Introduction To Stock Theory

In that rude state of society, in which there is no division of labour,

in which exchanges are seldom made, and in which every man provides

every thing for himself, it is not necessary that any stock should be

accumulated, or stored up before-hand, in order to carry on the business

of the society. Every man endeavours to supply, by his own industry, his

own occasional wants, as they occur. When he is hungry, he goes to the
/> forest to hunt; when his coat is worn out, he clothes himself with the

skin of the first large animal he kills: and when his hut begins to go

to ruin, he repairs it, as well as he can, with the trees and the turf

that are nearest it.

But when the division of labour has once been thoroughly introduced, the

produce of a man's own labour can supply but a very small part of his

occasional wants. The far greater part of them are supplied by the

produce of other men's labour, which he purchases with the produce, or,

what is the same thing, with the price of the produce, of his own. But

this purchase cannot be made till such time as the produce of his

own labour has not only been completed, but sold. A stock of goods of

different kinds, therefore, must be stored up somewhere, sufficient

to maintain him, and to supply him with the materials and tools of his

work, till such time at least as both these events can be brought about.

A weaver cannot apply himself entirely to his peculiar business, unless

there is before-hand stored up somewhere, either in his own possession,

or in that of some other person, a stock sufficient to maintain him, and

to supply him with the materials and tools of his work, till he has not

only completed, but sold his web. This accumulation must evidently

be previous to his applying his industry for so long a time to such a

peculiar business.

As the accumulation of stock must, in the nature of things, be previous

to the division of labour, so labour can be more and more subdivided in

proportion only as stock is previously more and more accumulated. The

quantity of materials which the same number of people can work up,

increases in a great proportion as labour comes to be more and more

subdivided; and as the operations of each workman are gradually reduced

to a greater degree of simplicity, a variety of new machines come to

be invented for facilitating and abridging those operations. As the

division of labour advances, therefore, in order to give constant

employment to an equal number of workmen, an equal stock of provisions,

and a greater stock of materials and tools than what would have been

necessary in a ruder state of things, must be accumulated before-hand.

But the number of workmen in every branch of business generally

increases with the division of labour in that branch; or rather it is

the increase of their number which enables them to class and subdivide

themselves in this manner.

As the accumulation of stock is previously necessary for carrying on

this great improvement in the productive powers of labour, so that

accumulation naturally leads to this improvement. The person who employs

his stock in maintaining labour, necessarily wishes to employ it in

such a manner as to produce as great a quantity of work as possible. He

endeavours, therefore, both to make among his workmen the most proper

distribution of employment, and to furnish them with the best machines

which he can either invent or afford to purchase. His abilities, in both

these respects, are generally in proportion to the extent of his stock,

or to the number of people whom it can employ. The quantity of industry,

therefore, not only increases in every country with the increase of the

stock which employs it, but, in consequence of that increase, the same

quantity of industry produces a much greater quantity of work.

Such are in general the effects of the increase of stock upon industry

and its productive powers.

In the following book, I have endeavoured to explain the nature of

stock, the effects of its accumulation into capital of different kinds,

and the effects of the different employments of those capitals. This

book is divided into five chapters. In the first chapter, I have

endeavoured to shew what are the different parts or branches into which

the stock, either of an individual, or of a great society, naturally

divides itself. In the second, I have endeavoured to explain the nature

and operation of money, considered as a particular branch of the general

stock of the society. The stock which is accumulated into a capital, may

either be employed by the person to whom it belongs, or it may be

lent to some other person. In the third and fourth chapters, I have

endeavoured to examine the manner in which it operates in both these

situations. The fifth and last chapter treats of the different effects

which the different employments of capital immediately produce upon the

quantity, both of national industry, and of the annual produce of land

and labour.