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[CHAPTER III.]: [OF TRADE.] - Dugald Stewart, Lectures on Political Economy, vol. 2 
Lectures on Political Economy. Now first published. Vol. II. To which is Prefixed, Part Third of the Outlines of Moral Philosophy, edited by Sir William Hamilton (Edinburgh, Thomas Constable, 1856).
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OF THE FREEDOM OF TRADE.
(Interpolation from Notes.)—I now proceed to trace, in as few words as possible, the outline of that practical doctrine, concerning the freedom of trade, which it was the great scope of Mr. Smith’s work to establish; combining together, in one point of view, various speculations, which his comprehensive plan necessarily led him to state under different titles.
I have observed, in my Account of the Life and Writings of Mr. Smith, “that the great and leading object of Mr. Smith’s speculations is to illustrate the provision made by nature in the principles of the human mind, and, in the circumstances of man’s external situation, for a gradual and progressive augmentation in the means of national wealth, and to demonstrate, that the most effectual plan for advancing a people to greatness, is to maintain that order of things which nature has pointed out, by allowing every man, as long as he observes the rules of justice, to pursue his own interest in his own way, and to bring both his industry and his capital into the freest competition with those of his fellow-citizens.
“Every system of policy which endeavours, either by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it, is, in reality, subversive of the great purpose which it means to promote.
“What the circumstances are, which, in modern Europe, have contributed to disturb this order of nature, and, in particular, to encourage the industry of towns, at the expense of that of the country, Mr. Smith has investigated with great ingenuity, and in such a manner as to throw much new light on the history of that state of society which prevails in this quarter of the globe. His observations on this subject tend to shew, that these circumstances were, in their first origin, the natural and the unavoidable result of the peculiar situation of mankind during a certain period; and that they took their rise, not from any general scheme of policy, but from the private interests and prejudices of particular orders of men.
“The state of society, however, which at first arose from a singular combination of accidents, has been prolonged much beyond its natural period, by a false system of Political Economy, propagated by merchants and manufacturers; a class of individuals whose interest is not always the same with that of the public, and whose professional knowledge gave them many advantages, more particularly in the infancy of this branch of science, in defending those opinions which they wished to encourage. By means of this system, a new set of obstacles to the progress of national prosperity has been created. Those which arose from the disorders of the feudal ages, tended directly to disturb the internal arrangements of society, by obstructing the free circulation of labour and of stock, from employment to employment, and from place to place. The false system of Political Economy which has been hitherto prevalent, as its professed object has been to regulate the commercial intercourse between different nations, has produced its effect in a way less direct and less manifest, but equally prejudicial to the states that have adopted it.”*
According to this view of the subject, the doctrine of the freedom of trade appears to me to divide itself naturally into two articles. The one relates to those restraints which check the free circulation of labour and stock among the members of the same community, the other, to the restraints on the commercial intercourse of different nations. I shall consider these two articles separately, beginning with the restraints on domestic commerce. What I have to offer on this subject, I must again remind you, will be little more than an abridgment of Mr. Smith’s argument, which, indeed, it is absolutely necessary to introduce in order to prepare the way for the discussions which still remain.
Of Restraints on Domestic Commerce and Industry.]
I had occasion before to mention Mr. Smith’s analysis of the component parts of the price of commodities.† The same author observes, that “as the price or exchangeable value of every particular commodity, taken separately, resolves itself into some one or other, or all of those three parts; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. . . . .
“When those three different sorts of revenue belong to different persons, they are readily distinguished; but when they belong to the same, they are sometimes confounded with one another, at least in common language.
“A gentleman who farms a part of his own estate, after paying the expense of cultivation, should gain both the rent of the landlord and the profit of the farmer. He is apt to denominate, however, his whole gain profit, and thus confounds rent with profit, at least in common language.”*
In some of Mr. Smith’s illustrations of this subject, there are principles involved which have a connexion with those definitions of national wealth and of productive labour, on which I formerly hazarded some criticisms. But to these it is not necessary for me to attend at present. Nor, perhaps, will it be possible for me to avoid some other peculiarities of expression connected with his system, which I should not voluntarily have adopted if I had followed the train of my own thoughts in stating the doctrines now to be explained. I cannot help adding, that the result of Mr. Smith’s speculations respecting the component parts of price, although sufficiently accurate for our present purpose, is by no means unexceptionable in point of distinctness.
It appears from a manuscript of Mr. Smith’s, now in my possession, that the foregoing analysis or division was suggested to him by Mr. Oswald of Dunnikier. It is somewhat remarkable, that the very same division is hinted at by Sir William Petty, who states it as an impediment to national prosperity, that taxes should be levied on lands alone, and not on land, stock, and labour.
In the very slight view of the subject to which I am obliged to confine my attention, I shall have little or no occasion to touch on the rent of land, the political regulations I have in view tending chiefly to affect wages and profit in the different employments of labour and stock. In order to convey a distinct idea of the manner in which these regulations operate, it is necessary for me to premise a few other general considerations, in addition to those which have been already suggested. It is necessary, in particular, for me to give a short recapitulation of Mr. Smith’s doctrines concerning the natural price of commodities, as distinguished from that which they actually bear in the market. Some of these principles I have had occasion to state already; but they are so intimately connected with the subject now in view, that I shall again recall them to your attention.
“When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price.”* This is frequently different from the market price, which depends upon the proportion which is actually brought to market, and the extent of the demand. With respect to the market price of commodities, it is very justly observed by Mr. Thornton, that “it is formed by means of a certain struggle which takes place between the buyers and the sellers. It is commonly said, that the price of a thing is regulated by the proportion between the supply and the demand. This is, undoubtedly, true; and for the following reason:—If the supply of an article, or the demand for it, is great, it is also known to be great; and if small, it is understood to be small. When, therefore, the supply, for example, is known to be less than the demand, the sellers judge that the buyers are in some degree in their mercy, and they insist on as favourable a price as their power over the buyers is likely to enable them to obtain. The price paid is not at all governed by the equity of the case, but entirely by the degree of command which the one party has over the other. When the demand is less than the supply, the buyers, in their turn, in some degree, command the market, giving not that sum which is calculated to indemnify the seller against loss, but so much only as they think that the seller will accept rather than not sell his article. The question of price is, therefore, in all cases, a question of power, and of power only. It is obvious, that a rise in the price of a scarce commodity, will be more or less considerable in proportion as the article is felt to be one of more or less strict necessity.”†
Of this remark of Mr. Thornton’s, a very striking illustration is afforded by our immense importations from the north of Europe; importations occasioned chiefly by the great difference in the value of money in this country, and in these nations; in consequence of which, they have it always in their power so to suit their prices to our market, as to keep them below that at which we can produce the same articles ourselves. It frequently happens, that avarice counteracts this state of things, in some instances to a great degree, and to a certain degree in all. Thus, for example, we can supply ourselves with iron at as cheap a rate as the Swedes and Russians now are disposed to do it, but not at so low a price as they might sell it. Had they been disposed to extend the iron trade, instead of demanding the highest prices which they could get, we should never have made the progress we have made in this very important article of manufacture. The price, in fact, of every article which we purchase from the north, is regulated by the price which the same article could be raised at in England, and not according to what Mr. Smith calls the natural price. Thus, we are assured by the best authorities, that the tallow and hides which come into the English market, are sold for above three times the natural proportion which they should bear to the price of that part of the beast which is consumed in Russia. According to the principles which have been seen to regulate the natural price of commodities, the pound of tallow should not be sold at a higher price than the pound of meat; whereas, in Russia, it is sold at more than ten, and even fifteen times that price. This, however, it is added, was not the case till the exportation of tallow to England became general.
My reason for entering here into this detail, was the illustration it affords of the difference between the principles which regulate the natural and the market prices of commodities. Among the articles imported from Russia, there are very few which we cannot produce ourselves; but the fact is, that the value of money is so different in the two countries, that whatever is brought to this market becomes too dear for their own consumption. A Russian peasant, accordingly, although supplied with abundance of animal food, is not able to afford to burn a candle; while we find that the English peasants burn candles made of Russian tallow, while they cannot afford to live upon butchers’ meat. “It is the great price which England can afford to give, and actually gives, that,” as remarked by a late intelligent writer, “raises all over Europe the price of every sort of article which comes to her market. The dearth of corn in England has enriched Poland, and many other countries, in a few years, and its wealth is gradually diffusing its influence over other parts of the world.” It is painful to observe, after this very judicious preamble, the same author relapse soon afterwards into the exploded errors of the mercantile system.
These facts, which turn almost entirely on the different values of money in different countries, are evidently by no means inconsistent with Mr. Smith’s general principle, that in the same society or neighbourhood, the market price of commodities has always a tendency to adjust itself to the natural price. “The quantity of every commodity brought to market,” says Mr. Smith, naturally suits itself to the effectual demand. It is the interest of all those who employ their land, labour, or stock, in bringing any commodity to market, that the quantity never should exceed the effectual demand; and it is the interest of all other people that it never should fall short of that demand.”* Notwithstanding, however, this natural tendency in the supply to adjust itself to the demand, a variety of circumstances may prevent it from actually taking place even in the same society or neighbourhood. “But, in some employments, the same quantity of industry will, in different years, produce very different quantities of commodities, while in others it will produce always the same, or very nearly the same. The same number of labourers in husbandry will, in different years, produce very different quantities of corn, wine, oil, hops, &c. But the same number of spinners and weavers will every year produce the same, or very nearly the same, quantity of linen and woollen cloth. It is only the average produce of the one species of industry which can be suited in any respect to the effectual demand; and as its actual produce is frequently much greater, and frequently much less than its average produce, the quantity of the commodities brought to market will sometimes exceed a good deal, and sometimes fall short a good deal, of the effectual demand. Even though that demand therefore should continue always the same, their market price will be liable to great fluctuations,—will sometimes fall a good deal below, and sometimes rise a good deal above, their natural price. In the other species of industry, the produce of equal quantities of labour being always the same, or very nearly the same, it can be more exactly suited to the effectual demand. While that demand continues the same, therefore, the market price of the commodities is likely to do so too, and to be either altogether, or as nearly as can be judged of, the same with the natural price.”*
Abstracting from these circumstances, other causes may produce the same effects. These Mr. Smith refers to three heads, first, particular accidents, which give one society of men an advantage over others in supplying the markets; secondly, local peculiarities of soil and climate; and, thirdly, particular regulations of police.†
It is to the last of these circumstances (particular regulations of police, such as monopolies, statutes of apprenticeship, &c.) that I am to confine myself in the following observations:—
In entering on this subject, Mr. Smith lays it down as a fundamental maxim, that “the whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal, or continually tending to an equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This, at least, would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free to choose what occupation he thought proper. Every man’s interest would prompt him to the advantageous, and to shun the disadvantageous employment.
“Pecuniary wages and profit, indeed, are everywhere in Europe extremely different, according to the different employments of labour and stock. But this difference arises partly from certain circumstances in the employments themselves, which, either really, or at least in the imaginations of men, make up for a small pecuniary gain in some, and counterbalance a great one in others, and partly from the policy of Europe, which nowhere leaves things at perfect liberty.”*
It is with the latter of these circumstances alone that we are properly concerned at present. But the enumeration of the circumstances referred to under the former head, may be useful, as affording an illustration of the general principles which regulate this article of Political Economy. The subject, too, is important in itself; and I shall compress the leading ideas of Mr. Smith into a very few sentences.
According to him, the wages of labour vary by relation to—
“1. The ease or hardship, cleanness or dirtiness, honourableness or dishonourableness of the employment.
“2. The easiness and cheapness, or the difficulty and expense of learning the business; hence the pecuniary recompense of painters and sculptors, lawyers and physicians, ought to be, and generally is, much more liberal than that of the mechanical employments.
“3. The constancy or inconstancy of employment; hence masons and bricklayers are paid higher in proportion than manufacturers, who are sure of constant employment.
“4. The great or small trust reposed in the workmen; and—
“5. The greater or less probability of success in the employment.”†
“Of the five circumstances, therefore, which vary the wages of labour, two only affect the profits of stock,—the agreeableness or disagreeableness of the business, and the risk or security with which it is attended.”‡
But what I should wish chiefly to remark at present is, that these circumstances, though they occasion considerable inequalities in the wages of labour and the profits of stock, occasion none in the whole of the advantages and disadvantages, real or imaginary, of the different employments of either.
This distribution, however, of labour and stock, which, in so far as it results from the unrestrained choice of individuals, may be regarded as the appointment of nature, has been disturbed in various ways by the policy of modern Europe. Of these, three are mentioned by Mr. Smith as more particularly deserving of attention.
“First, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them; secondly, by increasing it in others beyond what it naturally would be; and thirdly, by obstructing the free circulation of labour and stock, both from employment to employment, and from place to place.
“First, The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock, by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them.
“The exclusive privileges of corporations are the principal means it makes use of for this purpose.”* Mr. Smith’s reasonings against apprenticeships will be found in Book I. chap. x. part ii.† Were competition increased by their removal, he observes; “the trades, the crafts, the mysteries, would all be losers. But the public would be a gainer, the work of all artificers coming in this way much cheaper to market.”
A remarkable illustration of this last observation is furnished by the history of two villages, which I had once an opportunity of observing with some attention, the villages of La Chaux de Fond and Locle, situated in a small district, which forms part of the principality of Neufchatel. The number of inhabitants in these two villages, and in the adjoining district, was computed, some years ago, at six thousand. They carried on, at that time, an extensive commerce in lace, stockings, cutlery, and various other branches of manufacture; but watchmaking, and every branch of clockwork, were the articles in which they particularly excelled. They not only made every utensil employed in the manufacture, but had invented several peculiar to themselves; and all sorts of trade, subservient to those principally carried on, had gradually risen up among them. The number of watches annually made was reckoned at 40,000. Not many years ago, the greatest part of the territory contiguous to these villages, which is now covered with flourishing hamlets and fertile pastures, was almost one continued forest. So rapidly, however, has the population increased, that the produce of the country, which was formerly more than sufficient for the whole of the inhabitants, now scarcely furnishes, according to Mr. Coxe, an eighth part of the provisions necessary for the interior consumption, the remainder being drawn from the adjoining province of Franche Comté in France. The truth is, that every stranger who brought a certificate of good behaviour was at liberty to settle in the district, and follow any trade he chose, without restriction.
“The origin of watchmaking,” says Mr. Coxe, “in this part of Switzerland, as related by Mr. Osterwald, ancient banneret of Neufchatel, (the historiographer of these mountains,) is extremely curious; and the truth of his account was confirmed to me by several artists both of Locle and La Chaux de Fond. In 1679, one of the inhabitants brought with him from London a watch, the first that had been seen in these parts; which happening to be out of order, he ventured to trust it in the hands of one Daniel John Richard of La Sagne. Richard, after examining the mechanism with great attention, conceived himself capable, and was determined to attempt, to make a watch from the model before him; but to this end he was destitute of every other assistance than the powers of his own native genius. Accordingly, he employed a whole year in inventing and in finishing the several instruments previously necessary for executing his purpose; and in six months from that period, by the sole force of his own penetrating and persevering talents, he produced a complete watch. But his ambition and industry did not stop here; besides applying himself successfully to the invention of several new instruments useful for the perfection of his work, he took a journey to Geneva, where he gained considerable information in the art. He continued for some time the only man in these parts who could make a watch; but business increasing, he took in and instructed several associates, by whose assistance he was enabled to supply from his single shop all the demands of the neighbouring country. Towards the beginning of the present century, he removed to Locle, where he died in 1741, leaving five sons, who all of them followed their father’s occupation. From these the knowledge and practice of the art gradually spread itself, till it at length became almost the universal business of the inhabitants, and the principal cause of the populousness of these mountains.”*
Nor has the inventive genius of the people stopped here. A variety of mathematical instruments are to be found in their houses; and several natives have acquired very considerable fortunes by exhibiting mathematical figures and other objects of mechanical curiosity, in the different countries of Europe.
The point of view, however, in which restraints on the freedom of competition appear most injurious to the public prosperity is, when we attend to the undue advantage which they give to the industry of the towns over that of the country. It is from the country that every town draws its whole subsistence, and all the materials of its industry. “It pays for these chiefly in two ways: first, by sending back to the country a part of those materials wrought up and manufactured; in which case their price is augmented by the wages of the workmen, and the profits of their masters or immediate employers. Secondly, by sending to it a part both of the rude and manufactured produce, either of other countries, or of distant parts of the same country, imported into the town; in which case too the original price of those goods is augmented by the wages of the carriers or sailors, and by the profits of the merchants who employ them. In what is gained upon the first of those two branches of commerce, consists the advantage which the town makes by its manufactures; in what is gained upon the second, the advantage of its inland and foreign trade. The wages of the workmen, and the profits of their different employers, make up the whole of what is gained upon both. Whatever regulations, therefore, tend to increase those wages and profits beyond what they otherwise would be, tend to enable the town to purchase, with a smaller quantity of its labour, the produce of a greater quantity of the labour of the country. They give the traders and artificers in the town an advantage over the landlords, farmers, and labourers in the country, and break down that natural equality which would otherwise take place in the commerce which is carried on between them. The whole annual produce of the labour of the society is annually divided between those two different sets of people. By means of those regulations a greater share of it is given to the inhabitants of the town than would otherwise fall to them, and a less to those of the country.
“The price which the town really pays for the provisions and materials annually imported into it, is the quantity of manufactures and other goods annually exported from it. The dearer the latter are sold, the cheaper the former are bought. The industry of the town becomes more, and that of the country less advantageous. . . .
“The superiority which the industry of the towns has everywhere, in Europe, over that of the country, is not altogether owing to corporations and corporation laws. It is supported by many other regulations. The high duties upon foreign manufactures, and upon all goods imported by alien merchants, all tend to the same purpose. Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the competition of their own countrymen. Those other regulations secure them equally against that of foreigners. The enhancement of price occasioned by both is everywhere finally paid by the landlord, farmers, and labourers of the country who have seldom opposed the establishment of such monopolies. They have commonly neither inclination nor fitness to enter into combinations; and the clamour and sophistry of merchants and manufacturers, easily persuade them that the private interest of a part, and of a subordinate part, of the society, is the general interest of the whole.
“In Great Britain, the superiority of the industry of the towns over that of the country, seems to have been greater formerly than in the present times. The wages of country labour approach nearer to those of manufacturing labour, and the profits of stock employed in agriculture to those of trading and manufacturing stock, than they are said to have done in the last century, or in the beginning of the present. This change may be regarded as the necessary, though very late, consequence of the extraordinary encouragement given to the industry of the towns. The stock accumulated in them comes in time to be so great, that it can no longer be employed with the ancient profit in that species of industry which is peculiar to them. That industry has its limits like every other; and the increase of stock, by increasing the competition, necessarily reduces the profit. The lowering of profit in the town, forces out stock to the country, where, by creating a new demand for country labour, it necessarily raises its wages. It then spreads itself, if I may say so, over the face of the land, and by being employed in agriculture, is in part restored to the country, at the expense of which, in a great measure, it had originally been accumulated in the town.”*
For the explanation of the causes which, in modern Europe, have thus given to the commerce of the towns so decided an advantage over that of the country, I refer to what Mr. Smith has said on the subject in the third and fourth chapters of his Third Book, concerning the rise and progress of cities and towns after the fall of the Roman Empire. On the same subject, too, a great deal of most important and curious information is to be found in the first volume of Dr. Robertson’s History of Charles the Fifth.
To this general head of the privileges of corporations, the question concerning the advantages to be derived from universities properly belongs. Some valuable hints on this question have been suggested by Mr. Smith; but I must not at present enter upon the discussion.
Another class of obstructions to the natural distribution of labour and stock in the community, is produced by exclusive companies and monopolies of every description. The enormous length to which monopolies were carried in the reign of Queen Elizabeth, is well known. Mr. Hume tells us, that “she granted her servants and courtiers patents for monopolies; and these patents they sold to others, who were thereby enabled to raise commodities to what price they pleased, and who put invincible restraints upon all commerce, industry, and emulation in the arts. It is astonishing to consider the number and importance of those commodities, which were thus assigned over to patentees. Currants, salt, iron, powder, cards, calf-skins, fells, pouldavies, ox shin-bones, train oil, lists of cloth, pot-ashes, anise-seeds, vinegar, sea-coals, steel, aquavitæ, brushes, pots, bottles, salt-petre, lead, accidence, oil, calaminestone, oil of blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, transportation of iron ordnance, of beer, of horn, of leather, importation of Spanish wool, of Irish yarn. These are but a part of the commodities which had been appropriated to monopolists.”*
These monopolies were, in a great measure, removed by a statute of James First, declaring all monopolies to be “contrary to law, and to the known liberties of the people. It was then supposed, that every subject of England had entire power to dispose of his own actions, provided he did no injury to his fellow-subjects, and that no prerogative of the king, no power of any magistrate, nothing but the authority alone of laws could restrain that unlimited freedom.”†
While James, however, called in and annulled all the patents for monopolies which had been granted by his predecessors, and which had extremely fettered every species of domestic industry, exclusive companies still remained,—another species of monopoly, by which every prospect of future improvement in commerce was for ever sacrificed for a little temporary advantage to the sovereign. Of this species of monopoly there are still various examples, which have the most extensive influence on the general prosperity of this country. Their necessary effect, in every instance, is not only to exclude the greater part of the nation from a trade to which it might be convenient for them to turn their stock, but to oblige them to buy the goods, which are the subject of it, at a dearer rate than if the trade were open to all. For a full illustration of these observations, I must refer to the seventh chapter of the Fourth Book of the Wealth of Nations.
The doctrine of the freedom of trade, in so far as it applies to monopolies and exclusive companies, seems to have been perfectly understood by various writers of the seventeenth century, and particularly by Sir Josiah Child; and after him, Mr. Cary, a merchant of Bristol, who published, in the year 1695, a short and very ingenious essay on the state of England in relation to its trade. The same doctrine is strongly and repeatedly urged by the celebrated John de Witt, in a work entitled, The True Interests and Maxims of the Republic of Holland and West-Friesland:—“Next to a liberty of serving God, follows the liberty of gaining a livelihood without any dear-bought city freedom, but only by virtue of a fixed habitation, to have the common right of other inhabitants; which is here very necessary for keeping the people we have, and inviting strangers to come amongst us. For it is evident, that landed men, or others that are wealthy, being forced by any accident to leave their country or habitation, will never choose Holland to dwell in, being so chargeable a place, and where they have so little interest for their money. And for those who are less wealthy, it is well known, that no man from abroad will come to dwell or continue in a country where he shall not be permitted to get an honest maintenance. And it may be easily considered, how great an inconveniency it would be in this country for the inhabitants, especially strangers, if they should have no freedom of choosing and practising such honest means of livelihood as they think best for their subsistence; or if, when they had chosen a trade, and could not live by it, they might not choose another. This, then, being evident, that strangers without freedom of earning their bread, and seeking a livelihood, cannot live amongst us; and as it is certain, that our Manufactories, Fisheries, Traffic, and Navigation, with those that depend upon them, cannot, without continual supplies of foreign inhabitants, be preserved here, and much less, augmented or improved; it is likewise certain, that among the endless advantages which accrue to Holland by strangers, and which might accrue more, our boors may be be likewise profited. For we see, that for want of strangers in the country, the boors must give such great yearly and day-wages to their servants, that they can scarcely live, but with great toil, themselves, and their servants live rather in too great plenty. The same inconveniences we are likewise sensible of in cities, amongst tradesmen and servants, who are here more chargeable and burdensome, and yet less serviceable than in any other countries. . . . Therefore, it is necessary that all strangers that are masters, journeymen, consumptioners, merchants, traders, &c., should live peaceably amongst us, without any disturbance, let, or molestation whatever, and use their own estates and trades as they shall judge best.”*
Nothing, however, in any of these writers, is more explicit or more enlightened than the language of the common law of England on this subject. As early as the reign of Henry the Sixth, Lord Chief-Justice Fortescue, who was a zealous friend, too, of prerogative, declares, in his book De Laudibus Legum Angliæ, cap. xxxvi., that “it is lawful for any man to trade and store himself with any wares and merchandise at his own pleasure, and that every inhabitant of England by law enjoyeth all the fruits of his land, with all the profits he gaineth by his own labour.” Such, also, is very nearly the language of a statute of James the First, formerly referred to, by which it is expressly enacted, “that all commissions, grants, licenses, charters and letters patent heretofore made or granted, or hereafter to be made or granted, to any person or persons, bodies politic or corporate whatsoever, of, or for the sole buying, selling, making, working, or using of anything within this realm, . . . and all proclamations, inhibitions, restraints, warrants of assistants, and all other matters and things whatsoever, any way tending to the instituting, erecting, strengthening, furthering, or countenancing of the same, or any of them, are altogether contrary to the laws of this realm, and so are, and shall be utterly void and of none effect, and in no wise to be put in use or execution.” The following passage I quote verbatim from a petition presented to the House of Commons in 1691, relative to the East India trade, on behalf of divers Merchants and Traders in and about the City of London, and other their Majesties’ Subjects. “The trade to the East Indies is of very great importance to this nation; and yet, by the manifold abuses of the present East India Company both at home and abroad, (who have managed the same for their private gain, without any regard to the public good,) the trade is likely to be utterly lost to this kingdom, and to fall into the hands of foreigners, unless timely prevented by some better regulation thereof, on a new joint-stock and constitution.” The petitioners further pray, “that the House will take into consideration the establishing of a new East India Company, in such manner, and with such powers and limitations, as to them shall be thought most conducing to the preservation of so beneficial a trade to the kingdom.” One great objection urged by the favourers of the Company against the freedom of trade is, that “it will not only cause the said trade to suffer much, but other European nations will make great advantage thereof, to the hazard, if not the ruin, of the English commerce to those parts.”
In this manner, then, the policy of Europe, by the privileges of corporations, by apprenticeships, exclusive companies, and other regulations favouring monopolies, restrains the competition in some employments of stock and labour to a smaller number than would otherwise be disposed to enter into them.
“Secondly, In some other cases, it tends to increase the competition beyond the natural proportion.”* Of these, obvious examples are found in the institutions of bursaries, scholarships, &c. On this article, however, it is unnecessary to enlarge, as the inconveniences which they produce to individuals are amply compensated by the public benefit which attends them.
“Thirdly, The policy of Europe, by obstructing the free circulation of labour and stock both from employment to employment, and from place to place, occasions in some cases a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments.
“The statute of apprenticeship obstructs the free circulation of labour from one employment to another, even in the same place. The exclusive privileges of corporations obstruct it from one place to another, even in the same employment.
“It frequently happens, that while high wages are given to the workmen in one manufacture, those in another are obliged to content themselves with bare subsistence. The one is in an advancing state, and has, therefore, a continued demand for new hands; the other is in a declining state, and the superabundance of hands is continually increasing. Those two manufactures may sometimes be in the same town, and sometimes in the same neighbourhood, without being able to lend the least assistance to one another. The statute of apprenticeship may oppose it in the one case, and both that and an exclusive corporation in the other. In many different manufactures, however, the operations are so much alike, that the workmen could easily change trades with one another, if those absurd laws did not hinder them. . . .
“The obstruction which corporation laws give to the free circulation of labour, is common, I believe, to every part of Europe. That which is given to it by the poor-laws is, so far as I know, peculiar to England. It consists in the difficulty which a poor man has in obtaining a settlement, or even in being allowed to exercise his industry in any parish but that to which he belongs. It is the labour of artificers and manufactures only of which the free circulation is obstructed by corporation laws. The difficulty of obtaining settlements obstructs even that of common labour.”* But I shall delay entering on the consideration of the English poor-laws, till we have taken a view of the different systems which have been proposed for the maintenance of the poor.
So much with respect to the policy of restraints on domestic commerce and industry.
Of Restraints on the Commercial Intercourse of Different Nations.]
I shall now proceed to consider the restraints which affect the commercial intercourse of different nations. The system of regulations, which we are to examine under that head, is distinguished by Mr. Smith by the title of the Commercial or Mercantile system of Political Economy. This last phrase, as before hinted, is used by him in a very restricted sense. Its objects, he tells us, are the two following:—“1st, To provide a plentiful revenue or subsistence for the people, or more properly, to enable them to provide such a revenue or subsistence for themselves; and, 2dly, To supply the state or commonwealth with a revenue sufficient for the public services.”* According to the definition which I formerly gave of Political Economy,† it applies to all the different objects of law and political regulation, among which, undoubtedly, the principles which regulate the systems of agricultural or commercial policy occupy a very distinguished place. I mention this circumstance, that I may not be supposed, by adopting the language of Mr. Smith, to have lost sight of the explanation given in my Introductory Lectures of the province of Political Economy.
In stating the argument for a free trade with other countries, I shall aim at nothing more than a very succinct abridgment of Mr. Smith’s doctrines on this subject; a general knowledge of which I must necessarily presuppose in my hearers, when I proceed to the discussion of some of the questions connected with these inquiries. While this outline may facilitate the studies of those who have not yet perused that invaluable work, it will, I hope, be not altogether useless to others, as containing a recapitulation of some of the more important doctrines which it explains.
The great principle of the Mercantile system is, that money constitutes the wealth of a nation, or in other words, that a nation is rich or poor in proportion to the plenty or scarcity of the precious metals.
(Here Mr. Stewart introduced an abridged view of the first eight chapters of the fourth book of the Wealth of Nations,* with the following additions. After stating Mr. Smith’s reasonings with regard to the Navigation Act, he added:)—
On the same principle have been founded some late reasonings, which are not altogether destitute of plausibility, but which, on examination, will be found extremely unsound, in favour of the active interposition of Government to produce an increased plantation of English oaks, in order to render the regular supply of timber for his Majesty’s dock-yards independent of the accidents of commerce and war. On these reasonings, I propose to offer some particular strictures afterwards. But I shall first finish the general outline of Mr. Smith’s view of the Mercantile system, before proceeding to this.
(After stating the disposition which this country has always manifested to depress the commerce of France, Mr. Stewart observed:)—
The impolicy of these regulations was distinctly declared in the late commercial treaty entered into with that country. The influence, I may observe, which the writings of Mr. Smith are allowed to have had on our national conduct, in this and some other instances, affords a memorable example of the triumph of philosophy over the dictates of prejudice, and leads us to indulge a hope, that in an age of free and unrestrained discussion like the present, principles founded on truth and justice will gradually supplant the errors of ignorance.
(After stating the nature of the evidence which the custom-house books afford of the balance of trade, Mr. Stewart observed:)—
As Mr. Smith has not entered into any details, with regard to the nature of the objection to the evidence of the custom-house books in this respect, taking their fallaciousness for granted as a thing too well understood to require any particular illustration, it may not be improper to supply this elementary article of information, by a short statement of the particular facts and principles on which the doctrine may be justified. This is the more necessary, as the complicated commercial accounts of nations have been usually stated like the simple transactions of private merchants; and the technical business-like appearance of accuracy which the results exhibit, are apt to procure to them a degree of popular credit to which they have in truth no claim, and which is daily employed to mislead the public mind, by writers who, at the time, are fully aware of their general incorrectness. In illustration of this subject, I gladly avail myself of some judicious remarks of Mr. Macpherson. “It has been customary,” says that very laborious and accurate writer, “to consider our trade with those countries, from which we import a greater value than we export to them, as unprofitable; and that to those, to which our exports exceed the value of our imports, as profitable. But such a rule is liable to a great number of exceptions. The apparent balance must be frequently erroneous from the inaccuracy of the valuation. For example, the Irish linens are all rated in the custom-house entries in England at eightpence a yard on an average, whereas one shilling and fourpence a yard, the average price assumed in the Irish custom-house books, is rather under the value. As linens generally constitute above a half of the value of the imports from Ireland to England and Scotland, the error in the value of that one article turns the balance of trade with Ireland against Great Britain; (See Lord Sheffield’s Observations on the Manufactures, &c., of Ireland, p. 276, third edition, 1785;) and the valuations in many other branches of our commerce are not a whit more accurate. Money brought into Great Britain is not subject to entry, and therefore does not appear in the custom-house books, any more than bills of exchange. Money carried out swells the amount of export entries, and consequently enlarges the supposed general profit; though, according to the doctrine that gold and silver are the only standard of wealth, such exportation is so much clear loss to the nation. Great quantities of goods, subject to high duties, totally prohibited, or shipped for exportation upon bounties or drawbacks, are clandestinely imported. Such importations, though not appearing in the general account, there is reason to believe, have considerable influence on the exchange with some neighbouring countries. And such of those smuggled goods as have been entered for exportation, perhaps over and over again, thus make great additions to the fallacious estimate of the profitable balance, without ever being, in reality, exported at all for foreign consumption. All goods exported for the use of our armies abroad, are part of the national expenditure, and can no more constitute a real part of the profitable balance, apparently swelled by their exportation, than the goods taken from his stock by a manufacturer or shopkeeper for his own use, can be stated as enlarging his profitable sales. Cargoes entered outward, which are lost at sea, or taken by the enemy, swell the amount of exports, and, consequently, of supposed profit, whereas, in fact, they are a dead loss to the nation, (and, in case of capture, tend to enrich the enemy, by whom they are in reality exported;) while the want of the homeward cargo, which should have been imported in return, and which, to the individual sufferer, is not only a real loss but a heavy disappointment and derangement of his plans of trade, tends to enlarge the supposed balance of trade in our favour. And the loss or capture of homeward-bound ships in the same manner, by diminishing the amount of entered imports, fallaciously adds to the apparent favourable balance.
“On the other hand, there are branches of trade which would be ruinous if the imports did not exceed the exports, or, in other words, if the balance were not unfavourable, according to this standard of estimation. Such is the trade with all our West India settlements, which have been formed and supported by British capitals, and, in a great measure, owned by proprietors residing in Great Britain. Therefore, the outward cargoes are to be considered as the stock employed in the culture of the plantations; and the homeward cargoes are, in fact, the proceeds of that culture, the excess of which is not a loss to the nation, but the real amount of the net profits coming into the pockets of the proprietors, and giving a very comfortable demonstration how much the amount of the product is more than the prime cost. In other words, the outward cargoes are the seed, and the inward cargoes are the harvest. . . . The same reasoning will also hold good with the trade to Hudson’s Bay, and several others, wherein the excess of the imports is the real profit, and a continuation of favourable balances would, in a few years ruin the trade. In some branches of business, the goods exported are merely the charges of trade, as is the case in all fisheries. . . .
“There is another kind of deceptive inference to be drawn from the custom-house entries, if not duly guarded against. It is necessary to advert, that the exports to some countries constitute the prime cost of cargoes to be shipped off from them to a third country. Thus, the wines of Madeira are sent to the British settlements in the East and West Indies, and, even if intended for Britain, are often carried by the circuitous route of those distant regions before they are brought home. The bulk of the cargoes from Africa consists of the miserable natives, who are sold in the West Indies; and the proceeds are generally remitted to great Britain in bills of exchange, which do not appear at all in the custom-house books. And, in like manner, most of the cargoes, carried from Newfoundland and the adjacent countries, consist of fish, which never come to Great Britain, but are sold in Spain, Portugal, and other Roman Catholic countries, and their proceeds also brought home in bills of exchange.
“Were we to estimate the prosperity of a country merely from the balance of trade in the custom-house books, Scotland must be pronounced to be in a ruinous state ever since the American war, the imports from foreign countries being frequently more than the exports to them, as will appear by the accounts to be found in the subsequent part of this work. But the truth is, that since that event the people of Scotland have paid more attention than formerly to manufactures, which (by land carriage and coasting navigation, neither of which appear in the custom-house books) are carried to every part of Great Britain, and enter to a much greater amount into the exports of London than into those of Glasgow; and that, upon the whole, the trade of Scotland is now more flourishing than ever.
“From what has been said it will appear, that all arguments, calculations, or arrangements, founded upon the supposed balance of trade, are very fallacious; and that those founded upon the balance with any particular country, are generally much more fallacious than those deduced from the general balance of the whole foreign trade of the nation.”*
Thus far I have followed the statements of Mr. Macpherson, whose observations appear to me to form a very interesting and instructive comment on that part of Mr. Smith’s reply to the Mercantile system, in which he reasons with its advocates on their own fundamental principle. I now proceed to a still more important part of Mr. Smith’s argument, in which he endeavours to show that the whole doctrine of the balance of trade is absurd.
It is now a considerable number of years since these liberal principles came to be adopted by all the most enlightened writers of Europe. Mr. Hume was one of the first in this country who stated them in such a form as to attract to them some share of the public favour; and he had undoubtedly the merit of encouraging, by his example, his friend Mr. Smith to devote his profound and comprehensive genius to a systematical illustration of them. His Political Discourses were first printed in the year 1752, and, according to himself, were the only part of his works which were successful on the first publication. They have undoubtedly very great merit, and although erroneous in some fundamental maxims, may justly be regarded, on the whole, as one of the most valuable performances of the author. The Essay on the Jealousy of Trade concludes with the following very striking reflections:—“Were our narrow and malignant politics to meet with success, we should reduce all our neighbouring nations to the same state of sloth and ignorance that prevails in Morocco and the coast of Barbary. But what would be the consequence? they could send no commodities; they could take none from us; our domestic commerce itself would languish for want of emulation, example, and instruction; and we ourselves should soon fall into the same abject condition to which we had reduced them. I shall therefore venture to acknowledge, that, not only as a man, but as a British subject, I pray for the flourishing commerce of Germany, Spain, Italy, and even France itself. I am at least certain, that Great Britain and all those nations would flourish more did their sovereigns and ministers adopt such enlarged and benevolent sentiments towards each other.”*
At the period when this passage first appeared, it was considered as among the most paradoxical and dangerous parts of Mr. Hume’s political writings; and yet it assumes nothing more than what a moment’s consideration might have taught to any man of a plain and unprejudiced understanding, that a commercial nation has precisely the same interest in the wealth of its neighbours which a tradesman has in the wealth of his customers. It is to the general progress of civilized nations in the arts and improvements of social life, that the prosperity of England is chiefly owing. Nor is it going too far to say, with a late writer, “that not one acre is brought into cultivation in the wilds of Siberia which has not widened the market for English goods.” On the other hand, it is no less manifest, that the benefits of this extended commerce are reciprocal; and that while English industry is thus encouraged by the progressive prosperity of its neighbours, it amply repays whatever it receives. It can only be employed in advancing civilisation and enjoyment over the whole earth; and it is actually exerted at this present moment, in consequence of the obstacles presented by the laws of nature to the impotent tricks of government, to revive the industry of those very nations who have been the loudest in their outcries against its progress. If they obtained their wishes for the destruction of English prosperity, this would have no other effect than to reduce those nations themselves, who now ascribe their present depression to its influence, to a state of complete ruin.
The same liberal principles concerning trade, which were advanced by Mr. Hume, were soon after adopted, and very zealously enforced, by Dean Tucker, in various judicious performances; and, particularly, in a small work entitled Four Tracts on Political and Commercial Subjects, published in the year 1774. Much about the same time they attracted still more general attention, at least among practical men, in consequence of the sanction which they received from the pen of Dr. Franklin, a writer unrivalled in his own peculiar and characteristical style of composition, but unqualified, it is probable, by the habits of his early education, for that systematical arrangement of principles which we remark in the writings of Mr. Smith; while, however, he is eminently fitted to seize the valuable results of the speculations of others, and to present them in a strong light to the common sense of mankind. I shall only quote one passage from this writer, which I select merely from its more immediate connexion with the doctrines which I have been just stating.—“Perhaps, in general, it would be better if government meddled no farther with trade than to protect it, and let it take its course. Most of the statutes, or acts, edicts, arrêts, and placarts of parliaments, princes, and states, for regulating, directing, or restraining of trade, have, we think, been either political blunders, or jobs obtained by artful men for private advantage, under pretence of public good. When Colbert assembled some wise old merchants of France, and desired their advice and opinion how he could best serve and promote commerce, their answer after consultation was, in three words only, Laissez nous faire, ‘Let us alone.’ It is said by a very solid writer of the same nation, that he is well advanced in the science of politics who knows the full force of that maxim, Pas trop gouverner, ‘Not to govern too much;’—which, perhaps, would be of more use when applied to trade, than in any other public concern. It were therefore to be wished that commerce was as free between all the nations of the world, as it is between the several counties of England; so would all, by mutual communication, obtain more enjoyments. These counties do not ruin one another by trade, neither would the nations. No nation was ever ruined by trade, even seemingly the most disadvantageous.”*
It would require more time than we can now afford to bestow, to trace historically the origin and progress of those liberal and enlightened ideas which abound in Mr. Smith’s writings. I shall content myself, therefore, with remarking, that although it was by some French writers that they were first presented to the world in a systematical manner, yet the earliest hints of them seem to have been suggested in this country. I shall, perhaps, have an opportunity of producing some additional proofs of this statement afterwards. In the meantime, I shall only quote some remarks from a pamphlet on Money, published in the year 1734, [by Jacob Vanderlint:]—“All nations have some commodities peculiar to them, which, therefore, are undoubtedly designed to be the foundation of commerce between the several nations, and produce a great deal of maritime employment for mankind, which probably, without such peculiarities, could not be; and in this respect, I suppose, we are distinguished, as well as other nations; and I have before taken notice, that if one nation be by nature more distinguished in this respect than another, as they will, by that means, gain more money than such other nations, so the prices of all their commodities and labour will be higher in such proportion, and consequently, they will not be richer or more powerful for having more money than their neighbours.
“But, if we import any kind of goods cheaper than we can now raise them, which otherwise might be as well raised at home, in this case, undoubtedly, we ought to attempt to raise such commodities, and thereby furnish so many new branches of employment and trade for our own people, and remove the inconvenience of receiving any goods from abroad, which we can anywise raise on as good terms ourselves; and, as this should be done to prevent every nation from finding their account with us by any such commodities whatsoever, so this would more effectually shut out all such foreign goods than any law can do.
“And as this is all the prohibitions and restraints whereby any foreign trade should be obstructed, so, if this method were observed, our gentry would find themselves the richer, notwithstanding their consumption of such other foreign goods as, being the peculiarities of other nations, we may be obliged to import. For if, when we have thus raised all we can at home, the goods we import after this is done cheaper than we can raise such goods ourselves, (which they must be, otherwise we shall not import them,) it is plain the consumption of any such goods cannot occasion so great an expense as they would, if we could shut them out by an act of parliament, in order to raise them ourselves.
“From hence, therefore, it must appear, that it is impossible anybody should be poorer for using any foreign goods at cheaper rates than we can raise them ourselves, after we have done all we possibly can to raise such goods as cheap as we import them, and find we cannot do it; nay, this very circumstance makes all such goods come under the character of the peculiarities of those countries which are able to raise any such goods cheaper than we can do, for they will necessarily operate as such.”*
The same author, in another part of his work, states a maxim of Erasmus Philips, which he calls a glorious one; that “a trading nation should be an open warehouse, where the merchant may buy what he pleases, and sell what he can. Whatever is brought to you, if you don’t want it you won’t purchase it, and if you do want it, the largeness of the impost won’t keep it from you.”†
In this quotation, an argument for a free commerce all over the globe, is founded on the same principles on which Mr. Smith has demonstrated the beneficial effects of the division of labour among the members of the same community. The happiness of the whole race would, in fact, be promoted by the former arrangement in a manner exactly analogous to that by which the comforts of a particular nation are advanced by the latter. A general division of labour would thus take place among the different tribes of men, prompting each to cultivate to the utmost whatever productions the nature of its situation pointed out as the most profitable. The consequence would be, an augmentation, on the whole, of the productive powers of human industry, and a proportional enlargement of the means of individual enjoyment.
Though, however, these liberal and enlightened ideas concerning trade had long ago occurred to various writers of eminence, both in this country and on the Continent of Europe, it is only of late years, and particularly since the publication of the Wealth of Nations, that they have obtained a complete triumph, in the judgment of all candid and well-informed men, over the selfish but deep-rooted prejudices of the ancient system.
Attempts, indeed, are still occasionally made to mislead the multitude on various particular questions connected with the general principles of freedom, but by not one writer of respectable talents and character, who has appeared since the time of Mr. Smith. On the contrary, all over Europe, the uniformity of opinion on this fundamental doctrine of Political Economy becomes every day more and more prevalent, even among those who differ most widely on other branches of the science. In England, in particular, the most honourable testimony to the soundness of Mr. Smith’s speculative principles, has been repeatedly borne by the leaders of the two great parties which have so long divided the nation, and they have not been altogether without some practical influence on the measures of our government. In what light the same system is now viewed by those politicians abroad, who are the most friendly to the interests of this country, may be collected from the work of Mr. Gentz, On the State of Europe before and after the French Revolution,—an author certainly entitled to a high rank among the speculative statesmen of the present day, and who has drawn on himself no small share of odium from his countrymen for his supposed partiality to the public measures of Great Britain since the fall of the French monarchy.
“Le véritable intérêt de l’Europe prise en masse demande toujours le plus grand développement possible des forces et des facultés de chacune des nations qui en font partie. Si la Russie et le Portugal emploient des capitaux et des ouvriers Anglais pour vivifier leurs fabriques intérieures, une circonstance si peu naturelle suppose un vice quelconque dans le système de leur industrie ou même une organisation entièrement défectueuse si ces défauts pouvaient disparaître, non seulement les nations qui y sont immédiatement intéressées y trouveraient leur avantage, mais encore en vertue de l’enchaînement général qui lie toutes les forces productives de l’Europe entr’elles, cet avantage réjaillirait sur toutes les autres nations.
“Mais tant que cette amélioration radicale n’aura pas lieu, il est évidemment et incontestablement avantageux, non seulement pour les pays qui ont besoin de travail et de capitaux étrangers, mais même pour le système général de l’industrie Européenne, que les forces et les moyens de l’Angleterre suppléent à ce que manque ailleurs. Le mal ne serait-il pas infiniment plus grave, si ces champs de l’activité humaine, que cultivent et fécondent aujourdhui le travail et les capitaux Anglais, demeuraient entièrement sans culture? Ce mal là serait absolu, celui-ci n’est que relatif; celui-ci n’est un mal qu’en tant qu’il en suppose d’autres plus réels; à tout autre égard il est un bien.”*
In another passage of the same book, he avails himself of the same doctrine, in replying to the systematical and accredited attempts which have been made of late years, by various French writers, to hold up to the general indignation of the world the commercial and maritime greatness of this country.
“Il est de l’intérêt bien entendu de l’Europe que toutes les parties qui la composent, que tous les Etats cultivateurs, manufacturiers ou commerçans parviennent au plus haut degré de prospérité possible. Il est donc, et il sera dans toutes les circonstances, de l’intérêt bien entendu de l’Europe, que chaque nation participe à la richesse générale de l’univers, et par conséquent aussi aux possessions coloniales et au commerce des deux Indes, autant, et s’il se peut, ni plus, ni moins, que le demandent sa situation particulière, les besoins de son industrie, ses dispositions, ses facultés, et le développement le plus complet de toutes ses forces productives.
“Sous ce point de vue élevé, ce sera toujours le vœu non seulement de l’ami de l’humanité qui s’intéresse au bien de tous les peuples, mais encore de l’homme d’état éclairé, qui connaît l’enchaînement des lois qui forment l’économie générale de l’univers, qu’à la fin de la guerre actuelle, toute nation propre au commerce maritime rentre en jouissance de sa juste mesure de domination, de commerce et d’industrie coloniale. Mais qu’on se garde bien de confondre ce point de vue élevé, avec celui non moins faux que retréci, qui sert de base aux plaintes qu’on entend s’élever de toute part contre la supériorité commerciale des Anglais. Le premier est entièrement étranger aux auteurs de ces plaintes. S’il avait pu être saisi, s’il avait pu être seulement soupçonné par la multitude, il y a longtemps que les déclamations contre l’Angleterre auraient cessé de se faire entendre.”*
Of these attempts, that which has excited the most general attention is an anonymous tract published at Paris in the latter part of the year 1800, under the title of L’Etat de la France à la fin de l’an VIII. The reputed author of this publication is M. Hauterive. In opposition to his reasonings M. Gentz endeavours to show, with great force of argument, that there is gradually established, in the progress of commerce, a reciprocity of interests among nations as well as among individuals; that the commercial greatness of England is, in reality, an active principle of the industry, and a fruitful source of the present and future riches of all nations; that the only method of diminishing that greatness, which is either just or expedient, is to promote and encourage the same activity in other countries; and that the project of destroying by violence the foundations of Britain’s prosperity, must ultimately prove its authors to be enemies to the general welfare of Europe.
The following remarks, which form part of M. Gentz’s disquisitions on this article, may convey a general idea of the spirit which animates this very able performance, and may furnish no unsuitable appendix to the faint outline which I have endeavoured to give of Mr. Smith’s doctrines with regard to the freedom of trade:—
“Une amélioration dans l’administration intérieure de tous les Etats, une législation sage et libérale, plus d’attention à veiller aux intérêts du commerce et de l’industrie, à approfondir les sources de la véritable prosperité des nations. Toutes ces propositions, tous ces plans d’une réforme fondamentale dans le système économique de l’Europe, sont sûrs d’obtenir le suffrage de tous les gens éclairés comme de tous les amis du bien. Béni soit le gouvernement qui les embrassera dans toute leur étendue! et grâces soient rendus à l’écrivain qui aurait reçu assez de force et d’éloquence en partage, pour arracher à leur assoupissement ceux qui jusqu’ici ont manqué ou de sens pour les comprendre, ou de volonté pour les mettre en pratique! C’est avec ces armes, mais avec elles seules que l’Europe doit combattre l’Angleterre! Sans doute que le résultat d’une pareille lutte ne répondra ni aux attentes malicieuses de l’envie, ni aux vœux insensés de la crédule ignorance, d’une politique mercantile mal entendue, d’une cupidité qui se contredit et se détruit elle-même, en courant après des avantages chimériques. La supériorité commerciale des Anglais ne sera pas anéantie par cela que toutes les autres nations de l’Europe s’éleveront à un plus haut degré de perfection. Mais toutes posséderont ce qui leur revient: toutes par un sage et libre emploi de leur activité déployeront les forces qui leur sont propres, dans l’ordre, dans le degré et sous les conditions que la nature et leur position leur ont assignés; toutes seront grandes, toutes seront fortes, toutes seront puissantes, et de leur propre grandeur, et force et de la grandeur de toutes les autres. L’Europe s’élevera sans que pour cela l’Angleterre s’abaisse, et les hommes clairvoyans de tous les pays auront peine à comprendre comment il put jamais exister un temps, où l’on pensait que la richesse des uns entraînait nécessairement l’appauvrissement des autres.”*
In stating the substance of Mr. Smith’s argument for the freedom of trade, I took notice of an exception to his general rule, which he himself has admitted, where a particular sort of industry is necessary for the defence of the state. It is upon this ground that he expresses his approbation of the monopoly of the trade with Great Britain, which has been secured to our sailors and shipping by the Act of Navigation. On the same ground, I also observed, that a plea had been lately rested for a relaxation of this abstract principle of Political Economy, in favour of the particular employment of capital and industry, which has for its object the supply of native oak for the purposes of our naval demand; [supra, p. 25, seq.,] and I expressed my doubts how far this plea would be found, upon examination, to be tenable. As it is a question which was much agitated some years ago, and is in itself of considerable importance, a few remarks in support of that opinion, which I have already hinted, as most agreeable to my own sentiments, cannot be considered as a digression altogether foreign to our present employment.
The leading positions to which I wish to direct your attention, cannot be better stated than in the words of the Reports drawn up by the Commissioners, some years ago, appointed to inquire into the state of the woods, forests, &c., of the Crown. Of these Reports, a series from 1787 to 1793, has been submitted to the Legislature, and certainly contains some very interesting information on the present subject of inquiry. The Commissioners were Sir Charles Middleton, (now Lord Barham,) Mr. Call, and Mr. Fordyce, the first and last of whom are now members of a board established for superintending the civil affairs of the navy, which has resumed the inquiry that had previously been prosecuted by the Commissioners.
The passage which I am first to quote, is from the EleventhReport; and I do this with great pleasure, as it appears to state one of the strongest cases in which a departure from general principle would seem, on a superficial view, to be not only expedient, but absolutely necessary.—“From the answers we have received from each county,” say the Commissioners, “it will be found that there has been, within memory, a great decrease of oak timber, of all sizes, in every part of England; but that great naval timber has decreased more than any other; and timber in hedgerows, which is the most valuable for naval uses, in a still greater proportion than timber growing in woods; that the stock of great timber is now so much, and so generally diminished, in most countries, that they will not be able to continue to furnish so large a supply as they have done of late years; that foreign fir timber is now much more used than formerly, particularly in house building; that the price of underwood has risen, notwithstanding the more general use of coal for fuel; and that in some countries it is not uncommon to fell the oak trees when young, not suffering them to stand so long as to be of use to the navy, for fear of their overshading and destroying the underwood: that notwithstanding the advance in the price of timber, tillage is gradually extended, and the quantity of wood-land lessened; and that the plantations which are now made, are more generally for ornament than use, and of quick growing trees, in preference to oak for the navy.”
In a former Report, [the Third,] the scarcity of great timber had been accounted for on a principle somewhat more general and refined, and which, though the Commissioners, perhaps, lay too great stress upon it, must, I think, be allowed to be not altogether destitute of solidity. After stating it as a fact ascertained by experience, that the addition in the demand for naval timber does not produce a proportional supply, they observe that the reason is obvious. “An oak must grow an hundred years or more before it comes to maturity; but the profits arising from tillage or pasture are more certain and immediate, and perhaps as great; it cannot, therefore, be expected, that many private individuals will lay out money on the expectation of advantages which they themselves can have no chance to enjoy; commerce and industry seek for, and are supported by, speedy returns of gain, however small; and the more generally the commercial spirit shall prevail in this country, the less probability there is that planting of woods for the advantage of posterity will be preferred to the immediate profits of agriculture.”
In reply to this observation, a late writer, Sir Frederick Morton Eden, denies completely the general principle, that an article will not be cultivated because it requires a hundred years to bring it to perfection. “Acorns and wheat will, in general, be sown with the same view; namely, that the capital employed in their culture shall be replaced with an adequate profit. It is not necessary, either in trade or agriculture, that the returns should be annual. In many instances, several years must pass away before any return, and that uncertain in amount, can be expected. In the cultivation of underwood and hop-poles, from ten to twenty years must elapse before any crop can be obtained. Many cases of enclosing, draining, and manuring, might be pointed out, in which a still longer period will be necessary to reproduce the capital invested with an adequate profit. If, when timber is twenty years old, the owner finds, that by letting it stand twenty years longer, or, in other words, by re-investing its value in growing timber, he can at the end of the term obtain an adequate profit, he has a sufficient inducement to let his trees grow; and on the same principle, the owner of trees eighty years old will let them stand till they are one hundred years old. But the price of great timber is too low, compared with the price of other home products, to produce cultivation.”*
I have seldom met with a more illogical piece of reasoning than what I have just quoted from this very accurate writer. The proposition to be proved is, that an article will not be the less cultivated that it requires a hundred years to bring it to maturity. To prove this, the author remarks, that on the same principle on which a proprietor who found timber twenty years old on his estate, has a sufficient inducement to let it grow twenty years longer; by the prospect of additional gain at the end of that period, one who has trees of eighty years standing will be disposed to let them remain a hundred. The justness of this observation cannot be disputed; but still the question remains, What inducement has a person to plant acorns at present, the returns arising from which will not be produced for a hundred years? There is, surely, a very distant analogy between this and the sowing of wheat and other grain. Nor can it well be affirmed, that both are done with the same views. On the contrary, I may venture to assert, that, with the exception of a few individuals, whose family pride interests them in the greatness of their children’s grandchildren, and, I am afraid, I may add, of the fewer still whose conduct is influenced by remote views of public utility, pecuniary profits, not to be reaped for a century to come, present too faint an object for the imagination to deserve a place among the ordinary motives of human action.
Abstracting altogether, however, from this consideration, I perfectly agree with the author in thinking, that the established price of great timber is too low, compared with that of the other productions of industry, to indemnify a proprietor for the expensive and tedious process of cultivation,—a proposition sufficiently proved by the acknowledged fact, that foreign countries, notwithstanding the high import duties, which almost amount to a premium in favour of the home growers, are enabled to enter into a successful competition with the timber growers of Great Britain. I differ from him only in thinking, that an increase in the price would operate with any influence as an additional motive to the cultivation. The commissioners of the land revenue seem plainly to be of the same opinion with that which I have just stated, from the means they propose to secure the future supply of timber. Their suggestion is, that such parts of the royal domains as would, on an adjustment of the various rights claimed in them, be allotted to the Crown, and which they compute at sixty or seventy thousand acres, should be enclosed and planted, on the presumption that the land so enclosed would, after one hundred years, produce an annual supply of fifty thousand square loads of timber. The demand for timber for the national and private shipping at present, I may observe, is computed to exceed seventy thousand square loads a year.
The authors of this plan are all too well informed men not to have perceived how widely it deviates from the most indubitable and important principles of Political Economy; and that, in proposing to direct forcibly a proportion of the national capital to the production of an article which can be imported cheaper from abroad, it violates principles, of which Mr. Smith is allowed to have established the wisdom with demonstrative evidence. In recommending, too, a forest system, which would have the effect to continue, for an immense number of years, a large proportion of the land of the country in a comparatively unproductive state, it aims a blow at the agricultural resources of the country, which, according to the general opinion, it ought now to be the leading object of our policy to extend; while the idea of managing this great experimental farm by the officers of the Crown, is reprobated by the experience of all ages and nations, with respect to the administration and improvement of royal domains.
Notwithstanding of these considerations, however, if it could be proved that the plan would be likely to accomplish its object, and still more if it could be established, that no other plan would be equally efficacious for securing the national safety and independence, undoubtedly, these general principles ought to give way, in the mind of every prudent statesmen, to what Mr. Smith himself has accounted an object of higher value. But that the plan is not more unsound in principle, when considered in connexion with the other parts of our political arrangements, than it is nugatory in point of efficiency, even for the accomplishment of its specific object, a moment’s attention will satisfy even the most superficial inquirer. On this head, the following observations of Sir Frederick Morton Eden appear to me to be quite decisive:—“Such a plan, it is obvious, is not calculated to furnish any supply of timber to the navy during the present generation, except so far as it may preserve young trees already planted, and promote their advance to maturity. The Commissioners observe, that although the quantity of timber which has been furnished from all the forests during the present reign has not exceeded two thousand loads a year, square measure, they have no doubt that as soon as a settlement shall have been made with the Commissioners, or other ‘effectual means taken for increasing the stock of timber, the annual fall in the forests may be raised to nearly four thousand loads, square measure, and be continued at that rate, without intermission, until the new plantations shall be arrived at maturity.’
“Although, therefore, it should be admitted, that by the arrangement proposed, four thousand square loads would be annually secured from the royal forests for the next hundred years, the demand of the navy, if taken at seventy thousand loads a year, (the supposed present consumption,) or even at fifty thousand loads, (the average annual consumption twenty years ago,) would require, in the first case, sixty-six thousand loads, or more than sixteen times the quantity furnished by the royal forests; and in the latter case, forty-six thousand loads, or nearly twelve times the quantity furnished by the forests to be supplied from private property or commerce. But as the Commissioners very justly conclude, ‘that the gradual diminution of the wood and timber in the country is to be expected in any future stage of its improvement,’ it is obvious that, for the next hundred years, (even without that increased demand for naval timber, which must as naturally attend the improvement of the country,) the supply from the royal forests being limited, and the supply from private property being gradually diminished, Government must necessarily look to commerce, not only for the motives, but the means, of ship-building; and under these circumstances, it becomes highly important to consider, whether it is not repugnant to the sound principles of Political Economy to adopt a forest system, which will have the effect of continuing sixty thousand or seventy thousand acres of fine land in maritime mortmain, and of forming an experimental farm of that extent, to be managed by the officers of the Crown; for the immediate object of securing, from the forests, only a twelfth or sixteenth part of the present consumption, and for the remote object of possibly providing, after one hundred years, the whole supply that may then be wanted.”*
I have entered into this long discussion, chiefly to have the satisfaction of quoting a very short extract from a note written by the Chairman of the Quarter Sessions of Bury, in the county of Suffolk, in answer to the inquiries of the Commissioners concerning the means of increasing the quantity of timber, and which appears to me to form a very striking contrast to the passages already quoted from their Reports, both in its practical good sense, and in its exact coincidence with the most enlightened views of Political Economy.
“England possessed in the past age a great plenty of oak. Why? Because cultivation was in a barbarous state. It is the improvement of the kingdom, a thousand times more valuable than any timber can ever be, that has wrought the very good and proper diminution of oak; and it is to be hoped the diminution will continue, for if it does not, the improvement of our soil will not advance. While we are forced to feed our people with foreign wheat, and our horses with foreign oats, can raising oak be an object? The average oak of Suffolk of a hundred years growth is worth £5; and let it grow in a hedge, wood, or a field, it has at that age done £10 worth of mischief. There are soils (not in this county) singularly favourable to the growth of oak, and yet yielding not more than eight or ten shillings an acre. On such, oak would pay, but the crop to be timber only, and no cattle ever admitted. But where is the owner who will sow a crop of a hundred years? Vanity does something: it does at present more than it ought to do, by planting soils not of the right sort.
“The scarcity of timber ought never to be regretted, for it is a certain proof of national improvement; and for royal navies, countries yet barbarous are the right and only proper nurseries. Buy oak, as you buy fir to build your houses. There is oak enough within reach of the Adriatic for a million of ships of a hundred guns each. Proposals were made (as I have been informed) to the Administration concerning those woods, as a supply for England, but no ear given, as they had it elsewhere cheaper.”—(End of interpolation from Notes.)
OF THE CORN TRADE.
In the slight view which I gave, at our last two meetings, of Mr. Smith’s reasonings in favour of an unlimited freedom of commerce, I purposely avoided all mention of the Corn Trade, as I was anxious to confine myself as much as possible to an illustration of general principles, without entering into the peculiarities of those cases, which, in the opinion of some, require an appropriated system, of regulations. Of this important subject, Mr. Smith has treated very ably in a long digression, which he has introduced in his Chapter on Bounties.* It appeared to me, however, to be more consistent with a distinct and systematical arrangement,—First, to state the general doctrine; and afterwards to consider what limitations of it may be necessary in particular combinations of circumstances. The Corn Trade, besides, being the most important of all the branches of commerce, seemed of too great magnitude to be considered merely as an appendix to a disquisition concerning one particular article of the Commercial system; more especially, as it has no peculiar connexion with this article, but what arises from the accidental and local policy of Great Britain. I propose, therefore, to consider this branch of commerce separately; flattering myself that, by this deviation from Mr. Smith’s plan, I may indulge myself, without impropriety, in some illustrations which might have been regarded as tedious, if introduced in the course of an incidental or episodical discussion.
The trade of the corn merchant is divided by Mr. Smith into 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 for future exportation.
Of the Inland Corn Trade.
Of the different branches of the Corn Trade, that which is carried on at home is incomparably the most important. According to the computation of the author of the Tracts upon the Corn Trade, [Charles Smith,] founded on a statement of imports and exports, during a long course of years prior to 1765, the proportion of the average quantity of all sorts of grain imported into Great Britain, to that of all sorts of grain consumed, does not exceed that of one to five hundred and seventy.
The 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. Even in the highest year ever known, the year 1750, when the amount of the exports was 1,500,220 quarters, it did not exceed the seed one-twelfth part, supposing it one-tenth of the growth.1
These proportions, indeed, can by no means be relied on as perfectly accurate; and, in general, as Mr. [Adam] Smith remarks,* little stress ought to be laid on the results of what is commonly called Political Arithmetic. There can, however, be no doubt that the difference in point of extent between the foreign and the home trade in Corn is immense; and the numbers I have quoted may at least serve to convey an idea of the opinion of a very judicious and well-informed writer on the subject.
That in the case of the inland trade of Corn, the accommodation of the whole community is most effectually consulted by permitting an unlimited liberty of transportation, appears from this,—that even in years of the greatest scarcity, the interests of the inland dealer, and of the great body of the people, must be one and the same. The truth of this principle, it must be owned, is not self-evident; on the contrary, it is very strongly opposed by popular prejudices. But this only proves how expedient it is for a wise Government, not only to sanction by law the liberty of this branch of commerce, but to employ the most vigorous measures to render it effectual, by protecting the just rights of individuals against those unenlightened descriptions of men, who, from a partial or mistaken view of their own interests, may be disposed to infringe them.
The interests of the inland dealer (it was just now said) and that of the great body of the people, how opposite, soever, they may at first sight appear, must be at all times, even in years of the greatest scarcity, exactly the same. In proof of this, it is sufficient to observe, that the most effectual way in which the dealer can in a year of scarcity serve the public, is by raising the price of his corn as high as the real scarcity of the season requires, without raising it beyond this limit; and that this is the general principle on which he will act to the best of his knowledge, we have complete security in that prudential regard which we may presume every trader has to his own emolument.
It is abundantly obvious, that in a year of scarcity 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; and for this purpose, what means so simple and infallible as those which the corn dealer naturally employs? “Where the produce of an year,” says Mr. Hume, “falls so far short as to afford full subsistence only for nine months, the only expedient for making it last all the twelve, is to raise the prices,—to put the people by that means on short allowance,—and oblige them to save their food till a more plentiful season.”
By raising the price, accordingly, the corn-dealer discourages the consumption, and puts everybody, more or less, but particularly the inferior ranks of people, upon plans of economy and good management; while, at the same time, his knowledge of the state of the crop, and of his daily, weekly, and monthly sales, enables him better than any other person to regulate the price according to the circumstances of the country. The conduct which is thus prescribed to him by his own interest, is very happily compared by Mr. Smith to that of the prudent master of a vessel, when, from an apprehension of a want of provisions, he puts his crew on short allowance.* Though, from an excess of caution, this may be sometimes done, both in the one case and the other, without any real necessity, yet the inconveniences which the parties concerned are likely thus to incur, are inconsiderable in comparison of the danger, misery, and ruin to which they might eventually be exposed by a less provident conduct. In the case of the corn-dealer, his own interest acts here as a most powerful check on those exorbitant demands which might be suggested by a more unenlightened avarice;—not only as he will naturally strive to diminish as much as he can that popular odium which is attached to his profession, but as he must be sensible of the hazard of having on his hands a quantity of corn at the end of the season, which he might be obliged to dispose of afterwards at a much greater disadvantage.
Were it possible indeed for one great company of merchants to possess themselves of the whole crop of an extensive country, Mr. Smith acknowledges that it might be their interest to deal with it as the Dutch are said to do with the spiceries of the Moluccas, 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 whenever 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 various 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 a general combination. 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 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.
With respect to the dearths and the famines which, during the course of the last three centuries, have occasionally afflicted the different countries of Europe, Mr. Smith lays it down as a general proposition, “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 greater number of cases by the actual failure of the crops in consequence of the badness of the season; and that a famine has never arisen from any other cause than the violence of Government attempting, by improper means, to remedy the inconveniences of a dearth.”*
In 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 hardly ever be so great as to produce a famine; and the scantiest crops, if managed with frugality and economy, will maintain through the year the same number of people that are commonly fed in a more affluent manner by one of moderate plenty. Not only does the weather differ widely, in most instances, in different parts of an extensive territory; but even when it does not, the mischief occasioned by excessive droughts, or excessive rains in lands which are naturally disposed to be too dry or too wet, is always compensated in some degree by the advantage gained in soils of an opposite description. “Lorsque les récoltes manquent en quelque lieu d’un grand Empire, les travaux du reste de ses provinces étant payés d’une heureuse fécondité, suffisent à la consommation de la totalité. Sans sollicitude de la part du gouvernement, sans magazins publics, par le seul effet d’une communication libre et facile on n’y connoit ni disette ni grande cherté.”1 If this remark fails at all, it is 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. It is in such countries, accordingly, that the effects of excessive drought are most severely felt.
When the Government, in order to remedy the inconveniences 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 it encourages the people to consume it so fast as must necessarily produce a famine before the end of the season. The only effectual security against these evils is an unlimited liberty of the corn trade; and the only respect in which Government is called upon to interpose its authority, is to maintain and protect this liberty against those assaults to which it is so peculiarly liable from the prejudices and passions of the unenlightened multitude.
In truth, there is no branch of trade whatever which at once deserves so much, and requires so much the protection of law; and there is hardly any of the interpositions of law which demand a greater degree of steadiness and vigour on the part of the magistrate. The general and the permanent interests of the community ought in this, as in all other cases, to be consulted in opposition to the suggestions of a more partial beneficence; and the temporary indignation and odium of the people disregarded, in order to establish a solid claim to their lasting gratitude.
In years of scarcity, those who attend only to the pressure of the present moment, are apt to impute their distress to the avarice of the corn merchant, who becomes, of course, the object of their resentment and hatred, and who is thereby exposed to the danger of having his magazines plundered and destroyed. It is in years of scarcity, however, when prices are high, that the corn merchant expects to make, and is entitled to make, his principal profit. He is generally in contract with some farmer to furnish him for a certain number of years with a certain quantity of corn at a certain price; a price which will be naturally settled according to the ordinary or average rate of the markets. In years of scarcity, therefore, the corn merchant buys a great portion 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 fluctations of its price, seems evident enough from this single circumstance, that great fortunes are as seldom made in this as in any other trade. On the contrary, in this as in the other branches of trade, which form the employment of the speculative merchant, bankruptcies are much more numerous than in those where the supply of the commodity can be more accurately and uniformly adjusted to the demand. In consequence of this circumstance, added to the effects of popular prejudice, merchants of character and fortune are averse to enter into the Corn Trade, and abandon it to an inferior set of dealers, destitute of a sufficient capital to deserve the credit of the farmers, as well as of that liberality of mind, and those enlarged views of their own interests, which are commonly to be found in men accustomed to the operations of an extensive commerce.
The prejudices which the lower ranks of men are apt to entertain in all countries, against a trade so peculiarly beneficial to themselves, instead of being discountenanced by the wisdom of law, were unfortunately encouraged and strengthened by those narrow maxims of Political Economy which influenced for a course of ages the policy of modern Europe. Of these maxims a leading one was, that the people would buy their corn cheaper of the farmer than of the corn merchant, who, it was supposed, would require over and above the price he paid to the farmer, an exorbitant profit to himself. It was thought expedient, accordingly, to hinder as much as possible, a middleman of any kind from coming in between the grower and the consumer.
Another circumstance too, it is probable, had some influence in dictating this policy. For many years after the Conquest, the greatest part of the inland trade of England was carried on in markets and fairs; all bargains of sale being prohibited excepting in public markets and in boroughs, in order to prevent theft. A very considerable part of the revenues of the Crown arose from the duties payable to the king upon the goods thus brought to sale, and similar duties were enacted by the barons on the goods sold at the fairs within their jurisdictions.1
When the farmers and merchants were bringing their corn and other necessaries, to be sold at the markets and fairs, people met them by the way, and purchased their provisions, in order to retail them at a higher price. By this means the king and the lord of the manor lost the several duties payable to them; while, at the same time, the price was raised upon the inhabitants, by lessening the quantity of provisions brought to market. Such were the original forestallers, against whom severe penalties were enacted, as the trade they carried on seemed to be equally prejudicial to the privileges of the great and to the general interests of the community.
In process of time the description of a forestaller came to be farther extended to “any person who should buy” any merchandise or victual, coming towards any fair or market, or towards any city, port, creek, or road, of England or Wales, from beyond sea, to be sold; or who should make any bargain for having the same, before the merchandise or victuals should be in the market to be sold; or who should make any motion for enhancing the price; or should move any person coming to the market to forbear to bring the things to be sold.”
In the same statute from which these words are quoted, (the 5th and 6th Edward VI.,) the title of regrator is applied to “any person who shall by any means regrate, obtain, or get into his possession, in any fair or market, any corn, wine, fish, butter, cheese, &c., that were brought to any market in England or Wales to be sold, and shall sell the same in any fair or markets holden or kept in the same place, or in any other fair or market within four miles thereof.” It is added, that “a person who shall engross, or get into his hands by buying, contract, or promise-making, any growing corn in the fields, or any other corn or grain, butter, cheese, fish, or other dead victuals whatever, with intent to sell the same again, shall be holden or reputed an engrosser.” The penalties for these offences, as might be expected from the spirit of the age, are abundantly severe. “That an engrosser (for example) 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.”
In Scotland, laws to the same purpose were made against forestallers and regrators; and although the word engrosser does not appear in the laws, the description of an engrosser is fully comprehended under that of the forestaller and regrator, In the case of forestalling, the third criminal act infers escheat of moveables, (1592, c. 148.)1 The ancient policy of most other parts of Europe was similar, in this respect, to that of England and Scotland.
The same principles which led our ancestors to attempt the suppression of the trade of the corn merchant, induced them to impose restraints upon the trade of those whom they called kidders or carriers of corn,—a trade which nobody was allowed to exercise without a license, ascertaining his qualifications as a man of probity and fair dealing. In general, their object plainly was to discourage, as much as possible, any middle-man of any kind from coming in between the grower and the consumer.
On the important advantages arising from such an intervention, more especially from the trade of the extensive corn merchant, I shall have occasion afterwards to offer some observations. In the meantime, it may be worth while to remark, that this trade naturally arose from the improving agriculture of the country, and was a most unequivocal symptom of national prosperity; and that it had plainly been suggested, in part, by the experience of those very calamities which it seemed, on a superficial view, to threaten, and against which it is, in fact, the only effectual remedy. In the earlier ages of English history, the trade of a corn-dealer seems to have been unknown; nor, except in the Abbey Granges, do we meet with instances of corn being collected in large quantities.2 The natural consequence was, that the farmers without capital disposed of their crops at moderate prices soon after the harvest; purchasers, who only looked to their immediate wants, having corn cheap, were naturally prodigal and improvident in the consumption. The price, therefore, almost invariably rose as the year advanced, and was frequently at an enormous height just before harvest; and before a fresh supply could be obtained, the supply of the preceding year was often entirely exhausted. Stowe informs us, that in 1317, the harvest was all got in before the first of September, and that wheat, which had before been at £4 the quarter, fell to 6s. 8d., a twelfth part of that price. A detail of the prices of grain would furnish us with abundant proof, if proofs were wanting, of the extreme misery of those times, in which the only buyers of grain were the consumers. Five guineas a quarter is a price sufficiently grievous, even at a period when a labourer can earn 18d. a day; but between the Conquest and the accession of Edward the Third, the price of wheat varied from 8d. to £6, 8s. the quarter, to which almost incredible price (being equal to £19, 4s. of our present money,)1 it rose in 1270, and was attended with a famine. At this period, too, it must be remarked, a man’s day’s work in harvest was valued at a penny, and out of harvest at a halfpenny. On the other hand, that the conclusion may not be pushed too far, it is necessary to recollect that wheat was not the general bread corn of the peasantry. From a valuation of the moveable property in the borough of Colchester, made in the year 1296, preparatory to levying a subsidy of a seventh, for carrying on the war against France, it appears that among the petty tradesmen and artificers of that period, almost every family was provided with a small store of barley or oats, usually about a quarter or two of each; rye appears to have been very little used, and wheat scarcely at all. This circumstance is the more worthy of our notice, that it has been frequently overlooked by our economical writers, many of whom assume the price of wheat, when compared with the wages of labour, as a certain criterion for judging of the condition of the labouring classes at any given period. This, it is evident, can only hold good on the supposition, that this grain is wholly and entirely their ordinary food, which is not the case, even at this day, and was certainly very much otherwise in more early times. From the Household Book of Sir Edward Cooke, it appears that in 1596, rye bread and oat-meal formed a considerable portion of the bread of servants even in great families. In 1626, barley bread is stated, in a grant of a monopoly from King Charles, to have been the usual food of the ordinary sort of people.1 Nay, even so late as the beginning of the present reign, it appears from the supplement to [Charles Smith’s] Three Tracts on the Corn Trade, [1766.] that above one-third of the nation ate bread made of oats, rye, or barley.* He adds, that “some who have considered the matter with great attention, are inclined to think, that in the year 1764, one-half of the people could not be supposed to feed on wheaten bread.”†
Although, however, these considerations shew evidently the inaccuracy of many of our conclusions, founded on the price of wheat compared with the wages of labour, they do not invalidate the inference, formerly stated, [supra, p. 57,] of the extreme distress of the lower orders in 1270, and the other bad seasons already referred to. The fluctuations in the price of wheat must necessarily have been accompanied with corresponding (although, perhaps, not proportional) fluctuations in the prices of oats and barley, and whatever else formed the ordinary food of the people; and these fluctuations were the obvious consequence of the corn trade being entirely in the hands of farmers, without the intervention of extensive corn-dealers between the grower and the consumer. The evils arising from this circumstance were no doubt much aggravated by the imperfect police which then existed. “In the disorderly state,” says Mr. Smith, “of England under the Plantagenets, who governed it from about the middle of the twelfth till towards the end of the fifteenth century, one district might be in plenty, while another, at no great distance, by having its crops destroyed, either by some accident of the seasons, or by the incursion of some neighbouring baron, might be suffering all the horrors of a famine; and yet, if the lands of some hostile lord were interposed between them, the one might not be able to give the least assistance to the other.”2
These two causes, it is obvious, operated precisely in the same manner, by interrupting that natural course of things which provides in the plenty of one part of the country a relief for the scarcity of another. They are, therefore, equally illustrations of the same general principle.
In these calamitous times, it has been justly remarked, that the return of harvest must have been looked for with hardly less eagerness than that with which the Egyptian farmer is said to watch the overflowing of the Nile; and it has been conjectured, with considerable probability, that the enthusiastic joy with which the rustic feast of Harvest Home was anciently celebrated, arose from the circumstances of those ages, when a late crop or a bad season reduced the wretched cultivator to the extremity of want, and when the successful or unsuccessful management of this critical period decided the alternative of plenty or of famine.
I have been led into these remarks by the consideration of the statute of Edward VI., against forestallers and regrators,—a statute which was expressly calculated to deprive the country of those resources against dearth and famine which nature has so liberally provided for it, in the variety of its soils and climates, combined with the circumstance of its insular situation.
The rigour of this law was afterwards relaxed by several subsequent statutes, which permitted the engrossing of corn when the price of wheat should not exceed twenty, twenty-four, thirty-two, or forty shillings the quarter. At last, by the 15th of Charles II., 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.
All the freedom which the trade of the inland corn-dealer has ever yet enjoyed, was bestowed on it by this statute; and, in the opinion of Mr. Smith, “it has contributed more (notwithstanding all its imperfections) both to the plentiful supply of the home markets, and to the increase of tillage, than any other law in the statute-book.”*
The statute of the 12th 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. It must also be remembered, that “the engrossing of corn, as well as the engrossing of any other commodity, with intent to sell it at an unreasonable price, (notwithstanding the repeal of statutes concerning them by the 12th George III.,) is an offence indictable and fineable at Common Law; the penalty for such offences being (as in other minute misdemeanours) discretionary fine and imprisonment.”
That the restrictions, in the statute of Charles II. now referred to, are absurd and impolitic, Mr. Smith has shewn very clearly; but it is unnecessary to follow him into his reasonings on this subject, as the argument already stated for the freedom of the inland trade of corn, if it proves anything, leads to the general conclusion, that this freedom should be unlimited.
It is pleasing to observe the gradual progress of light and liberality on these important subjects among men called to the administration of public affairs, and to perceive the influence which the writings of Turgot and Smith have insensibly assumed over the councils of nations.† The following quotation from a Representation of the Lords of the Committee of his Majesty’s Council for Trade, drawn up in the year 1790, states the substance of the foregoing argument so forcibly and concisely, that I cannot deny myself the pleasure of transcribing it. To those who are acquainted with the works of the two philosophers just mentioned, it is unnecessary for me to point out its striking coincidence with their writings, both in point of sentiment and of expression.
“The best market for corn in every country is the home market; and the circulation of it within every kingdom ought to be free, so that the surplus of one part may supply the deficiency of the other, and that the price throughout the whole country may be brought as near as possible to a level.
“To facilitate the circulation of corn, this kingdom enjoys peculiar advantages, which arise from its situation as an island, from the number of its canals, and the excellence of its roads; as by these the populous and manufacturing counties in some parts of the island, can draw the necessary supplies from other parts which are less populous, but more productive of corn.
“In other countries, magazines of corn are formed by their respective governments, or by the principal magistrates of great cities, as a resource in times of scarcity. This country has no such institution. The stores of corn are here deposited in the barns and stacks of wealthy farmers, and in the magazines of merchants and dealers in corn, who ought by no means to be restrained, but rather encouraged in laying up stores of this nature; as after a deficient crop they are thereby enabled to divide the inconvenience arising from it as equally as possible through every part of the year; and by checking improvident consumption in the beginning of scarcity, prevent a famine which might otherwise happen before the next harvest. The inland trade of corn, therefore, ought to be perfectly free. This freedom can never be abused. To suppose that there can be a monopoly of so bulky and perishable a commodity, dispersed through so many hands over every part of the country, is an idle and vain apprehension. The ancient laws of this kingdom, which, by a false policy, restrained the inland trade of corn, have in general been repealed. The 15th Charles II., which does not permit the buying corn to sell again, and the laying it up in granaries, except when the several sorts of corn are below certain prices therein mentioned, is the only law of this description which will now be found in our statute-book, and ought certainly not to remain there any longer.”*
In the same representation, indeed, there are to be found principles concerning the freedom of exportation, and some other articles in the corn trade, which are borrowed from a much more unenlightened system; and on which I shall have occasion afterwards to make some remarks. But the progress of truth in eradicating prejudices is slow and gradual; and we must console ourselves in the meantime, with observing in its progressive, though tedious advance, the certain presages of its future triumph.
Having mentioned, in the quotation just now read from the Representation of the Lords of the Council on the Corn Trade, the institution of public magazines, I shall take this opportunity of remarking how very imperfectly they supply the place of an internal freedom of trade. Magazines can do nothing more than private speculators; they can only buy when corn is cheap, and sell when it is dear; but they do this at such a vast expense, and with so little economy, that if they do not take an equal advantage of profit with private speculators, they must demand an enormous tax to enable them to carry on their business; and if they do take such profit, the people are never the better for them. Mr. Symonds, in his paper on the public Magazines of Italy, has proved them to be everywhere nuisances.1
In France, the prejudices against monopolizers (Accapareurs) seem to have been still more inveterate than in England; and restraints imposed by the law upon the inland trade of corn, have been much more numerous and oppressive. The attempts which, in later times, were made to correct these prejudices, and to introduce a more enlightened policy on the subject, are intimately connected with the political history of that country, and with the fortunes of some distinguished political characters; and, therefore, I shall make no apology for the length or minuteness of the following details, more especially as many of them afford additional proofs and illustrations of the general principles which have been already stated.
In the year 1763, under the administration of M. de Laverdi, a considerable step had been made towards an emancipation of this branch of commerce from the restraints which had so long fettered it;1 and, in particular, a freedom of trade, from province to province, had been established. But these indulgences were afterwards recalled by the Abbé Terray in 1770. At this time, M. Turgot was Intendant of Limoges, where he had experienced, in one of the poorest provinces of France, during two years of scarcity, the happy effects of maintaining, with all the influence and power which his station enabled him to command, that degree of liberty which the laws then allowed to the inland dealers in grain. The Minister of Finance having requested, on this occasion, the advice of the Intendants of the different Provinces, M. Turgot addressed to him Seven Letters, which are said to have formed a complete treatise on this important object of legislation.2 Of these Letters, only Four have been preserved;* the other Three having, by some unaccountable accident, been lost. The whole were composed in three weeks,3 during a tour which the author made through the province under his Intendance, and amidst the various minute avocations connected with his office. Some are even said to have been written in a single evening. And yet in this imperfect fragment, so hastily executed, he has left a lasting monument of the extent and justness of his political views, as well as of an admirable and almost unrivalled talent for a clear, methodical, and concise exposition of general principles. I think it may be questioned if the argument has been yet stated by any other writer with equal ability and force. As for M. Terray, we are told by Dupont in his Biographical Memoirs of Turgot, he “read the letters and admired them; extolled in the warmest terms the information, the talents, and the courage of the author; and concluded, by renewing the old prohibitive regulations.”† “It is indeed unfortunate,” as another friend of Turgot, [Condorcet ?] remarks in mentioning the same incident, “that in political discussions our judgments are less influenced by our reason than by the temper of our minds. Most understandings are able to perceive the truth, but few possess that force of character which is necessary for reducing it to practice. In such cases we naturally strive to disbelieve what we have no inclination to carry into effect; and it is only the few who feel that courage which virtue inspires, who openly avow opinions which impose on them the duty of combating prejudices and intrigues, and of sacrificing the paltry politics of self-interest to general utility.”
In 1774, a few months after the accession of Louis XVI., M. Turgot was appointed Controller-General of the Finances,1 in the room of Abbé Terray, and one of the first acts of his administration was to establish the freedom of the inland trade of corn through the whole kingdom. “To animate agriculture by the prospect of a ready and free market for the commodities it supplies; to increase at once the quantity of subsistence and the rents of lands; to prepare for the people the resources of an active and extended commerce against unfavourable seasons and local scarcities; to render their wages at all times equal to their wants by diminishing as much as possible the variations in the price of grain;—in one word, by the establishment of a certain and constant market, to secure the proprietors, the cultivators, the government, and the people at large, against all risk of losing any part of the produce of the land, as well as against the vexations, oppressions, and disorders which must occasionally arise from a system of restraints and prohibitions;—such were the avowed motives of this wise and salutary law.”2 M. Turgot has himself explained and justified them at considerable length in the preamble of the Edict,* which appears to have been drawn up with the view of obviating those objections which might present themselves against the expediency of the measure on a partial and superficial view of the subject. I would have introduced a translation of it here from a copy of his Edicts, which is in my own possession, if I had not been afraid of adding too much to the length of this digression. I must not, however, omit to mention, that although perfectly aware of the advantages to be expected from a free exportation, as well as from a free inland trade, he had the caution and good sense to confine himself, in the first instance, to the establishment of the latter; leaving the exportation of grain under the same prohibitions which had been enacted by the Abbé Terray. “His Majesty reserving to himself the satisfaction of bestowing marks of his special protection on such of his subjects as may import foreign grain into those parts of the kingdom where any symptoms of scarcity may appear; and forbearing at present, to make any alterations on the laws which exist against exportation.”1
Unfortunately the harvest of this year turned out ill, and some apprehensions of a scarcity were felt or pretended in the spring following. It was difficult to suppose that this could have been the effect of an inland freedom of transportation; nor did the enemies of the minister venture on such an assertion. They, however, took advantage of the agitation of the public mind,—declaimed upon the dangers of a free exportation, which then remained under the very same prohibition as before, and the ruin to be apprehended from speculative statesmen, willing to sacrifice the people to philosophical experiments. A sound and consequential logic is not very necessary in addressing the multitude upon subjects which interest their passions; and it was easy to associate in their minds the measures of the actual administration with the public distress which was felt or apprehended. A celebrated statesman and eloquent writer,2 who has since acted a conspicuous part on the theatre of Europe, has left a stain on his character, which will not be easily effaced, by the share which he had in promoting the public discontents against the salutary measures of Turgot and his friends. Misled, it is probable, by his own sanguine schemes of beneficence, he believed that he was serving his country by every step which facilitated his own advancement to power. Nor is it at all unlikely that he was really a dupe to his own ingenuity in his mistaken speculations on the legislation of grain. One thing is certain, that the argument in favour of the old prohibition system has been stated by no writer, either in France or in England, with equal force and plausibility. And we know, that at a later period of his life, when every object of his personal ambition was fully attained, he continued to act on the same narrow and erroneous principles.
Another work which, about this period, (or rather a few years before,) excited much attention in France, was the Dialogues on the Commerce of Grain, by the Abbé Galiani of Naples. The author was then living at Paris as secretary of legation to the Neapolitan embassy, and composed on this very unpromising subject, and in the French language, eight dialogues, which Voltaire (in a letter addressed to Diderot) pronounces to be worthy of the genius of Plato combined with that of Molière. The principles he maintained were nearly the same with those which were afterwards adopted by Necker, and produced so great an impression on the public mind, that a formal refutation of them was undertaken by the Abbé Morellet. The Marquis Caraccioli, in a letter from Paris to Galiani, who had returned to Naples previous to the publication of his book, mentions the opinions of Turgot with respect to its merits. “Turgot,” says he, “agrees perfectly with the Abbé Morellet in thinking, that no doctrines were ever calculated to do more mischief.” The Government, however, at this period, inclined to the opinions of Galiani, and prohibited the Abbé Morellet to continue the controversy.
I made some remarks, at our last meeting, on the Corn-trade, confining myself chiefly to the inland branch of it, but interspersing a few observations, which seemed to arise naturally from the subject, on the prejudices against a free exportation. The prosecution of this argument led me to take notice of the extreme difficulty of this article of Political Economy,—a difficulty not arising from any peculiar obscurity in which the truth is involved, but from the necessity under which a statesman must frequently find himself of yielding something to the prejudices and passions of those whom he governs. The history of France during the last forty years affords some memorable examples of this; and I refer to it in preference to that of our own country, both because the opposite opinions have been there carried to a greater extreme, and because I feel myself less under restraint in censuring the undue influence which these opinions have occasionally had on public measures.
I mentioned the steps taken (under the administration of M. de Laverdi,) towards an emancipation of this branch of commerce from the restraints which had so long fettered it. The king’s Edict, giving “permission to circulate corn and flour through the whole extent of the kingdom, free from all duties,” was dated at Versailles 25th May 1763. Another Edict, relative to the exportation and importation of grain, was given at Compiegne in the month of July 1764. The preamble is not undeserving of attention.
“The attention which we owe to everything that may contribute to the welfare of our subjects, hath induced us to give a favourable hearing to the petitions which have been presented to us from all parts, to establish an entire liberty in the Corn Trade, and to revoke such laws and regulations as have been heretofore made to restrain it within too strict bounds. After having taken the opinion of persons the best acquainted in the affair, we thought it necessary to comply with the solicitations which have been made to us for the free exportation and importation of corn and meal, as proper to encourage and increase the cultivation of land; to maintain plenty by magazines and the importation of foreign corn; to prevent corn from being at a price which discourages the grower; to banish monopoly by an irrevocable exclusion of all particular permissions; and in the end, by a free and entire competition in the trade, to keep up between different nations that communication of exchanging superfluities for necessaries, so conformable to the order established by Divine Providence, and to views of humanity, which ought to animate all sovereigns.”
The speech of M. de Carodeuc de la Chalotais, when he presented this Edict for registration to the Parliament of Brittany, may be found in the Supplement to the [C. Smith’s] Three Corn Tracts, [1766.]* It is valuable as it exhibits a view of the state of the corn-trade in France for more than a century preceding.
The revocation of these Edicts under the administration of the Abbé Terray, and the subsequent measures of Turgot, were stated in my last lecture with sufficient minuteness for my present purpose.
Of the origin and progress of this literary and political controversy in France, a circumstantial account may be found in various writers. The following rapid sketch is a faint translation from the light and inimitable pen of Voltaire. I quote it less on account of the information it conveys, than of the happy touches with which the author characterizes the enthusiasm and levity of his frivolous countrymen.
“About the year 1750, the French nation surfeited with verses, with tragedies, with comedies, with operas, with romances, with romantic histories, with moral reflections more romantic still, and with disputes on the mysteries of theology, betook itself to discussions on the subject of grain. The vineyards were forgotten, and nothing was talked of but wheat and rye. Volumes on volumes were written about agriculture, which everybody read excepting the husbandman. It happened to strike some one in his way home from the Opéra Comique, that France had immense quantities of grain to dispose of; the nation became clamorous, and obtained from the Government, in 1764, the freedom of exportation. The consequence was the same as in the reign of Henry IV. The exportation was carried a little too far, and a year of scarcity followed. The discontented ran from one extreme to the other, and declaimed against the exportation which they had solicited. Some men of genius and of the most disinterested benevolence wrote with equal sagacity and courage in favour of an unlimited freedom in this branch of commerce. Others not inferior in genius, and with motives not less pure, contended that this freedom should be subjected to regulations. Of this number was the Abbé Galiani of Naples, who discovered the secret of composing (and in the French language) dialogues as amusing as our best romances, and as instructive as our most serious performances. If this work did not lower the price of bread, it gratified the public in a way not less acceptable, by adding to the stock of its entertainment. The advocates for an unlimited exportation replied formally. The result was, that their readers knew no longer what to make of the controversy: The greater part began a course of novel reading, in hopes that three or four years of plenty might enable them to form a judgment. The ladies relapsed into their former ignorance of the distinction between rye and wheat; and the curates returned to their old belief, that the seed must die and rot before it quickens.”*
The same prejudices with respect to the corn-trade, which were employed so unjustly but so successfully as an engine of popular opposition to the administration of Turgot, appear to have existed in full force in many parts of France at the period when the late Revolution commenced. Of this a judgment may be formed from the Cahiers, or papers of instructions given by the different electoral bodies to their representatives. By one of these (the Tiers-état de Meudon) it is demanded, that as France is exposed to the rigours of famine, every farmer shall be obliged to register his crop of every kind, and also every month the quantity sold.” Another requires, “That the severest laws be passed against monopolizers, whose agency at present desolates the kingdom.” Fifteen demand the erection of public magazines; and even the author of the Cahier presented by the Tiers-état de Paris, demand “that the transport of corn from province to province should be prohibited.”1 Nor will the inveteracy of these prejudices in France appear so wonderful, when we consider that in that country the people live almost entirely on bread; that in consequence of the small farms which are everywhere prevalent, the quantity of corn in the markets is always, in Autumn, beyond the proportion reserved for supplying the rest of the year; and that the number of real speculators or accapareurs, is by far too inconsiderable to remedy this evil. From these causes the supply must necessarily be irregular and frequently insufficient; an insufficiency, however, wonderfully increased by that popular violence which has been so often encouraged and sanctioned by blunders of Government and by arrêts of Parliament.
Of this prejudice, deeply rooted in the minds of the French population, a very dexterous and but too successful advantage was taken by those anarchists who availed themselves of the revolutionary crisis as a fit occasion for wresting the government from the hands of their lawful masters: and it was by means of that violence so naturally inspired by such prejudices, that the lower orders were first stimulated to those sanguinary atrocities which have left so indelible a stain on the national character. A more striking example is not furnished in the whole range of history, of the expediency of correcting, in times of established tranquillity, whatever errors and misapprehensions on the part of the people seem most likely to furnish arms to ambitious and unprincipled demagogues, with which they may, in times of distraction and disorder, assail the authority of wisdom and virtue. They demonstrate the truth of the maxim of a French writer, speaking of religious enthusiasm—a maxim which may be extended with equal justice to all the duties of a government:—“Seize the moment when the tide is at the lowest ebb to repair and strengthen your dikes.”
With these views it may be proper to prosecute a little farther this account of the fluctuations of the French policy, in regard to the commerce of grain. In doing so, I shall be unavoidably led to anticipate some observations connected with another branch of our subject. But this apparent defect in arrangement, is the necessary consequence of the connexion which subsists between the different branches of the corntrade.
In the months of May and June 1789, after a harvest, which though not great, is allowed to have been but little under the common average, so extraordinary a dearness prevailed, that M. Necker thought it expedient to order immense cargoes of wheat, and every other sort of corn, to be bought up all over Europe. In a paper published by himself, entitled Mémoire Instructif, he states, that he has ordered to be bought 1,404,463 quintals of different sorts of grain, of which more than 800,000 were arrived. The expense of this importation amounted to 45,543,697 livres, (about £2,000,000;) and to such a length were plans of economy carried among the higher orders, that we are assured the king allowed only bread of wheat and rye mixed to be served at his own table.
It does not belong to our present subject to offer any opinion concerning the primary causes of this pretended scarcity. That it originated with the minister I am very far from supposing or believing, but that he contributed, by his indiscretion, greatly to aggravate the evil, while he was disinterestedly risking his own fortune in an attempt to counteract it, appears to be unquestionable. The following sentence in his Mémoire Instructif admits of no apology, and is perfectly in the style of the addresses made, of late, by the English judges to the grand juries.
“Monopolizing is the first cause to which the multitude naturally ascribes the high price of grain; and, in fact, there is often but too much reason to complain of the mischiefs occasioned in this way by the avarice of mercantile speculators.”1
The consequences were such as might have been expected,—a blind rage against Monopolizers, accompanied with various outrages and atrocities. In June and July the markets were not opened till troops arrived to protect the farmers from having their corn seized; and the magistrates, to prevent insurrections among the people, had recourse to the pernicious measure of regulating prices. The farmers, in consequence, refrained from going to market, in order to sell their wheat at home at the best price they could get, (which was, of course, much higher than the assize of the markets;) and an evil which, if left to itself, must, at the worst, have terminated in the inconveniences connected with a short or deficient crop, began to assume the awful appearance of an inevitable famine.
In the proceedings of Government on this occasion, nothing seems to have been more reprehensible than an imprudent disclosure of its own apprehensions and alarms. We are told by Mr. Arthur Young, who was engaged in an agricultural survey of France at this period, that the publication of M. Necker’s Mémoire Instructif, (in which he announced the steps he had taken for the importation of a suitable supply,) “instead of sinking the price, raised it directly and enormously: upon one market day at Nangis, from thirty-eight livres to forty-three livres the septier of two hundred and forty pounds, and upon the following one (July 1st) to forty-nine livres. On the next day, at Columiers, it was taxed by the police at four livres five sous, and four livres six sous the twenty-five pounds; but as the farmers would not bring it to market at that price, they sold it at their farms at five and a half livres and even six livres; that is, at the rate of fifty-seven livres the septier. At Nangis it advanced, in fourteen days, eleven livres a septier; and at Columiers a great deal more.”* Of these facts Mr. Young was an eye-witness; and as they took place in the vicinity of the capital, for which the great foreign provision was chiefly destined, they prove, in the most unequivocal manner, the mischiefs produced by the agitation thus excited in the public mind. A measure which cost the nation forty millions of livres, had the effect, in the two markets which Mr. Young attended, of instantly raising the price of grain twenty-five per cent,—a rise depending solely on opinion, as both the quantity of corn and of money in the kingdom remained the same as before. If no public step whatever had been taken, Mr. Young gives it as his opinion, that the price of wheat, in no part of France, would have been, in 1789, at so high a rate as thirty livres, instead of rising to fifty and fifty-seven livres.
From these circumstances, Mr. Young has drawn a conclusion which deserves the serious attention of all Governments,—“Never to express publicly any apprehension of a want of corn, by proclamations against exports, by regulations of sale, by laws against monopolizers, or by holding out hopes of importation.”* All these measures have the same tendency. They confirm amongst the people the apprehension of want and of famine; and this can never take place without, in some degree, realizing the evil apprehended. It is, therefore, the duty of a wise and enlightened government, if at any time they should fear a short provision of corn, to take the most private and cautious measures possible either to prevent export, or to encourage imports, and to avoid making any public decree or declaration. Of the truth of this M. Necker appears to have been aware, when he published his Treatise on the Legislation and Commerce of Grain. “Un des plus grands inconvéniens attachés aux permis d’importation; c’est qu’elle instruit avec éclat de l’inquiétude du governement, qu’elle accroit ainsi les alarmes et renchérit le prix.”1 From the occurrences which took place in our own country a few years ago, there is ground for suspecting that the truth of this maxim is, here, far from being universally admitted among our legislators. The result, too, was perfectly analogous to what was observed in France. But on this topic I forbear to enlarge at present.
As it is only the inland trade of corn which falls immediately under our consideration in this part of our argument, it would be foreign to the subject to examine particularly the wisdom of M. Necker’s system in prohibiting the export of grain, (which the Archbishop of Sens had permitted the year before,) or in attempting to relieve the apprehended scarcity by importing to so large an amount as has already been mentioned, [supra, p. 71.] I cannot help, however, taking this opportunity of remarking, as an illustration of what was formerly stated concerning the insignificancy of the foreign trade of corn when compared with the inland, that the supply obtained by M. Necker at the expense of two millions sterling, would not (according to Mr. Young’s calculation) add three days’ provision to the national stock.1 So completely ineffectual is importation on the largest scale as a remedy for famine, and so absurd is the idea of providing for the wants of a numerous community by means of a resource which must necessarily bear so trifling a proportion to their consumption.
Mr. Young ventures to push the conclusion, and to assert, that all great variations in the price of corn are engendered by apprehension, and do not depend on the quantity in the market. That this was the case in France in 1789, appears clearly from the facts already stated; but although I am very far from presuming to deny the truth of the general proposition, I am not quite prepared to admit it in its full extent without some farther illustration. One great source, according to this author, of the common mistakes on this head, is the extravagant calculations that have been offered to the public concerning the annual produce of different countries. The Abbé Rosier, for example, declares, “que la France récolte, année ordinaire, près du double plus de bled qu’elle n’en consume.” “If this be true,” Mr. Young asks, “what becomes of the surplus? Where are the other 26,000,000 of people who are fed with French corn? Where do the 78,000,000 of septiers go that France has to spare, a quantity that would load all the ships possessed by that kingdom, above thirty times, to carry it? Instead of the common crop equalling two years’ consumption, it certainly does not equal thirteen months’ common consumption; that is, such a consumption as takes place at an average price. And all the difference of crops is, that consumption is moderate with a bad harvest, and plentiful with a good one. The failure of a crop in one province, in a very small degree, which, under a good government and entire liberty of trade, would not even be felt, will, under a system of restrictions and prohibitions, raise the price through the whole kingdom enormously; and if measures are taken by government to correct it, they will convert the high price into a famine.”* Thus far Mr. Young, to whose opinion on the subject I am disposed to pay the greater deference, that it coincides with that of Sir James Steuart, an author of very extensive and accurate research on all questions connected with Political Arithmetic, and whose information, in point of facts, will be allowed even by those who think the most lightly of his speculations, to rest in general on very authentic documents. I shall transcribe the passage, (with a few retrenchments,) though at the hazard of repeating some ideas, which may occur elsewhere, in a different form, in the course of the discussion.
“I have often said that numbers are in proportion to the produce of the earth. I now say, that, in most countries of Europe, the food produced in the country is nearly consumed by the inhabitants; or, in other words, that the part exported bears a small proportion to the home consumption. I do by no means establish this as a universal proposition, but I say it is true, for the most part, and under certain limitations. I allow, for example, that Holland, not producing food for its inhabitants, must draw it from some country which produces a superfluity regularly. But let it be observed that Poland, Germany, Flanders, and England, with many other countries, contribute their contingents to supply the demand of the Dutch, as well as of several large trading towns which have small territories. This being the case, the quota furnished by each country must be in a small proportion to the respective quantity growing in it. . . .
“In farther confirmation of this conclusion, let us attend to the state of the fact in England,—one of the countries in Europe abounding, undoubtedly, as much as most others in grain. Nothing is more common than to hear that an abundant crop furnishes more than three years’ subsistence. Nay, it is advanced by an author of note, (Advantages and Disadvantages of France and Great Britain, &c., Art. Grain,) that a plentiful year produces five years’ nourishment for the inhabitants. . . . I am, on the contrary, apt to believe, that no annual produce of grain ever was so great in England as to supply the inhabitants fifteen months, in that abundance with which they feed themselves in a year of plenty. If this be the case, at what may we compute the surplus in ordinary good years? I believe it will be thought a very good year which produces full subsistence for fifteen months; and crops which much exceed this are, I believe, very rare. My reasons for thinking so are as follows:—
“I consider all the yearly crop of grain in England as consumed at home, except what is exported; for I cannot admit that any considerable quantity is lost:—that it may be abused, misapplied, drunk when it should be eat, I do not deny. These are questions which do not regard the present inquiry. Whether, therefore, it be consumed in bread, beer, spirits, or by animals, I reckon it consumed; and, in a year when the greatest consumption is made at home, this I call the abundance with which the inhabitants feed themselves in years of plenty. Now, I find, in the performance above cited, a state of exportations for five years, from 1746 to 1750 inclusive where the quantity exported amounts in all to 5,289,847 quarters of all sorts of grain. This is not one year’s provision, according to Sir William Petty, who, supposing the inhabitants of England to be 6,000,000, estimates the yearly consumption of grain of all kinds at about 6,000,000 of quarters.* The bounties on Corn (continues the same author) have amounted in one year to £500,000. Supposing this statement to be true, and that the whole exportation was made out of the produce of one crop, this sum does not answer to the bounty upon 3,000,000 of quarters, which, according to Sir William Petty, make six months’ provision. I calculate thus:—The bounty upon wheat is five shillings a quarter, that upon rye three shillings and sixpence, that upon barley two shillings and sixpence, these are the species of grain commonly exported; cast the three premiums together, and divide by three, the bounty will come to three shillings and eightpence at a medium, at which rate £500,000 will pay the bounty of 2,727,272 quarters of grain. An immense quantity to be exported! but a very inconsiderable part of a crop, supposed capable to maintain England for five years.” . . .
“On the other hand,” continues the same author, “I am apt to believe that there never was a year of such scarcity as that the lands of England did not produce greatly above six months’ subsistence, such as the people are used to take in years of scarcity. Were six months of the most slender subsistence to fail, I imagine all Europe together might perhaps be at a loss to supply a quantity sufficient to prevent the greatest desolation of famine.”*
In proof of this, Sir James appeals to a fact which (not having access at the time to the registers of the trade in grain) he states on the authority of a London newspaper. From this document it appears, that from the 9th of April to the 13th of August 1757, while great scarcity was felt in England, there were declared to be in the port of London no more than 71,728 quarters of wheat, of which 15,529 were not then arrived; so that the whole quantity there imported to relieve the scarcity was 56,199 quarters. Not one month’s provision for the inhabitants of that city, reckoning them at 800,000 souls.
Another fact, leading to the same conclusion, Sir James states from his own observation on what he saw in Germany during the year 1757, where, in the numerous armies which were then assembled, there was a universal complaint of scarcity. “When we compare,” says he, “the numbers of an army, let it be of 100,000 men, with a suit no less numerous, and 40,000 horses, what an inconsiderable number does this appear in proportion to the inhabitants of so vast a country as Germany! Yet let us observe the quantity of provisions of all sorts constantly coming down the Rhine, the Moselle, and many other rivers, collected from foreign provinces on all hands; the numbers of cattle coming from Hungary; the loads of corn from Poland; and all this in a year which has produced what at any other time would have been called an excellent crop. After these foreign supplies, must not one be surprised to find scarcity complained of in the provinces where the war is carried on, and high prices everywhere else? From such circumstances I must conclude, that people are generally very much deceived in their estimate of plenty and of scarcity, when they talk of two or three years’ subsistence for a country being found upon their lands at once. I may indeed be mistaken in my conclusions, but the more I have reflected on this subject, the more I find myself confirmed in them, even from the familiar examples of the sudden rise of markets from very inconsiderable monopolies, and of the sudden fall by inconsiderable quantities imported.”*
After these remarks, Sir James Steuart proceeds to resolve a difficulty which naturally arises out of the foregoing doctrine, and which seems at first view to suggest a strong objection against some of his conclusions.
“If it be true,” says he, “that a crop in the most plentiful year is nearly consumed by the inhabitants, what becomes of them in years of scarcity? for nobody can deny that there is a great difference betwixt one crop and another. To this I answer, first, That I believe there is also a very great deceit, or common mistake, as to the difference between crops: a good year for one soil, is a bad one for another. But I shall not enlarge on this, because I have no sufficient proof of my opinion. The principal reason upon which I found it is, that it is far from being true, that the same number of people consume always the same quantity of food. In years of plenty, every one is well fed; the price of the lowest industry can procure subsistence sufficient to bear a division; food is not so frugally managed; a quantity of animals are fatted for use; all sorts of cattle are kept in good heart; a people drink more largely because all is cheap. A year of scarcity comes, the people are ill-fed, and when the lower classes come to divide with their children, the portions are brought to be very small; there is great economy upon consumption, few animals are fatted for use, cattle look miserably, and a poor man cannot indulge himself with a cup of generous ale. Added to all these circumstances, that in England the produce of pasture is very considerable, and it commonly happens, that a bad year for grain, which proceeds from rains, is for the same reason a good year for pasture; and in the estimation of a crop every circumstance must be allowed to enter.”*
It may be worth while to take this opportunity of remarking, that in this country we have a resource against scarcity, not to be found in vine countries, that of stopping the distilleries. The expedient of stopping the manufacture of starch has also been occasionally had recourse to.
The foregoing quotations seem abundantly to confirm the truth of the general positions which they were brought to support, that in most countries of Europe the food produced in the country is nearly consumed by the inhabitants, (or in other words, that the part exported bears a small proportion to the home consumption,) and consequently, that all great variations in the price of corn are engendered by apprehension, and do not depend on the quantity in the market. Various other proofs of the same thing may be found in Vaughan’s Treatise on Commerce. Even M. Necker himself admits, that during half a century the importation into France has never borne to the whole consumption a higher proportion than that of one or two to a hundred;1 nor does he seem much disposed to call in question the accuracy of those who affirm, that during the three years which followed after the Edict 1764, establishing a liberty of exportation under certain limitations, the exportation never exceeded the hundredth part of the annual consumption.2
These truths cannot be too frequently or too strongly inculcated on the minds of the people; and in so far as Necker’s measures in 1789 had a tendency to encourage contrary ideas, they justly merit the censures they have received. The passage, in particular, formerly quoted [supra, p. 71] with respect to monopolizers, at a period when the force of Government was so incompetent for the protection of persons and properties, leaves a blemish on his character both as a man and a minister, which it will not be easy for his most partial admirers to remove. The facts, too, stated by Mr. Young, seem sufficiently to prove, that by several indiscretions both in his measures and in his writings, he contributed to aggravate instead of lessening the evil.
Notwithstanding, however, these concessions to M. Necker’s opponents, and my own conviction of the erroneousness of his general principles concerning the legislation of grain, I cannot without forfeiting all claim to candour, join with Mr. Young in an unqualified censure of the measures which he opposed to the scarcity, real or pretended, of 1789. The ordinary powers of Government, which, during the administration of Necker’s immediate predecessor, had completely lost their energy and almost their existence, were then supplied entirely by the commanding influence of public opinion, and by the enthusiastic confidence with which the great body of the nation looked up to the virtues of the Sovereign, seconded by an almost universal conviction of the patriotism and the talents of his minister. In such circumstances, it would be unfair to judge of the measures which were adopted, by the same maxims which apply to a nation in times of tranquillity, among whom the wise and equitable arrangements of an enlightened legislator can be established at once by the irresistible arm of the executive magistrate.
That the freedom of the corn-trade, although a wise and just measure considered abstractly, was rashly established in the year 1787, by the Archbishop of Sens, will, I believe, be readily granted by all who are well acquainted with the circumstances of the case. It was certainly not a time to shock popular prejudices upon a subject of so delicate and critical a nature; and of all men, M. de Brienne, who had been intimately connected with M. Turgot, ought to have avoided a step which could not fail to revive the old clamours that had been excited (however unjustly) against a far less violent reform, when hazarded by that minister. Nor does it afford any apology for this measure to observe with Mr. Young, that the trade which this freedom encouraged was more an import trade than an export one. The contrary was much more likely to be believed by the people, and although (as we shall afterwards shew) a freedom of exportation is no less beneficial to the community than a freedom of importation, the truth of this principle is far from being obvious to common understandings, and it requires a course of years to verify it by actual experience. Its first effects, so far as they extend, are certainly to diminish the subsistence of the people, and to enhance its price; and it was in a high degree impolitic at a moment when the whole fabric of the French Government was tottering to its fall, to risk this alarming inconvenience, although of a temporary nature, upon the speculative hope of a distant advantage, which nothing but the continuance of national tranquillity could realize. I apprehend, therefore, that M. Necker was fully justified in prohibiting the trade of exportation, from the regard which a wise minister must frequently feel it his duty to pay to popular prejudices, more especially as, in this instance, he did no positive harm, but merely abandoned a speculative principle. Nor am I even disposed to condemn, without many qualifications of the censure, the efforts which he made for the importation of grain. They tended, at least, to satisfy the people, that the scarcity which existed was not owing to the intrigues of Government, and thereby to support that popularity of the Sovereign, which then constituted the whole strength of the monarchy; and which, if the charm had not been broken by the fatal measure of Necker’s exile, would in all probability have continued to oppose an effectual barrier to the rage of violent innovation. It must be remembered, too, that however trifling the supply may appear when compared with the whole population of France, the case is very different when compared with that of Paris and the neighbourhood, where it was of the greatest consequence to allay the popular alarms. Even here, if the supply had been small in fact, it affords a sufficient justification of the minister, if his measure contributed to revive the public confidence.—I believe, indeed, that it actually failed in this respect, but it was not unnatural to expect the contrary; and at any rate, circumstanced as things then were, it was the only measure left for the Government to employ.
A remark which Mr. Young himself has made, ought always to be kept in view in judging of the measures which were adopted on this occasion. “The mass of the people in great cities are all alike, absolutely ignorant of how they are fed, and whether the bread they eat be gathered like acorns from a tree, or rained from the clouds; they are well convinced that God Almighty sends the bread, and that they have the best possible right to eat it.”*
Mr. Smith, too, with all his strong attachment to an unbounded freedom in this branch of commerce, candidly insinuates an apology for the absurd regulations which restrain the corntrade under almost all governments. “The laws concerning corn,” he observes, “may everywhere 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 public tranquillity, establish that system which they approve of. It is, perhaps, on this account,” he adds, “that we so seldom find a reasonable system established with regard to either of those two capital objects.”†
The very same comparison between the laws respecting corn, and those which relate to religion, occurs in M. Necker’s Treatise on the Legislation and Commerce of Grain. In speaking of the free exportation of this article, he observes, that “although it were as favourable to the public prosperity, as he believes it adverse to it, it would be scarcely possible to maintain the authority of the law which should establish, in opposition to the prejudices and passions of the people.” “The bread,” says he, “by which the people are fed, the religion by which they are comforted, are ideas as simple as human nature, and inseparable from the human frame. The prosperity of the state, the interests of ages yet to come, the interests even of the succeeding generation, are words which produce no impression. The people feel themselves related to society by their sufferings alone, and of all that immense space which is called the future, the pressure of their wants prevents them from extending their views beyond a provision for to-morrow.
“It is thus,” he concludes, “that when the price of corn rises so high as to make their subsistence uncertain, a cry is naturally and necessarily raised against exportation, and against every law on which a pretence of blame can be thrown for the hardships and anxieties they suffer. In the midst of their daily toils, and of their ordinary indigence, they survey with tranquillity the indolence, the affluence, and the apparent happiness of the rich; they are accustomed to consider them as beings of a different species, and to be dazzled by the magical splendour of pomp and magnificence. But when an alarm, whether well or ill-founded, concerning the means of subsistence, lays hold of the imagination, and touches the great spring of all their movements, the whole of their energy rouses, and the same people who suffer themselves, with an infantine simplicity, to be easily guided by leading strings through all the spectacles which society presents of an inequality of prosperity, and through all the contrasts they see of want, on the one hand, and superfluity on the other, exhibit the ungovernable ferocity of a beast of prey when urged by the terror of famine.”
It is not, however, I presume, on these general considerations that M. Necker or his friends would wish to rest his vindication for the great importation he attempted in 1789. Nor do I suppose they would admit the conclusiveness of Mr. Young’s reasonings against it, founded on the inconsiderable proportion between the quantity imported and the whole population of France. I already said, that it is only with the population of Paris and the neighbourhood that it ought to be compared, as it was in this part of France that it was chiefly intended to operate. But abstracting entirely from this circumstance, Mr. Young seems to have overlooked completely one very important principle in this argument—that a very trifling difference in the quantity of grain in the market may occasion an immense fall or rise in the price. This observation was long ago made by Mr. King, in a passage quoted by Dr. Davenant, and has been more fully illustrated by the author [Mr. Charles Smith] of the Three Tracts on the Corn-Trade,* which I have already repeatedly referred to. M. Necker, too, in combating an assertion of a writer on the Commerce of Grain, that the price of that commodity varied proportionally with the quantity in the market, “so that to raise it a fifth or a tenth, a fifth or a tenth must be abstracted from the general supply,” asserts that the abstraction of a fifth or a tenth, or of much less, may, in certain circumstances, raise the price beyond all bounds. In particular, he asserts that the exportations after the year 1764, (which we are assured by the partisans of that measure never exceeded the hundredth part of the whole consumption,) raised, in several of the provinces of France, the price nearly a hundred per cent. “It is not,” he adds, “with the amount of grain left in the country that we must compare the quantity abstracted by exportation, but with the amount of that surplus, which experience shews to be necessary for keeping within bounds the speculations of monopolizers, and the alarms of the consumers.” Although, therefore, the quantity imported in 1789 had been much less than it was, it might still have produced a great reduction in the price, and would probably have done so if the public mind had not been agitated by a thousand other causes of a very different nature. The truth is, that the question concerning the expediency of this measure cannot be decided on any general principles of Political Economy, but turns entirely on the adaptation of the measure to the actual state of the public mind. On this point, whatever the result was, I have no doubt in preferring the judgment of the Minister to that of Mr. Young.
Still, however, we remain under very great obligations to this last writer for the stress he has laid on that very important fact which gave rise to this discussion,—That the import and export trade of corn are extremely insignificant in the case of a great country like France or England, when compared with that which is carried on at home. But although this demonstrates, that it is on the freedom of the inland trade that the subsistence of the people essentially depends, and that if the people were entirely under the government of reason, the export and import trades would be objects of very little consequence to the Legislator, it does not follow that they may be safely neglected by a statesman placed at the head of an unenlightened, prejudiced, and turbulent nation, over which he possesses little power but what is founded on public opinion. On the contrary, it appears from the fact, that an export or an import trade, however trifling the effects which they might be expected a priori to produce, may not only, in particular cases, materially affect the general tranquillity, but may actually produce a very great variation of price, by influencing the imaginations and passions of the multitude. In this point of view, they are objects of attention to the Legislator, no less than those causes of plenty and scarcity which may be subjected to the rigour of arithmetical computation; and in so far as this is the case, it will not be disputed, that the dexterous management of them requires a much nicer and more practised hand.
“It is a common and fatal error among systematical politicians (as Mr. Smith has well remarked in the last edition of his Theory of Moral Sentiments) to imagine, that they can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. They do not consider that the pieces upon the chess-board have no other principle of motion than that which the hand impresses upon them, but that in the great chess-board of human society every single piece has a principle of motion of its own altogether different from that which the Legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. Some general and even systematical idea of the perfection of policy and law (the same author continues) “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, everything which that idea may seem to require, must often be the highest degree of arrogance.”*
These observations, while they serve to illustrate a distinction to which I have frequently referred, between what is abstractly right and practically expedient, will, if I am not mistaken, go a certain length in vindicating M. Necker’s measures; or, at least, to show, that where they were erroneous, the error did not arise from their want of conformity to the general principles of Political Economy, but from their being carried into execution in a way which tended rather to augment than to allay the ferment in the public mind. On this subject, both he and his opponents seem to me to have gone into extremes; the one too much engrossed with the details of a particular administration to rise to the contemplation of general principles; the other blinded by their admiration of what is theoretically true to the obstacles which present themselves in the actual conduct of affairs.
In a paper published a good many years ago,† I have said of M. Necker’s Eloge on the Administration of Colbert, “that although confined and erroneous in its general principles, it contains many important and just remarks of a practical nature.” After all that I have read and heard of this celebrated man, I am still disposed to retain the same favourable sentiments of his character and of his talents, and even where I differ the most widely from his systematical views, not only to acknowledge the purity of his intentions, but to admire the extensive influence which his genius and virtues so long gave him over the destiny of Europe. “Of his merits and measures as a statesman,” says Mr. Gibbon in his Memoirs, “various opinions may be entertained; but all impartial men must agree in their esteem of his integrity and patriotism.” At a later period, the same writer has said, in speaking of a visit which he paid to M. Necker in 1792, after his fall from power: “Of Necker I have really a much higher idea than I ever had before. In our domestic intimacy he cast away his gloom and reserve; I saw a great deal of his mind, and all that I saw was fair and worthy. He was overwhelmed by the hurricane; he mistook his way in the fog; but in such a perilous situation, I much doubt if any mortal could have seen or stood.”
I have only to remark farther at present, that those who advised the measure of sending Necker into exile immediately after the opening of the National Assembly, have themselves to blame for those misfortunes which afterwards overwhelmed themselves and their country. Till that period nothing could exceed the popularity of the king; and this popularity was the most powerful engine which Necker had to employ for the government of the nation. It became henceforth manifest, that the king was either not sincerely disposed to carry into effect those plans of reform which he had led the people to expect; or that his good intentions were frustrated by some secret influence over his counsels. A breach took place between the Government and the people; a violent insurrection demolished the Bastile; the military caught the general enthusiasm; and when M. Necker, after an absence of three weeks, was prevailed on by the solicitation of the king to resume the reins of Government, he found the people completely instructed in the fatal secret of their own strength, and under the direction of demagogues too turbulent and ambitious to submit to the control of any higher authority. If he had consulted merely his own tranquillity and reputation, he would have refused to obey the summons which was thus extorted by necessity from the authors of his recent disgrace; and would have put it out of the power of malignant and unprincipled men to involve him in any responsibility for events which from this moment no human wisdom could avert.
I shall make no apology for this short digression, which, I hope, is not altogether foreign to my subject, and from which I now return to the general argument concerning the legislation of grain.
In what I have hitherto said on the Inland Trade of Corn, I have considered chiefly in what manner an unlimited freedom operates as a palliative of the inconveniences of a dearth. I now proceed to observe that the same freedom is the best preventive of that calamity, by the encouragement it gives to an intermediate order of men between the grower and consumer, who contribute powerfully to the prosperity of the farmer, and to the increase of the annual produce.
I before said, that the ancient policy of Europe encouraged the popular odium against this beneficial trade, regulating thereby the Agricultural Commerce of the country by maxims essentially different from those which it established with regard to the Manufacturing Commerce of the towns. The Farmer was obliged to become a Corn Merchant, while the Manufacturer was, in many cases, forbidden to sell his goods by retail. The object of the one law was to make corn cheap; that of the other to encourage the business of shopkeepers. In both cases the means employed had an obvious tendency to restrain individuals in the employment of their capitals, while at the same time these means were altogether inadequate to the ends proposed. The manufacturer, though he had been allowed to keep a shop, and to sell his own goods by retail, could not have undersold the shopkeeper, for the capital placed in his shop must have been withdrawn from his manufacture, he must have had the profits of a manufacturer on one part of his capital, and those of a shopkeeper on the other. Though he might appear, therefore, to make a double profit on 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 to which they furnished employment. For the same reason the farmer 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.
The dealer who employs his whole stock in one branch of business, has an advantage similar to the workman whose labour is employed in a single operation. This division in the employment of stock was forced on faster than it would naturally have taken place by the law which prohibited the manufacturer from exercising the trade of a shopkeeper. The law which obliged the farmer to exercise the trade of a corn merchant, endeavoured to hinder it from going so fast. Both were unjust, but the latter was the most pernicious. It forced the farmer to divide his capital into two parts, of which one only could be employed in the cultivation of land, and consequently must have tended to obstruct improvement, and to raise the price of corn.
After the business of the farmer, that of the corn merchant, if properly protected, 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. It would enable the farmers to keep their whole capitals constantly employed in cultivation, and in case of accidents, would secure them a friend in the wealthy corn merchant, to diminish their dependence on the forbearance of their landlords.
But I have already insisted longer than was necessary on this part of the subject, as the truth of the foregoing observations is, I believe, almost universally acknowledged in this part of the island, by all who, in their examination of the question, have formed their judgments on principles of justice, or of general expediency. The old popular prejudices, however, still maintain their ground among various descriptions of the community, and will probably continue to do so, till the memory of our former laws is gradually obliterated by those more enlightened ideas which Philosophy has disseminated, and which have been lately sanctioned by a unanimous decision of our Supreme Court. In the other part of the United Kingdom, the progress of truth and of liberality does not appear, in this instance at least, to have been equally rapid. The following has been stated as part of an address to the Grand Jury at the Shropshire Assizes 1795, by a judge highly respectable for his private character, and eminently distinguished by his professional abilities:1 —“Since I have been in this place, gentlemen, a report has reached me, (without foundation I sincerely hope,) that a set of private individuals are plundering at the expense of public happiness, by endeavouring, in this most abundant country, to purchase the grain now growing on the soil. For the sake of common humanity, I trust it is untrue. Gentlemen, you ought to be the combatants of this hydra-headed monster. It is peculiarly your duty to see justice done to the country. In your respective districts, as watchmen be on your guard. I am convinced from my knowledge of you, that I have no occasion to point out your duty in this case; and that although the Act of Edward VI. be repealed, (whether wisely or unwisely, I take not upon me to say,) yet it still remains an offence at common law, coeval with the constitution; and be assured, gentlemen, whoever is convicted before me, (and I believe I may answer for the rest of my brethren,) when the sword of justice is drawn, it shall not be sheathed until the full vengeance of the law is inflicted upon them: neither purse nor person shall prevent it.”
In a cause tried before the Court of King’s Bench, 7th June 1800, the same judge is said to have expressed himself as follows:—“I am confident that the public do suffer greatly by machinations, which the Legislature cannot perhaps prevent. This is a very serious subject. Our ancestors thought it wise, in aid of the common law of our land, to enact a statute against forestalling the articles of food. This statute has been thought good policy, from the time of Edward VI. down to our memory; but which was repealed, I know not why. Certainly those who repealed it thought they were acting wisely: at the same time, I rather think it might have appeared otherwise, upon more mature deliberation. Men may form fine theories in their closets, but which men of a better knowledge of the world may know to be fallacious and delusive. A very eminent author published a very celebrated, and indeed an excellent work in many respects, the treatise On the Wealth of Nations, in which that ingenious author says, ‘forestalling and regrating are no more to be dreaded than witchcraft.’* Another person of high character, with some flaws in it,1 has since adopted that idea; and he was the man to whose exertion was owing the repeal of the statute of Edward against forestalling. Undoubtedly it would have been better if that statute had not been repealed. It is well the extent of the design in the repeal was not carried up to affect the common law of the land;—I wish the old statute to be re-enacted.”2
What effect these doctrines have had in encouraging the common popular prejudices on this subject, we may judge from the following observations quoted literally from a Newspaper, which has a very extensive circulation in every part of this island.
“Next to the baneful influence of forestallers and regrators, we conceive the enormous farms held by individuals as one great cause of the present high price of provisions. They are a most intolerable evil, as they cause, in the first instance, the neglect of cultivation, and the unproductiveness of the land, while they enable the farmer to withhold his produce from the markets, and to speculate upon the distresses of the people. But if it be really desired to arrive at the root, and remedy this enormous evil, there can be no better device than a public register of the produce of the harvest in every parish of the kingdom, and a return of sales with the prices, the times, and the buyers’ names. From Parishes, these registers should be sent and compared in the Hundreds, and from thence in the County Towns; and finally, the common aggregate return should be transmitted to the Secretary of State for the Home Department. Hence, it would at once appear whether there existed scarcity, or the danger of it, and in what degree it was felt or to be apprehended: hence, it would be known what counties were able to succour others which stood in need of it: hence, importation would be encouraged in time if it were needful, by a general competition and a plain calculation; and hence would an enormous part of our capital, now employed only to oppress and starve the public, be driven into the channels of a just and profitable commerce. Perhaps our commercial principles have carried us quite far enough. If we are governed by our capital instead of governing it,—we have the words of Mr. Burke himself for it, who realized the doctrines of Smith,—that it is the greatest of all calamities. Had this extraordinary man survived, he would have been the first to repeal his own statute, and to restore the salutary laws which he abrogated.
“So far as regards the interference of authority with private property, we must observe, that individuals have only a qualified property in articles of general use and necessity. The whole corn of a province cannot belong to a private granary by any sale or conveyance whatsoever. He can have no right or title to lock up his warehouses while his fellow-creatures perish with hunger. The public safety supersedes every private privilege; and the first duty of a government is to feed its people. The whole corn of the kingdom in the first instance is the property of the grower; but it is a qualified property, for it is not to be withheld from the people. He has undertaken to sell as well as to grow, and to provide corn for the mechanic and the soldier, who clothe and defend him and his family. He has then no right to detain his stacks from the market, nor to extort a price equivalent to detention. A just and free competition would induce every grower to seek a priority of sale, in order to lay out his profits upon his farms; when in steps a third man, who buys it in his barns, in order to withhold it from the market. But what better right can this interloper have than the proprietor himself, from whom he purchased, who has committed to him the care of regulating prices, and supplying with commodities that he does not produce? What pretence has he to interfere between the grower and the consumer? And if he has a pretence, how can Government want one, whose duty nay, whose first duty, is to fill the mouths of its subjects?”1 —[But this doctrine was not unopposed.]
“For some time past, some creatures of some of our ministers have been attempting to direct the discontents of the public, at the high price of provisions, against various useful classes of the community, in order to withdraw the odium from themselves and their ruinous measures. They want to devote to execration those very men who feed the public, tossing them overboard without remorse, as a tub to the whale, which they feared might threaten themselves. In the course of this project the most senseless arguments, and, at the same time, the most dangerous principles, have been avowed. These Jacobins have had recourse to everything absurd, and everything wicked, which the economical system of Robespierre ever enacted. The law of the maximum is but a part of what our Jacobins would establish.
“One of their writers who has broached an infinite deal of inflammatory nonsense on these points, now complains of large farms as the cause of the scarcity. He proposes registers of produce, buyers and sellers, &c., to be kept in parishes, hundreds, and so forth, till they are transmitted to the Secretary of State’s office. This is neither more nor less than to make the Secretary of State corn merchant general for the whole kingdom. These people tell us, likewise, of qualified property in articles of the first necessity, and so forth. We are tempted to think, that the fools who circulated such stuff are not quite aware of the extent to which their principles may justly be carried. If there be but a qualified property in corn, it is quite easy to show that there can only be a qualified property in that which raises corn,—land. Thus it is easy to prove, that large estates (more necessarily than large farms) are the cause of the scarcity, till the ignorant are at length convinced, by their false and absurd doctrines, that it would be just to rob the Marquis of Buckingham of his property, and to establish an agrarian law, because large estates are not favourable to cultivation. We notice these consequences of the monstrous speculations sent abroad, merely to show certain persons that they should have a care how they venture, for a temporary purpose, to teach doctrines and to enact laws which are in the worst spirit of Jacobinism. If the rage for interfering with all sorts of trade in articles of food be continued, a check will be given to all enterprise and improvement in agriculture; we shall see revived the ridiculous restrictions which ignorance established in the ages of barbarism. It will then be seen whether these speculators can feed the nation with parchment and wax, and their paper regulations, after they have banished all industry, capital, and enterprise from those trades on which the supply of the market depends.”1
From a late decision it would appear, that the rules of English law on this head are extended, by the judges, at present beyond the articles which constituted the necessaries of life when they were first introduced, to whatever articles have since come under that description, in consequence of the progress of luxury. During the last winter,* (according to the report of the newspapers,) a rule for a criminal information was granted in the Court of King’s Bench against Samuel Ferrand Waddington, accused of monopolizing hops. On this occasion, it was stated by the counsel for the prosecution, that “buying hops on the poles is an offence against the common law of this land;” and, in support of this position, the authority of Lord Coke is quoted, who says, “it is against the common law of England to buy corn in sheaves, for that the market is thereby forestalled.” Lord Coke adds, that “the forestaller should not be allowed to live in the habitations of mankind, being the oppressor of the poor, and the enemy of the community.”
The opinion of one of the judges is thus reported:—“I am glad that this motion is made. I know an idea has prevailed with regard to some modern Acts of Parliament, that by their enactments this practice has ceased to be an offence; that the old common law of the land with regard to forestalling and engrossing is at an end. This motion will correct a great deal of misconception upon that subject.—Certainly,” he adds, “this continues to be an offence at common law.”
For my own part, I am much inclined to agree with those authors who assert that no sort of monopoly can well be injurious to the public without the assistance of Government. “We have heard in England,” says Mr. Young, “of attempts to monopolize hemp, alum, and cotton, and many other articles; speculations that ultimately have not proved to be beneficial, as they have always ended in the ruin of the projectors. But to monopolize any article of common and daily supply and consumption, to a mischievous degree, is absolutely impossible; and in truth the natural and obvious effect of this very unpopular trade is in the highest degree useful to the community; to take from the market a portion when the supply is large, and to restore it to the market when the supply is small, so as to level as much as possible the inequality of prices. Government cannot do this without erecting granaries; which we know from the experience of other parts of Europe, to be a system at once expensive and pernicious. It can only be accomplished effectually by that description of men, to whom the odious name of monopolizer is commonly applied.” It is justly, however, observed by Mr. Young, that “in France the necessity for them is much greater than in England. In the former country, the prevalence of small farms emptying the whole crop into the markets in autumn, without making any reserve for summer; there is no possible remedy but many and great monopolizers, who are beneficial to the public exactly in proportion to their profits. But in a country like England, divided into large farms, such corn-dealers (though highly beneficial, as appears from Mr. Smith’s reasonings,) are not equally essential. The farmers are rich enough to wait for their returns, and keep a reserve in stacks to be thrashed in summer;—the best of all methods,” Mr. Young concludes, “of keeping corn, and the only one in which it receives no damage.”1
At the moment, indeed, when I now write, (June 1800,) a Bill is pending in Parliament, which, if it were to pass into a law, would establish a monopoly in this branch of commerce of a most dangerous and destructive nature. The object of the Bill is to incorporate certain persons, by the name of the London Company for the Manufacture of Flour, Meal, and Bread. The argument against it cannot be better stated than by copying part of “The Resolutions published by the General Meeting of the Owners and Occupiers of Mills, and others concerned in the Flour Trade,” in consequence of a unanimous agreement to oppose the Bill in question in all its stages.
“1. That in the confidence of the security which all the subjects of these realms enjoy alike under the laws, several millions of money have been embarked in the construction of mills, and in the manufacture of flour and meal; that these mills have of late years been greatly increased in number and capacity; that the canals by which the country is intersected have greatly facilitated and economized the circulation of grain; and that the number of persons engaged in this trade, unconnected with one another, dispersed over the whole kingdom, whose interests are constantly distinct, and even opposite, and the mediocrity of whose fortune obliges them to make rapid sales of an article which is in itself perishable, have given rise to a competition in the manufacture and sale of flour so wide, active, and incessant, as to give the best possible security to the public for a regular and ample supply at the most reasonable rate.
“2. That the Flour Trade has gradually grown up to its present perfect state by this open competition, derived from the freedom and security it has enjoyed; that from the abundance of mills, no obstruction by contrary winds, frosts, floods, droughts, or other accidents, has been found to interrupt a regular and ample supply; that no speculation, artifice, fraud, or combination, can now affect the markets, as the supplies come to the metropolis by so many channels, and from so many persons unknown to one another, that the wheat, by being purchased in small quantities, in different places, and in the most quiet and unconnected manner, is bought at the cheapest rate, the interest of the millers being the check between the grower and consumer for keeping down the prices, while the very great contention among the millers themselves serves to reduce the expense of the manufacture; so that the price of flour is almost invariably in the London market much under the proportionate rate of the price of mealing wheat.
“3. That the erection of one great corporate establishment, by Act of Parliament, with the enormous capital of £150,000 divided into 4800 shares, and which, in its progress, may be increased ad infinitum—the proprietors of which are to be absolved from all responsibility for their transactions, beyond the amount of their shares, may become the source of most serious calamity, and cannot possibly be productive of any benefit to the public.
“That it is called for by no proved or apparent necessity, since experience has shewn that the manufacture of flour, meal, and bread, may be satisfactorily carried on by men unconnected, and whose private fortunes are answerable to the community for their acts.
“That to grant a charter with exclusive privileges, to a numerous body of persons, who must confide in agents to carry on a trade which may be better conducted in an open manner by persons for the maintenance of themselves and families, would be inconsistent with the protection to which all tradesmen are entitled under the law, and by which they enjoy the fruits of their own labour, in return for the diligence, skill, and attention which they exert therein.
“That the first operation of this charter would be to annihilate all the small mills and bake-houses now dispersed over the town and country, by which not only great accommodation is given to the people in their vicinity, by the supply of offal for their domestic animals, and by a saving of time and fuel in the preparation of their victuals; but by which also the competition would be destroyed, which is the best security to the public, both for an ample supply at a reasonable rate, and for preventing all improper mixtures and adulteration of flour.
“That even if the views of the undertakers should be strictly adhered to, an establishment of such extent, and demanding at one spot such enormous weekly supplies, would necessarily govern the market. If all its stock should be purchased in London, it would frequently require to buy up the whole quantity exposed for sale, and must be at the mercy of the dealers as to price; or if it became its own importer, and drew its supplies from various quarters, it would take from the dealers all certainty of a sale in London, and would deprive the metropolis of a constant and regular corn-market.
“That if, in process of time, it should degenerate into a job, be left to a negligent direction, or be transferred to speculators, it might be productive of incalculable mischief to the metropolis, since being left in the Bill free from all restraints, (the objects of the institution even being undefined, except in the preamble,) tied down to no purpose, obliged to perform no one service, rendered perpetual as to duration, and the proprietors absolved from all responsibility in their transactions beyond £25 per share, they might enter into the most dangerous speculations, and create the most extensive and destructive monopoly; they might not merely dictate to the London Market, but intercept the transit of grain through the country. They might import quantities of foreign produce as substitutes for British wheat, to the injury of the national agriculture; and being relieved from all the checks of competition, and carrying on the joint trades of miller and baker under the same roof, they might impose any species of bread that they pleased upon the public at any price.
“That an establishment of so enormous a size, amassing under the eye of the people such a stock of grain, must in times of scarcity give rise to jealousies that would endanger its existence, after it had destroyed all the other sources of public supply; and finally, that it would be a most dangerous thing to trust to any one institution for so large a part of the subsistence of the people, since experience has proved that no precaution is sufficient to prevent the almost momentary destruction of the most stupendous work.
“4. That the said Bill, so unprecedented in its nature, and which strikes in its principle at the foundation of all legal security for trade, be therefore opposed in all its stages; and that the mill-owners and occupiers in every part of the kingdom, whose interests are equally threatened thereby, and whom it is not proposed to indemnify for the destruction of their property, be called upon to meet in their respective districts, and to shew its infallible tendency in their local markets, which constantly take their tone from that of London; and, in the meantime, that they confide in the wisdom and prudence of the representatives of the people in Parliament, that a bill of such magnitude, and pregnant with such evils, will not be hurried through the house until time shall be given to the country to deliberate and declare their sense thereon.”1
Of the Trade carried on by the Merchant Importer of Grain for Home Consumption.
The beneficial tendency of this branch of the Corn-trade to the great body of the people in such a country as Great Britain, by increasing the immediate supply of the home market, would appear, at the first view, to be too obvious to stand in need of any illustration.
It has, however, been imagined by many, that this advantage is only apparent; [1°·] that on the most favourable supposition, it is confined to manufacturers and the other classes who, living in towns, derive their supply of provisions from the country; while, in the same proportion, it is injurious to the cultivators of the land, both proprietors and farmers. Nay, [2°·] it has been alleged, that even to the mercantile interest it must be prejudicial in the end, by the discouragement it gives to that home agriculture from which the only regular and steady supply of the market can be expected.
With respect to the first of these objections, founded on the supposed injury which a freedom of importation does to the cultivators of the land, it is of great importance to remark, that although it may lower somewhat the average money price of corn, it cannot possibly operate 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, in general, virtually 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. And, of consequence, their real wealth would be the same as at present, although it might be expressed by a smaller quantity of silver.”*
In proof of this position, it is only necessary to refer to what Mr. Smith has so ingeniously and satisfactorily established concerning the effect of the money price of corn in regulating that of all other commodities.
“It regulates the money price of labour, which must be always 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.
“It 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 the proportion is different in different periods. It regulates, for example, the money price of grass and hay, of butchers’ meat, of horses, and the maintenance of horses, of land carriage consequently, or of the greater part of the inland commerce of the country.
“By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of all manufactures. By regulating the money price of labour, it regulates that of manufacturing arts and industry; and by regulating both, it regulates that of the complete manufacturer. The money price of labour, and of everything that is the produce either of land or labour, must necessarily either rise or fall in proportion to the money price of corn.”*
It appears, therefore, that although in consequence of a free importation the average money price of corn should fall, neither the circumstances of the farmer, nor those of the landlord, would be in the smallest degree hurt by the change.
On the other hand, it is abundantly manifest, that a free importation of corn, accompanied with a freedom of exportation, is the only effectual expedient for preventing those fluctuations in the money price of this article which take place under the present system. And it is surely more beneficial, both to the landed and commercial interests,1 that corn should be always at a steady and medium price, than that it should sometimes greatly exceed, and at other times fall greatly below that medium.
The steadiness in the money price of corn is beneficial to the landed interest; for, as the prices of labour and manufactures are regulated by the price of corn, the first would soon become uniform if the last were rendered so; and the value of corn would thereby be ascertained by a steady medium price of labour, instead of a money price subject to perpetual variations.
The same steadiness is for the interest of the manufacturers, as it prevents equally that poverty and distress to which their workmen are subject in dear years; and that dissipation and idleness which are the consequences of an extraordinary plenty.
At present, however, we shall confine ourselves to the freedom of importation, with respect to which it may be laid down as a self-evident proposition, that to prohibit the importation of corn, when it is at such a price as to disable a part of the community from buying a sufficiency, is to increase the misery of the poor, in order to add to the nominal opulence of the rich. In truth, a measure of this sort, adopted with a view to raise the price, is nearly the same as prohibiting the improvement of land, and consequent multiplication of the means of subsistence, in order to serve the owners of those lands that cannot be farther improved, or converting the half of the kingdom into a forest, in order to serve the proprietors of the other half.
There are strong reasons for believing, that a considerable part of the people in Great Britain are obliged to content themselves with a very scanty allowance of food when the prices are far below what admits of importation;1 and that as corn turns dearer, a greater and greater number must lessen their quantity. Indeed, if after a deficient crop, the whole people continued to subsist in the same liberal manner as in a year of plenty, provisions would rise beyond all bounds. The fact however is, that as provisions advance in price, more and more people lessen their allowance and give up the competition; and thus prevent prices from rising in proportion to the deficiency. It is owing to this that the price of butcher meat seldom varies above a half, while bread is often double or triple of its ordinary price. As the former article is a sort of luxury, the competition for it is sooner given up by the lower classes; whereas bread must be had by every person, though in small quantities, whatever the price may be. Hence, too, it happens, that in poor countries butcher meat is generally cheapest when corn is high, the lower classes not being then able to purchase any; and that in London, where the richness of the inhabitants keeps up the competition, the variation in the price of butcher meat is much greater than in the remote provinces.
The inference which I draw from these considerations is, that the variations in the price of corn, however great, are not always such as might be expected from the difference between a plentiful and a deficient crop; that, on the one hand, a very great rise of price may be occasioned by a very trifling deficiency in the harvest, accompanied with a general alarm; and, on the other hand, that there is reason for believing that numbers of people in Great Britain are sometimes obliged to put themselves on short allowance long before corn has risen to that rate which permits importation.
Let us now consider what effect a freedom of importation is likely to have on the agriculture of the country.
It has been already shewn, that in proportion as the money price of corn falls, the real value of silver rises, and that this must necessarily lower somewhat the money price of all commodities, so as to give the industry of the country, where it takes place, some advantage in all foreign markets. The tendency, therefore, of this fall in the money price of corn, is, so far, to encourage and increase that industry. It is evident, also, that the extent of the home market for corn (which, as was formerly observed, is, in every country, by far the most extensive and important market for that commodity,) must be in proportion to the general industry of the country where it grows, or to the number of those who are employed in producing something else, which they may give in exchange for this great necessary of life. That rise, therefore, in the real value of silver, which is the effect of lowering the average money price of corn, tends to enlarge the most extensive market for corn, and thereby to encourage instead of discouraging its growth. It encourages cultivation in the most effectual of all ways, by increasing the number of inhabitants upon the land, or, in other words, by providing customers to buy the produce at home, free of the expense of carriage, and who can furnish the proprietors with the manufactures which they may want, also free of this expense. Even the money income of the farmer (and, of consequence, the rents of the landlord) may, in this way, rise instead of falling, as the greatness of the quantity which he sells may do more than compensate, in point of pecuniary profit, the reduction in the price.
Nor is this the only circumstance that may operate in favour of the money income of the farmer and landlord, while the nominal price of corn is lowered; for, in so far as this reduction of price increases manufactures and population, it must raise the price of other productions of the land, which cannot be imported from foreign countries, such as butcher meat, poultry, milk, grass, hay, and various other articles.
This position does not rest upon theory only; it is abundantly confirmed by experience.1 It is well known, that every district where manufactures are established, must import the means of subsistence from those where there are no manufactures. And yet it will be admitted that land gives a higher rent, and is better cultivated, and people live better and are richer in manufacturing districts than in the less populous parts of the country; that is, the advantages are on the side of the districts which import, not on those which export; and, in like manner, in Holland, which imports the means of subsistence from every quarter of the world, the land gives a higher rent, and is better cultivated, and the people, how precarious soever the foundation of their National wealth, are individually richer than in any country of Europe.*
The rise in the rent of land in manufacturing countries, and also in the neighbourhood of towns, is not owing to the rise of corn, which is the greatest article of the labourer’s food, nor to the rise of wool, leather, wood, &c., which are the articles most needed for his clothing and conveniences. All these can be imported at a small expense; and none of them are much dearer in London, where they are all imported, than in the remote provinces. But the rise of rent, in the circumstances just stated, is owing to the demand for articles which it is impossible to import, and for some that cannot be imported but at a great expense,—for milk, garden stuffs, hay, straw, grass, for riding and carriage horses, poultry, lamb, veal, &c. Most of these articles are used by the higher classes, and their high prices do not affect the poor. They add to the money income of the farmer and landlord, without occasioning any inconvenience to the labouring classes. And (on the supposition that a perfect freedom of importation were established) the same effect would be produced, in some degree, over the country at large, by that rise in various articles of rude produce, which would be a necessary consequence of thriving manufactures.
If a free importation of corn had been allowed from the first settling of America, it is difficult to say what effects it might not have produced on the population and wealth of Great Britain. The Americans would thus have been induced to cultivate more and more land, and to produce more and more food and materials for manufactures, to supply the wants of the increasing numbers of people that have no land at home. The restraints on importation, which in times of moderate plenty amount to a prohibition, discourage the attempts of under-peopled countries to supply our deficiencies; for no cultivator will raise provisions for a market that may not be open for several years. Hence, even in America where land is so plentiful, they only cultivate so much as is necessary to supply the demand at home, and the common demand from Europe, but not for any extraordinary demand from such a nation as Britain, where the liberty of importation depends on contingencies which cannot be subjected to any calculation.
As I have made frequent references in the course of the foregoing argument to our own country, I ought perhaps to have taken an earlier opportunity of mentioning the state of our existing laws on the subject of importation. But I was unwilling to interrupt the general reasoning with local details; and it appeared to me more advisable to delay any historical statements that I had to offer with respect to particular systems of policy, till I had concluded what I had to say on the general principles by which they ought to be regulated. In the meantime, it may be proper to take notice of a few facts to which I have already had occasion to refer in the way of illustration, and of which a short statement may perhaps throw additional light on some of the preceding conclusions.
“By 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 fourpence 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. 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 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 to the former, to a duty which amounted to a prohibition. The importation of other sorts of grain was restrained by duties proportionally high.
“The distress which in years of scarcity the strict execution of this statute 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. The necessity of these temporary statutes sufficiently demonstrated the impropriety of this general one.”*
Notwithstanding, however, the inconsistency of this statute with the genuine principles of Political Economy, Mr. Smith acknowledges its necessity as a counterpart to the law which establishes a bounty on exportation. “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 public 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.” . . . . “The restraints on importation, indeed, were prior to the establishment of the bounty, but they were plainly dictated by the same spirit, and by the same principles which afterwards enacted that regulation.”†
(Interpolation from Notes.)—It now only remains, before concluding this branch of our subject, to mention two miscellaneous particulars connected with it, which could not properly be introduced sooner.
I before remarked, how very inconsiderable the trade of the importer, and indeed of all the departments of the commerce of corn is, when compared with that which circulates the home produce in an extensive agricultural country like ours. According to the author of the Corn Tracts, the average proportion of all kinds of grain imported to those consumed, did not, in this country, exceed that of 1 to 570; and the average quantity of all sorts of grain exported, did not exceed the one-and-thirtieth part of the annual produce, even in the highest year ever known, 1750, when the exports amounted to 1,500,220 quarters.* Since the publication, indeed, of that valuable work, the circumstances of this country have undergone very material changes. But still the quantities of grain imported, how astonishing soever in their comparative extent they may be, and however creditable to the commercial enterprise of this country, bear but a small proportion to the quantities required for consumption. Even in the year 1800, when our importations were made at an expense of £15,000,000, these did not, according to a computation of the national consumption published in the Farmers’ Magazine, exceed one-sixth part of the whole supply; and according to the statements of Mr. Benjamin Bell,† did not exceed an eighteenth. And yet it is not many years since it was the general belief, that our importations had risen to a third or a fourth of the annual consumption, and in some instances even to a half. It may be worth while to add, that these estimates of our expenditure during the year 1801, turn out to be below its real amount; for it was expressly stated by Mr. Pitt, in arguing that the Bank of England ought to pay in specie, (7th February 1803,) that £20,000,000 sterling had been sent out of the country to purchase corn during the preceding scarcity.
The first writer who undeceived the public with regard to the amount of our importations, was the ingenious author of the Corn Tracts, [1758, &c.;] and much additional information on the same subject, brought up to the year 1801, may be found in the pamphlets published some time ago by Lord Sheffield* and Sir Thomas Turton.† Inconsiderable, however, as our importations are, compared with the demands of our population, they afford the most striking illustration of the commercial resources of this country.
It appears from Sir Thomas Turton’s pamphlet, that it was against this description of traders that the outcry was most violent during the time of the London disturbances; a memorable example of the inconsistencies and absurdities into which the multitude may be betrayed by ill-intentioned men when under the pressure of want. For a refutation of the prejudice, I refer to what Sir Thomas Turton has written with excellent good sense on the subject.
With respect to the countries from which these importations were obtained, I cannot now enter into any particulars. I shall just remark, therefore, that among the great granaries from which they are derived, the best are those of the North of Europe: Poland, Prussia, Russia, and Denmark, particularly the two former. A small quantity of corn, chiefly in the state of flour, was brought from Canada and the American States. With regard to the last of these, we are informed by Lord Sheffield, that part of the tobacco grounds in Virginia now produce wheat, but that Pennsylvania, which formerly raised a surplus for exportation, now grows hardly sufficient for its own consumption. We have but once imported grain from Africa; that was in the year 1796, when 30,000 quarters of corn were brought from the neighbourhood of the Cape of Good Hope. The quality of this grain was such, however, that great part of it is understood to have been re-exported. None has been imported from any part of the Mediterranean, in consequence of the regulations to prevent the introduction of the plague into this country.—(End of interpolation from Notes.)
Of the Trade carried on by the Merchant Exporter of Corn for Foreign Consumption.
That this trade does not contribute directly to the plentiful supply of the home market is abundantly evident. Its influence, however, is not the less real, that the process by which it operates is indirect and circuitous.
The supply of the home market can never be plentiful, unless the surplus can, in all ordinary cases, be exported; a prohibition to export necessarily limiting the improvement and cultivation of the country, to what the consumption of its own inhabitants requires. The freedom of exportation enables it to extend cultivation for the supply of foreign nations.*
The effectual encouragement which a free exportation gives to agriculture, and of consequence its indirect tendency in process of time to reduce prices, are well illustrated by an anecdote mentioned by the author [Charles Smith] of the Three Corn Tracts, on the authority of a friend who was an eye-witness of the facts.1
“In Turkey, the Grand Vizier, about twenty or thirty years ago,”—the Corn Tracts, I believe, were first published [at London] in the year 1758,—“suffered a more general exportation of corn to be carried on, and more openly than any of his predecessors had done, insomuch that three hundred French vessels, from twenty to two hundred tons, were, on one day, seen to enter Smyrna Bay to load corn, and wheat was then sold for less than seventeenpence, English, a bushel, with all the expenses in putting the same on board, included.
“From these open proceedings the Janizaries and people took the alarm, pretending that all the corn was going to be exported, and that they, in consequence, must be starved; and in Constantinople grew so mutinous, that they could not be appeased till the Vizier was strangled, and his body thrown out to them.
“His successor took particular care not to split on the same rock, and would suffer no exportation at all; many of the farmers, who looked on the exportation as their greatest demand, neglected tillage, to save their rents, which in that country are paid either in kind, or in proportion to their crops, to such a degree, that in less than three years the same quantity of corn which, in time of export, sold for not quite seventeenpence, was worth more than six shillings, and the distresses of the people in Smyrna were such, that every bakehouse and magazine of corn was obliged to have a military guard, which took care that no one person should have more than a fixed quantity; and so strictly was this order observed, that an English ship, in the Turkey trade, was detained for sailing some time for want of bread.
“The ill consequences of these proceedings were not removed in many years, and to this day the fate of the Vizier, as an unfortunate good man, is lamented.”
(Interpolation from Notes.)—In such small states as those of Italy or Switzerland, an unlimited exportation might perhaps be attended with danger, though even there it may be questioned whether this would be the case, were it not for the extraordinary demand from other countries, occasioned by their absurd regulations with respect to the Corn-trade. In such agricultural regions as Great Britain and France, exportation can never furnish a ground for any serious alarm. To a case of absolute necessity, indeed, if such case should ever occur, all other considerations must of course give way. But it is only in such a case that the statesman can have any apology to plead for violating that sacred principle of justice, which entitles the farmer, like any other merchant, to send his commodity to the most profitable market. In our own country, however, the general tendency of our regulations has plainly been to increase agriculture, by not only permitting exportation, but by rewarding it with a bounty when prices are low, checking, at the same time, the importation of corn by heavy duties; and, on the other hand, to prevent a scarcity, by prohibiting exportation when prices are high, and allowing importation at an easy duty. Of our regulations on this subject, the last permanent one was that of 1791, by which the whole maritime part of England was divided into twelve districts, for the purpose of regulating the imports and exports of corn, and the various rates of duties; the maritime part of Scotland being in like manner divided into four districts, making in all sixteen. This statute further enacted, that the exportation and importation of corn at the port of London should be regulated by the prices at the Corn Exchange, and that an inspector of corn returns should be appointed.
Notwithstanding the strong and obvious objections to which these very complicated arrangements are liable, few legislative acts have received higher panegyrics from a particular description of writers than the Corn Act of 1791. “All the elaboration of diligence,” says Mr. George Chalmers, (who, by the way, is understood to have had a chief share in preparing the statute,) “and all the wisdom of experience, were employed in forming this Corn Act.”* And yet the same writer acknowledges in the last edition of his Political Estimate, that “a continued succession of unfavourable seasons had rendered nugatory its judicious enactments.”†
Without entering into any statement of details on this particular subject, I shall mention only the very striking contrast which our policy of late presents to what it formerly was; forcing importation into an island from which exportation was so long rewarded with a premium. In consequence of a change in our national circumstances, which I shall not here stop to investigate, those considerations which influenced the Legislature at the period when the bounty was first established no longer exist; and the apprehensions lest our landed gentlemen and farmers should lose by a superabundant produce, have been converted into an alarm lest they should be undersold in our own markets by foreign farmers, cultivating their lands at a smaller expense. Though, however, this change of circumstances renders the laws relating to exportation of less interest than they formerly were, a history of them, and the inquiries with which they are connected, must be at all times interesting. I therefore shall make no apology for stating a few facts and observations relative to a branch of trade which has given rise to so much discussion, both at home and abroad.
The idea of rewarding exportation with a bounty, seems first to have occurred during the reign of Charles II., although it has been very generally referred to a period somewhat later, (12th Charles II., 15th Charles II., and 25th Charles II.) By the 1st William and Mary, the bounties on the several sorts of grain were established on the same footing on which they subsisted till the year 1773. Dr. Campbell in his Political Survey of Great Britain, says, that “though this statute is generally considered as the first Bounty Act, the regulations which it contains are the very same with those of the 25th Charles II.”* Its evident design was to raise the price of corn, which, indeed, is expressly stated in the Act to be too low; and it is commonly understood to have been passed as a return to the landed interest, for their exertions in placing the crown on the head of King William. As the bounty, too, was confined to corn exported in English ships, it operated in increasing the shipping and sailors of the country; and, in fact, while the exportation continued, gave employment, from the quantity and bulk of corn, to a much greater number of vessels than any other trade. In conformity with this last view of the Bounty Act, the Abbé Galiani, who is sometimes disposed, like many other foreigners, to discover reasons of remote expediency for English enactments, which really did not influence the Legislature, says, that it was to encourage our shipping that this Act was passed.
The high price of corn in 1751, occasioned much tumult and riot in different parts of the island, and gave a new turn to the speculations of the politician on this department of trade, particularly with regard to the expediency of the bounty. The popular clamour became still louder in the years 1765, 1766, and 1767; and in every instance of dearth, these disturbances have gone on increasing in violence to the present times. Two remarkable alterations of our law in this matter deserve particular notice. The first of these is the Act 1773, which was conducted through the House of Commons by Mr. Burke. With respect to this Act, it has been justly observed, that it effected a virtual repeal of the Bounty Act, though it retained the language of that statute, in compliance with the prevailing opinions, which it is sometimes easier to betray than to conquer. It has accordingly been pronounced by Mr. Smith, in conformity with his own system, to be like the laws of Solon, if not the best in itself, the best which the temper and situation of the times would admit. The second of these Acts, the Corn Bill of 1804, plainly implies a dereliction of those general principles which influenced the Legislature in passing the Act 1773.
The policy of the statute encouraging exportation by a bounty, has been the subject of so much controversy since the year 1751, that I shall enter very slightly into the discussion, more especially, as the actual circumstances of the country now render it of comparatively little importance. It is highly extolled by the French Economists, by the author of the Tracts on the Corn-trade, by Mr. Arthur Young, and by Mr. Dirom. Mr. [Adam] Smith has exerted great ingenuity on the other side of the question, and has found a very able supporter in Mr. Howlett,* who, after having yielded to the prevailing opinions concerning its expediency, confesses himself a complete proselyte to the doctrines of Mr. Smith. An examination of the reasonings of this part of the Wealth of Nations will be found in Dr. Anderson’s Observations on the Means of Promoting National Industry, in the Supplement to Mr. Dirom’s Inquiry, by Mr. Mackie of Ormiston, and in the last two editions of the Essay on Population by Mr. Malthus, [1803 and 1806.] This last author is by far the ablest advocate for the bounty who has appeared since the publication of the Wealth of Nations; and although I am by no means prepared to adopt implicitly his own conclusion in favour of the wisdom of the measure, yet I think it must be admitted, that he has clearly pointed out more than one vulnerable part of Mr. Smith’s argument. Some of his objections to Mr. Smith have been acutely controverted in an able article of the Edinburgh Review for October 1804. But admitting in the fullest extent the ingenuity of these reasonings, they do not appear to me to amount to a complete justification of Mr. Smith for arguing, so entirely as he has done, on abstract principles, a question which is complicated with so great a variety of local and temporary circumstances, as that which relates to the policy of the bounty. The other two writers on the same side, Mr. Dirom and Mr. Mackie, are far less formidable antagonists of the bounty system; and they have both of them, particularly the latter, fallen into some very palpable misapprehensions of Mr. Smith’s meaning. But neither of them seems to deserve the very contemptuous language which has been employed towards them by their adversaries; nor are they unworthy of the attention of those who wish to have a full view of this question.
In proof of the beneficial effects of the bounty on exportation, it has been urged, that since the period of the Bounty Act there has been at once a greater uniformity in the prices of wheat and other grain, and a reduction in the average price; the general and regular improvement of agriculture which has been the consequence of this artificial enlargement of the market, having been more than sufficient to counterbalance that enhancement of price, which in years of plenty is necessarily occasioned by the increased exportation. The fact unquestionably is, that since the establishment of the bounty, during the remainder of the seventeenth, and the first sixty-four years of the last century, the average price of grain has continued to fall, and that probably to a much greater extent than is commonly imagined, the depreciation of money not having been always sufficiently attended to in estimating that reduction.
On this important fact, however, all parties are agreed, and whatever conclusion we may form with regard to its cause, it seems to establish incontestably one general proposition, that the prosperity of agriculture depends much more on the steadiness of an adequate price, than upon the high amount of the average price computed during any inconsiderable period of time. On the other hand, that this reduction in the price of corn has not been the consequence of that legislative measure, has been inferred by different writers from the following circumstances;—that the very same effect has taken place in France, where no bounties are given, but where, on the contrary, during by far the greater part of the period in question, exportation has been prevented by the strictest prohibitions; and that a similar reduction of prices during the eighteenth century, appears to have taken place in the other markets of Europe.
The argument against the bounty urged by Mr. Smith, is founded on those general principles of freedom which characterized his system. “Bounties 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 that is less advantageous than that in which it would run of its own accord; 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.”*
On a review of the arguments alleged on both sides of the question, Mr. Smith is led to conclude, “that the fall in the price of corn during the first half of the eighteenth century, must have happened in spite of the bounty, and cannot possibly have happened in consequence of it.”† And of his reasonings on this subject, an unqualified approbation has lately been expressed by Mr. George Chalmers, an author who is not in general much disposed to be partial to any of Mr. Smith’s opinions.
“Now these facts not only confirm the reasonings of Smith and Howlett, but evince that the bounty went directly from the pockets of the consumers into the purses of the brokers, yet without benefiting the growers. From the first establishment of the bounty till its recent cessation, owing to natural causes, upwards of seven millions of money have been paid by the public, not for a good purpose, but for a bad purpose. It has, moreover, created a continued contest, by a struggle between avarice and want. And, to the scandal of the better judgment of the nation, a probable good has been allowed for more than a century to outface two positive evils: the probable good was the supposed fructification of our fields: the two positive evils were the payment of seven millions of money, for making corn dearer in the home market, without contributing to the manurance of the soil.”*
For my own part, although I would not be understood to express any decided opinion in opposition to Mr. Smith’s conclusion concerning the impolicy of the bounty, and far less to acquiesce in the opinion of those who think, that in the present circumstances of this country, any artificial expedient of this sort is calculated to operate very effectually in invigorating our agricultural industry, I must own, that there are some steps of his reasonings which do not convey full satisfaction to my mind. That, in general, the Corn-laws of this country have contributed less to the advantage of the grower than to that of the trader in that article, I am induced to believe from a variety of considerations; and if it should appear that this observation applies in all its extent to the law which established the bounty, certainly the very strong terms in which Mr. Smith has censured that measure are in no respect reprehensible. But it does not seem fair reasoning to oppose to a measure of this kind the unqualified argument against bounties in general, that they force some part of the capital of a country into a disadvantageous employment. This principle, certainly, does not apply fully to the trade of corn, on account of the essential pre-eminence of agriculture over all other species of industry, and the fatal consequences which are inseparable from its decline. Mr. Smith himself owns, that agriculture labours in this country under disadvantages peculiar to itself; in consequence of which, a much smaller proportion of the national capital is attracted to that employment of industry, than would be under a more perfect system of Political Economy. If it could be proved, therefore, that the bounty tends to the encouragement of agriculture, the argument in its favour would, in my apprehension, be complete on the same sound principle on which Mr. Smith himself justifies drawbacks, as tending not to destroy the natural course of things, but to counteract those causes by which that natural course is disturbed. To those who reflect on the circumstances by which agriculture is essentially distinguished from all the other employments of industry, these observations cannot fail to appear with much additional force.
As far as I am able to judge, the general interests of all the different parts of the world would be best attained by leaving the trade of corn perfectly open,—supposing that the liberty of commerce were established in every other instance, and of consequence, that agriculture were free from the influence of those laws which give a preference to the industry of the towns over that of the country. But in the present state of Great Britain, whatever regulations can be proved to be really serviceable to the cultivator of the ground, cannot, in my opinion, be censured as deviations from the general principles of freedom, as long as this most important of all employments labours under so many burdens, inseparable perhaps from the constitution of modern society. It gives me much pleasure to observe the coincidence between these remarks and the following passage, which occurs in a new edition of Mr. Malthus’s Essay:—
“If things had been left to take their natural course, there is no reason to think that the commercial part of the society would have increased beyond the surplus produce of the cultivators; but the high profits of commerce from monopolies, and other peculiar encouragements, have altered this natural course of things; and the body politic is in an artificial, and in some degrees diseased state, with one of its principal members out of proportion to the rest. Almost all medicine is in itself bad, and one of the great evils of illness is the necessity of taking it. No person can well be more averse to medicine in the Animal Economy, or to a system of expedients in Political Economy, than myself; but in the present state of the country something of the kind may be necessary to prevent greater evils. It is a matter of very little comparative importance, whether we are fully supplied with broadcloths, linens, and muslins, or even with tea, sugar, and coffee; and no rational politician, therefore, would think of proposing a bounty upon such commodities. But it is certainly a matter of the highest importance, whether we are fully supplied with food, and if a bounty would produce such a supply, the most liberal political economist might be justified in proposing it, considering food as a commodity distinct from all others, and pre-eminently valuable.”*
To the same purpose, this author elsewhere observes, that, “if throughout the commercial world every kind of trade were perfectly free, one should undoubtedly feel the greatest reluctance in proposing any interruption to such a system of general liberty; and indeed, under such circumstances, agriculture would not need peculiar encouragements. But under the present universal prevalence of the commercial system, with all its different expedients of encouragement and restraint, it is folly to except from our attention the great manufacture of corn which supports all the rest. The high duties paid on the importation of foreign manufactures are so direct an encouragement to the manufacturing part of the society, that nothing but some encouragement of the same kind can place the manufacturers and cultivators of this country on a fair footing. Any system of encouragement, therefore, which might be found necessary for the commerce of grain, would evidently be owing to the prior encouragements which had been given to manufactures. If all be free, I have nothing to say; but if we protect and encourage, it seems to be folly not to encourage that production which of all others is the most important and valuable.”*
While, however, I acquiesce in the general spirit of these observations, and consider them as a complete answer to Mr. Smith’s reasonings against the bounty, in so far as these reasonings are founded on those abstract principles which conclude universally in favour of a free trade, I am by no means so sanguine as Mr. Malthus and the other advocates of the bounty, when they lay any considerable stress on this or any other artificial expedient, as a remedy against the present acknowledged disorder in our agricultural resources. I would not go quite so far as Mr. Howlett had done, and question, “whether the Corn Laws have occasioned one single acre to be cultivated which would not have been done if they had not existed.”† But I am fully satisfied that the influence of all legal regulations with regard to the importation and exportation of grain is perfectly trifling, when compared with the permanent and overbearing influence of the state of agriculture in the country. The actual disproportion in this country between the produce and the consumption, is an evil of too great magnitude to be corrected by a feeble palliative of this sort; and one of its worst consequences is to withdraw the attention of statesmen from those just and enlarged principles of freedom, by the gradual operation of which alone a remedy can be provided for such an evil. What these principles are, I have already, in different parts of this course, had occasion to point out.
Of the Trade of the Merchant Carrier or Importer of Corn for future Exportation.
The last branch of the corn-trade mentioned by Mr. Smith, is that of the merchant carrier, or importer of foreign corn, in order to export it again. Mr. Smith despatches this branch of the subject in a very few sentences, and I have nothing to add to what he has advanced with regard to it.—(End of interpolation from Notes.)
Miscellaneous Observations upon the Corn-Trade.
The reasonings which have been already stated on the subject of the Corn-Trade, seem abundantly to justify our doubts, whether the interference of legislators in this branch of commerce has not, in most instances, aggravated the evils which they were anxious to correct; and whether, on the whole, the welfare of a great agricultural nation, such as ours, would not be most effectually consulted by leaving the course of imports and exports to be regulated entirely by the interested speculations of individuals, according to the variable circumstances of the market. As I am always apprehensive, however, of the dangers which may be incurred by an unqualified adoption of general political principles, I would not be understood to deny, that cases may occur, in the revolution of seasons, in which it may be necessary for Government to co-operate actively in providing for the wants of the people, either by holding out bounties to importation, or by temporary regulations, calculated to economize the general consumption of the necessaries of life. The exceptions justified by such extreme cases imply, in truth, nothing defective or erroneous in our general principles, the soundness of which is sufficiently vindicated if they are conformable to the ordinary course of human affairs, although they may not admit of a universal application to every possible contingency. The number of these exceptions, however, may be expected gradually to diminish, in proportion as the arrangements of Political Economy, by becoming more comprehensive and systematical, provide a remedy for the apparent anomalies of nature, in the uniformity of her general laws. In the instance, for example, now under our consideration, there is every reason to believe, that little occasion would be left for extraordinary interpositions of the Legislature, if agriculture were uniformly to hold the pre-eminent rank to which it is justly entitled, among the various objects of national attention.
I have been led into these reflections by our late experience of the general distress occasioned, all over the island, by the failure of the crop of 1799, in consequence of the rains which continued almost incessantly during the spring, summer, and autumn of that year,—“a year,” according to Mr. Young, “unparalleled in the meteorological annals of Great Britain.” The activity with which Government availed itself, on this occasion, of all the means it possessed to obtain information from every quarter, procured, it may be reasonably presumed, more accurate returns concerning the actual extent of the scarcity than were ever collected in any former instance; and the zeal with which its efforts to alleviate or to remedy the evil were seconded by various public-spirited and enlightened individuals, gave a certain degree of uniformity and system, not only to public measures, but to the exertions of private beneficence. A short summary, therefore, of the most important facts and conclusions which were thus brought under general discussion, may, at some future period, be an object, perhaps, not merely of curiosity but of use; and even at present, when it must necessarily possess an inferior degree of interest, from the lateness of the events to which it refers, it will not (I flatter myself) be considered as forming an improper conclusion to the speculations in which we have been lately engaged.
Among other writers whose abilities were called forth by the scarcity of last year, was that indefatigable veteran, Mr. Arthur Young, at the distance (if I recollect right) of about forty years from the date of his earliest publications. His pamphlet (which is entitled The Question of Scarcity plainly stated ) is valuable chiefly as a record of the information which he received concerning the deficiency of the preceding crop, in consequence of letters of inquiry which he addressed to his correspondents in every part of the kingdom. It exhibits the authorities upon which he founded the opinions delivered in his examination before the Committee of the House of Commons, and, in this point of view, is unquestionably a document which deserves a place in the collections of all those who turn their attention to researches of this nature.
The result of Mr. Young’s inquiries led him to conclude, on the whole, that the deficiency of the crop of wheat (including both quality and quantity) amounted to more than one-third.
“The original letters,” he adds, “are all in my possession, and may be consulted by any gentleman who wishes to examine them. I have very little reason to doubt that the accuracy is as great as can reasonably be expected in such investigations; and the number of counties reported is so large, that I have no great apprehensions of any material error affecting the general average,—the particulars being so numerous, that the error on one side may probably be corrected by counter-errors on the other.”
By the deficiency of a crop, (it is to be observed,) Mr. Young means, the rate at which it falls short of an ordinary or average crop. An average crop, in the case of wheat, he states in his examination before the Corn Committee, at something between twenty-two and twenty-four bushels per acre. In his own private opinion, he intimates in his pamphlet, it might be stated at twenty-four bushels nearly; but he expressed himself to the Committee with a certain degree of latitude, in order to avoid any suspicion of a wish to exaggerate the deficiency of the crop in question.1
In truth, this deficiency, great as it is, falls short of what most persons expected beforehand, from the general aspect of the season. In England (we are told) no year was ever too dry for wheat,—a plant which thrives well in Spain, where rain has been known to cease for twenty-two months together; and in the Greek islands, where the heat, as Tournefort observes, perfectly calcines the earth.2
By many, both in and out of Parliament, the accuracy of Mr. Young’s estimate was disputed; and it was very strongly asserted by some, that the deficiency did not exceed one-fourth. Without, however, ascribing any superiority to this gentleman either in point of information or of general correctness, it must, I think, be allowed, that, in the present instance, his conclusions are entitled to a peculiar degree of credit, in consequence of the extensive scale on which his inquiries were conducted. It is extremely possible, after all, that they may be wide of the truth; but they certainly possess an authority, in the determination of the question now under consideration, altogether different from what belongs to any local observations, however rigorously exact they may be in all their details. I mention this circumstance, because farmers, and even country gentlemen, are but too apt, on occasions of this kind, to appeal obstinately to their own individual experience, in opposition to those more comprehensive results which they conceive to be influenced by views of self-interest, or the spirit of theory; forgetting that the same circumstances which bestow on practical knowledge so inestimable a value in managing the little concerns of agricultural improvement, have a tendency to bias or warp the judgment in whatever relates to the general interests of an extensive country, diversified by numberless causes both moral and physical. One testimony in favour of the foregoing estimate it may be worth while to mention: it is that of the Speaker of the House of Commons, who in his speech of March 6, 1800, states it as a fact now very generally admitted, that the deficiency of the preceding crop amounted to one-third.1
With respect to the deficiency in Scotland, Mr. Young expresses himself with more diffidence. “If the accounts,” says he, “which I have received in conversation, be correct, the deficiency in the wheat crop amounts to one-half. That in the oat crop,” he adds, “is stated to be the same.”
After collecting every possible information concerning the deficiency of the crop in 1799, an important fact remained to be ascertained with respect to the stock in hand at the period of the harvest. This was estimated very differently by different individuals. A very able and respectable writer, Mr. Thomas Davis, of Wiltshire, asserted, that the stock in hand was equal to six months’ consumption. “If there was left of the old stock at harvest only enough for three months, (and I say there was double that quantity,) where is the cause for alarm?”1
Other writers stated it at three months. But even this estimate, moderate as it is, when compared with the preceding one, will appear obviously, on a little consideration, to go beyond the truth.
In considering the quantity of the stock in hand at harvest as a resource against the scarcity to be apprehended from a scanty crop, one circumstance deserves attention, which has been frequently overlooked; that a certain stock in hand is absolutely necessary at that season of the year to supply the market till the new crop is ready for use. Mr. Young states this “as probably not less than one month’s consumption of the whole kingdom.” The only part, therefore, of the stock in hand, which can be supposed to come in aid of the deficient crop, is the excess of the old stock (if there was any such) above what is necessary and common; and consequently, if there existed at the harvest a stock equal to three months’ consumption to form an object of commercial speculation, the whole stock then in hand must be understood to have been equal to four months’ consumption. The probability of such a supposition is strongly opposed by the extent of capital which such commercial speculations would necessarily require.
The whole population of England being then computed at 6,000,000. Since that time, the consumption of wheat in proportion to that of oats must have increased greatly; and the increase of population would appear to have been considerable. Mr. Young supposes it at present to amount to 10,000,000. His estimate is probably above the truth; but it is sufficiently accurate for the present argument. Of this number, Mr. Young supposes 8,000,000 at least to feed on wheat; and the other 2,000,000 to live on barley and oats. These numbers (he tells us) he fixes on, in order to avoid all charge of exaggeration; intimating, at the same time, that in his private opinion, the number of wheat eaters is in reality much greater, and that those who, in common times, live on barley and oats, are probably nearer to one than to two millions.
The annual consumption of wheat was estimated by the same gentleman (Mr. [C.] Smith,) from a careful collection and comparison of different authorities, at eight bushels per head, and that of oats at twenty-three;* and the inquiries of subsequent writers seem abundantly to confirm the justness of his conclusion. Mr. Young supposes, therefore, that at present eight millions of people consume as many quarters of wheat.
In August 1799, the price of wheat (upon the average of England) was above nine shillings the bushel, or £3, 12s. the quarter. Two millions [of quarters] at that price come to £7,200,000—a capital which it is scarcely conceivable should be scattered over the country, ready to be applied to a speculation so hazardous in the issue. Indeed, we may venture to assert, that, in by much the greater part of the kingdom, no such speculations could be made by millers and mealmen, either in the way of keeping or of buying. The truth is, that the number of those who are tempted to speculate when prices are very high, is at all times so inconsiderable that it may be laid down as a general fact, that speculative hoarding is proportioned to cheapness. Such speculations, too, it must be remembered, when attempted so late as the month of August, have but a small sphere to act in; the quantity of corn in the whole kingdom then being small, and every part of it necessarily possessing a share of that small portion. As for farmers, a still more direct appeal to the evidence of the senses:—“Every person,” says Young, “who is in the habit of travelling over England, knows perfectly well, that for one distriet where old wheat stacks abound in harvest, there are ten where you will look in vain for more than a few solitary ones in the hands of here and there a great farmer.” The assertions to the contrary in the evidence brought before Parliament, come from individuals, who, living in parts of the kingdom where farms are generally large, (such as Wiltshire and Dorsetshire,) have absurdly extended the result of their local observations to the island at large. Such is the assertion of Mr. Davis of Wiltshire, that there was left, of the old stock, at harvest 1799, enough for six months’ consumption,—although during that year the price had been ten shillings a quarter beyond the average, notwithstanding the importation of nearly half a million of quarters.1
Another circumstance which has frequently contributed to mislead individuals in their statements on this subject, is the business of thrashing wheat, which, in the neighbourhood of great towns where there is a regular demand for straw at all times, is often delayed till the spring and summer. The fact, however, undoubtedly is, that in by far the greater part of the kingdom (excepting in the case of the few farmers who are rich enough to speculate in price) wheat is thrashed during the course of the winter, when cattle thrive better on straw than they would do in spring. In winter 1799-1800, this must have been still more generally the case than in ordinary seasons, on account of the enormous price which straw yielded everywhere; which price (as Mr. Young has observed) must have operated, in addition to the high price of the grain, as a direct premium upon thrashing.
Of what happens in ordinary years a judgment may be formed from a fact which Mr. Young states with confidence; that in two years at least out of three, the summer price is higher than the winter,—a fact which is indeed no more than might have been expected a priori, from the prevalence of small farms in England, and from the necessity which small farmers are under, of carrying their corn early to market.
The following Table of the average prices for the year following the harvest of 1798, is extracted from Young,* and illustrates strongly the foregoing observations:—
This Table (admitting it to be correct) affords a demonstration that the number of great farmers in England, and of individuals able to speculate in grain, far from being so great as to put it in their power, on an average of the kingdom, to raise the price immediately after a scanty crop beyond its just proportion, is by no means sufficient to counterbalance the effects produced by the abundant supply of the markets, arising from the necessities of the little farmers. The consequence is, that the people do not put themselves on short allowance so soon as they ought, (their consumption being always more or less regulated by the price,) and the evil increases as the year advances. It would, in truth, be incomparably greater than it now is, were it not for those who are stigmatized with the odious name of Monopolizers, whose capitals enable them, to a certain extent, to equalize both price and consumption through the whole year, by withdrawing grain from the market when prices are low, and restoring it when prices are high. If the capital employed in such speculations was still greater, and divided among a greater number of capitalists, the remedy would be proportionally more complete.1
The Table just now exhibited deserves attention on another account, as it affords an additional argument to prove that the stock on hand at harvest 1799, has been, in general, greatly overrated. On a comparison between the average price of this year, and the average price of the twelve years preceding, it appears that the former was just ten shillings a quarter higher than the latter. After such a price, how is it conceivable that the stock on hand should have so far exceeded that which is found, in ordinary years, to exist at the same season?
The great and rapid fall which has taken place lately in the prices of grain, (July 1800,) furnishes no argument against the foregoing conclusions. The unprecedented height to which prices had risen, drove the people to the use of substitutes for their ordinary food, and to measures of economy formerly unknown. The demand was, of course, proportionally slackened, and a reduction in the consumption sunk prices far below that level at which they must have kept if the habits of the people had continued the same as in ordinary years. If these habits had changed completely at an early period of the winter, prices could not have remained so long at the enormous height which they reached.
To these considerations must be added the immense and unexampled quantities of grain imported into the island, and the near prospect we now enjoy of an abundant harvest.1 No inference can therefore be drawn from the present fall of prices, either to disprove the reality of the scarcity, or to justify the clamours which have been raised against those pretended monopolizers to whom the distressing of the poor have been most uncandidly and iniquitously ascribed.
It may appear to some to be superfluous to dwell so long on the details of a scarcity which is now over. But the history of such a year as the last is worth an hundred theories; and, if we should ever be again visited by a similar calamity, it may be of much use to us to have the means of calling to mind, not only the expedients which were suggested for lessening the pressure of the evil, but the prejudices which operated to mislead the public opinion. The same prejudices would not fail to be revived in the same combination of circumstances; and it is only by reflecting on them calmly, while the subject is yet fresh in our recollection, that we can hope to fortify our judgments completely against their future influence.
Among these prejudices, there is none more pernicious in its effects, and, at the same time, none more invariably prevalent in every season of scarcity, than an idea,—that the scarcity is not real, but created by jobbers and monopolizers. Such an idea is but too apt to occur, of itself, to that order of men who suffer the most severely from extravagant prices; and hence their disposition to retaliate by riot and violence upon the supposed authors of their sufferings. How short-sighted, therefore, were the views of those individuals who, from a laudable anxiety to tranquillize the public mind, were led, on the authority of one or two districts, to foster those misapprehensions which it was their duty to correct; by asserting both in and out of Parliament, that “the deficiency of the harvest 1799 did not exceed one-fourth, and that it was more than covered by the stock in hand!” This language was held by many who ought to have known better; while the statements of those who spoke the truth were stigmatized as approaching to sedition and mutiny.
I am abundantly sensible, that the means we possess at present of estimating the deficiency of a given crop, by information collected from individuals in different parts of the country, are far from being completely satisfactory; and that farmers may be justly suspected, on such an occasion, of a disposition to accommodate their calculations to their own interested purposes. This is undoubtedly an evil, in so far as their representations have a tendency to advance the price; but it is an evil incomparably less than might be occasioned by a contrary error; and in comparing the information thus collected, allowances are always made for such exaggerations.
It were much to be wished, that in a year of scarcity, the extent of the evil, all over the kingdom, could be ascertained with accuracy; and, I have no doubt, that more effectual means for that purpose might be devised than have yet been employed. But it is a difficult task for Government to decide, when such a calamity occurs, how to proceed; as the very inquiries which are instituted with a view to remedy the evil, have inevitably, in the first instance, the effect of adding to its magnitude. If no inquiry is made, ministers are accused of negligence; and, after it is undertaken, they are blamed for that enhancement of price which is the natural consequence of a general alarm.
The inconveniences of such inquiries are much increased in this country, by the circumstance of their being commonly conducted through the medium of Parliamentary Committees; by which means the factions of all descriptions are inevitably made parties to the discussion, and political passions and prejudices are superadded to those which are necessarily connected with a subject so deeply interesting to all, and of which so few are competent to judge. Mr. Young suggests, that they ought to have been made through the medium of the Board of Agriculture; and indeed, if the members of this society are not to be honoured with the public confidence in matters so intimately connected with the object of their institution, it will not be easy to justify the national expense which has been already incurred by the establishment.
The most effectual method of guarding against the alarm occasioned in a year of scarcity, by those inquiries which are necessary for ascertaining the actual state of the country, would be to make the same inquiries annually. In truth, they ought to be made regularly, under every Government, not only with a view to those interpositions which may be occasionally requisite on the part of the statesman, but as the means of ascertaining with accuracy, some of the most important facts, which enter as elements into all our reasonings connected with this article of Political Economy. The relation, for example, between price and the quantity of produce, is a point of a very interesting nature, on which little or nothing satisfactory has been hitherto advanced, and on which various speculations have obtained credit, which, there is reason to believe, have never been brought fairly to the test of experience. To this relation I have had occasion already to refer in different parts of this argument; and as it is intimately connected with the subject now under consideration; I shall make no apology for explaining a little more fully the scope of the question to which I allude.
I had occasion to take notice already of an erroneous opinion not yet completely exploded among political writers, that, in the case of a scanty harvest, the rise of price may be expected to be in the same proportion with the deficiency;* that the abstraction, for example, of a fifth or a tenth from the general supply, will raise the price a fifth or a tenth above the common rate; and I quoted what seems to me a very just observation of Necker’s, that the abstraction of a fifth or a tenth, or of a much smaller portion, may, in certain circumstances, raise the price beyond all bounds.
Mr. Young, in his last pamphlet,† is not very explicit on this point. In one passage (p. 53) he remarks, that “the experience of centuries may tell us, that the price of corn will not rise in exact proportion to the deficiency.” In another, (speaking of the enormous prices during the winter 1799-1800, after a crop supposed to be deficient by one-third,) he states it as an obvious principle, (p. 71,) that “a deficiency in the crop of thirty-three per cent. ought not to be attended with a rise of one hundred per cent.;” without, however, intimating on what grounds he rests this assertion, or even explaining in what sense he means the assertion to be understood. When it is said that “a deficiency in the crop of thirty-three per cent. ought not to be attended with a rise of one hundred per cent.,” does the author mean, that this rise is above the rate which the experience of a similar deficiency in former instances might have led us to expect? or that this want of correspondence between the actual rise and the degree of deficiency, indicates an undue avarice in the different classes of corn-dealers? From the clause which immediately follows, the latter interpretation would seem to be the more probable; for we are told, that “some measures ought to be adopted, difficult as they may be, to prevent an inequality so oppressive to the poor.” And yet I don’t know how to reconcile these words with the sentence immediately preceding, in which it is asserted, that “the high price at present arises entirely from the seasons.” The whole paragraph is as follows:—
“The high price at present I consider as entirely arising from the seasons; but as a deficiency in the crops of thirty-three per cent. ought not to be attended with a rise of one hundred per cent., some measures ought to be adopted, difficult as they may be, to prevent an inequality so oppressive to the poor.”1
Upon this subject (the relation between price and the quantity of produce) there is a very curious passage in the works of Davenant, of which it is proper for me to take notice both on account of the high reputation of that excellent writer, and of the stress which has been laid upon it by different authors from his time.
“It is observed that but one-tenth defect in the harvest may raise the price three-tenths; and when we have but half one crop of wheat, which now and then happens, the remainder is spun out by thrift and good management, and the use of other grain; but this will not do above one year, and would be a small help in the succession of two or three unseasonable harvests; for the scarcity even of one year is very destructive, in which many of the poorest sort perish, either for want of sufficient food, or by unwholesome diet.
“We take it,” the same writer continues, “that a defect in the harvest may raise the price of corn in the following proportions:—
“So that when corn rises to treble the common rate, it may be presumed that we want above one-third of the common produce; and if we should want five-tenths or half the common produce, the price would rise to near five times the common rate.”1
The passage now quoted may be found in Davenant’s chapter, “On the Land of England and its Product;” in which, as in other parts of his Essay on the Balance of Trade, he professes to found his speculations on certain calculations communicated to him by Mr. Gregory King,—a person of whose skill in Political Arithmetic he speaks in the strongest terms, and in the opinion of the ablest judges, most deservedly. Whether this particular observation rests on his own authority or on that of Mr. King, does not appear from anything that he has stated. I confess I should rather lean to the former supposition, from the manner in which the observation is introduced; although I find it generally referred to Mr. King by modern writers on Political Economy,2 I mention this circumstance, because Mr. King’s skill and accuracy which have become proverbial among this class of authors, serve to account for the facility with which this very extraordinary statement has been received.1
In what manner the numerical proportions specified in Davenant’s Table were obtained we are not informed, whether they were inferred from any train of reasoning a priori, or were deduced from a series of actual observations on the relation between price and produce. As the former of these suppositions, however, seems to be altogether absurd, we may safely conclude, that (however inaccurate and imperfect the induction may have been) it was by some of the latter description that the conclusion was formed.
We are also left in uncertainty about another very important particular, whether the proportions specified by Davenant are such as are observable in particular markets; or whether they are meant to exhibit the relation between the national produce and the average price of grain over the whole country. There, too, it seems reasonable to conclude in favour of the second supposition; for the author speaks of the effect produced by a defect in the harvest, not of those arising from a failure in the supply which a particular market may occasionally afford.
There is yet another point, about which I am more at a loss in conjecturing Davenant’s meaning. Taking for granted that I am right in the last interpretation which I have now given to his words, Does his proposition state the average price through the whole year, or the average price at a particular period? And in the latter supposition, what period may we presume this author to have had in view? For some time after the harvest, it seems impossible (in the case of a deficient crop) that any exact relation should obtain between the degree of deficiency and the augmentation of price; for how should the extent of the evil be guessed at with any accuracy? And afterwards we almost invariably find prices changing from month to month, in consequence of collateral circumstances, through the whole progress of the year.
I am inclined therefore to think, that the price referred to by Davenant is the average price of the whole year over the whole kingdom. But surely at the time when that author wrote, returns of prices were not made with such accuracy as to furnish a ground-work for any such calculations. Even at present the corn returns are acknowledged to be inadequate for the purpose;1 and till the 23d and 31st of George III., no plan for ascertaining the average price of corn had been thought of which could afford any tolerable approximation to the truth.2
Nor is this all. Supposing the proportions assigned by Davenant to have been just at the time he wrote, what reason have we to conclude that the same proportions obtain at present? On the contrary, have we not the best reasons for inferring, that if they were just then, the case now must be widely different? How great must have been the effects produced by the gradual emancipation of the inland trade of corn from the fetters imposed by the old prejudices against forestallers and regrators?—By the increased capital now employed in this branch of commerce?—By the facility and economy in the circulation of grain, arising from the canals with which the country is everywhere intersected?—By the substitutes for bread, and the other improvements lately made in the art of nutrition?—not to mention the various fluctuations in our policy concerning importation and exportation. During the extreme dearth of last winter, another circumstance operated, the effects of which it is plainly impossible to subject to any rule; I mean the exertions made in favour of the poor by the more opulent classes of the community.* From overlooking this contingency, Sir James Steuart was long ago led to say, that in the case of the necessaries of life there is a limit determinately fixed to price by the faculties or means of the lower orders. This at least he lays down as a maxim in an industrious country; for he acknowledges that the contrary may happen where multitudes depend on the charity of others. His reasoning on the subject is not undeserving of our attention.
“The number of buyers of subsistence nearly determine the quantity sold; because it is a necessary article, and must be provided in a determinate proportion for every one; and the more the sale is frequent, the more the price is determinate. Next, as to the standard: this I apprehend, must depend upon the faculties of the buyers; and these again must be determined by the extent of those of the greatest number of them; that is to say, by the extent of the faculties of the lower classes of the people. This is the reason why bread, in the greatest famine, never can rise above a certain price; for did it exceed the faculties of the great classes of a people, their demand must be withdrawn, which would leave the market overstocked for the consumption of the rich; consequently, such persons who in times of scarcity are forced to starve, can only be such whose faculties fall, unfortunately, below the standard of those of the great class. Consequently, in countries of industry, the price of subsistence never can rise beyond the powers to purchase of that numerous class who enjoy physical necessaries; consequently, never to such an inordinate height as to starve considerable numbers of the people,—a thing which very commonly happens in countries where, industry being little known, multitudes depend merely on the charity of others, and have no resource left as soon as this comes to fail them.”1
As this reasoning proceeds on the supposition that the poor have no resources but in their own industry, it is plainly inapplicable to the history of the late scarcity, when such unexampled exertions were made, in every part of the country, for the assistance and relief of the lower orders. In consequence of these exertions, the competition was kept up much beyond what the unassisted faculties of the poor could have produced; and the operation of those circumstances was fortunately checked, which, if things had been left to follow their own course, would have limited prices, long before they had approached to the height which they reached. Numbers must have been found to perish for want of food; and a melancholy remedy would have been found against the exorbitancy of price in a diminishing competition.2
Before concluding this subject, I shall touch very slightly on some of the most important measures which were adopted or proposed as palliatives of the general distress.3
The historical sketch which I have now finished relative to the scarcity after the harvest of 1799, appeared to me to be the more necessary, that from a variety of circumstances there is reason to apprehend, that occasions may again occur (not, it is to be hoped, accompanied with the same aggravated difficulties) when the benevolent interposition both of the Legislature and of individuals may be necessary for the assistance of the people. It seems now to be universally admitted, that the advancement of cultivation for some time past has by no means kept pace with our growing numbers; and the dependence of this island on other countries, for the means of subsistence, during an uninterrupted series of years, has been justly considered as a most alarming fact, by all who are able to judge of the best interests of the nation. To the effects produced by our growing population, must also be added those which result from the astonishing increase of horses during the last thirty or forty years. In such circumstances any considerable deficiency in a single crop, must necessarily produce the most serious inconveniences.
The increase of population undoubtedly operates powerfully by the demand it occasions, to provide an adequate supply; but experience has shewn that this is counteracted by various causes, particularly by the increased demands for the products of grass, occasioned by the immense wealth of the kingdom. The multiplication of enclosures and other agricultural improvements, though they cannot fail to diminish greatly the evil, do not as yet promise a speedy and effectual remedy.
The wastes and commons of the kingdom (it has been observed by many) afford ample resources for a much greater population than we possess; and the remark is perfectly just. Every exertion for their improvement may be ranked among the wisest national measures; and, so far as the end can be accomplished, the most solid of all additions is made to the independent wealth, and to the real greatness of the empire.
In the meantime, some measures are called for, the operation of which may be more immediate, and which, without interfering with other more general schemes of utility, may add to the resources which we can at present command.
Of these, the most effectual is to reconcile the poor, as much as possible, to those cheaper modes of sustenance, which the ingenuity of scientific men, stimulated by the pressure of the times, has suggested. Improvements of this sort in their ordinary cookery may reasonably be expected, as one of the consequences of those public kitchens which are now so prevalent in every part of the kingdom; and although alterations, such as affect the general habits of a people, must, of course, be gradual, it ought to be remembered, that every step which is gained in introducing a wholesome and nourishing substitute for bread, forms an important accession to the mass of material opulence.
In the country, the general use of milk and potatoes affords a resource of still greater importance. If every country labourer had his potato ground and a cow, the extremity of want would be as little known as it is said to be among the lower orders in Ireland. The peculiar advantages attending potatoes as a food for the body of the people, are well known; and what inestimable advantages a poor family may derive from the possession of a cow, may be learned from the Memoirs published by Lord Winchelsea. Mr. Young informs us, that of seventy labourers about Burley having gardens and grass for one or two cows from this nobleman, only two widows have applied, on occasion of the scarcity during the winter of 1799-1800, for parochial relief.
One measure of unquestionable efficacy might be easily carried into execution, to prohibit, by legislative authority, all parochial relief in any other mode than by potatoes, rice, or soup. This measure has been recommended not merely as a temporary expedient, but as a permanent regulation;1 and it would certainly produce important consequences. It would secure an extensive cultivation of potatoes, or a great and regular import of rice; and it would operate irresistibly in altering the habits of the lower orders, in some particulars, equally prejudicial to themselves and to the public.
It is undoubtedly painful to mention plans which seem to imply new economical arrangements on the part of the inferior classes of the community; but nothing that has been hitherto said affects their real comforts, and, in truth, tends only to substitute what they may regard as a more homely plenty, instead of the scanty enjoyments of their accustomed fare. At any rate, the circumstances of the country (from causes which I shall not stop now to investigate) recommend imperiously some alteration in our national modes of subsistence, more especially as we find a similar reform likely to gain ground among those whom we have been taught to regard as our national rivals and enemies.
The following facts (which I mention on the authority of Arthur Young, a writer who will not be accused of partiality to the French Revolution,) is not unworthy of attention at the present moment. It is extracted from a pamphlet published as lately as March 1800.
“The farming bailiff I sent to the Duke of Liancourt ten years ago, is now in London, having left France but a fortnight, and has given me many accounts of French husbandry; one circumstance of which deserves notice, that every scrap of waste and neglected land is converted into little possessions by the poor, and cultivated most assiduously; much,” it is added, “by means of potatoes.”1
I cannot help adding here, (although the observation is not immediately connected with our present subject,) that in years of moderate plenty, a very great part of the distress experienced by the lower orders in this island, must be ascribed to their own pernicious habits; habits, however, which, I am afraid, are likely long to remain the subject of our unavailing regrets. It is remarked by Dr. Currie in his Medical Reports, that “the want of a diet sufficiently nutritious is doubtless one of the causes that promote the typhus and other diseases among our poor. . . This,” he continues, “does not seem to arise in general from the price of their labour being inadequate to furnish such a diet, but from their ignorance in the most advantageous modes of cookery, and still more from their indulging in articles that consume their means without adding to their sustenance. In the 1800 cellars in Liverpool, there are many in which animal food is not tasted more than once a week, but there are very few in which tea is not drunk daily,—it is often indeed drunk twice a day. The money spent on tea,” the same author adds, “is worse than wasted. It is not only diverted to an article that furnishes no nutrition, but to one that debilitates the empty stomach, and incapacitates for labour. Hence the vast number of dyspeptic complaints among our patients of the public charities, which are almost all to be traced to the use of tea or spirits, often indeed assisted by depression of mind.”
The miserable effects produced by the unfortunate appetite for intoxicating liquors, so prevalent among the lower orders of this country, have been often discussed. I shall not attempt to investigate its origin, nor to ascertain how far it ought to be regarded as a cause, or how far as an effect of their poverty. It is certainly much more easily explicable than the origin of that appetite for tea which is now become so general among the poorest classes of the community both in Scotland and England. That it is an unfortunate circumstance in many respects, and which justly deserves the reprobation which Dr. Currie bestows on it, must be granted by all;—but although something may be fairly ascribed to the ignorance and want of foresight, and absurd imitation of those who indulge themselves in this expensive and hurtful beverage, is there not reason to apprehend, that here too, as in the case of spirituous liquors, the source of the evil lies deeper than is generally apprehended? A late writer who has stood forward as an advocate for labourers in husbandry, has asserted that “teadrinking is not the cause, but the consequence of the distresses of the poor;” and his observations on the subject (although I would not be understood to subscribe to them in their full extent) seem to me not undeserving of attention.1
The reasonings of Mr. Davies receive some confirmation from the fact, that in other instances where the distresses of the poor have been great, they have been led to betake themselves to similar resources. In a very interesting account published some time ago, of the management of the poor at Hamburgh, we are told that previous to the enlightened attempts that have been lately made for their relief, “the indigent classes in that city had been habituated to live almost entirely on a miserable beverage which was called coffee, and sold in messes, with about half-a-pound of indifferent bread. This wretched substitute for food they took twice a day.”1 It is pleasing to add, on the authority of a Report published in 1798, that by the introduction of Count Rumford’s soups, a saving of nine parts in sixteen, or rather more than half the former expense of their food, has been gained in the maintenance of the poor at Hamburgh, while a visible improvement in health and strength (particularly in the case of children) has accompanied this reformation.
A very melancholy fact which has been mentioned by Dr. Beddoes in one of his medical publications, adds to the weight of some of the foregoing considerations. What I allude to is the use of opium among some descriptions of our poor. “Whether,” he observes, “it was first taken to recruit the labourer after excessive toil, or occasionally to cheer the gloom of despondence, or to make up the deficiencies of that abominable water-gruel and potato diet, by which the joyless being of so many pale, meagre, shivering women and children is prolonged, I am not informed. I had known,” he adds, “the fact for some time, and lately received the following account from a medical observer.”2
I shall not draw any particular inference from these facts, but must be allowed to remark, that when such habits become generally prevalent, they justify the conclusion, that whatever share of blame may be due to the individuals who adopt them, all is not right in the Political System.
ON SUBJECTING THE COMMERCE OF MONEY TO THE REGULATION OF LAW.
Having treated of the general principles which regulate the rate of interest, independently of the interposition of the statesman, I proceed now to consider the motives which have influenced the policy of different nations in subjecting the commerce of money to the regulation of law. For this purpose it will be necessary for me to take a pretty wide circuit, by referring to some speculative opinions of the ancients, which have been long exploded as unfounded prejudices, but which have had, nevertheless, a secret effect in modifying the ideas and institutions of Modern Europe. If, in discussing this preliminary point, I should be thought somewhat diffuse, I flatter myself that the nature of the subject, which is curious and interesting, independently of its connexion with the questions to which I mean to apply it, will be a sufficient apology.
In contrasting the opinions of ancient and modern times concerning the rules of practical morality, there is nothing which, at first view, appears more astonishing than the strong terms in which some of their most eminent philosophers reprobate the practice of lending money upon interest,—a practice which is now so familiarized to the minds of all civilized nations, that it would be considered as no less absurd to offer a formal proof of its innocence and equity, than to argue against them. The circumstance on which Aristotle grounds his disapprobation of this practice is of so extraordinary a nature, that although it has been often referred to by modern casuists, it would be improper to pass it over without some animadversion. “Among the various ways,” he observes, “of getting money, agriculture and the rearing of cattle are natural and honourable, because the earth itself and all animals are by nature fruitful. But to make gain from money, which is naturally barren and unfruitful, is most justly accounted dishonourable, and is held in detestation;—inasmuch as it is a perversion of money from its natural use, the purchasing what we want.” The argument is so extremely absurd, that it could never have led this acute and profound philosopher to the conclusion it is employed to support, but may be justly numbered among the instances in which speculative men have exerted their ingenuity to defend, by sophistical reasonings, the established prejudices of the times in which they lived, and in which the supposed evidence of the inference has served, in their estimation, to compensate for the weakness of the premises. It is, however, worthy of observation, that Aristotle’s argument (such as it is) was manifestly suggested by the etymology of the word Τόκος, (which, in the Greek language, signifies interest,) from the verb Τίκτω, pario,—an etymology which seems to imply that the principal generates the interest.1 The same idea, too, occurs in the scene between Antonio and Shylock, in Shakespeare’s Merchant of Venice.
It is perhaps treating this very puerile conceit with more respect than is due to it, to quote, by way of reply, the following consideration, which, one would suppose, (as an ingenious writer of our own time remarks,) might naturally enough have occurred to a man of Aristotle’s penetration; more particularly when we consider “the great number of pieces of money that had passed through his hands; more, perhaps, than were passed through the hands of philosopher before or since!” “That though a daric would not beget another daric any more than it would a ram or a ewe, yet for a daric which a man borrowed, he might get a ram and a couple of ewes, and that the ewes, if the ram were left with them a certain time, would probably not be barren. That, then, at the end of the year, he would find himself master of his three sheep, together with two, if not three lambs; and that if he sold his sheep again to pay back his daric, and gave one of his lambs for the use of it in the meantime, he would be two lambs, or at least, one lamb richer than if he made no such bargain.”
The passage of Aristotle to which the foregoing remarks relate, occurs in the tenth chapter of the First Book of his Politics, and is sufficient of itself to enable us to form a judgment of the propriety of a censure which a late writer has bestowed on Mr. Smith and Mr. Hume, as well as on the sect of French writers known by the name of Economists, as if they had borrowed from Aristotle, without the smallest acknowledgment, the fundamental principles of their theories of Political Economy.* When we consider how much the interest of money enters as an element into all commercial speculations in modern times, is it possible to imagine there should be anything more than the most general and accidental coincidence between the reasonings of such writers as Hume and Smith, and those of an author, whose experience of the nature and effects of commerce was so limited as to impress his mind with a conviction, that to receive a premium for the use of money was inconsistent with the rules of morality?
The same sentiments with respect to usury, (fœnus,) (under which title was comprehended every premium, great or small, which was received by way of interest,) occurs in the Roman writers. “Concerning the arts,” says Cicero, in his First Book of De Officiis, “and the means of acquiring wealth, which are to be accounted liberal, and which mean, the following are the sentiments usually entertained. Those means of gain are in least credit which incur the hatred of mankind,—as those of tax-gatherers and usurers.”† The same author (in the Second Book of the same work) mentions an anecdote of old Cato, who being asked what he thought of lending money upon interest, answered, “What do you think of the crime of murder?”‡ The comparison certainly appears to us extravagant and absurd in the extreme; and yet (as I formerly had occasion to observe) the very same language was held in the English House of Commons about two centuries ago.
The regulations of the Jewish Lawgiver on this subject are more peculiarly interesting to us, as they have had a more immediate influence upon the opinions that have prevailed in Modern Europe.
“Thou shalt not lend,” it is said, “upon usury to thy brother: usury of money, usury of victuals, usury of anything that is lent.—Unto a stranger thou mayst lend upon usury, but unto thy brother thou shalt not lend upon usury, that the Lord thy God may bless thee in all that thou settest thy hand to in the land whither thou goest to possess it.”*
From this prohibition in the Mosaic Law, the primitive Christians were led to conclude, that the practice of usury was in all cases inconsistent with their profession, inasmuch as the Christian dispensation having abolished the distinction betwixt Jew and Gentile, the same liberality which Moses had enjoined towards their own nation, became necessarily incumbent on them towards all mankind; and accordingly, there is no crime against which the Fathers in their homilies declaim with more vehemence. “On this point,” Mr. Gibbon remarks,† “they are quite unanimous;” and refers in support of his assertion to Barbeyrac’s Morale des Pères, and a learned work by Gerard Noodt, De Fœnere et Usuris. The same abhorrence of usury of every kind appears in the Canon Law, insomuch that the penalty of that law is excommunication; nor is the usurer allowed burial until he has made restitution of what he had gained in the exercise of this iniquitous profession, or security was given that restitution should be made after his death.
A circumstance which probably contributed not a little to strengthen this prejudice, was the hatred which the Christians in former ages entertained against the Jews and all their opinions and practices. To lend money on interest was to engage in a trade rendered infamous in the general estimation by the character of those who most frequently carried it on; and (as an ingenious and lively writer remarks) “it was an easier method, and a method pretty much in vogue in these scrupulous times, to let the Jews get the money anyhow they could, and then squeeze it out of them as it was wanted.”*
The authority of Aristotle, which was for a long time almost despotic over the Christian world, co-operated powerfully with the causes now mentioned, in checking the natural progress of human reason upon a subject, about which it appears to us somewhat surprising that there could ever exist a diversity of opinion.
The influence of these ideas has extended to times of a much more recent date. About the middle of last century they were entertained by the most eminent divines of the Church of England, who frequently preached against every species of usury, even that which was permitted by law; contending, that although law sanctioned a certain rate of interest to prevent greater evils, and in compliance with the general corruption of men, (in the same manner as the law of Moses authorized Polygamy,) yet the rules of morality did not justify this practice in any case whatever. And the same doctrine was maintained by some lawyers in a debate in the British House of Commons, a considerable time after the commencement of the present century.
These prejudices seem now to be completely exploded in every part of Europe, insomuch that it appears to be almost as absurd to offer a serious argument against them, as it would be to defend them. A learned author, however, and of the Catholic Church, who published last year (1797) a Treatise upon the Law of Usury and Annuities, (Mr. Plowden of the Middle Temple,) would seem to be of a different opinion, having employed no less than fifty-nine pages of his work in considering the Law of Usury in a spiritual view, in order to establish the following general conclusion: That “it is not sinful but lawful for a British subject to receive legal interest for the money he may lend, whether he receive it in annual dividends from the public, or in interest from private individuals who may have borrowed it upon mortgage, bond, or otherwise.”1 M. Necker, too, in the notes annexed to his Eloge on Colbert, (published about eighteen years ago,) thought it necessary for him to offer an apology for the freedom with which he ventured to discuss some political questions concerning interest, by reminding his readers, that he reasons upon this subject, merely as a statesman and not as a divine. “Ce que je dis de l’Intérêt est sous un point de vue politique, et n’a point de rapport avec les respectables maximes de la religion sur ce point.”
The facts and observations which have hitherto been stated, relate chiefly to the History of the prejudice against usury. I hope, however, they will be found to be not altogether unconnected with the reasonings which are to follow, as they shew that it has not been confined to men educated under particular religious systems, and that therefore its origin must be sought for in those political and moral circumstances which extended in common to the different ages and nations among whom it has prevailed.
Among these circumstances, there is one which obviously presents itself to our notice, as discriminating remarkably the states of society in the ancient and modern worlds; I mean the difference in point of extent between the ancient and modern commerce.
In those nations of antiquity with whose history we are best acquainted, and to whom the foregoing observations relate, there does not seem to have been anything that bore a resemblance to the commerce of modern Europe. The Tyrians, indeed, the Sidonians, and the Carthaginians were commercial nations; but what were their notions concerning money-loans we are left to conjecture, having no records to guide our researches. The sentiments which prevailed at Athens and Rome on the subject of trade are well known. Plato asserts in his book De Legibus, that it had been better for the Athenians to have continued to send annually the sons of seven of their principal citizens to be devoured by the Minotaur, than to have changed their ancient manners, and to have become a maritime power; and Aristotle, although he frequently discovers a predilection for opinions contrary to those of his master, does not venture to contradict him in this particular. The prejudices of the Romans against the lucrative arts and professions were still more inveterate. Among such nations, accordingly, money-loans would be much less regarded in their relation to commercial speculations, than as subservient to the wants of the necessitous; and the epithet barren, which Aristotle applies to money, shows plainly that it was in this point of view he considered them. Discreditable, however, as the trade of a money-lender was at Rome, a certain rate of interest was permitted by law, and a variety of regulations with respect to it established, which M. Dupuy has illustrated with much learning in the Appendix to his Memoir on the Roman Money. An interesting abstract of this Essay may be found in Paucton’s Métrologie. Usury is called by Mr. Gibbon “the inveterate grievance of Rome.” “After being discouraged,” he observes, “by the Twelve Tables, and abolished by the clamours of the people, it was revived by their wants and idleness, tolerated by the discretion of the Prætors, and finally determined by the Code of Justinian. Persons of illustrious rank were confined to the moderate profit of four per cent.; six was pronounced to be the ordinary and legal standard of interest; eight was allowed for the convenience of manufacturers and merchants; and twelve was granted to nautical insurance; but except in this perilous adventure, the practice of exorbitant interest was severely restrained.”1
A very remarkable, and indeed singular instance of legislative refinement on the subject of money loans, in times of the most remote antiquity, is mentioned by Sir William Jones in his Third Discourse, published in the Asiatic Researches. “In the first of the Sacred Law Tracts,” he observes, “which the Hindoos suppose to have been revealed by Menu some millions of years ago,”—and which Sir William himself refers to a date long prior to the Christian era,—“there is a curious passage on the legal interest of money, and the limited rate of it in different cases, with an exception in regard to adventures at sea;—an exception,” says Sir William Jones, “which the sense of mankind approves, and which commerce absolutely requires; though it was not before the reign of Charles I. that our English jurisprudence fully admitted it in respect of maritime contracts.” In this, however, as in many other instances of the information we have lately received from that quarter of the globe, we can only indulge our wonder, without possessing sufficient data to serve as a groundwork for satisfactory speculation.
The low state of commerce in Greece and Rome, and the contempt in which it was held by those who governed public opinion, sufficiently account for the prejudice against loans for interest, so strongly expressed by their philosophers and statesmen; and this authority sanctioned by some passages in the Mosaic Law, naturally produced a still greater detestation for the practice in modern Europe, at a time when its commerce was confined to a few cities in Italy, or to the Hanse Towns, and when the only persons who exercised this trade, were held in universal odium on account of their religious principles. Indeed, abstracting entirely from these accessory circumstances, loans for interest can scarcely be looked on in a favourable light, except in connexion with an active and enterprising commerce; and it is only during the last three centuries that this has become an object of universal and of ardent pursuit, giving a commencement to those mighty changes which it seems destined to accomplish in the condition of the human race. The commerce of money among different nations, so wonderfully facilitated by bills of exchange, is a branch of trade altogether of modern origin.
In a state where there is little or no commerce, the great motive for borrowing is necessity; and the only motives for lending must be humanity or avarice. In the former case, as the lender only advances a sum of money which would otherwise have remained useless in his chest, the same disposition which induced him to succour the distressed will, in general, prevent him from accepting a premium for an act of beneficence. In the case of lenders of a different description, who are anxious to turn to their own account the necessities of their fellow-creatures, it is reasonable to presume that their dealings will be governed by the same spirit which, in a commercial country, characterizes pawnbrokers, and others who make a traffic of the miseries of the poor. The value of a loan to an individual who is in want of bread, cannot be ascertained by calculation, as it may be when money is borrowed for the purposes of trade. The relief of the present moment seems cheaply purchased at any price, of which the payment is to be delayed to a distant day; and it is not judging too harshly of human nature to suppose, that the demands of the lender, whose temper leads him to make a profession of this species of gaining, will rise in proportion to the distress of the borrower, and to the risk he runs of losing the principal. In a country, therefore, where there is no commerce, every money-lender who accepts of interest will be regarded in the same odious light in which pawnbrokers are considered among us; and the man “who putteth out his coin to usury,” will be naturally classed (as he is in the words of Scripture) with “him who taketh a reward against the guiltless.”*
A very striking illustration of the effects which are naturally produced on the character by that sort of speculation, which has for its object the necessities of the poor, occurs in the history of the charitable corporation which was established about the year 1730, with the professed view of lending money to the poor upon pledges, so as to prevent their oppression by pawnbrokers. Many characters, respectable from rank, fortune, and reputation, belonged to this corporation; but, in a short time, they were so corrupted by the trade they carried on, and the public cry was so loud against the iniquity of their transactions, that the House of Commons found it necessary to make a parliamentary inquiry into their conduct, the consequence of which was, that the corporation was broken, and three of the managers who were members of the House were expelled.
These remarks, while they account for the origin of the opinions concerning the practice of taking interest for money among those nations of antiquity whose commercial transactions were few and insignificant, will be sufficient, at the same time, to establish its reasonableness and equity in countries where money is most commonly borrowed for the purposes of commercial profit, and where, of consequence, the use of it has a fixed and determinate value, depending, like that of any commodity in general request, on the circumstances of the market at the time. In such countries both parties are benefited by the transaction, and even the state is a gainer in the end. The borrowers of money are frequently among the most opulent of the community, who wish to enlarge their capitals and extend their trade, and who, by doing so, are enabled to give farther encouragement to industry, and to supply labour and bread to the indigent.
It is not a little remarkable that John Calvin appears to have been one of the first who extricated himself entirely from the ancient prejudices on this subject. “Pecunia non parit pecuniam. Quid mare quid domus, ex cujus locatione pensionem percipio? an ex tectis et parietibus argentum proprie nascitur? Sed et terra producit, et mari advehitur quod pecuniam deinde producat, et habitationis commoditas cum certa pecunia parari commutarive solet. Quod si igitur plus ex negotiatione lucri percipi possit, quam ex fundi cujusvis proventu: an feretur qui fundum sterilem fortasse colono locaverit ex quo mercedem vel proventum recipiat sibi, qui ex pecunia fructum aliquem perceperit, non feretur? et qui pecunia fundum acquirit, annon pecunia illa generat alteram annuam pecuniam? Unde vero mercatoris lucrum? Ex ipsius, inquies, diligentia atque industria. Quis dubitat pecuniam vacuam inutilem omnino esse? neque qui a me mutuam rogat, vacuam apud se habere a me acceptam cogitat. Non ergo ex pecunia illa lucrum accedit, sed ex proventu. Illæ igitur rationes subtiles quidem sunt, et speciem quandam habent, sed ubi propius expenduntur, reipsa concidunt. Nunc igitur concludo, judicandum de usuris esse, non ex particulari aliquo Scripturæ loco, sed tantum ex aequitatis regula.”* To those who are acquainted with the prevailing sentiments of Calvin’s time, this passage cannot fail to be an object of curiosity.
Notwithstanding, however, this diversity of circumstances in the condition of ancient and modern nations, and the important changes it has operated on their opinions, it has by no means produced universally the effects which might have been expected. A certain rate of interest is indeed allowed by law, and no person doubts of its being perfectly fair and honourable to receive it; but everything above this legal rate is reprobated under the name of usury, as a crime of a very heinous nature, and, till the time of Queen Anne, was punished with confiscation of the usurer’s whole moveables, the punishment being mitigated, since that period, to the forfeiture of thrice the sum usuriously lent. In order, too, to repress the crime still more effectually, our law allows of methods for the probation of it, which are contrary to the general maxims of common law. If there is a written bond in the hands of the usurer, he may be forced to exhibit his own bond in order to convict himself, contrary to the common maxim, nemo tenetur edere instrumenta contra se. And where the crime cannot be proved otherwise, it may by the usurer’s oath, contrary to the maxim which is received in other cases, nemo tenetur jurare in suam turpitudinem.
There can be little doubt that these laws originated at first in prejudices which took rise in a very different state of society, but they have been powerfully supported by some considerations which have been generally supposed to demonstrate their political and commercial expediency. A few writers only have ventured to call this in question, and to express their doubts, whether the rate of interest should not be left, like the terms of other contracts, to be adjusted by the discretion of the parties. Among these, Mr. Bentham, of Lincoln’s Inn, has particularly distinguished himself, in a very ingenious Treatise, entitled, A Defence of Usury, [1787,] in which he attempts to prove, “that no man of ripe years and of sound mind, acting freely and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain in the way of obtaining money as he thinks fit; nor anybody hindered from supplying him upon any terms he thinks proper to accede to.”* The late Dr. Reid, too, in an Essay, read a good many years ago before a literary society in Glasgow, maintained nearly the same proposition, and argued in support of it upon principles very similar to those employed by Mr. Bentham. Nor has the opinion been confined to our own country; for it is maintained by several very eminent French writers, by M. Turgot, for example, and the whole sect of the Economists; and it has been actually brought to the test of experience in different commercial states, particularly in Holland and at Hamburgh.
The following passage from Turgot deserves to be quoted, as it states with equal clearness and conciseness the point on which the question turns:—
“It is an error to believe that the interest of money in trade ought to be fixed by the laws of princes. It has a current price, like that of all other merchandise. This price varies a little, according to the greater or less security which the lender has; but, on equal security, he ought to raise and lower his price in proportion to the abundance of the demand; and the law no more ought to fix the interest of money than it ought to regulate the price of any other commodities which have a currency in trade.”
I quote this passage from Turgot’s Reflections, &c.;† but he has treated the subject at much greater length in a separate Essay, entitled, Mémoire sur le prêt à Intérêt et sur le Commerce des Fers.
At a much earlier period I find the same doctrine advanced by the celebrated Mr. Law, in a memorial presented by him (before his elevation to the ministry) to the Regent Duke of Orleans. This paper is entitled, Mémoire sur l’Usage des Monnoyes, et sur le Profit ou la perte qu’il peut y avoir pour un Prince et pour un Etat, dans l’Altération du Titre des bas Monnoyes, et dans l’Augmentation ou la Diminution de leurprix par rapport aux Etats voisins.1 “L’Intérêt de la monnoye ne doit pas être réglé par le Prince. Je suppose qu’elle vaut présentement à gênes quatre pour cent, qu’on attend des vaisseaux d’Espagne avec des grosses sommes, si ces vaisseaux arrivent heureusement, l’intérêt baissera à trois. S’ils n’arrivoient pas, ne dois-je pas en profiter, et faire valoir mon argent cinq pour cent?
“Le monnoye est comme une marchandise. J’ai un magazin de draps d’Augleterre, qui valent six livres la palme. Si le Prince régloit le prix de nos draps à six livres, il me feroit tort; car s’il arrive une quantité de draps, je ne trouverai plus à vendre les miens à six livres, je serai obligé de m’en défaire à moins, et le Prince ne me bonifiera pas le perte.
“Si ces draps n’arrivent pas, comme je cours le risque de la perte, ne dois-je pas jouir du bénéfice que le prix naturel de mes draps me donne alors?
Pour réduire l’intérêt, il faut rendre le monnoye moins valable, en augmentant la quantité, ou en diminuant la demande. Il y a deux cent ans que l’intérêt était à dix pour cent, présentement il est à cinq, et en quelques endroits à trois pour cent; mais ce n’est pas la loi qui l’a détruit, c’est l’augmentation de la quantité de monnoye depuis la découverte des Indes.”
In a note upon this passage by the author of the French work in which Law’s Memoir is published, the following remark is made:—
“Les principes exposés jusqu’ici par M. Law sont d’une évidence à laquelle il est impossible de se refuser de bonne foi avec un esprit juste. Mais ici il commence à s’éloigner du vrai, pour avoir vu les choses trop en générale, sans faire attention aux circonstances particulières; et son système étoit une conséquence de ce qu’il avance ici sur l’intérêt de l’argent. Si la circulation étoit fort rapprochée de son ordre naturel, il est probable que les princes n auroient pas besoin de régler les taux de l’intérêt. Mais comme dans les Royaumes où la circulation paroit le mieux établie, il ne laisse pas de subsister un nombre infini de causes d’obstruction, les propriétaires de l’argent composent toujours le plus petit nombre, ainsi ils exercent un véritable monopole.”
In support of this remark, a reference is made to a Dissertation on Interest, printed in the same volume, page 477, et seq.
In this Dissertation, after stating some reasons against a legal rate of interest, the author adds:—“Il s’ensuit que le prix de l’argent ne devroit être fixé plus que celui des autres denrées, dont l’abondance ou le rareté règlent le prix: mais la dureté et l’avidité des créanciers, les troubles que leurs rigueurs ont excités en divers états, la facilité plus évidente de convertir l’argent en monopole à la faveur même des gros intérêts que toute autre denrée; enfin depuis les conseils de la charité Chrétienne ont engagé les Législateurs à intervenir dans une convention qui devoit être libre de sa nature.”
The same author speaks afterwards of the opinion which reprobates the interference of legislative authority in this particular, as having been first broached in France by Mr. Law. “Une opinion apportée en France pour la première fois par M. Law; c’est que l’état ne doit jamais donner de réglemens, sur le taux de l’intérêts.”
“Cette opinion,” he continues, “vrai en soi, a cessé de l’être dans la pratique par diverses circonstances, et peut-être le seroitelle encore, si jamais les Législateurs ne fussent intervenus dans ces sortes de réglemens.1 Mais une fois qu’ils se sont chargés de ce soin, il sembleroit à craindre que jamais la bénéfice d’une diminution ne fût générale dans un état. L’expérience prouve du moins que l’ancien taux fournit toujours aux futures des moyens de difficultés et d’embarras qui tiennent l’intérêt au dessus de son cours naturel. L’emploi de l’argent dans les effets publics se fait aujourd’hui sur le pied de quatre à quatre et demi pour cent, et le prêt marchand continue d’être à six,” &c. &c. The reasoning which follows is so inconclusive, that it is not worth while to transcribe it.
On the other hand, the prevailing ideas among our commercial politicians in this island are (if I am not mistaken) in favour of our existing laws; and they are supported by an authority justly entitled to the highest respect on all questions of Political Economy, that of Mr. Adam Smith.* Indeed, I do not recollect that any writer of note (excepting the two already mentioned) have ventured to dispute the expediency of this part of our code; although a pretty strong presumption obviously presents itself against it, from the example of the Dutch and Hamburghers, and the total silence of our political writers on the subject during the ten years that have elapsed since the publication of Mr. Bentham’s Essay. A very competent judge, Sir Francis Baring, in his late Pamphlet, On the Bank of England, [1797,] has not scrupled to say that Mr. Bentham’s Essay still remains unanswered, for the best of all possible reasons, that it is perfectly unanswerable.
Another very obvious consideration, which may well excite our curiosity in examining the expediency of our existing laws on this subject, is suggested by the variations in the rate of interest (whether established by law or by custom) among different nations, and in the same nation at different periods. Among the Romans, till the time of Justinian, we find it as high as twelve per cent. In England, so late as the time of Henry VIII., we find it at ten per cent. Even at present in Ireland, it is at six per cent.; and in the West Indies at eight per cent.; and in Hindostan, where there is no rate limited by law, the lowest customary rate is ten or twelve. At Constantinople, in certain cases, thirty per cent. is said to be a common rate. Now, of all these widely different rates, what one is there that is intrinsically more proper than another? What is it that evinces this propriety in each instance?—what but the mutual convenience of the parties, as manifested by their consent? It is convenience, then, that has produced whatever there has been of custom in the matter; what can there then be in custom to make it a better guide than the convenience which gave it birth? and what is there in convenience that should make it a worse guide in one case than in another? It would be convenient to me to give six per cent. for money: I wish to do so. “No,” says the Law, “you shan’t.” Why so? “Because it is not convenient for your neighbour to give above five for it.” The absurdity of the reason surely does not stand in need of any comment.
Much has not been done as yet by legislators in order to fix the price of other commodities; and in what little has been done the wisdom of their regulations is very far from being generally acknowledged. Putting money out at interest, is exchanging present money for future; but why a policy, which, as applied to exchanges in general, would be commonly deemed absurd and mischievous, should be deemed necessary in the instance of this particular kind of exchange, is a proposition about which it is surely reasonable to hesitate, till it has been carefully considered. For him who takes as much as he can get for the use of a house, or of any other article of value, there is no particular appellation, nor any term of reproach: nobody is ashamed of doing so, nor is it usual so much as to profess to do otherwise. Why a man who takes as much as he can get, be it six, or seven, or eight, or ten per cent. for the use of a sum of money, should be called usurer, or loaded with any other opprobrious name, any more than if he had bought a house with it, and made a proportionable profit by the house, it is not easy to imagine; upon that general view of the question, at least, which first presents itself to our notice.
I proceed, therefore, now to a closer examination of the subject; for which purpose I shall consider, First, the various arguments that have been alleged in favour of that limitation of interest which is fixed by our laws;—after which I shall [Secondly] point out some of the inconveniences which these laws seem likely to produce. In both discussions I shall avail myself, without scruple, of the ideas of Mr. Bentham, wherever they appear to me to be useful for establishing the conclusions I have in view.
Before, however, I enter on the general question, I think it necessary to remark, that those who dispute the expediency of anti-usurious laws, argue against these laws only so far as they are supposed to abridge the liberty of the contracting parties; for in cases where there is no contract, it seems to be manifest that the rate of interest should be fixed by law. Such cases may happen from many different causes. When a sum of money, for instance, becomes due, the right to it is litigated by the debtor. The litigation continues for years, the money in the meantime remaining in the hands of the debtor. At last he is found not only to have disputed the debt on insufficient grounds, but not even to have had what the law calls a probabilis causa litigandi. Here it is just that he not only pay the principal but the interest on it, while the money, in consequence of his unfounded claim, was withheld from the creditor; and in such a case it is necessary that the rate of interest should be determined by law. Again, suppose a man is abroad when a sum falls due to him, and that he has no attorney who has power to receive it, the debtor keeps it in his hand and uses it for years; here there is no contract to fix what the rate of interest shall be, and therefore it is proper that law should supply the defect. The case of tutors who have the administration of the money of minors is very similar.
In these cases, and others of like nature, where there was not any bargain between the parties what the rate of interest should be, it seems proper and necessary that it should be determined by law. And for this purpose two different plans might be proposed: First, by a constant rate fixed at once by the Legislature, to take place in all cases, without regard to the casual variations of the market rate; a plan which is adopted in our own country, where five per cent. has been fixed ever since the reign of Queen Anne, as the rate which may be legally demanded if no express stipulation has been made to the contrary. Or, Secondly, the rate of interest payable in cases where there is no contract, might be fixed annually by a jury, as near to the market rate for the time as can be done; in like manner as the price of grain in Scotland is fixed annually by a jury in what is called the fiars.
Taking for granted, therefore, as a point about which there cannot be any dispute, that there ought to be a fixed rate of interest for the adjustment of all differences that may arise among parties who have not previously settled the terms of their money-contracts, let us consider the reasons that may be alleged for a legal rate by which the terms of every such contract are to be restrained within certain limits.
Of these reasons one of the most plausible is founded on the expediency of maintaining, as far as possible, habits of economy in the great body of a people, and of checking the thoughtlessness and extravagance of those who are in danger of ruining their fortunes by prodigality. Were it not for this class of men, Sir James Steuart is of opinion that there would be no occasion for a statute to regulate the rate of interest. “The profits of trade,” he observes, “would strike an average among the industrious classes, and that average would fall or rise, in proportion to the flourishing or decay of commerce.”1 A case, therefore, which appeared to this ingenious and profound writer to be so strong as of itself to justify the policy of Anti-usurious Laws, will require to be considered with particular attention.2
In examining the grounds on which this opinion rests, I shall wave entirely the general question, whether it ought to be one of the objects of law to impose restraints on the prodigality of spendthrifts. It is sufficient for our purpose to remark, that in so far as this is the aim of the Anti-usurious Laws, they are altogether inadequate to the end proposed.
In proof of this, let us attend to the situation in which persons of this description are placed: First, on the supposition that the prodigal has some security to offer for the money he borrows; and, Secondly, on the supposition that he has none.
In the first case, it seems to be abundantly manifest, that so long as the prodigal has any thing to pledge or to dispose of, whether in possession or even in reversion, no Anti-usurious Laws can be efficacious in checking his extravagance. While he has ready money of his own, or effects which he can turn into ready money without loss, he will never think of borrowing money to spend; and when at last these resources fail him, so long as he has security to give, equal to that upon which money is to be had at the highest ordinary rate, he has no occasion, nor is at all likely to borrow money at an extraordinary interest. It is true that from persons of this disposition regular payment of interest is not to be expected; but supposing the money-lender to be satisfied with the security, he will seldom hesitate about the loan, in consequence of any apprehensions founded on the character of the borrower. On the contrary, Mr. Bentham observes, that where the security is good, there will be always found a sufficient number of money-lenders, with whom a disposition to prodigality will operate as a recommendation. In confirmation of this he mentions the advantage to be made in case of mortgage, by foreclosing or forcing a sale; an advantage which, he says, is not uncommonly looked for in transactions of this nature, “as is well known to all who have had occasion to observe the course of business in the Court of Chancery.”*
It remains for me only to mention, under this head, the case of those who, although they have no real or good security to offer, have some contingency in prospect, which they may wish to avail themselves of, in supporting their credit. In such instances there will be found, no doubt, money-lenders, who (if there were no laws to the contrary) would be willing to run the risk for an extraordinary profit: And it may be imagined that the penalties on usury may be useful in preventing the prodigal from advancing farther in his ruinous career. But is this really the case? So much the reverse that our Anti-usurious Laws only aggravate the evil they are meant to remedy. The following dilemma may be fairly stated on the subject:—Either these laws are effectual in restraining usury, or they are not. If they are perfectly effectual in restraining usury, they drive the prodigal to despair, and force him to sell his contingency. If they are not effectual, they are in so far nugatory; and what is worse by the penalties which await the usurer in the event of a discovery, they enhance the demand which he makes on the borrower.
With respect to the second class of prodigals, those who have no security to offer, either of a certain or of a contingent nature, a very few words may suffice. If they are able to raise any money, it can only be lent on the score of friendship or of humanity; in either of which cases an extraordinary rate of interest is out of the question. From those who make a trade of money-lending, they have nothing to expect either at the ordinary or at an extraordinary rate:—And the very circumstance of offering the latter, would amount to a confession of that desperate state of credit and of character, which has exhausted all the common resources of attachment and generosity.
The way in which prodigals run into debt, after they spend their substance, is in general, by borrowing of their friends and acquaintance, at ordinary interest, or more commonly at no interest, small sums, such as each man may be content to lose, or be ashamed to ask real security for. This is the race which prodigals, who have spent their all, run at present, under the actual system of restraining laws; and this, and no other, would be the race they would run, if these laws had no existence.
In order to complete this argument with respect to the inefficacy of Anti-usurious Laws as a restraint on prodigality, the following consideration is very forcibly stated by Mr. Bentham. “In spite,” says he, “of all laws against usurers, there is another set of people from whom prodigals get what they want, and always will get it so long as they have any credit remaining, and should they find it necessary, at an expense more than equal to any excess of interest they might have to give; I mean the tradesmen who deal in the goods they want. Everybody knows it is much easier to get goods than money. People trust goods upon much slenderer security than they do money. It is very natural they should do so; ordinary profit of trade upon the whole capital employed in a man’s concerns, even after the expense of warehouse rent, journeyman’s wages, and other such general charges are taken into the account, is at least equal to double interest, or ten per cent. Ordinary profit upon any particular parcel of goods must, therefore, be a great deal more: Suppose—for the sake of illustration—fifteen per cent. in the way of trading, then a man can afford to be at least three times as adventurous, as he can in the way of lending, and with equal prudence. So long, then, as a man is looked upon as one who will pay, he can much easier get the goods he wants, than he could get the money to buy them with, though he were content to give for it twice, or even thrice, the ordinary rate of interest.
From these considerations it appears how very idle it is preventing a man from making six or seven, or eight per cent. interest, when, if he chooses to run a proportionable risk, he may in this way make thirty or forty per cent., or any rate you please. And, as to the prodigal, if he cannot get what he wants upon these terms, what chance is there of his getting it upon any terms, supposing the laws upon usury to be repealed? This, then, is another way, in which, instead of serving, it injures him, by driving him from a market which might have proved less disadvantageous, to a more disadvantageous one: and consequently, the effect of the Anti-usurious Laws with regard to prodigality, if they have any effect, is to increase the evil complained of.
Besides prodigals, there are three other classes of persons for whose security these restrictive laws may be supposed to have been designed. The first is the indigent; the second, the interprising and adventurous, (or, in one word, projectors;) the third, those whose simplicity renders them incompetent to the management of their own concerns.
As for the first class, the inexpediency of the Anti-usurious Laws (in so far as they are interested) follows as an obvious consequence from the unlimited variety of situations, in respect of the degree of exigency in which the indigent may be placed. No principle can well be conceived more indisputable than this, that the consideration a man pays for borrowed money ought, in prudence, to vary with the advantage he expects to derive from the use of it, or the need he may have of the money at the time; and therefore, as the advantage or the necessity admits of an undetermined number of degrees, so may the terms of the loan, considered merely in a prudential point of view. If, for example, one man can make eleven per cent. by the use of money, where another can make but ten, six per cent. may be as prudentially given by the former, as five per cent. by the latter. In like manner, on the other hand, if an apprehended loss would amount to eleven per cent., six per cent. would be as reasonable and prudential a consideration to stipulate, as five per cent. would be in the case of a borrower who had a loss amounting to ten per cent., from which to save himself by the same means. And in any case, though in proportion to the amount of the loss, the rate of interest were ever so great, as that the clear saving should not amount to more than one per cent., or any fraction per cent.; yet so long as it amounted to anything, he would be just so much the better for borrowing, even on such comparatively disadvantageous terms. If, instead of gain, we put any other kind of benefit or advantage—if, instead of loss, we put any other kind of mischief or inconvenience, of equal value, the result will be the same.
The conclusion to which these observations lead is plainly this,—that as no legislator can judge so well as each individual for himself, whether money is worth to him anything, and how much beyond the ordinary interest, the interference of law in regulating the terms of money contracts, is not only officious and useless, but is actually prejudicial to those whom it is meant to serve.
With respect to the second class of men, whose rashness the Anti-usurious Laws may have a tendency to restrain, (I mean projectors,) the operation of these laws will require a more ample consideration; because, in this instance, they have found an advocate in no less an author than Mr. Smith, whose general principles concerning the freedom of trade and of industry, one should naturally have expected, would have inclined him to the opposite opinion. Here, however, Mr. Smith has met with a very acute and able antagonist in Mr. Bentham, who has subjoined to his Defence of Usury, a Letter addressed to Mr. Smith, containing a variety of remarks on the pernicious effects of our present laws, in consequence of the discouragements which they oppose to the progress of inventive industry. These remarks seem to me to present unanswerable objections to this part of Mr. Smith’s system.
The passage in the Wealth of Nations in which the opinion in question is stated, is as follows,—
“The legal rate, it is to be observed, though it ought to be somewhat above, ought not to be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent., the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give the high interest. Sober people who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers to prodigals and projectors. The person who lends money, gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people, than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage.”*
That there is somthing not altogether sound in the principles implied in this passage, might, I think, be naturally suspected, from the following consideration, that the law, and therefore the censure passed on projectors by the approbation given to that law, admits of no discrimination in favour of the reasonable and meritorious individuals who may frequently be comprehended under that invidious denomination. The censure falls upon all such persons as, in the pursuit of wealth, or even of any other object, endeavours, by the assistance of wealth, to strike into any channel of invention. It falls upon all such persons as, in the cultivation of any of the useful arts, direct their endeavours to any of those departments in which their utility shines most conspicuous and indubitable; upon all such persons as, in the line of any of their pursuits, aim at anything that can be called improvement; whether it consist in the production of any new article adapted to man’s use, or in the meliorating the quality, or diminishing the expense, of any of those which are already known to us. It falls, in short, upon every application of the human powers in which ingenuity stands in need of wealth for its assistant. Mr. Smith himself plainly uses the word project in the most extensive acceptation of that term. “The establishment of any new manufacture,” he remarks in another part of his work, “of any new branch of commerce, or of any new practice in agriculture, is a speculation from which the projector promises extraordinary profits. These profits,” he adds, “are sometimes very great, and sometimes, more frequently perhaps, they are quite otherwise; but in general they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well-known, the competition reduces them to the level of other trades.”*
The question, therefore, comes plainly to this, not whether it would be useful to the public to discourage rash and useless projects, but whether it would be useful to discourage the projecting spirit in general. Indeed, it is only in this last way that our present laws can have any effect, by lessening the total number of projectors, without lessening the proportion of bad to good.
That the projector cannot hope for money at the highest rate of interest which is legal at the time, because that may always be had with more safety from old established trades, is very justly remarked by Mr. Smith. But what is the consequence? That our Anti-usurious Laws operate as a check on all who are ambitious to follow the steps of those who have distinguished themselves as the benefactors of the human race. For whatever prejudice may be entertained against projects and projectors, it is nevertheless an indisputable truth, (to use the words of Mr. Bentham,) that “whatever is now the routine of trade, was at its commencement project, whatever is now establishment, was at one time innovation.”*
The approbation bestowed by Mr. Smith on these laws in their particular application to projectors, is the more surprising, that it seems to be in direct opposition to some of his fundamental maxims. “With regard to misconduct,” he observes, “the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune make but a very small part of the whole number engaged in trade, and all other sorts of business, not much more, perhaps, than one in a thousand.”†
In another passage, speaking of the effects of prodigality to retard the accumulation of National Wealth, Mr. Smith represents them as far too inconsiderable to call for the interposition of Government, and even censures, with some degree of asperity, the folly and presumption of statesmen in attempting to remedy the evil. “It is the highest presumption and impertinence in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”*
If this consideration, so forcibly stated by Mr. Smith, furnish a good argument against the interposition of law in restraining the prodigality of individuals, it concludes with tenfold force against its interference in the case of projectors; for this obvious reason, that prodigality is much more certainly ruinous, and much more common, than projecting; to which we may add, that in controlling prodigality, the law controls passion by reason; in controlling projects, it controls knowledge by ignorance.
On this last topic, nothing better can be offered than the following passage from Mr. Smith:—“What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge better than any statesman or lawyer can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no counsel or senate whatsoever, and which would be nowhere so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
“To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases be either a useless or a hurtful regulation.”†
Nothing certainly can be more just and satisfactory than these remarks; and we may add to them, that to limit the legal interest to a rate at which the carriers on of the oldest and best established and least hazardous trades are always glad to borrow, is to give the monopoly of the money market to the trades, against the projectors of new imagined trades; not one of which but must appear more hazardous than the old, were it only from the circumstance of its novelty.
It has been already observed, that the censure on projects involves all past improvements; and as in this extensive application of it, no person can pretend to vindicate it, who does not prefer the savage to the civilized state of society, it may be reasonably presumed that the greater part of those from whom it has proceeded, have made some tacit exception in favour of those projects which have been already brought to the test of experience. And yet, admitting the principles on which the maxim is founded to be just, they unquestionably apply with far greater force to the past than to the future; inasmuch as every unsuccessful project furnishes additional lights to those who are afterwards to follow the same career of experiment and invention.
The career of art, the great road which receives the footsteps of projectors, is beautifully and happily compared by Mr. Bentham* to a vast plain bestrewed with gulfs, such as Curtius was swallowed up in. Each requires a human victim to fall into it ere it can close; but when it once closes, it closes to open no more, and so much of the path is safe to those who follow. If the want of perfect information of former miscarriages, renders the reality of human life less happy than this picture, still the similitude must be acknowledged, and we see at once the only plain and effectual method for bringing that similitude still nearer and nearer to perfection; I mean the framing the history of the projects of time past, and the making provision for recording, and collecting, and publishing, as they are brought forth, the race of those with which the womb of futurity is still pregnant.
It is indeed comfortable to reflect, that this state of continually improving security is the natural state not only of the road to opulence, but of every other track of human life. In the war which industry and ingenuity maintain with fortune, past ages of ignorance and barbarism form the forlorn hope which has been detached in advance, and made a sacrifice of for the sake of the future. The golden age, it is but too true, is not the lot of the generation in which we live; but if it is to be found in any part of the track marked out for human existence, it will be found, (we may venture to hope,) not in any part which is past, but in some part which is yet to come.
So much for the argument for Anti-usurious Laws founded on their supposed tendency to repress the hurtful rashness of projectors. It yet remains, before concluding this part of the subject, to say a few words on their supposed utility in protecting [the third class,] the simple and inexperienced from the arts of the fraudulent.
I have already taken notice of the great variety of circumstances on which the reasonableness of the terms of a money-contract depends, circumstances which vary with the condition of the parties between whom the contract is formed. Is it not then a most extraordinary expedient, in order to prevent the advantage which the designing may take of the weak, to confine all those, without exception, who may have occasion to engage in transactions of this nature, to one fixed rate of interest, which they are prohibited to go beyond, under the severest penalties? Is not such a regulation likely to do more mischief on the whole, than the accidental frauds which may now and then be practised on such individuals as are possessed of that degree of understanding which allows them the general management of their own affairs.
But farther, if the law thinks proper to fix the maximum of interest in pecuniary bargains, why does it not also fix a minimum with as severe a penalty upon the man who borrows at a lower rate? The borrower and lender are equally entitled to favour from the legislator, as both are to be presumed equally capable to understand their own interest. The one has the same interest in lending that the other has in borrowing; and there is nothing that should give the one an advantage over the other in making the bargain. It seems evident that the legislator goes upon the idea of those times when the borrowers were the poor and necessitous, who being liable to great oppression from the rich usurer, were entitled to favour and protection; but the lenders now are as poor and necessitous as the borrowers. In a commercial country they are indeed more so; because they comprehend the widow, the orphan, the aged, and infirm, who often live upon the interest of a small stock. In this case, then, the law guards the rich against the oppression of the poor, when it intends only to guard the poor against the oppression of the rich. Suppose a man worth £3000, lends to a weak man of equal fortune £1000, and by imposing on his ignorance or weakness, makes him agree to pay for it six per cent., that is, defrauds his weak neighbour of £10;—the law determines that, for this fraud, he shall not only make restitution, but, moreover, shall forfeit £3000, that is, all that he has; and the forfeiture would have been the same if the fraud had only amounted to tenpence. Suppose, now, the borrower to be the sharper, and that he persuades a simpleton to lend the £1000 at four per cent. when he might have five. His crime appears to be perfectly equal to the crime we first supposed in the lender; nor is it possible for the nicest casuist to discern a grain of guilt in the one that is not in the other. Yet in the one case the law pronounces absolute ruin against the fraudulent lender, while in the other it allows the fraudulent borrower to pass altogether unpunished.
But waving these considerations, and supposing, for a moment, not only that the protection of the simple in the borrowing of money is a fair and proper object of law, but that it is in the power of the legislator in this instance completely to accomplish the proposed end, what advantage is gained so long as there are so many similar occasions, as there ever must be, where the simplicity of the individual is equally likely to make him a sufferer, and on which the legislator cannot interpose with effect, nor has ever so much as thought of interposing?
Buying goods with money, or upon credit, is the business of every day; borrowing money is the business only of some particular exigency, which in comparison can occur but seldom. Regulating the price of goods in general would be an endless task, and no legislator has ever been weak enough to think of attempting it; and supposing he were to regulate the prices, what would that signify for the protection of simplicity, unless he were to regulate also the quantum of what each man should buy?
But in what degree soever a man’s weakness may expose him to imposition, he stands much more exposed to it in the way of buying goods than in the way of borrowing money. To be informed, beforehand, of the ordinary prices of all the sorts of things a man may have occasion to buy, may be a task of considerable variety and extent. To be informed of the ordinary rate of interest, is to be informed of one single fact, too interesting not to have attracted attention, and too simple to have escaped the memory.
Even in regard to subjects whose importance might be supposed to justify a regulation of their price by the legislator, (such, as for instance, land,) it may be doubted whether there ever was an instance where, without some such ground as, on the one side, fraud, or suppression of facts necessary to form a judgment of the value, or at least ignorance of such facts on the other, a bargain was rescinded, merely because a man had sold too cheap, or bought too dear. Were I to take a fancy to give a hundred years’ purchase instead of thirty for a piece of land, rather than not have it, where is the court that would interpose to hinder me, much less to punish the seller with the loss of three times the purchase-money, as in the case of usury? Yet, when I had got my piece of land and paid my money, repentance, were the law even so well disposed to assist me, might be unavailing; for the seller might have spent the money, or gone off with it. But in the case of borrowing money, it is the borrower always who, according to the indefinite, or short term for which money is lent, is on the safe side; any imprudence he may have committed with regard to the rate of interest may be corrected at any time. If I find I have given too high an interest to one man, I have no more to do than to borrow of another at a lower rate and pay off the first; if I cannot find another to lend me at a lower, there cannot be a more certain proof that the first was not in reality too high.
Some measures of police, indeed, might perhaps be useful in such an overgrown city as London, for checking the exorbitant impositions which are there practised in the loan of petty sums to that humble class of traders who expose their wares in the streets for sale. Mr. Colquhoun, at least, by whom this singular species of banking was first brought under the public notice, says, that it is highly injurious to the morals of those who are concerned in it; and, although something might be advanced on the other side of the question, I shall not venture to say that he is entirely wrong. The object of this trade, which is chiefly carried on by females, is to accommodate those women who sell fish and other goods on the streets, with such small sums as may be necessary for their daily demand. The usual diurnal stock is said to be five shillings, for the use of which for twelve hours they pay sixpence when the money is returned in the evening, the lender thus receiving £7, 10s. a year for every five shillings. “In contemplating,” says Mr. Colquhoun, “this very curious species of banking, (trifling as it seems to be,) it is impossible not to be forcibly struck with the immense profits that arise from it. It is only necessary for one of these female sharpers to possess a capital of seventy shillings, or £3, 10s., with fourteen steady and regular customers, in order to realize an income of one hundred guineas a-year.”* If any regulations of police should be thought necessary for correcting such practices, which originate entirely in the ignorance and bad habits of the populace in a large and luxurious city, no inference can be drawn from them to invalidate the reasonings stated by Mr. Bentham; nor would it be even fair to conclude that such transactions are universally accompanied with all the mischiefs which Mr. Colquhoun affirms arise from this practice, as carried on at present. The truth is, that Mr. Colquhoun does not seem to be sufficiently aware of the circumstances which justify the equity of a lender in exacting a higher proportional premium for the loan of a small sum than for the loan of a large one, nor of the circumstances which, in the case of a small trade, justify the prudence of a borrower in consenting to such conditions. One of these circumstances is, that the risk is greater, as in small loans the profit is not sufficient to defray the expense of examining with sufficient minuteness into the circumstances of the borrower; a second, and far stronger is, that the borrower of a small sum can afford to give a higher interest than the borrower of a large one. The value of loans to a small amount is often so great that it can scarcely be said to bear any proportion whatever to that of large sums. As an example, we may observe the case of a labouring man having an opportunity of getting employment, but in want of five shillings to purchase the necessary tools, while his master rigidly adhering to the custom of the trade, refuses to furnish them himself. In such a case, which I understand occurs very frequently in England, the labourer, if he could get five shillings, would be able to repay it in a few days with large interest. It would be difficult to find a case where a thousand pounds could be laid out so as to produce such advantages.
I proceeded, at our last meeting, to make some observations on the motives which have influenced the policy of different nations in subjecting the commerce of money to the regulation of law. The general principles which regulate the rate of interest, independently of the interposition of statesmen, I touched on slightly in a former Lecture, without aiming at so full an illustration of the subject as it might have been proper for me to attempt, if it had not already been placed in so clear a light by the united abilities of Mr. Hume and of Mr. Smith.
Among the writers who have disputed the expediency of legal restraints on the rate of interest, I mentioned M. Turgot, Mr. Bentham, and the whole of that class of politicians known in France by the title of Economists, [supra, p. 157.] To these I added the name of the celebrated Mr. Law, who, from a Memoir presented, before his elevation to the ministry, to the Regent Duke of Orleans, appears to have held the same opinion. The arguments he employs in support of it are expressed with that clearness and conciseness which in general distinguish his writings. The Memoir to which I refer is to be found in the sixth [second?—see above, p. 158] volume of a French work, entitled, Researches and Considerations on the Finances of France, from the year 1695 to the year 1721, p. 181; edition of Liege 1758. In the same volume, this doctrine concerning the freedom of money-loans is, as I have above stated, ascribed by the editor to Mr. Law as its author, or at least, as its first broacher in France. “Une opinion apportée en France pour la première fois par M. Law, c’est que l’état ne doit jamais donner de Réglemens sur le taux de l’intérêt,” page 64.
In what I have already said on this subject, I have chiefly followed Mr. Bentham, who has traced the consequence of the general principle more minutely than any of his predecessors. I propose to prosecute the same argument this evening, requesting it may always be remembered, that in considering questions of this nature, which have divided the sentiments of those who have considered them with much more attention than it has been in my power to bestow on them, I would be always understood to express myself with diffidence; and that the general aim of these speculations is not to inculcate particular conclusions, but to promote a spirit of free discussion.
That the arguments commonly alleged in favour of Antiusurious Laws are not sufficient to establish their expediency or equity, may, I flatter myself, be safely inferred from the remarks formerly stated. I shall confine myself, therefore, in what follows, to a view of the mischievous effects which they seem likely to produce.
The first I shall mention is that of precluding so many people altogether from the possibility of obtaining the money they stand in need of, to answer their respective exigencies, and what is worse, that precise description of people whose necessity is the greatest. In this point of view, then, the sole tendency of the law is to aggravate the distress of the unfortunate.
While, however, the law thus precludes a man from borrowing upon terms which it deems too disadvantageous, it does not preclude him from selling upon any terms, however ruinous. Everybody knows that forced sales are attended with a loss; and to this loss, what would be deemed a most extravagant interest bears in general no proportion. When a man’s moveables are taken in execution, they may be reckoned pretty well sold, if, after all expenses paid, the produce amounts to two-thirds of what it would cost to replace them. In this case, the well-meant interference of the law costs the debtor thirty-three per cent. If a man’s fortune consists in immovable property, the fluctuations in the value of land, occasioned by the varying circumstances of the country, may sometimes lay him under a necessity of disposing of his estate to a still greater disadvantage. During the distress occasioned by the American war, lands, which it was necessary should be sold, were sold at London, by public auction, at twenty, eighteen, nay, in some instances, as low as fifteen years’ purchase, whereas before the war, thirty years’ purchase for land was reckoned a medium price. Could any rate of interest, at which the seller might have raised money by loan, have injured his fortune nearly in the same proportion?
What has been hitherto said is confined to the case of those who have present value to give for the money they stand in need of. If they have no such value;—then if they succeed in purchasing assistance upon any terms, it must be in breach of the law. Even in this case, however, the mischievous influence of the law still pursues them, aggravating the very mischief it pretends to remedy. Though it be not completely efficacious in the way that the legislator proposes, it is perfectly so in the way opposite to that which he has in view. The effect of it is to raise the rate of interest higher than it would be otherwise, and that in two ways. In the first place, a man must, in common prudence, as Mr. Smith observes, make a point of being indemnified, not only for whatsoever extraordinary risk it is that he runs, independently of the law, but for the very risk occasioned by the law: he must be insured, as it were, against the law. This cause would operate were there even as many persons ready to lend upon the illegal rate as upon the legal. But this is not the case, a great number of persons are, of course, driven out of this competition by the danger of the business; and another great number by the disrepute which, under cover of these prohibitory laws, has fastened itself upon the name of usurer. So many persons, therefore, being driven out of the trade, it happens in this branch, as it must in every other, that those who remain have the less to withhold them from advancing their terms; and without confederating, each one will find it easier to push his advantage up to any given degree of exorbitancy, than he would, if his rapacity were checked by a more general competition.
Through the whole course of the foregoing argument, I have proceeded on the supposition that Anti-usurious Laws, although in particular instances open to evasion, may yet be so framed as to accomplish to a certain degree those restraints on pecuniary bargains which the legislator wishes to impose. There is, however, in Mr. Smith’s Wealth of Nations, a passage in which he asserts (by implication at least) the contrary; a passage the more extraordinary in this eminent writer, that, if it were true, it would prove those laws, of which he has expressed his approbation, to be completely nugatory. “No law,” says he, “can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made. Notwithstanding the edict of 1766, by which the French King attempted to reduce the rate of interest from five to four per cent., money continued to be lent in France at five per cent., the law being evaded in several different ways.”*
It is remarkable, that of this position, expressed in the most general and unqualified terms, (and which is certainly very far from being self-evident,) no proof whatever is produced by Mr. Smith, but one particular instance; an instance which proves nothing but the inefficacy of one particular law, which might have been owing to an accidental defect in its structure, or in the provisions made for carrying it into execution. What is more, the position does not seem to be true in the extent in which it is stated. At least, if it is true, that “no law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made,” the same combination of circumstances must afford obstacles equally powerful to the efficacy of the law against all higher rates; and for this purpose nothing can be effectual but a resolution on the parts of all persons any way privy not to inform. Supposing this to be the case, all rates of interest would be equally free, and the state of men’s dealings in this way just what it would be were there no law at all on the subject. That this is not the case in England, is manifest from the examples which every now and then occur, of convictions upon the statutes against usury. In other parts of Europe where Anti-usurious Laws are established, there is probably, in this respect, a difference of degree, according as the case of the legislator has been more or less employed in rendering the laws effectual. In one country, the empire of Russia, the whole system of laws on this article is said to be merely a dead letter.
“The rate fixed by law in Russia,” says Mr. Bentham, “is five per cent.; but although many persons in that country borrow money, none borrow it at the legal rate. The lowest ordinary rate upon the very best real security, is eight per cent.; nine, and even ten, upon such security are common. Six or seven may have place, now and then, between relations or other particular friends; because now and then a man may make a present of one or two per cent. to a person whom he means to favour. The contract is renewed from year to year; for a thousand roubles, the borrower in his written contract obliges himself to pay at the end of the year one thousand and fifty. Before witnesses he receives his thousand roubles; and without witnesses he immediately pays back his thirty roubles, or his forty roubles, or whatever the sum may be, that is necessary to bring the real rate of interest to the rate verbally agreed on.”*
I have already said, that in England the Anti-usurious Laws are confessedly of very considerable efficacy in restraining the terms of pecuniary bargains. Even in England, however, the law is very far from being consistent with itself, inasmuch as it sanctions virtual usury in a variety of cases; and therefore if it were guided by any general principle upon this subject, it ought either to guard against these indirect violations of its own general spirit, or leave the commerce of money entirely open.
One of the most obvious instances in which virtual usury is permitted by law, is in a practice well known among merchants by the name of drawing and re-drawing. The nature of this operation is very distinctly and fully explained by Mr. Smith in the second chapter of the Second Book of his Wealth of Nations. From the account of it which he gives, it is obvious in what way by means of it money may be obtained, and in fact has very often been obtained by merchants at an interest more than double of that permitted by law. The extra interest is in this case marked under the names of commission and price of exchange. The commission is but small on each draft, (never less, however, than one-half per cent.,) but by a frequent repetition of the operation during the course of the year, it may swell the rate of interest to eight or ten per cent., or even considerably higher. By means of this expedient, therefore, the Anti-usurious Laws may be eluded, though by a process somewhat complicated and troublesome; and it is evident where this is had recourse to, it renders the business of borrowing money much more ruinous to the merchant than any bargain he could well be supposed to have made with money-lenders, had the commerce of money been perfectly free. The monopoly of this virtual usury is secured to bankers, and the profits they derive from it must consequently be higher than if a general competition in the trade of money-lending were allowed to capitalists of every description.
Beside this expedient for raising money at an usurious rate, (which may be thought to be rather tolerated and overlooked than sanctioned by law,) there are others which have at all times been in use under its immediate countenance and authority.
The first I shall mention is, by having recourse to pawnbrokers. In this case, the law by regulating, avowedly protects usury, and actually authorizes a very high rate of interest as a compensation for the expense of warehouseroom, and that of insurance against fire and other accidents. Nor is there much reason for believing that the limits prescribed by law are here of any considerable efficacy. On the contrary, it is presumable that the profits of the trade are, like those of other trades, determined chiefly by the competition amongst the traders.
The indulgence given by our law to pawnbrokers has, no doubt, proceeded from a sense of their absolute necessity in such a state of society as ours, particularly in great and overgrown towns. In a city, for example, like London, there are vast multitudes who have no friend to aid them in distress; who live from day to day, or from week to week, without realizing any stock for a season of adversity. When such a man falls sick, the whole revenue of a poor family is stopped at once. If he would borrow, his personal security depends on his recovery, and on his being able by future industry to pay the debt by what he can save over and above the maintenance of his family. In such a situation, his only resource is evidently to sell some part of his furniture, or to pledge it with a pawnbroker; and without this resource, thousands who gradually recover their credit, would be driven at once to ruin and beggary.
The trade of a pawnbroker, it must, notwithstanding, be confessed, lays a man under great temptation to deal hardly with the poor; and it is highly expedient that severe penalties should be held out against those who exercise it oppressively and cruelly. The humanity of our own Legislature in this respect must not be passed over in silence. Within the last ten years, several very important regulations have been made, not only with a view of limiting the rates of money lent on pledges, but (what is of far greater consequence) to prevent the unfortunate from being obliged to part with their property without a fair consideration,—imposing, at the same time, severe penalties on those who avail themselves of the means which such shops are calculated to afford, to commit depredations on the property of others.1 For the attainment, however, of the ends which our legislators have had so laudably in view, there is ground to believe that much yet remains to be done. The author of the Treatise on the Police of the Metropolis,* lately published, remarks, that a class of sharpers obtain licenses to become pawnbrokers. He observes, that “any person, even the most notorious rogue or vagabond, who can raise ten pounds to pay a license, may, at present, set up the trade of a pawnbroker; and it is even said, that some have got licenses who have actually been on board the Hulks. This class of swindling pawnbrokers,” he says, “are uniformly receivers of stolen goods, and under the cover of their license do much mischief to the public, which might be prevented, in a great measure, by placing the power of granting licenses in the hands of the Magistrates of the Division, upon the footing of public-houses, and rendering it necessary for all persons to obtain a certificate of character before they can obtain such license, and also to enter into a recognizance of good behaviour.”†
The same author states the number of pawnbrokers within the bills of mortality, paying a license of £10 a year, at 213; and of pawnbrokers in the country, paying £5 a year, at 431,—in all, 644. He adds, that the property of the poorest and most distressed part of the community, to the amount of more than half a million sterling, is constantly in the hands of pawnbrokers in the metropolis alone. This, too, seems a very moderate statement. Sir Frederick Eden tells us, that he was present, three or four years ago, at the trial of a pawnbroker, at Newcastle-upon-Tyne, for receiving stolen goods, when it appeared that above 30,000 pawns went through his hands in a year.
I have already said that, in a great metropolis like London, the trade of a pawnbroker, under proper regulations, seems to be a necessary evil; and I have hinted my doubts whether it is of much use for law to interpose in fixing limits to the rate of interest. It is here, however, where our laws have relaxed from their usual severity against usurers, that the most specious apology might be made for their rigorous application,—inasmuch as the security is, in this case, not only equal to, but better than what it can be in any other, consisting in the present possession of a moveable article, of easy sale, on which the creditor has the power, and certainly does not want the inclination, to set such price as is most for his advantage. Even in such cases, however, the interposition of law in favour of the indigent, would probably only aggravate the evil it meant to cure.* (Accordingly, Dr. Reid, in an Essay on this subject, formerly referred to, [supra, p. 157,] in which he argues for the perfect freedom of pecuniary bargains in all cases where the parties are upon an equal footing, and where the borrower cannot be said to be pressed by any necessity, yet pleads for an exception in every instance in which the borrower is compelled to apply to a money-lender by indigence. “If the Law,” says he, “could distinguish between the poor and the rich,—between those who borrow from hard necessity, to prevent going to prison, or having their goods carried off by legal execution, and those who borrow to extend their trade and increase their profit;—if this were possible, I heartily agree that, with regard to the first of these cases, the law should fix the highest rate of interest that can be taken, and that the law should be enforced under the severest penalties, such as our present laws inflict on usurers.” He grants, at the same time, the difficulty of distinguishing by a law the poor from the rich, and contents himself with submitting, as the best criterion he can suggest for the purpose, that all those shall be considered as entitled to the protection of law who borrow upon a pledge. A man does not borrow in this way who can give good personal security; and he who cannot give good personal security for what he must borrow, may be considered as in necessity. “It seems reasonable, therefore,” according to Dr. Reid, “that such laws as we at present have, should take place against pawnbrokers; and it is the more reasonable, as the pawnbroker has absolute security from his debtor having a pledge in his hand.” I have already given my reasons for thinking, that even in the case of indigence, all these well-meant interpositions of law in limiting the rate of interest, only aggravate the evil which they propose to cure.)
Another case in which the usurious rate of interest is sanctioned by law, is that of Bottomry and Respondentia. In a contract of the former kind, the lender advances money to the owner of a ship, who pledges his property in it as security, engaging to repay the money, with a stipulated consideration for risk and advance, when the ship returns;—it being understood, on the other hand, that if the ship be lost, the lender is to lose his money. Respondentia contracts are of the same nature, differing only in this, that the security is on goods instead of the ship; which goods being necessarily sold or exchanged in the course of the voyage, and the ship not being pledged, the person of the borrower is alone responsible for the money lent; and hence he is said to take up money at respondentia. The condition of repayment is, that the goods do not perish through the dangers of the sea.1 These terms are also applied to contracts for the repayment of money borrowed, not on the ship and goods only, but on the mere hazard of the voyage itself, which kind of agreement is sometimes called fœnus nauticum, and sometimes usura maritima. But as this gave an opening for usurious and gaming contracts, especially on long voyages, it was enacted, 19th Geo. II. c. 37, that all moneys lent on bottomry or at respondentia, or vessels bound to or from the East Indies, shall be expressly lent on ships or goods; and that if the borrower has not an interest in the ship, or in the effects on board, equal to the value of the sum borrowed, he shall be responsible to the lender for so much of the principal as has not been laid out, with legal interest and all other charges, though the ship and merchandise be totally lost.”2
In contracts of bottomry and respondentia, (including under this title the fœnus nauticum,) the law authorizes a departure from the established regulations with respect to interest; acknowledging, in such instances, the reasonableness of a compensation for risk, as well as for the use of the money borrowed, and leaving the particular terms of the bargain to be adjusted by the parties, according to the market rate of interest, and the rate of insurance.1
I took notice in my last lecture [supra, p. 152, seq.] of a most extraordinary fact mentioned by Sir William Jones, that “in the first of the Sacred Law Tracts,” supposed to be revealed by Menu some millions of years ago, and which Sir William Jones himself refers to a date long prior to the Christian era, “there is a general regulation limiting the rate of interest in ordinary cases, with an express exception in regard to adventures at sea. This exception (as Sir William Jones observes) the sense of mankind approves, and commerce absolutely requires, though it was not before the reign of Charles I. that our English Jurisprudence fully admitted it in respect of maritime contracts.” The truth is, that the existence of the exception in this very ancient code, is less wonderful than that of the general rule; more particularly when we consider that the rule appears to have maintained its ground, as it also had done in modern Europe, after the unsoundness of its principle had been thus explicitly acknowledged. Such coincidences among distant ages and nations in their prejudices and inconsistencies, are still more wonderful than in institutions recommended by reason and justice; and incomparably more so, than any accidental repetitions of discoveries in the exacter sciences.
The same inconsistency may be remarked in those laws which grant an unlimited license to all the different kinds of insurance; to the purchase and sale of annuities; and, in a word, to every case where a man is permitted to take upon himself an unlimited degree of risk, receiving for so doing an unlimited compensation. Mr. Erskine, in his Institutes of the Law of Scotland,* says, “where a creditor’s right to interest is clogged with an uncertain condition, by which he runs the hazard of losing his whole debt, if the condition should never exist, he may stipulate for a higher interest than the legal, without the crime of usury; for there the interest is not given, merely in consideration of the use of the money, but of the risk also undertaken by the creditor.” And to the same purpose Mr. Christian, “It is an established rule, that no contract is within the statute of usury, although more than five per cent. is to be paid on money advanced, if the principal is actually put in hazard, and may be totally lost to the lender.”1 In all these instances the law grants a liberty perfectly just and highly expedient, but altogether inconsistent with the general principles which, in a commercial country, limit pecuniary bargains to certain fixed conditions.
The remarks which have now been made, afford a very strong confirmation of the reasonings already offered, to shew the inexpediency of a legal rate of interest. They prove that while such a restraint is perfectly efficacious in aggravating the distresses of those whom it professes to protect, it never can be so contrived as to accommodate the commercial transactions of a country to the arbitary views of the legislator. The natural course of trade is too powerful to be controlled by laws which are at variance with the interests of private parties, and with the general state of society. And all that law can in such cases effect, is to force individuals on those indirect modes of evasion, which accomplish the end in a more circuitous and expensive way for themselves, as well as more prejudicial to the interests of the public. The same remarks also shew, that the general position formerly quoted [supra, p. 180] from Mr. Smith, to wit, that “no law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made,” although by no means true in the unqualified form in which he has stated it, is yet a most just and important maxim, when received under proper limitations. To the same purpose also, Mr. Locke long ago remarked, that “it is in vain to go about effectually to reduce the price of interest by a law; and you may as rationally expect to set a fixed rate upon the hire of houses, or of ships, as of money. He that wants a vessel, rather than lose his market, will not stick to have it at the market rate, and find ways to do it with security to the owner, though the rate were limited by law; and he that wants money rather than lose his voyage or his trade, will pay the natural interest for it, and submit to such ways of conveyance as shall, keep the lender out of reach of the law. So that your Act at best will serve only to increase the arts of lending, but not at all lessen the charge of the borrower, who, it is likely, shall, with more trouble, and going farther about, pay also the more for his money.”1 How nugatory, therefore, are those plans which speculative politicians have so often held out for advancing national wealth and prosperity by reducing the rate of interest to a still lower standard! In the last century this was a favourite object with Sir Josiah Child, who recommended such a measure as “an effectual expedient for advancing the price of lands in the purchase, for improving the rent of farms, for employing the poor, for multiplying artificers, for increasing foreign trade, and for augmenting the stocks of merchants.” Nor does the inefficacy of this project appear to be yet universally admitted. A late respectable writer, Dr. Crumpe, after giving the sanction of his approbation to the reasonings of Child, recommends the lowering of the legal rate of interest in Ireland, as the most likely means of promoting the manufactures of that country, and consequently the employment of the people.2 An author, too, of still higher name, the Marquis Beccaria, in a Discourse on Public Economy of Commerce, published about the year 1769, in enumerating the principal means by which a government may promote trade, mentions expressly the low interest of money.1 The circumstance which has misled all these writers has evidently been, that inseparable connexion which was before fully illustrated between a flourishing commerce and a low rate of interest. As the latter of these results naturally and necessarily follows from the former, they were led to imagine, that if the effect could only be secured by the direct interposition of law, it would draw along with it, as consequences, all those happy concomitants or causes with which they had found it connected in the course of their observations.
Having mentioned Locke’s Treatise on Interest, (which was written in opposition to Child,) I cannot help observing, that although he declares in favour of a legal rate of interest,2 yet all his reasonings lead to an opposite conclusion. And, indeed, the arguments he alleges in favour of a legal rate are so trifling, and so slightly urged, that he was probably prevented, merely by a respect for established opinions, from pushing his conclusion to its full extent. The passage deserves to be quoted in his own words:—
“It is necessary that there should be a stated rate of interest, and in debts and forbearances, where contract has not settled it between the parties, the law might give a rule, and courts of judicature might know what damages to allow. This may, and therefore should, be regulated.
“That in the present current of running cash, which now takes its course almost all to London, and is engrossed by a very few hands in comparison, young men, and those in want, might not too easily be exposed to extortion and oppression, and the dexterous and combining money-jobbers not have too great and unbounded a power to prey upon the ignorance or necessity of borrowers. There would not be much danger of this if money were more equally distributed into the several quarters of England, and into a greater number of hands, according to the exigencies of trade.
“If money were to be hired as land is, or to be had, as corn or wool, from the owner himself, and known good security be given for it, it might then, probably, be had at the market (which is the true) rate, and that rate of interest would be a constant gauge of your trade and wealth. But, when a kind of monopoly, by consent, has put this general commodity into a few hands, it may need regulation, though what the stated rate of interest should be, in the constant change of affairs and flux of money, is hard to determine. Possibly, it may be allowed, as a reasonable proposal, that it should be within such bounds as should not, on the one side, quite eat up the merchant’s and tradesmen’s profit and discourage their industry; nor, on the other hand, so low, as should hinder men from risking their money in other men’s hands, and so rather choose to keep it out of trade, than venture it upon so small a profit. When it is too high, it so hinders the merchant’s gain that he will not borrow; when too low, it so hinders the monied man’s profit that he will not lend; and in both these ways it is an hindrance to trade.”
In stating these observations, I would, by no means, be understood to deny, that low interest is a cause as well as an effect of National Wealth, or that it ought to be an object with a statesman to favour as much as possible its reduction, by the general plan of his policy. I only speak of the inefficacy of particular regulations to that purpose, unless they are so accommodated to the actual circumstances of a country that the same consequences would spontaneously have taken place in the natural course of things, without the interposition of the legislator.
The importance of low interest to the progress of National Wealth follows, as an obvious consequence, from the remarks formerly made on the accumulation of stock. “The proprietor,” says Turgot, “who lends money, ought to be considered as a dealer in a commodity absolutely necessary for the production of riches, and which cannot be at too low a price. To charge this commerce, therefore, with duties, would be as unreasonable as to lay a duty on a dung-hill, which is to manure the land.”* The truth is, that a decrease in the market rate of interest (so far as it is in the power of laws to favour it, by their general spirit and tendency) is the only safe and effectual encouragement which a statesman can give to national industry. It will afterwards appear, that the regulations of commerce, which have been commonly employed for that purpose, (such as prohibitions, monopolies, bounties, drawbacks, &c.,) are not merely useless, but positively hurtful. They may, indeed, encourage particular branches of industry, but it is at the expense of other branches, from which they withdraw their natural share of the capital of the country. Nor do they always succeed in advancing even those trades which they favour, inasmuch as by multiplying their productions beyond their due proportion, they must, in some instances, have the effect of overstocking the market. Hence the only equitable and advantageous encouragements to industry are those which favour all its branches alike; and such, precisely, is the effect of a low rate of interest.”1 It enables individuals with the same given resources, to put larger capitals in motion, leaving them, in the employment of their capitals, entirely to the guidance of their own prudential views of profit, and extending to all equally the means of applying their industry to their favourite objects.
Among the other mischievous effects of raising supplies on the funding system, its tendency to increase the market rate of interest is one of the most important. Immense sums, which would otherwise have been employed in the various departments of useful industry, are kept disengaged for speculations in the funds; and a shock is frequently given to the trade and manufactures of the kingdom by a sudden abstraction of capital, in consequence of those high temptations to lenders which it is necessary for Government to hold out in times of difficulty.
It is, however, chiefly against the agricultural improvement of the country that public loans operate. The high profits of trade enable persons of good credit to elude the laws against usury, by expedients which custom authorizes, and which actual circumstances render absolutely necessary. The shortness of the period too, to which their temporary accommodations generally extend, while it enhances the rate of interest, leaves the money-lender at all times the ready command of his capital. The case is widely different with those who have occasion to borrow money for agricultural speculations, which afford but moderate profits, and which, from their slow returns, require loans of a more permanent nature. This is felt severely in the present times, even by those who have landed security to offer, and who, accordingly, are frequently reduced to the ruinous resource of raising money on annuities; consequences, undoubtedly, of the most alarming sort to the country in general, but which necessarily result from the high rate of interest obtainable upon government securities.
Although, therefore, it seems to be impossible for a statesman, by an arbitrary reduction of the legal rate of interest, to accelerate the national prosperity at pleasure, it is equally clear, on the other hand, that the general plan of its policy may influence, to a great degree, this essential requisite to improvement.
How much the inconveniences, which have just been mentioned as resulting from public loans, are aggravated by the Anti-usurious Laws, is sufficiently evident. The tendency of such restraints on the commerce of money being obviously to raise the rate of interest in the market. M. Turgot has made some good observations on this point, in his Essay on Money Loans, formerly referred to, [supra, p. 157.]
I shall conclude this subject with remarking, that the prejudices and laws with respect to Compound Interest are entirely of a piece with those which have been now under our consideration, originating in the same idea, that the protection of the borrower requires the interposition of the legislator, in every instance, in a greater degree than that of the lender.
It appears from an Epistle of Cicero to Atticus, that compound interest was not then, in every case, contrary to law; for he says, that usuræ centesimæ cum anatocismo anniversario might be enacted.1 But this law was abrogated by Justinian;2 and in modern Europe compound interest is almost universally reprobated as the worst species of usury and extortion. In reason and equity, however, there seems to be no foundation for this opinion; the same principles which justify simple interest, concluding decisively in favour of compound interest, when the principal is withheld after being demanded; and, accordingly, Henry de Cocceii pronounced, long ago, that usuræ usurarum, or anatocismus, is perfectly agreeable to the law of nature.
“Jure naturæ usuras usurarum semper deberi, puto, etsi promissæ non fuerint. Is enim qui mea pecunia utitur, ac pro eo usu annuas usuras promittit, nec solvit has ipsas usuras, plus suo habet; utitur jure alieno; mihi aliquid abest, unde lucrum capere possem si debitor usuras solvisset: adeoque ex natura obligationis sequitur, æstimationem ejus, quod facto debitoris mihi abest, id est, usuras usurarum, solvi debere.”3 The argument, however, is stated much more forcibly by Mr. Bentham, who has allotted a separate section of his Treatise to the discussion of this very question. The substance of his reasoning may be collected from the following abstract:—
“If the borrower pays his interest at the day, and thereby performs his engagement with punctuality, the lender has it in his power to secure compound interest, by lending it out again immediately. If he fails of receiving it, he is by so much a loser. The borrower, by paying it at the day, is no loser; if he does not pay it at the day he is by so much a gainer; and what is worse, the gain which the law in its tenderness thus bestows on him, is a reward which it holds out in many cases for breach of faith, for indolence, and for negligence. The loss, on the other hand, which it thus throws on the forbearing lender, is a punishment which it inflicts on him for his forbearance; while the power which it gives him of avoiding that loss, by prosecuting the borrower upon the instant of failure, is a reward which it holds out to him for his hard-heartedness and rigour.
“It may indeed be, in many cases, impossible for the borrower to pay the interest at the day; but what is the obvious inference? That the creditor should not have it in his power to ruin the debtor for not paying at the day, and that he should receive a compensation for the loss occasioned by such failure. The spirit of our existing laws is precisely the reverse of this. The creditor has it in his power to ruin him, and he has it not in his power to obtain such a compensation. On the contrary, if the debtor has recourse to law, and resolves to fight his creditor through all the windings of mischievous delay, he purchases a respite at ten times, perhaps at a hundred times, the expense of compound interest; while, of the money thus thrown away, no part falls to the share of the individual he has injured, but is consumed by the legal agents who conduct the litigation.”*
ON SUBJECTING THE COMMERCE OF LAND TO THE REGULATION OF LAW.]
(Interpolation from Notes.)—I proceed next, agreeably to the arrangement formerly laid down, [Political Economy, Vol. I. p. 45,] to make some remarks on the expediency of restraints on the Commerce of Land.
The pre-eminent importance of landed property, and the various effects connected with its distribution, will justify me sufficiently for treating of it separately from the other constituents of National Wealth. From the observations which I formerly had occasion to make, it appears how intimately this subject is connected with the advancement of that species of wealth which gives existence to all the others, furnishing to the various classes of manufacturers and artists, both the materials of their subsistence, and the rude materials on which their industry is employed. “Il faut cependant observer,” to borrow the words of a French writer, “que le laboureur fournissant à tous l’objet le plus important et le plus considérable de leur consommation, (je veux dire leurs aliments, et de plus la matière de presque tous les ouvrages,) a l’avantage d’une plus grande indépendance. Son travail, dans l’ordre des travaux partagés entre les différents membres de la Société, conserve la même primauté, la même pré-éminence qu’avait, entre les différents travaux qu’il était obligé dans l’état solitaire de consacrer à ses besoins de toute espèce, le travail qui subvenait à sa nourriture. Ce n’est pas ici une primauté d’honneur ou de dignité; elle est de nécessité physique. Le laboureur peut absolument parlant se passer du travail des autres ouvriers, mais aucun ouvrier ne peut travailler si le laboureur ne le fait vivre.”* This general proposition I endeavoured to illustrate in a former part of my course.† The remarks which I have now to offer, relate entirely to the policy of different nations, with respect to the distribution and commerce of landed property.
In the codes of the ancient legislators, one of the leading objects of attention appears to have been to secure as great an equality as possible in the appropriation of lands, by establishing various expedients to obviate the effect of those circumstances which have a tendency to disturb this equality.—For this purpose, Moses prohibited the perpetual alienation of landed property, and ordered that every fiftieth year, the land which had been sold during the preceding period should return to the former proprietor or his family.‡ —In the laws of the Athenians, we meet with a variety of provisions, plainly proceeding from the same views as influenced the Jewish legislator. Such were those which restricted the citizens in the power of making testaments,—those which established an equal division of property among the male children,—those which put it out of the power of the same person to succeed to two inheritances,—and many other regulations of a similar nature. On the subject of the laws of succession among the Greeks, a great deal of most important light has been thrown by Sir William Jones, in the Commentary annexed to his Translation of the Speeches of Isæus.
Among the ancient Germans, according to a passage in Tacitus, there appear to have been some regulations which tended to accomplish the same object, by a process still more simple and direct. The nation was considered as the proprietor of all the lands, which individuals held for a time; and at the end of each year, a new distribution of land was made, according to the varying circumstances of the population.* It is remarkable, as Mr. Hume observes in his History of England, that “among the Irish, as far down as the seventeenth century, land was divided in a similar way. If any of the sept died, his portion was not shared out among his sons, but the chieftain, at his discretion, made a new partition of all the lands belonging to that sept, and gave every one his share.”†
The earliest laws of the Romans deserve attention in the same point of view. By an examination of these, it is evident that their leading idea was to prevent the original number of proprietors from being diminished. This was more particularly the case with their laws relating to the succession of females, which have been very ingeniously illustrated by Montesquieu.‡
In modern times, the state of society which arose in Europe after the subversion of the western empire, gave rise to a very opposite policy, by suggesting as a necessary expedient against the rudeness and violence of the time, two institutions, which have both had a most extensive influence, not only on the distribution of land, but on the whole system of modern manners. These are the right of Primogeniture and the practice of Entails.
That a certain preference should be given by a parent to his first-born, who, in the order of nature, is marked out as the protector and guardian of his younger children, is so agreeable to the most obvious suggestions of the mind, that it is not surprising we should find traces of it in the history of the earliest ages. In the accounts of the primitive times, given in the Sacred Writings, the influence of the prerogative that has always been attached to seniority, is strongly illustrated by the stories of Jacob and Esau, and of Leah and Rachel. The same preference, too, occurs in the Pagan mythology, where, in consequence of this very circumstance, Jupiter is invested with the supremacy. This preference, however, does not seem to have existed among the Greeks, Romans, Britons, and Saxons, all of whom divided the land indiscriminately among the children. At Athens, the sons succeeded equally; but the daughters were endowed by their brothers. What share of the inheritance was allotted to the daughters, or whether it was regulated by any fixed rule, does not appear. Sir William Jones, in the learned Commentary mentioned above, thinks that this was left entirely to the affection and liberality of the brothers. By the Roman law, all the children, both male and female, were called equally to the inheritance of their father’s possessions.
From the custom of Gavelkind in Kent, which divides the land equally among all the sons, Selden concludes, that this was the general custom of the realm before the Norman Conqust, retained in this district, in consequence of the successful struggle which was made by the inhabitants to preserve their ancient liberties. The same opinion, also, is sanctioned by Sir William Blackstone.* Spelman, in his Glossary, under the word Gaveletum (Gavelkind,) refers the origin of this custom to Germany. “Prisca Anglo-Saxonum consuetudo e Germania delata, qua omnes filii ex æquis portionibus, patris adeunt hæreditatem; (ut filiæ solent, prole mascula deficiente.) Fratres similiter, defuncto sine sobole fratre; et nullo existente fratre, sorores pariter.” But it appears to be somewhat doubtful what the rules of succession in Germany really were. Mr. Barrington, in his Observations on the Statutes, with many others, follows on this point the opinion of Spelman, relying entirely on the following passage of Tacitus, which certainly does not warrant any such conclusion:—“Hæredes tamen successoresque sui cuique liberi: et nullum testamentum. Si liberi non sunt, proximus gradus in possessione fratres, patrui, avunculi. Quanto plus propinquorum, quo major adfinium numerus, tanto gratiosior senectus: nec ulla orbitatis pretia.”* It is not here said that the property was divided equally among the children, nor does it contain one expression at all inconsistent with the supposition, that the children first succeeded singly and in the course of their ages, in defect of these, the brothers, and on their failure, the uncles. On the other hand, another passage from Tacitus is quoted by Dr. Gilbert Stuart,† in proof of the right of primogeniture among them, which it seems to me impossible to explain away:—“Inter familiam, et penates, et jura successionum, equi traduntur: excipit filius, non, ut cetera, maximus natu, sed prout ferox bello et melior.” This testimony in favour of the eldest son, Dr. Stuart remarks, is the more strong, as being included in an exception to the general rule.
But whatever may have been the origin of the law of gavelkind, there cannot well be any diversity of opinion about its expediency as a political institution, more particularly when it is considered in connexion with that system of Political Economy which has been dictated by the circumstances of modern Europe. Of this, indeed, no proof more striking can be produced than the prosperous state of agriculture in the county where it still exists,—an effect which, as I mentioned formerly, [Vol. I. p. 168,] Mr. Arthur Young seems disposed to ascribe to the want of manufactures. The following information on this point, stated by Mr. Marshall in his Rural Economy of the Southern Counties, is extremely interesting and valuable:—“In the district of Maidstone, even among the tenantry, are found men of wealth and respectability; qualities for which the yeomanry of Kent have long been proverbial.
“Out of the Law of Gavelkind, this valuable order of men have principally risen. And seeing the present flourishing state of their county, after seven hundred years of experience, the wisdom of that law appears in a strong light. For although it has furnished the county with its present high state of society, with respect to the middle classes, it has not done away the gradations of rank, which appear to be necessary in every organized society.”*
Its moral tendency is illustrated by an anecdote mentioned by the same writer:—“Some years ago, in the district of Maidstone, a person, who died possessed of considerable property, left five sons, and a will, in which partiality to individuals was, of course, expected. Nevertheless, the brothers, harmonized by the influence of equal law, agreed, before the will was broken open, to inherit according to the natural law of their county; and the will was burnt with the seal unbroken.
“The operation of this equitable law in the instance under notice, has been highly favourable to society, which has thereby gained five wealthy, respectable, productive members,—yeomen of the higher class. Whereas, had the whole property devolved on one of them, even this one, probably, would have been rendered unprofitable to society, while the rest must have been thrown upon the world, to scramble for property in trade or the professions.”†
Another mode of succession, of which some traces still remain in England, is worthy of notice, as a yet more striking contrast to those ideas with which we have been familiarized by the prevailing laws and manners of modern Europe; I mean the custom of Borough-English, according to which the youngest son, and not the eldest, succeeds to socage tenements on the death of his father. Blackstone’s suggestion concerning the origin of this custom is not entirely destitute of probability.
“Perhaps a more rational account may be fetched (though at a sufficient distance) from the practice of the Tartars, among whom, according to Father Duhalde, this custom of descent to the youngest son also prevails. That nation is composed totally of shepherds and herdsmen; and the elder sons, as soon as they are capable of leading a pastoral life, migrate from their father with a certain allotment of cattle, and go to seek a new habitation. The youngest son, therefore, who continues latest with the father, is naturally the heir of his house, the rest being already provided for. And thus we find that, among many other northern nations, it was the custom for all the sons but one to migrate from the father, which one became his heir. So that possibly this custom, wherever it prevails, may be the remnant of that pastoral state of our British and German ancestors, which Cæsar and Tacitus describe.”*
What the circumstances were which first introduced the Law of Primogeniture in modern Europe, has been explained with great ingenuity by Mr. Smith in his Wealth of Nations.†
The obstacles which this institution opposes to the improvement of agriculture, have been so ably and distinctly pointed out by the same author, that I shall not here enter into the discussion. It is necessary that our speculations should apply as much as possible to the actual circumstances of the world, without regard to any ideal improvements of which they are susceptible. I cannot help, however, remarking, how much these restraints have a tendency to complicate the science of Political Economy, when studied with reference to our present situation. In truth, these are of infinitely greater moment than any restraints on the freedom of trade can possibly be; and while they exclude a variety of the general principles of the science from having an application to our present circumstances, others must, in consequence of their influence, as I apprehend, be admitted with great limitations. Some questions, too, of a very intricate nature, derive their origin entirely from the inconveniences which result from these discouragements of the natural distribution of land. Their influence, for instance, on the progressive cultivation of the soil, has rendered it necessary for the Legislature to interfere, for the accomplishment of that end, by a more indirect process than would otherwise have been necessary. In a commercial country, where there are no perpetuities, the attachment to land would be everywhere nearly proportioned to its intrinsic value; and a number of properties would be constantly brought to market, which would put an end to that monopoly price which land may be said at present to bear. Our existing institutions, by diverting small capitals from the purchase and improvement of land, contribute, more than any other single cause, to depress agricultural industry below the level of other employments of capital and labour.
In this manner, the free circulation of land would animate and invigorate the remotest extremities of the political body; while the natural course of human affairs would determine effectually those inequalities in the distribution of land and money, which are essentially connected with political subordination, and with the progressive improvement of the human mind. There is not, indeed, among all the different objects of policy, any one instance which illustrates more strongly the good sense of the old French maxim, Not to govern too much, than that of the history of landed property, fettered, among the ancients, by agrarian laws, and among the moderns, by institutions of an opposite tendency, and so seldom left to the operation of those natural causes which, wherever they have free scope, are found to be wisely and beneficently ordered for the improvement and prosperity of the human race. The Statute of Alienations, passed in the reign of Henry VII, is universally understood to have had a powerful influence on the subsequent progress, not only of agriculture, but of all the other arts; and however just Mr. Hume’s strictures may be on the motives which influenced that sovereign in the enactment of this law,* the great and beneficial consequences which have followed from his innovation on the former system, are indisputable. The Statute of Alienations, like all other wise improvements in legislation, accomplishes its end, not by giving any sudden shock to the prejudices and interests of the existing generation, but by giving natural causes a time and opportunity to operate, and by removing those artificial obstacles which check the progressive tendencies of society.
It may be proper to mention, before leaving this subject, that these general principles of Political Economy, though unquestionably just, as far as regards the wealth and population of a country, may probably require some limitation, when applied to an actually existing government such as ours, where an order of Nobility makes an essential part of the constitution. Some deviations from a perfectly free commerce of land may, in such cases, be expedient to secure the independence of hereditary legislators, and to accomplish whatever other purposes of their order may accord with the essential spirit of the constitution. It must never be forgotten, that wealth and population, though important objects of care, ought always to be regarded in their due subordination to those political arrangements on which the order of society depends. Even in such cases, however, the reasonable and equitable exception thus rendered necessary, should be carried no farther than the nature of the constitution requires.
To those who wish to prosecute this subject, I would recommend a perusal of a Sketch of the History of Entails by Lord Kames, subjoined to his Sketches. In the same publication you will find a proposal by that ingenious and public-spirited writer, for the gradual removal of this disorder, for such I must call it, the general scope of which is, to prohibit Entails for the future, and to delare those that had been already made, effectual only to such of the heirs as should be in existence at the date of the proposed Act. A similar declaration is suggested with regard to trust-deeds, without a restriction of which, Lord Kames says, that the other provision would be of little avail.* In conformity to the same wise and equitable respect for the interests of heirs actually existing, a committee was appointed, about fifty years ago, by a very respectable body in this country, the Faculty of Advocates, to frame such a Bill as that advised by Lord Kames. The general plan drawn up by the committee was very similar to that proposed by his Lordship; and according to the opinion of most persons at the time, the effect of this Bill, if passed into a law, would have been, that one half of the entails then existing would be sunk in twenty years, and nine-tenths of them in forty or fifty. A majority of the Faculty gave their sanction to this measure; but, in consequence of some circumstances, the detail of which would be uninteresting, the whole project, after it had excited much discussion, fell to the ground. That this, or some similar palliative of an evil so great and so rapidly progressive, would be soon followed by the happiest effects, it is impossible to deny.
To these very slight remarks on the Law of Entails, I shall make no apology for adding a few others on a subject to which it naturally leads the attention, though not immediately connected with the foregoing argument; I mean the question relative to the limits within which the power of Testamentary Succession should be confined by law. This, indeed, may be considered as a sort of digression from the plan to which I have confined myself, as it relates to movables equally with immovables. But the subject will be found, if I do not deceive myself, to reflect some additional light on certain general principles which have been already stated: at any rate, it will be useful by turning your thoughts to a political problem which has attracted the attention of many eminent persons among our contemporaries, and to which I shall have no other opportunity of attending before the conclusion of these lectures.
As the Law of Entails leaves too much to the fancy of the proprietor in regulating the succession to his property, so some modern politicians have gone into the opposite extreme, by affirming that individuals ought to have no power to dispose of their property, real or personal, by Will; and that all the rules of succession should be fixed by legislative authority. This seems to have been the opinion of Cocceii and of Turgot, and the same doctrine is maintained by the author of the Frederician code. It is not a little remarkable, that Sir William Blackstone has indirectly given his sanction to the equity of this project, by denying, not only that the right of testamentary bequests has any foundation in natural law, but by affirming that the case is the same with the right of succession of the children of a person deceased. “We are apt to conceive at first view, that this right has nature on its side; yet we often mistake for nature what we find established by long and inveterate custom. It is certainly a wise and effectual, but clearly a political establishment; since the permanent right of property, vested in the ancestor himself, was no natural, but merely a civil right.”* In so far as this reasoning rests on the supposition, that the personal right of property, vested in the ancestor himself, is not a natural one, I flatter myself, that it is sufficiently refuted by the observations which I have made in my other course, on the foundation of the right of property in the law of nature.† And as to the fact with respect to the right of inheritance, I believe it will be found, that the further back we carry our researches into the history of mankind, the stronger the general prepossessions of mankind will be in favour of the claims of children. With respect to the right of devising by testament, Sir William Blackstone’s assertion, although not so strikingly contradicted by the general prepossessions of mankind, will be found to be stated in much too strong and unqualified a manner. It is true, that wills do not exist among rude nations; for this plain reason, that it requires the aid of an established government to enforce the observance of them. But it does not appear from this that the right of testamentary bequest has no foundation in our sense of justice, any more than the respect paid by rude nations to the possessor in the case of stolen goods, proves that the right of property has no similar foundation. The truth, however, seems to be, that rude nations indirectly acknowledge the right of testamentary bequests, in the case, at least, of persons who have no children of their own, by the practice of adoption, which prevails almost universally in the rude periods of society, and which answers nearly the same purpose as disposing of property by will. It is, indeed, the only way, till regular government is established, by which it is possible to render a last will effectual; as, when it is resorted to, the property never wants a possessor.
It may be worth while to add to this remark, that in the earlier ages of society, the habits and associations produced necessarily by the circumstances and relations of domestic life, supply, in many cases, the want of municipal regulations, and of a strict police. When we look back to the accounts of the patriarchal times, recorded in the Sacred Writings, we find the religious reverence with which the parental authority was regarded securing to the death-bed injunctions of the head of the family, as complete an obedience as if he had still lived to enforce their execution.
Of this we have a fine instance in the conversation between the patriarch Jacob, and his son Joseph, recorded in the forty-eighth chapter of the Book of Genesis:—
“And Israel beheld Joseph’s sons, and said, Who are these?
“And Joseph said unto his father, They are my sons, whom God hath given me in this place. And he said, Bring them, I pray thee, unto me, and I will bless them.
“Now the eyes of Israel were dim for age, so that he could not see. And he brought them near unto him; and he kissed them, and embraced them.
“And Israel said unto Joseph, I had not thought to see thy face: and, lo, God hath shewed me also thy seed.
“And Joseph brought them out from between his knees, and he bowed himself with his face to the earth.
“And Joseph took them both, Ephraim in his right hand towards Israel’s left hand, and Manasseh in his left hand towards Israel’s right hand, and brought them near unto him.
“And Israel stretched out his right hand, and laid it upon Ephraim’s head, who was the younger, and his left hand upon Manasseh’s head, guiding his hands wittingly; for Manasseh was the first-born.
“And he blessed Joseph, and said, God, before whom my fathers Abraham and Isaac did walk, the God which fed me all my life long unto this day,
“The Angel which redeemed me from all evil, bless the lads; and let my name be named on them, and the name of my fathers Abraham and Isaac; and let them grow into a multitude in the midst of the earth.
“And when Joseph saw that his father laid his right hand upon the head of Ephraim, it displeased him: and he held up his father’s hand, to remove it from Ephraim’s head unto Manasseh’s head.
“And Joseph said unto his father, Not so, my father: for this is the first-born; put thy right hand upon his head.
“And his father refused and said, I know it, my son, I know it: he also shall become a people, and he also shall be great: but truly his younger brother shall be greater than he, and his seed shall become a multitude of nations.
“And he blessed them that day, saying, In thee shall Israel bless, saying, God make thee as Ephraim and as Manasseh: and he set Ephraim before Manasseh.”
In this beautiful picture of patriarchal manners, we have a proof, not only of the extent of the father’s power in regulating the succession to his property after his death, but in altering the rank and condition of his children, contrary to the arrangement pointed out by nature in the order of their birth, the religious reverence paid to his last injunctions, supplying the authority of laws and magistrates. We may remark also the effect of a very natural sentiment, in the peculiar latitude of bequest, which the patriarch found himself entitled to exercise with regard to that portion of his property which had been his own personal conquest.
“And Israel said unto Joseph, Behold, I die: but God shall be with you, and bring you again unto the land of your fathers.
“Moreover I have given to thee one portion above thy brethren, which I took out of the hand of the Amorite with my sword and with my bow.”
These observations may be of some use in correcting the erroneous conclusions into which writers on jurisprudence have been led by the vague idea which they annex to the phrase natural law,—a phrase which they sometimes employ to express the rules of justice in opposition to positive institutions, and sometimes to denote the practices of rude nations before the establishment of the power of the civil magistrate. That Sir William Blackstone himself has been partly misled by this circumstance, the following passage seems a sufficient proof:—“Wills and testaments, rights of inheritance and successions, are all of them creatures of the civil or municipal laws, and accordingly are, in all respects, regulated by them; every distinct country having different ceremonies and requisites to make a testament completely valid; neither does anything vary more than the right of inheritance under different national establishments.”*
If these reasonings were just, they would undoubtedly obviate one very strong objection to the project of Cocceii and Turgot, and would have the subject to be decided entirely on principles of political expediency; not that I think the ideas of these two ingenious writers could be vindicated even on such grounds, for if they were carried into effect, a variety of mischievous consequences seems unavoidable.
In the first place, the effect of such an arrangement would be to diminish the parental authority; a principle, however, which, on the other hand, notwithstanding its importance to the welfare of society, may undoubtedly be carried too far, and which it may be expedient to restrain within due bounds, by securing to children a certain proportion of their father’s effects, placed beyond the reach of the caprices and bad passions to which human nature is subject. The second effect would be to damp the spirit of industry, by rendering men indifferent about the acquisition of riches, and disposing them to spend them with indiscretion. The third is, the effect it would have in leading them to transfer their property to other countries, where the interests of the community, and the feelings of individuals, are treated with more respect.
I confess, too, it appears to me, notwithstanding what Blackstone has said on this subject, that our natural sense of justice, independently of any views of expediency, dictates, that the fruits of a man’s laborious industry, or what is the same thing in the present constitution of society, everything which is fully and completely his own property, he should be able to transfer by testament, agreeably to his own pleasure, a due provision being secured to those individuals whom he has been the means of bringing into the world, and to whom, independently of all considerations of their personal merit or demerit, he lies under obligations of the most sacred nature. But how far the right of bequest should extend in the case of landed property, is another question, upon which I do not presume to decide, any farther, than that it should not extend to any individuals who, at the death of the testator, were mere creatures of the imagination. Perhaps, as I hinted before, the principles of English jurisprudence on this head, even with all the disadvantages resulting from their institution of trust-deeds, which reprobates perpetuities, but allows the testator, as far as he sees proper, to exert the powers of bequest in favour of any heirs actually existing at the time, is as consonant as any other that can well be imagined, to those established habits of thinking and feeling, which, in the present state of the world, it is peculiarly incumbent on a wise legislator to respect; while, at the same time, its beneficial effects to society are incalculably great. Compared with our [the Scottish] system of policy in this respect, it leaves the commerce of land in a great measure free. With some slight restriction, therefore, the following sentiment of Sir William Blackstone is as just as it is elegantly expressed:—“The transmission of one’s possessions to posterity, has an evident tendency to make a man a good citizen and a useful member of society; it sets the passions on the side of duty, and prompts a man to deserve well of the public, when he is sure that the reward of his services will not die with himself, but be transmitted to those with whom he is connected by the dearest and most tender affections.”*
In the case of those who die intestate, these considerations do not apply. Here the arrangements of the Legislature are unembarrassed by the regard which is always due to the feelings, and even prejudices, which are interwoven with the national manners.
I could have wished to prosecute this subject a little farther, and to illustrate the happy effects which a general freedom of commerce and industry, in particular of landed property, produces on the moral and intellectual improvement of mankind. The field, however, is too extensive to be now entered on. I shall content myself, therefore, with remarking how widely the characters of men are diversified by the species of property to which they attach themselves, as well as by the proportions in which it is distributed among them. The various pursuits of private life are still more remarkable in the strongly contrasted manners of an agricultural and of a commercial nation. It is only in such a state of society as that in which we live, in which commerce, agriculture, and manufactures act and react upon each other, that the human character and genius can be completely developed. The inconveniences we labour under, which are comparatively few, arise chiefly from some legislative restraints, which might easily be removed, without injury to individuals, or damage to the state. Nor can there be a doubt, that the progress of human reason, which has already accomplished so much, will, gradually and slowly, correct these imperfections, and bring the established systems of Political Economy nearer and nearer to the order of nature.—(End of Interpolation from Notes.)
[* ] [Sect. iv., infra, Vol. X. pp. 60, 61.]
[† ] [See above, Political Economy, Vol. I. (Works, Vol. VIII.) p. 391.]
[* ] [Wealth of Nations, Book I. chap. vi.; Vol. I. p. 78, seq., tenth edition.]
[* ] [Wealth of Nations, Book I. chap. vii.; Vol. I. p. 82, tenth edition.]
[† ] [Inquiry into the Nature and Effect of the Paper Credit of Great Britain, Chap. viii. p. 193, seq.]
[* ] [Wealth of Nations, Book I. chap. vii.; Vol. I. p. 86, tenth edition.]
[* ] [Ibid. pp. 87, 88.]
[† ] [Ibid. p. 90.]
[* ] [Wealth of Nations, Book I. chap. x.; Vol. I. p. 151, seq., tenth edition.]
[† ] [For Mr. Smith’s illustrations of these, see Wealth of Nations, Book I. chap. x.; Vol. I. pp. 152-170, tenth edition.]
[‡ ] [Ibid.]
[* ] [Ibid. pp. 183, 184.]
[† ] [Ibid. pp. 183-201.]
[* ] [Sketches of the Natural, Civil, and Political State of Swisserland; in a Series of Letters to William Melmoth, Esq., 1779. Letter XXVII. pp. 338, 339.]
[* ] [Wealth of Nations, Book I. chap. x.; Vol. I. pp. 193-199, tenth edition.]
[* ] [History of England, Chap. xliv.]
[† ] [Ibid. chap. xlix.]
[* ] [Part I. chap. xv. p. 66, seq. Ed. Lond. 1702.]
[* ] [Wealth of Nations, Book I. chap. x.; Vol. I. p. 202, tenth edit.—See above, p. 12.]
[* ] [Ibid. pp. 209-212.]
[* ] [Ibid. Book IV. Introduction; Vol. II. p. 138, tenth edition.]
[† ] [Supra, Political Economy, Vol. I. p. 9, seq.]
[* ] [The abstract here alluded to by Mr. Bridges, as given in the notes taken by Mr. Bonar, is as follows:—“It was for a long time the opinion of statesmen, that as the wealth of an individual consists in the quantity of money which he possesses, or can command, and that as the more this is increased, the more is his wealth augmented, so the same thing must hold true of a nation; and, therefore, that the more gold and silver which can be accumulated in a nation, the more will its opulence and prosperity be increased. Hence one great object of government was, by means of laws and regulations, to prevent the exportation of gold and silver out of a country, and to draw into the country as much specie as possible. Experience, however, at last proved that all such attempts were unavailing; that where a superfluity of gold and silver was accumulated in a country, no laws or regulations could prevent its being sent abroad for the purchase of commodities. This is clearly proved in the case of Spain and Portugal, where all their sanguinary laws against carrying gold and silver out of the country have never prevented their exportation, as they come into these countries in greater abundance than their own necessities require. It has been computed that the Lisbon packet brings over to Britain on an average no less than £50,000 worth of gold and silver weekly. This may not be accurate, but there can be no doubt that all the laws and regulations that were made, never had the effect of detaining in the country the superfluous gold and silver that could not be made use of if it remained.
“Governments finding it impossible to restrain by force the exportation of gold and silver from a country, came next to turn their attention to what was termed the balance of trade. It was thought, that according to the value which these commodities imported by a nation bear to the commodities exported by it, as greater or less, so would the prosperity of the country rise or fall. If it was found that the value of the goods sent out was greater than that of those imported, then it was of course reckoned that the country was in a prosperous state,—but if it was otherwise, the country was deemed to be declining.
“For the ascertaining of the value of the commodities sent out and received, two methods were had recourse to, one was the Custom House books, the other the Rate of Exchange.”
(After referring to Mr. Macpherson’s views given in the text on the Custom House entries as testing a nation’s prosperity, Mr. Bonar proceeds:)—“The other criterion resorted to for this purpose,—the Rate of Exchange, though perhaps not quite so fallacious, yet is by no means a certain test. Many circumstances often occasion a rise or fall in the course of the Exchange, independent of the amount of goods actually exported and imported.
“Notwithstanding the fallacy of the modes of ascertaining the proportional value of commodities exported and imported, still the balance of trade, as it has been called, has been constantly the object of solicitous attention to governments. With a view to guard against what is supposed an unfavourable balance, it has been the aim of legislators, by laws and regulations, to restrain commerce with foreign nations, in such a manner as they thought most likely to prevent the consequence so much dreaded. This has been attempted chiefly in two ways:—the imposition of heavy duties, or even the total prohibition of importing the commodities of another nation,—and the granting of bounties and other encouragements to the exportation of native commodities. ‘These restraints upon importation, and encouragements to exportation, constitute,’ as Mr. Smith remarks, ‘the principal means by which the Commercial System proposes to increase the quantity of gold and silver in any country, by turning the balances of trade in its favour.’*
“Against this system Mr. Smith argues in the following satisfactory and conclusive manner:—
“ ‘By restraining either by high duties or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. . . . That this monopoly of the home market frequently gives great encouragement to that particular species of industry which enjoys it, and frequently turns toward that employment a greater share of both the labour and stock of the society, than would otherwise have gone to it, cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not perhaps altogether so evident. . . . No regulation of commerce can increase the quantity of industry in any society, beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord. Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command.’†
“ ‘As every individual endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual therefore labours to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows how much he is promoting it. . . . He intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. . . .
“ ‘What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
“ ‘To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.
“ ‘What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it, will not thereby be diminished, no more than that of the above mentioned artificers’, but only left to find out the way in which it can be employed with the greatest advantage. It is certainly not employed to the greatest advantage when it is thus directed towards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or less diminished when it is thus turned away from producing commodities evidently of more value than the commodity which it is directed to produce: according to the supposition, that commodity could be purchased from foreign countries cheaper than it can be made at home. It could therefore have been purchased with a part only of the commodities, or what is the same thing, with a part only of the price of the commodities, which the industry employed by an equal capital would naturally have produced at home. . . .
“ ‘By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap or cheaper than in the foreign country. But it will by no means follow that the sum total either of its industry or of its revenue can ever be augmented by any such regulation. . . . Though for want of such regulations the society should never acquire the proposed manufacture, it would not upon that account necessarily be the poorer in any one period of its duration. Its whole capital and industry might still have been employed, though upon different objects, in the manner the most advantageous at the time. . . .
“ ‘The natural advantages which one country has over another in producing particular commodities, are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hot-beds, and hot walls, very good grapes can be raised in Scotland; and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of Claret and Burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment, thirty times more of the capital and industry of the country, than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three hundredth part more of either.’*
“The reasoning through all this passage appears to me clear and satisfactory; and from the whole it is plain, and may be assumed as certain truth, that the system of forcing, by restraints upon foreign commodities, a part of the capital of a nation from its natural direction, instead of being beneficial, must be highly prejudicial.
“One exception only is made by Mr. Smith, that is, ‘when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The Act of Navigation, therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others by heavy burdens upon the shipping of foreign countries.’ ”†
(After Mr. Stewart’s remarks on this exception, Mr. Bonar continues:)—“Besides the restraining, or totally prohibiting the importation of certain species of commodities for the encouragement of domestic production, the Commercial System has devised another expedient for the purpose of preventing what has been supposed the unfavourable balance of trade; that is, the granting extraordinary encouragements to the exportation of commodities by the means of drawbacks and bounties.
“ ‘Of these,’ Mr. Smith justly remarks, ‘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 domestic 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 that employment of its own accord, but only to hinder the duty from driving away any part of that share to other employments. . . .
“ ‘The same thing may be said of the drawbacks upon the re-exportation of foreign goods imported.’‡
“The case, however, is different in respect to bounties. These are expressly given ‘to enable merchants and manufacturers to sell their goods as cheap or cheaper than their rivals in the foreign market. . . . We cannot, it is said, force foreigners to buy our goods; the next best expedient, therefore, it has been thought, is to pay them for buying. It is in this manner that the mercantile system proposes to enrich the whole country. Bounties, 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. . . . 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, perhaps to begin a trade of which the expense 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. . . . 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 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.’ ”]*
[* ] [Wealth of Nations, Book IV. chap. i.; Vol. II. p. 175, tenth edition.]
[† ] [Ibid. chap. ii. p. 176, seq.]
[* ] [Ibid. pp. 181-185.]
[† ] [Ibid. p. 192.]
[‡ ] [Ibid. p. 252, seq.]
[* ] [Ibid. pp. 261-263.]
[* ] [Annals of Commerce, &c., 1805, Part III. Vol. iii. pp. 341-344.]
[* ] [Essays, Vol. I.]
[* ] [Principles of Trade, sect. 38; Works, by Sparks, Vol. II. p. 401.]
[* ] [Money Answers all Things, &c., pp. 97-99.—See below, Vol. X. p. 89.]
[† ] [Ibid. p. 45.]
[* ] [De l’Etat de l’Europe, &c., Partie III. chap. iv. p. 338, seq., orig. edit.]
[* ] [Ibid. p. 329, seq., orig. edit.]
[* ] [Ibid. pp. 348, 349, orig. edit.]
[* ] [Address on the Maritime Rights of Great Britain, Part III. p. 92, seq. second edition.]
[* ] [Ibid. pp. 94-96.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 263, seq., tenth edition.]
[1 ] Pp. 144, 145. [Edition 1766.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 310, tenth edition.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 292, tenth edition.]
[* ] [Ibid. p. 295.]
[1 ]Théorie de Luxe, Tom. I. p. 5, quoted by Young in his France, p. 482.
[1 ] Hume, Vol. II. p. 126.—Dirom, p. 29.
[1 ] Erskine’s [Institutes,] p. 488.
[2 ] Eden, On the Poor, Vol. I. p. 18.
[1 ] Smith, Vol. I. p. 277.—[Book I. chap. xi. Vol. I. p. 288, tenth edition.]—See the Table of Prices in the Wealth of Nations, [Vol. I. p. 398, seq.]
[1 ] Eden, On the Poor, Vol. I. p. 60, seq.
[* ] [P. 182, seq.]
[† ] [Ibid.]
[2 ] Vol. I. p. 277, Irish edition.—[Book I. chap. xi.; Vol. I. p. 288, tenth edit.]
[* ] [Ibid. p. 309.]
[† ] [The preceding sentence stood originally thus:]—“Nor is it unamusing to those who reflect on the unrestrained abuse which the circumstances of our own times have so long encouraged in the ignorant and unprincipled, against the best benefactors of the human race, to perceive the secret influence which the writings of a Turgot and a Smith begin to assume over the councils of nations.”
[* ] [In the Notes taken of this course in a subsequent year by Mr. Bridges, another Report of a Committee of the House of Peers is referred to, as having been quoted by Mr. Stewart;—that, to wit, on the Dearth in 1799-1800. This, however, it is not thought necessary to adduce articulately.]
[1 ]Annals of Agriculture, Young’s France, p. 483.
[1 ]Nouvel Abrégé Chronologique de l’Histoire de France, T. H. pp. 81-184.
[2 ] Dupont, p. 86.—[Œuvres de Turgot, Tome I. p. 95.]
[* ] [Œuvres, Tome VI. pp. 120-291.]
[3 ] Condorcet, p. 49.
[† ] [Œuvres de Turgot, Tome I. p. 99.]
[1 ] He had before been appointed Minister of the Marine, but held the office only five weeks. Abrégé Chron. Vol. II. p. 178. Dupont, p. 124.—[Œuvres de Turgot, Tome I. p. 145.]
[2 ] Condorcet, p. 73.
[* ] [See Œuvres, Tome VII. p. 10, seq.]
[1 ] “Se reservant au surplus sa Majesté, de donner des marques de sa protection spéciale, à ceux de ses sujets qui auront fait venir des blés étrangers dans les lieux du Royaume où le besoin s’en seroit fait sentir; n’intendant sa Majesté statuer quant à présent et jusqu’à ce que les circonstances soient devenues plus favorables, sur la liberté de la vente hors du Royaume.”—[Œuvres, Tome VII. p. 27.]
[2 ] Necker.
[* ] [I have not been successful in finding the speech in the place designated. The edition which I have examined is dated London, 1766.]
[* ] [The original will be found in the Dictionnaire Philosophique, Art. Blé, Sect. iii.]
[1 ] Young’s France, p. 482.
[1 ] “Les accaparemens sont la premiere cause à laquelle la multitude attribue la cherté des grains, et en effet on a souvent eu lieu de se plaindre de la cupidité des spéculateurs.”
[* ] [Trave’s in France, p. 477.]
[* ] [Ibid. p. 476.]
[1 ] P. 293.
[1 ] Young’s France, p. 479.
[* ] [Travels in France, p. 485, note.]
[* ] [This calculation Sir James Steuart takes from a previous part of his work, Book I. chap. viii.; Works, Vol. I. p. 53, seq.]
[* ] [Political Œconomy, Book I. chap. xvii.; Works, Vol. I. pp. 143-146.]
[* ] [Ibid. pp. 148, 149.]
[* ] [Ibid. pp. 149, 150.]
[1 ] I state this on the authority of Vaughan, for I have not been able to find the passage in Necker.
[2 ]Sur La Législation des Grains, p. 58.
[* ] [Travels in France, p. 484, seq.]
[† ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 318, tenth edition.]
[* ] [P. 47, seq. et alibi.]
[* ] [Part VI. chap. ii. sect. 2, sixth and later editions.]
[† ] [Account of the Life and Writings of Adam Smith, 1793, sect. iv.; infra, Vol. X. p. 64.]
[1 ] Lord Kenyon.—See Ferguson’s Memorial.
[* ] [Book IV. chap. v.; Vol. II. p. 309, tenth edition.]
[1 ] Mr. Burke.
[2 ] See the Newspapers of the above date.
[1 ] From the Star for 4th August 1800; but at second hand, but from what original newspaper is not stated.
[1 ] From the Morning Chronicle, August, 1800.
[* ] [1800? No reference for this case has been given.]
[1 ] [Travels in France,] pp. 480, 481, note; [not an exact quotation.]
[1 ] “London Flour Company.”—“The Earl of Liverpool rose, he said, to move two or three clauses, with a view to satisfy the minds, and quiet the apprehensions of those who seemed to be alarmed at the idea of the Company having so long a term of duration, before they could be dissolved, as ten years; the first clause, therefore, that he should move, was a clause to enable his Majesty, with the advice of his Privy Council, to dissolve the said Company at six months’ notice, whenever it should be made appear to him that they had abused their powers, or been guilty of practices injurious to the public; and to make room for that clause, he would previously move to leave out all the words of limitation, and to insert the clause he had drawn up in place of them.—Agreed to.
“The next clause his Lordship said he should move, went to put an end to the jealousy stated to prevail, lest the Company should become corn merchants and corn importers, which they themselves professed they had no intention or inclination of doing, and which, indeed, the very words of the Bill would be found not to warrant. As, however, it must be thought right that the Company should have a power to sell their damaged wheat, or wheat under particular circumstances, in the clause that he was about to move, the Company were restricted from selling more than 1000 quarters in any one week. His Lordship moved a clause to that effect, which was agreed to.
“The third clause which he meant to introduce, was to gratify the wishes of the bakers respecting the standard wheaten bread. His Lordship said it was a singular circumstance, that it was asserted that such bread was not suited to the taste of this vast metropolis, though speaking with respect to the common people, it was fitted for individuals from all the different provinces and counties in the kingdom, in many of which no other than household bread was ever tasted. Yet these very individuals, if the fact were true as asserted, changed their taste on coming to town, and nothing, forsooth, but fine white bread could be relished by them, though according to the opinion of many judges, it was a worse and less wholesome bread than the brown bread. His Lordship said, however, as the assize of bread stood at present, the standard wheaten bread could not be made by the common baker, and therefore the bakers apprehended that the sale of brown bread near their shops would lessen their custom, as it would be substituted in lieu of their fine bread. He owned, he thought, there was some weight in this apprehension, though the effect of it would be trifling indeed, as he had seen from a variety of calculations upon the subject. He would, however, move a clause, enabling the bakers to make the standard wheaten or household bread, in the same manner as the Company were authorized to do by the Bill, by enabling the Magistrates to set an adequate assize thereon. This would add to the competition, and at the same time that the increased consumption of the household bread would lessen the consumption of the fine bread, as it would go farther, so would it, in a certain proportion, diminish the necessity for so large an importation of foreign wheat, which certainly was an object extremely desirable. Having thus explained the object of the clause, his Lordship moved it, and it was agreed to.”
“The Earl of Liverpool said, he wished to say but a very few words: and first he declared, that after the fullest consideration of the Bill in every point of view, he was satisfied that the principle was right, and he trusted that under the provisions of the Bill and the clauses that he had moved, not only that all alarm and apprehension of danger from it would be set at rest, but that the effect of the measure would be found to be what the gentlemen who projected sincerely meant it to be, of great use and advantage to the public. He would therefore move that the Bill be read a third time, The Bill was read a third time, passed, and ordered to be sent down to the Commons, with the amendments.”—[Cut from a Newspaper, but no reference given.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 311, tenth edition.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. pp. 268, 269, tenth edition.]
[1 ]Report of the Committee of the Town-Council of Glasgow on the Corn Bill, &c. &c., 1791.
[1 ] See Dawson’s Thoughts, &c.
[1 ] Dawson’s Thoughts, &c. See also Report of the Town-Council of Glasgow, [on the Corn Bill, 1791,] pp. 7, 8,—(both very confused on this head.)
[* ] [See Joseph Scaliger’s Epigram, De Mirandis Bataviæ, supra, Political Economy, Vol. I. (Works, Vol. VIII.) p. 284.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. pp. 312, 313, tenth edition.]
[† ] [Ibid. p. 313.]
[* ] [Pp. 144, 145, edit. 1700.]
[† ] [See above, Political Economy, Vol. I. (Works, Vol. VIII.) p. 202.]
[* ] [Remarks on the Deficiency of Grain occasioned by the Bad Harvest, 1799, 1800.]
[† ] [An Address to the Good Sense and Candour of the People in behalf of the Dealers in Corn, &c., 1800.]
[* ] [Wealth of Nations, Book IV. chap. v.; Vol. II. p. 313, seq., tenth edition.]
[1 ] P. 33.—[Lond. ed. 1766; p. 29, Edin. ed. 1758.]
[* ] [Political Estimate, Chap. xii. p. 264, edit. 1812.]
[† ] [Ibid.]
[* ] [Book II. chap. iii.; Vol. II. p. 67, footnote.]
[* ] [Dispersion of the Gloomy Apprehensions, &c., 1797, p. 37, seq.]
[* ] [Wealth of Nations, Book IV. chap. v. p. 278, seq., tenth edition.]
[† ] [Ibid. p. 264.]
[* ] [Political Estimate, Chap. xii., p. 259, seq., edition, 1812.]
[* ] [On Population, Book III. chap. ix.; Vol. II. p. 235, seq., third edition, 1806.]
[* ] [Ibid. Book III. chap. x.; Vol. II. p. 272, seq., third edition.]
[† ] [Dispersion, &c., p. 38.]
[1 ] According to Mr. Young, the average produce of wheat, as hitherto ascertained by the Board of Agriculture, appears to be 23 bushels per acre. From the minutes which he himself collected thirty years ago, in the course of three agricultural tours through England, (extending to about 5000 miles,) he was led to state it at twenty-four bushels; and the result of his remarks during various tours, made during the last fifteen years, was precisely the same, confirming the accuracy of his former inquiries to a degree which exceeded his expectations.
[2 ] Young’s Pamphlet, [Question of Scarcity, &c.,] p. 42.
[1 ] Young, [Question of Scarcity, &c.] p. 56.
[1 ] Quoted by Young, [Question of Scarcity, &c.,] p. 56.
[* ] [Ibid. Supplement, chap. v. pp. 198, 199, edition, 1766.]
[1 ] Young, [Question of Scarcity, &c.] p. 56.
[* ] [Ibid.]
[1 ] That occasional inconveniences and hardships may be felt in consequence of improper combinations among corn-merchants, (such as those which have been lately so loudly complained of in the London market,) cannot be denied; but the possibility of these combinations arises from the general prejudices against the Corn-trade, which keep it in the hands of a comparatively small number of speculators, who may be presumed, from the very circumstance of their engaging in it, not to regard character as their principal object.
[1 ] The summer of 1800 has been the most remarkable for drought and heat of any I remember. The harvest is already (August 13) considerably advanced. Last year, on the 2d of October, I saw the greater part of the barley in Berkshire still standing and, more than three weeks afterwards, a considerable proportion of the crops in Yorkshire in the fields.
[* ] [Supra, p. 84.]
[† ] [Question of the Scarcity, &c., 1800.]
[1 ] In Mr. Young’s Political Arithmetic, (published in 1774,) he expresses himself more explicitly on this point. See p. 194.
[1 ] Davenant’s Works by Whitworth, Vol. II. p. 224.
[2 ] See [C. Smith’s] Tracts on the Corn Trade, [1766,] p. 50; and Young’s Political Arithmetic, p. 194.
[1 ] On the margin of a copy of Mr. Young’s Pamphlet, On the Scarcity, (lent to me by Lord Lauderdale,) Davenant’s statement now under consideration is transcribed, but without any comment. See p. 71 of that copy.
[1 ] Arthur Young, Pamphlet, On the Scarcity, [1800,] p. 71.
[2 ] Chalmers’ Estimate, pp. 273, 274. [Chap. xii. p. 259, edition 1812.]
[* ] [From the Notes of Mr. Bridges, it appears that Mr. Stewart adjourned all consideration of the influence of these exertions to a subsequent part of the course,—the chapter, to wit, on the Poor Laws,—which seems to have been, for the most part at least, written at a later date than the existing manuscripts of these Lectures. At the risk of a little repetition, these further observations will be given afterwards from the Notes of Mr. Bridges. The following additional remarks on Davenant’s Table are also supplied from the same source:]
(Interpolation from Notes.)—After what has been now said, it is hardly necessary for me to add anything with respect to the Table itself. The use, however, which has lately been made of it by Mr. Brand, induces me to add, in farther confirmation of what has been already urged with regard to it, that if it is to be understood as furnishing a rule of computation in this country at all periods, it must on the same principle be equally applicable to all countries. So far, however, is this from being the case, that I may venture to assert, that the relation between produce and price, or to speak more explicitly, the relation between a deficiency of the former and an increase of the latter, will everywhere vary according to the political condition of nations, the established system of law with regard to the commerce of grain, the habits of the people in the article of food, the methods of economizing it which they possess, the measure of the public charity, and many other circumstances. The following facts I mention, on the authority of a traveller, of whose accuracy and judgment I have the highest opinion. It is directly in point to the question; and I have no doubt that the same conclusion to which it leads, would be confirmed in every case where inquiries were made. “The summer of 1799, when I was in Sweden, must have been a very fatal one. In the provinces bordering on Norway, the peasants called it the worst that they had ever remembered. Cattle had all suffered extremely during the winter, from the drought of the preceding year; and in July, about a month before the harvest, a considerable portion of the people was living upon bread made of the inner bark of the fir, and of dried sorrel, absolutely without any mixture of meal to make it more palatable and nourishing.” I have borrowed this statement from an Essay on Population,* and it seems to authorize me in concluding, that the degree of scarcity then prevailing in Sweden, was greatly beyond anything which has occurred within memory in this country. And yet it appears from a pamphlet published a few years ago by the same author, [An Investigation of the Cause of the present High Price of Provisions, 1800,] that the price of rye, which may be considered as the chief article of food in Sweden, had not risen above double the usual average; whereas, in this country, wheat rose, at the same time, above three times its usual price.
On what conceivable principle, then, shall Dr. Davenant’s Table be applicable to all the different variations of circumstances in this country, when it appears that the relation between price and produce varies so widely in the course of the same year in different parts of Europe?
These considerations strike me so forcibly, that if by any accidental coincidence Dr. Davenant’s Table should be found to correspond with what has actually been the case, I should only consider it as an additional proof of the vagueness of the data upon which it was formed.
The Essay of Mr. Brand, above alluded to, is entitled, A Determination of the Average Depression of the Price of Wheat in War below that of the preceding Peace, from the Revolution to the end of the last Peace. The chief, and indeed the professed design of this author, who is a clergyman of the Church of England, is to demonstrate by mathematical calculations, the happy influence of war on the internal prosperity of the country. The general result of his investigations is, that war reduces the prices of all necessaries, in so far as these are not directly taxed. In ascertaining the prices of every particular year, he has availed himself of what mathematicians call the method of Interpolation; by means of which, when judiciously employed, many things which it may be difficult to determine by actual observation at the moment of their occurrence, are determined, accurately enough, by certain observations made before and after that period. A similar method of investigation had, before the publication of Mr. Brand’s pamphlet, been introduced into Political Economy by a late very ingenious writer, Sir George Shuckburgh, in the construction of a Table, published in the Philosophical Transactions,* entitled, A Table exhibiting the Prices of Various Necessaries of Life, together with those of Day-Labour, at different Periods from the Conquest to the Present Time; deduced by Interpolation.
To such an application of this method, supposing always that due allowances are made for all the various circumstances by which our data may be influenced, no reasonable objection can be made. And whatever doubt may be entertained with respect to the justness of this author’s results, it must be owned that his idea was happy and philosophical; and the prosecution of it may in time throw light upon various questions connected with this branch of science. How far the same method has been applied with judgment and fairness by Mr. Brand, it is not necessary for me to inquire particularly. It is amusing, however, to observe with what mathematical precision his inferences in several instances correspond with the actual state of the market when he published. But however little faith is to be given to his different conclusions, I flatter myself that some good may result from his work, as a new attempt to bring this question again under discussion, should it lead to nothing more than a correction of the public apprehensions, arising from the belief, that the increase of prices is always in proportion to the deficiency, and that when they rise beyond that rate, there is ground to suspect undue practices on the part of farmers and corn merchants. In process of time, something still more advantageous may result from the inquiry. At all events, the attempts of Mr. King and Dr. Davenant, to collect general rules on this subject, are highly meritorious; and although the data on which all such inquiries proceed must necessarily be very precarious, their example is sufficient to encourage a renewal of the investigation, with the help of those additional lights, how imperfect soever they may be, of which we are now in possession. Mr. Chalmers remarks, that “if the statutes of the 31st and 23d of the present King, had produced no other benefit to the country than establishing an effectual mode for ascertaining the average price of corn, and thereby prevented causeless alarms, they had merited the praise of most useful regulations.”* I do not mean to affirm that the means provided for ascertaining prices by these acts, particularly those which relate to Scotland, are well fitted for accomplishing their purpose. But the object surely is not of very difficult accomplishment; nor indeed does anything more than the will of the Legislature seem necessary for obtaining an accurate account of the number of acres sown with wheat and other grain, in every parish of the kingdom, in order to infer an average of the prices of the kingdom. From these data, if regularly ascertained for a series of years, some results might be deduced of great practical utility.
The passage in Dr. Davenant which led me into these observations, has been again referred to of late by Mr. Thornton, in his Inquiry into the Nature and Effects of the Paper Credit of Great Britain. While this author, with that soundness of judgment which appears to me to characterize all his speculations, avails himself of Dr. Davenant’s Table, he does this, as he expressly mentions, merely for the purpose of giving some general idea of the vast effect which a very small failure in the supply of corn produces on the price of that necessary of life.
Having mentioned this publication of Mr. Thornton, I take this opportunity of recommending it to your perusal, as containing the clearest and most satisfactory illustration which I have ever yet met with, of some of the most important fundamental principles connected with the theory of paper credit. A variety of misapprehensions, into which Mr. Smith, Mr. Hume, and Montesquieu, had fallen on this subject, are corrected by Mr. Thornton, with due respect to the merits of these eminent authors, and many interesting details are introduced by him, which nothing but a perfect acquaintance with the particular operations of merchandise could have enabled him to give. A few of his conclusions, to which I cannot altogether assent, I could have wished to have examined here, particularly the effects of a fluctuation in the quantity of the paper currency on the price of commodities; [See above, Political Œconomy, Vol. I. App. ii.;] but the advanced period of the season will hinder me from entering into this and some other interesting subjects of inquiry.—(End of Interpolation from Notes.)
[* ] [By Malthus, Book II. chap. ii.; Vol. I. p. 345, third edition.]
[* ] [Volume for 1798, p. 176.]
[* ] [Political Estimate, Chap. xi. p. 204, edition 1812.]
[1 ] Vol. I. pp. 397, 398.—[Political Œconomy, Book II. chap. xxviii.; Works, Vol. II. pp. 82, 83.]
[2 ] See Arthur Young, Question of Scarcity, p. 62.
[3 ] [Author’s Memorandum.]—Leave twenty pages blank.—Public Kitchens.—Edinburgh.—See volume marked on the back Howlett’s Pamphlets.—[See, however, the interpolation on the Poor Laws from the Notes of Mr. Bridges, postea.]
[1 ] Young’s Pamphlet.
[1 ] With respect to the advantages of rice as a substitute for flour.—See Reports on the Poor, p. 187.
[1 ] See Davies, p. 37. [Case of Labourers in Husbandry Stated and Considered, 1795, by David Davies, Rector of Barkham, Berks.]
[1 ] Paper by the Bishop of Durham.
[2 ] Beddoes’ Lectures, &c., p. 69.
[1 ] Gibbon, [Decline and Fall, chap. xliv., footnote.]
[* ] [Mr. Stewart refers to Dr. Gillies. See a note in his translation of the Politics of Aristotle, p. 38, seq., first edit.]
[† ] [Cap. xlii.]
[‡ ] [Cap. xxv.]
[* ] [Deuteronomy, xxiii. 19, 20.]
[† ] [Decline and Fall, Chap. xliv., footnote.]
[* ] [Montesquieu, Esprit, &c., XXI. xvi.]
[1 ]British Critic, for April 1798.
[1 ] Vol. VIII. p. 87, [Chap. xliv.]
[* ] [See Psalm xv. 5.]
[* ] [Epistolæ. Quoted also in Dissertation, (Works, Vol. I.) p. 530.]
[* ] [Letter I. Works, Vol. III. p. 3.]
[† ] [Œuvres, Tom. V. p. 88.]
[1 ] Published in the second volume of a work entitled, Recherches et Considérations sur les Finances de France depuis l’Année 1595, jusqu’à l’Année 1721.
[1 ] Locke’s opinion on the subject seems to coincide with this very nearly. See his Works, Vol. II. p. 31. [(First) Considerations on Interest and Money.]
[* ] [Wealth of Nations, Book II. chap. iv.; Vol. II. p. 44, tenth edition.]
[1 ]Political Œconomy, [Book IV. chap. iv.; Works, Vol. III. p. 158.]
[2 ] Mr. Locke, too, rests his opinion of the expediency of these laws nearly on the same consideration, Vol. II. p. 31. [(First) Considerations on Interest and Money.]
[* ] [Defence of Usury, Letter iii.; Works, Vol. III. p. 6.]
[* ] [Book II. chap. iv.; Vol. II. pp. 44, 45, tenth edition.]
[* ] [Ibid. Book I. chap. x.; Vol. I. p. 177, tenth edition.]
[* ] [Defence of Usury, Letter xiii.; Works, Vol. III. p. 22.]
[† ] [Wealth of Nations, Book II. chap. iii.; Vol. II. p. 20, tenth edition.]
[* ] [Ibid.; Vol. II. p. 27, tenth edition.]
[† ] [Ibid. Book IV. chap. ii.; Vol. II. p. 182, tenth edition.]
[* ] [Defence of Usury, Letter xiii.; Works, Vol. III. p. 26.]
[* ] [Treatise on the Police of the Metropolis, Chap. v. p. 128, seventh edition.]
[* ] [Book II. chap. iv.; Vol. II. p. 45, tenth edition.]
[* ] [Defence of Usury, Letter vii.; Works, Vol. III. p. 12.]
[1 ] Eden, On the Poor, Vol. I. p. 399.
[* ] [Peter Colquhoun, LL.D.]
[† ] [Chap. v. p. 116, seventh edition.]
[* ] [The last sentence inserted, and the following passage within round brackets, left out in the last correction.]
[1 ] Hamilton’s Merchandise, p. 537.
[2 ]Blackstone, Vol. II. p. 458.
[1 ] With respect to the principles of the Civil Law concerning the fœnus nauticum, the annotations of Henry de Cocceii on Chapter xii. Book ii. of Grotius, De Jure Belli, &c., are worthy of a perusal. See likewise Lampredi. In general, it appears, that the code of Justinian, while it confined persons of illustrious rank to the moderate profits of four per cent., and pronounced six to be the ordinary and legal rate of interest, allowed eight for the convenience of manufacturers and merchants, and twelve (or usuræ centesimæ) in the case of loans risked on the hazardous issue of nautical adventures.
With respect to modern nations, the fact is thus stated by Lampredi:—“Consuetudine et moribus invaluit, ubivis gentium, ut jus antiquum revocaretur, et in Bodemeria,” (a word of German origin, corresponding to our term bottomry,) “ceterisque negotiis maritimis periculi pretium nullis esset limitibus circumscriptum, atque adeo usura etiam plusquam centesima in pactum deduci licite posset.”—Vol. I. p. 414.
[* ] [Book IV. Title iv. 76.]
[1 ] [Edition of Blackstone’s Commentaries,] Vol. II. p. 458.
[1 ] Vol. II. p. 6.—[First Considerations of Interest and Money.]
[2 ] P. 340.—Mem:—To consult Locke’s arguments on the other side of the question.
[1 ]Monthly Review, Vol. XLI. p. 176.
[2 ] Vol. II. p. 31.—[First Considerations of Interest and Money.]
[* ] [Réflexions sur la Formation et la Distribution des Richesses, § xcv. Œuvres, Vol. V. p. 123.]
[1 ] Gale’s Second Essay on Public Credit.
[1 ] Lib. V. Epist. ult.
[2 ] See Grotius, Lampredi, and H. Cocceii.
[3 ] [H. Cocceii ad] Grotium, De Jure Belli, &c., Lib. II. cap. xii. 22. [Edit. Lausannæ, 1751, Tom. II. p. 721.]
[* ] [Defence of Usury, Letter xi.; Works, Vol. III. p. 18.]
[* ] [Turgot, Sur la Formation et la Distribution des Richesses, § v.; Œuvres, Tom. V. p. 6.]
[† ] [Supra, Political Economy, Vol. I. (Works, Vol. VIII.) p. 258, seq.]
[‡ ] [Leviticus, xxv. 10.]
[* ] [Germania, cap. xxvi.]
[† ] [Chap. xlvi. James I.]
[‡ ] [Esprit des Loix, Liv. xxvii. Partie II. p. 167, ed. Genève, 1749.]
[* ] [Treatise on the Law of Descents: Law Tracts, Vol. II. pp. 189-248, orig. edit.]
[* ] [Germania, cap. xx.]
[† ] [View of Society in Europe; Authorities, Book I. chap. ii. sect. ii. p. 220, edit. 1778.]
[* ] [District of Maidstone, Division III. § ii.; Vol. I. pp. 53, 54, edit. 1798.]
[† ] [Ibid. pp. 54, 55.]
[* ] [Commentaries, Book II. chap. vi.; Vol. II. p. 83, fourteenth edition.]
[† ] [Book III. chap. ii.; Vol. II. p. 82, seq, tenth edition.]
[* ] [History of England, Chap. xxvi.]
[* ] [Sketches, Appendix, Sketch i.; Vol. II. p. 490, 4to edition.]
[* ] [Commentaries, Book II. chap. i.; Vol. II. p. 10, fourteenth edition.]
[† ] [Supra, Works, Vol. VII. pp. 260-273.]
[* ] [Commentaries, Book II. chap. i.; Vol. II. p. 12, fourteenth edition.]
[* ] [Commentaries, Book II. chap. i.; Vol. II. p. 10, seq., fourteenth edition.]