ABSTRACT
Hume’s ‘‘rich country-poor country’’ argument, although almost forgotten in
the history of economic and political thought, generated huge interest among his contemporaries. In the third paragraph of his essay ‘‘Of Money,’’ first
published in his Political Discourses in 1752, Hume offered a striking com-
parative assessment of the economic future of rich and poor nations (Hume
1985u [1752c], 283-84).2 Rich nations, he declared, had virtually unbeatable
advantages over their backward competitors. Their Achilles heel, however,
was in their high wage costs. Consequently, in order to preserve their compe-
titiveness, manufacturing industries often relocated from high to low wage
areas. This industrial migration, Hume claimed, gave a welcome boost to the economies of latecomer nations. Its beneficial effects, however, only lasted
until wages in the new location also rose to uncomfortably high levels, forcing
the same industries to migrate to countries of yet lower wage levels. Hume
regarded his native Scotland as a poor country. His appraisal of the low-wage
advantage of poor nations and the corresponding weakness of rich ones had a
decisive influence on his stance on key issues of economic policy, including his
assessment of the impact of foreign trade on the economy and the infla-
tionary consequences of credit creation. It was his lifelong interest in the economic future of poor countries that made him a Scottish political economist.
