Wealth & Money Quote by Adam Smith

Smith is quietly yanking banking down from the pedestal of “wealth creation” and putting it back where he thinks it belongs: in the plumbing. The line draws a razor-edged distinction between piling up “capital” in the abstract and getting existing capital to actually do something. Banks, in his telling, don’t conjure national riches out of thin air. At their best, they reduce dead weight in the system - hoarded coin in chests, idle balances, assets stuck in the wrong hands - and redirect it into tools, inventories, wages, and projects that produce output.

The key phrase is “active and productive.” It’s a moral and political claim as much as an economic one. Smith’s subtext is anti-mystification: finance is not an alchemy, it’s an allocation mechanism. That’s why he praises only the “most judicious operations.” He’s warning that banking can just as easily misfire - credit can lubricate industry or inflate vanity, speculation, and fragility. The compliment comes with a leash.

Context matters: Smith is writing in a world where paper money, banknotes, and expanding credit networks are transforming commerce, and where critics fear banks are dangerous engines of illusion. He answers with a conditional defense. Banking increases “industry” not by changing a nation’s fundamental resources, but by improving their circulation and deployment. It’s an early formulation of a still-contentious idea: finance is productive when it serves the real economy, and parasitic when it mistakes movement for value.