The Online Library of Liberty

A project of Liberty Fund, Inc.

• 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

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

[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.