Profits move with the same forces as wages, but in the opposite direction. As capital piles up in an economy, more merchants enter each trade and compete profits down. Profit is harder to measure than wages because luck, rivals, and shipwrecks swing returns, so Smith uses interest rates as a rough gauge. The rate of interest tracks ordinary return on stock more steadily than any single ledger. England's legal interest cap fell from ten percent under Henry VIII to five under Queen Anne as the country grew richer.
Town trades often show lower profit rates but higher wages because many employers compete for scarce workers. Remote places may offer higher profits and lower wages when labour is plentiful. Scotland paid lower wages and higher ordinary profit than England. Holland shows mature capital: low profits, high wages, and nearly everyone in business. New colonies can briefly combine high wages and high profits when land is fertile and workers are scarce. A small shop may earn a high percentage on little stock while a great house earns a lower percentage on vast capital.
When national capital decays, profits and interest can spike even as wages collapse, as in exploited Bengal. Weak contract enforcement raises interest as if every borrower were bankrupt. Masters in dear years praise scarcity because it humbles workers, even when high food prices hurt servants too.
Smith closes with a sharp point: merchants complain loudly when high wages raise prices, but stay quiet when high profits compound through the supply chain. In advancing countries, low profit rates in many goods can offset high wages and keep exports competitive. Understanding profit as a shrinking percentage on growing capital explains why success often feels like thinner margins even as the economy expands. When profits fall in a trade, capital drifts elsewhere; when they rise, new entrants arrive until the advantage is shared away. That is why Smith treats average profit as a barometer of how crowded investment has become, not as a moral scorecard for any one shopkeeper. Interest and profit fall together in rich countries because more capital chases the same number of good openings.
Coming Up in Chapter 10
Average profit and average wages still hide huge gaps between jobs. Smith next explains why butchers, lawyers, and apprentices face different pay, and why European law often blocks equal competition.
