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1: The Distribution of Wealth, When Trade Enjoys Complete and Permanent Freedom - 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.


1

The Distribution of Wealth, When Trade Enjoys Complete and Permanent Freedom

I assume that the country that our tribe occupies is as large as England, France, Spain, or as these three kingdoms put together. It has to have a certain extensiveness, and commerce must find a considerable stock-in-trade in the variety of products that the provinces will need to exchange.

This country is filled with hamlets, villages, boroughs, towns. It is a multitude of free cities which govern themselves near enough by the same laws; and which, remembering their origins, regard themselves as one and the same family, although they already form several peoples.

All these peoples, busy with agriculture and the arts which relate to it, or which tend to make it flourish, live a simple life, and live in peace. The magistracies are the ceiling of ambition for the citizens and none of them has yet thought of aspiring to tyranny.

These peoples know neither tolls, nor customs dues, nor arbitrary taxes, nor privileges, nor the police forces which hamper liberty. Among them, every one does what he wishes and freely enjoys the fruits of his labour.

Finally, they have no enemies, since we have placed them in a country inaccessible to any foreign nation.

There you have the assumptions following which you can form an idea for yourself of what I understand by commerce which enjoys complete freedom. It simply mattered to make that notion perfectly clear; and it hardly matters that some of the assumptions do not appear realistic.

To make trade flourish in all the provinces where I spread out cities, it is essential that the surplus pours out without hindrance, reciprocally from the one to the other, and that it supplies what is missing in the places where it spreads. It is a kind of ebb and flow where things balance out by alternating movement and tend to place themselves on a level.

Among the peoples we are observing, nature alone can place obstacles in trade’s way, and we lift them, or at least we lessen them. Navigation on the rivers is made easier, canals are dug, roads are constructed. These works which amaze us, as we, who do nothing except by dint of money, are rarely rich enough to undertake them, cost little to a sober nation which has willing arms. It sees its interest there; it feels that it is working for itself; and it carries out the greatest undertakings. It is not forced to impose taxes since all contribute voluntarily, one of his labour, another of his foodstuffs, to provide the workers’ subsistence.

The transport of merchandise is thus carried out with the minimum expenditure. Everywhere we have outlets to make surplus goods leave: everywhere these outlets are so many doors to allow essential goods to arrive; and, in consequence, exchanges between all the provinces are always made with equal facility, at least to the extent that the nature of the ground allows. If there is some difference, it only comes from the obstacles which nature has placed, and which it has not been possible to flatten out equally everywhere. But where there are more obstacles there is also more industry; and skill seems to make good the wrongs of nature. Let us see how wealth spreads naturally everywhere in a land such as the one I have just invented.

The country districts, each abounding in varied types of products, are rightly the first source of wealth.

In the boroughs, in the villages, in the hamlets, even on the farms, people work up the raw materials to make them ready for the needs of the settler who cultivates his field, or of the farmer who cultivates another’s field. There they make ploughs, yokes, carts, tumbrils, pickaxes, spades, coarse linen, heavy cloths and other works which require little skill, and are used in the neighbourhood of the places where they are made.

These manufactures, however coarse they are, give a new value to raw materials. They are thus so many channels through which the spring of wealth is distributed to spread from one side to the other at a certain distance.

I say at a certain distance, because the works which come out of these manufactures are only a stock-in-trade for the canton where they are established. Being of little value in themselves, and made expensive by the costs of transport, they would not be marketable in distant places where people make similar goods.

The wealth of the towns consists in the revenues of the landowners and the industry of the inhabitants, an industry whose income is in money. So it is money that forms the principal wealth of the towns, just as produce forms the principal wealth of the countryside.

It is in the towns that the greatest consumption is made. It is the place where the most skilled artisans in every kind of work set up valuable manufactures. There are permanent markets where people come from the countryside to buy works which are not made in the villages, or which are not made so skilfully there. There you have the channels through which wealth in money circulates in greater abundance. [more appreciably: 1798]

If a town’s industry were only paid for by the landowners who lived there, it would not increase the quantity of money which circulated in that place. However, it would make it circulate faster and that speed would make the same amount of money equal to a greater one.

But if, as we have noted, the articles which are made in the countryside are not of a type to be sold far away, it is not the same with those which come from the manufactures established in the towns. As they are at a greater price, the increase occasioned by transport costs is very little in comparison with this price. The artisans are thus not reduced to being paid only by the landowners of the towns they live in. Money reaches them from all the places where their works are sought after. It is really they who dig the channels through which wealth comes together in the towns; channels which form more branches and more extensive branches in line with industry’s progress.

Such in general is the distribution of wealth between the countryside and the towns; it is that the country districts are rich in products through the ploughman’s work and that the cities are rich in money through the incomes of the landowners and the work of the artisans.

[1798 addition: But you must not think I mean that money is wealth exclusively for the towns. Doubtless it moves continually through the countryside where it is exchanged for products: but it always returns to the towns as to reservoirs from which it flows back again into the countryside.]

But from one country area to another, and from town to town, this distribution is not and cannot be made in an equal fashion.

The ploughman sees the foodstuffs that are for sale. The more he is asked for, the more he demands from the fields he cultivates, and he applies all his effort to bring each piece of land to value. The countryside neighbouring the main towns, where people consume more, is thus the richest in produce.

In the remote countryside this wealth will be in proportion to the greater or lesser ease in transporting foodstuffs into the principal towns. Whatever trouble people have taken to make roads, to dig canals, to make rivers navigable, it has not always been possible to open up equally convenient outlets everywhere. Nature often placed obstacles in the way, which, even after being smoothed out, caused further great expenses for the transport of goods.

It is not in the ploughman’s interest to have foodstuffs beyond what can be consumed. So the provinces where export is less easy will be less rich in products. Less rich, I say, in comparison with the others; but rich enough for themselves because they will have as much as they need for their consumption.

In the provinces whose soil is the most unyielding the inhabitants will be harder working and they will have more ingenuity. They will develop the land right up to the rocks which they will cover with crops. In the seasons when they do not have enough work at home they will go in search of it in neighbouring provinces. They will return to their villages with profits which will place them in a position to form some small enterprises. They will increase the number of their animals, they will clear some scraps of land; and they will set up some common manufactures to work up their soil’s raw materials themselves. It is in that way that, in proportion to their extent, the least fertile provinces will be able to be almost as populous as the others.

Towns are not all in an equally favourable position for trade because they do not all have the same means to communicate afar. There cannot everywhere be large rivers, channels of communication and usable roads. There will therefore be towns which are more accessible, more engaged in marketing as a result, and more populous. These are the principal ones.

If a city conquered all the others, its town, now the seat of sovereign power, would be the capital, and could fill itself with people to the point where it would confine a twentieth of the citizens. We shall see elsewhere what such a capital must produce in a state. But there are not yet any among the peoples who have developed from our tribe. Up till now they have only been busy each governing itself separately, and none of them has had occasion to discover what it might do with conquests. It takes many circumstances to prepare the means of conquest for a people; and when all these circumstances come together, it does not nourish the ambition of dominating afar, except when, after making unintended conquests, it judges that it is capable of making them: this ambition is not therefore the first idea that proposes itself to a people.

All the cities are consequently free and independent, and if we consider them at a time when dissension has not armed them against each other, we shall judge that their towns communicate among themselves without hindrance.

On this assumption wealth divides itself among the towns by reason of the consumption made in them.

In the chief towns, which enclose a great population and which count many wealthy landowners among the citizens, there will be a great assembly of artisans and merchants of every kind, and money will circulate there more rapidly and in greater quantity.

In the smaller towns there will be less wealth, or less money in circulation; because being less populous they will consume less, and as they consume less they will not have as many artisans or merchants.

But although richer or poorer in money, all the towns have plenty of the things on which they have become dependent; because in all of them, the population is proportioned to the subsistence they can obtain for themselves. The less rich have only been formed because they have found subsistence in the places where they are settled. Now they find every day all the more to subsist on, as their citizens possess more industry as the days pass, and this industry is not held up by any impediment.

Let us conclude that the spread of wealth among the towns condemns none of them to lack necessities. Comparing some with others they are richer or less rich in money as they are more or less populated, but there is abundance in all.

Having seen what is the wealth of the provinces, the countryside and the towns, it remains for us to observe the division of it which must be made among the citizens. They have only one means to enrich themselves, trade.

Now we have distinguished the trade of products which is that of the settler and the farmer, the commerce in manufactures which is that of the artisan, and the commission trade [or long-distance trade: 1798] which is that of the merchant.

In all these kinds of commerce one only earns in relation to the high price one can set on the goods one sells. It will therefore be according to these prices that the division of wealth will be made among the merchants.

If, under the pretext of provisioning the towns, privileged companies had exclusive permission to carry corn there, you can conceive that they would rapidly enrich themselves on a fantastic scale. They would buy corn at the lowest price in the country districts where the harvests had been plentiful, because corn could only be handed over to them; and soon after they would sell it at the highest price, because, by keeping it back in their warehouses and putting on sale only an amount that was below consumption, they would cause a scarcity, even in places where there was abundance. This monopoly is not known in our cities.

Since everyone is free to sell to whom he wishes and when he wishes, it is the sellers and buyers who decide, alone and freely, on the price of each commodity.

This price, as we have seen, will rise or fall from one market to another. However, if we except the cases of glut or of great scarcity, prices will in general vary imperceptibly because competition will always be nearly the same.

It is rare too, when commerce is free, that the move from abundance to scarcity causes considerable variation in the price.

That would happen if in the same year all provinces experienced the same plenty at the same time, and the same dearth at another time. This cannot happen in a country of a certain extent whose parts are in a different situation. Normally when one province is in dearth another is in abundance.

Now abundance in one province causes the price of foodstuffs to fall very little there, when trade is free to export the surplus.

Likewise dearth raises the price little in another where trade is not slow to bring in the surplus.

So it is not in proportion to a localised abundance or scarcity that prices vary most perceptibly: it is rather in proportion as trade has less freedom. So we have demonstrated that, when freedom is complete and permanent, goods tend to make themselves equally common everywhere at the same price, or near enough.

Whatever this variation may be, wealth cannot be spread very unequally between those who carry out trade in products amongst peoples where this trade enjoys complete freedom, and where, in consequence, competition between sellers and buyers is the sole regulator of prices.

So it will not be in the power of some settlers or farmers to sell their food-stuffs for as much as they would like. The market price will necessarily be the price of everything: and they will be mutually forced to content themselves with the same profits.

In this state of affairs, the commerce in products will not enrich some at the expense of others, because no one will gain too much, and all will gain. All will share in the pleasures to which custom gives them claims; and if some, harder-working, live in greater comfort, the others will not fall into wretchedness; because to subsist it will be enough to work as one generally works. It is not to be feared that market prices will deprive anyone of the profits he ought to make. For that to happen all the cultivators would have to agree to sell at a loss, which cannot be.

Commerce in manufactures will spread wealth in the same manner. Competition will regulate the artisans’ wage according to the type of work. Some will earn more, some less. But all will subsist, and each, in his branch of work, will be happy to enjoy those things which in general those who make them in competition with him enjoy.

It will be the same for the commission trade, as for the two other trades, since competition will regulate the wage of the merchants.

If goods came from a distant, foreign country we should not know in our cities what they had cost in those places; and by capitalising on that ignorance, merchants would be able to make huge profits, especially as they would have few competitors. But, following our assumptions, this disadvantage is not to be feared. Since our cities only trade among themselves, the goods offered for sale are the products of their soil, or the works of their manufactures; that is to say, goods whose prices, known by everyone, are always regulated by competition.

In proving in the first part of this work that the true price is the same in the common market where all nations come freely to sell and buy, I have noted that this price is higher or lower for them depending on whether they are far away or adjacent to the common market.

Prices will therefore not be the same wherever our cities have been established. First of all, they will be higher in the towns than in the country districts. That is because, besides the wages due to the merchants, we also owe them the carriage costs and an indemnity for the risks they have run.

Secondly, prices will be higher in the chief towns since that is where people make the largest consumption. There one is better fed, better clothed, better housed, better furnished. Now the more one consumes, the more one demands; and the more one demands, the more one buys at a high price, other things being equal.

Besides, in proportion as consumption becomes greater, people will have to go to look for products in a greater extent of territory. There will thus be more risks and more transport costs to pay.

But lastly, although prices are not the same everywhere, they will be regulated everywhere by competition: everywhere they will be what they should be, and wealth will be spread with little inequality among those who compete in the same branch of trade. Everyone will have what he needs to subsist according to his condition, and no one will be able to make himself much wealthier than his rivals.

Someone who has not enough money income to live in a town will have enough in products to live in a country district: the worker who has no kind of income will find his subsistence in a wage proportioned to the price of foodstuffs; and because no one will be able to make himself surpassingly rich, so no one will be able to fall into wretchedness.

I estimate that a present-day merchant who gains 40 or 50 per cent will accumulate great wealth if, continuing to live with the sobriety to which he has become accustomed, he reinvests each year the lion’s share of his profits in trade. So it is not because he spends little that he becomes rich: it is because he earns a lot; and if he earned little he would not become wealthy whatever his savings were otherwise. But among the peoples whom we are observing the gains will be limited to procuring for the merchants the use of things necessary to their status.

There is only one class of citizen whom savings could enrich, that is the landlords. By making savings on their incomes, they would be able to increase the value of their lands, and it is to be wished that they should do so. This method of getting richer would help the day-labourers, for whom they provide work, to live more comfortably; and it would be beneficial to the state, for which it would provide products in greater quantity. But it can only be very slowly that one acquires wealth by this route, and the wealth is necessarily limited.

So everything comes together among the peoples whom we have conjured up to place limits to the fortunes of individuals; it seems that they cannot know the passion for money. Among them each person has his essentials: a large number live in ease; few are rich; no one is opulent. That is what freedom of trade must naturally bring about when it puts every good at its true price and it proportions wages to the price of subsistence.