(^444) THE WEALTH AND POVERTY OF NATIONS
Smith, low profits were "the natural effect of prosperity," and Dutch
merchants were suffering in effect from what Marxists would later call
false consciousness.^2
Smith also noted that "the wages of labour are said to be higher in
Holland than in England," and this too showed that Holland was
richer. Well, it might mean that, but it might also imply that Holland
was growing faster than England, and that was simply not true.* Re
call that Smith had already made such a link between high wages and
growth in comparing the American colonies with the mother country.
"[TJhough North America," he wrote, "is not yet so rich as England,
it is much more thriving, and advancing with much greater rapidity to
the further acquisition of riches."^3
Smith should have applied the standards of his Britain-North Amer
ica comparison to that between Britain and Holland; that is, distin
guished between wealth and growth, between being rich and thriving.
They would have prepared him for signs of Dutch slowdown, t Instead,
he focused on a Holland overflowing with capital and seeking outiets
for investment abroad, which was true enough. Already in the early
eighteenth century, the Dutch were placing large sums in the British
and French funds, as well as in Bank of England, East India, and South
Sea stock. They were doing this, of course, because British and French
placements paid more; but the point is, they paid more because do
mestic demand was greater and supply shorter, and all this because, in
England at least, economic growth was more rapid.**
Meanwhile Dutch industry had fallen on hard times. (This is one in
stance when Smith would have gained by visiting.) Output of Leiden
fine cloth had fallen from 25,000 rolls a year in 1700 to 8,000 by the
late 1730s; of Leiden camlets from 37,000 pieces in 1700 to 12,600
in 1750, 3,600 by 1770. Haarlem linen bleaching shriveled in the
1730s and '40s. The famous windmill-driven complex on the Zaan
(timber, sail-canvas, ropemaking, shipbuilding) went into free fall by
the 1750s, many of the mills still and silent. Cotton printing and to-
- His laconism in this instance may lead us to believe that his comparison, whatever
its accuracy, was of nominal rather than real wages—in other words, not based on pur
chasing power.
t "The trade of Holland, it has been pretended by some people, is decaying, and it
may perhaps be true that some particular branches of it are so."
- They might also have paid more because English business was bad, risks greater, and
they were looking for outside gulls to save the day—like Mexico in 1994. (Not true,
of course.) Prices are determined by demand as well as supply. In this instance Smith
looks only at the Dutch side—supply—and ignores demand.
- They might also have paid more because English business was bad, risks greater, and