The Online Library of Liberty

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• 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

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 ]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.]

[k]3–6

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

[h]2–6