The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Key to Abbreviations and References
• General Introduction
• The Text and Apparatus
• Advertisement a
• Advertisement to the Fourth Edition
• Introduction and Plan of the Work
• [i] Book I: Of the Causes of Improvement In the Productive Powers of Labour, and of the Order According to Which Its Produce Is Naturally Distributed Among the Different Ranks of the People
• [i.i] Chapter I: Of the Division of Labour
• [i.ii] Chapter II: Of the Principle Which Gives Occasion to the Division of Labour
• [i.iii] Chapter III: That the Division of Labour Is Limited By the Extent of the Market 1
• [i.iv] Chapter IV: Of the Origin and Use of Money 1
• [i.v] Chapter V: Of the Real and Nominal Price of Commodities, Or of Their Price In Labour, and Their Price In Money
• [i.vi] Chapter VI: Of the Component Parts of the Price of Commodities
• [i.vii] Chapter VII: Of the Natural and Market Price of Commodities 1
• [i.viii] Chapter VIII: Of the Wages of Labour
• [i.ix] Chapter IX: Of the Profits of Stock
• [i.x.a] Chapter X: Of Wages and Profit In the Different Employments of Labour and Stock
• [i.x.b] Part I: Inequalities Arising From the Nature of the Employments Themselves
• [i.x.c] Part II: Inequalities Occasioned By the Policy of Europe
• [i.xi.a] Chapter XI: Of the Rent of Land
• [i.xi.b] Part I: Of the Produce of Land Which Always Affords Rent
• [i.xi.c] Part II: Of the Produce of Land Which Sometimes Does, and Sometimes Does Not, Afford Rent
• [i.xi.d] Part III: Of the Variations In the Proportion Between the Respective Values of That Sort of Produce Which Always Affords Rent, and of That Which Sometimes Does, and Sometimes Does Not, Afford Rent
• Digression Concerning the Variations In the Value of Silver During the Course of the Four Last Centuries
• [i.xi.e] First Period
• [i.xi.f] Second Period
• [i.xi.g] Third Period
• [i.xi.h] Variations In the Proportion Between the Respective Values of Gold and Silver
• [i.xi.i] Grounds of the Suspicion That the Value of Silver Still Continues to Decrease
• [i.xi.j] Different Effects of the Progress of Improvement Upon the Real Price of Three Different Sorts of Rude Produce
• [i.xi.k] First Sort
• [i.xi.l] Second Sort
• [i.xi.m] Third Sort
• [i.xi.n] Conclusion of the Digression Concerning the Variations In the Value of Silver
• [i.xi.o] Effects of the Progress of Improvement Upon the Real Price of Manufactures
• [i.xi.p] Conclusion of the Chapter
• [ii] Book II: Of the Nature, Accumulation, and Employment of Stock
• Introduction
• [ii.i] Chapter I: Of the Division of Stock
• [ii.ii] Chapter II: Of Money Considered As a Particular Branch of the General Stock of the Society, Or of the Expence of Maintaining the National Capital
• [ii.iii] Chapter III: Of the Accumulation of Capital, Or of Productive and Unproductive Labour
• [ii.iv] Chapter IV: Of Stock Lent At Interest
• [ii.v] Chapter V: Of the Different Employment of Capitals
• [iii] Book III: Of the Different Progress of Opulence In Different Nations
• [iii.i] Chapter I: Of the Natural Progress of Opulence
• [iii.ii] Chapter II: Of the Discouragement of Agriculture In the Antient State of Europe After the Fall of the Roman Empire 1
• [iii.iii] Chapter III: Of the Rise and Progress of Cities and Towns, After the Fall of the Roman Empire
• [iii.iv] Chapter IV: How the Commerce of the Towns Contributed to the Improvement of the Country
• [iv] Book IV: Of Systems of Political Oeconomy
• Introduction
• [iv.i] Chapter I: Of the Principle of the Commercial, Or Mercantile System 1
• [iv.ii] Chapter II: Of Restraints Upon the Importation a From Foreign Countries of Such Goods a As Can Be Produced At Home
• [iv.iii] Chapter III: Of the Extraordinary Restraints Upon the Importation of Goods of Almost All Kinds, From Those Countries With Which the Balance Is Supposed to Be Disadvantageous
• [iv.iii.a] Part I: Of the Unreasonableness of Those Restraints Even Upon the Principles of the Commercial System a
• [iv.iii.b] Digression Concerning Banks of Deposit, Particularly Concerning That of Amsterdam 1
• [iv.iii.c] Part II: Of the Unreasonableness of Those Extraordinary Restraints Upon Other Principles a
• [iv.iv] Chapter IV: Of Drawbacks
• [iv.v.a] Chapter V: Of Bounties
• [iv.v.b] Digression Concerning the Corn Trade and Corn Laws a – a

BOOK IV

Of Systems of political Oeconomy

introduction

1Political œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects; first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the publick services. It proposes to enrich both the people and the sovereign.

2The different progress of opulence in different ages and nations, has given occasion to two different systems of political œconomy, with regard to enriching the people. The one may be called the system of commerce, the other that of agriculture. I shall endeavour to explain both as fully and distinctly as I can, and shall begin with the system of commerce. It is the modern system, and is best understood in our own country and in our own times.

CHAPTER I

Of the Principle of the commercial, or mercantile System1

1That wealth consists in money, or in gold and silver, is a popular notion which naturally arises from the double function of money, as the instrument of commerce, and as the measure of value.2 In consequence of its being the instrument of commerce, when we have money we can more readily obtain whatever else we have occasion for, than by means of any other commodity. The great affair, we always find, is to get money. When that is obtained, there is no difficulty in making any subsequent purchase. In consequence of its being the measure of value, we estimate that of all other commodities by the quantity of money which they will exchange for. We say of a rich man that he is worth a great deal, and of a poor man that he is worth very little money. A frugal man, or a man eager to be rich, is said to love money; and a careless, a generous, or a profuse man, is said to be indifferent about it. To grow rich is to get money; and wealth and money, in short, are, in common language, considered as in every respect synonymous.3

2A rich country, in the same manner as a rich man, is supposed to be a country abounding in money; and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. For some time after the discovery of America, the first enquiry of the Spaniards, when they arrived upon any unknown coast, used to be, if there was any gold or silver to be found in the neighbourhood? By the information which they received, they judged whether it was worth while to make a settlement there, or if the country was worth the conquering. Plano Carpino, a monk sent ambassador from the king of France to one of the sons of the famous Gengis Khan, says that the Tartars used frequently to ask him, if there was plenty of sheep and oxen in the kingdom of France?4 Their enquiry had the same object with that of the Spaniards.5 They wanted to know if the country was rich enough to be worth the conquering. Among the Tartars, as among all other nations of shepherds, who are generally ignorant of the use of money, cattle are the instruments of commerce and the measures of value. Wealth, therefore, according to them, consisted in cattle, as according to the Spaniards it consisted in gold and silver. Of the two, the Tartar notion, perhaps, was the nearest to the truth.6

3Mr. Locke remarks a distinction between money and other moveable goods.7 All other moveable goods, he says, are of so consumable a nature that the wealth which consists in them cannot be much depended on, and a nation which abounds in them one year may, without any exportation, but merely by their own waste and extravagance, be in great want of them the next. Money, on the contrary, is a steady friend, which, though it may travel about from hand to hand, yet if it can be kept from going out of the country, is not very liable to be wasted and consumed. Gold and silver, therefore, are, according to him, the most solid and substantial part of the moveable wealth of a nation, and to multiply those metals ought, he thinks, upon that account, to be the great object of its political œconomy.

4Others admit that if a nation could be separated from all the world, it would be of no consequence how much, or how little money circulated in it.8 The consumable goods which were circulated by means of this money, would only be exchanged for a greater or a smaller number of pieces; but the real wealth or poverty of the country, they allow, would depend altogether upon the abundance or scarcity of those consumable goods. But it is otherwise, they think, with countries which have connections with sovereign nations, and which are obliged to carry on foreign wars, and to maintain fleets and armies in distant countries. This, they say, cannot be done, but by sending abroad money to pay them with; and a nation cannot send much money abroad, unless it has a good deal at home. Every such nation, therefore, must endeavour in time of peace to accumulate gold and silver, that, when occasion requires, it may have wherewithal to carry on foreign wars.

5In consequence of these popular notions, all the different nations of Europe have studied, though to little purpose, every possible means of accumulating gold and silver in their respective countries. Spain and Portugal, the proprietors of the principal mines which supply Europe with those metals, have either prohibited their exportation under the severest penalties, or subjected it to a considerable duty.9 The like prohibition seems antiently to have made a part of the policy of most other European nations. It is even to be found, where we should ^aleast of all expect^a to find it, in some old Scotch acts of parliament, which forbid under heavy penalties the carrying gold or silver forth of the kingdom.10 The like policy antiently took place both in France and England.

6When those countries became commercial, the merchants found this prohibition, upon many occasions, extremely inconvenient. They could frequently buy more advantageously with gold and silver than with any other commodity, the foreign goods which they wanted, either to import into their own, or to carry to some other foreign country. They remonstrated, therefore, against this prohibition as hurtful to trade.11

7They represented, first, that the exportation of gold and silver in order to purchase foreign goods, did not always diminish the quantity of those metals in the kingdom. That, on the contrary, it might frequently increase ^bthat quantity^b ; because, if the consumption of foreign goods was not thereby increased in the country, those goods might be re–exported to foreign countries, and being there sold for a large profit, might bring back much more treasure than was originally sent out to purchase them.12 Mr. Mun compares this operation of foreign trade to the seed–time and harvest of agriculture. “If we only behold,” says he, “the actions of the husbandman in the seed–time, when he casteth away much good corn into the ground, we shall account him rather a madman than a husbandman. But when we consider his labours in the harvest, which is the end of his endeavours, we shall find the worth and plentiful increase of his actions.”13

8They represented, secondly, that this prohibition could not hinder the exportation of gold and silver, which, on account of the smallness of their bulk in proportion to their value, could easily be smuggled abroad. That this exportation could only be prevented by a proper attention to, what they called, the balance of trade.14 That when the country exported to a greater value than it imported, a balance became due to it from foreign nations, which was necessarily paid to it in gold and silver, and thereby increased the quantity of those metals in the kingdom. But that when it imported to a greater value than it exported, a contrary balance became due to foreign nations, which was necessarily paid to them in the same manner, and thereby diminished that quantity. That in this case to prohibit the exportation of those metals could not prevent it, but only, by making it more dangerous, render it more expensive. That the exchange was thereby turned more against the country which owed the balance, than it otherwise might have been; the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it, not only for the natural risk, trouble and expence of sending the money thither, but for the extraordinary risk arising from the prohibition. But that the more the exchange was against any country, the more the balance of trade became necessarily against it; the money of that country becoming necessarily of so much less value, in comparison with that of the country to which the balance was due. That if the exchange between England and Holland, for example, was five per cent. against England, it would require a hundred and five ounces of silver in England to purchase a bill for a hundred ounces of silver in Holland: that a hundred and five ounces of silver in England, therefore, would be worth only a hundred ounces of silver in Holland, and would purchase only a proportionable quantity of Dutch goods: but that a hundred ounces of silver in Holland, on the contrary, would be worth a hundred and five ounces in England, and would purchase a proportionable quantity of English goods: That the English goods which were sold to Holland would be sold so much cheaper; and the Dutch goods which were sold to England, so much dearer, by the difference of the exchange; that the one would draw so much less Dutch money to England, and the other so much more English money to Holland as this difference amounted to: and that the balance of trade, therefore, would necessarily be so much more against England, and would require a greater balance of gold and silver to be exported to Holland.

9Those arguments were partly solid and partly sophistical. They were solid so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. They were solid too in asserting that no prohibition could prevent their exportation, when private people found any advantage in exporting them.15 But they were sophistical in supposing, that either to preserve or to augment the quantity of those metals required more the attention of government, than to preserve or to augment the quantity of any other useful commodities, which the freedom of trade, without any such attention, never fails to supply in the proper quantity. They were sophistical too, perhaps, in asserting that the high price of exchange necessarily increased, what they called, the unfavourable balance of trade, or occasioned the exportation of a greater quantity of gold and silver. That high price, indeed, was extremely disadvantageous to the merchants who had any money to pay in foreign countries. They paid so much dearer for the bills which their bankers granted them upon those countries. But though the risk arising from the prohibition might occasion some extraordinary expence to the bankers, it would not necessarily carry any more money out of the country. This expence would generally be all laid out in the country, in smuggling the money out of it, and could seldom occasion the exportation of a single six–pence beyond the precise sum drawn for. The high price of exchange too would naturally dispose the merchants to endeavour to make their exports nearly balance their imports, in order that they might have this high exchange to pay upon as small a sum as possible. The high price of exchange, ^cbesides, must necessarily have operated as a tax, in raising the price of foreign goods, and thereby diminishing their consumption. It would tend, therefore,^c not to increase, but to diminish, what they called, the unfavourable balance of trade, and consequently the exportation of gold and silver.16

10Such as they were, however, those arguments convinced the people to whom they were addressed. They were addressed by merchants to parliaments, and to the councils of princes, to nobles and to country gentlemen; by those who were supposed to understand trade, to those who were conscious to themselves that they knew nothing about the matter.17 That foreign trade enriched the country, experience demonstrated to the nobles and country gentlemen, as well as to the merchants; but how, or in what manner, none of them well knew. The merchants knew perfectly in what manner it enriched themselves. It was their business to know it. But to know in what manner it enriched the country, was no part of their business. ^dThis^d subject never came into their consideration, but when they had occasion to apply to their country for some change in the laws relating to foreign trade. It then became necessary to say something about the beneficial effects of foreign trade, and the manner in which those effects were obstructed by the laws as they then stood. To the judges who were to decide the business, it appeared a most satisfactory account of the matter, when they were told that foreign trade brought money into the country, but that the laws in question hindered it from bringing so much as it otherwise would do. Those arguments therefore produced the wished–for effect. The prohibition of exporting gold and silver was in France and England confined to the coin of those respective countries. The exportation of foreign coin and of bullion was made free. In Holland, and in some other places, this liberty was extended even to the coin of the country. The attention of government was turned away from guarding against the exportation of gold and silver, to watch over the balance of trade, as the only cause which could occasion any augmentation or diminution of those metals.18 From one fruitless care it was turned away to another care much more intricate, much more embarrassing, and just equally fruitless. The title of Mun’s book, England’s Treasure in Foreign Trade,19 became a fundamental maxim in the political œconomy, not of England only, but of all other commercial countries. The inland or home trade, the most important of all, the trade in which an equal capital affords the greatest revenue, and creates the greatest employment to the people of the country,20 was considered as subsidiary only to foreign trade. It neither brought money into the country, it was said, nor carried any out of it. The country therefore could never become either richer or poorer by means of it, except so far as its prosperity or decay might indirectly influence the state of foreign trade.

11A country that has no mines of its own must undoubtedly draw its gold and silver from foreign countries, in the same manner as one that has no vineyards of its own must draw its wines. It does not seem necessary, however, that the attention of government should be more turned towards the one than towards the other object. A country that has wherewithal to buy wine, will always get the wine which it has occasion for; and a country that has wherewithal to buy gold and silver, will never be in want of those metals.21 They are to be bought for a certain price like all other commodities, and as they are the price of all other commodities, so all other commodities are the price of those metals. We trust with perfect security that the freedom of trade, without any attention of government, will always supply us with the wine which we have occasion for: and we may trust with equal security that it will always supply us with all the gold and silver which we can afford to purchase or to employ, either in circulating our commodities, or in other uses.22

12The quantity of every commodity which human industry can either purchase or produce, naturally regulates itself in every country according to the effectual demand, or according to the demand of those who are willing to pay the whole rent, labour and profits which must be paid in order to prepare and bring it to market. But no commodities regulate themselves more easily or more exactly according to this effectual demand23 than gold and silver; because on account of the small bulk and great value of those metals, no commodities can be more easily transported from one place to another, from the places where they are cheap, to those where they are dear, from the places where they exceed, to those where they fall short of this effectual demand. If there ^ewas^e in England, for example, an effectual demand for an additional quantity of gold; a packet–boat could bring from Lisbon, or from wherever else it was to be had, fifty tuns of gold, which could be coined into more than five millions of guineas.24 But if there ^fwas^f an effectual demand for grain to the same value, to import it would require, at five guineas a tun, a million of tuns of shipping, or a thousand ships of a thousand tuns each. The navy of England would not be sufficient.

13When the quantity of gold and silver imported into any country exceeds the effectual demand, no vigilance of government can prevent their exportation. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home.25 The continual importations from Peru and Brazil exceed the effectual demand of those countries, and sink the price of those metals there below that in the neighbouring countries.26 If, on the contrary, in any particular country their quantity fell short of the effectual demand, so as to raise their price above that ^gof^g the neighbouring countries, the government would have no occasion to take any pains to import them. If it ^hwas^h even to take pains to prevent their importation, it would not be able to effectuate it. Those metals, when the Spartans had got wherewithal to purchase them, broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedemon.27 All the sanguinary laws of the customs are not able to prevent the importation of the teas of the Dutch and Gottenburgh East India companies; because somewhat cheaper than those of the British company. A pound of tea, however, is about a hundred times the bulk of one of the highest prices, sixteen shillings, that is commonly paid for it in silver, and more than two thousand times the bulk of the same price in gold, and consequently just so many times more difficult to smuggle.

14It is partly owing to the easy transportation of gold and silver from the places where they abound to those where they are wanted, that the price of those metals does not fluctuate continually like that of the greater part of other commodities, which are hindered by their bulk from shifting their situation, when the market happens to be either over or under–stocked with them.28 The price of those metals, indeed, is not altogether exempted from variation, but the changes to which it is liable are generally slow, gradual, and uniform. In Europe, for example, it is supposed, without much foundation, perhaps, that, during the course of the present and preceding century, they have been constantly, but gradually, sinking in their value, on the account of the continual importations from the Spanish West Indies.29 But to make any sudden change in the price of gold and silver, so as to raise or lower at once, sensibly and remarkably, the money price of all other commodities, requires such a revolution in commerce as that occasioned by the discovery of America.

15If, notwithstanding all this, gold and silver should at any time fall short in a country which has wherewithal to purchase them, there are more expedients for supplying their place, than that of almost any other commodity. If the materials of manufacture are wanted, industry must stop. If provisions are wanted, the people must starve. But if money is wanted, barter will supply its place, though with a good deal of inconveniency. Buying and selling upon credit, and the different dealers compensating their credits with one another, once a month or once a year, will supply it with less inconveniency. A well regulated paper money will supply it, not only without any inconveniency, butⁱ, in some cases, with someⁱ advantages.30 Upon every account, therefore, the attention of government never was so unnecessarily employed, as when directed to watch over the preservation or increase of the quantity of money in any country.

16No complaint, however, is more common than that of a scarcity of money. Money, like wine, must always be scarce with those who have neither wherewithal to buy it, nor credit to borrow it. Those who have either, will seldom be in want either of the money, or of the wine which they have occasion for. This complaint, however, of the scarcity of money, is not always confined to improvident spendthrifts. It is sometimes general through a whole mercantile town, and the country in its neighbourhood. Overtrading is the common cause of it. Sober men, whose projects have been disproportioned to their capitals, are as likely to have neither wherewithal to buy money, nor credit to borrow it, as prodigals whose expence has been disproportioned to their revenue.31 Before their projects can be brought to bear, their stock is gone, and their credit with it. They run about every where to borrow money, and every body tells them that they have none to lend. Even such general complaints of the scarcity of money do not always prove that the usual number of gold and silver pieces are not circulating in the country, but that many people want those pieces who have nothing to give for them. When the profits of trade happen to be greater than ordinary, overtrading becomes a general error both among great and small dealers. They do not always send more money abroad than usual, but they buy upon credit both at home and abroad, an unusual quantity of goods, which they send to some distant market, in hopes that the returns will come in before the demand for payment. The demand comes before the returns, and they have nothing at hand, with which they can either purchase money, or give solid security for borrowing. It is not any scarcity of gold and silver, but the difficulty which such people find in borrowing, and which their creditors find in getting payment, that occasions the general complaint of the scarcity of money.

17It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing.32 Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it.33

18It is not because wealth consists more essentially in money than in goods, that the merchant finds it generally more easy to buy goods with money, than to buy money with goods; but because money is the known and established instrument of commerce, for which every thing is readily given in exchange, but which is not always with equal readiness to be got in exchange for every thing. The greater part of goods besides are more perishable than money, and he may frequently sustain a much greater loss by keeping them.34 When his goods are upon hand too, he is more liable to such demands for money as he may not be able to answer, than when he has got their price in his coffers. Over and above all this, his profit arises more directly from selling than from buying, and he is upon all these accounts generally much more anxious to exchange his goods for money, than his money for goods. But though a particular merchant, with abundance of goods in his warehouse, may sometimes be ruined by not being able to sell them in time, a nation or country is not liable to the same accident. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. But it is but a very small part of the annual produce of the land and labour of a country which can ever be destined for purchasing gold and silver from their neighbours. The far greater part is circulated and consumed among themselves; and even of the surplus which is sent abroad, the greater part is generally destined for the purchase of other foreign goods. Though gold and silver, therefore, could not be had in exchange for the goods destined to purchase them, the nation would not be ruined. It might, indeed, suffer some loss and inconveniency, and be forced upon some of those expedients which are necessary for supplying the place of money. The annual produce of its land and labour, however, would be the same, or very nearly the same, as usual, because the same, or very nearly the same consumable capital would be employed in maintaining it. And though goods do not always draw money so readily as money draws goods, in the long–run they draw it more necessarily than even it draws them. Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods. Money, therefore, necessarily runs after goods, but goods do not always or necessarily run after money. The man who buys, does not always mean to sell again, but frequently to use or to consume; whereas he who sells, always means to buy again. The one may frequently have done the whole, but the other can never have done more than the one–half of his business. It is not for its own sake that men desire money, but for the sake of what they can purchase with it.35

19Consumable commodities, it is said, are soon destroyed; whereas gold and silver are of a more durable nature, and, were it not for this continual exportation, might be accumulated for ages together, to the incredible augmentation of the real wealth of the country. Nothing, therefore, it is pretended, can be more disadvantageous to any country, than the trade which consists in the exchange of such lasting for such perishable commodities. We do not, however, reckon that trade disadvantageous which consists in the exchange of the hardware of England for the wines of France; and yet hardware is a very durable commodity, and ^jwas^j it not for this continual exportation, might too be accumulated for ages together, to the incredible augmentation of the pots and pans of the country. But it readily occurs that the number of such utensils is in every country necessarily limited by the use which there is for them; that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there; and that if the quantity of victuals were to increase, the number of pots and pans would readily increase along with it,36 a part of the increased quantity of victuals being employed in purchasing them, or in maintaining an additional number of workmen whose business it was to make them. It should as readily occur that the quantity of gold and silver is in every country limited by the use which there is for those metals; that their use consists in circulating commodities as coin, and in affording a species of houshold furniture as plate; that the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it: increase that value, and immediately a part of it will be sent abroad to purchase, wherever it is to be had, the additional quantity of coin requisite for circulating them: that the quantity of plate is regulated by the number and wealth of those private families who chuse to indulge themselves in that sort of magnificence: increase the number and wealth of such families, and a part of this increased wealth will most probably be employed in purchasing, wherever it is to be found, an additional quantity of plate: that to attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils. As the expence of purchasing those unnecessary utensils would diminish instead of increasing either the quantity or goodness of the family provisions; so the expence of purchasing an unnecessary quantity of gold and silver must, in every country, as necessarily diminish the wealth which feeds, cloaths, and lodges, which maintains and employs the people. Gold and silver, whether in the shape of coin or of plate, are utensils, it must be remembered, as much as the furniture of the kitchen. Increase the use for them, increase the consumable commodities which are to be circulated, managed, and prepared by means of them, and you will infallibly increase the quantity; but if you attempt, by extraordinary means, to increase the quantity, you will as infallibly diminish the use and even the quantity too, which in those metals can never be greater than what the use requires. Were they ever to be accumulated beyond this quantity, their transportation is so easy, and the loss which attends their lying idle and unemployed so great, that no law could prevent their being immediately sent out of the country.

20It is not always necessary to accumulate gold and silver, in order to enable a country to carry on foreign wars, and to maintain fleets and armies in distant countries. Fleets and armies are maintained, not with gold and silver, but with consumable goods.37 The nation which, from the annual produce of its domestick industry, from the annual revenue arising out of its lands, labour, and consumable stock, has wherewithal to purchase those consumable goods in distant countries, can maintain foreign wars there.

21A nation may purchase the pay and provisions of an army in a distant country three different ways; by sending abroad either, first, some part of its accumulated gold and silver; or, secondly, some part of the annual produce of its manufactures; or last of all, some part of its annual rude produce.

22The gold and silver which can properly be considered as accumulated or stored up in any country, may be distinguished into three parts; first, the circulating money; secondly, the plate of private families; and last of all, the money which may have been collected by many years parsimony, and laid up in the treasury of the prince.

23It can seldom happen that much can be spared from the circulating money of the country; because in that there can seldom be much redundancy. The value of goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more. Something, however, is generally withdrawn from this channel in the case of foreign war. By the great number of people who are maintained abroad, fewer are maintained at home. Fewer goods are circulated there, and less money becomes necessary to circulate them. An extraordinary quantity of paper money, of some sort or other too, such as exchequer notes, navy bills, and bank bills in England, is generally issued upon such occasions, and by supplying the place of circulating gold and silver, gives an opportunity of sending a greater quantity of it abroad. All this, however, could afford but a poor resource for maintaining a foreign war, of great expence and several years duration.

24The melting down the plate of private families, has upon every occasion been found a still more insignificant one. The French, in the beginning of the last war, did not derive so much advantage from this expedient as to compensate the loss of the fashion.

25The accumulated treasures of the prince have, in former times, afforded a much greater and more lasting resource. In the present times, if you except the king of Prussia, to accumulate treasure seems to be no part of the policy of European princes.38

26The funds which maintained the foreign wars of the present century, the most expensive perhaps which history records, seem to have had little dependency upon the exportation either of the circulating money, or of the plate of private families, or of the treasure of the prince. The last French war cost Great Britain upwards of ninety millions, including not only the seventy–five millions of new debt that was contracted,39 but the additional two shillings in the pound land tax, and what was annually borrowed of the sinking fund. More than two–thirds of this expence ^kwas^k laid out in distant countries; in Germany, Portugal, America, in the ports of the Mediterranean, in the East and West Indies. The kings of England had no accumulated treasure. We never heard of any extraordinary quantity of plate being melted down. The circulating gold and silver of the country had not been supposed to exceed eighteen millions. Since the late recoinage of the gold, however, it is believed to have been a good deal under–rated.40 Let us suppose, therefore, according to the ^lmost^l exaggerated computation ^mwhich I remember to have either seen or heard of, ^m that, gold and silver together, it amounted to thirty millions.41 Had the war been carried on, by means of our money, the whole of it must, even according to this computation, have been sent out and returned again at least twice, in a period of between six and seven years. Should this be supposed, it would afford the most decisive argument to demonstrate how unnecessary it is for government to watch over the preservation of money, since upon this supposition the whole money of the country must have gone from it and returned to it again, two different times in so short a period, without any body’s knowing any thing of the matter. The channel of circulation, however, never appeared more empty than usual during any part of this period. Few people wanted money who had wherewithal to pay for it. The profits of foreign trade, indeed, were greater than usual during the whole war; but especially towards the end of it. This occasioned, what it always occasions, a general overtrading in all the ports of Great Britain; and this again occasioned the usual complaint of the scarcity of money, which always follows overtrading. Many people wanted it, who had neither wherewithal to buy it, nor credit to borrow it; and because the debtors found it difficult to borrow, the creditors found it difficult to get payment. Gold and silver, however, were generally to be had for their value, by those who had that value to give for them.

27The enormous expence of the late war, therefore, must have been chiefly defrayed, not by the exportation of gold and silver, but by that of British commodities of some kind or other. When the government, or those who acted under them, contracted with a merchant for a remittance to some foreign country, he would naturally endeavour to pay his foreign correspondent, upon whom he had granted a bill, by sending abroad rather commodities than gold and silver. If the commodities of Great Britain were not in demand in that country, he would endeavour to send them to some other country, in which he could purchase a bill upon that country. The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any. When those metals are sent abroad in order to purchase foreign commodities, the merchant’s profit arises, not from the purchase, but from the sale of the returns. But when they are sent abroad merely to pay a debt, he gets no returns, and consequently no profit. He naturally, therefore, exerts his invention to find out a way of paying his foreign debts, rather by the exportation of commodities than by that of gold and silver. The great quantity of British goods exported during the course of the late war, without bringing back any returns, is accordingly remarked by the author of The Present State of the Nation.42

28Besides the three sorts of gold and silver above mentioned, there is in all great commercial countries a good deal of bullion alternately imported and exported for the purposes of foreign trade. This bullion, as it circulates among different commercial countries in the same manner as the national coin circulates in every particular country, may be considered as the money of the great mercantile republick. The national coin receives its movement and direction from the commodities circulated within the precincts of each particular country: the money of the mercantile republick, from those circulated between different countries. Both are employed in facilitating exchanges, the one between different individuals of the same, the other between those of different nations. Part of this money of the great mercantile republick may have been, and probably was, employed in carrying on the late war. In time of a general war, it is natural to suppose that a movement and direction should be impressed upon it, different from what it usually follows in profound peace; that it should circulate more about the seat of the war, and be more employed in purchasing there, and in the neighbouring countries, the pay and provisions of the different armies. But whatever part of this money of the mercantile republick, Great Britain may have annually employed in this manner, it must have been annually purchased, either with British commodities, or with something else that had been purchased with them; which still ⁿbringsⁿ us back to commodities, to the annual produce of the land and labour of the country, as the ultimate resources which enabled us to carry on the war. It is natural indeed to suppose, that so great an annual expence must have been defrayed from a great annual produce. The expence of 1761, for example, amounted to more than nineteen millions.43 No accumulation could have supported so great an annual profusion. There is no annual produce even of gold and silver which could have supported it. The whole gold and silver annually imported into both Spain and Portugal, according to the best accounts, does not commonly much exceed six millions sterling,44 which, in some years, would scarce have paid four months expence of the late war.

29The commodities most proper for being transported to distant countries, in order to purchase there, either the pay and provisions of an army, or some part of the money of the mercantile republick to be employed in purchasing them, seem to be the finer and more improved manufactures; such as contain a great value in a small bulk, and can, therefore, be exported to a great distance at little expence. A country whose industry produces a great annual surplus of such manufactures, which are usually exported to foreign countries, may carry on for many years a very expensive foreign war, without either exporting any considerable quantity of gold and silver, or even having any such quantity to export. A considerable part of the annual surplus of its manufactures must, indeed, in this case be exported, without bringing back any returns ^oto the country, though it does to the merchant; the government purchasing of the merchant his bills upon foreign countries, in order to purchase there the pay and provisions of an army^o . Some part of ^pthis surplus^p however, may still continue to bring back a return. The manufacturers, during the war, will have a double demand upon them, and be called upon, first, to work up goods to be sent abroad, for paying the bills drawn upon foreign countries for the pay and provisions of the army; and, secondly, to work up such as are necessary for purchasing the common returns that had usually been consumed in the country. In the midst of the most destructive foreign war, therefore, the greater part of manufactures may frequently flourish greatly; and, on the contrary, they may decline on the return of the peace. They may flourish amidst the ruin of their country, and begin to decay upon the return of its prosperity. The different state of many different branches of the British manufactures during the late war, and for some time after the peace, may serve as an illustration of what has been just now said.

30No foreign war of great expence or duration could conveniently be carried on by the exportation of the rude produce of the soil. The expence of sending such a quantity of it to a foreign country as might purchase the pay and provisions of an army, would be too great. Few countries too produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people. It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported. Mr. Hume frequently takes notice of the inability of the ancient kings of England to carry on, without interruption, any foreign war of long duration.45 The English, in those days, had nothing wherewithal to purchase the pay and provisions of their armies in foreign countries, but either the rude produce of the soil, of which no considerable part could be spared from the home consumption, or a few manufactures of the coarsest kind, of which, as well as of the rude produce, the transportation was too expensive. This inability did not arise from the want of money, but of the finer and more improved manufactures. Buying and selling was transacted by means of money in England then, as well as now. The quantity of circulating money must have borne the same proportion to the number and value of purchases and sales usually transacted at that time, which it does to those transacted at present; or rather it must have borne a greater proportion because there was then no paper, which now occupies a great part of the employment of gold and silver. Among nations to whom commerce and manufactures are little known, the sovereign, upon extraordinary occasions, can seldom draw any considerable aid from his subjects, for reasons which shall be explained hereafter.46 It is in such countries, therefore, that he generally endeavours to accumulate a treasure, as the only resource against such emergencies. Independent of this necessity, he is in such a situation naturally disposed to the parsimony requisite for accumulation. In that simple state, the expence even of a sovereign is not directed by the vanity which delights in the gaudy finery of a court, but is employed in bounty to his tenants, and hospitality to his retainers.47 But bounty and hospitality very seldom lead to extravagance; though vanity almost always does. Every Tartar chief, accordingly, has a treasure.48 The treasures of Mazepa, chief of the Cossacks in the Ukraine, the famous ally of Charles the XIIth, are said to have been very great. The French kings of the Merovingian race had all treasures. When they divided their kingdom among their different children, they divided their treasure too. The Saxon princes, and the first kings after the conquest, seem likewise to have accumulated treasures. The first exploit of every new reign was commonly to seize the treasure of the preceding king, as the most essential measure for securing the succession.49 The sovereigns of improved and commercial countries are not under the same necessity of accumulating treasures, because they can generally draw from their subjects extraordinary aids upon extraordinary occasions. They are likewise less disposed to do so.50 They naturally, perhaps necessarily, follow the mode of the times, and their expence comes to be regulated by the same extravagant vanity which directs that of all the other great proprietors in their dominions.51 The insignificant pageantry of their court becomes every day more brilliant, and the expence of it not only prevents accumulation, but frequently encroaches upon the funds destined for more necessary expences. What Dercyllidas said of the court of Persia, may be applied to that of several European princes, that he saw there much splendor but little strength, and many servants but few soldiers.52

31The importation of gold and silver is not the principal, much less the sole benefit which a nation derives from its foreign trade. Between whatever places foreign trade is carried on, they all of them derive two distinct benefits from it. It carries out that surplus part of the produce of their land and labour for which there is no demand among them, and brings back in return for it something else for which there is a demand. It gives a value to their superfluities, by exchanging them for something else, which may satisfy a part of their wants, and increase their enjoyments.53 By means of it, the narrowness of the home market does not hinder the division of labour in any particular branch of art or manufacture from being carried to the highest perfection.54 By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption, it encourages them to improve its productive powers, and to augment its annual produce to the utmost, and thereby ^qto^q increase the real revenue and wealth of the society. These great and important services foreign trade is continually occupied in performing, to all the different countries between which it is carried on.55 They all derive great benefit from it, though that in which the merchant resides generally derives the greatest, as he is generally more employed in supplying the wants, and carrying out the superfluities of his own, than of any other particular country. To import the gold and silver which may be wanted, into the countries which have no mines, is, no doubt, a part of the business of foreign commerce. It is, however, a most insignificant part of it. A country which carried on foreign trade merely upon this account, could scarce have occasion to freight a ship in a century.

32It is not by the importation of gold and silver, that the discovery of America has enriched Europe. By the abundance of the American mines, those metals have become cheaper.56 A service of plate can now be purchased for about a third part of the corn, or a third part of the labour, which it would have cost in the fifteenth century. With the same annual expence of labour and commodities, Europe can annually purchase about three times the quantity of plate which it could have purchased at that time. But when a commodity comes to be sold for a third part of what had been its usual price, not only those who purchased it before can purchase three times their former quantity, but it is brought down to the level of a much greater number of purchasers; perhaps to more than ten, perhaps to more than twenty times the former number. So that there may be in Europe at present not only more than three times, but more than twenty or thirty times the quantity of plate which would have been in it, even in its present state of improvement, had the discovery of the American mines never been made. So far Europe has, no doubt, gained a real conveniency, though surely a very trifling one. The cheapness of gold and silver renders those metals rather less fit for the purposes of money than they were before. In order to make the same purchases, we must load ourselves with a greater quantity of them, and carry about a shilling in our pocket where a groat would have done before. It is difficult to say which is most trifling, this inconveniency, or the opposite conveniency. Neither the one nor the other could have made any very essential change in the state of Europe. The discovery of America, however, certainly made a most essential one.57 By opening a new and inexhaustible market to all the commodities of Europe, it gave occasion to new divisions of labour and improvements of art, which, in the narrow circle of the antient commerce, could never have taken place for want of a market to take off the greater part of their produce. The productive powers of labour were improved, and its produce increased in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants. The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new sett of exchanges, therefore, began to take place which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several of those unfortunate countries.58

33The discovery of a passage to the East Indies, by the Cape of Good Hope, which happened much about the same time, opened, perhaps, a still more extensive range to foreign commerce than even that of America, notwithstanding the greater distance.59 There were but two nations in America, in any respect superior to savages, and these were destroyed almost as soon as discovered. The rest were mere savages. But the empires of China, Indostan, Japan, as well as several others in the East Indies, without having richer mines of gold or silver, were in every other respect much richer, better cultivated, and more advanced in all arts and manufactures than either Mexico or Peru, even though we should credit, what plainly deserves no credit, the exaggerated accounts of the Spanish writers, concerning the antient state of those empires. But rich and civilized nations can always exchange to a much greater value with one another, than with savages and barbarians. Europe, however, has hitherto derived much less advantage from its commerce with the East Indies, than from that with America. The Portuguese monopolized the East India trade to themselves for about a century, and it was only indirectly and through them, that the other nations of Europe could either send out or receive any goods from that country. When the Dutch, in the beginning of the last century, began to encroach upon them, they vested their whole East India commerce in an exclusive company. The English, French, Swedes, and Danes, have all followed their example, so that no great nation in Europe has ever yet had the benefit of a free commerce to the East Indies. No other reason need be assigned why it has never been so advantageous as the trade to America, which, between almost every nation of Europe and its own colonies, is free to all its subjects. The exclusive privileges of those East India companies, their great riches, the great favour and protection which these have procured them from their respective governments, have excited much envy against them. This envy has frequently represented their trade as altogether pernicious, on account of the great quantities of silver, which it every year exports from the countries from which it is carried on. The parties concerned have replied, that their trade, by this continual exportation of silver, might, indeed, tend to impoverish Europe in general, but not the particular country from which it was carried on; because, by the exportation of a part of the returns to other European countries, it annually brought home a much greater quantity of that metal than it carried out. Both the objection and the reply are founded in the popular notion which I have been just now examining. It is, therefore, unnecessary to say any thing further about either. By the annual exportation of silver to the East Indies, plate is probably somewhat dearer in Europe than it otherwise might have been; and coined silver probably purchases a larger quantity both of labour and commodities. The former of these two effects is a a very small loss, the latter a very small advantage; both too insignificant to deserve any part of the publick attention. The trade to the East Indies, by opening a market to the commodities of Europe, or, what comes nearly to the same thing, to the gold and silver which is purchased with those commodities, must necessarily tend to increase the annual production of European commodities, and consequently the real wealth and revenue of Europe. That it has hitherto increased them so little, is probably owing to the restraints which it every where labours under.

34I thought it necessary, though at the hazard of being tedious, to examine at full length this popular notion that wealth consists in money, or in gold and silver. Money in common language, as I have already observed, frequently signifies wealth;60 and this ambiguity of expression has rendered this popular notion so familiar to us, that even they, who are convinced of its absurdity, are very apt to forget their own principles, and in the course of their reasonings to take it for granted as a certain and undeniable truth. Some of the best English writers upon commerce set out with observing, that the wealth of a country consists, not in its gold and silver only, but in its lands, houses, and consumable goods of all different kinds. In the course of their reasonings, however, the lands, houses, and consumable goods seem to slip out of their memory, and the strain of their argument frequently supposes that all wealth consists in gold and silver, and that to multiply those metals is the great object of national industry and commerce.

35The two principles being established, however, that wealth consisted in gold and silver, and that those metals could be brought into a country which had no mines only by the balance of trade, or by exporting to a greater value than it imported; it necessarily became the great object of political œconomy to diminish as much as possible the importation of foreign goods for home–consumption, and to increase as much as possible the exportation of the produce of domestick industry. Its two great engines for enriching the country, therefore, were restraints upon importation, and encouragements to exportation.61

36The restraints upon importation were of two kinds.

37First, Restraints upon the importation of such foreign goods for home–consumption as could be produced at home, from whatever country they were imported.

38Secondly, Restraints upon the importation of goods of almost all kinds from those particular countries with which the balance of trade was supposed to be disadvantageous.

39Those different restraints consisted sometimes in high duties, and sometimes in absolute prohibitions.

40Exportation was encouraged sometimes by drawbacks, sometimes by bounties, sometimes by advantageous treaties of commerce with foreign states, and sometimes by the establishment of colonies in distant countries.

41Drawbacks were given upon two different occasions. When the home–manufactures were subject to any duty or excise, either the whole or a part of it was frequently drawn back upon their exportation; and when foreign goods liable to a duty were imported in order to be exported again, either the whole or a part of this duty was sometimes given back upon such exportation.

42Bounties were given for the encouragement either of some beginning manufactures, or of such sorts of industry of other kinds as were supposed to deserve particular favour.

43By advantageous treaties of commerce, particular privileges were procured in some foreign state for the goods and merchants of the country, beyond what were granted to those of other countries.

44 By the establishment of colonies in distant countries, not only particular privileges, but a monopoly was frequently procured for the goods and merchants of the country which established them.

45The two sorts of restraints upon importation above–mentioned, together with these four encouragements to exportation, constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country by turning the balance of trade in its favour. I shall consider each of them in a particular chapter, and without taking much further notice of their supposed tendency to bring money into the country, I shall examine chiefly what are likely to be the effects of each of them upon the annual produce of its industry. According as they tend either to increase or diminish the value of this annual produce, they must evidently tend either to increase or diminish the real wealth and revenue of the country.

CHAPTER II

Of Restraints upon the Importation^afrom foreign Countries of such Goods^aas can be produced at Home

1By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home–market is more or less secured to the domestick industry employed in producing them. Thus the prohibition1 of importing either live cattle or salt provisions from foreign countries secures to the graziers of Great Britain the monopoly of the home–market for butchers–meat. The high duties upon the importation of corn, which in times of moderate plenty amount to a prohibition, give a like advantage to the growers of that commodity.2 The prohibiton of the importation of foreign woollens is equally favourable to the woollen manufacturers.3 The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage.4 The linen manufacture has not yet obtained it, but is making great strides towards it.5 Many other sorts of manufacturers have, in the same manner, obtained in Great Britain, either altogether, or very nearly a monopoly against their countrymen. ^bThe variety of goods of which the importation into Great Britain is prohibited, either absolutely, or under certain circumstances, greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs.^b6

2That this monopoly of the home–market frequently gives great encouragement to that particular species of industry which enjoys it, and frequently turns towards that employment a greater share of both the labour and stock of the society than would otherwise have gone to it, cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not, perhaps, altogether so ^cevident^c .7

3The general industry of the society never can exceed what the capital of the society can employ. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society, must bear a certain proportion to the whole capital of that society, and never can exceed that proportion. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord.8

4Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society.

5First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestick industry; provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock.

6Thus upon equal or nearly equal profits, every wholesale merchant naturally prefers the home–trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home–trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command. The capital which an Amsterdam merchant employs in carrying corn from Konnigsberg to Lisbon, and fruit and wine from Lisbon to Konnigsberg, must generally be the one–half of it at Konnigsberg and the other half at Lisbon. No part of it need ever come to Amsterdam. The natural residence of such a merchant should either be at Konnigsberg or Lisbon, and it can only be some very particular circumstances which can make him prefer the residence of Amsterdam. The uneasiness, however, which he feels at being separated so far from his capital, generally determines him to bring part both of the Konnigsberg goods which he destines for the market of Lisbon, and of the Lisbon goods which he destines for that of Konnigsberg, to Amsterdam: and though this necessarily subjects him to a double charge of loading and unloading, as well as to the payment of some duties and customs, yet for the sake of having some part of his capital always under his own view and command, he willingly submits to this extraordinary charge; and it is in this manner that every country which has any considerable share of the carrying trade, becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on. The merchant, in order to save a second loading and unloading, endeavours always to sell in the home–market as much of the goods of all those different countries as he can, and thus, so far as he can, to convert his carrying trade into a foreign trade of consumption. A merchant, in the same manner, who is engaged in the foreign trade of consumption, when he collects goods for foreign markets, will always be glad, upon equal or nearly equal profits, to sell as great a part of them at home as he can. He saves himself the risk and trouble of exportation, when, so far as he can, he thus converts his foreign trade of consumption into a home–trade. Home is in this manner the center, if I may say so, round which the capitals of the inhabitants of every country are continually circulating, and towards which they are always tending, though by particular causes they may sometimes be driven off and repelled from it towards more distant employments.9 But a capital employed in the home–trade, it has already been shown,10 necessarily puts into motion a greater quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of the country, than an equal capital employed in the foreign trade of consumption: and one employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade. Upon equal, or only nearly equal profits, therefore, every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestick industry, and to give revenue and employment to the greatest number of ^d people of his own country.

7Secondly, every individual who employs his capital in the support of domestick industry, necessarily endeavours so to direct that industry, that its produce may be of the greatest possible value.

8The produce of industry is what it adds to the subject or materials upon which it is employed. In proportion as the value of this produce is great or small, so will likewise be the profits of the employer. But it is only for the sake of profit that any man employs a capital in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money or of other goods.11

9But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value.12 As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can.13 He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.14 Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the publick good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.15

10What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The stateman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.16

11To give the monopoly of the home–market to the produce of domestick industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestick can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own cloaths, but employs a taylor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.17

12What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheapter than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.18 The general industry of the country, being always in proportion to the capital which employs it, will not thereby be diminished, no more than that of the above–mentioned artificers; but only left to find out the way in which it can be employed with the greatest advantage. It is certainly not employed to the greatest advantage, when it is thus directed towards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or less diminished, when it is thus turned away from producing commodities evidently of more value than the commodity which it is directed to produce. According to the supposition, that commodity could be purchased from foreign countries cheaper than it can be made at home. It could, therefore, have been purchased with a part only of the commodities, or, what is the same thing, with a part only of the price of the commodities, which the industry employed by an equal capital, would have produced at home, had it been left to follow its natural course. The industry of the country, therefore, is thus turned away from a more, to a less advantageous employment, and the exchangeable value of its annual produce, instead of being increased, according to the intention of the lawgiver, must necessarily be diminished by every such regulation.19

13By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap or cheaper than in the foreign country. But through the industry of the society may be thus carried with advantage into a particular channel sooner than it could have been otherwise, it will by no means follow that the sum total, either of its industry, or of its revenue, can ever be augmented by any such regulation. The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue. But the immediate effect of every such regulation is to diminish its revenue, and what diminishes its revenue, is certainly not very likely to augment its capital faster than it would have augmented of its own accord, had both capital and industry been left to find out their natural employments.

14 Though for want of such regulations the society should never acquire the proposed manufacture, it would not, upon that account, necessarily be the poorer in any one period of its duration. In every period of its duration its whole capital and industry might still have been employed, though upon different objects, in the manner that was most advantageous at the time. In every period its revenue might have been the greatest which its capital could afford, and both capital and revenue might have been ^eaugmented^e with the greatest possible rapidity.

15The natural advantages which one country has over another in producing particular commodities are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them.20 By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expence for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment, thirty times more of the capital and industry of the country, than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three hundredth part more of either. Whether the advantages which one country has over another, be natural or acquired, is in this respect of no consequence. As long as the one country has those advantages, and the other wants them, it will always be more advantageous for the latter, rather to buy of the former than to make. It is an acquired advantage only, which one artificer has over his neighbour, who exercises another trade; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades.21

16Merchants and manufacturers are the people who derive the greatest advantage from this monopoly of the home market. The prohibition22 of the importation of foreign cattle, and of salt provisions, together with the high duties upon foreign corn, which in times of moderate plenty amount to a prohibition,23 are not near so advantageous to the graziers and farmers of Great Britain, as other regulations of the same kind are to its merchants and manufacturers. Manufactures, those of the finer kind especially, are more easily transported from one country to another than corn or cattle. It is in the fetching and carrying manufactures, accordingly, that foreign trade is chiefly employed.24 In manufactures, a very small advantage will enable foreigners to undersell our own workmen, even in the home market. It will require a very great one to enable them to do so in the rude produce of the soil. If the free importation of foreign manufactures ^fwas^f permitted, several of the home manufactures would probably suffer, and some of them, perhaps, go to ruin altogether, and a considerable part of the stock and industry at present employed in them, would be forced to find out some other employment. But the freest importation of the rude produce of the soil could have no such effect upon the agriculture of the country.

17If the importation of foreign cattle, for example, ^gwas^g made ever so free, so few could be imported, that the grazing trade of Great Britain could be little affected by it. Live cattle are, perhaps, the only commodity of which the transportation is more expensive by sea than by land.25 By land they carry themselves to market. By sea, not only the cattle, but their food and their water too must be carried at no small expence and inconveniency. The short sea between Ireland and Great Britain, indeed, renders the importation of Irish cattle more easy. But though the free importation of them, which was lately permitted only for a limited time,26 were rendered perpetual, it should have no considerable effect upon the interest of the graziers of Great Britain. Those parts of Great Britain which border upon the Irish sea are all grazing countries. Irish cattle could never be imported for their use, but must be drove through those very extensive countries, at no small expence and inconveniency, before they could arrive at their proper market. Fat cattle could be drove so far. Lean cattle, therefore, only could be imported, and such importation could interfere, not with the interest of the feeding or fattening countries, to which, by reducing the price of lean cattle, it would rather be advantageous, but with that of the breeding countries only. The small number of Irish cattle imported since their importation was permitted, together with the good price at which lean cattle still continue to sell, seem to demonstrate that even the breeding countries of Great Britain are never likely to be much affected by the free importation of Irish cattle. The common people of Ireland, indeed, are said to have sometimes opposed with violence the exportation of their cattle. But if the exporters had found any great advantage in continuing the trade, they could easily, when the law was on their side, have conquered this mobbish opposition.

18Feeding and fattening countries, besides, must always be highly improved, whereas breeding countries are generally uncultivated. The high price of lean cattle, by augmenting the value of uncultivated land, is like a bounty against improvement. To any country which was highly improved throughout, it would be more advantageous to import its lean cattle than to breed them. The province of Holland, accordingly, is said to follow this maxim at present. The mountains of Scotland, Wales, and Northumberland, indeed, are countries not capable of much improvement, and seem destined by nature to be the breeding countries of Great Britain. The freest importation of foreign cattle could have no other effect than to hinder those breeding countries from taking advantage of the increasing population and improvement of the rest of the kingdom, from raising their price to an exorbitant height, and from laying a real tax upon all the more improved and cultivated parts of the country.27

19The freest importation of salt provisions, in the same manner, could have as little effect upon the interest of the graziers of Great Britain as that of live cattle. Salt provisions are not only a very bulky commodity, but when compared with fresh meat, they are a commodity both of worse quality, and as they cost more labour and expence, of higher price. They could never, therefore, come into competition with the fresh meat, though they might with the salt provisions of the country. They might be used for victualling ships for distant voyages, and such like uses, but could never make any considerable part of the food of the people. The small quantity of salt provisions imported from Ireland since their importation was rendered free, is an experimental proof that our graziers have nothing to apprehend from it. It does not appear that the price of butcher’s–meat has ever been sensibly affected by it.

20Even the free importation of foreign corn could very little affect the interest of the farmers of Great Britain. Corn is a much more bulky commodity than butcher’s–meat.28 A pound of wheat at a penny is as dear as a pound of butcher’s–meat at fourpence. The small quantity of foreign corn imported even in times of the greatest scarcity, may satisfy our farmers that they can have nothing to fear from the freest importation. The average quantity imported, one year with another, amounts only, according to the very well informed author of the tracts upon the corn trade,29 to twenty–three thousand seven hundred and twenty–eight quarters of all sorts of grain, and does not exceed the five hundredth and seventy–one part of the annual consumption.30 But as the bounty upon corn occasions a greater exportation in years of plenty, so it must of consequence occasion a greater importation in years of scarcity, than ^hin the actual state of tillage,^h would otherwise take place. By means of it, the plenty of one year does not compensate the scarcity of another,31 and as the average quantity exported is necessarily augmented by it, so must likewise, in the actual state of tillage, the average quantity imported. If there ⁱwasⁱ no bounty, as less corn would be exported, so it is probable that, one year with another, less would be imported than at present. The corn merchants, the fetchers and carriers of corn, between Great Britain and foreign countries, would have much less employment, and might suffer considerably; but the country gentlemen and farmers could suffer very little. It is in the corn merchants accordingly, rather than in the country gentlemen and farmers, that I have observed the greatest anxiety for the renewal and continuation of the bounty.32

21 Country gentlemen and farmers are, to their great honour, of all people, the least subject to the wretched spirit of monopoly.33 The undertaker of a great manufactory is sometimes alarmed if another work of the same kind is established within twenty miles of him. The Dutch undertaker of the woollen manufacture at Abbeville, stipulated that no work of the same kind should be established within thirty leagues of that city.34 Farmers and country gentlemen, on the contrary, are generally disposed rather to promote than to obstruct the cultivation and improvement of their neighbours farms and estates. They have no secrets, such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours, and of extending as far as possible any new practice which they have found to be advantageous. Pius Questus, says old Cato, stabilissimusque, minimeque invidiosus; minimeque male cogitantes sunt, qui in eo studio occupati sunt.35 Country gentlemen and farmers, dispersed in different parts of the country, cannot so easily combine36 as merchants and manufacturers, who being collected into towns, and accustomed to that exclusive corporation spirit which prevails in them, naturally endeavour to obtain against all their countrymen, the same exclusive privilege which they generally possess against the inhabitants of their respective towns. They accordingly seem to have been the original inventors of those restraints upon the importation of foreign goods, which secure to them the monopoly of the home–market. It was probably in imitation of them, and to put themselves upon a level with those who, they found, were disposed to oppress them, that the country gentlemen and farmers of Great Britain so far forgot the generosity which is natural to their station, as to demand the exclusive privilege of supplying their countrymen with corn and butcher’s–meat.37 They did not perhaps take time to consider, how much less their interest could be affected by the freedom of trade, than that of the people whose example they followed.

22To prohibit by a perpetual law the importation of foreign corn and cattle, is in reality to enact, that the population and industry of the country shall at no time exceed what the rude produce of its own soil can maintain.

23There seem, however, to be two cases in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestick industry.

24The first is when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation,38 therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others by heavy burdens upon the shipping of foreign countries. The following are the principal dispositions of this act.

25 First, all ships, of which the owners, masters, and three–fourths of the mariners are not British subjects, are prohibited, upon pain of forfeiting ship and cargo, from trading to the British settlements and plantations, or from being employed in the coasting trade of Great Britain.

26Secondly, a great variety of the most bulky articles of importation can be brought into Great Britain only, either in such ships as are above described, or in ships of the country where those goods are produced, and of which the owners, masters, and three–fourths of the mariners, are of that particular country; and when imported even in ships of this latter kind, they are subject to double aliens duty. If imported in ships of any other country, the penalty is forfeiture of ship and ^jgoods^j . When this act was made, the Dutch were, what they still are, the great carriers of Europe, and by this regulation they were entirely excluded from being the carriers to Great Britain, or from importing to us the goods of any other European country.

27Thirdly, a great variety of the most bulky articles of importation are prohibited39 from being imported, even in British ships, from any country but that in which they are produced; under pain of forfeiting ship and cargo. This regulation too was probably intended against the Dutch. Holland was then, as now, the great emporium for all European goods, and by this regulation, British ships were hindered from loading in Holland the goods of any other European country.

28Fourthly, salt fish of all kinds, whale–fins, whale–bone, oil, and blubber, not caught by and cured on board British vessels, when imported into Great Britain, are subjected to double aliens duty. The Dutch, as they are still the principal, were then the only fishers in Europe that attempted to supply foreign nations with fish. By this regulation, a very heavy burden was laid upon their supplying Great Britain.

29When the act of navigation was made, though England and Holland were not actually at war, the most violent animosity subsisted between the two nations. It had begun during the government of the long parliament, which first framed this act,40 and it broke out soon after in the Dutch wars during that of the Protector and of Charles the Second. It is not impossible, therefore, that some of the regulations of this famous act may have proceeded from national animosity.41 They are as wise, however, as if they had all been dictated by the most deliberate wisdom. National animosity at that particular time aimed at the very same object which the most deliberate wisdom would have recommended, the diminution of the naval power of Holland, the only naval power which could endanger the security of England.

30The act of navigation is not favourable to foreign commerce, or to the growth of that opulence which can arise from it. The interest of a nation in its commercial relations to foreign nations is, like that of a merchant with regard to the different people with whom he deals, to buy as cheap and to sell as dear as possible. But it will be most likely to buy cheap, when by the most perfect freedom of trade it encourages all nations to bring to it the goods which it has occasion to purchase; and, for the same reason, it will be most likely to sell dear, when its markets are thus filled with the greatest number of buyers. The act of navigation, it is true, lays no burden upon foreign ships that come to export the produce of British industry. Even the antient aliens duty, which used to be paid upon all goods exported as well as imported, has, by several subsequent acts, been taken off from the greater part of the articles of exportation.42 But if foreigners, either by prohibitions or high duties, are hindered from coming to sell, they cannot always afford to come to buy; because coming without a cargo, they must lose the freight from their own country to Great Britain. By diminishing the number of sellers, therefore, we necessarily diminish that of buyers, and are thus likely not only to buy foreign goods dearer, but to sell our own cheaper, than if there was a more perfect freedom of trade.43 As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England.44

31The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestick industry, is, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the home market to domestick industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax, into a less natural direction,45 and would leave the competition between foreign and domestick industry, after the tax, as nearly as possible upon the same footing as before it. In Great Britain, when any such tax is laid upon the produce of domestick industry, it is usual at the same time, in order to stop the clamorous complaints of our merchants and manufacturers, that they will be undersold at home, to lay a much heavier duty upon the importation of all foreign goods of the same kind.

32This second limitation of the freedom of trade according to some people should, upon some occasions, be extended much ^kfurther^k than to the precise foreign commodities which could come into competition with those which had been taxed at home. When the necessaries of life have been taxed in any country, it becomes proper, they pretend, to tax not only the like necessaries of life imported from other countries, but all sorts of foreign goods which can come into competition with any thing that is the produce of domestick industry. Subsistence, they say, becomes necessarily dearer in consequence of such taxes; and the price of labour must always rise with the price of the labourers subsistence.46 Every commodity, therefore, which is the produce of domestick industry, though not immediately taxed itself, becomes dearer in consequence of such taxes, because the labour which produces it becomes so. Such taxes, therefore, are really equivalent, they say, to a tax upon every particular commodity produced at home. In order to put domestick upon the same footing with foreign industry, therefore, it becomes necessary, they think, to lay some duty upon every foreign commodity, equal to this enhancement of the price of the home commodities with which it can come into competition.

33Whether taxes upon the necessaries of life, such as those in Great Britain upon^l soap, salt, leather, candles, &c. necessarily raise the price of labour, and consequently that of all other commodities, I shall consider hereafter, when I come to treat of taxes.47 Supposing, however, in the mean time, that they have this effect, and they have it undoubtedly, this general enhancement of the price of all commodities, in consequence of that of labour, is a case which differs in the two following respects from that of a particular commodity, of which the price was enhanced by a particular tax immediately imposed upon it.

34First, it might always be known with great exactness how far the price of such a commodity could be enhanced by such a tax: but how far the general enhancement of the price of labour might affect that of every different commodity, about which labour was employed, could never be known with any tolerable exactness. It would be impossible, therefore, to proportion with any tolerable exactness the tax upon every foreign, to this enhancement of the price of every home commodity.

35Secondly, taxes upon the necessaries of life have nearly the same effect upon the circumstances of the people as a poor soil and a bad climate. Provisions are thereby rendered dearer in the same manner as if it required extraordinary labour and expence to raise them. As in the natural scarcity arising from soil and climate, it would be absurd to direct the people in what manner they ought to employ their capitals and industry, so ^mis it^m likewise in the artificial scarcity arising from such taxes. To be left to accommodate, as well as they could, their industry to their situation, and to find out those employments in which, notwithstanding their unfavourable circumstances, they might have some advantage either in the home or in the foreign market, is what in both cases would evidently be most for their advantage. To lay a new tax upon them, because they are already overburdened with taxes, and because they already pay too dear for the necessaries of life, to make them likewise pay too dear for the greater part of other commodities, is certainly a most absurd way of making amends.

36Such taxes, when they have grown up to a certain height, are a curse equal to the barrenness of the earth and the inclemency of the heavens; and yet it is in the richest and most industrious countries that they have been most generally imposed. No other countries could support so great a disorder. As the strongest bodies only can live and enjoy health, under an unwholesome regimen; so the nations only, that in every sort of industry have the greatest natural and acquired advantages, can subsist and prosper under such taxes. Holland is the country in Europe in which they abound most, and which from peculiar circumstances continues to prosper, not by means of them, as has been most absurdly supposed, but in spite of them.48

37As there are two cases in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestick industry; so there are two others in which it may sometimes be a matter of deliberation; in the one, how far it is proper to continue the free importation of certain foreign goods; and in the other, how far, or in what manner it may be proper to restore that free importation after it has been for some time interrupted.

38The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods, is, when some foreign nation restrains by high duties or prohibitions the importation of some of our manufactures into their country. Revenge in this case naturally dictates retaliation, and that we should impose the like duties and prohibitions upon the importation of some or all of their manufactures into ours. Nations, accordingly seldom fail to retaliate in this manner. The French have been particularly forward to favour their own manufactures by restraining the importation of such foreign goods as could come into competition with them. In this consisted a great part of the policy of Mr. Colbert,49 who, notwithstanding his great abilities, seems in this case to have been imposed upon by the sophistry of merchants and manufacturers, who are always demanding a monopoly against their countrymen. It is at present the opinion of the most intelligent men in France that his operations of this kind have not been beneficial to his country.50 That minister, by the tarif of 1667, imposed very high duties upon a great number of foreign manufactures. Upon his refusing to moderate them in favour of the Dutch, they in 1671 prohibited the importation of the wines, brandies, and manufactures of France. The war of 1672 seems to have been in part occasioned by this commercial dispute. The peace of Nimeguen put an end to it in 1678, by moderating some of those duties in favour of the Dutch, who in consequence took off their prohibition. It was about the same time that the French and English began mutually to oppress each other’s industry, by the like duties and prohibitions, of which the French, however, seem to have set the first example. The spirit of hostility which has subsisted between the two nations ever since, has hitherto hindered them from being moderated on either side. In 1697 the English prohibited the importation of bonelace, the manufacture of Flanders.51 The government of that country, at that time under the dominion of Spain, prohibited in return the importation of English woollens. In 1700, the prohibition of importing bonelace into England, was taken off upon condition that the importation of English woollens into Flanders should be put on the same footing as before.52

39There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician,53 whose councils are directed by the momentary fluctuations of affairs. When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselvesⁿ, not only to those classes, butⁿ to almost all the other classes of them. When our neighbours prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may no doubt give encouragement to some particular class of workmen among ourselves, and by excluding some of their rivals, may enable them to raise their price in the home–market. Those workmen, however, who suffered by our neighbours prohibition will not be benefited by ours. On the contrary, they and almost all the other classes of our citizens will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favour of that particular class of workmen who were injured by our neighbours prohibition, but of some other class.

40The case in which it may sometimes be a matter of deliberation, how far, or in what manner it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is, when particular manufactures, by means of high duties or prohibitions upon all foreign goods which can come into competition with them, have been so far extended as to employ a great multitude of hands.54 Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence. The disorder which this would occasion might no doubt be very considerable. It would in all probability, however, be much less than is commonly imagined, for the two following reasons:

41First, all those manufactures, of which any part is commonly exported to other European countries without a bounty, could be very little affected by the freest importation of foreign goods. Such manufactures must be sold as cheap abroad as any other foreign goods of the same quality and kind, and consequently must be sold cheaper at home. They would still, therefore, keep possession of the home market, and though a capricious man of fashion might sometimes prefer foreign wares, merely because they were foreign, to cheaper and better goods of the same kind that were made at home, this folly could, from the nature of things, extend to so few, that it could make no sensible impression upon the general employment of the people. But a great part of all the different branches of our woollen manufacture, of our tanned leather, and of our hardware, are annually exported to other European countries without any bounty, and these are the manufactures which employ the greatest number of hands. The silk, perhaps, is the manufacture which would suffer the most by this freedom of trade, and after it the linen, though the latter much less than the former.

42Secondly, though a great number of people should, by thus restoring the freedom of trade, be thrown all at once out of their ordinary employment and common method of subsistence, it would by no means follow that they would thereby be deprived either of employment or subsistence. By the reduction of the army and navy at the end of the late war more than a hundred thousand soldiers and seamen, a number equal to what is employed in the greatest manufactures, were all at once thrown out of their ordinary employment; but, though they no doubt suffered some inconveniency, they were not thereby deprived of all employment and subsistence. The greater part of the seamen, it is probable, gradually betook themselves to the merchant–service as they could find occasion, and in the mean time both they and the soldiers were absorbed in the great mass of the people, and employed in a great variety of occupations. Not only no great convulsion, but no sensible disorder arose from so great a change in the situation of more than a hundred thousand men, all accustomed to the use of arms, and many of them to rapine and plunder. The number of vagrants was scarce anywhere sensibly increased by it, even the wages of labour were not reduced by it in any occupation, so far as I have been able to learn, except in that of seamen in the merchant–service.55 But if we compare together the habits of a soldier and of any sort of manufacturer, we shall find that those of the latter do not tend so much to disqualify him from being employed in a new trade, as those of the former from being employed in any. The manufacturer has always been accustomed to look for his subsistence from his labour only: the soldier to expect it from his pay. Application and industry have been familiar to the one; idleness and dissipation to the other. But it is surely much easier to change the direction of industry from one sort of labour to another, than to turn idleness and dissipation to any. To the greater part of manufactures besides, it has already been observed,56 there are other collateral manufactures of so similar a nature, that a workman can easily transfer his industry from one of them to another. The greater part of such workmen too are occasionally employed in country labour. The stock which employed them in a particular manufacture before, will still remain in the country to employ an equal number of people in some other way. The capital of the country remaining the same, the demand for labour will likewise be the same, or very nearly the same, though it may be exerted in different places and for different occupations. Soldiers and seamen, indeed, when discharged from the king’s service, are at liberty to exercise any trade, within any town or place of Great Britain or Ireland.57 Let the same natural liberty of exercising what species of industry they please be restored to all his majesty’s subjects, in the same manner as to soldiers and seamen; that is, break down the exclusive privileges of corporations, and repeal the statute of apprenticeship, both which are real encroachments upon natural liberty, and add to these the repeal of the law of settlements, so that a poor workman, when thrown out of employment either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal, and neither the publick nor the individuals will suffer much more from the occasional disbanding some particular classes of manufacturers, than from that of soldiers.58 Our manufacturers have no doubt great merit with their country, but they cannot have more than those who defend it with their blood, nor deserve to be treated with more delicacy.

43To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the publick, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter enflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature.59 The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest publick services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.

44The undertaker of a great manufacture who, by the home markets being suddenly laid open to the competition of foreigners, should be obliged to abandon his trade, would no doubt suffer very considerably. That part of his capital which had usually been employed in purchasing materials and in paying his workmen, might, without much difficulty, perhaps, find another employment. But that part of it which was fixed in workhouses, and in the instruments of trade, could scarce be disposed of without considerable loss. The equitable regard, therefore, to his interest requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning. The legislature, were it possible that its deliberations could be always directed, not by the clamorous importunity of partial interests, but by an extensive view of the general good, ought upon this very account, perhaps, to be particularly careful neither to establish any new monopolies of this kind, nor to extend further those which are already established. Every such regulation introduces some degree of real disorder into the constitution of the state,60 which it will be difficult afterwards to cure without occasioning another disorder.

45How far it may be proper to impose taxes upon the importation of foreign goods, in order, not to prevent their importation, but to raise a revenue for government, I shall consider hereafter when I come to treat of taxes.61 Taxes imposed with a view to prevent, or even to diminish importation, are evidently as destructive of the revenue of the customs as of the freedom of trade.

CHAPTER III

Of the extraordinary Restraints upon the Importation of Goods of almost all Kinds, from those Countries with which the Balance is supposed to be disadvantageous

^aapart i

Of the Unreasonableness of those Restraints even upon the Principles of the Commercial System^a

1To lay extraordinary restraints upon the importation of goods of almost all kinds, from those particular countries with which the balance of trade is supposed to be disadvantageous, is the second expedient by which the commercial system proposes to increase the quantity of gold and silver. ^bThus in Great Britain Silesia lawns may be imported for home consumption, upon paying certain duties. But French cambricks and lawns are prohibited to be imported , except into the port of London, there to be warehoused for exportation.1 Higher duties are imposed upon the wines of France than upon those of Portugal, or indeed of any other country. By what is called the impost 1692, a duty of five and twenty per cent., of the rate or value, was laid upon all French goods;2 while the goods of other nations were, the greater part of them, subjected to much lighter duties, seldom exceeding five per cent. The wine, brandy, salt and vinegar of France were indeed excepted; these commodities being subjected to other heavy duties, either by other laws, or by particular clauses of the same law. In 1696, a second duty of twenty–five per cent., the first not having been thought a sufficient discouragement, was imposed upon all French goods, except brandy; together with a new duty of five and twenty pounds upon the ton of French wine, and another of fifteen pounds upon the ton of French vinegar.3 French goods have never been omitted in any of those general subsidies, or duties of five per cent., which have been imposed upon all, or the greater part of the goods enumerated in the book of rates. If we count the one third and two third subsidies4 as making a compleat subsidy between them, there have been five of these general subsidies; so that before the commencement of the present war seventy–five per cent. may be considered as the lowest duty, to which the greater part of the goods of the growth, produce, or manufacture of France were liable. But upon the greater part of goods, those duties are equivalent to a prohibition. The French in their turn have, I believe, treated our goods and manufactures just as hardly; though I am not so well acquainted with the particular hardships which they have imposed upon them. Those mutual restraints have put an end to almost all fair commerce between the two nations, and smugglers are now the principal importers, either of British goods into France, or of French goods into Great Britain.^b5 The principles which I have been examining ^cin the foregoing chapter^c took their origin from private interest and the spirit of monopoly; those which I am going to examine ^din this^d , from national prejudice and animosity.6 They are, accordingly, as might well be expected, still more unreasonable. They are so, even upon the principles of the commercial system.7

2First, though it were certain that in the case of a free trade between France and England, for example, the balance would be in favour of France, it would by no means follow that such a trade would be disadvantageous to England, or that the general balance of its whole trade would thereby be turned more against it. If the wines of France are better and cheaper than those of Portugal, or its linens than those of Germany, it would be more advantageous for Great Britain to purchase both the wine and the foreign linen which it had occasion for of France, than of Portugal and Germany. Though the value of the annual importations from France would thereby be greatly augmented, the value of the whole annual importations would be diminished, in proportion as the French goods of the same quality were cheaper than those of the other two countries. This would be the case, even upon the supposition that the whole French goods imported were to be consumed in Great Britain.

3But, secondly, a great part of them might be re–exported to other countries, where, being sold with profit, they might bring back a return equal in value, perhaps, to the prime cost of the whole French goods imported. What has frequently been said of the East India trade might possibly be true of the French; that though the greater part of East India goods were bought with gold and silver, the re–exportation of a part of them to other countries, brought back more gold and silver to that which carried on the trade than the prime cost of the whole amounted to.8 One of the most important branches of the Dutch trade, at present, consists in the carriage of French goods to other European countries. ^eSome^e part even of the French wine drank in Great Britain is clandestinely imported from Holland and Zealand. If there was either a free trade between France and England, or if French goods could be imported upon paying only the same duties as those of other European nations, to be drawn back upon exportation, England might have some share of a trade which is found so advantageous to Holland.

4Thirdly, and lastly, there is no certain criterion by which we can determine on which side what is called the balance between any two countries lies, or which of them exports to the greatest value. National prejudice and animosity, prompted always by the private interest of particular traders, are the principles which generally direct our judgment upon all questions concerning it. There are two criterions, however, which have frequently been appealed to upon such occasions, the custom–house books and the course of exchange. The custom–house books, I think, it is now generally acknowledged, are a very uncertain criterion, on account of the inaccuracy of the valuation at which the greater part of goods are rated in them.9 The course of exchange ^f is, perhaps, almost equally so.

5When the exchange between two places, such as London and Paris, is at par, it is said to be a sign that the debts due from London to Paris are compensated by those due from Paris to London. On the contrary, when a premium is paid at London for a bill upon Paris, it is said to be a sign that the debts due from London to Paris are not compensated by those due from Paris to London, but that a balance in money must be sent out from the latter place; for the risk, trouble, and expence of exporting which, the premium is both demanded and given. But the ordinary state of debt and credit between those two cities must necessarily be regulated, it is said, by the ordinary course of their dealings with one another. When neither of them imports from the other to a greater amount than it exports to ^gthat other^g , the debts and credits of each may compensate one another. But when one of them imports from the other to a greater value than it exports to ^hthat other^h , the former necessarily becomes indebted to the latter in a greater sum than the latter becomes indebted to it: the debts and credits of each do not compensate one another, and money must be sent out from that place of which the debts over–balance the credits. The ⁱordinaryⁱ course of exchange, therefore, being an indication of the ordinary state of debt and credit between two places, must likewise be an indication of the ordinary course of their exports and imports, as these necessarily regulate that state.

6But though ^j the ordinary course of exchange ^kshould^k be allowed to be a sufficient indication of the ordinary state of debt and credit between any two places, it would not from thence follow, that the balance of trade was in favour of that place which had the ordinary state of debt and credit in its favour.10 The ordinary state of debt and credit between any two places is not always entirely regulated by the ordinary course of their dealings with one another; but is often influenced by that of the dealings of either with many other places. If it is usual, for example, for the merchants of England to pay for the goods which they buy of Hamburgh, Dantzic, Riga, &c. by bills upon Holland, the ordinary state of debt and credit between England and Holland will not be regulated entirely by the ordinary course of the dealings of those two countries with one another, but will be influenced by that of the dealings of England with those other places.11 England may be obliged to send out every year money to Holland, though its annual exports to that country may exceed very much the annual value of its imports from thence; and though what is called the balance of trade may be very much in favour of England.

7In the way besides in which the par of exchange has hitherto been computed, the ordinary course of exchange can afford no sufficient indication that the ordinary state of debt and credit is in favour of that country which seems to have, or which is supposed to have, the ordinary course of exchange in its favour: or, in other words, the real exchange may be, and, in fact, often is so very different from the computed one, that from the course of the latter no certain conclusion can, upon many occasions, be drawn concerning that of the former.^j

8When for a sum of money paid in England, containing, according to the standard of the English mint, a certain number of ounces of pure silver, you receive a bill for a sum of money to be paid in France, containing, according to the standard of the French mint, an equal number of ounces of pure silver, exchange is said to be at par between England and France. When you pay more, you are supposed to give a premium, and exchange is said to be against England, and in favour of France. When you pay less, you are supposed to get a premium, and exchange is said to be against France, and in favour of England.

9But, first we cannot always judge of the value of the current money of different countries by the ^lstandard^l of their respective mints. In some it is more, in others it is less worn, clipt, and otherwise degenerated from that standard. But the value of the current coin of every country, compared with that of any other country, is in proportion not to the quantity of pure silver which it ought to contain, but to that which it actually does contain. Before the reformation of the silver coin in king William’s time, exchange between England and Holland, computed, in the usual manner, according to the ^mstandard^m of their respective mints, was five and twenty per cent. against England. But the value of the current coin of England, as we learn from Mr. Lowndes, was at that time rather more than five and twenty per cent. below its standard value.12 The real exchange, therefore, may even at that time have been in favour of England, notwithstanding the computed exchange was so much against it; a smaller number of ounces of pure silver, actually paid in England, may have purchased a bill for a greater number of ounces of pure silver to be paid in Holland, and the man who was supposed to give, may in reality have got the premium. The French coin was, before the late reformation of the English gold coin,13 much less worn than the English, and was, perhaps, two or three per cent. nearer its standard. If the computed exchange with France, therefore, was not more than two or three per cent. against England, the real exchange might have been in its favour. Since the reformation of the gold coin, the exchange has been constantly in favour of England, and against France.

10Secondly, in some countries, the expence of coinage is defrayed by the government; in others, it is defrayed by the private people who carry their bullion to the mint, and the government even derives some revenue from the coinage. In England, it is defrayed by the government, and if you carry a pound weight of standard silver to the mint, you get back sixtytwo shillings, containing a pound weight of the like standard silver. In France, a duty of eight per cent. is deducted for the coinage, which not only defrays the expence of it, but affords a small revenue to the government.14 In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains.15 In France, the workmanship as you pay for it, adds to the value, in the same manner as to that of wrought plate. A sum of French money, therefore, containing a certain weight of pure silver, is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective mints, a sum of English money could not well purchase a sum of French money, containing an equal number of ounces of pure silver, nor consequently a bill upon France for such a sum. If for such a bill no more additional money was paid than what was sufficient to compensate the expence of the French coinage, the real exchange might be at par between the two countries, their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France.

11 Thirdly, and lastly, in some places, as at Amsterdam, Hamburgh, Venice, &c. foreign bills of exchange are paid in what they call bank money; while in others, as at London, Lisbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank money is always of more value than the same nominal sum of common currency. A thousand guilders in the bank of Amsterdam, for example, are of more value than a thousand guilders of Amsterdam currency. The difference between them is called the agio of the bank,16 which, at Amsterdam, is generally about five per cent. Supposing the current money of ⁿtheⁿ two countries equally near to the standard of their respective mints, and that the one pays foreign bills in this common currency, while the other pays them in bank money, it is evident that the computed exchange may be in favour of that which pays in bank money, though the real exchange should be in favour of that which pays in current money; for the same reason that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own standard, though the real exchange should be in favour of that which pays in worse. The computed exchange, before the late reformation of the gold coin, was generally against London with Amsterdam, Hamburgh, Venice, and, I believe, with all other places which pay in what is called bank money. It will by no means follow, however, that the real exchange was against it. Since the reformation of the gold coin, it has been in favour of London even with those places. The computed exchange has generally been in favour of London with Lisbon, Antwerp, Leghorn, and, if you except France, I believe, with most other parts of Europe that pay in common currency; and it is not improbable that the real exchange was so too.

Digression concerning Banks of Deposit, particularly concerning that of Amsterdam1

1The currency of a great state, such as France or England, generally consists almost entirely of its own coin. Should this currency, therefore, be at any time worn, clipt, or otherwise degraded below its standard value, the state by a reformation of its coin can effectually re–establish its currency. But the currency of a small state, such as Genoa or Hamburgh, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin, will not always be able to reform its currency. If foreign bills of exchange are paid in this currency, the uncertain value of any sum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being, in all foreign states, necessarily valued even below what it is worth.

2 In order to remedy the inconvenience to which this disadvantageous exchange must have subjected their merchants, such small states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value should be paid, not in common currency, but by an order upon, or by a transfer in the books of a certain bank, established upon the credit, and under the protection of the state; this bank being always obliged to pay, in good and true money, exactly according to the standard of the state. The banks of Venice, Genoa, Amsterdam, Hamburgh, and Nuremberg, seem to have been all originally established with this view,2 though some of them may have afterwards been made subservient to other purposes. The money of such banks being better than the common currency of the country, necessarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburgh, for example, which is said to be commonly about fourteen per cent. is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency poured into it from all the neighbouring states.

3Before 1609 the great quantity of clipt and worn foreign coin, which the extensive trade of Amsterdam brought from all parts of Europe, reduced the value of its currency about nine per cent. below that of good money fresh from the mint. Such money no sooner appeared than it was melted down or carried away, as it always is in such circumstances. The merchants, with plenty of currency, could not always find a sufficient quantity of good money to pay their bills of exchange; and the value of those bills, in spite of several regulations which were made to prevent it, became in a great measure uncertain.

4In order to remedy these inconveniencies, a bank was established in 1609 under the guarantee of the city. This bank received both foreign coin, and the light and worn coin of the country at its real intrinsic value in the good standard money of the country, deducting only so much as was necessary for defraying the expence of coinage, and the other necessary expence of management. For the value which remained, after this small deduction was made, it gave a credit in its books. This credit was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the same real value, and intrinsically worth more than current money. It was at the same time enacted, that all bills drawn upon or negociated at Amsterdam of the value of six hundred guilders and upwards should be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in consequence of this regulation, was obliged to keep an account with the bank in order to pay his foreign bills of exchange, which necessarily occasioned a certain demand for bank money.

5 Bank money, over and above both its intrinsic superiority to currency, and the additional value which this demand necessarily gives it, has likewise some other advantages. It is secure from fire, robbery, and other accidents;3 the city of Amsterdam is bound for it; it can be paid away by a simple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In consequence of those different advantages, it seems from the beginning to have borne an agio, and it is generally believed that all the money originally deposited in the bank was allowed to remain there, nobody caring to demand payment of a debt which he could sell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lose this premium. As a shilling fresh from the mint will buy no more goods in the market than one of our common worn shillings, so the good and true money which might be brought from the coffers of the bank into those of a private person, being mixed and confounded with the common currency of the country, would be of no more value than that currency, from which it could no longer be readily distinguished. While it remained in the coffers of the bank, its superiority was known and ascertained. When it had come into those of a private person, its superiority could not well be ascertained without more trouble than perhaps the difference was worth. By being brought from the coffers of the bank, besides, it lost all the other advantages of bank money; its security, its easy and safe transferability, its use in paying foreign bills of exchange. Over and above all this, it could not be brought from those coffers, as it will appear by and by, without previously paying for the keeping.

6Those deposits of coin, ^aor those deposits^a which the bank was bound to restore in coin, constituted the original capital of the bank, or the whole value of what was represented by what is called bank money. At present they are supposed to constitute but a very small part of it. In order to facilitate the trade in bullion, the bank has been for these many years in the practice of giving credit in its books upon deposits of gold and silver bullion. This credit is generally about five per cent. below the mint price of such bullion. The bank grants at the same time what is called a recipice or receipt, intitling the person who makes the deposit, or the bearer, to take out the bullion again at any time within six months, upon re–transfering to the bank a quantity of bank money equal to that for which credit had been given in its books when the deposit was made, and upon paying one–fourth per cent. for the keeping, if the deposit was in silver; and one–half per cent. if it was in gold; but at the same time declaring, that in default of such payment, and upon the expiration of this term, the deposit should belong to the bank at the price at which it had been received, or for which credit had been given in the transfer books. What is thus paid for the keeping of the deposit may be considered as a sort of warehouse rent; and why this warehouse rent should be so much dearer for gold than for silver, several different reasons have been assigned. The fineness of gold, it has been said, is more difficult to be ascertained than that of silver. Frauds are more easily practised, and occasion a greater loss in the more precious metal. Silver, besides, being the standard metal, the state, it has been said, wishes to encourage more the making of deposits of silver than ^bof^b those of gold.

7Deposits of bullion are most commonly made when the price is somewhat lower than ordinary; and they are taken out again when it happens to rise. In Holland the market price of bullion is generally above the mint price, for the same reason that it was so in England before the late reformation of the gold coin.4 The difference is said to be commonly from about six to sixteen stivers upon the mark, or eight ounces of silver of eleven parts fine, and one part alloy. The bank price, or the credit which the bank gives for deposits of such silver (when made in foreign coin, of which the fineness is well known and ascertained, such as Mexico dollars) is twenty–two guilders the mark; the mint price is about twenty–three guilders, and the market price is from twenty–three guilders six, to twenty–three guilders sixteen stivers, or from two to three per cent. above the mint price.* The proportions between the bank price, the mint price, and the market price of gold bullion, are nearly the same. A person can generally sell his receipt for the difference between the mint price of bullion and the market price. A receipt for bullion is almost always worth something, and it very seldom happens, therefore, that any body suffers his receipt to expire, or allows his bullion to fall to the bank at the price at which it had been received, either by not taking it out before the end of the six months, or by neglecting to pay the one–fourth or one–half per cent. in order to obtain a new receipt for another six months. This, however, though it happens seldom, is said to happen sometimes, and more frequently with regard to gold, than with regard to silver, on account of the higher warehouse–rent which is paid for the keeping of the more precious metal.

8The person who by making a deposit of bullion obtains both a bank credit and a receipt, pays his bills of exchange as they become due with his bank credit; and either sells or keeps his receipt according as he judges that the price of bullion is likely to rise or to fall. The receipt and the bank credit seldom keep long together, and there is no occasion that they should. The person who has a receipt, and who wants to take out bullion, finds always plenty of bank credits, or bank money to buy at the ordinary price; and the person who has bank money, and wants to take out bullion, finds receipts always in equal abundance.

9The owners of bank credits, and the holders of receipts, constitute two different sorts of creditors against the bank. The holder of a receipt cannot draw out the bullion for which it is granted, without re–assigning to the bank a sum of bank money equal to the price at which the bullion had been received. If he has no bank money of his own, he must purchase it of those who have it. The owner of bank money cannot draw out bullion without producing to the bank receipts for the quantity which he wants. If he has none of his own, he must buy them of those who have them. The holder of a receipt, when he purchases bank money, purchases the power of taking out a quantity of bullion, of which the mint price is five per cent. above the bank price. The agio of five per cent. therefore, which he commonly pays for it, is paid, not for an imaginary, but for a real value. The owner of bank money, when he purchases a receipt, purchases the power of taking out a quantity of bullion of which the market price is commonly from two to three per cent. above the mint price. The price which he pays for it, therefore, is paid likewise for a real value. The price of the receipt, and the price of the bank money, compound or make up between them the full value or price of the bullion.

10Upon deposits of the coin current in the country, the bank grants receipts likewise as well as bank credits; but those receipts are frequently of no value, and will bring no price in the market. Upon ducatoons, for example, which in the currency pass for three guilders three stivers each, the bank gives a credit of three guilders only, or five per cent. below their current value. It grants a receipt likewise intitling the bearer to take out the number of ducatoons deposited at any time within six months, upon paying one–fourth per cent. for the keeping. This receipt will frequently bring no price in the market. Three guilders bank money generally sell in the market for three guilders three stivers, the full value of the ducatoons, if they were taken out of the bank; and before they can be taken out, one–fourth per cent. must be paid for the keeping, which would be mere loss to the holder of the receipt. If the agio of the bank, however, should at any time fall to three per cent. such receipts might bring some price in the market, and might sell for one and three–fourths per cent. But the agio of the bank being now generally about five per cent. such receipts are frequently allowed to expire, or as they express it, to fall to the bank. The receipts which are given for deposits of gold ducats fall to it yet more frequently, because a higher warehouse–rent, or one–half per cent. must be paid for the keeping of them before they can be taken out again. The five per cent. which the bank gains, when deposits either of coin or bullion are allowed to fall to it, may be considered as the warehouse–rent for the perpetual keeping of such deposits.

11The sum of bank money for which the receipts are expired must be very considerable. It must comprehend the whole original capital of the bank, which, it is generally supposed, has been allowed to remain there from the time it was first deposited, nobody caring either to renew his receipt or to take out his deposit, as, for the reasons already assigned, neither the one nor the other could be done without loss. But whatever may be the amount of this sum, the proportion which it bears to the whole mass of bank money is supposed to be very small. The bank of Amsterdam has for these many years past been the great warehouse of Europe for bullion, for which the receipts are very seldom allowed to expire, or, as they express it, to fall to the bank. The far greater part of the bank money, or of the credits upon the books of the bank, is supposed to have been created, for these many years past, by such deposits which the dealers in bullion are continually both making and withdrawing.

12No demand can be made upon the bank but by means of a recipice or receipt. The smaller mass of bank money, for which the receipts are expired, is mixed and confounded with the much greater mass for which they are still in force; so that, though there may be a considerable sum of bank money, for which there are no receipts, there is no specific sum or portion of it, which may not at any time be demanded by one. The bank cannot be debtor to two persons for the same thing; and the owner of bank money who has no receipt, cannot demand payment of the bank till he buys one. In ordinary and quiet times, he can find no difficulty in getting one to buy at the market price, which generally corresponds with the price at which he can sell the coin or bullion it intitles him to take out of the bank.

13It might be otherwise during a publick calamity; an invasion, for example, such as that of the French in 1672. The owners of bank money being then all eager to draw it out of the bank, in order to have it in their own keeping, the demand for receipts might raise their price to an exorbitant height. The holders of them might form extravagant expectations, and, instead of two or three per cent. demand half the bank money for which credit had been given upon the deposits that the receipts had respectively been granted for. The enemy, informed of the constitution of the bank, might even buy them up in order to prevent the carrying away of the treasure. In such emergencies, the bank, it is supposed, would break through its ordinary rule of making payment only to the holders of receipts. The holders of receipts, who had no bank money, must have received within two or three per cent. of the value of the deposit for which their respective receipts had been granted. The bank, therefore, it is said, would in this case make no scruple of paying, either with money or bullion, the full value of what the owners of bank money who could get no receipts, were credited for in its books; paying at the same time two or three per cent. to such holders of receipts as had no bank money, that being the whole value which in this state of things could justly be supposed due to them.

14Even in ordinary and quiet times it is the interest of the holders of receipts to depress the agio, in order either to buy bank money (and consequently the bullion, which their receipts would then enable them to take out of the bank) so much cheaper, or to sell their receipts to those who have bank money, and who want to take out bullion, so much dearer; the price of a receipt being generally equal to the difference between the market price of bank money, and that of the coin or bullion for which the receipt had been granted. It is the interest of the owners of bank money, on the contrary, to raise the agio, in order either to sell their bank money so much dearer, or to buy a receipt so much cheaper. To prevent the stock–jobbing tricks which those opposite interests might sometimes occasion, the bank has of late years come to the resolution to sell at all times bank money for currency, at five per cent. agio, and to buy it in again at four per cent. agio. In consequence of this resolution, the agio can never either rise above five, or sink below four per cent. and the proportion between the market price of bank and that of current money, is kept at all times very near to the proportion between their intrinsick values. Before this resolution was taken, the market price of bank money used sometimes to rise so high as nine per cent. agio, and sometimes to sink so low as par, according as opposite interests happened to influence the market.

15The bank of Amsterdam professes to lend out no part of what is deposited with it, but, for every guilder for which it gives credit in its books, to keep in its repositories the value of a guilder either in money or bullion. That it keeps in its repositories all the money or bullion for which there are receipts in force, for which it is at all times liable to be called upon, and which, in reality, is continually going from it and returning to it again, cannot well be doubted. But whether it does so likewise with regard to that part of its capital, for which the receipts are long ago expired, for which in ordinary and quiet times it cannot be called upon, and which in reality is very likely to remain with it for ever, or as long as the States of the United Provinces subsist, may perhaps appear more uncertain. At Amsterdam, however, no point of faith is better established than that for every guilder, circulated as bank money, there is a correspondent guilder in gold or silver to be found in the treasure of the bank. The city is guarantee that it should be so. The bank is under the direction of the four reigning burgomasters, who are changed every year. Each new sett of burgomasters visits the treasure, compares it with the books, receives it upon oath, and delivers it over, with the same awful solemnity, to the sett which succeeds^c; and in that sober and religious country oaths are not yet disregarded. A rotation of this kind seems alone a sufficient security against any practices which cannot be avowed. Amidst all the revolutions which faction has ever occasioned in the government of Amsterdam, the prevailing party has at no time accused their predecessors of infidelity in the administration of the bank. No accusation could have affected more deeply the reputation and fortune of the disgraced party, and if such an accusation could have been supported, we may be assured that it would have been brought. In 1672, when the French king was at Utrecht, the bank of Amsterdam paid so readily as left no doubt of the fidelity with which it had observed its engagements. Some of the pieces which were then brought from its repositories appeared to have been scorched with the fire which happened in the town–house soon after the bank was established.5 Those pieces, therefore, must have lain there from that time.6

16What may be the amount of the treasure in the bank, is a question which has long employed the speculations of the curious. Nothing but conjecture can be offered concerning it. It is generally reckoned that there are about two thousand people who keep accounts with the bank, and allowing them to have, one with another, the value of fifteen hundred pounds sterling lying upon their respective accounts (a very large allowance), the whole quantity of bank money, and consequently of treasure in the bank, will amount to about three millions sterling, or, at eleven guilders the pound sterling, thirty–three millions of guilders; a great sum, and sufficient to carry on a very extensive circulation; but vastly below the extravagant ideas which some people have formed of this treasure.7

17The city of Amsterdam derives a considerable revenue from the bank. Besides what may be called the warehouse–rent above mentioned, each person, upon first opening an account with the bank, pays a fee of ten guilders; and for every new account three guilders three stivers; for every transfer two stivers; and if the transfer is for less than three hundred guilders, six stivers, in order to discourage the multiplicity of small transactions. The person who neglects to balance his account twice in the year forfeits twenty–five guilders. The person who orders a transfer for more than is upon his account, is obliged to pay three per cent. for the sum over–drawn, and his order is set aside into the bargain. The bank is supposed too to make a considerable profit by the sale of the foreign coin or bullion which sometimes falls to it by the expiring of receipts, and which is always kept till it can be sold with advantage. It makes a profit likewise by selling bank money at five per cent. agio, and buying it in at four. These different emoluments amount to a good deal more than what is necessary for paying the salaries of officers, and defraying the expence of management. What is paid for the keeping of bullion upon receipts, is alone supposed to amount to a neat annual revenue of between one hundred and fifty thousand and two hundred thousand guilders. Public utility, however, and not revenue, was the original object of this institution. Its object was to relieve the merchants from the inconvenience of a disadvantageous exchange. The revenue which has arisen from it was unforeseen, and may be considered as accidental. But it is now time to return from this long digression, into which I have been insensibly led in endeavouring to explain the reasons why the exchange between the countries which pay in what is called bank money, and those which pay in common currency, should generally appear to be in favour of the former, and against the latter. The former pay in a species of money of which the intrinsic value is always the same, and exactly agreeable to the standard of their respective mints; the latter in a species of money of which the intrinsic value is continually varying, and is almost always more or less below that standard.^d

^aapart ii

Of the Unreasonableness of those extraordinary Restraints upon other Principles^a

1^bIn the foregoing Part of this Chapter I have endeavoured to^b shew, even upon the principles of the commercial system, how unnecessary it is to lay extraordinary restraints upon the importation of goods from those countries with which the balance of trade is supposed to be disadvantageous.

2Nothing, however, can be more absurd than this whole doctrine of the balance of trade,1 upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses, and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade which is forced by means of bounties and monopolies, may be, and commonly is disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to shew hereafter.2 But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both.

3By advantage or gain, I understand, not the increase of the quantity of gold and silver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants.

4If the balance be even, and if the trade between the two places consist altogether in the exchange of their native commodities, they will, upon most occasions, not only both gain, but they will gain equally, or very near equally; each will in this case afford a market for a part of the surplus produce of the other: each will replace a capital which had been employed in raising ^cand preparing for the market^c3 this part of the surplus produce of the other, and which had been distributed among, and given revenue and maintenance to a certain number of its inhabitants. Some part of the inhabitants of each, therefore, will indirectly derive their revenue and maintenance from the other. As the commodities exchanged too are supposed to be of equal value, so the two capitals employed in the trade will, upon most occasions, be equal, or very nearly equal; and both being employed in raising the native commodities of the two countries, the revenue and maintenance which their distribution will afford to the inhabitants of each will be equal, or very nearly equal. This revenue and maintenance, thus mutually afforded, will be greater or smaller in proportion to the extent of their dealings. If these should annually amount to an hundred thousand pounds, for example, or to a million on each side, each of them ^dwould^d afford an annual revenue, in the one case, of an hundred thousand pounds, in the other, of a million, to the inhabitants of the other.

5If their trade should be of such a nature that one of them exported to the other nothing but native commodities, while the returns of that other consisted altogether in foreign goods; the balance, in this case, would still be supposed even, commodities being paid for with commodities. They would, in this case too, both gain, but they would not gain equally; and the inhabitants of the country which exported nothing but native commodities would derive the greatest revenue from the trade. If England, for example, should import from France nothing but the native commodities of that country, and, not having such commodities of its own as were in demand there, should annually repay them by sending thither a large quantity of foreign goods, tobacco, we shall suppose, and East India goods; this trade, though it would give some revenue to the inhabitants of both countries, would give more to those of France than to those of England. The whole French capital annually employed in it would annually be distributed among the people of France. But that part of the English capital only which was employed in producing the English commodities with which those foreign goods were purchased, would be annually distributed among the people of England. The greater part of it would replace the capitals which had been employed in Virginia, Indostan, and China, and which had given revenue and maintenance to the inhabitants of those distant countries. If the capitals were equal, or nearly equal, therefore, this employment of the French capital would augment much more the revenue of the people of France, than that of the English capital would the revenue of the people of England. France would in this case carry on a direct foreign trade of consumption with England; whereas England would carry on a round–about trade of the same kind with France. The different effects of a capital employed in the direct, and of one employed in the round–about foreign trade of consumption, have already been fully explained.4

6There is not, probably, between any two countries, a trade which consists altogether in the exchange either of native commodities on both sides, or of native commodities on one side and of foreign goods on the other. Almost all countries exchange with one another partly native and partly foreign goods. That country, however, in whose cargoes there is the greatest proportion of native, and the least of foreign goods, will always be the principal gainer.

7^e If it was not with tobacco and East India goods, but with gold and silver, that England paid for the commodities annually imported from France, the balance, in this case, would be supposed uneven, commodities not being paid for with commodities, but with gold and silver. The trade, however, would, in this case, as in the foregoing, give some revenue to the inhabitants of both countries, but more to those of France than to those of England. It would give some revenue to those of England. The capital which had been employed in producing the English goods that purchased this gold and silver, the capital which had been distributed among, and given revenue to certain inhabitants of England, would thereby be replaced, and enabled to continue that employment. The whole capital of England would no more be diminished by this exportation of gold and silver, than by the exportation of an equal value of any other goods. On the contrary, it would, in most cases, be augmented. No goods are sent abroad but those for which the demand is supposed to be greater abroad than at home, and of which the returns consequently, it is expected, will be of more value at home than the commodities exported. If the tobacco which, in England, is worth only a hundred thousand pounds, when sent to France will purchase wine which is, in England, worth a hundred and ten thousand pounds, the exchange will augment the capital of England by ten thousand pounds. If a hundred thousand pounds of English gold, in the same manner, purchase French wine, which, in England, is worth a hundred and ten thousand, this exchange will equally augment the capital of England by ten thousand pounds. As a merchant who has a hundred and ten thousand pounds worth of wine in his cellar, is a richer man than he who has only a hundred thousand pounds worth of tobacco in his warehouse, so is he likewise a richer man than he who has only a hundred thousand pounds worth of gold in his coffers. He can put into motion a greater quantity of industry, and give revenue, maintenance, and employment, to a greater number of people than either of the other two. But the capital of the country is equal to the capitals of all its different inhabitants, and the quantity of industry which can be annually maintained in it, is equal to what all those different capitals can maintain. Both the capital of the country, therefore, and the quantity of industry which can be annually maintained in it, must generally be augmented by this exchange. It would, indeed, be more advantageous for England that it could purchase the wines of France with its own hardware and broad–cloth, than with either the tobacco of Virginia, or the gold and silver of Brazil and Peru. A direct foreign trade of consumption is always more advantageous than a round–about one. But a round–about foreign trade of consumption, which is carried on with gold and silver, does not seem to be less advantageous than any other equally round–about one. Neither is a country which has no mines more likely to be exhausted of gold and silver by this annual exportation of those metals, than one which does not grow tobacco by the like annual exportation of that plant. As a country which has wherewithal to buy tobacco will never be long in want of it, so neither will one be long in want of gold and silver which has wherewithal to purchase those metals.5

8It is a losing trade, it is said, which a workman carries on with the alehouse; and the trade which a manufacturing nation would naturally carry on with a wine country, may be considered as a trade of the same nature. I answer, that the trade with the alehouse is not necessarily a losing trade. In its own nature it is just as advantageous as any other, though, perhaps, somewhat more liable to be abused.6 The employment of a brewer, and even that of a retailer of fermented liquors, are as necessary divisions of labour as any other. It will generally be more advantageous for a workman to buy of the brewer the quantity he has occasion for, than to ^fbrew^f it himself, and if he is a poor workman, it will generally be more advantageous for him to buy it, by little and little of the retailer, than a large quantity of the brewer. He may no doubt buy too much of either, as he may of any other dealers in his neighbourhood, of the butcher, if he is a glutton, or of the draper, if he affects to be a beau among his companions. It is advantageous to the great body of workmen, notwithstanding, that all these trades should be free, though this freedom may be abused in all of them, and is more likely to be so, perhaps, in some than in others. Though individuals, besides, may sometimes ruin their fortunes by an excessive consumption of fermented liquors, there seems to be no risk that a nation should do so. Though in every country there are many people who spend upon such liquors more than they can afford, there are always many more who spend less. It deserves to be remarked too that, if we consult experience, the cheapness of wine seems to be a cause, not of drunkenness, but of sobriety. The inhabitants of the wine countries are in general the soberest people in Europe; witness the Spaniards, the Italians, and the inhabitants of the southern provinces of France. People are seldom guilty of excess in what is their daily fare. Nobody affects the character of liberality and good fellowship, by being profuse of a liquor which is as cheap as small beer. On the contrary, in the countries which, ^geither from^g excessive heat or cold, produce no grapes, and where wine consequently is dear and a rarity, drunkenness is a common vice, as among the northern nations, and all those who live between the tropics, the negroes, for example, on the coast of Guinea. When a French regiment comes from some of the northern provinces of France, where wine is somewhat dear, to be quartered in the southern, where it is very cheap, the soldiers, I have frequently heard it observed, are at first debauched by the cheapness and novelty of good wine; but after a few months residence, the greater part of them become as sober as the rest of the inhabitants. Were the duties upon foreign wines, and the excises upon malt, beer, and ale, to be taken away all at once, it might, in the same manner, occasion in Great Britain a pretty general and temporary drunkenness among the middling and inferior ranks of people, which would probably be soon followed by a permanent and almost universal sobriety.7 At present drunkenness is by no means the vice of people of fashion, or of those who can easily afford the most expensive liquors. A gentleman drunk with ale, has scarce ever been seen among us.8 The restraints upon the wine trade in Great Britain, besides, do not so much seem calculated to hinder the people from going, if I may say so, to the alehouse, as from going where they can buy the best and cheapest liquor. They favour the wine trade of Portugal, and discourage that of France. The Portuguese, it is said, indeed, are better customers for our manufactures than the French, and should therefore be encouraged in preference to them. As they give us their custom, it is pretended, we should give them ours. The sneaking arts of underling tradesmen are thus erected into political maxims for the conduct of a great empire: for it is the most underling tradesmen only who make it a rule to employ chiefly their own customers. A great trader purchases his goods always where they are cheapest and best, without regard to any little interest of this kind.

9By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe, than the impertinent jealousy of merchants and manufacturers. The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit of a remedy. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquillity of any body but themselves.

10That it was the spirit of monopoly which originally both invented and propagated this doctrine, cannot be doubted; and they who first taught it were by no means such fools as they who believed it. In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.9 As it is the interest of the freemen of a corporation to hinder the rest of the inhabitants from employing any workmen but themselves, so it is the interest of the merchants and manufacturers of every country to secure to themselves the monopoly of the home market. Hence in Great Britain, and in most other European countries, the extraordinary duties upon almost all goods imported by alien merchants.10 Hence the high duties and prohibitions upon all those foreign manufactures which can come into competition with our own. Hence too the extraordinary restraints upon the importation of almost all sorts of goods from those countries with which the balance of trade is supposed to be disadvantageous; that is, from those against whom national animosity happens to be most violently inflamed.

11The wealth of a neighbouring nation, however, though dangerous in war and politicks, is certainly advantageous in trade. In a state of hostility it may enable our enemies to maintain fleets and armies superior to our own; but in a state of peace and commerce it must likewise enable them to exchange with us to a greater value, and to afford a better market, either for the immediate produce of our own industry, or for whatever is purchased with that produce. As a rich man is likely to be a better customer to the industrious people in his neighbourhood, than a poor, so is likewise a rich nation. A rich man, indeed, who is himself a manufacturer, is a very dangerous neighbour to all those who deal in the same way. All the rest of the neighbourhood, however, by far the greatest number, profit by the good market which his expence affords them. They even profit by his under–selling the poorer workmen who deal in the same way with him. The manufacturers of a rich nation, in the same manner, may no doubt be very dangerous rivals to those of their neighbours. This very competition, however, is advantageous to the great body of the people, who profit greatly besides by the good market which the great expence of such a nation affords them in every other way. Private people who want to make a fortune, never think of retiring to the remote and poor provinces of the country, but resort either to the capital or to some of the great commercial towns. They know, that, where little wealth circulates, there is little to be got, but that where a great deal is in motion, some share of it may fall to them. The same maxims which would in this manner direct the common sense of one, or ten, or twenty individuals, should regulate the judgment of one, or ten, or twenty millions, and should make a whole nation regard the riches of its neighbours, as a probable cause and occasion for itself to acquire riches. A nation that would enrich itself by foreign trade is certainly most likely to do so when its neighbours are all rich, industrious, and commercial nations. A great nation surrounded on all sides by wandering savages and poor barbarians might, no doubt, acquire riches by the cultivation of its own lands, and by its own interior commerce, but not by foreign trade. It seems to have been in this manner that the antient Egyptians and the modern Chinese acquired their great wealth. The antient Egyptians, it is said, neglected foreign commerce, and the modern Chinese, it is known, hold it in the utmost contempt, and scarce deign to afford it the decent protection of the laws. The modern maxims of foreign commerce, by aiming at the impoverishment of all our neighbours, so far as they are capable of producing their intended effect, tend to render that very commerce insignificant and contemptible.11

12^h It is in consequence of these maxims that the commerce between France and England has in both countries been subjected to so many discouragements and restraints. If those two countries, however, were to consider their real interest, without either mercantile jealousy or national animosity, the commerce of France might be more advantageous to Great Britain than that of any other country, and for the same reason that of Great Britain to France. France is the nearest neighbour to Great Britain. In the trade between the southern coast of England and the northern and north–western coasts of France, the returns might be expected, in the same manner as in the inland trade, four, five, or six times in the year. The capital, therefore, employed in this trade, could in each of the two countries keep in motion four, five, or six times the quantity of industry, and afford employment and subsistence to four, five, or six times the number of people, which an equal capital could do in the greater part of the other branches of foreign trade. Between the parts of France and Great Britain most remote from one another, the returns might be expected, at least, once in the year, and even this trade would so far be at least equally advantageous as the greater part of the other branches of our foreign European trade. It would be, at least, three times more advantageous, than the boasted trade with our North American colonies, in which the returns were seldom made in less than three years, frequently not in less than four or five years.12 France, besides, is supposed to contain twenty–four millions of inhabitants.13 Our North American colonies were never supposed to contain more than three millions:14 And France is a much richer country than North America; though, on account of the more unequal distribution of riches, there is much more poverty and beggary in the one country, than in the other. France, therefore, could afford a market at least eight times more extensive, and, on account of the superior frequency of the returns, four and twenty times more advantageous, than that which our North American colonies ever afforded. The trade of Great Britain would be just as advantageous to France, and, in proportion to the wealth, population and proximity of the respective countries, would have the same superiority over that which France carries on with her own colonies.15 Such is the very great difference between that trade which the wisdom of both nations has thought proper to discourage, and that which it has favoured the most.

13But the very same circumstances which would have rendered an open and free commerce between the two countries so advantageous to both, have occasioned the principal obstructions to that commerce. Being neighbours, they are necessarily enemies, and the wealth and power of each becomes, upon that account, more formidable to the other; and what would increase the advantage of national friendship, serves only to inflame the violence of national animosity. They are both rich and industrious nations; and the merchants and manufacturers of each, dread the competition of the skill and activity of those of the other. Mercantile jealousy is excited, and both inflames, and is itself inflamed, by the violence of national animosity: And the traders of both countries have announced, with all the passionate confidence of interested falsehood, the certain ruin of each, in consequence of that unfavourable balance of trade, which, they pretend, would be the infallible effect of an unrestrained commerce with the other.^h

14There is no commercial country in Europe of which the approaching ruin has not frequently been foretold by the pretended doctors of this system, from an unfavourable balance of trade.16 After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favour and against their neighbours, it does not appear that any one nation in Europe has been in any respect impoverished by this cause. Every town and country, on the contrary, in proportion as they have opened their ports to all nations; instead of being ruined by this free trade, as the principles of the commercial system would lead us to expect, have been enriched by it.17 Though there are in Europe, indeed, a few towns which in some respects deserve the name of free ports, there is no country which does so. Holland, perhaps, approaches the nearest to this character of any, though still very remote from it; and Holland, it is acknowledged, not only derives its whole wealth, but a great part of its necessary subsistence, from foreign trade.

15There is another balance, indeed, which has already been explained, very different from the balance of trade, and which, according as it happens to be either favourable or unfavourable, necessarily occasions the prosperity or decay of every nation. This is the balance of the annual produce and consumption. If the exchangeable value of the annual produce, it has already been observed, exceeds that of the annual consumption, the capital of the society must annually increase in proportion to this excess. The society in this case lives within its revenue, and what is annually saved out of its revenue, is naturally added to its capital, and employed so as to increase still further the annual produce.18 If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expence of the society in this case exceeds its revenue, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and, together with it, the exchangeable value of the annual produce of its industry.

16This balance of produce and consumption is entirely different from, what is called, the balance of trade. It might take place in a nation which had no foreign trade, but which was entirely separated from all the world. It may take place in the whole globe of the earth, of which the wealth, population, and improvement may be either gradually increasing or gradually decaying.

17The balance of produce and consumption may be constantly in favour of a nation, though what is called the balance of trade be generally against it. A nation may import to a greater value than it exports for half a century, perhaps, together; the gold and silver which comes into it during all this time may be all immediately sent out of it; its circulating coin may gradually decay, different sorts of paper money being substituted in its place, and even the debts too which it contracts in the principal nations with whom it deals, may be gradually increasing; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may, during the same period, have been increasing in a much greater proportion. The state of our North American colonies, and ⁱofⁱ the trade which they carried on with Great Britain, before the commencement of the ^jpresent^j disturbances* , may serve as a proof that this is by no means an impossible supposition.

CHAPTER IV

Of Drawbacks

1Merchants and manufacturers are not contented with the monopoly of the home market, but desire likewise the most extensive foreign sale for their goods. Their country has no jurisdiction in foreign nations, and therefore can seldom procure them any monopoly there. They are generally obliged, therefore, to content themselves with petitioning for certain encouragements to exportation.

2Of these encouragements what are called Drawbacks seem to be the most reasonable. To allow the merchant to draw back upon exportation, either the whole or a part of whatever excise or inland duty is imposed upon domestick industry, can never occasion the exportation of a greater quantity of goods than what would have been exported had no duty been imposed. Such encouragements do not tend to turn towards any particular employment a greater share of the capital of the country, than what would go to ^athat employment^a of its own accord, but only to hinder the duty from driving away any part of that share to other employments. They tend not to overturn that balance which naturally establishes itself among all the various employments of the society; but to hinder it from being overturned by the duty. They tend not to destroy, but to preserve, what it is in most cases advantageous to preserve, the natural division and distribution of labour in the society.

3The same thing may be said of the drawbacks upon the re–exportation of foreign goods imported; which in Great Britain generally amount to by much the largest part of the duty upon importation. ^b By the second of the rules, annexed to the act of parliament,1 which imposed, what is now called, the old subsidy, every merchant, whether English or alien, was allowed to draw back half that duty upon exportation; the English merchant, provided the exportation took place within twelve months; the alien, provided it took place within nine months. Wines, currants, and wrought silks were the only goods which did not fall within this rule, having other and more advantageous allowances. The duties imposed by this act of parliament were, at that time, the only duties upon the importation of foreign goods. The term within which this, and all other drawbacks, could be claimed, was afterwards (by 7 Geo. I. chap. 21. sect. 10.) extended to three years.2

4The duties which have been imposed since the old subsidy, are, the greater part of them, wholly drawn back upon exportation. This general rule, however, is liable to a great number of exceptions, and the doctrine of drawbacks has become a much less simple matter, than it was at their first institution.

5Upon the exportation of some foreign goods, of which it was expected that the importation would greatly exceed what was necessary for the home consumption, the whole duties are drawn back, without retaining even half the old subsidy. Before the revolt of our North American colonies, we had the monopoly of the tobacco of Maryland and Virginia. We imported about ninety–six thousand hogsheads, and the home consumption was not supposed to exceed fourteen thousand.3 To facilitate the great exportation which was necessary, in order to rid us of the rest, the whole duties were drawn back, provided the exportation took place within three years.

6We still have, though not altogether, yet very nearly, the monopoly of the sugars of our West Indian Islands. If sugars are exported within a year, therefore, all the duties upon importation are drawn back, and if exported within three years, all the duties, except half the old subsidy, which still continues to be retained upon the exportation of the greater part of goods. Though the importation of sugar exceeds, a good deal, what is necessary for the home consumption, the excess is inconsiderable, in comparison of what it used to be in tobacco.

7Some goods, the particular objects of the jealousy of our own manufacturers, are prohibited to be imported for home consumption. They may, however, upon paying certain duties, be imported and warehoused for exportation. But upon such exportation, no part of these duties ^care^c drawn back. Our manufacturers are unwilling, it seems, that even this restricted importation should be encouraged, and are afraid lest some part of these goods should be stolen out of the warehouse, and thus come into competition with their own. It is under these regulations only that we can import wrought silks,4 French cambricks and lawns,5 callicoes painted, printed, stained, or dyed, &c.

8We are unwilling even to be the carriers of French goods, and choose rather to forego a profit to ourselves, than to suffer those, whom we consider as our enemies, to make any profit by our means. Not only half the old subsidy, but the second twenty–five per cent., is retained upon the exportation of all French goods.6

9By the fourth of the rules annexed to the old subsidy,7 the drawback allowed upon the exportation of all wines amounted to a great deal more than half the duties which were, at that time, paid upon their importation; and it seems, at that time, to have been the object of the legislature to give somewhat more than ordinary encouragement to the carrying trade in wine. Several of the other duties too, which were imposed, either at the same time, or subsequent to the old subsidy; what is called the additional duty, the new subsidy,8 the one–third9 and two–thirds subsidies,10 the impost 1692,11 the coinage on wine,12 were allowed to be wholly drawn back upon exportation.13 All those duties, however, except the additional duty and impost 1692, being paid down in ready money, upon importation, the interest of so large a sum occasioned an expence, which made it unreasonable to expect any profitable carrying trade in this article. Only a part, therefore, of the duty called the impost on wine,14 and no part of the twenty–five pounds the ton upon French wines,15 or of the duties imposed in 1745,16 in 1763,17 and in 1778,18 were allowed to be drawn back upon exportation. The two imposts of five per cent., imposed in 177919 and 1781,20 upon all the former duties of customs, being allowed to be wholly drawn back upon the exportation of all other goods, were likewise allowed to be drawn back upon that of wine. The last duty that has been particularly imposed upon wine, that of 1780,21 is allowed to be wholly drawn back, an indulgence, which, when so many heavy duties are retained, most probably could never occasion the exportation of a single ton of wine. These rules take place with regard to all places of lawful exportation, except the British colonies in America.

10The 15th Charles II. chap. 7.22 called an act for the encouragement of trade, had given Great Britain the monopoly of supplying the colonies with all the commodities of the growth or manufacture of Europe; and consequently with wines. In a country of so extensive a coast as our North American and West Indian colonies, where our authority was always so very slender, and where the inhabitants were allowed to carry out, in their own ships, their non–enumerated commodities, at first, to all parts of Europe, and afterwards, to all parts of Europe South of Cape Finisterre,23 it is not very probable that this monopoly could ever be much respected; and they probably, at all times, found means of bringing back some cargo from the countries to which they were allowed to carry out one. They seem, however, to have found some difficulty in importing European wines from the places of their growth, and they could not well import them from Great Britain, where they were loaded with many heavy duties, of which a considerable part was not drawn back upon exportation. Madeira wine, not being a European commodity,24 could be imported directly into America and the West Indies, countries which, in all their non–enumerated commodities, enjoyed a free trade to the island of Madeira. These circumstances had probably introduced that general taste for Madeira wine, which our officers found established in all our colonies at the commencement of the war, which began in 1755, and which they brought back with them to the mother country, where that wine had not been much in fashion before. Upon the conclusion of that war, in 1763 (by the 4th Geo. III. Chap. 15. Sect. 12.),25 all the duties, except 3l. 10s. were allowed to be drawn back, upon the exportation to the colonies of all wines, except French wines, to the commerce and consumption of which, national prejudice would allow no sort of encouragement. The period between the granting of this indulgence and the revolt of our North American colonies was probably too short to admit of any considerable change in the customs of those countries.

11The same act, which, in the drawback upon all wines, except French wines, thus favoured the colonies so much more than other countries; in those, upon the greater part of other commodities, favoured them much less. Upon the exportation of the greater part of commodities to other countries, half the old subsidy was drawn back. But this law enacted, that no part of that duty should be drawn back upon the exportation to the colonies of any commodities, of the growth or manufacture either of Europe or the East Indies, except wines, white callicoes and muslins.^b

12Drawbacks were, perhaps, originally granted for the encouragement of the carrying trade, which, as the freight of the ships is frequently paid by foreigners in money, was supposed to be peculiarly fitted for bringing gold and silver into the country. But though the carrying trade certainly deserves no peculiar encouragement, though the motive of the institution was, perhaps abundantly foolish, the institution itself seems reasonable enough. Such drawbacks cannot force into this trade a greater share of the capital of the country than what would have gone to it of its own accord, had there been no duties upon importation. They only prevent its being excluded altogether by those duties. The carrying trade, though it deserves no preference, ought not to be precluded, but to be left free like all other trades. It is a necessary resource ^dfor^d those capitals which cannot find employment either in the agriculture or in the manufactures of the country, either in its home trade or in its foreign trade of consumption.26

13The revenue of the customs, instead of suffering, profits from such drawbacks, by that part of the duty which is retained. If the whole duties had been retained, the foreign goods upon which they are paid, could seldom have been exported, nor consequently imported, for want of a market. The duties, therefore, of which a part is retained, would never have been paid.

14These reasons seem sufficiently to justify drawbacks, and would justify them, though the whole duties, whether upon the produce of domestick industry, or upon foreign goods, were always drawn back upon exportation. The revenue of excise would in this case, indeed, suffer a little, and that of the customs a good deal more; but the natural balance of industry,27 the natural division and distribution of labour, which is always more or less disturbed by such duties, would be more nearly re–established by such a regulation.

15These reasons, however, will justify drawbacks only upon exporting goods to those countries which are altogether foreign and independent, not to those in which our merchants and manufacturers enjoy a monopoly. A drawback, for example, upon the exportation of European goods to our American colonies, will not always occasion a greater exportation than what would have taken place without it. By means of the monopoly which our merchants and manufacturers enjoy there, the same quantity might frequently, perhaps, be sent thither, though the whole duties were retained. The drawback, therefore, may frequently be pure loss to the revenue of excise and customs, without altering the state of the trade, or rendering it in any respect more extensive. How far such drawbacks can be justified, as a proper encouragement to the industry of our colonies, or how far it is advantageous to the mother country, that they should be exempted from taxes which are paid by all the rest of their fellow–subjects, will appear hereafter when I come to treat of colonies.28

16Drawbacks, however, it must always be understood, are useful only in those cases in which the goods for the exportation of which they are given, are really exported to some foreign country; and not clandestinely reimported into our own. That some drawbacks, particularly those upon tobacco, have frequently been abused in this manner, and have given occasion to many frauds equally hurtful both to the revenue and to the fair trader, is well known.

CHAPTER V

Of Bounties

1Bounties upon exportation are, in Great Britain, frequently petitioned for, and sometimes granted to the produce of particular branches of domestick industry.1 By means of them our merchants and manufacturers, it is pretended, will be enabled to sell their goods as cheap, or cheaper than their rivals in the foreign market. A greater quantity, it is said, will thus be exported, and the balance of trade consequently turned more in favour of our own country. We cannot give our workmen a monopoly in the foreign, as we have done in the home market. We cannot force foreigners to buy their goods, as we have done our own countrymen. The next best expedient, it has been thought, therefore, is to pay them for buying. It is in this manner that the mercantile system proposes to enrich the whole country, and to put money into all our pockets by means of the balance of trade.2

2Bounties, it is allowed, ought to be given to those branches of trade only which cannot be carried on without them. But every branch of trade in which the merchant can sell his goods for a price which replaces to him, with the ordinary profits of stock, the whole capital employed in preparing and sending them to market, can be carried on without a bounty. Every such branch is evidently upon a level with all the other branches of trade which are carried on without bounties, and cannot therefore require one more than they. Those trades only require bounties in which the merchant is obliged to sell his goods for a price which does not replace to him his capital, together with the ordinary profit; or in which he is obliged to sell them for less than it really costs him to send them to market. The bounty is given in order to make up this loss, and to encourage him to continue, or perhaps to begin, a trade of which the expence is supposed to be greater than the returns, of which every operation eats up a part of the capital employed in it, and which is of such a nature, that, if all other trades resembled it, there would soon be no capital left in the country.

3The trades, it is to be observed, which are carried on by means of bounties, are the only ones which can be carried on between two nations for any considerable time together, in such a manner as that one of them shall always and regularly lose, or sell its goods for less than it really costs to send them to market.3 But if the bounty did not repay to the merchant what he would otherwise lose upon the price of his goods, his own interest would soon oblige him to employ his stock in another way, or to find out a trade in which the price of the goods would replace to him, with the ordinary profit, the capital employed in sending them to market. The effect of bounties, like that of all the other expedients of the mercantile system, can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord.4

4The ingenious and well–informed author of the tracts upon the corn trade has shown very clearly,5 that since the bounty upon the exportation of corn was first established,6 the price of the corn exported, valued moderately enough, has exceeded that of the corn imported, valued very high, by a much greater sum than the amount of the whole bounties which have been paid during that period. This, he imagines, upon the true principles of the mercantile system, is a clear proof that this forced corn trade is beneficial to the nation; the value of the exportation exceeding that of the importation by a much greater sum than the whole extraordinary expence which the publick has been at in order to get it exported. He does not consider that this extraordinary expence, or the bounty, is the smallest part of the expence which the exportation of corn really costs the society. The capital which the farmer employed in raising it must likewise be taken into the account. Unless the price of the corn when sold in the foreign markets replaces, not only the bounty, but this capital, together with the ordinary profits of stock, the society is a loser by the difference, or the national stock is so much diminished. But the very reason for which it has been thought necessary to grant a bounty, is the supposed insufficiency of the price to do this.

5 The average price of corn, it has been said, has fallen considerably since the establishment of the bounty.7 That the average price of corn began to fall somewhat towards the end of the last century, and has continued to do so during the course of the sixty–four first years of the present, I have already endeavoured to show. But this event, supposing it to be as real as I believe it to be, must have happened in spite of the bounty, and cannot possibly have happened in consequence of it. ^aIt has happened in France, as well as in England , though in France there was, not only no bounty, but, till 1764, the exportation of corn was subjected to a general prohibition.8 This gradual fall in the average price of grain, it is probable, therefore, is ultimately owing neither to the one regulation nor to the other, but to that gradual and insensible rise in the real value of silver, which, in the first book of this discourse, I have endeavoured to show has taken place in the general market of Europe, during the course of the present century.9 It seems to be altogether impossible that the bounty could ever contribute to lower the price of grain.^a

6In years of plenty, it has already been observed,10 the bounty, by occasioning an extraordinary exportation, necessarily keeps up the price of corn in the home market above what it would naturally fall to. To do so was the avowed purpose of the institution. In years of scarcity, though the bounty is frequently suspended, yet the great exportation which it occasions in years of plenty, must frequently hinder more or less the plenty of one year from relieving the scarcity of another. Both in years of plenty, and in years of scarcity, therefore, the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market.

7That, in the actual state of tillage, the bounty must necessarily have this tendency, will not, I apprehend, be disputed by any reasonable person. But it has been thought by many people that ^bit tends to encourage tillage11 , and that in two different ways; first, by opening a more extensive foreign market to the corn of the farmer, it tends, they imagine, to increase the demand for, and consequently the production of that commodity; and secondly, by securing to him^b a better price than he could otherwise expect in the actual state of tillage, it ^ctends, they suppose, to encourage tillage. This double encouragement must, they imagine, in a long period of years, occasion such an increase in the production of corn, as may lower its price in the home market, much^c more than the bounty can raise it, in the actual state which tillage may, at the end of that period, happen to be in.

8^d I answer, that whatever extension of the foreign market can be occasioned by the bounty, must, in every particular year, be altogether at the expence of the home market; as every bushel of corn which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and secondly, the tax which arises from the advanced price of the commodity in the home–market, and which, as the whole body of the people are purchasers of corn, must, in this particular commodity, be paid by the whole body of the people. In this particular commodity, therefore, this second tax, is by much the heaviest of the two. Let us suppose that, taking one year with another, the bounty of five shillings upon the exportation of the quarter of wheat, raises the price of that commodity in the home–market, only sixpence the bushel, or four shillings the quarter, higher than it ^eotherways^e would have been in the actual state of the crop. Even upon this very moderate supposition, the great body of the people, over and above contributing the tax which pays the bounty of five shillings upon every quarter of wheat exported, must pay another of four shillings upon every quarter which they themselves consume. But, according to the very well informed author of the tracts upon the corn–trade,12 the average proportion of the corn exported to that consumed at home, is not more than that of one to thirty–one.13 For every five shillings, therefore, which they contribute to the payment of the first tax, they must contribute six pounds four shillings to the payment of the second. So very heavy a tax upon the first necessary of life, must either reduce the subsistence14 of the labouring poor, or it must occasion some augmentation in their pecuniary wages, proportionable to that in the pecuniary price of their subsistence. So far as it operates in the one way, it must reduce the ability of the labouring poor to educate and bring up their children, and must, so far, tend to restrain the population of the country. So far as it operates in the other, it must reduce the ability of the employers of the poor, to employ so great a number as they otherwise might do, and must, so far, tend to restrain the industry of the country. The extraordinary exportation of corn, therefore, occasioned by the bounty, not only, in every particular year, diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home–market; and thereby, in the long run, rather to diminish, than to augment, the whole market and consumption of corn.

9This enhancement of the money price of corn, however, it has been thought, by rendering that commodity more profitable to the farmer, must necessarily encourage its production.^d

10I answer, that this might be the case if the effect of the bounty was to raise the real price of corn, or to enable the farmer, with an equal quantity of it, to maintain a greater number of labourers in the same manner, whether liberal, moderate, or scanty, that other labourers are commonly maintained in his neighbourhood. But neither the bounty, it is evident, nor any other human institution, can have any such effect. It is not the real, but the nominal price of corn^f, which can in any considerable degree be^f affected by the bounty.15^gAnd though the tax which that institution imposes upon the whole body of the people, may be very burdensome to those who pay it, it is of very little advantage to those who receive it.^g

11The real effect of the bounty is not so much to raise the real value of corn, as to degrade the real value of silver; or to make an equal quantity of it exchange for a smaller quantity, not only of corn, but all other ^hhome–made^h commodities: for the money price of corn regulates that of all other ⁱhome–madeⁱ commodities.

12It regulates the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family either in the liberal, moderate, or scanty manner in which the advancing, stationary or declining circumstances of the society oblige his employers to maintain him.16

13It regulates the money price of all the other parts of the rude produce of land, which, in every period of improvement, must bear a certain proportion to that of corn, though this proportion is different in different periods. It regulates, for example, the money price of grass and hay, of butcher’s meat, of horses, and the maintenance of horses, of land carriage consequently, or of the greater part of the inland commerce of the country.17

14By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of ^jalmost^j all manufactures. By regulating the money price of labour, it regulates that of manufacturing art and industry. And by regulating both, it regulates that of the compleat manufacture. The money price of labour, and of every thing that is the produce either of land or labour, must necessarily either rise or fall in proportion to the money price of corn.

15Though in consequence of the bounty, therefore, the farmer should be enabled to sell his corn for four shillings the bushel instead of three and sixpence, and to pay his landlord a money rent proportionable to this rise in the money price of his produce; yet if, in consequence of this rise in the price of corn, four shillings will purchase no more ^khome–made^k goods of any other kind than three and sixpence would have done before, neither the circumstances of the farmer, nor those of the landlord, will be ^lmuch^l mended by this change. The farmer will not be able to cultivate ^mmuch^m better: the landlord will not be able to live ⁿmuchⁿ better. ^oIn the purchase of foreign commodities this enhancement in the price of corn may give them some little advantage . In that of home–made commodities it can give them none at all. And almost the whole expence of the farmer, and the far greater part, ^peven of ^p that of the landlord, is in home–made commodities.^o

16That degradation in the value of silver which is the effect of the fertility of the mines, and which operates equally, or very near equally, through the greater part of the commercial world, is a matter of very little consequence to any particular country. The consequent rise of all money prices, though it does not make those who receive them really richer, does not make them really poorer. A service of plate becomes really cheaper, and every thing else remains precisely of the same real value as before.

17But that degradation in the value of silver which, being the effect either of the peculiar situation, or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that country, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them, not only in the foreign, but even in the home market.

18It is the peculiar situation of Spain and Portugal as proprietors of the mines, to be the distributors of gold and silver to all the other countries of Europe. Those metals ought naturally, therefore, to be somewhat cheaper in Spain and Portugal than in any other part of Europe. The difference, however, should be no more than the amount of the freight and insurance; and, on account of the great value and small bulk of those metals, their freight is no great matter, and their insurance is the same as that of any other goods of equal value. Spain and Portugal, therefore, could suffer very little from their peculiar situation, if they did not aggravate its disadvantages by their political institutions.

19Spain by taxing, and Portugal by prohibiting the exportation of gold and silver, load that exportation with the expence of smuggling, and raise the value of those metals in other countries so much more above what it is in their own, by the whole amount of this expence.18 When you dam up a stream of water, as soon as the dam is full, as much water must run over the dam–head as if there was no dam at all.19 The prohibition of exportation cannot detain a greater quantity of gold and silver in Spain and Portugal than what they can afford to employ, than what the annual produce of their land and labour will allow them to employ, in coin, plate, gilding, and other ornaments of gold and silver.20 When they have got this quantity the dam is full, and the whole stream which flows in afterwards must run over. The annual exportation of gold and silver from Spain and Portugal accordingly is, by all accounts, notwithstanding these restraints, very near equal to the whole annual importation. As the water, however, must always be deeper behind the dam–head than before it, so the quantity of gold and silver which these restraints detain in Spain and Portugal must, in proportion to the annual produce of their land and labour, be greater ^qthan^q what is to be found in other countries. The higher and stronger the dam–head, the greater must be the difference in the depth of water behind and before it. The higher the tax, the higher the penalties with which the prohibition is guarded, the more vigilant and severe the police which looks after the execution of the law, the greater must be the difference in the proportion of gold and silver to the annual produce of the land and labour of Spain and Portugal, and to that of other countries. It is said accordingly to be very considerable, and that you frequently find there a profusion of plate in houses, where there is nothing else which would, in other countries, be thought suitable or correspondent to this sort of magnificence. The cheapness of gold and silver, or what is the same thing, the dearness of all commodities, which is the necessary effect of this redundancy of the precious metals, discourages both the agriculture and manufactures of Spain and Portugal, and enables foreign nations to supply them with many sorts of rude, and with almost all sorts of manufactured produce, for a smaller quantity of gold and silver than what they themselves can either raise or make them for at home.21 The tax and prohibition operate in two different ways. They not only lower very much the value of the precious metals in Spain and Portugal, but by detaining there a certain quantity of those metals which would otherwise flow over other countries, they keep up their value in those other countries somewhat above what it otherwise would be, and thereby give those countries a double advantage in their commerce with Spain and Portugal. Open the flood–gates, and there will presently be less water above, and more below, the dam–head, and it will soon come to a level in both places. Remove the tax and the prohibition, and as the quantity of gold and silver will diminish considerably in Spain and Portugal, so it will increase somewhat in other countries, and the value of those metals, their proportion to the annual produce of land and labour, will soon come to a level, or very near to a level, in all. The loss which Spain and Portugal could sustain by this exportation of their gold and silver would be altogether nominal and imaginary. The nominal value of their goods, and of the annual produce of their land and labour, would fall, and would be expressed or represented by a smaller quantity of silver than before: but their real value would be the same as before, and would be sufficient to maintain, command, and employ, the same quantity of labour. As the nominal value of their goods would fall, the real value of what remained of their gold and silver would rise, and a smaller quantity of those metals would answer all the same purposes of commerce and circulation which had employed a greater quantity before. The gold and silver which would go abroad would not go abroad for nothing, but would bring back an equal value of goods of some kind or another.22 Those goods too would not be all matters of mere luxury and expence, to be consumed by idle people who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so neither would their consumption be much augmented by it. Those goods would, probably, the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce, with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before. The annual produce of their land and labour would immediately be augmented a little, and in a few years would, probably, be augmented a great deal; their industry being thus relieved from one of the most oppressive burdens which it at present labours under.

20The bounty upon the exportation of corn necessarily operates exactly in the same way as this absurd policy of Spain and Portugal. Whatever be the actual state of tillage, it renders our corn somewhat dearer in the home market than it otherwise would be in that state, and somewhat cheaper in the foreign; and as the average money price of corn regulates more or less that of all other commodities, it lowers the value of silver considerably in the one, and tends to raise it a little in the other. It enables foreigners, the Dutch in particular, not only to eat our corn cheaper than they otherwise could do, but sometimes to eat it cheaper than even our own people can do upon the same occasions; as we are assured by an excellent authority, that of Sir Matthew Decker.23 It hinders our own workmen from furnishing their goods for so small a quantity of silver as they otherwise might do; and enables the Dutch to furnish their’s for a smaller. It tends to render our manufactures somewhat dearer in every market, and their’s somewhat cheaper than they otherwise would be, and consequently to give their industry a double advantage over our own.

21The bounty, as it raises in the home market, not ^rso much ^r the real, ^sas^s the nominal price of our corn, as it augments, not the quantity of labour which a certain quantity of corn can maintain and employ, but only the quantity of silver which it will exchange for, it discourages our manufactures, without rendering ^tany considerable^t service either to our farmers or country gentlemen. It puts, indeed, a little more money into the pockets of both, and it will perhaps be somewhat difficult to persuade the greater part of them that this is not rendering them a very ^uconsiderable^u service. But if this money sinks in its value, in the quantity of labour, provisions, and ^vhome–made^v commodities of all different kinds which it is capable of purchasing, as much as it rises in its quantity, the service will be ^wlittle more than^w nominal and imaginary.

22There is, perhaps, but one set of men in the whole commonwealth to whom the bounty either was or could be ^xessentially^x serviceable. These were the corn merchants, the exporters and importers of corn. In years of plenty the bounty necessarily occasioned a greater exportation than would otherwise have taken place; and by hindering the plenty of one year from relieving the scarcity of another, it occasioned in years of scarcity a greater importation than would otherwise have been necessary.24 It increased the business of the corn merchant in both; and in years of scarcity, it not only enabled him to import a greater quantity, but to sell it for a better price, and consequently with a greater profit than he could otherwise have made, if the plenty of one year had not been more or less hindered from relieving the scarcity of another. It is in this set of men, accordingly, that I have observed the greatest zeal for the continuance or renewal of the bounty.

23Our country gentlemen, when they imposed the high duties upon the importation of foreign corn, which in times of moderate plenty amount to a prohibition,25 and when they established the bounty, seem to have imitated the conduct of our manufacturers.26 By the one institution, they secured to themselves the monopoly of the home–market, and by the other they endeavoured to prevent that market from ever being overstocked with their commodity. By both they endeavoured to raise its real value, in the same manner as our manufacturers had, by the like institutions, raised the real value of many different sorts of manufactured goods. They did not perhaps attend to the great and essential difference which nature has established between corn and almost every other sort of goods. When either by the monopoly of the home–market, or by a bounty upon exportation, you enable our woollen or linen manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise, not only the nominal, but the real price of those goods. You render them equivalent to a greater quantity of labour and subsistence, you encrease not only the nominal, but the real profit, the real wealth and revenue of those ^ymanufacturers^y , and you enable them either to live better themselves, or to employ a greater quantity of labour in those particular manufactures. You really encourage those manufactures, and direct towards them a greater quantity of the industry of the country, than what would probably go to them of its own accord.27 But when by the like institutions you raise the nominal or money–price of corn, you do not raise its real value. You do not increase the real wealth, the real revenue either of our farmers or country gentlemen. You do not encourage the growth of corn, because you do not enable them to maintain and employ more labourers in raising it. The nature of things has stamped upon corn a real value which ^zcannot be altered by merely altering its money price^z .28 No bounty upon exportation, no monopoly of the home market, can raise ^athat value^a .29 The freest competition cannot lower it. Through the world in general that value is equal to the quantity of labour which it can maintain, and in every particular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined. Corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another. It is the real value of silver which varies with them.

24Bounties upon the exportation of any home–made commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord:30 and, secondly, to the particular objection of forcing it, not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production. When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that compleat comprehension of their own interest which commonly directs the conduct of those two other orders of people.31 They loaded the publick revenue with a very considerable expence;32^bthey imposed a very heavy tax upon the whole body of the people;^b but they did not, in any ^csensible degree,^c increase the real value of their own commodity; and by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depends upon the general industry of the country.

25To encourage the production of any commodity, a bounty upon production, one should imagine, would have a more direct operation, than one upon exportation.33 It ^dwould, besides, impose only one tax upon the people , that which they must contribute in order to pay the bounty.34 Instead of raising, it would tend to lower the price of the commodity in the home market; and thereby, instead of imposing a second tax upon the people, it might, at least, in part, repay them for what they had contributed to the first. Bounties upon production, however, have been very^d rarely granted. The prejudices established by the commercial system have taught us to believe, that national wealth arises more immediately from exportation than from production. It has been more favoured accordingly, as the more immediate means of bringing money into the country. Bounties upon production, it has been said too, have been found by experience more liable to frauds than those upon exportation. How far this is true, I know not. That bounties upon exportation have been abused to many fraudulent purposes, is very well known. But it is not the interest of merchants and manufacturers, the great inventors of all these expedients, that the home market should be overstocked with their goods, an event which a bounty upon production might sometimes occasion. A bounty upon exportation, by enabling them to send abroad the surplus part, and to keep up the price of what remains in the home market, effectually prevents this. Of all the expedients of the mercantile system, accordingly, it is the one of which they are the fondest. I have known the different undertakers of some particular works agree privately among themselves to give a bounty out of their own pockets upon the exportation of a certain proportion of the goods which they dealt in. This expedient succeeded so well, that it more than doubled the price of their goods in the home market, notwithstanding a very considerable increase in the produce. The operation of the bounty upon corn must have been wonderfully different, if it has lowered the money price of that commodity.

26Something like a bounty upon production, however, has been granted upon some particular occasions. The ^etonnage bounties^e given to the white–herring and whale–fisheries35 may, perhaps, be considered as somewhat of this nature. They tend directly^f, it may be supposed,^f to render the goods cheaper in the home market than they otherwise would be^g . In other respects their effects^h, it must be acknowledged,^h are the same as those of bounties upon exportation. By means of them a part of the capital of the country is employed in bringing goods to market, of which the price does not repay the cost, together with the ordinary profits of stock.

27ⁱ But though the ^jtonnage^j bounties to those fisheries do not contribute to the opulence of the nation, ^kit^k may perhaps be ^lthought, that they contribute^l to its defence, by augmenting the number of its sailors and shipping.36 This^m, it may be alleged, may sometimes^m be done by means of such bounties at a much smaller expence, than by keeping up a great standing navy, if I may use such an expression,ⁿ in the same ^oway^o as a standing army.

28^p Notwithstanding these favourable allegations, however, the following considerations dispose me to believe, that in granting at least one of these bounties, the legislature has been very grossly imposed upon.37

29First, the herring buss bounty seems too large.

30 From the commencement of the winter fishing 1771 to the end of the winter fishing 1781, the tonnage bounty upon the herring buss fishery has been at thirty shillings the ton. During these eleven years the whole number of barrels caught by the herring buss fishery of Scotland amounted to 378,347. The herrings caught and cured at sea, are called ^qsea sticks^q . In order to render them what are called merchantable herrings, it is necessary to repack them with an additional quantity of salt; and in this case, it is reckoned, that three barrels of ^rsea sticks^r , are usually repacked into two barrels of merchantable herrings. The number of barrels of merchantable herrings, therefore, caught during these eleven years, will amount only, according to this account, to 252,231⅓. During these eleven years the tonnage bounties paid amounted to 155,463l. 11s. or to 8s.2¼d. upon every barrel of ^ssea sticks^s , and to 12s. 3¾d. upon every barrel of merchantable herrings.

31The salt with which these herrings are cured, is sometimes Scotch, and sometimes foreign salt; both which are delivered free of all excise duty to the fish–curers. The excise duty upon Scotch salt is at present 1s. 6d. that upon foreign salt 10s. the bushel. A barrel of herrings is supposed to require about one bushel and one–fourth of a bushel foreign salt. Two bushels are the supposed average of Scotch salt. If the herrings are entered for exportation, no part of this duty is paid up; if entered for home consumption, whether the herrings were cured with foreign or with Scotch salt, only one shilling the barrel is paid up.38 It was the old Scotch duty upon a bushel of salt, the quantity which, at a low estimation, had been supposed necessary for curing a barrel of herrings. In Scotland, foreign salt is very little used for any other purpose but the curing of fish. But from the 5th April 1771, to the 5th April 1782, the quantity of foreign salt imported amounted to 936,974 bushels, at eighty–four pounds the bushel: the quantity of Scotch salt, delivered from the works to the fish–curers, to no more than 168,226, at fifty–six pounds the bushel only. It would appear, therefore, that it is principally foreign salt that is used in the fisheries. Upon every barrel of herrings exported there is, besides, a bounty of 2s. 8d. and more than two–thirds of the buss caught herrings are exported. Put all these things together and you will find, that, during these eleven years, every barrel of buss caught herrings, cured with Scotch salt when exported, has cost government 17s. 11¾d.; and when entered for home consumption 14s. 3¾d: and that every barrel cured with foreign salt, when exported, has cost government 1l. 7s. 5¾d; and when entered for home consumption 1l. 3s. 9¾d. The price of a barrel of good merchantable herrings runs from seventeen and eighteen to four and five and twenty shillings;39 about a guinea at an average* .

32Secondly, the bounty to the white herring fishery is a tonnage bounty; and is proportioned to the burden of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for vessels to fit out for the sole purpose of catching, not the fish, but the bounty.40 In the year 1759, when the bounty was at fifty shillings the ton, the whole buss fishery of Scotland brought in only four barrels of sea sticks. In that year each barrel of sea sticks cost government in bounties alone 113l. 15s.; each barrel of merchantable herrings 159l. 7s. 6d.

33Thirdly, the mode of fishing for which this tonnage bounty in the white herring fishery has been given (by busses or decked vessels from twenty to eighty tons burthen), seems not so well adapted to the situation of Scotland as to that of Holland; from the practice of which country it appears to have been borrowed. Holland lies at a great distance from the seas to which herrings are known principally to resort; and can, therefore, carry on that fishery only in decked vessels, which can carry water and provisions sufficient for a voyage to a distant sea. But the Hebrides or western islands, the islands of Shetland, and the northern and north–western coasts of Scotland, the countries in whose neighbourhood the herring fishery is principally carried on, are every where intersected by arms of the sea which run up a considerable way into the land, and which, in the language of the country, are called sea–lochs. It is to these sea–lochs that the herrings principally resort, during the seasons in which they visit those seas; for the visits of this, and, I am assured, of many other sorts of fish, are not quite regular and constant. A boat fishery, therefore, seems to be the mode of fishing best adapted to the peculiar situation of Scotland; the fishers carrying the herrings on shore, as fast as they are taken, to be either cured or consumed fresh. But the great encouragement, which a bounty of thirty shillings the ton gives to the buss fishery, is necessarily a discouragement to the boat fishery; which, having no such bounty, cannot bring its cured fish to market upon the same terms as the buss fishery.41 The boat–fishery, accordingly, which, before the establishment of the buss bounty, was very considerable, and is said to have employed a number of seamen, not inferior to what the buss fishery employs at present, is now gone almost entirely to decay. Of the former extent, however, of this now ruined and abandoned fishery, I must acknowledge, that I cannot pretend to speak with much precision. As no bounty was paid upon the outfit of the boat–fishery, no account was taken of it by the officers of the customs or salt duties.

34Fourthly, in many parts of Scotland, during certain seasons of the year, herrings make no inconsiderable part of the food of the common people. A bounty, which tended to lower their price in the home market, might contribute a good deal to the relief of a great number of our fellow–subjects, whose circumstances are by no means affluent. But the herring buss bounty contributes to no such good purpose. It has ruined the boat fishery, which is, by far, the best adapted for the supply of the home market, and the additional bounty of 2s. 8d. the barrel upon exportation, carries the greater part, more than two thirds, of the produce of the buss fishery abroad. Between thirty and forty years ago, before the establishment of the buss bounty, sixteen shillings the barrel, I have been assured, was the common price of white herrings. Between ten and fifteen years ago, before the boat fishery was entirely ruined, the price is said to have run from seventeen to twenty shillings the barrel. For these last five years, it has, at an average, been at twenty–five shillings the barrel. This high price, however, may have been owing to the real scarcity of the herrings upon the coast of Scotland. I must observe too, that the cask or barrel, which is usually sold with the herrings, and of which the price is included in all the foregoing prices, has, since the commencement of the American war, risen to about double its former price, or from about three shillings, to about six shillings. I must likewise observe, that the accounts I have received of the prices of former times, have been by no means quite uniform and consistent; and an old man of great accuracy and experience has assured me, that more than fifty years ago, a guinea was the usual price of a barrel of good merchantable herrings; and this, I imagine, may still be looked upon as the average price. All accounts, however, I think, agree, that the price has not been lowered in the home market, in consequence of the buss bounty.

35 When the undertakers of fisheries, after such liberal bounties have been bestowed upon them, continue to sell their commodity at the same, or even at a higher price than they were accustomed to do before, it might be expected that their profits should be very great; and it is not improbable that those of some individuals may have been so. In general, however, I have every reason to believe, they have been quite otherwise. The usual effect of such bounties is to encourage rash undertakers to adventure in a business, which they do not understand, and what they lose by their own negligence and ignorance, more than compensates all that they can gain by the utmost liberality of government. In 1750, by the same act, which first gave the bounty of thirty shillings the ton for the encouragement of the white herring fishery, (the 23 Geo. II. chap. 24.) a joint stock company was erected,42 with a capital of five hundred thousand pounds, to which the subscribers (over and above all other encouragements, the tonnage bounty just now mentioned, the exportation bounty of two shillings and eight pence the barrel, the delivery of both British and foreign salt duty free) were, during the space of fourteen years, for every hundred pounds which they subscribed and paid in to the stock of the society, entitled to three pounds a year, to be paid by the receiver–general of the customs in equal half yearly payments. Besides this great company, the residence of whose governor and directors was to be in London, it was declared lawful to erect different fishing–chambers, in all the different out–ports of the kingdom, provided a sum not less than ten thousand pounds was subscribed into the capital of each, to be managed at its own risk, and for its own profit and loss. The same annuity, and the same ^uencouragements^u of all kinds, were given to the trade of those inferior chambers, as to that of the great company. The subscription of the great company was soon filled up, and several different fishing–chambers were erected in the different out–ports of the kingdom. In spite of all these encouragements, almost all those different companies, both great and small, lost either the whole, or the greater part of their capitals; scarce a vestige now remains of any of them, and the white herring fishery is now entirely, or almost entirely, carried on by private adventurers.

36If any particular manufacture was necessary, indeed, for the defence of the society, it might not always be prudent to depend upon our neighbours for the supply; and if such manufacture could not otherways be supported at home, it might not be unreasonable that all the other branches of industry should be taxed in order to support it. The bounties upon the exportation of British–made sail–cloth,43 and British–made gun–powder,44 may, perhaps, both be vindicated upon this principle.

37But though it can very seldom be reasonable to tax the industry of the great body of the people, in order to support that of some particular class of manufacturers; yet in the wantonness of great prosperity, when the publick enjoys a greater revenue than it knows well what to do with, to give such bounties to favourite manufactures, may, perhaps, be as natural, as to incur any other idle expence. In publick, as well as in private expences, great wealth may, perhaps, frequently be admitted as an apology for great folly. But there must surely be something more than ordinary absurdity, in continuing such profusion in times of general difficulty and distress.

38What is called a bounty is sometimes no more than a drawback, and consequently is not liable to the same objections as what is properly a bounty. The bounty, for example, upon refined sugar exported, may be considered as a drawback of the duties upon the brown and muscovado sugars, from which it is made.45 The bounty upon wrought silk exported, a drawback of the duties upon raw and thrown silk imported.46 The bounty upon gunpowder exported, a drawback of the duties upon brimstone and saltpetre imported.47 In the language of the customs those allowances only are called drawbacks, which are given upon goods exported in the same form in which they are imported. When that form has been ^vso^v altered by manufacture of any kind, ^was to come under a new denomination,^w they are called bounties.

39Premiums given by the publick to artists and manufacturers who excel in their particular occupations, are not liable to the same objections as bounties.48 By encouraging extraordinary dexterity and ingenuity, they serve to keep up the emulation of the workmen actually employed in those respective occupations, and are not considerable enough to turn towards any one of them a greater share of the capital of the country than what would go to it of its own accord. Their tendency is not to overturn the natural balance of employments,49 but to render the work which is done in each as perfect and compleat as possible. The expence of premiums, besides, is very trifling; that of bounties very great. The bounty upon corn alone has sometimes cost the publick in one year, more than three hundred thousand pounds.50

40Bounties are sometimes called premiums, as drawbacks are sometimes called bounties. But we must in all cases attend to the nature of the thing, without paying any regard to the word.

Digression concerning the Corn Trade and Corn Laws^a–^a

1I cannot conclude this chapter concerning bounties, without observing that the praises which have been bestowed upon the law which establishes the bounty upon the exportation of corn, and upon that system of regulations which is connected with it, are altogether unmerited. A particular examination of the nature of the corn trade, and of the principal British laws which relate to it, will sufficiently demonstrate the truth of this assertion. The great importance of this subject must justify the length of the digression.

2The trade of the corn merchant is composed of four different branches, which, though they may sometimes be all carried on by the same person, are in their own nature four separate and distinct trades. These are, first, the trade of the inland dealer; secondly, that of the merchant importer for home consumption; thirdly, that of the merchant exporter of home produce for foreign consumption; and, fourthly, that of the merchant carrier, or of the importer of corn in order to export it again.

3I. The interest of the inland dealer, and that of the great body of the people, how opposite soever they may at first sight appear, are, even in years of the greatest scarcity, exactly the same. It is his interest to raise the price of his corn as high as the real scarcity of the season requires, and it can never be his interest to raise it higher. By raising the price he discourages the consumption, and puts every body more or less, but particularly the inferior ranks of people, upon thrift and good management. If, by raising it too high, he discourages the consumption so much that the supply of the season is likely to go beyond the consumption of the season, and to last for some time after the next crop begins to come in, he runs the hazard, not only of losing a considerable part of his corn by natural causes, but of being obliged to sell what remains of it for much less than what he might have had for it several months before. If by not raising the price high enough he discourages the consumption so little, that the supply of the season is likely to fall short of the consumption of the season, he not only loses a part of the profit which he might otherwise have made, but he exposes the people to suffer before the end of the season, instead of the hardships of a dearth, the dreadful horrors of a famine. It is the interest of the people that their daily, weekly, and monthly consumption, should be proportioned as exactly as possible to the supply of the season. The interest of the inland corn dealer is the same. By supplying them, as nearly as he can judge, in this proportion, he is likely to sell all his corn for the highest price, and with the greatest profit; and his knowledge of the state of the crop, and of his daily, weekly, and monthly sales, enable him to judge, with more or less accuracy, how far they really are supplied in this manner. Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniencies which his crew can thereby suffer are inconsiderable in comparison of the danger, misery, and ruin, to which they might sometimes be exposed by a less provident conduct. Though from excess of avarice, in the same manner, the inland corn merchant should sometimes raise the price of his corn somewhat higher than the scarcity of the season requires, yet all the inconveniencies which the people can suffer from this conduct, which effectually secures them from a famine in the end of the season, are inconsiderable in comparison of what they might have been exposed to by a more liberal way of dealing in the beginning of it. The corn merchant himself is likely to suffer the most by this excess of avarice; not only from the indignation which it generally excites against him, but, though he should escape the effects of this indignation, from the quantity of corn which it necessarily leaves upon his hands in the end of the season, and which, if the next season happens to prove favourable, he must always sell for a much lower price than he might otherwise have had.

4Were it possible, indeed, for one great company of merchants to possess themselves of the whole crop of an extensive country, it might, perhaps, be their interest to deal with it as the Dutch are said to do with the spiceries of the Molluccas,1 to destroy or throw away a considerable part of it, in order to keep up the price of the rest. But it is scarce possible, even by the violence of law, to establish such an extensive monopoly with regard to corn; and, wherever the law leaves the trade free, it is of all commodities the least liable to be engrossed or monopolized by the force of a few large capitals, which buy up the greater part of it. Not only its value far exceeds what the capitals of a few private men are capable of purchasing, but, supposing they were capable of purchasing it, the manner in which it is produced renders this purchase altogether impracticable. As in every civilized country it is the commodity of which the annual consumption is the greatest, so a greater quantity of industry is annually employed in producing corn than in producing any other commodity. When it first comes from the ground too, it is necessarily divided among a greater number of owners than any other commodity; and these owners can never be collected into one place like a number of independent manufacturers, but are necessarily scattered through all the different corners of the country. These first owners either immediately supply the consumers in their own neighbourhood, or they supply other inland dealers who supply those consumers. The inland dealers in corn, therefore, including both the farmer and the baker, are necessarily more numerous than the dealers in any other commodity, and their dispersed situation renders it altogether impossible for them to enter into any general combination.2 If in a year of scarcity therefore, any of them should find that he had a good deal more corn upon hand than, at the current price, he could hope to dispose of before the end of the season, he would never think of keeping up this price to his own loss, and to the sole benefit of his rivals and competitors, but would immediately lower it, in order to get rid of his corn before the new crop began to come in. The same motives, the same interests, which would thus regulate the conduct of any one dealer, would regulate that of every other, and oblige them all in general to sell their corn at the price which, according to the best of their judgment, was most suitable to the scarcity or plenty of the season.

5Whoever examines, with attention, the history of the dearths and famines which have afflicted any part of Europe, during either the course of the present or that of the two preceding centuries, of several of which we have pretty exact accounts, will find, I believe, that a dearth never has arisen from any combination among the inland dealers in corn, nor from any other cause but a real scarcity, occasioned sometimes, perhaps, and in some particular places, by the waste of war, but in by far the greatest number of cases, by the fault of the seasons; and that a famine has never arisen from any other cause but the violence of government attempting, by improper means, to remedy the inconveniencies of a dearth.

6In an extensive corn country, between all the different parts of which there is a free commerce and communication, the scarcity occasioned by the most unfavourable seasons can never be so great as to produce a famine; and the scantiest crop, if managed with frugality and œconomy, will maintain, through the year, the same number of people that are commonly fed in a more affluent manner by one of moderate plenty. The seasons most unfavourable to the crop are those of excessive drought or excessive rain. But, as corn grows equally upon high and low lands, upon grounds that are disposed to be too wet, and upon those that are disposed to be too dry, either the drought or the rain which is hurtful to one part of the country is favourable to another; and though both in the wet and in the dry season the crop is a good deal less than in one more properly tempered, yet in both what is lost in one part of the country is in some measure compensated by what is gained in the other. In rice countries, where the crop not only requires a very moist soil, but where in a certain period of its growing it must be laid under water, the effects of a drought are much more dismal. Even in such countries, however, the drought is, perhaps, scarce ever so universal as necessarily to occasion a famine, if the government would allow a free trade. The drought in Bengal, a few years ago, might probably have occasioned a very great dearth. Some improper regulations, some injudicious restraints imposed by the servants of the East India Company upon the rice trade, contributed, perhaps, to turn that dearth into a famine.3

7When the government, in order to remedy the inconveniencies of a dearth, orders all the dealers to sell their corn at what it supposes a reasonable price, it either hinders them from bringing it to market, which may sometimes produce a famine even in the beginning of the season; or if they bring it thither, it enables the people, and thereby encourages them to consume it so fast, as must necessarily produce a famine before the end of the season. The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventative of the miseries of a famine, so it is the best palliative of the inconveniencies of a dearth; for the inconveniencies of a real scarcity cannot be remedied; they can only be palliated. No trade deserves more the full protection of the law, and no trade requires it so much; because no trade is so much exposed to popular odium.

8In years of scarcity the inferior ranks of people impute their distress to the avarice of the corn merchant, who becomes the object of their hatred and indignation. Instead of making profit upon such occasions, therefore, he is often in danger of being utterly ruined, and of having his magazines plundered and destroyed by their violence. It is in years of scarcity, however, when prices are high, that the corn merchant expects to make his principal profit. He is generally in contract with some farmers to furnish him for a certain number of years with a certain quantity of corn at a certain price. This contract price is settled according to what is supposed to be the moderate and reasonable, that is, the ordinary or average price, which, before the late years of scarcity, was commonly about eight–and–twenty–shillings for the quarter of wheat, and for that of other grain in proportion. In years of scarcity, therefore, the corn merchant buys a great part of his corn for the ordinary price, and sells it for a much higher. That this extraordinary profit, however, is no more than sufficient to put his trade upon a fair level with other trades, and to compensate the many losses which he sustains upon other occasions, both from the perishable nature of the commodity itself, and from the frequent and unforeseen fluctuations of its price, seems evident enough, from this single circumstance, that great fortunes are as seldom made in this as in any other trade. The popular odium, however, which attends it in years of scarcity, the only years in which it can be very profitable, renders people of character and fortune averse to enter into it.4 It is abandoned to an inferior set of dealers; and millers, bakers, mealmen, and meal factors, together with a number of wretched hucksters, are almost the only middle people that, in the home market, come between the grower and the consumer.

9The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the publick, seems, on the contrary, to have authorised and encouraged it.

10By the 5th and 6th of Edward VI. cap. 14.5 it was enacted, That whoever should buy any corn or grain with intent to sell it again, should be reputed an unlawful engrosser, and should, for the first fault, suffer two months imprisonment, and forfeit the value of the corn; for the second, suffer six months imprisonment, and forfeit double the value; and for the third, be set in the pillory, suffer imprisonment during the king’s pleasure, and forfeit all his goods and chattels.6 The ancient policy of most other parts of Europe was no better than that of England.

11Our ancestors seem to have imagined that the people would buy their corn cheaper of the farmer than of the corn merchant, who, they were afraid, would require, over and above the price which he paid to the farmer, an exorbitant profit to himself. They endeavoured, therefore, to annihilate his trade altogether. They even endeavoured to hinder as much as possible any middle man of any kind from coming in between the grower and the consumer; and this was the meaning of the many restraints which they imposed upon the trade of those whom they called kidders or carriers of corn, a trade which nobody was allowed to exercise without a licence ascertaining his qualifications as a man of probity and fair dealing. The authority of three justices of the peace was, by the statute of Edward VI. necessary, in order to grant this licence.7 But even this restraint was afterwards thought insufficient, and by a statute of Elizabeth, the privilege of granting it was confined to the quarter–sessions.8

12The antient policy of Europe endeavoured in this manner to regulate agriculture, the great trade of the country, by maxims quite different from those which it established with regard to manufactures, the great trade of the towns. By leaving the farmer no other customers but either the ^bconsumers^b or ^ctheir^c immediate factors, the kidders and carriers of corn, it endeavoured to force him to exercise the trade, not only of a farmer, but of a corn merchant or corn retailer. On the contrary, it in many cases prohibited the manufacturer from exercising the trade of a shop–keeper, or from selling his own goods by retail. It meant by the one law to promote the general interest of the country, or to render corn cheap, without, perhaps, its being well understood how this was to be done. By the other it meant to promote that of a particular order of men, the shopkeepers, who would be so much undersold by the manufacturer, it was supposed, that their trade would be ruined if he was allowed to retail at all.

13The manufacturer, however, though he had been allowed to keep a shop, and to sell his own goods by retail, could not have undersold the common shopkeeper. Whatever part of his capital he might have placed in his shop, he must have withdrawn it from his manufacture. In order to carry on his business on a level with that of other people, as he must have had the profit of a manufacturer on the one part, so he must have had that of a shopkeeper upon the other. Let us suppose, for example, that in the particular town where he lived, ten per cent. was the ordinary profit both of manufacturing and shopkeeping stock; he must in this case have charged upon every piece of his own goods which he sold in his shop, a profit of twenty per cent. When he carried them from his workhouse to his shop, he must have valued them at the price for which he could have sold them to a dealer or shopkeeper, who would have bought them by wholesale. If he valued them lower, he lost a part of the profit of his manufacturing capital. When again he sold them from his shop, unless he got the same price at which a shopkeeper would have sold them, he lost a part of the profit of his shopkeeping capital. Though he might appear, therefore, to make a double profit upon the same piece of goods, yet as these goods made successively a part of two distinct capitals, he made but a single profit upon the whole capital employed about them; and if he made less than this profit, he was a loser, or did not employ his whole capital with the same advantage as the greater part of his neighbours.

14What the manufacturer was prohibited to do, the farmer was in some measure enjoined to do; to divide his capital between two different employments; to keep one part of it in his granaries and stack yard, for supplying the occasional demands of the market; and to employ the other in the cultivation of his land. But as he could not afford to employ the latter for less than the ordinary profits of farming stock, so he could as little afford to employ the former for less than the ordinary profits of mercantile stock. Whether the stock which really carried on the business of the corn merchant belonged to the person who was called a farmer, or to the person who was called a corn merchant, an equal profit was in both cases requisite, in order to indemnify its owner for employing it in this manner; in order to put his business upon a level with other trades, and in order to hinder him from having an interest to change it as soon as possible for some other. The farmer, therefore, who was thus forced to exercise the trade of a corn merchant, could not afford to sell his corn cheaper than any other corn merchant would have been obliged to do in the case of a free competition.

15The dealer who can employ his whole stock in one single branch of business, has an advantage of the same kind with the workman who can employ his whole labour in one single operation.9 As the latter acquires a dexterity which enables him, with the same two hands, to perform a much greater quantity of work; so the former acquires so easy and ready a method of transacting his business, of buying and disposing of his goods, that with the same capital he can transact a much greater quantity of business. As the one can commonly afford his work a good deal cheaper, so the other can commonly afford his goods somewhat cheaper than if his stock and attention were both employed about a greater variety of objects. The greater part of manufacturers could not afford to retail their own goods so cheap as a vigilant and active shop–keeper, whose sole business it was to buy them by wholesale, and to retail them again. The greater part of farmers could still less afford to retail their own corn, ^dor^d to supply the inhabitants of a town, at perhaps four or five miles distance from the greater part of them, so cheap as a vigilant and active corn merchant, whose sole business it was to purchase corn by wholesale, to collect it into a great magazine, and to retail it again.

16The law which prohibited the manufacturer from exercising the trade of a shopkeeper, endeavoured to force this division in the employment of stock to go on faster than it might otherwise have done. The law which obliged the farmer to exercise the trade of a corn merchant, endeavoured to hinder it from going on so fast. Both laws were evident violations of natural liberty, and therefore unjust; and they were both too as impolitick as they were unjust. It is the interest of every society, that things of this kind should never either be forced or obstructed. The man who employs either his labour or his stock in a greater variety of ways than his situation renders necessary, can never hurt his neighbour by underselling him. He may hurt himself, and he generally does so. Jack of all trades will never be rich, says the proverb. But the law ought always to trust people with the care of their own interest, as in their local situations they must generally be able to judge better of it than the legislator can do.10 The law, however, which obliged the farmer to exercise the trade of a corn merchant, was by far the most pernicious of the two.

17It obstructed, not only that division in the employment of stock which is so advantageous to every society, but it obstructed likewise the improvement and cultivation of the land. By obliging the farmer to carry on two trades instead of one, it forced him to divide his capital into two parts, of which one only could be employed in cultivation. But if he had been at liberty to sell his whole crop to a corn merchant as fast as he could thresh it out, his whole capital might have returned immediately to the land, and have been employed in buying more cattle, and hiring more servants, in order to improve and cultivate it better. But by being obliged to sell his corn by retail, he was obliged to keep a great part of his capital in his granaries and stack yard through the year, and could not, therefore, cultivate so well as with the same capital he might otherwise have done. This law, therefore, necessarily obstructed the improvement of the land, and, instead of tending to render corn cheaper, must have tended to render it scarcer, and therefore dearer, than it would otherwise have been.

18After the business of the farmer, that of the corn merchant is in reality the trade which, if properly protected and encouraged, would contribute the most to the raising of corn. It would support the trade of the farmer in the same manner as the trade of the wholesale dealer supports that of the manufacturer.

19The wholesale dealer, by affording a ready market to the manufacturer, by taking his goods off his hand as fast as he can make them, and by sometimes even advancing their price to him before he has made them, enables him to keep his whole capital, and sometimes even more than his whole capital, constantly employed in manufacturing, and consequently to manufacture a much greater quantity of goods than if he was obliged to dispose of them himself to the immediate consumers, or even to the retailers. As the capital of the wholesale merchant too is generally sufficient to replace that of many manufacturers, this intercourse between him and them interests the owner of a large capital to support the owners of a great number of small ones, and to assist them in those losses and misfortunes which might otherwise prove ruinous to them.

20An intercourse of the same kind universally established between the farmers and the corn merchants, would be attended with effects equally beneficial to the farmer. They would be enabled to keep their whole capitals, and even more than their whole capitals, constantly employed in cultivation. In case of any of those accidents, to which no trade is more liable than theirs, they would find in their ordinary customer, the wealthy corn merchant, a person who had both an interest to support them, and the ability to do it, and they would not, as at present, be entirely dependent upon the forbearance of their landlord, or the mercy of his steward. Were it possible, as perhaps it is not, to establish this intercourse universally, and all at once, were it possible to turn all at once the whole farming stock of the kingdom to its proper business, the cultivation of land, withdrawing it from every other employment into which any part of it may be at present diverted,11 and were it possible, in order to support and assist upon occasion the operations of this great stock, to provide all at once another stock almost equally great, it is not perhaps very easy to imagine how great, how extensive, and how sudden would be the improvement which this change of circumstances would alone produce upon the whole face of the country.

21The statute of Edward VI.,12 therefore, by prohibiting as much as possible any middle man from coming in between the grower and the consumer, endeavoured to annihilate a trade, of which the free exercise is not only the best palliative of the inconveniencies of a dearth, but the best preventative of that calamity: after the trade of the farmer, no trade contributing so much to the growing of corn as that of the corn merchant.

22The rigour of this law was afterwards softened by several subsequent statutes, which successively permitted the engrossing of corn when the price of wheat should not exceed twenty, twenty–four, thirty–two, and forty shillings the quarter. At last, by the 15th of Charles II. c. 7. the engrossing or buying of corn in order to sell it again, as long as the price of wheat did not exceed forty–eight shillings the quarter, and that of other grain in proportion, was declared lawful to all persons not being forestallers, that is, not selling again in the same market within three months.13 All the freedom which the trade of the inland corn dealer has ever yet enjoyed, was bestowed upon it by this statute.14 The statute of the twelfth of the present king, which repeals almost all the other ancient laws against engrossers and forestallers, does not repeal the restrictions of this particular statute, which therefore still continue in force.15

23This statute, however, authorises in some measure two very absurd popular prejudices.

24First, it supposes that when the price of wheat has risen so high as forty–eight shillings the quarter, and that of other grain in proportion, corn is likely to be so engrossed as to hurt the people. But from what has been already said, it seems evident enough that corn can at no price be so engrossed by the inland dealers as to hurt the people: and forty–eight shillings the quarter besides, though it may be considered as a very high price, yet in years of scarcity it is a price which frequently takes place immediately after harvest, when scarce any part of the new crop can be sold off, and when it is impossible even for ignorance to suppose that any part of it can be so engrossed as to hurt the people.

25Secondly, it supposes that there is a certain price at which corn is likely to be forestalled, that is, bought up in order to be sold again soon after in the same market, so as to hurt the people. But if a merchant ever buys up corn, either going to a particular market or in a particular market, in order to sell it again soon after in the same market, it must be because he judges that the market cannot be so liberally supplied through the whole season as upon that particular occasion, and that the price, therefore, must soon rise. If he judges wrong in this, and if the price does not rise, he not only loses the whole profit of the stock which he employs in this manner, but a part of the stock itself, by the expence and loss which necessarily ^eattend^e the storing and keeping of corn. He hurts himself, therefore, much more essentially than he can hurt even the particular people whom he may hinder from supplying themselves upon that particular market day, because they may afterwards supply themselves just as cheap upon any other market day. If he judges right, instead of hurting the great body of the people, he renders them a most important service. By making them feel the inconveniencies of a dearth somewhat earlier than they otherwise might do, he prevents their feeling them afterwards so severely as they certainly would do, if the cheapness of price encouraged them to consume faster than suited the real scarcity of the season. When the scarcity is real, the best thing that can be done for the people is to divide the inconveniencies of it as equally as possible through all the different months, and weeks, and days of the year. The interest of the corn merchant makes him study to do this as exactly as he can; and as no other person can have either the same interest, or the same knowledge, or the same abilities to do it so exactly as he, this most important operation of commerce ought to be trusted entirely to him; or, in other words, the corn trade, so far at least as concerns the supply of the home–market, ought to be left perfectly free.

26 The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft.16 The unfortunate wretches accused of this latter crime were not more innocent of the misfortunes imputed to them, than those who have been accused of the former. The law which put an end to all prosecutions against witchcraft, which put it out of any man’s power to gratify his own malice by accusing his neighbour of that imaginary crime, seems effectually to have put an end to those fears and suspicions, by taking away the great cause which encouraged and supported them. The law which should restore entire freedom to the inland trade of corn, would probably prove as effectual to put an end to the popular fears of engrossing and forestalling.

27The 15th of Charles II. c. 7. however, with all its imperfections, has perhaps contributed more both to the plentiful supply of the home market, and to the increase of tillage, than any other law in the statute book. It is from this law that the inland corn trade has derived all the liberty and protection which it has ever yet enjoyed; and both the supply of the home market, and the interest of tillage, are much more effectually promoted by the inland, than either by the importation or exportation trade.

28The proportion of the average quantity of all sorts of grain imported into Great Britain to that of all sorts of grain consumed, it has been computed by the author of the tracts upon the corn trade, does not exceed that of one to five hundred and seventy.17 For supplying the home market, therefore, the importance of the inland trade must be to that of the importation trade as five hundred and seventy to one.

29The average quantity of all sorts of grain exported from Great Britain does not, according to the same author, exceed the one–and–thirtieth part of the annual produce.18 For the encouragement of tillage, therefore, by providing a market for the home produce, the importance of the inland trade must be to that of the exportation trade as thirty to one.

30I have no great faith in political arithmetick, and I mean not to warrant the exactness of either of these computations19 . I mention them only in order to show of how much less consequence, in the opinion of the most judicious and experienced persons, the foreign trade of corn is than the home trade. The great cheapness of corn in the years immediately preceding the establishment of the bounty, may perhaps, with reason, be ascribed in some measure to the operation of this statute of Charles II., which had been enacted about five–and–twenty years before, and which had therefore full time to produce its effect.

31A very few words will sufficiently explain all that I have to say concerning the other three branches of the corn trade.

32II. The trade of the merchant importer of foreign corn for home consumption, evidently contributes to the immediate supply of the home market, and must so far be immediately beneficial to the great body of the people. It tends, indeed, to lower somewhat the average money price of corn, but not to diminish its real value, or the quantity of labour which it is capable of maintaining. If importation was at all times free, our farmers and country gentlemen would, probably, one year with another, get less money for their corn than they do at present, when importation is at most times in effect prohibited; but the money which they got would be of more value, would buy more goods of all other kinds, and would employ more labour. Their real wealth, their real revenue, therefore, would be the same as at present, though it might be expressed by a smaller quantity of silver; and they would neither be disabled nor discouraged from cultivating corn as much as they do at present. On the contrary, as the rise in the real value of silver, in consequence of lowering the money price of corn, lowers somewhat the money price of all other commodities, it gives the industry of the country, where it takes place, some advantage in all foreign markets, and thereby tends to encourage and increase that industry. But the extent of the home market for corn must be in proportion to the general industry of the country where it grows, or to the number of those who produce something else, and therefore have something else, or what comes to the same thing, the price of something else, to give in exchange for corn. But in every country the home market, as it is the nearest and most convenient, so is it likewise the greatest and most important market for corn. That rise in the real value of silver, therefore, which is the effect of lowering the average money price of corn, tends to enlarge the greatest and most important market for corn, and thereby to encourage, instead of discouraging, its growth.

33By the 22d of Charles II. c. 13. the importation of wheat, whenever the price in the home market did not exceed fifty–three shillings and four pence the quarter, was subjected to a duty of sixteen shillings the quarter; and to a duty of eight shillings whenever the price did not exceed four pounds.20 The former of these two prices has, for more than a century past, taken place only in times of very great scarcity; and the latter has, so far as I know, not taken place at all. Yet, till wheat had risen above this latter price, it was by this statute subjected to a very high duty; and, till it had risen above the former, to a duty which amounted to a prohibition. The importation of other sorts of grain was restrained ^fat rates, and^f by duties^g, in proportion to the value of the grain, almost equally^g high* . ⁱSubsequent laws still further increased those duties.ⁱ

34The distress which, in years of scarcity, the strict execution of ^jthose laws^j might have brought upon the people, would probably have been very great. But, upon such occasions, its execution was generally suspended by temporary statutes, which permitted, for a limited time, the importation of foreign corn.21 The necessity of these temporary statutes sufficiently demonstrates the impropriety of this general one.

35These restraints upon importation, though prior to the establishment of the bounty, were dictated by the same spirit, by the same principles, which afterwards enacted that regulation. How hurtful soever in themselves, these or some other restraints upon importation became necessary in consequence of that regulation. If, when wheat was either below forty–eight shillings the quarter, or not much above it, foreign corn could have been imported either duty free, or upon paying only a small duty, it might have been exported again, with the benefit of the bounty, to the great loss of the publick revenue, and to the entire perversion of the institution, of which the object was to extend the market for the home growth, not that for the growth of foreign countries.

36III. The trade of the merchant exporter of corn for foreign consumption, certainly does not contribute directly to the plentiful supply of the home market. It does so, however, indirectly. From whatever source this supply may be usually drawn, whether from home growth or from foreign importation, unless more corn is either usually grown, or usually imported into the country, than what is usually consumed in it, the supply of the home market can never be very plentiful. But, unless the surplus can, in all ordinary cases, be exported, the growers will be careful never to grow more, and the importers never to import more, than what the bare consumption of the home market requires. That market will very seldom be overstocked; but it will generally be understocked, the people, whose business it is to supply it, being generally afraid lest their goods should be left upon their hands. The prohibition of exportation limits the improvement and cultivation of the country to what the supply of its own inhabitants requires. The freedom of exportation enables it to extend ^k cultivation for the supply of foreign nations.

37By the 12th of Charles II. c. 4.22 the exportation of corn was permitted whenever the price of wheat did not exceed forty shillings the quarter, and that of other grain in proportion. By the 15th of the same prince,23 this liberty was extended till the price of wheat exceeded forty–eight shillings the quarter; and by the 22d,24 to all higher prices. A poundage, indeed, was to be paid to the king upon such exportation. But all grain was rated so low in the book of rates, that this poundage amounted only upon wheat to a shilling, upon oats to four–pence, and upon all other grain to six–pence the quarter. By the 1st of William and Mary,25 the act which established the bounty, this small duty was virtually taken off whenever the price of wheat did not exceed forty–eight shillings the quarter; and by the 11th and 12th of William III. c. 20. it was expressly taken off at all higher prices.26

38The trade of the merchant exporter was, in this manner, not only encouraged by a bounty, but rendered much more free than that of the inland dealer. By the last of these statutes, corn could be engrossed at any price for exportation; but it could not be engrossed for inland sale, except when the price did not exceed forty–eight shillings the quarter.27 The interest of the inland dealer, however, it has already been shown, can never be opposite to that of the great body of the people. That of the merchant exporter may, and in fact sometimes is. If, while his own country labours under a dearth, a neighbouring country should be afflicted with a famine, it might be his interest to carry corn to the latter country in such quantities as might very much aggravate the calamities of the dearth. The plentiful supply of the home market was not the direct object of those statutes;28 but, under the pretence of encouraging agriculture, to raise the money price of corn as high as possible, and thereby to occasion, as much as possible, a constant dearth in the home market. By the discouragement of importation, the supply of that market, even in times of great scarcity, was confined to the home growth; and by the encouragement of exportation, when the price was so high as forty–eight shillings the quarter, that market was not, even in times of considerable scarcity, allowed to enjoy the whole of that growth. The temporary laws, prohibiting for a limited time the exportation of corn, and taking off for a limited time the duties upon its importation, expedients to which Great Britain has been obliged so frequently to have recourse,29 sufficiently demonstrate the impropriety of her general system. Had that system been good, she would not so frequently have been reduced to the necessity of departing from it.

39Were all nations to follow the liberal system of free exportation and free importation, the different states into which a great continent was divided would so far resemble the different provinces of a great empire. As among the different provinces of a great empire the freedom of the inland trade appears, both from reason and experience, not only the best palliative of a dearth, but the most effectual preventative of a famine; so would the freedom of the exportation and importation trade be among the different states into which a great continent was divided. The larger the continent, the easier the communication through all the different parts of it, both by land and by water, the less would any one particular part of it ever be exposed to either of these calamities, the scarcity of any one country being more likely to be relieved by the plenty of some other. But very few countries have entirely adopted this liberal system. The freedom of the corn trade is almost every where more or less restrained, and, in many countries, is confined by such absurd regulations, as frequently aggravate the unavoidable misfortune of a dearth, into the dreadful calamity of a famine. The demand of such countries for corn may frequently become so great and so urgent, that a small state in their neighbourhood, which happened at the same time to be labouring under some degree of dearth, could not venture to supply them without exposing itself to the like dreadful calamity. The very bad policy of one country may thus render it in some measure dangerous and imprudent to establish what would otherwise be the best policy in another. The unlimited freedom of exportation, however, would be much less dangerous in great states, in which the growth being much greater, the supply could seldom be much affected by any quantity of corn that was likely to be exported. In a Swiss canton, or in some of the little states of Italy, it may, perhaps, sometimes be necessary to restrain the exportation of corn. In such great countries as France or England it scarce ever can. To hinder, besides, the farmer from sending his goods at all times to the best market, is evidently to sacrifice the ordinary laws of justice to an idea of publick utility, to a sort of reasons of state; an act of legislative authority which ought to be exercised only, which can be pardoned only in cases of the most urgent necessity. The price at which the exportation of corn is prohibited, if it is ever to be prohibited, ought always to be a very high price.

40 The laws concerning corn may every where be compared to the laws concerning religion. The people feel themselves so much interested in what relates either to their subsistence in this life, or to their happiness in a life to come, that government must yield to their prejudices, and, in order to preserve the publick tranquillity, establish that system which they approve of. It is upon this account, perhaps, that we so seldom find a reasonable system established with regard to either of those two capital objects.30

41IV. The trade of the merchant carrier, or of the importer of foreign corn in order to export it again, contributes to the plentiful supply of the home market. It is not indeed the direct purpose of his trade to sell his corn there. But he will generally be willing to do so, and even for a good deal less money than he might expect in a foreign market; because he saves in this manner the expence of loading and unloading, of freight and insurance. The inhabitants of the country which, by means of the carrying trade, becomes the magazine and storehouse for the supply of other countries, can very seldom be in want themselves. Though the carrying trade ^lmight^l thus contribute to reduce the average money price of corn in the home market, it would not thereby lower its real value. It would only raise somewhat the real value of silver.

42The carrying trade was in effect prohibited in Great Britain, upon all ordinary occasions, by the high duties upon the importation of foreign corn^m, of the greater part of which there was no drawback^m ; and upon extraordinary occasions, when a scarcity made it necessary to suspend those duties by temporary statutes, exportation was always prohibited. By this system of laws, therefore, the carrying trade was in effect prohibited upon all occasions.

43That system of laws, therefore, which is connected with the establishment of the bounty, seems to deserve no part of the praise which has been bestowed upon it. The improvement and prosperity of Great Britain, which has been so often ascribed to those laws, may very easily be accounted for by other causes. That security which the laws in Great Britain give to every man that he shall enjoy the fruits of his own labour, is alone sufficient to make any country flourish, notwithstanding these and twenty other absurd regulations of commerce; and this security was perfected by the revolution, much about the same time that the bounty was established.31 The natural effort of every individual to better his own condition,32 when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security. In Great Britain industry is perfectly secure; and though it is far from being perfectly free, it is as free or freer than in any other part of Europe.

44Though the period of the greatest prosperity and improvement of Great Britain, has been posterior to that system of laws which is connected with the bounty, we must not upon that account impute it to those laws. It has been posterior likewise to the national debt. But the national debt has most assuredly not been the cause of it.33

45Though the system of laws which is connected with the bounty, has exactly the same tendency with the police of Spain and Portugal; to lower somewhat the value of the precious metals in the country where it takes place; yet Great Britain is certainly one of the richest countries in Europe, while Spain and Portugal are perhaps among the most beggarly. This difference of situation, however, may easily be accounted for from two different causes. First, the tax in Spain, the prohibition in Portugal of exporting gold and silver,34 and the vigilant police which watches over the execution of those laws, must, in two very poor countries, which between them import annually upwards of six millions sterling,35 operate, not only more directly, but much more forcibly in reducing the value of those metals there, than the corn laws can do in Great Britain. And, secondly, this bad policy is not in those countries counter–balanced by the general liberty and security of the people. Industry is there neither free nor secure, and the civil and ecclesiastical governments of both Spain and Portugal, are such as would alone be sufficient to perpetuate their present state of poverty, even though their regulations of commerce were as wise as the greater part of them are absurd and foolish.

46The 13th of the present king, c. 43.36 seems to have established a new system with regard to the corn laws, in many respects better than the ancient one, but in one ⁿor two respectsⁿ perhaps not quite so good.

47By this statute the high duties upon importation for home consumption are taken off ^oso^o soon as the price of ^pmiddling wheat rises to^p forty–eight shillings the quarter; ^qthat of middling rye, pease or beans, to thirty–two shillings; that of barley to twenty–four shillings; and that of oats to sixteen shillings;^q and instead of them a small duty is imposed of only six–pence upon the quarter of wheat, and upon that of other grain in proportion. ^rWith regard to all these different sorts of grain, but particularly with regard to wheat, the home market is thus opened to foreign supplies at prices considerably lower than^r before.

48By the same statute the old bounty of five shillings upon the ^sexportation^s of wheat ceases ^tso soon as the price rises to forty–four shillings the quarter, instead of forty–eight, the price at which it ceased before; that of two shillings and six–pence upon the exportation of barley ceases so soon as the price rises to twenty–two shillings, instead of twenty–four, the price at which it ceased before; that of two shillings and sixpence upon the exportation of oatmeal ceases so soon as the price rises to fourteen shillings, instead of fifteen, the price at which it ceased before. The bounty upon rye is reduced from three shillings and sixpence to three shillings, and it ceases so soon as the price rises to twenty–eight shillings, instead of thirty–two, the price at which it ceased before.^t If bounties are as improper as I have endeavoured to prove them to be, the sooner they cease, and the lower they are, so much the better.

49The same statute permits, at ^uthe lowest^u prices, the importation of corn, in order to be exported again, duty free, provided it is in the mean time lodged in ^va warehouse under the joint locks of the king and the importer^v . This liberty, indeed, extends to no more than twenty–five of the different ports of Great Britain. They are, however, the principal ones, and there may not, perhaps, be warehouses proper for this purpose in the greater part of the others.^w

50So far this law seems evidently an improvement upon the antient system.

51^xBut by the same law a bounty of two shillings the quarter is given for the exportation of oats whenever the price does not exceed fourteen shillings. No bounty had ever been given before for the exportation of this grain, no more than for that of peas or beans.^x

52^yBy the same law too, the exportation of wheat is prohibited so soon as the price rises to fortyfour shillings the quarter; that of rye so soon as it rises to twenty–eight shillings; that of barley so soon as it rises to twenty–two shillings; and that of oats so soon as they rise to fourteen shillings. Those several prices seem all of them a good deal too low, and there seems to be an impropriety, besides, in prohibiting exportation altogether at those precise prices^y at which that bounty, which was given in order to force it, is withdrawn. The bounty ought certainly either to have been withdrawn at a much lower price, or exportation ought to have been allowed at a much higher.

53So far, therefore, this law seems to be inferior to the antient system. ^zWith all its imperfections, however, we may perhaps say of it what was said of the laws of Solon, that, though not the best in itself, it is the best which the interests, prejudices, and temper of the times would admit of. It may perhaps in due time prepare the way for a better.^z37

[1 ]The thesis that opulence does not consist in money is examined in LJ (A) vi.127–71, LJ (B) 244–70, ed. Cannan 190–211, and ED 4.6–10. While there are differences of detail, all three versions follow a similar plan: The statement of the mercantile fallacy is followed by an appreciation of paper money (see above, II.ii) before proceeding to review the errors of the system in practice, e.g. the prohibition of the export of bullion, the doctrine of the balance of trade, the thesis that intervention will upset the natural balance of industry (see for example, IV.ii.3). In each case, Smith also emphasized the benefits of free trade and highlighted the problems of national animosity, in a manner which is reminiscent of Hume. In both ED and LJ (B) the critique of Law’s Mississippi Scheme is included as a part of the general critique of the mercantile system, i.e. treated as one of the errors to which it had given occasion. See above, II.ii.78. The subjects of this particular chapter are considered in LJ (A) vi.127–46 and LJ (B) 244–56, ed. Cannan 190–200.

[2 ]See below, IV.i.1.

[3 ]This is explained above, I.v.6.

[4 ]Cannan has noted that there may be a confusion between Plano Carpini, sent as a legate by Pope Innocent IV in 1246, and Guillaume de Rubruquis, sent as ambassador by Louis IX in 1253. Cannan also observes that both are mentioned in N. Bergeron’s Voyages faits principalement en Asie dans les xii., xiii., xiv., et xv. siècles (La Haye, 1735).

[5 ]The Spanish attitude to colonization is mentioned at I.xi.c.36 and IV.vii.a.17.

[6 ]See above, I.iv.3, where it is mentioned that cattle were used as instruments of commerce in the ‘rude ages of society’.

[7 ]It is difficult to find a parallel passage in Locke. The nearest probably are: ‘Money has a value, as it is capable, by exchange, to procure us the necessaries or conveniences of life, and in this it has the nature of a commodity; only with this difference, that it serves us commonly by its exchange, never almost by its consumption.’ (Some Considerations of the Consequences of the Lowering of Interest, and raising the Value of Money, Works (1823), v.34.) ‘Thus came in the use of money, some lasting thing that men might keep without spoiling, and that by mutual consent men would take it in exchange for the truly useful, but perishable supports of life.’ (Essay on Civil Government, Works (1823), v.365.) In LJ (A) vi.135, Locke is referred to as a follower of the mercantile system, and one who had given it ‘somewhat more of a philosophicall air and the appearance of probability by some amendments’. In this connection, Smith cited the allowance which Locke is said to have made for the fact that cattle and corn could be regarded as part of a nation’s wealth, albeit less significant than money. Cf. LJ (B) 254, ed. Cannan 198–9.

[8 ]Harris admitted: ‘In a country having no foreign commerce, any quantity of money will, in a manner, be sufficient for all purposes; and any increase or diminution of the original stock, if it be but gradual and slow, will scarce be attended with any consequence of moment.’ But later he wrote: ‘In the days of prosperity . . . it would be prudent to lay up a kind of dead stock of the precious metals, against any emergencies that might happen . . . He that is ready armed, is less liable to be assailed; and silver and gold are keen and destructive weapons.’ (Essay, i.80 and 99–100.) Hume argued in his essay ‘Of Money’ that ‘If we consider any one kingdom by itself, it is evident, that the greater or less plenty of money is of no consequence.’ (Essays Moral, Political, and Literary, ed. Green and Grose, i.309.)

[9 ]The point is elaborated below, IV.v.a.19.

[a–a]expect least of all 1

[10 ]Act anent the having of the money furth of the Realme (1487). Acts of the Parliament of Scotland, ii.183.

[11 ]The subjects of this and the preceding paragraph follow the argument of LJ (A) vi.147–8; cf. LJ (B) 257–8, ed. Cannan 200–1.

[b–b]it 1

[12 ]See below, IV.iii.a.3.

[13 ]Thomas Mun, England’s Treasure by Forraign Trade (London, 1664, reprinted Oxford, 1967), 19, which reads ‘we will rather accompt him a mad man’. Smith comments on the prohibition on the exportation of bullion in LJ (A) v.75–6 where he states that it was based on a mistaken notion. He added:

The wealth of a kingdom has by allmost all authors after Mun been considered as consisting in the gold and silver in it. In his book called England’s [treasure] by foreign trade, he endeavours to shew the balance of trade is the only thing which can support England, as by this means gold and silver are brought into the kingdom, and in these allone he says the wealth of the kingdom can consist, as they alone are not perishable. On this doctrine of his, which however foolish has been adopted by all succeding writers, these laws [of felony] have been founded.’ Smith added that the exportation of bullion was first allowed by King William ‘on the importunities of the merchants’. A similar point is made in LJ (B) 256–7, ed. Cannan 200–201, and see also LJ (B) 83, ed. Cannan 59, LJ (A) vi.147. LJ (A) vi.135 remarks, with regard to mercantilism, that ‘Mr. Mun was the first who formed it into a regular system’ and in ED 4.5 he states that confusion of wealth with money ‘has given occasion to the systems of Mun and Gee; of Mandeville who built upon them; and of Mr Hume who endeavoured to refute them’. On the subject of felony, see below, IV.viii.19.

[14 ]See III.i.1. and IV.iii.c.2, where it is stated that nothing can be ‘more absurd’ than this doctrine. Mandeville held in Remark L that good politicians will ‘keep a watchful Eye over the Balance of Trade in general, and never suffer that all the Foreign Commodities together, that are imported in one Year, shall exceed in Value what their own Growth or Manufacture is in the same exported to others . . . If what I urg’d last be but diligently look’d after, and the Imports are never allow’d to be superior to the Exports, no Nation can ever be impoverish’d by Foreign Luxury.’ (The Fable of the Bees, pt.i.115, ed. Kaye, i.116.) Cantillon also held that ‘To revive a State it is needful to have a care to bring about the influx of an annual, a constant and a real balance of Trade.’ (Essai, 256, ed. Higgs 193.) See also, J. Child, New Discourse of Trade (1694), 152.

[15 ]See IV.v.a.19 and above, II.ii.30.

[c–c]therefore, would tend, 1

[16 ]Compare Mun’s comment that ‘the undervaluing of our money in exchange, will not carry it out of the Kingdom, as some men have supposed, but rather is a means to make a less quantity thereof to be exported, than would be done at the Par pro pari.’ (England’s Treasure by Forraign Trade (reprinted 1967), 41–2.)

[17 ]See below, IV.ii.21.

[d–d]The 6

[18 ]In LJ (B) 252, ed. Cannan 196 Smith also quotes Joshua Gee on the problems of an adverse balance, and John Locke at 254, ed. Cannan 198. Gee is also cited in LJ (A) vi.167.

[19 ]‘By’ not ‘in’.

[20 ]See above, II.v.25, for an elaboration of this point.

[21 ]Hume develops this theme in his essay ‘Of the Balance of Trade’, Essays Moral, Political, and Literary, ed. Green and Grose i.330–45.

[22 ]LJ (B) 247, ed. Cannan 192: ‘Goods will always bring in money, and as long as the stock of commodities in any nation encreases, they have it in their power to augment the quantity of coin.’

[23 ]This term is explained above, I.vii.8, and below, IV.vi.13.

[e–e]were 4–6

[24 ]See below, IV.vi.8, where it is stated on the authority of Joseph Baretti that the packet boat from Lisbon brings more than £50,000 in gold into England. Smith also comments on the ease with which gold may be transported at II.v.29, IV.v.a.18, and IV.vi.15.

[f–f]were 4–6

[25 ]See below, IV.v.a.19, where Smith applies the analogy of the dam–head in this case. The Spanish and Portuguese prohibition on the export of gold is discussed in LJ (B) 258–9, ed. Cannan 202. Hume made a similar point in his essay ‘Of the Balance of Trade’ in inquiring: ‘Can one imagine, that it had ever been possible, by any laws, or even by any art or industry, to have kept all the money in SPAIN, which the galleons have brought from the INDIES?’ (Essays Moral, Political and Literary, ed. Green and Grose, i.334.)

[26 ]It is stated at IV.vii.c.53 that the degradation of the value of gold and silver is one of the causes which nearly overbalanced the ‘natural good effects of the colony trade’ in the case of Spain and Portugal. See also I.xi.n.1.

[g–g]in 1

[h–h]were 4–6

[27 ]‘In the reign of Agis, gold and silver money first flowed into Sparta, and with money, greed and a desire for wealth prevailed through the agency of Lysander, who, though incorruptible himself, filled his country with the love of riches and with luxury, by bringing home gold and silver from the war, and thus subverting the laws of Lycurgus.’ (Plutarch Life of Lycurgus, xxx, translated by B. Perrin, Plutarch’s Lives (1914), i.297.) in Loeb Classical Library. Cantillon and Hume both refer to this aspect of the Lycurgan Laws. Cantillon, Essai, 143–4, ed. Higgs 109, and Hume ‘On the Balance of Trade’, Essays Moral, Political, and Literary, ed. Green and Grose, i.338. Sir James Steuart described the republic of Lycurgus as ‘the most perfect plan of political œconomy’ in Principles of Political Oeconomy, II.xiv.

[28 ]See above, I.vii.17.

[29 ]See above, I.xi.g.16–37, where Smith discusses the trends in the value of the metals, and IV.v.a.5, where he refers to a ‘gradual and insensible rise’ in the value of silver during the present century.

[i–i]with very great 1

[30 ]See above, II.ii.26. The use of paper as a substitute for gold is considered in LJ (A) vi.130.

[31 ]Cf. II.iv.15.

[32 ]See above, I.v.

[33 ]See above, II.i.19, where money is stated to be a part of the circulating capital of society. It is remarked at II.ii.23 that this part of capital does not contribute to revenue. See generally II.ii and especially §1–23.

[34 ]Smith comments on the problem of perishable commodities in discussing price determination at I.vii.10.

[35 ]Money is described as ‘the great wheel of circulation’ at II.ii.23; see also IV.vi.27, where money is described as a commodity with regard to which every man is a merchant.

[j–j]were 4–6

[36 ]See above, II.ii.30, for an elaboration of this point.

[37 ]See above, II.iii.2.

[38 ]See below, §30. Smith comments on accumulated treasures of modern times at V.i.g.41, V.ii.a.8, and V.iii.3.

[39 ]Smith comments on the cost of the conflict with France at II.iii.35 and cites the same figures at IV.vii.c.64 and V.iii.92; cf. also IV.viii.53. See The Present State of the Nation, attributed to W. Knox (1768), 27, and cf. Sir John Sinclair, The History of the Public Revenue of the British Empire (London, 1803), i.465, especially n.2.

[k–k]were 4–6

[40 ]The ‘late reformation’ of the coinage is discussed extensively at I.v.29 ff. and IV.vi.18 ff.

[l–l]2–6

[m–m]of Mr. Horsely, 1 [See index, s.v. Magens]

[41 ]Cf. LJ (A) vi.136–7: ‘The highest computation of the cash in Great Britain makes it not above 30 mills; it is probably less, but can not be more, by no computation.’ Smith endeavours to justify this statement in the remaining part of the lecture and in the course of his argument suggests that ‘The only method we have to judge of the quantity of money requisite to carry on the circulation is the amount of the rent of land estates. This according to the computation of the land tax is but 12½ mills. in the half year. The landholders in fact pay all the others . . . So that the land rent circulates thro the country and pays all the nation.’ (LJ (A) vi.142–3.) In LJ (B) 289, ed. Cannan 224, the annual rents in England are valued at 24 millions; cf. Cantillon, Essai, II.iv.

[42 ]‘The increase in the exports was found to have been occasioned chiefly by the demands of our own fleets and armies, and, instead of bringing wealth to the nation, were to be paid for by oppressive taxes upon the people of England.’ (The Present State of the Nation, attributed to W. Knox, 8.)

[n–n]bring 6

[43 ]‘During the year which ended with the dissolution of Parliament on 19 March 1761 supplies of £18,816,019—19—19¾ had been granted for the year, and of that sum £13,948,700—2—3½ was for sea and land service. A sum should be added as a share of the total civil list expenditure of £800,000, fixed for a year from 25 October 1760.’ (A. Anderson, Origin of Commerce (1764), ii.420–1.)

[44 ]These figures are cited at I.xi.g.32,33 on the authority of Raynal and Magens; and see below, IV.v.b.45.

[o–o]3–6

[p–p]it 1–2

[45 ]Hume commented on the war between England and France in 1415: ‘The poverty of all the European princes, and the small resources of their kingdoms, were of cause of these continual interruptions in their hostilities; and though the maxims of war were in general destructive, their military operations were mere incursions, which, without any settled plan, they carried on against each other.’ (History of England (1778), iii.103–4.)

[46 ]See below, V.iii.9.

[47 ]See above, III.iv.5, and below, V.iii.2.

[48 ]The military organization of the Tartars is described in V.i.a.3–5.

[49 ]See above, II.i.31.

[50 ]It is remarked at V.iii.8 that modern governments, in contrast to more primitive forms, foresee ‘the facility of borrowing’ and therefore dispense with the duty of saving.

[51 ]See above, III.iv, and especially § 10.

[52 ]‘Antiochus [not Dercyllidas] reported back to the Ten Thousand [The Arcadian Assembly] that the King [of the Persians] had bakers, and cooks, and wine–pourers, and door–keepers in vast numbers, but as for men who could fight with Greeks, he said that though he sought diligently he could not see any.’ (Xenophon, Hellenica, VII.i.38, translated by C. L. Brownson in Loeb Classical Library (1921), 142–3.)

[53 ]The doctrine of ‘vent for surplus’ was widely applied: see, for example, II.v.33, III.i.1, and IV.iii.c.4.

[54 ]The basic principle is discussed in I.iii.

[q–q]3–6

[55 ]Smith comments on the fact that trade is mutually advantageous to the parties involved in LJ (B) 261–2, ed. Cannan 204, and goes on to suggest that ‘It were happy, therefore, both for this country and for France, that all national prejudices were rooted out, and a free and uninterrupted commerce established.’ (LJ (B) 265, ed. Cannan 206.) The same point is made at 269, ed. Cannan 209, and in LJ (A) vi.160–7, where the advantages involved are explicitly linked to the division of labour: ‘It is on the power of this exchange that the division of labour depends, which as has been shown to the satisfaction of the whole of you is the great foundation of opulence, as it occasions the production of a greater quantity of the severall things wrought in.’ (161–2.)

[56 ]See above, I.xi.f.3 and V.ii.c.5.

[57 ]See generally, IV.vii.c, where Smith discusses the advantages acquired by Europe from the discovery of America.

[58 ]Smith comments at IV.vii.c.80 and 100 on the injustices inflicted by the Europeans on the original peoples of the colonies.

[59 ]The discovery of America, and of the passage to India via the Cape of Good Hope are cited at IV.vii.c.80 as the ‘two greatest and most important events recorded in the history of mankind’.

[60 ]See generally, IV.i.

[61 ]Similar sentiments are expressed below, IV.viii.1, where Smith also drew attention to types of policy designed to encourage certain kinds of import and to discourage some exports, e.g. the materials of manufacture and ‘instruments’ of trade. Smith also refers to monopoly ‘of one kind or another’ as the ‘sole engine of the mercantile system’ at IV.vii.c.89.

[a–a]of such Goods from Foreign Countries 1

[1 ]By 18 and 19 Charles II, c. 2 (1666) in Statutes of the Realm, v.597; 18 Charles II, c. 2 in Ruffhead’s edition. Imports from Ireland were allowed from 1759 by 32 George II, c. 11 (1758). See above, III.iv.20, and below, IV.ii.16 and V.ii.k.13.

[2 ]22 Charles II, c. 13 (1670). See above, III.iv.20, and below, IV.ii.16, IV.v.a.23, IV.v.b.33 and 37, IV.vii.b.33, V.ii.k.13.

[3 ]By 4 Edward IV, c. 1 (1464). Controls over the import and export of wool are discussed at IV.viii.17, where it is pointed out that the manufacturers of woollen products had been more successful than others in persuading the legislature to meet their special needs. Cf. Pownall, Letter, 29–31. In Letter 203 addressed to William Eden, dated 3 January 1780, Smith called for a repeal of all prohibitions on importation, and that on the exportation of wool.

[4 ]6 George III, c. 28 (1766), extended by 11 George III, c. 49 (1771). See below, IV.iv.7. See also above, II.v.15 and III.iii.19, where Smith comments on the fact that the silk manufacture was based on foreign materials.

[5 ]Additional duties were imposed from 25 May 1767 by 7 George III, c. 28 (1766).

[b–b]3–6

[6 ]In the letter (203) to Eden just cited, Smith commented on the ineffectiveness of absolute prohibitions on importation, and added that:

About a week after I was made a Commissioner of the Customs, upon looking over the list of prohibited goods, (which is hung up in every Customhouse and which is well worth your considering) and upon examining my own wearing apparel, I found, to my great astonishment, that I had scarce a stock, a cravat, a pair of ruffles, or a pocket handkerchief which was not prohibited to be worn or used in G. Britain. I wished to set an example and burnt them all. I will not advise you to examine either your own or Mrs Eden’s apparal or household furniture, least you be brought into a scrape of the same kind. See below, V.ii.k.64: ‘to pretend to have any scruple about buying smuggled goods . . . would in most countries be regarded as one of those pedantic pieces of hypocrisy which . . . serve only to expose the person who affects to practice them, to the suspicion of being a greater knave than most of his neighbours.’ Smith’s appointment afforded Edward Gibbon an opportunity for some heavy humour; In Letter 187 addressed to Smith, dated 26 November 1777 he wrote that: Among the strange reports, which are every day circulated in this wide town, I heard one to–day so very extraordinary, that I know not how to give credit to it. I was informed that a place of Commissioner of the Customs in Scotland had been given to a Philosopher who for his own glory and for the benefit of mankind had enlightened the world by the most profound and systematic treatise on the great objects of trade and revenue which had ever been published in any age or in any Country.

[c–c]certain 1

[7 ]See above, II.v.31. Smith comments frequently on the ‘natural balance of industry’ in this chapter and throughout Book IV. See, for example, IV.ii.12,31, IV.iv.14, and IV.v.a.39. The claim that an artificial direction regarding the use of resources is less satisfactory than a ‘natural’ one is made at IV.v.a.3,24, IV.vii.c.43,97, and cf. IV.ix.51. The idea is applied in the analysis of taxation, for example, at V.ii.k.63. It will be observed that in making this point, the reference is to the dynamic analysis of II.v. and III.i rather than to the treatment of the static allocative mechanism offered in Book I.

[8 ]In LJ (B) 233–4, ed. Cannan 180–1, Smith refers to ‘a natural balance of industry’ and to the ‘natural connection of all trades’, and makes the point that regulation will break the ‘balance of industry’. A similar point is made in LJ (A) vi.92. The doctrine is succinctly stated in ED 3.5.:

there is in every country what may be called a natural balance of industry, or a disposition in the people to apply to each species of work precisely in proportion to the demand for that work. That whatever tends to break this balance tends to hurt national or public opulence; whether it be by giving extraordinary discouragement to some sorts of industry or extraordinary encouragement to others. In this context, the criticism is extended to bounties (see below, IV.v.) and occurs in the discussion of policies which prevent the coincidence of market and natural price. See especially, LJ (B) 232–5, ed. Cannan 180–1, and above, I.vii. Compare Mandeville’s comment in the Sixth Dialogue: ‘we may learn, how the short–sighted Wisdom, of perhaps well–meaning People, may rob us of a Felicity, that would flow spontaneously from the Nature of every large Society, if none were to divert or interrupt the Stream.’ (The Fable of the Bees, pt. ii. 425, ed. Kaye ii.353.)

[9 ]Rather similar terms are used in the discussion of equilibrium price, in I.vii.15.

[10 ]Above, II.v.27.

[d]the 1

[11 ]See above, II.iii.6.

[12 ]A similar point is made at I.vi.17, I.xi.p.7, and II.ii.1.

[13 ]See below, IV.vii.c.88.

[14 ]Cf. TMS IV.i.1.10, where Smith also uses the concept of the ‘invisible hand’ in an economic context.

[15 ]There is an interesting variation on this theme in Steuart’s Principles, i.165, ed. Skinner i.143–4.

[16 ]Similar sentiments are expressed in IV.v.b.16 and IV.ix.51, where intervention is said to be presumptuous and impolitic, not to mention unjust. The argument is also applied at I.x.c.12.

[17 ]See above, I.ii.5.

[18 ]Cf. LJ (B) 261–2, ed. Cannan 204: ‘All commerce that is carried on betwixt any two countries must necessarily be advantageous to both. The very intention of commerce is to exchange your own commodities for others which you think will be more convenient for you. When two men trade between themselves it is undoubtedly for the advantage of both . . . The case is exactly the same betwixt any two nations.’ See also ED 4.9. The same example is provided in LJ (A) vi.159–60, with the qualification that exchange between individuals will always be beneficial only where they are ‘prudent’. See above, 447 n. 55.

[19 ]See below, IV.ix.50, where it is pointed out that intervention with the use of capital is ‘in reality subversive of the great purpose which it means to promote’. Without questioning this argument, Pownall adverted to the infant industry case as justifying protection on the ground that trades so protected might in the long run become competitive—citing as examples, the woollen and hardware manufactures. However, Pownall did not extend his argument to cases where manufactures were based on foreign materials, such as flax and silk: ‘Against such your principle, in the full force of its arguments, stands unanswerable.’ (Letter, 28–9.) Smith’s main qualifications to the doctrine of free trade appear below, IV.ii.22f. See also III.iii.19 and IV.viii.4.

[e–e]augmenting 1

[20 ]See above, I.vii.24.

[21 ]See above, I.ii.4.

[22 ]18 and 19 Charles II, c. 2 (1666) in Statutes of the Realm, v.597; 18 Charles II, c. 2 in Ruffhead’s edition. See above, III.iv.20, IV.ii.1, and below, V.ii.k.13.

[23 ]22 Charles II, c. 13 (1670). See above, III.iv.20 and IV.ii.1, and below, IV.v.a.23, IV.v.b.33 and 37, IV.vii.b.33, V.ii.k.13.

[24 ]See above, IV.i.29, and generally, III.iii.17–20.

[f–f]were 4–6

[g–g]were 4–6

[25 ]See above, I.iii.3, where Smith comments on the cheapness of water–carriage.

[26 ]32 George II, c. 11 (1758), continued by 5 George III, c. 10 (1765) and 12 George III, c. 2 (1772). See above, III.iv.20, and below, V.ii.k.13.

[27 ]See above, I.xi.l.1–7.

[28 ]Cf. I.xi.b.12.

[29 ]Charles Smith, Three Tracts on the Corn Trade and Corn Laws, 144–5. Charles Smith is described as ‘ingenious and well–informed’ at IV.v.a.4. See also IV.v.a.8 and IV.v.b.28. There is a long discussion of the bounty in IV.v.a.

[30 ]The same figure is quoted at IV.v.b.28. Pownall, Letter, 30, disputed these figures: ‘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 operates on the market; it is not the 1/571 part but the 1/15 part which would operate to the depression of the market and the oppression of the farmer’.

[h–h]2–6

[31 ]See above, I.xi.g.4, and below, IV.v.a.22.

[i–i]were 4–6

[32 ]See below, IV.v.a.22, where it is stated that corn merchants are the only set of men to whom the bounty could be ‘essentially serviceable’.

[33 ]Cf. I.xi.a, where Smith discusses the determinants of rent.

[34 ]The authority for the extreme statement is not clear. King stated: ‘In 1665, He [the King of France] settled Mr. Josas van Robay, a foreign Protestant, at Abbeville in Picardy, and by Letters Patent granted to him and his Workmen the free Exercise of their Religion, and several other very considerable Privileges, which their Families enjoy to this Day. This Clothier fixed the Manufacture of all sorts of Spanish Cloth in that City, and the King lent him by Agreement 2,000 Livres for every Loom he set up, until he had 40 Looms at work; so that he received 80,000 Livres. And at last it was found, he had so well established that Manufacture, that by degrees the Payment of the whole was remitted.’ (Charles King, The British Merchant (London 1743), ii.82.)

[35 ]‘At ex agricolis et viri fortissimi et milites strenuissimi gignuntur, maximeque pius quaestus stabilissimusque consequitur minimeque invidiosus, minimeque male cogitantes sunt qui in eo studio occupati sunt. . . . On the other hand, it is from the farming class that the bravest men and the sturdiest soldiers come, their calling is most highly respected, their livelihood is most assured and is looked on with the least hostility, and those who are engaged in that pursuit are least inclined to be disaffected.’ (Cato, De Re Rustica, introduction, translated by W. D. Hooper, revised by H. B. Ash in Loeb Classical Library (1934), 2–3.)

[36 ]Smith makes much of the point regarding ease of combination in discussing positions of economic power. See, for example, I.x.c.19, IV.v.b.4,24, IV.viii.34; and cf. I.viii.12, where the point is brought into the discussion of wages. See also IV.viii.4, where Smith discusses the poor bargaining position of those people who were engaged in the production of linen on an outwork basis; and cf. I.x.b.50, where it is remarked that the low rates of return for such workers were partly due to the fact that this was not their sole employment.

[37 ]See above, IV.i.10. Smith comments on the generosity of country gentlemen at I.xi.p.10.

[38 ]12 Charles II, c. 18 (1660). The provisions of the Navigation Acts are discussed at IV.vii.b.25–35. It is stated at IV.vii.c.19 that the restrictions thus imposed on trade with the colonies had the effect of raising the rate of profit in Great Britain. Smith remarks at IV.vii.c.23 that the provisions of the acts were not strictly enforced for several years after enactment. See also IV.vii.c.97.

[j–j]cargo 1–2

[39 ]The prohibition applied to all foreign goods which could not be imported except in British ships, not only to ‘bulky articles of importation’.

[40 ]An Act for increase of Shipping, and Encouragement of the Navigation of this Nation (1651). Acts and Ordinances of the Interregnum, ed. C. H. Firth and R. S. Rait, ii.559–62.

[41 ]At IV.iii.a.1 Smith draws a distinction between policies based on partial interests and those which reflect national animosity.

[42 ]From all except coal by 25 Charles II, c. 6 (1672). The aliens duty is frequently mentioned, for example, at I.x.c.25, IV.iii.c.10, IV.iv.3, and V.ii.k.21.

[43 ]Cf. ‘Buying is Bartering, and no Nation can buy Goods of others that has none of her own to purchase them with. . . . We know that we could not continue long to purchase the Goods of other Nations, if they would not take our Manufactures in Payment for them; and why should we judge otherwise of other Nations.’ (Mandeville, The Fable of the Bees, pt. i. 111, ed. Kaye i.111.)

[44 ]It is stated at II.v.30 that the security of Great Britain depends on the ‘number of its sailors and shipping’. Smith also comments on the contribution to national defence which was made by the fishing bounty at IV.v.a.27. The needs of defence are also cited at IV.v.a.36 as justification for granting bounties on the exportation of strategic materials such as gun–powder, in order to encourage their (domestic) manufacture.

[45 ]See above, IV.ii.3, where Smith distinguishes between the natural and ‘artificial’ uses of stock.

[k–k]farther 4–6

[46 ]See above, I.viii.52.

[l]malt, beer, 1

[47 ]See above, I.viii.35, and below, V.ii.k.1–12.

[m–m]it is 1

[48 ]See below, V.ii.k.14, 79–80, for comment on this point. It is stated at IV.ix.28 that Quesnay was mistaken in imagining that a country could prosper only ‘under a certain precise regimen, the exact regimen of perfect liberty and perfect justice’.

[49 ]Colbert is mentioned below, IV.ix.3,4, as a man of great industry and acuteness, who had ‘unfortunately embraced all the prejudices of the mercantile system’.

[50 ]Presumably this is a reference to the physiocrats, whose doctrines are reviewed in IV.ix. Cf. IV.ix.49, where it is stated that from one point of view the inconsistencies of physiocratic policy were more marked than those of the mercantile system.

[51 ]14 Charles II, c. 13 (1662) in Statutes of the Realm, v.405–6; 13 and 14 Charles II, c. 13 in Ruffhead’s edition, and 9 William III, c. 9 (1697) in Statutes of the Realm, vii. 304–6; 9 and 10 William III, c. 9 in Ruffhead’s edition.

[52 ]11 William III, c. 11 (1698) in Statutes of the Realm, vii.600; 11 and 12 William III, c. 11 in Ruffhead’s edition, to become effective ‘three months after the prohibition of the Woollen manufactures in Flanders shall be taken off’.

[53 ]Cf. LJ (B) 327, ed. Cannan 254: ‘They whom we call politicians are not the most remarkable men in the world for probity and punctuality.’

[n–n]both to those classes and 1

[54 ]Smith discusses another problem of dislocation in IV.vii.c.44,45, arising from the likely loss of the American trade. He also introduces a qualification to the doctrine of free trade at IV.v.b.39, where he points out that the policy of one country may hinder another from establishing ‘what would otherwise be the best policy’.

[55 ]See above, I.x.b.45.

[56 ]Above, I.x.c.43.

[57 ]The privilege was given after particular wars by 12 Charles II, c. 16 (1660); 12 Anne, c. 14, (1712) in Statutes of the Realm, ix.791–3; 12 Anne, st.1, c. 13 in Ruffhead’s edition, and 3 George III, c. 8 (1762). See above, I.x.c.9.

[58 ]The obstructions caused by the corporation laws and the Poor Laws are discussed above, I.x.c.

[59 ]See above, I.xi.p.10, where Smith points out that mercantile groups may influence the legislature. Cf. I.viii.13, I.x.c.61, IV.vii.b.49, IV.viii.17, and V.i.e.4.

[60 ]TMS VI.ii.2.8 states that: ‘Upon the manner in which any state is divided into the different orders and societies which compose it . . . depends what is called the constitution of that particular state.’ For a more conventional use of the term, see below, IV.vii.c.77. In the chapter of the TMS above cited, Smith spends a good deal of time in describing the ‘subaltern’ societies which comprise the state and the loyalties which they attract; an interesting emphasis when we recall that Part VI was the last major piece of work which Smith completed, together with the emphasis given to economic pressure groups, especially in WN IV.

[61 ]Below, V.ii.k.57–65.

[a–a]2A–6

[b–b][to 3rd last sentence of § 1] Thus in Great Britain higher duties are laid upon the wines of France than upon those of Portugal. German linen may be imported upon paying certain duties; but French linen is altogether prohibited. 1–2 text 2A–6

[1 ]18 George II, c.36 (1744); 21 George II, c.26 (1747); 32 George II, c.32 (1758); 7 George III, c.43 (1766). See below, IV.iv.7 and IV.viii.4.

[2 ]4 William and Mary, c.5 (1692). See below, IV.iv.9.

[3 ]7 and 8 William III, c.20 (1695). Wine and vinegar, as well as brandy, were not subject to the general increase of 25 per cent. The additional duties on brandy were £30 a tun on single proof and £60 a tun on double proof. See below, IV.iv.8,9 and IV.viii.43.

[4 ]See below, IV.iv.9 and V.ii.k.23.

[5 ]See V.ii.b.6. The relationship between smuggling and taxes is frequently mentioned: see for example, IV.vi.27, V.ii.k.27,49,75.

[c–c]om. 1

[d–d]2–6

[6 ]Hume developed this theme in his essay ‘Of the Jealousy of Trade’. Montesquieu also implied that jealousy may be a natural concomitant of an extended trade in stating that a trading nation (like England) ‘has a prodigious number of little particular interests; it may then injure or be injured in an infinite number of ways. Thus it becomes immoderately jealous, and is more afflicted at the prosperity of others than it rejoices at its own.’ (Esprit, XIX.xxvii.32.) In TMS IV.i.1.11, however, Smith added love of system as a motive for policy, quite apart from sectional or national interest:

When the Legislature establishes premiums and other encouragements to advance the linen or woollen manufactures, its conduct seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and much less from that with the manufacturer or merchant. The perfection of police, the extension of trade and manufactures, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions. Cf. TMS VII.iii.1.2.

[7 ]Cf. LJ (A) vi.164–5: ‘All these national jealousies which prompt them to spite and ill–will each other, and refuse to be supplied by them in any convenience of life, must lessen the exchange of commodities, hurt the division of labour, and diminish the opulence of both.’ Cf. LJ (B) 264, ed. Cannan 206, and TMS VI.ii.2,3, where Smith also points out that ‘the mean principle of national prejudice is often founded upon the noble one of the love of our own country’. However, Smith went on to state that while France and England may each have reason to fear the military power of the other, their riches are ‘proper objects of national emulation, not of national prejudice or envy’. Cf. Hume, ‘Of the Balance of Trade’, Essays Moral, Political, and Literary, ed. Green and Grose, i.335–6.

[8 ]Anderson commented:

Objections, and answers to the East India trade . . . I. Its exhausting our Treasure. Answered, We may, by this Trade, draw as much Silver from other Countries as we send to India. Origin of Commerce (1764), ii.452. See above, IV.i.7–8.

[e–e]A great 1

[9 ]‘It is a matter of great difficulty to know the true balance of trade; some expect the custom house accounts will set us to rights, but there may be a great many fallacies in those accounts; a great many goods exported may be over–rated, and a great many imported under–rated: besides, it is possible to run–in vast quantities of goods that we can have no account of; and some merchants have entered double the quantity of woollens they intend to ship off, to discourage others from sending to the same market.’ (J. Gee, The Trade and Navigation of Great Britain Considered (Glasgow, 1760), 127–8.) The rates at which commodities were valued were fixed, though it is possible to use the figures as a volume index. E. B. Schumpeter, English Overseas Trade Statistics, 1697–1808 (Oxford, 1960).

[f],at least, as it has hitherto been estimated, 1

[g–g]it 1–2

[h–h]it 1–2

[i–i]common 1

[j–j][to end of §7] this doctrine, of which some part is, perhaps, not a little doubtful, were supposed ever so certain, the manner in which the par of exchange has hitherto been computed, renders uncertain every conclusion that has ever yet been drawn from it. 1

[k–k]shall 6

[10 ]‘. . . the course of exchange betwixt different countries, is not so critical and exact a rule for measuring the ballance of trade, as is commonly imagined; since it is hardly possible to ascertain what is the true par.’ (J. Harris, Essay, i.118.)

[11 ]Harris provided an example (Essay, i.125.): ‘The business of exchange between England and Germany, and the northern countries, is chiefly transacted at London and Amsterdam. The course of exchange then between us and Holland, indicates how the state of accounts stands between us and all those countries in general, but not in respect of any one in particular. The ballance of our trade to Holland may be greatly in our favour, and yet the exchange to Amsterdam be generally against us; both which are supposed to be matters of fact.’

[   ][[see note j–jabove]]

[l–l]standards 1

[m–m]standards 1

[12 ]The same point, quoting the same authority, is mentioned above, I.xi.g.5.

[13 ]In 1774. See above, I.v.32 and I.xi.g.6.

[14 ]The seignorage was 3 per cent. See above, I.v.39, and below, IV.vi.19.

[15 ]See below, IV.vi.18. It is pointed out at I.v.38 that any delay in converting bullion into coin is equivalent to a small duty.

[16 ]The agio is mentioned above, II.ii.104.

[n–n]2–6

[1 ]It is stated in the preface of the 4th edition, that ‘I find myself at liberty to acknowledge my very great obligations to Mr. Henry Hope of Amsterdam’ with regard to information on the bank. cf. Steuart, Principles, ii.300, and generally, IV.2.xxxvii–xxxix.

[2 ]‘. . . the main if not the sole design of erecting these banks [Venice, Amsterdam, Hamburg, Nuremberg], was for the fixing of a kind of an indelible standard of money.’ (J. Harris, Essay, i.102.)

[3 ]See below, IV.iii.b.15

[a–a]2–6

[b–b]om. 4–6

[4 ]In 1774. See above, I.v.32 and I.xi.g.6.

[* ]The following are the prices at which the bank of Amsterdam at present (September, 1775) receives bullion and coin of different kinds:

Bar silver containing 11/12 fine silver 21 per mark, and in this proportion down to ¼ fine, on which 5 guilders are given.

Fine bars, 23 per mark.

Bar or ingot gold is received in proportion to its fineness compared with the above foreign gold coin. Upon fine bars the bank gives 340 per mark. In general, however, something more is given upon coin of a known fineness, than upon gold and silver bars, of which the fineness cannot be ascertained but by a process of melting and assaying.

[5 ]Voltaire, Siècle de Louis XIV, in Oeuvres (Paris, 1878), i.258, quoted by A. Anderson, Origin of Commerce (1764), ii.153.

[6 ]In LJ (B) 249, ed. Cannan 193, the date is given incorrectly as 1701; Smith then proceeds to show that the ‘constitution’ of the Bank of England differed from that of Amsterdam. This material does not figure in either LJ (A) or ED. See above. §5.

[7 ]Cf. LJ (B) 249, ed. Cannan 194: ‘It has been affirmed by some that the bank of Amsterdam has always money in its stores to the ammount of 80 or 90 millions. But this has lately been shown by an ingenious gentleman to be false, from a comparison of the trade of London and Amsterdam.’ The authority is probably that of Magens, who wrote: ‘The Bank of Amsterdam has the Fame of more Treasure than any other; the French Author of The Essay on Commerce says its Capital is 400,000,000 of Gilders; and the Amsterdam Edition of that Book is noted in the Margin 8, or 900,000,000, which amounts to 80,000,000 Sterling. Davenant seems assured that it is 36,000,000 Sterling, effectual Money Gold and Silver in Bank, and that their Transactions are not with Money, but by Assignments.’ (The Universal Merchant, ed. Horsley, 32.) Magens suggests maxima of 3,000 accounts and 60,000,000 guilders of treasure.

[d]But though the computed exchange must generally be in favour of the former, the real exchange may frequently be in favour of the latter. 1

[a–a]End of the Digression concerning Banks of Deposit. 1

[b–b]Though the computed exchange between any two places were in every respect the same with the real, it would not always follow that what is called the balance of trade was in favour of that place which had the ordinary course of exchange in its favour. The ordinary course of exchange might, indeed, in this case, be a tolerable indication of the ordinary state of debt and credit between them, and show which of the two countries usually had occasion to send out money to the other. But the ordinary state of debt and credit between any two places is not always entirely regulated by the ordinary course of their dealings with one another, but is influenced by that of the dealings of both with many other countries. If it was usual, for example, for the merchants of England to pay the goods which they buy from Hamburgh, Dantzick, Riga, &c. by bills upon Holland, the ordinary state of debt and credit between England and Holland would not be entirely regulated by the ordinary course of the dealings of those two countries with one another, but would be influenced by that of England with those other places. England might, in this case, be annually obliged to send out money to Holland, though its annual exports to that country exceeded the annual value of its imports from it, and though what is called the balance of trade was very much in favour of England.

Hitherto I have been endeavouring to 1

[1 ]Smith refers to ‘absurd speculations’ regarding the balance of trade at III.i.1, and see generally, IV.i.

[2 ]See below, IV.v.a.1–3; cf. IV.viii.51.

[c–c]2–6

[3 ]See above, IV.i.31 and III.i.1.

[d–d]will 6

[4 ]See above, II.v.28.

[e]no ¶ 1

[5 ]See above, II.iii.24, and below, IV.vi.12.

[6 ]See above, II.v.7.

[f–f]make 1–2

[g–g]from either 1

[7 ]It is pointed out at V.ii.k.50 that current British policy was to discourage the consumption of spirituous liquors on account of their tendency to ‘ruin the health and to corrupt the morals of the common people’.

[8 ]In LJ (A) vi.86 Smith attacked the view that an increase in the price of some liquors was likely to have the effect of reducing drunkenness:

By raising their price they make them an object of their desire, and such as good fellowship requires them to press on their guests. We see accordingly that in Spain and France, where all liquors are very cheap, there is less drunkenness than in this country. We may also see that this is the case here. A gentleman drunk with ale is a sight never to be seen, whereas one drunk with wine is not so uncommon. One will never press his friend to drink a glass of ale, as he never imagines he will scruple him that. But good fellowship requires that he should press him to drink wine, which costs him all he can well afford. A similar point is made in LJ (B) 231, ed. Cannan 179, and see below, V.ii.k.50.

[9 ]The same point is made at I.xi.p.10.

[10 ]The alien duties are frequently mentioned, e.g. at IV.ii.30, IV.iv.3, and V.ii.k.21.

[11 ]The attitude of the Chinese and ancient Egyptians to foreign trade is mentioned for example, at I.iii.7, I.ix.15, II.v.22, III.i.7, IV.ix.40 and 41.

[h–h][to end of § 13] om. 1–2 text 2A–6

[12 ]See below, IV.vii.c.35.

[13 ]See below, V.ii.k.78, where the population of France is stated to be 23 or 24 millions, and that of Britain, less than 8. Rickman estimated the population of England and Wales at less than 8 millions in the 1770s; Webster estimated the population of Scotland at 1¼ million in 1755. For details see B. R. Mitchell, Abstract of British Historical Statistics. For various estimates of French population, including Expilly and Necker, see M. Marion, Dictionnaire des institutions de la France aux XVII et XVIII siècles (Paris, 1923), 445.

[14 ]The same figure is cited at V.iii.76. Smith comments on the rapid rate of growth of population in America at I.viii.23.

[15 ]Smith makes a rather similar point in LJ (B) 264–5, ed. Cannan 206, in discussing the limitations imposed on trade with France and Spain, pointing out the superior advantages of trade with a country of some 20 millions as compared to another society consisting of only ‘two or three millions’. The argument also features in LJ (A) vi.166, where the population of France is stated to be about 20 millions and that of Portugal about 2 millions.

[   ][[see note h–habove]]

[16 ]Smith examines the doctrine of the balance of trade in LJ (A) vi.167–8, and LJ (B) 261–6, ed. Cannan 204–7. The ‘pretended doctors’ of the system whom he cites include Mun, Gee, Swift, Locke, and Mandeville.

[17 ]Cf. LJ (B) 269, ed. Cannan 209: ‘From the above considerations it appears that Brittain should by all means be made a free port, that there should be no interruptions of any kind made to forreign trade, that if it were possible to defray the expences of government by any other method, all duties, customs, and excise should be abolished, and that free commerce and liberty of exchange should be allowed with all nations and for all things.’

[18 ]See above, II.iii.14–18.

[i–i]2–6

[j–j]late 1

[kk* ]This paragraph was written in the year 1775.k

[a–a]it 1–2

[b–b][to end of § 11] Half the duties imposed by what is called the old subsidy, are drawn back universally, except upon goods exported to the British plantations; and frequently the whole, almost always a part of those imposed by later subisidies and imposts. 1–2 text 2A–6

[1 ]12 Charles II, c. 4 (1660). See below, IV.v.b.37, IV.viii.41, V.ii.k.23–24.

[2 ]4 William and Mary, c. 5 (1692) allowed drawbacks on certain goods if re–exported in three years. Other statutes set different periods. By 7 George I, st. 1, c. 21 (1720) the term was made three years for all. See below, V.ii.k.24.

[3 ]The same figures are used above, II v.34 and below, IV.vii.c.40.

[c–c]is 6

[4 ]26 George II, c. 21 (1753) (An Act for encouraging the Silk Manufactures of this Kingdom) made provision for the release of imported velvets, silks, and silks mixed with other materials and for the payment of the drawback on proper notice being given. H. Saxby, The British Customs (1757), 596, notes the drawback given under that Act. As Smith recognizes above, IV.ii.1, the regulations became even more stringent. 6 George III, c. 28 (1766) prohibited the importation of foreign silks and made provision for the seizure and subsequent sale of any commodities so imported. 11 George III, c. 49 (1771) continued the prohibition.

[5 ]18 George II, c. 36 (1744); 21 George II, c. 26 (1747); 32 George II, c. 32 (1758); 7 George III, c. 43 (1766). See above, IV.iii.a.1, and below, IV.viii.4.

[6 ]7 and 8 William III, c. 20 (1695) and 1 George I, st. 2, c. 12 (1714). See above, IV.iii.a.1, and below, IV.viii.43.

[7 ]The fourth rule stated that: ‘Every Merchant as well English as Stranger that shall ship and export any kind of Wines which formerlie have paid all the dutyes of the Tonnage inwarde shall have repaid . . . to them all the dutyes of Tonnage paid inwards except to the Englishman twenty shillinge the Tonne, and except to the stranger five and twenty shillinge the Tonne . . .’ (12 Charles II, c. 4 (1660)).

[8 ]9 William III, c. 23 (1697) in Statutes of the Realm, vii.382–5; 9 and 10 William III, c. 23 in Ruffhead’s edition. See also below, V.ii.k.23.

[9 ]2 and 3 Anne, c. 18 (1703) in Statutes of the Realm, viii.295–300; 2 and 3 Anne, c. 9 in Ruffhead’s edition. See below, V.ii.k.23.

[10 ]3 and 4 Anne, c. 3 (1704) in Statutes of the Realm, viii.332–6; 3 and 4 Anne, c. 5 in Ruffhead’s edition. See below, V.ii.k.23.

[11 ]4 William and Mary, c. 5 (1692). See above, IV.iii.a.1.

[12 ]The coinage on wine was a duty of 10s. a tun on imported wine, vinegar, cider, and beer, and 20s. a tun on brandy and strong wines to enable the cost of coinage at the mint to take place duty free. For details of the coinage see below, IV.vi.22.

[13 ]For details of the various duties see H. Saxby, The British Customs, 13–16—additional duty; 18–21—new subsidy; 21–2—one–third duty; 22—two–thirds duty; 35–9—impost of 1692; 46—coinage on wine.

[14 ]Of 1 James II, c. 3 (1685) and subsequent acts. £8 a tun on French wine and £12 a tun on Spanish and other wine.

[15 ]7 and 8 William III, c. 20 (1695) and 1 George I, c. 12 (1714).

[16 ]18 George II, c. 9 (1744): £8 a tun on French wine and vinegar, £4 a tun on other wine.

[17 ]3 George III, c. 12 (1762): additional duty from 31 March 1763 of £8 a tun on French wine and vinegar and £4 a tun on other wine.

[18 ]18 George III, c. 27 (1778): additional duties of £8. 8s. a tun on French wine and vinegar and £4. 4s. a tun on other wine.

[19 ]19 George III, c. 25 (1779).

[20 ]22 George III, c. 66 (1782), imposed from 25 July 1782.

[21 ]20 George III, c. 30 (1780): £8 a tun on French wine and vinegar and £4 a tun on others.

[22 ]15 Charles II, c. 7 (1663).

[23 ]See below, IV.vii.b.25–35 and IV.vii.c.15.

[24 ]Imports of Madeira wine were permitted because its European status was uncertain. Scottish servants and horses could also be imported by the same section of 15 Charles II, c. 7 (1663).

[25 ]4 George III, c. 15 (1764). See below, IV.vii.b.48.

[   ][[see note b–babove]]

[d–d]to 6

[26 ]See above, II.v.35, and below, IV.vii.c.96, where Smith discusses the case of Holland.

[27 ]A similar expression is used at IV.v.a.39 and IV.vii.c.43. See above, IV.ii.3 and note, and cf. LJ (A) vi. 92, LJ (B) 233–4, ed. Cannan 181.

[28 ]The nature of the colonial relationship is described below, chiefly in IV.vii.b.24–50.

[1 ]Bounties on importation are discussed in IV.viii.

[2 ]Cantillon argued: ‘It will always be found by examining particular cases that the exportation of all Manufactured articles is advantageous to the State, because in this case the Foreigner always pays and supports Workmen useful to the State.’ (Essai, 308, ed. Higgs 233.)

[3 ]See below, § 24, IV.iii.c.2, and IV.viii.51.

[4 ]Smith examines the bounties on corn and coarse linen in LJ (A) vi.91–7, and LJ (B) 232–5, ed. Cannan 180–2, arguing that they must break the natural balance of industry and thus diminish opulence. Smith thus concluded, in LJ (A) vi.97, that ‘the best police would be to leave everything to its naturall course, without bounty or any discouragement’. See above, IV.ii.3.

[5 ]Charles Smith, Three Tracts on the Corn Trade and Corn Laws (1766), 133–7. Charles Smith is described as ‘very well informed’ at IV.ii.20 and below, § 8.

[6 ]1 William and Mary, c. 12 (1688). See above, I.xi.g.4, III.iv.20, and below, IV.v.b.37, V.ii.k.13.

[7 ]In this chapter Smith argues against the view which had been stated in the lectures, to the effect that the bounty had reduced the price of corn. See for example, LJ (A) vi.95–6, LJ (B) 234, ed. Cannan 181–2, and ED 3.5. Cf. LJ (B) 298, ed. Cannan 230: ‘It is easy to shew that the free export and import of corn is favourable to agriculture. In England the country has been better stored with corn, and the price of it has gradualy sunk, since the exportation of it was permitted. The bounty on exportation does harm in other respects, but it increases the quantity of corn.’

[a–a]2A–6

[8 ]See above, I.xi.g.15, and cf. IV.ix.38, where the existing degree of liberty in the corn trade of France is ascribed to physiocratic influence. In commenting on Smith’s critique of the bounty, Pownall remarked (Letter, 31–7) on the similarity between Smith and Necker, and suggested that Smith had copied the latter’s ‘decisive proof’ that the bounty on corn had not lowered prices. Necker’s proof was that a general fall in the price of corn had taken place in France despite a prohibition on its export. Smith quotes Necker’s Sur la legislation et le commerce des grains (1775), below, V.ii.k.78.

[9 ]See above, I.xi.f, and cf. IV.i.14, where Smith refers to the more common view that the value of the precious metals had been falling in the present and preceding centuries owing to importation from the Spanish West Indies.

[10 ]See above, I.xi.g.12, and cf. V.ii.k.13.

[b–b]by securing to the farmer 1–2

[11 ]See above, I.xi.g.4, 15.

[c–c]to encourage tillage; and that the consequent increase of corn may, in a long period of years, lower its price 1–2

[d–d][to end of § 9] 2A–6

[e–e]otherwise 2A

[12 ]Charles Smith, Three Tracts on the Corn Trade and Corn Laws, 144. Charles Smith is similarly described at IV.ii.20.

[13 ]The same figures are cited at IV.v.b.29.

[14 ]See below, V.ii.k.3f where Smith discusses taxes on necessaries.

[   ][[see note d–dabove]]

[f–f]only, which can be at all 1–2

[15 ]See below, § 23. The distinction between real and nominal price is discussed in I.v

[g–g]2A–6

[h–h]3–6

[i–i]3–6

[16 ]See above, I.viii.52.

[17 ]Cf. LJ (B) 234, ed. Cannan 181–2: ‘tho the effects of the bounty encourageing agriculture brought down the price of corn, yet it raised the grass–farms, for the more corn the less grass. The price of grass being raised, butchers meat, in consequence of its dependance upon it, must be raised also. So that if the price of corn is diminished, the price of other commodities is necessarily raised.’ A similar point is made in LJ (A) vi.96.

[j–j]3–6

[k–k]3–6

[l–l]in the smallest degree 1–2

[m–m]3–6

[n–n]3–6

[o–o]2A–6

[p–p]of even 2A

[18 ]G. T. F. Raynal, Histoire philosophique iii.267–8, trans. Justamond, ii.352–3:

[Spain] prohibited, upon pain of capital punishment, the exportation of gold and silver; as if the Spaniards were not obliged to pay for what they wanted to buy . . . The prohibition of exporting gold and silver was to so little purpose, that though a prodigious quantity came over every year from America, there was very little seen in the kingdom . . . Spain has only agreed of late years, that the foreign trade should have all the profit of the goods it should send to America, only paying three per cent. The money was to be transmitted by bankers, settled for that purpose in the principal cities of Europe . . . Every private man is now at liberty to draw his money from Spain, upon paying the accustomed duties, which, in the year 1768, were advanced from three to four per cent. If they were more moderate, government would derive greater advantages from them. There are certain times, when the Spanish smugglers can bring the piastres on board the ships, for a price below the stated value; and it may easily be imagined those opportunities are eagerly seized. Cf. G. de Uztariz, The Theory and Practice of Commerce, trans. by John Kippax (London, 1751), ii.70: ‘Spain . . . which for some years has had, and still continues the like rigorous prohibition, and for a long time has had great and vigilant princes and zealous ministers, that have done their utmost to have them punctually observed, but without success.’

[19 ]Hume uses this analogy in his essay ‘Of the Balance of Trade’, Essays Moral, Political, and Literary, ed. Green and Grose, i.333. The analogy of the stream is used at II.ii.76, and cf. IV.vii.c.43.

[20 ]See above, IV.i.5, 12, 13, where Smith mentions the ease with which the precious metals can be transported and the futility of Spanish and Portuguese policy with regard to their export; It is also stated at IV.v.b.45 that the system of government in the two countries would ensure their poverty irrespective of policy with regard to gold. See also IV.vii.c.53 and I.xi.n.1, where the paragraph concludes with the remark that ‘though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better.’ LJ (A) vi.151 reads: ‘Portugall has little or nothing else to give in exchange for our corn and other goods but money. If therefore the exportation of it be prohibited by high penalties, the Portugese merchant who byes any commodities must pay not only the naturall price and what is requisite for the expense of transportation, but must also give a price on account of the risque the English merchant runns in getting it out of the country.’ Cf. LJ (A) vi.156.

The case of Spain, where the problems of prohibiting the export of coin are explained in terms of the analogy of the water level and the dam–head, is cited in LJ (A) vi.153 and LJ (B) 258–9, ed. Cannan 202. Harris makes a similar point, Essay, i.90, with regard to Spain and Portugal. However, it is pointed out at i.99 that money could be effectively hoarded provided that steps were taken to keep the excess quantity out of circulation. Cantillon also makes a similar point, Essai, 220–1, ed. Higgs 167. See generally, II.vi.

Mandeville (Fable of the Bees, pt. i.215, ed. Kaye, i.196–7) also remarked on the adverse effects which had followed from Spain’s acquisition of gold–producing colonies: from ‘too much Money, the making of Colonies and other Mismanagements, of which it was the occasion, Spain is from a fruitful and well–peopled Country, with all its mighty Titles and Possessions, made a barren and empty Thoroughfare, thro’ which Gold and Silver pass from America to the rest of the World; and the Nation, from a rich, acute, diligent and laborious, become a slow, idle, proud and beggarly People; so much for Spain. The next Country where Money may be called the Product is Portugal, and the Figure which that Kingdom with all its Gold makes in Europe, I think is not much to be envied.’

[q–q]that 1

[21 ]LJ (A) vi.157–8 comments: ‘Nothing was ever seen in any country which came from Spain but what was the naturall produce of the country . . . They have wool without which no broad cloth can be made in Europe, and yet no one ever saw Spanish broad cloth in the market; nor is any other thing else to be met with. The only things to be met with of Spanish growth are their fruits and their wines, which are allmost the only naturall productions of that fine country. The only other production we meet with is Spanish steel, which is of a peculiarily excellent quality, but the quantity of it is but very inconsiderable.’ See also LJ (B) 259–60, ed. Cannan 203, and below, IV.viii.24. The Spanish attitude to colonization and the consequences which followed from a considerable inflow of the precious metals are considered by Montesquieu, Esprit, XXI.xxii, ‘Of the Riches which Spain drew from America’.

[22 ]See above, II.ii.30.

[23 ]‘. . . bounties on exported corn, fish and flesh serve to feed the French cheaper than our own people.’ (M. Decker, Essay on the Causes of the Decline of Foreign Trade (London, 1740), 45.) Decker is also mentioned at IV.vii.c.22, V.ii.k.9, 18, and V.iii.74.

[r–r]3–6

[s–s]but only 1–2

[t–t]the smallest real 1–2

[u–u]real 1–2

[v–v]3–6

[w–w]merely 1–2

[x–x]really 1–2

[24 ]The same point is made above, I.xi.g.4 and IV.ii.20.

[25 ]22 Charles II, c. 13 (1670). See also III.iv.20, IV.ii.1, IV.ii.16, IV.v.b.33, IV.v.b.37–8, IV.vii.b.33, V.ii.k.13.

[26 ]See above, I.xi.g.10, where it is pointed out that in 1688, when the bounty was first granted, the country gentlemen ‘then composed a still greater proportion of the legislature than they do at present’. See also IV.ii.21.

[y–y]manufactures 4 <corrected 4e–6>

[27 ]See above, IV.ii.2, for an elaboration of this point, and cf. IV.ix.49.

[z–z]no human institution can alter 1

[28 ]In the original formulation of this passage, Smith referred to corn as having a ‘real value which no human institution can alter’. Pownall objected to this doctrine, (Letter, 13) but it would appear that Smith altered the passage as a result of criticism from James Anderson, author of Observations on the Means of Exciting a Spirit of National Industry (1777). In Letter 208 addressed to Andreas Holt, dated October 1780, Smith referred to Anderson as ‘A very diligent, laborious, honest Man’ and added that in the first edition of the WN:

I happened to say that the nature of things had stamped a real value upon Corn which no human institution can alter. The expression was certainly too strong, and had escaped me in the heat of Writing. I ought to have said that the nature of things had stamped upon corn a real value which could not be altered merely by altering its Money price. This was all that the argument required, and all that I really meant. Anderson quotes the disputed passage at p. 355 and considers Smith’s position as a whole in his postscript to Letter XIII entitled ‘On the Nature and Influence of the Bounty on Corn, and the other Corn Laws of Great Britain’. In this section Anderson argued that the ‘general system of corn laws in England’ was calculated to prevent the fluctuation of the price of grain’, and as such ‘extremely wise legislation’ (310). He did, however, accept Smith’s argument ‘with regard to the very great utility of an unlimited freedom . . . to the internal police of grain’, since otherwise ‘the bounty can produce but a very limited and partial effect in regulating the price of grain’ (370).

[a–a]it 1

[29 ]See above, § 10.

[30 ]A similar phrase occurs above, at § 3.

[31 ]See above, I.xi.p.10. Smith points out below, V.ii.k.12, that if a bounty could ‘in any case be reasonable’, it might be applied to the transportation of coal.

[32 ]The same sentiments are expressed below, V.ii.k.13. Estimates of the cost of the bounty are provided at I.xi.g.18 and V.ii.k.28.

[b–b]2A–6

[c–c]respect 1–2

[33 ]Bounties on production are mentioned at IV.viii.15.

[d–d]has, however, been more 1–2 text 2A–6

[34 ]See below, IV.viii.51, where it is pointed out that bounties involve in effect a double tax on the consumer.

[e–e]encouragements 1–2

[35 ]By 23 George II, c. 24 (1749) a bounty of 30s. a ton was to be paid on vessels of between 20 and 80 tons, and a bounty of 2s. 8d. per barrel on herring exported. The Act made other and less permanent provision for encouraging fisheries, notably the flotation of the Society of the Free British Fishery. See below, IV.v.a.35. The bounty was raised to 50s. per ton in 1757 but payment became irregular. When the charter of the Society was not renewed, the bounty was fixed at 30s. a ton and payment guaranteed by being charged on the revenue from customs and excise duties. See also 11 George III, c.31 (1771). 11 George III, c.38 (1771) fixed the whale fishing bounty at 40s. a ton from 1771 to 1776; 30s. a ton from 1776 to 1781; 20s. a ton from 1781 to 1786. See below, IV.vii.b.30. In Letter 299 addressed to Sir John Sinclair (undated), Smith wrote that: ‘I could write a volume upon the folly and bad effects of all the legal encouragements that have been given either to the linen manufacture or to the fisheries.’

[f–f]2A–6

[g]in the actual state of production 1–2

[h–h]2A–6

[i]No q1–2

[j–j]2A–6

[k–k]they 1–2

[l–l]defended as conducing 1–2

[36 ]See above, IV.ii.30, II.v.30. Smith refers to the need to protect strategically important industries below, § 36, and makes a related point at IV.vii.b.36.

[m–m]may frequently 1–2

[n]in time of peace, 1–2

[o–o]manner 1–2

[p–p][to end of § 37] Some other bounties may be vindicated perhaps upon the same principle. It is of importance that the kingdom should depend as little as possible upon its neighbours for the manufactures necessary for its defence; and if these cannot otherwise be maintained at home, it is reasonable that all other branches of industry should be taxed in order to support them. The bounties upon the importation of naval stores from America, upon British made sail–cloth, and upon British made gunpowder, may perhaps all three be vindicated upon this principle. The first is a bounty upon the production of America, for the use of Great Britain. The two others are bounties upon exportation. 1–2 text 2A–6. [The added passages may have been responsible for some delay in the publication of the third edition. In Letter 227 addressed to Strahan, dated 22 May 1783, Smith wrote that he awaited ‘some accounts which my friend Sir Grey Cooper was so good as to promise me from the treasury, in order to compleat all the Additions which I propose to make to my third edition.’ Writing again on 6 October (Letter 231) Smith indicated that while his proposed changes were virtually complete, he still awaited the accounts and the point is repeated in another letter (232) to Strahan dated 20 November. In letter 231 Smith told Strahan that he had hoped to get four months’ leave of absence in order to see the new edition through the press: ‘But a Welch Nephew of mine tells me that unless I advance him two hundred pounds he must sell his commission in the army. This robs me of the money with which I intended to defray the expence of my edition.’ However Smith was successful in obtaining a similar period of leave some five years later, when working on the final edition of the TMS. Letter 276 addressed to Thomas Cadell, dated 15 March 1788.]

[37 ]For a modern discussion see A. J. Youngson, After the Forty–Five (Edinburgh, 1973), 101–9.

[q–q]seasteeks 2A

[r–r]seasteeks 2A

[s–s]seasteeks 2A

[38 ]The amount paid in drawbacks may often have been less in many cases. The difficulties of notification were particularly acute in the Highlands, which were ill supplied with customs houses. Similar difficulties of collection applied to the bounties.

[39 ]In Letter 203 addressed to William Eden, dated 3 January 1780, Smith discusses the desirability of repealing the prohibitions on imports and the abolition of bounties. In this connection, he mentioned that the selling price of British and Dutch cured herrings was ‘about a guinea’ per barrel, despite the fact that the latter were so vastly superior to British cured that ‘you can scarce imagine the difference’. By putting a tax of half a guinea on Dutch herrings, thus confining them to the ‘tables of the better sort’. Smith thought that British manufacturers might be encouraged to sell in a dearer market and thus raise the quality of their product: ‘in five or six years time raise the manufacture to a degree of improvement, which at present I despair of its attaining to in fifty or Sixty years.’

[tt* ]See the accounts at the end of the volume.t

[40 ]Cf. LJ (A) vi.92: ‘When any branch of trade has a bounty on it all croud into it, and work not so much with expectation of answering a great demand but from a desire of making a fortune by this bounty, and proportion their work to it rather than to the demand.’

[41 ]Catches of the boat fishery were sometimes sold to the buss fishery, though the practice was illegal until 1787.

[42 ]The Society of the Free British Fishery.

[u–u]encouragement 2A

[43 ]12 Anne, c. 12 (1712) in Statutes of the Realm, ix.781–2; 12 Anne, st. 1, c. 16 in Ruffhead’s edition.

[44 ]4 George II, c. 29 (1730) and subsequent acts.

[45 ]21 George II, c. 2 (1747).

[46 ]8 George I, c. 15 (1721).

[47 ]4 George II, c. 29 (1730).

[v–v]3–6

[w–w]3–6

[48 ]Smith also defends the use of premiums in order to encourage elementary education, at V.i.f. 56.

[49 ]A similar expression is used, for example, at IV.iv.14 and IV.vii.c.43.

[50 ]In Letter 203 addressed to William Eden, dated 3 January 1780, Smith made the following reference to bounties on exportation: ‘These in Scotland and England together amount to about £300,000 a year; exclusive of the Bounty upon Corn which in some years has amounted to a sum equal to all the other bounties.’ See above, I.xi.g.18.

[a–a]2–6

[1 ]The same point is made at I.xi.b.33 and IV.vii.c.101.

[2 ]The problem of dispersed situation is frequently mentioned in the discussion of economic power. See, for example, IV.ii.21, IV.vii.b.24, and IV.viii.4, 34.

[3 ]See below, IV.vii.c.101.

[4 ]It is remarked above, I.x.b.34, in the discussion of ‘net advantages’, that of the five circumstances which affect wages, only two are relevant in the determination of profits, the agreeableness of the business and the risk involved.

[5 ]5 and 6 Edward VI, c. 14 (1551).

[6 ]See above, III.ii.21, and below, IV.v.b.26, where Smith compares the popular fear of engrossing and forestalling with the terrors of witchcraft.

[7 ]5 and 6 Edward VI, c. 14, s. 5 (1551) allowed for licensing and so made the act less rather than more stringent. But in general the Act was aimed against regrators, forestallers, and engrossers.

[8 ]5 Elizabeth I, c. 12 (1562), by transferring the power of licensing to quarter sessions, confirmed the impression of stringency in the provision for concessions.

[b–b]consumer 1

[c–c]his 1

[9 ]Smith comments on the advantages accruing to the London merchant dealing in a single type of linen, as compared to his counterpart in Glasgow or Aberdeen who might handle goods from Scotland, Ireland and Hamburg. See above, 32 n. 6.

[d–d]om. 4–6

[10 ]Similar sentiments are expressed, for example, at IV.ii.10, IV.v.b.43, and IV.ix.51.

[11 ]It is pointed out at II.v.37 that agriculture was ‘almost every where capable of absorbing a much greater capital than has ever yet been employed in it’.

[12 ]5 and 6 Edward VI, c. 14 (1551).

[13 ]See above, II.v.10, where the productive role of the merchant is explained.

[14 ]Smith’s use of statutes in support of his argument in this paragraph is confusing. 5 and 6 Edward VI, c. 14 (1551) held ‘it shall be lawful to every person or persons not forestalling, to buy engross and keep in his or their garners or houses such corn of the kind aforesaid’: wheat at 6s. 8d. a quarter and other grain at related prices. The distinction was thus made clear, and was confirmed by 5 Elizabeth I, c. 12 (1562); between a forestaller as someone who bought or tried to influence the price of commodities on their way to market, a regrator who bought and sold grain in a market within a radius of four miles, and engrossers who bought growing corn. In 15 Charles II, c. 7 (1663) the provisions of 5 and 6 Edward VI, c. 14 were repeated but in a way which led to the confusion in the text between forestallers and regrators: ‘It shall be lawfull for all and every person and persons (not forestalling nor selling the same in the same Market within three Months after the buying thereof) to buy in open Market, and to lay up and keep in his and their Graineries or Houses.’

The various statutes determining the prices at which engrossing was permitted are difficult to trace. Smith may have been thinking of statutes which permitted exportation at certain prices. He refers to these statutes at IV.v.b.37, 38.

[15 ]It is doubtful if Smith’s interpretation of 12 George III, c. 71 (1772) is wholly valid. The Act was a general statute repealing several laws against engrossers. 15 Charles II, c. 7 (1663) was not repealed until 10 Edward 7 and 1 George V, c. 8, s. 96 (1910), but the effectiveness of its restrictions on forestallers after the enactment of 12 George III, c. 71 is difficult to see.

[e–e]attends 1–2

[16 ]See above, § 10, and also III.ii.21, where the laws affecting engrossing are described as ‘absurd’.

[17 ]Charles Smith, Three Tracts on the Corn Trade and Corn Laws (1766), 145. See above, IV.ii.20, and IV.v.a.8.

[18 ]Ibid. 144. See above, IV.ii.20 and IV.v.a.8.

[19 ]Cantillon remarked: ‘There is no branch of knowledge in which one is more subject to error than Statistics when they are left to imagination, and none more demonstrable when they are based upon detailed facts.’ (Essai, 175, ed. Higgs 133.) In Letter 249 addressed to George Chalmers, dated 10 November 1785, Smith commented that he had ‘little faith in Political Arithmetic’ and cited as an example the difficulties which had encumbered Alexander Webster’s attempt to offer an accurate account of the population of Scotland. Webster (1707–84) had prepared An Account of the Numbers of People in Scotland in the year 1755 (1755; reprinted in J. G. Kyd, Scottish Population Statistics, Scottish Historical Society Publication, 3rd series, xliii (Edinburgh, 1952)). In the same letter, Smith referred to Webster as ‘of all the men I have ever known, the most skilful in Politic Arithmetic’. Despite his reservations about political arithmetic Smith was able to refer to the ‘ever honoured’ Sir William Petty, in Letter 30 addressed to Lord Shelburne, dated 4 April 1759.

[20 ]See above, III.iv.20, IV.ii.1, IV.ii.16, IV.v.a.23, and below, IV.v.b.37–8, IV.vii.b.33, V.ii.k.13.

[f–f]2–6

[g–g]proportionably 1

[hh* ]Before the 13th of the present king, the following were the duties payable upon the importation of the different sorts of grain:

till 4 l. and after that about 1s. 4d.

Buck wheat to 32s. per qr. to pay 16s.

These different duties were imposed, partly by the 22d of Charles II. in place of the Old Subsidy, partly by the New Subsidy, by the One–third and Two–thirds Subsidy, and by the Subsidy 1747.h [Smith has apparently taken his table from Charles Smith, Three Tracts on the Corn Trade and Corn Laws, 83. Charles Smith claims to have taken his from H. Saxby, The British Customs, but, apart from some inconsistencies in the rounding off of some very unwieldy fractions, Charles Smith miscopied some items from Saxby. The table is dervied from Saxby, 111–14.]

[i–i]3–6

[j–j]this statute 1–2

[21 ]See below, § 38.

[k]its 1–2

[22 ]See above, IV.iv.3, and below, IV.viii.41 and V.ii.k.23–4.

[23 ]15 Charles II, c. 7 (1663). See above, IV.v.b.22.,

[24 ]22 Charles II, c. 13 (1670). See above, III.iv.20, IV.ii.1, IV.ii.16, IV.v.a.23, IV.v.b.33; and below, IV.vii.b.33 and V.ii.k.13.

[25 ]1 William and Mary, c. 12 (1688). See also I.xi.g.4, III.iv.20, IV.v.a.8, V.ii.k.13.

[26 ]11 William III, c. 20 (1698) in Statutes of the Realm, vii.610–11; 11 and 12 William III, c. 20 in Ruffhead’s edition.

[27 ]Because of 15 Charles II, c. 7 (1663). See above, IV.v.b.22 and 37.

[28 ]See above, III.iv.20, IV.ii.1,16, IV.v.a.23, IV.v.b.33; and below, IV.vii.b.33 and V.ii.k.13.

[29 ]In his Three Tracts on the Corn Trade, 44–5, C. Smith lists the major statutes about corn from 1534 to 1766 and then comments that ‘although the Bounty hath been before suspended, and the Exportation prohibited, yet, till 1757, the Importation was never allowed duty free’ (46). The statute to which he refers is 30 George II, c. 7 (1757), which allowed imports duty free until 25 August 1757.

[30 ]It is pointed out below, V.i.g.8, that positive law with regard to religion will always be ‘more or less influenced by popular superstition and enthusiasm’.

[l–l]must 6

[m–m]2–6

[31 ]The link between personal security and economic growth is mentioned at II.i.30, and applied in explaining the rapid rate of growth attained in England, for example, at II.iii.36 and IV.vii.c.54. The same point is made with reference to the English colonies at IV.vii.b.51ff.

[32 ]The term ‘bettering our condition’ occurs frequently, for example, at II.iii.28, III.iii.12, and IV.ix.28. Hume in his essay, ‘Of Commerce’, provides a rather interesting contrast with this passage: ‘The poverty of the common people is a natural, if not an infallible effect of absolute monarchy; though I doubt, whether it be always true, on the other hand, that their riches are an infallible result of liberty. Liberty must be attended with particular accidents, and a certain turn of thinking, in order to produce that effect.’ He continues: ‘Where the labourers and artisans are accustomed to work for low wages, and to retain but a small part of the fruits of their labour, it is difficult for them, even in a free government, to better their condition . . .’ (Essays Moral, Political, and Literary, ed. Green and Grose, i.297.)

[33 ]Smith discusses the impact of a large and growing national debt on economic growth in V.iii.

[34 ]See above, IV.v.a.19.

[35 ]See above, I.xi.g.33.

[36 ]13 George III, c. 43 (1772).

[n–n]respect 1

[o–o]as 1

[p–p]wheat is so high as 1

[q–q]2–6

[r–r]The home market is in this manner not so totally excluded from foreign supplies as it was 1

[s–s]quarter 1

[t–t]when the price rises so high as forty–four shillings, and upon that of other grain in proportion. The bounties too upon the coarser sorts of grain are reduced somewhat lower than they were before, even at the prices at which they take place 1

[u–u]all 1

[v–v]king’s warehouse 1

[w]Some provision is thus made for the establishment of the carrying trade. 1

[x–x]2–6

[y–y]But by the same law exportation is prohibited as soon as the price of wheat rises to forty–four ahillings the quarter, and that of other grain in proportion. The price seems to be a good deal too low, and there seems to be an impropriety besides in stopping exportation altogether, at the very same price 1

[z–z]2–6

[37 ]TMS VI.ii.2.18 makes an interesting point: ‘Some general, and even systematical, idea of the perfection of policy and law, may no doubt be necessary for directing the views of the statesman. But to insist upon establishing, and upon establishing all at once, and in spite of all opposition, every thing which that idea may seem to require, must often be the highest degree of arrogance. It is to erect his own judgment into the supreme standard of right and wrong.’ The example of Solon is cited in § 16.

[kk* ]This paragraph was written in the year 1775.k

[tt* ]See the accounts at the end of the volume.t

[hh* ]Before the 13th of the present king, the following were the duties payable upon the importation of the different sorts of grain:

till 4 l. and after that about 1s. 4d.

Buck wheat to 32s. per qr. to pay 16s.

These different duties were imposed, partly by the 22d of Charles II. in place of the Old Subsidy, partly by the New Subsidy, by the One–third and Two–thirds Subsidy, and by the Subsidy 1747.h [Smith has apparently taken his table from Charles Smith, Three Tracts on the Corn Trade and Corn Laws, 83. Charles Smith claims to have taken his from H. Saxby, The British Customs, but, apart from some inconsistencies in the rounding off of some very unwieldy fractions, Charles Smith miscopied some items from Saxby. The table is dervied from Saxby, 111–14.]

[]2–6

[k]3–6

[t]om. 2A. In 2A the accounts are printed in the text.

[h]2–6