second mercantile expedient: special restraints on imports from countries, above all France, with which the balance of trade is thought unfavourable. He lists the punitive duties on French goods and argues, even on mercantile premises, that cheaper French goods would lower Britain's total import bill, that re-exports could bring back more bullion than they cost, and that no reliable measure of a bilateral balance exists. Neither the custom-house books nor the course of exchange will do, because worn coin, mint charges and bank money distort the computed exchange.

33. IV.3 Digression Concerning Banks of Deposit, Particularly Concerning That of Amsterdam 26 min 9

    A digression on the Bank of Amsterdam, founded in 1609 to give merchants a money of certain value amid clipped and foreign coin. Smith explains bank money, a credit in the bank's books that was required for large bills of exchange, and why it bore an agio of about 5 per cent over current coin. He describes the system of bullion deposits and six-month receipts, the bank's 4–5 per cent band, its revenues, the guess of 33 million guilders of treasure, and the burgomasters' oaths that it lent nothing out.

34. IV.3 Part II. Of the Unreasonableness of Those Extraordinary Restraints, upon Other Principles 28 min 8

    Smith now rejects the balance-of-trade doctrine itself. Trade freely carried on benefits both parties, and gain means growth in the exchangeable value of the annual produce, not in bullion. Paying for French wine in gold is no worse than paying in tobacco. He blames the doctrine on the 'mean rapacity' of merchants and manufacturers, who taught nations to see their neighbours' wealth as their own loss, and argues that a free trade with France would be worth far more than the colonial trade. The balance that matters is between annual produce and consumption.

35. IV.4 Of Drawbacks 14 min 5

    Drawbacks, refunds of duties when goods are exported, are the most defensible encouragement to exports, because they restore the distribution of capital that duties had disturbed rather than forcing a new one. Smith surveys the rules from the 'old subsidy' of 1660 onward, the full drawbacks on re-exported tobacco and sugar, the refusal to draw back duties on French goods, and the special treatment of wines sent to the colonies, which helped make Madeira fashionable. He warns that drawbacks on goods to monopolised colonial markets, and fraudulent relanding, are pure loss to the revenue.

36. IV.5 Of Bounties 50 min 11

    Export bounties pay foreigners to buy goods that would not otherwise pay their cost, forcing capital into losing trades. Smith's main target is the corn bounty of 1689. He argues that it taxes the public twice, through the bounty and the dearer bread, and that it raises only the nominal price of corn, lowering the value of silver at home much as Spain's and Portugal's bullion laws do. It benefits chiefly corn merchants. He then dissects the herring-buss bounty, which paid vessels to catch 'not the fish but the bounty', and distinguishes bounties from drawbacks and premiums.

37. IV.5 Digression Concerning the Corn Trade and Corn Laws 54 min 11

    Smith's digression on the corn trade and corn laws examines its four branches. The inland dealer's interest matches the public's: rising prices ration a short crop, so that a dearth comes from bad seasons and a famine only from governments trying to fix prices. He condemns the old laws against engrossing and forestalling, likening fears of them to belief in witchcraft. He defends free importation, export and the carrying trade, credits Britain's prosperity to secure property rather than the bounty, and judges the Corn Act of 1773 the best the times would allow.

38. IV.6 Of Treaties of Commerce 31 min 6

    Commercial treaties that favour one nation's goods give its merchants a monopoly at the expense of the favouring country. Smith prints the three articles of the Methuen Treaty of 1703 and argues that it was a bad bargain for Britain: Portuguese wines got a duty a third lower than French, in return only for the readmission of English woollens. The Brazilian gold it brought was no special gain. A long section on coinage then argues that a moderate seignorage would stop the melting of new coin and cost the Bank of England nothing.

39. IV.7 Of Colonies 24 min 16

    Part I of the chapter on colonies asks why colonies were founded. Ancient Greek cities sent out independent colonies when their people outgrew their land; Rome planted dependent colonies to quiet the landless poor and garrison conquests. The modern European colonies had no such clear motive. Venice's spice monopoly drew the Portuguese round Africa to India, and Columbus, sailing west for Asia, found America instead. Finding no riches in its plants or animals, he promised gold, and the "sacred thirst of gold" drove the Spanish conquests of Mexico and Peru. Other nations' settlers shared the same hopes but found no mines.

40. IV.7 Part II. Causes of the Prosperity of New Colonies 1 h 10 min 16

    Part II explains why colonies prosper: plenty of good land and liberty to manage their own affairs. Cheap land means high wages, rapid population growth and quick improvement. Smith compares the Greek, Roman, Spanish, Portuguese, Dutch, Danish and French colonies, condemning exclusive companies as the worst of governments. The English colonies did best because of restrictions on engrossing land, light taxes, a relatively liberal trade policy and free representative assemblies, though their manufactures were restricted. He discusses slavery in the sugar colonies and concludes that Europe's policy contributed little to the colonies except the men who founded them.

41. IV.7 Part III. Of the Advantages Which Europe Has Derived from the Discovery of America, and from That of a Passage to the East Indies by the Cape of Good Hope 2 h 18 min 23

    Part III weighs Europe's gains from America and the Cape route. Colonial trade benefits all Europe, but the colonial monopoly diverts capital into a distant, slow trade, raises profits, makes Britain's economy fragile, and serves only merchants: an empire built for "a nation whose government is influenced by shopkeepers". Writing during the American crisis, Smith proposes either voluntary separation or a union giving the colonies seats in Parliament. He calls the two discoveries the greatest events in history, ruinous to the peoples of the Indies, and ends with the East India Company, a merchant body unable to act as a sovereign.

42. IV.8 Conclusion of the Mercantile System 56 min 13

    Added in the third edition of 1784, this chapter examines the mercantile system’s less obvious devices: duty-free imports and bounties on raw materials, chiefly from the American colonies, and prohibitions on exporting wool, hides, tools and skilled workmen. Smith describes the wool laws, from mutilation under Elizabeth to coastal policing in his own day, as written in blood for the manufacturers’ benefit. He proposes an export tax in place of the ban. The chapter ends with his famous maxim that consumption is the sole end of production, and names merchants and manufacturers as the system’s architects.

43. IV.9 Of the Agricultural Systems, or of Those Systems of Political Economy Which Represent the Produce of Land, as Either the Sole or the Principal Source of the Revenue and Wealth of Every Country 1 h 11 min 19

    Smith turns to the Physiocrats, the French school of Quesnay, who held that only agriculture yields a net product and called manufacturers and merchants a barren class. He sets out their three classes, their advances and their Economical Table, then gives five objections, chiefly that manufacturing labour also adds value. He praises the system as the nearest approximation to truth yet published, for its view of wealth and its defence of liberty. After surveying the agricultural policies of China, Egypt, India and the ancient republics, he concludes with the system of natural liberty and the sovereign’s three duties.

44. IV Appendix to Book IV 1 min 1

    Two accounts added in 1784 to support Smith’s criticism of the herring-fishery bounty in Book IV, chapter 5. The first gives the busses fitted out in Scotland from 1771 to 1781, their catch and the bounty paid per barrel; the second gives the foreign and Scottish salt delivered duty-free for curing. Smith adds that the remitted salt duty on herrings sold at home is itself a further bounty.

45. V.1 Of the Expenses of the Sovereign or Commonwealth 48 min 11

    Book V opens with the first duty of the sovereign, defence, traced through the four stages of society. Hunters and shepherds go to war at no cost to the state; husbandmen nearly so; but manufactures and the growing complexity of war make soldiers a charge on the public. The state must then choose between a militia and a standing army. Smith judges the standing army decisively superior, illustrating from Macedon, Carthage and Rome, and argues that, officered by the propertied, it is no danger to liberty. Firearms make defence ever dearer but favour rich nations over poor.

46. V.1 Part II. Of the Expense of Justice 35 min 12

    The second duty, justice, also develops with the stages of society. Among hunters there is little property and so no magistrate; with herds comes inequality, and with it authority, based on personal qualities, age, fortune and birth. Smith concludes that civil government, so far as it secures property, is instituted for the defence of the rich against the poor. Justice began as a source of revenue through presents and fines, which bred corruption, and later came to be paid for by taxes and salaries. Smith discusses court fees, the competition among English courts, and the need for an independent judiciary.

47. V.1 Part III. Of the Expense of Public Works and Public Institutions 1 h 36 min 23

    The sovereign’s third duty is to provide public works and institutions that no individual could profitably maintain. Smith argues that roads, bridges, canals and harbours should pay for themselves through tolls, managed locally rather than by a central executive, and contrasts Britain’s turnpikes with French corvées and court-driven road-building. He then turns to companies for particular branches of trade: regulated companies are enlarged guilds, and joint-stock companies suffer ‘negligence and profusion’ because directors manage other people’s money. Histories of the African, Hudson’s Bay, South Sea and East India companies support the conclusion that only routine trades such as banking, insurance, canals and water supply suit the joint-stock form.

48. V.1 Article II. Of the Expense of the Institution for the Education of Youth 1 h 10 min 18

    Smith asks whether endowments for schools and universities have improved teaching, and answers that they have mostly corrupted it: teachers paid regardless of their success neglect their duty, as Oxford’s professors have given up even the pretence of teaching. He traces the scholastic curriculum to the universities’ origins as church corporations and contrasts it with the fee-paid teachers of ancient Greece. Yet the division of labour makes the mass of workers ‘as stupid and ignorant as it is possible for a human creature to become’, so the public should help pay for parish schools on the Scottish model, encourage and even require basic learning, and maintain the people’s martial spirit.

49. V.1 Article III. Of the Expense of the Institutions for the Instruction of People of All Ages 1 h 16 min 12

    Religious instruction, like teaching, is pursued most zealously where preachers depend on their hearers. Against Hume, who wanted a salaried clergy to keep it idle, Smith argues that a multitude of small, unprivileged sects would breed moderation. He explains the austere morality of popular sects by the conditions of the poor, and proposes science and public entertainments as remedies for fanaticism. A history follows: the medieval Church as a ‘spiritual army’ resting on its surplus, its decline through commerce, the Reformation, and the different effects of Lutheran, Anglican and Presbyterian church government, ending in praise of Scotland’s modestly paid clergy.

50. V.1 Part IV. Of the Expense of Supporting the Dignity of the Sovereign 5 min 3

    A short part on the expense of maintaining the sovereign’s dignity, which grows as society becomes richer and is greater for a monarch than for a republican magistrate. The conclusion to the whole chapter then sorts public expenses by who benefits: defence and dignity should be paid by general contributions in proportion to ability, while justice, roads, education and religion may be largely paid by their users. General revenue must make up the rest, which leads into the next chapter.

51. V.2 Of the Sources of the General or Public Revenue of the Society 22 min 7

    Part I of the chapter on public revenue asks whether a state can live on its own property instead of taxes. Revenue from stock (Hamburg's wine-cellar and bank, the post office, Pennsylvania's paper loans) suits only small or frugal states, and princes make poor traders, as the East India Company shows. Crown lands were the revenue of ancient republics and feudal monarchies, but in a modern state they would yield little and are badly managed. Smith recommends selling them to improve cultivation and pay off debt. Since neither source is adequate, a great civilized state must live mainly on taxes.

52. V.2 Part II. Of Taxes 1 h 3 min 24

    Smith opens his review of taxes with the four maxims (equality, certainty, convenience and economy), then begins with taxes on rent. He compares Britain's fixed-valuation land tax with variable taxes based on registered leases or surveys, criticises the French taille and the Physiocrats' single tax, and argues that tithes and other taxes on produce are unequal and discourage improvement. On houses he separates building rent from ground rent. Ground rents, which owe their existence to good government, are the most proper subject of taxation; window and hearth taxes fall unequally on the poor.

53. V.2 Article II. Taxes upon Profit, or upon the Revenue Arising from Stock 32 min 11

    Profit divides into interest and the employer's compensation for risk and trouble. The latter cannot be taxed directly, and interest, though it looks as taxable as rent, is hidden and mobile, since "the proprietor of stock is properly a citizen of the world". States therefore tax capital loosely and lightly, as in England, or rely on oath and trust, as at Hamburg and in the Swiss cantons. Taxes on particular trades fall on consumers. The French personal taille on farmers' supposed profits is arbitrary and pushes them to farm badly. Poll taxes on slaves are really taxes on planters' stock.

54. V.2 Appendix to Articles I. And II. Taxes upon the Capital Value of Lands, Houses, and Stock 17 min 10

    Taxes levied when property changes hands, by inheritance, sale, loan or legal process, take part of its capital value, not just its income. Smith surveys the Roman inheritance tax, Dutch succession duties, feudal reliefs and fines on alienation, and the stamp and registration duties that spread across Europe within a century. Taxes on land sales fall on the necessitous seller, those on loans on the borrower. Such taxes are certain and cheap to collect but unequal, and "unthrifty": they transfer capital that maintains productive labour to a sovereign who maintains unproductive labour.

55. V.2 Article III. Taxes upon the Wages of Labour 9 min 6

    Because wages are set by the demand for labour and the price of provisions, a direct tax on wages makes them rise by more than the tax: a tax of one-fifth raises wages by a quarter. Employers advance the increase, and it falls finally on consumers of manufactures or on landlords through lower rents, or it reduces employment. Smith calls such taxes absurd and destructive, citing the French taille on village workmen and the Bohemian tax on artisans. Official salaries, set above market levels by those who govern, can well bear a tax.

56. V.2 Article IV. Taxes Which It Is Intended Should Fall Indifferently upon Every Different Species of Revenue 1 h 52 min 24

    Capitation taxes are either arbitrary or unequal. Taxes on consumption tax revenue indirectly through spending. Smith defines necessaries socially, by the famous linen-shirt example, and argues that taxes on them raise wages and fall on the rich with an overcharge, while taxes on luxuries do not. He compares excise and customs, condemns prohibitive duties, smuggling laws, bounties and drawbacks, and proposes bonded warehouses on the model of Walpole's scheme. He criticises the gentry's exemption from the beer duty, Spain's alcavala, France's internal customs and tax farmers, and judges the British system better than France's or Holland's.

57. V.3 Of Public Debts 2 h 2 min 39

    The final chapter of the book explains why commercial states, unlike ancient princes who hoarded treasure, fall into debt: they spend their whole peacetime revenue, and a society of merchants makes borrowing easy. Smith traces Britain's move from short-term anticipations to perpetual funding, the misuse of the sinking fund, and the war-by-war growth of the debt through the Seven Years' War. He argues that funding destroys capital, warns that great debts usually end in bankruptcy, often disguised by debasing the coin, and closes by proposing that Britain extend its taxes to Ireland and America with representation, or else give up the costly "project of an empire".