Front Page Titles (by Subject) 18: Blows Directed Against Commerce: How Traders' Speculations Have as Their Outcome the Ruin of Trade - Commerce and Government Considered in their Mutual Relationship
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18: Blows Directed Against Commerce: How Traders’ Speculations Have as Their Outcome the Ruin of Trade - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship 
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).
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This book was originally published by Edward Elgar Publishing in 1997, copyright 1997 by Shelagh Eltis and Walter Eltis. Reprinted by permission of Edward Elgar Publishing.
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Blows Directed Against Commerce: How Traders’ Speculations Have as Their Outcome the Ruin of Trade
When trade enjoys complete freedom, it is possible to have a large number of competitors; and then the undertakings are exposed to greater or lesser risk, in proportion as they are more or less large scale. Let us see what the trader’s speculations can be in such circumstances. What matters for them is to ensure the greatest possible profit.
A farmer who takes land on a lease estimates its return on the basis of the crops in normal years, and according to the current price of foodstuffs in the markets.
There you have his first speculation. It is founded on a supposition that is more or less probable: but the outcome is uncertain. He will make a profit if he gathers as much produce as he has expected, and if he realises the price on which he has counted. In the opposite case, he will make losses. He will have few products to sell should hail take away some of his harvest; and yet he will be obliged to part with them at a low price if his neighbours have produced plentiful crops.
Such is the danger to which he is exposed when he acts according to the commonest speculation.
If he thinks of a new form of cultivation and is the first to try it out, his speculations will be all the more uncertain. Because they will only have as a basis analogies which he cannot yet judge, and where experience alone can assure success.
Finally, should he see products which are at a higher price, because they are at one and the same time scarcer and more sought after, and he grows them in preference, his enterprise will be all the riskier. Either his soil will not be right for them, or they will cease to be so eagerly sought after, or they will become plentiful because other growers will have made the same speculation.
For the soundness of his undertakings he needs to have made sure of the nature of his soil, to have always grasped exactly the changing tastes of the crowd, and to have taken into consideration the endeavours of the other cultivators.
As they are unable to calculate all these things, the farmers always expose themselves to risk. They win, they lose; but they all contribute to the progress of agriculture, some by their mistakes, the others by their success; and finally in each region, a way of farming is established, which could often be improved in many respects, but whose excellence seems in general confirmed by experience. Then the cultivator conforms to custom and speculates less each day.
The craftsman also makes speculations. These bear on the current price of raw materials, on the wage that custom allots him, on the public’s taste for certain works, and on the number of those who work alongside him in the same way.
The commonest artefacts which everyone uses are those where there are the fewest risks to incur. The price of the raw material varies little as it is always in good supply. The wage due to the worker is better known since these kinds of articles are always traded: they are there in large quantity, and it is a daily need that makes them sought after, not a passing fad. Finally, the number of craftsmen adjusts itself naturally to the needs of society, and consequently their competition, which is always much the same, puts little variation in their wages.
The profits in this type of work are thus better guaranteed: they renew themselves constantly. But they are insignificant. The worker whom they enable to live from day to day can only make small economies; and again he often makes them on his necessities, and could not change his condition without great difficulty.
These types of craftsmen have few speculations to make: for them to subsist it is enough for them to act as people did before them. But those who study the tastes of the rich, those who want to create new tastes, the craftsmen of luxury goods, in a word, if they can hope to earn greater profits, they also have more matters to take into account.
The raw materials on which they work normally being scarcer, and so costlier, become more and more expensive, as their articles become more fashionable. So they must limit themselves to smaller profits: too high a price could put off those who commission them.
Fashion, fickle by its nature, guarantees them nothing; and yet it is on this basis that they build all their speculations. Huge profits, if they make them, even come to work against them, because they soon see a host of rivals whom the lure of gain beckons to work in the same fashion. Then it often happens that one is hard-pushed to live from a trade which has made those who first carried it on wealthy.
Moved at random, and victims of fashion’s whims, these craftsmen are often exposed to finding themselves resourceless. Those who have many competitors, because they came to it too late, have not been able to accumulate savings; and those who have worked in more favourable circumstances had not thought of making any. They did not foresee that there would come a time when their work earned them less.
As they do not have enough capital to wait for the moment to sell profitably, they have scarcely finished an article than they are sometimes reduced to selling it cheaply. Often they even find themselves unable to work because they cannot buy the raw materials.
Then a merchant who wants to extend his trade offers them his help. He agrees to guarantee them a wage provided they are happy to work for him exclusively. The craftsmen accept conditions that need dictates to them; and they come by degrees, one after another, to place themselves on the merchants’ payroll.
Much the same is the case with the farmers: to fulfil their undertakings they need to have sold their products within fixed quarters. Besides, they are not normally rich enough to build storehouses where they might keep them, while they wait for the moment to sell them advantageously. So they believe themselves only too happy to be able to hand over to the merchants those products for which they cannot find a sale in the markets; and yet these merchants only buy them when they are at a low price, and they can count on selling them on at a profit.
Thus everything seems to favour the merchants who form great undertakings. Masters of all the tradable goods, they seem to have all the wealth of the state in their hands to make themselves rich from the toil of the ploughmen and the skill of the craftsmen. There you have a vast field of speculation for them.
You can see that these speculations bear on the need of the craftsman to be paid his wage, and the cultivator’s need to sell his products, and the need the public will have for the works of the craftsman and the products of the grower.
It is in the merchant’s interest to buy at the lowest price and to sell at the highest. So it matters to him that there should be a large number of artisans of every description, so that by their competition they bring themselves down to lower wages. For the same reason it also matters to him that many cultivators should be in a hurry to sell. Finally, it is important to him to have few competitors in the undertakings in which he is engaged.
You may conceive that with an exclusive privilege, he will easily obtain all these advantages; and that in contrast he will often be frustrated in them if trade enjoys complete freedom. Then speculations will be all the harder for him, as the success of his undertakings will depend on a host of circumstances that one cannot feed into a calculation, or that it is impossible to foresee.
However advantageously he has dealt with the craftsmen and the growers, he can be mistaken in his expectations. Because if it is with foodstuffs of prime need that he has filled his storehouses, an abundant crop which causes their price to fall will rob him of all his anticipated profit. It may even be that their sale will not reimburse him the costs of purchase and carriage.
Besides, there is absolutely no way to be sure of the consumption of them that must be made in the places where he counts on selling. A thousand accidents may reduce consumption as they may increase it; and when he knows what to rely on in this respect, how is he to know the proportion between the goods he is buying and the consumption to be made of them? Is he to know the quantity with which his rivals are furnished? So it could happen, against his expectation, that he had bought too much, and that he found himself reduced to having to sell at a loss. There are absolutely no speculations which could guide him with certainty in this respect. So he will be forced to conduct himself in these enterprises as though groping, following experience.
Such are the dangers to which he is exposed when he trades in goods of primary need; and yet those are the ones whose sale is most certain.
Second-order goods, of which we create so many needs, are not all equally necessary. Their use may be recent, and sometimes they are passing tastes which give way to others. So there is often a moment to grasp. If they are too ordinary, people will get tired of them; and if they are too scarce, the high price will limit the number of consumers. So by what calculations would it be possible to ensure for oneself the promised profits in this type of trade?
These difficulties which are found especially in the great commercial undertakings should trouble the government little. For it is not through a small number of entrepreneurs, who make themselves exclusively wealthy, that trade must be carried on. Rather, it is important that it is carried on by a great number who are content to live comfortably, and who enable a large number of craftsmen and cultivators to live in the same comfort.
Now when trade enjoys complete freedom, it is naturally conducted by a large number of entrepreneurs who share between them all the branches of trade and all the profits. Then it is difficult and almost impossible for a merchant to obtain wealth that is markedly disproportionate to that of his rivals. He would have to engage in undertakings where his speculations would be accompanied by too many uncertainties: he would not dare to venture it.
There you have the chief advantage of freedom of trade. It multiplies traders: it makes competition as considerable as possible: it shares out wealth with less inequality, and it brings every good down to its true price.
But if it matters to the state that there should be a large number of entrepreneurs, it matters to the entrepreneurs to be few in number. All difficulties are smoothed in the path of an exclusive company, because its undertakings, whatever they may be, call for few speculations. Since it alone has the right to buy from the producer and to sell on, it sets the wage of the craftsman and that of the cultivator at will; and because with the smallest trade it is assured of the greatest profit, it will burn some of the goods it has in the warehouses, if it fears that by making them plentiful it will lower their price.
Such then is the secret motive which causes exclusive privileges to be solicited; it is that people want large, guaranteed profits: still larger ones are always desired, and people always want them with fewer risks. So it is that the speculations of merchants always have as their final point the ruin of trade itself.
This motive is found again in finance whose speculations, as straight-forward as they are easy, seem to leave nothing to chance, and ruin trade in its essence, because they ruin agriculture. If it undertakes to raise taxes, it acts so that for each million it pours into the king’s coffers it levies two. If the state asks it for money, it lends it at 10 per cent and borrows at 5. If it acts as the king’s banker, its profit is all the more assured as it makes itself mistress of all the government’s operations. All depends on it, because one can do nothing without money, and it is it alone that can find money wherever it is needed.
Just reflect on the companies of merchants and financiers and you will recognise that they must imperceptibly draw to themselves all the money in circulation. If they pour it out constantly, it never ceases to return to them. On each occasion they take a new part of it. People owe them money, people owe even more: their credits mount up, and finally it happens that the state has contracted debts with them that it cannot pay. There you have, at bottom, what the speculations of high finance come to, and there you have too what they must produce.
Political speculations would present great difficulties if one had to study every component part of government, and direct them to the general good. But in a century when it is believed that all can be done with money, they become easy, because they are only concerned with the transitory devices which prepare the state’s ruin: that is what we have shown. The ruin of everything. There then, you have the final outcome of the speculations of trade, high finance and politics in centuries where abuses have multiplied.