Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow ESSAY No. LXVII. - The Principles of Free Trade

Return to Title Page for The Principles of Free Trade

Search this Title:

Also in the Library:

Subject Area: Economics
Topic: Free Trade

ESSAY No. LXVII. - Condy Raguet, The Principles of Free Trade [1835]

Edition used:

The Principles of Free Trade illustrated in a series of short and familiar Essays originally published in the Banner of the Constitution, 2nd ed. (Philadelphia, 1840).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


ESSAY No. LXVII.

november 24, 1830.

A profitable commerce always shews an excess of imports over exports. This proved, by reference to the West India trade, and the whaling voyages.

THE American System philosophers having had one of the main props of their doctrine, that the balance of trade has been for years against the country, wholly annihilated by the simple fact, that we now import specie from England, whilst nominal exchange, supposed by them to be real, is against this country six per cent., they have now nothing left to sustain that theory, but the custom-house amount of imports and exports. Their philosophy is this: If we export domestic commodities to the value of 50 millions of dollars, and import foreign goods to the value of 55 millions, the balance of trade is against us, and the difference must be paid in specie, which drains us of our cash, makes money scarce, and will inevitably ruin the country. A great many honest, well-meaning people believe this, and on that account, cry out against foreign commerce. For such we will offer a few remarks, which any body can understand, and we are sure that there is not a man in the land, who would not see the fallacy of the doctrine we are combating, if he would only take the trouble to read them.

A merchant ships to the West Indies 1000 barrels of flour, which cost in New York 5 dollars a barrel, that is, $5000. The freight of the voyage out, we will suppose, to be two dollars per barrel, and the insurance, commissions, and other charges, to amount to one dollar per barrel more. Unless, therefore, the merchant can sell his flour at 8 dollars per barrel, he will lose by the shipment, and we will accordingly suppose that he sells his cargo for $8000. This amount he invests in sugar, coffee, rum, molasses, or something else, and brings home. But he must pay freight, insurance, and commissions on these articles also, or, if he owns the vessel, he must incur expenses in navigating her, equivalent or nearly equivalent to the freight. These additional expenses we will estimate at a sum equal to two dollars per barrel, and it will then appear, that, in order to make a saving voyage, the merchant must sell his return cargo for $10,000. But in such case, we should have on the customhouse books, an export of $5000, and an import of $10,000, and according to the Peter and Paul theory, we should have to export $5000 in specie to pay the balance. But what if the merchant had made a clear profit besides of $1000. Then there would have been a balance of trade against us of $6000. Truly this is a droll sort of argument to be seriously employed, and yet droll as it is, it is one of the strongest arguments relied upon by the supporters of the American System. According to their political arithmetic, the more ruinous the voyage, the more advantageous to the country. If, say they, the outward cargo which cost $5000 should be sold at such a price as that only $4000 worth of commodities should be received in return for it, the balance of trade would be in favour of the country, because more was exported than was imported, and consequently we should receive $1000 in specie in payment of the balance.

Again: A ship is fitted out at New Bedford to go to the South Seas upon a whaling or a sealing voyage, having on board no cargo but staves for the oil casks, and stores to feed the crew for a three years’ cruise, worth $10,000. She brings home oil worth $30,000, or she takes her seal skins to China and brings home teas and silks worth $50,000. “This is a dreadful ruinous business,” say the balance of trade men. “We import more than we export.” They make no account of the American industry employed in harpooning whales, or in knocking the seals over with clubs. The sort of voyages they require to enrich the nation, are losing voyages, for the more oil or tea that should be thus imported, the greater would be the balance against us. We have known in our life time two voyages that came precisely up to the requirements of the American System. The export in one case was 100 barrels of corn meal to the West Indies, and in the other, 1000 barrels of flour to Lima, shipped on freight. In both cases the shipment sold for less than the amount of freight and charges. The shippers lost all their capital, and were brought in debt besides, but it was nevertheless a glorious issue for the commerce of the country. There was a considerable export, and no import; consequently there was a balance of trade in favour of the country, to be paid in specie. We think, however, it would puzzle a wiser man than some of our restrictive philosophers, to tell by whom the balance was to be paid.

Reader, the cases referred to here are but an epitome of the whole commerce of the country. If the commerce is profitable, the amount of imports must needs appear on the custom-house books greater than the amount of exports. But in reality the custom-house statements are far from being conclusive on the subject. A great deal of coin is imported in small parcels which is not entered at the custom-house, and a great many articles are, and have been at all times, smuggled. One thing, however, is certain, and that is, that no nation can, for any length of time, import more than she exports. Commerce, in the long run, is an exchange of equal values, and although in one year more may be exported than imported, or, vice versa, yet there is a constant tendency to equilibrium, and that equilibrium is ascertained better by the operation of real exchange, than by any documents that can possibly be collected.