The Profit Game: How Money Makes Money — The Wealth of Nations

Profits move with the same forces as wages but in the opposite direction. As stock accumulates across an economy, more merchants enter each trade and bid profits down; more capital in all trades does the same everywhere. Profit is harder to measure than wages because luck, rivals, and shipping losses swing returns day to day, so Smith uses interest rates as a rough gauge of ordinary profit. England's legal interest ceiling fell from ten percent under Henry VIII to five under Queen Anne, tracking a society that grew richer while trade margins shrank. Wages rose in the same period while profits in most branches fell.

Town trades often show lower profit rates but higher wages because many employers compete for scarce hands; remote places may offer higher profits and lower wages when labour is plentiful. Scotland pays lower wages and higher ordinary profit than England; France appears to Smith to advance more slowly than Scotland despite riches. Holland illustrates mature capital: two percent government borrowing, three percent for private credit, low profits, high wages, and a culture where everyone does business. New colonies can briefly combine high wages and high profits when fertile land and scarce labour reward planters, but both normalize as settlement fills in. Sudden wars or new branches of trade can temporarily lift profits by pulling stock into unusually lucrative channels, as after the late war when London companies borrowed at five percent.

When national capital decays, profits and interest can spike even as wages collapse, as in exploited Bengal or ancient provinces under predatory governors lending at forty-eight percent. Brutus lent in Cyprus at forty-eight percent under ruinous Roman administration. China's stationary wealth, insecure small capital, and twelve percent interest show how law and monopoly can keep profits high without dynamism. Weak contract enforcement raises interest as if every borrower were bankrupt. Smith closes with a sharp observation: merchants protest high wages for raising prices arithmetically, but stay silent about how high profits compound through the supply chain like interest on interest. In advancing countries, low profit rates in many goods can offset high wages and keep exports competitive.