The Online Library of Liberty

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• Preface
• Editorial Note
• I.: Biographical Sketch
• II.: Early Economic Writings: 1804-1808
• An Essay of the Impolicy of a Bounty On the Exportation of Grain
• Introduction
• Essay On the Corn Laws
• Chap. I: Of the History of the Corn Laws
• Chap. II: Influence of the Principle of Population Upon the Corn Trade
• Chap. III: Effects of the Bounty On the Rent of Land
• Chap. IV: Effects of the Bounty On the Profits of the Farmer
• Chap. V: Effects of the Bounty On the Value of Silver
• Chap. VI: Exportation
• Chap. VII: Importation
• Chap. VIII: Landlords, Farmers, and Corn-dealers
• Postscript to Essay On Impolicy
• Commerce Defended.
• Introduction
• Chapter I: On the Security Or Insecurity of the British Commerce
• Chapter II: On Land, As a Source of Wealth
• Chapter III: Of the Definition of the Terms Wealth and Prosperity
• Chapter IV: Of Manufactures
• Chapter V: Commerce
• Chapter VI: Consumption
• Chapter VII: Of the National Debt
• Chapter VIII: General Reflections
• Smith On Money and Exchange
• III.: James Mill and David Ricardo
• Elements of Political Economy,
• Preface
• Preface (to the 2nd Edn.)
• Introduction the Subject—its Limits—and Division
• Chapter I: Production
• Chapter II: Distribution
• Chapter III: Interchange
• Chapter IV: Consumption
• Mill On Scope and Method
• Whether Political Economy Is Useful London Review, Jan. 1836, Vol. Ii, Pp. 553–572.
• V.: James Mill and India
• Book Ii of the Hindus
• Chapter I: Chronology and Ancient History of the Hindus
• Chapter II: Classification and Distribution of the People
• Chapter III: The Form of Government
• Chapter IV: The Laws
• Chapter V: The Taxes
• Bibliography

II.

EARLY ECONOMIC WRITINGS: 1804-1808

James Mill is known among economists chiefly for his rôle as midwife in the birth of Ricardo's Principles of Political Economy (1817), and for his efforts as a Ricardian propagandist. But Mill did not meet Ricardo until 1808, by which time he had already written two pamphlets and a number of review articles on economic questions, while Ricardo had hardly begun his career as an economist. Apart from the two pamphlets and the extract from one of Mill's articles which are reprinted and introduced below, much of Mill's early economic journalism suffers from the fact that he relied exclusively on such work to support himself.1 Nevertheless, it is of considerable value to those interested in the development of economic thought in the neglected period between Adam Smith and Ricardo. Mill's original contact with the science of political economy probably came when he attended Dugald Stewart's lectures while a student at Edinburgh. Stewart had studied under Adam Smith, and lectured on political economy in a Smithian vein, though with some physiocratic deviations. James Mill, therefore, has some claim to be considered as a link, albeit indirect, between the founder of classical economics and Ricardo, its next great exponent.

Mill possessed in full measure what the philosophers of the eighteenth century referred to as l'ésprit de système; in all spheres of his considerable intellectual activity he appears as the disciple and determined partisan. Adam Smith was the dominant influence on Mill's work at this time, and all of his early economic writings take the form of defences of Smith's doctrinal and policy views. Although this is evident in the works reprinted here, in some respects their chief interest lies in the hints they provide of future developments, rather than in their Smithian basis. Mill spoke of Smith at this time as ‘that matchless political philosopher’, comparing him with Copernicus and Newton to the detriment of his Ptolemaic critics. This feature of Mill's early writings can be illustrated by the following comparison which he made between Smith and Sir James Steuart; it also provides insight into the characteristics which Mill prized in works of political economy.

Sir James surveyed the current systems with an eye more than ordinarily enlightened. It perceived that they were not sufficient. But it did not enable him to see through the subject, and to find out what was wanting to the establishment of satisfactory doctrines. He rather aimed at improvements than made any. His mind was not of that first order which lays hold of general relations, and by happy classifications is enabled to disentangle confusion, and ascend to simple and comprehensive axioms. To Sir James's eye the subject presented itself as a rude chaos; and he found himself unable to reduce it to light and order. He laboured zealously, but his labours came to nothing. He explained some old errors, and established some new truths. But his opinions have no general bearing. The mind is bewildered in following Sir James's speculations. The general principles of Political Economy seem to become more obscure in his hands than they were before. Dr Smith was accustomed to say that he understood Sir James Steuart's system better from his conversation than from his volumes; and at this we do not wonder. For, in truth, there is no combination of principles in his volumes which can be called a system at all. He adheres to the old commercial system; that is to say, the general strain of his reasonings and observations is more in conformity with this than with any other; yet he departs from it in many important doctrines, without perceiving whither these departures lead.

The labours of Dr Smith were of a different kind. He not only perceived that the preceding systems were deficient, but he perceived wherein they were deficient. He looked through the confusion of the subject; and after removing the unfounded theories of his predecessors, established with the evidence of demonstration a number of propositions, which truly deserve the name of principles. Sir James Steuart's book added very little to the knowledge of Political Economy. He had a confused perception of the insufficiency of what had been done before him; he discovered here and there an error, and added here and there an ingenious thought of his own. But Dr Smith reared the study to the dignity of a science. He explained the real sources of wealth, which till his time had been so grossly misunderstood; and conferred as great a benefit upon Political Economy, as was conferred on Astronomy by those philosophers who first confuted the perplexed doctrine of the cycles and epicycles, and established the simple principles of the Copernican system.2

Each of the works reprinted here was undertaken as a contribution to contemporary discussions of issues raised or connected in one way or another with government policy during the early phase of the Napoleonic Wars. The first work deals with the problem of grain scarcity and the policy of the government towards domestic agriculture and the importation of foreign foodstuffs. The second concerns the gains from international trade and Britain's commercial policy in the light of Napoleon's economic blockade: in dealing with this, Mill was drawn into wider questions, such as the causes of economic growth and the effect of government expenditure. In the last work belonging to this period we see Mill's contribution to the debate on monetary questions initiated by the restriction on cash payments during the war.

1. An Essay on the Impolicy of a Bounty on the Exportation of Grain (1804)

This was Mill's first separate work and has been described by D. G. Barnes, the author of the standard history of the Corn Laws, as ‘probably the ablest pamphlet against the bounty which was produced during the entire controversy over the merits of that system’.3 It appeared originally in the Literary Journal, Oct. 1804, as a review of a pamphlet by James Anderson4 ; and was expanded and published anonymously in the same year.

The background to Mill's pamphlet, like the Corn Laws themselves, is rather complex. One sign of the structural changes in the British economy associated with the industrial revolution was that towards the end of the eighteenth century Britain became a net importer of corn in contrast to her net exporter position at the beginning of the century. Although domestic agriculture had expanded by means of enclosure, cultivation of waste land, and improvement of farming methods, the expansion was not sufficient to keep pace with the growth of population and of the manufacturing sector. Together with this secular change, and to some extent confused with it, were periodic crises brought on by poor harvests and exacerbated by the hindrance to foreign supplies during the Napoleonic Wars. In Dec. 1799 a crisis of this kind led to a panic rise in the price of wheat. Prices continued to rise throughout the following year after another bad harvest, reaching a peak of 156s. per quarter in Mar. 1801.5

It was during this period of scarcity that James Anderson's pamphlet appeared. Anderson was a strong supporter of schemes to protect and encourage domestic agriculture, and held that a return to the export bounty system would solve the problems of recurrent scarcity and dependence on foreign supplies. He supported this opinion by reference to what he considered to be past experience. When the bounty system had been in full operation between 1689 and 1773, agriculture had flourished, prices had fallen, and Britain had been a net exporter of grain products. After the Corn Law of 1773, which was regarded by friends and opponents of agricultural protection alike as marking a change towards diminished protection,6 agriculture had suffered, exports had fallen, and prices had risen. The change in Britain's status from exporter to importer of corn was due entirely to legislation inspired by ‘speculative’ opinions; and here Anderson singled out Adam Smith for criticism, since Smith had attacked the bounty system and welcomed the law of 1773.7

The acute scarcity abated later in 1801, and for the next three years prices continued to fall, reaching 50s. per quarter by the spring of 1804, just above the pre-war level. This naturally aroused concern among land-owners. A Select Committee was appointed in May 1804 to reconsider the Corn Law of 1791, which had given an increased measure of protection at the time, but was now thought not to guarantee a ‘fair and reasonable price’ to the farmer. As a result of the Committee's findings a Bill was passed later in the year which conceded higher protection and endorsed the bounty principle.8 The measure proved to be unnecessary. Between 1804 and 1813, poor crops, and after 1807, the operation of the Continental System, kept prices above the level specified. Its true significance has been explained by Barnes as follows:

In reality the Act of 1804 was merely a link between that of 1791, which marked the first decided use of political power by the landed interest to secure class legislation, and that of 1815, which marked the most extreme use of this power.9

It was this Act and the reasoning of its supporters that Mill set out to attack. Mill upheld Smith's position with regard to the bounty system, but added a number of touches of his own. He believed that Britain had become a net importer of grain as a result of the growth of manufacturing and population relative to agriculture; and that the bounty had nothing to do with this. He went on to advance the proposition, based on the Malthusian principle that population and the demand for corn always rise to a level determined by subsistence, that a bounty is never required to ensure a ‘sufficient’ market for agricultural products. It is an elementary principle of society ‘that a sufficient market is always provided at home, for all the corn which the land with the utmost exertions of the farmer can ever be made to produce; that the demand will always be proportioned to the supply, however great that supply may be; and that a foreign market can never be wanted for any quantity of corn that can be regularly produced’.10 In his later pamphlet, Commerce Defended, a similar conclusion regarding foreign markets, derived from Say's Law, was applied to all goods.11

The bounty was unnecessary and could have no effect on agricultural production because although it raises the home price of corn, it does not raise the farmers' profits, except perhaps temporarily. Competition among farmers and the ability of the landlord to raise his rent combine to bring profits down to the ‘lowest consistent with the nature of the business’. Adam Smith in his criticism of the bounty had said that with higher prices the farmer pays ‘his landlord a money rent proportionable to the rise in the money price of his produce’12 ; but had stressed the fact that neither landlord nor farmer would be better off in real terms owing to the effect of a rise in the price of corn on the price of all other goods. Mill also makes the point that since ‘the money price of corn regulates the money price of everything else’, the effect of the bounty is to lower the value of money. But it is possible to detect the germ of the later Ricardian attack on the Corn Laws in Mill's view that by enabling land-owners to charge higher rents, the ‘sole effect’ of the bounty ‘is to put money into the pockets of the proprietors of land, by taking it out of the pockets of all other classes of the people’.13 Nevertheless, in the concluding chapters of his pamphlet, where he puts forward a case for free exportation and importation of corn, Mill is closer in spirit to the world of Adam Smith than to Ricardo and the debate on the Corn Laws as it was renewed in 1815. He concerns himself mainly with the benefits of free trade as a device for overcoming scarcity and minimising fluctuations in the price of corn, rather than with the effect of free trade on the division of the total product between rent, profits and wages.

2. Commerce Defended (1807)

Napoleon's campaign of economic warfare against Britain was initiated by the Berlin and Milan Decrees of 1806 and 1807 which prohibited all trade with Britain. In retaliation, Orders in Council were issued in 1807 confirming the blockade already maintained by the British navy on the Continental coast, and placing restrictions on all neutral ships trading with the Continent.14 Before writing Commerce Defended, the treatment of neutral ships had received Mill's attention in the Literary Journal. The question arose first in connection with the attempt to reconstitute the British colonial system by a series of Orders in Council after the American Revolution. This system was designed to protect British economic and naval interests by maintaining the monopoly of the colonial trade and its carriage. Under conditions of war the system proved difficult to operate without causing hardship to the West Indies, and ad hoc concessions were made which allowed American ships to share in the trade with British colonies. As the war on the economic front spread, a connected question arose as to the treatment that should be given to neutral ships trading with Britain and Europe. Mill consistently upheld the liberal view on this matter as put forward by Adam Smith; he attacked exponents of the old colonial system like Lord Sheffield,15 and defended the neutral trade against those who held that it was aiding the enemy.16

The really important phase of the economic controversy aroused by the Napoleonic blockade opened in 1807 when William Spence published his Britain Independent of Commerce. Under the guise of dealing with the current crisis, Spence set out to show ‘that though Europe and America, Asia and Africa, were to resolve never more to use an article of British manufacture, still this favoured isle has the means within itself, not merely of retaining the high rank which she possesses, but of progressively going on in her career of prosperity and of power’. In the circumstances, it is hardly surprising that this position was eagerly taken up and widely discussed. Spence's pamphlet eventually ran to seven editions, and his views were given wider currency by William Cobbett who reprinted large extracts from the pamphlet in his Political Register.17 p> Spence elicited two important rejoinders, one by Robert Torrens entitled The Economists Refuted and the other by James Mill which is reprinted here.18

Spence's pamphlet was one of a number of works published at this time which set out to revive certain notions derived from the physiocrats in opposition to the ‘orthodox’ views of Adam Smith.19 This does not mean that Spence can be taken as a fair representative of physiocratic ideas since he does not hesitate to abandon them in favour of arguments derived from mercantilist writers, and even Smith himself, where convenient to his case. Spence was nothing if not an eclectic. Mill certainly recognised this. He was willing for polemical purposes to make good use of the inconsistencies in Spence's hotch-potch of doctrines, but he also saw the need to go beyond a simple refutation of physiocracy to answer Spence's case.

Spence begins, at least, as a physiocrat. Agriculture is the real source of a nation's wealth because only in agriculture does labour earn a return which exceeds that required to replace capital and support labour during the production period. This net surplus accrues to the land-owner in the form of rent. Labour employed in manufacturing yields a subsistence-wage together with a ‘normal’ profit for the employer. Any ‘abnormal’ profit must be earned at the expense of other members of society, and this means, ultimately, at the expense of the rent-receiving classes. Under no circumstances, therefore, do manufacturing profits add to the net surplus of the society. But manufactures should not be discouraged: on the contrary, the existence of a manufacturing sector is necessary as a stimulus to the raising of an agricultural surplus. Agriculture and manufacturing ‘are the two chief wheels in the machine which creates national wealth’20 ; to set this machine in motion and keep it running smoothly the expenditure of the landowning classes is essential.

This leads Spence on to a criticism of Smith's view that parsimony and accumulation are the foundation of a nation's prosperity. Like Malthus, whose point of view he anticipates, he attacks savings not because they are hoarded, but because they entail a diversion of expenditure towards investment and away from immediate consumption. The fall in consumption expenditure brought about by an increase in investment leads to a decline in national prosperity.21 Since ‘expenditure not parsimony is the province of the class of land proprietors’, they perform their ‘duty’ best if their expenditure increases progressively. To this end, Spence extols the virtues of all forms of luxury spending. Even expenditure on frivolous luxuries helps to maintain prosperity, though he admitted that it would be more advantageous to a nation's wealth if expenditure were to be concentrated on such durable goods as ‘splendid palaces’.22

Land-owners had not always carried out their spending duties to the full, but fortunately the growth of the National Debt had come to the rescue by converting ‘what was destined for capital into consumable revenue’, thus averting the problem of over-accumulation of capital.23 It is true that the National Debt brought with it a heavy tax burden, but ‘this very oppression is the means of bettering the condition…of the lowest ranks of society’.24 For these reasons he considered high levels of government expenditure, as during periods of war, to be favourable to prosperity, and agreed with Lauderdale in opposing the setting up of a sinking fund.

It is in this context that Spence's attitude to commerce as a source of wealth must be considered. Wealth is primarily the result of interaction between domestic agriculture and manufacturing; commerce has a minor and dispensable part to play. Commerce is simply an exchange of equivalents; a nation gains nothing apart from ‘conveniences’ from importing because an equivalent outpayment must be made. Profits may be earned by individual importers, but these are gained at the expense of domestic consumers. He does admit that where exports exceed imports, the profits on such excess, being earned at the expense of foreigners, make a positive, if much overrated, contribution to wealth. Here he makes use of an argument borrowed from the mercantilist writers, namely that durable commodities are more valuable than ‘fugitive and evanescent’ goods. Viewed in this light it is obvious that Britain loses by trade.

We supply them with commodities of absolute necessity to comfortable existence, and we receive in return from them such precious articles as tea–which debilitates us, without affording an atom of nourishment: as wine, rum, brandy, which do us the favour of shortening the days of a great proportion of our population. It is the countries we trade with, and not we, that get rich by our commerce.25

He admitted though, that any sudden loss of foreign markets could bring temporary distress, and it is perfectly in keeping with Spence's views on government expenditure that he should advocate a programme of public works to deal with such disorders.26 In the long run, however, he appears to have felt that the best solution would be to divert spending from foreign to home-produced luxuries and necessities.

Mill's reply to Spence begins in earnest in Chapter IV with an attack on the fundamental physiocratic proposition that manufacturing profits, unlike rent, form no part of the net surplus of a society.27 He maintains that profit is a legitimate return on invested capital resulting from the enhanced productivity of labour when employed by capital, and not merely a transfer income earned at the expense of the consumer. He considered that Spence had fallen into a related fallacy when dealing with the gains derived from international trade. A nation gains from trade by the resultant increase in the ‘productive powers’ of its labour and land. These gains can be measured by the savings in real cost (expressed in physical terms of the wage-good corn) obtained by importing goods which, if produced at home, would cost more than the goods exported in exchange.28 This is not a statement of the comparative cost doctrine enunciated later by Ricardo; it does not make explicit the idea that importation would involve gain even if the cost of producing the good was higher abroad than at home. Mill's statement is one version of an eighteenth-century rule, of which the comparative cost doctrine was a refinement; but as Professor Viner has pointed out, the comparative cost doctrine ‘adds nothing to [the rule] as a guide for policy’.29

Mill moves on to counter Spence's under-consumptionist interpretation of the relationship of capital accumulation, consumption and government expenditure. Commerce Defended supplies an important link in the continuity of ‘orthodox’ macro-economic views between Smith and Ricardo. Mill, making use of ammunition provided by Smith, fires the opening salvo in the battle between those who saw only benefit in the process of capital accumulation, and those who believed that it was possible for accumulation to be ‘excessive’ in some sense: between those who regarded the economy as being self-regulating, and those who considered that some form of intervention might be required to achieve the ‘correct’ level of consumption expenditure and to avoid economic breakdown. Mill versus Spence gives a foretaste of Ricardo versus Malthus.

Mill accepted the growth-oriented interpretation of the wealth of a nation made popular by Smith: that wealth consists of a nation's ‘powers of annual production’ rather than its total accumulated stock of capital. The only part of the total stock of accumulated capital which was important to the growth of annual produce was that destined to support or aid productive labour.30 Mill does not define the terms productive and unproductive labour; he reformulates Smith's idea in terms of the goods (but not services) consumed or used by the two types of labour. Under unproductive consumption he includes all luxuries (whether consumed by productive or unproductive labour) and the ‘necessaries of life’ consumed by unproductive labour. Productive consumption consists of the machinery, raw materials and wage-goods used by productive labour. The first form of consumption ‘means extinction, actual annihilation of property’ whereas the second ‘means, more property, renovation, and increase of property’.31 The distinction can be related to the point made earlier about profit: that part of the annual produce which is consumed unproductively is not available for use as capital; it does not add to the productive powers of labour and thereby earn a profit.

This line of reasoning leads on in Chapter VI to a full examination and rebuttal of Spence's case for encouraging unproductive consumption. In the interests of growth, Mill argues, it is essential to increase the volume of productive consumption at the expense of unproductive consumption. Spence's fears concerning excessive capital formation rest on a confusion which Mill sets to rights by invoking Smith's famous doctrine that ‘what is annually saved is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people’.32 He takes this doctrine one stage further by asserting that general over-production is impossible. ‘The production of commodities creates, and is the one and universal cause which creates a market for the commodities produced.’33 His elaboration of this principle is conducted on the assumption of a barter economy, and under these circumstances it is tautologous: though an excess supply of a particular commodity matched by an excess demand elsewhere can exist, aggregate supply must equal aggregate demand. He obviously intended to imply that the same conclusion applied to a money economy; but since he does not show how the result would be established in such an economy, it is impossible to say whether he held to what is now known as Say's Identity or to Say's Equality, i.e. whether equality between aggregate demand and supply is established regardless of money, assuming money to be simply a medium of exchange, or whether the value of money relative to goods provides the mechanism for equating aggregate demand and supply.34

Mill's name is sometimes bracketed with that of J. B. Say as discoverer of this Law of Markets. In the discussions between Ricardo and Malthus on general over-production, the idea ‘that in reference to a nation, supply can never exceed demand’ was spoken of as ‘Mr Mill's’.35 But in the Preface to his Principles of Political Economy, Ricardo acknowledged Say as the originator of the doctrine. In view of the close friendship between Ricardo and Mill, and Mill's co-operation in producing the Principles, this might seem strange. Mill had in fact read the initial statement of the Law in Say's Traité before writing Commerce Defended, and went out of his way later to acknowledge Say's claims to priority.36 In a note to his article on ‘Economists’ for the Supplement to the Encyclopaedia Britannica he mentions Commerce Defended and says:

The only part of Mr Mill's pamphlet to which it is of any use at present particularly to refer, is where he proves that a balance necessarily exists between production and consumption; and that no amount of production can ever be without a market; a doctrine of cardinal importance, first illustrated by M. Say in his very able work, entitled Traité d' Economie Politique, but of which the evidence will perhaps be found more clearly deduced in this pamphlet than in any other treatise yet published.

Having shown that Spence's fears concerning the rate of capital accumulation are groundless, Mill attacks the welcome given by Spence to the growth of the National Debt and to Henry Petty's schemes for alienating the sinking fund. Mill's fervour on this issue is due partly to his acceptance of the Smithian view that government expenditure is ‘unproductive’, and partly to his political opinions regarding the burden on the people of current war expenditure.

Perhaps the most surprising fact about Mill's reply to Spence is that he concludes by agreeing with Spence's main conclusion, that the value of commerce to a nation's wealth is much overrated.37 Foreign trade leads to a better distribution of resources, but owing to the beneficent operation of the Law of Markets, trade is never necessary to guarantee full employment of those resources. He hints that ‘the national prosperity may in some cases even be consulted by abstaining from [foreign trade]’ so as to minimise economic instability.38 Mill thus moves away from Smith's ‘vent-for-surplus’ view of the gains from trade to take the position later upheld by the Ricardians on this issue.39

3. ‘Thomas Smith on Money and Exchange’, Edinburgh Review, Oct. 1808

One of the most important questions discussed in the early 1800's was the state of the currency in the light of the restriction of gold payments introduced by the Bank of England in 1793, and renewed throughout the war. Mill reviewed some of the important contributions to the first stage of the debate between ‘bullionists’ and ‘antibullionists’ in the Literary Journal and the Eclectic Review.40 But the best statement of his views on monetary matters at this time was made in an article for the Edinburgh Review, part of which is reproduced below.

Mill took a poor view of most of the contemporary writers on the subject of money: so far as he was concerned ‘the doctrine of money…remains as it was left by the great Father of political economy’. Unfortunately, this was one subject on which Adam Smith gave very little guidance; his views could be cited on both sides of the currency debate. Mill's strict adherence to the line laid down by Smith left him sitting on the fence between the opposing parties; it required Ricardo's intervention later to end Mill's indecision.41 Mill was not in favour of continuing the restriction on gold payments because he felt that it would gradually undermine confidence in paper money. But unlike the bullionist writers he refused to believe that with or without the restriction it was possible for the banks to over-issue paper money in the normal course of their business. According to Adam Smith, a certain quantity of money was required to circulate the annual produce of a nation; any addition to this ‘channel of circulation’ in the form of an increase in paper money would merely lead to the export of the precious metals.42 Mill followed Smith in believing that the quantity of money in circulation was controlled by the ‘real’ needs of the community. He rejected Thornton's idea, based on the quantity theory of money, that an excess issue would ‘widen’ the channels of circulation by raising prices; the excess would overflow and would not depreciate the currency. Mill's earliest statement of his disagreement with Thornton is given in a review article written in 1804 on the Irish currency problem.43

We advance a position which is directly the reverse of his [Thornton]; and we say that prices are very little affected, if they are affected at all, by an increase or diminution of the circulating medium. To see the truth of this position it is necessary to recollect what it is that purchases are in reality made by. Purchases are in fact the exchanges of commodities for one another;…Money is only the instrument by which the exchanges are performed. No man estimates the expenses which he shall be able to make, by the money he possesses; but by the valuable commodities he has to dispose of…It is very well established that it is the demand for commodities which determines their price. If the demand increases price rises; if it diminish prices fall. If then we would ascertain whether an increase in the circulating medium produce a rise of prices, we have only to examine what effect it is capable of producing upon the demand for commodities. The effect we think it will clearly appear, is very little.

On the basis of this simple argument, Mill concluded:

…that currency of a country can never be rendered excessive by the issues of banks; that currency can never sustain depreciation by the magnitude of these issues; and that the unfavourable state of exchange in Ireland, the high price of bullion, and the premium on guineas must be owing to something different from the paper issued by the bank of Ireland.44

The ‘something different’ was, he conjectured, political and social disorder.

This was basically the position which Mill developed in his Edinburgh Review article. Malthus, a moderate bullionist, thought highly of Mill's article,45 but Francis Horner considered that Mill was guilty of ‘deplorable heresies’ and begged Jeffrey not to allow Mill to review the Report of the Bullion Committee.46 The work reviewed by Mill was Thomas Smith's Essay on the Theory of Money and Exchange (1807). Smith was an anti-bullionist, and as part of his attack on those whom he regarded as being unduly impressed by the virtues of the precious metals as standards of value, he advanced the idea of regulating the value of currency by recourse to an ‘abstract standard’ to be determined by convention. After a good deal of rather pretentious philosophical discourse on the nature of definitions and abstract terms, Mill accuses Smith of confusing the two functions of money: as a medium of exchange and as a unit of account. Accounting can be carried on in terms of abstract symbols but they are of no use in the market place; even symbols must represent real objects. Mill concludes that ‘nothing can measure value, but value itself’. Money is simply a commodity like any other, chosen for its convenience and relative stability in value.

Mill then proceeds to an examination of the nature and properties of paper money, and it is here that our extract begins. Paper money issued by the banks can only be depreciated by loss of confidence in the issuer. An issue of paper money in excess of that required for the normal ‘channels of circulation’ would merely lead to paper replacing the gold which would now be exported. But paper would not depreciate in terms of gold because the price of gold in world markets must remain on a level, and is unaffected by the loss of gold from one nation. By the same token Mill did not believe that it was possible for paper money to depreciate in terms of commodities. The banks cannot over-issue paper because ‘every man desires to have no more currency than what is absolutely necessary for his immediate payments, that he may continue to make a profit with the larger portion of his funds’. The money drawn by individuals from the banks is thereby automatically regulated because it is ‘never called upon but to answer the natural exigencies of business, and in this way cannot become superabundant’. Moreover, bills issued by the banks are constantly returning to be retired. It is with this version of the ‘real bills’ doctrine that Mill answered those who believed that paper money had been issued to excess since the restriction on cash payments. Although he felt that the dangers to the Bank of England of a drain on gold were exaggerated, he was aware of the difficulties inherent in a situation in which the central issuing bank was also called upon to make advances to the government. The solution was simple: divest the Bank of England of its functions as banker to the government.

An ESSAY of the IMPOLICY of a BOUNTY on the EXPORTATION of GRAIN

An ESSAY of the IMPOLICY of a BOUNTY on the EXPORTATION of GRAIN;

and on the Principles which ought to
Regulate the Commerce of Grain,

Divided under
the following heads:
Of the History of the Corn Laws;
Influence of the Population on the Corn-Trade;
Effects of the Bounty on the Rent of Lands;
Effects of the Bounty on the Profits of the Farmer;
Effects of the Bounty on the Value of Silver;
Exportation; Importation; Landlords,
Farmers, and Corn Dealers.

LONDON
printed for c. & r. baldwin, new-bridge-street;
Sold also by J. Ginger of Piccadilly; W. J. & J. Richardson,
and J. Asperne of Cornhill; and by P. Hill, and
J. Anderson, Edinburgh.

1804
(Price 2s. 6d.)

INTRODUCTION

Corn, being the only necessary article, is affected by certain circumstances which render the trade in Corn somewhat more complicated and mysterious than the ordinary cases of trade. This obscurity however might be easily removed, if the real difficulties of the subject were all that we had to contend with. But a number of theories have been formed with regard to it; these have taken possession of people's minds, and to remove these is the first, and probably the greatest task which we have to perform, to diffuse a general knowledge of the principles which ought to regulate this important branch of the national affairs.

The great object is to procure a proper supply of the necessaries of life. During the scarcity which we endured in this country a few years ago, the minds of men were more turned to the subject than they had been before. By the inquiries then made it appeared that during the last forty years this country had not raised all the Corn necessary for its own subsistence; and it was known that during all periods the country had been occasionally subject to the disadvantages and miseries of scarcity. There were two evils therefore existing in this department of the national interests; that of being, in some measure, dependent upon our neighbours for the necessaries of life; and that of being liable to the hardships of scarcity. It was the policy of the State to contrive means for removing both of those disadvantages. They were acknowledged to be disadvantages of the greatest magnitude.

It was properly, and naturally, the chief object of concern, during the pressure of that scarcity, to find the means of redressing the evils immediately felt. The first of these was the importation of the article wanted. But various other measures were talked of. One became so much applauded that Mr Burke, a very short time before his death, thought it necessary, in a memorial presented to Mr Pitt, to prove the utter impolicy of it, under immediate fear that it was about to be adopted by the legislature.1 This was to fix by authority the rate of labourers’ wages, according to the price of corn; it being understood that at the rate of wages, and the price of corn then existing, the labourer was unable to procure the means of subsistence, and that the farmer was making extraordinary and unreasonable gains.

Besides the means of removing the evils immediately felt, the means were sought of preventing the recurrence of scarcity. For this object also one contrivance, that of public granaries, became so much a favourite, that Mr Burke thought it necessary to warn the public against it in that performance to which I have already alluded, and in which he has told us many things, which it is to be lamented so few of us seem to know.

While such projects were devised for removing scarcity, the second of the evils above-mentioned, and for preventing its recurrence, our attention was attracted, in some degree, to the first of those objects too, our dependence upon foreign countries for a part of our supply; and various schemes for the improvement of agriculture were daily discussed. The return of plenty put an end to those speculations; and we should have gone on without any further inquiry, till a new scarcity had overtaken us, if it had not been for an effect of the preceding scarcity which began to be experienced.

During the reign of enormous prices and of high profits, it is well known that the ideas of the farmers became too high. They estimated, as was not unnatural, at much more than its proper value, the continuance of the gains they were then making. They were so eager in their business that they became willing to promise any rent for their farms. New leases were in almost all cases granted upon terms proportioned, or nearly proportioned to the price of corn at that time. When the price of corn fell they found themselves of necessity reduced to distress, having bound themselves in an unwise, and unequal contract. But, as is usual with men, they did not blame themselves for the evils which they felt; they blamed the low price to which corn had fallen; and one of the happiest circumstances which could arrive to this country became the object of their clamour and outcry. The farmers had not sufficient profits; they could not carry on their trade; prices must be raised. Of course the landlords liked this cry much better, than that against unreasonable and ruinous leases. They joined in it; for their interest naturally prevented them from seeing its absurdity. They came to parliament for assistance to export corn, till the farmers could sell it high enough to pay them their present rents; and, wonderful to tell, parliament granted that assistance!2

Of course it was not for the declared purpose of enabling them to draw great rents that they sought or obtained the law. The old mercantile theory of politics suggested certain vague ideas of the efficacy of bounties; and they persuaded parliament, and endeavoured to persuade the world, that to grant a bounty on the exportation of corn, and a duty on importation, was one of the most effectual means to promote the interests of the country.

The advocates for the law enacted upon these reasons tell us, that the effects of a bounty upon the exportation of corn are to encourage in such a manner the production of corn, that in all ordinary years we shall not only supply ourselves, but have a surplus to export, and that in deficient years we shall have this surplus in reserve, to prevent the effects of scarcity; that the happy consequence of this law therefore will be a deliverance from both the evils under which we labour, of being dependent upon our neighbours for the necessaries of life, and of being subject to the hardships and dangers of scarcity.

This is unquestionably a very lofty promise. It is not a trifling benefit which the inventors of this expedient will have the honour of bestowing upon their country. Their merit is not diminished by the simplicity of the means employed to attain so important an end. But it may be reckoned somewhat wonderful, that a discovery of this magnitude should so long have escaped the intellectual eyes of all the great men who have spent their days in studying the means of national prosperity; and should be reserved to distinguish and immortalize those profound thinkers, and indefatigable inquirers who brought forward the late corn law. From the infinite diligence with which they have been long known to study all the profoundest questions of political economy, it was to be expected that they would go much deeper than any of their predecessors; and things of no small importance which had escaped all who went before them we justly hoped that they would bring to light. But a discovery so extraordinary as this even the great hopes which they had raised did not entitle us to expect. So much the greater therefore are our obligations.

They present their reasons to us in abundance of words, and they are composed of various particulars. They may all however be reduced to two heads; and it will assist us in obtaining a clear idea of them to consider them under that division. The first may be denominated their argument from experience; the second their argument from the nature of the case. Under these heads will be included everything which has been advanced in favour of the bounty upon exportation by Dirom and Mackie,3 by Dr Anderson,4 and Mr Malthus,5 and indeed every thing which the author of this essay conceives it to be possible to adduce in behalf of this doctrine. It is his intention to examine these arguments in every light in which they can be presented. And he has distributed the different parts of that examination under separate titles in the chapters which follow.

ESSAY ON THE CORN LAWS

CHAP. I

Of the History of the Corn Laws

To prove from experience the good effects of granting a bounty on the exportation of corn and of imposing a duty on importation, the advocates for that measure give us a chronological account of the corn trade, from the time of Edward the 3d. It will contribute to distinctness, if I make a division of this period. In the year 1688, a law was passed for the first time, granting a bounty on the exportation of corn, and imposing a duty on importation.6 This law continued in force till about the year 1770, when it was in a great measure repealed.7 And since the year 1770, the exportation of corn has scarcely been encouraged. We may therefore consider the history of the corn trade, as comprehending three great periods; Ist. That preceding the enactment of the exportation law in 1688; 2d. The period during which that law was in force; and 3d. The period during which that law has been repealed According to this division we may state the argument from experience, adduced by the patrons of the law, very shortly, thus:

During the first period, exportation was either not permitted at all, or was at least burthened with a duty. No register was kept of exports and imports during this period; so that no conclusion can be drawn from the balance of this account, with regard to the quantity of corn produced. But we have a register of prices. During the last forty years of this period, the average price of the quarter of wheat was £2 14s. 9d. whereas during forty years posterior to 1720, while the law of 1688 was in full force, the price of the quarter of wheat was £1 16s. 2d. This is sufficient to prove that the cultivation of corn was much more prosperous during the latter than during the former period.

At the commencement of the second period, a bounty for the first time was granted upon the exportation of corn; and importation was subjected to a duty, or altogether prohibited. During this period our exports of corn rose greatly above our imports; and at the same time the price of corn was very low.

During the last period, the operation of this law of bounty on exportation and duty on importation has not been steady; sometimes it has been suspended, sometimes permitted, and sometimes even inverted. And during this period our exportation of corn has fallen greatly below our importation, and the price of corn has become very high.

It appears then, that during the time when the law of bounty was in full force, the exportation of corn was great, and the price low; and that during the times both before and after, when that law was not in full force, the exportation was little or none, and the price high. From this they conclude that to grant a bounty on the exportation of corn, and to impose a duty on the importation, is proved by experience to be wise and politic.

No arguments are more satisfactory than those from experience when the conclusions are legitimate. But no species of false reasoning is more deceitful than that from experience; nor is any more common. Lord Bacon, the great father of the Philosophy of Experience well understood this source of error; and when he divided all false philosophy into three species, he represented those who reason fallaciously from experience as composing, the second of the three classes; and their errors, he said, were still more monstrous and deformed than those of the hypothetical, or speculative philosophers. Some of the greatest and most fatal errors which have ever been offered to the world have been the fruit of an imperfect argument from experience. Such was Mr Hume's famous argument against Christianity. This too was the origin of the monstrous doctrines of Mr Hobbes both in religion and politics. How often does false reasoning from the immoral lives of persons who profess to be very religious lead others to become infidels? or how often does false reasoning, from the abuses observed in the management of existing governments, lead people to wish for the subversion of government? What was it but an argument from experience of this sort which brought forward all the horrors of the French revolution? Nothing is more common, since the honours of the experimental philosophy were so generally acknowledged, than to find shallow thinkers bring forward their arguments from experience on every subject. Among the common herd too of readers or hearers you very often find them with the most absurd pretensions of this sort gaining absolute credit. There is no species of pretension, however, against which the man of sense ought to be more on his guard. He will find, if he takes the trouble to examine, that one half of the popular errors which at present prevail are derived from no other source.

When we come to examine a little closely this experience of the advocates for the exportation bounty, we find it to consist in the single circumstance of being co-temporary. The low price of corn, and a great exportation was co-temporary with the law for the bounty; and this is all. To make their argument good then, they must prove that every thing which is co-temporary with another, is absolutely owing to that other. The national debt began about the very time when the bounty law was passed. Do they maintain therefore that the exportation and low price of corn during 50 years was owing to the existence and progress of the national debt? A very pretty theory however we think might be formed on this idea. It is the opinion of a numerous class of speculators, that a national debt is advantageous; but that it may be increased so far as to become burthensome and ruinous. Now observe; Great Britain had a national debt from the beginning of the eighteenth century; it went on gradually till the middle of that century, and during that time she continued to export corn and the price of it fell; but about that time the national debt passed the bounds of propriety, and ever since, the importation of corn has increased, and the price has risen. Is not this a demonstration from experience, that a national debt is advantageous till it amount to a certain sum, and is disadvantageous when it goes beyond that sum? It was not from any idea of assistance to the cultivation of corn, or any intention to benefit the nation, that the king's ministers in 1688 proposed, and obtained the law for granting a bounty on the exportation of corn. We are expressly informed in the history of that time, that it was passed to give a premium to the country gentlemen, in order to obtain their consent to the imposition of the land tax. This land tax, therefore, has been co-temporary with the bounty law. Accordingly we may argue that the prosperous state of the corn trade, during the period described, was owing to the land tax. The only very disastrous period too of that trade has been since the alteration was introduced into the state of the land tax. The benefit of the land tax then for the encouragement of agriculture is fully proved. I see not why the poor laws should not be entitled to the same distinction. They were in full force during all the time of this prosperity. Some time ago, however, Mr Pitt introduced certain alterations of the poor laws; and since agriculture has been terribly on the decline. Agriculture has never flourished too since the sinking fund was established; indeed it has declined ever since his present Majesty came to the throne. But it flourished greatly during the reigns of the first two princes of the Brunswick line. Why, therefore, should we not conclude that the existence of those two princes was very favourable to agriculture, but that the existence of the last is very unfavourable to it? Or what if we should say, that the administration of Sir Robert Walpole, the Duke of Newcastle, &c. was very favourable to agriculture, but that of Mr Pitt is very unfavourable to it; let us, therefore, have done with him, that we may export plenty of corn, and have it cheap! Were nothing more proposed than to refute the patrons of the bounty law, what has been already said, is fully sufficient to shew the futility of their argument from experience. But as it is of importance that the public should receive as complete information as possible, respecting a subject so interesting as this, I shall examine a little more particularly the different periods which I have assigned; and we shall see whether the circumstances of the times do not point out to us causes of the variations in the state of the corn trade, altogether different from the law of exportation.

In the first period, the 40 years immediately preceding the year 1688, are particularly specified. This was that period of tumult, contention, distraction, and distress which succeeded the death of Charles the First; the period of the Protectorate, during which the affairs of the nation were in a state of so much derangement; and that of the reigns of Charles the Second and James the Second, during which the nation was kept in continual agitation by the fears of popery and arbitrary power. The unhappy circumstances of those times are surely sufficient and more than sufficient to account for the state of the corn trade, which was not more unprosperous than any other branch of national affairs. We have therefore no reason whatever to have recourse to the want of a bounty on the exportation of corn, to explain all the appearances in this first period.

The second period began with the establishment of that admirable constitution, of that balanced system of liberty and coercion, which unites the freedom and the protection of the individual more effectually than has ever yet been done by any other government on the face of the earth. This extraordinary advantage gave an encouragement to every species of industry which could not fail to be speedily and powerfully felt. It was felt accordingly; and the nation went forward in a career of prosperity, of which there is hardly any example.8 Agriculture experienced the first effects of the happy change, as necessarily happened from the circumstances in which the country was placed. Agriculture was that species of industry which was then best known in the nation, and to which the greatest capital was applied. Manufactures, at least for foreign trade, had previous to this time been very little known. During the tempestuous period too which preceded, when the security of property was greatly impaired, the capital employed in manufactures was the most easily dispersed; and manufacturing industry and enterprize, being most easily discouraged and checked, necessarily suffered more in proportion than the more hardy and indispensable business of agriculture. Agriculture then was in a much better condition to take advantage of the happy circumstances of the revolution; and advanced with very rapid strides for many years. Whoever considers duly these circumstances will not be surprized at the prosperous state of agriculture during this period. He will not find any occasion to account for it by any extraordinary cause, as that of a bounty on exportation. He will rather, if he is surprised at any thing in the case, wonder that, great as the prosperity was, it was not still greater. It will not then I think be denied that all the appearances of the first two periods which afford our experience of the corn trade, may be completely accounted for without the operation of the bounty law.

But what, it may be asked, can be said with regard to the third period? The operation of that law was interrupted during this period, and the prosperity of the Corn trade declined. To what other cause could this be owing but to the want of the duty on exportation? Let me finish the historical sketch which I have begun, and a cause will appear which will probably be judged satisfactory. While agriculture was advancing in the manner I have above described, all other branches of national industry began, from the same causes, to make progress. The movements of commerce were feeble at the beginning, from the extreme state of debility in which they began. It gathered strength however every day; and in a short time its progress appeared evidently to be more rapid than that of agriculture. Agriculture was greatly before commerce at the beginning of the century; but commerce continued to gain ground till toward the middle of the century, or perhaps a little after the middle; when it may be fairly reckoned to have got the start, and it has continued to increase its distance ever since. Whoever is acquainted with the 3d book of the Nature and Causes of the Wealth of Nations, in which Dr Smith explains so admirably how much more commerce has been encouraged in modern Europe than agriculture, will be at no loss to account for the more rapid progress of commerce than that of agriculture in Great Britain during the last century.

Of the different states of thing here described the necessary effects were these; during the time that agriculture kept before commerce, the produce of agriculture was more than sufficient to supply all those who were employed in agriculture, and those who were employed in manufactures, and in the other business of the nation; it furnished therefore a surplus to export; but when commerce on the other hand advanced greatly before agriculture, then agriculture could no longer afford enough to maintain all those who were employed in manufactures and the other business of the nation, and a deficiency remained to be supplied by importation. This is the cause that since the middle of the last century our importation of corn has exceeded our exportation, and not the temporary suspensions of the bounty on exportation.

If this conclusion be just, all the appearances in the three periods into which they divide the history of the corn trade are then fully accounted for; and the bounty on exportation had nothing to do with them. Let us examine still farther if there is any objection which they can possibly bring to that conclusion. They cannot pretend to doubt that this country was much farther back as a manufacturing country than as an agricultural country at the time of the revolution. This is a point which is too well known to admit of any dispute. They will readily admit too that this country is now much farther forward as a manufacturing country than as an agricultural country; for this is the thing of which they complain. The particular point of time likewise at which manufacturing industry got before agricultural, they will probably be willing to grant, was that time when exportation of corn began to be changed for importation. We are agreed then with regard to all the facts. We can only dispute therefore concerning causes. Perhaps they will say that the manufacturing business got the start of the agricultural, not on account of those general discouragements imposed upon agriculture, which are so ably illustrated by Dr Smith, and to which we have referred; but on account of the suspension of the bounty on the exportation of corn. If we saw two ships, the one a great way behind the other, but sailing in the same direction; if we saw too that the last was the fastest sailer, and gradually advanced upon the other, till at last she overtook her; and if we saw that at this time the slow sailing vessel dropt a sail, and the fast sailing vessel advanced before her, but did not increase her distance any faster than she diminished it before, should we say that the lowering of that sail was in any degree the cause why the fast sailing vessel got before the slow sailing one? Surely not. As the comparative velocity of the two ships was exactly the same both before and after that sail was down, we cannot assign to it any influence whatever in the progress of either.

During the first part of the last century, the bounty on the exportation of corn was in full force; during the latter part it was interrupted. But if it appears that the progress of manufacturing industry in its advancement upon agricultural was just as rapid during the time the bounty was operating, as it was in getting before agricultural industry after the bounty was interrupted, it will be ridiculous to ascribe the more rapid motion of manufacturing industry to the want of the bounty on the exportation of corn. Because it will appear that this motion is equally rapid both when the bounty acts, and when it does not act. We have fortunately a series of facts which place this matter beyond all doubt, and prove most decisively that it is not to the bounty on the exportation of corn that we are to ascribe the comparatively slow progress of agricultural industry.

Let us observe the comparative progress of agricultural and commercial industry, during the period when the bounty on the exportation of corn was operating. The test to which the example of the advocates for the bounty leads us to apply is the account of the exports and imports. In the year 1697, the first in which a register was kept of the quantity of corn exported and imported, the excess of the exports above the imports was 101,643 quarters: in the same year the general exports from Great Britain, including this corn, were £3,525,906 official value. In the year 1764, the last year of the full operation of the corn bounty, the excess of the exports above the imports of corn was 535,528 quarters; and in the same year the general exports from Great Britain amounted to £17,765,331; that is to say, during this period of nearly 70 years, the corn trade exhibits an improvement of about 400,000 quarters for one year, worth not so much as £800,000, while the general commerce of the country exhibits an improvement of more than fourteen millions. Such then was the comparative progress of commercial and agricultural industry, while the bounty on the exportation of corn was in full operation; the progress of commercial industry was many times more rapid than that of agricultural. Let us next observe what was the case after the operation of the bounty was interrupted. I shall only examine it down to the commencement of the war with republican France, because the extraordinary changes then experienced are not to be explained according to the ordinary course of events. The general exports from Great Britain then in the year 1792 amounted to £24,905,200. This compared with the account of the exports in 1764, exhibits an improvement of rather more than seven millions in thirty years, which is almost exactly the rate of improvement during the period in which the bounty operated. I have not immediately before me the state of the corn trade for the precise year 1792, but I have an account of the average of the five years immediately preceding. That makes the excess of imports amount to 411,819 quarters. This added to the 535,528 quarters exported in 1764, makes a difference of 947,347 quarters. But let us recollect what has to be done with this quantity of corn. It has to maintain all the persons who are employed in preparing merchandise for exportation to the amount of seven millions annually; for which it is not half sufficient. If we consider this we shall be at no loss to account for the necessity of importation without supposing any decay in the state of agriculture. If we consider too the vastly increased consumption of finer food for man, and of corn for horses, to which our great wealth has given occasion, we shall see how a still greater quantity of corn is rendered necessary; and from all these circumstances we shall be forced to conclude that unless agriculture had made rapid advances during the period since the suspension of the bounty on exportation, a much greater importation must have been necessary than we have experienced.

But we need not pursue these comparisons. The advocates for the bounty admit all that is necessary for their own refutation. They do not pretend that agriculture has declined. They would only expose themselves to ridicule if they did. There are too many proofs that it has not declined for any one to dare to dispute it. These advocates therefore do not deny that so far from declining, agriculture is improving. I know not that there is one among them who will hesitate to admit that it has improved as fast during the last 50 years, as it did during the 50 years preceding. But whether they will admit this willingly or not, the fact is certain. And every document we have tends to prove that the augmentation of capital, of skill, and by consequence of produce in agriculture, has been much greater during the latter period than during the former. Agriculture, instead of declining, has advanced therefore since the suspension of the bounty, and has advanced more rapidly since it was suspended than before.

Observe then the admirable consistency of the advocates for the bounty. They say that this law greatly promoted agriculture, and that agriculture, suffered much when it was repealed; yet they allow that agriculture has been more rapidly improved since that law was repealed, than it was during the time when that law was in operation. An ordinary reasoner would think that a contrary conclusion were fully as reasonable; that because agriculture has been more improved since the bounty law was repealed, therefore the bounty law was injurious to agriculture. Oh! but, say those ingenious speculators, we then could export corn, and we now must import it. What can be concluded from this but that we have more people to eat corn? They want however to bring the quantity of corn we raise on a level with the quantity of people we have to eat it; that is to say, they want to make agriculture increase as fast as commerce. So do I; and so does every one who understands and wishes well to the interests of his country. But is granting of a bounty on the exportation of corn the way to do this? Certainly not. Have we not shewn by the fact that commerce encreased as much faster than agriculture while such a bounty existed, as it has done since that bounty was taken away?

Their argument from experience then is altogether inconclusive, and fallacious.

CHAP. II

Influence of the Principle of Population upon the Corn Trade

Beside the argument from experience, it was stated that the advocates for a bounty on the exportation of corn pretend to conclude from the nature of the case that this bounty is a beneficial thing. This argument may be expressed as follows. The bounty, they say, opens a large market to the farmer; secures to him a reasonable profit; thus encourages him to augment the produce of his land; and so improves agriculture.

The whole strength of this argument evidently depends upon the assumption, that without this bounty a sufficient market would not exist for the farmer. It is not enough that he enjoys the monopoly of the home market; it is not enough that you allow him the market of the whole world in a free exportation. You must pay him over and above for carrying his corn to this foreign market. But is this in reality the nature of the farmer's business? It requires the examination only of a single principle, a principle very well understood, and indeed thus far not very difficult to understand, to see that the nature of the farmer's business is altogether different, and is in this respect most remarkably distinguished from all other trades.

It is very extraordinary that the persons who have pretended to dictate laws on this subject have never reflected that corn is a peculiar commodity; that it has relations different from those of any other commodity which man possesses; that these are among the most important relations which are found in that vast chain of connected things, on which his being and animal nature depends; and that the very elements of society are interwoven with the laws which regulate the production of this primary article.

No proposition is better established than this, that the multiplication of the human species is always in proportion to the means of subsistence. No proposition too is more incontrovertible than this, that the tendency of the human species to multiply is much greater than the rapidity with which it seems possible to increase the produce of the earth for their maintenance. For the full elucidation of this proposition, if any one is capable of doubting it, we refer to Mr Malthus's ingenious book on the principle of population.9 No one however will hesitate to allow all that is necessary for our argument, that the tendency of the species to multiply is much greater than the rapidity with which there is any chance that the fruits of the earth will be multiplied in Britain, or any other country in Europe. What is the consequence of this great law of society, but that the production of corn creates the market for corn? Raise corn as fast as you please, mouths are producing still faster to eat it. Population is invariably pressing close upon the heels of subsistence; and in whatever quantity food be produced, a demand will always be produced still greater than the supply. The exportation of corn, therefore, is not so very simple a thing as the advocates for the bounty wish to make it appear. By checking population it produces at least one effect, which no wise politician will disregard.

We see then that the nature of this elementary principle of society, of which we never ought to lose sight, is such that a sufficient market is always provided at home, for all the corn which the land, with the utmost exertions of the farmer, can ever be made to produce; that the demand will always be proportioned to the supply, however great that supply may be; and that a foreign market can never be wanted for any quantity of corn that can be regularly produced. A foreign market can never be necessary, but to take off the surplus of an extraordinary year. To send away any part of the regular produce of the country, however rapidly that produce may be increasing, is just to cut short a proportional part of the natural population of the country. That this ought not to be done but for very weighty reasons, surely needs no proof.

Two circumstances there are which alter this rule. In America, though population has increased so fast as to double itself every twenty years, a civilized people thinly scattered on a virgin soil have been able to increase the produce of the earth still faster than they have been able to multiply. This is a single instance in the history of the world. There is another circumstance of a different nature. When the natural tendency to multiply is checked by the vices of the government; when the wretched peasantry of a half-peopled country are in a great measure fed upon the spontaneous produce of the ground, and upon the cattle maintained on the waste lands, a great part of the little corn which is raised must be exported to nourish the pride of the great lords.

With the exception of these two cases I may lay it down as an incontrovertible proposition, that in every country an adequate demand, and even an urgent demand is always provided at home for the greatest possible increase of the fruits of the earth; and that the very principles of population ensure an ample encouragement to the utmost exertions of the farmer. From this proposition too it appears a very clear deduction, that in every well governed country, and whose circumstances are not as extraordinary as those of America, there never will be any voluntary exportation of corn, unless of the extraordinary produce of a plentiful year; for that people will always be produced to consume at home the regular produce, however rapidly it may increase.

This view of the subject seems altogether to have escaped the advocates for the bounty. On its importance however, it is surely unnecessary to dwell. It is impossible that any thing affecting so strongly one of the primary laws of society should not be of the very first importance. If then it follows from this important fact that an ample market, and full encouragement is always afforded to the farmer without the assistance of a bounty, all, as far as I can conceive, that can, after this, be said in defence of the bounty is, that though the principle of population affords sufficient encouragement to the raising of corn, the bounty affords additional encouragement. Before entering into the merits of this point, I should be inclined to say at first, that the overdoing of a good thing never, in any case that I can remember, has been productive of beneficial effects. Why, if a sufficient market is provided for corn, and sufficient encouragement for its production, should you interfere, and disturb the natural course of things? But we will not be satisfied with this general presumption against the bounty; a presumption, however, in which there is no little weight. By examining the particular circumstances of the case with a little attention, we shall find that the advocates for the bounty have spoken completely without thought, and without observing the most obvious circumstances, when they ascribed to the bounty the power of increasing the production of corn.

CHAP. III

Effects of the Bounty on the Rent of Land

The Intention of the bounty on the exportation of corn is to prevent the price of corn from ever falling so low as otherwise it would often naturally do. This either raises the average price of corn in the country, or it does not. The advocates for the bounty sometimes express themselves as if it did not; for they are not very consistent with themselves on this point, sometimes endeavouring to recommend their doctrine by the popular promise of average cheapness; though at other times it suits their argument to shew the opposite face of the subject. If the bounty however does not raise the average price of corn, it is impossible it can encourage the production. This is a proposition which I think I may save myself the trouble of proving. It is not the having a greater price than usual for a commodity one year, compensated by as great a deficiency the next, which tends to encourage the production of any commodity. It is the average profit on the trade which determines the value of the trade. A high average profit encourages it. A low average profit the contrary. If the bounty then lowers the average price of corn, it must of necessity discourage the raising of corn.

I believe, however, that the advocates for the bounty will easily give up this opinion. They will admit that the bounty raises to a certain degree the average price of corn. This high price they say would so encourage the raising of corn, that we should have a considerable quantity to export, which would bring us a good deal of money in all good years, and save us from scarcity in all bad ones. Let us consider how far these effects can be produced by the bounty. We only desire too the advocates to consider a very obvious principle. It is nothing but that common competition which regulates every trade, and of which it is astonishing that they should be so unable to perceive the effects. This high price of corn immediately raises the profit of farming stock and labour somewhat above the ordinary rate of profit in other employments. This as immediately creates a competition. The demand for farms becomes greater. The landlords are enabled to let their land higher, till farming profit comes again on a level with the profit of the general business of the country. Here then we are again in the very situation we were in before. Agriculture is a little more animated for a few years, till things find their proper level; and then it returns exactly to the condition from which it set out. The value of land is somewhat raised; and the price of corn has become higher; and these are the only effects. The first is an effect neither good nor bad, but as it is connected with the other; the last is one of the most unfortunate events that can befall any country. Nothing is more certain than that the landlords have it in their power to prevent the profits of the farmers from ever remaining any long time above the lowest, which is consistent with the nature of their business; that is, the rate common in the same country in other businesses equally agreeable. But surely no man in his senses can say that the farmer, if his profits are always the same, is in the smallest degree more encouraged when the price of corn is high than when it is low. The bounty then has no permanent influence to increase the production of corn. Its sole effect is to put money into the pockets of the proprietors of land, by taking it out of the pockets of all the other classes of the people; and to enrich a few present farmers who happen to have long leases; who will waste the ground with all their might to bring corn out of it, while these leases last; but will beware not to execute any expensive improvements, because they know they will be obliged to pay dearly for all their advantages, as soon as they have the lease to renew.

CHAP. IV

Effects of the Bounty on the Profits of the Farmer

We have already seen that the contract which the landlord has to make with the farmer necessarily reduces the profit of the farmer to the very lowest consistent with the nature of his business; whatever may be the price of the commodity which he raises. There is another circumstance which, independently of this contract, would speedily produce the same effect, and prevent any bounty whatever from contributing to the improvement of agriculture.

Those persons must be ignorant indeed, who need to be told that there is a balance of profits in all the different species of business carried on in any country. The per centage is not indeed exactly the same. Because some trades are less agreeable than others; some have more risk; and for those circumstances it is reasonable that a compensation should be made. But it is plain that reckoning all the agreeable, and all the disagreeable circumstances as profit or loss in every trade, there is an exact equality of profit in all the branches of free trade in any country. Any particular branch may obtain a temporary ascendency, but it is soon reduced by the influx of rivals in the trade, who naturally flock to the most gainful business.

According to this principle it is abundantly certain that the profits of the farmer must be upon this level before any bounty is applied in his favour, and must continue upon it, though no bounty were ever applied; and it is equally certain that no bounty can ever raise them above this level. Were they not upon this level, competitors would withdraw from the trade till they rose to it. Should they be raised ever so little above it, competitors would crowd into it till they brought them down.

Let us first suppose that a bounty is granted upon production. The farmer sold his corn before at the reasonable profit. If we suppose that he sells it at the same profit now, and gets the bounty over and above, his profit is raised much higher than that of all his countrymen in other trades. Some of them we may be assured will immediately endeavour to obtain a share of his high profits. New competitors cannot come into the same market without reducing the rate of profit; and this competition must continue till the rate of profit is brought down to the established and unalterable level. The business of agriculture is progressive during the period of this competition; but as soon as ever things are brought back to their natural state, and that is in a very short time, that business becomes stationary as before. To produce any permanent effects then by bounties on production, one bounty would not be sufficient; a new bounty would need to be imposed every four or five years; and by this progress we might increase the price of wheat as rapidly as we do the national debt. The absurdity of such a measure as this is sufficiently exposed by the very mention of it.

But the advocates for the bounty on exportation may say, that the case is not the same with this, as with the bounty on production. The foreign market they may represent as so extensive that all the competition which would be produced by the greatest increase of British corn, could have very little effect in reducing the price, and by consequence in reducing the profits of the British farmer.

Are we then to suppose it to be the opinion of those persons, that they can raise the profits of the farmer permanently above the profits of the other species of business in the country? They may as well undertake to procure for him sunshine and rain whenever each would be agreeable. Every removal of stock from the other kinds of business in the country to that of farming lessens the competition of capital in all those kinds of business, and thus raises the rate of profit.10 If the profit of the farmer does not fall by this increase of capital, more capital leaves the other trades of the country, and the profit in them rises till at last they are brought upon an equality with the business of the farmer. The only effectual method, therefore, the only method by which in the nature of things, the profits of the farmer can be raised above the profits in other trades, is to erect the farmers into an exclusive corporation, like the East India Company, and to limit both the number of persons, and the quantity of capital which shall be employed in the trade. I wonder, if the advocates for the bounty will recommend this as a scheme for improving agriculture! They might by this means undoubtedly raise the profits of the farmers; because they might give just as little as they pleased to the landlords as rent, and demand just as much as they please from the people for corn. Without this or any other artificial scheme, the profits of the farmer are, and ever must be on an exact level, subject to the trifling fluctuations which belong to this as to all trades, with the rate of profit in the other species of business in the country.

This is so necessarily and obviously true; that it is surely a matter of surprise to find a committee of the House of Commons talk of its being necessary to make a law, (see Report from the Committee on the Corn Trade, ordered to be printed on the 14th of May, 1804, p. 4.) ‘to secure a certain and uniform, fair and reasonable price to the farmer.’ Why did they not recommend a law ‘to secure to him the certain and uniform birth of a fair and reasonable number’ of calves and foals, from the number of cows and mares he employs as breeders? What insures the maker of knives and forks, or of ploughs and spades, a reasonable profit? Why, the market. Is not this sufficient to secure to every trader the profit which belongs to his business? Is it not absolutely necessary, by the very nature of things, that this should do so?

All those persons who are capable of estimating a statesman by the knowledge he displays of the genuine principles of national prosperity, will not forget the declaration of Mr Pitt in the House of Commons, on a day when the price of wheat in Mark-lane was 70s. the quarter, ‘that the price of corn was not nearly high enough.’ This declaration was founded on one of the most vulgar of all vulgar prejudices; ‘that a high price of corn is useful to encourage the raising of corn;’ a prejudice which we should suppose that, after a moment's reflection, no man of common sense could entertain. Who does not know that it is the profit of farming stock, which forms the encouragement of the farmer? And who does not know that the profit of farming stock may be as high, or higher, when corn is sold cheap as when it is sold dear? That therefore the encouragement of agriculture may be greater when the price of corn is low than when it is high? Is it found that the profit of other trades rises in proportion to the price of the article? So far from it, that the very reverse is in general found to be the case.

Mr Burke, from whom it were to be wished that many of those, who have so well learned antijacobinism from him, would learn something else, has admirably observed in that Tract to which we have already alluded, ‘That a greater and more ruinous mistake cannot be fallen into, than that the trades of agriculture and of grazing can be conducted upon any other than the common principles of commerce.’ ‘The balance between consumption and production,’ says he, ‘makes price. The market settles, and alone can settle that price. Nobody, I believe, has observed with any reflection what market is, without being astonished at the truth, the correctness, the celerity, the general equity with which the balance of things is settled.’ Talking of the profit of the farmer, he says, ‘Who are to judge what that profit and advantage ought to be? Certainly, no authority on earth. It is a matter of convention, dictated by the reciprocal conveniences of the parties, and indeed by their reciprocal necessities.’

CHAP. V

Effects of the Bounty on the Value of Silver

I have now shewn that there are two different circumstances; the power of the landlord to raise his rent, and the natural and unavoidable migration of capital; either of which is perfectly sufficient to prevent the profits of the farmer from ever being raised for any continuance of time, above the lowest consistent with the nature of the business; and that as the operation of both must be united against the bounty, its effects with regard to agriculture must soon be terminated. It is surely unnecessary to repeat the conclusion, that if the profits of the farmer are not raised by the bounty, it is impossible his encouragement to enlarge his business can be increased. What is the reason, according to the zealots of this sect, which renders the bounty necessary? Why, the insufficiency of the profits of the farmer. But the bounty, it is now apparent, cannot alter those profits. Therefore the bounty has no tendency to produce the effect proposed by the advocates for that measure.

But though the bounty produces no good effects, it is not altogether without effects. We must next advert to the view which Dr Smith has exhibited of this subject, a view which any one can affect to treat lightly only from not understanding it. No proposition is established more thoroughly to the conviction of those who have studied the scientific principles of political economy than this; that the money price of corn, regulates the money price of every thing else.11 The wages of the common labourer may in general be reckoned his maintenance. He must earn a sufficient quantity of corn to feed himself, otherwise he cannot exist. If he is paid in money, the sum of money he daily receives must always be equivalent to the quantity of corn he must use. If the price of the corn is high he must receive the greater sum of money, as his day's wages, to buy it with. This is so obviously necessary, that we need spend no more time in proving it. The money price of labour therefore is entirely regulated by the money price of corn.

Let us next see how the money price of corn affects that of every thing else. It is evident that it must regulate the price of all other products of the earth, as the culture of corn will encroach upon them till they become equally profitable with itself. ‘It regulates, for example,’ says Smith, ‘the money price of grass and hay, of butcher's meat, of horses, and the maintenance of horses, of land carriage consequently, or of the greater part of the inland commerce of the country.’

All the commodities of any country consist either of the rude produce of the land, or of manufactured goods. We have seen that the money price of the rude produce of land is altogether determined by the money price of corn. The price of manufactured goods may be resolved into three parts; 1st, The price of the raw material; 2d, The wages of labour; 3d, The profit of stock. The money price of the first two, we have already seen, is altogether regulated by that of corn.

The quantity of circulating stock in every manufacture is in proportion to the value of the raw material, and the wages of the manufacturer. But we have seen that the price both of the raw material, and the wages of the labourer in all manufactures, are raised in exact proportion to the price of corn. More circulating capital, therefore, is wanted in that proportion to carry on every manufacture, and the reasonable profit upon this additional capital must be added to the price of the manufactured commodity. Every one of the three constituent parts of the price of all manufactured commodities receives then an increase by every increase in the price of corn; and thus the price of all manufactured commodities must rise in a much greater proportion than the price of corn. The price therefore of labour, and of every thing which is the produce of land and labour, every exchangeable commodity which the country produces, is altogether determined by the price of corn.

Nothing then can be more incontrovertible than the proposition of Smith, that ‘the real effect of the bounty is not so much to raise the real value of corn, as to degrade the real value of silver; or to make an equal quantity of it exchange for a smaller quantity, not only of corn, but of all other commodities.’

Two conclusions, therefore, evidently follow;

The first is, that no ability whatever is by the bounty procured to the farmer of increasing the quantity of corn to be raised. ‘Though in consequence of the bounty,’ says Smith, ‘the farmer should be enabled to sell his corn for four shillings the bushel instead of three and sixpence, and to pay his landlord a money rent proportionable to this rise in the money price of his produce; yet, if in consequence of this rise in the price of corn, four shillings will purchase no more goods of any other kind than three and sixpence would have done before, neither the circumstances of the farmer, nor those of the landlord, will be in the smallest degree mended by this change. The farmer will not be able to cultivate better: the landlord will not be able to live better.’

The second conclusion is, that in a country situated as ours at present is, in which so many complaints have been lately heard of the depreciation of money, produced by various causes, it surpasses the common measure of folly to enact a law more powerful to produce the evil, than any other cause which exists. This is a point which deserves the most serious consideration of every thinking man, and more particularly of every commercial man in the country. We have heard Mr Pitt declare in the house of commons, when he was urging at the end of the last session of parliament an addition to the civil list money of the king, that the depreciation of money in this country had been not less than 60 or 70 per cent within the last 30 or 40 years. This is enormous. Nothing similar to this has happened in the rest of Europe. What a prodigious disadvantage must not this lay us under in our commerce with all other countries? If we are still able to send goods to those countries, how much more should we be able to send, were this prodigious burthen removed, and we were able to sell our goods 60 per cent cheaper? What is it that in such peculiar circumstances we think proper to do? Why, to add a new cause to increase the evil, a cause more fundamental and more powerful than any which previously existed. It behoves us to think a little what we are about. The burthen may be increased till our commerce can bear it no longer. Who knows how soon a favourable turn may be produced in the unhappy affairs of the continent of Europe, when we could not long support the burthens which we at present bear? At a time when our enormous taxation, the stoppage of payment at the bank, and the vast expenditure of a war are all operating to depreciate money in this country, to urge an act to grant a bounty on the exportation of corn, which must lead so powerfully to a still greater depreciation, betrays a criminal neglect or ignorance of the best interests of the country, which deserves the utmost reprobation of this age and of posterity.

We supposed that it was a proposition completely agreed upon by those who had studied the principles of national wealth, and a proposition which no one, bearing the name of a politician, was ignorant of, that one of the most favourable, and advantageous of all circumstances to a manufacturing country, was the cheapness of provisions. This determines the price of the raw material; it determines also the wages of the labourer; it determines therefore the price of the manufacture. When this costs little at home, it can be sold with great advantage abroad; it overcomes all competition; and the greatest quantity of it may be disposed of. When the price of corn on the other hand is high, this raises the price of the raw material of all manufactures, of the labour employed in them, and by consequence of the manufactured commodity; it must be sold dearer therefore abroad; and by consequence less of it can be disposed of. How wonderfully circumscribed the range of reflection which dictates the arguments of those who defend the bounty! They boast highly of the riches brought into the country by the annual exportation of a few hundred thousand quarters of corn, worth not so much as a million of money; while manufactures to the value of many millions are by that means prevented from being exported; while too the exportation of the corn has to be assisted by money which government pays, whereas the manufactures on the other hand would pay to government a large sum as duty; and while, at the same time, all the corn exported would be consumed at home at a full price, in the preparation of those additional manufactures; and by consequence the very same encouragement afforded to the farmer to prosecute his important business, as could have been by the exportation of his produce.

It is astonishing what a different course of reasoning men often pursue on subjects exactly similar, without being able to perceive their own inconsistency. On running over in one's mind some of the acts of the British legislature, how many cases does one find where it has acted on a principle directly the reverse of that on which it established the bounty law; cases which are as vehemently applauded by the common tribe of politicians, as the bounty law itself! Why should wool, for example, have been always subject to a system of laws, absolutely and immediately contradictory to the principle of the corn bounty? Why, if a bounty on the exportation of corn be so favourable to the production of corn, should not a bounty on the exportation of wool be favourable to the production of wool? Why, if the exportation of corn have such an effect to produce plenty of corn at home, should not the exportation of wool have an effect to produce plenty of wool at home? How has it been, that while the legislature has so often encouraged the exportation of corn, it has always prohibited the exportation of wool with so much anxiety, and punished it with so much severity? Why are such inconsistencies still allowed to disgrace the intellects of our law-givers? What difference can be pointed out between the case of wool and that of corn? If it be said that we have not wool enough to answer our occasions, neither have we corn enough. If it be said that wool is the material of one of our most important manufactures; corn is the most important material of all our manufactures. If it be of importance that the raw material of any of our manufactures should be got cheap, surely it is of importance that what is the great material of them all should be got cheap.

Why, if granting a bounty on exportation be so effectual a means of producing plenty and creating riches, do we not establish a bounty on the exportation of gold and silver? Why do we not grant a bounty on the exportation of sheep and oxen, butter and cheese, ale, porter, and spirits? Why not on tables and chairs, and all other articles of furniture? Nay, to go higher, why, in order to increase population, not grant a bounty on the exportation of men and women? Why not, especially, grant a bounty on the exportation of such classes as we have most need of, soldiers, for example, and sailors; As for politicians, we have such a supply of them, the very best in their kind, that we have no occasion for exportation, unless it be as a security against any decay in the numbers or breed.

We know of no person who has pretended to point out any defect in this argument of Dr Smith, except a Mr Mackie, who calls himself a farmer in East Lothian, in Scotland, and who has published two letters in the same volume with the performance of Mr Dirom. The gross ignorance which those letters betray of some of the most important, and best established principles of the important subject on which the author has treated, might have exempted me from the task of exposing the futility of his objections, if it did not appear that conclusions, similar to those of Mr Mackie, whether drawn from the same premises or not, are both adopted, and important regulations founded upon them for conducting the business of the nation. Let us hear to what extent Mr Mackie's objections reach. There are three different states in which Dr Smith says the affairs of all countries may be considered as placed, the declining, stationary, or advancing states. In the first two of these, Mr Mackie allows that the ideas of Dr Smith hold completely, but denies that they do so in the third. ‘I readily,’ says he, p. 219, ‘agree that the money price of corn may produce this effect (regulate the money price of all things) in a nation where the state of society is stationary or declining; such as China or Hindostan; but when applied to Britain, or any country advancing in wealth and population, the argument appears to me to be unfounded.’ Mr Mackie is one of that class of authors from whom you cannot get any precise account of the grounds of their opinions, who throw down a number of circumstances more or less remotely connected with the point in question, then assert the conclusion which they wish to draw, and leave you to find the connection between it and the premises the best way you can.

The most distinct statement of the reasons for his dissent from the conclusions of Smith, which I have found in the letter, is in these words, p. 221: ‘But in countries where industry, population, and wealth, going on in a progressive state of improvement, are constantly encreasing the national capital, and continually adding to the general consumption, these causes alone operate to raise the money price of labour and every other commodity, without being in the smallest degree affected by the money price of corn.’ What causes does the author mean? Does he mean an increasing state of industry, population, and wealth; or certain effects which he mentions of these increasing circumstances, namely, an augmentation of capital and an augmentation of consumption? As far as we can gather his meaning from his various details it is this last. An increase of industry, population and wealth produces an increase of capital and an increase of consumption; and an increase of capital and of consumption produces an increase in the price of labour and of commodities. In a country in this progressive state these causes alone he says produce this increase of wages and price, ‘without being in the smallest degree affected by the money price of corn.’ Here the grammatical construction of the author's language bears that the causes he mentions, the increase of capital and of consumption, are not in the smallest degree affected by the money price of corn; but as this is nonsense, or at least altogether foreign to the purpose, we may suppose he means to say, if he knew how to express himself, that it is the ‘price of labour and of every other commodity,’ which is not in the smallest degree affected by the money price of corn. Now if this be so; it is something very strange. When a country is in a declining or a stationary condition, two out of the three possible conditions, a rise in the price of corn, even according to this author himself, necessarily produces a rise in the price of labour, and of every other commodity, but as soon as ever a country begins to go forward a rise in the price of corn loses all this power; and the increase of capital and of consumption prevents it from having any effect whatever upon the price of labour and commodities. What a wonderful thing this increase of capital and of consumption must be? Why does not some adept in the science of political economy undertake to prove, (it would be a task admirably suitable to the talents of Mr Mackie,) that a rotation of crops is a thing very serviceable to increase the productive power of land in the declining and stationary states of a country, but loses all this efficacy in the advancing state?

I wonder if Mr Mackie means to assert that a rise in the price of corn has no effect in the advancing state of a country upon the other species of the rude produce of the earth; upon the price of potatoes, for example, or hay, or flax? Or if he supposes that a farmer, who knew he would make more by sowing corn in his field than any of those articles, would not sow corn instead of them, and every other farmer the same, till the quantity of those article would become so diminished as to raise their price to a level with that of corn. Because if Mr Mackie knows not this principle, or is incapable of perceiving its validity, I cannot descend to instruct him; I write for others than him. Here is one large class of articles then undoubtedly affected by the money price of corn; and raised in price in the same proportion exactly. There is another large class of articles of which those form the raw materials. So far therefore as the price of the raw material enters into the price of those articles, so far is their price also affected by that of corn. So far too as an increase in the price of the raw material requires an additional quantity of capital to carry on the same quantity of business, and by consequence an additional profit upon that additional capital, so far is the price of those articles still farther affected by the price of corn.

The absurdity of the assertion with regard to labour is almost equally obvious. When a country is stationary the wages of the labourer are sufficient to maintain him, and to preserve the number of labourers from decreasing, and no more. In this state of things the author allows, and it is very certain, whether he allows it or not, that every increase in the money price of the article by which the labourer is maintained must be accompanied by a correspondent rise in his wages. This rise however is merely nominal. The reward of his labour, the quantity of maintenance which he can command is the same as ever. It is the money price, therefore, Smith says, and not the real price which is affected by the money price of corn. When from this state a country begins to advance, the demand for labour increases; those who want to employ it bid against one another; and the wages of labour rise. This is an increase in the real price of labour, in the quantity of maintenance which the labourer can command. It is in general, however, a rise in the money price at the same time. The fluctuations in the value of money are in general slow, and the changes in the course of a few years are scarcely perceptible. If we suppose then that the prosperity of Great Britain, for example, and the demand for labour should increase so fast as to raise the price of labour one third in the course of five years, the value of money remaining all this while the same, the rise in the money price, and the rise in the real price of labour would be the same. The quantity of money which the labourer would receive would be one third greater; and the quantity of maintenance which he could command would likewise be one third greater. Now observe the proposition of Mr Mackie. This increasing demand for labour, he says, has a tendency to raise the money price labour only, not the real; a proposition than which a more senseless was probably never set down upon paper. Though the price of the labourer's maintenance, says he, be so raised during this time, that one third more of money will be able to purchase no more than might have been purchased by one third less at the beginning of that period the wages of the labourer will be only raised one third in money. They will not be raised in the smallest degree in reality. The quantity of maintenance which he can command will still be the same, that is the lowest capable of preserving the number of labourers from being reduced by starvation. But if any one is capable of supposing that a growing demand for labour, capable of raising the real price of labour one third, can be prevented from raising that price at all, only by a rise in the price of provisions I do not think it necessary to spend time to instruct him.

The whole of this miserable attempt has been produced by the incapacity of the author to attend to the distinction between the money price and the real price of labour. Whoever is capable of understanding the effects of prosperity, that is of a growing demand for labour upon the price of labour, must see that it produces effects upon the real price of labour, that is upon the quantity of maintenance which the labourer can command. If therefore the money price of that maintenance has risen one third while the rate of his wages has risen one third, the money price of his labour must have risen not one third only but two thirds; ‘nothing’ says Mr Burke (Thoughts and Details on Scarcity) ‘is such an enemy to accuracy of judgment as a coarse discrimination.’

It is unnecessary to pursue this subject any farther. It now appears that the money price of all the raw materials produced in the country, and also that the money price of labour are altogether determined by the money price of corn. I have already shewn in what manner a rise in the price of the material, and of the labour, requires an additional capital in every species of manufacture, and an additional profit upon that capital. The rise then on all the component parts, into which the price of commodities can be divided, is exactly the same in the advancing as in all the other states of society. It therefore clearly appears that universally the money price of corn regulates the money price of every thing else; and by consequence that ‘the real effect of the bounty,’ to repeat the language of Smith, ‘is not so much to raise the real value of corn, as to degrade the real value of silver, or to make an equal quantity of it exchange for a smaller quantity, not only of corn, but of all other commodities.’

I flatter myself that I have now fully proved that a bounty on the exportation of corn, never has had any effect, and never can have any, to encourage the cultivation of corn, or to increase the quantity of it produced. Every possible plea then for the policy of granting the bounty is taken away. I have proved, too, that the high price of corn to which the bounty is intended to give occasion, while it has no tendency whatever to encourage agriculture, has a necessary tendency to discourage every other species of industry, and to produce the greatest evils. I have therefore exhibited the strongest reasons for the speedy repeal of the corn law which was passed at the end of the last session of parliament. I am happy to understand that it is in the contemplation of many of the most respectable bodies of men in the kingdom, to petition parliament for the repeal of that law as soon after it meets as possible. They cannot attend to a concern which more strongly affects their own interest, as well as the interest of the nation at large; and it is eagerly to be hoped that they will be joined by all other bodies of a similar description. In that case no doubt whatever need be entertained of the immediate repeal of this statute. The British Parliament wants only the due information to be laid before it, in such a manner as to bear down the influence of ignorance and private interest. On its integrity and patriotism, as a body, the public relies, as it has every reason to rely, with the most perfect confidence.

In reading the different publications in which that measure is recommended, I have been struck, as I think every well informed person will be struck, with the total want of all general views, by which their authors are distinguished. They strongly betray a most limited acquaintance with the great principles of political philosophy. They take up a single particular; they are vehemently struck with one peculiar aspect which it shews; but are unable to extend their view to all the parts of the great subject with which it is connected; and are thus perpetually deceived in their reasonings and conclusions. The mistakes of such men might easily be overlooked, even their vanity and presumption might be pardoned, if we did not so often find that their partial, and contracted views adapt themselves to the understandings of men who have the power to carry their follies into execution, and thus become the principles upon which the affairs of nations are conducted, and by which the happiness of millions is determined.

CHAP. VI

Exportation

But though a bounty on exportation is thus clearly ineffectual to encourage agriculture, and thus particularly calculated to discourage every other branch of industry, and to produce the greatest mischief to the nation; a free exportation appears by no means to deserve the same condemnation. In the first place, ‘to hinder the farmer,’ says Smith, whose language we are always happy to use on every subject of which he has treated, ‘from sending his goods at all times to the best market, is evidently to sacrifice the ordinary laws of justice, to an idea of public utility, to a sort of reasons of state; an act of legislative authority which ought to be exercised only, which can be pardoned only, in cases of the most urgent necessity.’12 It is evident that to subject the commerce of grain to any forced conditions may naturally be expected to have effects very different from those produced by the free, natural, unrestrained course of the trade; that while the one may be expected to be altogether salutary, the other may be suspected to be very prejudicial.

The effects, however, of an absolute prohibition of the exportation of grain, would be far different from those which are generally supposed, and from those which are held forth by those gentlemen of long views, who preach abroad the doctrine of the bounty on exportation.

It would have no effect whatever to discourage agriculture. It is abundantly evident from the principle of population, that to whatever height the general and medium produce of the land could be brought up, new inhabitants would be produced to consume it, and to give for it an equivalent.

For this medium produce there will always be a competent market, and a competent demand in the home consumption, the surplus produce of an extraordinarily plentiful year, would however regorge. That is never more than sufficient to make up for the deficiency of unfavourable years. However, during the plentiful years, though part of the surplus produce would be reserved to supply this deficiency of the years of scarcity; part would no doubt come into the market, and reduce the price. That part again which was reserved for the years of scarcity would hinder the price from rising so high as then it would otherwise do. By this means the price of corn would be at all times somewhat lower than if exportation were permitted. But what would be the consequence to the farmer? Why the landlord would be obliged to let his land cheaper, and the profits of the farmer would remain the same. It is evident that the natural migration of capital would infallibly produce this effect. But if the profits of the farmer remain the same, the encouragement of his business would remain also the same. What too would be the consequence to the landlord? Neither would he be a loser. The low price of corn would reduce the price of labour and of every thing else; he would find himself just as rich as he was before. He would be able to hire the same number of servants, to build as magnificent a house, to buy as many articles, either of necessity or of luxury as he did before.

What, in the next place, would be the effects of a free exportation? I have already established as an undeniable proposition, that in every country, in ordinary circumstances, where the principle of population is not checked by the vices of the government, no part of the medium produce of grain will ever be exported, but in consequence of some forced regulation. According to this proposition it is only the surplus of an extraordinary year that can go out of the country by a free exportation. Now it is abundantly evident that whatever quantity of corn is exported in those favourable years, an equal quantity must be imported in unfavourable years. There is by the supposition, a sufficient number of people in the country to consume the whole produce of a medium year; therefore you cannot, by your exportation in a plentiful year, reduce the quantity of corn in the country below that medium produce, without destroying some of your people by hunger; and you must bring the produce of a scanty year up to that medium by importation, or you must allow some of your people to perish in this case too, from hunger.

When then would be the effects of these operations upon prices and produce? It is evident that the exportation of a plentiful year could not raise the price above that of a medium year; because it is the high price of a medium year, and the great demand at home, which prevents any part of that produce from going abroad. The importation in a scanty year would bring the price upon a level with the general free market, common to all the nations of the world, which would always be the same, or nearly the same, with the medium price at home. By this process the price of corn is preserved at all times very near that rate, which an exact proportion between the produce of the country, and the inhabitants of the country requires; a rate, and a process, which, by consequence, have, beyond all contrivances, the most powerful effect to produce that exact proportion. The progress of agriculture too, its gradual improvement, is, in this case, left to the impulse of the general circumstances of the country, to that powerful tendency in population to multiply, as fast as the circumstances of the country will permit.

It is easy to see in what manner this beautiful process is disturbed by the application of bounties. In the first place a bounty upon exportation carries more corn out of the country in the good years, than would go of its own accord. And in the next place, a bounty upon importation in bad years, brings more corn into the country than would come of its own accord. In the one case, we send abroad more corn than we can spare; and in the other, we bring home more than we have any occasion for. There is a direct loss of double freight, insurance, and profit, upon all that corn which is exported, only to be brought back again, and imported only to be sent out again. But this is the least part of the evil. By the one operation we produce for a time a much higher price, than would otherwise be produced, and a proportionate part of the miseries of scarcity. By the other, we produce a much lower price than would otherwise be produced. We thus maintain a perpetual fluctuation, and all the inconveniencies and miseries which violent fluctuation produces both to the farmer and to the people.

To the persons who plead even for a forced exportation, we need adduce no more in favour of a free exportation. But there are persons, and those too, of considerable profundity in the science of political economy, who think that the exportation of corn ought to be altogether prohibited. If we prohibit the exportation without permitting importation, the effects will be as follows. It is impossible so to preserve the surplus produce of the good years, as to make it compensate the deficiency of the bad. Part of it will find its way into the market in the good years, and be wasted and consumed. This part will be wanting for the supply of the bad years, and produce all the hardships of great scarcity. By this process too, the most violent fluctuation in prices, must be produced; as the surplus in the market must sink them very low in the good years, and the incurable deficiency raise them enormously high in the bad.

If we prohibit exportation, but allow importation, the deficiency left by the extravagant consumption and waste of the good years, remains always to be supplied by importation during the bad. This is a policy, therefore, directly calculated to render the average production of the country always inadequate to the consumption of the country. It is a policy, too, calculated to produce very great fluctuation; though not altogether so great as the non-importation scheme. The part of the surplus produce, which, during the good years finds its way into the market, must be much greater than under that scheme; since nobody will have nearly so great a motive to reserve it. The depreciation of prices, therefore, will be much greater. Importation, will, indeed, prevent the prices in the bad years from rising so high. But the expence of freight and insurance must render the imported corn considerably above the rate of medium years, and therefore very greatly above the enormously reduced prices of the years of great plenty.

CHAP. VII

Importation

The sect who admire the duty on exportation, are terribly afraid of a free importation. They desire to confine importation within the narrowest limits, and indeed to permit it at all, only in cases of the greatest necessity. Their prejudices are miserable. It would, they say, ruin the farmer, and hurt agriculture.

There is only one direct effect, which a free importation can produce; that is, a reduction of the average price of corn. I have already stated reasons to prove that this reduction would have no tendency to reduce the profits of the farmers, nor to injure agriculture. Even the single argument of Smith, Mr Mackie, the most dauntless champion of the monopoly system, allows, would be perfectly adequate to support this conclusion, if it held as truly in the advancing state, as it does in the declining or stationary states of society. I have proved that it does hold in that state as well as in both the others. It is therefore extorted from this eager adversary, that the importation can have no bad effects.

But it may be necessary, though not for the refutation of my opponents, for the satisfaction of the public, to consider a little more minutely the effects of a free importation.

It is evident that the market from which all corn imported must be brought, is the general free market, common to all countries in the world. Now, as the domestic market in every country is regulated by the wants and superfluities of the individuals who inhabit the country; so this general market of all countries is regulated by the wants and superfluities of the different countries which repair to it. It is the nature of this market to be very stationary, and scarcely subject at all to fluctuation. For though one country may very much fail in a particular year, or very much abound, that is never the case with all countries; and the deficiency of one or more is always very exactly supplied by the super-abundance of others; so that a steady medium price is always maintained in this market of nations.

The adversaries of a free importation tell us that countries, such as North America, Poland, and the countries around the Baltic, which are thinly peopled, and in which manufactures are but little established, can always raise corn cheaper than fully peopled, rich, and commercial countries; and that if importation is permitted from those countries free, they must undersell our farmers greatly, and so ruin agriculture. Those persons understand not, in the least degree, the nature of that great general market, in which the wants of all nations are supplied. We are not competitors in that market with poor nations only, but with rich also, with all the nations in the world. It is the circumstances therefore of all the richest nations, of those who are most completely our rivals, which settle the price in that market; and we are forced to buy in it not according to the circumstances of the poor nation, but according to those of the rich.

Corn never can be bought for importation into Great Britain below that standard price, in the market of nations, which is established by the wants and superfluities of them all; and which therefore must be the medium price of the nations which come into that market, taken altogether. The medium in some of them may be above it; and the medium in others below. These are the two extremes. But in all the rest it must be nearly the same. Whatever corn, therefore, is at any time imported into Great Britain must come into it purchased at this medium price, and loaded with all the expence of freight and insurance from the country where it is bought. And corn is an article of so much bulk in proportion to the value, that this expence must always bear a pretty high proportion to the original price. Foreign corn, therefore, can never come into England very cheap; and unless in England the medium price of corn be very much above the medium price in the other countries of Europe, none can ever be imported, except in years of particular scarcity. If the medium price in England therefore be the same with the standard of the universal market, which there is good reason to think it is, agriculture cannot receive any discouragement from a free importation, even on the principles of the bounty people themselves.

But let us suppose that the medium price in England is very much above this standard. This must be owing either to some peculiar degradation of the value of money in England, an evil of the greatest magnitude, and which the free importation of corn would greatly tend to redress, and without affecting permanently, or to any considerable degree, either the profits of the farmer, or the interests of agriculture. Or if the value of money be the same in England as it generally is in the rest of Europe, and the medium price of corn be still higher, it must be owing to this, that a smaller proportion of the people are engaged in agriculture, and a greater in other occupations. Now this must arise from one or other of two causes, either from agriculture's being more encouraged in those countries, or from other occupations having more encouragement in this country. In almost all the countries of Europe, the same or greater discouragements are laid upon agriculture than are laid in England. But in no country in the world are there such encouragements to other occupations. England then has the same advantage with regard to agriculture as other nations, but advantages peculiar to herself with regard to other occupations. But it is always the wisdom of nations as well as of individuals to pursue the employments in which they have peculiar advantages, rather than others in which they have no advantages. With regard to the inconvenience of depending upon the great general market of nations for any part of our supply, it is to a nation with half the commerce, and naval resources of this country absolutely nothing at all. Nothing in human affairs can be more certainly depended upon than that market.

But if it be accounted an indispensable policy to bring the number of persons employed in agriculture, and those in other occupations to the proportion that the former shall at all times feed the latter, it must be done either by affording greater encouragements to agriculture, or imposing discouragements upon other occupations. The former will be the plan adopted undoubtedly. But to grant a bounty upon exportation, and to impose a duty upon importation, is to adopt the latter plan, not the former; is to discourage all foreign commerce, but to afford no encouragement whatever to agriculture, as we have already abundantly proved. To obtain this object then some other means must be devised of encouraging agriculture. And some most important ones are not far to seek. Render the commerce of land as free and easy as that of all things else; relieve agriculture from those vexatious imposts from which other occupations are exempted; and render the employment of large capital as independent in agriculture, and a source of as great authority, as it is in trade, and you will have no occasion to complain of a slowly progressive agriculture.

If importation is rendered free, so long as the price of corn in England is high enough to surpass the price in that general market of nations, together with all the expence of carriage into England, corn will flow into that country, till it reduce the price there to that in the general market, augmented by all this expence of carriage. If exportation is rendered free, as soon as corn in England sinks below the price in the general market, it will flow out of England till the price become as high as in that market, bating the expence of carriage. The medium price in England is thus rendered the same with the standard price in the general market; and the range of fluctuation is rendered very small indeed. Price can only depart from the medium by the expence of carriage added in the one case and subtracted in the other. That this steadiness and uniformity would be one of the most advantageous things both to the farmer and to every other class of the people, is too obvious to require any proof.

What now would be the effects of this reduction of price upon the general wealth of the country, and upon the progress of agriculture? It is evident that every country, in which the price of grain is above the standard of this general market, lies under peculiar disadvantages in respect of its whole foreign commerce. The value of its money is degraded below that of other countries exactly in the same proportion; and to this extent it must be undersold by other nations in all foreign markets. To bring the price of grain therefore down to the standard of the general market, is of the utmost possible importance to foreign commerce, and to all those interests of the state which are dependent upon foreign commerce. What again would be the effect of the same reduction upon the progress of agriculture is abundantly evident from what has already been said. The owners of land would be obliged to reduce their rents till the farmers could make the same profits as are usual in the country, that is to say, the very same which they made before, and by which, of course, they would have the very same encouragement to improve their business. At the same time neither the farmers nor the landlords would be losers. The prices of every thing would fall. And though they would not pay for the things which they want with so much money, they would be able to buy just as many as they were before.

It may be shewn at the same time that the reduction of price in England by a free importation would be very immaterial. This is of no consequence with regard to the real policy of the measure which we recommend. But it may serve to render some persons who cannot regard it with the eye of a true statesman, less obstinate in their prejudices against it. Notwithstanding all that has been said about the deficiency of England in corn, it is abundantly certain that the medium price in England is very nearly the same with the standard price in the general market. This has undoubtedly been the opinion of the legislature as often as it granted a bounty on importation on the appearance of scarcity; because if the medium price were much above the general market, and that inhanced too by the appearance of scarcity, assuredly corn enough would come into the country without any bounty. As the bounty itself has never brought it with any peculiar rapidity, it is a certain proof that the price in England has never been very much above the general price in Europe.

The same thing appears from the state of the exportation of corn. Since the year 1790, the affairs of Europe have been so much deranged, and so many peculiar causes have affected the corn trade in England, that it would be unfair to draw any general conclusions from that period. From the year 1770 to the year 1790, we find that exportation and importation have alternated. During one year we have exported, during another we have imported. During the one year it is plain the price in England must have been below that in the general market, and during the other above it. The number of years however in which it was above it is greater than that in which it was below it. The price in England therefore was during that period more frequently above the price in the general market than below it. But it was frequently below it; and therefore though the medium price in England must have been somewhat above the standard price in the general market, it cannot have been much above it. The same thing appears from another fact. Even in the years of greatest importation, and when the price by consequence must have been highest, we always exported too. But this it is impossible we could have done, had the price been much higher in England than it was abroad. The same thing appears too from the very small quantity of grain imported during that period, notwithstanding the rout which has been made about it. My readers will perhaps be surprised when I tell them that of the two most important species of grain, wheat and barley, we have upon the whole of that period exported more than we have imported to the amount of 157,542 quarters; and it is altogether in the coarser species of grain, oats, pease, and beans, that the extra importation has been made.

From these consideration it evidently appears, that by a free exportation and importation of corn, the medium price in England would be somewhat reduced, but not much; that this reduction would be of the greatest importance to the country in respect to its foreign trade, and no discouragement whatever to agriculture; and that this free trade would produce a steady, regular price, very little subject to fluctuation, which would preserve the farmer from all the hardships of very low prices, and the people from all the hardships of very high prices; that the system of bounties on the other hand must raise the price of corn, which lays the country under great disadvantage in respect to foreign trade, without affording the smallest encouragement to agriculture; and that it has a tendency to produce the greatest fluctuation in prices, and to produce all the miseries and inconveniences both of too high and of too low prices.

CHAP. VIII

Landlords, Farmers, and Corn-dealers

It would not have been necessary for the present purpose, to say any thing on this subject, were it not on account of a prejudice which turns the attention of many people from the real object of importance. As soon as ever prices are considerably raised, we immediately hear an outcry against landlords, farmers, and corn-dealers. Nothing can be more unjust, and at the same time of worse consequence. High prices are never owing to those orders of men, and never can be, unless we make absurd laws, which force them into an unnatural situation. It is natural for the farmer and for the corn-dealer to sell their commodity when they can get the best price for it, and to keep it when they expect that the price will rise. Every other person, who has any thing to sell, does the same thing; and it would be the utmost injustice to refuse that liberty to the man who has corn to sell. It would be the utmost folly too, as it would soon reduce the quantity to be sold.

I need not repeat the proof which has been produced by Smith, and is so generally understood that the interest of the farmer, and of the corn-merchant is injured by any attempt to raise the price higher than the supply requires; and that at all times when the trade in corn is free, the interests of the traders in corn, and those of the people at large, are exactly the same.13

When it is so contrary therefore to all justice and sense, to accuse the corn-dealers for any excess in the price of that article, it is truly provoking to hear it continually charged upon them; to observe the attention of the country turned from a true to a false cause of the evil, and the remedy by consequence perpetually missed.

On occasion of the present high prices, accordingly, the newspapers have all been loud, as usual, against the corn-dealers; and have endeavoured by this vulgar cry, to turn the indignation of the ignorant people, against an innocent, and most useful set of men, and to withdraw our attention from the operation of that bill which has lately passed.

After stating an argument of the same kind on this very subject, Mr Burke expresses himself thus severely against those publications, which are contributing powerfully to corrupt both our public taste and public spirit. ‘The consideration.’ says he, ‘of this ought to bind us all, rich and poor together, against those wicked writers of the newspapers, who would inflame the poor against their friends, guardians, patrons, and protectors.’

Neither are the landlords to be blamed for making of their property as much as they can. Every other class of persons in the kingdom does the same; and it is unjust to require greater sacrifices of them than of others. Neither can they be accused of generally besieging the legislature for laws, to favour their peculiar interests. Many other classes of men have been far more industrious in this respect than they. I am even persuaded were they once convinced that the late corn law is prejudicial to the interest of the country, that they would be the first to petition for its repeal. I am not without hopes that the preceding considerations will have weight with many of them. But I am too well aware of the hold which a favourite system takes of the mind to expect that I shall convince them all, or indeed so much as the greater part. But I confidently expect that such a proportion of all the people in the country will become sensible of the impolicy of the late act, as will procure us a repeal of it speedily in the ensuing Session of Parliament.

THE END

POSTSCRIPT TO ESSAY ON IMPOLICY

As a postscript to this essay the following extract from a review by Mill of Sir James Steuart's collected works may be of interest; it concerns Steuart's plan for dealing with fluctuations in grain prices.

According to Sir James's system, by which nothing is to be left to itself, but every thing done by regulation, the corn trade must be put under management. In good years when the country produces more corn than the inhabitants can use, prices would fall so low that the farmers would be ruined, unless they could dispose of the surplus to other nations. But according to him it is not enough that they should be allowed to sell it wherever they can find a purchaser; they ought, moreover, to get a bounty for selling it to that purchaser; and this bounty should operate till prices rise to a certain rate. This is one part of the plan. This saves the farmers, and always keeps prices at a certain height. But very plentiful years are not the only inconvenience in a nation; there are also very scanty years; and in those years, not the farmers but the people suffer. According to our present regulations as we save the farmer by a bounty on exportation, so we propose to save the people by a bounty on importation. But this last part of the plan Sir James Steuart does not adopt. He wants to have granaries erected in every part of the country, which the government is to fill by purchase in cheap years, and to open for the supply of the market at the current prices in dear years. This subject is too much obscured by prejudice for us to undertake the exposure of these notions on the present occasion. The author, it is evident, had never reflected with any accuracy upon the operation of free trade, and therefore sees not the equalizing results which it is calculated to produce. He proposes, accordingly, to do that very imperfectly, by a great number of very troublesome regulations, which perfect freedom of trade would do completely of its own accord. Nothing more is wanting than to leave the farmer at perfect liberty to sell his corn wherever he can get the best price for it, and the consumer to buy it wherever he can get it cheapest, without any restriction, without either burthen or encouragement. The necessary effects of this are to secure to the farmer and to the people at all times those exact prices which are best adapted to their mutual interests. To depart from this course is only to disturb the laws of nature, to gratify the freaks or the interests of particular men.14

COMMERCE DEFENDED.

an Answer to the Arguments
by which MR. SPENCE, MR. COBBETT,
and others,
have attempted to prove that
Commerce
is not a
Source of National Wealth.

Second Edition.

By JAMES MILL, Esq.
Author of an Essay on the Impolicy of a Bounty on
the Exportation of Corn.

London:
Printed for C. and R. Baldwin, New Bridge-Street.

1808
Price Four Shillings.

INTRODUCTION

Rousseau confessed to Mr Hume, and Mr Hume repeated the conversation to Mr Burke, that the secret of which he availed himself in his writings to excite the attention of mankind, was the employment of paradoxes. When a proposition is so expressed as to bear the appearance of absurdity, but by certain reasonings and explanations is made to assume the semblance of truth, the inexperienced hearers are, in general, wonderfully delighted, give credit to the author for the highest ingenuity, and congratulate themselves on a surprising discovery.

When these paradoxes are so contrived as to harmonize with any prevailing sentiment or passion of the times, their reception is so much the more eager and general. Thus, had the paradox, that commerce is absolutely unproductive of wealth, been recommended to the people of this country some years ago, when they were taught to triumph in the increase of their commerce, and to look to it as the means of humbling the revolutionary pride of France, it would have been the object either of neglect or of ridicule. At present, when difficulties and dangers have encreased around this commerce, and fears are abroad that it may even be cut off, the new doctrine that we shall not suffer by its loss, falls in so conveniently with our apprehensions, that it appears extremely agreeable and consolatory. Being a doctrine at once paradoxical and flattering, no more is wanting to render it popular.

It is to be suspected, however, that this would not afford a very safe principle on which to regulate the great interests of the nation. Our navy, for example, mighty as its ascendancy must be deemed, may now, when the whole continent of civilized Europe is at the disposal of its determined enemy, be regarded as exposed to dangers, greater, perhaps, than ever threatened it before. Could we, in a moment of despondency, permit ourselves to think, that, like our commerce, it might be ruined by this enemy, should our wisdom consist in trying to persuade ourselves that it was of no value, and that we ought to part from it without regret? Ireland, too, considering the power of the enemy who desires to attack it, and the commotions by which it is agitated within, is unquestionably in greater danger of being wrested from us at this moment, than at any late period of our history. What then? Should we consider any man as acting a patriotic or prudent part, who should labour to persuade us that Ireland is of little or no value, and should it fall into the hands of Bonaparte, that the loss we should sustain would be of little avail? We should, on the other hand, join in condemning his misguided and preposterous zeal; for however we might rest assured that neither Ireland nor our navy would be voluntarily, any more than our commerce, resigned to Bonaparte, yet we might fear that such a doctrine, becoming popular, would induce our Cabinets and Parliaments, which are not always led by the wisest men in the nation, to neglect those essential interests more than they otherwise would have done.

This is precisely the danger which threatens commerce at the present moment, and which is the more alarming, the greater the difficulties by which it is surrounded, and the more delicate, and easily affected, the interests which it involves. Agriculture is hardy and independent. The powers of the earth, and the first necessities of man, insure to this a certain prosperity, proportionate to the state of industry in the nation, in spite of the neglect, and even the discouragement of the public rulers. But should the legislature become influenced by a theory hostile to commerce, at a time when other circumstances conspire against it, the affairs of the nation might easily receive a turn, which would soon terminate her grandeur as the mistress of trade.

The propagators of this doctrine, which has met with a more favourable reception in this commercial country than beforehand one could have easily imagined, are, as yet, but two, Mr Spence and Mr Cobbett.

Mr Spence has written a pamphlet, in which, after exhibiting in as high colours as he possibly can the value which is vulgarly set upon commerce in this country, he endeavours to shew that it will certainly, or at least very probably, be torn from us by Bonaparte; that it is however altogether destitute of value; and that our wealth and prosperity are intrinsic. To establish these conclusions Mr Spence attempts to revive the system of the Economistes, a sect of political philosophers who arose in France about the middle of the last century, and who, in opposition to the mercantile doctrine, that all wealth is derived from commerce, or rather a favourable balance of commerce, taught that all wealth is derived from land. He proposes indeed a limitation upon the ideas of that sect, in one particular instance, from which however he seems to waver in other parts of his discourse; but the main object of the pamphlet, as he expressly states, is to apply the doctrine of the Economistes to the present circumstances of this country. Mr Spence appears from his pamphlet to have a considerable turn for abstract thinking, and to be a man of pretty extensive reading in political economy. But his mind has not been trained in the logic of enlarged and comprehensive views. He does not judge of an extensive and complicated subject from an exact knowledge of all its parts, of their various connections, and relative importance. It is enough for him to seize some leading object, or some striking relation, and from these to draw conclusions with ingenuity to the whole.

Mr Cobbett is an author who deals more in assertion than proof; and therefore a writer who gives reasons for what Mr Cobbett affirms, is a very convenient coadjutor. He seems, accordingly, to have been charmed with the appearance of Mr Spence's pamphlet; and has republished the principal part of that gentleman's reasonings, in his Political Register. Even the assertions of Mr Cobbett, I am by no means disposed to treat with neglect. He seems to form his opinions more frequently from a sort of intuition, than from argument. His mind is but little accustomed to spread out, as it were, before itself, the intermediate ideas on which its conclusions are founded; and the nature of the education which it has received, from its own unaided progress and exertions, sufficiently accounts for this peculiarity. It does not follow that his opinions are not founded on evidence, and that they do not frequently exhibit much sagacity. It is often the form, rather than the matter, in which he is deficient. Even on some pretty difficult questions of political economy, (those, for example, respecting the corn-trade,) he has discovered a clearness and justness of thought, which but few of our scientific reasoners have reached.1 On a subject, more perverted at least by passion, the structure of society, his mind, untainted by theory, or rather emancipated by its own vigour and honesty from a pernicious theory which it had imbibed, has seized the doctrines of wisdom and prosperity, without the aid of many examples. He has assumed the patronage of the poor, at a time when they are depressed below the place which they have fortunately held in this country for a century, and when the current of our policy runs to depress them still farther. At a time, too, when every tongue and every pen seem formed to adulation, when nothing is popular but praises of men in power, and whatever tendency to corruption may exist, receives in this manner double encouragement, he has the courage boldly to arraign the abuses of government and the vices of the great. This is a distinction which, with all his defects, ranks him among the most eminent of his countrymen.

Such are the two authors whose doctrines, respecting the value of commerce, have at present attained no little celebrity; and whose reasonings it will be a principal part of our business, in the following pages, to examine.

CHAPTER I

ON THE SECURITY OR INSECURITY OF THE BRITISH COMMERCE

Both these Authors preface their inquiries into the value of commerce, by an attempt to persuade us that the commerce of this country has become extremely insecure. This is not exactly the most philosophical course; as it is taking aid from our fears in support of their argument. Mr Spence informs us,2 that ‘the idea which a few years ago would have been laughed at, that any man could acquire the power of shutting the whole continent against our trade, seems now not unlikely to be realized.’ And Mr Cobbett assures us, that the soldier is abroad, and will not return home till he hath acquired his share of the good things of this world.3 On this point, those two champions appear to be at variance. The soldier will certainly not get possession of any of our good things, by shutting them out from the Continent; and if he come and take them, we shall be in danger of losing our land as well as our commerce.

A calm and rational view of our circumstances, will probably soon convince us that neither the one bugbear of these authors, nor the other, ought in the highest degree to alarm us; and that we shall owe it to our own egregious misconduct, if we suffer any considerable disaster, from the efforts of our enemy either to invade us or to destroy our commerce. In regard to invasion, the experiment may be said to have been fairly tried, and to have failed; in the vast preparations made by Bonaparte, and the abandonment of the attempt to employ them. This danger then, especially as it seems to have little influence at present on the public feelings, we may pass without further notice. The experiment of excluding our commerce is now to be tried, and it may be regarded as a fortunate circumstance, that it can be tried so completely. When our enemy is thoroughly convinced, that neither his invading nor his excluding scheme, can be made the instrument of any serious injury to us; and when we ourselves are convinced that we have nothing either in peace or war to fear from him, the minds of both parties may decidedly incline to peace.

Let us only contemplate for one moment the vast extent of the habitable globe, and consider how small in comparison is that portion of coast over which the sway of Bonaparte extends; and we shall probably conclude with considerable confidence, that in the wide world channels will be found for all the commerce, to which this little island can administer. Let us look first at the United States of America. To these, we have for years sent more goods of British manufacture than to the whole continent of Europe. The vast commerce of the West India Islands, next, comes naturally in view. The immense extent of Portuguese and Spanish America, whose communication with manufacturing countries may in a great measure be confined to ourselves, will, notwithstanding the disadvantages under which they labour, furnish a growing demand for the produce of our industry.5 Even the coasts of Africa, miserable as their condition is, might present to the careful explorer something better for the commodities which he may offer, than their wretched population. The Cape of Good Hope itself, improved by British wisdom and British capital, opens a field of boundless extent. The vast shores of the Indian ocean, both continental and insular, with their unrivalled productions, are all our own. Whatever the ingenuity of the Indian, the Malay, and the Chinese can produce, or their various and productive soils can yield, is ready to be exchanged for the commodities which we can supply to the wants of that immense population.

This superficial review can hardly fail to satisfy the man who knows but the outline of geography, that, while Britain is mistress of the sea, she might have scope for a boundless commerce, though the whole continent of Europe were swallowed up by an earthquake. But in regard to Europe itself, it is only to the superficial eye, that the power of Bonaparte over our commerce can appear formidable. Not to mention the probability that the Baltic, the channel by which a great part of our commerce has for a number of years found its way into Europe, will not long be shut against us; the very notion of guarding the whole extent of European coast, from the mouth of the Elbe to the gulph of Venice, must appear ridiculous to all men of information and reflection. Let any man but consider the well known fact, that under the very eye of the most vigilant Custom House in the world, and where an actual army of Custom House officers is concentrated, contraband East India goods are regularly contracted for by the smugglers, to be delivered in any house in London, for 25 per cent. Even Hollands and brandy, which are not the most handy commodities, are currently landed in the Downs, in the presence of a British fleet. With a knowledge of these facts, can it be supposed, that any British goods which the Continent wants, will not find their way into it in spite of any regulations which Bonaparte can adopt? A line of soldiers regularly planted from one extremity of the coast to another, from the point of Jutland to the bottom of the Adriatic gulph, would not suffice to exclude our commerce.

An important fact is to be considered. The population of Great Britain take no interest in the success of the smugglers. The greater or at least the more respectable part condemn the traffic, and rather wish to obstruct it. The case is very different on the Continent. Even in France, the great mass of the people wish for British commodities, and condemn the policy which excludes them. But in what may be called the conquered countries, in Holland for example, and Portugal, the interests and the ancient habits of the people of all ranks, give them the strongest propensity to elude, by every possible contrivance, the restrictive policy of Bonaparte. Where a whole people have the strongest interest in deceiving the government, in a case in which it can be so easily deceived as in the exclusion of British commerce from the Continent, we may confidently conclude that the public decrees will be very indifferently executed. If 25 per cent. can cover the expence of smuggling in the Downs, we may be certain that one half of that sum will be sufficient to cover the expence of smuggling British goods on the coasts of Europe. Even from this expence are to be deducted the Custom House duties which must have been paid in the course of regular entry; so that in many cases British goods will reach the continental consumer, loaded with an expence of probably not more than 5 per cent above what they would have cost in the way of regular trade. But allowing their price to be enhanced at a rate of 10 or 12 per cent., the deduction which this can occasion from the quantity which would otherwise be sold, cannot bear a very great proportion to the general amount of the extensive, various, and unrivalled traffic of Great Britain.

The fact is, the British commerce has much more to fear from the injudicious regulations of the British government, than from the decrees of Bonaparte. The great instrument of that species of traffic, which must now be carried on with the Continent, are neutral bottoms. It will not be very difficult, however, for our ministers to put it out of the power of the neutrals to serve us in this important capacity. The late orders of council are of a nature to give effect to the decrees of Bonaparte, beyond any thing which the plenitude of his power could achieve. Instead of thwarting and restricting the intercourse of neutrals, Britain ought studiously to afford it every facility and accommodation. Wherever a neutral vessel obtains admittance into a continental port, means are afforded for introducing British goods. If the orders of the British council however serve to unveil the disguises, under which the neutrals might be enabled to cover our goods, this important resource may be in a great measure cut off, and the ingenuity of the merchants, so fertile in expedients for eluding restrictions on trade, may be defeated. We may perceive then, in the wide extent of the world, and its innumerable productions and wants, in our dominion of the seas, and in the impotence of all exclusive efforts, sufficient security for our commerce, if we exercise but common prudence, in spite of all external hostilities that can be waged against it.

CHAPTER II

ON LAND, AS A SOURCE OF WEALTH

In the praises which the Economistes, together with Mr Spence and Mr Cobbett, bestow upon land as a source of wealth, absolutely considered, the intelligent reader will not hesitate to join. Of all species of labour, that which is bestowed upon the soil, is in general rewarded by the most abundant product. In the present circumstances of the greater part of Europe, the cultivation of the soil not only pays the wages of labour, and the profit of stock employed in it, the sole return of other species of industry, but over and above this affords a share of the produce payable, as rent to the landlord. On this point, therefore, no controversy strictly exists; and when the patrons of the agricultural theory lament that the cabinets and legislatures of Europe, influenced by the ideas of the mercantile system, have so often thrown obstructions in the way of rural industry in favour of manufactures and trade, we acknowledge the justness of their accusations. One of the main objects which the immortal Smith proposed to himself, was to unfold the delusions of the mercantile system, by which the policy of almost all the governments of Europe was turned to the encouragement of trade rather than of agriculture, and a greater share of the industry and capital of every nation than consisted with its interests, was thus forcibly diverted into the commercial channel. Even to this hour the sound inquirer has most frequently occasion for his efforts in exposing the errors into which both governments and individuals fall by the remaining influence of the same theory. The firm hold indeed which this doctrine yet maintains on the minds of men, forms the principal obstacle to the diffusion, among mankind, of juster principles of political economy and of government. When a system, therefore, is propagated, diametrically opposite to the Mercantile, we might quietly allow the two theories to combat one another; and trust that the exposure of errors, if not the establishment of truths, would be the consequence. Unfortunately, however, it is much more the propensity of mankind to run from one extreme to another, than to rest in the wise and salutary middle; and a bias to the errors of the agricultural system would be not a whit less pernicious than a bias to the system which it would supplant. Of this indeed we have experimental proof; as some of the worst regulations which the new legislators of France adopted, were entirely founded upon the system of the Economistes.

There is one consequence of the doctrine which Messrs Spence and Cobbett have embraced, which they seem rather unfairly to have kept out of sight. They address themselves with great industry to the self-interest of the landholders, and study to win their support by representing the landed interest as deeply suffering by the opinions which prevail. They abstain, however, from informing this class of their readers, that land, according to their doctrine, is the one and only proper subject of taxation. This the Economistes taught. It is a logical conclusion from their principles. If land be the one and only source of wealth, the absurdity is evident of seeking in any other quarter that portion of the national produce which is required for the necessities of the state; nor can one single argument be used against the exclusive taxation of land, which is not an argument, equally pointed, against the doctrine which the agricultural theorists espouse. It is shrewdly to be suspected that the landholders would deem themselves but little indebted to those gentlemen for the establishment of their system, were it to be followed by this practical consequence. The fact is, that land in this country bears infinitely less than its due proportion of taxes, while commerce is loaded with them. At the beginning of the last century, and previous to that period, the land-tax equalled, or rather exceeded, the whole amount of all the other taxes taken together. How insignificant a proportion does the land-tax now bear to the taxes on consumable commodities? The land-tax has remained without augmentation, while the permanent taxes have risen from little more than two millions to upwards of two and forty millions a year, and while the value of land has risen from fourteen or fifteen years purchase to thirty years purchase and upwards. The landholders, therefore, have little foundation for complaining, though the policy of the country has frequently appeared to favour mercantile rather than agricultural industry. By their superior influence in the legislature, they have taken care to repay themselves, as far as their personal interests were concerned, by throwing the burthen of the taxes upon the growing produce of commerce, while the increasing value of land stood exempt. The interests, however, of the country at large, the interests of the middling and industrious classes, have thus suffered in two ways. They have suffered by sustaining an undue proportion of the taxes; and they have suffered by the diminution of the annual produce of the land and labour of the country.6

CHAPTER III

OF THE DEFINITION OF THE TERMS WEALTH AND PROSPERITY

Mr Spence, with a view to introduce accuracy into his inquiry, presents us near the commencement of his pamphlet with a definition of the terms Wealth and Prosperity. This was indeed highly necessary, for while our ideas waver on this point, all our reasonings, respecting the wealth and prosperity of nations, must by consequence be uncertain and deceitful. It is of the utmost importance, therefore, in the examination of Mr Spence's doctrines, to ascertain the precision or inaccuracy of his definition of wealth. The following passage contains not only the definition but its illustration:

‘In investigating the present subject,7 it will be necessary previously to inquire into the opinions which have been held relative to the real sources of wealth and prosperity to a nation, and we shall then be able to apply the results deduced from such an examination to our own case. And in the first place, the meaning of the terms, wealth and prosperity, must be settled; for, if the reader were to take these words in their usual acceptation, if he were to conclude, that by the first is meant gold and silver merely, and by the latter extensive dominion, powerful armies, &c. he would be affixing to these terms meanings very different from those which are here meant to be annexed to them, and ideas, which, however, common, are founded in error. Spain has plenty of gold and silver, yet she has no wealth; whilst Britain is wealthy with scarcely a guinea: and France, with her numerous conquests, her extended influence, and her vast armies is probably not enjoying much prosperity; certainly not nearly so much as we enjoy, though we have far less influence, and much smaller armies than she has. Wealth, then, is defined to consist in abundance of capital, of cultivated and productive land, and of those things which man usually esteems valuable. Thus, a country where a large proportion of inhabitants have accumulated fortunes; where much of the soil is productively cultivated, and yields a considerable revenue to the land-owner, may be said to be wealthy; and on the contrary, a nation where few of the inhabitants are possessed of property, and where the land is badly cultivated, and yields but little revenue to the proprietor, may be truly said to be poor. Britain is an example of the first state, Spain and Italy of the last. A nation may be said to be in prosperity, which is progressively advancing in wealth, where the checks to population are few, and where employment and subsistence are readily found for all classes of its inhabitants. It does not follow, that a prosperous nation must be wealthy; thus America, though enjoying prosperity, has not accumulated wealth. Nor does it follow, that because a nation possesses wealth, it is therein a state of prosperity. All those symptoms of wealth which have been enumerated, may exist, and yet a nation may in prosperity be going retrograde, its wealth may be stationary, its population kept at a stand, and the difficulty of getting employment for those who seek it, may be becoming greater every day.’

First, here, Mr Spence warns us against supposing that wealth consists in gold and silver merely; that prosperity consists in extensive dominion, powerful armies, and the like: And assuredly if any one entertains this idea of wealth and prosperity, he is in a woeful delusion. Having learned from Mr Spence what wealth and prosperity are not, let us next learn what they are. ‘Wealth’, he says, ‘is defined to consist in abundance of capital, of cultivated and productive land, and of those things which man usually esteems valuable.’ Here three things are enumerated as the constituents of wealth. The first is capital. Now it is an established and indispensible rule in definition, that the words themselves in which the definition is conceived should be of the most precise and determinate signification; because, otherwise, the definition is of no use. But here the term ‘capital’ stands as much in need of definition as the term wealth, which it is brought to define. What is capital, or wherein does it consist? There are as many difficulties in these questions, as in the questions, What is wealth, and wherein does it consist? To define one vague and ambiguous word by another which is equally vague and ambiguous, is to pay us with mere words instead of ideas. The second constituent of wealth, according to Mr Spence's definition, is cultivated and productive land. But would not Mr Spence allow that uncultivated land, if it might be very easily cultivated and rendered productive, ought also to be accounted wealth? In a definition where every thing ought to be in the highest degree accurate, an exception even of this sort is important. Let us, however, attend particularly to what Mr Spence states as the third constituent of wealth; ‘Those things which man usually esteems valuable.’ This is a sweeping clause. In the first place this third constituent includes both the other two, for undoubtedly capital and productive land are among the things which man esteems valuable. The third constituent, therefore, is not only the third, but the first, second, and third all in one.8 It would have been much better without enumerating the first two, which are undoubtedly but parts of the last, to have said at once that wealth consisted in those things which man usually esteems valuable. Still, however, the expression would have been so vague as to be entirely useless as a definition. Man usually esteems air and light as very valuable, but in what sense can they be regarded as national wealth? It is very evident from this explanation that Mr Spence neither understands what is requisite to a definition, nor has formed to himself any distinct idea of the meaning of the term wealth.

Another particularity in this definition is worthy of a little attention. Mr Spence says, that wealth is defined to consist in abundance of capital, &c. When Mr Spence, or any other political philosopher, inquires whether land, or manufactures, or commerce be the source of wealth, the question is not respecting quantity. We say that land is productive of wealth, without considering whether the quantity be one bushel or a million. But when Mr Spence defines wealth as consisting in abundance of capital, land, and valuable things, he evidently confounds the philosophical meaning of the work with the vulgar, in which wealth signifies a great quantity of riches. So much for Mr Spence's definition of wealth.

Let us next consider what he says in regard to prosperity. He does not indeed attempt to define prosperity; But he gives us a description of a nation which may be said to be in prosperity. ‘It is a nation which is progressively advancing in wealth, where the checks to population are few, and where employment and subsistence are readily found for all classes of its inhabitants.’ It would be tedious here to enter into the same minute analysis which we applied to the definition of wealth. We may barely remark, that of the three clauses of which the description consists, the last two are included in the first; as it is in the nation which is progressively advancing in wealth that the checks to population are fewest, and employment and subsistence are most readily found for all classes of the inhabitants. This indeed is that remarkable distinction of the progressive state of society which is so admirably illustrated by Dr Smith.9

Having seen how little useful are the definitions with which Mr Spence has favoured us, it may be requisite for our subsequent inquiries to explain accurately in what sense the term wealth will here be used. Wealth is relative to the term value; it is necessary therefore first to affix a meaning to the latter. The term value has in common acceptation two meanings. It signifies either value in use, or value in exchange. Thus water has great value in use but commonly has no value in exchange, that is to say, nothing can be obtained for it in purchase. On the other hand, a diamond or a ruby has little or no value in use, but great value in exchange. Now the term wealth will always be employed in the following pages as denoting objects which have a value in exchange, or at least notice will be given if we have ever occasion to use it in another sense.

CHAPTER IV

OF MANUFACTURES

It is at this point that our controversy with Messrs Spence and Cobbett properly begins. They assert that manufactures are no source of wealth.10 We say that they are. It is the reader's part to compare our reasons. Mr Spence, who seems to supply the arguments of the party, says that manufactures are productive of no wealth, because the manufacturer in the preparation of any commodity consumes a quantity of corn equal to the value which he has added to the raw materials of which the article is composed. It is to be observed, before we proceed farther, that this is the only reason which they adduce in favour of this fundamental part of their hypothesis. In this one assertion is contained the sum and substance of the evidence which they exhibit against manufactures. If this assertion is unequal to the conclusion which it is brought to support, the wonderful discoveries of the Economistes are on a tottering basis. I have called this fundamental proposition an assertion, because it is assumed entirely without proof, and what is more, I am afraid, in opposition to proof. When the manufacturer prepares a commodity, the prepared commodity is worth more than the food which the workmen consumed in preparing it. Do you ask my reasons? Carry it, I say, to market; you will find that it will fetch more; because it must not only repay the wages of the labour, but the profit of the stock which has been employed in its preparation. Set the goods on one side, and an equal quantity of raw materials and food with what has been consumed in the preparation of the goods on the other, and every body will give you more for the goods. The country is therefore the richer by having the goods.

Let us hear what Mr Spence has to say in objection to this reasoning. An examination of his plea will still more clearly exhibit to us the fallacy of his position. The superiority of price, which the manufactured commodity obtains in the market, adds nothing he says to the wealth of the country; because whatever the manufacturer obtains above the value of the raw produce is taken from the landholder; the original owner of that produce. ‘An example’ he adds,11 ‘will demonstrate this: If a coach-maker were to employ so many men for half a year in the building of a coach, as that for their subsistence during that time, he had advanced fifty quarters of corn, and if we suppose he sold this coach to a land proprietor for sixty quarters of corn, it is evident, that the coach-maker would be ten quarters of corn richer than if he had sold it for fifty quarters, its original cost. But it is equally clear, that the land proprietor would be ten quarters of corn poorer, than if he had bought his coach at its prime cost. A transfer, then, not a creation of wealth, has taken place, whatever one gains the other loses, and the national wealth is just the same.’

There is a great appearance of ingenuity and force in this reasoning; and on the greater part of mankind it is well calculated to impose. I am rather surprized, however, that a person of Mr Spence's acuteness did not perceive that it is in reality a vulgar sophism. But when hypothesis has taken firm hold of a man, his acuteness is unluckily confined to one function.

Mr Spence has here confounded two things which are remarkably different. He mistakes the sale of a coach for the manufacture of a coach. It is surely bad reasoning however to conclude that because the sale of a coach is not productive of wealth, therefore the manufacture of a coach is not productive. The sale of the coach produces nothing; the manufacture of it however, produces the coach. It is very true that when a landholder has sixty quarters of corn and the coach-manufacturer a coach, if the coach is transferred to the landowner and the corn to the coach-maker, the country is not the richer. But it is certainly not less true that if the coach-maker has in the month of October fifty quarters of corn, which in the month of March he has transformed into a coach worth sixty quarters, the country is the richer in consequence of the manufacture of the coach, to the amount of ten quarters of corn.

Important, however, as is the addition which it thus clearly appears is made to national wealth by means of manufacturing industry, we should still have a very imperfect idea of its wonderful powers, should we confine ourselves to this observation. In a state of agriculture but moderately improved, the labourers employed in it may be regarded as raising a produce not less than five times what they themselves can consume. Were there no manufacturers, the whole of this surplus produce would be absolutely useless. Where could it find a purchaser? It is the manufacturers who convert this surplus produce into the various articles useful or agreeable to man, and who thus add the whole value it obtains to four parts at least in five of the produce of the soil.12

There is but one supposition, as far as I am able to perceive, by which this argument can be eluded. If our antagonists suppose a state of society in which the population has become so great that it requires the utmost efforts of the whole employed upon the land to produce food for the society; in that case they may insist that the whole produce of the soil is used and obtains a value without the aid of manufacturers. In this state of things, however, it is unfortunate that the argument of Mr Spence will prove not manufactures only, but land to be unproductive. The cultivators of the soil, during the time in which they raise a certain produce, have here consumed a quantity of produce of an equal value. But this is the very reason which he adduces to prove that manufactures are not a source of wealth. Manufactures then never cease to produce wealth, except in one case, in which land itself ceases to produce it; so that when manufactures cease to produce wealth, every thing ceases to produce it; wealth cannot be produced at all. So much for Mr Spence's reasoning against manufactures.

The truth is, that to give even tolerable plausibility to the theory of the Economistes we must allow that nothing is useful or valuable to man but the bare necessaries of life, or rather the raw produce of the soil. If any thing else is valuable to him, whatever creates that value must add to his riches. The reasonings of the Economistes indeed proceed upon a most contracted and imperfect view of the operations and nature of man. How limited would be his enjoyments were he confined to the raw produce of the soil! How much are those enjoyments, how much is his wellbeing, promoted by the various productions of art which he has found the means of providing! The simple, but at the same time the great and wonderful contrivance to which we owe the profusion of accommodations with which the civilized life of man abounds, is the division of labour. Wherever a society can be supposed to consist of one class of labourers only, the cultivators of the soil, it must be poor and wretched. Even if each individual, or each family, may be supposed so far to vary their labour as to provide themselves with some species of coarse garment, or some rude hut to shelter them from the weather, the affairs of the society must still be miserable. Let us next consider the simplest division of labour which we can well imagine. Let us suppose that the society becomes divided into husbandmen, and into the manufacturers merely of their agricultural tools, of their garments and houses. How much more completely would the community almost immediately, or at least as soon as the manufacturers acquired any dexterity in their trades, be provided with the accommodations which we have just enumerated? Their riches would be augmented. The labour of the same number of men would now yield a much larger produce. It is to the manufacturers however, it is to that division of labour which sets them apart as a distinct class, that this superiority of produce, that this augmentation of riches, is entirely owing.

‘The greatest improvement,’ says Dr Smith, ‘in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is any where directed or applied, seem to have been the effects of the division of labour…It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions in a well governed society that universal opulence which extends itself to the lowest ranks of the people.’13 The effects indeed of the division of labour, are surprising and almost miraculous. But as the division of labour commenced with the first formation of a class of manufacturers, and as it is in manufactures that the division of labour has been carried to the greatest height, the business of agriculture being much less susceptible of this improvement, the whole or the greater part of the opulence, which is diffused in society by the division of labour, is to be ascribed to manufactures. The same is the case with machinery. How much the production of commodities is accelerated and increased by the invention and improvement of machines, requires no illustration. It is chiefly in manufactures that this great advantage too has been reaped. In agriculture, the use of machinery is much more limited.

Every view of the subject affords an argument against the intricate but flimsy reasonings of the Economistes. In the infancy of manufactures, when the distaff alone, and other simple and tedious instruments are known, let us suppose that a piece of cloth is prepared. Mr Spence informs us, that nothing is added to the wealth of the society by the preparation of this piece of cloth, because a quantity of corn, equal to it in value, has during the preparation been consumed by the manufacturers. Let us suppose, however, that, suddenly, spinning and other machines are invented, by which the same labourers are enabled to prepare six similar pieces, in the same time, and while they are consuming the same quantity of corn. If their manufacture in the former case replaced the corn which they consumed; in this case it replaces it six times. Will Mr Spence deny that in such instances manufactures are productive of wealth? But how many more than six times have the productive powers of labour in the arts and manufactures been multiplied since the first division and distribution of occupations?

Without any further accumulation of arguments, I may take it I believe for granted, that the insufficiency of Mr Spence's reasonings, to prove that manufactures are not a source of wealth, sufficiently appears. Let us now therefore proceed to another of his topics.

CHAPTER V

COMMERCE

By commerce, in the language of Mr Spence's pamphlet, is meant trade with foreign nations; and I have no objection, on the present occasion at least, to follow his example. Mr Spence begins his investigation of this subject with the following paragraph14 :

‘As all commerce naturally divides itself into commerce of import and export, I shall in the first place, endeavour to prove, that no riches, no increase of national wealth, can in any case be derived from commerce of import; and, in the next place, that, although national wealth may, in some cases, be derived from commerce of export, yet, that Britain in consequence of particular circumstances, has not derived, nor does derive, from this branch of commerce, any portion of her national wealth; and, consequently, that her riches, her prosperity, and her power are intrinsic, derived from her own resources, independent of commerce, and might and will exist, even though her trade should be annihilated. These positions, untenable as at first glance they may seem, I do not fear being able to establish to the satisfaction of those, who will dismiss from their mind the deep rooted prejudices, with which, on this subject, they are warped; and who, no longer contented with examining the mere surface of things, shall determine to penetrate through every stratum of the mine which conceals the grand truths of political economy.’

Let us begin then with the most earnest endeavour, according to the recommendation of Mr Spence, to purge our minds from ‘prejudices,’ attending solely to the reasons in favor of those positions, ‘which seem untenable at first glance.’ Let us summon up courage to follow his deep and adventurous example; and not contented with remaining ingloriously ‘at the surface,’ let us clap on the miner's jacket and trowsers, and descend in the bucket with Mr Spence; that, as truth, according to the ancient philosopher, lay at the bottom of a well, we may find ‘the grand truths of political economy,’ at the bottom of a coal pit.

As trade with foreign nations consists of two distinct branches, commerce of import, and commerce of export, it will be convenient for us to consider each of these divisions separately. This circumstance will divide the present chapter into two articles.

ARTICLE FIRST, COMMERCE OF IMPORT

The reason which Mr Spence adduces to prove to those, who dismiss their deep rooted prejudices, and penetrate into the mine of political economy, that commerce of import can never produce wealth, he states in the following terms; ‘Every one must allow, that for whatever a nation purchases in a foreign market, it gives an adequate value, either in money or in other goods; so far then, certainly, it gains no profit nor addition to its wealth. It has changed one sort of wealth for another, but it has not increased the amount, it was before possessed of.15

We have had already occasion to wonder at the oversights or mistakes, which so acute a man as Mr Spence has committed, and we are here again brought into the same predicament. Might he not, without any great depth, without descending far below the ‘surface,’ have reflected that a commodity may be of one value in one place, and of another value in another place. A ton of hemp for example, which in Russia is worth £50, is in Great Britain worth £65. When we have exported therefore a quantity of British goods, which in Britain are worth £50, and have imported in lieu of them a ton of hemp, which is worth £65, the riches of the country are by this exchange increased fifteen pounds.16 We might illustrate this observation by a variety of examples. The meaning and force of it however are already sufficiently apparent. Whenever a cargo of goods of any sort is exported, and a cargo of other goods, bought with the proceeds of the former, is imported, whatever, the goods imported exceed in value the goods exported, beyond the expence of importation, is so much clear gain to the country increased by the transaction.

Mr Spence, however, has an argument to shew, that this reasoning is inconclusive. He allows, that the merchant, by whom the goods have been imported, makes a profit to the above amount. But this he says is no gain to the country. The additional sum, which the merchant obtains for the goods imported, is derived from the British consumer. Whatever the one gains therefore the other loses, and the country is nothing the richer. It is curious that this argument would prove the country to be not a farthing the richer, if all the goods imported were got by the merchants for nothing, or were even created by a miracle in their warehouses. In this case too, whatever the merchants obtained for their miraculous goods, would be drawn from the British consumer, and whatever the one gained the other would lose; consequently the country would be not a farthing the richer for this extraordinary augmentation of goods. The reader will probably conclude, that an argument of this sort proves too much. We may recollect too, that this is neither more nor less than the argument which Mr Spence produced, to prove that manufactures were productive of no wealth. Whatever the manufactured commodity brought, beyond the value of the raw produce consumed in the manufacture, was drawn, he said, from the purchaser, who lost whatever the seller gained. On this account he concluded, that the country was not the richer for manufactures. This argument we found to be so weak, that it implied the mistake of the sale of a commodity for its manufacture. In the present case too, the confusion and misapprehension are nearly the same. The transfer of the imported goods from one British subject to another, is mistaken for the exchange of a quantity of goods between Great Britain and a foreign country. The sale of the goods at home renders not the country richer, it is the purchase of them abroad, with a quantity of British goods of less value.

What we have already said appears to be perfectly sufficient to expose the fallacy of Mr Spence's arguments to prove the inutility of commerce of import.17 We may add, however, a few observations, to explain to the reader somewhat more distinctly in what manner commerce of import does contribute to national wealth. On the subject of political economy, it seems best to recur as often as possible to particular instances; it being so very common for authors, who indulge, like Mr Spence, in very general terms, to bewilder both themselves and their readers. We import iron for example from the Baltic, though in certain favourable situations, where coal and the ore are found in the same vacinity, we make it at home. How does it appear, that this importation is advantageous? For this reason, that in all other cases but those specified, we can buy it cheaper abroad, than we can make it at home. We send forth a hundred pounds worth of goods, and we purchase with those goods a quantity of iron, which is worth more than one hundred pounds. Whatever this superiority of value exceeds the charges of importation is gain to the country.

To render this observation still more applicable to Mr Spence's principles, we may show how the instance resolves itself even into the rude produce of the soil. On making a ton of iron in Great Britain, let us suppose, that the labourers, &c. employed in providing the ore and the coals, and in smelting and preparing the metal, have consumed ten quarters of corn. Every ton of iron therefore prepared in Great Britain costs ten quarters of corn. Let us suppose, that in the preparation of a certain quantity of British manufactures, nine quarters of corn have been consumed; and let us suppose, that this quantity of goods will purchase in the Baltic a ton of iron, and afford, besides, the expence requisite for importing the iron into Britain. Is there not an evident saving of a quarter of corn, in the acquisition of this ton of iron? Is not the country one quarter of corn the richer, by means of its importation? In the importation of a thousand such tons, is it not a thousand quarters richer?

It is curious, that Mr Spence, whether by chance or design, I know not, has chosen all his examples of importation among invidious instances. He always illustrates his arguments by the importation of luxuries, of articles of immediate consumption, as tea for example, which being speedily used, seem not to add to the stock of the country, or to form part of its riches. This, however, if it is intended to have any effect, is only an argument to the ignorance of his readers; for the nature of the case is in no respect different. Why should Mr Spence object to the commerce in articles of immediate consumption when the produce of the land itself consists chiefly of articles of immediate consumption? Is the land not a source of wealth, because its chief produce is corn, which is generally all consumed within less than eighteen months from the time of its production?

To make indeed any distinction in this argument between articles of necessity, and articles of luxury, is absolutely nugatory. Whenever a country advances a considerable way beyond the infancy of society, it is a small portion of the members of the community who are employed in providing the mere necessaries of life. By far the greater proportion of them are employed in providing supply to other wants of man. Now in this case, as well as in the former, the sole question is, whether a particular description of wants can be most cheaply supplied at home or abroad. If a certain number of manufacturers employed at home can, while they are consuming 100 quarters of corn, fabricate a quantity of goods, which goods will purchase abroad such a portion of supply to some of the luxurious wants of the community as it would have required the consumption of 150 quarters at home to produce; in this case too the country is 50 quarters the richer for the importation. It has the same supply of luxuries for 50 quarters of corn less, than if that supply had been prepared at home.

The commerce of one country with another is in fact merely an extension of that division of labour by which so many benefits are conferred upon the human race. As the same country is rendered the richer by the trade of one province with another; as its labour becomes thus infinitely more divided, and more productive than it could otherwise have been; and as the mutual supply of all the accommodations which one province has and another wants, multiplies the accommodations of the whole, and renders the country in a wonderful degree more opulent and happy; the same beautiful train of consequences is observable in the world at large; that great empire, of which the different kingdoms and tribes of men may be regarded as the provinces. In this magnificent empire too one province is favourable to the production of one species of accommodation and another province of another. By their mutual intercourse they are enabled to sort and distribute their labour as most peculiarly suits the genius of each particular spot. The labour of the human race thus becomes much more productive, and every species of accommodation is afforded in much greater abundance. The same number of labourers whose efforts might have been expended in producing a very insignificant quantity of home-made luxuries, may thus in Great-Britain produce a quantity of articles for exportation, accommodated to the wants of other places, and peculiarly suited to the genius of Britain to furnish, which will purchase for her an accumulation of the luxuries of every quarter of the globe. There is not a greater proportion of her population employed in administering to her luxuries, in consequence of her commerce, there is probably a good deal less; but their labour is much more productive; the portion of commodities which the people of Great-Britain acquire, by means of the same labour, is vastly greater.

ARTICLE SECOND; COMMERCE OF EXPORT

Mr Spence's reasoning concerning commerce of export is rather more complicated than that concerning commerce of import. ‘It is plain,’ he says,18 ‘that in some case an increase of national wealth may be drawn from commerce of export. The value obtained in foreign markets for the manufactures which a nation exports, resolves itself into the value of the food which has been expended in manufacturing them, and the profit of the master manufacturer and the exporting merchant. These profits are undoubtedly national profit. Thus, when a lace-manufacturer has been so long employed in the manufacturing a pound of flax into lace, that his subsistence during that period has cost £30; this sum is the real worth of the lace; and if it be sold at home, whether for £30 or £60, the nation is, as has been shewn, no richer for this manufacture. But if this lace be exported to another country, and there sold for £60, it is undeniable that the exporting nation has added £30 to its wealth by its sale, since the cost to it was only £30.’ Allowing, however, that this advantage, without any abatement, was drawn by Great-Britain from her export commerce, its utmost amount, he says, would still be trifling, and our exaggerated notions of the value of our trade, ridiculous. ‘Great-Britain,’ he informs us,19 ‘in the most prosperous years of her commerce, has exported to the amount of about fifty millions sterling. If we estimate the profit of the master manufacturer, and the exporting merchant, at 20 per cent on this, it will probably be not far from the truth; certainly it will be fully as much as in these times of competition is likely to be gained. Great-Britain then gains annually by her commerce of export ten millions.’ This sum, he tells us, is a mere trifle in the amount of our annual produce. ‘More than twice this sum,’ he says,20 ‘is paid for the interest of the national debt! More than four times this sum is paid to the government in taxes!’8 This sum, however, insufficient as it is to justify our lofty conceptions of the value of our commerce, is in reality, he at last assures us, not gained by Great-Britain. The reason which he brings in proof of this assertion, is the point to the examination of which we now proceed.

Great-Britain, he says, and in proof of this he enters into a long dissertion, imports regularly to as great an amount as she exports, and for that reason she gains nothing by her export trade. But how then? What else would Mr Spence have us do? Would he have us export our goods for nothing? And is that the plan which he would propose to make the country gain by her commerce? Ought we to carry our commodities to foreigners, and beg them only to accept of the articles; but above all things not to insist upon making us take any thing in payment; as this would be the certain way to prevent us from gaining by the trade?

For what on the other hand is it that Mr Spence would recommend to us to get for our goods? If we receive not other goods, the only return we can receive seems to be money. Would Mr Spence then tell us that we should get rich by receiving every year gold and silver for our fifty millions of exports? Not to insist upon the inherent absurdity of such a notion, let us only observe how inconsistent it would be with his own declared opinions? He warned us, in a passage already quoted,22 against conceiving that wealth consists in gold and silver merely. He assured us that23 ‘spain has plenty of gold and silver, yet she has no wealth, whilst Britain is wealthy with scarcely a guinea.’ He informs us farther,24 ‘that a nation which has abundance of gold and silver, is in fact not richer than if it had none. It has paid an equal value of some other wealth for them, and there is no good reason why it should be desirous of having this rather than any other species of wealth; for the only superiority in value which the precious metals possess over other products of the labour of man, is their fitness for being the instruments of circulation and exchange. But in this point of view the necessity of having gold and silver no longer exists; experience has in modern times evinced that paper, or the promissory notes of men of undoubted property, form a circulating medium fully as useful and much less expensive.’

He here informs us expressly that gold and silver are in no respect more to be desired than any other imported commodity. But the importing of other commodities he assured us was the cause which prevented our commerce of export from being a source of wealth. We now see that by his own confession gold and silver are in the same predicament with other imported commodities. But, if in order to gain by our commerce of export, we must receive in return neither goods nor money, we see no alternative that is left, except, as we said before, giving our goods away for nothing.

It may serve to render the subject still more clear, if I add a few words in the farther explanation of money. The true idea of money is neither more nor less than that of a commodity which is bought and sold like other commodities. In dealings with foreign nations, that class of transactions which we are now considering, this will very easily appear. When British goods, sold abroad, are paid for in money, it is not the denomination of the foreign coin which the merchant regards, it is the quantity of gold and silver which it contains. It is its value as bullion merely that he estimates in the exchange; and it is in the form of bullion, not of foreign coin, that the gold and silver, when it is in gold and silver that he receives his payment, is imported. The importation of gold and silver, therefore, differs in no respect from the importation of platinum, zinc, copper or any other metal. A certain part of it being taken occasionally to be stamped as money, makes not an atom of difference between the cases. It appears, therefore, with additional evidence, that if the importation of other commodities in exchange for the British goods which we export, annihilates the advantage of the exportation; so likewise does the importation of gold and silver. Again, therefore, we ask in what possible way are we to derive wealth from our commerce of export, but by the generous disposal of our goods for nothing to the kind and friendly nations who will please to receive them.

If we trace this subject a little farther, we shall perceive how the importation of money would disorder the policy of Mr Spence. It is very evident that the gold and silver which can be of any use in a nation, does not exceed a certain quantity.25 In Great-Britain, where it is almost banished from the medium of exchange, the annual supply which is wanted, cannot be very large. To render what we receive, above this trifling supply, of any utility, it must again travel abroad to purchase something for which we may have occasion. But in this case again it administers to the traffic of importation; and thus, by the very act of its becoming useful, produces the effect which Mr Spence says cuts off the advantage to be derived from commerce of export.

We have yet, however, to examine an important resource of Mr Spence's theory. He makes a distinction between commodities, which are of a durable, and commodities which are of a perishable nature. The commodities he says, which are of a durable nature, are much more valuable as articles of wealth, than articles which are of a perishable nature; and the country which produces or purchases the one, contributes much more to the augmentation of its wealth, than the country which acquires the latter. It sometimes happens to more accurate reasoners than Mr Spence, that one part of their theory clashes with another. But we think that it does not very often happen, that a man of Mr Spence's powers of mind, (for it is rather in the want of practice in speculation, than in want of capacity for it, that his defect seems to lie) so obviously becomes the antagonist of his own doctrine. In the whole train of commodities, are any of a more perishable nature than all the most important productions of the land? Of many of the manufactures, on the other hand, the productions are of a very durable sort, as the manufactures for example of tooth-picks, and of glass beads for the ladies. According to this ingenious distinction, therefore, could we increase the manufacture of tooth-picks, and glass beads, by diminishing the production of corn, we should contribute to the riches of the country.

The use which Mr Spence makes of this distinction, is notable. The greater part of the articles of British importation, he says, are of a perishable nature; whereas her articles of exportation are of a durable nature; for this reason she ought to be considered as losing by her foreign trade. ‘We do,’ says he,26 ‘gain annually a few millions by our export trade, and if we received these profits in the precious metals, or even in durable articles of wealth, we might be said to increase our riches by commerce; but we spend at least twice the amount of what we gain, in luxuries, which deserve the name of wealth but for an instant, which are here today, and to morrow are annihilated. How then can our wealth be augmented by such a trade?’

We may here remark another instance, in which the ideas of Mr Spence wage hostilities with one another. We shall hereafter find, that he recommends consumption and luxury, as favorable to the prosperity of the state. Yet here we perceive, that all his reasons against the utility of commerce, terminate in a quarrel with the importation of articles of luxury.27

Nothing was ever more unfortunate than this distinction of Mr Spence. We have seen before, in the article on commerce of import, that no distinction in the question of wealth exists between the commerce in articles of luxury, and any other. Whatever arguments therefore are drawn from this distinction, are addressed to the ignorance of those, who, as Mr Spence says, ‘skim the surface.’ The only distinction of importance, which can be made between one sort of commodities and another, is that between the commodities which are destined to serve for immediate and unproductive consumption, and the commodities which are destined to operate as the instruments or means of production. Of the first sort, are all articles of luxury; and even the necessaries of life of all those, who are not employed in productive labour. Of the latter sort, are the materials of our manufactures, as wool, iron, cotton, &c., whatever forms the machinery and tools of productive labour, and even the food and clothes of the labourer. Of the commodities which administer to productive labour, it is evidently absurd to make any distinction between those which are durable, and those, which to use a phrase of Mr Spence, are, ‘evanescent’; as the most evanescent of them all has performed its part, before it vanishes, and replaced itself with a profit. Thus, the drugs of the dyer, even the coals which are consumed in his furnace, the corn which feeds his workmen, or the milk, one of the most perishable of all commodities, which they may use in their diet, have performed their part as completely, and to the amount of their value as usefully as the iron lever, with which he drives his press. On the other hand, when articles are destined for immediate and unproductive consumption, it seems a consideration of very trifling importance, whether they are articles which are likely to be all used in the course of one year, or in the course of several years. When a rouge for the ladies cheeks, which may be kept for any time, and hoarded up to any quantity, is imported, we surely cannot regard the interests of the country as much more consulted, than when the most evanescent luxury which Mr Spence can conceive is introduced into it. When it is on a distinction without a difference, that Mr Spence's argument against commerce ultimately depends, his doctrine must rest on a sandy foundation.28

Mr Spence's opinions, however, on this subject are very wonderful. ‘Of two nations,’ he says,30 ‘if one employed a part of its population in manufacturing articles of hardware, another in manufacturing wine, both destined for home consumption; though the nominal value of both products should be the same, and the hardware should be sold in one country for £10,000, and the wine in the other for the same sum, yet it is evident, that the wealth of the two countries would, in the course of a few years, be very different. If this system were continued for five years, in the one country, the manufacturers of hardware would have drawn from the consumers of this article, £50,000; and, at the same time, this manufacture being of so unperishable a nature, the purchasers of it would still have in existence the greater part of the wealth they had bought; whereas, in the other nation, though the wine manufacturers would have also drawn to themselves £50,000 from the consumers of wine, yet these last would have no vestige remaining of the luxury they had consumed. It is evident, therefore, that at the end of five years, the wealth of the former nation would be much greater than that of the latter, though both had annually brought into existence wealth to an equal nominal amount.’

Now what is the idea which seems to be involved in this explanation? It is, that the nation which imports articles of a durable nature grows rich by hoarding them up. It is curious, that the very idea, and in fact the very example, which Dr Smith brings forward as so absurd that it might serve to cover with ridicule the mercantile system, is actually adduced by Mr Spence, in the simplicity of his heart, as a solid reason to prove the inutility of commerce. Dr Smith thus remarks: ‘Consumable commodities, it is said, are soon destroyed; whereas gold and silver are of a more durable nature, and, were it not for their continual exportation, might be accumulated for ages together, to the incredible augmentation of the real wealth of the country. Nothing, therefore, it is pretended, can be more disadvantageous to any country, than the trade which consists in the exchange of such lasting for such perishable commodities. We do not, however, reckon [on] that trade disadvantageous which consists in the exchange of the hardware of England for the wines of France; and yet hardware is a very durable commodity, and were it not for this continual exportation, might too be accumulated for ages together, to the incredible augmentation of the pots and pans of the country. But it readily occurs that the number of such utensils is in every country necessarily limited by the use which there is for them; that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there; and that, if the quantity of victuals was to increase, the number of pots and pans would readily increase along with it, a part of the increased quantity of the victuals being employed in purchasing them, or in maintaining an additional number of workmen, whose business it was to make them.’30

In fact nothing can well be more weak than to consider the augmentation of national riches, by the accumulation of durable articles of luxury, as a consideration of moment. The value of the whole amount of them in any country is never considerable, and it is evident that whatever they cost is as completely withdrawn from maintaining productive industry, as that which is paid for the most perishable articles.31 Mr Spence has an extremely indistinct and wavering notion of national wealth. He seems on the present occasion to regard it as consisting in the actual accumulation of the money and goods which at any time exist in the nation. But this is a most imperfect and erroneous conception. The wealth of a country consists in her powers of annual production, not in the mere collection of articles which may at any instant of time be found in existence.32 How inadequate an idea would he have of the wealth of Great Britain who should fix his ideas merely upon the goods in the warehouses of her merchants, and upon the accommodations in the houses of individuals; and should not rather direct his attention to the prodigious amount of goods and accommodations which are called into existence annually by the miraculous powers of our industry? The only part, it is evident, of the existing collection of commodities which in any degree contributes to augment the annual produce, the permanent riches of the country, is that part which administers to productive labour; the machines, tools, and raw materials which are employed in the different species of manufacturing and agricultural industry. All other articles whether durable or perishable are lost to the annual produce, and the smaller the quantity of either so much the better.

To trace however these ideas as far as Mr Spence pleases; let us suppose that our merchants instead of importing perfumes, for example, for the nose, should import ornaments for the hair and other similar trinkets of the greatest durability. When or how can these be supposed to be of utility or value? The use of them, it is evident, is as frivolous and as little conducive to any valuable end as that of the perfumes. It is only in the idea of their sale therefore that they can be considered as more valuable than the perfumes. They might still be sold for something after the perfumes are consumed. In the first place, the sale of half worn trinkets or hardware would not, it is likely, be very productive. But observe the nature of the sale itself. What a nation sells, it sells to some other nation. Should it then sell its accumulation of trinkets and hardware, it must import something in lieu of them. This must be either perishable articles, or such durable articles as the hardware which was exported; for money, even according to Mr Spence, forms no distinction. But this fresh cargo of durable articles is in the same predicament with the former; useless while it remains, and only capable of augmenting the riches of the country when it is resold. But this course it is evident may be repeated to infinity, and still the augmentation of wealth be as little attained as before. It is seldom that a false argument in political economy admits of so complete a reduction to absurdity as this.

We have thus with some minuteness examined the validity of what Mr Spence brings, in the shape of argument, to prove that the export commerce of Great Britain is productive of no wealth.33 A very short and conclusive argument however was sufficient for the refutation of this boasted doctrine. The imports of Great Britain are equal, he says, in amount to her exports, and they are chiefly of a perishable nature. What Great Britain therefore might gain by her exports she loses by her imports. But we have already proved, in the preceding article, that commerce of import is itself a source of gain, and that, whether the articles imported are of a perishable or a durable nature. Whatever therefore is gained by our commerce of export is so far from being diminished by our commerce of import, that this last affords a gain equal in amount to that of the former. The profits of commerce are doubled by the operation of import.3435

There is another view of this subject exhibited by Mr Spence, which it may yet be of some importance to consider. Though the grand axiom of the Economistes, that the only source of wealth is land, is undoubtedly, he says, founded in truth, yet an application which they make of this axiom to the present affairs of Europe is erroneous. Though it is36 ‘the natural order of prosperity in a state that agriculture produces manufactures, not manufactures agriculture; yet the case seems very different with Europe, and an attention to facts will prove, that in Britain agriculture has thriven only in consequence of the influence of manufactures; and that the increase of this influence is requisite to its farther extension.’ It is needless to state the proof which he adduces of these positions; for it is neither more nor less than a repetition, in Mr Spence's own manner, of the view which Dr Smith exhibits37 of the progress of industry in the feudal governments of modern Europe; where the slow and imperceptible insinuation of commerce burst asunder the bands of feudal tyranny, and instead of the sloth and poverty of servitude introduced the industry and opulence of liberty. It is enough for us at present to advert attentively to the position which Mr Spence here so emphatically announces, that such have been, and such are, the actual circumstances of Europe, that agriculture neither could have thriven, nor can yet thrive, but by means of manufactures. On this single admission, methinks, one might conclude that it was rather a rash doctrine to promulgate that commerce is of no utility to Great Britain, and that she might contemplate the loss of it with little emotion.

But having seen that manufactures, by Mr Spence's own admission, are absolutely necessary to the prosperity of Europe in her present circumstances, particularly in the present arrangement of her landed property; let us next see what is that state of things to which alone he admits that his doctrine respecting land and commerce is applicable. Having shewn that the conclusion which the Economistes drew, and drew very logically, from their principles, that till the whole land of every country be cultivated in the most complete manner, manufactures should receive little encouragement, will not apply to the circumstances of modern Europe, he next proceeds to describe that state of affairs to which the principles and conclusions of that sect do apply. Observe then what is that arrangement of the circumstances of Europe, what the changes from their present situation, which are requisite to adapt them for the practical operation of the doctrines of the Economistes. ‘If the question were.’ says Mr Spence,38 ‘on what system may the greatest prosperity be enjoyed by the bulk of society, there can be no doubt that the system recommended by the Economistes, which directs the attention of every member of society to be turned to agriculture, would be most effectual to this end. But such a system could be efficaciously established in Europe in no other way than by the overthrow of all the present laws of property, and by a revolution which would be as disasterous in its ultimate consequences as it would be unjust and impracticable in its institution. This system could be acted upon only by the passing an Agrarian law; by the division of the whole soil of a country in equal portions amongst its inhabitants.’ Let us here intreat Mr Spence to pause for a moment, and to reflect upon the practical lessons which he is so eager to teach us. The present course of industry by manufactures and commerce he admits is adapted to the present circumstances of Europe, and that all the prosperity which she exhibits is owing to it; the application of the doctrine that all prosperity is owing to agriculture would require, he says, ‘the division of the whole soil of the country in equal portions amongst its inhabitants, a revolution which would be as disasterous in its ultimate consequences, as it would be unjust and impracticable in its institution;’ yet on the strength of this system he would have us believe that commere is of no utility; he would have us conduct our affairs on a plan which is not applicable to the present situation of the world, and abandon the course by which we have attained our actual prosperity.39

Another admission here of Mr Spence is truly pleasant. An equal division of the land, he says, would be an institution impracticable; and well indeed is the observation founded. How could mankind ever agree about what is equal? Equal surfaces are very unequal in value; and the value is a circumstance so ambiguous and disputable, that it can never be accurately ascertained. Besides, the value of land is perpetually changing. In the hands of the industrious man it improves; in the hands of the slothful man it becomes barren. What then? In order to preserve our equality, must we take part of his improved land from the industrious man to give to the slothful? This would be giving a premium to sloth, and laying a tax, sufficient to operate as a prohibition, upon industry. We should thus have all our people slothful, and all our land barren. But independent of this, the number of people does not always remain the same. It is perpetually changing. That no one then might be without a share, it would be requisite to be making perpetual changes in the apportionment of the land; and thus no one would ever know what was or was not his land. He could never therefore expend any pains in the culture of it. With great justice then has Mr Spence asserted that the institution of an Agrarian law is impracticable. Observe, however, another assertion of his: ‘that the system of the Economistes can be efficaciously established, that it can be acted upon, in no other way than by an equal division of the soil.’ The system of the Economistes, then, cannot be established, but in an impossible state of things. It is a system not applicable to human affairs. It is therefore an absurdity.40

It is perhaps not less remarkable that Mr Spence himself proceeds, apparently unconscious that it is a refutation of his own doctrine which he is penning, to exhibit a proof that his system, even if it were capable of being introduced could lead to no happiness; far from it; but to a state of the greatest misery. ‘Let us attend,’ he says,41 ‘a moment to the results which would ensue from the establishment of such a system. If the twelve millions of inhabitants of Great Britain were to have the seventy-three millions of acres of land, which this island is said to contain, divided amongst them, each individual receiving six acres as his share, there can be no doubt, that the condition of the great bulk of the people would be materially improved. Such a quantity of land would suffice for the production of meat, clothes and fire, of every thing necessary for comfortable existence; and the peasant, no longer anxious about the means of providing bread for his family, might devote his abundant leisure to the cultivation of his mind, and thus realize, for a while, the golden dreams of a Condorcet or a Godwin. Yet however great the prosperity of such a state of society, it would be impossible for it to accumulate wealth. For, as all its members would provide their own food, there could be no sale for any surplus produce, consequently no greater quantity would be raised than could be consumed, and at the end of the year, however great might have been the amount of the wealth brought into existence during that period by agriculture, not a trace of its existence would remain. Nor would the prosperity of such a state of society be of long duration. In a nation where such plenty reigned, the great command of the Creator, to increase and multiply, would act in full force, and the population would double in twenty-five years. Supposing then this state of things to continue, in seventy-five iyears from its establishment, Britain would contain ninety-six millions of souls, a number full as great as could possibly exist on seventy-three millions of acres of land. Here, then, misery would commence; the difficulty of procuring subsistence would be greater to the whole of society than it now is to a small proportion; population would be at a stand; and on any occasional failure of food, all the dreadful consequences would ensue which so frequently befall the over-peopled country of China.’42 Scarcely could we desire an author to administer with more naïveté than this to his own confutation.

The doctrine of Mr Spence then comes to this. If he admits absolutely the axiom of the Economistes, that land is the only source of wealth; then he must admit the whole of their system, which is built upon this axiom with logical and unquestionable exactness; but which we have found to be utterly impracticable in human affairs, and tending, even if it could be introduced, not to a state of happiness, but to a state of misery. Mr Spence indeed asserts, over and over, that the axiom of the Economistes is an undoubted truth. Nay he enters into a chain of reasoning, or illustration, to prove that it is incontrovertible. We might therefore, by all the laws of reasoning, hold him to the conclusions which necessarily flow from it. But as he seems to wish to relax a little from the severity of the economical system, when he admits that it is inapplicable to the present circumstances of Europe, let us examine this amended doctrine. We shall find that no argument can be founded upon it, which does not in reality give up the question. If Mr Spence say that land is indeed the only source of wealth, but commerce, in the circumstances of modern Europe, is necessary to render the land productive, we may answer that all possible circumstances, even according to his own admission, will in the same manner require commerce, with the sole exception of that equal division of the land which is requisite to the establishment of the economical system. Commerce, therefore, is conducive to the prosperity of national affairs in every concurrence of circumstances consistent with the laws of human nature. If Mr Spence still insist that commerce is only mediately, that land alone is immediately, the source of wealth, we shall certainly not dispute with him about a word, however incorrect we may deem the word which he employs; for in a question about the utility of food to the human body, we should not think it necessary very anxiously to contend with any new-fangled physiologist who should argue that food does not contribute to the renovation and expansion of the bodily parts immediately, by direct conjunction, but only mediately, by stimulating the organs to accomplish this renovation and expansion. We should think it fully sufficient for the proof of our position, that food is useful, if it were admitted that without food, such effects could not be produced. We should not, however, pay much attention to our physiological Instructor, should he proceed to his practical deductions, and tell us, ‘Bonaparte will speedily be able to cut off your whole supplies of food; but be not in the least degree alarmed; only listen to me, and I will prove to you that food is not immediately, but mediately useful to your bodies; therefore you can do as well, or perhaps better, without it.’43

CHAPTER VI

CONSUMPTION

The doctrine of Mr Spence respecting consumption is not less worthy of examination than his doctrine concerning production. This author divides the members of a civilized society into four classes; the class of landowners–The class of cultivators–The class of manufacturers–And the unproductive class. ‘As the whole revenue of a country,’ he says,44 ‘is derived from its land; and as the class of land-proprietors are the recipients of this revenue, it is evident that from this class must be drawn the revenues of the two other classes of society; the manufacturing and unproductive class. It is a condition, then, essential,’ he adds, ‘to the creation of national wealth, that the class of land-proprietors expend the greater part of the revenue which they derive from the soil. So long as they perform this duty, every thing goes on in its proper train. With the funds which the manufacturing and the unproductive classes appropriate to themselves from the expenditure of the class of landowners, they are enabled to purchase the food which the farmer offers to them. The farmer being enabled to dispose of his produce, acquires the funds necessary for the payment of his rent, &c. Let us make the supposition that fifty of our great landowners, each deriving twenty thousand pounds a year from his estates, which they have been accustomed to spend, were to be convinced by the arguments of Dr Smith, that the practice of parsimony is the most effectual way of accumulating national riches, and should save the £1000000 which their revenue amounted to. Is it not selfevident that the members of the manufacturing and unproductive classes, who had been accustomed to receive this sum, would have their power of consuming diminished? The farmer consequently could not sell so much of his produce, nor at so good a price as before. It is clear then that expenditure, not parsimony, is the province of the class of land proprietors; and that it is upon the due performance of this duty by the class in question, that the production of national wealth depends. And not only does the production of national wealth depend upon the expenditure of the class of land-proprietors, but for the due increase of this wealth, and for the constantly progressive maintenance of the prosperity of the community, it is absolutely requisite that this class should go on progressively increasing its expenditure. It will follow, as a consequence, that in countries constituted as this and those composing the rest of Europe are, the increase of luxury is absolutely essential to their well-being. It is impossible exactly to define what are luxuries and what necessaries; yet a slight consideration will shew that a very great proportion of our manufactures cannot be included under the latter title. Every one knows that a few hundreds a year are sufficient to procure all the necessaries and comforts of life: in what then can the sums above this amount, which are spent by the numbers in this country who have their £10,000 and £20,000 a year, be expended, but in luxuries? And as from this consideration it is plain that the population of the manufacturing class, at present occupied in providing necessaries, is fully equal to fabricate all that are wanted of this description, it follows that the additional population of this class can only be employed in the manufacture of new luxuries.’

This is the first part of our author's doctrine concerning consumption, and I have been anxious to exhibit a full view of it. Its nature and value we now proceed to investigate.

The reader of this pamphlet, we trust, will immediately discover one short argument subversive of this whimsical speculation. It is founded, we see, upon the assumption that land is the only source of wealth; a position which we have found to be altogether untenable. Both manufactures and commerce are sources, and important sources of wealth; therefore the landed proprietors are not the original owners of the whole, nor of nearly the whole, annual revenue of the country. The foundation of Mr Spence's doctrine being thus removed, the superstructure of necessity falls to the ground.45

It may be useful, however, to exhibit a fuller and more accurate view of the fallacy of this doctrine respecting consumption. It proceeds entirely upon a misapprehension; upon the confounding together of two things, which are remarkably different, by failing to distinguish the double meaning of an ambiguous term. The two senses of the word consumption are not a little remarkable. We say, that a manufacturer consumes the wine which is laid up in his cellar, when he drinks it; we say too, that he has consumed the cotton, or the wool in his warehouse, when his workmen have wrought it up: he consumes part of his money in paying the wages of his footmen; he consumes another part of it in paying the wages of the workmen in his manufactory. It is very evident, however, that consumption, in the case of the wine and the livery servants, means something very different from what it means in the case of the wool or cotton, and the manufacturing servants. In the first case, it is plain, that consumption means extinction, actual annihilation of property; in the second case, it means more properly renovation, and increase of property. The cotton or wool is consumed only that it may appear in a more valuable form; the wages of the workmen only that they may be repaid, with a profit, in the produce of their labour. In this manner too, a land proprietor may consume a thousand quarters of corn a year, in the maintenance of dogs, of horses for pleasure, and of livery servants; or he may consume the same quantity of corn in the maintenance of agricultural horses, and of agricultural servants. In this instance too, the consumption of the corn, in the first case, is an absolute destruction of it. In the second case, the consumption is a renovation and increase. The agricultural horses and servants will produce double or triple the quantity of corn which they have consumed. The dogs, the horses of pleasure, and the livery servants, produce nothing.

We perceive, therefore, that there are two species of consumption; which are so far from being the same, that the one is more properly the very reverse of the other. The one is an absolute destruction of property, and is consumption properly so called; the other is a consumption for the sake of reproduction, and might perhaps with more propriety be called employment than consumption. Thus the land proprietor might with more propriety be said to employ, than consume the corn, with which he maintains his agricultural horses and servants; but to consume the corn which he expends upon his dogs, livery servants, &c. The manufacturer too, would most properly be said to employ, not to consume, that part of his capital, with which he pays the wages of his manufacturing servants; but to consume in the strictest sense of the word what he expends upon wine, or in maintaining livery servants. Such being the remarkable difference between the meanings of the word consumption, the man in whose reasonings and doctrines those meanings are confounded, must arrive at woeful conclusions.

It appears from this very explanation of the meanings of the term, that it is of importance to the interests of the country, that as much as possible of its annual produce should be employed, but as little as possible of it consumed. The whole annual produce of every country is distributed into two great parts; that which is destined to be employed for the purpose of reproduction, and that which is destined to be consumed. That part which is destined to serve for reproduction, naturally appears again next year, with its profit. This reproduction, with the profit, is naturally the whole produce of the country for that year. It is evident, therefore, that the greater the quantity of the produce of the preceding year, which is destined to administer to reproduction in the next, the greater will naturally be the produce of the country for that year. But as the whole annual produce of the country is necessarily distributed into two parts, the greater the quantity which is taken for the one, the smaller is the quantity which is left for the other. We have seen, that the greatness of the produce of the country in any year, is altogether dependent upon the greatness of the quantity of the produce of the former year which is set apart for the business of reproduction. The annual produce is therefore the greater, the less the portion is which is alloted for consumption. If by consumption therefore Mr Spence means, what we have termed consumption properly so called, or dead unproductive consumption, and it does appear that this is his meaning, his doctrine is so far from being true, that it is the very reverse of the truth. The interests of the country are the most promoted, not by the greatest, but by the least possible consumption of this description.

Let not Mr Spence, however, be alarmed. Let him rest in perfect assurance, that the whole annual produce of the country will be always very completely consumed, whether his landholders choose to spend or to accumulate. No portion of it will be left unappropriated to the one species of consumption, or to the other. No man, if he can help it, will let any part of his property lie useless and run to waste. Nothing is more clear, than that the self-interest of men, ever has impelled and ever will impel them, with some very trifling exceptions, to use every particle of property which accrues to them, either for the purpose of immediate gratification, or of future profit. That part, however, which is destined for future profit, is just as completely consumed, as that which is destined for immediate gratification. A thousand ploughmen consume fully as much corn and cloth in the course of a year as a regiment of soldiers. But the difference between the kinds of consumption is immense. The labour of the ploughman has, during the year, served to call into existence a quantity of property, which not only repays the corn and cloth which he has consumed, but repays it with a profit. The soldier on the other hand produces nothing. What he has consumed is gone, and its place is left absolutely vacant. The country is the poorer for his consumption, to the full amount of what he has consumed. It is not the poorer, but the richer for what the ploughman has consumed, because, during the time he was consuming it, he has reproduced what does more than replace it.

We may hence perceive how it is, that a country advances in property, and how it is that it declines. When the produce of each year is the same with that of the preceding year, it is plain that the riches of the country are stationary; when the produce of each year is greater than that of the preceding, the wealth of the country is advancing; and when the produce of each year is less than that of the preceding, the wealth of the country is on the decline. What then is the cause by which the annual produce of a country is increased? About this there can luckily be no controversy. The cause by which the annual produce of a country is increased, is the increase of that division of the annual produce, which is destined to administer to reproduction. That we may have more work, we must employ more workmen, and use more materials. The maintenance of these workmen, and the materials on which they operate, are the new fund which is indispensably requisite to the increase of the annual produce. But the only source whence this provision can be drawn, is the source whence the whole fund destined to administer to reproduction is drawn, the annual produce of the country. Now, we have already clearly seen, that the annual produce of every country is always divided into two parts, that which is destined for mere consumption, and that which is destined for the business of reproduction; and that those two parts always wholly exhaust that produce. In whatever proportion, therefore, the part destined for reproduction is augmented, in the same proportion must the part intended for consumption be diminished, and vice versa. When the affairs of a country are stationary, when the produce of this year, for example, is the same with that of the last, that is to say, is equal both to that part which was appropriated to the business of reproduction and to that which was appropriated to consumption, the part destined for reproduction must have been so large as to suffice for replacing itself, and for affording an increase equal to that part of the annual produce which was taken for consumption. Again, if the produce for the succeeding year is to be the same with the present, such a part of this year's produce must be devoted to the business of reproduction as will suffice to replace itself, and to afford a surplus equal to that part which is reserved for immediate consumption. While this proportion is maintained, the situation of the country is stationary. When, however, it fortunately happens, that a smaller proportion than this of the annual produce is withdrawn for consumption, and a greater proportion than this is left for reproduction, the prosperity of the country advances. The produce of each year is greater than that of the preceding. On the other hand, whenever in the stationary situation of a country, a greater than the usual proportion of the annual produce is withdrawn from the business of reproduction, and devoted to consumption, the produce of the succeeding year becomes necessarily diminished, and as long as this consumption continues, the affairs of the country are retrograde. It is evident, that the arrangement of society, which has a tendency to draw the greatest proportion of the annual produce to consumption, is that in which there is the greatest inequality of fortunes, in which there is the greatest number of persons, who have no occasion to devote themselves to any useful pursuit. But it is the maintenance of great fleets and armies, which is always the most formidable weight in the scale of consumption, and which has the most fatal tendency to turn the balance against reproduction and prosperity. It is by the lamentable continuance of wars, almost always nourished by puerile prejudices and blind passions, that the affairs of prosperous nations are first brought to the stationary condition, and from this plunged into the retrograde.

Mr Spence offers one curious observation. After the statement which we have already quoted, of the miseries which he supposes would flow from a disposition in the landholders not to spend, he anticipates an objection.46 ‘Let it not be urged,’ says he, ‘that what they might save would not be hoarded, (for misers now-a-days are wiser than to keep their money in strong boxes at home) but would be lent on interest; it would still be employed in circulation, and would still give employment to manufacturers.’ This objection he encounters with the following answer: ‘It should be considered, that money borrowed on interest is destined not for expenditure, but to be employed as capital; that the very circumstance of lessening expenditure decreases the means of the profitable employment of capital, and consequently that the employment of the sum alluded to as capital, would in no degree diminish the hardships of those, who had been deprived of the revenue derived from its expenditure.’ Wonderful, as after what we have been considering, it may appear, it is yet certain, that Mr Spence here objects to the augmentation of the portion of the annual produce, which is destined for reproduction. The savings of the landholders, says he, would be employed as capital. But why should they not be employed as capital? Because, says Mr Spence, expenditure would be lessened. Well may we here congratulate our author on the clearness and comprehensiveness of his views. What then? The corn which we supposed the landowner to consume upon his agricultural servants and horses, would not be as completely expended as that which we supposed him to consume upon his livery servants, his stud, and his dog kennel? The ploughmen of the country do not expend as well as the soldiers? There is here a want of discernment, which in a man, who stands up as an emphatical teacher in political economy, does hardly deserve quarter.47 Of the two parts of the annual produce, that which is destined for reproduction and that which is destined for consumption, the one is as completely expended as the other, and the part which is destined for reproduction, is that which is probably all expended in the shortest time.48 For the man who intends to make a profit is in haste to obtain it. But a considerable time may elapse before a man consume the whole of what he lays up for mere gratification. He may have in his cellar a stock of wine to serve him for several years, but the flax or the wool in his warehouse will probably be all worked up in the course of one year.

To render the futility of Mr Spence's objection still more clear, we may shew him by an analysis of a particular case in what manner the savings of his land-holders would contribute not to theworst but to the best effects in civil society. As this error respecting the importance of dead consumption is common both to the mercantile system and to that of the Economistes, and very generally diffused among the ordinary part of mankind, it is of no little importance, even at the risk of being thought tedious, to endeavour to set it in the strongest light I am able. Let us suppose that one of Mr Spence's landholders with a revenue of £10,000, the whole of which he has been accustomed to spend in the maintainance of a brilliant and luxurious establishment, becomes resolved all at once to cut short his expenditure one half. He has thus the very first year £5,000 to dispose of. Even Mr Spence allows that he will lend, not hoard it. Let us suppose that he lends it to the linen manufacturer in his neighbourhood. To what use in his hands is it immediately applied? to the augmentation unquestionably of his business. He goes directly and buys an additional quantity of flax from the farmer, he sets to work an additional number of flax-dressers and spinners, he employs the carpenters, blacksmiths, and other necessary artisans in erecting for him an additional number of looms, and he hires an additional number of weavers. In this manner the £10,000 of the landholder is as completely consumed as ever it was. But £5,000 of it is consumed in a very different manner. It is consumed, 1st upon a very different set of people, and 2d to a very different end. 1. It is consumed upon the growers, the dressers, the spinners, and weavers of flax, with the carpenters, blacksmiths, and other artisans whose labours are subservient to that manufacture, instead of being expended, as formerly, upon lacqueys and cooks, and the other artificers of luxury. 2. It is expended for the sake of reproduction. By means of its expenditure a property of an equal and more than equal amount is now called into existence; by its former expenditure nothing was called into existence. The produce of the country for this year therefore is greater than it would otherwise have been by the amount of £5,000, with its natural profits. If we suppose these profits to be only ten per cent, which is surely reasonable, the produce of the country is thus £5,500 the greater, on account of the very first year's saving of the landholder.49

Another strange perversity of Mr Spence's doctrine here presents itself. It is directly opposed to the very end which it purposes to promote, consumption. By renouncing Mr Spence's plan in the instance we have adduced, the country would have more to expend to the amount of £5,500 in the very first year of the new operation of the £5,000; because it would have more produce to the amount of £5,500. Mr Spence will not surely say that a nation can consume more than it produces; and it is very odd that he and the other pupils of the same doctrine do not reflect that consumption is posterior to production, as it is impossible to consume what is not produced. Consumption in the necessary order of things is the effect of production, not production the effect of consumption. But as every country will infallibly consume to the full amount of its production, whatever is applied to augment the annual produce of the country by consequence augments its annual consumption. The greater therefore the departure from Mr Spence's rules, the more rapid in every country the increase of consumption will be.50

There is another idea the explication of which I could have willingly avoided, because it is more abstruse than may appear adapted to the greater part of the readers of a pamphlet, and after all the pains I can take to render it plain in the narrow space to which I am confined, considerable obscurity may still appear to rest upon it. This explication however is not only necessary because it serves to clear away a remaining objection of the Economistes, but because it exposes the fallacy of certain notions current in this country, which threaten to have very extensive practical consequences. The Economistes and their disciples express great apprehensions lest capital should increase too fast, lest the production of commodities should be too rapid. There is only, say they, a market for a given quantity of commodities, and if you increase the supply beyond that quantity you will be unable to dispose of the surplus.

No proposition however in political economy seems to be more certain than this which I am going to announce, how paradoxical soever it may at first sight appear; and if it be true, none undoubtedly can be deemed of more importance. The production of commodities creates, and is the one and universal cause which creates a market for the commodities produced.51 Let us but consider what is meant by a market. Is any thing else understood by it than that something is ready to be exchanged for the commodity which we would dispose of? When goods are carried to market what is wanted is somebody to buy. But to buy, one must have wherewithal to pay. It is obviously therefore the collective means of payment which exist in the whole nation that constitute the entire market of the nation. But wherein consist the collective means of payment of the whole nation? Do they not consist in its annual produce, in the annual revenue of the general mass of its inhabitants? But if a nation's power of purchasing is exactly measured by its annual produce, as it undoubtedly is; the more you increase the annual produce, the more by that very act you extend the national market, the power of purchasing and the actual purchases of the nation. Whatever be the additional quantity of goods therefore which is at any time created in any country, an additional power of purchasing, exactly equivalent, is at the same instant created; so that a nation can never be naturally overstocked either with capital or with commodities; as the very operation of capital makes a vent for its produce. Thus to recur to the example which we have already analyzed; fresh goods to the amount of £5,500 were prepared for the market in consequence of the application of the £5000 saved by the landholder. But what then? have we not seen that the annual produce of the country was increased; that is, the market of the country widened, to the extent of £5,500, by the very same operations? Mr Spence in one place advises his reader to consider the circumstances of a country in which all exchange should be in the way of barter, as the idea of money frequently tends to perplex. If he will follow his own advice on this occasion, he will easily perceive how necessarily production creates a market for produce. When money is laid out of the question, is it not in reality the different commodities of the country, that is to say, the different articles of the annual produce, which are annually exchanged against one another? Whether these commodities are in great quantities or in small, that is to say, whether the country is rich or poor, will not one half of them always balance the other? and is it not the barter of one half of them with the other which actually constitutes the annual purchases and sales of the country? Is it not the one half of the goods of a country which universally forms the market for the other half, and vice versa? And is this a market that can ever be overstocked? Or can it produce the least disorder in the market whether the goods are in great or in small quantity? All that here can ever be requisite is that the goods should be adapted to one another; that is to say, that every man who has goods to dispose of should always find all those different sorts of goods with which he wishes to supply himself in return. What is the difference when the goods are in great quantity and when they are in small? Only this, that in the one case the people are liberally supplied with goods, in the other that they are scantily; in the one case that the country is rich, in the other that it is poor: but in the one case, as well as in the other, the whole of the goods will be exchanged, the one half against the other; and the market will always be equal to the supply. Thus it appears that the demand of a nation is always equal to the produce of a nation. This indeed must be so; for what is the demand of a nation? The demand of a nation is exactly its power of purchasing. But what is its power of purchasing? The extent undoubtedly of its annual produce. The extent of its demand therefore and the extent of its supply are always exactly commensurate. Every particle of the annual produce of a country falls as revenue to somebody. But every individual in the nation uniformly makes purchases, or does what is equivalent to making purchases, with every farthing's worth which accrues to him. All that part which is destined for mere consumption is evidently employed in purchases. That too which is employed as capital is not less so. It is either paid as wages to labourers, who immediately buy with it food and other necessaries, or it is employed in the purchase of raw materials. The whole annual produce of the country, therefore, is employed in making purchases. But as it is the whole annual produce too which is offered to sale, it is visible that the one part of it is employed in purchasing the other; that how great soever that annual produce may be it always creates a market to itself; and that how great soever that portion of the annual produce which is destined to administer to reproduction, that is, how great soever the portion employed as capital, its effects always are to render the country richer, and its inhabitants more opulent, but never to confuse or to overload the national market. I own that nothing appears to me more completely demonstrative than this reasoning.52

It may be necessary, however, to remark, that a nation may easily have more than enough of any one commodity, though she can never have more than enough of commodities in general. The quantity of any one commodity may easily be carried beyond its due proportion; but by that very circumstance is implied that some other commodity is not provided in sufficient proportion. What indeed is meant by a commodity's exceeding the market? Is it not that there is a portion of it for which there is nothing that can be had in exchange. But of those other things then the proportion is too small. A part of the means of production which had been applied to the preparation of this superabundant commodity, should have been applied to the preparation of those other commodities till the balance between them had been established. Whenever this balance is properly preserved, there can be no superfluity of commodities, none for which a market will not be ready.53 This balance too the natural order of things has so powerful a tendency to produce, that it will always be very exactly preserved where the injudicious tampering of government does not prevent, or those disorders in the intercourse of the world, produced by the wars into which the inoffending part of mankind are plunged, by the folly much more frequently than by the wisdom of their rulers.

This important, and as it appears demonstrative doctrine, affords a view of commerce which ought to be very consolatory to Mr Spence. It shews that a nation always has within itself a market equal to all the commodities of which it can possibly have to dispose; that its power of purchasing is always equivalent to its power of producing, or at least to its actual produce; and that as it never can be greater, so it never can be less. Foreign commerce, therefore, is in all cases a matter of expediency rather than of necessity. The intention of it is not to furnish a vent for the produce of the industry of the country, because that industry always furnishes a vent for itself. The intention of it is to exchange a part of our own commodities for a part of the commodities which we prefer to our own of some other nation; to exchange a set of commodities which it peculiarly suits our country to produce for a set of commodities which it peculiarly suits that other country to produce. Its use and advantage is to promote a better distribution, division and application of the labour of the country than would otherwise take place, and by consequence to render it more productive. It affords us a better, a more convenient and more opulent supply of commodities than could have been obtained by the application of our labour within ourselves, exactly in the same manner as by the free interchange of commodities from province to province within the same country, its labour is better divided and rendered more productive.

It thus appears of what extraordinary importance to every community is the augmentation of capital; that is to say, the augmentation of that part of the annual produce which is consumed in the way of reproduction. If we but recall the thought of that important doctrine first illustrated by Smith, that a progression is necessary in national affairs to render the circumstances of the great body of the people in any degree comfortable, our humanity, as well as our patriotism, will become deeply interested in the doctrine of parsimony. Dr Smith shews that even when a country is stationary, the subsistence of the labouring classes is reduced to the lowest rate which is consistent with common humanity; that is to say, it is barely sufficient to enable them to maintain their present numbers, but not sufficient to enable them in the least degree to augment them. But if we recollect how much greater than this are the powers of multiplication in the species, how natural it is for the average of families to be more numerous than merely to replace the father and the mother; we shall see with feelings of commiseration how wretched must be the circumstances of those families that are more numerous, and of how many human creatures brought into existence, it must be the miserable fate to perish through want of subsistence. But if such is the dismal situation of the great body of the people, when the national affairs are but stationary, how much more shocking to our feelings are their circumstances, when the situation of the country is retrograde. In this situation the labourer is unable to earn even at a rate which is sufficient to maintain the number of the labouring class. Calamity now comes down with a heavier hand. That class must even be thinned by the dreadful operation of deficient subsistence. On the other hand, when the affairs of the country are progressive, the wages of the labouring class are sufficient not only to maintain their existing numbers, but to augment them. The reward of labour is liberal. The labourer can support a moderate family with ease; and plenty and comfort diffuse themselves throughout the community. Have we not seen that this progressive state of society, that all these happy consequences result from continual additions made to the capital of the country, or to that part of the annual produce which is devoted to reproduction? and have we not seen that the retrograde condition, with all its deplorable consequences, results from making continual additions to that part of the annual produce which is taken for mere consumption? Little obligation then has society to those doctrines by which this consumption is recommended. Obstacles enow exist to the augmentation of capital without the operation of ridiculous speculations. Were the doctrine that it can increase too fast, as great a truth as it is an absurdity, the experience of all the nations on earth proves to us, that of all possible calamities this would be the least to be feared. Slow has been its progress every where; and low the degree of prosperity which has in any place been given to the mass of the people to enjoy.

CHAPTER VII

OF THE NATIONAL DEBT

Were the exhortations to consumption, of Mr Spence and others, addressed only to individuals, we might listen to them with a great deal of indifference; as we might trust with abundant confidence that the disposition in mankind to save and to better their condition would easily prevail over any speculative opinion, and be even little affected by its practical influence. When the same advice, however, is offered to government, the case is widely and awfully changed. Here the disposition is not to save but to expend. The tendency in national affairs to improve, by the disposition in individuals to save and to better their condition, here finds its chief counteraction.54 Here all the most obvious motives, the motives calculated to operate upon the greater part of mankind, urge to expence; and human wisdom has not yet devised adequate checks to confine within the just bounds this universal propensity. Let us consider then what are likely to be the consequences should this strong disposition become impelled, and precipitated by a prevailing sentiment among mankind. One of the most powerful restraints upon the prodigal inclinations of governments, is the condemnation with which expence, at least beyond the received ideas of propriety, is sure to be viewed by the people. But should this restraint be taken off, should the disposition of government to spend become heated by an opinion that it is right to spend, and should this be still farther inflamed by the assurance that it will by the people also be deemed right in their government to expend, no bounds would then be set to the consumption of the annual produce. Such a delusion could not certainly last long: but even its partial operation, and that but for a short time, might be productive of the most baneful consequences. The doctrines of Mr Spence which we have already considered, naturally lead to this dangerous application; but it is only when he comes to speak of the national debt that his advice is directly addressed to government.55

‘For my own part,’ says Mr Spence,56 ‘I am inclined to believe that the national debt, instead of being injurious, has been of the greatest service to our wealth and prosperity. It appears that man is in fact much more inclined to save than to spend. The land-proprietors accordingly have never fully performed their duty; they have never expended the whole of their revenue. What the land-proprietors have neglected to do, has been accomplished by the national debt. It has every now and then converted twenty or thirty millions of what was destined for capital into consumable revenue, and it has thus given a most beneficial stimulus to agriculture.’

The reader does not, I suppose, expect that I should compliment this doctrine with any very long discussion. As it is founded upon the very same mistakes which we have traced in our author's doctrines respecting the consumption of individuals; it would be necessary for me to tread over again the very same steps, to the fatigue of my reader as well as of myself. As the practical consequences, however, of these mistakes are deeply dangerous, and as there is reason to think that they have a more real operation in the administration of British affairs than the mere speculative reader, it is probable, would easily believe; it is necessary to consider with a little attention the principal points of this application of Mr Spence's theory.

According to Mr Spence the national debt has been advantageous because the government has thus spent what the land-proprietors would otherwise have saved. When his language is put into accurate terms it means this; the land-proprietors have every year endeavoured to increase to a certain amount that part of the annual produce which is destined for the business of reproduction, whereby they would have increased the annual produce, and the permanent riches of the country; but government has every year, or at least at every short interval of years, taken the property which the people would thus have employed in augmenting the riches of the country, and has devoted it to mere dead consumption, whence the increase of production has been prevented. It is in this manner, according to Mr Spence, that the national debt has been advantageous.

Let us hear Mr Spence's reasonings in defence of this doctrine. ‘Capital,’ says he,57 ‘is essential to a nation, but a nation may have too much of it; for what is the use of capital, but to prepare articles on which a revenue may be spent, and where is the revenue to be spent, to be derived from, if it be all converted into capital?’ It is evident that Mr Spence here falls into his old mistake, supposing that capital is not spent as well as revenue, that is, the part of the national produce which is appropriated to reproduction, as well as that which is appropriated to consumption.

‘When, during a war,’ says Mr Spence,58 ‘a loan of twenty or thirty millions is made, in what is the sum expended? Is it not consumed in providing food and clothing for the army and navy, &c.’ But, had no loan been wanted; and had the individuals of the army and navy been cultivators, manufacturers, and contributors, in all the necessary ways, to national production, might not the same sums have been employed in maintaining and clothing them? The difference would have been highly important. As industrious individuals, they would have reproduced within each year a property equivalent to that which they consumed, together with its natural profits. As soldiers and sailors, they consumed without producing any thing; and at the end of each year a property equal to what they consumed was destroyed, and not the value of a pin created to replace it.

After hearing what Mr Spence has to say in favour of loans, let us hear him on the subject of the taxes paid for the interest of those loans. ‘These taxes,’ says he,59 ‘are perhaps a greater cause of prosperity than the original debt was.’ His reason is immediately added; because, says he,60 ‘they are, for the most part, constantly devoted to the purchase of consumable commodities,’ that is to say, they are constantly devoted to dead consumption. The same fatal mistake still clings to Mr Spence. The double meaning of the word consumption still confounds him. Were the sums, paid in taxes, not sacrificed to dead consumption, would they not still be employed in making purchases? would they not be employed in purchasing the raw materials of manufactures, or in paying the wages of manufacturing and agricultural servants, who with these wages again would purchase their food and clothing? Mr Spence applauds the taxes, because they take so much from that part of the annual produce of the country which is destined for productive consumption, and add it to the part which is destined for dead consumption. This is the very cause for which the intelligent contemplator deplores them.

‘Heavy taxes,’ says Mr Spence,61 ‘are doubtless oppressive to many of the members of a society individually considered, yet where the whole, or by far the greater part of the taxes of a nation are expended in that nation, taxation may be carried to a very great extent, without injuring national prosperity.’ It is curious to observe how extremes meet. This is a favourite doctrine too of the mercantile system, of which those of the school of Mr Spence have so great an abhorrence. The reason of both is the same, that the taxes are laid out in the purchase of commodities; and they have not the discernment to reflect, that the money would have been as certainly laid out in the purchase of commodities, had it remained as capital. As capital, however, it would within the year have replaced itself with a profit; as taxes it is all consumed, and nothing is created to replace it. By its consumption as taxes the country is rendered poorer, by its consumption as capital, the country would have become richer.

Mr Spence has next a most excellent idea. The sums paid as taxes, he allows, might have employed productive labourers. ‘But,’ says he,62 ‘if we have already productive labourers, sufficient for the supply of all our wants, why increase their number?’ This is an argument the most commodious in the world. It is equally accommodated to all times and places. The population of England and Wales was found, in 1801, to be very nearly nine millions and a half. In the time of Edward the 1st, the population of England and Wales was found to be about two millions and a half. Had Mr Spence lived in the days of Edward the 1st, his argument would have been just as handy as at the present moment. It would apply as logically to the wilds of Tartary, as to England and France. Let us observe another of Mr Spence's consistencies. He here tells us, we see, that society ought to become stationary. We have already productive labourers enow; why increase their number? Yet Mr Spence informed us, in a passage which we have already quoted, that on this increase depended the prosperity of every country. ‘A nation,’ he told us, ‘may be said to be in prosperity, which is progressively advancing in wealth, where the checks to population are few, and where employment and subsistence are readily found for all classes of its inhabitants.’

This is all which I can perceive, that Mr Spence advances in the form of direct argument, to prove that the national debt, and heavy taxes, are a public blessing63 ; and, if the maxim be well founded, that the proofs of any proposition ought to be strong, in proportion as the doctrine is wonderful, great is the danger that Mr Spence's speculations will not have a very splendid fortune.64

There is an idea, which he has appended to this doctrine, which would furnish occasion to a most important inquiry; were it not of a more extensive nature than to admit of being brought within the limits of the present Tract. ‘In the time of war,’ says Mr Spence,65 when the most taxes are paid, the bulk of the population of this country enjoy greater prosperity than at any other time.’ He adds, ‘just now, for example, never were the bulk of the people so prosperous.’ As he states this merely as an inference from his theory, entirely unsupported by any reference to facts, and as we have seen that his theory is extremely erroneous, we might reject the inference without any farther inquiry. But I am desirous of entering my protest in a manner somewhat more circumstantial against an opinion demonstratively unfounded, cruel to the sufferers, and calculated, as far as its influence extends, to prolong the national calamity of war; an opinion the more likely, if false, to produce disastrous consequences, because it is entertained by many persons in the more affluent circumstances of life, for whom it is too natural to believe, when they themselves are at their ease, that all the world are in a similar situation. It must have been from such a consideration as this of the circumstances of the poor, from an attentive inquiry founded upon his own enjoyments, that Mr Spence must have learned to assure us, that they are in great prosperity. Surely, Mr Cobbett will here take up arms against his new confederate. There is no point which Mr Cobbett has laboured with greater industry, and better effect, for many months, than to prove that the situation of the lower orders has become much more unfavourable since the commencement of Mr Pitt's career as a minister. I remember some time ago, though the date I cannot assign, he presented to us a calculation to prove how much the price of the quartern loaf had risen upon the wages of the labourer, and how inadequate his weekly wages had now become, to afford even bread, (not to speak of fire, clothing, and lodging, or a day of sickness) even to a moderate family. To afford evidence upon this subject, sufficient to compel the assent of such persons as are resolved to withhold it as long as they possibly can, a very copious induction of well attested facts would be requisite. These on such a question could not be very easily procured; and the inquiry, even if the facts were ascertained, would extend itself beyond the limits to which we are at present confined. We can, however, appeal within a narrow compass to a few general facts, which afford a strong ground for inference to the whole subject. One of these, of a most extraordinary and important nature, is the state of the poor's rate. The medium average of the annual expenditure on account of the poor, in the years 1783, 1784, and 1785, was £2,004,238. During the period of peace, which intervened from this date till the breaking out of the war in 1793, no general account was taken of the poor's rate; and we have, therefore, no complete collection of facts, by which we can ascertain in what degree it increased during that period. If we may form however, a conclusion from the general state of the country, in which wages were continually advancing, while the price of provisions was stationary, or rather on the decline, we seem warranted to infer, that it did not increase at all, if it did not rather decline; at any rate that it did not increase, but in a very small degree. We have something indeed much more precise than this, on which to found our conclusions. In the Returns from the Parishes inserted in the Work of Sir F. M. Eden, on the Poor,66 we have statements of the annual expenditure during that period; and though they are not digested into tables, or the general results exhibited, a comparison in a few cases will satisfy the inquirer, that the poor's rate was the same, or very nearly the same, in 1785 and 1792. The case, however, widely altered during the progress of the war. The attention of the nation had been gradually more and more attracted to this growing calamity during some years previous to 1803, when an act of the legislature was passed, for taking an account of the nature and amount of the expenditure on the poor. At this time it was found to amount to the enormous sum of £4,267,965, 9s. 2d. In the course of ten years of war, therefore, the poor's rate had more than doubled. In nine years, from 1776 to 1785, it had increased only £473,434; in ten years, from 1793 to 1803, it increased £2,263,727. Does this fact seem to support the strange conclusion of Mr Spence, that the people of England are most prosperous during war? and above all, that they were never in so prosperous a condition, as they are at this moment? Does Mr Spence really know, that the number of persons in England, who receive parochial charity, is 1,234,768? The whole population, exclusive of military and convicts, but including the paupers, are 8,872,980. Deduct from this the number of paupers, we have 7,638,212. The paupers, therefore, are to the rest of the population, as one to six nearly. If we suppose, that the higher and middling classes form but one fourth of the population, we shall find that nearly every fifth individual in the labouring classes is a parish pauper. Does this lamentable and extraordinary fact indicate a state of prosperity? If we consider that it is the male part of the population chiefly, that is the earning part and pays the poor's rate, it will appear, that the paupers are equal to nearly one third of the whole male population, including old men, young men, and children. Mr Spence will here, it is probable, launch out into a declamation on the growing vices of the poor, (this at least is the general resource) and will to these ascribe the extraordinary increase of the poor's rate during the war. But why should the vices of the poor have increased so fast during the war? If this is the effect of war, deeply is its prolongation to be deplored. I know, however, no facts by which it can be made appear, that the poor are more vicious than they were in 1785; and as to complaints, these were as strong fifty years ago, as they are now. If it be said, that the poor's rate itself is a proof of the increase in the vices of the poor; this is merely begging the question. It is first making the vices of the poor account for the poor's rate, and next the poor's rate account for the vices. Besides, how much soever the growing tendency of vice is to be deplored, its progress in a whole people is always much slower than what is here ascribed to it. The comparison too of the wages of the labourer with the price of provisions, as made by Mr Cobbett, in the manner stated above, affords direct evidence on this subject, and leads to the same lamentable conclusion. There are, unluckily, but few recent statements publicly attested, to which on this subject a writer can appeal, and I am unwilling to advance any thing merely on my own experience and observation. There are, however, some general facts which afford a fair inference to all other cases. In some papers for example printed in 1807, by order of the society of shipowners in Great Britain, I find it stated, that since the year 1780, the price of provisions has increased £84. 8s. 2d. per cent. That wages, however, have increased only £39. 7s. 1d. per cent. a rate of increase which is not nearly one half of that of provisions. This account too of the low rate of wages is the more to be depended upon, that it was adverse to the conclusion which the ship owners wanted to establish. Now, though the shipping trade for a few years has been far from flourishing, it is only for a few years; and even during them there has been no diminution in the employment of shipwrights, because the enormous demand in the king's yards, and in the navy, has much more than compensated for any slackness in the yards of the merchants. We have never heard complaints, that shipwrights were not as well paid as any other artificers of a similar description; that their wages have not risen in a similar, or rather in a superior proportion. We may, therefore, infer, with abundant assurance, that the rate of wages, in proportion to that of provisions, has in all cases where some peculiar circumstances have not created an extraordinary competition for hands, suffered a similar depression. From all this we are surely authorised to conclude, that the assertion of Mr Spence respecting the prosperous condition of the people at large, is rash and unwarranted.

I am unwilling to dwell upon this topic, as I am sensible, that I expose myself to a very formidable argument, which we have acquired, in this country, a wonderful dexterity in wielding against one another, that is, the argumentum ad invidiam, (if Mr Cobbett will for once pardon the use of a learned phrase) the argument, not of refutation, but of odium. The opinion which I have just now ventured to express, and which, if true, it is of so much importance not only to express but to proclaim, there are many gentlemen, who will ingeniously refute, not by attacking the argument, but the author; not by showing that the opinion is unfounded, but by asserting, that the author wishes to stir up the poor against the rich. The two antagonists whom I have more particularly challenged in this tract, I must, however, deny the honour of belonging to that illustrious body. If my argument has not convinced them, they may, if they deem it of sufficient importance, endeavour to refute it; but both of them seem to be too much fettered by old fashioned prejudices, to satisfy themselves, that it is the best mode of refuting an argument to calumniate the arguer.

It might be not useless to those who are the most averse to hear of the fact, barely to allow themselves for one moment to suppose it real, and then to ask themselves, whether it ought to be disguised or to be made known; whether the fatal cause is more likely to be removed by concealment or by exposure. That the fact, if real, is a lamentable one, I suppose will not be doubted; first on principles of mere humanity, next on those of patriotism. For what would it indicate? Have we not seen that when a country is prosperous, the labouring classes of the people are by necessary consequence in comfortable circumstances? that when the comforts of the labouring classes have decayed, the prosperity of the country is at least at a stand, a point from which declension is the consequence, natural and very difficult to be avoided? Since the subject is then of so much importance, let us hope that all those whom the opinion here stated may offend, will exert themselves to refute it. If they can produce facts but nearly as strong against it as are stated to prove it, our wishes will forcibly incline us all to range ourselves of their party.

CHAPTER VIII

GENERAL REFLECTIONS

After this controversy to determine whether any wealth is derived from commerce, the question respecting its relative importance, as a source of production, is of some moment. If it is not altogether destitute of utility, in what degree ought it to be considered as valuable? Though Mr Spence, who condemns it as entirely unproductive, is excluded from this inquiry, it is a subject on which our countrymen have need of much more instruction than it will be possible to give them in a few pages of this pamphlet.

A general idea of the value of commerce, as a source of wealth, may be easily derived from the doctrines which have been laid down in the preceding discussion. We have seen that the true conception of a nation's wealth is that of her powers of annual production. A nation is poor or is rich according as the quantity of property which she annually creates, in proportion to the number of her people, is great or is small. Now commerce tends to increase this annual produce by occasioning a more productive application and distribution both of the land and of the labour of the country. Instead of raising flax, for example, or hemp, on our land, we raise corn; with that corn we feed a number of hardware manufacturers, and with this hardware we buy a greater quantity of flax than the land which raised our corn, and fabricated our hardware, would have produced. This is exactly equivalent to an increase in the powers of our land; it is the same thing as if we had been enabled to make that portion of land which could only raise a certain quantity of flax, raise all that additional quantity which our hardware could purchase. In this instance, the increase in the productive powers of the country by the mercantile operations we have supposed, seems to be measured by the gains of the merchant. The gains of the merchant, however, may be considered in different lights. First, he may be enabled to sell the whole of the imported flax at as high a rate as that at which the flax raised at home could afford to be sold. If he can sell it at this rate, his gains seem to measure the increase in the annual produce very exactly; they are the price of the additional quantity of flax which his hardware has purchased. But, secondly, if these gains are very high, competitors will be attracted, who will endeavour to share in them by reducing the price of what they import. In this case, if the quantity imported remained the same, the gains of the merchants being reduced, the increase of the annual produce would surpass the gains of the merchants. There is, however, a third light in which the subject is to be viewed; this reduction in the price of flax would render it impossible any longer to raise it with a profit on a considerable part of the land which had been formerly devoted to it; only such land as had a peculiar adaptation to the crop could now be cultivated for it; the quantity imported would therefore be increased; but though the profits of the merchants would thus be multiplied, a fresh addition would be made by every increase of the importation to the annual produce of the country, whence it would appear that in this case too the gains of the merchants would fall below the increase afforded to the nation. There is a fourth case, which requires no illustration, in which, by means of monopoly and bounties, the gains of the merchant may be very high, when those of the country are very low, in which the merchant may gain when the country loses. But in all cases in which trade is free, the gain to the country cannot be less than the profit to the merchant; in almost all such cases it must be greater.

From this view of the subject it will be seen that no exact estimate can be made of what any nation gains by commerce. It may, however, be safely concluded that its importance is in general greatly overrated. Every arm could be employed, and every article of the annual produce could be sold, if the country were surrounded by Friar Bacon's wall of brass, a thousand feet high. The labour of the nation would not be so productive; the annual produce would not be so large; the people would not be so cheaply, that is, liberally supplied with commodities; neither individuals, nor the government, could spend so much without turning back the progress of the country. But every labourer would find work, and every shilling of capital would find employment.

When we hear people, therefore, talk, as we do too often hear them, and in places too high, of commerce as the cause of our national grandeur; when we find it appealed to as the measure of our prosperity; and our exports and our imports quoted as undeniable proofs that the country has flourished under the draining of the most expensive war that ever nation waged on the face of the earth, we have reason to smile at the ignorance or the deceitfulness of the speaker. Further, when we find important measures of state embraced upon the allurements of these ideas, when regulations are formed to bend forcibly the national industry to a conformity with them; but above all, when wars are commenced, or peace is repelled, for the loss or gain, or rather much more frequently an absurd apprehension respecting the loss or gain of a branch of commerce, we ought to deplore the fate of the nation, and the unskilfulness of her rulers. We may assert, without an hyperbole, that the fee simple of our whole export commerce is not worth the expence of the last fifteen years war; that had it all been sacrificed, to the last sixpence, to save us from that expence, we should have been gainers by the bargain.67 Had Mr Spence then directed his efforts to moderate our ideas of the value of commerce, without teaching other doctrines which, first, were false, and next led to practical conclusions of the most dangerous tendency, he might have been of service to his country. It is but too true that the greater number of the persons with whom we converse seem to imagine that commerce creates wealth by a sort of witchcraft, as our financiers would sometimes persuade us that they can maintain fleets and armies by a juggle of figures. The truth is, that nothing creates wealth but the hands of our industrious countrymen, set to work by the means, and regulated by the skill and judgment of others. Commerce is only one of the causes, and one not very high in the scale, by which their industry is rendered more productive.

Mr Cobbett's antipathy to commerce appears to me to be founded on juster views than the disapprobation of Mr Spence. Little troubling himself about the subtle question of the origin of wealth, and unacquainted with the plausible and ingenious, but fallacious arguments of the Economistes, he yet saw clearly, and felt keenly, the injury which the country sustained from a policy guided by ideas of the boundless value of commerce. It is from topics of this sort that almost all his invectives against commerce are drawn. ‘Wars’, he cries,69 ‘have been made over and over again for the sake of commerce; and when the rights and honour of the nation are to be sacrificed by a peace, the regaining or preserving of commerce is invariably the plea. To support commerce, the wars in Egypt were undertaken; the wars in India are carried on without ceasing; the war in South-America and in Africa are now undertaken. Oh! What English blood, and English labour, and English happiness, and English honour, has not this commerce cost!’ Thus again, he says,69 ‘The fact is, that the means of supporting fleets and armies, the means of meeting all the squanderings that we witness, the means of paying the dividends at the bank, come out of the land of the country and the labour of its people. Nothing is more convenient for the purpose of a squandering, jobbing, corrupting, bribing minister, than a persuasion amongst the people, that it is from the commerce, and not from their labour, that the taxes come; and it has long been a fashionable way of thinking, that it is no matter how great the expences are, so that the commerce does but keep pace with them in every case. Nothing can better suit such a minister and his minions, than the propagation of opinions like these. But, gentlemen, you have seen the commerce tripled since the fatal day when Pitt became minister; and have you found that your taxes have not been increased? The commerce has been tripled, and so have the parish paupers. Away, then, I beseech you with this destructive delusion! See the thing in its true light. Look upon all the taxes as arising out of the land and the labour, and distrust either the head or the heart of the man who would cajole you with a notion of their arising from any other source.’ Once more, ‘If events’, says he,70 ‘proceed as, thank God, they are now proceeding, this so long deluded people will think rightly upon the subject of commerce, and when they do, away go, in a very short space of time, all the locusts that now eat up our substance; that now degrade the country; that now barter its happiness and its honour for their own villainous advantage. England has long groaned under a commercial system, which is the most oppressive of all possible systems; and it is, too, a quiet, silent, smothering oppression, that it produces, which is more hateful than all others.’

But Mr Cobbett should consider that commerce is entirely innocent of that political misconduct which excites his complaint and indignation. If an ignorant minister is deceived into absurd measures by overrating the value of commerce, or a deceitful minister screens his administration by disseminating exaggerated ideas of its value, the fault is with such ministers. How is commerce to blame? The argument which Mr Cobbett uses against commerce is exactly the same with that which is used by infidels against religion. Because courts and ministers have so often founded on religious pretexts measures the most pernicious to human kind, they conclude that religion ought to be abolished. Their complaints run entirely in Mr Cobbett's strain. What wars, say they, and bloodshed has it occasioned? What chains has it forged for mankind? True, we answer. The mischief which has been wrought, in the name of religion, has been infinite and detestable. The effects of religion, meanwhile, like the effects of commerce, are all beneficent. But were both religion and commerce extinguished, can Mr Cobbett, or the infidels, imagine that ignorant ministers would not still mistake their duty, and mercenary ministers not find pretexts to delude the people? Let us only consult the most vulgar experience. France has no commerce, nor Austria, the boasted value of which can impose upon the public. But are Austria and France governed with any more attention to the happiness of the people than England? and are ministers there without their pretexts to persuade the people that they are well governed, as well as the ministers of England? Have not the rulers of France, the glory of the nation and its renown in arms, of which they make abundant use? This too used to be the boast of Austria. At present it is laid aside for a space. But the preservation of the independence of the country, the dignity of its royal family, and of its nobles, still form in Austria a source of triumph. The fact is, that nothing is a security against deception, but the knowledge of the people, by which deception is detected. As long as a people are ignorant enough to be easily deceived, it is not in the nature of human affairs that deception should not take place; it would be absurd to expect it. Let Mr Cobbett rest assured that wherever a nation has been so far deficient in knowledge as to be deluded into the approbation of impolitic measures by boasts respecting commerce, it would have been no difficult matter to have found the means of deceiving it, had comerce not existed. I am far therefore from concluding with Mr Cobbett that, were commerce gone, we should be delivered from all the locusts that now eat up our substance.’ Could the loss of commerce enlighten us that we should be proof against delusion? Or are the means of deception so few that they are all summed up in commerce?

Mr Cobbett appears to imagine that commerce has corrupted our government. It has subjected us, he says, to oppression. But as he does not explain how, it is not easy to reply to this objection. As Mr Cobbett is far from supposing, that the popular part of our government has lately increased in power, commerce must have disordered the constitutions, by increasing the power, either of the kingly or of the aristocratical part. This is directly contrary to the opinion of Mr Spence, who explains at considerable length71 the tendency of commerce to break the force of regal and aristocratical servitude. The regal and aristocratical power in this country has increased by the amazing increase of the share of the annual produce which is placed at the disposal of the executive government, and which is chiefly distributed among the great men. But it is the parliament by which this amazing increase has been voted. Now commercial men, though their number in parliament is considerable, form but a small proportion of the whole; neither have we ever heard that they were more forward in voting the taxes than the landed lords and gentlemen. The fact is, that though rich merchants and manufacturers are by far too apt to ape their betters in a foolish predilection for arbitrary principles of government in regard to the great body of the people, yet their situation does lead them to an intercourse with the lower orders upon rather more liberal terms than the situation of the mere land proprietor. The persons employed by the merchant and the manufacturer are in general very independent of their employers, and if they meet with ill usage, will immediately change their masters. Those on the other hand, who are under the land proprietor, are commonly far more dependent upon him, and his situation in this manner generally creates in him a much more arbitrary temper and conduct. He is therefore almost always disposed to coercive and arbitrary measures of government; and were his prejudices to influence the tone of administration, absolute power would seldom fail to be the final result. Even some of the prejudices connected with commerce have been extremely favourable to liberty in this country. The supposition that the country depended in a great degree upon commerce, and the vast instrumentality of the lower orders in this department, have contributed greatly to the consideration of their interests in our course of legislation. Had the body of our population consisted entirely of the tenants and peasants of the landholders, and our legislature consisted of none but the latter, the more completely subservient the tenants and peasants could have been rendered to their masters, the more happy a situation of things it would have appeared. Mr Cobbett's opinion is contradicted by the whole of our experience. All over Europe where the population has chiefly consisted of landholders and peasants, arbitrary power and poverty have invariably reigned. In Great Britain, where commerce has been established, much more freedom and opulence have been enjoyed.

Were our attention much more concentrated upon domestic industry and a far less proportion devoted to foreign trade, Mr Cobbett thinks the national interests would be promoted. There is reason, to some extent, for his opinion. Agricultural industry is not at the same height in England as commercial and manufacturing industry. But what is the reason of this? It is chiefly owing to the distribution of our landed property. The greater part of it is possessed in portions too large. A man of ample capital will never lay it out in cultivating another man's estate; because this employment is less independent; because it is a station of inferiority. He therefore, in preference devotes his fortune to trade. The cultivation of the ground is discouraged too, by the imposts of tithes, and of poor rates; which are taxes upon improvement. By these, and various other causes, capital is driven from agriculture. But is this the fault of commerce? It only takes what impolitic and unnatural laws will not permit the other to employ.

Commerce, then, we may infer from all that has been said, is a very good thing when it comes spontaneously, but a thing which may very easily be bought too dear. The two main springs of national wealth and prosperity, are the cultivation of the land, and manufactures for home employment and consumption. Foreign commerce is a mere auxiliary to these two; and its sole utility consists in enabling the nation to obtain its supply to certain demands, at a less expence of land and labour than it could have supplied them at home. It may be clearly seen too, that it depends upon the circumstances of other nations, in what degree foreign commerce may be advantageous. When the nations which surround England, for example, are so situated that certain articles which England affords bear in them a very high price, while many other articles in them which England wants bear a very low price, it suits England to manufacture a great deal for foreign markets, because, with a small quantity of what she produces, she can supply herself with a great quantity of what they produce. But should those articles in the surrounding countries gradually become dearer, while the articles from England become cheaper, it would then become less and less the interest of England to manufacture for these countries; and if the articles which she wants should rise in them to the price at which she could provide them for her own land and labour, it would then become her interest to provide them at home, and manufacture for these countries no longer. The fluctuations then of foreign commerce, afford a very fallacious indication of national prosperity. The national prosperity may in some cases even be consulted by abstaining from it.

After forming these conclusions respecting the sources of production, one great branch of the subject of which we have treated in this pamphlet, some remaining reflections yet force themselves upon us respecting its other great branch, consumption; concerning which the misapprehensions of our countrymen are not less numerous, and are still more nearly allied to practice.

Notwithstanding the avidity for immediate gratification, with which the greater part of mankind appear to be inspired, the disposition to accumulate seems, from experience, to be a still more powerful propensity; and wherever men are secure in the enjoyment of their property, a great proportion of them always exert themselves to make what they get exceed what they spend. By means of this powerful principle it is natural for every nation, which has scope for its industry, to make continual advancement, to see the produce of every succeeding year surpass that of the year which went before it. One arrangement of society may be more favourable to this advancement than another. In one country the natural subdivision of property may be more counteracted than in another. But no arrangement of society, consistent with any tolerable degree of freedom and security, seems capable of preventing this wonderful agent from adding something every year to the fund of production, from continually increasing the annual produce. As it is this gradual progress on which the happiness of the great body of the people depends, we may reflect with satisfaction and wonder on the strength of the principle on which it is secured; on the provision which is laid in the original laws of human nature for the well-being of the species!

But when we contemplate this beneficent arrangement, and afterwards turn our eyes to the actual state of things among mankind, it is impossible not to be struck with grief and amazement. From the operation of so powerful and steady a principle we should every where have expected opulence and prosperity; we actually behold, almost every where, poverty and wretchedness! Where are we to find the solution of this strange contradiction in human affairs? By whom is that property devoured, which mankind, in their individual capacity, have so strong an inclination to increase?

The general expensiveness of government, of which complaints are so common, and so well founded, will not account for the fact. All governments constantly spend as much as ever the people will let them. An expensive government is a curse. Every farthing which is spent upon it, beyond the expence necessary for maintaining law and order, is so much dead loss to the nation, contributes so far to keep down the annual produce, and to diminish the happiness of the people. But where a nation is considerable, and its industry improved and productive, the mere expence of government, however prodigal, cannot bear a great proportion to the whole of the annual produce; and the general savings of all the individuals in the nation can hardly fail to surpass the expences of the court. A country therefore can hardly fail to improve, notwithstanding the ordinary expence even of a wasteful government; it will only improve more slowly than it would have done had the government been more economical. The people may be still prosperous and happy, though they might have been a little more prosperous and happy, had the expence of the government been less.

To what baneful quarter, then, are we to look for the cause of the stagnation and misery which appear so general in human affairs? War! is the answer. There is no other cause. This is the pestilential wind which blasts the prosperity of nations. This is the devouring fiend which eats up the precious treasure of national economy, the foundation of national improvement, and of national happiness. Though the consumption even of a wasteful government cannot keep pace with the accumulation of individuals, the consumption of war can easily outstrip it. The savings of individuals, and more than the savings of individuals, are swallowed up by it. Not only is the progression of the country stopped, and all the miseries of the stationary condition are experienced, but inroads are almost always made upon that part of the annual produce which had been previously devoted to reproduction. The condition of the country therefore goes backwards; and in general it is only after the country is so exhausted that the expence of the war can hardly by any means be found, that it is ever put an end to. When the blessing of peace is restored, the country slowly recovers itself. But hardly has it gained its former prosperity when it is generally restruck by the calamity of war, and compelled to measure back its steps. In this alternation between misery and the mere beginnings of prosperity, are nations for the most part, condemned to remain; the energies of human nature are exerted to no purpose; its beneficent laws are counteracted; and the happiness of society, which seems to be secured by such powerful provisions, like the water of Tantalus, is only allowed to approach the lip, that it may be immediately dashed away from it. The celebrated Vauban, the unrivalled engineer of Louis the 14th, whose profession made him locally acquainted with every part of his country, and who spoke the language of an honest observation, untainted by the prejudices of his education, or the course of his life, observed, ‘si la France est si misérable, ce n'est ni à l'intemperie de l'air, ni à la faute des peuples, ni à la stérilité des terres, qu'il faut l'attribuer; puisque l'air y est excellent, les habitans laborieux, adroits, pleins d'industrie et tres nombreux; mais aux guerres qui l'ont agitée depuis longtems et au defaut d’économie que nous n'entendons pas assez.’72

In every country, therefore, where industry is free, and where men are secure in the enjoyment of what they acquire, the greatest improvement which the government can possibly receive is a steady and enlightened aversion to war. While such a nation remains at peace, the faults of the government can hardly ever be so great, that the merits of the nation will not more than compensate them, and that society from its own beneficent tendency will not improve. Nothing however can compensate the destruction of war. The creative efforts of individuals can never equal its gigantic consumption, and the seeds of prosperity are eaten up.

[From this point on Mill develops his view that the war with France had reached stalemate. France controls the Continent, Britain the seas; neither side can gain by continuing a war which weakens both equally. In particular he is pessimistic about the possibility of raising an army or creating a stable coalition to defeat Napoleon. He believes that a truce could be drawn up which would accord with the self-interest of both France and Britain.]

SMITH ON MONEY AND EXCHANGE

Edinburgh Review, Oct. 1808, vol. 13, no. XXV, pp. 50–68

There are two kinds of paper money, which are so remarkably different, that it is surprising any occasion should remain to point out the distinction between them; yet such confusion has prevailed on this subject, that some great errors owe their origin to the misapprehension of one for the other. Of these, one species is the paper money issued by government, and which it is rendered obligatory upon the people to receive. Of this nature were the assignats, and the mandats, issued by the revolutionary government of France; of this nature, too, was a paper money issued by the government of the United States in the crisis of revolution, and by the Dutch in their celebrated war for the independence of the republic. The second species of paper money consists in the notes of bankers, payable to bearer on demand, and which pass current for the sums there specified. Bills of exchange and other obligations, payable only at a stated time, and bearing interest, are sometimes denominated paper currency; but it will contribute to distinctness, if we exclude them from the appellation of paper money.

We are disposed to give Mr Smith very considerable praise, whether he discovered the distinction, or learned it elsewhere, for having very clearly perceived the difference between the paper money which a government may force upon the people, and the paper money circulated from banks, which nobody receives but at his pleasure. He has seen, too, that many errors may be traced to the strange inaccuracy of confounding together these two species of paper money. ‘It is very extraordinary,’ he says, ‘that many erroneous doctrines are still kept up,—the writers on this subject continuing to persevere in support of many maxims, which, in practice, have been long ago abolished. One great cause of this appears to be, that there have existed two species of paper money, perfectly separate and distinct in their nature, properties and effected but which have been hitherto confounded together by all these writers.’ It is unfortunate, after making this salutary distinction, that he should have been misled, by his own notion of an imaginary standard, into an unprofitable train of speculation; otherwise it is probable that some useful truths would have been the consequence of so hopeful a commencement.

Fortunately, it is the free and voluntary species of paper money, almost exclusively, with which we have been experimentally acquainted in this country; and as the other is abundantly simple in its nature, and moreover very circumscribed in its use (for it necessarily very soon destroys itself), it is only the paper money consisting in the notes of bankers, which calls on us for consisideration on the present occasion. The notion which we have endeavoured to establish of the nature of coined money, will speedily enable us to discover the principle and laws of paper currency.

As coins are neither more nor less than commodities which are bought and sold for their value, like other commodities, so banknotes are obviously obligations upon the issuers to pay a certain quantity of those commodities; and these obligations also are bought and sold for their value, or for that quantity of the valuable commodity, coin, which they can command. They are usually denominated the representatives or symbols of coin. It is very evident, however, that this is not only a vague but an inaccurate expression. They are no more representatives or symbols of coin than bills of exchange, or any other transferable bonds for the payment of money. They are actual obligations for the receipt of a certain quantity of specie; and they are received in payment as readily as the specie itself,—only when it is well known that specie can be received for them, without delay, and without inconvenience,—or when it is known, that they will be as readily received in the market as the coin which they specify. If bills of exchange, therefore, and other transferable bonds, are regarded in the market as mere commodities,—as goods or chattels, and are bought and sold as such, bank notes differ in no other respect than as being payable on demand, and, from that circumstance, being more conveniently received in all common purchases and sales. If the term, representative of money, is clearly understood to be a metaphorical expression, and to mean nothing more, than an obligation for money, when a people are pleased with it, may perform the business of currency, as well as money itself, we have no objection to it. But if it give occasion, as it certainly does among authors, to vague and mystical apprehensions respecting paper money, which serve to involve this subject in obscurity and confusion, it ought to be discarded. In fact, when we endeavour to assign an accurate idea to the term, representative of money, as applied to bank notes, we find it impossible. A bank note is a mere contract, of a known party, to pay to the bearer a certain quantity of gold and silver in the shape of coin. When a man takes this bank note in payment, it is not as a representative of coin; for how does it represent coin? or what advantage to him would it be, though it represented it ever so exactly? The most accurate representative of coin, are well fabricated counterfeits; yet every man, when he knows them, refuses these in payment. It is not, therefore, because the bank note represents coin, but because it is a satisfactory obligation to receive coin, that it is accepted in payments; and because it is often more convenient to receive the obligation than to receive the coin. A common cheque upon a banker, which nobody ever dreamed of calling a representative of money, is just as much a representative of it as bank notes; nay, in fact, the order which a manufacturer on the Saturday night puts into the hand of one of his workmen, to get from his clerk the wages of the week, is a representative exactly of the same description. The only real difference in practice is, that the one obligation generally passes but through one, or a few hands, till it comes upon the obligee; the other commonly passes through many hands, each accepting it as a satisfactory security for the valuable commodity which it is an order to receive.

Having satisfied ourselves with regard to the nature of paper currency, it will be no difficult matter to comprehend the phenomena which it exhibits; although these have given rise to some questions and speculations which well deserve a short consideration.

The doctrine of depreciation, on which some other conclusions depend, is that which we shall first consider. When bank paper becomes depreciated in consequence of diminished credit, the nature of this event is sufficiently understood; and no misapprehension prevails in regard to it. When a man foresees any risk or difficulty attending the payment of a bank note offered to him in exchange, he naturally refuses to accept it, unless with such a deduction as appears to him sufficient to cover the risk or difficulty which he apprehends.

There is, however, another species of depreciation, to which, it has been imagined, that paper currency may give occasion; a depreciation arising from a superabundance of the circulating medium. To those who are not acquainted with the subject, some explanation is necessary to understand the tenor of the assertion. As the price of any article, or its value in exchange, is determined by the proportion which the supply bears to the demand, it necessarily happens, if the supply is enlarged while the demand continues the same, that the price of the article diminishes. It is imagined, therefore, by the analogy of this case, that banks may cause the value of paper money to descend. Suppose, that the country is at any particular moment supplied with that quantity of currency which its occasions demand, it is concluded that the banks, by an overissue of their paper, may increase this quantity, and so produce a depreciation. Dr Smith, indeed, maintained, that a certain quantity of currency was necessary to fill the channel of circulation; that as soon, however, as it was full, any thing more thrown into it, by necessity overflowed. But this doctrine has been lately derided. Mr Henry Thornton, is his ‘Inquiry into the Nature and Effects of the Paper Credit of Great Britain,’ brought forward a speculation, which has been followed by almost all the writers who have succeeded him, to prove that, after the channel of circulation is full, banks may increase by their notes the quantity of currency; because every addition depreciates their value, or, in other words, raises the price of commodities in proportion to the increase. He thinks, therefore, that he may turn the metaphor of Dr Smith against himself, by remarking, that the channel of circulation, whatever currency may be thrown into it, can never overflow, as it immediately enlarges itself in proportion to the quantity received.

No proposition seems to be more certainly established than this,—that the precious metals, in all countries which are not exceedingly distant from one another, approach very nearly to an equality of price. We have no occasion, here, to enter into the explanation of the particular kind of traffic, by which they circulate from country to country; it is enough to know that they do circulate, and that so easily, that the smallest rise of their value, in any particular country, is sure to draw them speedily from other countries, or a fall in their value to send them out of any country, till the usual level or balance is established. Let us now see how this fact operates upon the question of depreciation. It is evident that Mr Thornton, by that depreciation which he describes as consisting in a rise of prices, does not mean a depreciation of bank notes, compared with gold and silver,—such a depreciation, for example, as would take place, if a pound note should only pass in circulation for eighteen shillings; he means that kind of depreciation which takes place when a pound note is still received for the full amount of twenty shillings,—but when neither the note nor the twenty shillings can purchase more of any commodity than eighteen shillings would do before. It is evident that such a depreciation as this, if it any where exists, does not confine itself to the paper currency, but communicates itself equally to the specie of the country. It is a depreciation of the gold and silver, in the same degree as of the bank notes. But the price of gold and silver must remain the same, or very nearly the same, in this country, for example, and all the other countries in the world. If the doctrine of Mr Thornton, then, be just, our banks are powerful instruments indeed; not only can they depreciate our own currency; they necessarily depreciate, by the same operation, the currency of nearly all the nations on the face of the earth. If, however, the currency of all nations be so immense a quantity, compared with ours, that any possible fluctuations which it can undergo, resemble the addition or subtraction of a drop in the waters of the ocean, then, no such depreciation as Mr Thorton supposes can take place; and Dr Smith, little as Mr Henry Thornton appears to respect him, was probably right in asserting, that when the channel of circulation is full, if any thing more is thrown in, it overflows.

It is a remarkable proof of the confusion and obscurity which have reigned on this subject, that many of the writers appear to have lost sight of the broad distinction between the paper money which a government compels the people to receive, and the notes of bankers, which no man receives but at his pleasure. In the first place, no man ever takes from a bank but the smallest quantity of notes he possibly can. Every man desires to have in his hands no more currency that what is absolutely necessary for his immediate payments, that he may continue to make a profit with the larger portion of his funds. This, however, is not the case with those to whom the compulsory paper of government is tendered. It is offered to them in payment of the debts which the government has contracted; and whether they want so large a quantity of currency or not, they must receive it. In the next place, the paper which is issued by a bank is perpetually returning to it; every man into whose hands a greater quantity of it comes than he has immediate occasion for, carrying it to the bank for payment. The paper, on the other hand, which is issued by government, never returns to it; because the government never pays. It is evident, therefore, that while there is no limit to the emissions of government, but its own wants, or the extreme depreciation of its paper, and that, while this species of paper may be accumulated in the country to any excess, there is a visible and impassable limit to the emission of bank notes, in the desire of every individual to draw from it as small a quantity as possible; and to the accumulation of these, a still more remarkable limit, in the utility which every man finds in remitting them to the bank, whenever a quantity of them beyond his immediate occasions is collected in his hands.

When the nature of those limits is duly considered, and when we reflect upon the fact, that a gold and silver currency can never fall below the level of the price of those metals in surrounding countries, is it not probable, that the emission of bank paper is, by its own nature, so restrained, that it cannot produce the general depreciation of currency which is supposed? There is a remakable fact, which seems entirely to confirm this inference. When the paper which was issued by the governments of Holland and America exceeded a certain amount, it began to depreciate though the confidence in the governments which emitted it was then as great as when the issue commenced. The depreciation arose, not from the credit of government having become less, but from the quantity of paper having become too great. But this depreciation, it is to be observed, affected not the gold and silver which at any time appeared,—that retained its ancient value, and could at last command ten or twenty times the amount of the paper which it could have purchased before the depreciation commenced. How should this paper have become depreciated by its excess, without affecting the value of gold and silver; and the excess of bankers' paper have carried the depreciation of gold and silver along with it? The operation upon prices must have been exactly the same in the one case as in the other. If this difference cannot be explained upon the principle of Mr Thornton, it follows the those principles are not just.

But, without proceeding further with these reasonings, which are rather argumenta ad hominem, than conclusions drawn from the nature of the thing, let us see whether we cannot arrive at some decisive evidence by aid of the principles which we have already discovered. We have seen that specie, and even bank notes, are commodities, which are bought and sold like other commodities. Now, were the commodity of notes obtained at the Bank of England for nothing,—did every man obtain them merely for the asking,—there might very easily be an extraordinary quantity of them thrown into circulation. But it so happens, that a man cannot obtain one of them, without having something to give for it. Every one which is transferred to him he has bought and paid for, with a value equivalent to the sum specified in the note. But it is abundantly certain, that no man, in general, buys more of any commodity than he has occasion for, and least of all of the commodity called money. No money is therefore ever drawn by individuals from the bank, but for the business of immediate payments; and the money wanted for immediate payments is just the money requisite for the circulation of the country.

We must entreat the excuse of our mercantile readers, when we use a language so unusual to them, as to denominate the discounting of a bill the purchase of bank notes; and must implore them, for a moment, to lay aside the consideration of the name, and endeavour, if possible, to fix their attention upon the thing. We studiously aim to avoid the technical phraseology respecting money, which, by its extreme abridgement, is admirably adapted, indeed, to the despatch of business, both in speaking and writing, but, by the same circumstance, has contributed greatly to introduce obscurity and confusion into the rationale of the subject.01 A very slight degree of reflection may convince them, that the operation is literally a purchase. What the man carries to the bank, who wants to obtain notes, is a bill of exchange, due in sixty days. The bank receives this bill, which is an obligation upon a responsible party for a sum of money, giving in exchange for that sum, with the deduction of interest. The owner has therefore sold his bill to the bank, as truly as the man who sells a bill upon ‘Change; and the commodity he has bought with it is banknotes. If we carry this analysis a step further, we shall still more clearly perceive the nature of the transaction. A bill of exchange, such as is commonly discounted at the bank, is a promise of payment, at a fixed day, for goods bought and received. Thus, a merchant purchases of the manufacturer a thousand pounds worth of goods; but as it is not convenient to give the money for them immediately, he gives his bill for payment of the sum at a future day. The manufacturer, however, wants his money. He therefore carries the bill to the bank, where he receives money for it, only deducting interest for the time which it has to run. Is not this the very same thing, in reality, to the manufacturer who gets the bill discounted, as if he had sold his goods to the bank, allowing discount for prompt payment? It is with goods, therefore, in the last resort, that notes are always bought at the bank; and it is observable, that nobody goes to the bank to receive notes for his bills, thereby losing the discount, to any greater amount than is necessary to make the payments for which he is immediately called upon. But if bank notes are never called into circulation but in the payment of goods, it would appear that they are never called but to answer the natural exigencies of business, and in this way cannot become superabundant. Their amount can never surpass that of the gold and silver coin, which would circulate if they were not in existence. This we seem now entitled to assume as an established proposition. When a man purchases bank notes with real goods, at the rate of gold and silver, he would certainly purchase gold and silver with these goods, if the notes were not present, or if they did not equally well answer his purpose. He only buys the notes because he has occasion for currency; and if the notes were not to be had, he would buy the only other species of currency,—gold and silver coin: real goods being always able to command it at the market price of the contiguous countries.

The other peculiarity attending a currency in bank notes,—that they are perpetually returning to the bank,—is likewise followed by consequences, of which it is of some importance to have a just conception. Let us suppose, that by any means a superabundance of paper money has come into circulation. Government, for example, being unable to wait for the slow influx of the taxes, prevails upon the bank, we shall suppose, to advance some millions of bank notes, which are to be paid with interest when the taxes come in. But there was already a sufficient quantity of currency in circulation, both to pay the taxes, and to perform the other payments of the country. This advance therefore to government, in bank notes, when it comes into circulation, is all surplus. The question is, what becomes of it? A considerable quantity of it—let us suppose, for the sake of simplicity, the whole—will be immediately paid away in discharging debts contracted by government in the purchase of goods. The individuals into whose hands the additional currency is first paid, discover in it no symptoms of superfluity. They sold their goods to government, and they have received payment, as they would have received it from any other purchaser. They proceed again to market with the money come in, precisely as on any other occasion. But the next step, or a few more steps, produces a difference. The money which is proceeding towards government in the shape of taxes, is not yet paid, but is partly in the hands of the contributors, and partly accumulated in other hands. When any of the additional currency, therefore, comes into the hands of any of those persons, who have already a sufficiency, and who are under no obligation, for some months, to strip themselves of what they have, by making their payments, they have a surplus, and are disposed to turn it to advantage. But, as they know that, in the course of a few months, as soon as their payments must be made, what is now surplus, will become necessary to them, it cannot be embarked in any extension of their trade, from which the return would not be sufficiently prompt; it is, therefore, by various ways, and for various considerations, allowed to accumulate in the hands of the different private dealers in money, by whom it is employed in the retiring or discounting of bills.

It now returns to the bank by the following process. When bills which have been discounted at the bank are retired, currency is directly returned to the bank; when it is employed by private money-dealers in discounting bills, it prevents the demand of discounts at the bank, and, by consequence, all fresh issues of notes. But while, by this process, a greater quantity of money is daily returned to the bank, in retiring the bills which daily become due, than issues from it in the discounting of new bills, it is evident that a diminution of currency is effected; and this process necessarily continues till the proper balance of currency is restored, and the superabundant issue is all drawn back. In this manner, likewise, does it appear, that no greater amount of bank notes can be made to circulate in any country, than would circulate of gold and silver, if paper currency were unknown; that a rise of prices, or a depreciation of the currency,2 cannot be the effect of an overissue; but that, the channel of circulation being once full, whatever flows in must run over.

Let us put, however, an extreme case. Let us suppose, that government, not satisfied with one advance, goes on demanding, and the bank granting, faster than the retiring or the bills which it has discounted, can withdraw its notes from circulation. The consequence of this would speedily be, that all its bills would be retired, and few or none would be offered for discount; yet still, by means of government, it might continue to pour its paper upon the country; and if it was exempt from the obligation of paying in cash,—but not otherwise,—the amount of this paper might extend to any degree beyond that of the gold and silver which would circulate in the country. But it is very evident, that where this is the case, i.e. wherever government distributes a paper currency which cannot be converted into cash at pleasure, there is no difference between the paper thus issued, and the compulsory emissions of government itself. They must follow, therefore, similar laws. In the first place, the precious metals would entirely disappear from the circulation, and the notes would sink to any degree of depreciation; but gold and silver would retain its price; and the man who had preserved a guinea, might soon be able to purchase with it a bank note for a hundred pounds.

From what we have thus discovered, one practical consequence of great importance may be deduced. As a bank, which issues notes, while it emits them solely in the discounting of good bills at short dates to individuals, can never issue more than the demands of business require; but, as it may, by advances to government, easily surpass the limit of those demands, it is evident that any general derangement, arising from a surplus of currency, must of necessity be owing to advances to government. What is, therefore, wanting to prevent these derangements, is a law by which all advances of that nature should be prohibited, under the most awful sanctions. We do not mean to say that government should, on all possible occasions, be prevented from anticipations on the revenue, though, on all accounts, this should be allowed as seldom as possible. We only say, that government should never be allowed to anticipate, through the medium of a bank which issues notes. When these anticipations are really necessary, the advances should be made (as loans, a much heavier concern, are) by the money-dealers, and bankers of discount, but never by banks of circulation. The difference between the cases is prodigious. What is advanced by the money-dealers, and bankers of discount, is by them, first drawn from the channel of circulation, and a vacuum is thus previously made to receive what is about to be immediately poured in by governments. What, however, is advanced by the banks which circulate notes, is not necessarily, nor generally, withdrawn first from the channel of circulation. These banks advance most frequently a quantity of new-made notes, which, being poured into a channel already full, necessarily overflow, and more or less derange and disturb the regular movement of the current. If regularity of movement in that current, then, be of any importance, banks which issue notes of circulation, should be interdicted, under pain of confiscation, from all advances to government. They should, indeed, be strictly prohibited from all connexion with government whatsoever. By this rule, the bank of England should be immediately freed from all the business of government, with which it is loaded and embarrassed, in paying the interest of the national debt, in the management of exchequer bills, and other functions; and thus have its operations limited to the issuing of its own notes in the discounting of bills. It would, in this way, be impossible that it could ever derange the channel of circulation, while the business of government might be managed with equal efficacy by banks, which, not issuing notes, could have no means to produce a surplus of currency.

After these remarks on the laws which the phenomena of depreciation in respect to paper money observe, remarks which we are fully aware require more ample illustration, but on which we have already exceeded the limits of that species of disquisition to which we are at present confined, we shall next inquire, how the obligation to pay in cash operates upon a paper currency. But, on this topic, we shall be obliged greatly to contract our observations.

The obligation to pay in cash, may be considered, 1st, in its relation to the credit of the bank; 2d, in its relation to the quantity of currency.

• 1 That, to the first of these, it is an indispensable requisite, will not require many words to prove. That any man would give real value for a piece of paper, for which he knew that nobody was under any obligation to give him value again, would be ridiculous to imagine. Yet, that no possible absurdity might remain, to which some writer on paper money had not attained, it is seriously asserted and argued by Mr Smith, that banks should be entirely exempt from the obligation of paying in cash the notes which they circulate. We could have been well content to have amused ourselves a little with the ludicrous observations which he brings forward in support of this new position. But, as we have serious matter before us, in much greater quantity than we can overtake, we must deny both ourselves and our readers this relaxation. Though payments in cash are suspended at the bank of England, it is universally understood that this is only for a time; it is universally understood that the obligation to pay will, in a short time, be put in force; and, above all, it is universally understood, that the bank is able and ultimately liable to pay. It is obviously in consequence of these convictions, that the paper of that bank continues to circulate. Let it, however, be once passed into a law, that the bank of England is for ever exempt from the obligation of paying her notes in cash, and we should quickly see to what depreciation they would fall. Let it only become the general conviction, that she is unable to pay, and remarkable effects would be the consequence. It is very true, as Mr Smith observes, that the paper of the bank might still continue to perform the office of money, as well as coin, ‘provided the people would be pleased with it.’ But we do not stand in need of reasoning; we have the most remarkable facts to prove to us that they would not continue pleased with it. When sovereigns themselves have issued stamped pieces of leather for money, or when they depreciated the coins, these might have performed the offce of money to the amount of the sums they were issued for, ‘had the people been pleased with them.’ But did this ever happen? Or is it necessary to say why it never happened?
• 2 To discover the effects of the obligation to pay in cash upon the quantity of currency, is a much more difficult and complicated inquiry.

In the first place, it is evidently a check upon overissuing. When a bank is apt to be called upon to pay gold for its notes, it feels itself obliged to confine the quantity which it issues, within a certain proportion to the gold which it can readily command. What that proportion may be, depends upon circumstances. When the credit of a bank is firmly established, and when habit has confirmed the people in the use of paper money, cash will very seldom be demanded for notes; and the paper may safely bear a very large proportion to the gold which is reserved as its security. Where, on the other hand, the credit of a bank is suspected by the people, or where they have a taste for a good deal of gold in their circulation, there the paper must bear a less proportion to the gold which must be reserved as its security. But, in both cases, the bank has a very obvious motive in imposing limits upon the quantity of notes which it may issue, and which it is obliged to pay in cash;—it will not advance, even to the importunities of government, beyond all chance of safety, if the least pecuniary alarm should arise.

In the next place, let us consider the effects of the obligation to pay in cash, upon the state of the currency, when an overissue has really been made. It is not the immediate effect of a superabundance of paper money, to produce what is called a run upon the bank, or a demand for guineas. When the man wants, who has in his hands more notes of good credit than he has immediate occasion for, is—not to get coin for them, which would not in the smallest degree alter his situation, but—to get them employed. On the other hand, if guineas were universally obtained, it would not directly reduce the superabundant currency; because, for every note which was then withdrawn, a portion of coin would be substituted. Indirectly, however, the demand for guineas upon the bank would have a powerful effect. Whenever guineas were by this means thrown into circulation, so as in any degree to exceed the effective demand, they would experience that slight reduction of price, which so rapidly carries the precious metals out of one country into another. They would continue to be exported, till this drain from the circulation, together with the notes which the bank in the mean time would call in, should have reduced the currency to that quantity, which the transactions of the nation, and the price of gold and silver in the neighbouring countries, might require.

These effects are so visible, that they must be acknowledged by all; and so salutary, that their importance can be disputed by none: but there are certain other effects which are ascribed to them as concomitants, which are not of so agreeable a nature, and which we must now endeavour to understand. Mr Henry Thornton, our present author, and other writers who have had an interest in defending the suspension of payments in cash at the bank of England, have attempted to prove that this bank may, by means of a demand for coin, raised by an alarm, or any other cause, be drained of guineas to any possible amount, however small be the quantity of paper which she maintains in circulation. The amount of notes which she finds it useful to maintain in circulation are at present, we shall say, 15 millions. If the bank resolves to maintain these 15 millions, in circulation, and if a demand for guineas arise, she may be called upon for gold to double, or ten times, or, indeed, to any number of times that amount. Thus, for example, notes to the amount of 100,000l. we shall suppose, are brought to her for gold; but, when she has drawn back those notes, and given for them gold, her paper currency is reduced to that extent; and if she resolves to maintain her quantity of notes in circulation, she must immediately reissue the notes which have been thus returned. But no sooner are they reissued, than they are brought back for gold: again the quantity of the paper circulation is reduced; again the notes must be issued; and, if the demand for gold continues, and this process is repeated a sufficient number of times, the bank may be exhausted to any conceivable extent, while she has never had more than her usual quantity of notes in circulation. ‘Even,’ says Mr Thornton, (Inquiry into the Nature and Effects of the Paper Credit of Great Britain, p. 92.) ‘if we should suppose the bank to bring down its paper circulation to one hundred thousand pounds, and to maintain it at that sum, it is obvious that this same operation might be so reiterated from day to day, as to extract at length from the bank the greatest imaginable number of guineas.’

In order to see further into this subject, we must analyze a little the operations of this bank. Let us suppose, for the sake of simplifying the inquiry, that the sole business of the bank of England is that of issuing notes in the discounting of bills. Let us suppose that, as she discounts none at more, so she discounts none at less than sixty days date. And let us suppose, too, that she maintains 15 millions of paper currency in circulation. She has thus at all times in her coffers bills of exchange to the amount of 15 millions. But, of all this quantity of bills, the whole must be paid in sixty days; she therefore draws back in sixty days the whole of her 15 millions of notes; that is to say, she draws back, at the rate of 250,000l., or a quarter of a million, every day. But, if she draws back notes by the retiring of bills, at the rate of a quarter of a million a day, she must issue notes in the discounting of bills at the rate of a quarter of a million a day, to compensate this return, and keep the paper in circulation at its accustomed amount. That this would be the course of business in regular times, is abundantly evident. The rate of discounting bills at the bank every day would exactly balance the rate at which bills were retired; and the notes drawn in by the one operation, would exactly correspond to the notes sent out by the other. If the persons by whom the bills were retired were, on each day, an entirely distinct set of persons from those to whom bills were discounted, 250,000l. would literally every day be paid into the bank, by the one operation, and the same sum drawn out by the other. It so happens, however, in practice, that the man who has a bill to retire, has very often, on the same day, a bill to get discounted: in this manner, instead of giving one sum, and receiving another, the two sums are compared together, and the man only gives or receives the balance. But it is very evident that this common way of retiring one set of bills by discounting another, in no respect alters the nature of the case. It is still true, in fact, that a quarter of a million has been paid, and a quarter of a million drawn, though these payments and drawings may to a certain degree, have balanced one another, without the actual trouble of counting and transferring the money.

We may now discern a fact, the consequences at least of which Mr Henry Thorton and his disciples have entirely overlooked. Let us suppose, while the bank is going on in her accustomed course, discounting bills at the rate of 250,000l. a day, that a demand for guineas comes upon her to the same amount; and that her daily issues are immediately paid back for gold. What is the consequence of this? First, her fifteen millions of notes in circulation, are reduced 250,000l., or a quarter of a million. If she resolves to keep up her 15 millions, she must immediately reissue, in the discounting of additional bills, the notes which have been thus returned. On the first day, therefore, of the demand for guineas, while the usual quantity of bills, to the amount, namely, of a quarter of a million, have been retired, she has discounted double that quantity. Another consequence, then, is, that, at the end of this first day, she has added a quarter of a million to the amount of bills in her coffers, while the sum of her notes in circulation remains the same. By the same operation on the second day, she adds to her bills another quarter of a million; and the effect is every day repeated, till, at the end of sixty days, the amount of her bills is fairly doubled; that is to say, the bank has then extended her loans from 15,000,000l. to 30,000,000l.,—one half in her own notes, the other half in gold and silver.

Here, however, a very important question suggests itself; Whence is this extraordinary quantity of bills for discount to come? Or what possible use can there be in thus extending the discounts of the bank, for the sake of maintaining a certain quantity of notes in circulation? To this question Mr Thornton has an answer very ready, and an answer on which he seems to lay the greatest stress. The consideration of it will enable us to discover the whole mystery of his reasoning. He enters into a long detail to prove that any sudden revolution in the transactions of the bank of England, by which the regularity of payments in London should be interrupted, would occasion a shock to the credit of the whole country, attended with the most pernicious consequences; and to prevent this, the bank is under the necessity, he says, of always maintaining her accustomed quantity of notes. But it will appear that, in this answer, Mr Thornton has confounded two things together, of which the difference is peculiarly important;—he has confounded together the discounts of the bank and the currency of the bank. There is no doubt, that any considerable interruption to the regularity of the great payments in London, would occasion a shock to the general system of credit, which is anxiously to be avoided. It is very evident, too, that the bank, by withholding suddenly from the merchants those accommodations which they have been accustomed to receive, would produce that interruption. But wherein does the accommodation which the merchants are accustomed to receive from the bank consist? Most evidently in affording them loans,—not in giving them one kind of currency in preference to another.

If the bank, according to the foregoing supposition, has regularly afforded loans on bills to the amount of 15,000,000l., any considerable and sudden reduction of those loans, might produce the most serious consequences. But let her discounts be regularly maintained at this level, and she need give herself no trouble about the currency. Currency is a thing which always, and infallibly, provides for itself. Now, we have seen already in what manner a run upon the bank for guineas affects her discounts. If she persist in keeping out the usual quantity of notes, her discounts must be daily enlarged to the whole amount of the notes which daily return upon her for gold. But if the notes which come in for gold are merely not issued, her discounts remain invariably at 15,000,000l.,—and her business of discounting proceeds without any alteration. If the demand for gold continues till any considerable portion of her notes are withdrawn from circulation, what remain are not sufficient to retire the bills in her coffers which are daily becoming due; they must be retired, therefore, with gold; and, when this happens, she then begins to receive with one hand what she pays away with the other, and the drain upon her can proceed no further.

Mr Thornton, indeed, says, that as there is never any doubt about the credit of the bank of England notes, the guineas are drawn away to supply the discredited notes in the country. But to suppose that guineas could be accumulated in the country, and yet be impossible to be had in London, if there was occasion for them, is too absurd to require refutation. The guineas which are drawn from the bank of England to be sent to the country, are all drawn by the London bankers and money-dealers, in the first instance; and if there is any demand for them in London, there they will remain. Would a London banker send ten thousand guineas to the country to accommodate his correspondent, if to-day, or to-morrow, he had bills to that amount falling due upon himself, which he had no other means of retiring? Indubitably he would not;—he would retire his own bills in the first instance, and leave his correspondent in the country to shift for himself. It is evident, that little or none of the gold issued by the bank would go to the country, or any where else, till the circulation of London was completely supplied.

It appears, therefore, that there is no danger to the regularity of the London payments by diminishing the notes of the bank of England, provided she diminishes not her discounts; and, were the demand for guineas to continue so great as to exclude her notes from circulation, she could only be called upon to find a quantity of gold equal to her 15,000,000l. in notes, to afford the whole of the usual discounts, and preserve the regularity of the London payments. Even then, too, she would be in no worse condition, than the rest of the banks who discount without issuing notes, and find it still a very gainful trade. But it is perfectly certain that she could never be called upon, while she confined her business to the discounting of bills, for nearly so great a quantity of guineas as her notes amount to. It is always found, that when a bank can stand, with every demonstration of ease, a run for but a few days, confidence is restored, and the drain is interrupted. As to the drain which may arise from the exporting of guineas to foreign countries, it is perfectly evident, that the smallest increase to the difficulty of finding them at home gives them a value, which entirely prevents that operation, and even brings gold from abroad. Mr Henry Thornton enters into a long explanation of the difficulties and delay of bringing bullion from abroad; but he completely forgets another very obvious circumstance, that the delay and difficulties are equally great of drawing gold from this to other countries; and that these two sets of difficulties, therefore, exactly balance one another.

This doctrine is entirely confirmed by the facts connected with the crisis in our pecuniary affairs during the year 1796, and the beginning of 1797, when the suspension of payments in cash took place. From the end of 1794, or the beginning of 1795, there had been a rapid increase of the advances to government, insomuch, that these advances had risen, in the course of a few months, from six to ten millions; while the cash and bullion in the bank had, during the same months, sunk from eight millions to five. During this time, the directors of the bank continued to make loud and frequent remonstrances to the Chancellor of the Exhequer, on the dangers into which the bank was brought by these extraordinary advances, and earnestly to implore that they might be reduced. So far, however, was this from taking place, that from the urgent demands of government on the one hand, and the compliance of the bank on the other, they were carried, in the month of March 1796, to the enormous amount of 11,351,000l. From September to December they were reduced about a million and a half, but, after that, began again to rise; and on the 26th of February, when the cash and bullion in the bank scarcely exceeded one million, the advances to government, including interest, amounted to 10,762,490l. For a little time before this memorable juncture, the governors of the bank having no command over the money advanced to government, endeavoured to draw in their notes by lessening the amount of their discounts; and, by this circumstance, not by a want of currency, produced that derangement and difficulty in the London payments of which Mr Thornton complains. From the end of December to the 26th of February, the quantity of discounted bills had sunk from 3,796,000l. to 2,905,000l.

The conclusion from all this appears abundantly certain. If the bank of England, provided she never made advances to government, could not, as we have already shown, be ever drained of gold, unless she chose, beyond the amount of her notes in circulation,—and would not, to a moral certainty, be drained to nearly so great an amount,—and if we find her in advance to government, to a pitch so enormous, when she became plunged in inextricable difficulties, is it not clear that to these advances the difficulties must have been owing? It would have given us great pleasure to have entered upon the analysis of this case likewise, and to have traced the operation of these advances, step by step, to the crisis which they at last produced. But we have already so far exceeded all reasonable limits, that we are absolutely precluded from an inquiry, which would still lead us to a considerable length. Besides, the principles which we have already laid down, may be applied by any one who is at all accustomed to these inquiries, in the solution of this case, which presents no peculiar difficulty…

[1]The bulk of Mill's economic writings at this time appeared in the Literary Journal and the Eclectic Review: a list of such reviews as can with some certainty be attributed to him can be found in the bibliographical appendix to this volume. Mill was responsible for the reviews of political works (which included political economy) in the Literary Journal, and as editor it is unlikely that he would have published anything which ran counter to his own strong views on these subjects. Although there is no contemporary identification of authorship for the Literary Journal or the Eclectic Review, all of the articles cited here and in the bibliography contain internal evidence of his hand, chiefly in the form of passages which also appeared in acknowledged work.

[2]See the review of Steuart's Collected Works, Literary Journal, Mar. 1806, Vol. I (2nd Series), pp. 231-2. Lauderdale's Inquiry into the Nature and Origin of Public Wealth was also made the object of unfavourable comparison with Smith in the same journal, Jul. 1804, pp. 1-18.

[3]A History of the English Corn Laws, 1660-1846, Augustus M. Kelley reprint, New York, 1961, p. 90.

[4]A Calm Investigation of the Circumstances that have led to the Present Scarcity of Grain in Britain, London, 1801.

[5]See W. F. Galpin, The Grain Supply of England during the Napoleonic Period, Macmillan, New York, 1925, Appendix 5.

[6]Barnes, op. cit., pp. 43-45 has shown this to be a misinterpretation of the law of 1773.

[7]Wealth of Nations (ed. E. Cannan), Modern Library edn., bk. IV, ch. V. For Anderson's criticisms see op. cit., p. 16f.

[8]43, 44 Geo. III, c. 109.

[9]Op. cit., p. 89.

[10]See below, p. 56.

[11]See below, pp. 150-1.

[12]Wealth of Nations, p. 477.

[13]See below, p. 59.

[14]The economic background to the blockade has recently been treated exhaustively by F. Crouzet, Le blocus continental et l'économie brittannique, Paris, 1958.

[15]See e.g. his review of Sheffield's Strictures on the Necessity of Inviolably Maintaining the Navigation and Colonial System, Literary Journal, Jan. 1806, vol. I (2nd Series), pp. 51-61. Some of the points Mill made later in his article on ‘Colonies’ for the Supplement to the Encyclopaedia Britannica are anticipated here.

[16]See the articles on this subject in the Literary Journal for Dec. 1805, Feb., Mar. and Jun. 1806.

[17]See articles entitled ‘Perish Commerce’ in Cobbett's Weekly Political Register' Nov. 7, 21, 28 and Dec. 5, 12, for 1807. Correspondence on the question continued until Mar. 1808.

[18]As a curtain-raiser Mill reviewed Spence's work in the Eclectic Review, Dec. 1807, vol. III, pp. 1052-8. Other contributions to the discussion include a review of Spence in the Edinburgh Review, Jan. 1808, vol. XI, pp. 429-48; P. Williams, Remarks Suggested by Britain Independent of Commerce, London, 1808; and (anon.) Sketches on Political Economy intended as a Reply to Mr Mill, London, 1809.

[19]On this see R. L. Meek's ‘Early Theories of Under-Consumption’ and ‘Physiocracy and Classicism in Britain’ as reprinted in his Economics of Physiocracy, Allen and Unwin, London, 1962, and J.J. Spengler ‘The Physiocrats and Say's Law of Markets’, Journal of Political Economy, Sep. and Dec. 1945, vol. LIII, pp. 193-211 and pp. 317-47.

[20]See Britain Independent of Commerce, p. 24. All page references are to the 7th edition as reprinted in Spence's Tracts, London, 1822.

[21]Ibid., p. 28.

[22]To the possible objection that an increase of luxury would debilitate the nation, he makes the following reassuring response: ‘However great may be the quantity of luxuries produced by the manufacturing class, the bulk of that class, from which the army of the state must be directly supplied, will never enjoy more than the bare necessaries of life, and consequently cannot be enervated by the luxuries it brings into existence.’ Ibid., p. 31.

[23]Ibid., p. 71n.

[24]Ibid., p. 72n.

[25]Ibid., p. 52.

[26]Ibid., pp. 58-59.

[27]It is worth noting that Mill was favourably inclined to the physiocratic account of the foundation of society and their Hobbesian view of sovereignty. He also approved of their advocacy of commercial liberty, but felt that their economic ideas had been superseded by the work of Adam Smith. See his article on the ‘Economists’ for the Supplement to the Encyclopaedia Britannica, London, 1824, vol. III, pp. 708-24.

[28]See below, pp. 108-9. A different approach to the gains is attempted on pp. 149-50.

[29]Studies in the Theory of International Trade, Harper, New York, 1937, p. 440.

[30]See below, p. 118. For comment see E. Cannan, Theories of Production and Distribution, Staple Press, London, 1937, pp. 12-14.

[31]See below, p. 128.

[32]Wealth of Nations, I, p. 320; cf. below, p. 132.

[33]See below, p. 135.

[34]On this question see G. S. Becker and W. J. Baumol, ‘The Classical Monetary Theory: The Outcome of the Discussion’, Economica, Nov. 1952, vol. I9, pp. 355-76.

[35]Ricardo's Works, vol. VI, pp. 132, 134, 141-2, 149.

[36]He reviewed Say's book in the Literary Journal, Apr. 1805, vol. V, pp. 412-25, and drew attention to the law (p. 419). There is also a reference to Say in Commerce Defended itself, p. 132n below.

[37]See below, pp. 150-6. Torrens also accepted Spence's conclusion. ‘However I may differ with Mr Spence and Mr Cobbett on subjects of political economy, yet I honour them for being the foremost to controvert the degrading opinion that England's greatness depends on anything which foreigners can grant or take away.’ The Economists Refuted, reprinted in Principles of Sir Robert Peel's Act of 1844, 2nd ed., London, 1857, p. 56.

[38]See below, p. 156. An earlier statement of this position can be found in the Literary Journal, Oct. 1803, vol. II, pp. 366-74; 385-400; 433-41.

[39]For comment on the differences between the Ricardian and Smithian positions, see Hla Myint, ‘The “Classical Theory” of International Trade and Underdeveloped Countries’, Economic Journal, June 1958, vol. LXVIII, pp. 317-37 and D. N. Winch, ‘Classical Economics and the Case for Colonization’, Economica, Nov. 1963, vol. XXX, pp. 381-99.

[40]See the bibliography appended to this volume.

[41]See below, pp. 179-81.

[42]Wealth of Nations, bk. II, ch. II.

[43]Boase's ‘Observations on Lord King’, Literary Journal, Jun. 1804, vol. III, pp. 627-35; 694-701; 753-60.

[44]Ibid., pp. 757-9.

[45]See a letter from Francis Jeffrey to Henry Brougham, 19 Oct. 1809, Brougham MSS., University College, London.

[46]See the letters quoted in Ricardo's Works, vol. III, pp. 9-10.

[1][Thoughts and Details on Scarcity originally presented to the Rt. Hon. William Pitt in the month of November 1795, London, 1800. The theme of Burke's memorandum was that ‘to provide for us in our necessities is not in the power of Government’.]

[2][43, 44 Geo. III, c. 109.]

[3][An Inquiry into the Corn Laws and Corn Trade of Great Britain and their influence on the Prosperity of the Kingdom, with a suggestion for the improvement of the Corn Laws by the late Alexander Dirom. To which is added a supplement by William Mackie, Edinburgh, 1796.]

[4][A Calm Investigation of the Circumstances that have led to the Present Scarcity of Grain in Britain, London, 1801.]

[5][In the 2nd edn. of his Essay on Population (1803) Malthus included a section praising the export bounty on corn.]

[6][1 W & M, c. 12. When wheat prices fell below 48s. per quarter a bounty of £200 for every 100 tons exported was to be paid.]

[7][11 Geo. III, c. 1. Export of corn prohibited.]

[8][Mill is following Smith closely here. Cf. Wealth of Nations (ed. Cannan), Modern Library edn., bk. IV, ch. V, p. 508.]

[9][An Essay on the Principle of Population, London, 1798. An expanded and modified 2nd edition of this essay was published in 1803.]

[10][This, of course, is Smith's theory of profits, cf. Wealth of Nations, p. 87. In a review of Lord Sheffield in the Literary Journal (Jan. 1806, pp. 51-61) Mill drew this firm conclusion from Smith's theory of profits: ‘It is a fixed maxim in political economy that everything which tends to lower the general price of commodities by reducing the profits of stock is an advantage to the country.’ This doctrine remained ‘fixed’ for Mill until Ricardo advanced an alternative theory.]

[11][Wealth of Nation, pp. 476f. Mill was using the 1st or 2nd edition because in the 3rd edition Smith stated that ‘the money price of corn regulates that of all other home-made commodities’. This qualification is left out of all Mill's quotations from Smith in the following pages.]

[12][Wealth of Nations, p. 507.]

[13][Wealth of Nations, pp. 490-1.]

[14][Literary Journal, Mar. 1806, pp. 234-5. Mill wrote a further article criticising the Corn bounty in the Eclectic Review, Jan. 1809, vol. V, pp. 50-61.]

[1][That is, he agreed with Mill's criticisms of the bounty on the export of corn. In his Political Register, 8 Dec. 1804, p. 871 Cobbett quoted at length from Mill's review of James Anderson for the Literary Journal, Oct. 1804, praising it as ‘a complete refutation of all the arguments advanced by all the writers in favour of the bounty law’.]

[2]‘Britain Independent of Commerce,’ p. 7 [p. 5]. It is necessary here to remark, that as nearly the whole of the present Tract was written before the 3d edition of Mr Spence's pamphlet appeared, it is the 2d edition always that is quoted, unless when the 3d edition is actually named.4

[3]Polit. Reg., Dec. 6, 1806, p. 867.

[5][Mill's enthusiasm concerning the potential trading opportunities open to Britain in Latin America can be seen in his ‘Emancipation of Spanish America’, Edinburgh Review, vol. XIII (Jan. 1809), No. 26, pp. 273–311. It was probably the result of his friendship with General Miranda, who assisted Mill in the writing of this article.]

[6]Mr Spence, in a new passage inserted in his 3d edition, p. 40 [p. 36], does at last state as a consequence of his doctrine, ‘that all taxes, however levied, in the end fall upon the soil’. But this is very different from saying that they ought to be immediately levied upon the soil. The landholders may very quietly allow you to say that the taxes fall upon them, as long as you make them light upon others. Mr Spence is even accommodating enough to say that the corollary of the Economistes is wrong; and that taxes ought not to light, as they teach, upon the landlords. It is a matter of regret he did not give us his reasons; for I can discover none which are not as strong against the theory as against the corollary. Unfortunately, however, all that Mr Spence affords us on this score is the following; ‘Reasons,’ says he, (Ibid, p. 41, 42,) [p. 37, 38] ‘which it is impracticable in this plan to adduce, render it doubtful, whether a direct land-tax would be advisable even in an infant state; and it is much more obvious that the intricate and artificial regulations of adult societies wholly preclude the propriety of such a tax.’

[7]See pp. 9, 10 [pp. 7, 8].

[8]This is just such a definition, as if, describing the corporal part of man, we should say that it consisted of a trunk, limbs, and body.

[9]Wealth of Nations, B. I. c. 8.

[10]’Whether,’ says Mr Spence, (p. 19 [p. 17] Brit. Indep. of Commerce) ‘the manufacturer receives the price of his manufacture in food or in money, if the whole be fairly analyzed, and every thing traced to its source, it will in every case be found, in the most refined, as in the most barbarous, state of society, that agriculture is the great source, manufactures no source at all, of national wealth.’ This indeed is one of the hinges on which his doctrine turns. It is the foundation, for example, of his opinions concerning consumption; and he introduces his inquiry into that subject in the following terms; ‘As it has been shewn’ (see pp. 29, 30, [p. 28] of his pamphlet) ‘that the whole revenue of a country, (deducting an insignificant portion sometimes derived from foreign commerce) is derived from its land.’ This reservation, in favour of commerce of export, he expressly denies to manufactures for home consumption. ‘When a lace manufacturer’, (Ibid. p. 43 [p. 44]) ‘has been so long employed in the manufacturing a pound of flax into lace, that his subsistence during that period has cost £30, this sum is the real worth of the lace, and if it be sold at home, whether for £30 or £60, the nation is no richer for this manufacture.’

[11]See Mr S's pamphlet, p. 16 [pp. 14, 15].

[12]It is to be borne in mind that the whole of the question discussed in this chapter respecting the utility of manufactures, regards manufactures for home consumption; and, for the sake of distinctness, the idea of foreign commerce is altogether excluded. Mr Spence has judiciously adopted this plan; and his example was here highly worthy of imitation. To know the value of manufactures it was right in the first place to consider their operation in a country supposed to have no connection with any other.

[13][Wealth of Nations (ed. Cannan), Modern Library edn., p. 3 and p. 11].

[14]See pp. 38, 39 [p. 40].

[15]Brit. Indepen. of Comm. p. 39 [p. 41].

[16]For the sake of preserving the argument as simple as possible, the consideration of freight and charges is not here introduced, as this affects in no degree the reasoning, and only requires that an abatement be made from the amount of profit. It is not the quantity of profit, but profit in any quantity, which the argument respects. The customary profit of trade will always be made, as long as the business continues.

[17]Mr Spence's notions appear not to be very steady even on this subject. Thus, he says, (p. 8 [p.6]) speaking of the attempts to exclude our commerce, that, ‘he has rather been inclined to pity the poor inhabitants of the countries, who are prevented from buying our manufactures, than us that are hindered from selling them.’ Now, what he pities those poor countries for, is, that they are not enabled to carry on an import trade. Why? if import trade can never add any thing to wealth.

[18]See his pamphlet, p. 43 [p. 44].

[19]See his pamphlet, p. 43 [p. 45].

[20]See his pamphlet, p. 44 [p. 45; in the later version Spence says ‘thrice’ and ‘six times’].

[21]Mr Spence is but an indifferent political arithmetician. He computes the grains upon the fifty millions of British exports, (by allowing twenty per cent for the profits of the master manufacturer and the exporting merchant) at ten millions a year. But from this sum, says he, (p. 44 [p. 45n]) ‘we ought certainly to deduct the annual amount of our commercial losses at sea. The greater part of our exports, as well as of our imports, being insured by British underwriters, the whole amount which they annually pay is so much dead loss to the nation deducting the premiums which they receive from foreign countries.’ He here makes the poor nation sustain its losses at sea twice over. The premiums of insurance paid by the merchants to the underwriters cover the whole of the losses with a profit. These premiums are as little charged by the merchant to his account of profit as the expence of freight. His profits are reckoned with a complete deduction of those premiums; and when we say that his profit is ten per cent or twenty per cent full account is made of loss. To make us first deduct our losses from the profits of the merchants, and then make a deduction of them again, for the sums paid by the underwriters, is hard dealing.

[22]See p. 97 of this pamphlet.

[23]Ibid.

[24]See p. 18 [p. 16] of Mr Spence's pamphlet, ‘Britain Independent of Commerce.’

[25][For a fuller statement of Mill's position on monetary questions at this time see the extract which follows this pamphlet.]

[26]See his pamphlet, p. 53 [p. 56; in the later version Spence left out ‘in the precious metals’].

[27]Mr Spence is very apt to shift the ground of his arguments. He began his dissertation on the inutility of our export commerce, p. 47 [p. 49], thus; ‘I grant, that when a nation exports considerably more than she imports, the profits charged on her exported goods, will be national profits; but, inasmuch as Britain imports as much as she exports, and inasmuch as a great proportion of her imports consists of luxuries, which are speedily consumed; from these circumstances I contend, that her wealth derives no augmentation from her commerce of export.’ We see, that his reasons against the utility of commerce in this passage, are two; 1st, The equality of our imports with our exports, of whatever sort these imports may be; 2d, The perishable nature of a great part of these imports. In the passage just quoted in the text, we perceive that Mr Spence gives up the first of these reasons, allowing, that if we imported durable articles, we might gain by commerce, and insists only upon the last. We lose by our commerce, he says here, only because we import articles of a perishable nature.

[28]How often, and how justly has it been observed, that the costly palaces, and other luxuries of the greatest durability, on which Louis the XIVth expended vast sums of money, contributed as certainly to the exhaustion and impoverishment of France, as the expensive wars which he carried on, or the daily extravagance of his prodigal court? Mr Spence will surely allow that the pyramids of Egypt are sufficiently durable. Yet the political philosopher would amuse us, who should advise us to enrich our country, by building a few of these durable structures. Durability then is not the philosopher's stone; one thing may be more useful in half an hour, than another thing in twenty years.

[30]See his pamphlet, p. 51 [pp. 53–54].

[30][Wealth of Nations, pp. 407–8.]

[31]When Mr Spence sets so great a value upon articles of durability, he ought to recollect his own doctrine (see p. 16 [p. 14] of Mr Spence's pamphlet) ‘that the manufacturer transmutes wealth of so perishable a nature as food into the more durable wealth manufactures.’ Must he not then, according to the doctrine of durability, augment the national wealth?

[32][Cf. Wealth of Nations, Introduction and bk. II, ch. III.]

[33]Great Britain is understood by the world to gain more by commerce than all other nations put together. According to Mr Spence, she is in the singular situation of losing by it, while other nations gain. He told us already (see p. 108 [above]), that he pitied those nations from which Bonaparte excluded our goods. He tells us again (Brit. Independent of Com. p. 56 [p. 59]) ‘We shall find, that it is Europe, Asia, America,–all the countries with which she trades,–not Britain, that is enriched by her commerce.’ Commerce then may enrich; it is only Great Britain that is silly enough to mismanage it.

[34]When it suits Mr Spence's purpose he can represent commerce as a very powerful agent in national prosperity. Thus he says (Brit. Indep. of Com. p. 84 [p. 87]) ‘should the blacks of St. Domingo be able to resist the attempts of the French for their subjection, and succeed in establishing a regular independent government, they will not fail, by means of their commercial intercourse, speedily to become civilized and powerful.’ Mr Spence generally admits the effect of commerce in promoting civilization; but how can it render a nation powerful, by rendering it opulent?

[35][Mill oversteps the mark here. A nation gains from trade via its imports, as he has shown; exports represent simply the means by which the gains are acquired. He never seems quite to have grasped this notion; see e.g. below, pp. 272ff.]

[36]See p. 20 [p. 18; the wording is slightly altered in Spence's later version] of his pamphlet, Brit. Indep. of Commerce.

[37]See Wealth of Nations, B. III. particularly the last three chapters.

[38]See his pamphlet, p. 27 [p. 25].

[39]It is truly amusing to compare some of the parts of Mr Spence's pamphlet with other parts. He here tells us that the most prosperous condition of society would be that established on the principles of the Economistes, requiring the greatest subdivision of landed property. Yet hear him on the subject of a great subdivision of landed property, in another passage; (note p. 45 [pp. 46–47n]) ‘In France, where there is an infinity of small estates of ten and twenty, and even so low as two and three acres each, which are the bane of all national increase of wealth, probably more than half the population is employed in agriculture.’

[40]There is one pretty important subject on which Mr Spence has wonderfully changed his language at least, during the period between the publication of the second and third editions of his pamphlet. In his second edition, (p. 57,) he expressed himself on the famous question respecting the balance of trade, in the following manner: ‘Ever since the publication of Dr Adam Smith's Wealth of Nations, it has been usual for those who have embraced the Doctor's opinions, to ridicule the axiom of the older politicians, viz. that for a nation to gain wealth by commerce, it is necessary it should export more than it imports, and receive the balance of trade in the precious metals. From what has been observed, it will be obvious, that the absurdity charged by him and his followers on the doctrine of the Pettys, the Davenants, and the Deckers, of former times, is by no means so convincingly made out as they would have us to believe. It appears these ancient politicians had an accurate idea of the true nature of commerce, though they erred in attaching too much importance to it. They rightly considered commerce to be, as its derivation implies, an exchange of one commodity for another; and hence they justly conceived, that if a nation imported, in return for its exports, a quantity of commodities only equal in value to them, it would never get wealth by such an interchange of one value for another. The absurdity, then, charged upon this doctrine of the balance of trade, does not belong to the principle itself, which is founded in truth, but to its application.’ This passage, so decidedly asserting the truth of the doctrine respecting the balance of trade, is entirely omitted in the third edition; and instead of it we find inserted, in a different place, the following passage; ‘Before I proceed,’ (see 3d edit. p. 53 [p. 49]) ‘to advance the reasoning, and to point out the facts upon which this opinion is founded, it is necessary to shew, by a slight examination, the fallacy of the doctrine of the balance of trade; or the opinion that Britain accumulates riches from her commerce, by receiving every year a balance in the precious metals, in consequence of a constant excess of her exports over her imports. Glaringly absurd as is this doctrine in the eyes of every tyro in political economy, and clearly as it has been demonstrated that no such balance can be received; we still, as a century ago, hear not only our newspaper politicians, but our statesmen even, estimating the value of a branch of commerce by a reference to this exploded theory.’ Does Mr Spence abide by his own sentence, that he was more ignorant than a tyro in political economy, when his second edition was published? Or will he exert his ingenuity to prove that his former passage was consistent with the present? If he can undertake this, I would not have advised him to expunge the former passage.

[41]Britain Indepen. of Commerce, p. 27 [pp. 25–27].

[42]It is remarkable in what obvious instances the unsteadiness of Mr Spence's ideas sometimes exhibits itself. Thus he tells us, (p. 18 [p. 16] of his pamphlet) that ‘gold and silver are undoubtedly wealth.’ Yet in the very same page he says, ‘If gold and silver be but the representative of wealth and paper-money, the shadow of a shade,’ &c. and then proceeds to found an important inference upon this assumption. In the next page, too, he says, ‘Thus, then, whatever is the circulating medium, whether it be gold and silver, or paper, or both, being but the representative of wealth, there can be no difference as to the sources of wealth, between a nation which has, and one which has not, a circulating medium.’ Mr Spence, though evidently a man of education, has certainly been little accustomed to the business of accurate composition. We find, here, even a grammatical blunder.

[43]In one or two passages, particularly one inserted for the first time in his 3d edition, Mr Spence appears desirous to insinuate that there is a distinction between manufactures for home consumption, and manufactures for export, in respect to the encouragement of agriculture; as if manufactures for home consumption contributed to the progress of agriculture, but manufactures for exportation did not. It would have been highly satisfactory, if this indeed be his opinion, for even that does not certainly appear, had he but taken the trouble to give us his reasons. As for me, I frankly own, I cannot so much as conceive what those reasons could have been. I can recollect, however, very distinctly where Mr Spence informs us that manufactures for home consumption can never add to the wealth of any country, but that manufactures for exportation sometimes may. He tells us, p. 17 [p. 16], that his arguments ‘have convincingly shewn that all wealth is created by agriculture none by manufactures,’ meaning manufactures for home consumption. He tells us too, p. 43 [pp. 44–45], ‘when a lace manufacturer has been so long employed in the manufacturing a pound of flax into lace, that his subsistence during that period has cost £30, this sum is the real worth of the lace; and if it be sold at home, whether for £30 or £60, the nation is no richer for this manufacture. But if this lace be exported to another country, and there sold for £60, it is undeniable that the exporting nation has added £30 to its wealth by its sale.’ He says too, p. 57, 2d edition, ‘However enlarged are the views, and however correct the reasoning of Dr Smith, on most branches of the subject on which he wrote, he has in many instances fallen into errors, to the full as egregious as those which he condemns.’ Let us next hear the instances which he specifies; ‘witness his doctrine, that wealth is really created by manufactures made and consumed at home; and his confused and unintelligible attempt to confute the opposite tenets of the French Economists.’ Ibid.

[44]See Mr S's pamphlet, from p. 29 to 37 [pp. 27–35].

[45]Mr Spence here furnishes us with an unanswerable argument against his doctrine of durable commodities. He insists upon it, as we have already seen, that all commerce is unprofitable, which does not import durable commodities. But commodities the more they are durable, are the more opposed to consumption. In conformity with his doctrine of consumption, he ought to recommend commerce in the most perishable commodities. His doctrine of durable commodities affords an argument against his doctrine of consumption; and his doctrine of consumption affords an argument against his doctrine of durable commodities.

[46]See Mr S's pamphlet, p. 32 [pp. 30–31].

[47]Here too, Mr Spence follows a remarkable part of the system of the original Economistes. ‘La consommation est la mesure de la reproduction.–Plus il se consomme, plus il se produit,’ said Mercier de la Rivière, Ordre Essentiel des Sociétés Polit. Tom. ii. p. 138. At the time when this system was first invented, when men had just begun to analyse the operations of society, such a mistake deserved, perhaps, indulgence. But after the real causes of wealth have been so clearly evolved by Dr Smith, after the mysterious process of production has been so exactly resolved into its first elements, it shows either a very slight acquaintance with his work, or a woeful inability to trace the consequences of the truths demonstrated in it, if a man can now adopt the doctrine of the Economistes respecting consumption.–A late French writer, M. Say, Economie Polit. Liv. v. ch. 3. tells a pleasant anecdote of a practical pupil of this doctrine. ‘JL'ai connu,’ says he, ‘un jeune homme qui fesait voler par la fenêre les flacons de cristal à mesure qu'il les vidoit; il faut disait-il, encourager les manufactures.’

[48][Cf. Wealth of Nations, p. 321.]

[49]Mr Spence says in a note (p. 24 [p. 3on] of his pamphlet, 3d edition) ‘There is a singular vagueness and confusion in the whole of Dr Smith's reasoning, relative to the different effects of prodigality and parsimony upon national wealth. His arguments seem to be intended to maintain, that fresh capital may be profitably employed, in manufacturing goods which nobody will buy; for, certainly no purchasers would be found for the goods brought into existence by the employment of new capital, if all the members of the society were to convert the greater part of their revenue into capital.’–This is pretty much as if a follower of the Ptolemaic astronomy should accuse the reasonings of Sir Isaac Newton of vagueness and confusion, because they do not tally with the doctrines of the cycles and epicycles.

[50]My reader may convince himself by personal inspection that the following passage is actually to be found in Mr Spence's pamphlet (p. 55) [pp. 58–59] ‘sir Richard Arkwright, by his invention and employment of improved machinery, in the spinning of cotton, annually gained great riches. But would he ever have been wealthy, if he had every year spent in tea, wine, sugar, &c. destined for his immediate consumption, a sum equal to, or greater than, the whole of his gain? Surely not. The dullest intellect must see, that he never could have acquired wealth, by this constant expenditure of his gains, in articles to be consumed by himself, which, when consumed, left no relic behind them; however great might have been his gains, and however long he might have acted on this system. If, then, a private manufacturer cannot acquire wealth in this way, neither can a manufacturing nation. The cases are precisely parallel.’

[51][In his reply to Mill, Agriculture the Source of the Wealth of Britain, Spence said that he found this principle incomprehensible. ‘Mr Mill grants that his theory will probably appear to his readers to be involved in considerable obscurity. He will therefore pardon me, if, after all the attention I have bestowed to develope its meaning, I should have been unsuccessful.’ See Tracts on Political Economy, p. 160.]

[52]The attentive reader will perceive that no deduction is made in the preceding argument for that part of the annual produce which is consumed immediately by the producer. The motive for this was a desire not to perplex the argument by qualifying clauses. To notice this particular, at the same time, was entirely unnecessary, since that part of the annual produce which may be consumed by the producer, as it increases not the demand in the national market, so neither does it increase the stock or supply in that market, because it is not carried to market at all. It is also to be considered that in every country where labour is well divided, and skilfully applied, the proportion of the produce which the producers immediately consume is always very small.

[53]What then are we to think of such speculators as Lord Henry Petty, who told the House of Commons in one of the debates on the appropriation of part of the sinking fund in his new finance plan, that it was necessary to prevent the national debt from being paid too fast, lest the country should become overstocked with capital? There was not an individual in the House who contradicted him.

[54][Cf. Smith's statement that: ‘Great nations are never impoverished by private, though they are sometimes by public prodigality and misconduct.’ Wealth of Nations, p. 325.]

[55]We have already seen, p. 137, an application of the doctrine of the utility of expence, in the plea of Lord Henry Petty for alienating part of the sinking fund. The sinking fund has been operating for twenty years. It ought in that time to have given a tolerable specimen of its effects. Well, how has it paid the national debt? Why, the national debt is now nearly triple its amount at that time when the sinking fund was instituted. If the rapid payment of the national debt were the greatest of our dangers, we might bless God upon being the securest nation in the universe. We may here see, however, with some alarm, the extent of practice which might rapidly be given to the consuming doctrine. Lord Henry Petty professes to regard the sinking fund as the sheet anchor of the nation. Yet upon the strength of this speculation he could recommend to Parliament to devote part of that sinking fund to immediate consumption!

[56]Britain Indep. of Commerce, p. 74 [p. 78n].

[57]Britain Indep. of Commerce, p. 75 [p. 78n].

[58]Ibid.

[59]Britain Indep. of Commerce, p. 75 [p. 79n].

[60]Ibid.

[61]Britain Indep. of Commerce, p. 76 [p. 79n].

[62]Britain Indep. of Commerce, p. 76 [p. 79n].

[63]He refers to Lord Lauderdale's ‘Inquiry into the nature and origin of public wealth.’ His lordship's arguments, however, are merely those of Mr Spence extended. They are drawn from the same source, and applied to the same end. Wherever the above arguments are conclusive against Mr Spence, if they are conclusive against him at all, they are equally so against Lord Lauderdale. It seems therefore unnecessary to extend the pamphlet by any examination of arguments, which are already refuted.

[64]Among other accusations which Mr Spence has brought against Dr Smith, he wishes to prove, that, though he dissents from the doctrine of the Economistes, he yet ‘virtually admits its truth.’ (See p. 41 [p. 37] of Mr Spence's pamph. 3d edit.) ‘He asserts,’ says Mr Spence, ‘that all revenue must be derived from rent of land, profit of stock, or wages of labour. But in the course of his investigation, he admits, that no taxes are finally paid by the profit of stock; the employer of capital always shifting the burden from himself upon the consumer. He allows, too, that taxes cannot finally fall upon wages, since the wages of the labourer increase in proportion, as the price of the articles he consumes is augmented by taxation. On what, then, can taxes fall, but upon the rent of land? If all revenue be necessarily derived from rent, wages and profit, and the two latter cannot be affected by taxation, Dr Smith, on his own premises, admits the truth of the doctrine of the Economists.’ One can with some difficulty determine what to say of this. It is directly untrue. Dr Smith is so far from saying, that no taxes fall ultimately either upon the profit of stock or the wages of labour, that he explains particularly in what manner taxes do fall upon both. Mr Spence, however, certainly did not intend this misrepresentation. He tells us, that he borrowed the idea from the Edinburgh Review, [Jan. 1803, No. II, p. 445]. It is probable, that he trusted to this authority, without undergoing the drudgery of consulting Dr Smith; (taking the business of instructing the public very easily!) and the writer in the Review, with the precipitance natural to a reviewer must have made the assertion at random.

[65]Britain Indepen. of Commerce, p. 76 [p. 80n].

[66][The State of the Poor: or an History of the labouring classes in England from the Conquest to the present period, London, 1797.]

[67]This may be rigidly proved by arithmetical demonstration. Let us take our commerce at its present standard. We export rather more than forty millions a year of British produce and manufactures. Let us suppose that one-fourth of this is gain to the country, which is probably a good deal more than the fact. The annual gain of the nation by this trade is then £10,000,000. Now the most steady and flourishing kinds of business are seldom worth more than ten years purchase. But we shall make a much larger allowance. Land itself is only worth thirty years purchase even at its present elevated price; and commerce is surely worth one-third less than land. Let us suppose then that our commerce is worth 20 years purchase; while our land is worth 30. The whole of our commerce, even at this high estimate, would be worth only £200,000,000. But we have added by the war above £300,000,000 to the national debt. When we consider that the war taxes were taken at £21,000,000 in Lord Henry Petty's budget for one year only, we may be pretty certain we are below the mark, when we say at a venture that £110,000,000 more have been raised for the war by that means. It thus appears that the war with the French revolution has already cost us more than twice the worth of our whole commerce.

[69]Cobbett's Political Register, v. 12, [21 Nov. 1807] p. 821.

[69]Ibid, pp. 822, 823.

[70]Cobbett's Political Register, p. 824.

[71]See Brit. Indep. Com. p. 20 to 26 [pp. 18–25].

[72]Vauban Dixme Royale.

[1]A very competent judge, Sir James Steuart, (see Polit. Econom. b. iii. c. 6.), has expressed himself with peculiar emphasis on this point. ‘QUEST. 1. The first question I shall propose, for illustrating this subject, shall be, Whence it comes to pass that the doctrine of money is so extremely difficult and involved?—ANSW. This I ascribe chiefly to the introduction of a money jargon, employed by the people who have had the management of mints, or who have been practical merchants, without knowing any thing of the theory of their business.’

[2]We are aware that we have not here obviated the whole of the objections which may be made to this conclusion; and that the excess of the bullion price of gold and silver, over the mint price, has appeared to some persons a sufficient proof of actual depreciation, arising from an overissue. The full consideration of this subject, we must reserve for another opportunity; at present, we can only state it to be our opinion that the phenomenon in question may be explained from the fact of our having a currency composed of two metals, which are constantly varying in value as to each other. To those, too, who are habituated to such speculations, our whole theory of depreciation may be sufficiently explained, perhaps, by the following simple propositions. There can be no depreciation of coin, except in consequence of the wearing or adulteration of the metals; and there can be no depreciation of paper which circulates at par with coin—whatever be its quantity:—All depreciation of paper, it appears to us, is produced by suspicion of the credit of those who issue it. A suspension or postponement of cash payment, is obviously a ground for such suspicion; and the more that is issued while this continues, the more must this suspicion and depreciation accumulate. When it has once begun, it is easy to see how rapidly it must increase. But this is merely because the additional issue is an additional load on a credit already suspicious,—not because there is a surplus of currency in the country. No man receives Government paper, even in the first instance, but in exchange for something which he thinks worth the same sum in coin;—and no man ever receives paper money from another, except when he chooses to receive it for his goods or his labour;—consequently, he can never receive more than he wants; nor can there be any depreciation from mere overissuing.

[2]‘Britain Independent of Commerce,’ p. 7 [p. 5]. It is necessary here to remark, that as nearly the whole of the present Tract was written before the 3d edition of Mr Spence's pamphlet appeared, it is the 2d edition always that is quoted, unless when the 3d edition is actually named.4

[4][Mill's page references are followed by references in square brackets to the 7th edition of Spence's pamphlet as reprinted in Tracts on Political Economy, London, 1822, this edition being more readily available.]