GREAT nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands.*
Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts.* Such people, as they themselves produce nothing, are all maintained by the produce of other men’s labour. […]
It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will.
That is to say, people who consume more than they produce. ‘Unproductive’ does not necessarily mean bad. As Smith says later, a man who throws lots of parties for his friends is all the poorer for it in monetary terms, but he is much more likeable than a miser.
Then as now, people argued that lavishing taxpayers’ money on government jobs or the arms industry boosted the economy. Smith shows that it actually drains the economy, far more than the little weaknesses and luxuries of wealth-creating private citizens do.
Précis
Adam Smith explained that while private individuals both create and consume wealth, governments only consume it. Consequently, he said, it was most inappropriate for politicians to criticise the public for the way they spend their own money, since extravagance in government was far more likely to beggar a nation than domestic extravagance was. (53 / 60 words)