Adam Smith's Simplified Wealth of Nations, Book 2, Chapter 3a: Productive Labor

Chapter 3a: The Accumulation of Capital and Productive vs Unproductive Labor

1 Productive labour adds value while unproductive labour does not. 2 The labour of some of the most respectable orders in the society is like the labour of menial servants. Examples of unproductive labourers: They are maintained by a part of the produce of the industry of other people. The gravest, most important, and some of the most frivolous professions are unproductive: Their labour has a certain value regulated by the same principles which regulate other kinds of labour. 3 Productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the national produce. 4 The whole annual produce of the land and labour of every country is ultimately destined for: When the produce first comes from the ground or from the productive labourers, it naturally divides itself into two:
  1. The produce destined for replacing a capital
    • This is for renewing the provisions, materials, and finished work withdrawn from a capital.
  2. The produce for the revenue of:
    • the owner of this capital as the profits, or
    • some other person, as the rent of his land.
Thus, of the produce of land: The largest part of the produce of a great manufactory always replaces its undertaker's capital. 5 That part of the national annual produce which replaces capital, immediately only pays for the maintenance of productive hands. 6 A man who employs his stock as capital always expects it to be replaced with a profit. 7 Unproductive labourers and those who do not labour at all, are all maintained by revenue: 8 The proportion between the productive and unproductive hands depends very much on the proportion between the annual produce destined for replacing a capital, and the annual produce destined for rent or profit. 9 In opulent European countries, the largest portion of the produce of the land is destined for replacing the capital of the rich and independent farmer. But during the feudal government, a very small portion of the produce was sufficient to replace the capital employed in cultivation. But the whole produce of the land undoubtedly belongs to him who can dispose of the labour and service of all those whom it maintains. 10 In the opulent European countries, great capitals are presently employed in trade and manufactures. 11 That part of the annual produce destined for replacing a capital is much greater in rich than in poor countries.

12 The proportion between those different funds determines the industry or idleness of a country's inhabitants.

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Next: Chapter 3b: Savings