Reflections on the Formation and Distribution of wealth [27]
unequal profits; but this inequality does not prevent them from having a reciprocal influence on each other, nor from establishing a species of equilibrium among themselves, like that between two liquors of unequal gravity, and which communicate with each other by means of a reversed syphon, the two branches of which they fill; there can be no height to which the one can rise or fall, but the liquor in the other branch will be affected in the same manner. I will suppose, that on a sudden, a great number of proprietors of lands are desirous of setting them. It is evident that the price of lands will fall, and that with a less sum we may acquire a larger revenue; this cannot come to pass without the interest of money rising, for the possessors of money would chuse rather to buy lands, than to lend at a lower interest than the revenue of the lands they could purchase. If, then, the borrowers want to have money, they will be constrained to pay a greater rate. If the interest of the money increases, they will prefer lending it, to setting out in a hazardous manner on enterprizes of agriculture, industry, and commerce: and they will be aware of any enterprizes but those that produce, besides the retribution for their trouble, an emolument by far greater than the rate of the lender's produce. In a word, if the profits, springing from an use of money, augment or diminish, the capitals are converted by withdrawing them from other employings, or are withdrawn by converting them to other ends, which necessarily alters, in each of those employments, the proportion of profits on the capital to the annual product. Generally, money converted into property in land, does not bring in so much as money on interest; and money on interest brings less than money used in laborious enterprises: but the produce of money laid out in any way whatever, cannot augment or decree without implying a proportionate augmentation, or decrease in other employments of money.
89. The current interest of money is the standard by which the abundance or scarcity of capitals may be judged; it is the scale on which the extent of a nation's capacity for enterprizes in agriculture, manufactures, and commerce, may be reckoned.
Thus the current interest of money may be considered as a standard of the abundance or scarcity of capitals in a nation, and of the extent of enterprises of every denomination, in which she may embark: it is manifest, that the lower the interest of money is, the more valuable is the land. A man that has an income of fifty thousand livres, if the land is sold but at the rate of twenty years purchase is an owner of only one million; he has two millions, if the land is sold at the rate of forty. If the interest is at five per cent. any land to be brought into cultivation would continue fallow, if, besides the recovery of the advances, and the retribution due to the care of the cultivator, its produce would not afford five per cent. No manufactory, no commerce can exist, that does not bring in five per cent. exclusively of the salary and equivalents for the risque and trouble of the undertaker. If there is a neighbouring nation in which the interest stands only at two per cent. not only it will engross all the branches of commerce, from which the nation where an interest at five per cent. is established, is excluded, but its manufacturers and merchants, enabled to satisfy themselves with a lower interest, will also sell their goods at a more moderate price, and will attract the almost exclusive commerce of all articles, which they are not prevented to sell by particular circumstances of excessive dearth, and expences of carriages, from the nation in which the interest bears five per cent.
90. Influence of the rate of interest of money on all lucrative enterprizes.
The price of the interest may be looked upon as a kind of level, under which all labour, culture, industry, or commerce, acts. It is like a sea expanded over a vast country, the tops of the mountains rise above the surface of the water, and form fertile and
89. The current interest of money is the standard by which the abundance or scarcity of capitals may be judged; it is the scale on which the extent of a nation's capacity for enterprizes in agriculture, manufactures, and commerce, may be reckoned.
Thus the current interest of money may be considered as a standard of the abundance or scarcity of capitals in a nation, and of the extent of enterprises of every denomination, in which she may embark: it is manifest, that the lower the interest of money is, the more valuable is the land. A man that has an income of fifty thousand livres, if the land is sold but at the rate of twenty years purchase is an owner of only one million; he has two millions, if the land is sold at the rate of forty. If the interest is at five per cent. any land to be brought into cultivation would continue fallow, if, besides the recovery of the advances, and the retribution due to the care of the cultivator, its produce would not afford five per cent. No manufactory, no commerce can exist, that does not bring in five per cent. exclusively of the salary and equivalents for the risque and trouble of the undertaker. If there is a neighbouring nation in which the interest stands only at two per cent. not only it will engross all the branches of commerce, from which the nation where an interest at five per cent. is established, is excluded, but its manufacturers and merchants, enabled to satisfy themselves with a lower interest, will also sell their goods at a more moderate price, and will attract the almost exclusive commerce of all articles, which they are not prevented to sell by particular circumstances of excessive dearth, and expences of carriages, from the nation in which the interest bears five per cent.
90. Influence of the rate of interest of money on all lucrative enterprizes.
The price of the interest may be looked upon as a kind of level, under which all labour, culture, industry, or commerce, acts. It is like a sea expanded over a vast country, the tops of the mountains rise above the surface of the water, and form fertile and