Book II, Chapter III, 3

The annual produce of England's land and labor, for example, is certainly much greater than it was a little more than a century ago, at the restoration of Charles II. Few people today, I believe, doubt this. Yet during that period scarcely five years have passed without the publication of a book or pamphlet, often written with enough skill to gain some authority with the public, professing to demonstrate that the nation's wealth was rapidly declining: that the country was losing its people, agriculture was neglected, manufactures were decaying, and trade was ruined. Nor were all these publications partisan pamphlets, miserable offspring of dishonesty and corruption. Many were written by thoroughly candid and intelligent people, who wrote only what they believed, and only because they believed it.

England's annual produce of land and labor was likewise certainly much greater at the Restoration than we can suppose it was about a hundred years earlier, at Elizabeth's accession. At that time, too, there is every reason to believe that the country had advanced much further than it had about a century before, toward the end of the disputes between the houses of York and Lancaster. Even then it was probably better off than at the Norman conquest; and at the Norman conquest, better off than amid the confusion of the Saxon heptarchy. Even in that early period it was certainly a more developed country than at the invasion of Julius Caesar, when its inhabitants lived in nearly the same condition as the Indigenous peoples of North America.

In each of these periods, however, there was much private and public extravagance, many costly and needless wars, and a large diversion of annual produce from the support of productive workers to that of unproductive ones. At times, amid the turmoil of civil conflict, there was such outright waste and destruction of stock that one might suppose it not only impeded the natural accumulation of wealth, as it certainly did, but left the country poorer at the end of a period than at its beginning. Even in the happiest and most fortunate period of all, the one since the Restoration, how many disorders and disasters have occurred that, had they been foreseen, would have been expected to bring not just poverty but utter ruin upon the country? The fire and plague of London, the two Dutch wars, the disorders of the Revolution, the war in Ireland, the four costly French wars of 1688, 1701, 1742, and 1756, together with the two rebellions of 1715 and 1745. During the four French wars, the nation incurred more than £145,000,000 in debt, besides all the other extraordinary annual expenses they caused; their total cost therefore cannot be put at less than £200,000,000. Since the Revolution, so great a share of the annual produce of the country's land and labor has at various times gone to maintain an extraordinary number of unproductive workers. But had those wars not directed so much capital toward that end, most of it would naturally have maintained productive workers whose labor would have replaced, with a profit, the entire value of what they consumed. The value of the country's annual produce of land and labor would have increased considerably each year, and each year's increase would have increased the next year's still more. More houses would have been built, more land improved, previously improved land better cultivated; more manufactures would have been established, existing ones expanded. It is perhaps difficult even to imagine the height to which the country's real wealth and revenue might by now have risen.

Yet though government extravagance has undoubtedly slowed England's natural progress toward wealth and improvement, it has not stopped it. The annual produce of its land and labor is undoubtedly much greater now than at either the Restoration or the Revolution. The capital used each year to cultivate that land and maintain that labor must therefore be much greater too. Amid all the government's exactions, this capital has been silently and gradually amassed by the private frugality and sound conduct of individuals, by their universal, continual, unbroken effort to improve their condition. It is this effort—protected by law and free to act in the most advantageous way—that has sustained England's progress toward wealth and improvement through almost all past ages, and may, we hope, continue to do so in the future. England, however, has never been blessed with a particularly frugal government, nor has frugality ever been the distinctive virtue of its inhabitants. For kings and ministers to presume to supervise the household finances of private people, restraining their expenses through sumptuary laws or bans on imported luxuries, is therefore the height of impertinence. They themselves are invariably the greatest spendthrifts in society. Let them take proper care of their own expenses; they may safely leave private people to take care of theirs. If their own extravagance does not ruin the state, their subjects' never will.

Just as frugality increases public capital and extravagance diminishes it, the conduct of people whose expenses precisely equal their revenue, neither accumulating capital nor drawing on it, neither increases nor diminishes that capital. Some forms of spending, however, appear to contribute more to the growth of public wealth than others.

A person's revenue may be spent on things consumed immediately, so that one day's spending can neither lighten nor reinforce another's; or it may be spent on more durable things, which can accumulate, and whose purchase on one day may, as he chooses, either lighten, sustain, or heighten the effect of spending on the next. A wealthy man, for instance, may spend his revenue on a lavish table, a great many household servants, and crowds of dogs and horses. Or, content with modest meals and few attendants, he may spend most of it on decorating his house or country villa; on useful or ornamental buildings and furnishings; on collections of books, statues, and paintings; on more frivolous things, such as jewels, baubles, and ingenious trinkets of various kinds; or, most frivolous of all, on a huge wardrobe of fine clothes, like the favorite and minister of a great prince who died a few years ago. Suppose two men of equal fortune spent their revenues chiefly in these different ways. The splendor of the man who spent mostly on durable goods would continually grow, as each day's spending helped sustain and heighten the effect of the next day's; the other's splendor, by contrast, would be no greater at the end of the period than at its beginning. At the end, the first man would also be the richer of the two. He would own a stock of goods of some kind which, though perhaps not worth all it cost, would always be worth something. No trace of the other's expenditure would remain: the effects of ten or twenty years of lavish spending would vanish as completely as if they had never existed.

The form of spending that benefits an individual's wealth more also benefits a nation's. The houses, furniture, and clothing of the wealthy soon become useful to people of lower and middle rank. When their social superiors tire of these possessions, others can buy them, and as this way of spending becomes widespread among the wealthy, the comfort of the people as a whole gradually improves. In countries long rich, one often finds people of lower rank in possession of perfectly sound houses and furniture, though neither the houses could have been built nor the furniture made for their use. What was once a residence of the Seymour family is now an inn on the Bath road. The marriage bed of James I. of Great Britain, brought to him from Denmark by his queen as a gift worthy of one sovereign to another, adorned an alehouse at Dunfermline a few years ago. In some old cities that have long stood still or declined somewhat, one can sometimes scarcely find a single house that could have been built for its present residents. Inside those houses one will also often find excellent, though old-fashioned, pieces of furniture, still perfectly serviceable, that could no more have been made for them. Noble palaces, magnificent villas, great collections of books, statues, paintings, and other curiosities often bring beauty and honor not just to their neighborhoods but to their entire countries. Versailles brings beauty and honor to France, Stowe and Wilton to England. Italy still commands a certain reverence through its many monuments of this kind, though the wealth that produced them has declined, and the genius that designed them seems to have died out, perhaps for want of the same occupation.

Spending on durable goods also favors not only accumulation but frugality. If someone spends too much on them at any point, he can easily change course without incurring public censure. A sharp reduction in servants, a change from a lavish table to a frugal one, or the abandonment of a carriage once established cannot escape the notice of neighbors, who assume such changes acknowledge earlier misbehavior. Few who have had the misfortune to go too far in spending of this kind therefore have the courage to correct themselves until ruin and bankruptcy force them to. But if someone has spent too much on building, furniture, books, or paintings, no one can infer imprudence when he changes course. Earlier expenditure often makes further expenditure on these things unnecessary; when he stops, it appears not that he has outrun his fortune but that he has satisfied his taste.

Moreover, spending on durable goods generally maintains more people than the most lavish hospitality. Of the two or three hundred weight of provisions sometimes served at a great feast, perhaps half is thrown on the dung heap, and much is always wasted and misused. But if the cost of that entertainment had instead gone to employ masons, carpenters, upholsterers, mechanics, etc., provisions of equal value would have been distributed among a still larger number of people. They would have bought them a penny's worth or a pound's weight at a time, without wasting or discarding a single ounce. Moreover, the spending in one case maintains productive workers, in the other unproductive ones. In one case, therefore, it increases the exchangeable value of the annual produce of the country's land and labor; in the other, it does not.

I do not, however, mean to suggest by any of this that one form of spending always shows a more generous or open spirit than the other. When a wealthy man spends his revenue chiefly on hospitality, he shares most of it with his friends and companions. When he buys durable goods, he often spends it all on himself and gives nothing to anyone without receiving something in return. This latter form of spending, especially when directed toward frivolous objects—the little ornaments of dress and furniture, jewels, trinkets, and gewgaws—often reveals not merely a shallow disposition but a mean and selfish one. All I mean is that this form, because it always brings about some accumulation of valuable goods, favors private frugality and therefore an increase in public capital, and maintains productive rather than unproductive workers, does more than the other to promote the growth of public wealth.

England's yearly output of land and labor, for example, is certainly much greater now than it was a little more than a century ago, when Charles II was restored to the throne. I believe few people now doubt this. Yet during that period, hardly five years passed without a book or pamphlet claiming to show that the nation was quickly growing poorer. These publications said that the population was shrinking, farming was neglected, manufacturing was declining, and trade was ruined. Some were written so well that the public took them seriously. Nor were they all partisan pamphlets produced by dishonesty and people willing to write for money. Many were written by sincere and intelligent people who said only what they believed, simply because they believed it.

England's yearly output of land and labor was also certainly much greater at the Restoration than we can suppose it was about a hundred years earlier, when Elizabeth came to the throne. And there is every reason to believe the country was much more developed under Elizabeth than it had been roughly a century before, near the end of the conflict between the houses of York and Lancaster. Even then, it was probably better off than at the Norman conquest. At the Norman conquest it was probably better off than during the turmoil of the Saxon heptarchy. Even in that early period, England was certainly more developed than it had been when Julius Caesar invaded and its inhabitants lived in nearly the same condition as the people then called savages in North America.

Yet every one of these periods saw great private and public extravagance. There were many expensive, unnecessary wars, and much of the yearly output was diverted from supporting productive workers to supporting unproductive ones. At times, civil conflict brought such complete waste and destruction of stock that we might expect the country to have ended the period poorer than it began, not merely to have accumulated wealth more slowly, as it certainly did. Consider the happiest and most fortunate period of all, the time since the Restoration. How many disasters occurred that, had people foreseen them, would have made them expect not just poverty but the country's complete ruin? There were the fire and plague of London, the two Dutch wars, the turmoil of the revolution, the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and 1756, and the two rebellions of 1715 and 1745. In the four French wars, the nation took on more than £145,000,000 in debt, in addition to all the other unusual yearly costs they caused. The total cost cannot be put below £200,000,000. Since the Revolution, a large part of the yearly output of the country's land and labor has at different times supported unusually many unproductive people. Without those wars directing so much capital to that purpose, most of it would naturally have supported productive workers. Their labor would have replaced everything they consumed and added a profit. The country's yearly output would have grown substantially in value each year, and each year's growth would have increased the next year's growth still further. More houses would have been built and more land improved. Previously improved land would have been farmed better. More manufacturing businesses would have been established, and existing ones expanded. It is hard even to imagine how high the country's real wealth and revenue might now be.

Government extravagance must have slowed England's natural progress toward wealth and development, but it has not stopped it. The yearly output of its land and labor is certainly much greater now than it was at either the Restoration or the Revolution. So the capital used each year to cultivate the land and support that labor must also be much greater. Despite all the government's demands for money, individuals have quietly and gradually built up this capital by saving and managing their affairs well. They have done so through their shared, constant, unbroken effort to improve their own situation. That effort, protected by law and free to work in the most useful way, has kept England moving toward wealth and development in nearly every earlier period. We may hope it will continue to do so. Yet England has never had a very frugal government, and its people have never been especially noted for thrift either. So it is presumptuous in the extreme for kings and ministers to claim they must oversee private people's household spending and limit it with laws against luxury or bans on imported luxuries. They themselves are, without exception, society's biggest spenders. Let them take care of their own expenses and trust private people to take care of theirs. If their own extravagance does not ruin the state, private extravagance never will.

Saving increases society's capital, and wasteful spending reduces it. But people who spend exactly what they earn, neither putting money aside nor drawing on capital, neither increase nor reduce it. Still, some kinds of spending seem to help a country grow wealthier more than others.

A person can spend revenue on things consumed at once. With these, one day's spending can neither ease nor add to the effect of the next day's spending. Or he can spend it on more durable things that build up over time. Then, as he chooses, each day's spending can ease, sustain, or increase the effect of what he spends the next day. A rich man, for instance, might spend his revenue on lavish meals and on keeping many household servants, dogs, and horses. Or he might keep his meals simple and employ few attendants. He could then spend most of his revenue on improving his home or country villa, putting up useful or decorative buildings, buying useful or decorative furniture, and collecting books, statues, and paintings. He might instead buy less useful things: jewels, baubles, and clever trinkets of various kinds. Most trivial of all, he might build up a huge wardrobe of fine clothes, as the favorite and minister of a great prince who died a few years ago did. Imagine two equally wealthy men who spend mainly in these two different ways. The possessions of the one who mostly buys durable goods would become grander all the time, as each day's purchases add to what he has already acquired. The possessions of the other would be no grander at the end than at the start. The first man would also be wealthier at the end. He would own a stock of goods that might not be worth all he paid but would still be worth something. Nothing would remain of the second man's spending. Ten or twenty years of lavish expense would have vanished as completely as if it had never occurred.

The kind of spending that does more for a person's wealth also does more for a nation's. Rich people's houses, furniture, and clothing soon become useful to people of the middle and lower ranks. Those people can buy these things when their earlier owners grow tired of them. When the rich generally spend in this way, the whole population gradually gains better places to live and things to use. In countries that have long been wealthy, poorer people often have sturdy houses and furniture that would never have been built or made for them originally. A former home of the Seymour family is now an inn on the Bath road. The marriage bed of James I. of Great Britain, brought from Denmark by his queen as a gift fit for one sovereign to give another, stood a few years ago as a decoration in an alehouse in Dunfermline. In some old cities that have long stood still or declined somewhat, you can scarcely find a single house that could have been built for its present occupants. Inside, too, you will often see fine but old-fashioned furniture that remains perfectly usable, though it could no more have been made for them than the houses were. Grand palaces, splendid villas, and large collections of books, statues, paintings, and other curiosities often bring beauty and honor not only to their neighborhood but to their whole country. Versailles brings beauty and honor to France, as Stowe and Wilton do to England. Italy still inspires a kind of respect because of its many such monuments, even though the wealth that made them has faded and the talent that designed them seems to have died out, perhaps for lack of similar work.

Spending on durable goods also encourages thrift as well as the accumulation of goods. If someone spends too much on them, he can easily stop without drawing public criticism. If he sharply cuts the number of his servants, replaces lavish meals with simple ones, or gives up his carriage after taking one up, his neighbors will notice. They will assume he is admitting that he previously spent badly. Few people who have gone too far with this kind of spending have the courage to cut back until ruin and bankruptcy force them to. But if someone has spent too much on building, furniture, books, or paintings, nobody need conclude that he was reckless when he stops. Earlier purchases often make further purchases unnecessary. When he stops, it looks as if he has satisfied his tastes rather than exhausted his means.

Spending on durable goods also usually supports more people than even the most lavish entertaining does. At a great feast, perhaps half of the two or three hundred weight of provisions served ends up on the waste heap. Much is always wasted or misused. If the same money were instead spent hiring masons, carpenters, upholsterers, mechanics, etc., an equal value of provisions would go to even more people. They would buy it a pennyworth or a pound at a time, without losing or throwing away a single ounce. In the latter case, moreover, the spending supports productive workers. At the feast, it supports unproductive people. So the latter kind of spending increases the exchangeable value of a country's yearly output of land and labor, while the feast does not.

I do not mean that spending on durable goods always shows a more generous spirit than spending on hospitality. When a rich man spends mainly on entertaining, he shares much of his revenue with friends and companions. When he buys durable goods, he often spends all of it on himself and gives nothing to anyone without receiving something in return. Spending on durable goods, especially frivolous things such as small decorations for clothing and furniture, jewels, trinkets, and baubles, can therefore reveal not just shallow tastes but a selfish and mean character. My point is only that this spending helps a country grow wealthier more than the other kind does. It leaves behind some valuable goods, makes private thrift easier and thus helps increase society's capital, and supports productive rather than unproductive workers.