Natural Progress of Opulence

The Natural Progress of Opulence comes from a chapter in The Wealth of Nations by Adam Smith. The subject of this chapter in The Wealth of Nations is the “allocation of capital between cities and the countryside.”^[1] Adam Smith asserts that the optimum economic progress for a country would be to allocate most of its capital to the countryside and then gradually develop the cities. Adam Smith is using this example to address long term economic growth. Smith states, “As subsistence is, in the nature of things, prior to conveniency and luxury, so the industry which procures the former, must necessarily be prior to that which ministers to the latter.”^[2] In order for industrial success, subsistence is required first from the countryside. Industry and trade occur in cities while agriculture occurs in the countryside.

Adam Smith states that if investors were left to their own devices they would in fact invest in agriculture primarily because, “The man who employs his capital in land, has it more under his view and command, and his fortune is much less liable to accident, than that of the trader, who is obliged frequently to commit it, not only to the winds and the waves, but to the more uncertain elements of human folly and injustice, by giving great credits in distant countries to men, with whose character and situation he can seldom be thoroughly acquainted.”^[3] Agricultural work is a more desirable situation than industrial work because the owner is in complete control. Smith states that “In our North American colonies, where uncultivated land is still to be had upon easy terms, no manufactures for distant sale have ever yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country, he does not, in North America, attempt to establish with it a manufacture for more distant sale, but employs it in the purchase and improvement of uncultivated land. From artificer he becomes planter, and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him rather to work for other people than for himself. He feels that an artificer is the servant of his customers, from whom he derives his subsistence; but that a planter who cultivates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and independent of all the world.”^[4] Where there is open countryside agriculture is much preferable to industrial occupations and ownership.

Adam Smith goes on to say “According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce.”^[5] This sequence leads to growth and therefore opulence.

References

1. ^ http://faculty.chicagobooth.edu/sam.peltzman/teaching/aei%20brookings0904.pdf
2. ^ http://www.bartleby.com/10/301.html
3. ^ http://www.bartleby.com/10/301.html
4. ^ http://www.bartleby.com/10/301.html
5. ^ http://www.bartleby.com/10/301.html