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APPENDIX A: A Letter from Governor Pownall to Adam Smith - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 6 Correspondence of Adam Smith 
Correspondence of Adam Smith, ed. E. C. Mossner and I. S. Ross, vol. VI of the Glasgow Edition of the Works and Correspondence of Adam Smith (Indianapolis: Liberty Fund, 1987).
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A Letter from Governor Pownall to Adam Smith1
Richmond, 25 Sept. 1776
When I first saw the plan and superstructure of your very ingenious and very learned Treatise on the Wealth of Nations, it gave me a compleat idea of that system, which I had long wished to see the publick in possession of. A system, that might fix some first principles in the most important of sciences, the knowledge of the human community, and its operations. That might become principia to the knowledge of politick operations; as Mathematicks are to Mechanicks, Astronomy, and the other Sciences.
Early in my life I had begun an analysis, of those laws of motion (if I may so express myself) which are the source of, and give direction to, the labour of man in the individual; which form that reciprocation of wants and intercommunion of mutual supply that becomes the creating cause of community; which give energy, motion, and that organized form to the compound labour and operations of that community, which is government; which give source to trade and commerce, and are the forming causes of the instrument of it, money; of the effect of it in operation, an influx of riches, and of the final effect, wealth and power. The fate of that life called me off from study. I have however at times (never totally losing sight of it) endeavoured to resume this investigation; but fearing that the want of exercise and habit in those intellectual exertions may have rendered me unequal to the attempt, I am extremely happy to find this executed by abilities superior to what I can pretend to, and to a point beyond that which the utmost range of my shot could have attained. Not having any personal knowledge of the author, or of the port which I now understand he bears in the learned world, I read your book without prejudice.—I saw it deserved a more close and attentive application, than the season of business would allow me to give to it; I have since in the retreat of summer studied it: you have, I find, by a truly philosophic and patient analysis, endeavoured to investigate analitically those principles, by which nature first moves and then conducts the operations of man in the individual, and in community: And then, next, by application of these principles to fact, experience, and the institutions of men, you have endeavoured to deduce synthetically, by the most precise and measured steps of demonstration, those important doctrines of practice, which your very scientifick and learned book offers to the consideration of the world of business.
Viewing your book in this light, yet seeing, as my reasoning leads me to conceive, some deviations which have misled your analysis, some aberrations from the exact line of demonstration in the deductive part; and considering any errors in a work of that authority, which the learning and knowledge that abounds in yours must always give, as the most dangerous, and the more so, as they tend to mix themselves in with the reasoning and conduct of men, not of speculation, but of business—I have taken the liberty, by stating my doubts to you in this Letter, to recommend a revision of those parts which I think exceptionable.
If these doubts should appear to you to contain any matter of real objection, I should hope those parts might be corrected, or that the bad consequences of those positions, which I conceive to be dangerous, may be obviated. When I first wrote these observations, I meant to have sent them to you, by the interposition of a common friend, in a private letter; but, as I think these subjects deserve a fair, full, and publick discussion, and as there are now in the world of business many very ingenious men, who have turned their minds to these speculations, the making this publick may perhaps excite their ingenuity, and thus become the means of eliciting truth in the most important of all sciences. It may animate even your spirit of inquiry, and lead to further researches. It is not in the spirit of controversy, which I both detest and despise, but in that of fair discussion that I address this to you.
When, in your investigation of those springs, which give motion, direction, and division to labour2 —you state ‘a propensity to barter’; as the cause of this division: when you3 say, ‘that it is that trucking business which originally gives occasion to the division of labour;’ I think you have stopped short in your analysis before you have arrived at the first natural cause and principle of the division of labour. You do indeed4 doubt, ‘whether this propensity be one of those original principles in human nature, of which no farther account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech.’ Before a man can have the propensity to barter, he must have acquired somewhat, which he does not want himself, and must feel, that there is something which he does want, that another person has in his way acquired; a man has not a propensity to acquire, especially by labour, either the thing which he does not want, or more than he wants, even of necessaries; and yet nature so works in him, he is so made, that his labour, in the ordinary course of it, furnishes him in the line in which he labours, with more than he wants; but while his labour is confined in that particular line, he is deprived of the opportunity to supply himself with some other articles equally necessary to him, as that which he is in the act of acquiring. As it is with one man, so is it with the next, with every individual, and with all. Nature has so formed us, as that the labour of each must take one special direction, in preference to, and to the exclusion of some other equally necessary line of labour, by which direction of his labour, he will be but partially and imperfectly supplied. Yet while each take a different line of labour, the channels of all are abundantly supplied.
Man’s wants and desires require to be supplied through many channels; his labour will more than supply him in some one or more; but through the limitation and the defined direction of his capacities he cannot actuate them all. This limitation, however, of his capacities, and the extent of his wants, necessarily creates to each man an accumulation of some articles of supply, and a defect of others, and is the original principle of his nature, which creates, by a reciprocation of wants, the necessity of an intercommunion of mutual supplies; this is the forming cause, not only of the division of labour, but the efficient cause of that community, which is the basis and origin of civil government; for, by necessarily creating an inequality of accumulation, and a consequential subordination of classes and orders of men, it puts the community under that form, and that organization of powers, which is government. It is this principle, which, operating by a reciprocation of wants in nature, as well as in man, becomes also the source to that intercommunion of supplies, which barter, trade, and general commerce, in the progress of society, give. It is not in the voluntary desires, much less in a capricious ‘propensity to barter,’ that this first principle of community resides; it is not a consequence of reason and speech actuating this propensity, it is interwoven with the essence of our nature, and is there in the progress of, and as part of that nature, the creating and efficient cause of government; of government as the true state of nature to man, not as an artificial succedaneum to an imagined theoretic state of nature.
The pursuing of the Analysis up to this first principle, does not immediately, I agree with you, ‘belong to the subject of your inquiries;’ for the doctrine contained in the second chapter of your first book, seems only noted en passant, but is no where, either in the course of your Analysis, used, nor applied in the subsequent explications. But as some thirty years ago, I had made this Analysis of the 5Principles of Polity; and as I have, in the practical administration of the powers of government, found, that those powers on one hand do, as from the truest source, derive from these principles of nature, and that the liberties of mankind are most safely established on them: and as I think that great danger may arise to both, in deriving the source of community and government from passions or caprice, creating by will an artificial succedaneum to nature, I could not but in the same manner, en passant, make this cursory remark.
Having established and defined this first operation of man in community, that of barter, you proceed to consider the natural rules by which this is conducted; what it is which gives value; what it is which measures the relative or comparative value, and hence the doctrine of price: and by the intervention of these, the introduction of money and coin. As in the former doctrine, I thought you had not pursued the analysis to the real sources of nature; so here, on the contrary, I think you have stretched your doctrine beyond the garb of nature. Some of your more refined doctrines have rather subtilised ideas, as they lie in your mind, than analised those distinctions which lie in nature. On the first reading the eight first chapters of your first book, in which these matters are treated of, before I came to the use and application of your doctrines in the explication of practice and business, I began to apprehend, that some dangerous consequences in practice might be deduced from theory, instead of those sound and beneficial doctrines which derive through experience, by a true analysis of nature and her principles. I thought I saw, that many mischievous impertinent meddlings might take rise from a distinction between a natural and a market price. As I had been used to hold that only to be the measure of exchangeable value, which the world generally takes and uses as such, money formed of the precious metals: I could not but apprehend, that many extensively dangerous practices might arise from your laying aside, in your Analysis of Money, the idea of its being a deposit. I saw, that that theory of metaphysicks, led to a destructive practice in physicks; to the practice of creating a circulation of paper, and of calling such circulation, money; and of introducing it as such. In your doctrine, that ‘labour is the measure of exchangeable value of all commodities,’ connected with your mode of explanation of the wages of labour, the profit of stock, the rent of land, and the effect of the progress of improvements, I thought I saw great danger, that Theory, in the pride of rectitude, might harden its heart against the real, though relative, distresses, which the labourer and the landed gentry of a country do suffer, and are oppressed by, during the progress of improvement, in consequence of a continuing influx of riches; and might therefore depreciate, or even endeavour to obstruct, all those current remedies which give comfort and relief to these distresses, and alleviate even those which cannot be remedied.
Although6 the demand for those who live by wages must naturally increase with the increase of national wealth; and consequently the price of wages rise in proportion to the rise of every thing else; so as that the labourer will in the end partake of the general riches and happiness of the publick. Although7 the rise in the price of all produce is in the end no calamity, but the forerunner of every publick advantage: Yet as those prices do forerun, and must, during the progress of improvement, always forerun; wages and rent must always continue at an under–value in the comparison. They will indeed rise also, but as this foreruns, they can only follow, sed non passibus æquis. The labourer, and he who lives on rent, therefore, must always, though improving, be unable to improve so fast as to emerge from a continued distress: if this distinction, that a flowing encrease of wealth, although it is the forerunner of every advantage to the publick in general, and in the end to every individual, yet is the continuing cause to the continued distress of the labourer, and of him who lives by rent, is not carefully attended to. If the state of the circumstances of distress, which continues to oppress those classes of the community, are not constantly adverted to with feeling, and with exertions of precaution and benevolence, we shall, in the triumph of our general prosperity, be the constant oppressors of those who have the best title to share in this prosperity.
Under these ideas and apprehensions I did very carefully and repeatedly, before I proceeded to the applied doctrines contained in the latter book, revise the analytic part of the former. When I came to the doctrines applied to practice, and the businesses of the world, I found that my cautions had not been unnecessary, and that my apprehensions, that some such consequences might be drawn from it, were grounded: I found also what I did not from the principles expect (nor as yet do I see how they derive from them, as any part of the chain of reasoning) that in the course of the doctrines you hold, you are led to disapprove the law giving a bounty on corn exported; and also to think, that the monopoly, which we claim in the American trade,8 ‘like all other mean and malignant expedients of the mercantile system,’ without in the least increasing, doth on the contrary diminish the industry of the country, in whose favour it is established; and doth, although it may have the seducing aspect of a relative advantage,9 subject the nation, its trade and commerce, to an absolute disadvantage. I hope you will not think, that I misunderstand, or mean to mis–state, your position. You allow, and very fully explain the great advantages of the colony trade, but think that the monopoly is the reason why, great as it is, we do not derive so great advantages from it to the nation and to the landed interest, and to the community in general, as we might have done, had it not been crampt and perverted by the monopoly.
In the many occasions which I have had to view this monopoly, I own, although I have seen some errors in the extension of the measure, further than is expedient or necessary, yet I do not see the malignancy of the principle of a monopoly; nor while I have lived amidst the daily proofs of the relative advantage which it gives to the mother country, by its colonies, over all other foreign nations, I have not been able to discover, nor have your arguments, although so methodically and so clearly drawn out, been able to explain to me, that absolute disadvantage which you think it subjects us to.
Although I agree entirely with you, having also previously read the same opinion in Mr. Necker’s Treatise, sur la Legislation & le Commerce des Graines, that the bounty which our law gives to the exportation of corn, has not been the sole cause which hath rendered corn cheaper than otherwise it would have been; but, on the contrary, hath, in each direct instance, given it some small advance in the general scale of prices: Yet, considering that so far as it does this, and gives relief to the relative oppression which the landed interest must continue to feel under a continued influx of riches, and an advancing rise in the prices of every thing else; I think it one of the wisest measures for a country like England that could be devised.
I think with you, that many of our laws and regulations of trade are practical errors, and mischievous. I think that, while they seem to be founded on our navigation act, they mistake the spirit of it, and no less mistake the real interest of the nation: yet I cannot but hold these to be errors only, as they deviate from the true principle of the act of navigation, which is a different thing from the acts of trade.
Having prefaced thus much as to the several doctrines on which I have conceived some doubts, I will now, following the order of your work, state those doubts. When I found you discarding metallic money, that intervening commodity which having, by common consent, acquired a value of its own, hath been hitherto esteemed a common known measure of the value of all other things, from being any longer such common measure, and by a refinement of theory, endeavouring to establish in its place ‘an abstract notion,’ that labour was the common measure of all value; I did not only doubt the truth of the position, but, looking to the uses that might be made of the doctrine, hesitated on the principle. If labour be the only real and ultimate measure of value, money is but the instrument, like the counters on the checkquer, which keeps the account; if this be all the use of money, then circulation, or even an account opened with a banker (according to a practice in Scotland, as described by you) is to all uses and ends as good as money. If it is not necessary, that the common measure should have some known permanent value in itself, so as to be a deposit of that absent value which it represents, as well as measures, so as to convey to all who possess it an absolute power of purchase, then indeed the circulating instrument, the machine that circulates, whether it be a paper or a leather one, or even an account, without any deposit, is equal to all the uses and end of money, is that which we may safely receive for the future. As I have been mixed in the business of a country, where the evils of this doctrine and practice have been severely felt, and where it was my duty to watch, that nothing was imposed upon the publick as money, but what was either in itself a deposit, or was established on a fund equal to a deposit, and what had all the uses of a permanent known measure in all cases of circulation; I could not but read this leading doctrine of your’s with great caution and doubt. I must doubt, whether it be labour simply which creates and becomes the measure of value, when I find other component parts mixed in the most simple idea of value: I cannot conceive, that equal quantities of labour are absolutely of equal value, when I find the value of labour both in use and in exchange varying in all proportions, amidst the correlative values of these components parts; I cannot suppose labour to be the ultimate measure, when I find labour itself measured by something more remote.—You say very properly in the major of your syllogism, that when the division of labour has once thoroughly taken place, it is but a very small part of the necessaries and conveniences of life, with which a man’s own labour can supply him. But when we come to the minor proposition of it, we must consider also the objects on which labour is employed; for it is not simply the labour, but the labour mixed with these objects, that is exchanged; it is the composite article, the laboured article: Some part of the exchangeable value is derived from the object itself; and in this composite value, which is the thing actually exchanged, the labour bears very different proportions of value, according to the different nature of the object on which it is employed. Labour, employed in collecting the spontaneous produce of the earth, is very different in the composite exchangeable value of the fruit collected, from that which is employed in raising and collecting the cultured fruits of the earth. Labour, employed on a rich, cleared, subdued and fruitful, or on a poor and unkindly soil, or on a wild uncleared waste, has a very different value in the composite object produced in the one, from what it bears in the composite value of the other. As the object then makes part of the composite value, we must consider, in the exchangeable value, the object also, as a component part. Whose then is the object? Who has acquired, and does possess, the object or objects on which the labour may be employed? Let us take up this consideration under these first scenes of man, which are usually called a state of nature, somewhat advanced in the division of labour and community. Previous to the employing of labour, there must be some acquisition of objects whereon to employ this labour; a strong and selfish man, who will not labour, sits, we will suppose, idly under a tree, loaded with the spontaneous fruits of nature; an industrious, but weaker man, wants some part of those to supply his necessity, the idler will not let him collect the fruit, unless that other collects also enough for both. Or if, still more churlish and more selfish, he will not let him who is willing, by his labour, to collect a sufficiency for his use, unless the labourer collects also more than sufficient for the idler’s present use, sufficient for his future use also. Does the labourer here command or exchange, by his labour, any part of the labour of the idler? Certainly not. In this state a division of the objects on which labour must be employed, and with which it must be mixed, as well as a division of labour hath taken place; and therefore the labourer must be able, by his labour, to command in exchange a certain portion of these objects which another hath, as well as a certain part of that other’s labour. It will not relieve this doubt by saying, as Mr Locke (treating of right) says, that there can be no right of possession, but by a man’s mixing his labour with any object; because we are here not considering the matter of right, but the matter of fact: nor will it answer to say, that the acquisition itself is an act of labour, because I have here stated the case of a churlish sluggard idler, strong enough to maintain himself in idleness, by commanding not only the actual labourer, but certain greater or lesser quantity of that labour, according as his selfish churlish temper leads him to press upon the necessity of the weaker. Suppose the same idler, in this division of the objects of labour, to have got possession of a fishing lake, or a beaver–pond, or in a sandy desart of a spring; or of a spot of fruitful ground, amidst a barren country; or of a ford, or particular position, which commands a fine hunting–ground, so as to exclude the labourer from the objects whereon his labour must be employed, in order to form that laboured article which is to supply his wants. You see, that the means of commanding the objects of labour, as well the labour of another, make part of the supply whereby a man must live, whereby he may be said to be rich or poor. Even you yourself (I hope you will excuse the expression under which I quote it) say, with rather some degree of confusion in terms, ‘that every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else; the toil and trouble which it can save to himself, and which it can impose upon other people.’ This expresses the conclusion which I draw from the case I have stated, and not your position, that labour is the measure, and that it is labour which is exchangeable for value: it is, on the contrary, the mixture of the labour, and the objects laboured upon, which produces the composite value. The labour must remain unproductive, unless it hath some object whereon to exert itself, and the object is of no use unless laboured upon. The exchange therefore is made by A keeping a part of his labour mixed with a part of the object, and B using a part of his objects rendered useful by the labour of A mixed with them. The consequence therefore in your syllogism cannot fairly conclude, that the value of any commodity to the person who possesses it, and who means not to use or to consume it himself, but to exchange it for other commodities, is equal to the quantity of labour, which it enables him to purchase or command. On the contrary, it is a composite value of the object and labour mixed, and takes part of its value from each of the component parts. It is not therefore labour (which is but one of the component parts of the exchangeable commodity) which gives the exchangeable value, but the labour and the object mixed, the compounded laboured article, in which the labour bears all possible proportions to the correlative value of the two component parts, according as the possessor of the object, or the exertor of the labour, or the common general course of the estimation of mankind shall settle it. Real value, if any such thing there be different from market value, is the mixed composite laboured article, not labour simply.
You have, Sir, made a very proper distinction of value in use, and value in exchange. That labour which varies in its productive power, according as it is differently applied, and according to the object it is employed upon, must certainly vary in its use, and equal quantities of it must be in such different circumstances of very unequal value to the labourer. Labour in vain, lost labour—Labour which makes itself work, (phrases which, to a proverb, express some species of labour,) cannot be said to be of any use to the labourer. He who would shave a block with razor, will labour in vain. He who sows on a rock, or on a barren sand, or in a drowned morass, will lose his labour. He who sheers his hogs, will have great cry and little wool, and only make himself work: but labour will still vary more in its exchangeable value; equal quantities of labour will receive very variable degrees of estimation and value. In the first operation of barter of labour (the value of the objects being, for the sake of argument, laid aside) we will suppose A to say to B, you shall have as much of the surplus of my labour on the article m, as you will exchange for the surplus of your labour on the article Δ. By this, A ‘means to save as much of his toil and trouble to himself, and to impose as much upon B, as he can.’ B means the same. What then is to be the real standard of measure? Not labour itself. What is to give the respective estimation in which each holds his labour? Each alternatively will be disposed to estimate his own most valuable, and to each ‘the labour of the other will sometimes appear to be of greater and sometimes of smaller value10 .’ This value cannot be fixed by and in the nature of the labour; it will depend upon the nature of the feelings and the activity of the persons estimating it. A and B having, by equal quantities of labour, produced equal quantities of two of the most necessary articles of supply, whose values, in the general scale of things, vary the least; each having a surplus in the article which his labour has produced, and each likewise having an equal want of what the other has produced. This quantity of labour, although stated as equal, will have very different exchangeable values in the hands of the one or the other, as A or B are by nature formed to make a good bargain in the common adjustment of the barter. He who has not an impatience in his desire on one hand, or a soon–alarmed fear on the other of losing his market; who has a certain firmness, perseverance and coldness in barter; who has a certain natural self–estimation, will take the lead in setting the price upon the meek and poor in spirit; upon the impatient and timid bargainer. The higher or lower value of these equal quantities of labour, will follow the one or the other spirit. The value is not equal, and is not fixed in, nor depends upon, the equal quantity of the labour, it is unequal and differs, and is fixed by, and derives from, the different natures of the persons bargaining. The exchangeable value of equal quantities of labour, stated equal in all circumstances, is not only not equal in this first instance, between that of A and B, but may, in other comparisons, vary both in A and in B individually.’ The exchangeable value of B, although inferior in barter with A, may acquire an ascendant value, and be superior in barter with C. This difference and this variation will run through every degree in the utmost extent of the markets: nay, the same person will, in different habits, relations and circumstances of life, estimate that labour (which shall be stated to be absolutely equal) as of very different value; he will, on different occasions, estimate his ‘ease, liberty, and desire of happiness’ differently. Equal quantities of labour, equal, I mean absolutely, and in every respect, will acquire and derive very different values both in use, and in exchange both in respect of the person by whom such is exerted, as well as in respect of the person who barters for it, from the objects with which it is mixed. Respecting the person by whom it is exerted, if a day’s labour always produces a day’s subsistance, the value in use is always the same; if it doth not, the value in use must vary. In respect of exchangeable value, labour will sometimes give value to things which, in themselves, had little or no value: in others, it will derive value from the things with which it is mixed; it will itself have an exchangeable value from its compounded value, that is, from the proportion of value which it bears in the composite laboured article.
What is thus varying in a relative value, must require some correlative, which, while this measures other things, in return will measure it; that which is itself measured by something more remote, cannot be the final measure or standard. It cannot11 therefore be ‘alone the ultimate and real standard by which the value of all commodities can, at all times and places, be estimated and compared: it is not their real price.’ I must therefore conclude, in a proposition which I quote from yourself, where I wish you had let the business12 rest; ‘That there can be no accurate measure, but that exchangeable value must be settled by the higgling and bargaining of the market, according to that sort of rough equality, which, though not exact, is sufficient for the carrying on the business of life.’
You confess, that this proposition of your’s. ‘That labour is the measure of the value, and the real price of all commodities,’ is ‘an abstract notion.’ As such I should not have taken any notice of it; but you endeavour to establish it as a leading principle, whereby I think a practical one, which mankind hath universally and generally acted upon, may be in dangerous speculations distinguished away. If the common forensick idea, that money which, in the common acceptation of it, hath actually been used to measure, doth in strict truth measure as ‘a common intervening commodity’, both labour and all other things, and their relations, is to be considered as a mere practical notion, and we are in reasoning to look to some abstract notion, as the real standard. What do we, but pervert our reasoning from distinct notions in practice, to ‘abstract notions,’ and subleties in theory: as I apprehend that these theories have been, and fear they may and will again be used, if admitted into the reasoning of the world, to very mischievous and destructive schemes; as I think that they remove old bounds, and erase old and solid foundations, and may be applied to the building paper castles in the air; as they lead to speculations, which swerve from the idea of pledge and deposit in money matters, and tend to create an imaginary phantom of circulation, erected on the foundation of credit and opinion of trust only, I have taken the liberty of stating my doubts upon it.
While I have thus doubted, whether labour is the ultimate measure and standard of the exchangeable value of all commodities, I should be willing with you to admit, that corn will not universally answer as such a measure had not you yourself,13 in another part of your book seemed to think, that ‘the nature of things has stamped upon corn, a real value, which no human institution can alter; and that corn is that regulating commodity, by which the real value of all other commodities must be finally measured and determined.’ Gold and silver, you say, varying as it doth in its own value, can never be an accurate measure of the value of other things. There is then, according to what I have always been used to think, and what from your Treatise I find myself confirmed in, no one commodity that will measure all others, but that all are to one another in their reciprocal value alternate measures; and that gold and silver is only the common and most general, almost the universal, measure, so found to be, and so used by the general experience and consent of mankind, as that intervening commodity which will most uniformly become a common measure, at the same that it doth (as being a deposit of value, which all mankind have agreed to receive) give universal power of purchase.
As I think that there is no real measure of value, so I think there is no fixed natural rate of value, or real price distinct from the market price. I think, that the doctrine which states the two definitions as an actual existing truth, and as a practical distinction formed for business, not true on one hand, but on the other a dangerous proposition.
You say,14 ‘That there is in every society or neighbourhood an ordinary or average rate both of wages and profit, in every different employment of labour and stock;’ these average rates you call ‘the natural price, at the time and place in which they commonly prevail.’
The actual price at which any commodity is commonly sold, is called its market price.
I clearly see the distinction in definition; but I do not learn how the ordinary average rates, or price paid for labour, or for the use of land or stock, or for any commodity in the neighbourhood, where it comes from the first hand, in the first act of bargain and sale, is any more natural than the price which it finds and bears in any other succeeding act of bargain and sale, at the time and place wherever it is sold. What is it, in the first instance, which settles these average rates, which you call natural, but the competition of the effectual demand, compared with the supply, and founded on some proportion whereby the price paid for labour, stock or land, will enable the seller to purchase an equivalent quantity of those necessaries and conveniences which his state of life requires? If, from this first operation of bargain and sale, the commodity, by means of carriage, and the collection, storage, and distribution of the middle man, goes to a succeeding and more complicated value with these adventitious articles of expence added to it: Is not the price which is here, also the price at which it here commonly sells, and which is in like manner precisely determined equally, that ordinary average rate and natural price as the former? Or rather, is not the price in the first operation of bargain and sale equally a market price as the latter, settled by that higgling and barter which doth and must regulate it in all times and in all cases? The refinement which, using different expressions, as in one case calling it ‘the ordinary average rate,’ and in the other, ‘that price at which it is commonly sold,’ is a distinction of words without scarce a difference in idea, certainly none in fact and truth. If there be any such thing as a natural price, both are natural; if not, which I rather think both are the artificial market price, such as the act of higgling and barter can settle on the reciprocation of wants and mutual supply. What else is it in nature which settles the ordinary average rates, which you call the natural price? This price ‘naturally increases,’ as adventitious circumstances mix with the commodity brought to sale. The encreased market price encreases by the adventitious circumstances of labour in carriage, of risque, storage, and the middle–man’s profit. This encrease is naturally regulated by the ordinary and average rates of these added circumstances in their time and place; and on these the competition, compared with the supply, doth as naturally in one case as in the other create the market price; which may be called, if you choose to call the former so, a natural price; but both are, in fact, equally in their time and place the market price. When therefore you say,15 ‘that the natural price is the central price, to which the prices of all commodities are perpetually gravitating’; I must own that I receive the metaphor of the proposition with great apprehensions of the uses in practice, which the doctrine may lead to. If any one, who has got a lead in business, should adopt your distinction of natural and market price; and, following the delusion of your metaphor, should think, that, as in nature, all market prices do perpetually gravitate to the natural central price, so the circuiting motion of all market prices should be made to take and keep this direction round their center; (perfectly satisfying himself, that as he ought not, so he does not, meddle with the natural prices of things:) he may, through a confusion and reverse of all order, so perplex the supply of the community, as totally to ruin those who are concerned in it, and intirely to obstruct it. He may render trade almost impracticable, and annihilate commerce. That the succeeding prices of the secondary operations of bargain and sale are regulated by the same rules and laws of barter as the first; and that the outset of the first will give direction of motion, as well as motion to all succeeding operations, regulated by the same laws of this motion, is certainly true; and that it will (while in the ordinary course of things) keep this motion equable by the respective average rates in their time and place; that the violence and artifices of man will ever and anon try to warp and misrate it, is certainly true; and a truth well worthy of constant attention—not with a view to interfere and intermeddle with the market prices, under any theory of regulating them by some supposed natural central price, but to obstruct and oppose all interference and meddling whatsoever; and upon this truth to maintain in the market an universal freedom, choice and liberty.
Although, as I have stated my opinion above, I think, that the general course of all prices, or that correlative value between commodities must depend upon, and derive from the reciprocal higgling of bargain and sale, and are not measured by labour: Yet so far as they depend upon, or are mixed with labour, there is some natural scale below which they cannot go; which scale takes its level from the quantity of subsistence which such labour will procure. The plain and homespun wisdom of our ancestors, therefore, did not attempt to measure the prices of things by any abstract notion of labour being that measure, but they measured labour itself16 ‘by the plenty or dearth of provisions,’ or the subsistance, according to the laboured productive effects of nature from time to time. Although therefore I agree with you,17 ‘that the common wages of labour depends every where upon the contract made between two parties, whose interests are by no means the same;’ yet in that,18 ‘a man must always live by his work, and that his wages must at least maintain him.’ There is a scale of rate below which the price of labour cannot by any contract or bargain be lowered.
That the prices of wages do continually increase with the advancing prosperity of any community, and that they are the highest in those communities, who are advancing with the most rapid velocity, is a truth, a comfortable and an encouraging truth: yet as prices of wages follow but with slow and loaded steps, in proportion to the quick motions of the rise of the prices of all other things, if some care and attention is not given to aid the motion of the rise of wages, in some measure to keep it above the lowest scale, which it can subsist by; we may, in the triumph of prosperity, and in the pride of rectitude, see the poor labourer, of the lower classes, under a continued state of helpless oppression, amidst the prosperity of the community in general; but of the nature, and of the manner of regulating these, I shall have occasion to treat in another place, and on another occasion.
As value or price is not any fixed natural thing, but is merely the actual correlative proportion of exchange amongst all commodities; so that intervening commodity which does in fact most commonly, or on common result, and by common consent, express this correlative proportion, is the common measure of this value: It is not an abstract notion of labour, ‘but money19 (as ‘Mr Hume says) which is by agreement the common measure.’ This common measure does not barely express the proportion of value between commodities when brought together in the act of exchange, but is that something, that most common intervening commodity, which mankind hath generally and universally agreed shall not only express this act of exchange, and the relation of reciprocal value under which it is made, but which is in fact an universal equivalent deposit of value, which gives, in all places and at all times, with all persons, a power of purchase, and is in fact and truth that intervening commodity, which, as a common measure, exchanges without actually bringing the things exchanged into barter. The thing which we thus express in abstract reasoning by the word money, is by use universal, by general and common consent, the precious metals applied as this practical common measure, the uses which it hath, and the purposes to which it is applied amongst the acts and things of the community, gives it a value in its exchangeable operations. This idea of money is fixed by old bounds of common consent and universal practice; and as I am not willing to remove old bounds, fixed in a real foundation, to follow an abstract notion20 ‘on Dædalian wings through the air;’ I will here next take the liberty to state the reasons which make me hesitate to follow you in those regions of theory. Although you tell me, that it is not the metallic money which is exchanged, it is the money’s worth; that money may be the actual measure of this exchange, but that it is the labour which the money represents and sells and purchases, which is the real measure. Yet when my ideas lead me in the very line of your analysis to conceive, that labour is not, no more than any other commodity, the ultimate measure, but is the thing measured; that when measured against subsistance, it is actually measured by that subsistance. When I consider, that although it is the money’s worth which is exchanged, yet it is the money which measures and exchanges it. I cannot but think it nearest even to abstract truth, and safest in practice, to abide by the old bounds of that idea which mankind hath generally and universally fixed, that moneyis the common measure, to be which adequately, and in all its uses, it must be a deposit also.
In your account21 of the origin and use of money, you very properly state, that ‘every prudent man in every period of society (after the first establishment of the division of labour) must naturally have endeavoured to manage his affairs in such manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry.’ If in the doing this, all, led by any thing in the nature of any commodity itself, or by some coincidence of reasoning and consent, should agree upon any one commodity in general, which would be thus generally and universally received in exchange, that, in the most refined strictness of abstract reasoning, as well as in decisive fact, would become that22intervening commodity which would measure the exchangeable value, and be the real instrument of actual exchange in the market. It would not only be that measure, but it would become a real as well as actual deposit of value, and would convey to whomsoever possessed it, a general, universal and effective power of purchase.
When next then I inquire, what this intervening commodity is—I find,23 that metallic money, or rather, ‘silver, is that which, by the general consent of mankind, has become that deposit, which is the common measure; this is a general effect of some general cause. The experience of its degree of scarceness, compared with its common introduction amidst men, together with the facility of its being known by its visible and palpable properties, hath given this effect. Its degree of scarceness hath given it a value proportioned to the making it a deposit; and the certain quantity in which this is mixed with the possessions and transactions of men, together with the facility of its being known, had made it a common measure amongst those things. There are perhaps other things which might be better applied to commerce as a common measure, and there are perhaps other things which might better answer as a deposit; but there is nothing, except [the precious metals, or rather] silver, known and acknowledged by the general experience of mankind, which is a deposit and a common measure. Paper, leather, or parchment, may, by the sanction of government, become a common measure, to an extent beyond what silver could reach; yet all the sanction and power of government never will make it an adequate deposit. Diamonds, pearls, or other jewels, may, in many cases, be considered as a more apt and suitable deposit, and may be applied as such to an extant to which silver will not reach: yet their scarcity tends to thrown them into a monopoly; they cannot be subdivided nor amassed into one concrete; and the knowledge of them is more calculated for a mystery, or trade, than for the forensic uses of man in common, and they will never therefore become a common measure.
‘The quantity of this deposit, and the general application of it to several different commodities, in different places and circumstances, creates a correlative proportion between it and other objects, with which it stands compared, and from this proportion forms its own scale; this scale derives from the effect of natural operations, and not from artificial imposition. If therefore silver was never used but by the merchant, as the general measure of his commerce and exchange, coin would be (as it is in such case) of no use; it would be considered as bullion only. Although bullion is thus sufficient for the measure of general commerce, yet for the daily uses of the market something more is wanted in detail; something is wanted to mark to common judgment its proportion, and to give the scale: government therefore here interposes, and by forming it into coin gives the scale, and makes it become to forensic use an instrument in detail, as well as it is in bullion a measure in general.’
It is here, Sir, that I think your Analysis, subtilised by too high refinement, deviates from the path in which the nature of things would have led you. Quitting the idea of money being a common measure, and totally leaving out all idea of its being a deposit, your Analysis leads you to conceive no other idea of it but as circulation, or, as you distinctly express it, a circulating machine; and of course, according to these principles, considering it as an instrument, you state it in your account amongst those instruments which form the fixed capital of the community. The result of which in fair reasoning is, that as these machines cost an expence (which must be either drawn from the circulating capital of the community, or from its revenue by savings) both to erect them and to maintain them; so every saving which can be made in the erection or maintenance of such a machine, will be advantageous to the circulating capital, the source of materials and wages, and the spring of industry. In this line of deduction you come to the result in practice, and say,24 that ‘the substitution of paper, in the room of gold and silver money, replaces a very expensive instrument of commerce with one much less costly, and sometimes equally convenient; circulation comes to be carried on by a new wheel, which it costs less both to erect and to maintain than the old one.’
As my reasoning hath many years ago impressed it strongly on my mind, that money is a common measure, and must be a deposit, and in coin an instrument of the market; and as many years experience in a country of paper hath convinced me, that if any instrument of the exchange of commodities, other than that which, while it measures the correlative values in circulation, is founded on a deposit, equivalent at all times to the conversion of it into money, shall be introduced, it will be a source of fraud, which, leading by an unnatural influx of riches to luxury without bounds, and to enterprize without foundation, will derange all industry, and instead of substantial wealth end by bankruptcies in distress and poverty.
So far as circulation can carry on the exchanges of commodities in the community, so far paper bills of credit, or even accounts opened, may do in the room of the metallic money; but without a deposit, which is adequate and equivalent in all times and places, and with all persons, to this conversion of it, I have no sure foundation, that I do possess, in all times and places, and with all persons, the power of purchasing or of accumulating as I like. Although I have all the trust and confidence in the world in the credit of this circulating machine of paper, yet it has not the universal extent in, nor the operation of all the uses of money, although therefore it may be ‘sometimes equally convenient;’ it is not that intervening commodity which hath all the uses of money,25 universally and adequately. Circulation, even where no paper money or credit exists, must always much exceed in its total of exchange the sum total of the money deposit, how much that is, experience in the fact can alone determine: paper may certainly, without any danger, encrease this power of circulation, if it does not exceed what the deposit will answer while it is in circulation, and is created on such a fund, as will finally convert it into money. So far as paper, by the extent of the uses, and the absolute security and exchangeable conversion of it into metallic money, can be and is made a deposit, so far it may safely measure as money, and become a convenient instrument; but in that this security is always more or less uncertain; in that it depends on the prudence and probity of the money makers, it is always liable to exception, abuse and failure. So far forth as it is defective in its fund, the creation and use of it must be always hazardous, and hath been generally ruinous; and however distant and remote the end may be, must be a fraud in the end. In a world of enterprize, where trust and credit is substituted in the stead of fund and prompt change, paper money loses the very essence of a deposit; unless I have a deposit, which gives me an absolute actual power of purchasing, in all times and places, in all events, to all intents and uses; or that which is absolutely ready and immediate change for such deposit. The bill which I have, may or may not, here or there, now and then, sometimes not always, maintain in me the power of purchasing, or of real hoarding or banking as I like. General, universal, permanent consent of all mankind, has, from actual experience of its uses, given to metallic money a permanent and absolute value: partial, local, temporary agreement, founded in opinion of trust and credit, can give to paper but a partial, local, temporary ideal value, which never will be a real and universal deposit; it may become to certain local temporary purposes a circulating machine, but money is something more: this paper is not that intervening commodity, which all mankind hath universally agreed to be that common measure which is a deposit; such alone is money in the strict as well as common acceptation of the word and idea.
So far as paper money can be so contrived as to have, while it is in circulation, all the uses of money; or is so founded, that it can in all moments and in all places be taken out of circulation by conversion into metallic money at its nominal value, so far it will be equal to money both as a measure and as a deposit. But so far as it is defective in any one use, however much it may excel in any other use, it will and must depreciate below the real value of the metallic money, which it is supposed to represent; so far as in any point of time or place the power of converting it into metallic money is remote, so for is it ideal, unsubstantial, and no deposit. Although with a fund of 20,000l. a banker, or the treasury of a government, may circulate 100,000l. yet as whevever, for any reason, or by any event, it becomes necessary to take that 100,000l. out of circulation, the banker or the treasury can but pay 20,000l. or four shillings in the pound, that circulation must end in a fraud.
Where, in the circulation of capital, paper money is substituted instead of metallic money, you allow, that it will not answer in its uses to foreign trade. I, for the same reason, add, it will not pay taxes, so far as those taxes are to supply expences incurred or laid out abroad. If great variety of reabsorbing glands did not in Scotland take up, in the course of circulation, the amount of the taxes levied on that part of the kingdom, their paper money could not pay that amount.
Just as much gold, as paper circulation becomes a substitute for, may be spared from circulation, and will become, as you truly say, a new fund for commerce, and will go abroad in foreign trade: if it is employed in a commerce of luxury or consumption, it is in every respect hurtful to society; so far as it purchases raw and rude materials, or provisions or tools, and instruments to work with, it may be beneficial. You think that, however individuals may run into the former, bodies and societies are more likely to actuate the latter. Yet in countries where a superabundant quantity of paper money hath taken place, where the power of creating this money hath advanced faster in its creation and emissions than the labour, industry and abilities of the inhabitants would have produced it. This artificial plenty hath always encouraged a commerce of luxury; an over–trading; a multitude and disproportionate number of shop–keepers; extravagant expences in idle land–holders; more building than can be supported; and all kinds of ambitious and dangerous projects. ‘26 The commerce and industry of a country, you must acknowledge, and do candidly confess, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the dædalian wings of paper money, as when they travel on the solid ground of gold and silver. Over and above the accidents to which they are exposed from the unskilfulness (I would here add the fraud also) of the conductors of this paper money, they are liable to several others, from which no prudence or skill of the conductors can guard them.’—You indeed reason from the abuse, but all these arguments do equally derive from the defect of this paper money. As it creates an influx of riches, which does not spring from industry, which is not the effect and produce of useful labour; it creates, with aggravated circumstances, all that distress which the real useful labourer and real man of property, the land–owner, must feel, even under an influx of real riches; it gives motion and velocity to this influx, without producing any real deposit whereon the riches, which it pours in to circulation, may be funded aswealth. The land–holder lives for a while under oppression and distress; he then, raising his rents beyond what the real stock will bear, lives in a delusive abundance of luxurious expence, but is finally ruined. The successor, who purchases him out, succeeds by the same disease to the same ruin. The labourer, and all who live on fixed stipend, are under a continued series of oppression. The false wealth only of adventurers, jobbers, and cheats, become the riches of the country; that real deposit, which would be a fund of real wealth and real supply in case of distress, will be chaced away. The phantom of circulation, which is substituted in its place, will, instead of coming in aid, fail, and vanish on the first alarm of distress.
‘27 An unsuccessful war, for example, in which the enemy got possession of the capital (who does not tremble as he reads?) and consequently of that treasure which supported the credit of paper money, would occasion a much greater confusion in a country where the whole circulation was carried on by paper, than in one where the greater part of it was carried on by gold and silver. The usual instrument of commerce having lost its value, no exchanges could be made but by barter or upon credit. All taxes having been usually paid in paper money, the prince would not have wherewithal either to pay his troops or to furnish his magazines; and the state of the country would be much more irretrievable, than if the greater part of its circulation had consisted in gold and silver. A prince, anxious to maintain his dominions in a state in which he can most easily defend them, ought, upon this account (and I add upon all others) to guard not only against the excessive multiplication of paper money, which ruins the very banks that issue it, but even against that multiplication of it, which enables them to fill the greater part of the circulation with it.’
I was willing to oppose, in your own words, this fair description which you give of the dangerous state of a country which abounds in circulation of riches, instead of a deposit, which is wealth, as an antidote against the delusions of this powerful temptation: and as I think the dose ought to be repeated, I will repeat it in the words of the very clear–minded and ingenious Mr. Hume.28
‘He has entertained (he says from similar reasons as above stated) a great doubt concerning the benefit of banks and paper credit, which are so generally esteemed advantageous to every nation. That provisions and labour should become dear, by the encrease of trade and money, is, in many respects, an inconvenience, but an inconvenience that is unavoidable, and the effect of that publick wealth and prosperity, which is the end of all our wishes. It is compensated, however, by the advantages which we reap, from the possession of those precious metals, and the weight which they give the nation in all foreign wars and negotiations. But there appears no reason for the encreasing that inconvenience by a counterfeit money, which foreigners will not accept in any payment, and which any great disorder in the state will reduce tonothing.’
It is for these reasons, because I am not for removing old bounds, and that I wish to preserve the old general established opinion, that money is a common measure; because I am unwilling to receive that new and delusive friendcirculation, instead of the old and steady one,money, which being a deposit, will stick by us in all times, that I have taken the liberty to examine this part of your Analysis, and to wish, if you should be persuaded to revise it, that you would enquire, in the real track of nature, whether that commodity, by the intervention of which the exchanges of all commodities may in all times and cases be actuated, must not, in truth as well as in fact, be that common measure in the use of which all mankind have universally agreed, and must not be a deposit, which the metallic money alone is: and whether, where paper circulation is not so proportioned to the deposit as that, that deposit is always ready to exchange it during its circulation; is not established on such a fund as will absolutely exchange it; whether, I say, such paper circulation is not a delusion that must finally, however remotely, lead to a fraud.
By what I have said above I do not mean to say, that paper is not useful; I think, that under such due regulations respecting the fund, which is to exchange it, the uses to which it is to be applied, and the quantity in which it may be safely issued, as will make it a common measure and a deposit, it is not only generall beneficial, but that the greatest advantages may be derived from it to the publick.
If now, Sir, by these principles, as I have stated them, as they are found in the fund and the uses, you examine all the schemes of paper circulation from that of the bank of Amsterdam, founded on a real deposit, to that of the Scotch banks, founded on29 trust and confidence, without any actual deposit; if you examine the paper money, and the operations of that wise and prudent institution, the loan–office of Pensylvania, examine the foundation and the succeeding operations of the bank of England, you will find, that you have a fixed canon, by which you may precisely mark what are real, what delusive; what may be beneficial, what will be ruinous in the end. Whereas, if no other idea but that of circulation enters into our notion of money; if it be conceived to be nothing more than a circulating machine, under that conception every delusive fraudulent credit, which every adventurer can establish on a deceived and betrayed confidence, may set in motion a circulation, that may on every ground be justified even in the moment of its bankruptcy. And even those just and wise precautions, with which you have endeavoured to guard this circulation against fraud, may tend to give an opinion of confidence to this circulation, when it shall be so guarded, which in any case it ought not to have, unless it can be so framed as to have all the use of money in circulation, and be so funded as in the end to be a real deposit.
It is impossible to pass over those parts of your learned work, wherein you treat of labour, stock, and land; of wages, profit, and rent; of the monied prices of commodities, and especially your very curious and scientifick Treatise on the Precious Metals applied as Money; it is impossible to read those parts respecting the effects of the progress of improvement in the community, of the nature, accumulation, and employment of stock, without reiterating the idea and the wish expressed in the beginning of this letter, of seeing your book considered as institute of the principiaof those laws of motion, by which the operations of the community are directed and regulated, and by which they should be examined. In that part, however, which explains the different effect of different employment of capital, wherein you seem rather to have engrafted some foreign shoots, than to have trained up, in the regular branchings of your Analysis, to propositions fully demonstrated, I will beg to arrest your steps for a moment, while we examine the ground whereon we tread; and the more so, as I find these propositions used in the second part of your work as data; whence you endeavour to prove, that the monopoly of the colony trade is a disadvantageous commercial institution.
After having very justly described the four different ways in which capital stock may be employed—first, in drawing from the elements of earth and water the rude, the spontaneous or cultured produce; next, in working these materials up for use; next, the general exchange or trade of these commodities, conveyed from place to place as they are wanted; and, lastly, the retail distribution of them to the consumer. After having divided by fair analysis the general trade or commerce, described under the third head, into three different operations—that is, the home trade; the foreign trade of consumption, and the carrying trade. After having shewn the just gradation of beneficial employ of capital, which these different operations produce, and how truly beneficial each in its respective natural gradations is,30 ‘When the course of things, without any constraint or violence, naturally introduces it;’ you lay and prepare a ground of contrast, from whence in your fourth book to prove, that the establishment of a monopoly in the colony trade, by perverting this natural order and gradation of operations in commerce, hath rendered the commerce of such colonies less beneficial than they might otherwise in general have been; I am here marking only the order of your argument, not trying the force of it. In the order of this argument, I think I discover an essential misconception of that branch and operation of commerce, which is in nature circuitous, and as such beneficial; but which you conceive to be and call a round–about commerce, and as such of course, and in the nature of things, disadvantageous. Your argument goes to prove, that the monopoly, instead of leaving the direct trade to its full and free operation, instead of suffering the round–about trade (as you call it) to take up the surplus only of capital which that produces, and next the carrying trade naturally to absorb what the others disgorge, doth force capital, which might have been more beneficially employed in a direct trade, into a round–about trade; which is too commonly mistaken for the carrying trade of Great Britain.
I mean, in its place, to examine this your argument, in your application of it to the actual subject. I will here, in the mean time, with your leave, make an assay of the truth of its combination; for it appears to me, that in treating a circuitous commerce as a round–about trade, you confound two things the most distinct in their nature, and the most different in their effect of any two that could have been put together.
A circuitous trade or commerce is that by which receiving, with the due profits of return of capital, some article of trade or some commodity, which is better to go to market with than money, I go to market with that commodity so received; and perhaps again with some other in like manner received; and perhaps again with a third, making by each operation my due profits, annexed to each return of my capital; and finally a greater superlucration of profit than I could have done by the same number of direct trades; and consequently either a greater revenue, or a greater accumulation of capital, that may again employ more productive labour.
A round–about trade, on the contrary, with lost labour, with waste of expence, and unprofitable detention of capital, sends to market some commodity (as the proverb well expresses it) by Tom–Long the carrier.
We will suppose, that the British merchant or factor hath sold his British manufactures in Virginia, in which he vested his capital; and that he has it in speculation, whether by taking money, a bill of exchange, or some commodity, which is ready money’s worth in the British market, he shall make a direct return of his capital, and its simple accretion of profit; or whether by taking such commodities, as by an intermediate operation in his way home, he may derive an intermediate adventitious profit from, before the same is again reinvested in British goods for the Virginian market.
In the first case, his capital may be said to return with its profit directly; in the second, although it may make a circuit, and be detained awhile in its way home, yet it is not detained, nor goes out of its way unprofitably to Great Britain; for by the superlucration, arising from the intermediate operation, it gives proportionably either a greater revenue, or as an encreased capital employs more productive labour.
We will suppose a second case taken up on this speculation, that he either receives corn by barter, or by purchase invests what he has received in that commodity, with which, instead of coming directly home, he calls in his way at Cadiz or Lisbon; the sale of his corn there returns him his capital with a second accretion of profit. Here again he speculates in like manner, and determines to invest this accumulated capital in wines, fruits, etc. which at the home market will again return his capital, with farther accretion of profit. Has not every movement of this circuitous trade been a different operation? Has not each operation made a distinct return of capital? Has not each return given its peculiar profit? Has any expence been wasted? Any labour lost? Has there been any detention of capital unprofitably to Great Britain, while, at its return, it affords either more revenue, or, as capital, employs more productive labour than otherwise it would.
Let us in another line suppose, that this merchant or factor receives tobacco, rice, indigo, or peltry, which he brings directly home; with these commodities at the British market he speculates, whether he shall take ready money there for them, which, vesting in British manufactures, or foreign manufactures bought with British produce, he will return directly to Virginia again with. Or whether these commodities, which represent his capital, with its accretion of profit, might not still more encrease it, if he himself sent them to that market where they are purchased for consumption. We will suppose, that his prudence directs him to the latter conduct. He fends them then to Russia or to Germany. They there return him his capital, with another accretion of profit. We will suppose, that he re–invests his capital with hemp or flax for the British, or in linnens for the American market. He is by this operation enabled to go back again to America, either with Russian or German manufactures, bought with British commodities, or selling what he bought of Russia or Germany in the British markets, with a still more increased quantity of British manufactures than what any direct trade between America and Great Britain could have purchased. Here again the same questions may be asked, and must receive the same answers.
On the contrary, wherever there is a round–about trade, there the commercial operations are obstructed, and the advantages greatly defalcated, if not, in many instances, entirely lost. The obliging the merchant to bring rice from the southern latitudes northward to Great Britain, which rice must go back again south to its market in the southern parts of Europe and the Streights, was a round–about trade, it was labour lost, it was a waste of expence, an unprofitable detention of capital, and the commodity was sent by Tom Long the carrier to market. The monopoly therefore, in that case, where it created a round–about trade, hath been relaxed. Sugars are in the same case; and a like relaxation, under peculiar regulations relating to that peculiar article, have been recommended, and might be safely and beneficially given. There are some parts of the tobacco crops, which, in the assortment, might be admitted to somewhat a similar liberty without danger, but with benefit. Nay, that intermediate operation of the circuitous trade, mentioned above, which obliges the Virginian tobacco to come to England before it goes to Germany, and the German linnens also to come to England before they go to America, is a round–about trade, a needless and very disadvantageous operation, in which some relaxation ought to be made. I can see, that the English merchant may lose a commission, but labour and expence would be saved to the community. In like manner the obliging the West India ships, which, since the interruption of the American trade, load staves, lumber and corn in England, which articles are brought from foreign parts, is obliging them to take up these things by a round–about trade; whereas, if they were permitted to ship, in British shipping only, these articles at the foreign markets directly for the West Indies, many inconveniencies, which the British part of the community experiences, might be avoided, and both labour and expence saved to the community at large. If salt fish, which is intended for the southern markets, was obliged to be brought northward first to England, and so go round about to the south, its proper market, it would create a round–about trade. If these ships loading with salt for their back carriage were obliged to come round by England, it would create a round–about trade, and in either case would waste labour, and might lose all the profit of the capital employed. The monopoly therefore does not take place in this.
The permitting, in certain cases stated, and under certain regulations specified, the Americans who go with fish directly to the Streight, Spain, or Portugal, to purchase there, if purchased of British merchants, certain articles, and to carry the same, so purchased, directly back to America, so far as it would avoid the round–about trade, persevering, and even extending at the same time the British market, has been for twelve or fourteen years successively recommended.
I think in general on this subject, that wherever the monopoly would create a round–about trade, it should not take place; and that wherever it hath occasioned any such round–about operation, if should be relaxed; always however keeping in view this object and end, namely, that so far as our colonies are to be considered as an institution, established and directed to encrease the naval force of our marine empire, and so far as that force derives in any degree from the operations of their commercial powers, so far that monopoly, which engrafts them upon our internal establishment, is indispensible, and ought never to be departed from or relaxed. The sovereign power, which hath the care of the defence and strength of the empire, ought never to permit any the most flattering idea of commercial opulence to come in competition with the solid ground of strength and defence. In this way of reasoning I find myself joined by you, who reason in the same way, and almost in the same words, when speaking of the act of navigation you say, that, ‘although it be not favourable to foreign commerce, or to the growth of that general opulence which might arise from it, yet, as defence is of much more importance than opulence, it is the wisest of all the commercial regulations of England’. On the ground and deriving my reasoning from the same principle, I say, that the monopoly is of the same spirit; is not only wise, but is also necessary, and that it is not the monopoly, but the injudicious undistinguishing application of it, without that reason which alone can justify it, and in channels where it necessarily creates a round–about trade, which renders it disadvantageous, not only to the colonies, but to the general community of the empire.
As no round–about trade, unless where the obliging the colony trade to submit to such, is necessary to the system of defence, should be occasioned, but should even, where it has taken place, be relaxed, so, on the contrary,31 I have always thought, that a circuitous operation in the colony trade, as the thing which of all others tends most to increase and extend the American markets for British manufactures, should be allowed and encouraged, provided that trade in its circuition keeps its course in an orbit that hath Great Britain for its center.
Having thus shewn, simply to the point of stating the case, not arguing it, that a circuitous commerce and a round–about trade are two very different and distinct things, having very different operations and very different effects: having shewn that the circuitous trade is very advantageous, while a round–about trade is always detrimental, but that the circuitous commerce of the colonies is not that hurtful round–about trade which you treat as occasioned by the monopoly, I will now proceed to examine, under their several heads, your application of the principles which you lay down in your analysis, as what directs your synthetic reasonings on the commercial institutions which have taken place in the British œconomy.
Although I perfectly agree with you, that the restraints on the importation of such foreign goods as can be produced cheaper at home are useless; and that the laying restraints on the importation of such as cannot be made so cheap at home, answers no good end, but may be hurtful; although I allow, that these measures, as a kind of institution of monopoly in favour of internal industry in preference, or to the exclusion of the produce of foreign industry coming to it, does not always tend to encourage the home industry, but, on the contrary, gives a false turn to it, puts it on a false ground and profit, and may have the effect of forcing an unprofitable labour: yet I am unwilling to quit the principle of encouraging the first efforts of home industry, if employed on home commodities in the home market, as I think the principle, applied only in cases where it is wanted, may be very beneficial; I had rather, in my notions of political œconomy, abide by the principle, and examine, upon each application of it, how it does or does not operate to encourage a profitable industry, skill and habit in peculiar branches of labour, which the society has to learn, and which learnt will be profitable. If a society, which once used to send abroad its rude produce to purchase manufactures made of that very rude produce so sent out, and which it knew not how to work up, had never been, by some adventitious aid, over and above what the sources of the first efforts of its industry could have given, encouraged to begin in trials of its skill; if the individual is not, while he is learning his trade, and the skill of working profitably in it, supported in part, he can never attempt to learn it; if the society does not pay for the learning, it can never have it; although it be true that at first the apprentice (for by that name I will express the first efforts of a manufacture) is not employed to the greatest advantage, because he might buy the articles which he is learning to make, cheaper than he can make them; although the community pays this difference; although these efforts, thus artificially forced, are at first disadvantageous and unprofitable to the community: yet by his industry being so directed to, and so supported in a line of labour, which he could not naturally have gone into, nor could have supported himself by, these first efforts, which the community pays for, do by repeated exercise produce skill, which in time will work as well, and enable the home manufacturer (if his labour is employed on native home rude produce) to sell as cheap, and soon cheaper, than the foreign workman and manufacturer; his labour then will become profitable to himself, and advantageous to the community of which he is a part. It was thus our woollen and hardware manufacturers were first encouraged and supported; but the very same principle, and the same reasoning upon it, hath always led me to a persuasion, that no aids of a monopoly in the home market, nor no bounties, can ever force a manufacture founded and employed on foreign rude material. It is an attempt, by robbing Peter to pay Paul, to establish a trade, the natural profit of which cannot support the establishment, and the loss of which must be made up to it by payments from the society at large. Against such your principle, in the full force of its arguments, stands unanswerable. Such is the linnen manufacture wrought on foreign line and flax; such is the silk in some degree; this last, however, so far differs, as that rude material may be imported full as cheap as any rival country in Europe can raise it.
You think, the restraints upon the importation of live cattle and corn an unreasonable and ungenerous monopoly, for that the grazing and farming business of Great Britain could be but little affected by a free importation of these, and not in the least hurt. As, on the contrary, I think, any change in this part of our system might be attended with the most important consequences, especially to a class of people who bear the chief burthen of all the taxes, and are the support of the state of the community. I own, I tremble for the change, and should hope this matter may be a little more thoroughly explored, in all the effects of its operation, before any such idea becomes a leading doctrine.
You have with clear and profound reasoning32 shewn, that, in an improving state of the community, the prices of cattle and of butchers meat, and the lesser articles of the supply must start, and continue to rise until they come to such a rate, as shall make it worth the farmer’s while to cultivate the land, which he rents, to the purposes of breeding and feeding such cattle, and to the raising these other articles for the market; this you properly call the natural progress of improvement, and these rising values the natural course of prices. If a free importation of cattle and of these lesser articles should be allowed, this adventitious supply coming from countries which have great wastes for breeding cattle, which do not pay such heavy taxes, and which are not arrived at that degree of improvement in which this country is found, such importation must derange this scale of natural prices, and must arrest this progress of improvement in its course. If such foreign country can breed and feed, and afford to import and bring to market cattle and these lesser articles cheaper than our grazer can, the grazing business at home must cease. Well—but say you, if under these circumstances grazing will not answer, the land will be broken up for tillage. But here again, if a free importation of corn, on a like plan, derived from such reasoning on these principles, is, as you recommend, permitted, that branch of business, not capable of farther extension, and met at market by such importation, will be at a stand, and finally become retrograde; we shall be obliged to give up all our improvements, and return to our wastes and commons. In order to obviate in some measure these objections, a kind of distinction is made between the importation of lean and fat cattle. The importation of lean cattle would not, says the argument, hurt, but benefit the feeding farms. The breeding farms, however, would be ruined; and there is a link of connection, which so allies the whole progress of country business in one chain of intercommunion, that all in the end would suffer and be undone.
A second palliative used to obviate these objections, which naturally arise against this idea of giving up our system of restraints on importation of cattle,33 is, that the importation of salt provisions could never come in competition with the fresh provisions of the country. To try how this would operate, let us suppose that the Victualling–Office, as the law now stands, is in the ordinary course of taking great quantities of cattle, and in the extraordinary demand which war occasions, takes off a proportionate encreased number; this of course raises the price of the grazers sales, and countervails, in some measure, with the landed interest, the burthen of the encreased taxes. But if a free importation of salt provisions is to take place as a settled system, the English grazer, while the war encreases his burthens, and raises the price of every article which he purchases, is himself met at the market by a competition brought against him from a country that does not bear this encreased burthen; and he cannot therefore find that natural scale of price, which the maintenance of his business and relative state in the country requires; he must be ruined, and the land soon rendered incapable of paying its rents, and of raising those very taxes.
In the same train of reasoning you think, that a free importation of corn could very little affect the interest of the farmers of Great Britain, because the quantity imported, even in times of the greatest scarcity, bears so inconsiderable a proportion to the whole stock raised. From this argument, founded in fact, you think the farmers could have nothing to fear from the freest importation; and you reproach them on the account of the system of restraint against free importation of corn, as forgetting the generosity which is natural to their station, in demanding the exclusive privilege of supplying their countrymen. If here, Sir, you had weighed well a distinction which Mons. Necker34 has, with exquisite precision, explained, you would have spared this reproach. It is not the ratio of the quantity of corn exported or imported, and the quantity of the whole stock raised, but the ratio between the surplus and this quantity exported or imported, which creates the effect; it is not a ratio of 1/571, but a ratio of 1/15, which acts and which operates on the market; it is not the 1/571 part but the 1/15th part which would operate to the depression of the market and the oppression of the farmer.
Chearful under the burthen of the taxes, and spiritedly willing to pay them in support of his country, he only wishes to enable himself to do so from his industry, and the natural profits of it at his own market, without having that market loaded from an external supply, and depressed by a competition from countries which are not in that state of improvement, and do not pay those taxes, which he must add to his price, if he is to live and pay them; he does not desire the exclusive supply, but a fair and equal market on the natural scale of prices, which shall give vent to his supply; this surely he may do without reproach. On the contrary, were it possible to suppose that the country gentleman could be persuaded to change the system, and give up the security which the restraint on importation gives him in his interest, he would deservedly incur the real reproach of having lost that practical sense, which the country gentlemen have always hitherto been found to have, when they come to real business.
But I think you rather misrepresent our system of restraint on importation of corn; it does not absolutely prohibit corn from being brought into the country, and does not establish an exclusive supply in the country land–owner; it only restrains such an importation as may either in quantity or price injure the free and fair vent of our own supply in our own market, at such prices as the general state of the improvement of the community and the scale of prices, which is the natural consequence, require.
From the consideration of our restraints on importation of corn, whose operations act as a bounty, you proceed to the consideration of the direct bounty which our system gives on the exportation of corn, to which you make the like, but stronger objections. As you seem on this subject to have adopted the reasoning which35 Mr. Necker uses, and to have copied it closely; and as his book, as well as your’s, will carry great authority with it, I will in this place examine both your objections ensemble.
Contrary to the common use made of the popular argument in favour of the measure, you both say, the measure has a direct tendency in the instant to raise the price of corn in the interior market, and to enable the merchant to introduce it into the foreign market at a lower price. What you say is fact, and the truth rightly understood; and yet while this measure encourages a plenty, overflowing with a constant succession of surplusses, it hath a tendency, in a series of times taken together, to lower the price. That our measure of the bounty has not been the sole cause of lowering the price of corn, Mr. Necker gives a decisive proof in fact, which you36 copy. That the general lowering of the price of corn is not owing to the English measure of the bounty on exportation, is (he says) plain, because the same general lowering of the price has taken place in France in the same period, where a direct contrary system, a total prohibition of exportation hath invariably prevailed till very lately. You add to his argument an assertion, ‘that it raises however not the real but nominal price only, and is of no use to the landed interest.’ There is perhaps (you say) but one set of men in the whole commonwealth to whom the bounty either was or could easily be serviceable, these are the corn–merchants; it loads (you add) the publick revenue with a very considerable expence, but does not in any respect encrease the real value of the landed man’s commodity.
Mr. Necker has also said that the bounty is not necessary; for if there be a surplus, and the foreign market wants it, it will have it without the aid of the bounty. The difference only is, that if the merchant finds that he cannot export it at the price of the British market, so as to carry it to the foreign market, he must wait till it falls in price in England, or rises in the foreign market, as many shillings per quarter as the bounty would give: then he will be equally able to export it without as before with the bounty. In a corollary of which argument you join him in saying, as he had said, that if the surplus quantity may be, by the aid of the bounty, thus exported when corn is at a high price, the surplus of a plentiful year will always so go out, as not to come in aid to relieve the scarcity of a defective one.
After having (in a manner indeed which rather has reference to the effect it might have in France) reprobrated the measure of granting a bounty on the exportation of corn, he gives an opinion, in which I own I was surprized to find you following him; that if an encouragement is necessary to agriculture, it should be given not on the exportation, but on the production.
I will first state what I think to be the real operations and end of the bounty on corn exported, and then consider the positions above, not by way of reply, but by comparison on fair examination, mark wherein they deviate and differ from the real state of the case.
Any country rising in that progressive state of improvement, by which England for near a century hath been rising, must have experienced a continued influx of riches; that continued influx must have and hath created a continued progressive rise of prices. If the continuation of the influx was arrested in its course, however great the quantity of riches which hath come in, however great the glut of money; yet, after it hath spread itself in all parts, and found its general level, all prices will be proportionably raised; the original proportions which they held, before the start of prices, will be restored; all therefore, however high, will be but nominal, and a greater or a less quantity of the precious metals will be totally indifferent; but the case is very different, while the influx is in continuance. During its operation it starts the prices of things, but of different things with very different velocity in the motion of the rise. Objects of fancy, caprice, luxurious use, and the lesser articles of food, which bore little or no price, while the necessaries must always have born a certain price, even what may be called a high price in a poor and unimproved state of the community, will, when the progression of improvement begins, start first in price, and with a velocity that will continue to forerun the velocity of rise in the price of necessaries. The relative proportion of the scale of prices being changed, the difference of the prices is real, and corn will be always last and lowest in the scale. Although the price of corn may and will rise, yet not rising in proportion to other things, and the rents of land and the wages of labour depending on the price of corn, the price of every other thing must not only rise before rent and wages can start in price, but must continue so to forerun in their rise, that the landed man and labourer must be in a continued state of oppression and distress: that they are so in fact, the invariable and universal experience of all improving countries, actuating manufactures and trades, demonstrates. In the end all must equally partake of the general prosperity; corn must rise in price; rents must rise; wages must be encreased: but during the continuance of the influx there must be a partial distress, which, although relative, is not the less but the more aggravated from being relative, others being in the actual enjoyment of a prosperity which the landed man can but look up to and hope for in the end. If the operation was short, and if the influx soon spread itself into a level, it would not be of much moment in what order the scale of prices arose. In a country where the land–workers and owners are few, in proportion to those employed in trade and commerce, as in rich commercial countries of small extent, there this effect is soon produced; there the landed interest cannot suffer much from the disproportionate velocity of the rise of prices, however accelerated, but in a trading and commercial country, of large extent, the spreading and level of the inflowing riches must be an operation of so long time, and the effect so far removed from the first cause, that the land–worker and owner can never receive a proportionate relief, much less the benefit of an equable scale of prices, while that cause is in operation. If the influx be a continued encreasing operation, the scale will always be ascending. In a country circumstanced as thus described, if the legislator is ever to intermeddle, or can ever do any good by meddling in these matters, his interference should be directed to relieve this oppressed order and class of the community. The English measure of the bounty does this, by aiding in its first effect the relative, and therefore real price of the produce of the land without obstructing the natural effects of the advancing and improving state of the community. It relieves the relative distress, which the acceleration of the inflowing of riches occasions to the land–worker; it helps to accelerate the rising of the price of his commodity, and in some measure guards them from a greater distress, which they would otherwise feel: as it is, the traders and merchants eat out the landed man: they do suffer, but much less than they would do. In a country of this sort the velocity of the influx of riches (especially if an artificial influx by paper money is added to the real one) may have even too much acceleration, if care is not taken at the same time to accelerate also the distribution of these riches into every channel and duct. In such a country as England, but more especially in France, if commerce be encouraged by the force of any artificial spring, if a disproportionate and37more than natural influx of riches comes in upon it, how much soever (when this influx may in the end have taken its whole effect and spread itself into a level) the land and labourer must necessarily share in the general prosperity, yet if care is not taken to give acceleration to the motion of the landed interest, in some proportion to the motion of the advance of commerce, and the influx of riches, the landed interest must remain under a continued depression of circumstances. Under this relative depression the land–worker, while he is buying every thing he wants at an advanced price, requres some adventitious force or spring to aid the velocity of the rise of the price of his commodity which he hath to sell. The wisdom of our ancestors, men of business, acting not from selfish and ungenerous motives, not from any jealousy of commerce, but from feeling and experience, gave this very encouragement, and gave it, in the very way in which it could have the truest effect; in which it could do the least harm, and the most good. They encouraged the landworker without checking the operations of commerce, or retarding the progress of improvement: and while in the direct instant they effected by the bounty a rise of price to the saleable commodity of the landworker, and gave that encouragement, which was thus become necessary; yet they so gave the bounty, as that in the remote effect it would prevent the enhancing of the general price, because the bounty encouraged the raising not only a surplus, but a succession of surplusses. They converted these surplusses even of our food into an article of commerce, and encouraged, and made it the interest of the corn merchant to trade with it in every part of the world.
Thus acted the homely understanding of the country gentlemen upon practice; men of refined and great abilities, speculating in the closet, decide upon theory, that it would have answered the same ends better to have given the bounty not on exportation, but on production.
As the bounty on exportation goes only to the surplus exported, and as a bounty on production must have gone to the whole quantity raised, which measure do you, who made the objection, think would load the publick revenue most? But unless there was an assured constant vent by exportation of any surplus that should be raised, such a bounty as you and Mr. Necker recommend, would never encrease the quantity, or raise a surplus, (for say you, B. IV.C.V. p. 123. [IV.v.b.36]) ‘unless the surplus can in all ordinary cases be exported, the grower will be careful never to grow any more than what the bare consumption of the home market requires, and that market will be very seldom over–stocked, but will be generally understocked.’ To what end, say I, should the farmer work; it would be only making to himself work, to lose profit, for the more he raised, the less would be the price.
On the contrary, the bounty on the exportation, at the same time that it doth (as you and Mr. Necker justly observe) actually and directly raise the price of the commodity, it raises (I say) not the nominal but the real price, for it brings that price which was relatively too low, nearer to the level of the general scale of prices: At the same time that it is (as you truly say) serviceable to the corn–merchant, it enables him, without lowering the price of corn below the rate at which the farmer in the country can afford to produce it, to throw it into the general circulation of the commerce of Europe at an average rate which suits that commerce. This tends to encrease, and does encrease the quantity raised, and yet preventing on one hand a discouraging fall, or a disproportionate inhancement of price on the other, keeps that price equable; and by creating a succession of surplusses, obviates your fear, that the exportation of the surplus of the plentiful year should prevent the use of a surplus, which should relieve, and come in aid to, the defects of a scarce one; for it doth actually, by the succession of surplusses, which the high prices of the home market will always first command, provide against such scarcity, which point the regulations in the permanent corn law, of the 13th of G. III. on this head do still more effectually secure.
Let us now try how your’s and Mr. Necker’s objections to the English measure of granting a bounty on corn exported bear against these operations.
Let us try Mr. Necker’s first objection, viz. that it is a measure unnecessary, because, says he, if there be a surplus which the foreign market wants, it will take it off, as soon as the home price falls, or the foreign prices rise, as many shillings in the quarter of corn as the amount of the bounty comes to. We shall find, that if no surplus of wheat, for instance, can go out and flow in the channels of the European market, at a higher price than 32 shillings per quarter, (the general average price of wheat in Europe) there will be no such surplus; the farmer in the present improved state of England, loaded at the same time as it is with taxes, cannot afford to raise wheat at that price: And if the British merchant did wait till the English wheat did sink to that price, he might better never export it; he would find, that the Dutch, Hambrough or Dantzic merchant had got to market before him, and had forestalled it. On the other hand considering that, at the very lowest estimation, the farmer cannot raise wheat at a lower average rate than 37 shillings per quarter, the bounty adds the five shillings, per quarter, which is just sufficient on one hand to enable the merchant to give the farmer a living price, and on the other to carry it to the foreign market at the average rates of that market; so that if the encouragement of the farmer, and of the supply be proper, and if ‘the business of the corn–merchant be in reality that trade, (as you say) which, if properly protected and encouraged, would contribute the most to the raising of corn.’38 This measure of a bounty on export is every way not only beneficial, but necessary: although you have said, in one place, that it is serviceable to the corn merchant only, yet in this view you yourself find, that this trade of the corn merchant ‘will support the trade of the farmer, in the same manner as the wholesale dealer supports that of the manufacturer.’
The next objection in which you and Mr. Necker join, is, that the doing any thing to raise the price of corn (as you express it, of subsistance, as Mr. Necker rather more logically) in the home–market, must of course raise the expence of our manufactures, and give advantage to the rival manufactures of every part of Europe against us. This objection takes rise from a total mis–stating of the case.
If corn was the first article which started in price, so that all other commodities followed it, then indeed both your positions would be true; first that so far as respects the home market, we should only raise the nominal price for all rising proportionably, there would be no alteration in the ratios of the scale: this would therefore be of no use to the farmer on one hand, but by raising all the articles of subsistence and supply, our manufactures must become too dear for the average rates of the general market. But the contrary is the fact. Corn is the last of all the articles of the market which starts in its price, and rises always with the slowest motion. It is only in consequence of all other commodities having arisen, that a rise in this becomes necessary, and when it does begin to rise, it follows with such unequal motion, that some encouragement becomes necessary, as a spring to aid the velocity of its rise in proportion to other things. It is not the rise of the price of corn, but the general improved state of the country, raising the rates of all things, and the burthen of taxes successively accumulated, which raises the price of our manufactures. On the contrary, encouraging the raising of corn by a good price in the direct instant, creates a plenty: a plenty, with a succession of surplusses, keeps down the price, taken in a general series of times; and in some measure it tends also to lower the price of manufactures, by the number of hands which plenty of subsistance, if I may so express myself, always creates.
Seeing then nothing narrow, invidious, selfish, or ungenerous in our system of restraints and bounties on our corn trade, considering it as a necessary, wife and beneficial system, interwoven into the general œconomy of our agriculture, manufactures and commerce: persuaded that a certain sober conviction of experience, arising from practice, first suggested the truth, I cannot but hope, that the same wisdom which gave the bounty, will operate with the country gentlemen, to doubt every speculation of closet doctrine, and to oppose, on every occasion, every the most distant attempt to lower, or to confine within narrower limits this bounty.
You have made several observations on, some objections to, and give rather a hasty and summary judgment on the general system of our corn laws: I have made some remarks on these parts also, but I shall reserve these to another place, where I shall have occasion to examine all the regulations relative to the supply of the community with bread–corn, and to the manner in which the surplus of that supply is converted into an article of commerce.
I will now proceed to the consideration of your opinions and doctrines respecting the monopoly of the colony trade.
You allow,39 ‘this colony–trade to be very advantageous, though not by means, yet in spight, of the monopoly, and that the natural good effects of it more than counterbalance to Great Britain the bad effects of the monopoly; so that, monopoly and all together, that trade, even as it is carried on at present, is not only advantageous, but greatly advantageous.’ Although you allow this, yet while you consider our colonies ‘rather as a cause of weakness than of strength’, ‘as a source of expence not revenue’; while you say, that40 ‘the invidious and malignant project of excluding other nations from any share’ in our colony–trade depresses the industry of all other countries, but chiefly that of the colonies, without in the least encreasing, but on the contrary diminishing, that of the country in whose favour it is established; that, in order to obtain a relative advantage, that country not only gives up an absolute one in this trade itself, but subjects itself to both an absolute and relative disadvantage in every other branch of trade wherein this monopoly does not operate. While you say this, you conclude,41 ‘that under the present system of management, Great Britain derives nothing but loss from the dominion which she assumes over her colonies.’ In consequence of this doctrine, you are not only for breaking up the monopoly, but for a dismemberment of the empire,42 by giving up the dominion over our colonies. This prompt and hasty conclusion is very unlike the author of ‘the Treatise on the wealth of nations,’ it savours more of the puzzled inexperience of an unpracticed surgeon, who is more ready with his amputation knife, than prepared in the skill of healing medicines. If we lose our colonies, we must submit to our fate; but the idea of parting with them on the ground of system, is much like the system which an ironical proverb recommends, ‘of dying to save charges’. When superficial importants talk, write, or vend such their idle crudities, one is not surprized; unworthy of notice they are neglected: but when a man, who, like yourself, hath joined practical knowledge to the most refined spirit of speculation, can suffer himself so to be mislead, an examination of those speculations, or at least of their consequences, as they lead to practice, is due to him and to the world: I will therefore examine your objections to the monopoly, and the reasoning whereon you found them, by the actual operations and effects of this colony–trade, acted upon by this monopoly.
But first I cannot but observe, that a round assertion, ‘that our colonies have never yet furnished any military force for the defence of the mother country, and that they have been a cause rather of weakness than of strength’, is such as should have followed only from a deduction of facts: and I will beg leave to suggest to you some facts that induce me, and may perhaps you also, to be of a very different opinion. That very naval force, which by their armed vessels they are now so destructively exerting against our West–India trade and transports, they did very effectively in the two late wars, especially in the last, exert to the ruin of the West Indian commerce of France and Spain, and to the almost total obstruction of all communication of those countries with their respective colonies. If you have not heard of what they did then, judge of it by what they are able to do now, against the whole undiverted power of their mother country.
The mother country, with her own immediate force, must always meet the immediate force of its enemies, wherever exerted. If therefore France sent its European forces to America, Great Britain, with her European force, must meet them in that field. If the strength of our colonies, exerted against the colonial strength of France or Spain was effective; or if it was ready to serve where it could best serve, and where most wanted; if it was not only equal to its own defence, but did act against the enemy offensively also, with effect, it did bring forth ‘a military force for the defence of the mother country.’ The military force of the province of Massachusett’s Bay not only defended the dominions of the mother country in that province, but for many years exerted itself in defending Accadia or Nova Scotia. In the war which ended by the peace of Aix la Chapelle, the military force of that province took Louisburg and Cape Breton, an acquisition which purchased for the mother country that peace. So far as my assertion may go in proof, I will venture to assert, that had France during the last war effectuated a landing in Great Britain, and had been able to maintain themselves there until an account of it should have arrived in New England, I should have been able to have brought over, or sent from the province, Massachusett’s Bay (perhaps joined by Connecticut also) ‘a military force for the defence of the mother country’.
On the point of revenue, I will also beg leave to repeat, because I have now still stronger reason for it, an assertion which I made in parliament, that before we went to decided war, a revenue might have been had upon compact, on terms which would have established the constitutional sovereignty of this country, regulating at the same time the trade and naval powers of the colonies, if those terms might have gone, at the same time, to the securing the rights of those colonies as granted by the government of that mother country. As to the ways and means of coming at the grounds of agreement, and the nature of that revenue and compact, an explanation never will be withheld, if ever again events shall render them practical. The colonies did always raise a revenue in support of that establishment of internal government, which the mother country had set over them; I do not say that I approve the manner in which they applied it. As to their raising, while under a state of minority, farther taxes, except port duties, for the external purposes of the empire at large, I will give no opinion, but submit it to your judgment, who have thoroughly considered the different fructuation of surplus produce expended in revenue, or vested in circulating capital, for further improvements, which further extend the British market in America, to decide, which of the two were, in that state, most beneficial to the mother country. I reason here in the line in which you consider the subject, the line of political œconomy, not of administration of government.
Your objections to the monopoly endeavour to prove, that; in the invidious and malignant project (as you stile it) of excluding as much as possible all other nations from any share in the trade of our colonies, Great Britain sacrifices, in a great degree, an absolute advantage, to enjoy in a lesser degree a relative one: that if the trade had been free and open, the industry of the colonies would not only have been less cramped, but the source of all the advantages deriving to Europe, from the settlement of Europeans in America, would have been more abundant and more productive of advantage: and that, although Great Britain had sacrificed a relative advantage which she derived from the exclusive trade, she would yet have had a greater absolute advantage; as an explanatory proof you instance in the monopoly of the article of tobacco. The market opened for this article would, you think, probably have lowered the profits of a tobacco–plantation nearer to the level of a corn–farm; the price of the commodity would probably have been lowered, and an equal quantity of the commodities, either of England or of any other country, might have purchased a greater quantity of tobacco than it can at present. I will suppose with you, that by this new arrangement, and the consequential new ratio in the scale of prices betwixt Europe and America, that Great Britain as well as other countries would have derived a great absolute advantage: yet as these other countries would have derived the same advantage from our colonies, this fancied absolute advantage could be but merely nominal; for although England thus got more tobacco for a less quantity of British commodities, yet as other countries also got the same on the same terms directly from Maryland or Virginia, what Great Britain thus got would not only be less in value, but would run the risque of being a drug upon her hands. In giving up therefore the relative advantage which she enjoyed by her exclusive trade, while she gained a nominal, she would lose every real advantage. Besides, there is surely some management to be observed in the culture of an article of produce, whose consumption hath arisen from whim and caprice into an habitual, but not a necessary use: instead of encouraging an unbounded produce of this, it were best, probably, that it should be limited. I am sure it is an absolute advantage to Great Britain, that Virginia and Maryland should find it most to their advantage to cultivate tobacco, rice, indico, or any other exotick commodity, than that by bringing the profits of a tobacco–plantation nearer upon a level with those of a corn–farm; they should find their advantage in raising corn to the rivalling us at the European markets in our home commodity, and to the depression of our agriculture. So far therefore as this argument goes, it demonstrates to me, at least, that by quitting the relative, a real advantage, we should not even gain a nominal advantage, but should run every risque of losing every advantage, both relative and absolute, real and nominal, which is to be derived from this source restrained, and at the same time of setting up a rival culture against our own agriculture. If you see the matter in this light in which it appears to me, you will, I am sure, feel how dangerous it is to vend these novelties of speculation against the sober conviction of experience.
Your argument goes on to state, that there are very probable reasons for believing, that although we do sacrifice this absolute advantage (which would, it is supposed, probably be drawn from a free and open trade) for a narrow mean relative advantage; yet we do not possess even this relative advantage, without subjecting ourselves, at the same time, both to an absolute and to a relative disadvantage in almost every other branch of trade of which we have not the monopoly.
It strikes me as material, and I am sure, therefore, you will excuse me making, in this place, one remark even on the manner of your argument, and how you stretch your reasoning nicely. You in words advance upon the ground of probable reasons for believing only, you prove by probable suppositions only; yet most people who read your book, will think you mean to set up an absolute proof, and your conclusion is drawn as though you had.
You proceed to describe these absolute and relative disadvantages.
The monopoly of the colony trade, wherein the English merchant was enabled to sell dear and buy cheap, gave a rate of profit in that trade much above the level of profit in any other, and would therefore never fail of drawing capital from those other branches into this, as fast as it could employ such. This double effect of drawing capital from all other branches of trade, and of raising the rates of profit higher in our internal trades than it would otherwise have been, arose at the first establishment of the monopoly, and hath continued ever since. Having thus stated the effect, you proceed to prove them to be bad and disadvantageous.
By drawing, not through the natural effects of trade, but by the artificial operations of the monopoly, capital from other trades, and other branches of trade in Europe, which were greatly advantageous both in a commercial and in a political view, this monopoly, it is probable (you say) may not have occasioned so much an addition to the trade of Great Britain, as a total change in its direction.
First, as to the assertion, that capital has been drawn from certain trades and certain branches of trade in Europe, and turned by the monopoly into the colony trade, which without this would not have been so diverted; that (I answer) is a matter of fact, which must not be established by an argument, à priori—but on an actual deduction of facts. As I did not find the latter in your book, I looked into the only records which we have of the progressive state of our commerce, in a43 series of returns of the imports and exports of Great Britain, as made to parliament. I cannot ascertain in our European trade that fact which your theory supposes. The tides and currents of commerce, like that of the ocean over which it passes, are constantly shifting their force and course, but this comes not up to your fact. I find no deprivation, but an encreased state of our European trade; and at the same time an immense multiplied encrease of our colony trade, and of every branch of commerce connected with it. Supposing, however, that this fact was true, that there hath been a total change in the direction of our trade, by drawing capital from several of the European trades, and by employing more of our general capital in the colony trade than would naturally have gone to it, had all trade been free and open: yet that supposition will never, against fact, prove, that this monopoly, thus employing more capital in, and deriving more profits from the colony–trade, hath occasioned a privation of advantage to the trade of Great Britain in general—Fact contradicts that position. Well, but as Great Britain cannot have sufficient capital to actuate all, it must occasion a privation in some of the branches of its trade; for, although there may not be an absolute decrease in certain branches, there is a relative one, as they have not increased in the proportion in which they would have done. This is again argument, à priori, in matters of fact, wherein it cannot act as proof; however, for the sake of your argument we will even suppose it, and ask the question, what then? To which, in my way of reasoning, I should answer, that as in the division of labour no one man can actuate all the branches of it, so in the division of the commerce of the world, no nation nor no capital can carry on all the branches of it in every channel in which it flows. That country then which, while it does less in those branches of trade wherein least is to be gotten, but has the command in that which exceeds all others in profit, doth surely draw the greatest possible advantage from commerce. This part then of your argument proves to me, assisted by the reasoning which you use in other parts of your work, the very reverse of the conclusion which you here draw from it.
You say in the next place, that this monopoly has contributed to raise and keep up the rates of profit in all the different branches of the British trade higher than they would naturally have been, or, which is the same thing, to prevent them from falling so low as they would otherwise have fallen; and that this forced height of profit hath subjected the country, where it takes effect, both to an absolute and to relative disadvantage in every branch of trade, in which it has not the monopoly. I could here answer in general by your own reasoning, as you use it in the case of the profits of grazing and corn land; as when the state of the community is such, that it occasions a greater call for, and consequently a greater profit on the one than the other; that other will soon be converted into the one which is in demand, and will give the greater profits, till both come to a level: so in commerce, under whatever regulations, either those which the natural wants or the political institutions of men establish, it is carried on, will always shift about, and endeavour to flow in those channels wherein most profit is to be had. That country then which is under those fortunate and powerful circumstances, and has the wisdom so to profit of those circumstances, as to be able to maintain a monopoly of the most profitable channels; and be able to maintain, at the same time, (notwithstanding the clog of its high rates of profits) a share of other branches of trade, even where it is undersold, has surely acquired that ascendency in trade and commerce, which is always better understood than explained. But I will not rest within these entrenchments, I will meet your argument in your open field.
You say,44 that in consequence of these high rates of profit, under which our commodities and manufactures must be brought to market, we must in our foreign trade ‘both buy dearer and sell dearer, must both buy less and sell less;’ but I deny the consequence, ‘that we must profit less,’45 because, although those high rates may confine the extent, yet raising the profit of the dealing, we enjoy as much, and produce in trade as much, as if we did more business of less profits: all is kept equal and level as to the foreign trade, and our colony trade goes on, the mean while, in a still more rapid prosperity. Your conclusion therefore, ‘that it is in this manner that the capital of Great Britain has partly been drawn, and partly driven from the greater part of the different branches of trade, of which she has not the monopoly; from the trade of Europe in particular, and from that of the countries which lie round the Mediterranean sea,’ is neither deducible from your argument, à priori, nor will you find it justified by fact.
Yet again that we, who think well of the monopoly, may not derive any support from thinking, that as the colony–trade is more advantageous to Great Britain than any other, so the capital being forced into that channel, is of more advantage to the country than if employed any other way. That we may not avail ourselves of this comfort, you proceed to shew it to be ‘a natural effect of this monopoly; that it turns our capital from a foreign trade of consumption with a neighbouring into one with a more distant country; in many cases from a direct trade of consumption into a round–about one and in some cases from all foreign trade of consumption into a carrying one.’ And as in the analytick part of your work you have shewn, that the direct trade of consumption, especially that with a neighbouring country, maintains the greatest quantity of productive labour, by the direct and frequent returns of its capital; that a round–about trade is always less advantageous, and the carrying still least so of all; you draw your conclusion, that therefore the operation of the monopoly, thus acting, turns our capital into channels where it employs less productive labour than it would naturally have done, if the trade was left to its free and natural operations. By your first position you mean, that it hath turned the capital from the European trade to the North American and West Indian trade, from whence the returns are less frequent, both on account of the greater distance, but more especially on account of the peculiar circumstances of America. An improving country, always dealing beyond their capital, must wait to pay their debts by their improvements, by which means, although the merchant may repay himself by the profit he puts upon his goods, and by other means, yet the capital of Great Britain is detained and withheld; and, thus detained, prevented from maintaining such a quantity of productive labour as otherwise it would do. In answer to this state of the argument (which I hope I have stated fairly) I say, that that part of our capital, which is some while withheld in America and does not return directly, is not withheld unprofitably to Great Britain: like that portion of the harvest which is detained for seed, it is the matrix of a succeeding and encreased production; by operating to advance still farther these improvements, and consequently the population of these countries, it is creating and extending a new market, whose demands for our productive labour calls forth that labour faster and to more advantage, than the same capital directly returned and vested in British goods could do; as it encreases this market in a constant progression, it calls forth more manufacturers; gives a spring to agriculture; and extends the commerce of Great Britain.
Well but, say you, ‘secondly, the monopoly of the colony–trade has, in many cases, forced some part of the capital of Great Britain from a direct foreign trade of consumption into a round–about one.’ Wherever it does so, that is an error in the system, it should be corrected and amended, so far as is consistent (as I said above) with the establishment of the unity of empire in all its orders and subordination of orders. I have in a former part of this letter, and many years ago on other occasions, pointed out some of these errors and their remedy; but I must beg here to apply those distinctions, which, in my remarks on the analytick part of your work, I shewed to exist in nature and fact, between a circuitous and a round–about trade; and to observe, that where your objections are pointed against the circuitous operations of our colony–trade, they do not act with effect; for these are always advantageous, and should be even more encouraged than they are. Such a series of such circuitous operations as create and extend the market, accumulating by each operation a fresh profit, return home not only (by this accumulated capital) with the means of employing more manufacturers, but with having created46 an encreasing demand for more and more manufactures. The encreasing market of our improving colonies, still more and more rapidly improved by the circuitous trade, must, while we have the command of that market, multiply British manufacturers; these manufacturers thus multiplied47 , ‘constitute (as you state it truly) a new market for the produce of the land, and most advantageous of all markets, the home market, for corn and cattle.’
Another objection yet remains, that in many cases the colony–trade becomes, by means of the regulations of the monopoly, merely a carrying trade. This carrying trade, which you describe as a defect, would be so, if the carrying was the only part in which our capital was employed, and the hire of the carriage the only profit that we derive from it, but instead of that, joined as it is with the circuitous trade, it becomes, in a political as well as a commercial view, a beneficial part of the operations which employs our own shipping.
Having gone through your argument of objection, you close with some corollary observations, as deriving from it. You think, that the unnatural spring applied to the colony–trade, has destroyed the natural ballance which would otherwise have taken place amongst all the different branches of British industry, and that the direction of it is thus thrown too much into one channel. The idea then of a blood vessel, artificially swelled beyond its natural dimensions, strikes your imagination, and you are brought under an apprehension of some terrible disorder. As this disorder did not seize Great Britain in the case you supposed,48 you then search out five unforseen and unthought–of events (to which I could add another very perfectly foreseen and thoroughly understood) which fortunately occurred to prevent it. As I am no malade imiginair in politicks, and have no fears of those49 ‘convulsions, apoplexy, or death,’ which have been so often predicted, I know not how to go seriously, against fact into reasoning upon them. That our trade has felt, on a great and sudden shock, no such convulsions or apoplexy, but that its productive powers continue to be actuated, and its circulation to run in some other channels, though our American artery is obstructed, proves, that this was not our principal, much less our sole great channel of commerce; some part, perhaps great part, of our circulation passed through it into other remoter vessels, which is now perhaps full as properly with more profit to the British merchant, poured through more direct channels. In short, the whole state of our trade, as it stands in fact, and is found in effect, is to me a proof in point against your case in theory.
‘50 The effect of the monopoly (you say) has been not to encrease the quantity, but to alter the quality of the manufactures of Great Britain, suited to a market from which the returns are slow,’ instead of keeping on in an old trade, ‘from which the returns are frequent.’
If we consider the effect which the opening a new market under a monopoly, or in a free trade, hath on a commercial country, we shall find, if it be a market which calls for some new assortment of manufactures of a quality different from the ordinary and accustomed sort, in which that commercial country dealt before this new demand was opened, that a free and open market, into which the operations of a competition comes, is more likely to alter the quality of the manufactures, than where any commercial country possesses that market under a monopoly. In the former case they must watch and suit every call, every fashion, and even caprice of their free customers; in the latter case they will oblige their appropriated customers, to take off such goods as they please to send them, altho’ the sorts do not in quality entirely suit that market; they will under this monopoly, carry this so far as to drive the country, which is subject to the monopoly, into smuggling, not only on account of the price, but merely to get goods of a quality which suits them. Your information in the practick, as well as theoretick knowledge of our commerce, will be able to supply proofs of this fact from many revolutions of our manufactures in different periods of our commerce. It is not therefore the effect of a monopoly, so much as it would be the effect of a free and open trade, to alter the quality of the manufactures of Great Britain. We will then next enquire, how this monopoly operates as to the increase or not of the quantity. In the first step we are agreed, that this increasing market of appropriated customers doth at this one entrance encrease the quantity of manufactures demanded. Let us next enquire, how ‘the surplus produce of the colonies, which (you justly say51 ) is the source of all of that encrease of enjoyments and industry, which Europe derives from the discovery and colonization of America,’ operates under a monopoly, or would operate under a free and open trade to encrease the quantity of British industry and manufactures. The articles of this produce are (it is needless to enquire how) become of accustomed demand in the markets of Europe, not only for its more pleasurable enjoyment, but in the line of industry also. So far as Great Britain hath the monopoly of these articles, she will become a necessary trader in these markets. She will not go to such markets with these articles only; she will make up a cargo with assortments of her manufactures also; the one will necessarily introduce the others; and if the first cannot be had without the latter it will introduce those others, where, from the disadvantages of a high scale of prices, they would not otherwise have been introduced; so that our monopoly of these American sources of enjoyments and industry to the Europeans, doth not only tend to encrease the quantity of our industry and manufactures partially, but absolutely. As they are interwoven with our general commerce, they do actually tend to introduce and carry on our commerce in our manufactures, even under those disadvantages, which you have described as the effects of the monopoly; this is one ground of that ascendancy in commerce, which I rather referred to, than described as enjoyed by Great Britain.
As to the fact about the returns of capital, if you will compare notes between the merchant trading in British manufactures to Germany, and the merchant trading with British manufactures to America and the West Indies, you will find the returns of the latter upon the whole (if these goods go no farther than North America, or our West Indies) not slower than those from Germany. Credit has, even before the present war, been extended in Germany, and shortened towards America: inquire after this fact in Norwich, London, and the other great manufacturing places, and you will find it so.
That the productive labour of Great Britain is kept down by the monopoly; that this monopoly prevents its affording revenue so much as it might; and that rent and wages are always less abundant than otherwise they would be, is a corollary or propositions neither proved by reasoning nor established by fact. That the monopoly, raising the rates of mercantile profit, discourages the improvement of land, is still more aberrant from the line of reason, and more directly contrary to fact: the reason you give is, that the superior profits made by trade will draw capital from improvements in land. It will so in the first instance, but as this encreasing advanced interest of trade ‘constitutes a new market for the produce of the land,’ the rates of the price of the produce of the land will so rise, and so raise the profits made by improvements, that, although at first, as I have shewn above, it suffers a relative depression, the application of capital to it will of course and necessarily become a very advantageous employment of such: but the new and daily encreasing market of America, of which we have the monopoly, raising the rates of profit in trade, draws after it the daily ascending rates of that land, which supplies this market and the workmen in it; and is the very thing coincident with a general prosperity, that hath given such a spring to agriculture in this country.
When you say in another wreath of this corollary, that the high rates of profit necessarily keep up the high rate of interest, which è contra must lower the value of land. I answer, that the rate of interest does not necessarily depend on the rates of profit made by money, but on the proportion of demand for the use of it to the quantity which, and the velocity with which, the influx of riches, in consequence of an advancing mercantile prosperity, brings it into circulation. High profits themselves will occasion money to come in to the market which wants it; high profits, and an increasing demand, will open and give birth to a secondary source by paper circulation: so that the major of your syllogism is not founded in reason; nor is the conclusion, that the natural encrease of rent, and the rise in the value of land, is retarded by the effects of the monopoly, fact. I do here distinguish the effects of the monopoly from the effects of the trade itself: this, like all other advantageous applications of capital, where great mercantile profits are to be gotten, accelerates the rise of the profits of trade faster than those of land; but those of land are in the effect raised also by it; and although in a slower degree of velocity to that of the rise of mercantile profit, yet not in a retarded but accelerated velocity also.
Upon the whole, I fully and perfectly agree with you, that any regulation which gives a confined course of direction, and keeps in that line of direction any operation, must check and destroy part of the vis motrix, with which the body moving would fly off in a direct course. Just as the central force, which confines any body to circulate round that center in any given orbit, doth check and diminish part of the projectile force with which it would have flown off from that orbit: So the monopoly, which requires the colony–trade to observe Great Britain as its center, doth certainly check and diminish part of that commercial activity with which it is at all points in exertion to fly off in a tangent. Although I agree in this truth, yet being taught to think, that all separate communities, until some commercial millenium shall melt down all into one, must ever seek to give such a specifick direction to the operations of their own specifick powers, as shall maintain the separate and relative state of existence in which each community is placed; and knowing it to be an universal law of nature, that in any machine, part of the original momentum must always find itself diminished in proportion as it becomes necessary to give a specifick direction to its operation: So I consider the losing or lessening part of the productive activity, which the culture and commerce of the colonies might give in a direct line, that is, to the world at large, but not to Great Britain especially, as analogous to that law of nature; as the very essence of that combination of force, and consequential specifick direction, which confines it circulating in an orbit round Great Britain as its center; and as the precise state of that theorem, which no politician in the one case, any more than any true mechanick in the other, would deny as untrue, or condemn as wrong.
I cannot therefore but remain, and do fancy, that every sober man of business will remain in the persuasion and conviction, confirmed by experience, that while the monopoly of our colony trade gives as such to Great Britain, in its relative state of existence in the world, a relative advantage in the commercial world; Great Britain doth not lose unnecessarily any absolute advantage, nor doth subject itself to either absolute or relative disadvantage, in all other branches of commerce in which it hath not the monopoly: That it employs our capital, upon the ballance of the whole, to the greatest advantage, and conspires in the means, together with other branches of trade, of drawing forth our utmost productive industry: And that under the true system of a monopoly, Great Britain might derive from the dominion which she had in her colonies (of which dominion they were, in their due subordination, part) force, revenue, and every commercial advantage.
These are the matters in which I think your book has erred. I have examined them with a view to such discussion, as may occasion a review of them; because I do really think, that your book, if corrected on these points, planned and written as it is, might become an institute, containing the principia of those laws of motion, by which the system of the human community is framed and doth act, an instituteof political œconomy, such as I could heartily wish, for the reasons given at the beginning of this letter, that some understanding Tutor in our Universities would take up, as a basis of lectures on this subject.
I should here have proceeded to the consideration of your plans of the system, which you think Great Britain should adopt in her future conduct towards America; but the present state of events suspends all political discussion on that head. If future events shall ever lay a rational, sound and true ground of colonial government, the proposing of such may then be proper, and shall not be withheld. At present jacta est alea, the fate of this country is now at the hazard of events, which force, and not reason, is to decide. I am afraid we are reasoning here about things which once were, and were most dear, but are no more.
I cannot conclude this letter without saying, that as I have impressed upon my mind the highest opinion of your abilities, learning, and knowledge, and think well of your fair intentions, I hope I have never deviated from the respect which is due to such. I have taken pains to comprehend fully, and have meant to state fairly, your reasoning; and to propose my own, as I ought, with diffidence. If any expression breaths the spirit of controversy, instead of what I meant, fair discussion, I disavow it; for although personally unknown to you, yet from what I learn of you by your works, I find myself in every sentiment of respect and esteem.
Sir, Your most obedient, And most humble Servant,
[1 ]A Letter from Governor Pownall to Adam Smith, L.L.D. F.R.S., being an Examination of Several Points of Doctrine, laid down in his ‘Inquiry in to the Nature and Causes of the Wealth of Nations’ (London, 1776). See Letter 174 above, also Letter 182 addressed to Governor Pownall, dated 19 Jan. 1777. This text, with the errata corrected, is reprinted from the copy in the British Library. Pownall’s WN citations were from ed. 1, 1776. These have been converted to vol. and page ref. to ed. 1, and each is followed by the Glasgow Edition form. Citations and editorial notes are placed within square brackets.
[2 ][i. 16; I.ii.1.]
[3 ][i. 18; I.ii.3.]
[4 ][i. 16; I.ii.2.]
[5 ][London, 1752]. A little Treatise which I wrote when I was very young, and which is very imperfect and incorrect in its manner and composition; but such in the matter and reasoning, as frequent revision and application of the principles to matters in fact, have confirmed me in the conviction of as true, although different from the common train of reasoning in those who follow Mr. Locke’s phrases rather than his arguments.
[6 ][i. 85; I.viii.21.]
[7 ][i. 286; I.xi.l.1 2]
[8 ][ii. 217; IV. vii. c. 56]
[9 ][ii. 201; IV. vii.c.26]
[10 ][i. 39; I.v.8, also, see I.iv.13].
[11 ][i. 39; I.v.7.]
[12 ][i. 37; I.v.4.]
[13 ][ii. 101; IV.v.a.23.]
[14 ][i. 66; I.vii.1.]
[15 ][i. 70; I.vii.15.]
[16 ]Vide the several statutes of labourers.
[17 ][i. 81; I.viii.11.]
[18 ][i. 83; I.viii.15.]
[19 ]Essay on Money, p. 321. [Essays, 1764, 1767 edns. Hume wrote ‘money is nothing but the representation of labour and commodities, and serves only as a method of rating or estimating them’, Phil. Wks. (1875), iii. 312, ‘Of Money’.]
[20 ][i. 389; II.ii.86.]
[21 ][i. 28; I.iv.2.]
[22 ][i.37; I.v.6.]
[23 ]Vide Administration of the Colonies [ed. 5, 1774], vol. i, ch. v.
[24 ][i. 350; II.ii.26.]
[25 ][i. 351; II.ii.29.]
[26 ][i. 389; II.ii.86.]
[27 ][i. 389; II.ii.87.]
[28 ]Hume’s third Essay on Money [Phil. Wks. iii. 311.].
[29 ][i. 351; I.ii.28, also § 41 et seq.]
[30 ][i. 453; II.v.32.]
[31 ]Vide Administ. of the British colonies, vol. i, ch. viii.
[32 ][i. 274ff.; I.xi.l, Second Sort of Rude Produce.]
[33 ][ii. 41; IV.ii.19.]
[34 ]Sur la législation et le commerce des grains .
[35 ]Sur la législation et le commerce des grains.
[36 ][Vol. i. 248; l.xi.g.ll, see also V.v.a.21–2.]
[37 ]Either by an undue creation of paper money, or by the bringing in great quantities of money amassed by conquest or by rapine, as was the case in Rome, by the money brought from Asia; as was the case in Britain, by the money brought from Indostan.
[38 ][ii. 116; IV.v. b. 18.]
[39 ][ii. 214; IV.vii.c.50.]
[40 ][ii. 196; IV.vii.c.18.]
[41 ][ii. 224; IV.vii.c.65.]
[42 ][ii. 224; IV.vii.c.66.]
[43 ]A very useful collection, published by Sir C. Whitworth, M.P. [State of the Trade of Great Britain in its imports and exports progressively from the year 1697 (1776)].
[44 ][ii. 201; IV.vii.c.27.]
[45 ][ii. 219; IV.vii.c.59.]
[46 ]This is what, in The Administration of the British colonies, vol. i, ch. viii, I call creating and securing ‘an encreasing nation of appropriated customers;’ which idea you, from that superiority that speaking è cathedra always inspires, treat with sovereign contempt; ‘it is, you say, a project fit only for a nation of shop–keepers, governed by shop–keepers.’ This idea, however, upon the closest and strictest analysis is the only one I can find precisely to define the relation which a commercial country bears to its colonies, and to express that institution of policy, in our act of navigation, which you rather too lightly and too contemptuously call (p. 222) ‘a truly shop–keeper proposal’.
[47 ][ii. 215; IV.vii.c.51.]
[48 ][ii. 211; IV.vii.c.45.]
[49 ][ii. 210; IV.vii.c.43.]
[50 ][ii. 216; IV.vii.c.55.]
[51 ][ii. 193; IV.vii.c.9.]