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5: What Is Meant by Trade - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

Edition used:

Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


5

What Is Meant by Trade

We calltrade the exchange that is made when a person gives us one good for another which he receives; and we call merchandise [marchandises] the goods on offer for exchange, because one only exchanges them by creating a market, or by agreeing, after some haggling, to give so much of one for so much of the other.

Now we have observed that two goods that are exchanged create each other’s price. They are therefore each at the same time price and merchandise; or rather they take one or other of these names, following the relationships in which we consider them.

When the good is considered as price, the man who gives it is called buyer: when it is considered as merchandise, the man who delivers it is called seller; and since in different lights it can be regarded as price and as merchandise, it follows that those who make exchanges can be considered with respect to one another both as seller and as buyer. When I give you a septier of corn for a cask of wine, it is I who buy the wine, it is you who sell it, and my septier is the price of your cask. When you give me a cask of wine for a septier of corn, it is you who buy the corn, it is I who sell it, and your cask is the price of my septier. In all that, there is nothing but exchanges, and however one expresses them, the ideas are always the same. But the expressions vary, because we are obliged to consider the same things in different respects.

Commerce presumes two things: surplus production on the one hand, and on the other consumption to be made.

Surplus production, because I can only exchange a surplus.

Consumption to be made, because I can only exchange it with someone who needs to consume it.

Up till now our tribe is composed only of settlers, that is of men who cultivate the soil. Now these settlers can be considered as producers and as consumers: as producers, because it is their wants which made the land bring forth all sorts of foodstuffs; as consumers, because it is they who consume the different products.

According to the assumptions we have made, exchanges up to now have been made directly between the settlers; commerce has thus been conducted immediately between producers and consumers.

But it is not always possible for the settlers who come to market to sell their merchandise at a favourable price. They will therefore on occasion be compelled to take it back again. That is an inconvenience which they would avoid if they could dispose of it somewhere, and give it to someone who could seize the opportunity to exchange it profitably in their absence. With this prospect, they would willingly give up a part.

Those who have their dwellings in the neighbourhood of the market will thus have an interest in drawing merchandise into their hands. Consequently, they will build storehouses where it can be kept, and they will offer to sell it on behalf of others, in exchange for an agreed commission.

These commission agents, which is what one calls those who undertake a thing on behalf of others, are between the producers and consumers; it is through them that exchanges are made, but it is not for them. They just find a profit in the deal, and it is their due: because the settlers find an advantage in exchanging their produce, without being forced to deal directly with each other.

I assume that the person who entrusts a septier of corn promises to give a bushel of corn if the commission agent obtains for him a cask of wine in exchange; and that the agent, well-placed to seize the right moment, gets a cask plus ten pints for this septier. He will have gained both from the seller of corn and from the buyer.

On the one hand, the tribe feels the need of these agents, and on the other, there is an advantage in being one. You can judge therefore that they will set up business, and perhaps in excessive numbers. But, because the more of them there are, the less profit they will make, their numbers will gradually adjust to the tribe’s needs.

An agent is only the recipient of a good which is not his. But because he makes profits, one day he will be able to buy himself the merchandise that was previously entrusted to him. Then he will buy the goods; he will have them at his risk and hazard, and he will sell them again for his own account. There we have what one calls a merchant.

Before there were agents and merchants, one could scarcely sell except at a market, and only on the day that the market was held. Since we have agents and merchants, one can sell every day and everywhere, and as exchanges have become easier, they are more frequent.

The settlers thus have a greater number of outlets to move their surplus among themselves; and the tribe experiences every day how advantageous it is to have agents and merchants.

In truth the agents and merchants will make profits at the expense of the tribe: but, by their intervention, the tribe itself will make profits it could not have made without them. For any surplus, which is useless and without value when it cannot be exchanged, becomes useful when it can be exchanged and acquires a value.

This surplus, as I have remarked, is the only negotiable good; since one only sells what one can do without. It is true that I could certainly sell a good that I need; but since I would only do it to obtain another that I needed even more, it is clear that I regard it as useless for me, compared with the one I acquire. It is again true that I could even sell the corn needed for my consumption; but I should only sell it because, being sure to be able to replace it, I find an advantage in selling on the one hand to buy back on the other. In a word, whatever assumption one makes, in going back from seller to seller, one must always reach an original one who only sells and only can sell his surplus. That is why I say that the surplus is the sole thing that exists in trade.*

When the settlers deal directly among themselves they exchange their own surplus. But when the merchants themselves trade is it likewise their surplus that they exchange? And can one say that the merchandise they have in their warehouses is also surplus for them? Doubtless not: merchants are exchanging the farmers’ surplus. They are like channels of communication between producers and consumers by which trade circulates; and through their intervention, the settlers most widely separated from each other communicate between themselves. Such is the utility of the trade carried on by the merchants.

There are different types of commerce, and it is important not to confuse them.

Either we exchange produce such as nature has given us, and I call that exchange trade in produce.

Or we exchange these products when we have made them take forms which adapt them for various uses, and I call that exchange trade in manufactures, or of hand-made goods.

The settler engages in trade in produce when he sells the surplus of his crop; and the artisans or manufacturers engage in trade in manufactures when they sell the articles they have made.

But when trade is conducted through the intervention of merchants I call that commission trade because the merchants set themselves up as agents between the producers on one side and the consumers on the other. Considered as merchants they are neither farmers nor manufacturers; they merely resell what they have bought.

One distinguishes the retail merchant and the wholesaler, whom it is easy not to confuse; the name alone shows the difference well enough. It is not so easy to mark what distinguishes the trading merchant from the transacting merchant. Both of them are engaged in commission trade; but common usage seems to confuse them.

I shall call a merchant [marchand] a trader [tra fiquant] when, through a sequence of exchanges made in several countries, he seems to trade in everything. For example, a French merchant is a trader when he carries merchandise to England; then in England, where he leaves it, he takes another good which he carries elsewhere; and after several exchanges he comes back to France, to which he brings foreign merchandise. One understands that he can, without travelling, carry on this trade through factors or commission merchants.

The trader [trafiquant] is called an international dealer [négociant] when, having made of commerce a speculative matter, he watches all its branches, brings together its circumstances, and calculates their advantages and drawbacks in the purchases and sales to be made, and, through his connections, he seems to dispose of the tradable effects of many nations.

All these types are included under the name of merchants [commerçants]. Besides, since they only differ in degree, you may understand that it will often be impossible to distinguish the merchant [marchand] from the international trader [trafiquant] and the trader from the dealer [négociant]. That is why one can often use indiscriminately for each other the words commerce, trading, dealing. One must just remember that merchants, of whatever type they are, only carry out commission trade, a trade that I shall sometimes call dealing.

[* ] It is not that I think that each settler only ever sells his surplus; but I think that everything that is sold is surplus for some one of them. For example, if there was a great dearth in Spain, I do not doubt that France would sell there some of the grain necessary for her own consumption: but she would replace it with what she bought in the North, and she would only replace it because there was a nation in the North where there was a surplus of corn.