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• Lectures On Political Economy.
• Part First.: of Political Economy Proper. (continued.)
• [continuation of Book Second.]: [of National Wealth.]
• [chapter III.]: [of Trade.]
• Sect. I.—: Of the Freedom of Trade.
• [sect. II.]—: Of the Corn Trade.
• [sect. III.]—: On Subjecting the Commerce of Money to the Regulation of Law.
• [sect. IV.—: On Subjecting the Commerce of Land to the Regulation of Law.]
• [chapter IV.]: Of Taxes.
• [sect. I.—: Of Taxes In General.—introductory.]
• [sect. II.]—: Taxes Upon Land. *
• [sect. III.]—: Taxes Upon the Rent of Houses.
• [sect. IV.]—: Taxes Upon Profit, Or Upon the Revenue Arising From Stock.
• [sect. V.—: Conclusion.]
• [book Third.]: [of the Poor—their Maintenance.]
• [chapter I.]: [historical Sketch of the Poor-laws.]
• [sect. I.—: Of the English Poor-laws.]
• Sect. II.—: Of the Scottish Poor-laws.
• [chapter II.]: [subsidiary Measures For the Relief of the Poor.]
• [sect. I.—: Of Charity Workhouses.]
• [sect. II.—: Of Benefit Clubs, Or Friendly Societies.]
• [sect. III.—: On the Distresses of the Poor, In So Far As They Proceed From Their Own Evil Habits.]
• [book Fourth.]: [of the Education of the Lower Orders.]
• [part Second.]: [of the Theory of Government, Or Politics Proper. * ]
• [chapter I.]: Of the Simple Forms of Government.
• [sect. I.]—: Introduction.
• [sect. II.—: Of the Simple Forms of Government In Special.]
• [chapter II.]: Of Mixed Governments.
• [sect. I.—: Of Mixed Governments In General.]
• [sect. II.—: On, In Special; and Particularly] of the English Constitution.
• Appendices to Parts First and Second.
• Appendix I.—: To B. II. Ch. III. § 3, P. 114.
• Quotation On the Exportation of Grain, From Howlett.
• Appendix II.—: To Part I., P. 326.
• A Conclusion of the First Three Books of Political Economy,—strictly So Called.
• Appendix III.—: To Part II., P. 452.
• An Earlier Conclusion of Politics Proper.

SECT. I.—

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.

[SUBSECT. I.—

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.

[SUBSECT. II.—

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.)

[* ] [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.]