Skip to main content

Full text of "An inquiry into the nature and causes of the wealth of nations"

See other formats


' 


'  1m 


i  » 


I 

X 

ADAM  SMITH 

\ 

THE  WEALTH  OF  NATIONS 


VOL.  II. 


a 


AN  INQUIRY 


INTO  THE 


NATURE  AND  CAUSES 


OF  THE 


WEALTH  OF  NATIONS 


boston  college  library 

CHESTNUT  HILL,  MASS. 


ADAM  SMITH,  LL.D.  A 


EDITED  BY 

JAMES  E.  THOROLD  ROGERS 


M.P.  FOR  SOUTHWARK 


SECOND  EDITION 


©tffurb 

AT  THE  CLARENDON  PRESS 

1880 


[ All  rights  reserved ] 


CONTENTS  OF  VOL.  II. 


J 

BOOK  IV. 

Of  Systems  of  Political  Economy. 

PAGE 

Introduction . i 

CHAPTER  I. 

Of  the  Principle  of  the  Commercial  or  Mercantile  System  .  .  i 

CHAPTER  II. 

Of  Restraints  upon  the  Importation  from  Foreign  Countries  of  such 

Goods  as  can  be  produced  at  Home  .  .  .  .  .25 

CHAPTER  III. 

Of  the  extraordinary  Restraints  upon  the  Importation  of  Goods  of 
almost  all  kinds,  from  those  Countries  with  which  the  Balance 
is  supposed  to  be  disadvantageous  .  .  .  „  .46 

Part  I.  Of  the  Unreasonableness  of  those  Restraints,  even 

upon  the  Principles  of  the  Commercial  System  .  .  46 

Digression  concerning  Banks  of  Deposit,  particularly  con¬ 
cerning  that  of  Amsterdam  .  .  .  .  -53 

Part  II.  Of  the  Unreasonableness  of  those  extraordinary 

Restraints  upon  other  Principles  .  .  .  .6  2 


VI 


CONTENTS. 


PAGE 

CHAPTER  IV. 

Of  Drawbacks  .  .  .  .  .  .  .  .  .  *73 

CHAPTER  V. 

Of  Bounties  .......  ...  79 

Digression  concerning  the  Corn  Trade  and  Corn  Laws  .  .  .99 

CHAPTER  VI. 

Of  Treaties  of  Commerce  .  .  .  .  .  .  .  .122 

CHAPTER  VH. 

Of  Colonies  .  .  .  .  .  .  .  .  .  .134 

Part  I.  Of  the  Motives  for  establishing  new  Colonies  .  134 

Part  II.  Causes  of  the  Prosperity  of  new  Colonies  .  .  144 

Part  III.  Of  the  Advantages  which  Europe  has  derived 
from  the  Discovery  of  America,  and  from  that  of  a 
Passage  to  the  East  Indies  by  the  Cape  of  Good  Hope  17 1 

CHAPTER  VIII. 

'  Conclusion  of  the  Mercantile  System  .  .  .  .  .  .226 

CHAPTER  IX. 

Of  the  Agricultural  Systems,  or  of  those  Systems  of  Political 
Economy  which  represent  the  Produce  of  Land  as  either  the 
sole  or  the  principal  Source  of  the  Revenue  and  Wealth  of 
every  Country  .  .  . . 246 


✓ 


CONTENTS . 


Vll 


BOOK  y. 

Of  the  Revenue  of  the  Sovereign  or  Commonwealth. 

CHAPTER  I. 

Of  the  Expenses  of  the  Sovereign  or  Commonwealth 

Paet  I.  Of  the  Expense  of  Defence  .... 

Part  II.  Of  the  Expense  of  Justice  .  . 

Part  III.  Of  the  Expense  of  Public  Works  and  Public 
Institutions  ........ 

Article  I.  Of  the  Public  Works  and  Institutions  for 
facilitating  the  Commerce  of  Society.  First,  For 
facilitating  the  general  Commerce  of  the  Society. 
Secondly,  For  facilitating  particular  Branches  of 
Commerce  ........ 

Article  II.  Of  the  Expense  of  the  Institutions  for  the 
Education  of  Youth  ...... 

Article  III.  Of  the  Expense  of  the  Institutions  for 
the  Instruction  of  People  of  all  Ages  . 

Part  IV.  Of  the  Expense  of  supporting  the  Dignity  of 
the  Sovereign  ........ 

Conclusion  of  the  Chapter  ...... 

CHAPTER  II. 

Of  the  Sources  of  the  General  or  Public  Revenue  of  the  Society 

Part  I.  Of  the  Funds  or  Sources  of  Revenue  which  may 
peculiarly  belong  to  the  Sovereign  or  Commonwealth  . 


PAGE 

274 

274 

292 

3°5 

306 

344 

372 

401 

401 

404 

404 


Part  II.  Of  Taxes 


4i3 


CONTENTS . 


•  •  • 
yin 

Article  I.  Taxes  upon  Rents ;  Taxes  upon  the  Rent  of 
Lcind  •  •••••••» 

Taxes  which  are  proportioned,  not  to  the  Rent,  but  to 
the  Produce  of  Land  ...... 

Taxes  upon  the  Rent  of  Houses  .  . 

Article  II.  Taxes  upon  Profit,  or  upon  the  Revenue 
arising  from  Stock  ...... 

Taxes  upon  the  Profit  of  particular  Employments 

Appendix  to  Articles  I  and  II.  Taxes  upon  the 
Capital  Value  of  Lands,  Houses,  and  Stock  . 

Article  III.  Taxes  upon  the  "Wages  of  Labour  . 

Article  IV.  Taxes  which  it  is  intended  should  fall  in¬ 
differently  upon  every  different  .Species  of  Revenue  . 
Capitation  Taxes  ....... 

Taxes  upon  Consumable  Commodities 

CHAPTER  III. 

Of  Public  Debts  .  .  .  . 

Index  .......... 


PAGE 

417 

427 

432 

440 

446 

453 

460 

463 

463 

466 

506 

551 


BOOK  IY 


OF  SYSTEMS  OF  POLITICAL  ECONOMY. 


INTRODUCTION. 


POLITICAL  ECONOMY,  considered  as  a  branch  of  the  science 

of  a  statesman  or  legislator,  proposes  two  distinct  objects : 

first,  to  provide  a  plentiful  revenue  or  subsistence  for  the  people, 
or  more  properly- t,n  ona.ble  them  to  provide  such  a  revenue  or 
subsistence  for  themselves ;  and  secondly ?  to  supply  the  state  or 
commonwealth  with  a  revenue  sufficient  for  the  public  services. 

It  proposes  to  enrich  both  the  people  and  the  sovereign.1 

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


CHAPTER  I. 


OF  THE  PRINCIPLE  OF  THE  COMMERCIAL  OR  MERCANTILE  SYSTEM. 

T. 

HAT  wealth  consists  in  money,  or  in  gold  and  silver,  is  a 
popular  notion  which  naturally  arises  from  the  double  function 
of  money,  as  the  instrument  of  commerce,  and  as  the  measure  of 


1  The  meaning  which  Adam  Smith 
assigned  to  Political  Economy  has  passed 
away.  The  terms  are  now  understood  to 
mean — the  science  which  discovers  the 
laws  which  determine  the  production, 
consumption,  and  distribution  of  wealth. 
Unfortunately,  nearly  all  these  words 
are  ambiguous.  It  has  been  suggested 
that  a  better  definition  is  found  in  the 
following  : — The  science  of  those  forces 
which  set  labour  in  motion,  in  so  far  as 
that  labour  is  employed  on  objects  which 
thereby  acquire  a  value  in  exchange. 
Adam  Smith’s  definition  is  nearly  co- 

VOL.  II. 


extensive  with  the  modern  theory  of 
politics,  from  the  Benthamite  point  of 
view,  which  seeks  to  establish  the  greatest 
possible  good  for  the  greatest  possible 
number.  Such  a  theory  of  political 
economy  tends  to  make  the  science  co¬ 
extensive  with  that  of  morals,  by  ac¬ 
counting  for  all  the  causes  which  affect 
the  well-being  of  a  community,  while 
modern  economists  limit  their  inquiries 
to  the  causes  which  increase  or  waste 
wealth.  The  distinction  was  seen  by 
Aristotle,  Nicom.  Eth.  Book  vi.  caps. 
6-8. 


2  TEE  NATURE  AND  CAUSES  OF  book  iv. 

j£&  _ 

Rvalue?}  In  consequence  of  its  being  the  instrument  of  commerce, 
^Ivben  we  have  monejr  we  can  more  readily  obtain  whatever  else  we 
have  occasion  for,  than  by  means  of  any  other  commodity.  The 
great  affair,  we  always  find,  is  to  get  money.  When  that  is  ob¬ 
tained,  there  is  no  difficulty  in  making  any  subsequent  purchase. 
In  consequence  of  its  being  the  measure  of  value,  we  estimate  that 
of  all  other  commodities  by  the  quantity  of  money  which  they  will 
exchange  for.  We  say  of  a  rich  man  that  he  is  worth  a  great  deal, 
and  of  a  poor  man  that  he  is  worth  very  little  money.  A  frugal 
man,  or  a  man  eager  to  be  rich,  is  said  to  love  money;  and  a  care¬ 
less,  a  generous,  or  a  profuse  man,  is  said  to  be  indifferent  about  it. 
To  grow  rich  is  to  get  money;  and  wealth  and  money,  in  short,  are 
in  common  language  considered  as  in  every  respect  synonymous. 

A  rich  country,  in  the  same  mannar-as  ^  rich  man,  is  supposed 
to  be  a  country  abounding  in  money ;  .and  to  heap  up  gofcP and 
silver  in  any  country  is  supposed  to  be  the  readiest  way  to  enrich 
it.  For  some  time  after  the  discovery  of  America,  the  first  inquiry 
of  the  Spaniards,  when  they  arrived  upon  any  unknown  coast,  used 
to  be,  it  there  was  any  gold  or  silver  to'TiFTound-  in  the  neigh- 
~  bourhood  ?  By  the  information  which  they  received,  they  judged 
whether  it  was  worth  while  to  make  a  settlement  there,  or  if  the 
country  was  worth  the  conquering.  Plano  Carpino,1  a  monk  sent 
ambassador  from  the  king  of  France  to  one  of  the  sons  of  the 
famous  Gengis  Khan,  says  that  the  Tartars  used  frequently  to 
ask  him  if  there  were  plenty  of  sheep  and  oxen  in  the  kingdom 
of  France?  Their  inquiry  had  the  same  object  with  that  of  the 
Spaniards.  They  wanted  to  know  if  the  country  was  rich  enough 
to  be  worth  the  conquering.  Amc^ig  the  Tartars,  as  among  all 
other  nations  of  shepherds,  who  are  generally  ignorant  of  the  use 
of  money,  cattle  are  the  instruments  of  commerce  and  the  measures 
of  value.  Wealth,  therefore,  according  to  them,  consisted  in  cattle, 
as  according  to  the  Spaniards  it  consisted  in  gold  and  silver.  Of 
the  two,  the  Tartar  notion  perhaps  was  nearest  to  the  truth. 

Mr.  Locke2  remarks  a  distinction  between  money  and  other 
moveable  goods.  All  other  moveable  goods,  he  says,  are  of  so 
consumable  a  nature  that  the  wealth  which  consists  in  them  cannot 

1  The  story  is  told  by  Rubruquis,  whose  2  This  appears  to  be  a  general  refer- 
journey  to  Tartary  is  contained  in  the  ence  to  Locke’s  three  essays  on  Money  and 
same  volume  with  that  of  Carpino.  See  Interest.  I  can  find  no  passage  in  them 
Voyage  de  Rubruquis  en  Tartarie,  p.  142.  which  contains  the  words  of  the  text. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


3 


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

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

In  consequence  of  these  popular  notions,  all  the  different  nations 

of  Europe  have  studied,  though  to  little  purpose,  every  possible 

means  of  accumulating  gold  and  silver  in  their  respective  countries. 

Spain  and  Portugnlj  prnpviVfnrs  of  the  principal  mines  which 
supply  Europe  with  those  metals,  have  either  prohibited  their 
exportation  under  the  severest  penalties,  or  subjected  it.  to  a  con¬ 
siderable  duty.  The  like  prohibition  seems  anciently  to  have  made 
a  part  of  the  policy  of  most  other  European  nations.  It  is  even  to 
be  found,  where  we  should  least  of  all  expect  to  find  it,  in  some 
old  Scotch  Acts  of  Parliament,  which  forbid  under  heavy  penalties 
the  carrying  gold  or  silver  forth  of  the  kingdom.  The  like  policy 
anciently  took  place  both  in  France  and  England.1 

1  The  officer  charged  with  this  duty  wns  the  Earl  of  Holland,  in  the  reign  of 
was  known  by  the  name  of  the  King’s  Charles  I. 

Exchanger,  and  the  last  person  appointed 

B  7, 


4 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

They  represented,  first,  that  the  exportation  of  gold  and  silver 
in  order  to  purchase  foreign  goods,  did  not  always  diminish  the 
quantity  of  those  metals  in  the  kingdom.  That^  on  JTm  rnqtmry, 
jt  miglit'-frequcntlv^iiicrease  that  qnnntitwi  because,  if  the 
sumption  of  foreign  goods  was  not  thereby  increased  in  the  country, 
'those  goods  might  hn  t,n  fnrmgk^knnfrips.  and  being 

there  sold  for  a  large  profit,  might  bring  back  much  more  treasure 
than  was  origin 

this  operation  of  foreign  trade  to  the  seed-time  and  harvest  of  agri¬ 
culture.  fIf  we  only  behold,’  says  he,  ‘the  actions  of  the  husband¬ 
man  in  the  seed-time,  when  he  casteth  away  much  good  corn  into 
the  ground,  we  shall  account  him  rather  a  madman  than  a  husband¬ 
man.  But  when  we  consider  his  labours  in  the  harvest,  which  is 
the  end  of  his  endeavours,  we  shall  find  the  worth  and  plentiful 
increase  of  his  actions.’ 1 

They  represented,  secondly,  that  this  prohibition  could  not  hinder 
the  exportation  of  gold  and  silver,  which,  on  account  of  the  small¬ 
ness  of  their  bulk  in  proportion  to  their  value,  could  easily  be 
smuggled  abroad.  That  this  exportation  could  only  be  prevented 
bv  a  prop  nr  niton f inn  lr>  what  they  called  the  balance  of  trade. 
That  when  the  country  exported  to  a  greater  value  than*  it  imported, 
a  balance  became  due  to  it  from  foreign  nations,  which  wTas  necesr 
sarily  paid  to  it  in  gold  and  silver,  and  thereby  increased  the  quan¬ 
tity  ofjBns^rnotak  Tn  the  kingdom.  BhtTrraTlvhen  it  imported 
to  a  greater  value  than  it  exported,  a  contrary  balance  became  due 
to  foreign  nations,  which  was  necessarily  paid  to  them  in  the  same 
manner,  and  thereby  diminished  that  quantity.  That  in  this  case 
to  prohibit  the  exportation  of  those  metals  could  not  prevent  it,  but 
only,  by  making  it  mure  dangerous,  render  it  more  expensive.  That 
the  exchange  was  thereby  turned  more  against  the  country  which 
owed  the  balance  than  it  otherwise  might  have  been ;  the  merchant 

1  Treasure  by  Foreign  Trade,  p.  50. 


ally  sent  out  to  pun 


^rEWfun  compares 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


5 


who  purchased  a  bill  upon  the  foreign  country  being  obliged  to  pay 
the  banker  who  sold  it,  not  only  for  the  natural  risk,  trouble,  and 
expense  of  sending  the  money  thither,  but  for  the  extraordinary  risk 
arising  from  the  prohibition.  But  that  the  more  the  exchange  was 
against  any  country,  the  more  the  balance  of  trade  became  neces¬ 
sarily  against  it;  the  money  of  that  country  becoming  necessarily  of 
so  much  less  value,  in  comparison  with  that  of  the  country  to  which 
the  balance  was  due.  That  if  the  exchange  between  England  and 
Holland,  for  example,  was  fi  ve  per  cent,  against  England,  it  would 
require  a  hundred  and  five  ounces  of  silver  in  England  to  purchase 
a  bill  for  a  hundred  ounces  of  silver  in  Holland :  that  a  hundred 
and  five  ounces  of  silver  in  England,  therefore,  would  be  worth  only 
a  hundred  ounces  of  silver  in  Holland,  and  would  purchase  only  a 
proportionable  quantity  of  Dutch  goods  :  but  that  a  hundred  ounces 
of  silver  in  Holland,  on  the  contrary,  would  be  worth  a  hundred 
and  five  ounces  in  England,  and  would  purchase  a  proportionable 
quantity  of  English  goods  :  that  the  English  goods  which  were  sold 
to  Holland  would  be  sold  so  much  cheaper ;  and  the  Dutch  goods 
which  were  sold  to  England,  so  much  dearer,  by  the  difference  of 
the  exchange;  that  the  one  would  draw  so  much  less  Dutch  money 
to- England,  and  the  other  so  much  more  English  money  to  Holland, 

as  this  difference  amounted  to  :  and  that  the  balance  of  trade,  there- 

\ 

fore,  would  necessarily  be  so  much  more  against  England,  and 
would  require  a  greater  balance  of  gold  and  silver  to  be  exported 
to  Holland. 

Those  arguments  were  partly  solid  and  partly  sophistical.  They 
were  solid  so  far  as  they  asserted  that  the  exportation  of  gold  and 
silver  in  trade  might  frequently  be  advantageous  to  the  country. 
They  were  solid  too  in  asserting  that  no  prohibition  could  prevent 
their  exportation,  when  private  people  found  any  advantage  in 
exporting  them.  But  they  were  sophistical  in  supposing,  that 
either  to  preserve  or  to  augment  the  quantity  of  those  metals 
required  more  the  attention  of  Government,  than  to  preserve  or 
to  augment  the  quantity  of  any  other  useful  commodities,  which 
the  freedom  of  trade,  without  any  such  attention,  never  fails  to 
supply  in  the  proper  quantity.  They  were  sophistical  too,  perhaps, 
in  asserting  that  the  high  price  of  exchange  necessarily  increased 
what  they  called  the  unfavourable  balance  of  trade,  or  occasioned 
the  exportation  of  a  greater  quantity  of  gold  and  silver.  That 


6 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


high  price,  indeed,  was  extremely  disadvantageous  to  the  mer¬ 
chants  who  had  any  money  to  pay  in  foreign  countries.  They 
paid  so  much  dearer  for  the  bills  which  their  bankers  granted 
them  upon  those  countries.  Eut  though  the  risk  arising  from 
the  prohibition  might  occasion  some  extraordinary  expense  to  the 
bankers,  it  "would  not  necessarily  carry  any  more  money__ou.t-Qf 
the  country.  This  expense  would  generally  be  all  laid  out  in 
the  country,  in  smuggling  tne  money  out  of  it.  and  could  seldom 
occasion  the  exportatiohof  a  single  sixportoo  beyond  the  precise 
sum  drawn  for.  The  high  price  of  exchange  too  would  naturally 
dispose  the  merchants  to  endeavour  to  make  their  exports  nearly 
balance  their  imports,  in  order  that  they  might  have  this  high 
exchange  to  pay  upon  as  small  a  sum  as  possible.  The  high 
price  of  exchange,  besides,  must  necessarily  have  operated  a$  a 
tax,  in  raising  ihe  price  of  foreign  goods,  and  thereby  diminishing 
their  consumption.  It  would  tend,  therefore,  not  to  increase  but 
to  diminish  what  They  called  the  unfavourable  balance  of  trade,  and 
consequently  the  exportation  of  gold  and  silver. 

Such  as  they  were,  however,  those  arguments  convinced  the 
people  to  whom  they  were  addressed.  They  were  addressed  by 
merchants  to  parliaments,  and  to  the  councils  of  princes,  to  nobles 
and  to  country  gentlemen ;  by  those  who  were  supposed  to  under¬ 
stand  trade,  to  those  who  were  conscious  to  themselves  that  they 
knew  nothing  about  the  matter.  That  foreign  trade  enriched 
the  country,  experience  demonstrated  to  the  nobles  and  country 
gentlemen,  as  wrell  as  to  the  merchants ;  but  how,  or  in  what 
manner,  none  of  them  well  knew.  The  merchants  knew  perfectly 
in  what  manner  it  enriched  themselves.  It  was  their  business 
to  know  it.  But  to  know  in  what  manner  it  enriched  the  country, 
was  no  part  of  their  business.  This  subject  never  came  into  their 
consideration  but  when  they  had  occasion  to  apply  to  their  country 
for  some  change  in  the  laws  relating  to  foreign  trade.  It  then 
became  necessary  to  say  something  about  the  beneficial  effects  of 
foreign  trade,  and  the  manner  in  which  those  effects  were  obstructed 
by  the  laws  as  they  then  stood.  To  the  judges  who  were  to  decide 
the  business,  it  appeared  a  most  satisfactory  account  of  the  matter, 
when  they  were  told  that  foreign  trade  brought  money  into  the 
country,  but  that  the  laws  in  question  hindered  it  from  bringing 
so  much  as  it  otherwise  would  do.  Those  arguments  therefore 


CHAP.  I. 


THE  WEALTH  OF  NA  TIONS. 


7 


produced  the  wished-for  effect.  The  prohibition  of  exporting  gold 
and  silver  was  in  France  and  England  confined  to  the  coin  of 
those  respective  countries.  The  exportation  of  foreign  coin  and 
of  bullion  was  made  free.  In  Holland,  and  in  some  other  places, 
this  liberty  was  extended  even  to  the  coin  of  the  country.  The 
attention  of  Government  was  turned  away  from  guarding  against 
the  exportation  of  gold  and  silver,  to  watch  over  the  balance  of 
trade,  as  the  only  cause  which  could  occasion  any  augmentation 
or  diminution  of  those  metals.  From  one  fruitless  care  it  was 
turned  away  to  another  care  much  more  intricate,  much  more 
embarrassing,  and  just  equally  fruitless.  The  title  of  Mun’s  book, 
England’s  Treasure  in  Foreign  Trade,  became  a  fundamental  maxim 
in  the  political  economy,  not  of  England  only,  but  of  all  other  com¬ 
mercial  countries.  The  inland  or  home  trade,  the  most  important 
of  all,  the  trade  in  which  an  equal  capital  affords  the  greatest 
revenue,  and  creates  the  greatest  employment  to  the  people  of  the 
country,1  was  considered  as  subsidiary  only  to  foreign  trade.  It 
neither  brought  money  into  the  country,  it  was  said,  nor  carried 
any  out  of  it.  The  country,  therefore,  could  never  become  either 
richer  or  poorer  by  means  of  it,  except  so  far  as  its  prosperity  or 
decay  might  indirectly  influence  the  state  of  foreign  trade. 

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

1  This  contrast  of  home  and  foreign  dustry  affords  the  greatest  revenue  and 
trade  to  the  advantage  of  the  former  is  the  greatest  employment  which  suits  a 
suggested  by  the  economists  from  whom  community  best. 

►Smith  learnt  his  principles.  That  in- 


8 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


we  can  afford  to  purchase  or  to  employ,  either  in  circulating*  our 
commodities,  or  in  other  uses. 

The  quantity  of  every  commodity  which  human  industry  can  either 
purchase  or  produce,  naturally  regulates  itself  in  every  country  accord¬ 
ing  to  the  effectual  demand,  or  according  to  the  demand  of  those  who 
are  willing  to  pay  the  whole  rent,  labour,  and  profits  which  must 
be  paid  in  order  to  prepare  npd  bring  it,  tn  market.  But  no  com¬ 
modities  regulate  themselves  more  easily  or  more  exactly  according 
to  this  effectual  demand  than  gold  and  silver ;  because,  on  account 
of  the  small  bulk  and  great  value  of  those  metals,  no  commodities 
can  be  more  easily  transported  from  one  place  to  another,  from  the 
places  where  they  are  cheap  to  those  where  they  are  dear,  from 
the  places  where  they  exceed,  to  those  where  they  fall  short  of  this 
effectual  demand.  If  there  was  in  England,  for  example,  an  effectual 
demand  for  an  additional  quantity  of  gold,  a  packet-boat  could  bring 
from  Lisbon,  or  from  wherever  else  it  was  to  be  had,  fifty  tons  of 
gold,  which  could  be  coined  into  more  than  five  millions  of  guineas. 
But  if  there  was  an  effectual  demand  for  grain  to  the  same  value, 
to  import  it  would  require,  at  five  guineas  a  ton,  a  million  of  tons 
of  shipping,  or  a  thousand  ships  of  a  thousand  tons  each.  The  navy 
of  England  would  not  be  sufficient.1 

When  the  quantity  of  gold  and  silver  imported  into  any  country 
exceeds  the  effectual  demand,  no  vigilance  of  Government  can  pre¬ 
vent  their  exportation.  All  the  sanguinary  laws  of  Spain  and 
Portugal  are  not  able  to  keep  their  gold  and  silver  at  home.  The 
continual  importations  from  Peru  and  Brazil  exceed  the  effectual 
demand  of  those  countries,  and  sink  the  price  of  those  metals  there 
below  that  in  the  neighbouring  countries.  If,  on  the  contrary,  in 
any  particular  country  their  quantity  fell  short  of  the  effectual  de¬ 
mand,  so  as  to  raise  their  price  above  that  of  the  neighbouring 
countries,  the  Government  would  have  no  occasion  to  take  any  pains 
to  import  them.  If  it  was  even  to  take  pains  to  prevent  their  im¬ 
portation,  it  would  not  be  able  to  effectuate  it.  Those  metals,  when 
the  par  tans  had  the  wherewithal  to  purchase  them,  broke  through 
all  the  barriers  which  the  laws  of  Lycurgus  opposed  to  their  entrance 
in  Lacedemon.  All  the  sanguinary  laws  of  the  customs  are  not  able 
to  prevent  the  importation  of  the  teas  of  the  Dutch  and  Gottenburg 

1  At  present  (18S0)  the  tonnage  of  the  mercantile  marine  of  England  is  about 
seven  millions. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS, 


9 


East  India  Companies,  because  somewhat  cheaper  than  those  of  the 
British  Company.  A  pound  of  tea,  however,  is  about  a  hundred 
times  the  bulk  of  one  of  the  highest  prices,  sixteen  shillings,  that  is 
commonly  paid  for  it  in  silver,  and  more  than  two  thousand  times 
the  bulk  of  the  same  price  in  gold,  and  consequently  just  so  many 
times  more  difficult  to  smuggle. 

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

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

No  complaint,  however,  is  more  common  than  that  of  a  scarcity 
of  money.  Money,  like  wine,  must  always  be  scarce  with  those  who 
have  neither  wherewithal  to  buy  it,  nor  credit  to  borrow  it.  Those 


10 


THE  NATURE  AND  CAUSES  OF 


book  i v. 


who  have  either,  will  seldom  be  in  want  either  of  the  money  or  of 
the  wine  which  they  have  occasion  for.  This  complaint,  however, 
of  the  -scarcity  of  money,  'is  not  always  confined  to  improvident 
spendthrifts.  It  is  sometimes  general  through  a  whole  town,  and 
the  country  in  its  neighbourhood.  Overtrading  is  the  common 
cause  of  it.  Sober  men,  whose  projects  have  been  disproportioned 
to  their  capitals,  are  as  likely  to  have  neither  wherewithal  to  buy 
money,  nor  credit  to  borrow  it,  as  prodigals  whose  expense  has  been 
disproportioned  to  their  revenue.  Before  their  projects  can  be 
brought  to  bear,  their  stock  is  gone,  and  their  credit  with  it.  They 
run  about  everywhere  to  borrow  money,  and  everybody  tells  them 
that  they  have  none  to  lend.  Even  such  general  complaints  of  the 
scarcity  of  money  do  not  always  prove  that  the  usual  number  of 
rynlrl  n»>r]  cilvpr  a  gyp  r^f  circulating  in  the  country,  but  that 
many  people  want,  those  p1'0^00  have  nothing  to  give  for  them. 
When  the  profits  of  trade  happen  to  be  greater  than  ordinary,  over¬ 
trading  becomes  a  general  error  both  among  g'reat  and  small  dealers. 
They  do  not  always  send  more  money  abroad  than  usual,  but  they 
buy  upon  credit  both  at  home  and  abroad,  an  unusual  quantity  of 
goods,  which  they  send  to  some  distant  market,  in  hopes  that  the  ' 
returns  will  come  in  before  the  demand  for  payment.  The  demand 
comes  before  the  returns,  and  they  have  nothing  at  hand  with 
which  they  can  either  purchase  money,  or  give  solid  security  for 
borrowing.  It  is  not  any  scarcity  of  gold  and  silver,  but  the  diffi¬ 
culty  which  such  people  find  in  borrowing,  and  which  their  creditors 
find  in  getting  payment,  that  occasions  the  general  complaint  of  the 
scarcity  of  money. 1 

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

It  is  not  because  wealth  consists  more  essentially  in  money  than 
in  goods,  that  the  merchant  finds  it  generally  more  easy  to  buy 
goods  with  money  than  to  buy  money  with  goods  ;  but  because 
money  is  the  known  and  established  instrument  of  commerce,  for 

1  The  confusion  between  private  and  public  losses  is  a  constant  source  of  fallacies 
in  political  economy. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


11 


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


12 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


Consumable  commodities,  it  is  said,  are  soon  destroyed ;  whereas 
gold  and  silver  are  of  a  more  durable  nature,  and,  were  it  not  for 
this  continual  exportation,  might  be  accumulated  for  ages  together, 
to  the  incredible  augmentation  of  the  real  wealth  of  the  country. 
Nothing,  therefore,  it  is  pretended,  can  be  more  disadvantageous  to 
any  country  than  the  trade  which  consists  in  the  exchange  of  such 
lasting  for  such  perishable  commodities.  We  do  not,  however, 
reckon  that  trade  disadvantageous  which  consists  in  the  exchange 
of  the  hardware  of  England  for  the  wines  of  France  ;  and  yet 
hardware  is  a  very  durable  commodity,  and  wTas  it  not  for  this 
continual  exportation,  might  too  be  accumulated  for  ages  together, 
to  the  incredible  augmentation  of  the  pots  and  pans  of  the  country. 
But  it  readily  occurs  that  the  number  of  such  utensils  is  in  every 
country  necessarily  limited  by  the  use  which  there  is  for  them ; 
that  it  would  be  absurd  to  have  more  pots  and  pans  than  were 
necessary  for  cooking  the  victuals  usually  consumed  there ;  and 
that  if  the  quantity  of  victuals  were  to  increase,  the  number  of 
pots  and  pans  would  readily  increase  along  with  it,  a  part  of  the 
increased  quantity  of  victuals  being  employed  in  purchasing  them, 
or  in  maintaining  an  additional  number  of  workmen  whose  business 
it  was  to  make  them.  It  should  as  readily  occur  that  the  quantity 
of  gold  and  silver  is  in  every  country  limited  by  the  use  which 
there  is  for  those  metals  ;  that  their  use  consists  in  circulating 
commodities  as  coin,  and  in  affording  a  species  of  household 
furniture  as  plate  ;  that  the  quantity  of  coin  in  every  country  is 
regulated  by  the  value  of  the  commodities  which  are  to  be  circu¬ 
lated  by  it  :  increase  that  value,  and  immediately  a  part  of  it  will 
be  sent  abroad  to  purchase,  wherever  it  is  to  be  had,  the  additional 
quantity  of  coin  requisite  for  circulating  them  :  that  the  quantity 
of  plate  is  regulated  by  the  number  and  wealth  of  those  private 
families  who  choose  to  indulge  themselves  in  that  sort  of  magni¬ 
ficence  :  increase  the  number  and  wealth  of  such  families,  and  a 
part  of  this  increased  wealth  will  most  probably  be  employed  in 
purchasing,  wherever  it  is  to  be  found,  an  additional  quantity  of 
plate :  that  to  attempt  to  increase  the  wealth  of  any  country,  either 
by  introducing  or  by  detaining  in  it  an  unnecessary  quantity  of 
gold  and  silver,  is  as  absurd  as  it  would  be  to  attempt  to  increase  the 
good  cheer  of  private  families,  by  obliging  them  to  keep  an  un¬ 
necessary  number  of  kitchen  utensils.  As  the  expense  of  purchas- 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


13 


ing  those  unnecessary  utensils  would  diminish  instead  of  increasing 
either  the  quantity  or  goodness  of  the  family  provisions,  so  the 
expense  of  purchasing  an  unnecessary  quantity  of  gold  and  silver 
must,  in  every  country,  as  necessarily  diminish  the  wealth  which 
feeds,  clothes,  and  lodges,  which  maintains  and  employs  the  people. 
Gold  and  silver,  whether  in  the  shape  of  coin  or  of  plate,  are  utensils, 
it  must  be  remembered,  as  much  as  the  furniture  of  the  kitchen. 
Increase  the  use  for  them,  increase  the  consumable  commodities 
which  are  to  be  circulated,  managed,  and  prepared  by  means  of 
them,  and  you  will  infallibly  increase  the  quantity  ;  but  if  you 
attempt,  by  extraordinary  means,  to  increase  the  quantity,  you  will 
as  infallibly  diminish  the  use  and  even  the  quantity  too,  which  in 
those  metals  can  never  be  greater  than  what  the  use  requires. 
Were  they  ever  to  be  accumulated  beyond  this  quantity,  their 
transportation  is  so  easy,  and  the  loss  which  attends  their  lying 
idle  and  unemployed  so  great,  that  no  law  could  prevent  their  being 
immediately  sent  out  of  the  country. 

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

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

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

It  can  seldom  happen  that  such  can  be  spared  from  the  circu¬ 
lating  money  of  the  country  ;  because  in  that  there  can  seldom  be 
much  redundancy.  The  value  of  goods  annually  bought  and  sold 
in  any  country  requires  a  certain  quantity  of  money  to  circulate 


14 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

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

The  funds  which  maintained  the  foreign  wars  of  the  present 
century,  the  most  expensive  perhaps  which  history  records,  seem 
to  have  had  little  dependency  upon  the  exportation  either  of  the 
circulating  money,  or  of  the  plate  of  private  families,  or  of  the 
treasure  of  the  prince.  The  last  French  war  cost  Great  Britain 
upwards  of  ninety  millions,  including  not  only  the  seventy-five 
millions 1  of  new  debt  that  was  contracted,  but  the  additional  two 
shillings  in  the  pound  land-tax,  and  what  was  annually  borrowed  of 
the  sinking’  fund.  More  than  two-thirds  of  this  expense  was  laid 
out  in  foreign  countries ;  in  Germany,  Portugal,  America,  in  the 
ports  of  the  Mediterranean,  in  the  East  and  West  Indies.  The 
kings  of  England  had  no  accumulated  treasure.  We  never  hear 
of  any  extraordinary  quantity  of  plate  being  melted  down.  The 
circulating  gold  and  silver  of  the  country  had  not  been  supposed 
to  exceed  eighteen  millions.  Since  the  late  re-coinage  of  the  gold, 

1  The  actual  addition,  according  to  Grellier’s  History  of  the  National  Debt,  p.  261, 
was  £63,020,716. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


15 


however,  it  is  believed  to  have  been  a  good  deal  underrated.  Let 
us  suppose,  therefore,  according  to  the  most  exaggerated  computa¬ 
tion  which  I  remember  to  have  either  seen  or  heard  of,  that,  gold  and 
silver  together,  it  amounted  to  thirty  millions.1  Had  the  war  been 
carried  on  by  means  of  our  money,  the  whole  of  it  must,  even  accord¬ 
ing  to  this  computation,  have  been  sent  out  and  returned  again  at 
least  twice,  in  a  period  of  between  six  and  seven  years.  Should 
this  be  supposed,  it  would  afford  the  most  decisive  argument  to  de¬ 
monstrate  how  unnecessary  it  is  for  Government  to  watch  over  the 
preservation  of  money,  since  upon  this  supposition  the  whole  money 
of  the  country  must  have  gone  from  it  and  returned  to  it  again, 
two  different  times  in  so  short  a  period,  without  anybody’s  know¬ 
ing  anything  of  the  matter.  The  channel  of  circulation,  however, 
never  appeared  more  empty  than  usual  during  any  part  of  this 
period.  Few  people  wanted  money  who  had  wherewithal  to  pay 
for  it.  The  profits  of  foreign  trade,  indeed,  were  greater  than  usual 
during  the  whole  war,  but  especially  towards  the  end  of  it.  This 
occasioned,  what  it  always  occasions,  a  general  overtrading  in  all 
the  ports  of  Great  Britain ;  and  this  again  occasioned  the  usual 
complaint  of  the  scarcity  of  money,  which  always  follows  over¬ 
trading.  Many  people  wanted  it,  who  had  neither  wherewithal  to 
buy  it,  nor  credit  to  borrow  it ;  and  because  the  debtors  found  it 
difficult  to  borrow,  the  creditors  found  it  difficult  to  get  payment. 
Gold  and  silver,  however,  were  generally  to  be  had  for  their  value, 
by  those  who  had  that  value  to  give  for  them. 

The  enormous  expense  of  the  late  war,  therefore,  must  have  been 
chiefly  defrayed,  not  by  the  exportation  of  gold  and  silver,  but  by 
that  of  British  commodities  of  some  kind  or  other.  When  the 
Government,  or  those  who  acted  under  them,  contracted  with  a 
merchant  for  a  remittance  to  some  foreign  country,  he  would 
naturally  endeavour  to  pay  his  foreign  correspondent,  upon  whom 
he  had  granted  a  bill,  by  sending  abroad  rather  commodities  than 
gold  and  silver.  If  the  commodities  of  Great  Britain  were  not  in 
demand  in  that  country,  he  would  endeavour  to  send  them  to  some 
other  country,  in  which  he  could  purchase  a  bill  upon  that  country. 
The  transportation  of  commodities,  when  properly  suited  to  the 
market,  is  always  attended  with  a  considerable  profit ;  whereas  that 

1  In  1856  Mr.  Newmarch,  Hist,  of  Prices,  vi.  703,  estimated  the  gold  currency  of  the 
United  Kingdom  at  seventy-five  millions. 


16 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


of  gold  and  silver  is  scarce  ever  attended  with  any.  When  those 
metals  are  sent  abroad  in  order  to  purchase  foreign  commodities, 
the  merchant's  profit  arises,  not  from  the  purchase,  but  from  the 
sale  of  the  returns.  ’But  when  they  are  sent  abroad  merely  to  pay 
a  debt,  he  gets  no  returns,  and  consequently  no  profit.  He 
naturally,  therefore,  exerts  his  invention  to  find  out  a  way  of  paying 
his  foreign  debts,  rather  by  the  exportation  of  commodities  than 
by  that  of  gold  and  silver.  The  great  quantity  of  British  goods 
exported  during  the  course  of  the  late  war,  without  bringing  back 
any  returns,  is  accordingly  remarked  by  the  author  of  The  Present 
State  of  the  Nation.1 

Besides  the  three  sorts  of  gold  and  silver  above  mentioned,  there 
is  in  all  great  commercial  countries  a  good  deal  of  bullion  alternately 
imported  and  exported  for  the  purposes  of  foreign  trade.  This 
bullion,  as  it  circulates  among  different  commercial  countries  in  the 
same  manner  as  the  national  coin  circulates  in  every  particular 
country,  may  be  considered  as  the  rfroney  of  the  great  mercantile 
republic.  The  national  coin  receives  its  movement  and  direction 
from  the  commodities  circulated  within  the  precincts  of  each  par¬ 
ticular  country :  the  money  of  the  mercantile  republic,  from  those 
circulated  between  different  countries.  Both  are  employed  in 
facilitating  exchanges,  the  one  between  different  individuals  of  the 
same,  the  other  between  those  of  different  nations.  Part  of  this 
money  of  the  great  mercantile  republic  may  have  been,  and  prob¬ 
ably  was,  employed  in  carrying  on  the  late  war.  In  time  of  a 
general  war,  it  is  natural  to  suppose  that  a  movement  and  direction 
should  be  impressed  upon  it  different  from  what  it  usually  follows  in 
profound  peace ;  that  it  should  circulate  more  about  the  seat  of  the 
war,  and  be  more  employed  in  purchasing  there,  and  in  the  neigh¬ 
bouring  countries,  the  pay  and  provisions  of  the  different  armies. 
But  whatever  part  of  this  money  of  the  mercantile  republic,  Great 
Britain  may  have  annually  employed  in  this  manner,  it  must  have 
been  annually  purchased,  either  with  British  commodities,  or  with 
something  else  that  had  been  purchased  with  them  ;  which  still 
brings  us  back  to  commodities,  to  the  annual  produce  of  the  land 
and  labour  of  the  country,  as  the  ultimate  resources  which  enabled 
us  to  carry  on  the  war.  It  is  natural  indeed  to  suppose  that  so 
great  an  annual  expense  must  have  been  defrayed  from  a  great 
1  The  author  of  this  tract  is  said  to  have  been  Erasmus  Philips. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


17 


annual  produce.  The  expense  of  i 761,  for  example,  amounted  to 
more  than  nineteen  millions.  No  accumulation  could  have  sup¬ 
ported  so  great  an  annual  profusion.  There  is  no  annual  produce 
even  of  gold  and  silver  which  could  have  supported  it.  The  whole 
gold  and  silver  annually  imported  into  both  Spain  and  Portugal, 
according  to  the  best  accounts,  does  not  commonly  much  exceed  six 
millions  sterling,  which,  in  some  years,  would  scarce  have  paid  four 
months’  expense  of  the  late  war. 

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


1  Nothing  is  more  frequently  commented  on,  during  the  continuance  of  a 
VOL.  II.  C 


18 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


No  foreign  war  of  great  expense  or  duration  could  conveniently 
be  carried  on  by  the  exportation  of  the  rude  produce  of  the  soil. 
The  expense  of  sending  such  a  quantity  of  it  to  a  foreign  country 
as  might  purchase  the  pay  and  provisions  of  an  army,  would  be  too 
great  \  Few  countries  too  produce  much  more  rude  produce  than 
what  is  sufficient  for  the  subsistence  of  their  own  inhabitants. 
To  send  abroad  any  great  quantity  of  it,  therefore,  would  be  to  send 
abroad  a  part  of  the  necessary  subsistence  of  the  people.  It  is  other¬ 
wise  with  the  exportation  of  manufactures.  The  maintenance  of 
the  people  employed  in  them  is  kept  at  home,  and  only  the  surplus 
part  of  their  work  is  exported.  Mr.  Hume  frequently  takes  notice 
of  the  inability  of  the  ancient  kings  of  England  to  carry  on,  without 
interruption,  any  foreign  war  of  long  duration.  The  English,  in 
those  days,  had  nothing  wherewithal  to  purchase  the  pay  and  pro¬ 
visions  of  their  armies  in  foreign  countries,  but  either  the  rude 
produce  of  the  soil,  of  which  no  considerable  part  could  be  spared 
from  the  home  consumption,  or  a  few  manufactures  of  the  coarsest 
kind,  of  which,  as  well  as  of  the  rude  produce,  the  transportation 
was  too  expensive.  This  inability  did  not  arise  from  the  want  of 
money,  but  of  the  finer  and  more  improved  manufactures.  Buying 
and  selling  was  transacted  by  means  of  money  in  England  then, 
as  well  as  now.  The  quantity  of  circulating  money  must  have 
borne  the  same  proportion  to  the  number  and  value  of  purchases 
and  sales  usually  transacted  at  that  time,  which  it  does  to  those 
transacted  at  present ;  or  rather  it  must  have  borne  a  greater  pro¬ 
portion,  because  there  was  then  no  paper,  which  now  occupies  a 


great  war,  than  the  apparent  prosperity 
of  certain  manufactures,  and  the  general 
activity  of  industry.  During  the  Ameri¬ 
can  civil  war,  there  were  people  who 
believed  that  the  country  was  richer  for 
its  waste.  The  fact  is,  there  is  great 
activity  in  production,  for  armies  must 
be  maintained  under  circumstances  in 
which  profusion  is  inevitable,  and  conse¬ 
quently  there  is  a  great  demand  for  the 
production  of  commodities.  The  charge 
incurred  is  generally  met  in  modern 
times  by  loans,  the  raising  of  which  do 
not  require  any  immediate  sacrifice.  But 
when  the  demand  ceases,  a  reaction 
ensues,  and  the  manufacturer  has  to 
contend  against  a  failing  market  and  in¬ 
creased  taxation.  Were  it  not  for  the 
practice  of  carrying  on  war  by  incurring 
debt,  no  country  would  ever  fall  into  the 


error  of  believing  that  a  season  of  war 
could  ever  be  a  season  of  prosperity. 

1  This  depends  on  the  character  of  the 
rude  produce.  It  would  be  possible,  did 
the  country  in  question  supply  a  large 
amount  of  precious  or  valuable  metals 
from  its  mines.  It  would  be  possible,  if 
the  rude  produce  were  of  great  value  and 
in  great  demand.  Thus,  for  example,  the 
wool  of  England  was  a  rude  produce 
in  the  middle  ages,  which  undoubtedly 
gave  a  monarch  like  Edward  the  Third 
great  facilities  for  carrying  on  his  cam¬ 
paigns.  So  the  cotton  of  the  United 
States  was,  and  would  still  be,  as  im¬ 
portant  an  article  of  export  for  the  pur¬ 
pose  of  meeting  bills  drawn  on  foreign 
countries  by  those  who  negotiate  loans, 
as  the  manufactures  of  many  other 
countries  would  be. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


19 


great  part  of  the  employment  of  gold  and  silver.  Among  nations 
to  whom  commerce  and  manufactures  are  little  known,  the  sove¬ 
reign,  upon  extraordinary  occasions,  can  seldom  draw  any  consider¬ 
able  aid  from  his  subjects,  for  reasons  which  shall  he  explained 
hereafter.  It  is  in  such  countries,  therefore,  that  he  generally 
endeavours  to  accumulate  a  treasure,  as  the  only  resource  against 
such  emergencies.  Independent  of  this  necessity,  he  is  in  such  a 
situation  naturally  disposed  to  the  parsimony  requisite  for  accu¬ 
mulation.  In  that  simple  state,  the  expense  even  of  a  sovereign 
is  not  directed  by  the  vanity  which  delights  in  the  gaudy  finery  of 
a  court,  but  is  employed  in  bounty  to  his  tenants  and  hospitality  to 
his  retainers.  But  bounty  and  hospitality  very  seldom  lead  to  ex¬ 
travagance,  though  vanity  almost  always  does.  Every  Tartar  chief, 
accordingly,  has  a  treasure.  The  treasures  of  Mazeppa,  chief  of  the 
Cossacks  in  the  Ukraine,  the  famous  ally  of  Charles  XII,  are  said  to 
have  been  very  great.  The  French  kings  of  the  Merovingian  race 
had  all  treasures.  When  they  divided  their  kingdom  among  their 
different  children,  they  divided  their  treasure  too.  The  Saxon  princes, 
and  the  first  kings  after  the  Conquest,  seem  likewise  to  have  accu¬ 
mulated  treasures.  The  first  exploit  of  every  new  reign  was  com¬ 
monly  to  seize  the  treasure  of  the  preceding  king,  as  the  most  I 
essential  measure  for  securing  the  succession.  The  sovereigns  of 
improved  and  commercial  countries  are  not  under  the  same  necessity 
of  accumulating  treasures,  because  they  can  generally  draw  from 
their  subjects  extraordinary  aids  upon  extraordinary  occasions. 
They  are  likewise  less  disposed  to  do  so.  They  naturally,  perhaps 
necessarily,  follow  the  mode  of  the  times,  and  their  expense  comes 
to  be  regulated  by  the  same  extravagant  vanity  which  directs  that 
of  all  the  other  great  proprietors  in  their  dominions.  The  insig¬ 
nificant  pageantry  of  their  court  becomes  every  day  more  brilliant, 
and  the  expense  of  it  not  only  prevents  accumulation,  but  frequently 
encroaches  upon  the  funds  destined  for  more  necessary  expenses. 
What  Dercyllidas  said  of  the  court  of  Persia  may  be  applied  to  that 
of  several  European  princes,  that  he  saw  there  much  splendour  but 
little  strength,  and  many  servants  but  few  soldiers. 

The  importation  of  gold  and  silver  is  not  the  principal,  much 
less  the  sole  benefit  which  a  nation  derives  from  its  foreign  trade. 
Between  whatever  places  foreign  trade  is  carried  on,  they  all  of 
them  derive  two  distinct  benefits  from  it.  It  carries  out  that 


c  3 


20 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

It  is  not  by  the  importation  of  gold  and  silver  that  the  discovery 
of  America  has  enriched  Europe.  By  the  abundance  of  the  American 
mines,  those  metals  have  become  cheaper.  A  service  of  plate  can 
now  be  purchased  for  about  a  third  part  of  the  corn,  or  a  third  part 
of  the  labour,  which  it  would  have  cost  in  the  fifteenth  century. 
With  the  same  annual  expense  of  labour  and  commodities,  Europe 
can  annually  purchase  about  three  times  the  quantity  of  plate 
which  it  could  have  purchased  at  that  time.  But  when  a  com¬ 
modity  comes  to  be  sold  for  a  third  part  of  what  had  been  its  usual 
price,  not  only  those  who  purchased  it  before  can  purchase  three 
times  their  former  quantity,  but  it  is  brought  down  to  the  level  of 
a  much  greater  number  of  purchasers ;  perhaps  to  more  than  ten, 
perhaps  to  more  than  twenty  times  the  former  number.  So  that 
there  may  be  in  Europe  at  present  not  only  more  than  three  times, 
but  more  than  twenty  or  thirty  times  the  quantity  of  plate  which 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


21 


would  have  been  in  it,  even  in  its  present  state  of  improvement, 
had  the  discovery  of  the  American  mines  never  been  made.  So  far 
Europe  has,  no  doubt,  gained  a  real  conveniency,  though  surely  a 
very  trifling  one.  The  cheapness  of  gold  and  silver  renders  those 
metals  rather  less  fit  for  the  purposes  of  money  than  they  were 
before.  In  order  to  make  the  same  purchases,  we  must  load  our¬ 
selves  with  a  greater  quantity  of  them,  and  carry  about  a  shilling 
in  our  pocket  where  a  groat  would  have  done  before.  It  is  difficult 
to  say  which  is  most  trifling — this  inconveniency,  or  the  opposite 
conveniency.  Neither  the  one  nor  the  other  could  have  made  any 
very  essential  change  in  the  state  of  Europe.  The  discovery  of 
America,  however,  certainly  made  a  most  essential  one.  By  opening 
'  a  new  and  inexhaustible  market  to  all  the  commodities  of  Europe, 
it  gave  occasion  to  new  divisions  of  labour  and  improvements  of  art, 
which,  in  the  narrow  circle  of  the  ancient  commerce,  could  never 
have  taken  place  for  want  of  a  market  to  take  off  the  greater  part 
of  their  produce.  The  productive  powers  of  labour  were  improved, 
and  its  produce  increased  in  all  the  different  countries  of  Europe, 
and  together  with  it  the  real  revenue  and  wealth  of  the  inhabitants. 
The  commodities  of  Europe  were  almost  all  new  to  America,  and 
many  of  those  of  America  were  new  to  Europe.  A  new  set  of 
exchanges,  therefore,  began  to  take  place  which  had  never  been 
thought  of  before,  and  which  should  naturally  have  proved  as 
advantageous  to  the  new,  as  it  certainly  did  to  the  old  continent. 
The  savage  injustice  of  the  Europeans  rendered  an  event,  which 
ought  to  have  been  beneficial  to  all,  ruinous  and  destructive  to 
several  of  those  unfortunate  countries. 

The  discovery  of  a  passage  to  the  East  Indies,  by  the  Cape  of 
Good  Hope,  which  happened  much  about  the  same  time,  opened, 
perhaps,  a  still  more  extensive  range  to  foreign  commerce  than  even 
that  of  America,  notwithstanding  the  greater  distance.  There  were 
but  two  nations  in  America,  in  any  respect  superior  to  savages,  and 
these  were  destroyed  almost  as  soon  as  discovered.  The  rest  were 
mere  savages.  But  the  empires  of  China,  Hindostan,  Japan,  as  well 
as  several  others  in  the  East  Indies,  without  having  richer  mines  of 
gold  or  silver,  were  in  every  other  respect  much  richer,  better  cul¬ 
tivated,  and  more  advanced  in  all  arts  and  manufactures  than  either 
Mexico  or  Peru,  even  though  we  should  credit,  what  plainly  deserves 
no  credit,  the  exaggerated  accounts  of  the  Spanish  writers  concerning 


22 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


the  ancient  state  of  those  empires.  But  rich  and  civilised  nations 
can  always  exchange  to  a  much  greater  value  with  one  another 
than  with  savages  and  barbarians.  Europe,  however,  has  hitherto 
derived  much  less  advantage  from  its  commerce  with  the  East 
Indies  than  from  that  with  America.  The  Portuguese  monopo¬ 
lised  the  East  Indian  trade  to  themselves  for  about  a  century,  and 
it  was  only  indirectly  and  through  them  that  the  other  nations  of 
Europe  could  either  send  out  or  receive  any  goods  from  that 
country.  When  the  Dutch,  in  the  beginning  of  the  last  century, 
began  to  encroach  upon  them,  they  vested  their  whole  East  India 
commerce  in  an  exclusive  company.  The  English,  French,  Swedes, 
and  Danes  have  all  followed  their  example,  so  that  no  great  nation 
in  Europe  has  ever  yet  had  the  benefit  of  a  free  commerce  to  the 
East  Indies.  No  other  reason  need  be  assigned  why  it  has  never 
been  so  advantageous  as  the  trade  to  America,  which,  between 
almost  every  nation  of  Europe  and  its  own  colonies,  is  free  to  all  its 
subjects.  The  exclusive  privileges  of  those  East  India  companies, 
their  great  riches,  the  great  favour  and  protection  which  these  have 
procured  them  from  their  respective  governments,  have  excited 
much  envy  against  them.  This  envy  has  frequently  represented 
their  trade  as  altogether  pernicious,  on  account  of  the  great  quanti¬ 
ties  of  silver  which  it  every  year  exports  from  the  countries  from 
which  it  is  carried  on.  The  parties  concerned  have  replied,  that 
their  trade,  by  this  continual  exportation  of  silver,  might,  indeed, 
tend  to  impoverish  Europe  in  general,  but  not  the  particular  country 
from  which  it  was  carried  on  ;  because,  by  the  exportation  of  a  part 
of  the  returns  to  other  European  countries,  it  annually  brought 
home  a  much  greater  quantity  of  that  metal  than  it  carried  out. 
Both  the  objection  and  the  reply  are  founded  in  the  popular  notion 
which  I  have  been  just  now  examining.  It  is,  therefore,  unneces¬ 
sary  to  say  anything  further  about  either.  By  the  annual  exporta¬ 
tion  of  silver  to  the  East  Indies,  plate  is  probably  somewhat  dearer 
in  Europe  than  it  otherwise  might  have  been,  and  coined  silver 
probably  purchases  a  larger  quantity  both  of  labour  and  commodi¬ 
ties.  The  former  of  these  two  effects  is  a  very  small  loss,  the  latter 
a  very  small  advantage ;  both  too  insignificant  to  deserve  any  part 
of  the  public  attention.  The  trade  to  the  East  Indies,  by  opening  a 
market  to  the  commodities  of  Europe,  or,  what  comes  nearly  to  the 
same  thing,  to  the  gold  and  silver  which  is  purchased  with  those 


CHAP.  I. 


THE  WEALTH  OF  NATIONS . 


23 


commodities,  must  necessarily  tend  to  increase  the  annual  production 
of  European  commodities,  and  consequently  the  real  wealth  and 
revenue  of  Europe.  That  it  has  hitherto  increased  them  so  little,  is 
probably  owing  to  the  restraints  which  it  everywhere  labours  under. 

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

The  two  principles  being  established,  however,  that  wealth  con¬ 
sisted  in  gold  and  silver,  and  that  those  metals  could  be  brought 
into  a  country  which  had  no  mines  only  by  the  balance  of  trade,  or 

by  exporting  to  a  greater  value  than  it  imported,  it  necessarily 
became  the  great  object  of  political  economy  to  diminish  as  much  as 
possible  the  importation  of  foreign  goods  for  home  consumption, 
and  to  increase  as  much  as  possible  the  exportation  of  the  produce 
of  domestic  industry.  Its  two  great  engines  for  enriching  the 
country,  therefore,  were  restraints  upon  importation,  and  encourage¬ 

ments  to  exportation. 

The  restraints  upon  importation  were  of  two  kinds. 

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

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

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


24 


TIIE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

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

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

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

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


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


25 


CHAPTER  II. 


OF  RESTKAINTS  UPON  THE  IMPORTATION  FROM  FOREIGN  COUNTRIES 
OF  SUCH  GOODS  AS  CAN  BE  PRODUCED  AT  HOME. 


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. 

Thus  the  prohibition  of  importing  either  live  cattle  or  salt  provisions 
from  foreign  countries  secures  to  the  graziers  of  Great  Britain  the 
monopoly  of  the  home  market  for  butcherVmeat.  The  high  duties 
upon  the  importation  of  corn,  which  in  times  of  moderate  plenty 
amount  to  a  prohibition,  give  a  like  advantage  to  the  growers  of 
that  commodity.  The  prohibition  of  the  importation  of  foreign 
woollens  is  equally  favourable  to  the  woollen  manufactures.  The 
silk  manufacture,  though  altogether  employed  upon  foreign  ma¬ 
terials,  has  lately  obtained  the  same  advantage.  The  linen  manu¬ 
facture  has  not  yet  obtained  it,  but  is  making  great  strides  towards 
it.  Many  other  sorts  of  manufacturers  have,  in  the  same  manner, 
obtained  in  Great  Britain,  either  altogether,  or  very  nearly  a 
monopoly  against  their  countrymen.  The  variety  of  goods  of  which 
the  importation  into  Great  Britain  is  prohibited,  either  absolutely, 
or  under  certain  circumstances,  greatly  exceeds  what  can  easily  be 
suspected  by  those  who  are  not  well  acquainted  with  the  laws  of 
the  customs. 

That,  this  monopoly  of  the  home  market  frequently  gives  great 
encouragement  to  that  particular  species  of  industry  which  enjoys 
it,  and  frequently  turns  towards  that  employment  a  greater  share  of 

both  the  labour  and  stock  of  the  society  than  would  otherwise  have 

gone  to  it,  cannot  be  doubted.  But  whether  it  tends  either  to 
increase  the  general  industry  of  the  society,  or  to  give  it  the  most 

advantageous  direction,  is  not,  perhaps,  altogether  so  evident. 

The  general  industry  of  the  society  never  can  exceed  what  the 

capital  of  the  society  can  employ.  As  the  number  of  workmen  that 
can  be  kept  in  employment  by  any  particular  person  must  bear 


26 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

Every  individual  is  continually  exerting  himself  to  find  out  the 
most  advantageous  employment  for  whatever  capital  he  can  de¬ 

mand.  It  is  his  own  advantage,  indeed,  and  not  that  of  the  society. 
which  he  has  in  view.  But  the  study  of  his  own  advantage 
naturally  or  rather  necessarily,  leads  him  to  prefer  that  employment 

which  is  most  advantageous  to  the  society. 

^  l_  '  " ■<■■'"«— -I*.-.. I  IU.  I.,U,U  «.*■»  „||,|  .  .  II..,.,,  I  ,  I 

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

Thus,  upon  equal  or  nearly  equal  profits,  every  wholesale  merchant 
naturally  prefers  the  home  trade  to  the  foreign  trade  of  consump¬ 
tion,  and  the  foreign  trade  of  consumption  to  the  carrying  trade.1 
In  the  home  trade  his  capital  is  never  so  long  out  of  his  sight  as  it 
frequently  is  in  the  foreign  trade  of  consumption.  He  can  know 
better  the  character  and  situation  of  the  persons  whom  he  trusts, 
and,  if  he  should  happen  to  be  deceived,  he  knows  better  the  laws 
of  the  country  from  which  he  must  seek  redress.  In  the  carrying 
trade,  the  capital  of  the  merchant  is,  as  it  were,  divided  between 
two  foreign  countries,  and  no  part  of  it  is  ever  necessarily  brought 
home,  or  placed  under  his  own  immediate  view  and  command. 
The  capital  which  an  Amsterdam  merchant  employs  in  carrying 
corn  from  Konigsberg  to  Lisbon,  and  fruit  and  wine  from  Lisbon 
to  Konigsberg,  must  generally  be  the  one  half  of  it  at  Konigs¬ 
berg  and  the  other  half  at  Lisbon.  No  part  of  it  need  ever  come 


1  1  Dans  un  grand  etat,  le  commerce 
extdrieure  forme  un  objet  tres-modique 
en  comparaison  du  commerce  interieure 


des  productions  nationales.’  Turgot, 
Commerce  des  Grains,  p.  1S7. 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


27 


to  Amsterdam.  The  natural  residence  of  such  a  merchant  should 
either  be  at  Konigsberg  or  Lisbon,  and  it  can  only  be  some  very 
particular  circumstance  which  can  make  him  prefer  the  residence  of 
Amsterdam.  The  uneasiness,  however,  which  he  feels  at  being 
separated  so  far  from  his  capital,  generally  determines  him  to  bring 
part  both  of  the  Konigsberg  goods  which  he  destines  for  the 
market  of  Lisbon,  and  of  the  Lisbon  goods  which  he  destines  for 
that  of  Konigsberg,  to  Amsterdam ;  and  though  this  necessarily 
subjects  him  to  a  double  charge  of  loading  and  unloading,  as  well  as 
to  the  payment  of  some  duties  and  customs,  yet  for  the  sake  of 
having  some  part  of  his  capital  always  under  his  own  view  and 
command,  he  willingly  submits  to  this  extraordinary  charge ;  and 
it  is  in  this  manner  that  ever}^  country  which  has  any  considerable 
share  of  the  carrying  trade,  becomes  always  the  emporium,  or 
general  market,  for  the  goods  of  all  the  different  countries  whose  \ 
trade  it  carries  on.  The  merchant,  in  order  to  save  a  second 
loading  and  unloading,  endeavours  always  to  sell  in  the  home 
market  as  much  of  the  goods  of  all  those  different  countries  as 
he  can,  and  thus,  so  far  as  he  can,  to  convert  his  carrying  trade 
into  a  foreign  trade  of  consumption.  A  merchant,  in  the  same 
manner,  who  is  engaged  in  the  foreign  trade  of  consumption,  when 
he  collects  goods  for  foreign  markets,  will  always  be  glad,  upon 
equal  or  nearly  equal  profits,  to  sell  as  great  a  part  of  them  at  home 
as  he  can.  He  saves  himself  the  risk  and  trouble  of  exportation, 
when,  so  far  as  he  can,  he  thus  converts  his  foreign  trade  of 
consumption  into  a  home  trade.  Home  is  in  this  manner  the 
centre,  if  I  may  say  so,  round  which  the  capitals  of  the  inhabitants 
of  every  country  are  continually  circulating,  and  towards  which 
they  are  always  tending,  though  by  particular  causes  they  may 
sometimes  be  driven  off  and  repelled  from  it  towards  more  distant 
employments.  But  a  capital  employed  in  the  home  trade,  it  has 
already  been  shown,  necessarily  puts  into  motion  a  greater  quan¬ 
tity  of  domestic  industry,  and  gives  revenue  and  employment  to  a 
greater  number  of  the  inhabitants  of  the  country,  than  an  equal 
capital  employed  in  the  foreign  trade  of  consumption ;  and  one 
employed  in  the  foreign  trade  of  consumption  has  the  same  ad¬ 
vantage  over  an  equal  capital  employed  in  the  carrying  trade. 
Upon  equal,  or  only  nearly  equal  profits,  therefore,  every  individual 
naturally  inclines  to  employ  his  capital  in  the  manner  in  which 


28 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


it  is  likely  to  afford  tlie  greatest  support  to  domestic  industry,  and 
to  give  revenue  and  employment  to  the  greatest  number  of  people 
of  his  own  country. 

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

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

But  the  annual  revenue  of  every  society  is  always  precisely  equal 
to  the  exchangeable  value  of  the  whole  annual  produce  of  its 
industry,  or  rather  is  precisely  the  same  thing  with  that  exchange¬ 
able  value.  As  every  individual .  therefore,  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  necessarily  labours  to  render 

as  great  as  he  can 

rally,  indeed,  neither  intends  to  promote  the  public 

knows  how  much  he  is  promoting  it.  By  preferring  the  support  of 
domestic  to  that  of  foreign  industry,  he  intends  only  his  own 

security ;  and  by  directing  that  industry  in  such  a  manner  as  its 
produce  may  be  of  the  greatest  value,  he  intends  only  his  own  gain, 

and  he  is  in  this,  as  in  many  other  cases,  led  by  an  invisible  hand 

to  promote  an  end  which  was  no  part  of  his  intention.  Nor  is  it 
always  the  worse  for  the  yooiely  llial  it  way  luTpart  of  it.  By 
pursuing  his  own  interest  he  frequently  promotes  that  of  the 
society  more  effectually  than  when  he  really  intends  to  promote  it. 
I  have  never  known  much  good  done  by  those  who  affected  to 
trade  for  the  public  good.  It  is  an  affectation,  indeed,  not  very 
common  among  merchants,  and  very  few  words  need  be  employed 
in  dissuading  them  from  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 


^ene- 
interest,  nbr 


the  annual  revenue  of  the  society 


CHAP.  II. 


THE  WEALTH  OF  NATIONS . 


29 


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  occa¬ 
sion  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 


30 


TIIE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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  com¬ 
modity  could  be  purchased  from  foreign  countries  cheaper  than 
it  can  be  made  at  home.  It  could,  therefore,  have  been  purchased 
with  a  part  only  of  the  commodities,  or,  what  is  the  same  thing, 
with  a  part  only  of  the  price  of  the  commodities,  which  the  industry 
employed  by  an  equal  capital  would  have  produced  at  home,  had  it 
been  left  to  follow  its  natural  course.  The  industry  of  the  country, 
therefore,  is  thus  turned  away  from  a  more  to  a  less  advan¬ 
tageous  employment,  and  the  exchangeable  value  of  its  annual 
produce,  instead  of  being  increased,  according  to  the  intention  of 
the  lawgiver,  must  necessarily  be  diminished  by  every  such  regu¬ 
lation. 

Ity  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  though  the  industry  of  the 
society  may  be  thus  carried  with  advantage  into  a  particular 
channel  sooner  than  it  could  have  been  otherwise,  it  will  by  no 
means  follow  that  the  sum  total,  either  of  its  industry  or  of  its 
revenue,  can  ever  be  augmented  by  any  such  regulation.  The 
industry  of  the  society  can  augment  only  in  proportion  as  its 
capital  augments,  and  its  capital  can  augment  only  in  proportion  to 
what  can  be  gradually  saved  out  of  its  revenue.  But  the  immediate 
effect  of  every  such  regulation  is  to  diminish  its  revenue,  and  what 
diminishes  its  revenue  is  certainly  not  very  likely  to  augment  its 
capital  faster  than  it  would  have  augmented  of  its  own  accord, 
had  both  capital  and  industry  been  left  to  find  out  their  natural 
employments. 

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


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


31 


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  employ¬ 
ment  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  ab¬ 
surdity,  though  not  altogether  so  glaring,  yet  exactly  of  the  same 
kind,  in  turning  towards  any  such  employment  a  thirtieth  or  even 
a  three-hundredth  part  more  of  either.  Whether  the  advantages 
which  one  country  has  over  another  be  natural  or  acquired,  is  in  this 
respect  of  no  consequence.  As  long  as  the  one  country  has  those 
advantages  and  the  other  wants  them,  it  will  always  be  more 
advantageous  for  the  latter  rather  to  buy  of  the  former  than  to 
make.  It  is  an  acquired  advantage  only  which  one  artificer  has 
over  his  neighbour  who  exercises  another  trade ;  and  yet  they  bofh 
find  it  more  advantageous  to  buy  of  one  another  than  to  make  what 
does  not  belong  to  their  particular  trades. 

Merchants  and  manufacturers  are  the  people  who  derive  the 
greatest  advantage  from  this  monopoly  of  the  home  market.1  The 
prohibition  of  the  importation  of  foreign  cattle  and  of  salt  pro¬ 
visions,  together  with  the  high  duties  upon  foreign  corn,  which  in 
times  of  moderate  plenty  amount  to  a  prohibition,  are  not  near  so 
advantageous  to  the  graziers  and  farmers  of  Great  Britain  as  other 
regulations  of  the  same  kind  are  to  its  merchants  and  manufac- 


1  A  merchant  or  manufacturer  will  get 
no  special  advantage  from  the  monopoly 
alluded  to,  unless  the  trade  or  production 
is  limited  to  a  fixed  number  of  persons. 
If  the  trade  is  aided  by  the  monopoly, 
and  competition  within  the  trade  is  free, 
the  increased  rate  of  profit  will  attract 
other  traders  to  the  occupation,  and  re¬ 
duce  the  actual  profit  to  the  ordinary 
level.  Upon  each  transaction  the  trader 
may  procure  an  advanced  rate  of  profit, 


but  his  aggregate  profit  will  be  no  higher 
than  that  in  unprotected  trades,  if  indeed 
they  be  not  reduced  below  it,  owing  to 
the  over-estimate  people  ordinarily  make 
about  the  advantages  of  a  protected 
trade.  It  was  because  the  monopoly  of 
Protection  was  found  to  be  no  advantage 
to  the  manufacturers,  that  these  persons 
early  moved  against  it.  The  case  was 
different  with  the  landowners. 


32 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


turers.  Manufactures,  those  of  the  finer  kind  especially,  are  more 
easily  transported  from  one  country  to  another  than  corn  or  cattle. 

(It  is  in  the  fetching  and  carrying  manufactures,  accordingly,  that 
foreign  trade  is  chiefly  employed.  In  manufactures,  a  very  small 
advantage  will  enable  foreigners  to  undersell  our  own  workmen, 
even  in  the  home  market.  It  will  require  a  very  great  one  to 
enable  them  to  do  so  in  the  rude  produce  of  the  soil.  If  the  free 
importation  of  foreign  manufactures  was  permitted,  several  of  the 
home  manufactures  would  probably  suffer,  and  some  of  them 
perhaps  go  to  ruin  altogether,  and  a  considerable  part  of  the  stock 
and  industry  at  present  employed  in  them  would  be  forced  to  find 
out  some  other  employment.  But  the  freest  importation  of  the 
rude  produce  of  the  soil  could  have  no  such  effect  upon  the  agri- 
L  culture  of  the  country. 

If  the  importation  of  foreign  cattle,  for  example,  was  made  ever 
so  free,  so  few  could  be  imported  that  the  grazing  trade  of  Great 
Britain  could  he  little  affected  by  it.  Live  cattle  are,  perhaps,  the 
only  commodity  of  which  the  transportation  is  more  expensive  by 
sea  than  by  land.  By  land,  they  carry  themselves  to  market.  By 
sea,  not  only  the  cattle  but  their  food  and  their  water  too  must  he 
carried  at  no  small  expense  and  inconveniency.  The  short  sea 
between  Ireland  and  Great  Britain,  indeed,  renders  the  importation 
of  Irish  cattle  more  easy.  But  though  the  free  importation  of  them, 
which  was  lately  permitted  only  for  a  limited  time,  were  rendered 
perpetual,  it  could  have  no  considerable  effect  upon  the  interest  of 
the  graziers  of  Great  Britain.  Those  parts  of  Great  Britain  which 
border  upon  the  Irish  Sea  are  all  grazing  countries.  Irish  cattle 
could  never  he  imported  for  their  use,  but  must  be  drove  through 
those  very  extensive  countries,  at  no  small  expense  and  inconveni¬ 
ency,  before  they  could  arrive  at  their  proper  market.  Fat  cattle 
could  not  be  drove  so  far.  Lean  cattle  therefore  only  could  be 
imported,  and  such  importation  could  interfere,  not  with  the 
interest  of  the  feeding  or  fattening  countries,  to  which,  by  reducing 
the  price  of  lean  cattle,  it  would  rather  be  advantageous,  but  with 
that  of  the  breeding  countries  only.  The  small  number  of  Irish 
cattle  imported  since  their  importation  was  permitted,  together 
with  the  good  price  at  which  lean  cattle  continue  to  sell,  seem  to 
demonstrate  that  even  the  breeding  countries  of  Great  Britain  are 
never  likely  to  be  much  affected  by  the  free  importation  of  Irish 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


33 


cattle.  The  common  people  of  Ireland,  indeed,,  are  said  to  have 
sometimes  opposed  with  violence  the  exportation  of  their  cattle. 
But  if  the  exporters  had  found  any  great  advantage  in  continuing 
the  trade,  they  could  easily,  when  the  law  was  on  their  side,  have 
conquered  this  mobbish  opposition. 

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

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

Even  the  free  importation  of  foreign  corn  could  very  little  affect 
the  interest  of  the  farmers  of  Great  Britain.  Corn  is  a  much  more 
bulky  commodity  than  butcher’s-meat.  A  pound  of  wheat  at  a 
penny  is  as  dear  as  a  pound  of  butcheFs-meat  at  fourpence.  The 

VOL.  II.  D 


34 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


small  quantity  of  foreign  corn  imported  even  in  times  of  the 
greatest  scarcity,  may  satisfy  our  farmers  that  they  can  have 
nothing  to  fear  from  the  freest  importation.  The  average  quantity 
imported,  one  year  with  another,  amounts  only,  according  to  the 
very  well-informed  author  of  the  tracts  upon  the  corn-trade,  to 
twenty-three  thousand  seven  hundred  and  twenty-eight  quarters  of 
all  sorts  of  grain,  and  does  not  exceed  the  five  hundred  and  seventy- 
first  part  of  the  annual  consumption.1  But  as  the  bounty  upon 
corn  occasions  a  greater  exportation  in  years  of  plenty,  so  it  must  of 
consequence  occasion  a  greater  importation  in  years  of  scarcity,  than 
in  the  actual  state  of  tillage  would  otherwise  take  place.  By  means 
of  it,  the  plenty  of  one  year  does  not  compensate  the  scarcity  of 
another,  and  as  the  average  quantity  exported  is  necessarily  aug¬ 
mented  by  it,  so  must  likewise,  in  the  actual  state  of  tillage,  the 
average  quantity  imported.  If  there  was  no  bounty,  as  less  corn 
would  be  exported,  so  it  is  probable  that,  one  year  with  another, 
less  would  be  imported  than  at  present.  The  corn-merchants,  the 
fetchers  and  carriers  of  corn  between  Great  Britain  and  foreign 


countries,  would  have  much  less  employment,  and  might  suffer 
considerably;  but  the  country  gentlemen  and  farmers  could  suffer 
very  little.  It  is  in  the  corn-merchants,  accordingly,  rather  than 
in  the  country  gentlemen  and  farmers,  that  I  have  observed  the 
greatest  anxiety  for  the  renewal  and  continuation  of  the  bounty.2 

Country  gentlemen  and  farmers  are,  to  their  great  honour,  of 
all  people  the  least  subject  to  the  wretched  spirit  of  monopoly. 
The  undertaker  of  a  great  manufactory  is  sometimes  alarmed  if 
another  work  of  the  same  kind  is  established  within  twenty  miles 


1  The  change  which  has  taken  place 
in  our  time,  when  as  much  as  26,000,000 
quarters  of  corn  have  been  imported  in 
one  year,  is  due  partly  to  the  demand  of 
an  increased  population,  much  more  to 
the  cheapening  of  freights.  This  cheapen¬ 
ing,  again,  is  partly  due  to  the  substi¬ 
tution  of  canals  for  rivers,  and  railways 
for  land  transport,  partly  to  improve¬ 
ments  in  the  building  and  navigation  of 
ships,  partly  to  the  practical  information 
which  is  possessed  by  mariners  in  our 
time  in  hydrography  and  the  physical 
characters  of  the  sea.  The  economies 
which  have  been  induced  by  the  latter 
cause  are  well  described  in  Captain 
Maury’s  excellent  work  on  the  Physical 
Geography  of  the  Sea.  At  the  present 


time,  imported  corn  is  probably  about 
one-half  to  one-third  of  that  produced  at 
home. 

2  The  continuance  of  protection  to 
home  agriculture  during  the  crisis  and 
after  the  conclusion  of  the  great  conti¬ 
nental  war,  must,  if  Smith’s  estimate  of 
what  the  country  gentlemen  and  farmers 
were  in  his  time  be  true,  have  greatly 
modified  the  feelings  they  previously  en¬ 
tertained.  It  is  certain  that  at  and  after 
the  agitation  which  brought  about  the 
repeal  of  the  Corn  Laws  the  classes  re¬ 
ferred  to  were  violent  beyond  expression 
in  their  advocacy  of  protection,  when  the 
mercantile  classes  had  thoroughly  repu¬ 
diated  it. 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


35 


of  him.  The  Dutch  undertaker  of  the  woollen  manufacture  at 
Abbeville  stipulated  that  no  work  of  the  same  kind  should  be 
established  within  thirty  leagues  of  that  city.  Farmers  and  country 
gentlemen,  on  the  contrary,  are  generally  disposed  rather  to  pro¬ 
mote  than  to  obstruct  the  cultivation  and  improvement  of  their 
neighbours’  farms  and  estates.  They  have  no  secrets,  such  as  those 
of  the  greater  part  of  manufacturers,  but  are  generally  rather  fond 
of  communicating  to  their  neighbours,  and  of  extending  as  far  as 
possible,  any  new  practice  which  they  have  found  to  be  advan¬ 
tageous.  Pius  Questus ,  says  old  Cato,1  stabilissimusque ,  minimeque 
invidiosus ;  minimeque  male  cogitantes  sunt ,  qui  in  eo  studio  occupati 
sunt.  Country  gentlemen  and  farmers,  dispersed  in  different  parts 
of  the  country,  cannot  so  easily  combine  as  merchants  and  manu¬ 
facturers,  who,  being  collected  into  towns  and  accustomed  to  that 
exclusive  corporation  spirit  which  prevails  in  them,  naturally  en¬ 
deavour  to  obtain  against  all  their  countrymen  the  same  exclusive 
privilege  which  they  generally  possess  against  the  inhabitants  of 
their  respective  towns.  They  accordingly  seem  to  have  been  the 
original  inventors  of  those  restraints  upon  the  importation  of  foreign 
goods  which  secure  to  them  the  monopoly  of  the  home  market.  It 
was  probably  in  imitation  of  them,  and  to  put  themselves  upon  a 
level  with  those  who  they  found  were  disposed  to  oppress  them,  that 
the  country  gentlemen  and  farmers  of  Great  Britain  so  far  forgot 
the  generosity  which  is  natural  to  their  station  as  to  demand  the 
exclusive  privilege  of  supplying  their  countrymen  with  corn  and 
butch er’s-meat.  They  did  not  perhaps  take  time  to  consider  how 
much  less  their  interest  could  be  affected  by  the  freedom  of  trade 
than  that  of  the  people  whose  example  they  followed. 

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

There  seem,  however,  to  be  two  cases  in  which  it  will  generally 
be  advantageous  to  lay  some  burden  upon  foreign  for  the  encourage¬ 
ment  of  domestic  industry. 

The  first  is,  when  some  particular  sort  of  industry  is  necessary 
for  the  defence  of  the  country.  The  defence  of  Great  Britain,  for 
example,  depends  very  much  upon  the  number  of  its  sailors  and 


1  De  Re  Rustica.  Proeraiuin. 


36 


THE  NATURE  AND  CAUSES  OF 


"BOOK  IV. 


shipping.  The  Act  of  Navigation,  therefore,  very  properly  en¬ 
deavours  to  give  the  sailors  and  the  shipping  of  Great  Britain  the 
monopoly  of  the  trade  of  their  own  country,  in  some  cases  by  abso¬ 
lute  prohibitions,  and  in  others  by  heavy  burdens  upon  the  shipping 
of  foreign  countries.  The  following  are  the  principal  dispositions 
of  this  Act. 

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

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

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

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

When  the  Act  of  Navigation  was  made,  though  England  and 


CHAP.  ir. 


THE  WEALTH  OF  NATIONS . 


37 


Holland  were  not  actually  at  war,  the  most  violent  animosity 
subsisted  between  the  two  nations.  It  had  begun  during  the 
government  of  the  Long  Parliament,  which  first  framed  this  Act, 
and  it  broke  out  soon  after  in  the  Dutch  wars  during1  that  of  the 
Protector  and  of  Charles  the  Second.  It  is  not  impossible,  there¬ 
fore,  that  some  of  the  regulations  of  this  famous  Act  may  have 
proceeded  from  national  animosity.  They  are  as  wise,  however, 
as  if  they  had  all  been  dictated  by  the  most  deliberate  wisdom. 
National  animosity  at  that  particular  time  aimed  at  the  very  same 
object  which  the  most  deliberate  wisdom  would  have  recommended, 
the  diminution  of  the  naval  power  of  Holland,  the  only  naval  power 
which  could  endanger  the  security  of  England.1 

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


1  It  is  singular  that  Smith  should  have 
deferred  so  much  to  municipal  prejudice 
as  to  have  lauded  the  navigation  laws. 
On  his  own  principles,  the  adoption  of 
the  carrying  trade  will  be  determined 
by  the  ordinary  rules  of  profit  and  loss, 
and  need  not  be  stimulated  by  positive 
enactments.  The  abandonment  of  these 
laws  in  1849,  as  far  as  foreign  trade  was 
concerned,  and  in  1854,  as  regards  the 


coasting  trade,  has  neither  checked  the 
development  of  the  mercantile  marine, 
nor  lessened  the  supply  of  sailors  available 
for  purposes  of  national  defence.  One  of  the 
greatest  hindrances  to  the  development 
of  the  former  was  a  system  which  prevail¬ 
ed  during  the  time  in  which  Smith  wrote, 
and,  for  a  long  time  afterwards,  the  press- 
gang.  The  navigation  laws  certainly  did 
not  diminish  the  naval  power  of  Holland. 


38 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


dearer,  but  to  sell  our  own  cheaper,  than  if  there  was  a  more 
perfect  freedom  of  trade.  As  defence,  however,  is  of  much  more 
importance  than  opulence,  the  Act  of  Navigation  is,  perhaps,  the 
/  wisest  of  all  commercial  regulations  of  England. 

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

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


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


39 


it  becomes  necessary,  they  think,  to  lay  some  duty  upon  every 
foreign  commodity,  equal  to  this  enhancement  of  the  price  of  the 
home  commodities  with  which  it  can  come  into  competition. 

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

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

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

Such  taxes,  when  they  have  grown  up  to  a  certain  height,  are  a 


40 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

The  case  in  which  it  may  sometimes  be  a  matter  of  deliberation 
how  far  it  is  proper  to  continue  the  free  importation  of  certain 
foreign  goods,  is,  when  some  foreign  nation  restrains  by  high  duties 
or  prohibitions  the  importation  of  some  of  our  manufactures  into 
their  country.  Revenge  in  this  case  naturally  dictates  retaliation, 
and  that  we  should  impose  the  like  duties  and  prohibitions  upon 
the  importation  of  some  or  all  of  their  manufactures  into  ours. 
Nations,  accordingly,  seldom  fail  to  retaliate  in  this  manner.  The  . 
French  have  been  particularly  forward  to  favour  their  own  manu¬ 
factures  by  restraining  the  importation  of  such  foreign  goods  as 
could  come  into  competition  with  them.  In  this  consisted  a  great 
part  of  the  policy  of  M.  Colbert,  who,  notwithstanding  his  great 
abilities,  seems  in  this  case  to  have  been  imposed  upon  by  the 
sophistry  of  merchants  and  manufacturers,  who  are  always  de¬ 
manding  a  monopoly  against  their  countrymen.  It  is  at  present 
the  opinion  of  the  most  intelligent  men  in  France  that  his  operations 
of  this  kind  have  not  been  beneficial  to  his  country.  That  minister, 
by  the  tariff  of  1 667,  imposed  very  high  duties  upon  a  great  number 
of  foreign  manufactures.  Upon  his  refusing  to  moderate  them  in 
favour  of  the  Dutch,  they  in  1671  prohibited  the  importation  of 
the  wines,  brandies,  and  manufactures  of  France.  The  war  of  1672 
seems  to  have  been  in  part  occasioned  by  this  commercial  dispute. 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


41 


The  peace  of  Nimeguen  put  an  end  to  it  in  1678,  by  moderating 
some  of  those  duties  in  favour  of  the  Dutch,  who  in  consequence 
took  off  their  prohibition.  It  was  about  the  same  time  that  the 
French  and  English  began  mutually  to  oppress  each  other’s  industry, 
by  the  like  duties  and  prohibitions,  of  which  the  French,  however, 
seem  to  have  set  the  first  example.  The  spirit  of  hostility  which 
has  subsisted  between  the  two  nations  ever  since,  has  hitherto 
hindered  them  from  being  moderated  on  either  side.  In  1697  the 
English  prohibited  the  importation  of  bone-lace,  the  manufacture  of 
Flanders.  The  Government  of  that  country,  at  that  time  under  the 
dominion  of  Spain,  prohibited  in  return  the  importation  of  English 
woollens.  In  1 700,  the  prohibition  of  importing  bone-lace  into  Eng¬ 
land  was  taken  off,  upon  condition  that  the  importation  of  English 
woollens  into  Flanders  should  be  put  on  the  same  footing  as  before. 

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


42 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


tax  upon  the  whole  country,  not  in  favour  of  that  particular  class 
of  workmen  who  were  injured  by  our  neighbours’  prohibition,  but 
of  some  other  class. 

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

First,  all  those  manufactures,  of  which  any  part  is  commonly  ex¬ 
ported  to  other  European  countries  without  a  bounty,  could  be  very 
little  affected  by  the  freest  importation  of  foreign  goods.  Such 
manufactures  must  be  sold  as  cheap  abroad  as  any  other  foreign  goods 
of  the  same  quality  and  kind,  and  consequently  must  be  sold 
cheaper  at  home.  They  would  still,  therefore,  keep  possession  of  the 
home  market,  and  though  a  capricious  man  of  fashion  might  some¬ 
times  prefer  foreign  wares,  merely  because  they  were  foreign,  to 
cheaper  and  better  goods  of  the  same  kind  that  were  made  at  home, 
this  folly  could,  from  the  nature  of  things,  extend  to  so  few,  that  it 
could  make  no  sensible  impression  upon  the  general  employment  of 
the  people.  But  a  great  part  of  all  the  different  branches  of  our 
woollen  manufacture,  of  our  tanned  leather,  and  of  our  hardware,  are 
annually  exported  to  other  European  countries  without  any  bounty, 
and  these  are  the  manufactures  which  employ  the  greatest  number 
of  hands.  The  silk,  perhaps,  is  the  manufacture  which  would  suffer 
the  most  by  this  freedom  of  trade,  and  after  it  the  linen,  although 
the  latter  much  less  than  the  former.1 

1  Adam  Smith  has  hit  on  the  precise  the  contingency  to  which  he  refers.  Up 
instance  which  has,  in  part,  illustrated  to  the  negotiation  of  the  French  treaty  of 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


43 


Secondly,  though  a  great  number  of  people  should,  by  thus  re¬ 
storing  the  freedom  of  trade,  be  thrown  all  at  once  out  of  their 
ordinary  employment  and  common  method  of  subsistence,  it  would 
by  no  means  follow  that  they  would  thereby  be  deprived  either  of 
employment  or  subsistence.  By  the  reduction  of  the  army  and 
navy  at  the  end  of  the  late  war,  more  than  a  hundred  thousand 
soldiers  and  seamen,  a  number  equal  to  what  is  employed  in  the 
greatest  manufactures,  were  all  at  once  thrown  out  of  their  ordinary 
employment ;  but,  though  they  no  doubt  suffered  some  inconve- 
niency,  they  were  not  thereby  deprived  of  all  employment  and  sub¬ 
sistence.  The  greater  part  of  the  seamen,  it  is  probable,  gradually 
betook  themselves  to  the  merchant-service  as  they  could  find  occa¬ 
sion,  and  in  the  meantime  both  they  and  the  soldiers  were  absorbed 
in  the  great  mass  of  the  people,  and  employed  in  a  great  variety 
of  occupations.  Not  only  no  great  convulsion,  but  no  sensible  dis¬ 
order  arose  from  so  great  a  change  in  the  situation  of  more  than 
a  hundred  thousand  men,  all  accustomed  to  the  use  of  arms,  and 
many  of  them  to  rapine  and  plunder.  The  number  of  vagrants  was 
scarce  anywhere  sensibly  increased  by  it,  even  the  wages  of  labour 
were  not  reduced  by  it  in  any  occupation,  so  far  as  I  have  been  able 
to  learn,  except  in  that  of  seamen  in  the  merchant-service.  But  if  we 
compare  together  the  habits  of  a  soldier  and  of  any  sort  of  manu¬ 
facturer,  we  shall  find  that  those  of  the  latter  do  not  tend  so  much 
to  disqualify  him  from  being  employed  in  a  new  trade,  as  those  of 
the  former  from  being  employed  in  any.  The  manufacturer  has 
always  been  accustomed  to  look  for  his  subsistence  from  his  labour 
only  ;  the  soldier  to  expect  it  from  his  pay.  Application  and  in¬ 
dustry  have  been  familiar  to  the  one  ;  idleness  and  dissipation  to 
the  other.  But  it  is  surely  much  easier  to  change  the  direction  of 
industry  from  one  sort  of  labour  to  another,  than  to  turn  idleness 
and  dissipation  to  any.  To  the  greater  part  of  manufactures  be¬ 
sides,  it  has  already  been  observed,  there  are  other  collateral  manu¬ 
factures  of  so  similar  a  nature,  that  a  workman  can  easily  transfer 
his  industry  from  one  of  them  to  another.  The  greater  part  of  such 

1861,  foreign  silks  were  loaded  with  an  that  of  France  is,  and,  besides,  there  is 
ad  valorem  duty  of  fifteen  per  cent.,  and  no  occupation  in  which  trade  disputes 
it  is  said  that  the  home  trade  has  been  have  been  more  destructive  than  in  this, 
seriously  injured  by  the  competition.  It  is  certain  too  that  the  English  silk 
But  the  English  silk  trade  was  never  manufacture  was  on  the  decline  long  be- 
healthy.  The  climate  of  this  country  is  fore  the  treaty  in  question  was  negotiated, 
not  so  suitable  for  this  manufacture  as  or  the  duty  on  foreign  goods  omitted. 


44 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


workmen  too  are  occasionally  employed  in  country  labour.  The 
stock  which  employed  them  in  a  particular  manufacture  before,  will 
still  remain  in  the  country  to  employ  an  equal  number  of  people  in 
some  other  way.  The  capital  of  the  country  remaining  the  same, 
the  demand  for  labour  will  likewise  be  the  same,  or  very  nearly  the 
same,  though  it  may  be  exerted  in  different  places  and  for  different 
occupations.  Soldiers  and  seamen,  indeed,  when  discharged  from 
the  king’s  service,  are  at  liberty  to  exercise  any  trade,  within  any 
town  or  place  in  Great  Britain  and  Ireland.  Let  the  same  natural 
liberty  of  exercising  what  species  of  industry  they  please  be  re¬ 
stored  to  all  his  Majesty’s  subjects,  in  the  same  manner  as  to 
soldiers  and  seamen  ;  that  is,  break  down  the  exclusive  privilege  of 
corporations,  and  repeal  the  statute  of  apprenticeship,  both  which 
are  real  encroachments  upon  natural  liberty,  and  add  to  these  the 
repeal  of  the  law  of  settlements,1  so  that  a  poor  workman,  when 
thrown  out  of  employment,  either  in  one  trade  or  in  one  place,  may 
seek  for  it  in  another  trade  or  in  another  place,  without  the  fear 
either  of  a  prosecution  or  of  a  removal,  and  neither  the  public  nor 
the  individuals  will  suffer  much  more  from  the  occasional  disband¬ 
ing  some  particular  class  of  manufacturers,  than  from  that  of  sol¬ 
diers.  Our  manufacturers  have  no  doubt  great  merit  with  their 
country,  but  they  cannot  have  more  than  those  who  defend  it  with 
their  blood,  nor  deserve  to  be  treated  with  more  delicacv. 

To  expect,  indeed,  that  the  freedom  of  trade  should  ever  be  en¬ 
tirely  restored  in  Great  Britain,  is  as  absurd  as  to  expect  that  an 
Oceana  or  Utopia  should  ever  be  established  in  it.2  Not  only  the 
prejudices  of  the  public,  but  what  is  much  more  unconquerable,  the 
private  interests  of  many  individuals,  irresistibly  oppose  it.  Were 
the  officers  of  the  army  to  oppose  with  the  same  zeal  and  unanimity 
any  reduction  in  the  number  of  forces,  with  which  master  manufac¬ 
turers  set  themselves  against  every  law  that  is  likely  to  increase  the 
number  of  their  rivals  in  the  home  market ;  were  the  former  to 


1  All  these  restrictions  are  now  abro¬ 
gated,  except  in  so  far  as  the  regulations 
of  trades-unions  forbid  or  discourage  the 
employment  of  artisans  who  have  not 
served  an  apprenticeship.  The  right  of 
carrying  on  certain  professions  is  also 
put  under  the  condition  of  incorporation 
in  some  society.  But' this  restriction  is 
always  justified  under  the  plea  of  the 


public  good. 

2  This  prophecy  has  been  nullified. 
Since  1820,  when  Vansittart’s  last  vicious 
budget  was  promulgated,  the  country  has 
made  rapid  strides  in  the  policy  of  free 
trade,  and  since  1846  has  adopted  it  on 
principle.  No  person,  perhaps,  has  con¬ 
tributed  so  largely  to  this  result  as  the 
author  of  the  Wealth  of  Nations. 


CHAP.  II. 


THE  WEALTH  OF  NATIONS. 


45 


animate  their  soldiers,  in  the  same  manner  as  the  latter  inflame 
their  workmen,  to  attack  with  violence  and  outrage  the  proposers 
of  any  such  regulation  ;  to  attempt  to  reduce  the  army  would  be  as 
dangerous  as  it  has  now  become  to  attempt  to  diminish  in  any  re¬ 
spect  the  monopoly  which  our  manufacturers  have  obtained  against 
us.  This  monopoly  has  so  much  increased  the  number  of  some 
particular  tribes  of  them,  that,  like  an  overgrown  standing  army, 
they  have  become  formidable  to  the  Government,  and  upon  many 
occasions  intimidate  the  Legislature.  The  member  of  Parliament 
who  supports  every  proposal  for  strengthening  this  monopoly,  is 
sure  to  acquire  not  only  the  reputation  of  understanding  trade,  but 
great  popularity  and  influence  with  an  order  of  men  whose  numbers 
and  wealth  render  them  of  great  importance.  If  he  opposes  them, 
on  the  contrary,  and  still  more  if  he  has  authority  enough  to  be 
able  to  thwart  them,  neither  the  most  acknowledged  probity,  nor 
the  highest  rank,  nor  the  greatest  public  services  can  protect  him 
from  the  most  infamous  abuse  and  detraction,  from  personal  insults, 
nor  sometimes  from  real  danger,  arising  from  the  insolent  outrage 
of  furious  and  disappointed  monopolists. 

The  undertaker  of  a  great  manufacture  who,  by  the  home  markets 
being  suddenly  laid  open  to  the  competition  of  foreigners,  should  be 
obliged  to  abandon  his  trade,  would  no  doubt  suffer  very  con¬ 
siderably.  That  part  of  his  capital  which  had  usually  been  em¬ 
ployed  in  purchasing  materials  and  in  paying  his  workmen  might, 
without  much  difficulty,  perhaps,  find  another  employment.  But 
that  part  of  it  which  was  fixed  in  workhouses,1  and  in  the  instru¬ 
ments  of  trade,  could  scarce  be  disposed  of  without  considerable 
loss.  The  equitable  regard,  therefore,  to  his  interest  requires  that 
changes  of  this  kind  should  never  be  introduced  suddenly,  but 
slowly,  gradually,  and  after  a  very  long  warning.  The  Legislature, 
were  it  possible  that  its  deliberations  could  be  always  directed,  not 
by  the  clamorous  importunity  of  partial  interests,  but  by  an  exten¬ 
sive  view  of  the  general  good,  ought  upon  this  very  account,  perhaps, 
to  be  particularly  careful  neither  to  establish  any  new  monopolies  of 
this  kind,  nor  to  extend  further  those  which  are  already  established. 
Every  such  regulation  introduces  some  degree  of  real  disorder  into 
the  constitution  of  the  State,  which  it  will  be  difficult  hereafter  to 
cure  without  occasioning  another  disorder. 

1  This  use  of  the  word,  like  that  of  ‘  undertaker,’  is  obsolete. 


46 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


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


CHAPTER  III. 

OF  THE  EXTRAORDINARY  RESTRAINTS  UPON  THE  IMPORTATION  OF 
GOODS  OF  ALMOST  ALL  KINDS,  FROM  THOSE  COUNTRIES  WITH 
WHICH  THE  BALANCE  IS  SUPPOSED  TO  BE  DISADVANTAGEOUS. 

PART  I. 

Of  the  Unreasonableness  of  those  Restraints ,  even  upon  the  Principles 

of  the  Commercial  System. 

% 

TO  lay  extraordinary  restraints  upon  the  importation  of  goods 
of  almost  all  kinds,  from  those  particular  countries  with 
which  the  balance  of  trade  is  supposed  to  be  disadvantageous,  is 
the  second  expedient  by  which  the  commercial  system  proposes  to 
increase  the  quantity  of  gold  and  silver.  Thus  in'  Great  Britain, 
Silesia  lawns  may  be  imported  for  home  consumption,  upon  paying 
certain  duties.  But  French  cambrics  and  lawns  are  prohibited  to 
be  imported,  except  into  the  port  of  London,  there  to  be  ware¬ 
housed  for  exportation.  Higher  duties  are  imposed  upon  the  wines 
of  France  than  upon  those  of  Portugal,  or  indeed  of  any  other 
country.  By  what  is  called  the  impost  1692,  a  duty  of  five-and- 
twenty  per  cent.,  of  the  rate  or  value,  was  laid  upon  all  French 
goods  ;  while  the  goods  of  other  nations  were,  the  greater  part  of 
them,  subjected  to  much  lighter  duties,  seldom  exceeding  five  per 
cent.  The  wine,  brandy,  salt  and  vinegar  of  France  were  indeed 
excepted ;  these  commodities  being  subjected  to  other  heavy  duties, 


CHAP.  III. 


THE  WEALTH  OF  NATIONS , 


47 


either  by  other  laws,  or  by  particular  clauses  of  the  same  law.  In 
1696,  a  second  duty  of  twenty-five  per  cent.,  the  first  not  having 
been  thought  a  sufficient  discouragement,  was  imposed  upon  all 
French  goods,  except  brandy  ;  together  with  a  new  duty  of  five- 
and-twenty  pounds  upon  the  tun  of  French  wine,  and  another  of 
fifteen  pounds  upon  the  tun  of  French  vinegar.  French  goods 
have  never  been  omitted  in  any  of  those  general  subsidies,  or  duties 
of  five  per  cent.,  which  have  been  imposed  upon  all,  or  the  greater 
part  of  the  goods  enumerated  in  the  book  of  rates.  If  we  count 
the  one-third  and  two-third  subsidies  as  making  a  complete  subsidy 
between  them,  there  have  been  five  of  these  general  subsidies ;  so 
that  before  the  commencement  of  the  present  war  seventy-five  per 
cent,  may  be  considered  as  the  lowest  duty,  to  which  the  greater 
part  of  the  goods  of  the  growth,  produce,  or  manufacture  of  France 
were  liable.  But  upon  the  greater  part  of  goods,  those  duties  are 
equivalent  to  a  prohibition.  The  French  in  their  turn  have,  I 
believe,  treated  our  goods  and  manufactures  just  as  hardly  ;  though 
I  am  not  so  well  acquainted  with  the  particular  hardships  w^hich 
they  have  imposed  upon  them.  Those  mutual  restraints  have  put 
an  end  to  almost  all  fair  commerce  between  the  two  nations,  and 
smugglers  are  now  the  principal  importers,  either  of  British  goods 
into  France,  or  of  French  goods  into  Great  Britain.  The  prin¬ 
ciples  which  I  have  been  examining  in  the  foregoing  chapter  took 
their  origin  from  private  interest  and  the  spirit  of  monopoly  ;  those 
which  I  am  going  to  examine  in  this,  from  national  prejudice  and 
animosity.  They  are,  accordingly,  as  might  well  be  expected,  still 
more  unreasonable.  They  are  so,  even  upon  the  principles  of  the 
commercial  system. 

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


48 


THE  NATURE  AND  CAUSES  OF 


BOOK  TV. 


importations  would  be  diminished,  in  proportion  as  the  French 
goods  of  the  same  quality  were  cheaper  than  those  of  the  other 
two  countries.1  This  would  be  the  case,  even  upon  the  supposition 
that  the  whole  French  goods  imported  were  to  be  consumed  in 
Great  Britain. 

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

Thirdly,  and  lastly,  there  is  no  certain  criterion  by  which  we  can 
determine  on  which  side  what  is  called  the  balance  between  any 
two  countries  lies,  or  which  of  them  exports  to  the  greatest  value. 
National  prejudice  and  animosity,  prompted  always  by  the  private 
interest  of  particular  traders,  are  the  principles  which  generally 
direct  our  judgment  upon  all  questions  concerning  it.  There  are 
two  criterions,  however,  which  have  frequently  been  appealed  to 
upon  such  occasions,  the  Custom-house  books  and  the  course  of 
exchange.  The  Custom-house  books,  I  think,  it  is  now  generally 


1  The  author  is  here  distinguishing  be¬ 
tween  what  is  called  an  adverse  balance 
between  one  country  and  any  other,  and 
an  adverse  balance  between  one  country 
and  all  others.  The  former  may  and  in¬ 
deed  does  indicate  that  the  trade  carried 
on  with  that  individual  country  is  ad¬ 
vantageous,  and  even  on  the  principles  of 
the  mercantile  system  occasions  a  less  ex¬ 
portation  of  gold  and  silver  than  the  pro¬ 


hibition  of  such  a  trade.  The  latter  may 
be  and  is,  apart  from  the  operation  of  any 
system,  an  indication  that  a  country  is 
spending  more  than  it  earns  or  lias  the 
means  to  pay  for,  except  by  incurring 
debts,  or,  as  is  the  case  when  a  country 
has  a  balance  of  consumption  against  it, 
by  exporting  securities  in  order  to  square 
the  balance. 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


49 


acknowledged,  are  a  very  uncertain  criterion,  on  account  of  the  inac¬ 
curacy  of  the  valuation  at  which  the  greater  part  of  goods  are  rated 
in  them.  The  course  of  exchange  is,  perhaps,  almost  equally  so. 

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

But  though  the  ordinary  course  of  exchange  should  be  allowed  to 
be  a  sufficient  indication  of  the  ordinary  state  of  debt  and  credit 
between  any  two  places,  it  would  not  from  thence  follow  that  the 
balance  of  trade  was  in  favour  of  that  place  which  had  the  ordinary 
state  of  debt  and  credit  in  its  favour.  The  ordinary  state  of  debt 
and  credit  between  any  two  places  is  not  always  entirely  regulated 
by  the  ordinary  course  of  their  dealings  with  one  another,  but  is 
oi'ten  influenced  by  that  of  the  dealings  of  either  with  many  other 
places.  If  it  is  usual,  for  example,  for  the  merchants  of  England 
to  pay  for  the  goods  which  they  buy  of  Hamburg,  Dantzic,  Biga, 
&c.  by  bills  upon  Holland,  the  ordinary  state  of  debt  and  credit 
between  England  and  Holland  will  not  be  regulated  entirely  by 
the  ordinary  course  of  the  dealings  of  those  two  countries  with  one 

VOL.  II.  E 


50 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


another,  but  will  be  influenced  by  that  of  the  dealings  of  England 
with  those  other  places.  England  may  be  obliged  to  send  out 
every  year  money  to  Holland,  though  its  annual  exports  to  that 
country  may  exceed  very  much  the  annual  value  of  its  imports 
from  thence,  and  though  what  is  called  the  balance  of  trade  may 
be  very  much  in  favour  of  England. 

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

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

But,  first,  we  cannot  always  judge  of  the  value  of  the  current 
money  of  different  countries  by  the  standard  of  their  respective 
mints.  In  some  it  is  more,  in  others  it  is  less  worn,  dipt,  and 
otherwise  degenerated  from  that  standard.  But  the  value  of  the 
current  coin  of  every  country,  compared  with  that  of  any  other 
country,  is  in  proportion  not  to  the  quantity  of  pure  silver  which 
it  ought  to  contain,  but  to  that  which  it  actually  does  contain. 
Before  the  reformation  of  the  silver  coin  in  King  William’s  time, 
exchange  between  England  and  Holland,  computed,  in  the  usual 
manner,  according  to  the  standard  of  their  respective  mints,  was 
flve-and -twenty  per  cent,  against  England,1  But  the  value  of  the 

1  A  similarly  permanent  state  of  the  States.  In  mercantile  and  bill  transac- 
exchange  between  country  and  country,  tions,  says  Mr.  Tait,  the  dollar  is  valued 
seemingly  adverse  to  one,  is  that  be-  at  the  fixed  par  of  4s.  6cl.,  444  dollars  44 
tween  Great  Britain  and  the  United  cents  being  equal  to  <£100.  But  in  the 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


51 


current  coin  of  England,  as  we  learn  from  Mr.  Lowndes,1  was  at 
that  time  rather  more  than  five-and-twenty  per  cent,  below  its 
standard  value.  The  real  exchange,  therefore,  may  even  at  that 
time  have  been  in  favour  of  England,  notwithstanding  the  com¬ 
puted  exchange  was  so  much  against  it ;  a  smaller  number  of 
ounces  of  pure  silver,  actually  paid  in  England,  may  have  pur¬ 
chased  a  bill  for  a  greater  number  of  ounces  of  pure  silver  to  be 
paid  in  Holland,  and  the  man  who  was  supposed  to  give,  may 
in  reality  have  got  the  premium.  The  French  coin  was,  before  the 
late  reformation  of  the  English  gold  coin,  much  less  worn  than  the 
English,  and  was,  perhaps,  two  or  three  per  cent,  nearer  its 
standard.  If  the  computed  exchange  with  France,  therefore,  was 
not  more  than  two  or  three  per  cent,  against  England,  the  real 
exchange  might  have  been  in  its  favour.  Since  the  reformation 
of  the  gold  coin,  the  exchange  has  been  constantly  in  favour  of 
England,  and  against  France. 

Secondly,  in  some  countries  the  expense  of  coinage  is  defrayed 
by  the  Government ;  in  others,  it  is  defrayed  by  the  private  people 
who  carry  their  bullion  to  the  mint,  and  the  Government  even 
derives  some  revenue  from  the  coinage.  In  England,  it  is  de¬ 
frayed  by  the  Government,  and  if  you  carry  a  pound  weight  of 
standard  silver  to  the  mint,  you  get  back  sixty-two  shillings,  con¬ 
taining  a  pound  weight  of  the  like  standard  silver.2  In  France,  a 
duty  of  eight  per  cent,  is  deducted  for  the  coinage,  which  not  only 
defrays  the  expense  of  it,  but  affords  a  small  revenue  to  the  Go¬ 
vernment.  In  England,  as  the  coinage  costs  nothing,  the  current 
coin  can  never  be  much  more  valuable  than  the  quantity  of  bullion 
which  it  actually  contains.  In  France,  the  workmanship  as  you 
pay  for  it,  adds  to  the  value,  in  the  same  manner  as  to  that  of 
wrought  plate.  A  sum  of  French  money,  therefore,  containing  a 
certain  weight  of  pure  silver,  is  more  valuable  than  a  sum  of 


Custom-house  valuations  the  pound  ster¬ 
ling  is  valued  at  4  dollars  80  cents,  and 
the  dollar  at  4s.  2 cl.,  which  gives  the  ap¬ 
pearance  of  a  permanent  premium  in 
favour  of  England  of  8|  per  cent.  In 
reality,  of  course,  this  obscurity  is  merely 
superficial. 

1  Essay  for  the  Amendment  of  the 
Silver  Coins.  The  author  wished  to  make 
the  crown  pass  at  6s.  5 d.  His  arguments 
were  answered  by  Locke. 

2  A  pound  weight  of  silver  since  1816 


has  been  coined  into  66  shillings,  so  that, 
at  five  shillings  the  ounce,  the  silver  coin 
of  this  country  pays  a  seignorage  of  10 
per  cent.  But  silver  is  not  a  legal  tender 
to  a  greater  amount  than  forty  shillings. 
Gold  still  pays  no  seignorage.  In  France, 
the  seignorage  on  gold  and  silver  coin 
is  much  less  than  in  Smith’s  time.  The 
charge  for  coinage  called  Retenue  is  6 
francs  per  kilogramme  for  gold,  and  2 
francs  per  kilogramme  for  silver.  Tait’s 
Modern  Cambist. 


E  2, 


52 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


English  money  containing  an  equal  weight  of  pure  silver,  and 
must  require  more  bullion,  or  other  commodities  to  purchase  it. 
Though  the  current  coin  of  the  two  countries,  therefore,  were 
equally  near  the  standards  of  their  respective  mints,  a  sum  of 
English  money  could  not  well  purchase  a  sum  of  French  money 
containing  an  equal  number  of  ounces  of  pure  silver,  nor  con¬ 
sequently  a  bill  upon  France  for  such  a  sum.  If  for  such  a  bill 
no  more  additional  money  was  paid  than  what  was  sufficient  to 
compensate  the  expense  of  the  French  coinage,  the  real  exchange 
might  be  at  par  between  the  two  countries,  their  debts  and  credits 
might  mutually  compensate  one  another,  while  the  computed  ex¬ 
change  was  considerably  in  favour  of  France.  If  less  than  this 
was  paid,  the  real  exchange  might  be  in  favour  of  England,  while 
the  computed  was  in  favour  of  France. 

Thirdly,  and  lastly,  in  some  places,  as  at  Amsterdam,  Hamburg, 
Venice,  &c.,  foreign  bills  of  exchange  are  paid  in  what  they  call 
Bank  Money ;  while  in  others,  as  at  London,  Lisbon,  Antwerp, 
Leghorn,  &c.,  they  are  paid  in  the  common  currency  of  the  country. 
What  is  called  bank  money  is  always  of  more  value  than  the  same 
nominal  sum  of  common  currency.  A  thousand  guilders  in  the 
bank  of  Amsterdam,  for  example,  are  of  more  value  than  a  thousand 
guilders  of  Amsterdam  currency.  The  difference  between  them  is 
called  the  agio  of  the  bank,  which,  at  Amsterdam,  is  generally 
about  five  per  cent.  Supposing  the  current  money  of  the  two 
countries  equally  near  to  the  standard  of  their  respective  mints,  and 
that  the  one  pays  foreign  bills  in  this  common  currency,  while  the 
other  pays  them  in  bank  money,  it  is  evident  that  the  computed 
exchange  may  be  in  favour  of  that  which  pays  in  bank  money, 
though  the  real  exchange  should  be  in  favour  of  that  which  pays 
in  current  money  ;  for  the  same  reason  that  the  computed  exchange 
may  be  in  favour  of  that  which  pays  in  better  money,  or  in  money 
nearer  to  its  own  standard,  though  the  real  exchange  should  be  in 
favour  of  that  which  pays  in  worse.  The  computed  exchange, 
before  the  late  reformation  of  the  gold  coin,  was  generally  against 
London  with  Amsterdam,  Hamburg,  Venice,  and,  I  believe,  with 
all  other  places  which  pay  in  what  is  called  bank  money.1  It  will 

1  The  bank  money  of  these  institutions  mark  is  17 \d.,  the  Currency  mark  i^\d. 
has  perished  with  them.  The  distinction,  sterling.  The  agio  is  always  fluctuating, 
however,  between  Banco  and  Currency  because  the  market  price  of  silver  con- 
still  holds  at  Hamburg,  where  the  Banco  stantly  varies ;  at  these  terms,  however, 


CHAP.  III. 


THE  WEALTH  OF  NATIONS . 


53 


by  no  means  follow,  however,  that  the  real  exchange  was  against  it. 
Since  the  reformation  of  the  gold  coin,  it  has  been  in  favour  of 
London,  even  with  those  places.  The  computed  exchange  has 
generally  been  in  favour  of  London  with  Lisbon,  Antwerp,  Leg¬ 
horn,  and,  if  you  except  France,  I  believe,  with  most  other  parts  of 
Europe  that  pay  in  common  currency ;  and  it  is  not  improbable 
that  the  real  exchange  was  so  too. 

Digression  concerning  Banks  of  Deposit ,  'particularly  concerning  that 

of  Amsterdam . 

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

In  order  to  remedy  the  inconvenience  to  which  this  disadvan¬ 
tageous  exchange  must  have  subjected  their  merchants,  such  small 
states,  when  they  began  to  attend  to  the  interest  of  trade,  have 
frequently  enacted  that  foreign  bills  of  exchange  of  a  certain  value 
should  be  paid,  not  in  common  currency,  but  by  an  order  upon  or 
by  a  transfer  in  the  books  of  a  certain  bank,  established  upon  the 
credit  and  under  the  protection  of  the  state  ;  this  bank  being 
always  obliged  to  pay,  in  good  and  true  money,  exactly  according 
to  the  standard  of  the  state.  The  banks  of  Venice,  Genoa,  Amster¬ 
dam,  Hamburg,  and  Nuremberg,  seem  to  have  been  all  originally 
established  with  this  view,  though  some  of  them  may  have  after¬ 
wards  been  made  subservient  to  other  purposes.  The  money  of 

it  amounts  to  nearly  2  2|  per  cent.  It  who  is  not  a  burgher  can  have  an  account 
may  be  observed  here,  that  the  Bank  of  opened  with  it.  At  present  (1880)  Ham- 
Hamburg  is  not  a  bank  of  issue,  but  of  burg  is  under  the  monetary  system  of  the 
deposit  and  transfer,  and  that  no  person  German  empire. 


54 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


such  banks  being  better  than  the  common  currency  of  the  country, 
necessarily  bore  an  agio,  which  was  greater  or  smaller,  according  as 
the  currency  was  supposed  to  be  more  or  less  degraded  below  the 
standard  of  the  state.  The  agio  of  the  bank  of  Hamburg,  for 
example,  which  is  said  to  be  commonly  about  fourteen1  per  cent., 
is  the  supposed  difference  between  the  good  standard  money  of  the 
state  and  the  dipt,  worn,  and  diminished  currency  poured  into  it 
from  all  the  neighbouring  states. 

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

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

Bank  money,  over  and  above  both  its  intrinsic  superiority  to 
currency,  and  the  additional  value  which  this  demand  necessarily 
gives  it,  has  likewise  some  other  advantages.  It  is  secure  from 

1  See  above,  note  to  p.  52. 


CHAP.  III. 


THE  WEALTH  OF  NATIONS . 


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

Those  deposits  of  coin,  or  those  deposits  which  the  bank  was 
bound  to  restore  in  coin,  constituted  the  original  capital  of  the  bank, 
or  the  whole  value  of  what  was  represented  by  what  is  called  bank 
money.  At  present  they  are  supposed  to  constitute  but  a  very 
small  part  of  it.  In  order  to  facilitate  the  trade  in  bullion,  the 
bank  has  been  for  these  many  years  in  the  practice  of  giving  credit 
in  its  books  upon  deposits  of  gold  and  silver  bullion.  This  credit  is 
generally  about  five  per  cent,  below  the  mint  price  of  such  bullion. 
The  bank  grants  at  the  same  time  what  is  called  a  recipice  or  receipt, 
entitling  the  person  who  makes  the  deposit,  or  the  bearer,  to  take 
out  the  bullion  again  at  any  time  within  six  months,  upon  re-trans¬ 
ferring  to  the  bank  a  quantity  of  bank  money  equal  to  that  for 
which  credit  had  been  given  in  its  books  when  the  deposit  was 
made,  and  upon  paying  one-fourth  per  cent,  for  the  keeping,  if  the 
deposit  was  in  silver,  and  one-half  per  cent,  if  it  was  in  gold ;  but 


56 


THE  NATURE  AND  CAUSES  OF 


book  IV. 


at  the  same  time  declaring-,  that  in  default  of  such  payment,  and 
upon  the  expiration  of  this  term,  the  deposit  should  belong  to  the 
bank  at  the  price  at  which  it  had  been  received,  or  for  which  credit 
had  been  given  in  the  transfer  books.  What  is  thus  paid  for  the 
keeping  of  the  deposit  may  be  considered  as  a  sort  of  warehouse 
rent ;  and  why  this  warehouse  rent  should  be  so  much  dearer  for 
gold  than  for  silver,  several  different  reasons  have  been  assigned. 
The  fineness  of  gold,  it  has  been  said,  is  more  difficult  to  be  ascer¬ 
tained  than  that  of  silver.  Frauds  are  more  easily  practised,  and 
occasion  a  greater  loss  in  the  more  precious  metal.  Silver,  besides, 
being  the  standard  metal,  the  state,  it  has  been  said,  wishes  to 
encourage  more  the  making  of  deposits  of  silver  than  of  those  of  gold. 

Deposits  of  bullion  are  most  commonly  made  when  the  price  is 
somewhat  lower  than  ordinary  ;  and  they  are  taken  out  again  when 
it  happens  to  rise.  In  Holland,  the  market  price  of  bullion  is 
generally  above  the  mint  price,  for  the  same  reason  that  it  was  so 
in  England  before  the  late  reformation  of  the  gold  coin.  The 
difference  is  said  to  be  commonly  from  about  six  to  sixteen  stivers 
upon  the  mark,  or  eight  ounces  of  silver  of  eleven  parts  fine  and 
one  part  alloy.  The  bank  price,  or  the  credit  which  the  bank  gives 
for  deposits  of  such  silver  (when  made  in  foreign  coin,  of  which  the 
fineness  is  well  known  and  ascertained,  such  as  Mexico  dollars),  is 
twenty-two  guilders  the  mark  ;  the  mint  price  is  about  twenty- 
three  guilders,  and  the  market  price  is  from  twenty-three  guilders 
six,  to  twenty-three  guilders  sixteen  stivers,  or  from  two  to  three 
per  cent,  above  the  mint  price.*  The  proportions  between  the  bank 
price,  the  mint  price,  and  the  market  price  of  gold  bullion,  are 

*  The  following  are  the  prices  at  which  the  bank  of  Amsterdam  at  present  (Sep¬ 
tember,  1775)  receives  bullion  and  coin  of  different  kinds  : — 

SILVER. 

Mexico  dollars  )  r,  Mexico  dollars  new  coin  -21  10  p.  mrk* 

French  crowns  >  -p  vie ers.  Ducatoons . 3  o 

English  silver  coin  )  22  per  mar  Rix  dollars  -----  2  8 

Bar  silver  containing  pi  fine  silver  21  per  mark,  and  in  this  proportion  down  to  f 
fine,  on  which  5  guilders  are  given. 

Fine  bars,  23  per  mark. 

GOLD. 

Portugal  coin  Ditto  old-  -  -  -  300  per  mark. 

Guineas  •  B — 310  per  mark.  New  ducats  -  -  -  4  19  8  per  ducat. 

Louis  d’ors  new 

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


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


57 


nearly  the  same.  A  person  can  generally  sell  his  receipt  for  the 
difference  between  the  mint  price  of  bullion  and  the  market  price, 
A  receipt  for  bullion  is  almost  always  worth  something,  and  it  very 
seldom  happens,  therefore,  that  anybody  suffers  his  receipt  to  expire, 
or  allows  his  bullion  to  fall  to  the  bank  at  the  price  at  which  it  had 
been  received,  either  by  not  taking  it  out  before  the  end  of  the  six 
months,  or  by  neglecting  to  pay  the  one-fourth  or  one-half  per  cent, 
in  order  to  obtain  a  new  receipt  for  another  six  months.  This, 
however,  though  it  happens  seldom,  is  said  to  happen  sometimes, 
and  more  frequently  with  regard  to  gold  than  with  regard  to  silver, 
on  account  of  the  higher  warehouse-rent  which  is  paid  for  the  keep¬ 
ing  of  the  more  precious  metal. 

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

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


58 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


is  paid  likewise  for  a  real  value.  The  price  of  the  receipt,  and  the 
price  of  the  bank  money,  compound  or  make  up  between  them  the 
full  value  or  price  of  the  bullion. 

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

The  sum  of  bank  money  for  which  the  receipts  are  expired  must 
be  very  considerable.  It  must  comprehend  the  whole  original 
capital  of  the  bank,  which,  it  is  generally  supposed,  has  been 
allowed  to  remain  there  from  the  time  it  was  first  deposited,  nobody 
caring  either  to  renew  his  receipt  or  to  take  out  his  deposit,  as,  for 
the  reasons  already  assigned,  neither  the  one  nor  the  other  could  be 
done  without  loss.  But  whatever  may  be  the  amount  of  this  sum, 
the  proportion  which  it  bears  to  the  whole  mass  of  bank  money  is 
supposed  to  be  very  small.  The  bank  of  Amsterdam  has  for  these 
many  years  past  been  the  great  warehouse  of  Europe  for  bullion, 
for  which  the  receipts  are  very  seldom  allowed  to  expire,  or,  as  they 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


59 


express  it,  to  fall  to  the  bank.  The  far  greater  part  of  the  bank 
money,  or  of  the  credits  upon  the  books  of  the  bank,  is  supposed  to 
have  been  created,  for  these  many  years  past,  by  such  deposits  which 
the  dealers  in  bullion  are  continually  both  making  and  withdrawing. 

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

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


60 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

The  bank  of  Amsterdam  professes  to  lend  out  no  part  of  what  is 
deposited  with  it,  but,  for  every  guilder  for  which  it  gives  credit  in. 
its  books,  to  keep  in  its  repositories  the  value  of  a  guilder  either  in 
money  or  bullion.  That  it  keeps  in  its  repositories  all  the  money 
or  bullion  for  which  there  are  receipts  in  force,  for  which  it  is  at  all 
times  liable  to  be  called  upon,  and  which,  in  reality,  is  continually 
going  from  it  and  returning  to  it  again,  cannot  well  be  doubted. 
But  whether  it  does  so  likewise  with  regard  to  that  part  of  its 
capital,  for  which  the  receipts  are  long  ago  expired,  for  which  in 
ordinary  and  quiet  times  it  cannot  be  called  upon,  and  which  in 
reality  is  very  likely  to  remain  with  it  for  ever,  or  as  long  as  the 
States  of  the  United  Provinces  subsist,  may  perhaps  appear  more 
uncertain.  At  Amsterdam,  however,  no  point  of  faith  is  better 
established  than  that  for  every  guilder  circulated  as  bank  money 
there  is  a  correspondent  guilder  in  gold  or  silver  to  be  found  in  the 
treasure  of  the  bank.  The  city  is  guarantee  that  it  should  be  so. 
The  bank  is  under  the  direction  of  the  four  reigning  burgomasters, 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


61 


who  are  changed  every  year.  Each  new  set  of  burgomasters  visits 
the  treasure,  compares  it  with  the  books,  receives  it  upon  oath,  and 
delivers  it  over,  with  the  same  awful  solemnity,  to  the  set  which 
succeeds  ;  and  in  that  sober  and  religious  country  oaths  are  not  yet 
disregarded.1  A  rotation  of  this  kind  seems  alone  a  sufficient 
security  against  any  practices  which  cannot  be  avowed.  Amidst  all 
the  revolutions  which  faction  has  ever  occasioned  in  the  government 


of  Amsterdam,  the  prevailing  party  has  at  no  time  accused  their 
predecessors  of  infidelity  in  the  administration  of  the  bank.  No 
accusation  could  have  affected  more  deeply  the  reputation  and 
fortune  of  the  disgraced  party,  and  if  such  an  accusation  could  have 
been  supported,  we  may  be  assured  that  it  would  have  been  brought. 
In  1672,  when  the  French  king  was  at  Utrecht,  the  bank  of 
Amsterdam  paid  so  readily  as  left  no  doubt  of  the  fidelity  with 
which  it  had  observed  its  engagements.  Some  of  the  pieces  which 
were  then  brought  from  its  repositories  appeared  to  have  been 
scorched  with  the  fire  which  happened  in  the  town-house  soon  after 
the  bank  was  established.  Those  pieces,  therefore,  must  have  lain 
there  from  that  time.  » 

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

The  city  of  Amsterdam  derives  a  considerable  revenue  from  the 
bank.  Besides  what  may  be  called  the  warehouse-rent  above 
mentioned,  each  person,  upon  first  opening  an  account  with  the 
bank,  pays  a  fee  of  ten  guilders ;  and  for  every  new  account  three 


1  They  were,  however ;  for  when  the 
armies  of  the  Revolution  overrun  the 
Low  Countries,  it  was  found,  as  had  been 
suspected,  that  the  bank  was  utterly  in¬ 
solvent.  It  is  supposed  that  the  losses 
of  the  bank  were  due  to  advances  made 


to  the  Dutch  East  India  Company.  In 
point  of  fact,  the  secrecy  which  formed 
the  characteristic,  and,  as  some  people 
thought,  the  security  of  the  bank,  became, 
as  is  generally  the  case  with  such  secrecy, 
a  cloak  for  fraud. 


62 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

PART  II. 

Of  the  Unreasonableness  of  those  extraordinary  Restraints  upon  other 

Principles. 

In  the  foregoing  Part  of  this  Chapter  I  have  endeavoured  to 
show,  even  upon  the  principles  of  the  commercial  system,  how  un¬ 
necessary  it  is  to  lay  extraordinary  restraints  upon  the  importation 


CHAP.  III. 


THE  WEALTH  OF  NATIONS . 


63 


of  goods  from  tliose  countries  with  which  the  balance  of  trade  is 
supposed  to  be  disadvantageous. 

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

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

If  the  balance  be  even,  and  if  the  trade  between  the  two  places 
consist  altogether  in  the  exchange  of  their  native  commodities,  they 
will,  upon  most  occasions,  not  only  both  gain,  but  they  will  gain 
equally,  or  very  near  equally:  each  will  in  this  case  afford  a  market 
for  a  part  of  the  surplus  produce  of  the  other :  each  will  replace  a 
capital  which  had  been  employed  in  raising  and  preparing  for  the 
market  this  part  of  the  surplus  produce  of  the  other,  and  which  had 
been  distributed  among,  and  given  revenue  and  maintenance  to  a 
certain  number  of  its  inhabitants.  Some  part  of  the  inhabitants 
of  each,  therefore,  will  indirectly  derive  their  revenue  and  main¬ 
tenance  from  the  other.  As  the  commodities  exchanged  too  are 
supposed  to  be  of  equal  value,  so  the  two  capitals  employed  in  the 


1  There  is  generally  a  basis  of  truth  in 
every  fallacy.  But  it  is  difficult  to  find 
any  truth  at  all  in  the  doctrine  which 
Smith  combats,  that  in  voluntary  trade 
one  man’s  gain  is  another’s  loss.  It  is 
plain  that  the  division  of  occupations  and 
employments  was  originated  in  order  to 
give  greater  efficiency  to  each  person  in 
his  own  calling,  and  that  trade  is  the 


equation  of  all  employments.  But  gross 
as  the  fallacy  was,  it  possessed  the  mind 
of  such  a  man  as  Bacon,  and  when  Smith 
wrote,  it  was  all  but  universally  received. 
If  there  be  any  foundation  for  the  theory, 
it  is  to  be  found  in  those  ‘  sneaking  arts 
of  underling  tradesmen,’  to  which  Smith 
refers  lower  down. 


64 


THE  NATURE  AND  CAUSES  OF 


BOOK  VI. 


trade  will,  upon  most  occasions,  be  equal,  or  very  nearly  equal ; 
and  both  being1  employed  in  raising  the  native  commodities  of  the 
two  countries,  the  revenue  and  maintenance  which  their  distribution 
will  afford  to  the  inhabitants  of  each  will  be  equal,  or  very  nearly 
equal.  This  revenue  and  maintenance,  thus  mutually  afforded,  will 
be  greater  or  smaller  in  proportion  to  the  extent  of  their  dealings. 
If  these  should  annually  amount  to  a  hundred  thousand  pounds, 
for  example,  or  to  a  million  on  each  side,  each  of  them  would  afford 
an  annual  revenue,  in  the  one  case,  of  a  hundred  thousand  pounds, 
in  the  other,  of  a  million,  to  the  inhabitants  of  the  other. 

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


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


65 


The  different  effects  of  a  capital  employed  in  the  direct,  and  of  one 
employed  in  the  round-about  foreign  trade  of  consumption,  have 
already  been  fully  explained. 

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

If  it  was  not  with  tobacco  and  East  India  goods,  but  with  gold 
and  silver,  that  England  paid  for  the  commodities  annually  imported 
from  France,  the  balance  in  this  case  would  be  supposed  uneven, 
commodities  not  being  paid  for  with  commodities,  but  with  gold 
and  silver.  The  trade,  however,  would  in  this  case,  as  in  the  fore¬ 
going,  give  some  revenue  to  the  inhabitants  of  both  countries,  but 
more  to  those  of  France  than  to  those  of  Engdand.  It  would  give 
some  revenue  to  those  of  England.  The  capital  which  had  been 
employed  in  producing  the  English  goods  that  purchased  this  gold 
and  silver,  the  capital  which  had  been  distributed  among,  and  given 
revenue  to  certain  inhabitants  of  England,  would  thereby  be  re¬ 
placed,  and  enabled  to  continue  that  employment.  The  whole 
capital  of  England  would  no  more  be  diminished  by  this  exportation 
of  gold  and  silver  than  by  the  exportation  of  an  equal  value  of 
any  other  goods.  On  the  contrary,  it  would  in  most  cases  be 
augmented.  No  goods  are  sent  abroad  but  those  for  which  the 
demand  is  supposed  to  be  greater  abroad  than  at  home,  and  of 
which  the  returns  consequently,  it  is  expected,  will  be  of  more 
value  at  home  than  the  commodities  exported.  If  the  tobacco 
which  in  England  is  worth  only  a  hundred  thousand  pounds,  when 
sent  to  France  will  purchase  wine  which  is  in  England  worth  a 
hundred  and  ten  thousand  pounds,  the  exchange  will  augment  the' 
capital  of  England  by  ten  thousand  pounds.  If  a  hundred  thousand 
pounds  of  English  gold,  in  the  same  manner,  purchase  French  wine, 
which  in  England  is  worth  a  hundred  and  ten  thousand,  this  ex¬ 
change  will  equally  augment  the  capital  of  England  by  ten  thousand 
pounds.  As  a  merchant  who  has  a  hundred  and  ten  thousand 
pounds'  worth  of  wine  in  his  cellar  is  a  richer  man  than  he  who 

VOL.  II.  F 


66 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


has  only  a  hundred  thousand  pounds’  worth  of  tobacco  in  his  ware¬ 
house,  so  is  he  likewise  a  richer  man  than  he  who  has  only  a 
hundred  thousand  pounds’  worth  of  gold  in  his  coffers.  He  can 
put  into  motion  a  greater  quantity  of  industry,  and  give  revenue, 
maintenance,  and  employment  to  a  greater  number  of  people  than 
either  of  the  other  two.  But  the  capital  of  the  country  is  equal 
to  the  capitals  of  all  its  different  inhabitants,  and  the  quantity  of 
industry  which  can  be  annually  maintained  in  it,  is  equal  to  what 
all  those  different  capitals  can  maintain.  Both  the  capital  of  the 
country,  therefore,  and  the  quantity  of  industry  which  can  be 
annually  maintained  in  it,  must  generally  be  augmented  by  this 
exchange.  It  would,  indeed,  be  more  advantageous  for  England 
that  it  could  purchase  the  wines  of  France  with  its  own  hardware 
and  broadcloth,  than  with  either  the  tobacco  of  Virginia,  or  the 
«*old  and  silver  of  Brazil  and  Peru.  A  direct  foreign  trade  of 
consumption  is  always  more  advantageous  than  a  round-about 
one.  But  a  round-about  foreign  trade  of  consumption,  which  is 
carried  on  with  gold  and  silver,  does  not  seem  to  be  less  ad¬ 
vantageous  than  any  other  equally  round-about  one.  Neither  is 
a  country  which  has  no  mines  more  likely  to  be  exhausted  of  gold 
and  silver  by  this  annual  exportation  of  those  metals,  than  one 
which  does  not  grow  tobacco  by  the  like  annual  exportation  of 
that  plant.  As  a  country  which  has  wherewithal  to  buy  tobacco 
will  never  be  long  in  want  of  it,  so  neither  will  one  be  long  in 
want  of  gold  and  silver  which  has  wherewithal  to  purchase  those 
metals. 

It  is  a  losing  trade,  it  is  said,  which  a  workman  carries  on  with 
the  alehouse ;  and  the  trade  which  a  manufacturing  nation  would 
naturally  carry  on  with  a  wine  country,  may  be  considered  as  a 
trade  of  the  same  nature.  I  answer,  that  the  trade  with  the  ale¬ 
house  is  not  necessarily  a  losing  trade.  In  its  own  nature  it  is  just 
as  advantageous  as  any  other,  though,  perhaps,  somewhat  more 
liable  to  be  abused.  The  employment  of  a  brewer,  and  even  that  of 
a  retailer  of  fermented  liquors,  are  as  necessary  divisions  of  labour 
as  any  other.  It  will  generally  be  more  advantageous  for  a  work¬ 
man  to  buy  of  the  brewer  the  quantity  he  has  occasion  for,  than  to 
brew  it  himself,  and,  if  he  is  a  poor  workman,  it  will  generally  be 
more  advantageous  for  him  to  buy  it,  by  little  and  little  of  the 
retailer,  than  a  large  quantity  of  the  brewer.  He  may  no  doubt 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


67 


buy  too  much  of  either,  as  he  may  of  any  other  dealers  in  his  neigh¬ 
bourhood  ;  of  the  butcher,  if  he  is  a  glutton,  or  of  the  draper,  if  he 
affects  to  be  a  beau  among  his  companions.  It  is  advantageous  to 
the  great  body  of  workmen,  notwithstanding,  that  all  these  trades 
should  be  free,  though  this  freedom  may  be  abused  in  all  of  them, 
and  is  more  likely  to  be  so,  perhaps,  in  some  than  in  others.  Though 
individuals,  besides,  may  sometimes  ruin  their  fortunes  by  an 
excessive  consumption  of  fermented  liquors,  there  seems  to  be  no 
risk  that  a  nation  should  do  so.  Though  in  every  country  there 
are  many  people  who  spend  upon  such  liquors  more  than  they  can 
afford,  there  are  always  many  more  who  spend  less.  It  deserves  to 
be  remarked  too  that,  if  we  consult  experience,  the  cheapness  of 
wine  seems  to  be  a  cause,  not  of  drunkenness,  but  of  sobriety.  The 
inhabitants  of  the  wine  countries  are  in  general  the  soberest  people 
in  Europe  ;  witness  the  Spaniards,  the  Italians,  and  the  inhabitants 
of  the  southern  provinces  of  France.  People  are  seldom  guilty  of 
excess  in  what  is  their  daily  fare.  Nobody  affects  the  character  of 
liberality  and  good  fellowship,  by  being  profuse  of  a  liquor  which  is 
as  cheap  as  small  beer.  On  the  contrary,  in  the  countries  which, 
either  from  excessive  heat  or  cold,  produce  no  grapes,  and  where 
wine  consequently  is  dear  and  a  rarity,  drunkenness  is  a  common 
vice,  as  among  the  northern  nations,  and  all  those  who  live  between 
the  tropics,  the  negroes,  for  example,  on  the  coast  of  Guinea.  When 
a  French  regiment  comes  from  some  of  the  northern  provinces  of 
France,  where  wine  is  somewhat  dear,  to  be  quartered  in  the 
southern,  where  it  is  very  cheap,  the  soldiers,  I  have  frequently 
heard  it  observed,  are  at  first  debauched  by  the  cheapness  and 
novelty  of  good  wine  ;  but  after  a  few  months’  residence,  the  greater 
part  of  them  become  as  sober  as  the  rest  of  the  inhabitants.  Were 
the  duties  upon  foreign  wines,  and  the  excises  upon  malt,  beer,  and 
ale,  to  be  taken  away  all  at  once,  it  might,  in  the  same  manner, 
occasion  in  Great  Britain  a  pretty  general  and  temporary  drunken¬ 
ness  among  the  middling  and  inferior  ranks  of  people,  which  would 
probably  be  soon  followed  by  a  permanent  and  almost  universal 
sobriety.  At  present,  drunkenness  is  by  no  means  the  vice  of  people 
of  fashion,  or  of  those  who  can  easily  afford  the  most  expensive 
liquors.  A  gentleman  drunk  with  ale  has  scarce  ever  been  seen 
among  us.  The  restraints  upon  the  wine  trade  in  Great  Britain, 
besides,  do  not  so  much  seem  calculated  to  hinder  the  people  from  . 


68 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


going1,  if  I  may  say  so,  to  the  alehouse,  as  from  going  where  they 
can  buy  the  best  and  cheapest  liquor.  They  favour  the  wine  trade 
of  Portugal,  and  discourage  that  of  France.  The  Portuguese,  it  is 
said,  indeed,  are  better  customers  for  our  manufactures  than  the 
French,  and  should  therefore  be  encouraged  in  preference  to  them. 
As  they  give  us  their  custom,  it  is  pretended,  we  should  give  them 
ours.  The  sneaking  arts  of  underling  tradesmen  are  thus  erected 
into  political  maxims  for  the  conduct  of  a  great  empire  ;  for  it  is 
the  most  underling  tradesmen  only  who  make  it  a  rule  to  employ 
chiefly  their  own  customers.  A  great  trader  purchases  his  goods 
always  where  they  are  cheapest  and  best,  without  regard  to  any 
little  interest  of  this  kind. 

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

That  it  was  the  spirit  of  monopoly  which  originally  both  invented 
and  propagated  this  doctrine,  cannot  be  doubted ;  and  they  who 
first  taught  it  were  by  no  means  such  fools  as  they  who  believed  it. 
In  every  country  it  always  is  and  must  be  the  interest  of  the  great 
body  of  the  people  to  buy  whatever  they  want  of  those  who  sell  it 
cheapest.  The  proposition  is  so  very  manifest,  that  it  seems 
ridiculous  to  take  any  pains  to  prove  it ;  nor  could  it  ever  have 
been  called  in  question,  bad  not  the  interested  sophistry  of  mer¬ 
chants  and  manufacturers  confounded  the  common  sense  of  mankind. 
Their  interest  is,  in  this  respect,  directly  opposite  to  that  of  the 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


69 


great  body  of  the  people.  As  it  is  the  interest  of  the  freemen  of  a 
corporation  to  hinder  the  rest  of  the  inhabitants  from  employing 
any  workmen  but  themselves,  so  it  is  the  interest  of  the  merchants 
and  manufacturers  of  every  country  to  secure  to  themselves  the 
monopoly  of  the  home  market.  Hence  in  Great  Britain,  and  in 
most  other  European  countries,  the  extraordinary  duties  upon  almost 
all  goods  imported  by  alien  merchants.  Hence  the  high  duties  and 
prohibitions  upon  all  those  foreign  manufactures  which  can  come 
into  competition  with  our  own.  Hence  too  the  extraordinary  re¬ 
straints  upon  the  importation  of  almost  all  sorts  of  goods  from  those 
countries  with  which  the  balance  of  trade  is  supposed  to  be  dis¬ 
advantageous  ;  that  is,  from  those  against  whom  national  animosity 
happens  to  be  most  violently  inflamed. 

The  wealth  of  a  neighbouring  nation,  however,  though  dangerous 
in  war  and  politics,  is  certainly  advantageous  in  trade.  In  a  state 
of  hostility,  it  may  enable  our  enemies  to  maintain  fleets  and  armies 
superior  to  our  own  ;  but  in  a  state  of  peace  and  commerce,  it  must 
likewise  enable  them  to  exchange  with  us  to  a  greater  value,  and  to 
afford  a  better  market,  either  for  the  immediate  produce  of  our  own 
industry,  or  for  whatever  is  purchased  with  that  produce.  As  a 
rich  man  is  likely  to  be  a  better  customer  to  the  industrious  people 
in  his  neighbourhood  than  a  poor,  so  is  likewise  a  rich  nation.  A 
rich  man,  indeed,  who  is  himself  a  manufacturer,  is  a  very  dangerous 
neighbour  to  all  those  who  deal  in  the  same  way.  All  the  rest  of 
the  neighbourhood,  however,  by  far  the  greatest  number,  profit  by 
the  good  market  which  his  expense  affords  them.  They  even  profit 
by  his  underselling  the  poorer  workmen  who  deal  in  the  same  way 
with  him.  The  manufacturers  of  a  rich  nation,  in  the  same  manner, 
may  no  doubt  be  very  dangerous  rivals  to  those  of  their  neighbours. 
This  very  competition,  however,  is  advantageous  to  the  great  body 
of  the  people,  who  profit  greatly  besides  by  the  good  market  which 
the  great  expense  of  such  a  nation  affords  them  in  every  other  way. 
Private  people  who  want  to  make  a  fortune,  never  think  of  retiring 
to  the  remote  and  poor  provinces  of  the  country,  but  resort  either 
to  the  capital  or  to  some  of  the  great  commercial  towns.  They 
know  that,  where  little  wealth  circulates,  there  is  little  to  be  got, 
but  that  where  a  great  deal  is  in  motion,  some  share  of  it  may  fall 
to  them.  The  same  maxims  which  would  in  this  manner  direct  the 
common  sense  of  one,  or  ten,  or  twenty  individuals,  should  regulate 


70 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


the  judgment  of  one,  or  ten,  or  twenty  millions,  and  should  make  a 
whole  nation  regard  the  riches  of  its  neighbours  as  a  probable  cause 
and  occasion  for  itself  to  acquire  riches.  A  nation  that  would  en¬ 
rich  itself  by  foreign  trade  is  certainly  most  likely  to  do  so  when  its 
neighbours  are  all  rich,  industrious,  and  commercial  nations.  A 
great  nation  surrounded  on  all  sides  by  wandering  savages  and  poor 
barbarians  might,  no  doubt,  acquire  riches  by  the  cultivation  of  its 
own  lands,  and  by  its  own  interior  commerce,  but  not  by  foreign 
trade.  It  seems  to  have  been  in  this  manner  that  the  ancient 
Egyptians  and  the  modern  Chinese  acquired  their  great  wealth. 
The  ancient  Egyptians,  it  is  said,  neglected  foreign  commerce,  and 
the  modern  Chinese,  it  is  known,  hold  it  in  the  utmost  contempt, 
and  scarce  deign  to  afford  it  the  decent  protection  of  the  laws.  The 
modern  maxims  of  foreign  commerce,  by  aiming  at  the  impoverish¬ 
ment  of  all  our  neighbours,  so  far  as  they  are  capable  of  producing 
their  intended  effect,  tend  to  render  that  very  commerce  insignificant 
and  contemptible. 

It  is  in  consequence  of  these  maxims  that  the  commerce  between 
France  and  England  has  in  both  countries  been  subjected  to  so 
many  discouragements  and  restraints.  If  those  two  countries,  how¬ 
ever,  were  to  consider  their  real  interest,  without  either  mercantile 
jealousy  or  national  animosity,  the  commerce  of  France  might  be 
more  advantageous  to  Great  Britain  than  that  of  any  other  country, 
and  for  the  same  reason  that  of  Great  Britain  to  France.  France 
is  the  nearest  neighbour  to  Great  Britain.  In  the  trade  between 
the  southern  coast  of  England  and  the  northern  and  north-western 
coasts  of  France,  the  returns  might  be  expected,  in  the  same  manner 
as  in  the  inland  trade,  four,  five,  or  six  times  in  the  year.  The 
capital,  therefore,  employed  in  this  trade,  could  in  each  of  the  two 
countries  keep  in  motion  four,  five,  or  six  times  the  quantity  of  in¬ 
dustry,  and  afford  employment  and  subsistence  to  four,  five,  or  six 
times  the  number  of  people,  which  an  equal  capital  could  do  in  the 
greater  part  of  the  other  branches  of  foreign  trade.  Between  the 
parts  of  France  and  Great  Britain  most  remote  from  one  another, 
the  returns  might  be  expected,  at  least,  once  in  the  year,  and  even 
this  trade  would  so  far  be  at  least  equally  advantageous  as  the 
greater  part  of  the  other  branches  of  our  foreign  European  trade. 
It  would  be,  at  least,  three  times  more  advantageous  than  the 
boasted  trade  with  our  North  American  colonies,  in  which  the 


CHAP.  III. 


THE  WEALTH  OF  NATIONS. 


71 


returns  were  seldom  made  in  less  than  three  years,  frequently  not  in 
less  than  four  or  five  years.  France,  besides,  is  supposed  to  con¬ 
tain  twenty-four  millions  of  inhabitants.  Our  North  American 
colonies  were  never  supposed  to  contain  more  than  three  millions  : 
and  France  is  a  much  richer  country  than  North  America ;  though, 
on  account  of  the  more  unequal  distribution  of  riches,  there  is  much 
more  poverty  and  beggary  in  the  one  country  than  in  the  other. 
France,  therefore,  could  afford  a  market  at  least  eight  times  more 
extensive,  and,  on  account  of  the  superior  frequency  of  the  returns, 
four-and- twenty  times  more  advantageous,  than  that  which  our 
North  American  colonies  ever  afforded.  The  trade  of  Great  Britain 
would  be  just  as  advantageous  to  France,  and,  in  proportion  to  the 
wealth,  population,  and  proximity  of  the  respective  countries,  would 
have  the  same  superiority  over  that  which  France  carries  on  with 
her  own  colonies.  Such  is  the  very  great  difference  between  that 
trade  which  the  wisdom  of  both  nations  has  thought  proper  to  dis¬ 
courage,  and  that  which  it  has  favoured  the  most. 

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

There  is  no  commercial  country  in  Europe  of  which  the  approach¬ 
ing  ruin  has  not  frequently  been  foretold  by  the  pretended  doctors 
of  this  system,  from  an  unfavourable  balance  of  trade.  After  all 
the  anxiety,  however,  which  they  have  excited  about  this,  after  all 
the  vain  attempts  of  almost  all  trading  nations  to  turn  that  balance 
in  their  own  favour,  and  against  their  neighbours,  it  does  not 


72 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


appear  that  any  one  nation  in  Europe  has  been  in  any  respect  im¬ 
poverished  by  this  cause.  Every  town  and  country,  on  the  con¬ 
trary,  in  proportion  as  they  have  opened  their  ports  to  all  nations ; 
instead  of  being  ruined  by  this  free  trade,  as  the  principles  of  the 
commercial  system  would  lead  us  to  expect,  have  been  enriched  by 
it.  Though  there  are  in  Europe,  indeed,  a  few  towns  which  in  some 
respects  deserve  the  name  of  free  ports,  there  is  no  country  which 
does  so.  Holland,  perhaps,  approaches  the  nearest  to  this  character 
of  any,  though  still  very  remote  from  it ;  and  Holland,  it  is  acknow¬ 
ledged,  not  only  derives  its  whole  wealth,  but  a  great  part  of  its 
necessary  subsistence,  from  foreign  trade. 

There  is  another  balance,  indeed,  which  has  already1  been  ex¬ 
plained,  very  different  from  the  balance  of  trade,  and  which,  accord¬ 
ing  as  it  happens  to  be  either  favourable  or  unfavourable,  necessarily 
occasions  the  prosperity  or  decay  of  every  nation.  This  is  the 
balance  of  the  annual  produce  and  consumption.  If  the  exchange¬ 
able  value  of  the  annual  produce,  it  has  already  been  observed, 
exceeds  that  of  the  annual  consumption,  the  capital  of  the  society 
must  annually  increase  in  proportion  to  this  excess.  The  society 
in  this  case  lives  within  its  revenue,  and  what  is  annually  saved  out 
of  its  revenue  is  naturally  added  to  its  capital,  and  employed  so  as 
to  increase  still  further  the  annual  produce.  If  the  exchangeable 
value  of  the  annual  produce,  on  the  contrary,  fall  short  of  the  annual 
consumption,  the  capital  of  the  society  must  annually  decay  in  pro¬ 
portion  to  this  deficiency.  The  expense  of  the  society  in  this  case 
exceeds  its  revenue,  and  necessarily  encroaches  upon  its  capital. 
Its  capital,  therefore,  must  necessarily  decay,  and,  together  with  it, 
the  exchangeable  value  of  the  annual  produce  of  its  industry. 

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

The  balance  of  produce  and  consumption  may  be  constantly  in 
favour  of  a  nation,  though  what  is  called  the  balance  of  trade  be 
generally  against  it.  A  nation  may  import  to  a  greater  value  than 
it  exports  for  half  a  century,  perhaps,  together ;  the  gold  and  silver 

1  See  Book  II.  chap.  iii. 


CHAP.  IV. 


THE  WEALTH  OF  NATIONS . 


73 


which  comes  into  it  during*  all  this  time  may  be  all  immediately 
sent  out  of  it ;  its  circulating*  coin  may  gradually  decay,  different 
sorts  of  paper  money  being  substituted  in  its  place,  and  even  the 
debts  too  which  it  contracts  in  the  principal  nations  with  whom  it 
deals,  may  be  gradually  increasing  ;  and  yet  its  real  wealth,  the 
exchangeable  value  of  the  annual  produce  of  its  lands  and  labour, 
may,  during  the  same  period,  have  been  increasing  in  a  much 
greater  proportion.  The  state  of  our  North  American  colonies,  and 
of  the  trade  which  they  carried  on  with  Great  Britain,  before  the 
commencement  of  the  present  disturbances,*  may  serve  as  a  proof 
that  this  is  by  no  means  an  impossible  supposition. 


CHAPTER  IV. 


OP  DRAWBACKS.1 


0 

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

Of  these  encouragements,  what  are  called  drawbacks  seem  to  be 
the  most  reasonable.  To  allow  the  merchant  to  draw  back  upon 
exportation,  either  the  whole  or  a  part  of  whatever  excise  or  inland 
duty  is  imposed  upon  domestic  industry,  can  never  occasion  the  ex¬ 
portation  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 


*  This  paragraph  was  written  in  the 
year  1775. 

1  The  greater  part  of  the  machinery 
employed  to  aid  this  process  for  encou¬ 
raging  foreign  trade  has  been  rendered 
obsolete  by  the  establishment  of  bonded 
warehouses  for  duty -paying  and  ex- 
ciseable  articles.  The  employment  of 


such  warehouses,  in  which  goods  are 
stowed,  prior  to  consumption,  is  an  ad¬ 
vantage  to  the  tax-payer,  and  can  be  no 
loss  to  the  revenue.  But  when  the  plan 
w7as  first  proposed  by  Walpole,  the  Lon¬ 
don  merchants  resisted  it  successfully, 
and  it  was  finally  established  by  the 
younger  Pitt. 


74 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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.  They  tend  not  to 
overturn  that  balance  which  naturally  establishes  itself  among  all 
the  various  employments  of  the  society,  but  to  hinder  it  from  being 
overturned  by  the  duty.  They  tend  not  to  destroy,  but  to  preserve, 
what  it  is  in  most  cases  advantageous  to  preserve,  the  natural  di¬ 
vision  and  distribution  of  labour  in  the  society. 

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

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

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

We  still  have,  though  not  altogether,  yet  very  nearly,  the 


CHAP.  IV. 


THE  WEALTH  OF  NATIONS. 


75 


monopoly  of  the  sugars  of  our  West  Indian  Islands.  If  sugars  are 
exported  within  a  year,  therefore,  all  the  duties  upon  importation 
are  drawn  back,  and  if  exported  within  three  years,  all  the  duties, 
except  half  the  old  subsidy,  which  still  continues  to  be  retained 
upon  the  exportation  of  the  greater  part  of  goods.  Though  the 
importation  of  sugar  exceeds,  a  good  deal,  what  is  necessary  for  the 
home  consumption,  the  excess  is  inconsiderable,  in  comparison  of 
what  it  used  to  be  in  tobacco. 

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

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

By  the  fourth  of  the  rules  annexed  to  the  old  subsidy,  the  draw¬ 
back  allowed  upon  the  exportation  of  all  wines  amounted  to  a  great 
deal  more  than  half  the  duties  which  were,  at  that  time,  paid  upon 
their  importation ;  and  it  seems,  at  that  time,  to  have  been  the 
object  of  the  Legislature  to  give  somewhat  more  than  ordinary  en¬ 
couragement  to  the  carrying  trade  in  wine.  Several  of  the  other 
duties  too,  which  were  imposed,  either  at  the  same  time,  or  subse¬ 
quent  to  the  old  subsidy;  what  is  called  the  additional  duty,  the 
new  subsidy,  the  one-third  and  two-thirds  subsidies,  the  impost 
1692,  the  coinage  on  wine,  were  allowed  to  be  wholly  drawn  back 
upon  exportation.  All  those  duties,  however,  except  the  additional 
duty  and  impost  1692,  being  paid  down  in  ready  money,  upon  im¬ 
portation,  the  interest  of  so  large  a  sum  occasioned  an  expense, 
which  made  it  unreasonable  to  expect  any  profitable  carrying  trade 
in  this  article.  Only  a  part,  therefore,  of  the  duty  called  the 


76 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


impost  on  wine,  and  no  part  of  the  twenty-five  pounds  the  tun 
upon  French  wines,  or  of  the  duties  imposed  in  I745>  *n  17^3>  an<^ 
in  1778,  were  allowed  to  be  drawn  back  upon  exportation.  The 
two  imposts  of  five  per  cent.,  imposed  in  1779  and  1781,  upon  all 
the  former  duties  of  customs,  being'  allowed  to  be  wholly  'drawn 
back  upon  the  exportation  of  all  other  goods,  were  likewise  allowed 
to  be  drawn  back  upon  that  of  wine.  The  last  duty  that  has  been 
particularly  imposed  upon  wine,  that  of  1780,  is  allowed  to  be 
wholly  drawn  back — an  indulgence  which,  when  so  many  heavy 
duties  are  retained,  most  probably  could  never  occasion  the  exporta¬ 
tion  of  a  single  tun  of  wine.  These  rules  take  place  with  regard 
to  all  places  of  lawful  exportation,  except  the  British  colonies  in 
America. 

The  15th  Charles  II,  chap.  7,  called  an  Act  for  the  Encouragement 
of  Trade,  had  given  Great  Britain  the  monopoly  of  supplying  the 
colonies  with  all  the  commodities  of  the  growth  or  manufacture  of 
Europe ;  and  consequently  wTith  wines.  In  a  country  of  so  extensive 
a  coast  as  our  North  American  and  West  Indian  colonies,  where 
our  authority  wTas  always  so  very  slender,  and  where  the  inhabitants 
were  allowed  to  carry  out,  in  their  own  ships,  their  non-enumerated 
commodities,  at  first,  to  all  parts  of  Europe,  and  afterwards,  to  all 
parts  of  Europe  south  of  Cape  Finisterre,  it  is  not  very  probable 
that  this  monopoly  could  ever  be  much  respected  ;  and  they  pro¬ 
bably,  at  all  times,  found  means  of  bringing  back  some  cargo  from 
the  countries  to  which  they  were  allowed  to  carry  out  one.  They 
seem,  however,  to  have  found  some  difficulty  in  importing  European 
wines  from  the  places  of  their  growth,  and  they  could  not  well  im¬ 
port  them  from  Great  Britain,  where  they  were  loaded  with  many 
heavy  duties,  of  which  a  considerable  part  was  not  drawn  back  upon 
exportation.  Madeira  wine,  not  being  a  European  commodity, 
could  be  imported  directly  into  America  and  the  West  Indies — 
countries  which,  in  all  their  non-enumerated  commodities,  enjoyed 
a  free  trade  to  the  island  of  Madeira.  These  circumstances  had 
probably  introduced  that  general  taste  for  Madeira  wine,  which  our 
officers  found  established  in  all  our  colonies  at  the  commencement 
of  the  war^  which  began  in  1755,  and  which  they  brought  back 
with  them  to  the  mother  country,  where  that  wine  had  not  been 
much  in  fashion  before.  Upon  the  conclusion  of  that  wrar,  in  1763 
(by  the  4th  Geo.  Ill,  chap.  15,  sect.  12),  all  the  duties,  except 


CHAP.  IV. 


THE  WEALTH  OF  NATIONS. 


77 


^3  i  os.,  were  allowed  to  be  drawn  back,  upon  the  exportation  to 
the  colonies  of  all  wines,  except  French  wines,  to  the  commerce  and 
consumption  of  which,  national  prejudice  would  allow  no  sort  of 
encouragement.  The  period  between  the  granting  of  this  in¬ 
dulgence  and  the  revolt  of  our  North  American  colonies  was  pro¬ 
bably  too  short  to  admit  of  any  considerable  change  in  the  customs 
of  those  countries. 

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

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

The  revenue  of  the  customs,  instead  of  suffering,  profits  from 

* 

such  drawbacks,  by  that  part  of  the  duty  which  is  retained.  If  the 
whole  duties  had  been  retained,  the  foreign  goods  upon  which  they 
are  paid  could  seldom  have  been  exported,  nor  consequently  im¬ 
ported,  for  want  of  a  market.  The  duties,  therefore,  of  which 
a  part  is  retained,  would  never  have  been  paid. 

These  reasons  seem  sufficiently  to  justify  drawbacks,  and  would 


78 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


justify  them,  though  the  whole  duties,  whether  upon  the  produce 
of  domestic  industry,  or  upon  foreign  goods,  were  always  drawn 
back  upon  exportation.  The  revenue  of  excise  would  in  this  case, 
indeed,  suffer  a  little,  and  that  of  the  customs  a  good  deal  more ; 
but  the  natural  balance  of  industry,  the  natural  division  and  dis¬ 
tribution  of  labour,  which  is  always  more  or  less  disturbed  by  such 
duties,  would  be  more  nearly  re-established  by  such  a  regulation.1 

These  reasons,  however,  will  justify  drawbacks  only  upon  ex¬ 
porting  goods  to  those  countries  which  are  altogether  foreign  and 
independent,  not  to  those  in  which  our  merchants  and  manufac¬ 
turers  enjoy  a  monopoly.  A  drawback,  for  example,  upon  the 
exportation  of  European  goods  to  our  American  Colonies,  will 
not  always  occasion  a  greater  exportation  than  what  would  have 
taken  place  without  it.2  By  means  of  the  monopoly  which  our 
merchants  and  manufacturers  enjoy  there,  the  same  quantity  might 
frequently,  perhaps,  be  sent  thither,  though  the  whole  duties  were 
retained.  The  drawback,  therefore,  may  frequently  be  pure  loss  to 
the  revenue  of  excise  or  customs,  without  altering  the  state  of 
the  trade,  or  rendering  it  in  any  respect  more  extensive.  How  far 
such  drawbacks  can  be  justified,  as  a  proper  encouragement  to  the 
industry  of  our  colonies,  or  how  far  it  is  advantageous  to  the 
mother  country  that  they  should  be  exempted  from  taxes  which 
are  paid  by  all  the  rest  of  their  fellow-subjects,  will  appear  hereafter 
when  I  come  to  treat  of  colonies. 

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


1  Indirectly,  too,  the  whole  revenue 
would  be  benefited  in  so  far  as  all  earning's 
come  under  the  review  of  public  finance, 
and  are  made  to  contribute  to  a  fiscal 
system.  All  liberty  means  additional 
force,  adjusted  rather  than  controlled  by 
other  forces  ;  and  it  is  upon  the  earnings 
of  free  labour  that  a  government  is  best 
able  to  levy  its  revenue.  Hence  it  is 
that  all  attempts  to  benefit  a  particular 
class  by  exceptional  legislation  (unless  it 
be  that  which  relieves  the  receivers  of 


rent  in  densely-peopled  countries)  is  sure 
to  be  nugatory,  because  it  reduces  the 
fertility  of  labour  and  diminishes  the  re¬ 
sources  of  the  public. 

2  The  corrective  of  course  was  smug- 

#  o 

gling,  which,  as  Adam  Smith  admits 
above  (p.  76),  under  the  euphemism  that 
‘  it  is  not  very  probable  that  this  mono¬ 
poly  could  ever  be  much  respected,’  was 
more  than  a  counterpoise  to  the  draw¬ 
back,  and  would  have  been  absolutely 
dominant  in  the  absence  of  it. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


79 


CHAPTER  V. 

OF  BOUNTIES. 

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

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.  Every  such  branch  is  evidently  upon 
a  level  with  all  the  other  branches  of  trade  which  are  carried 
on  without  bounties,  and  cannot  therefore  require  one  more  than 
they.  Those  trades  only  require  bounties  in  which  the  merchant 
is  obliged  to  sell  his  goods  for  a  price  which  does  not  replace  to 
him  his  capital,  together  with  the  ordinary  profit ;  or  in  which 
he  is  obliged  to  sell  them  for  less  than  it  really  costs  him  to  send 
them  to  market.  The  bounty  is  given  in  order  to  make  up  this 
loss,  and  to  encourage  him  to  continue,  or  perhaps  to  begin,  a  trade 
of  which  the  expense  is  supposed  to  be  greater  than  the  returns,  of 
which  eveiy  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. 

The  trades,  it  is  to  be  observed,  which  are  carried  on  by  means  of 
bounties,  are  the  only  ones  which  can  be  carried  on  between  two 


80 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


nations  for  any  considerable  time  together,  in  such  a  'manner  as 
that  one  of  them  shall  always  and  regularly  lose,  or  sell  its  goods 
for  less  than  it  really  costs  to  send  them  to  market.  But  if  the 
bounty  did  not  repay  to  the  merchant  what  he  would  otherwise 
lose  upon  the  price  of  his  goods,  his  own  interest  would  soon  oblige 
him  to  employ  his  stock  in  another  way,  or  to  find  out  a  trade  in 
which  the  price  of  the  goods  would  replace  to  him,  with  the  ordi¬ 
nary  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  thePtrade  of  a  country 
into  a  channel  much  less  advantageous  than  that  in  which  it  would 
naturally  run  of  its  own  accord. 

The  ingenious  and  well-informed  author  of  the  tracts  upon  the 
com  trade1  has  shewn  very  clearly,  that  since  the  bounty  upon 
the  exportation  of  corn  was  first  established,  the  price  of  the  corn 
exported,  valued  moderately  enough,  has  exceeded  that  of  the  corn 
imported,  valued  very  high,  by  a  much  greater  sum  than  the 
amount  of  the  whole  bounties  which  have  been  paid  during  that 
period.  This,  he  imagines,  upon  the  true  principles  of  the  mercan¬ 
tile  system,  is  a  clear  proof  that  this  forced  corn  trade  is  beneficial 
to  the  nation ;  the  value  of  the  exportation  exceeding  that  of  the 
importation  by  a  much  greater  sum  than  the  whole  extraordinary 
expense  which  the  public  has  been  at  in  order  to  get  it  exported. 
He  does  not  consider  that  this  extraordinary  expense,  or  the  bounty, 
is  the  smallest  part  of  the  expense  which  the  exportation  of  corn 
really  costs  the  society.  The  capital  which  the  farmer  employed  in 
raising  it  must  likewise  be  taken  into  the  account.2  Unless  the 
price  of  the  corn  when  sold  in  the  foreign  markets  replaces,  not 


1  The  author  of  these  tracts,  whom 
Smith  lauds  so  highly,  was  Charles  Smith, 
a  miller  in  an  extensive  way  of  business 
in  Barking.  See  Chalmers’  edition,  1804. 

2  On  the  principles  of  the  mercantile 
system,  and  in  accordance  with  the  theory, 
that  the  only  trade  worth  encourage¬ 
ment  is  that  which  assists  the  accumu¬ 
lation  of  gold  and  silver  in  countries 
which  do  not  naturally  possess  them;  and 
on  the  assumption  that  the  exported  corn 
sold  at  a  higher  price,  independent  of  the 
bounty,  than  it  would  have  sold  for  if  no 
such  stimulus  had  been  applied  to  trade, 
it  is  difficult  to  argue  that  the  bounty  did 


not  create  a  new  market,  since  prices  on 
an  emergency,  and  on  the  theory  that 
the  corn  was  exchanged  for  the  precious 
metals,  increase  the  stock  of  these  articles. 
But  the  real  significance  of  this  expedient 
is,  that  it  was  intended  to  bolster  up  the 
rents  of  the  landlords  by  mulcting  the 
general  public,  who  were  made  to  pay, 
first,  for  the  machinery  by  which  their 
home-grown  stock  of  provisions  was  di¬ 
minished  ;  next,  for  the  unnatural  in¬ 
crease  in  the  price  of  that  which  they 
consumed.  The  gain  of  the  bounty,  too, 
for  obvious  reasons,  was  appropriated 
solely  by  the  landowners. 


CHAP.  V. 


THE  WE  A  L  Til  OF  NA  TIONS. 


81 


only  the  bounty,  but  this  capital,  together  with  the  ordinary  profits 
of  stock,  the  society  is  a  loser  by  the  difference,  or  the  national 
stock  is  so  much  diminished.  But  the  very  reason  for  which  it  has 
been  thought  necessary  to  grant  a  bounty,  is  the  supposed  insuf¬ 
ficiency  of  the  price  to  do  this. 

The  average  price  of  corn,  it  has  been  said,  has  fallen  considerably 
since  the  establishment  of  the  bounty.  That  the  average  price  of 
corn  began  to  fall  somewhat  towards  the  end  of  the  last  century, 
and  has  continued  to  do  so  during  the  course  of  the  sixty-four  first 
years  of  the  present,  I  have  already  endeavoured  to  show.  But 
this  event,  supposing  it  to  be  as  real  as  I  believe  it  to  be,  must  have 
happened  in  spite  of  the  bounty,  and  cannot  possibly  have  hap¬ 
pened  in  consequence  of  it.  It  has  happened  in  France,  as  well 
as  in  England,  though  in  France  there  was  not  only  no  bounty, 
but,  till  1764,  the  exportation  of  corn  was  subjected  to  a  general 
prohibition.  This  gradual  fall  in  the  average  price  of  grain,  it 
is  probable,  therefore.,  is  ultimately  owing  neither  to  the  one  regu¬ 
lation  nor  to  the  other,  but  to  that  gradual  and  insensible  rise 
in  the  real  value  of  silver,  which,  in  the  first  book  of  this  discourse, 
I  have  endeavoured  to  show  has  taken  place  in  the  general  market 
of  Europe  during  the  course  of  the  present  century.1  It  seems 
to  be  altogether  impossible  that  the  bounty  could  ever  contribute 
to  lower  the  price  of  grain. 


1  It  does  not  seem  that  Adam  Smith 
had  an}1-  other  reason  on  which  to  ex¬ 
plain  this  low  price  of  corn  during  the 
period  referred  to,  except  the  fact  itself. 
There  does  not  appear,  however,  to  be 
any  evidence  that  the  supply  of  silver  de¬ 
clined  below  the  wants  of  the  European 
market  at  this  time,  still  less  that  it  was 
insufficient  to  fill  up  the  void  created  by 
wear.  On  the  contrary,  the  silver  cur¬ 
rency  seems  to  have  been  considerably 
supplemented  by  the  use  of  gold. 

The  true  explanation  of  the  fact  com¬ 
mented  on  is,  that  towards  the  end  of 
the  seventeenth  century  the  art  of  agri¬ 
culture  was  rapidly  developed.  It  was 
at  this  time  that  the  employment  of 
winter  roots  became  general,  and  that 
artificial  grasses  were  discovered,  anti 
adapted  to  English  agriculture.  The 
newspapers  of  the  time  contain  numer¬ 
ous  advertisements  of  the  seeds  of  these 
roots  and  grasses,  in  which  attention  is 

VOL.  II. 


invited  to  their  value  and  novelty.  These 
improvements  were  assisted  by  a  suc¬ 
cession  of  exceedingly  favourable  seasons. 
That  such  was  the  fact  is  plain,  partly 
from  the  rapid  increase  of  population 
in  England  and  Wales  ;  for  it  is  calcu¬ 
lated  on  very  substantial  grounds,  that 
the  inhabitants  of  the  southern  king¬ 
dom  were  not  much  more  than  5,000,000 
at  the  close  of  the  seventeenth,  and 
reached  nearly  10,000,000  at  the  middle 
of  the  eighteenth  century.  During  this 
period  too,  notwithstanding  the  low  price 
of  corn,  rents  rose  considerably,  and  the 
landed  gentry  became  much  more  opu¬ 
lent  than  before.  Now  the  facts  of  a 
low  price  of  corn,  an  increased  rate  of 
wages,  a  rapidly  increasing  population, 
and  a  great  enlargement  of  rent,  cannot 
be  the  result  of  an  enhanced  price  of 
silver,  but  must  have  been  caused  by  a 
great  and  regular  development  in  the  art 
of  agriculture. 


G 


82 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

I  answer,  that  whatever  extension  of  the  foreign  market  can  be 
occasioned  by  the  bounty,  must,  in  every  particular  year,  be  alto¬ 
gether  at  the  expense  of  the  home  market ;  as  every  bushel  of 
corn  which  is  exported  by  means  of  the  bounty,  and  which  w’ould 
not  have  been  exported  without  the  bounty,  would  have  remained 
in  the  home  market  to  increase  the  consumption  and  to  lower  the 
price  of  that  commodity.  The  corn  bounty,  it  is  to  be  observed,  as 
well  as  every  other  bounty  upon  exportation,  imposes  two  different 
taxes  upon  the  people  :  first,  the  tax  which  they  are  obliged  to  con¬ 
tribute,  in  order  to  pay  the  bounty ;  and  secondly,  the  tax  which 
arises  from  the  advanced  price  of  the  commodity  in  the  home 
market,  and  which,  as  the  whole  body  of  the  people  are  purchasers 
of  corn,  must,  in  this  particular  commodity,  be  paid  by  the  whole 
body  of  the  people.  In  this  particular  commodity,  therefore,  this 


CHAP.  Y. 


THE  WEALTH  OF  NATIONS. 


83 


second  tax  is  by  much  tbe  heaviest  of  the  two.  Let  us  suppose 
that,  taking  one  year  with  another,  the  bounty  of  five  shillings 
upon  the  exportation  of  the  quarter  of  wheat,  raises  the  price  of 
that  commodity  in  the  home  market  only  sixpence  the  bushel,  or 
four  shillings  the  quarter,  higher  than  it  otherways  would  have 
been  in  the  actual  state  of  the  crop.  Even  upon  this  very  mode¬ 
rate  supposition,  the  great  body  of  the  people,  over  and  above 
contributing  the  tax  which  pays  the  bounty  of  five  shillings  upon 
every  quarter  of  wheat  exported,  must  pay  another  of  four  shillings 
upon  every  quarter  which  they  themselves  consume.  But,  accord¬ 
ing  to  the  very  well-informed  author  of  the  tracts  upon  the  corn- 
trade,  the  average  proportion  of  the  corn  exported  to  that  consumed 
at  home,  is  not  more  than  that  of  one  to  thirty-one.  For  every 
five  shillings,  therefore,  which  they  contribute  to  the  payment  of 
the  first  tax,  they  must  contribute  six  pounds  four  shillings  to  the 
payment  of  the  second.  So  very  heavy  a  tax  upon  the  first  neces¬ 
sary  of  life,  must  either  reduce  the  subsistence  of  the  labouring  poor, 
or  it  must  occasion  some  augmentation  in  their  pecuniary  wages, 
proportionable  to  that  in  the  pecuniary  price  of  their  subsistence. 
So  far  as  it  operates  in  the  one  way,  it  must  reduce  the  ability  of 
the  labouring  poor  to  educate  and  bring  up  their  children,  and 
must,  so  far,  tend  to  restrain  the  population  of  the  country.  So  far 
as  it  operates  in  the  other,  it  must  reduce  the  ability  of  the  em¬ 
ployers  of  the  poor  to  employ  so  great  a  number  as  they  otherwise 
might  do,  and  must,  so  far,  tend  to  restrain  the  industry  of  the 
country.  The  extraordinary  exportation  of  corn,  therefore,  occa¬ 
sioned  by  the  bounty,  not  only,  in  every  particular  year,  diminishes 
the  home,  just  as  much  as  it  extends  the  foreign  market  and  con¬ 
sumption,  but,  by  restraining*  the  population  and  industry  of  the 
country,  its  final  tendency  is  to  stunt  and  restrain  the  gradual 
extension  of  the  home  market;  and  thereby,  in  the  long  run,  rather 
to  diminish  than  to  augment  the  whole  market  and  consumption 
of  corn. 

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

I  answer,  that  this  might  be  the  case  if  the  effect  of  the  bounty 
was  to  raise  the  real  price  of  corn,  or  to  enable  the  farmer,  with  an 
equal  quantity  of  it,  to  maintain  a  greater  number  of  labourers  in 


84 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


the  same  manner,  whether  liberal,  moderate,  or  scanty,  that  other 
labourers  are  commonly  maintained  in  his  neighbourhood.  But 
neither  the  bounty,  it  is  evident,  nor  any  other  human  institution, 
can  have  any  such  effect.  It  is  not  the  real  but  the  nominal  price 
of  corn,  which  can  in  any  considerable  degree  be  affected  by  the 
bounty.  And  though  the  tax  which  that  institution  imposes 
upon  the  whole  body  of  the  people,  may  be  very  burdensome 
to  those  who  pay  it,  it  is  of  very  little  advantage  to  those  who 
receive  it. 

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

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

It  regulates  the  money  price  of  all  the  other  parts  of  the  rude 
produce  of  land,  which,  in  every  period  of  improvement,  must  bear 
a  certain  proportion  to  that  of  corn,  though  this  proportion  is 
different  in  different  periods.  It  regulates,  for  example,  the  money 
price  of  grass  and  hay,  of  butcher’s-meat,  of  horses,  and  the  main¬ 
tenance  of  horses,  of  land  carriage  consequently,  or  of  the  greater 
part  of  the  inland  commerce  of  the  country.1 

By  regulating  the  money  price  of  all  the  other  parts  of  the  rude 
produce  of  land,  it  regulates  that  of  the  materials  of  almost  all 
manufactures.  By  regulating  the  money  price  of  labour,  it  regu¬ 
lates  that  of  manufacturing  art  and  industry.  And  by  regulating 
both,  it  regulates  that  of  the  complete  manufacture.  The  money 
price  of  labour,  and  of  everything  that  is  the  produce  either  of 


1  If  the  bounty  on  corn  heightened 
its  price,  the  tendency  of  the  bounty 
would  be  to  diminish  the  price  of  other 
agricultural  produce,  by  narrowing  the 
area  of  consumption.  When  bread  is 
dear,  meat  is  generally  cheap.  It  is  pro¬ 
bable  therefore  that,  as  far  as  the  bounty 
operated,  it  was  a  heavy  tax  on  the  con¬ 
sumer,  and  no  great  boon,  if  it  were  not, 
on  the  contrary,  a  real  injury  to  the 


producer.  If  therefore  it  regulated  other 
prices,  it  did  so  adversely.  It  artificially 
lowered  the  value  of  silver  in  one  direc¬ 
tion,  to  artificially  heighten  it  in  other 
directions.  The  effect  of  this  unnatural 
disturbance  of  prices  was  all  the  more 
iniquitous,  as  the  enhancement  was  of 
the  necessaries  of  life,  the  depreciation  of 
its  luxuries. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS . 


85 


land  or  labour,  must  necessarily  either  rise  or  fall  in  proportion  to 
the  money  price  of  corn. 

Though  in  consequence  of  the  bounty,  therefore,  the  farmer 
should  be  enabled  to  sell  his  corn  for  four  shillings  the  bushel 
instead  of  three  and  sixpence,  and  to  pay  his  landlord  a  money  rent 
proportionable  to  this  rise  in  the  money  price  of  his  produce  ;  yet 
if,  in  consequence  of  this  rise  in  the  price  of  corn,  four  shillings 
will  purchase  no  more  home-made  goods  of  any  other  hind  than 
three  and  sixpence  would  have  done  before,  neither  the  circum¬ 
stances  of  the  farmer,  nor  those  of  the  landlord,  will  be  much 
mended  by  this  change.  The  farmer  will  not  be  able  to  cultivate 
much  better:  the  landlord  will  not  be  able  to  live  much  better.  In 
the  purchase  of  foreign  commodities  this  enhancement  in  the  price 
of  corn  may  give  them  some  little  advantage.  In  that  of  home¬ 
made  commodities  it  can  give  them  none  at  all.  And  almost  the 
whole  expense  of  the  farmer,  and  the  far  greater  part,  even  of  that 
of  the  landlord,  is  in  home-made  commodities. 

That  degradation  in  the  value  of  silver  which  is  the  effect  of  the 
fertility  of  the  mines,  and  which  operates  equally,  or  very  near 
equally,  through  the  greater  part  of  the  commercial  world,  is  a 
matter  of  very  little  consequence  to  any  particular  country.  The 
consequent  rise  of  all  money  prices,  though  it  does  not  make  those 
who  receive  them  really  richer,  does  not  make  them  really  poorer. 

'  A  service  of  plate  becomes  really  cheaper,  and  everything  else 
remains  precisely  of  the  same  real  value  as  before. 

But  that  degradation  in  the  value  of  silver  which,  being  the 
effect  either  of  the  peculiar  situation,  or  of  the  political  institutions 
of  a  particular  country,  takes  place  only  in  that  county,  is  a  matter 
of  very  great  consequence,  which,  far  from  tending  to  make  any¬ 
body  really  richer,  tends  to  make  everybody  really  poorer.  The 
rise  in  the  money  price  of  all  commodities,  which  is  in  this  case 
peculiar  to  that  country,  tends  to  discourage  more  or  less  every  sort 
of  industry  which  is  carried  on  within  it,  and  to  enable  foreign 
nations,  by  furnishing  almost  all  sorts  of  goods  for  a  smaller  quan¬ 
tity  of  silver  than  its  own  workmen  can  afford  to  do,  to  undersell 
them,  not  only  in  the  foreign,  but  even  in  the  home  market.1 

1  The  value  of  silver  in  relation  to  all  rest  of  the  world.  No  regulation  can 
commodities  cannot  be  degraded  by  any  enhance  the  price  of  all  articles.  But  it 
legislative  process  short  of  that  which  is  possible  for  regulations  to  make  all 
effects  a  complete  insulation  from  the  kinds  of  labour  less  effective,  and  there 


86 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

Spain  by  taxing,  and  Portugal  by  prohibiting  the  exportation  of 
gold  and  silver,  load  that  exportation  with  the  expense  of  smug¬ 
gling*,  and  raise  the  value  of  those  metals  in  other  countries  so  much 
more  above  what  it  is  in  their  own,  by  the  whole  amount  of  this 
expense.  When  you  dam  up  a  stream  of  water,  as  soon  as  the  dam 
is  full,  as  much  water  must  run  over  the  dam-head  as  if  there  was 
no  dam  at  all.  The  prohibition  of  exportation  cannot  detain  a 
greater  quantity  of  gold  and  silver  in  Spain  and  Portugal  than 
what  they  can  afford  to  employ,  than  what  the  annual  produce  of 
their  land  and  labour  will  allow  them  to  employ,  in  coin,  plate, 
gilding,  and  other  ornaments  of  gold  and  silver.  When  they  have 
got  this  quantity  the  dam  is  full,  and  the  whole  stream  which  flows 
in  afterwards  must  run  over.  The  annual  exportation  of  gold  and 
silver  from  Spain  and  Portugal  accordingly  is,  by  all  accounts,  not¬ 
withstanding  these  restraints,  very  near  equal  to  the  whole  annual 
importation.  As  the  water,  however,  must  always  be  deeper  behind 
the  dam-head  than  before  it,  so  the  quantity  of  gold  and  silver 
which  these  restraints  detain  in  Spain  and  Portugal  must,  in  propor¬ 
tion  to  the  annual  produce  of  their  land  and  labour,  be  greater  than 
what  is  to  be  found  in  other  countries.  The  higher  and  stronger 
the  dam-head,  the  greater  must  be  the  difference  in  the  depth  of 
water  behind  and  before  it.  The  higher  the  tax,  the  higher  the 
penalties  with  which  the  prohibition  is  guarded ;  the  more  vigilant 
and  severe  the  police  which  looks  after  the  execution  of  the  law,  the 

fore  to  bring  about  a  general  decline  in  money  price  of  corn,  I  repeat,  does  not 
the  productive  power  of  a  country.  It  determine  or  regulate  the  money  price  of 
was  not  then  in  the  general  degradation  anything  else  except  it  be  labour,  and 
of  the  value  of  silver,  that  the  folly  and  then  only  when  the  labourers’  wages 
injustice  of  the  bounty  consisted,  but  in  satisfy  only  the  barest  necessaries  of 
the  practical  effects  of  the  measure.  The  lifer 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


87 


greater  must  be  the  difference  in  the  proportion  of  gold  and  silver 
to  the  annual  produce  of  the  land  and  labour  of  Spain  and  Por¬ 
tugal,  and  to  that  of  other  countries.  It  is  said  accordingly  to  be 
very  considerable,  and  that  you  frequently  find  there  a  profusion 
of  plate  in  houses,  where  there  is  nothing  else  which  would,  in 
other  countries,  be  thought  suitable  or  correspondent  to  this  sort 
of  magnificence.  The  cheapness  of  gold  and  silver,  or,  what  is  the 
same  thing,  the  dearness  of  all  commodities,  which  is  the  neces¬ 
sary  effect  of  this  redundancy  of  the  precious  metals,  discourages 
both  the  agriculture  and  manufactures  of  Spain  and  Portugal,  and 
enables  foreign  nations  to  supply  them  with  many  sorts  of  rude, 
and  with  almost  all  sorts  of  manufactured  produce,  for  a  smaller 
quantity  of  gold  and  silver  than  what  they  themselves  can  either 
raise  or  make  them  for  at  home.1  The  tax  and  prohibition  operate  in 
two  different  ways.  They  not  only  lower  very  much  the  value  of  the 
precious  metals  in  Spain  and  Portugal,  but  by  detaining  there  a 
certain  quantity  of  those  metals  which  would  otherwise  flow  over 
other  countries,  they  keep  up  their  value  in  those  other  countries 
somewhat  above  what  it  otherwise  would  be,  and  thereby  give  those 
countries  a  double  advantage  in  their  commerce  with  Spain  and 
Portugal.  Open  the  flood-gates,  and  there  will  presently  be  less 
water  above,  and  more  below,  the  dam-head,  and  it  will  soon  come 
to  a  level  in  both  places.  Remove  the  tax  and  the  prohibition,  and 
as  the  quantity  of  gold  and  silver  will  diminish  considerably  in 
Spain  and  Portugal,  so  it  will  increase  somewhat  in  other  countries, 
and  the  value  of  those  metals,  their  proportion  to  the  annual  pro¬ 
duce  of  land  and  labour,  will  soon  come  to  a  level,  or  very  near  to  a 
level,  in  all.  The  loss  which  Spain  and  Portugal  could  sustain  by 
this  exportation  of  their  gold  and  silver  would  be  altogether  nominal 
and  imaginary.  The  nominal  value  of  their  goods,  and  of  the 
annual  produce  of  their  land  and  labour,  would  fall,  and  would  be 
expressed  or  represented  by  a  smaller  quantity  of  silver  than  before ; 


1  Absurd  as  these  prohibitions  were, 
this  effort  in  Spain  and  Portugal  could 
have  been  only  very  partial.  Smith  bears 
testimony  to  the  fact  that  no  prohibition 
can  prevent  smuggling,  and  that  nothing 
is  smuggled  more  easily  than  gold  and 
silver.  The  two  countries  alluded  to 
suffered  a  decline,  partly  because  the 
energies  of  the  people  were  wasted  in 
the  wild  race  after  the  discovery  and 


appropriation  of  the  precious  metals,  to 
the  omission  of  other  industries,  partly 
to  the  grinding  despotism  of  the  govern¬ 
ment  in  each  country,  most  of  all  to 
the  debasement  which  religious  in¬ 
tolerance  and  savage  persecution  in¬ 
duced  in  the  national  mind.  As  liberty 
and  toleration  have  been  granted  and 
adopted,  these  countries  have  made  pro¬ 
gress. 


88 


THE  NATURE  AND  CAUSES  OF  book  iy. 


but  their  real  value  would  be  the  same  as  before,  and  would  be  suffi¬ 
cient  to  maintain,  command,  and  employ  the  same  quantity  of 
labour.  As  the  nominal  value  of  their  goods  would  fall,  the  real 
value  of  what  remained  of  their  gold  and  silver  would  rise,  and  a 
smaller  quantity  of  those  metals  would  answer  all  the  same  purposes 
of  commerce  and  circulation  which  had  employed  a  greater  quantity 
before.  The  gold  and  silver  which  would  go  abroad  wTould  not  go 
abroad  for  nothing,  but  would  bring  back  an  equal  value  of  goods 
of  some  kind  or  another.  Those  goods  too  would  not  be  all  matters 
of  mere  luxury  and  expense,  to  be  consumed  by  idle  people,  who 
produce  nothing  in  return  for  their  consumption.  As  the  real 
wealth  and  revenue  of  idle  people  would  not  be  augmented  by  this 
extraordinary  exportation  of  gold  and  silver,  so  neither  would  their 
consumption  be  much  augmented  by  it.  Those  goods  would,  pro¬ 
bably,  the  greater  part  of  them,  and  certainly  some  part  of  them, 
consist  in  materials,  tools,  and  provisions,  for  the  employment  and 
maintenance  of  industrious  people,  who  would  reproduce,  with  a 
profit,  the  full  value  of  their  consumption.  A  part  of  the  dead 
stock  of  the  society  would  thus  be  turned  into  active  stock,  and 
would  put  into  motion  a  greater  quantity  of  industry  than  had  been 
employed  before.  The  annual  produce  of  their  land  and  labour 
would  immediately  be  augmented  a  little,  and  in  a  few  years  would, 
probably,  be  augmented  a  great  deal ;  their  industry  being  thus 
relieved  from  one  of  the  most  oppressive  burdens  which  it  at  pre¬ 
sent  .labours  under. 

The  bounty  upon  the  exportation  of  corn  necessarily  operates 
exactly  in  the  same  way  as  this  absurd  policy  of  Spain  and 
Portugal.  Whatever  be  the  actual  state  of  tillage,  it  renders  our 
corn  somewhat  dearer  in  the  home  market  than  it  otherwise  would 
be  in  that  state,  and  somewhat  cheaper  in  the  foreign ;  and  as  the 
average  money  price  of  corn  regulates  more  or  less  that  of  all 
other  commodities,  it  lowers  the  value  of  silver  considerably  in 
the  one,  and  tends  to  raise  it  a  little  in  the  other.  It  enables 
foreigners,  the  Dutch  in  particular,  not  only  to  eat  our  corn  cheaper 
than  they  otherwise  could  do,  but  sometimes  to  eat  it  cheaper  than 
even  our  own  people  can  do  upon  the  same  occasions ;  as  we  are 
assured  by  an  excellent  authority,  that  of  Sir  Matthew  Decker.1 

1  Decker  is  reputed  to  have  written  Foreign  Trade.  See  Macculloch’s  Lite- 
an  Essay  on  the  Causes  of  the  Decline  of  rature  of  Political  Economy,  p.  328. 


CHAP.  y. 


THE  WEALTH  OF  NATIONS. 


89 


It  hinders  our  own  workmen  from  furnishing  their  goods  for  so 
small  a  quantity  of  silver  as  they  otherwise  might  do  ;  and  enables 
the  Dutch  to  furnish  theirs  for  a  smaller.  It  tends  to  render  our 
manufactures  somewhat  dearer  in  every  market,  and  theirs  some¬ 
what  cheaper  than  they  otherwise  would  be,  and  consequently  to 
give  their  industry  a  double  advantage  over  our  own. 

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

There  is,  perhaps,  but  one  set  of  men  in  the  whole  common¬ 
wealth  to  whom  the  bounty  either  was  or  could  be  essentially 
serviceable.  These  were  the  corn  merchants,  the  exporters  and 
importers  of  corn.  In  years  of  plenty,  the  bounty  necessarily  oc¬ 
casioned  a  greater  exportation  than  would  otherwise  have  taken 
place ;  and  by  hindering  the  plenty  of  one  year  from  relieving  the 
scarcity  of  another,  it  occasioned  in  years  of  scarcity  a  greater 
importation  than  would  otherwise  have  been  necessary.  It  in¬ 
creased  the  business  of  the  corn  merchant  in  both  ;  and  in  years 
of  scarcity,  it  not  only  enabled  him  to  import  a  greater  quantity, 
but  to  sell  it  for  a  better  price,  and  consequently  with  a  greater 
profit  than  he  could  otherwise  have  made,  if  the  plenty  of  one 
year  had  not  been  more  or  less  hindered  from  relieving  the  scarcity 
of  another.  It  is  in  this  set  of  men,  accordingly,  that  I  have 
observed  the  greatest  zeal  for  the  continuance  or  renewal  of  the 
bounty.1 


1  No  doubt.  Adam  Smith  is  stating 
that  of  which  he  had  personal  experience. 
But  the  interest  of  corn  merchants  was 
not  furthered  by  the  bounty.  The  profit 
of  a  corn  merchant  is  derived  from  the 


fact,  that  his  interposition  is  a  service  to 
producer  and  consumer,  this  profit  being 
reduced  to  the  minimum  by  the  compe¬ 
tition  of  other  corn  merchants.  Besides 
this,  he  gets  an  insurance  against  the 


90 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


Our  country  gentlemen,  when  they  imposed  the  high  duties  upon 
the  importation  of  foreign  corn,  which  in  times  of  moderate  plenty 
amount  to  a  prohibition,  and  when  they  established  the  bounty, 
seem  to  have  imitated  the  conduct  of  our  manufacturers.  By  the 
one  institution,  they  secured  to  themselves  the  monopoly  of  the 
home  market,  and  by  the  other  they  endeavoured  to  prevent  that 
market  from  ever  being  overstocked  with  their  commodity.1  By 
both  they  endeavoured  to  raise  its  real  value,  in  the  same  manner 
as  our  manufacturers  had,  by  the  like  institutions,  raised  the  real 
value  of  many  different  sorts  of  manufactured  goods.  They  did  not 
perhaps  attend  to  the  great  and  essential  difference  which  nature 
has  established  between  corn  and  almost  every  other  sort  of  goods. 
When  either  by  the  monopoly  of  the  home  market,  or  by  a  bounty 
upon  exportation,  you  enable  our  woollen  or  linen  manufacturers  to 
sell  their  goods  for  somewhat  a  better  price  than  they  otherwise 
could  get  for  them,  you  raise  not  only  the  nominal  but  the  real 
price  of  those  goods.  You  render  them  equivalent  to  a  greater 
quantity  of  labour  and  subsistence,  you  increase  not  only  the 
nominal  but  the  real  profit,  the  real  wealth  and  revenue  of  those 
manufacturers,  and  you  enable  them  either  to  live  better  themselves, 
or  to  employ  a  greater  quantity  of  labour  in  those  particular  manu¬ 
factures.  You  really  encourage  those  manufactures,  and  direct 
towards  them  a  greater  quantity  of  the  industry  of  the  country, 
than  what  would  probably  go  to  them  of  its  own  accord.  But 
when  by  the  like  institutions  you  raise  the  nominal  or  money-price 
of  corn,  you  do  not  raise  its  real  value.  You  do  not  increase  the 
real  wrealth,  the  real  revenue  either  of  our  farmers  or  country 


ordinary  risks  of  his  calling.  The  more 
the  risk,  the  greater  the  insurance.  But 
his  gains  as  a  speculator  are  not  ob¬ 
tained  at  the  expense  of  the  public,  but 
at  the  expense  of  other  speculators,  just 
in  the  same  way  as  a  man  who  wins 
wagers  at  horse  races  wins  them  not 
from  the  general  public,  but  from  other 
persons  who  lose  wagers.  Nothing  can 
be  more  unfair  than  the  prejudice  against 
corn-dealers  and  similar  speculators,  when 
they  enter  into  bona-fide  transactions. 
In  effect  they  do  a  service  to  society, 
apart  from  that  which  they  render  the 
producer  and  consumer,  in  shortening  the 
extremes  of  high  and  low  prices.  See 
below,  p.  99. 


1  But  with  this  difference,  that  the 
use  of  manufactured  commodities  is 
more  or  less  optional,  always  in  degree, 
generally  in  the  article  altogether. 
Hence  the  monopoly  of  the  manufac¬ 
turer  is  corrected  by  the  will  of  the  con¬ 
sumer.  But  the  case  of  food  is  wholly 
different ;  the  use  is  not  optional  at 
all,  and  the  quantity  used  hardly  so. 
The  injury  then  inflicted  by  a  prohibi¬ 
tion  of  foreign  corn,  is  incomparably 
greater  than  that  of  a  prohibition  of 
foreign  manufactures,  and  the  imme¬ 
diate  advantage  which  the  landlord 
gets  by  the  prohibition  is  far  greater 
than  that  which  the  manufacturer  can 
get. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


91 


gentlemen.  You  do  not  encourage  the  growth  of  corn,  because 
you  do  not  enable  them  to  maintain  and  employ  more  labourers 
in  raising  it.  The  nature  of  things  has  stamped  upon  corn  a  real 
value  which  cannot  be  altered  by  merely  altering  its  money  price. 
No  bounty  upon  exportation,  no  monopoly  of  the  home  market, 
can  raise  that  value.  The  freest  competition  cannot  lower  it. 
Through  the  world  in  general  that  value  is  equal  to  the  quantity 
of  labour  which  it  can  maintain,  and  in  every  particular  place  it  is 
equal  to  the  quantity  of  labour  which  it  can  maintain  in  the  way, 
whether  liberal,  moderate,  or  scanty,  in  which  labour  is  commonly 
maintained  in  that  place.  Woollen  or  linen  cloth  are  not  the  regu¬ 
lating  commodities  by  which  the  real  value  of  all  other  commodities 
must  be  finally  measured  and  determined.  Corn  is.  The  real  value 
of  every  other  commodity  is  finally  measured  and  determined  by 
the  proportion  which  its  average  money  price  bears  to  the  average 
money  price  of  corn.  The  real  value  of  corn  does  not  vary  with 
those  variations  in  its  average  money  price,  which  sometimes  occur 
from  one  century  to  another.  It  is  the  real  value  of  silver  which 
varies  with  them.1 

Bounties  upon  the  exportation  of  any  home-made  commodity  are 
liable,  first,  to  that  general  objection  which  may  be  made  to  all 
the  different  expedients  of  the  mercantile  system — the  objection  of 
forcing  some  part  of  the  industry  of  the  country  into  a  channel 
less  advantageous  than  that  in  which  it  would  run  of  its  own 
accord ;  and,  secondly,  to  the  particular  objection  of  forcing  it,  not 
only  into  a  channel  that  is  less  advantageous,  but  into  one  that 
is  actually  disadvantageous ;  the  trade  which  cannot  be  carried  on 
but  by  means  of  a  bounty  being  necessarily  a  losing  trade.  The 
bounty  upon  the  exportation  of  corn  is  liable  to  this  further 


1  The  price  of  corn  depends  on  the 
proportion  which  the  efficiency  of  agri¬ 
cultural  industry  bears  to  the  demand 
for  its  produce.  Increase  the  efficiency, 
and  keep  the  population  at  the  same 
amount,  and  the  price  falls,  though  it 
does  not  follow  by  the  way,  as  Mr.  Mill 
argues,  that  rent  will  fall  with  improve¬ 
ment.  The  relation  of  corn  prices  to 
labour  and  rent  in  the  first  half  of  the 
eighteenth  century  is  conclusive  on  this 
point.  At  this  time  the  value  of  corn 
was  low,  owing  to  causes  referred  to  in 
a  preceding  note.  Nor  does  the  price 


of  labour  depend  on  the  price  of  food, 
though  the  former  cannot  fall  perma¬ 
nently  below  the  power  of  purchasing 
sufficient  food.  But  this  being  satisfied, 
— and  the  wages  of  the  lowest-priced 
labour  are  almost  always  a  good  deal 
above  the  necessary  food  of  the  labourer 
— the  rate  of  wages  depends  on  the  ratio 
subsisting  between  population  and  capi¬ 
tal.  The  real  value  of  corn  has  risen 
materially,  with  variations  in  other  money 
prices,  not  only  from  year  to  year,  as 
every  one  admits,  but  on  an  average  of 
considerable  duration. 


92 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


objection,  that  it  can  in  no  respect  promote  the  raising  of  that 
particular  commodity  of  which  it  was  meant  to  encourage  the 
production.  When  our  country  gentlemen,  therefore,  demanded 
the  establishment  of  the  bounty,  though  they  acted  in  imitation 
of  our  merchants  and  manufacturers,  they  did  not  act  with  that 
complete  comprehension  of  their  own  interest  which  commonly 
directs  the  conduct  of  those  two  other  orders  of  people.  They 
loaded  the  public  revenue  with  a  very  considerable  expense  ;  they 
imposed  a  very  heavy  tax  upon  the  whole  body  of  the  people  ;  but 
they  did  not,  in  any  sensible  degree,  increase  the  real  value  of  their 
own  commodity ;  and  by  lowering  somewhat  the  real  value  of 
silver,  they  discouraged,  in  some  degree,  the  general  industry  of 
the  country,  and,  instead  of  advancing,  retarded  more  or  less  the 
improvement  of  their  own  lands,  which  necessarily  depends  upon 
the  general  industry  of  the  country.1 

To  encourage  the  production  of  any  commodity,  a  bounty  upon 
production,  one  should  imagine,  would  have  a  more  direct  operation 
than  one  upon  exportation.  It  would,  besides,  impose  only  one  tax 
upon  the  people,  that  which  they  must  contribute  in  order  to  pay 
the  bounty.  Instead  of  raising,  it  would  tend  to  lower  the  price 
of  the  commodity  in  the  home  market ;  and  thereby,  instead  of 
imposing  a  second  tax  upon  the  people,  it  might,  at  least  in  part, 
repay  them  for  what  they  had  contributed  to  the  first.  Bounties 
upon  production,  however,  have  been  very  rarely  granted.2  The 
prejudices  established  by  the  commercial  system  have  taught  us  to 
believe,  that  national  wealth  arises  more  immediately  from  exporta¬ 
tion  than  from  production.  It  has  been  more  favoured  accordingly, 
as  the  more  immediate  means  of  bringing  money  into  the  country. 
Bounties  upon  production,  it  has  been  said  too,  have  been  found  by 
experience  more  liable  to  frauds  than  those  upon  exportation.  How 
far  this  is  true,  I  know  not.  That  bounties  upon  exportation  have 
been  abused  to  many  fraudulent  purposes,  is  very  well  known.  But 
it  is  not  the  interest  of  merchants  and  manufacturers,  the  great 
inventors  of  all  these  expedients,  that  the  home  market  should  be 

1  It  is  more  correct  to  say  that  the  2  They  have,  from  time  to  time,  on 
country  gentlemen  in  striving  to  get,  and  flax  culture.  Smith  alludes  to  that  on 
in  really  getting,  an  increased  price  for  herrings.  There  was  a  similar  bounty 
their  wheat,  gained  a  loss  on  other  ag  i-  on  t'ae  whale  fishery.  It  is  almost  super- 
cultural  produce,  the  use  of  which  was  fluous  to  add  that  all  have  been  aban- 
more  or  less  voluntary.  doned. 


CHAP.  y. 


THE  WEALTH  OF  NATIONS. 


93 


overstocked  with  their  goods,  an  event  which  a  bounty  upon  pro¬ 
duction  might  sometimes  occasion.  A  bounty  upon  exportation, 
by  enabling  them  to  send  abroad  the  surplus  part,  and  to  keep  up 
the  price  of  what  remains  in  the  home  market,  effectually  prevents 
this.  Of  all  the  expedients  of  the  mercantile  system,  accordingly, 
it  is  the  one  of  which  they  are  the  fondest.  1  have  known  the 
different  undertakers  of  some  particular  works  agree  privately 
among  themselves  to  give  a  bounty  out  of  their  own  pockets  upon 
the  exportation  of  a  certain  proportion  of  the  goods  which  they 
dealt  in.  This  expedient  succeeded  so  well,  that  it  more  than 
doubled  the  price  of  their  goods  in  the  home  market,  notwith¬ 
standing  a  very  considerable  increase  in  the  produce.  The  opera¬ 
tion  of  the  bounty  upon  corn  must  have  been  wonderfully  different, 
if  it  has  lowered  the  money  price  of  that  commodity. 

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

But  though  the  tonnage  bounties  to  those  fisheries  do  not  con¬ 
tribute  to  the  opulence  of  the  nation,  it  may  perhaps  be  thought 
that  they  contribute  to  its  defence,  by  augmenting  the  number  of 
its  sailors  and  shipping.  This,  it  may  be  alleged,  may  sometimes 
be  done  by  means  of  such  bounties  at  a  much  smaller  expense,  than 
by  keeping  up  a  great  standing  navy,  if  I  may  use  such  an  expres¬ 
sion,  in  the  same  way  as  a  standing  army. 

Notwithstanding  these  favourable  allegations,  however,  the  fol¬ 
lowing  considerations  dispose  me  to  believe,  that  in  granting  at 
least  one  of  these  bounties,  the  Legislature  has  been  very  grossly 
imposed  upon. 

First,  The  herring  buss  bounty  seems  too  large. 

From  the  commencement  of  the  winter  fishing  1771  to  the  end  of 
the  winter  fishing  1781,  the  tonnage  bounty  upon  the  herring  buss 
fishery  has  been  at  thirty  shillings  the  ton.  During  these  eleven 


94 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


years*  the  whole  number  of  barrels  caught  by  the  herring  buss 
fishery  of  Scotland  amounted  to  378,347.  The  herrings  caught  and 
cured  at  sea,  are  called  sea  sticks.  In  order  to  render  them  what 
are  called  merchantable  herrings,  it  is  necessary  to  repack  them 
with  an  additional  quantity  of  salt ;  and  in  this  case,  it  is  reckoned 
that  three  barrels  of  sea  sticks  are  usually  repacked  into  two  barrels 
of  merchantable  herrings.  The  number  of  barrels  of  merchantable 
herrings,  therefore,  caught  during  these  eleven  years,  will  amount 
only,  according  to  this  account,  to  252,231^.  During  these  eleven 
years  the  tonnage  bounties  paid  amounted  to  ^155,463  11s.,  or  to 
8^.  2 \d.  upon  every  barrel  of  sea  sticks,  and  to  12s.  ^\d.  upon  every 
barrel  of  merchantable  herrings. 

The  salt  with  which  these  herrings  are  cured  is  sometimes  Scotch, 
and  sometimes  foreign  salt ;  both  which  are  delivered  free  of  all 
excise  duty  to  the  fish-curers.  The  excise  duty  upon  Scotch  salt  is 
at  present  is.  6cl.,  that  upon  foreign  salt  10s.  the  bushel.  A  barrel 
of  herrings  is  supposed  to  require  about  one  bushel  and  one-fourth 
of  a  bushel  foreign  salt.  Two  bushels  are  the  supposed  average  of 
Scotch  salt.  If  the  herrings  are  entered  for  exportation,  no  part  of 
this  duty  is  paid  up  ;  if  entered  for  home  consumption,  whether  the 
herrings  were  cured  with  foreign  or  with  Scotch  salt,  only  one 
shilling  the  barrel  is  paid  up.  It  was  the  old  Scotch  duty  upon 
a  bushel  of  salt,  the  quantity  which,  at  a  low  estimation,  had  been 
supposed  necessary  for  curing  a  barrel  of  herrings.  In  Scotland, 
foreign  salt  is  very  little  used  for  any  other  purpose  but  the  curing 
of  fish.  But  from  the  5th  April  1771,  to  the  5th  April  1782,  the 
quantity  of  foreign  salt  imported  amounted  to  936,974  bushels,  at 
eighty-four  pounds  the  bushel :  the  quantity  of  Scotch  salt,  delivered 
from  the  works  to  the  fish-curers,  to  no  more  than  168,226,  at 
fifty-six  pounds  the  bushel  only.  It  would  appear,  therefore,  that 
it  is  principally  foreign  salt  that  is  used  in  the  fisheries.  Upon 
every  barrel  of  herrings  exported  there  is,  besides,  a  bounty  of  is.  8d., 
and  more  than  two-thirds  of  the  buss-caught  herrings  are  exported. 
Put  all  these  things  together,  and  you  will  find  that,  during  these 
eleven  years,  every  barrel  of  buss-caught  herrings,  cured  with  Scotch 
salt  when  exported,  has  cost  Government  iys.  life/. ;  and  when 
entered  for  home  consumption  145.  3! d.;  and  that  every  barrel 
cured  with  foreign  salt,  wdien  exported,  has  cost  Government 
jUi  Js.  Aid. ;  and  when  entered  for  home  consumption,  jUi  35.  9 \d. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


95 


The  price  of  a  barrel  of  good  merchantable  herrings  runs  from 
seventeen  and  eighteen  to  four  and  five  and  twenty  shillings  ;  about 
a  guinea  at  an  average.1 

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

Thirdly,  The  mode  of  fishing  for  which  this  tonnage  bounty  in 
the  white-herring  fishery  has  been  given  (by  busses  or  decked  vessels 
from  twenty  to  eighty  tons  burden),  seems  not  so  well  adapted  to 
the  situation  of  Scotland  as  to  that  of  Holland,  from  the  practice  of 
which  country  it  appears  to  have  been  borrowed.  Holland  lies  at 
a  great  distance  from  the  seas  to  which  herrings  are  known  prin¬ 
cipally  to  resort ;  and  can,  therefore,  carry  on  that  fishery  only  in 
decked  vessels,  which  can  carry  water  and  provisions  sufficient  for 
a  voyage  to  a  distant  sea.  But  the  Hebrides  or  western  islands,  the 
islands  of  Shetland,  and  the  northern  and  north-western  coasts  of 
Scotland,  the  countries  in  whose  neighbourhood  the  herring  fishery 
is  principally  carried  on,  are  everywhere  intersected  by  arms  of  the 
sea  which  run  up  a  considerable  way  into  the  land,  and  which,  in  the 
language  of  the  country,  are  called  sea-lochs.  It  is  to  these  sea- 
lochs  that  the  herrings  principally  resort  during  the  seasons  in 
which  they  visit  those  seas  ;  for  the  visits  of  this,  and,  I  am  assured, 
of  many  other  sorts  of  fish,  are  not  quite  regular  and  constant.  A 
boat  fishery,  therefore,  seems  to  be  the  mode  of  fishing  best  adapted 
to  the  peculiar  situation  of  Scotland ;  the  fishers  carrying  the  her¬ 
rings  on  shore,  as  fast  as  they  are  taken,  to  be  either  cured  or  con¬ 
sumed  fresh.  But  the  great  encouragement,  which  a  bounty  of 
thirty  shillings  a  ton  gives  to  the  buss  fishery,  is  necessarily  a  dis¬ 
couragement  to  the  boat  fishery  ;  which,  having  no  such  bounty, 
cannot  bring  its  cured  fish  to  market  upon  the  same  terms  as  the 
buss  fishery.  The  boat  fishery,  accordingly,  which,  before  the  estab¬ 
lishment  of  the  buss  bounty,  was  very  considerable,  and  is  said  to 

1  See  the  accounts  at  the  end  of  the  chapter. 


96 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


have  employed  a  number  of  seamen,  not  inferior  to  what  the  buss 
fishery  employs  at  present,  is  now  gone  almost  entirely  to  decay. 
Of  the  former  extent,  however,  of  this  now  ruined  and  abandoned 
fishery,  I  must  acknowledge  that  I  cannot  pretend  to  speak  with 
much  precision.  As  no  bounty  was  paid  upon  the  outfit  of  the  boat 
fishery,  no  account  was  taken  of  it  by  the  officers  of  the  customs  or 
salt  duties. 

Fourthly,  In  many  parts  of  Scotland,  during  certain  seasons  of 
the  year,  herrings  make  no  inconsiderable  part  of  the  food  of  the 
common  people.  A  bounty,  which  tended  to  lower  their  price  in  the 
home  market,  might  contribute  a  good  deal  to  the  relief  of  a  great 
number  of  our  fellow-subjects,  whose  circumstances  are  by  no  means 
affluent.  But  the  herring  buss  bounty  contributes  to  no  such  good 
purpose.  It  has  ruined  the  boat  fishery,  which  is  by  far  the  best 
adapted  for  the  supply  of  the  home  market,  and  the  additional 
bounty  of  is.  8 cl.  the  barrel  upon  exportation,  carries  the  greater 
part,  more  than  two-thirds,  of  the  produce  of  the  buss  fishery  abroad. 
Between  thirty  and  forty  years  ago,  before  the  establishment  of  the 
buss  bounty,  sixteen  shillings  the  barrel,  I  have  been  assured,  was  the 
common  price  of  white  herrings.  Between  ten  and  fifteen  years  ago, 
before  the  boat  fishery  was  entirely  ruined,  the  price  is  said  to  have 
run  from  seventeen  to  twenty  shillings  the  barrel.  For  these  last 
five  years,  it  has,  at  an  average,  been  at  twenty-five  shillings  the 
barrel.  This  high  price,  however,  may  have  been  owing  to  the  real 
scarcity  of  the  herrings  upon  the  coast  of  Scotland.  I  must  observe 
too,  that  the  cask  or  barrel,  which  is  usually  sold  with  the  herrings, 
and  of  which  the  price  is  included  in  all  the  foregoing  prices,  has, 
since  the  commencement  of  the  American  war,  risen  to  about  double 
its  former  price,  or  from  about  three  shillings  to  about  six  shillings. 
I  must  likewise  observe,  that  the  accounts  I  have  received  of  the 
prices  of  former  times  have  been  by  no  means  quite  uniform  and 
consistent ;  and  an  old  man  of  great  accuracy  and  experience  has 
assured  me,  that  more  than  fifty  years  ago,  a  guinea  was  the  usual 
price  of  a  barrel  of  good  merchantable  herrings;  and  this,  I  imagine, 
may  still  be  looked  upon  as  the  average  price.  All  accounts  how¬ 
ever,  I  think,  agree  that  the  price  has  not  been  lowered  in  the  home 
market,  in  consequence  of  the  buss  bounty.1 


1  Smith  was  a  Scotch  Commissioner  of  authority  on  the  facts.  His  inferences 
Customs,  and  could  therefore  speak  with  are  confirmed  by  the  circumstance  that 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


97 


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

the  Scotch  customs  constantly  produced  allowances,  during  great  part  of  the 
nothing  to  the  Exchequer,  but  were  com-  eighteenth  century.  See  Macphtrson’s 
pletely  swallowed  up  by  bounties  and  fourth  volume,  passim. 

VOL.  II.  H 


98 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

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

Premiums  given  by  the  public  to  artists  and  manufacturers  who 
excel  in  their  particular  occupations,  are  not  liable  to  the  same 
objections  as  bounties.  By  encouraging  extraordinary  dexterity 
and  ingenuity,  they  serve  to  keep  up  the  emulation  of  the  work¬ 
men  actually  employed  in  those  respective  occupations,  and  are  not 
considerable  enough  to  turn  towards  any  one  of  them  a  greater 
share  of  the  capital  of  the  country  than  what  would  go  to  it  of  its 
own  accord.  Their  tendency  is  not  to  overturn  the  natural  balance 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


99 


of  employments,  but  to  render  the  work  which  is  done  in  each  as 
perfect  and  complete  as  possible.1  The  expense  of  premiums, 
besides,  is  very  trifling ;  that  of  bounties  very  great.  The  bounty 
upon  corn  alone  has  sometimes  cost  the  public,  in  one  year,  more 
than  three  hundred  thousand  pounds. 

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


Digression  concerning  the  Corn  Trade  and  Corn  Laws. 

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

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

I.  The  interest  of  the  inland  dealer,  and  that  of  the  great  body 
of  the  people,  how  opposite  soever  they  may  at  first  sight  appear, 
are,  even  in  years  of  the  greatest  scarcity,  exactly  the  same.  It  is 
his  interest  to  raise  the  price  of  his  corn  as  high  as  the  real  scarcity 
of  the  season  requires,  and  it  can  never  be  his  interest  to  raise  it 
higher.  By  raising  the  price  he  discourages  the  consumption,  and 
puts  everybody  more  or  less,  but  particularly  the  inferior  ranks  of 

1  No  question  is  perhaps  more  vexed  contrast,  to  be  excusable.  We  shall  have 
than  that  of  the  value  of  such  encourage-  occasion,  however,  to  comment  on  these  in- 
ments  to  invention  as  those  for  which  stances  and  circumstances  in  dealing  with 
Smith  apologises,  and  admits,  at  least  by  the  subjects  treated  of  in  the  Fifth  Book. 

H  % 


100 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


people,  upon  thrift  and  good  management.  If,  by  raising  it  too 
high,  he  discourages  the  consumption  so  much  that  the  supply  of 
the  season  is  likely  to  go  beyond  the  consumption  of  the  season, 
and  to  last  for  some  time  after  the  next  crop  begins  to  come  in,  he 
runs  the  hazard,  not  only  of  losing  a  considerable  part  of  his  corn 
by  natural  causes,  but  of  being  obliged  to  sell  what  remains  of  it 
for  much  less  than  what  he  might  have  had  for  it  several  months 
before.  If  by  not  raising  the  price  high  enough  he  discourages  the 
consumption  so  little,  that  the  supply  of  the  season  is  likely  to  fall 
short  of  the  consumption  of  the  season,  he  not  only  loses  a  part  of 
the  profit  which  he  might  otherwise  have  made,  but  he  exposes  the 
people  to  suffer  before  the  end  of  the  season,  instead  of  the  hardships 
of  a  dearth,  the  dreadful  horrors  of  a  famine.  It  is  the  interest 
of  the  people  that  their  daily,  weekly,  and  monthly  consumption 
should  be  proportioned  as  exactly  as  possible  to  the  supply  of 
the  season.  The  interest  of  the  inland  corn  dealer  is  the  same. 
By  supplying  them,  as  nearly  as  he  can  judge,  in  this  proportion, 
he  is  likely  to  sell  all  his  corn  for  the  highest  price,  and  with  the 
greatest  profit ;  and  his  knowledge  of  the  state  of  the  crop,  and  of 
his  daily,  weekly,  and  monthly  sales,  enable  him  to  judge,  with 
more  or  less  accuracy,  how  far  they  really  are  supplied  in  this 
manner.  Without  intending  the  interest  of  the  people,  he  is 
necessarily  led,  by  a  regard  to  his  own  interest,  to  treat  them, 
even  in  years  of  scarcity,  pretty  much  in  the  same  manner  as  the 
prudent  master  of  a  vessel  is  sometimes  obliged  to  treat  his  crew. 
When  he  foresees  that  provisions  are  likely  to  run  short,  he  puts 
them  upon  short  allowance.  Though  from  excess  of  caution  he 
should  sometimes  do  this  without  any  real  necessity,  yet  all  the 
inconveniences  which  his  crew  can  thereby  suffer  are  inconsiderable 
in  comparison  of  the  danger,  misery,  and  ruin  to  which  they  might 
sometimes  be  exposed  by  a  less  provident  conduct.  Though  from 
excess  of  avarice,  in  the  same  manner,  the  inland  corn  merchant 
should  sometimes  raise  the  price  of  his  corn  somewhat  higher  than 
the  scarcity  of  the  season  requires,  yet  all  the  inconveniences  which 
the  people  can  suffer  from  this  conduct,  which  effectually  secures 
them  from  a  famine  in  the  end  of  the  season,  are  inconsiderable  in 
comparison  of  what  they  might  have  been  exposed  to  by  a  more 
liberal  way  of  dealing  in  the  beginning  of  it.  The  corn  merchant 
himself  is  likely  to  suffer  the  most  by  this  excess  of  avarice ;  not 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


101 


only  from  tlie  indignation  which,  it  generally  excites  against  him, 
but,  though  he  should  escape  the  effects  of  this  indignation,  from 
the  quantity  of  corn  which  it  necessarily  leaves  upon  his  hands  in 
the  end  of  the  season,  and  which,  if  the  next  season  happens  to 
prove  favourable,  he  must  always  sell  for  a  much  lower  price  than 
he  might  otherwise  have  had.1 

Were  it  possible,  indeed,  for  one  great  company  of  merchants  to 
possess  themselves  of  the  whole  crop  of  an  extensive  country,  it 
might,  perhaps,  be  their  interest  to  deal  with  it  as  the  Dutch  are 
said  to  do  with  the  spiceries  of  the  Moluccas — to  destroy  or  throw 
away  a  considerable  part  of  it,  in  order  to  keep  up  the  price  of  the 
rest.  But  it  is  scarce  possible,  even  by  the  violence  of  law,  to 
establish  such  an  extensive  monopoly  with  regard  to  corn  ;  and, 
wherever  the  law  leaves  the  trade  free,  it  is  of  all  commodities  the 
least  liable  to  be  engrossed  or  monopolised  by  the  force  of  a  few 
large  capitals,  which  buy  up  the  greater  part  of  it.  Not  only 
its  value  far  exceeds  what  the  capitals  of  a  few  private  men 
are  capable  of  purchasing,  but,  supposing  they  were  capable  of 
purchasing  it,  the  manner  in  which  it  is  produced  renders  this 
purchase  altogether  impracticable.  As  in  every  civilised  country 
it  is  the  commodity  of  which  the  annual  consumption  is  the 
greatest,  so  a  greater  quantity  of  industry  is  annually  employed 
in  producing  corn  than  in  producing  any  other  commodity.  When 
it  first  comes  from  the  ground  too,  it  is  necessarily  divided  among 
a  greater  number  of  owners  than  any  other  commodity ;  and  these 
owners  can  never  be  collected  into  one  place  like  a  number  of 
independent  manufacturers,  but  are  necessarily  scattered  through 
all  the  different  corners  of  the  country.  These  first  owners  either 
immediately  supply  the  consumers  in  their  own  neighbourhood,  or 
they  supply  other  inland  dealers  who  supply  those  consumers.  The 
inland  dealers  in  corn,  therefore,  including  both  the  farmer  and  the 
baker,  are  necessarily  more  numerous  than  the  dealers  in  any  other 
commodity,  and  their  dispersed  situation  renders  it  altogether 


1  The  real  difficulty  before  the  corn- 
dealer  is  to  interpret  the  amount  of 
supply,  and  so  to  eliminate  the  risk  of 
misconceiving  it.  Of  course  the  public 
must  insure  him  against  this  risk,  by  an 
extra  price.  It  is  therefore  folly  on  the 
part  of  th3  home  producer,  and  a  loss 
to  the  public,  when  information  as  to 
agricultural  statistics  is  withheld.  Nor 


is  this  public  loss  a  benefit  to  the  pro¬ 
ducer,  for  it  is  absorbed,  as  I  said  above, 
in  the  insurance  or  risk  paid  to  the 
inland  dealer.  The  reason,  no  doubt, 
why  the  information  is  withheld,  or 
grudgingly  conceded,  is  that,  under  pre¬ 
carious  tenures,  landlord  and  tenant  are 
perpetually  playing  at  a  game  of  hide- 
and-seek. 


102 


THE  NATURE  AND  CA  USES  OF 


BOOK  IV. 


impossible  for  them  to  enter  into  any  general  combination.  If, 
in  a  year  of  scarcity  therefore,  any  of  them  should  find  that  he 
had  a  good  deal  more  com  upon  hand  than,  at  the  current  price,  he 
could  hope  to  dispose  of  before  the  end  of  the  season,  he  would 
never  think  of  keeping  up  this  price  to  his  own  loss,  and  to  the  sole 
benefit  of  his  rivals  and  competitors,  but  would  immediately  lower 
it,  in  order  to  get  rid  of  his  corn  before  the  new  crop  began  to  come 
in.  The  same  motives,  the  same  interests,  which  would  thus 
regulate  the  conduct  of  any 4  one  dealer,  would  regulate  that  of 
every  other,  and  oblige  them  all  in  general  to  sell  their  corn  at 
the  price  which,  according  to  the  best  of  their  judgment,  was  most 
suitable  to  the  scarcity  or  plenty  of  the  season. 

Whoever  examines,  with  attention,  the  history  of  the  dearths  and 
famines  which  have  afflicted  any  part  of  Europe,  during  either  the 
course  of  the  present  or  that  of  the  two  preceding  centuries  (of 
several  of  which  we  have  pretty  exact  accounts),  will  find,  I  believe, 
that  a  dearth  never  has  arisen  from  any  combination  among  the 
inland  dealers  in  corn,  nor  from  any  other  cause  but  a  real  scarcity, 
occasioned  sometimes  perhaps,  and  in  some  particular  places,  by  the 
waste  of  war,  but  in  by  far  the  greatest  number  of  cases,  by  the 
fault  of  the  seasons ;  and  that  a  famine  has  never  arisen  from  any 
other  cause  but  the  violence  of  Government  attempting,  by  improper 
means,  to  remedy  the  inconveniences  of  a  dearth.1 

In  an  extensive  corn  country,  between  all  the  different  parts  of 
which  there  is  a  free  commerce  and  communication,  the  scarcity 
occasioned  by  the  most  unfavourable  seasons  can  never  be  so  great 
as  to  produre  a  famine  ;  and  the  scantiest  crop,  if  managed  with 
frugality  and  economy,  will  maintain,  through  the  year,  the  same 
number  of  people  that  are  commonly  fed  in  a  more  affluent  manner 
by  one  of  moderate  plenty.2  The  seasons  most  unfavourable  to  the 


1  Famine  in  this  country  has  been  very 
rare.  The  policy  of  Government  in  pro¬ 
hibiting  or  restraining  the  dealers’  trade, 
and  in  a  less  degree  by  confining  markets 
to  particular  places,  may  have  induced 
local  famines.  The  greatest  famine  in 
England  was  that  of  the  years  1315, 
1316,  when  wheat,  to  interpret  the  highest 
prices  of  the  time  in  modern  money  at 
the  rate  of  times,  sold  for  £12  13s.  4 d. 
the  quarter  in  one  or  two  places.  The 
reader  will  find  at  the  conclusion  of 
Chapter  IX  (Book  I)  a  table  of  the  prices 


of  wheat  from  the  year  1 259  to  the  present 
time,  and  be  able  to  draw  his  own  in¬ 
ferences  from  these  prices.  The  chief  risk 
of  famine  consists  in  the  fact  that  a  com¬ 
munity  is  content  to  live  on  a  low  de¬ 
scription  of  food. 

2  This  is  a  little  overstated.  It  is  a 
law  in  prices,  that  when  the  supply  of 
any  article  of  prime  necessity  falls  short, 
the  actual  supply  sells  for  a  far  higher 
price  than  the  whole  average  amount 
would  sell  at.  In  other  words,  the 
difference  between  abundance  and  scar- 


CHAP.  Y. 


THE  WEALTH  OF  NATIONS. 


103 


crop  are  those  of  excessive  drought  or  excessive  rain.  But,  as  corn 
grows  equally  upon  high  and  low  lands — upon  grounds  that  are 
disposed  to  he  too  wet,  and  upon  those  that  are  disposed  to 
be  too  dry — either  the  drought  or  the  rain  which  is  hurtful  to  one 
part  of  the  country  is  favourable  to  another ;  and  though  both  in 
the  wet  and  in  the  dry  season  the  crop  is  a  good  deal  less  than 
in  one  more  properly  tempered,  yet  in  both  what  is  lost  in  one  part 
of  the  country  is  in  some  measure  compensated  by  what  is  gained 
in  the  other.  In  rice  countries,  where  the  crop  not  only  requires  a 
very  moist  soil,  but  where  in  a  certain  period  of  its  growing  it  must 
be  laid  under  water,  the  effects  of  a  drought  are  much  more  dismal. 
Even  in  such  countries,  however,  the  drought  is,  perhaps,  scarce 
ever  so  universal  as  necessarily  to  occasion  a  famine,  if  the  Govern¬ 
ment  would  allow  a  free  trade.  The  drought  in  Bengal,  a  few  years 
ago.  might  probably  have  occasioned  a  very  great  dearth.  Some 
improper  regulations,  some  injudicious  restraints  imposed  bj^  the 
servants  of  the  East  India  Company  upon  the  rice  trade,  contri¬ 
buted,  perhaps,  to  turn  that  dearth  into  a  famine.1 

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

In  years  of  scarcity,  the  inferior  ranks  of  people  impute  their 


city  is  far  greater  than  that  between 
scarcity  and  bare  subsistence.  This  law, 
fir»t  noticed  by  Gregory  King  (Davenant’s 
works),  has  been  dwelt  on  by  Mr.  Tooke, 
History  of  Prices,  vol.  i. 

1  The  incompetence  of  the  East  India 
Company  was  a  prominent  fact  at  the 
time  in  which  Smith  wrote.  As  far  as 
regards  that  supervision,  which,  in  a 
country  like  India,  a  Government  must 


needs  exercise,  the  charge  may  still  be 
made,  the  modern  lack  of  judgment 
consisting  in  total  indifference  to  pro¬ 
viding  adequate  means  of  communication 
between  region  and  region.  At  the  same 
time,  it  must  not  be  forgotten,  that  the 
mass  of  the  inhabitants  in  Hinclostan  feed 
on  rice,  a  kind  of  grain  which,  being  the 
cheapest,  allows  no  ad  op  cion  of  a  lower 
article  of  food  in  periods  of  scai’city. 


104 


THE  NATURE  AND  CAUSES  OF 


BOOK  1Y. 


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

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

By  the  5th  and  6th1  of  Edward  YI,  chap.  14,  it  was  enacted, 
That  whoever  should  buy  any  corn  or  grain  with  intent  to  sell  it 
again,  should  be  reputed  an  unlawful  engrosser,  and  should,  for  the 
first  fault,  suffer  two  months’  imprisonment,  and  forfeit  the  value 
of  the  com ;  for  the  second,  suffer  six  months’  imprisonment,  and 
forfeit  double  the  value ;  and  for  the  third,  be  set  in  the  pillory, 

1  The  5th  and  6th  Ed.  VI  (155 1-2)  was  a  year  of  scarcity,  though  prices  were  little 
more  than  half  those  of  1556-7. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


105 


suffer  imprisonment  during  the  king’s  pleasure,  and  forfeit  all  his 
goods  and  chattels.  The  ancient  policy  of  most  other  parts  of 
Europe  was  no  better  than  that  of  England. 

Our  ancestors  seem  to  have  imagined  that  the  people  would  buy 
their  corn  cheaper  of  the  farmer  than  of  the  corn  merchant,  who,  they 
were  afraid,  would  require,  over  and  above  the  price  which  he  paid  to 
the  farmer,  an  exorbitant  profit  to  himself.  They  endeavoured, 
therefore,  to  annihilate  his  trade  altogether.  They  even  endeavoured 
to  hinder  as  much  as  possible  any  middle  man  of  any  kind  from 
coming  in  between  the  grower  and  the  consumer ;  and  this  was  the 
meaning  of  the  many  restraints  which  they  imposed  upon  the  trade 
of  those  whom  they  called  bidders  or  carriers  of  corn,  a  trade  which 
nobody  was  allowed  to  exercise  without  a  licence  ascertaining  his 
qualifications  as  a  man  of  probity  and  fair  dealing.  The  authority  of 
three  justices  of  the  peace  was,  by  the  statute  of  Edward  VI,  neces¬ 
sary,  in  order  to  grant  this  licence.  But  even  this  restraint  was 
afterwards  thought  insufficient,  and  by  a  statute  of  Elizabeth,1  the 
privilege  of  granting  it  was  confined  to  the  quarter-sessions. 

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

The  manufacturer,  however,  though  he  had  been  allowed  to  keep 
a  shop,  and  to  sell  his  own  goods  by  retail,  could  not  have  undersold 
the  common  shopkeeper.  Whatever  part  of  his  capital  he  might 
have  placed  in  his  shop,  he  must  have  withdrawn  it  from  his 

1  5  Eliz.  cap.  xii. 


106 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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


CHAP.  Y. 


THE  WEALTH  OF  NATIONS. 


107 


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

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

It  obstructed,  not  only  that  division  in  the  employment  of  stock 


108 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

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

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

An  intercourse  of  the  same  kind  universally  established  between 
the  farmers  and  the  corn  merchants  would  be  attended  with  effects 
equally  beneficial  to  the  farmers.  They  would  be  enabled  to  keep 
their  whole  capitals,  and  even  more  than  their  whole  capitals, 
constantly  employed  in  cultivation.  In  case  of  any  of  those 


CHAP.  y. 


THE  WEALTH  OF  NATIONS. 


109 


accidents,  to  which  no  trade  is  more  liable  than  theirs,  they  would 
find  in  their  ordinary  customer,  the  wealthy  corn  merchant,  a  person 
who  had  both  an  interest  to  support  them  and  the  ability  to  do  it, 
and  they  would  not,  as  at  present,  be  entirely  dependent  upon  the 
forbearance  of  their  landlord,  or  the  mercy  of  his  steward.  Were 
it  possible,  as  perhaps  it  is  not,  to  establish  this  intercourse  uni¬ 
versally,  and  all  at  once,  were  it  possible  to  turn  all  at  once  the 
whole  farming  stock  of  the  kingdom  to  its  proper  business,  the 
cultivation  of  land,  withdrawing  it  from  every  other  employment 
into  which  any  part  of  it  may  be  at  present  diverted,  and  were  it 
possible,  in  order  to  support  and  assist  upon  occasion  the  operations 
of  this  great  stock,  to  provide  all  at  once  another  stock  almost 
equally  great,  it  is  not  perhaps  very  easy  to  imagine  how  great, 
how  extensive,  and  how  sudden  would  be  the  improvement  which 
this  change  of  circumstances  would  alone  produce  upon  the  whole 
face  of  the  country. 

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

The  rigour  of  this  law  was  afterwards  softened  by  several  sub¬ 
sequent  statutes,  which  successively  permitted  the  engrossing  of  corn 
when  the  price  of  wheat  should  not  exceed  twenty,  twenty-four, 
thirty-two,  and  forty  shillings  the  quarter.  At' last,  by  the  15th  of 
Charles  II,  c.  7,  the  engrossing  or  buying  of  corn  in  order  to  sell 
it  again,  as  long  as  the  price  of  wheat  did  not  exceed  forty-eight 
shillings  the  quarter,  and  that  of  other  grain  in  proportion,  was 
declared  lawful  to  all  persons  not  being  forestallers,  that  is,  not 
selling  again  in  the  same  market  within  three  months.  All  the 
freedom  which  the  trade  of  the  inland  corn  dealer  has  ever  yet  en¬ 
joyed,  was  bestowed  upon  it  by  this  statute.  The  statute  of  the  12th 
of  the  present  king,  which  repeals  almost  all  the  other  ancient  laws 
against  engrossers  and  forestallers,  does  not  repeal  the  restrictions 
of  this  particular  statute,  which  therefore  still  continue  in  force. 

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


110 


THE  NATURE  AND  CAUSES  OF 


BOOK  iv. 


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

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


CHAP.  y. 


THE  WEALTH  OF  NATIONS. 


Ill 


knowledge,  or  the  same  abilities  to  do  it  so  exactly  as  he,  this  most 
important  operation  of  commerce  ought  to  be  trusted  entirely  to 
him ;  or,  in  other  words,  the  corn  trade,  so  far  at  least  as  concerns 
the  supply  of  the  home  market,  ought  to  be  left  perfectly  free. 

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

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

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

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

I  have  no  great  faith  in  political  arithmetic,  and  I  mean  not  to 
warrant  the  exactness  of  either  of  these  computations.  I  mention 


112 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


them  only  in  order  to  show  of  how  much  less  consequence,  in  the 
opinion  of  the  most  judicious  and  experienced  persons,  the  foreign 
trade  of  corn  is  than  the  home  trade.  The  great  cheapness  of  corn 
in  the  years  immediately  preceding  the  establishment  of  the  bounty 
may,  perhaps  with  reason,  be  ascribed  in  some  measure  to  the 
operation  of  this  statute  of  Charles  II,  which  had  been  enacted 
about  five-and-twenty  years  before,  and  which  had  therefore  full 
time  to  produce  its  effect. 

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

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


CHAP.  Y. 


THE  WEALTH  OF  NATIONS. 


113 


greatest  and  most  important  market  for  corn,  and  thereby  to  en¬ 
courage,  instead  of  discouraging,  its  growth. 

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

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

These  restraints  upon  importation,  though  prior  to  the  establish¬ 
ment  of  the  bounty,  were  dictated  by  the  same  spirit,  by  the  same 
principles,  which  afterwards  enacted  that  regulation.  How  hurtful 
soever  in  themselves,  these  or  some  other  restraints  upon  importation 
became  necessary  in  consequence  of  that  regulation.  If,  when 


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

Grain,  Duties.  Duties.  Duties. 

Beans  to  28s.  per  qr,  19s.  10 d.  after  till  40s.  -  165.  8d.  then  i2d. 

Barleyto  28s.  „  19 s.  10 d.  „  32 s.  -  1 6s.  o d.  „  12c?. 

Malt  is  prohibited  by  the  annual  Malt-tax  Bill. 

Oats  to  1 6s.  per  qr.  5 s.  10 d.  after  9 \d. 

Pease  „  40s.  „  16$.  o d.  ,,  9I d. 

Rye  „  3 6s.  „  19s.  10 d.  till  40s.  o d.  -  16*-.  8 d.  then  12c?. 

Wheat,,  44s.  „  21  s.  9 d.  „  535.  4c?.  -  175.0c?.  „  85.  till  4?. 

and  after  that  about  is.  4c?. 

Buckwheat  to  32s.  per  qr.  to  pay  16s. 

These  different  duties  were  imposed,  partly  by  the  22nd  of  Charles  II,  in  place 
of  the  Old  Subsidy,  partly  by  the  New  Subsidy,  by  the  One-third  and  Two-thirds 
Subsidy,  and  by  the  Subsidy  1747. 

VOL.  II. 


I 


114 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


wheat  was  either  below  forty-eight  shillings  the  quarter,  or  not 
much  above  it,  foreign  corn  could  have  been  imported  either  duty 
free,  or  upon  paying  only  a  small  duty,  it  might  have  been  exported 
again,  with  the  benefit  of  the  bounty,  to  the  great  loss  of  the  public 
revenue,  and  to  the  entire  perversion  of  the  institution,  of  which 
the  object  was  to  extend  the  market  for  the  home  growth,  not  that 
for  the  growth  of  foreign  countries. 

III.  The  trade  of  the  merchant  exporter  of  corn  for  foreign 
consumption,  certainly  does  not  contribute  directly  to  the  plentiful 
supply  of  the  home  market.  It  does  so,  however,  indirectly.  From 
whatever  source  this  supply  may  be  usually  drawn,  whether  from 
home  growth  or  from  foreign  importation,  unless  more  corn  is  either 
usually  grown,  or  usually  imported  into  the  country,  than  what  is 
usually  consumed  in  it,  the  supply  of  the  home  market  can  never 
be  very  plentiful.  But,  unless  the  surplus  can,  in  all  ordinary  cases, 
be  exported,  the  growers  will  be  careful  never  to  grow  more,  and 
the  importers  never  to  import  more,  than  what  the  bare  consump¬ 
tion  of  the  home  market  requires.  That  market  will  very  seldom 
be  overstocked  ;  but  it  will  generally  be  understocked,  the  people, 
whose  business  it  is  to  supply  it,  being  generally  afraid  lest  their 
goods  should  be  left  upon  their  hands.  The  prohibition  of  exporta¬ 
tion  limits  the  improvement  and  cultivation  of  the  country  to  what 
the  supply  of  its  own  inhabitants  requires.  The  freedom  of  ex¬ 
portation  enables  it  to  extend  cultivation  for  the  supply  of  foreign 
nations.1 

By  the  12th  of  Charles  II,  c.  4,  the  exportation  of  corn  was 
permitted  whenever  the  price  of  wheat  did  not  exceed  forty  shillings 
the  quarter,  and  that  of  other  grain  in  proportion.  By  the  15th 
of  the  same  prince,  this  liberty  was  extended  till  the  price  of  wheat 
exceeded  forty-eight  shillings  the  quarter;  and  by  the  22nd, 
to  all  higher  prices.  A  poundage,  indeed,  was  to  be  paid  to  the 
king  upon  such  exportation.  But  all  grain  was  rated  so  low  in 


1  And  also  by  implication,  to  render 
the  home  market  more  steady.  If,  as 
is  suggested  ia  the  text,  freedom  of  ex¬ 
portation  tends  to  stimulate  the  produc¬ 
tion  of  corn,  and  if  also  the  home  market 
is  the  best  as  well  as  the  nearest,  the 
exportation  of  corn  would  be  stopped  in 
times  of  scarcity,  and  the  scarcity  itself 


would  be  lessened  by  the  fact  that  the 
area  from  which  the  home  growth  is 
produced  is  wider.  In  our  day,  when 
the  exportation  of  home-grown  corn  has 
altogether  ceased,  the  abolition  of  any 
tax  on  foreign  corn  operates  just  as  the 
removal  of  any  hindrance  on  exportation 
did  in  Smith’s  time. 


CHAP.  y. 


THE  WEALTH  OF  NATIONS. 


115 


the  book  of  rates,  that  this  poundage  amounted  only  upon  wheat  to 
a  shilling,  upon  oats  to  fourpence,  and  upon  all  other  grain  to  six¬ 
pence  the  quarter.  By  the  1st  of  William  and  Mary,  the  Act 
which  established  the  bounty,  this  small  duty  was  virtually  taken 
off  whenever  the  price  of  wheat  did  not  exceed  forty-eight  shillings 
the  quarter ;  and  by  the  nth  and  12th  of  William  III,  c.  20,  it  was 
expressly  taken  off  at  all  higher  prices. 

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

Were  all  nations  to  follow  the  liberal  system  of  free  exportation 
and  free  importation,  the  different  states  into  which  a  great  conti¬ 
nent  was  divided  would  so  far  resemble  the  different  provinces  of  a 


116 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


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

7  O  J 

ought  to  be  exercised  only,  which  can  be  pardoned  only  in  cases  of 
the  most  urgent  necessity.  The  price  at  which  the  exportation  of 
corn  is  prohibited,  if  it  is  ever  to  be  prohibited,  ought  always  to  be 
a  very  high  price. 

The  laws  concerning  corn  may  everywhere  be  compared  to  the 
laws  concerning  religion.  The  people  feel  themselves  so  much 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


117 


interested  in  wliat  relates  either  to  their  subsistence  in  this  life,  or 
to  their  happiness  in  a  life  to  come,  that  Government  must  yield 
to  their  prejudices,  and,  in  order  to  preserve  the  public  tranquillity, 
establish  that  system  which  they  approve  of.  It  is  upon  this 
account,  perhaps,  that  we  so  seldom  find  a  reasonable  sj^stem  estab¬ 
lished  with  regard  to  either  of  those  two  capital  objects. 

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

The  carrying  trade  was  in  effect  prohibited  in  Great  Britain, 
upon  all  ordinary  occasions,  by  the  high  duties  upon  the  importation 
of  foreign  corn,  of  the  greater  part  of  which  there  was  no  drawback; 
and  upon  extraordinary  occasions,  when  a  scarcity  made  it  necessary 
to  suspend  those  duties  by  temporary  statutes,  exportation  was 
always  prohibited.  By  this  system  of  laws,  therefore,  the  carrying 
trade  was  in  effect  prohibited  upon  all  occasions.1 

That  system  of  laws,  therefore,  which  is  connected  with  the 
establishment  of  the  bounty,  seems  to  deserve  no  part  of  the  praise 
which  has  been  bestowed  upon  it.  The  improvement  and  pros¬ 
perity  of  Great  Britain,  which  has  been  so  often  ascribed  to  those 
laws,  may  very  easily  be  accounted  for  by  other  causes.  That  secu¬ 
rity  which  the  laws  in  Great  Britain  give  to  every  man,  that  he 


1  Even  a  small  duty  on  corn,  if  it  be 
not  drawn  back  on  exportation,  is  suf¬ 
ficient  to  prevent  a  country  from  being 
the  entrepot  of  the  corn  trade.  The 
shilling  duty  retained  by  Sir  Robert  Peel 
on  foreign  corn,  after  the  time  that  the 
repeal  of  the  corn  laws  was  fully  effected, 
was  sufficient  to  prevent  this  country  from 


exporting  any  notable  amount  of  corn. 
This  duty  was  repealed  in  1869,  and 
since  that  period  the  imports  of  corn 
have  steadily  increased.  The  quantity 
exported  is  generally  small,  but  of  high 
quality,  being  it  is  said  almost  always 
seed  corn. 


118 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


shall  enjoy  the  fruits  of  his  own  labour,  is  alone  sufficient  to  make 
any  country  flourish,  notwithstanding  these  and  twenty  other  absurd 
regulations  of  commerce;  and  this  security  was  perfected  by  the 
revolution,  much  about  the  same  time  that  the  bounty  was  estab¬ 
lished.  The  natural  effort  of  every  individual  to  better  his  own 
condition,  when  suffered  to  exert  itself  with  freedom  and  security, 
is  so  powerful  a  principle,  that  it  is  alone,  and  without  any  assist¬ 
ance,  not  only  capable  of  carrying  on  the  society  to  wealth  and 
prosperity,  but  of  surmounting  a  hundred  impertinent  obstructions 
with  which  the  folly  of  human  laws  too  often  encumbers  its  opera¬ 
tions  ;  though  the  effect  of  these  obstructions  is  always  more  or  less 
either  to  encroach  upon  its  freedom,  or  to  diminish  its  security.  In 
Great  Britain,  industry  is  perfectly  secure ;  and  though  it  is  far 
from  being  perfectly  free,  it  is  as  free  or  freer  than  in  any  other 
part  of  Europe. 

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

Though  the  system  of  laws  which  is  connected  with  the  bounty 
has  exactly  the  same  tendency  with  the  police  of  Spain  and  Por¬ 
tugal,  to  lower  somewhat  the  value  of  the  precious  metals  in  the 
country  where  it  takes  place,  yet  Great  Britain  is  certainly  one  of 
the  richest  countries  in  Europe,  while  Spain  and  Portugal  are  per¬ 
haps  among  the  most  beggarly.  This  difference  of  situation,  how¬ 
ever,  may  easily  be  accounted  for  from  two  different  causes.  First, 
the  tax  in  Spain,  the  prohibition  in  Portugal  of  exporting  gold  and 
silver,  and  the  vigilant  police  which  watches  over  the  execution  of 
those  laws,  must,  in  two  very  poor  countries,  which  between  them 
import  annually  upwards  of  six  millions  sterling,  operate,  not  only 
more  directly,  but  much  more  forcibly  in  reducing  the  value  of 
those  metals  there,  than  the  corn  laws  can  do  in  Great  Britain. 
And,  secondly,  this  bad  policy  is  not  in  those  countries  counter¬ 
balanced  by  the  general  liberty  and  security  of  the  people.  In¬ 
dustry  is  there  neither  free  nor  secure,  and  the  civil  and  ecclesiastical 
Governments  of  both  Spain  and  Portugal  are  such  as  would  alone 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


119 


be  sufficient  to  perpetuate  their  present  state  of  poverty,  even  though 
their  regulations  of  commerce  were  as  wise  as  the  greater  part  of 
them  are  absurd  and  foolish. 

The  13th  of  the  present  king  [Geo.  III.],  c.  43,  seems  to  have 
established  a  new  system  with  regard  to  the  corn  laws,  in  many 
respects  better  than  the  ancient  one,  but  in  one  or  two  respects 
perhaps  not  quite  so  good. 

By  this  statute  the  high  duties  upon  importation  for  home  con¬ 
sumption  are  taken  off  so  soon  as  the  price  of  middling  wheat  rises 
to  forty-eight  shillings  the  quarter ;  that  of  middling  rye,  pease,  or 
beans,  to  thirty-two  shillings ;  that  of  barley  to  twenty-four  shil¬ 
lings,  and  that  of  oats  to  sixteen  shillings ;  and  instead  of  them 
a  small  duty  is  imposed  of  only  sixpence  upon  the  quarter  of  wheat, 
and  upon  that  of  other  grain  in  proportion.  With  regard  to  all 
these  different  sorts  of  grain,  but  particularly  with  regard  to  wheat, 
the  home  market  is  thus  opened  to  foreign  supplies  at  prices  con¬ 
siderably  lower  than  before. 

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

The  same  statute  permits,  at  the  lowest  prices,  the  importation 
of  corn,  in  order  to  be  exported  again,  duty  free,  provided  it  is 
in  the  meantime  lodged  in  a  warehouse  under  the  joint  locks 
of  the  king  and  the  importer.  This  liberty,  indeed,  extends  to 
no  more  than  twenty-five  of  the  different  ports  of  Great  Britain. 
They  are,  however,  the  principal  ones,  and  there  may  not,  perhaps, 


120 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


be  warehouses  proper  for  this  purpose  in  the  greater  part  of  the 
others. 

So  far,  this  law  seems  evidently  an  improvement  upon  the  ancient 
system. 

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

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

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


APPENDIX. 

The  two  following  Accounts  are  subjoined  in  order  to  illustrate 
and  confirm  what  is  said  in  the  Fifth  Chapter  of  the  Fourth 
Book,  concerning  the  Tonnage  Bounty  to  the  Wliite  Herring 
Fishery.  The  reader,  I  believe,  may  depend  upon  the  accuracy  of 
both  accounts. 


CHAP.  V. 


THE  WEALTH  OF  NATIONS. 


121 


An  Account  of  Busses  fitted  out  in  Scotland  for  Eleven  Years,  with  the  Number  of 
Empty  Barrels  carried  out,  and  the  Number  of  Barrels  of  Herrings  caught ;  also 
the  Bounty  at  a  Medium  on  each  Barrel  of  Seasteeks,  and  on  each  Barrel  when 
fully  pached. 


Years. 

Number 
of  Busses. 

Empty  Barrels 
carried  out. 

Barrels  of  Her¬ 
rings  caught. 

Bounty  paid  on 
the  Busses. 

1771 

29 

5i948 

2,832 

£  s.  ,  d. 

2,085  0  0 

1772 

168 

4i»316 

22,237 

11,055  7  6 

1773 

190 

42,333 

42,055 

12,510  8  6 

1774 

248 

59*303 

56,365 

16,952  2  6 

1775 

275 

69,144 

52,879 

I9*3I5  i5  0 

1776 

294 

76,329 

51,863 

21,290  7  6 

1777 

240 

62,679 

43»3I3 

17,592  2  6 

1778 

220 

56,390 

40,958 

16,316  2  6 

1779 

206 

55,I94 

29,367 

15,287  0  0 

1780 

181 

48,315 

19,885 

13,445  12  6 

1781 

135 

33,992 

1 6,593 

9,613  12  6 

Total  . 

2,186 

550,943 

378,347 

155,463  11  0 

Seasteeks  .  .  378,347 


One-third  deducted  126,115! 

Barrels  full  packed  252,231! 

And  if  the  herrings  are  exported,  there  is  besides  a  premium  of  .  .028 

So  that  the  bounty  paid  by  Government  in  money  for  each  barrel  is  .  £0  14  nf 

But  if  to  this,  the  duty  of  the  salt  usually  taken  credit  for  as  expended 
in  curing  each  barrel,  which  at  a  medium  is  of  foreign,  one  bushel  and 
one-fourth  of  a  bushel,  at  10s.  a  bushel,  be  added,  viz.  .  .  .  .0126 

The  bounty  on  each  barrel  would  amount  to . £175! 

If  the  herrings  are  cured  with  British  salt,  it  will  stand  thus,  viz. : — 

Bounty  as  before . £0  14  nf 

— but  if  to  this  bounty  the  duty  on  two  bushels  of  Scotch  salt  at  is.  6 cl. 
per  bushel,  supposed  to  be  the  quantity  at  a  medium  used  in  curing  each 
barrel,  is  added,  to  wit . 030 

The  bounty  on  each  barrel  will  amount  to  .  .  .  .  .£01711! 

And  when  buss  herrings  are  entered  for  home  consumption  in  Scotland,  and  pay 
the  shilling  a  barrel  of  duty,  the  bounty  stands  thus,  to  wit,  as  before  .  £0  12  3! 

From  which  the  is.  a  barrel  is  to  be  deducted  .  .  .  .  .010 


o  11  3! 

But  to  that  there  is  to  be  added  again,  the  duty  of  the  foreign  salt  used 
in  curing  a  barrel  of  herrings,  viz.  .  .  .  .  .  .  .  .0126 


Bounty  at  a  medium  for  each  barrel  of  sea- 
stseks  .  .  .  .  .  .£082! 

But  a  barrel  of  seasteeks  being  only  reckoned 
two-thirds  of  a  barrel  fully  packed,  one-third  is  de¬ 
ducted,  which  brings  the  bounty  to  .£012  3! 


So  that  the  premium  allowed  for  each  barrel  of  herrings  entered  for 
home  consumption  is . £139! 


122 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


If  the  herrings  are  cured  with  British  salt,  it  will  stand  as  follows,  viz. : — 

Bounty  on  each  barrel  brought  in  by  the  busses,  as  above  .  .  .  £o  12  3f 

From  which  deduct  the  is.  a  barrel  paid  at  the  time  they  are  entered 
for  home  consumption  .  .  .  .  .  .  .  .  .  .010 

£0  11  3f 

But  if  to  the  bounty  the  duty  on  two  bushels  of  Scotch  salt  at  is.  6d. 
per  bushel,  supposed  to  be  the  quantity  at  a  medium  used  in  curing  each 


barrel,  is  added,  to  wit  .  .  .  .  .  .  .  .  .  .030 

The  premium  for  each  barrel  entered  for  home  consumption  will  be  .  £0  14  3| 


Though  the  loss  of  duties  upon  herrings  exported  cannot,  per¬ 
haps,  properly  be  considered  as  bounty,  that  upon  herrings  entered 
for  home  consumption  certainly  may. 

An  Account  of  the  Quantity  of  Foreign  Salt  imported  into  Scotland,  and  of  Scotch  Salt 
delivered  duty  free  from  the  Works  there  for  the  Fishery,  from  the  5th  of  April, 
1771,  to  the  5 th  of  April,  1782,  with  a  Medium  of  both  for  one  year. 


PERIOD. 

Foreign  Salt 
imported. 

Scotch  Salt 
delivered  from 
the  Works. 

From  the  5th  of  April,  1771,  to  ) 
the  5th  of  April,  1782  .  .  ) 

Bushels. 

936,974 

Bushels. 

168,226 

Medium  for  one  year 

85,i79tt 

i5>293tt 

It  is  to  be  observed  that  the  bushel  of  foreign  salt  weighs  84  lb.,  that  of  British  salt 
56  lb.  only. 


CHAPTER  YI. 


OF  TREATIES  OF  COMMERCE. 


WHEN  a  nation  binds  itself  by  treaty  either  to  permit  the 
entry  of  certain  goods  from  one  foreign  country  which  it 
prohibits  from  all  others,  or  to  exempt  the  goods  of  one  country 
from  duties  to  which  it  subjects  those  of  all  others,  the  country,  or  at 
least  the  merchants  and  manufacturers  of  the  country,  whose  com¬ 
merce  is  so  favoured,  must  necessarily  derive  great  advantage  from 
the  treaty.  Those  merchants  and  manufacturers  enjoy  a  sort  of 
monopoly  in  the  country  which  is  so  indulgent  to  them.  That 
country  becomes  a  market  both  more  extensive  and  more  advan- 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


123 


tageous  for  their  goods :  more  extensive,  because  the  goods  of  other 
nations  being  either  excluded  or  subjected  to  heavier  duties,  it  takes 
off  a  greater  quantity  of  theirs :  more  advantageous,  because  the 
merchants  of  the  favoured  country,  enjoying  a  sort  of  monopoly 
there,  will  often  sell  their  goods  for  a  better  price  than  if  exposed  to 
the  free  competition  of  all  other  nations.1 

Such  treaties,  however,  though  they  may  be  advantageous  to  the 
merchants  and  manufacturers  of  the  favoured,  are  necessarily  dis¬ 
advantageous  to  those  of  the  favouring  country.  A  monopoly  is  thus 
granted  against  them  to  a  foreign  nation  ;  and  they  must  frequently 
buy  the  foreign  goods  they  have  occasion  for,  dearer  than  if  the 
free  competition  of  other  nations  was  admitted.  That  part  of  its 
own  produce  with  which  such  a  nation  purchases  foreign  goods, 
must  consequently  be  sold  cheaper,  because  when  two  things  are 
exchanged  for  one  another,  the  cheapness  of  the  one  is  a  necessary 
consequence,  or  rather  is  the  same  thing  with  the  dearness  of  the 
other.  The  exchangeable  value  of  its  annual  produce,  therefore,  is 
likely  to  be  diminished  by  every  such  treaty.  This  diminution, 
however,  can  scarce  amount  to  any  positive  loss,  but  only  to  a 
lessening  of  the  gain  which  it  might  otherwise  make.  Though  it 
sells  its  goods  cheaper  than  it  otherwise  might  do,  it  will  not  pro¬ 
bably  sell  them  for  less  than  they  cost ;  nor,  as  in  the  case  of 
bounties,  for  a  price  which  will  not  replace  the  capital  employed  in 
bringing  them  to  market,  together  with  the  ordinary  profits  of 
stock.  The  trade  could  not  go  on  long  if  it  did.  Even  the  favour¬ 
ing  country,  therefore,  may  still  gain  by  the  trade,  though  less  than 
if  there  was  a  free  competition. 

Some  treaties  of  commerce,  however,  have  been  supposed  advan¬ 
tageous  upon  principles  very  different  from  these ;  and  a  commercial 
country  has  sometimes  granted  a  monopoly  of  this  kind  against 
itself  to  certain  goods  of  a  foreign  nation,  because  it  expected  that  in 
the  whole  commerce  between  them,  it  would  annually  sell  more  than 
it  would  buy,  and  that  a  balance  in  gold  and  silver  would  be 
annually  returned  to  it.  It  is  upon  this  principle  that  the  treaty  of 
commerce  between  England  and  Portugal,  concluded  in  1703  by  Mr. 
Methuen,  has  been  so  much  commended.  The  following  is  a  literal 
translation  of  that  treaty,  which  consists  of  three  articles  only: — 

"  Art.  I.  His  sacred  royal  majesty  of  Portugal  promises,  both  in 

1  See  Ricardo’s  Political  Economy,  chap.  xxv. 


124 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


his  own  name  and  that  of  his  successors,  to  admit,  for  ever  here¬ 
after,  into  Portugal,  the  woollen  cloths,  and  the  rest  of  the  woollen 
manufactures  of  the  British,  as  was  accustomed,  till  they  were  pro¬ 
hibited  by  the  law  ;  nevertheless  upon  this  condition  : 

“  Art.  II.  That  is  to  say,  that  her  sacred  royal  majesty  of  Great 
Britain  shall,  in  her  own  name  and  that  of  her  successors,  be  obliged, 
for  ever  hereafter,  to  admit  the  wines  of  the  growth  of  Portugal  into 
Britain :  so  that  at  no  time,  whether  there  shall  be  peace  or  war 
between  the  kingdoms  of  Britain  and  France,  anything  more  shall 
be  demanded  for  these  wines  by  the  name  of  custom  or  duty,  or  by 
whatsoever  other  title,  directly  or  indirectly,  whether  they  shall  be 
imported  into  Great  Britain  in  pipes  or  hogsheads,  or  other  casks, 
than  what  shall  be  demanded  for  the  like  quantity  or  measure  of 
French  wine,  deducting  or  abating  a  third  part  of  the  custom  or 
duty.  But  if  at  any  time  this  deduction  or  abatement  of  customs, 
which  is  to  be  made  as  aforesaid,  shall  in  any  manner  be  attempted 
or  prejudiced,  it  shall  be  just  and  lawful  for  his  sacred  royal  majesty 
of  Portugal  again  to  prohibit  the  woollen  cloths,  and  the  rest  of  the 
British  woollen  manufactures. 

“  Art.  III.  The  most  excellent  lords  the  plenipotentiaries  promise 
and  take  upon  themselves,  that  their  above-named  masters  shall 
ratify  this  treaty;  and  within  the  space  of  two  months  the  ratifica¬ 
tions  shall  be  exchanged.” 

By  this  treaty  the  Crown  of  Portugal  becomes  bound  to  admit  the 
English  woollens  upon  the  same  footing  as  before  the  prohibition, 
that  is,  not  to  raise  the  duties  which  had  been  paid  before  that  time. 
But  it  does  not  become  bound  to  admit  them  upon  any  better  terms 
than  those  of  any  other  nation,  of  France  or  Holland,  for  example. 
The  Crown  of  Great  Britain,  on  the  contrary,  becomes  bound  to 
admit  the  wines  of  Portugal,  upon  paying  only  two-thirds  of  the 
duty  which  is  paid  for  those  of  France,  the  wines  most  likely  to 
come  into  competition  with  them.  So  far  this  treaty,  therefore,  is 
evidently  advantageous  to  Portugal,  and  disadvantageous  to  Great 
Britain. 

It  has  been  celebrated,  however,  as  a  masterpiece  of  the  commer¬ 
cial  policy  of  England.  Portugal  receives  annually  from  the  Brazils 
a  greater  quantity  of  gold  than  can  be  employed  in  its  domestic 
commerce,  whether  in  the  shape  of  coin  or  of  plate.  The  surplus  is 
too  valuable  to  be  allowed  to  lie  idle  and  locked  up  in  coffers,  and  as 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


125 


it  can  find  no  advantageous  market  at  home,  it  must,  notwith¬ 
standing  any  prohibition,  be  sent  abroad,  and  exchanged  for  some¬ 
thing  for  which  there  is  a  more  advantageous  market  at  home.  A 
large  share  of  it  comes  annually  to  England,  in  return  either  for 
English  goods,  or  for  those  of  other  European  nations  that  receive 
their  returns  through  England.  Mr.  Baretti 1  was  informed  that 
the  weekly  packet-boat  from  Lisbon  brings,  one  week  with  another, 
more  than  fifty  thousand  pounds  in  gold  to  England.  The  sum  had 
probably  been  exaggerated.  It  would  amount  to  more  than  two 
millions  six  hundred  thousand  pounds  a  year,  which  is  more  than 
the  Brazils  are  supposed  to  afford. 

Our  merchants  were  some  years  ago  out  of  humour  with  the 
Crown  of  Portugal.  Some  privileges  which  had  been  granted  them, 
not  by  treaty,  but  by  the  free  grace  of  that  Crown,  at  the  solicitation, 
indeed,  it  is  probable,  and  in  return  for  much  greater  favours,  defence, 
and  protection  from  the  Crown  of  Great  Britain,  had  been  either 
infringed  or  revoked.  The  people,  therefore,  usually  most  interested 
in  celebrating  the  Portugal  trade,  were  then  rather  disposed  to 
represent  it  as  less  advantageous  than  it  had  commonly  been 
imagined.  The  far  greater  part,  almost  the  whole,  they  pretended, 
of  this  annual  importation  of  gold,  was  not  on  account  of  Great 
Britain,  but  of  other  European  nations  ;  the  fruits  and  wines  of 
Portugal  annually  imported  into  Great  Britain  nearly  compensating 
the  value  of  the  British  goods  sent  thither. 

Let  us  suppose,  however,  that  the  whole  was  on  account  of  Great 
Britain,  and  that  it  amounted  to  a  still  greater  sum  than  Mr.  Baretti 
seems  to  imagine  :  this  trade  would  not,  upon  that  account,  be  more 
advantageous  than  any  other  in  which,  for  the  same  value  sent  out, 
we  received  an  equal  value  of  consumable  goods  in  return. 

It  is  but  a  very  small  part  of  this  importation  which,  it  can  be 
supposed,  is  employed  as  an  annual  addition  either  to  the  plate  or 
to  the  coin  of  the  kingdom.  The  rest  must  all  be  sent  abroad  and 
exchanged  for  consumable  goods  of  some  kind  or  other.  But  if 
those  consumable  goods  were  purchased  directly  with  the  produce 
of  English  industry,  it  would  be  more  for  the  advantage  of  England, 
than  first  to  purchase  with  that  produce  the  gold  of  Portugal,  and 
afterwards  to  purchase  with  that  gold  those  consumable  goods.  A 
direct  foreign  trade  of  consumption  is  always  more  advantageous 

1  Travels,  vol.  i.  Letter  xvi. 


126 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


than  a  round-about  one ;  and  to  bring  the  same  value  of  foreign 
goods  to  the  home  market,  requires  a  much  smaller  capital  in  the 
one  way  than  in  the  other.  If  a  smaller  share  of  its  industry,  there¬ 
fore,  had  been  employed  in  producing  goods  fit  for  the  Portugal 
market,  and  a  greater  in  producing  those  fit  for  the  other  markets, 
where  those  consumable  goods  for  which  there  is  a  demand  in  Great 
Britain  are  to  be  had,  it  would  have  been  more  for  the  advantage  of 
England.  To  procure  both  the  gold,  which  it  wants  for  its  own 
use,  and  the  consumable  goods,  would,  in  this  way,  employ  a  much 
smaller  capital  than  at  present.  There  would  be  a  spare  capital, 
therefore,  to  be  employed  for  other  purposes,  in  exciting  an  ad¬ 
ditional  quantity  of  industry,  and  in  raising  a  greater  annual 
produce. 

Though  Britain  were  entirely  excluded  from  the  Portugal  trade, 
it  could  find  very  little  difficulty  in  procuring  all  the  annual  sup¬ 
plies  of  gold  which  it  wants,  either  for  the  purposes  of  plate,  or  of 
coin,  or  of  foreign  trade.  Gold,  like  every  other  commodity,  is 
always  somewhere  or  another  to  be  got  for  its  value  by  those  who 
have  that  value  to  give  for  it.  The  annual  surplus  of  gold  in  Por¬ 
tugal,  besides,  would  still  be  sent  abroad,  and  though  not  carried 
away  by  Great  Britain,  would  be  carried  away  by  some  other 
nation,  which  would  be  glad  to  sell  it  again  for  its  price,  in  the 
same  manner  as  Great  Britain  does  at  present.  In  buying  gold  of 
Portugal,  indeed,  we  buy  it  at  the  first  hand ;  whereas,  in  buying 
it  of  any  other  nation,  except  Spain,  we  should  buy  it  at  the 
second,  and  might  pay  somewhat  dearer.  This  difference,  however, 
would  surely  be  too  insignificant  to  deserve  the  public  attention. 

Almost  all  our  gold,  it  is  said,  comes  from  Portugal.  With  other 
nations  the  balance  of  trade  is  either  against  us,  or  not  much  in  our 
favour.  But  we  should  remember,  that  the  more  gold  we  import 
from  one  country,  the  less  we  must  necessarily  import  from  all 
others.  The  effectual  demand  for  gold,  like  that  for  every  other 
commodity,  is  in  every  country  limited  to  a  certain  quantity.  If 
nine-tenths  of  this  quantity  are  imported  from  one  country,  there 
remains  a  tenth  only  to  be  imported  from  all  others.  The  more 
gold  besides  that  is  annually  imported  from  some  particular  coun¬ 
tries,  over  and  above  what  is  requisite  for  plate  and  for  coin,  the 
more  must  necessarily  be  exported  to  some  others ;  and  the  more 
that  most  insignificant  object  of  modern  policy,  the  balance  of  trade, 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


127 


appears  to  be  in  our  favour  with  some  particular  countries,  the  more 
it  must  necessarily  appear  to  be  against  us  with  many  others. 

It  was  upon  this  silly  notion,  however,  that  England  could  not 
subsist  without  the  Portugal  trade,  that,  towards  the  end  of  the  late 
war,  France  and  Spain,  without  pretending  either  offence  or  provo¬ 
cation,  required  the  King  of  Portugal  to  exclude  all  British  ships 
from  his  ports,  and,  for  the  security  of  this  exclusion,  to  receive  into 
them  French  or  Spanish  garrisons.  Had  the  King  of  Portugal  sub¬ 
mitted  to  those  ignominious  terms  which  his  brother-in-law  the 
King  of  Spain  proposed  to  him,  Britain  would  have  been  freed  from 
a  much  greater  inconveniency  than  the  loss  of  the  Portugal  trade, 
the  burden  of  supporting  a  very  weak  ally,  so  unprovided  of  every¬ 
thing  for  his  own  defence,  that  the  whole  power  of  England,  had  it 
been  directed  to  that  single  purpose,  could  scarce,  perhaps,  have  de¬ 
fended  him  for  another  campaign.  The  loss  of  the  Portugal  trade 
would,  no  doubt,  have  occasioned  a  considerable  embarrassment  to 
the  merchants  at  that  time  engaged  in  it,  who  might  not,  perhaps, 
have  found  out,  for  a  year  or  two,  any  other  equally  advantageous 
method  of  employing  their  capitals ;  and  in  this  would  probably 
have  consisted  all  the  inconveniency  which  England  could  have 
suffered  from  this  notable  piece  of  commercial  policy.1 

The  great  annual  importation  of  gold  and  silver  is  neither  for 
the  purpose  of  plate  nor  of  coin,  but  of  foreign  trade.  A  round¬ 
about  foreign  trade  of  consumption  can  be  carried  on  more  advanta¬ 
geously  by  means  of  these  metals  than  of  almost  any  other  goods. 
As  they  are  the  universal  instruments  of  commerce,  they  are  more 
readily  received  in  return  for  all  commodities  than  any  other  goods; 
and  on  account  of  their  small  bulk  and  great  value,  it  costs  less  to 
transport  them  backward  and  forward  from  one  place  to  another 
than  almost  any  other  sort  of  merchandise,  and  they  lose  less  of 


1  The  treaties  of  commerce,  negotiated 
in  the  seventeenth,  eighteenth,  and  part 
of  the  nineteenth  centuries,  were  founded 
on  diplomatic  or  political,  and  not  on  eco¬ 
nomical  grounds.  That  with  Portugal  was 
notably  intended  to  narrow  the  trade  with 
France,  and  to  secure  an  ally  in  Por¬ 
tugal.  It  may  also  have  indirectly  pur¬ 
posed  to  increase  the  stock  of  the  precious 
metals. 

Modern  treaties  of  commerce,  such  as 
that  of  Mr.  Cobden  with  France,  are  also 
diplomatic ;  but  they  have  a  totally  dif¬ 


ferent  reason  from  that  of  the  earlier 
diplomacy.  They  are  intended  to  further 
the  intercourse  of  nations,  and  the  diplo¬ 
macy  by  which  they  are  accompanied  has 
no  political  ends.  They  assist  foreign 
trade,  because  the  contracting  parties 
agree  to  such  an  abolition  of  protection 
rr  restriction  as  will  render  trade  possi¬ 
ble,  and  they  can  be  carried  out  by  such 
a  country  as  this,  because,  as  long  as  Eng¬ 
land  raises  a  large  revenue  by  customs, 
she  can  always  negotiate  on  the  basis  of  the 
alterations  which  she  makes  in  her  tariff. 


128 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


their  value  by  being  so  transported.  Of  all  the  commodities,  there¬ 
fore,  which  are  bought  in  one  foreign  country,  for  no  other  purpose 
but  to  be  sold  or  exchanged  again  for  some  other  goods  in  another, 
there  are  none  so  convenient  as  gold  and  silver.  In  facilitating  all 
the  different  round-about  foreign  trades  of  consumption  which  are 
carried  on  in  Great  Britain,  consists  the  principal  advantage  of  the 
Portugal  trade ;  and  though  it  is  not  a  capital  advantage,  it  is,  no 
doubt,  a  considerable  one. 

That  any  annual  addition  which,  it  can  reasonably  be  supposed,  is 
made  either  to  the  plate  or  to  the  coin  of  the  kingdom,  could  require 
but  a  very  small  annual  importation  of  gold  and  silver,  seems  evident 
enough ;  and  though  we  had  no  direct  trade  with  Portugal,  this  small 
quantity  could  always,  somewhere  or  another,  be  very  easily  got. 

Though  the  goldsmiths’  trade  be  very  considerable  in  Great 
Britain,  the  far  greater  part  of  the  new  plate  which  they  annually 
sell,  is  made  from  other  old  plate  melted  down ;  so  that  the  addition 
annually  made  to  the  whole  plate  of  the  kingdom  cannot  be  very 
great,  and  could  require  but  a  very  small  annual  importation. 

It  is  the  same  case  wTith  the  coin.  Nobody  imagines,  I  believe, 
that  even  the  greater  part  of  the  annual  coinage,  amounting,  for  ten 
years  together,  before  the  late  reformation  of  the  gold  coin,  to  up¬ 
wards  of  eight  hundred  thousand  pounds  a  year  in  gold,  was  an 
annual  addition  to  the  money  before  current  in  the  kingdom.  In 
a  country  where  the  expense  of  the  coinage  is  defrayed  by  the 
Government,  the  value  of  the  coin,  even  when  it  contains  its  full 
standard  weight  of  gold  and  silver,  can  never  be  much  greater  than 
that  of  an  equal  quantity  of  those  metals  uncoined  ;  because  it  re¬ 
quires  only  the  trouble  of  going  to  the  Mint,  and  the  delay  perhaps 
of  a  few  weeks,  to  procure  for  any  quantity  of  uncoined  gold  and 
silver  an  equal  quantity  of  those  metals  in  coin.  But,  in  every 
country,  the  greater  part  of  the  current  coin  is  almost  always  more 
or  less  worn,  or  otherwise  degenerated  from  its  standard.  In  Great 
Britain  it  was,  before  the  late  reformation,  a  good  deal  so,  the  gold 
being  more  than  two  per  cent,  and  the  silver  more  than  eight  per 
cent,  below  its  standard  weight.  But  if  forty-four  guineas  and 
a  half,  containing  their  full  standard  weight,  a  pound  weight  of 
gold,  could  purchase  very  little  more  than  a  pound  weight  of  un¬ 
coined  gold,  forty-four  guineas  and  a  half  wanting  part  of  their 
weight  could  not  purchase  a  pound  weight,  and  something  was  to  be 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


129 


added  in  order  to  make  up  the  deficiency.  The  current  price  of  gold 
bullion  at  market,  therefore,  instead  of  being  the  same  with  the 
Mint  price,  or  £46  145.  6(1.,  was  then  about  £47  145.  and  sometimes 
about  £48.  When  the  greater  part  of  the  coin,  however,  was  in 
this  degenerate  condition,  forty-four  guineas  and  a  half,  fresh  from 
the  Mint,  would  purchase  no  more  goods  in  the  market  than  any 
other  ordinary  guineas,  because  when  they  came  into  the  coffers  of 
the  merchant,  being  confounded  with  other  money,  they  could  not 
afterwards  be  distinguished  without  more  trouble  than  the  difference 
was  worth.  Like  other  guineas,  they  were  worth  no  more  than 
<£46  145.  6d.  If  thrown  into  the  melting-pot,  however,  they  pro¬ 
duced,  without  any  sensible  loss,  a  pound  weight  of  standard  gold, 
which  could  be  sold  at  any  time  for  between  £47  145.  and  £48, 
either  in  gold  or  silver,  as  fit  for  all  the  purposes  of  coin  as  that 
which  had  been  melted  down.  There  was  an  evident  profit,  there¬ 
fore,  in  melting  down  new  coined  money,  and  it  was  done  so  instan¬ 
taneously,  that  no  precaution  of  Government  could  prevent  it.  The 
operations  of  the  Mint  were,  upon  this  account,  somewhat  like  the 
web  of  Penelope ;  the  work  that  was  done  in  the  day  was  undone 
in  the  night.  The  Mint  was  employed,  not  so  much  in  making 
daily  additions  to  the  coin,  as  in  replacing  the  very  best  part  of  it 
which  was  daily  melted  down. 

Were  the  private  people,  who  carry  their  gold  and  silver  to  the 
Mint,  to  pay  themselves  for  the  coinage,  it  would  add  to  the  value 
of  those  metals  in  the  same  manner  as  the  fashion  does  to  that  of 
plate.  Coined  gold  and  silver  would  be  more  valuable  than  un¬ 
coined.  The  seignorage,  if  it  wTas  not  exorbitant,  would  add  to  the 
bullion  the  whole  value  of  the  duty ;  because,  the  Government 
having  everywhere  the  exclusive  privilege  of  coining,  no  coin  can 
come  to  market  cheaper  than  they  think  proper  to  afford  it.  If  the 
duty  was  exorbitant  indeed,  that  is,  if  it  was  very  much  above  the 
real  value  of  the  labour  and  expense  requisite  for  coinage,  false 
coiners,  both  at  home  and  abroad,  might  be  encouraged,  by  the 
great  difference  between  the  value  of  bullion  and  that  of  coin,  to 
pour  in  so  great  a  quantity  of  counterfeit  money  as  might  reduce 
the  value  of  the  Government  money.  In  France,  however,  though 
the  seignorage  is  eight  per  cent.,1  no  sensible  inconveniency  of  this 
kind  is  found  to  arise  from  it.  The  dangers  to  which  a  false  coiner 

1  See  vol.  l.  p.  47. 

K 


VOL.  II. 


130 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


is  everywhere  exposed,  if  he  lives  in  the  country  of  which  he  coun¬ 
terfeits  the  coin,  and  to  which  his  agents  or  correspondents  are  ex¬ 
posed  if  he  lives  in  a  foreign  country,  are  by  far  too  great  to  be 
incurred  for  the  sake  of  a  profit  of  six  or  seven  per  cent. 

The  seignorage  in  France  raises  the  value  of  the  coin  higher  than 
in  proportion  to  the  quantity  of  pure  gold  which  it  contains.  Thus 
by  the  edict  of  January,  1 726,  the  Mint  price  of  fine  gold  of 
twent}r-four  carats  was  fixed  at  seven  hundred  and  forty  livres  nine 
sous  and  one  denier  one-eleventh,  the  mark  of  eight  Paris  ounces.* 
The  gold  coin  of  France,  making  an  allowance  for  the  remedy  of 
the  Mint,  contains  twenty-one  carats  and  three-fourths  of  fine  gold, 
and  two  carats  one-fourth  of  alloy.  The  mark  of  standard  gold, 
therefore,  is  worth  no  more  than  about  six  hundred  and  seventy-one 
livres  ten  deniers.  But  in  France  this  mark  of  standard  gold  is 
coined  into  thirty  louis-d’ors  of  twenty-four  livres  each,  or  into 
seven  hundred  and  twenty  livres.  The  coinage,  therefore,  increases 
the  value  of  a  mark  of  standard  gold  bullion  by  the  difference  be¬ 
tween  six  hundred  and  seventy-one  livres  ten  deniers,  and  seven 
hundred  and  twenty  livres ;  or  by  forty-eight  livres  nineteen  sous 
and  two  deniers. 

A  seignorage  will,  in  many  cases,  take  away  altogether,  and  will, 
in  all  cases,  diminish  the  profit  of  melting  down  the  new  coin.  This 
profit  always  arises  from  the  difference  between  the  quantity  of 
bullion  which  the  common  currency  ought  to  contain,  and  that 
which  it  actually  does  contain.  If  this  difference  is  less  than  the 
seignorage,  there  will  be  loss  instead  of  profit.  If  it  is  equal  to  the 
seignorage,  there  will  be  neither  profit  nor  loss.  If  it  is  greater  than 
the  seignorage,  there  will  indeed  be  some  profit,  but  less  than  if 
there  was  no  seignorage.  If,  before  the  late  reformation  of  the  gold 
coin,  for  example,  there  had  been  a  seignorage  of  five  per  cent,  upon 
the  coinage,  there  would  have  been  a  loss  of  three  per  cent,  upon 
the  melting  down  of  the  gold  coin.  If  the  seignorage  had  been 
two  per  cent.,  there  would  have  been  neither  profit  nor  loss.  If  the 
seignorage  had  been  one  per  cent.,  there  would  have  been  a  profit, 
but  of  one  per  cent,  only  instead  of  two  per  cent.  Wherever  money 
is  received  by  tale,  therefore,  and  not  by  weight,  a  seignorage  is  the 
most  effectual  preventative  of  the  melting  down  of  the  coin,  and, 

*  See  Dictionnaire  des  Monnoies,  tom.ii.  de  Bazinghen,  Conseiller-Commissaire  en 
article  Seigneurage,  p.  489,  par  M.  Abot  la  Cour  des  Monnoies  a  Paris. 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


131 


for  the  same  reason,  of  its  exportation.  It  is  the  best  and  heaviest 
pieces  that  are  commonly  either  melted  down  or  exported  ;  because 
it  is  upon  such  that  the  largest  profits  are  made. 

The  law  for  the  encouragement  of  the  coinage,  by  rendering  it 
duty-free,  was  first  enacted  during  the  reign  of  Charles  II  for  a 
limited  time ;  and  afterwards  continued,  by  different  prolongations, 
till  1769,  when  it  was  rendered  perpetual.  The  Bank  of  England, 
in  order  to  replenish  their  coffers  with  money,  are  frequently  obliged 
to  carry  bullion  to  the  Mint ;  and  it  was  more  for  their  interest, 
they  probably  imagined,  that  the  coinage  should  be  at  the 
expense  of  the  Government  than  at  their  own.  It  was,  probably, 
out  of  complaisance  to  this  great  company  that  the  Government 
agreed  to  render  this  law  perpetual.  Should  the  custom  of  weighing 
gold,  however,  come  to  be  disused,  as  it  is  very  likely  to  be  on 
account  of  its  inconveniency ;  should  the  gold  coin  of  England 
come  to  be  received  by  tale,  as  it  was  before  the  late  re-coinage, 
this  great  company  may,  perhaps,  find  that  they  have  upon  this,  as 
upon  some  other  occasions,  mistaken  their  own  interest  not  a  little. 

Before  the  late  re-coinage,  when  the  gold  currency  of  England 
was  two  per  cent,  below  its  standard  weight,  as  there  was  no 
seignorage,  it  was  two  per  cent,  below  the  value  of  that  quantity 
of  standard  gold  bullion  which  it  ought  to  have  contained.  When 
this  great  company,  therefore,  bought  gold  bullion  in  order  to  have 
it  coined,  they  were  obliged  to  pay  for  it  two  per  cent,  more  than  it 
was  worth  after  the  coinage.  But  if  there  had  been  a  seignorage  of 
two  per  cent,  upon  the  coinage,  the  common  gold  currency,  though 
two  per  cent,  below  its  standard  weight,  would  notwithstanding 
have  been  equal  in  value  to  the  quantity  of  standard  gold  which  it 
ought  to  have  contained ;  the  value  of  the  fashion  compensating  in 
this  case  the  diminution  of  the  weight.  They  would  indeed  have 
had  the  seignorage  to  pay,  which  being  two  per  cent.,  their  loss 
upon  the  whole  transaction  would  have  been  two  per  cent,  exactly 
the  same,  but  no  greater  than  it  actually  was. 

If  the  seignorage  had  been  five  per  cent,  and  the  gold  currency 
only  Uvo  per  cent,  below  its  standard  weight,  the  Bank  would  in 
this  case  have  gained  three  per  cent,  upon  the  price  of  the  bullion  ; 
but  as  they  would  have  had  a  seignorage  of  five  per  cent,  to  pay 
upon  the  coinage,  their  loss  upon  the  whole  transaction  would,  in 
the  same  manner,  have  been  exactly  two  per  cent. 

K  2 


132 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


If  the  seignorage  had  been  only  one  per  cent,  and  the  gold 
currency  two  per  cent,  below  its  standard  weight,  the  Bank  would 
in  this  case  have  lost  only  one  per  cent,  upon  the  price  of  the 
bullion ;  but,  as  they  would  likewise  have  had  a  seignorage  of  one 
per  cent,  to  pay,  their  loss  upon  the  whole  transaction  would  have 
been  exactly  two  per  cent,  in  the  same  manner  as  in  all  other  cases. 

If  there  was  a  reasonable  seignorage,  while  at  the  same  time  the 
coin  contained  its  full  standard  weight,  as  it  has  done  very  nearly 
since  the  late  re-coinage,  whatever  the  Bank  might  lose  by  the 
seignorage,  they  would  gain  upon  the  price  of  the  bullion ;  and  what¬ 
ever  they  might  gain  upon  the  price  of  the  bullion,  they  would  lose 
by  the  seignorage.  They  would  neither  lose  nor  gain,  therefore,  upon 
the  whole  transaction,  and  they  would  in  this,  as  in  all  the  foregoing 
cases,  be  exactly  in  the  same  situation  as  if  there  was  no  seignorage. 

When  the  tax  upon  a  commodity  is  so  moderate  as  not  to 
encourage  smuggling,  the  merchant  who  deals  in  it,  though  he 
advances,  does  not  properly  pay  the  tax,  as  he  gets  it  back  in 
the  price  of  the  commodity.  The  tax  is  finally  paid  by  the  last 
purchaser  or  consumer.  But  money  is  a  commodity  with  regard 
to  which  every  man  is  a  merchant.  Nobody  buys  it  but  in  order 
to  sell  it  again ;  and  with  regard  to  it,  there  is  in  ordinary  cases  no 
last  purchaser  or  consumer.  When  the  tax  upon  coinage,  therefore, 
is  so  moderate  as  not  to  encourage  false  coinage,  though  everybody 
advances  the  tax,  nobody  finally  pays  it;  because  everybody  gets 
it  back  in  the  advanced  value  of  the  coin. 

A  moderate  seignorage,  therefore,  would  not  in  any  case  augment 
the  expense  of  the  Bank,  or  of  any  other  private  persons  who  carry 
their  bullion  to  the  Mint  in  order  to  be  coined,  and  the  want  of 
a  moderate  seignorage  does  not  in  any  case  diminish  it.  Whether 
there  is  or  is  not  a  seignorage,  if  the  currency  contains  its  full 
standard  weight,  the  coinage  costs  nothing  to  anybody,  and  if  it  is 
short  of  that  weight,  the  coinage  must  always  cost  the  difference 
between  the  quantity  of  bullion  which  ought  to  be  contained  in  it, 
and  that  which  actually  is  contained  in  it. 

The  Government,  therefore,  when  it  defrays  the  expense  of 
coinage,  not  only  incurs  some  small  expense,  but  loses  some  small 
revenue  which  it  might  get  by  a  proper  duty ;  and  neither  the 
Bank  nor  any  other  private  persons  are  in  the  smallest  degree 
benefited  by  this  useless  piece  of  generosity. 


CHAP.  VI. 


THE  WEALTH  OF  NATIONS. 


133 


The  directors  of  the  Bank,  however,  would  probably  be  unwilling* 
to  agree  to  the  imposition  of  a  seignorage  upon  the  authority  of 
a  speculation  which  promises  them  no  gain,  but  only  pretends  to 
insure  them  from  any  loss.  In  the  present  state  of  the  gold  coin, 
and  as  long  as  it  continues  to  be  received  by  weight,  they  certainly 
would  gain  nothing  by  such  a  change.  But  if  the  custom  of 
weighing  the  gold  coin  should  ever  go  into  disuse,  as  it  is  very 
likely  to  do,  and  if  the  gold  coin  should  ever  fall  into  the  same  state 
of  degradation  in  which  it  was  before  the  late  re-coinage,  the  gain, 
or  more  properly  the  savings  of  the  Bank,  in  consequence  of  the 
imposition  of  a  seignorage,  would  probably  be  very  considerable. 
The  Bank  of  England  is  the  only  company  which  sends  any  con¬ 
siderable  quantity  of  bullion  to  the  Mint,  and  the  burden  of  the 
annual  coinage  falls  entirely,  or  almost  entirely,  upon  it.  If  this 
annual  coinage  had  nothing  to  do  but  to  repair  the  unavoidable 
losses  and  necessary  wear  and  tear  of  the  coin,  it  could  seldom 
exceed  fifty  thousand  or  at  most  a  hundred  thousand  pounds.  But 
when  tbe  coin  is  degraded  below  its  standard  weight,  the  annual 
coinage  must,  besides  this,  fill  up  the  large  vacuities  which 
exportation  and  the  melting-pot  are  continually  making  in  the 
current  coin.  It  was  upon  this  account  that  during  the  ten  or 
twelve  years  immediately  preceding  the  late  reformation  of  the 
gold  coin,  the  annual  coinage  amounted  at  an  average  to  more  than 
eight  hundred  and  fifty  thousand  pounds.  But  if  there  had  been 
a  seignorage  of  four  or  five  per  cent,  upon  the  gold  coin,  it  would 
probably,  even  in  the  state  in  which  things  then  were,  have  put  an 
effectual  stop  to  the  business  both  of  exportation  and  of  the  melting- 
pot.  The  Bank,  instead  of  losing  every  year  about  two  and  a  half 
per  cent,  upon  the  bullion  which  was  to  be  coined  into  more  than 
eight  hundred  and  fifty  thousand  pounds,  or  incurring  an  annual  loss 
of  more  than  twenty-one  thousand  two  hundred  and  fifty  pounds, 
would  not  probably  have  incurred  the  tenth  part  of  that  loss.1 

The  revenue  allotted  by  Parliament  for  defraying  the  expense  of 


1  At  the  present  time,  the  Bank  of 
England  is  still  the  only  agent  between 
the  Mint  and  the  public.  But  it  receives 
the  old  coin  by  weight,  a  slight  allowance 
being  made  for  wear.  The  Government 
still  exacts  no  seignorage  for  gold  coin. 
Hence  the  public  defrays  ultimately  the 
cost  of  wear,  though  the  occurrence  of 
this  charge  is  occasional,  for  the  lighter 


gold  rarely  reaches  the  Bank,  the  heavier 
pieces  only  flowing  back  to  the  central 
institution.  In  1869,  it  was  supposed 
that  there  was  a  very  large  amount  of 
light  gold  in  circulation,  but  in  the  ten 
years  from  1869  to  1878  inclusive,  a 
large  quantity  of  gold  has  been  coined 
(£46,792,979),  and  it  does  not  appear 
that  much  light  gold  is  now  current. 


134 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


the  coinage  is  but  fourteen  thousand  pounds  a  year,  and  the  real 
expense  which  it  costs  the  Government,  or  the  fees  of  the  officers 
of  the  Mint,  do  not  upon  ordinary  occasions,  I  am  assured,  exceed 
the  half  of  that  sum.  The  saving  of  so  very  small  a  sum,  or  even 
the  gaining  of  another  which  could  not  well  be  much  larger,  are 
objects  too  inconsiderable,  it  may  be  thought,  to  deserve  the  serious 
attention  of  Government.  But  the  saving  of  eighteen  or  twenty 
thousands  pounds  a  year  in  case  of  an  event  which  is  not  improbable, 
which  has  frequently  happened  before,  and  which  is  very  likely  to 
happen  again,  is  surely  an  object  which  well  deserves  the  serious 
attention  even  of  so  great  a  company  as  the  Bank  of  England. 

Some  of  the  foregoing  reasonings  and  observations  might  perhaps 
have  been  more  properly  placed  in  those  chapters  of  the  First  Book 
which  treat  of  the  origin  and  use  of  money,  and  of  the  difference 
between  the  real  and  the  nominal  price  of  commodities.  But  as 
the  law  for  the  encouragement  of  coinage  derives  its  origin  from 
those  vulgar  prejudices  which  have  been  introduced  by  the  mer¬ 
cantile  system,  I  judged  it  more  proper  to  reserve  them  for  this 
chapter.  Nothing  could  be  more  agreeable  to  the  spirit  of  that 
system  than  a  sort  of  bounty  upon  the  production  of  money,  the 
very  thing  which,  it  supposes,  constitutes  the  wealth  of  every 
nation.  It  is  one  of  its  many  admirable  expedients  for  enriching 
the  country. 


CHAPTER  VII. 

OF  COLONIES. 

PART  I. 

Of  the  Motives  for  establishing  new  Colonies. 

THE  interest  which  occasioned  the  first  settlement  of  the 
different  European  colonies  in  America  and  the  West  Indies 
was  not  altogether  so  plain  and  distinct  as  that  which  directed 
the  establishment  of  those  of  ancient  Greece  and  Home. 

All  the  different  states  of  ancient  Greece  possessed,  each  of  them, 
but  a  very  small  territory,  and  when  the  people  in  any  one  of  them 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


135 


multiplied  beyond  what  that  territory  could  easily  maintain,  a  part 
of  them  were  sent  in  quest  of  a  new  habitation  in  some  remote  and 
distant  part  of  the  world ;  the  warlike  neighbours  who  surrounded 
them  on  all  sides  rendering  it  difficult,  for  any  of  them  to  enlarge 
very  much  its  territory  at  home.  The  colonies  of  the  Dorians 
resorted  chiefly  to  Italy  and  Sicily,  which,  in  the  times  preceding 
the  foundation  of  Rome,  were  inhabited  by  barbarous  and  uncivilized 
nations :  those  of  the  Ionians  and  iEolians,  the  two  other  great 
tribes  of  the  Greeks,  to  Asia  Minor  and  'the  islands  of  the  iEgean 
Sea,  of  which  the  inhabitants  seem  at  that  time  to  have  been 
pretty  much  in  the  same  state  as  those  of  Sicily  and  Italy.  The  ' 
mother  city,  though  she  considered  the  colony  as  a  child,  at  all 
times  entitled  to  great  favour  and  assistance,  and  owing  in  return 
much  gratitude  and  respect,  yet  considered  it  as  an  emancipated 
child,  over  whom  she  pretended  to  claim  no  direct  authority  or 
jurisdiction.  The  colony  settled  its  own  form  of  government, 
enacted  its  own  laws,  elected  its  own  magistrates,  and  made  peace 
or  war  with  its  neighbours  as  an  independent  state,  which  had  no 
occasion  to  wait  for  the  approbation  or  consent  of  the  mother  city. 
Nothing  can  be  more  plain  and  distinct  than  the  interest  which 
directed  every  such  establishment.1 

Rome,  like  most  of  the  other  ancient  republics,  was  originally 
founded  upon  an  agrarian  law,  which  divided  the  public  territory 
in  a  certain  proportion  amorg  the  different  citizens  who  composed 
the  state.  The  course  of  human  affairs,  by  marriage,  by  succes¬ 
sion,  and  by  alienation,  necessarily  deranged  this  original  division, 
and  frequently  threw  the  lands,  which  had  been  allotted  for  the 
maintenance  of  many  different  families,  into  the  possession  of  a 
single  person.  To  remedy  this  disorder — for  such  it  was  supposed 
to  be — a  law  was  made  restricting  the  quantity  of  land  which  any 
citizen  could  possess  to  five  hundred  jugera,  about  three  hundred 
and  fifty  English  acres.  This  law,  however,  though  we  read  of  its 
having  been  executed  upon  one  or  two  occasions,  was  either 
neglected  or  evaded,  and  the  inequality  of  fortunes  went  on 
continually  increasing.  The  greater  part  of  the  citizens  had  no 


1  The  relations  supposed  to  exist  be¬ 
tween  mother  country  and  colony  are 
given  with  distinctness  in  Thucydides, 
i.  25,  where  the  differences  between 
Corinth  and  Corcyra  are  traced  to  the 


undutifulness  of  the  latter.  It  seems, 
however,  that  the  relations  between  the 
mother  state  and  the  colony  were  more 
intimate  in  the  Dorian  than  in  the 
other  great  families  of  Hellenic  origin. 


136 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


land,  and  without  it  the  manners  and  customs  of  those  times 
rendered  it  difficult  for  a  freeman  to  maintain  his  independency. 
In  the  present  times,  though  a  poor  man  has  no  land  of  his  own, 
if  he  has  a  little  stock,  he  may  either  farm  the  lands  of  another,  or 
he  may  carry  on  some  little  retail  trade  ;  and  if  he  has  no  stock,  he 
may  find  employment  either  as  a  country  labourer  or  as  an  artificer. 
But  among  the  ancient  Homans  the  lands  of  the  rich  were  all 
cultivated  by  slaves,  who  wrought  under  an  overseer,  who  was 
likewise  a  slave ;  so  that  a  poor  freeman  had  little  chance  of  being 
employed  either  as  a  farmer  or  as  a  labourer.  All  trades  and 
manufactures  too,  even  the  retail  trade,  were  carried  on  by  the 
slaves  of  the  rich  for  the  benefit  of  their  masters,  whose  wealth, 
authority,  and  protection  made  it  difficult  for  a  poor  freeman  to 
maintain  the  competition  against  them.  The  citizens,  therefore, 
who  had  no  land,  had  scarce  any  other  means  of  subsistence  but  the 
bounties  of  the  candidates  at  the  annual  elections.  The  tribunes, 
when  they  had  a  mind  to  animate  the  people  against  the  rich  and 
the  great,  put  them  in  mind  of  the  ancient  division  of  lands,  and 
represented  that  law  which  restricted  this  sort  of  private  property 
as  the  fundamental  law  of  the  republic.  The  people  became 
clamorous  to  get  land,  and  the  rich  and  the  great,  we  may  believe, 
were  perfectly  determined  not  to  give  them  any  part  of  theirs. 
To  satisfy  them  in  some  measure,  therefore,  they  frequently  pro¬ 
posed  to  send  out  a  new  colony.  But  conquering  Home  was,  even 
upon  such  occasions,  under  no  necessity  of  turning  out  her  citizens 
to  seek  their  fortune,  if  one  may  say  so,  through  the  wide  world, 
without  knowing  where  they  were  to  settle.  She  assigned  them 
lands  generally  in  the  conquered  provinces  of  Italy,  where,  being 
within  the  dominions  of  the  republic,  they  could  never  form  any 
independent  state ;  but  were  at  best  but  a  sort  of  corporation, 
which,  though  it  had  the  power  of  enacting  bye-laws  for  its  own 
government,  was  at  all  times  subject  to  the  correction,  jurisdiction, 
and  legislative  authority  of  the  mother  city.  The  sending  out  a 
colony  of  this  kind,  not  onty  gave  some  satisfaction  to  the  people, 
but  often  established  a  sort  of  garrison  too  in  a  newly-conquered 
province,  of  which  the  obedience  might  otherwise  have  been 
doubtful.  A  Homan  colony,  therefore,  whether  we  consider  the 
nature  of  the  establishment  itself  or  the  motives  for  making  it, 
;  was  altogether  different  from  a  Greek  one.  The  words  accordingly 


CHAP.  VII.- 


THE  WEALTH  OF  NATIONS. 


137 


which  in  the  original  languages  denote  those  different  establish¬ 
ments,  have  very  different  meanings.  The  Latin  word  ( Colonio ) 
signifies  simply  a  plantation  ;  the  Greek  word  ( cnroiKLa ),  on  the 
contrary,  signifies  a  separation  of  dwelling,  a  departure  from  home, 
a  going  out  of  the  house.  But  though  the  Roman  colonies  were 
in  many  respects  different  from  the  Greek  ones,  the  interest  which 
prompted  to  establish  them  was  equally  plain  and  distinct.  Both 
institutions  derived  their  origin  either  from  irresistible  necessity  or 
from  clear  and  evident  utility. 

The  establishment  of  the  European  colonies  in  America  and  the 
West  Indies  arose  from  no  necessity;  and  though  the  utility  which 
has  resulted  from  them  has  been  very  great,  it  is  not  altogether 
so  clear  and  evident.  It  was  not  understood  at  their  first  establish¬ 
ment,  and  wTas  not  the  motive  either  of  that  establishment  or  of  the 
discoveries  which  gave  occasion  to  it,  and  the  nature,  extent,  and 
limits  of  that  utility  are  not,  perhaps,  well  understood  at  this  day. 

The  Venetians,  during  the  fourteenth  and  fifteenth  centuries, 
carried  on  a  very  advantageous  commerce  in  spiceries  and  other 
East  India  goods,  which  they  distributed  among  the  other  nations 
of  Europe.  They  purchased  them  chiefly  in  Egypt,  at  that  time 
under  the  dominion  of  the  Mamelukes,  the  enemies  of  the  Turks, 
of  whom  the  Venetians  were  the  enemies ;  and  this  union  of  interest, 
assisted  by  the  money  of  Venice,  formed  such  a  connection  as  gave 
the  Venetians  almost  a  monopoly  of  the  trade.1 

The  great  profits  of  the  Venetians  tempted  the  avidity  of  the 
Portuguese.  They  had  been  endeavouring,  during  the  course  of  the 
fifteenth  century,  to  find  out  by  sea  a  way  to  the  countries  from 
which  the  Moors  brought  them  ivory  and  gold-dust  across  the 
Desert.  They  discovered  the  Madeiras,  the  Canaries,  the  Azores, 
the  Cape  de  Verd  islands,  the  coast  of  Guinea,  that  of  Loango, 
Congo,  Angola,  and  Benguela,  and,  finally,  the  Cape  of  Good 
Hope.  They  had  long  wished  to  share  in  the  profitable  traffic  of 
the  Venetians,  and  this  last  discovery  opened  to  them  a  probable 
prospect  of  doing  so.  In  1497,  Vasco  de  Gama  sailed  from  the 
port  of  Lisbon  with  a  fleet  of  four  ships,  and,  after  a  navigation  of 
eleven  months,  arrived  upon  the  coast  of  Hindostan,  and  thus  com¬ 
pleted  a  course  of  discoveries  which  had  been  pursued  with  great 

1  According  to  Sanuto,  himself  a  Ye-  the  toll  levied  by  the  Sultan  of  Egypt  was 
netian;  however  (Gesta  Dei  per  Francos),  enormous  and  ruinous  to  trade. 


138 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


steadiness,  and  with  very  little  interruption,  for  near  a  century 
together. 

Some  years  before  this,  while  the  expectations  of  Europe  were  in 
suspense  about  the  projects  of  the  Portuguese,  of  which  the  success 
appeared  yet  to  be  doubtful,  a  Genoese  pilot  formed  the  yet  more 
daring  project  of  sailing  to  the  East  Indies  by  the  West.  The 
situation  of  those  countries  was  at  that  time  very  imperfectly 
known  in  Europe.  The  few  European  travellers  who  had  been 
there  had  magnified  the  distance ;  perhaps  through  simplicity  and 
ignorance,  what  was  really  very  great,  appearing  almost  infinite  to 
those  who  could  not  measure  it ;  or,  perhaps,  in  order  to  increase 
somewhat  more  the  marvellous  of  their  adventures  in  visiting  regions 
so  immensely  remote  from  Europe.  The  longer  the  way  was  by  the 
East,  Columbus  very  justly  concluded,  the  shorter  it  would  be 
by  the  West.  He  proposed,  therefore,  to  take  that  way,  as  both 
the  shortest  and  the  surest,  and  he  had  the  good  fortune  to  convince 
Isabella  of  Castile  of  the  probability  of  his  project.  He  sailed  from 
the  port  of  Palos  in  August  1492,  near  five  years  before  the  expe¬ 
dition  of  Vasco  de  Gama  set  out  from  Portugal,  and,  after  a  voyage 
of  between  two  and  three  months,  discovered  first  some  of  the  small 
Bahama  or  Lucayan  islands,  and  afterwards  the  great  island  of 
St.  Domingo. 

But  the  countries  which  Columbus  discovered,  either  in  this 
or  in  any  of  his  subsequent  voyages,  had  no  resemblance  to  those 
which  he  had  gone  in  quest  of.  Instead  of  the  wealth,  cultivation, 
and  populousness  of  China  and  Hindostan,  he  found  in  St.  Domingo, 
and  in  all  the  other  parts  of  the  new  world  which  he  ever  visited, 
nothing  but  a  country  quite  covered  with  wood,  uncultivated,  and 
inhabited  only  by  some  tribes  of  naked  and  miserable  savages.  He 
was  not  very  willing,  however,  to  believe  that  they  were  not  the 
same  with  some  of  the  countries  described  by  Marco  Polo,  the  first 
European  who  had  visited,  or  at  least  had  left  behind  him  any 
description  of  China  or  the  East  Indies ;  and  a  very  slight  resem¬ 
blance,  such  as  that  which  he  found  between  the  name  of  Cibao,  a 
mountain  in  St.  Domingo,  and  that  of  Cipango,  mentioned  by 
Marco  Polo,  was  frequently  sufficient  to  make  him  return  to  this 
favourite  prepossession,  though  contrary  to  the  clearest  evidence. 
In  his  letters  to  Ferdinand  and  Isabella,  he  called  the  countries 
which  he  discovered  the  Indies.  He  entertained  no  doubt  but 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


139 


that  they  were  the  extremity  of  those  which  had  been  described  by 
Marco  Polo,  and  that  they  were  not  very  distant  from  the  Ganges, 
or  from  the  countries  which  had  been  conquered  by  Alexander. 
Even  when  at  last  convinced  that  they  were  different,  he  still 
flattered  himself  that  those  rich  countries  were  at  no  great  distance, 
and,  in  a  subsequent  voyage,  accordingly,  went  in  quest  of  them 
along  the  coast  of  Terra  Firma,  and  towards  the  Isthmus  of  Darien. 

In  consequence  of  this  mistake  of  Columbus,  the  name  of  the 
Indies  has  stuck  to  those  unfortunate  countries  ever  since;  and 
when  it  was  at  last  clearly  discovered  that  the  new  were  altogether 
different  from  the  old  Indies,  the  former  were  called  the  West, 
in  contradistinction  to  the  latter,  which  were  called  the  East  Indies. 

It  was  of  importance  to  Columbus,  however,  that  the  countries 
which  he  had  discovered,  whatever  they  were,  should  be  represented 
to  the  court  of  Spain  as  of  very  great  consequence ;  and,  in  what 
constitutes  the  real  riches  of  every  country,  the  animal  and  vegetable 
productions  of  the  soil,  there  was  at  that  time  nothing  which  could 
well  justify  such  a  representation  of  them. 

The  Cori,  something  between  a  rat  and  a  rabbit,  and  supposed 
by  M.  Buffon 1  to  be  the  same  with  the  Aperea  of  Brazil,  was  the 
largest  viviparous  quadruped  in  St.  Domingo.  This  species  seems 
never  to  have  been  very  numerous,  and  the  dogs  and  cats  of  the 
Spaniards  are  said  to  have  long  ago  almost  entirely  extirpated  it, 
as  well  as  some  other  tribes  of  a  still  smaller  size.  These,  however, 
together  with  a  pretty  large  lizard,  called  the  Ivana  or  Iguana, 
constituted  the  principal  part  of  the  animal  food  which  the  land 
afforded. 

The  vegetable  food  of  the  inhabitants,  though  from  their  want  of 
industry  not  very  abundant,  was  not  altogether  so  scanty.  It 
consisted  in  Indian  corn,  yams,  potatoes,  bananas,  &c.,  plants  which 
were  then  altogether  unknown  in  Europe,  and  which  have  never 
since  been  very  much  esteemed  in  it,  or  supposed  to  yield  a  sus¬ 
tenance  equal  to  what  is  drawn  from  the  common  sorts  of  grain  and 
pulse  which  have  been  cultivated  in  this  part  of  the  world  time  out 
of  mind. 

The  cotton-plant  indeed  afforded  the  material  of  a  very  important 
manufacture,  and  was  at  that  time  to  Europeans  undoubtedly  the 
most  valuable  of  all  the  vegetable  productions  of  those  islands.  But 

1  Histoire  Naturelle,  vol.  xv.  p.  162. 


140 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


though  in  the  end  of  the  fifteenth  century  the  muslins  and  other 
cotton  goods  of  the  East  Indies  were  much  esteemed  in  every 
part  of  Europe,  the  cotton  manufacture  itself  was  not  cultivated 
in  any  part  of  it.  Even  this  production,  therefore,  could  not  at 
that  time  appear  in  the  eyes  of  Europeans  to  be  of  very  great 
consequence. 

Finding  nothing  either  in  the  animals  or  vegetables  of  the  newly- 
discovered  countries  which  could  justify  a  very  advantageous  re¬ 
presentation  of  them,  Columbus  turned  his  view  towards  their 
minerals ;  and  in  the  richness  of  the  productions  of  this  third 
kingdom,  he  flattered  himself  he  had  found  a  full  compensation  for 
the  insignificancy  of  those  of  the  other  two.  The  little  bits  of  gold 
with  which  the  inhabitants  ornamented  their  dress,  and  which,  he 
was  informed,  they  frequently  found  in  the  rivulets  and  torrents 
that  fell  from  the  mountains,  were  sufficient  to  satisfy  him  that 
those  mountains  abounded  with  the  richest  gold  mines.  St. 
Domingo,  therefore,  was  represented  as  a  country  abounding 
with  gold,  and,  upon  that  account  (according  to  the  prejudices 
not  only  of  the  present  times,  but  of  those  times),  an  inexhaustible 
source  of  real  wealth  to  the  crown  and  kingdom  of  Spain.  When 
Columbus,  upon  his  return  from  his  first  voyage,  was  introduced 
with  a  sort  of  triumphal  honours  to  the  sovereigns  of  Castile  and 
Arragon,  the  principal  productions  of  the  countries  which  he  had 
discovered  were  carried  in  solemn  procession  before  him.  The  only 
valuable  part  of  them  consisted  in  some  little  fillets,  bracelets,  and 
other  ornaments  of  gold,  and  in  some  bales  of  cotton.  The  rest 
were  mere  objects  of  vulgar  wonder  and  curiosity;  some  reeds  of  an 
extraordinary  size,  some  birds  of  a  very  beautiful  plumage,  and 
some  stuffed  skins  of  the  huge  alligator  and  manati,  all  of  which 
were  preceded  by  six  or  seven  of  the  wretched  natives,  whose 
singular  colour  and  appearance  added  greatly  to  the  novelty  of 
the  show. 

In  consequence  of  the  representations  of  Columbus,  the  council 
of  Castile  determined  to  take  possession  of  countries  of  which  the 
inhabitants  were  plainly  incapable  of  defending  themselves.  The 
pious  purpose  of  converting  them  to  Christianity  sanctified  the 
injustice  of  the  project.  But  the  hope  of  finding  treasures  of  gold 
there,  was  the  sole  motive  which  prompted  to  undertake  it ;  and  to 
give  this  motive  the  greater  weight,  it  was  proposed  by  Columbus 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


141 


that  the  half  of  all  the  gold  and  silver  that  should  be  found  there 
should  belong  to  the  Crown.  This  proposal  was  approved  of  by  the 
council. 

As  long  as  the  whole  or  the  far  greater  part  of  the  gold,  which 
the  first  adventurers  imported  into  Europe,  was  got  by  so  very  easy 
a  method  as  the  plundering  of  the  defenceless  natives,  it  was  not 
perhaps  very  difficult  to  pay  even  this  heavy  tax.  But  when  the 
natives  were  once  fairly  stripped  of  all  that  they  had,  which,  in  St. 
Domingo  and  in  all  the  other  countries  discovered  by  Columbus, 
was  done  completely  in  six  or  eight  years,  and  when  in  order  to 
find  more  it  had  become  necessary  to  dig  for  it  in  the  mines,  there 
was  no  longer  any  possibility  of  paying  this  tax.  The  rigorous 
exaction  of  it,  accordingly,  first  occasioned,  it  is  said,  the  total 
abandoning  of  the  mines  of  St.  Domingo,  which  have  never  been 
wrought  since.  It  was  soon  reduced  therefore  to  a  third,  then  to  a 
fifth,  afterwards  to  a  tenth,  and  at  last  to  a  twentieth  part  of  the 
gross  produce  of  the  gold  mines.  The  tax  upon  silver  continued  for 
a  long  time  to  be  a  fifth  of  the  gross  produce.  It  was  reduced  to  a 
tenth  only  in  the  course  of  the  present  century.  But  the  first  adven¬ 
turers  do  not  appear  to  have  been  much  interested  about  silver. 
Nothing  less  precious  than  gold  seemed  worthy  of  their  attention. 

All  the  other  enterprises  of  the  Spaniards  in  the  new  world, 
subsequent  to  those  of  Columbus,  seem  to  have  been  prompted 
by  the  same  motive.  It  was  the  sacred  thirst  of  gold  that  carried 
Oieda,  Nicuessa,  and  Vasco  Nugnes  de  Balboa  to  the  isthmus  of 
Darien,  that  carried  Cortez  to  Mexico,  and  Almagro  and  Pizarro 
to  Chili  and  Peru.  When  those  adventurers  arrived  upon  any 
unknown  coast,  their  first  inquiry  was  always  if  there  was  any  gold 
to  be  found  there  ;  and  according  to  the  information  which  they 
received  concerning  this  particular,  they  determined  either  to  quit 
the  country  or  to  settle  in  it. 

Of  all  those  expensive  and  uncertain  projects,  however,  which 
bring  bankruptcy  upon  the  greater  part  of  the  people  who  engage 
in  them,  there  is  none  perhaps  more  perfectly  ruinous  than  the 
search  after  new  silver  and  gold  mines.  It  is  perhaps  the  most  dis¬ 
advantageous  lottery  in  the  world,  or  the  one  in  which  the  gain  of 
those  who  draw  the  prizes  bears  the  least  proportion  to  the  loss  of 
those  who  draw  the  blanks ;  for  though  the  prizes  are  few  and  the 
blanks  many,  the  common  price  of  a  ticket  is  the  whole  fortune  of  a 


142 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


very  rich  man.1  Projects  of  mining,  instead  of  replacing  the 
capital  employed  in  them,  together  with  the  ordinary  profits  of 
stock,  commonly  absorb  both  capital  and  profit.  They  are  the 
projects,  therefore,  to  which  of  all  others  a  prudent  lawgiver,  who 
desired  to  increase  the  capital  of  his  nation,  would  least  choose 
to  give  any  extraordinary  encouragement,  or  to  turn  towards  them 
a  greater  share  of  that  capital  than  what  would  go  to  them  of 
its  own  accord.  Such  in  reality  is  the  absurd  confidence  which 
almost  all  men  have  in  their  own  good  fortune,  that  wherever  there 
is  the  least  probability  of  success,  too  great  a  share  of  it  is  apt  to  go 
to  them  of  its  own  accord. 

But  though  the  judgment  of  sober  reason  and  experience  con¬ 
cerning  such  projects  has  always  been  extremely  unfavourable, 
that  of  human  avidity  has  commonly  been  quite  otherwise.  The 
j  same  passion  which  has  suggested  to  so  many  people  the  absurd 
idea  of  the  philosopher’s  stone,  has  suggested  to  others  the  equally 
absurd  one  of  immense  rich  mines  of  gold  and  silver.  They 
did  not  consider  that  the  value  of  those  metals  has,  in  all  ages 
and  nations,  arisen  chiefly  from  their  scarcity,  and  that  their 
scarcity  has  arisen  from  the  very  small  quantities  of  them  which 
nature  has  anywhere  deposited  in  one  place,  from  the  hard  and 
intractable  substances  with  which  she  has  almost  everywhere  sur¬ 
rounded  those  small  quantities,  and  consequently  from  the  labour 
and  expense  which  are  everywhere  necessary  in  order  to  penetrate 
to  and  get  at  them.2  They  flattered  themselves  that  veins  of  those 


1  This  criticism  of  Smith  has  been  veri¬ 
fied  in  later  times.  The  additions  which 
California  and  Australia  have  made  to  the 
wealth  of  the  world  have  not  consisted 
in  the  gold  found  there,  still  less  in  the 
fortunes  gained  by  the  miners  in  those 
regions,  but  in  the  rapid  plantation  of 
new  colonies,  in  the  demand  which  has 
sprung  up  in  those  colonies  for  European 
goods,  and  in  the  subsequent  develop¬ 
ment  of  important  raw  material  from 
those  regions.  The  export  of  Australian 
wool,  amounting  in  the  year  1879  to 
more  than  a  million  tons  weight,  is  a  far 
more  important  produce  than  all  the  gold 
which  the  colony  has  added  to  the  cur¬ 
rencies  and  the  luxury  of  the  world. 

2  Sir  Roderick  Murclr'son  tSiluria,  457) 
says,  ‘  The  fear  that  gold  may  be  greatly 
depreciated  in  value  relating  to  silver,  is 
unwarranted  by  the  data  registered  in  the 


crust  of  the  earth.  Gold  is,  after  all,  by 
far  the  most  restricted,  in  its  native  dis¬ 
tribution,  of  all  the  precious  metals. 
Silver  and  argentiferous  lead,  on  the  con¬ 
trary,  expand  so  largely  downwards  into 
the  bowels  of  the  rocks,  as  to  lead  us  to 
believe  that  they  must  yield  enormous 
profits  to  the  skilful  miner  for  ages  to 
come ;  and  the  more  so  in  proportion 
as  better  machinery  and  new  inventions 
shall  lessen  the  difficulty  of  subterraneous 
mining.  It  may  indeed  be  well  doubted 
whether  the  quantities  both  of  gold  and 
silver,  procured  from  regions  unknown  to 
our  progenitors,  will  prove  more  than 
sufficient  to  meet  the  exigencies  of  an 
enormously  increased  population  and  our 
augmenting  commerce  and  luxury.  But 
this  is  not  the  theme  for  a  geologist ;  and 
I  would  simply  say,  that  Providence 
seems  to  have  originally  adjusted  the 


CHAP.  VII. 


TEE  WEALTH  OF  NATIONS. 


143 


metals  might  in  many  places  be  found  as  large  and  as  abundant  as 
those  which  are  commonly  found  of  lead,  or  copper,  or  tin,  or  iron. 
The  dream  of  Sir  Walter  Raleigh  concerning  the  golden  city  and 
country  of  Eldorado,1  may  satisfy  us  that  even  wise  men  are  not 
always  exempt  from  such  strange  delusions.  More  than  a  hundred 
years  after  the  death  of  that  great  man,  the  Jesuit  Gumila2  was 
still  convinced  of  the  reality  of  that  wonderful  country,  and  ex¬ 
pressed  with  great  warmth,  and,  I  dare  to  say,  with  great  sincerity, 
how  happy  he  should  be  to  carry  the  light  of  the  Gospel  to  a  people 
who  could  so  well  reward  the  pious  labours  of  their  missionary. 

In  the  countries  first  discovered  by  the  Spaniards,  no  gold  or 
silver  mines  are  at  present  known  which  are  supposed  to  be  worth 
the  working.  The  quantities  of  those  metals  which  the  first  adven¬ 
turers  are  said  to  have  found  there,  had  probably  been  very  much 
magnified,  as  well  as  the  fertility  of  the  mines  which  were  wrought 
immediately  after  the  first  discovery.  What  those  adventurers  were 
reported  to  have  found,  however,  was  sufficient  to  inflame  the  avidity 
of  all  their  countrymen.  Every  Spaniard  who  sailed  to  America 
expected  to  find  an  Eldorado.  Fortune  too  did  upon  this  what  she 
has  done  upon  very  few  other  occasions  :  she  realised  in  some  mea¬ 
sure  the  extravagant  hopes  of  her  votaries,  and  in  the  discovery  and 
conquest  of  Mexico  and  Peru  (of  which  the  one  happened  about 
thirty,  the  other  about  forty  years  after  tbe  first  expedition  of 
Columbus),  she  presented  them  with  something  not  very  unlike 
that  profusion  of  the  precious  metals  which  they  sought  for. 

A  project  of  commerce  to  the  East  Indies,  therefore,  gave  occa¬ 
sion  to  the  first  discovery  of  the  West.  A  project  of  conquest  gave 
occasion  to  all  the  establishments  of  the  Spaniards  in  those  newly- 
discovered  countries.  The  motive  which  excited  them  to  this  con¬ 
quest  was  a  project  of  gold  and  silver  mines  ;  and  a  course  of  acci¬ 
dents,  which  no  human  wisdom  could  foresee,  rendered  this  project 
much  more  successful  than  the  undertakers  had  any  reasonable 
4  grounds  for  expecting. 

relative  value  of  these  two  precious  and  the  superficial  distribution  of  the 
metals,  and  that  their  relations  having  other, — “  Surely  there  is  a  vein  for  the 
remained  the  same  for  ages,  will  long  silver  —  the  earth  hath  dust  of  gold” 
survive  all  theories.  Modern  science,  (Job  xxviii.  I,  6).’ 

instead  of  contradicting,  only  confirms  1  The  discoyery  of  the  large,  rich,  and 
the  truth  of  the  aphorism  of  the  patri-  beautiful  empire  of  Guiana,  &c.,  pub- 
arch  Job,  which  thus  shadowed  forth  lished  in  1596. 

the  downward  persistence  of  the  one,  2  El  Orinoco  illustrado,  vol.  i.  cap.  xxv. 


144 


THE  NATURE  AND  CA  USES  OF 


BOOK  IV. 


The  first  adventurers  of  all  the  other  nations  of  Europe,  who 
attempted  to  make  settlements  in  America,  were  animated  by  the 
like  chimerical  views;  but  they  were  not  equally  successful.  It  was 
more  than  a  hundred  years  after  the  first  settlement  of  the  Brazils 
before  any  silver,  gold,  or  diamond  mines  were  discovered  there. 
In  the  English,  French,  Dutch,,  and  Danish  colonies,  none  have 
ever  yet  been  discovered ;  at  least,  none  that  are  at  present  supposed 
to  be  worth  the  working.  The  first  English  settlers  in  North  Ame¬ 
rica,  however,  offered  a  fifth  of  all  the  gold  and  silver  which  should 
be  found  there  to  the  king,  as  a  motive  for  granting  them  their 
patents.  In  the  patents  to  Sir  Walter  Raleigh,  to  the  London  and 
Plymouth  companies,  to  the  council  of  Plymouth,  &c.,  this  fifth  was 
accordingly  reserved  to  the  crown.  To  the  expectation  of  finding 
gold  and  silver  mines,  those  first  settlers  too  joined  that  of  discover¬ 
ing  a  north-west  passage  to  the  East  Indies.  They  have  hitherto 
been  disappointed  in  both. 


PART  II. 

Causes  of  the  Prosperity  of  new  Colonies. 

The  colony  of  a  civilised  nation  which  takes  -possession,  either  of 
a  waste  country,  or  of  one  so  thinly  inhabited,  that  the  nativeTeasiTy 
give" place  to  the  new  settlers,  advances  more  rapidly  to  wealth  and 
greatness  than  any  other  human  society.  ' — 

The  colonists  carry  out  with  them  acknowledge  of  agriculture  and 
of  other  useful  arts,  superior  to  what  can  grow  up  of  its  own  accord 
in  the  course  of  many  centuries  among  savage  and  barbarous  nations. 
They  carry  out  with  them  too  the  habit  of  subordination,  some 
notion  of  the  regular  government  which  takes  place  in  their  own 
country,  of  the  system  of  laws  which  support  it,  and  of  a  regular 
administration  of  justice;  and  they  naturally  establish  something 
of  the  same  kind  in  the  new  settlement.  But  among  savage  and  „ 
barbarous  nations,  the  natural  progress  of  law  and  government  is 
still  slower  than  the  natural  progress  of  arts,  after  law  and  govern¬ 
ment  has  been  so  far  established  as  is  necessary  for  their  protec¬ 
tion.  Every  colonist  gets  more  land  than  he  can  possibly  cultivate. 
He  has  no  rent,  and  scarce  any  taxes  to  pay.  No  landlord  shares 
with  him  in  its  produce,  and  the  share  of  the  sovereign  is  commonly 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


145 


but  a  trifle.  He  has  every  motive  to  render  as  great  as  possible  n 
produce,  which  is  thus  to  be  almost  entirely  his  own.  But  his  land 
is  commonly  so  extensive,  that  with  all  his  own  industry,  and  with 
all  the  industry  of  other  people  whom  he  can  get  to  employ,  he  can 
seldom  make  it  produce  the  tenth  part  of  what  it  is  capable  of  pro¬ 
ducing.  He  is  eager,  therefore,  to  collect  labourers  from  all  quar¬ 
ters,  and  to  reward  them  with  the  most  liberal  wages.  But  those 
liberal  wages,  joined  to  the  plenty  and  cheapness  of  land,  soon  make 
those  labourers  leave  him  in  order  to  become  landlords  themselves, 
and  to  reward,  with  equal  liberality,  other  labourers,  who  soon  leave 
them  for  the  same  reason  that  they  left  their  first  master.  The 
liberal  reward  of  labour  encourages  marriage.  The  children,  during 
the  tender  years  of  infancy,  are  well  fed  and  properly  taken  care  of, 
and  when  they  are  grown  up,  the  value  of  their  labour  greatly  over¬ 
pays  their  maintenance.  When  arrived  at  maturity,  the  high  price 
of  labour  and  the  low  price  of  land  enable  them  to  establish  them-  I 
selves  in  the  same  manner  as  their  fathers  did  before  them.1 

In  other  countries,  rent  and  profit  eat  up  wages,  and  the  two 
superior  orders  of  people  oppress  the  inferior  one.  But  in  new 
colonies,  the  interest  of  the  two  superior  orders  obliges  them  to 
treat  the  inferior  one  with  more  generosity  and  humanity ;  at  least, 
where  that  inferior  one  is  not  in  a  state  of  slavery.  Waste  lands, 
of  the  greatest  natural  fertility,  are  to  be  had  for  a  trifle.  The 
increase  of  revenue  which  the  proprietor,  who  is  always  the  under¬ 
taker,  expects  from  their  improvement,  constitutes  his  profit ;  which 
in  these  circumstances  is  commonly  very  great.  But  this  great 
profit  cannot  be  made  without  employing  the  labour  of  other  people 
in  clearing  and  cultivating  the  land ;  and  the  disproportion  between 
the  great  extent  of  the  land  and  the  small  number  of  the  people, 
which  commonly  takes  place  in  new  colonies,  makes  it  difficult  for 
him  to  get  this  labour.  He  does  not,  therefore,  dispute  about  wages, 
but  is  willing  to  employ  labour  at  any  price.  The  high  wages  of 
labour  encourage  population.  The  cheapness  and  plenty  of  good 
land  encourage  improvement,  and  enable  the  proprietor  to  pay  those 


1  To  these  causes  may  be  added,  that 
in  such  new  countries  there  is  no  mere 
spending  class,  or  this  class  is  small,  and 
in  no  great  credit.  Where  there  are  great 
families  of  ancient  opulence,  there  is  also 
great  expenditure  on  unproductive  objects 

VOL.  II.  L 


and  services ;  and  where  there  is  such 
expenditure,  there  is  also,  by  force  of 
circumstances,  great  penury ;  because  the 
ministers  of  mere  luxury  compete  for 
existence  with  those  who  are  engaged  in 
industrial  pursuits. 


146 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


high  wages.  In  those  wages  consists  almost  the  whole  price  of  the 
land  ;  and  though  they  are  high,  considered  as  the  wages  of  labour, 
they  are  low,  considered  as  the  price  of  what  is  so  very  valuable. 
What  encourages  the  progress  of  population  and  improvement, 
encourages  that  of  real  wealth  and  greatness. 

The  progress  of  many  of  the  ancient  Greek  colonies  towards 
wealth  and  greatness,  seems  accordingly  to  have  been  very  rapid. 
In  the  course  of  a  century  or  two,  several  of  them  appear  to  have 
rivalled,  and  even  to  have  surpassed  their  mother  cities.  Syracuse 
and  Agrigentum  in  Sicily,  Tarentum  and  Locri  in  Italy,  Ephesus 
and  Miletus  in  Lesser  Asia,  appear  by  all  accounts  to  have  been  at 
least  equal  to  any  of  the  cities  of  ancient  Greece.  Though  posterior 
in  their  establishment,  yet  all  the  arts  of  refinement,  philosophy, 
poetry,  and  eloquence  seem  to  have  been  cultivated  as  early,  and  to 
have  been  improved  as  highly  in  them,  as  in  any  part  of  the  mother 
country.  The  schools  of  the  two  oldest  Greek  philosophers,  those 
of  Thales  and  Pythagoras,  were  established,  it  is  remarkable,  not  in 
ancient  Greece,  but  the  one  in  an  Asiatic,  the  other  in  an  Italian 
colony.  All  those  colonies  had  established  themselves  in  countries 
inhabited  by  savage  and  barbarous  nations,  who  easily  gave  place 
to  the  new  settlers.  They  had  plenty  of  good  land,  and  as  they 
were  altogether  independent  of  the  mother  city,  they  were  at  liberty 
to  manage  their  own  affairs  in  the  way  that  they  judged  was  most 
suitable  to  their  own  interest. 

The  history  of  the  Homan  colonies  is  by  no  means  so  brilliant. 
Some  of  them,  indeed,  such  as  Florence,  have  in  the  course  of  many 
ages,  and  after  the  fall  of  the  mother  city,  grown  up  to  be  consider¬ 
able  states.  But  the  progress  of  no  one  of  them  seems  ever  to  have 
been  very  rapid.  They  were  all  established  in  conquered  provinces, 
which  in  most  cases  had  been  fully  inhabited  before.  The  quantity 
of  land  assigned  to  each  colonist  was  seldom  very  considerable,  and 
as  the  colony  was  not  independent,  they  were  not  always  at  liberty 
to  manage  their  own  affairs  in  the  way  that  they  judged  was  most 
suitable  to  their  own  interest.1 

In  the  plenty  of  good  land,  the  European  colonies  established  in 

1  For  the  character  of  the  ancient  be  found  in  the  Spanish  settlements  of 
Roman  colonies,  see  Niebuhr’s  History  of  the  New  World.  Still,  Roman  colonies 
Rome,  Hare’s  and  Thirlwall’s  translation,  became  the  principal  cities  of  Europe  east 
vol.  ii.  p.  43.  In  general,  the  nearest  of  the  Rhine, 
counterpart  to  these  Roman  colonies  is  to 


CHAP.  VII. 


THE  WEALTH  OF  NA  TIONS . 


147 


America  and  the  West  Indies  resemble,  and  even  greatly  surpass, 
those  of  ancient  Greece.  In  their  dependency  upon  the  mother 
state,  they  resemble  those  of  ancient  Home  ;  but  their  great  distance 
from  Europe  has  in  all  of  them  alleviated  more  or  less  the  effects 
of  this  dependency.  Their  situation  has  placed  them  less  in  the 
view  and  less  in  the  power  of  their  mother  country.  In  pursuing 
their  interest  their  own  way,  their  conduct  has,  upon  many  occasions, 
been  overlooked,  either  because  not  known  or  not  understood  in 
Europe ;  and  upon  some  occasions  it  has  been  fairly  suffered  and 
submitted  to,  because  their  distance  rendered  it  difficult  to  restrain 
it.  Even  the  violent  and  arbitrary  Government  of  Spain  has,  upon 
many  occasions,  been  obliged  to  recall  or  soften  the  orders  which  had 
been  given  for  the  government  of  her  colonies,  for  fear  of  a  general 
insurrection.  The  progress  of  all  the  European  colonies  in  wealth, 
population,  and  improvement,  has  accordingly  been  very  great. 

The  Crown  of  Spain,  by  its  share  of  the  gold  and  silver,  derived 
some  revenue  from  its  colonies  from  the  moment  of  their  first  estab¬ 
lishment.  It  was  a  revenue,  too,  of  a  nature  to  excite  in  human 
avidity  the  most  extravagant  expectations  of  still  greater  riches. 
The  Spanish  colonies,  therefore,  from  the  moment  of  their  first 
establishment,  attracted  very  much  the  attention  of  their  mother 
country;  while  those  of  the  other  European  nations  were  for  a  long 
time  in  a  great  measure  neglected.  The  former  did  not,  perhaps, 
thrive  the  better  in  consequence  of  this  attention,  nor  the  latter 
the  worse  in  consequence  of  this  neglect.  In  proportion  to  the 
extent  of  the  country  which  they  in  some  measure  possess,  the 
Spanish  colonies  are  considered  as  less  populous  and  thriving  than 
those  of  almost  any  other  European  nation.  The  progress  even  of 
the  Spanish  colonies,  however,  in  population  and  improvement, 
has  certainly  been  very  rapid  and  very  great.  The  city  of  Lima, 
founded  since  the  conquest,  is  represented  by  Ulloa1  as  containing* 
fifty  thousand  inhabitants  near  thirty  years  ago.  Quito,  which 
had  been  but  a  miserable  hamlet  of  Indians,  is  represented  by  the 
same  author  as  in  his  time  equally  populous.  Gemelli  Careri,2  a 
pretended  traveller,  it  is  said,  indeed,  but  who  seems  everywhere  to 
have  written  upon  extreme  good  information,  represents  the  city  of 

1  See  for  a  description  of  Lima,  and  Parte,  lib.  i.  cap.  v.  For  Quito,  see  the 
the  population  of  various  races  which  it  same  author,  Prim.  Parte,  lib.  v.  cap.  v. 
contained  in  1740,  Ulloa,  Relation  de  2  Voyage  du  Tour  du  Monde,  tom.  vi. 
Viage  a  la  America  Meridional,  Seg.  p.  36. 


148 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


Mexico  as  containing  a  hundred  thousand  inhabitants  ;  a  number 
which,  in  spite  of  all  the  exaggerations  of  the  Spanish  writers,  is 
probably  more  than  five  times  greater  than  what  it  contained  in  the 
time  of  Montezuma.  These  numbers  exceed  greatly  those  of  Boston, 
New  York,  and  Philadelphia,  the  three  greatest  cities  of  the  English 
colonies.  Before  the  conquest  of  the  Spaniards  there  were  no  cattle 
fit  for  draught,  either  in  Mexico  or  Peru.  The  llama  was  their  only 
beast  of  burden,  and  its  strength  seems  to  have  been  a  good  deal 
inferior  to  that  of  a  common  ass.  The  plough  was  unknown  among 
them.  They  were  ignorant  of  the  use  of  iron.  They  had  no  coined 
money,  nor  any  established  instrument  of  commerce  of  any  kind. 
Their  commerce  was  carried  on  by  barter.  A  sort  of  wooden  spade 
was  their  principal  instrument  of  agriculture.  Sharp  stones  served 
them  for  knives  and  hatchets  to  cut  with  ;  fish-bones  and  the  hard 
sinews  of  certain  animals  served  them  for  needles  to  sew  with  ;  and 
these  seem  to  have  been  their  principal  instruments  of  trade.  In 
this  state  of  things,  it  seems  impossible  that  either  of  those  empires 
could  have  been  so  much  improved  or  so  well  cultivated  as  at  pre¬ 
sent,  when  they  are  plentifully  furnished  with  all  sorts  of  European 
cattle,  and  when  the  use  of  iron,  of  the  plough,  and  of  many  of  the 
arts  of  Europe,  has  been  introduced  among  them.  But  the  popu¬ 
lousness  of  every  country  must  be  in  proportion  to  the  degree  of  its 
improvement  and  cultivation.  In  spite  of  the  cruel  destruction  of 
the  natives  which  followed  the  conquest,  these  two  great  empires 
are,  probably,  more  populous  now  than  they  ever  were  before  :  and 
the  people  are  surely  very  different ;  for  we  must  acknowledge,  I 
apprehend,  that  the  Spanish  creoles  are  in  many  respects  superior  to 
the  ancient  Indians. 

After  the  settlements  of  the  Spaniards,  that  of  the  Portuguese 
in  Brazil  is  the  oldest  of  any  European  nation  in  America.  But 
as  for  a  long  time  after  the  first  discovery,  neither  gold  nor  silver 
mines  were  found  in  it,  and  as  it  afforded,  upon  that  account, 
little  or  no  revenue  to  the  Crown,  it  was  for  a  long  time  in  a 
great  measure  neglected  ;  and  during  this  state  of  neglect,  it  grew 
up  to  be  a  great  and  powerful  colony.  While  Portugal  was  under 
the  dominion  of  Spain,  Brazil  was  attacked  by  the  Dutch,  who 
got  possession  of  seven  of  the  fourteen  provinces  into  which  it  is 
divided.  They  expected  soon  to  conquer  the  other  seven,  when 
Portugal  recovered  its  independency  by  the  elevation  of  the  family 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


149 


of  Braganza  to  the  throne.  The  Dutch  then,  as  enemies  to  the 
Spaniards,  became  friends  to  the  Portuguese,  who  were  likewise 
the  enemies  of  the  Spaniards.  They  agreed,  therefore,  to  leave 
that  part  of  Brazil  which  they  had  not  conquered  to  the  King  of 
Portugal,  who  agreed  to  leave  that  part  which  they  had  conquered 
to  them,  as  a  matter  not  worth  disputing  about  with  such  good 
allies.  But  the  Dutch  Government  soon  began  to  oppress  the 
Portuguese  colonists,  who,  instead  of  amusing*  themselves  with  com¬ 
plaints,  took  arms  against  their  new  masters,  and  by  their  own 
valour  and  resolution,  with  the  connivance,  indeed,  but  without 
any  avowed  assistance  from  the  mother  country,  drove  them  out 
of  Brazil.  The  Dutch,  therefore,  finding  it  impossible  to  keep  any 
part  of  the  country  to  themselves,  were  contented  that  it  should 
be  entirely  restored  to  the  crown  of  Portugal.  In  this  colony 
there  are  said  to  be  more  than  six  hundred  thousand  people,  either 
Portuguese  or  descended  from  Portuguese,  creoles,  rnulattoes,  and 
a  mixed  race  between  Portuguese  and  Brazilians.  No  one  colony 
in  America  is  supposed  to  contain  so  great  a  number  of  European 
extraction. 

Towards  the  end  of  the  fifteenth,  and  during  the  greater  part 
of  the  sixteenth  century,  Spain  and  Portugal  were  the  two  great 
naval  powers  upon  the  ocean ;  for  though  the  commerce  of  Venice 
extended  to  every  part  of  Europe,  its  fleets  had  scarce  ever  sailed 
beyond  the  Mediterranean.  The  Spaniards,  in  virtue  of  the  first 
discovery,  claimed  all  America  as  their  own ;  and  though  they 
could  not  hinder  so  great  a  naval  pow7er  as  that  of  Portugal  from 
settling  in  Brazil,  such  was,  at  that  time,  the  terror  of  their  name, 
that  the  greater  part  of  the  other  nations  of  Europe  were  afraid 
to  establish  themselves  in  any  other  part  of  that  great  continent. 
The  French,  who  attempted  to  settle  in  Florida,  were  all  murdered 
by  the  Spaniards.  But  the  declension  of  the  naval  power  of  this 
latter  nation,  in  consequence  of  the  defeat  or  miscarriage  of  what 
they  called  their  Invincible  Armada,  which  happened  towards  the  end 
of  the  sixteenth  century,1  put  it  out  of  their  power  to  obstruct  any 
longer  the  settlements  of  the  other  European  nations.  In  the  course 
of  the  seventeenth  century,  therefore,  the  English,  French,  Dutch, 
Danes  and  Swedes,  all  the  great  nations  who  had  any  ports  upon  the 
ocean,  attempted  to  make  some  settlements  in  the  new  world. 

1  i.e.  a.d.  1588. 


150 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


The  Swedes  established  themselves  in  New  Jersey;  and  the 
number  of  Swedish  families  still  to  be  found  there  sufficiently 
demonstrates  that  this  colony  was  very  likely  to  prosper,  had  it 
been  protected  by  the  mother  country.  But  being*  neglected  by 
Sweden,  it  was  soon  swallowed  up  by  the  Dutch  colony  of  New 
York,  which  again,  in  1674,  fell  under  the  dominion  of  the 
English. 

The  small  islands  of  St.  Thomas  and  Santa  Cruz  are  the  only 
countries  in  the  new  world  that  have  ever  been  possessed  by  the 
Danes.  These  little  settlements  too  were  under  the  government 
of  an  exclusive  company,  which  had  the  sole  right,  both  of  pur¬ 
chasing  the  surplus  produce  of  the  colonists,  and  of  supplying 
them  with  such  goods  of  other  countries  as  they  wanted,  and 
which,  therefore,  both  in  its  purchases  and  sales,  had  not  only 
the  power  of  oppressing  them,  but  the  greatest  temptation  to  do 
so.  The  government  of  an  exclusive  company  of  merchants  is, 
perhaps,  the  worst  of  all  governments  for  any  country  whatever. 
It  was  not,  however,  able  to  stop  altogether  the  progress  of  these 
colonies,  though  it  rendered  it  more  slow  and  languid.  The  late 
King  of  Denmark  dissolved  this  company,  and  since  that  time 
the  prosperity  of  these  colonies  has  been  very  great. 

The  Dutch  settlements  in  the  West,  as  well  as  those  in  the 
East  Indies,  were  originally  put  under  the  government  of  an 
exclusive  company.  The  progress  of  some  of  them,  therefore, 
though  it  has  been  considerable,  in  comparison  with  that  of  almost 
any  country  that  has  been  long  peopled  and  established,  has  been 
languid  and  slow  in  comparison  with  that  of  the  greater  part  of 
new  colonies.  The  colony  of  Surinam,  though  very  considerable, 
is  still  inferior  to  the  greater  part  of  the  sugar  colonies  of  the 
other  European  nations.  The  colony  of  Nova  Belgia,  now  divided 
into  the  two  provinces  of  New  York  and  New  Jersey,  would  pro¬ 
bably  have  soon  become  considerable  too,  even  though  it  had 
remained  under  the  government  of  the  Dutch.  The  plenty  and 
cheapness  of  good  land  are  such  powerful  causes  of  prosperity, 
that  the  very  worst  government  is  scarce  capable  of  checking 
altogether  the  efficacy  of  their  operation.  The  great  distance  too 
from  the  mother  country  would  enable  the  colonists  to  evade  more 
or  less,  by  smuggling,  the  monopoly  which  the  company  enjoyed 
against  them.  At  present,  the  company  allows  all  Dutch  ships 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


151 


to  trade  to  Surinam  upon  paying  two-and-a-half  per  cent,  upon 
the  value  of  their  cargo  for  a  licence ;  and  only  reserves  to  itself 
exclusively  the  direct  trade  from  Africa  to  America,  which  consists 
almost  entirely  in  the  slave  trade.  This  relaxation  in  the  ex¬ 
clusive  privileges  of  the  company  is  probably  the  principal  cause 
of  that  degree  of  prosperity  which  that  colony  at  present  enjoys. 
Cura^oa  and  Eustatia,  the  two  principal  islands  belonging  to  the 
Dutch,  are  free  ports  open  to  the  ships  of  all  nations ;  and  this 
freedom,  in  the  midst  of  better  colonies  whose  ports  are  open  to 
those  of  one  nation  only,  has  been  the  great  cause  of  the  prosperity 
of  those  two  barren  islands. 

The  French  colony  of  Canada  was,  during  the  greater  part  of 
the  last  century,  and  some  part  of  the  present,  under  the  govern¬ 
ment  of  an  exclusive  company.  Under  so  unfavourable  an  adminis¬ 
tration  its  progress  was  necessarily  very  slow  in  comparison  with 
that  of  other  new  colonies ;  but  it  became  much  more  rapid  when 
this  company  was  dissolved  after  the  fall  of  what  is  called  the 
Mississippi  scheme.  When  the  English  got  possession  of  this 
country,  they  found  in  it  near  double  the  number  of  inhabitants 
which  father  Charlevoix1  had  assigned  to  it  between  twenty  and 
thirty  years  before.  That  Jesuit  had  travelled  over  the  whole 
country,  and  had  no  inclination  to  represent  it  as  less  considerable 
than  it  really  was. 

The  French  colony  of  St.  Domingo  was  established  by  pirates 
and  freebooters,  who,  for  a  long  time,  neither  required  the  pro¬ 
tection  nor  acknowledged  the  authority  of  France;  and  when  that 
race  of  banditti  became  so  far  citizens  as  to  acknowledge  this 
authority,  it  was  for  a  long  time  necessary  to  exercise  it  with 
very  great  gentleness.  During  this  period  the  population  and 
improvement  of  this  colony  increased  very  fast.  Even  the  op¬ 
pression  of  the  exclusive  company,  to  which  it  was  for  some  time 
subjected,  with  all  the  other  colonies  of  France,  though  it  no  doubt 
retarded,  had  not  been  able  to  stop  its  progress  altogether.  The 
course  of  its  prosperity  returned  as  soon  as  it  was  relieved  from 
that  oppression.  It  is  now  the  most  important  of  the  sugar 
colonies  of  the  West  Indies,  and  its  produce  is  said  to  be  greater 
than  that  of  all  the  English  sugar  colonies  put  together.  The 
other  sugar  colonies  of  France  are  in  general  all  very  thriving. 

1  ‘  Une  Colonie  de  vint  k  vint-cinq  mille  Ames.’  Charlevoix,  ii.  390,  l’an  1 7 1 3- 


152 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


But  there  are  no  colonies  of  which  the  progress  has  been  more 
rapid  than  that  of  the  English  in  North  America. 

Plenty  of  good  land,  and  liberty  to  manage  their  own  affairs 
their  own  way,  seem  to  be  the  two  great  causes  of  the  prosperity 
of  all  new  colonies. 

In  the  plenty  of  good  land  the  English  colonies  of  North  America, 
though,  no  doubt,  very  abundantly  provided,  are,  however,  inferior 
to  those  of  the  Spaniards  and  Portuguese,  and  not  superior  to 
some  of  those  possessed  by  the  French  before  the  late  war.  But 
the  political  institutions  of  the  English  colonies  have  been  more 
favourable  to  the  improvement  and  cultivation  of  this  land  than 
those  of  any  of  the  other  three  nations. 

First,  the  engrossing  of  uncultivated  land,  though  it  has  by 
no  means  been  prevented  altogether,  has  been  more  restrained  in 
the  English  colonies  than  in  any  other.  The  colony  law,  which 
imposes  upon  every  proprietor  the  obligation  of  improving  and 
cultivating,  within  a  limited  time,  a  certain  proportion  of  his  lands, 
and  which,  in  case  of  failure,  declares  those  neglected  lands  grant- 
able  to  any  other  person;  though  it  has  not,  perhaps,  been  very 
strictly  executed,  has,  however,  had  some  effect. 

Secondly,  in  Pennsylvania  there  is  no  right  of  primogeniture, 
and  lands,  like  moveables,  are  divided  equally  among  all  the 
children  of  the  family.  In  three  of  the  provinces  of  New  England 
the  oldest  has  only  a  double  share,  as  in  the  Mosaical  law.  Though 
in  those  provinces,  therefore,  too  great  a  quantity  of  land  should 
sometimes  be  engrossed  by  a  particular  individual,  it  is  likely, 
in  the  course  of  a  generation  or  two,  to  be  sufficiently  divided 
again.  In  the  other  English  colonies,  indeed,  the  right  of  primo¬ 
geniture  takes  place,  as  in  the  law  of  England.  But  in  all  the 
English  colonies  the  tenure  of  their  lands,  which  are  all  held  by 
free  socage,  facilitates  alienation,  and  the  grantee  of  any  extensive 
tract  of  land  generally  finds  it  for  his  interest  to  alienate,  as  fast 
as  he  can,  the  greater  part  of  it,  reserving  only  a  small  quit  rent. 
In  the  Spanish  and  Portuguese  colonies,  what  is  called  the  right 
of  Majorazzo*  takes  place  in  the  succession  of  all  those  great 
estates  to  which  any  title  of  honour  is  annexed.  Such  estates  go 
all  to  one  person,  and  are  in  effect  entailed  and  unalienable.  The 
French  colonies,  indeed,  are  subject  to  the  custom  of  Paris,  which, 

*  Jus  Majoratus. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


153 


in  the  inheritance  of  land,  is  much  more  favourable  to  the  younger 
children  than  the  law  of  England.  But,  in  the  French  colonies, 
if  any  part  of  an  estate,  held  by  the  noble  tenure  of  chivalry  and 
homage,  is  alienated,  it  is,  for  a  limited  time,  subject  to  the  right 
of  redemption,  either  by  the  heir  of  the  superior  or  by  the  heir 
of  the  family;  and  all  the  largest  estates  of  the  country  are  held 
by  such  noble  tenures,  which  necessarily  embarrass  alienation.  But, 
in  a  new  colony,  a  great  uncultivated  estate  is  likely  to  be  much 
more  speedily  divided  by  alienation  than  by  succession.  The  plenty 
and  cheapness  of  good  land,  it  has  already  been  observed,  are  the 
principal  causes  of  the  rapid  prosperity  of  new  colonies.  The 
engrossing  of  land,  in  effect,  destroys  this  plenty  and  cheapness. 
The  engrossing  of  uncultivated  land,  besides,  is  the  greatest  ob¬ 
struction  to  its  improvement.  But  the  labour  that  is  employed 
in  the  improvement  and  cultivation  of  land  affords  the  greatest 
and  most  valuable  produce  to  the  society.  The  produce  of  labour, 
in  this  case,  pays  not  only  its  own  wages,  and  the  profit  of  the 
stock  which  employs  it,  but  the  rent  of  the  land  too  upon  which 
it  is  employed.  The  labour  of  the  English  colonists,  therefore, 
being  more  employed  in  the  improvement  and  cultivation  of  land, 
is  likely  to  afford  a  greater  and  more  valuable  produce  than  that 
of  any  of  the  other  three  nations,  which,  by  the  engrossing  of 
land,  is  more  or  less  diverted  towards  other  employments. 

Thirdly,  the  labour  of  the  English  colonists  is  not  only  likely  to 
afford  a  greater  and  more  valuable  produce,  but,  in  consequence  of 
the  moderation  of  their  taxes,  a  greater  proportion  of  this  produce 
belongs  to  themselves,  which  they  may  store  up  and  employ  in 
putting  into  motion  a  still  greater  quantity  of  labour.  The  English 
colonists  have  never  yet  contributed  anything  towards  the  defence 
of  the  mother  country,  or  towards  the  support  of  its  civil  govern¬ 
ment.  They  themselves,  on  the  contrary,  have  hitherto  been 
defended  almost  entirely  at  the  expense  of  the  mother  country. 
But  the  expense  of  fleets  and  armies  is  out  of  all  proportion  greater 
than  the  necessary  expense  of  civil  government.  The  expense  of 
their  own  civil  government  has  always  been  very  moderate.  It  has 
generally  been  confined  to  what  was  necessary  for  paying  competent 
salaries  to  the  governor,  to  the  judges,  and  to  some  other  officers  of 
police,  and  for  maintaining  a  few  of  the  most  useful  public  works. 
The  expense  of  the  civil  establishment  of  Massachusetts  Bay, 


154 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


before  the  commencement  of  the  present  disturbances,  used  to  be 
but  about  j^i 8,000  a  year;  that  of  New  Hampshire  and  Rhode 
Island,  <5^3,500  each ;  that  of  Connecticut,  ^4,000 ;  that  of  New 
York  and  Pennsylvania,  ^4,500  each  ;  that  of  New  Jersey,  j£°j,200  ; 
that  of  Virginia  and  South  Carolina,  <^8,000  each.  The  civil 
establishment  of  Nova  Scotia  and  Georgia  are  partly  supported  by 
an  annual  grant  of  Parliament.  But  Nova  Scotia  pays,  besides, 
about  j£°7,ooo  a  year  towards  the  public  expenses  of  the  colony;  and 
Georgia  about  ^2,500  a  year.  All  the  different  civil  establishments 
in  North  America,  in  short,  exclusive  of  those  of  Maryland  and 
North  Carolina,  of  which  no  exact  account  has  been  got,  did  not, 
before  the  commencement  of  the  present  disturbances,  cost  the 
inhabitants. above  <^64,700  a  year;  an  ever-memorable  example  at 
how  small  an  expense  three  millions  of  people  may  not  only  be 
governed,  but  well  governed.  The  most  important  part  of  the 
expense  of  government,  indeed,  that  of  defence  and  protection,  has 
constantly  fallen  upon  the  mother  country.  The  ceremonial  too  of 
the  civil  government  in  the  colonies,  upon  the  reception  of  a  new 
governor,  upon  the  opening  of  a  new  assembly,  &c.,  though  suf¬ 
ficiently  decent,  is  not  accompanied  with  any  expensive  pomp  or 
parade.  Their  ecclesiastical  government  is  conducted  upon  a  plan 
equally  frugal.  Tithes  are  unknown  among  them  ;  and  their  clergy, 
who  are  far  from  being  numerous,  are  maintained  either  by  moderate 
stipends,  or  by  the  voluntary  contributions  of  the  people.  The 
power  of  Spain  and  Portugal,  on  the  contrary,  derives  some  support 
from  the  taxes  levied  upon  their  colonies.  France,  indeed,  has 
never  drawn  any  considerable  revenue  from  its  colonies,  the  taxes 
which  it  levies  upon  them  being  generally  spent  among  them.  But 
the  colony  government  of  all  these  three  nations  is  conducted  upon 
a  much  more  expensive  plan,  and  is  accompanied  with  a  much  more 
expensive  ceremonial.  The  sums  spent  upon  the  reception  of  a  new 
viceroy  of  Peru,  for  example,  have  frequently  been  enormous.  Such 
ceremonials  are  not  only  real  taxes  paid  by  the  rich  colonists  upon 
these  particular  occasions,  but  they  serve  to  introduce  among  them 
the  habit  of  vanity  and  expense  upon  all  other  occasions.  They  are 
not  only  very  grievous  occasional  taxes,  but  they  contribute  to 
establish  perpetual  taxes  of  the  same  kind  still  more  grievous  ;  the 
ruinous  taxes  of  private  luxury  and  extravagance.  In  the  colonies 
of  all  those  three  nations  too,  the  ecclesiastical  government  is 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


155 


extremely  oppressive.  Tithes  take  place  in  all  of  them,  and  are 
levied  with  the  utmost  rigour  in  those  of  Spain  and  Portugal. 
All  of  them  besides  are  oppressed  with  a  numerous  race  of  mendicant 
friars,  whose  beggary  being  not  licensed,  but  consecrated  by  religion, 
is  a  most  grievous  tax  upon  the  poor  people,  who  are  most  carefully 
taught  that  it  is  a  duty  to  give,  and  a  very  great  sin  to  refuse  them 
their  charity.  Over  and  above  all  this,  the  clergy  are,  in  all  of 
them,  the  greatest  engrossers  of  land. 

Fourthly,  in  the  disposal  of  their  surplus  produce,  or  of  what  is 
over  and  above  their  own  consumption,  the  English  colonies  have 
been  more  favoured,  and  have  been  allowed  a  more  extensive  market, 
than  those  of  any  other  European  nation.  Every  European  nation 
has  endeavoured  more  or  less  to  monopolise  to  itself  the  commerce 
of  its  colonies,  and,  upon  that  account,  has  prohibited  the  ships  of 
foreign  nations  from  trading  to  them,  and  has  prohibited  them  from 
importing  European  goods  from  any  foreign  nation.  But  the 
manner  in  which  this  monopoly  has  been  exercised  in  different 
nations  has  been  very  different. 

Some  nations  have  given  up  the  whole  commerce  of  their  colonies 
to  an  exclusive  company,  of  whom  the  colonists  were  obliged  t©  buy 
all  shell  European  goods  as  they  wanted,  and  to  whom  they  were 
obliged  to  sell  the  whole  of  their  own  surplus  produce.  It  was  the 
interest  of  the  company,  therefore,  not  only  to  sell  the  former  as 
dear,  and  to  buy  the  latter  as  cheap  as  possible,  but  to  buy  no  more 
of  the  latter,  even  at  this  low  price,  than  what  they  could  dispose 
of  for  a  very  high  price  in  Europe.  It  was  their  interest,  not  only 
to  degrade  in  all  cases  the  value  of  the  surplus  produce  of  the  colony, 
but  in  many  cases  to  discourage  and  keep  down  the  natural  increase 
of  its  quantity.  Of  all  the  expedients  that  can  well  be. contrived  to 
stunt  the  natural  growth  of  a  new  colony,  that  of  an  exclusive 
company  is  undoubtedly  the  most  effectual.  This,  however,  has 
been  the  policy  of  Holland,  though  their  company,  in  the  course  of 
the  present  century,  has  given  up  in  many  respects  the  exertion  of 
their  exclusive  privilege.  This  too  was  the  policy  of  Denmark  till 
the  reign  of  the  late  king.  It  has  occasionally  been  the  policy  of 
France,  and  of  late,  since  1755,  after  it  had  been  abandoned  by  all 
other  nations,  on  account  of  its  absurdity,  it  has  become  the  policy 
of  Portugal  with  regard  at  least  to  two  of  the  principal  provinces  of 
Brazil,  Pernambuco  and  Maranhao. 


156 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


Other  nations,  without  establishing  an  exclusive  company,  have 
confined  the  whole  commerce  of  their  colonies  to  a  particular  port 
of  the  mother  country,  from  whence  no  ship  was  allowed  to  sail, 
but  either  in  a  fleet  and  at  a  particular  season,  or,  if  single,  in  con¬ 
sequence  of  a  particular  licence,  which  in  most  cases  was  very  well 
paid  for.  This  policy  opened,  indeed,  the  trade  of  the  colonies  to 
all  the  natives  of  the  mother  country,  provided  they  traded  from  the 
proper  port,  at  the  proper  season,  and  in  the  proper  vessels.  But  as 
all  the  different  merchants,  who  joined  their  stocks  in  order  to  fit 
out  those  licensed  vessels,  would  find  it  for  their  interest  to  act  in 
concert,  the  trade  which  was  carried  on  in  this  manner  would 
necessarily  be  conducted  very  nearly  upon  the  same  principles  as 
that  of  an  exclusive  company.  The  profit  of  those  merchants 
would  be  almost  equally  exorbitant  and  oppressive  ;  the  colonies 
would  be  ill  supplied,  and  would  be  obliged  both  to  buy  very  dear, 
and  to  sell  very  cheap.  This,  however,  till  within  these  few  years, 
had  always  been  the  policy  of  Spain,  and  the  price  of  all  European 
,  goods,  accordingly,  is  said  to  have  been  enormous  in  the  Spanish 
West  Indies.  At  Quito,  we  are  told  by  Ulloa1,  a  pound  of  iron 
sold  *for  about  four  and  sixpence,  and  a  pound  of  steel  for  about  six 
and  ninepence  sterling.  But  it  is  chiefly  in  order  to  purchase 
European  goods  that  the  colonies  part  with  their  own  produce. 
The  more,  therefore,  they  pay  for  the  one,  the  less  they  really  get 
for  the  other,  and  the  dearness  of  the  one  is  the  same  thing  with 
the  cheapness  of  the  other.  The  policy  of  Portugal  is  in  this 
respect  the  same  as  the  ancient  policy  of  Spain,  with  regard  to  all 
its  colonies,  except  Pernambuco  and  Maranhao,  and  with  regard  to 
these  it  has  lately  adopted  a  still  worse. 

Other  nations  leave  the  trade  of  their  colonies  free  to  all  their 
subjects  who  may  carry  it  on  from  all  the  different  ports  of  the 
mother  country,  and  who  have  occasion  for  no  other  licence  than 
the  common  dispatches  of  the  custom-house.  In  this  case  the 
number  and  dispersed  situation  of  the  different  traders  renders  it 
impossible  for  them  to  enter  into  any  general  combination,  and 
their  competition  is  sufficient  to  hinder  them  from  making  very 
exorbitant  profits.  Under  so  liberal  a  policy,  the  colonies  are 

1  ‘Vale  el  Quintal  de  Hierro  h  ciento  viii.  Adam  Smith  has  confused  the  quin- 
y  mas  pesas,  y  ciento  y  cinquenta  el  de  tal  (loo  Spanish  pounds)  with  the  English 
Azero.’  Ulloa,  primi  parte,  lib.  v.  cap.  pound.  The  quintal  =  101*44  lbs.  English. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


157 


enabled  both  to  sell  their  own  produce  and  to  buy  the  goods  of 
Europe  at  a  reasonable  price.  But  since  the  dissolution  of  the 
Plymouth  company,  when  our  colonies  were  but  in  their  infancy, 
this  has  always  been  the  policy  of  England.  It  has  generally  too 
been  that  of  France,  and  has  been  uniformly  so  since  the  dissolution 
of  what,  in  England,  is  commonly  called  their  Mississippi  Company. 
The  profits  of  the  trade,  therefore,  which  France  and  England  carry 
on  with  their  colonies,  though  no  doubt  somewhat  higher  than  if 
the  competition  was  free  to  all  other  nations,  are,  however,  by  no 
means  exorbitant ;  and  the  price  of  European  goods  accordingly 
is  not  extravagantly  high  in  the  greater  part  of  the  colonies  of  either 
of  those  nations. 

In  the  exportation  of  their  own  surplus  produce  too,  it  is  only 
with  regard  to  certain  commodities  that  the  colonies  of  Great  Britain 
are  confined  to  the  market  of  the  mother  country.  These  commo¬ 
dities  having  been  enumerated  in  the  Act  of  Navigation  and  in  some 
other  subsequent  Acts,  have  upon  that  account  been  called  enumerated 
commodities.  The  rest  are  called  non-enumerated ;  and  may  be 
exported  directly  to  other  countries,  provided  it  is  in  British  or 
Plantation  ships,  of  which  the  owners  and  three-fourths  of  the 
mariners  are  British  subjects. 

Among  the  non-enumerated  commodities  are  some  of  the  most 
important  productions  of  America  and  the  West  Indies;  grain  of 
all  sorts,  lumber,  salt  provisions,  fish,  sugar,  and  rum. 

Grain  is  naturally  the  first  and  principal  object  of  the  culture 
of  all  new  colonies.  By  allowing  them  a  very  extensive  market 
for  it,  the  law  encourages  them  to  extend  this  culture  much  beyond 
the  consumption  of  a  thinly-inhabited  country,  and  thus  to  provide 
beforehand  an  ample  subsistence  for  a  continually  increasing  popu¬ 
lation. 

In  a  country  quite  covered  with  wood,  where  timber  consequently 
is  of  little  or  no  value,  the  expense  of  clearing  the  ground  is  the 
principal  obstacle  to  improvement.  By  allowing  the  colonies  a  very 
extensive  market  for  their  lumber,  the  law  endeavours  to  facilitate 
improvement  by  raising  the  price  of  a  commodity  which  would 
otherwise  be  of  little  value,  and  thereby  enabling  them  to  make 
some  profit  of  what  would  otherwise  be  mere  expense. 

In  a  country  neither  half-peopled  nor  half-cultivated,  cattle 
naturally  multiply  beyond  the  consumption  of  the  inhabitants,  and 


158 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


are  often  upon  that  account  of  little  or  no  value.  But  it  is  ne¬ 
cessary,  it  has  already  been  shown,  that  the  price  of  cattle  should 
bear  a  certain  proportion  to  that  of  corn  before  the  greater  part 
of  the  lands  of  any  country  can  be  improved.  By  allowing  to 
American  cattle,  in  all  shapes,  dead  and  alive,  a  very  extensive 
market,  the  law  endeavours  to  raise  the  value  of  a  commodity  of 
which  the  high  price  is  so  very  essential  to  improvement.  The 
good  effects  of  this  liberty,  however,  must  be  somewhat  diminished 
by  the  4th  of  George  III,  c.  15,  which  puts  hides  and  skins  among 
the  enumerated  commodities,  and  thereb}r  tends  to  reduce  the  value 
of  American  cattle. 

To  increase  the  shipping  and  naval  power  of  Great  Britain,  by 
the  extension  of  the  fisheries  of  our  colonies,  is  an  object  which 
the  Legislature  seems  to  have  had  almost  constantly  in  view. 
Those  fisheries,  upon  this  account,  have  had  all  the  encouragement 
which  freedom  can  give  them,  and  they  have  flourished  accordingly. 
The  New  England  fishery  in  particular  was,  before  the  late  disturb¬ 
ances,  one  of  the  most  important,  perhaps,  in  the  world.  The  whale 
fishery,  which,  notwithstanding  an  extravagant  bounty,  is  in  Great 
Britain  carried  on  to  so  little  purpose,  that  in  the  opinion  of  many 
people  (which  I  do  not,  however,  pretend  to  warrant)  the  whole 
produce  does  not  much  exceed  the  value  of  the  bounties  which 
are  annually  paid  for  it,  is  in  New  England  carried  on  without 
any  bounty  to  a  very  great  extent.  Eish  is  one  of  the  principal 
articles  with  which  the  North  Americans  trade  to  Spain,  Portugal, 
and  the  Mediterranean. 

Sugar  was  originally  an  enumerated  commodity  which  could  be 
exported  only  to  Great  Britain.  But  in  1731,  upon  a  representation 
of  the  sugar  planters,  its  exportation  was  permitted  to  all  parts 
of  the  world.  The  restrictions,  however,  with  which  this  liberty 
was  granted,  joined  to  the  high  price  of  sugar  in  Great  Britain, 
have  rendered  it  in  a  great  measure  ineffectual.  Great  Britain 
and  her  colonies  still  continue  to  be  almost  the  sole  market  for 
all  the  sugar  produced  in  the  British  plantations.  Their  con¬ 
sumption  increases  so  fast  that,  though  in  consequence  of  the 
increasing  improvement  of  Jamaica  as  well  of  the  Ceded  Islands, 
the  importation  of  sugar  has  increased  very  greatly  within  these 
twenty  years,  the  exportation  to  foreign  countries  is  said  to  be  not 
much  greater  than  before. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


159 


Rum  is  a  very  important  article  in  tlie  trade  which  the  Americans 
carry  on  to  the  coast  of  Africa,  from  which  they  bring  back  negro 
slaves  in  return. 

If  the  whole  surplus  produce  of  America  in  grain  of  all  sorts, 
in  salt  provisions  and  in  fish,  had  been  put  into  the  enumeration, 
and  thereby  forced  into  the  market  of  Great  Britain,  it  would  have 
interfered  too  much  with  the  produce  of  the  industry  of  our  own 
people.  It  was  probably  not  so  much  from  any  regard  to  the 
interest  of  America,  as  from  a  jealousy  of  this  interference,  that 
those  important  commodities  have  not  only  been  kept  out  of  the 
enumeration,  but  that  the  importation  into  Great  Britain  of  all 
grain,  except  rice,  and  of  salt  provisions,  has,  in  the  ordinary  state 
of  the  law,  been  prohibited. 

The  non-enumerated  commodities  could  originally  be  exported  to 
all  parts  of  the  world.  Lumber  and  rice,  having  been  once  put 
into  the  enumeration,  when  they  were  afterwards  taken  out  of  it, 
were  confined,  as  to  the  European  market,  to  the  countries  that 
lie  south  of  Cape  Finisterre.  By  the  6th  of  George  III,  c.  52,  all 
non-enumerated  commodities  were  subjected  to  the  like  restriction. 
The  parts  of  Europe  which  lie  south  of  Cape  Finisterre  are  not 
manufacturing  countries,  and  we  were  less  jealous  of  the  colony 
ships  carrying  home  from  them  any  manufactures  which  could 
interfere  with  our  own. 

The  enumerated  commodities  are  of  two  sorts :  first,  such  as  are 
either  the  peculiar  produce  of  America,  or  as  cannot  be  produced, 
or  at  least  are  not  produced,  in  the  mother  country.  Of  this  kind 
are  molasses,  coffee,  cocoa-nuts,  tobacco,  pimento,  ginger,  whale-fins, 
raw  silk,  cotton- wool,  beaver  and  other  peltry  of  America,  indigo, 
fustic,  and  other  dyeing  woods ;  secondly,  such  as  are  not  the  peculiar 
produce  of  America,  but  which  are  and  may  be  produced  in  the 
mother  country, though  not  in  such  quantities  as  to  supply  the  greater 
part  of  her  demand,  which  is  principally  supplied  from  foreign 
countries.  Of  this  kind  are  all  naval  stores,  masts,  yards  and 
bowsprits,  far,  pitch  and  turpentine,  pig  and  bar  iron,  copper  ore, 
hides  and  skins,  pot  and  pearl  ashes.  The  largest  importation  of 
commodities  of  the  first  kind  could  not  discourage  the  growth  or 
interfere  with  the  sale  of  any  part  of  the  produce  of  the  mother 
country.  By  confining  them  to  the  home  market,  our  merchants, 
it  was  expected,  would  not  only  be  enabled  to  buy  them  cheaper 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


i  1 


*160 


in  the  plantations,  and  consequently  to  sell  them  with  a  better 
profit  at  home,  but  to  establish  between  the  plantations  and  foreign 
countries  an  advantageous  carrying  trade,  of  which  Great  Britain 
was  necessarily  to  be  the  centre  or  emporium,  as  the  European 
country  into  which  those  commodities  were  first  to  be  imported. 
The  importation  of  commodities  of  the  second  kind  might  be  so 
managed  too,  it  was  supposed,  as  to  interfere,  not  with  the  sale 
of  those  of  the  same  kind  which  wTere  produced  at  home,  but  with 
that  of  those  which  were  imported  from  foreign  countries ;  because, 
by  means  of  proper  duties,  they  might  be  rendered  always  some¬ 
what  dearer  than  the  former,  and  yet  a  good  deal  cheaper  than 
the  latter.  By  confining  such  commodities  to  the  home  market, 
therefore,  it  was  proposed  to  discourage  the  produce,  not  of  Great 
Britain,  but  of  some  foreign  countries  with  which  the  balance  of 
trade  was  believed  to  be  unfavourable  to  Great  Britain. 

The  prohibition  of  exporting  from  the  colonies  to  any  other 
country  but  Great  Britain,  masts,  yards  and  bowsprits,  far,  pitch 
and  turpentine,  naturally  tended  to  lower  the  price  of  timber  in 
the  colonies,  and  consequently  to  increase  the  expense  of  clearing 
their  lands,  the  principal  obstacle  to  their  improvement.  But 
about  the  beginning  of  the  present  century,  in  1703,  the  Pitch 
and  Tar  Company  of  Sweden  endeavoured  to  raise  the  price  of  their 
commodities  to  Great  Britain,  by  prohibiting  their  exportation, 
except  in  their  own  ships,  at  their  own  price,  and  in  such  quantities 
as  they  thought  proper.  In  order  to  counteract  this  notable  piece 
of  mercantile  policy,  and  to  render  herself  as  much  as  possible 
independent,  not  only  of  Sweden  but  of  all  the  other  Northern 
powers,  Great  Britain  gave  a  bounty  upon  the  importation  of  naval 
stores  from  America,  and  the  effect  of  this  bounty  was  to  raise 
the  price  of  timber  in  America,  much  more  than  the  confinement 
to  the  home  market  could  lower  it ;  and  as  both  regulations  were 
enacted  at  the  same  time,  their  joint  effect  was  rather  to  encourage 
than  to  discourage  the  clearing  of  land  in  America. 

Though  pig  and  bar  iron  too  have  been  put  among  the  enume¬ 
rated  commodities,  yet  as,  when  imported  from  America,  they  are 
exempted  from  considerable  duties  to  which  they  are  subject  when 
imported  from  any  other  country,  the  one  part  of  the  regulation 
contributes  more  to  encourage  the  erection  of  furnaces  in  America 
than  the  other  to  discourage  it.  There  is  no  manufacture  which 


8°ST0n 
C*EST, 

chap.  yii.  THE  WEALTH  OF  NATIONS .  161 

occasions  so  great  a  consumption  of  wood  as  a  furnace,  or  which 
can  contribute  so  much  to  the  clearing  of  a  country  overgrown 
with  it. 

The  tendency  of  some  of  these  regulations  to  raise  the  value 
of  timber  in  America,  and  thereby  to  facilitate  the  clearing  of  the 
land,  was  neither,  perhaps,  intended  nor  understood  by  the  Legis¬ 
lature.  Though  their  beneficial  effects,  however,  have  been  in 
this  respect  accidental,  they  have  not  upon  that  account  been  less 
real. 

The  most  perfect  freedom  of  trade  is  permitted  between  the 
British  colonies  of  America  and  the  West  Indies,  both  in  the 
enumerated  and  in  the  n on-enumerated  commodities.  Those  colonies 
are  now  become  so  populous  and  thriving,  that  each  of  them  finds 
in  some  of  the  others  a  great  and  extensive  market  for  every 
part  of  its  produce.  All  of  them  taken  together,  they  make  a  great 
internal  market  for  the  produce  of  one  another. 

The  liberality  of  England,  however,  towards  the  trade  of  her 
colonies  has  been  confined  chiefly  to  what  concerns  the  market  for 
their  produce,  either  in  its  rude  state,  or  in  what  may  be  called  the 
very  first  stage  of  manufacture.  The  more  advanced  or  more 
refined  manufactures  even  of  the  colony  produce,  the  merchants 
and  manufacturers  of  Great  Britain  choose  to  reserve  to  themselves, 
and  have  prevailed  upon  the  Legislature  to  prevent  their  establish¬ 
ment  in  the  colonies,  sometimes  by  high  duties,  and  sometimes  by 
absolute  prohibitions. 

While,  for  example,  Muscovado  sugars  from  the  British  planta¬ 
tions  pay  upon  importation  only  6s.  4 d.  the  hundredweight,  white 
sugars  pay  £1  is.  id.;  and  refined,  either  double  or  single,  in 
loaves,  3F4  2<s.  When  those  high  duties  were  imposed,  Great 

Britain  wag  the  sole,  and  she  still  continues  to  be  the  principal 
market  to  which  the  sugars  of  the  British  colonies  could  be  ex¬ 
ported.  They  amounted,  therefore,  to  a  prohibition,  at  first  of 
claying  or  refining  sugar  for  any  foreign  market,  and  at  present 
of  claying  or  refining  it  for  the  market,  which  takes  off,  perhaps, 
more  than  nine-tenths  of  the  whole  produce.  The  manufacture  of 
claying  or  refining  sugar  accordingly,  though  it  has  flourished  in 
all  the  sugar  colonies  of  France,  has  been  little  cultivated  in  any 
of  those  of  England,  except  for  the  market  of  the  colonies  them¬ 
selves.  While  Grenada  was  in  the  hands  of  the  French,  there  was 

VOL.  11. 


C°*-(-EQ£ 

IUT  HU. 


! 


M 


162 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


a  refinery  of  sugar,  by  claying  at  least,  upon  almost  every  planta¬ 
tion.  Since  it  fell  into  those  of  the  English,  almost  all  works  of 
this  kind  have  been  given  up,  and  there  are  at  present  (October 
1 773),  I  am  assured,  not  above  two  or  three  remaining  in  the 
island.  At  present,  however,  by  an  indulgence  of  the  Custom¬ 
house,  clayed  or  refined  sugar,  if  reduced  from  loaves  into  powder, 
is  commonly  imported  as  Muscovado. 

While  Great  Britain  encourages  in  America  the  manufactures 
of  pig  and  bar  iron,  by  exempting  them  from  duties  to  which  the 
like  commodities  are  subject  when  imported  from  any  other  country, 
she  imposes  an  absolute  prohibition  upon  the  erection  of  steel 
furnaces  and  slit-mills  in  any  of  her  American  plantations.  She 
will  not  suffer  her  colonists  to  work  in  those  more  refined  manu¬ 
factures,  even  for  their  own  consumption ;  but  insists  upon  their 
purchasing  of  her  merchants  and  manufacturers  all  goods  of  this 
kind  which  they  have  occasion  for. 

She  prohibits  the  exportation  from  one  province  to  another  by 
water,  and  even  the  carriage  by  land  upon  horseback  or  in  a  cart, 
of  hats,  of  wools  and  woollen  goods,  of  the  produce  of  America; 
a  regulation  which  effectually  prevents  the  establishment  of  any 
manufacture  of  such  commodities  for  distant  sale,  and  confines  the 
industry  of  her  colonists  in  this  way  to  such  coarse  and  household 
manufactures  as  a  private  family  commonly  makes  for  its  own 
use,  or  for  that  of  some  of  its  neighbours  in  the  same  province. 

To  prohibit  a  great  people,  however,  from  making  all  that  they 
can  of  every  part  of  their  own  produce,  or  from  employing  their 
stock  and  industry  in  the  way  that  they  judge  most  advantageous 
to  themselves,  is  a  manifest  violation  of  the  most  sacred  rights  of 
mankind.  Unjust,  however,  as  such  prohibitions  may  be,  they 
have  not  hitherto  been  very  hurtful  to  the  colonies.  Land  is  still 
so  cheap,  and,  consequently,  labour  so  dear  among  them,  that  they 
can  import  from  the  mother  country  almost  all  the  more  refined 
or  more  advanced  manufactures  cheaper  than  they  could  make  them 
for  themselves.  Though  they  had  not,  therefore,  been  prohibited 
from  establishing  such  manufactures,  yet  in  their  present  state  of 
improvement,  a  regard  to  their  own  interest  would,  probably,  have 
prevented  them  from  doing  so.  In  their  present  state  of  improve¬ 
ment,  those  prohibitions,  perhaps,  without  cramping  their  industry, 
or  restraining  it  from  any  employment  to  which  it  would  have 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


163 


gone  of  its  own  accord,  are  only  impertinent  badges  of  slavery  im¬ 
posed  upon  them,  without  any  sufficient  reason,  by  the  groundless 
jealousy  of  the  merchants  and  manufacturers  of  the  mother  country. 
In  a  more  advanced  state,  they  might  be  really  oppressive  and 
insupportable. 

Great  Britain  too,  as  she  confines  to  her  own  market  some  of  the 
important  productions  of  the  colonies,  so  in  compensation  she  gives 
to  some  of  them  an  advantage  in  that  market ;  sometimes  by  im¬ 
posing  higher  duties  upon  the  like  productions  when  imported  from 
other  countries,  and  sometimes  by  giving  bounties  upon  their  im¬ 
portation  from  the  colonies.  In  the  first  way  she  gives  an  advan¬ 
tage  in  the  home  market  to  the  sugar,  tobacco,  and  iron  of  her  own 
colonies,  and  in  the  second  to  their  raw  silk,  to  their  hemp  and  flax, 
to  their  indigo,  to  their  naval  stores,  and  to  their  building-timber. 
This  second  way  of  encouraging  the  colony  produce  by  bounties 
upon  importation,  is,  so  far  as  I  have  been  able  to  learn,  peculiar 
to  Great  Britain.  The  first  is  not.  Portugal  does  not  content 
herself  with  imposing  higher  duties  upon  the  importation  of 
tobacco  from  any  other  country,  but  prohibits  it  under  the  severest 
penalties. 

With  regard  to  the  importation  of  goods  from  Europe,  England 
has  likewise  dealt  more  liberally  with  her  colonies  than  any  other 
nation. 

Great  Britain  allows  a  part,  almost  always  the  half,  generally  a 
larger  portion,  and  sometimes  the  whole  of  the  duty  which  is  paid 
upon  the  importation  of  foreign  goods,  to  be  drawn  back  upon  their 
exportation  to  any  foreign  country.  No  independent  foreign  country, 
it  was  easy  to  foresee,  would  receive  them  if  they  came  to  it  loaded 
with  the  heavy  duties  to  which  almost  all  foreign  goods  are  subjected 
on  their  importation  into  Great  Britain.  Unless,  therefore,  some 
part  of  those  duties  was  drawn  back  upon  exportation,  there  was  an 
end  of  the  carrying  trade  ;  a  trade  so  much  favoured  by  the  mer¬ 
cantile  system. 

Our  colonies,  however,  are  by  no  means  independent  foreign 
countries ;  and  Great  Britain  having  assumed  to  herself  the  exclu¬ 
sive  right  of  supplying  them  with  all  goods  from  Europe,  might 
have  forced  them  (in  the  same  manner  as  other  countries  have  done 
their  colonies),  to  receive  such  goods,  loaded  with  all  the  same  duties 
which  they  paid  in  the  mother  country.  But,  on  the  contrary,  till 

M  3 


164 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


1763,  the  same  drawbacks  were  paid  upon  the  exportation  of  the 
greater  part  of  foreign  goods  to  our  colonies  as  to  any  independent 
foreign  country.  In  1763,  indeed,  by  the  4th  of  Geo.  Ill,  c.  15* 
this  indulgence  was  a  good  deal  abated,  and  it  was  enacted,  ‘  That 
no  part  of  the  duty  called  the  old  subsidy  should  be  drawn  hack  for 
any  goods  of  the  growth,  production,  or  manufacture  of  Europe 
or  the  East  Indies,  which  should  be  exported  from  this  kingdom  to 
any  British  colony  or  plantation  in  America ;  wines,  white  calicoes 
and  muslins  excepted.’  Before  this  law,  many  different  sorts  of 
foreign  goods  might  have  been  bought  cheaper  in  the  plantations 
than  in  the  mother  country;  and  some  may  still. 

Of  the  greater  part  of  the  regulations  concerning  the  colony 
trade,  the  merchants  who  carry  it  on,  it  must  be  observed,  have 
been  the  principal  advisers.  We  must  not  wonder,  therefore,  if,  in 
the  greater  part  of  them,  their  interest  has  been  more  considered 
than  either  that  of  the  colonies  or  that  of  the  mother  country.  In 
their  exclusive  privilege  of  supplying  the  colonies  with  all  the  goods 
which  they  wanted  from  Europe,  and  of  purchasing  all  such  parts 
of  their  surplus  produce  as  could  not  interfere  with  any  of  the  trades 
which  they  themselves  carried  on  at  home,  the  interest  of  the 
colonies  was  sacrificed  to  the  interest  of  those  merchants.  In  allow¬ 
ing  the  same  drawbacks  upon  the  re-exportation  of  the  greater  part 
of  European  and  East  India  goods  to  the  colonies,  as  upon  their 
re-exportation  to  any  independent  country,  the  interest  of  the 
mother  country  was  sacrificed  to  it,  even  according  to  the  mercantile 
ideas  of  that  interest.  It  was  for  the  interest  of  the  merchants  to 
pay  as  little  as  possible  for  the  foreign  goods  which  they  sent  to  the 
colonies,  and,  consequently,  to  get  back  as  much  as  possible  of  the 
duties  which  they  advanced  upon  their  importation  into  Great 
Britain.  They  might  thereby  be  enabled  to  sell  in  the  colonies, 
either  the  same  quantity  of  goods  with  a  greater  profit,  or  a  greater 
quantity  with  the  same  profit,  and,  consequently,  to  gain  something 
either  in  the  one  way  or  the  other.  It  was,  likewise,  for  the  in¬ 
terest  of  the  colonies  to  get  all  such  goods  as  cheap  and  in  as  great 
abundance  as  possible.  But  this  might  not  always  be  for  the 
interest  of  the  mother  country.  She  might  frequently  suffer  both 
in  her  revenue,  by  giving  back  a  great  part  of  the  duties  which  had 
been  paid  upon  the  importation  of  such  goods  ;  and  in  her  manu¬ 
factures,  by  being  undersold  in  the  colony  market,  in  consequence 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


1 65 


of  the  easy  terms  upon  which  foreign  manufactures  could  be  carried 
thither  by  means  of  those  drawbacks.  The  progress  of  the  linen 
manufacture  of  Great  Britain,  it  is  commonly  said,  has  been  a  good 
deal  retarded  by  the  drawbacks  upon  the  re-exportation  of  German 
linen  to  the  American  colonies. 

But  though  the  policy  of  Great  Britain  with  regard  to  the  trade 
of  her  colonies  has  been  dictated  by  the  same  mercantile  spirit  as 
that  of  other  nations,  it  has,  however,  upon  the  whole,  been  less 
illiberal  and  oppressive  than  that  of  any  of  them. 

In  everything,  except  their  foreign  trade,  the  liberty  of  the 
English  colonists  to  manage  their  own  affairs  their  own  way  is  com¬ 
plete.  It  is  in  every  respect  equal  to  that  of  their  fellow-citizens  at 
home,  and  is  secured  in  the  same  manner,  by  an  assembly  of  the 
representatives  of  the  people,  who  claim  the  sole  right  of  imposing 
taxes  for  the  support  of  the  colony  government.  The  authority  of 
this  assembly  overawes  the  executive  power,  and  neither  the  meanest 
nor  the  most  obnoxious  colonist,  as  long  as  he  obeys  the  law,  has 
anything  to  fear  from  the  resentment,  either  of  the  governor,  or  of 
any  other  civil  or  military  officer  in  the  province.  The  colony 
assemblies,  though,  like  the  House  of  Commons  in  England,  they 
are  not  always  a  very  equal  representation  of  the  people,  yet  they 
approach  more  nearly  to  that  character  ;  and  as  the  executive  power 
either  has  not  the  means  to  corrupt  them,  or,  on  account  of  the  sup¬ 
port  which  it  receives  from  the  mother  country,  is  not  under  the 
necessity  of  doing  so,  they  are  perhaps  in  general  more  influenced 
by  the  inclinations  of  their  constituents.  The  councils,  which,  in 
the  colony  legislatures,  correspond  to  the  House  of  Lords  in  Great 
Britain,  are  not  composed  of  an  hereditary  nobility.  In  some  of 
the  colonies,  as  in  three  of  the  governments  of  New  England,  those 
councils  are  not  appointed  by  the  king,  but  chosen  by  the  represen¬ 
tatives  of  the  people.  In  none  of  the  English  colonies  is  there  any 
hereditary  nobility.  In  all  of  them,  indeed,  as  in  all  other  free 
countries,  the  descendant  of  an  old  colony  family  is  more  respected 
than  an  upstart  of  equal  merit  and  fortune ;  but  he  is  only  more 
respected,  and  he  has  no  privileges  by  which  he  can  be  troublesome 
to  his  neighbours.  Before  the  commencement  of  the  present  dis¬ 
turbances,  the  colony  assemblies  had  not  only  the  legislative,  but  a 
part  of  the  executive  power.  In  Connecticut  and  Rhode  Island, 
they  elected  the  governor.  In  the  other  colonies  they  appointed 


166 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


the  revenue  officers  who  collected  the  taxes  imposed  by  those 
respective  assemblies,  to  whom  those  officers  were  immediately 
responsible.  There  is  more  equality,  therefore,  among  the  English 
colonists  than  among  the  inhabitants  of  the  mother  country.  Their 
manners  are  more  republican,  and  their  governments,  those  of  three 
of  the  provinces  of  New  England  in  particular,  have  hitherto  been 
more  republican  too. 

The  absolute  governments  of  Spain,  Portugal,  and  France,  on  the 
contrary,  take  place  in  their  colonies  ;  and  the  discretionary  powers 
which  such  governments  commonly  delegate  to  all  their  inferior 
officers  are,  on  account  of  the  great  distance,  naturally  exercised 
there  with  more  than  ordinary  violence.  Under  all  absolute  govern¬ 
ments  there  is  more  liberty  in  the  capital  than  in  any  other  part  of 
the  country.  The  sovereign  himself  can  never  have  either  interest 
or  inclination  to  pervert  the  order  of  justice,  or  to  oppress  the  great 
body  of  the  people.  In  the  capital  his  presence  overawes  more  or 
less  all  his  inferior  officers,  who  in  the  remoter  provinces,  from 
whence  the  complaints  of  the  people  are  less  likely  to  reach  him, 
can  exercise  their  tyranny  with  much  more  safety.  But  the 
European  colonies  in  America  are  more  remote  than  the  most  distant 
provinces  of  the  greatest  empires  which  had  ever  been  known 
before.  The  government  of  the  English  colonies  is  perhaps  the 
only  one  which,  since  the  world  began,  could  give  perfect  security 
to  the  inhabitants  of  so  very  distant  a  province.  The  administra¬ 
tion  of  the  French  colonies,  however,  has  always  been  conducted 
with  more  gentleness  and  moderation  than  that  of  the  Spanish  and 
Portuguese.  This  superiority  of  conduct  is  suitable  both  to  the 
character  of  the  French  nation,  and  to  what  forms  the  character  of 
every  nation,  the  nature  of  their  government,  which,  though  arbi¬ 
trary  and  violent  in  comparison  with  that  of  Great  Britain,  is  legal 
and  free  in  comparison  with  those  of  Spain  and  Portugal. 

It  is  in  the  progress  of  the  North  American  colonies,  however, 
that  the  superiority  of  the  English  policy  chiefly  appears.  The 
progress  of  the  sugar  colonies  of  France  has  been  at  Jeast  equal, 
perhaps  superior,  to  that  of  the  greater  part  of  those  of  England ; 
and  yet  the  sugar  colonies  of  England  enjoy  a  free  government 
nearly  of  the  same  kind  with  that  which  takes  place  in  her  colonies 
of  North  America.  But  the  sugar  colonies  of  France  are  not  dis¬ 
couraged,  like  those  of  England,  from  refining  their  own  sugar ; 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


167 


and,  what  is  of  still  greater  importance,  the  genius  of  their  govern¬ 
ment  naturally  introduces  a  better  management  of  their  negro 
slaves. 

In  all  European  colonies  the  culture  of  the  sugar-cane  is  carried 
on  by  negro  slaves.  The  constitution  of  those  who  have  been  born 
in  the  temperate  climate  of  Europe  could  not,  it  is  supposed,  sup¬ 
port  the  labour  of  digging  the  ground  under  the  burning  sun  of 
the  West  Indies;  and  the  culture  of  the  sugar-cane,  as  it  is 
managed  at  present,  is  all  hand  labour,  though,  in  the  opinion  of 
many,  the  drill  plough  might  be  introduced  into  it  with  great 
advantage.  But,  as  the  profit  and  success  of  the  cultivation  which 
is  carried  on  by  means  of  cattle,  depend  very  much  upon  the  good 
management  of  those  cattle,  so  the  profit  and  success  of  that  which 
is  carried  on  by  slaves  must  depend  equally  upon  the  good  manage¬ 
ment  of  those  slaves ;  and  in  the  good  management  of  their  slaves 
the  French  planters,  I  think  it  is  generally  allowed,  are  superior  to 
the  English.  The  law,  so  far  as  it  gives  some  weak  protection  to 
the  slave  against  the  violence  of  his  master,  is  likely  to  be  better 
executed  in  a  colony  where  the  government  is  in  a  great  measure 
arbitrary,  than  in  one  where  it  is  altogether  free.  In  every  country 
where  the  unfortunate  law  of  slavery  is  established,  the  magistrate, 
when  he  protects  the  slave,  intermeddles  in  some  measure  in  the 
management  of  the  private  property  of  the  master ;  and,  in  a  free 
country,  where  the  master  is  perhaps  either  a  member  of  the  colony 
assembly,  or  an  elector  of  such  a  member,  he  dare  not  do  this  but 
with  the  greatest  caution  and  circumspection.  The  respect  which 
he  is  obliged  to  pay  to  the  master,  renders  it  more  difficult  for  him 
to  protect  the  slave.  But  in  a  country  where  the  government  is  in 
a  great  measure  arbitrary,  where  it  is  usual  for  the  magistrate  to 
intermeddle  even  in  the  management  of  the  private  property  of 
individuals,  and  to  send  them,  perhaps,  a  lettre  de  cachet  if  they  do 
not  manage  it  according  to  his  liking,  it  is  much  easier  for  him  to 
give  some  protection  to  the  slave  ;  and  common  humanity  naturally 
disposes  him  to  do  so.  The  protection  of  the  magistrate  renders 
the  slave  less  contemptible  in  the  eyes  of  his  master,  who  is  thereby 
induced  to  consider  him  with  more  regard,  and  to  treat  him  with 
more  gentleness.  Gentle  usage  renders  the  slave  not  only  more 
faithful,  but  more  intelligent,  and  therefore,  upon  a  double  account, 
more  useful.  He  approaches  more  to  the  condition  of  a  free 


168 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


servant,  and  may  possess  some  degree  of  integrity  and  attachment 
to  his  master  s  interest — virtues  which  frequently  belong  to  free 
servants,  but  which  never  can  belong  to  a  slave,  who  is  treated  as 
slaves  commonly  are  in  countries  where  the  master  is  perfectly  free 
and  secure.1 

That  the  condition  of  a  slave  is  better  under  an  arbitrary  than 
under  a  free  government,  is,  I  believe,  supported  by  the  history  of 
all  ages  and  nations.  In  the  Roman  history,  the  first  time  we  read 
of  the  magistrate  interposing  to  protect  the  slave  from  the  violence 
of  his  master  is  under  the  Emperors.  When  Yedius  Pollio,2  in  the 
presence  of  Augustus,  ordered  one  of  his  slaves,  who  had  committed 
a  slight  fault,  to  be  cut  into  pieces  and  thrown  into  his  fishpond  in 
order  to  feed  his  fishes,  the  Emperor  commanded  him,  with  indig¬ 
nation,  to  emancipate  immediately  not  only  that  slave  but  all  the 
others  that  belonged  to  him.  Under  the  Republic,  no  magistrate 
could  have  had  authority  enough  to  protect  the  slave,  much  less  to 
punish  the  master. 

The  stock,  it  is  to  be  observed,  which  has  improved  the  sugar 
colonies  of  France,  particularly  the  great  colony  of  St.  Domingo, 
has  been  raised  almost  entirely  from  the  gradual  improvement  and 
cultivation  of  those  colonies.  It  has  been  almost  altogether  the 
produce  of  the  soil  and  of  the  industry  of  the  colonists,  or,  what  comes 
to  the  same  thing,  the  price  of  that  produce  gradually  accumulated 
by  good  management,  and  employed  in  raising  a  still  greater  pro¬ 
duce.  But  the  stock  which  has  improved  and  cultivated  the  sugar 
colonies  of  England  has,  a  great  part  of  it,  been  sent  out  from 
England,  and  has  by  no  means  been  altogether  the  produce  of  the 
soil  and  industry  of  the  colonists.  The  prosperity  of  the  English 
sugar  colonies  has  been,  in  a  great  measure,  owing  to  the  great 
riches  of  England,  of  which  a  part  has  overflowed,  if  one  may  say  so, 
upon  those  colonies.  But  the  prosperity  of  the  sugar  colonies  of 
France  has  been  entirely  owing  to  the  good  conduct  of  the  colonists, 
which  must  therefore  have  had  some  superiority  over  that  of  the 
English  ;  and  this  superiority  has  been  marked  in  nothing  so  much 
as  in  the  good  management  of  their  slaves. 


1  How  true  this  reasoning  is,  will  be 
manifest  from  the  evidence  afforded  us  as 
to  the  condition  of  the  plantation  slaves 
in  the  American  Union,  before  the  out¬ 
break  of  the  American  civil  war.  Mrs. 


Stowe’s  tale  was  a  fiction,  and  therefore 
may  be  said  to  be  an  exaggeration,  but 
there  is  no  exaggeration  in  the  accounts 
given  by  Mr.  Olmsted  and  Mrs.  Butler. 

2  The  story  is  told  in  Seneca  de  Ira,  iii.40. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


169 


Sucli  have  been  the  general  outlines  of  the  policy  of  the  different 
European  nations  with  regard  to  their  colonies. 

The  policy  of  Europe,  therefore,  has  very  little  to  boast  of, 
either  in  the  original  establishment,  or,  so  far  as  concerns  their 
internal  government,  in  the  subsequent  prosperity  of  the  colonies  of 
America. 

Folly  and  injustice  seem  to  have  been  the  principles  which  pre¬ 
sided  over  and  directed  the  first  project  of  establishing  those 
colonies ;  the  folly  of  hunting  after  gold  and  silver  mines,  and  the 
injustice  of  coveting  the  possession  of  a  country  whose  harmless 
natives,  far  from  having  ever  injured  the  people  of  Europe,  had 
received  the  first  adventurers  with  every  mark  of  kindness  and 
hospitality. 

The  adventurers,  indeed,  who  formed  some  of  the  later  establish¬ 
ments,  joined  to  the  chimerical  project  of  finding  gold  and  silver 
mines  other  motives  more  reasonable  and  more  laudable ;  but  even 
these  motives  do  very  little  honour  to  the  policy  of  Europe. 

The  English  Puritans,  restrained  at  home,  fled  for  freedom  to 
America,  and  established  there  the  four  governments  of  New 
England.  The  English  Catholics,  treated  with  much  greater  in¬ 
justice,  established  that  of  Maryland ;  the  Quakers  tfiat  of  Penn¬ 
sylvania.  The  Portuguese  Jews,  persecuted  by  the  Inquisition, 
stripped  of  their  fortunes,  and  banished  to  Brazil,  introduced  by 
their  example  some  sort  of  order  and  industry  among  the  transported 
felons  and  strumpets  by  whom  that  colony  was  originally  peopled, 
and  taught  them  the  culture  of  the  sugar-cane.  Upon  all  these 
different  occasions  it  was  not  the  wisdom  and  policy,  but  the  dis¬ 
order  and  injustice  of  the  European  governments,  which  peopled 
and  cultivated  America. 

In  effectuating  some  of  the  most  important  of  these  establish¬ 
ments,  the  different  governments  of  Europe  had  as  little  merit  as  in 
projecting  them.  The  conquest  of  Mexico  was  the  project,  not  of 
the  council  of  Spain,  but  of  a  governor  of  Cuba ;  and  it  was 
effectuated  by  the  spirit  of  the  bold  adventurer  to  whom  it  was 
entrusted,  in  spite  of  everything  which  that  governor,  who  soon 
repented  of  having  trusted  such  a  person,  could  do  to  thwart  it. 
The  conquerors  of  Chili  and  Peru,  and  of  almost  all  the  other  Spanish 
settlements  upon  the  continent  of  America,  carried  out  with  them 
no  other  public  encouragement  but  a  general  permission  to  make 


170 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


settlements  and  conquests  in  the  name  of  the  King  of  Spain. 
Those  adventures  were  all  at  the  private  risk  and  expense  of  the 
adventurers.  The  Government  of  Spain  contributed  scarce  any¬ 
thing  to  any  of  them  ;  that  of  England  contributed  as  little 
towards  effectuating  the  establishment  of  some  of  its  most  im¬ 
portant  colonies  in  North  America. 

When  those  establishments  were  effectuated,  and  had  become  so 
considerable  as  to  attract  the  attention  of  the  mother  country,  the 
first  regulations  which  she  made  with  regard  to  them  had  always  in 
view  to  secure  to  herself  the  monopoly  of  their  commerce,  to  confine 
their  market  and  to  enlarge  her  own  at  their  expense,  and,  con¬ 
sequently,  rather  to  damp  and  discourage  than  to  quicken  and 
forward  the  course  of  their  prosperity.  In  the  different  ways  in 
which  this  monopoly  has  been  exercised  consists  one  of  the  most 
essential  differences  in  the  policy  of  the  different  European  nations 
with  regard  to  their  colonies.  The  best  of  them  all,  that  of 
England,  is  only  somewhat  less  illiberal  and  oppressive  than  that  of 
any  of  the  rest.1 

In  what  way,  therefore,  has  the  policy  of  Europe  contributed 
either  to  the  first  establishment  or  to  the  present  grandeur  of  the 
colonies  of  America  ?  In  one  way,  and  in  one  way  only,  it  has 
contributed  a  good  deal.  Magna  virum  Mater  !  It  bred  and  formed 
the  men  who  were  capable  of  achieving  such  great  actions  and  of 
laying  the  foundation  of  so  great  an  empire ;  and  there  is  no  other 
quarter  of  the  world  of  which  the  policy  is  capable  of  forming,  or 
has  ever  actually  and  in  fact  formed  such  men.  The  colonies  owe 
to  the  policy  of  Europe  the  education  and  great  views  of  their 
active  and  enterprising  founders  ;  and  some  of  the  greatest  and 
most  important  of  them,  so  far  as  concerns  their  internal  government, 
owe  to  it  scarce  anything  else. 


1  It  is  plain  that  the  mercantile  policy 
which  this  country  carried  out  with  the 
American  plantations  was  one  in  which 
both  parties  suffered  a  loss.  The  colo¬ 
nies  were  allowed  a  monopoly  of  sale  in 
England ;  the  English  merchants  as¬ 
sumed  a  monoply  of  exportation  to  the 
colonies.  Had  the  trade  between  the 
mother  country  and  its  dependencies 
been  natural,  it  is  manifest  that  these 
irregularities  were  superfluous ;  if  it  was 
not  natural,  it  is  equally  manifest  that 
the  regulations  were  mischievous.  In 


point  of  fact,  both  countries  adopted,  in 
so  far  as  the  principles  of  the  colonial 
system  restrained  the  market,  the  worst 
and  least  profitable  mode  of  carrying 
on  their  trade.  But  so  wedded  were 
the  statesmen  of  the  age  to  their  theory, 
that  the  concession  of  Independence  was 
interpreted  as  necessitating  the  down¬ 
fall  of  British  commerce,  and  the  only 
consolation  which  the  English  Govern¬ 
ment  felt  was  that  Great  Britain  had 
still  some  colonies  left. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


171 


PART  III. 

Of  the  Advantages  which  Europe  has  derived  from  the  Discovery  of 

America,  and  from  that  of  a  passage  to  the  East  Indies  by  the 

Cape  of  Good  Hope . 

Such  are  the  advantages  which  the  colonies  of  America  have 
derived  from  the  policy  of  Europe. 

What  are  those  which  Europe  has  derived  from  the  discovery  and 
colonisation  of  America  ? 

Those  advantages  may  be  divided,  first,  into  the  general  ad¬ 
vantages  which  Europe,  considered  as  one  great  country,  has 
derived  from  those  great  events ;  and,  secondly,  into  the  particular 
advantages  which  each  colonising  countiy  has  derived  from  the 
colonies  which  particularly  belong  to  it,  in  consequence  of  the 
authority  or  dominion  which  it  exercises  over  them. 

The  general  advantages  which  Europe,  considered  as  one  great 
country,  has  derived  from  the  discovery  and  colonisation  of 
America,  consist,  first,  in  the  increase  of  its  enjoyments ;  and, 
secondly,  in  the  augmentation  of  its  industry. 

The  surplus  produce  of  America,  imported  into  Europe,  furnishes 
the  inhabitants  of  this  great  continent  with  a  variety  of  commodities 
which  they  could  not  otherwise  have  possessed,  some  for  conveni- 
ency  and  use,  some  for  pleasure,  and  some  for  ornament,  and 
thereby  contributes  to  increase  their  enjoyments. 

The  discovery  and  colonisation  of  America,  it  will  readily  be 
allowed,  have  contributed  to  augment  the  industry,  first,  of  all  the 
countries  which  trade  to  it  directly,  such  as  Spain,  Portugal,  France, 
and  England ;  and,  secondly,  of  all  those  which,  without  trading  to 
it  directly,  send,  through  the  medium  of  other  countries,  goods  to  it 
of  their  own  produce  j  such  as  Austrian  Flanders  and  some  provinces 
of  Germany,  which,  through  the  medium  of  the  countries  before 
mentioned,  send  to  it  a  considerable  quantity  of  linen  and  other 
goods.  All  such  countries  have  evidently  gained  a  more  extensive 
market  for  their  surplus  produce,  and  must  consequently  have  been 
encouraged  to  increase  its  quantity. 

But  that  those  great  events  should  likewise  have  contributed  to 
encourage  the  industry  of  countries  such  as  Hungary  and  Poland, 


172 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


which  may  never,  perhaps,  have  sent  a  single  commodity  of  their 
own  produce  to  America,  is  not,  perhaps,  altogether  so  evident. 
That  those  events  have  done  so,  however,  cannot  be  doubted.  Some 
part  of  the  produce  of  America  is  consumed  in  Hungary  and 
Poland,  and  there  is  some  demand  there  for  the  sugar,  chocolate,  and 
tobacco  of  that  new  quarter  of  the  world.  But  those  commodities 
must  be  purchased  with  something  which  is  either  the  produce  of 
the  industry  of  Hungary  and  Poland,  or  with  something  which  had 
been  purchased  with  some  part  of  that  produce.  Those  commodi¬ 
ties  of  America  are  new  values,  new  equivalents,  introduced  into 
Hungary  and  Poland,  to  be  exchanged  there  for  the  surplus  produce 
of  those  countries.  By  being  carried  thither  they  create  a  new  and 
more  extensive  market  for  that  surplus  produce.  They  raise  its  value, 
and  thereby  contribute  to  encourage  its  increase.  Though  no  part 
of  it  may  ever  be  carried  to  America,  it  may  be  carried  to  other 
countries  which  purchase  it  with  a  part  of  their  share  of  the  surplus 
produce  of  America  ;  and  it  may  find  a  market  by  means  of  the 
circulation  of  that  trade  which  was  originally  put  into  motion  by 
the  surplus  produce  of  America. 

Those  great  events  may  even  have  contributed  to  increase  the 
enjoyments  and  to  augment  the  industry  of  countries  which  not 
only  never  sent  any  commodities  to  America,  but  never  received  any 
from  it.  Even  such  countries  may  have  received  a  greater  abun¬ 
dance  of  other  commodities  from  countries  of  which  the  surplus 
produce  had  been  augmented  by  means  of  the  American  trade. 
This  greater  abundance,  as  it  must  necessarily  have  increased  their 
enjoyments,  so  it  must  likewise  have  augmented  their  industry.  A 
greater  number  of  new  equivalents  of  some  kind  or  other  must  have 
been  presented  to  them  to  be  exchanged  for  the  surplus  produce  of 
that  industry.  A  more  extensive  market  must  have  been  created 
for  that  surplus  produce,  so  as  to  raise  its  value,  and  thereby 
encourage  its  increase.  The  mass  of  commodities  annually  thrown 
into  the  great  circle  of  European  commerce,  and  by  its  various 
revolutions  annually  distributed  among  all  the  different  nations 
comprehended  within  it,  must  have  been  augmented  by  the  whole 
surplus  produce  of  America.  A  greater  share  of  this  greater  mass, 
therefore,  is  likely  to  have  fallen  to  each  of  those  nations,  to  have 
increased  their  enjoyments  and  augmented  their  industry. 

The  exclusive  trade  of  the  mother  countries  tends  to  diminish,  or, 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


173 


at  least,  to  keep  down  below  what  they  would  otherwise  rise  to,  both 
the  enjoyments  and  industry  of  all  those  nations  in  general,  and  of 
the  American  colonies  in  particular.  It  is  a  dead  weight  upon  the 
action  of  one  of  the  great  springs  which  puts  into  motion  a  great 
part  of  the  business  of  mankind.  By  rendering  the  colony  produce/ 
dearer  in  all  other  countries,  it  lessens  its  consumption,  and  thereby 
cramps  the  industry  of  the  colonies,  and  both  the  enjoyments  and 
the  industry  of  all  other  countries,  which  both  enjoy  less  when  they 
pay  more  for  what  they  enjoy,  and  produce  less  when  they  get  less 
for  what  they  produce.  By  rendering  the  produce  of  all  other  coun¬ 
tries  dearer  in  the  colonies,  it  cramps,  in  the  same  manner,  the  in¬ 
dustry  of  all  other  countries,  and  both  the  enjoyments  and  the  in¬ 
dustry  of  the  colonies.  It  is  a  clog  which,  for  the  supposed  benefit 
of  some  particular  countries,  embarrasses  the  pleasures  and  encum¬ 
bers  the  industry  of  all  other  countries  ;  but  of  the  colonies  more 
than  of  any  other.  It  not  only  excludes,  as  much  as  possible,  all 
other  countries  from  one  particular  market,  but  it  confines,  as  much 
as  possible,  the  colonies  to  one  particular  market;  and  the  difference 
is  very  great  between  being  excluded  from  one  particular  market, 
when  all  others  are  open,  and  being  confined  to  one  particular 
market,  when  all  others  are  shut  up.  The  surplus  produce  of  the 
colonies,  however,  is  the  original  source  of  all  that  increase  of  en¬ 
joyments  and  industry  which  Europe  derives  from  the  discovery  and 
colonisation  of  America;  and  the  exclusive  trade  of  the  mother 
countries  tends  to  render  this  source  much  less  abundant  than  it 
otherwise  would  be. 

The  particular  advantages  which  each  colonising  country  derives 
from  the  colonies  which  particularly  belong  to  it,  are  of  two  dif¬ 
ferent  kinds  :  first,  those  common  advantages  which  every  empire 
derives  from  the  provinces  subject  to  its  dominion ;  and,  secondly, 
those  peculiar  advantages  which  are  supposed  to  result  from  pro¬ 
vinces  of  so  very  peculiar  a  nature  as  the  European  colonies  of 
America. 

The  common  advantages  which  every  empire  derives  from  the 
provinces  subject  to  its  dominion,  consist,  first,  in  the  military  force 
which  they  furnish  for  its  defence ;  and,  secondly,  in  the  revenue 
which  they  furnish  for  the  support  of  its  civil  government.  The 
Roman  colonies  furnished  occasionally  both  one  and  the  other.  The 
Greek  colonies,  sometimes,  furnished  a  military  force ;  but  seldom 


174 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


any  revenue.  They  seldom  acknowledged  themselves  subject  to  the 
dominion  of  the  mother  city.  They  were  generally  her  allies  in 
war,  but  very  seldom  her  subjects  in  peace. 

The  European  colonies  of  America  have  never  yet  furnished  any 
military  force  for  the  defence  of  the  mother  country.  Their  military 
force  has  never  yet  been  sufficient  for  their  owrn  defence ;  and  in  the 
different  wars  in  which  the  mother  countries  have  been  engaged, 
the  defence  of  their  colonies  has  generally  occasioned  a  very  con¬ 
siderable  distraction  of  the  military  force  of  those  countries.  In 
this  respect,  therefore,  all  the  European  colonies  have,  without  ex¬ 
ception,  been  a  cause  rather  of  weakness  than  of  strength  to  their 
respective  mother  countries. 

The  colonies  of  Spain  and  Portugal  only  have  contributed  any 
revenue  towards  the  defence  of  the  mother  country,  or  the  support 
of  her  civil  government.  The  taxes  which  have  been  levied  upon 
those  of  other  European  nations,  upon  those  of  England  in  par¬ 
ticular,  have  seldom  been  equal  to  the  expense  laid  out  upon  them 
I  in  time  of  peace,  and  never  sufficient  to  defray  that  which  they  occa¬ 
sioned  in  time  of  war.  Such  colonies,  therefore,  have  been  a  source 
of  expense  and  not  of  revenue  to  their  respective  mother  countries. 

The  advantages  of  such  colonies  to  their  respective  mother  coun¬ 
tries  consist  altogether  in  those  peculiar  advantages  which  are 
supposed  to  result  from  provinces  of  so  very  peculiar  a  nature  as 
the  European  colonies  of  America  ;  and  the  exclusive  trade,  it  is 
acknowledged,  is  the  sole  source  of  all  those  peculiar  advantages. 

In  consequence  of  this  exclusive  trade,  all  that  part  of  the  surplus 

(produce  of  the  English  colonies,  for  example,  which  consists  in  what 
are  called  enumerated  commodities,  can  be  sent  to  no  other  country 
but  England.  Other  countries  must  afterwards  buy  it  of  her.  It 
must  be  cheaper  therefore  in  England  than  it  can  be  in  any  other 
country,  and  must  contribute  more  to  increase  the  enjoyments  of 
England  than  those  of  any  other  country.  It  must  likewise  con¬ 
tribute  more  to  encourage  her  industry.  For  all  those  parts  of  her 
own  surplus  produce  which  England  exchanges  for  those  enumerated 
commodities,  she  must  get  a  better  price  than  any  other  countries 
can  get  for  the  like  parts  of  theirs,  when  they  exchange  them  for 
the  same  commodities.  The  manufactures  of  England,  for  example, 
will  purchase  a  greater  quantity  of  the  sugar  and  tobacco  of  her  own 
colonies  than  the  like  manufactures  of  other  countries  can  purchase 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


175 


of  that  sugar  and  tobacco.  So  far,  therefore,  as  the  manufactures 
of  England  and  those  of  other  countries  are  both  to  be  exchanged 
for  the  sugar  and  tobacco  of  the  English  colonies,  this  superiority  of 
price  gives  an  encouragement  to  the  former,  beyond  what  the  latter 
can  in  these  circumstances  enjoy.  The  exclusive  trade  of  the  colo¬ 
nies,  therefore,  as  it  diminishes,  or  at  least  keeps  down  below  what 
they  would  otherwise  rise  to,  both  the  enjoyments  and  the  industry 
of  the  countries  which  do  not  possess  it ;  so  it  gives  an  evident  ad¬ 
vantage  to  the  countries  which  do  possess  it  over  those  other 
countries. 

This  advantage,  however,  will,  perhaps,  be  found  to  be  rather 
what  may  be  called  a  relative  than  an  absolute  advantage ;  and  to 
give  a  superiority  to  the  country  which  enjoys  it,  rather  by  de¬ 
pressing  the  industry  and  produce  of  other  countries,  than  by 
raising  those  of  that  particular  country  above  what  they  would 
naturally  rise  to  in  the  case  of  free  trade. 

The  tobacco  of  Maryland  and  Virginia,  for  example,  by  means  of 
the  monopoly  which  England  enjoys  of  it,  certainly  comes  cheaper 
to  England  than  it  can  do  to  France,  to  whom  England  commonly 
sells  a  considerable  part  of  it.  But  had  France  and  all  other  Euro¬ 
pean  countries  been,  at  all  times,  allowed  a  free  trade  to  Maryland 
and  Virginia,  the  tobacco  of  those  colonies  might,  by  this  time, 
have  come  cheaper  than  it  actually  does,  not  only  to  all  those  other 
countries,  but  likewise  to  England.  The  produce  of  tobacco,  in 
consequence  of  a  market  so  much  mofb  extensive  than  any  which  it 
has  hitherto  enjoyed,  might,  and  probably  would,  by  this  time  have  JkN 
been  so  much  increased  as  to  reduce  the  profits  of  a  tobacco  planta¬ 
tion  to  their  natural  level  with  those  of  a  com  plantation,  which,  it 
is  supposed,  they  are  still  somewhat  above.  The  price  of  tobacco 


might,  and  probably  would,  by  this  time  have  fallen  somewhat 
lower  than  it  is  at  present.  An  equal  quantity  of  the  commodities 


either  of  England,  or  of  those  of  other  countries,  might  have  pur¬ 
chased  in  Maryland  and  Virginia  a  greater  quantity  of  tobacco  than 
it  can  do  at  present,  and  consequently  have  been  sold  there  for  so 
much  a  better  price.  So  far  as  that  weed,  therefore,  can,  by  its 
cheapness  and  abundance,  increase  the  enjoyments  or  augment  the 
industry  either  of  England  or  of  any  other  country,  it  would,  pro¬ 
bably,  in  the  case  of  a  free  trade,  have  produced  both  these  effects 


in  somewhat  a  greater  degree  than  it  can  do  at  present,  j  England, 


176 


THE  NATURE  AND  CAUSES  OF 


BOOK  1Y. 


indeed,  would  not  in  this  case  have  had  any  advantage  over  other 
countries.  She  might  have  bought  the  tobacco  of  her  colonies 
somewhat  cheaper,  and,  consequently,  have  sold  some  of  her  own 
commodities  somewhat  dearer  than  she  actually  does.  But  she 
could  neither  have  bought  the  one  cheaper  nor  sold  the  other  dearer 
than  any  other  country  might  have  done.  She  might  perhaps  have 
gained  an  absolute,  but  she  would  certainly  have  lost  a  relative 
advantage. 

In  order,  however,  to  obtain  this  relative  advantage  in  the  colony 
trade,  in  order  to  execute  the  invidious  and  malignant  project  of 
excluding  as  much  as  possible  other  nations  from  any  share  in  it, 
England,  there  are  very  probable  reasons  for  believing,  has  not  only 
sacrificed  a  part  of  the  absolute  advantage  which  she,  as  well  as 
every  other  nation,  might  have  derived  from  that  trade,  but  has 
subjected  herself  both  to  an  absolute  and  to  a  relative  disadvantage 
in  almost  every  other  branch  of  trade. 

When,  by  the  Act  of  Navigation,  England  assumed  to  herself  the 
monopoly  of  the  colony  trade,  the  foreign  capitals  which  had  before 
been  employed  in  it  were  necessarily  withdrawn  from  it.  The 
English  capital,  which  had  before  carried  on  but  a  part  of  it,  was 
now  to  carry  on  the  whole.  The  capital  which  had  before  supplied 
the  colonies  with  but  a  part  of  the  goods  which  they  wanted  from 
Europe,  was  now  all  that  was  employed  to  supply  them  with  the 
whole.  But  it  could  not  supply  them  with  the  whole,  and  the 
goods  with  which  it  did  supply  them  were  necessarily  sold  very  dear. 
The  capital  which  had  before  bought  but  a  part  of  the  surplus  pro¬ 
duce  of  the  colonies,  was  now  all  that  was  employed  to  supply  the 
whole.  But  it  could  not  buy  the  whole  at  anything  near  the  old 
price,  and,  therefore,  whatever  it  did  buy  it  necessarily  bought  very 
cheap.  But  in  an  employment  of  capital  in  which  the  merchant 
sold  very  dear  and  bought  very  cheap,  the  profit  must  have  been 
very  great,  and  much  above  the  ordinary  level  of  profit  in  other 
branches  of  trade.  This  superiority  of  profit  in  the  colony  trade 
could  not  fail  to  draw  from  other  branches  of  trade  a  part  of  the 
capital  which  had  before  been  employed  in  them.  But  this  revul¬ 
sion  of  capital,  as  it  must  have  gradually  increased  the  competition 
of  capitals  in  the  colony  trade,  so  it  must  have  gradually  diminished 
that  competition  in  all  those  other  branches  of  trade  ;  as  it  must 
have  gradually  lowered  the  profits  of  the  one,  so  it  must  have 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


177 


gradually  raised  those  of  the  other,  till  the  profits  of  all  came  to  a 
new  level,  different  from  and  somewhat  higher  than  that  at  which 
they  had  been  before. 

«  This  double  effect;  of  drawing  capital  from  all  other  trades,  and 
of  raising  the  rate  of  profit  somewhat  higher  than  it  otherwise 
would  have  been  in  all  trades,  was  not  only  produced  by  this 
monopoly  upon  its  first  establishment;  but  has  continued  to  be  pro¬ 
duced  by  it  ever  since. 

First,  this  monopoly  has  been  continually  drawing  capital  from 
all  other  trades  to  be  employed  in  that  of  the  colonies. 

Though  the  wealth  of  Great  Britain  has  increased  very  much 
since  the  establishment  of  the  Act  of  Navigation,  it  certainly  has  not 
increased  in  the  same  proportion  as  that  of  the  colonies.  But  the  j 
foreign  trade  of  every  country  naturally  increases  in  proportion  to 
its  wealth,  its  surplus  produce  in  proportion  to  its  whole  produce ; 
and  Great  Britain  having  engrossed  to  herself  almost  the  whole  of  / 
what  may  be  called  the  foreign  trade  of  the  colonies,  and  her  capital 
not  having  increased  in  the  same  proportion  as  the  extent  of  that 
trade,  she  could  not  carry  it  on  without  continually  withdrawing* 
from  other  branches  of  trade  some  part  of  the  capital  which  had  be¬ 
fore  been  employed  in  them,  as  well  as  withholding  from  them  a 
great  deal  more  which  would  otherwise  have  gone  to  them.  Since  j 
the  establishment  of  the  Act  of  Navigation,  accordingly,  the  colony 
trade  has  been  continually  increasing,  while  many  other  branches  of 
foreign  trade,  particularly  of  that  to  other  parts  of  Europe,  have 
been  continually  decaying.  Our  manufactures  for  foreign  sale, 
instead  of  being  suited,  as  before  the  Act  of  Navigation,  to  the  neigh¬ 
bouring  market  of  Europe,  or  to  the  more  distant  one  of  the  coun¬ 
tries  which  lie  round  the  Mediterranean  Sea,  have,  the  greater  part 
of  them,  been  accommodated  to  the  still  more  distant  one  of  the 
colonies,  to  the  market  in  which  they  have  the  monopoly,  rather 
than  to  that  in  which  they  have  many  competitors.  The  causes  of 
decay  in  other  branches  of  foreign  trade,  which,  by  Sir  Matthew' 
Decker  and  other  writers,1  have  been  sought  for  in  the  excess  and 
improper  mode  of  taxation,  in  the  high  price  of  labour,  in  the  increase 
of  luxury,  &c.,  may  all  be  found  in  the  overgrowth  of  the  colony 
trade.  The  mercantile  capital  of  Great  Britain,  though  very  great, 


1  See  above,  page  88. 


VOL.  II. 


N 


178 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


yet  not  being  infinite,  and  though  greatly  increased  since  the  Act 
of  Navigation,  yet  not  being  increased  in  the  same  proportion  as  the 
colony  trade,  that  trade  could  not  possibly  be  carried  on  without 
withdrawing  some  part  of  that  capital  from  other  branches  of  trade,  , 
nor  consequently  without  some  decay  of  those  other  branches. 

England,  it  must  be  observed,  was  a  great  trading  country,  her 
mercantile  capital  was  very  great  and  likely  to  become  still  greater 
and  greater  every  day,  not  only  before  the  Act  of  Navigation  had 
established  the  monopoly  of  the  colony  trade,  but  before  that  trade 
was  very  considerable.  In  the  Dutch  war,  during  the  government 
of  Cromwell,  her  navy  was  superior  to  that  of  Holland;  and  in 
that  which  broke  out  in  the  beginning  of  the  reign  of  Charles  II, 
it  was  at  least  equal,  perhaps  superior,  to  the  united  navies  of  France 
and  Holland.  Its  superiority,  perhaps,  would  scarce  appear  greater 
in  the  present  times ;  at  least,  if  the  Dutch  navy  was  to  bear  the 
same  proportion  to  the  Dutch  commerce  now  which  it  did  then. 
But  this  great  naval  power  could  not,  in  either  of  those  wars,  be 
owing  to  the  Act  of  Navigation.1  During  the  first  of  them,  the 
plan  of  that  Act  had  been  but  just  formed  ;  and  though  before  the 
breaking  out  of  the  second  it  had  been  fully  enacted  by  legal 
authority,  yet  no  part  of  it  could  have  had  time  to  produce  any 
considerable  effect,  and  least  of  all  that  part  which  established  the 
exclusive  trade  to  the  colonies.  Both  the  colonies  and  their  trade 
were  inconsiderable  then  in  comparison  of  wdiat  they  are  now.  The 
island  of  Jamaica  was  an  unwholesome  desert,  little  inhabited,  and 
less  cultivated.  New  York  and  New  Jersey  were  in  the  possession 
of  the  Dutch  ;  the  half  of  St.  Christopher’s  in  that  of  the  French. 
The  island  of  Antigua,  the  two  Carolinas,  Pennsylvania,  Georgia, 
and  Nova  Scotia,  were  not  planted.  Virginia,  Maryland,  and  New 
England  were  planted ;  and  though  they  were  very  thriving 
colonies,  yet  there  was  not,  perhaps,  at  that  time  either  in  Europe 
or  America  a  single  person  who  foresaw  or  even  suspected  the  rapid 
progress  which  they  have  since  made  in  wealth,  population,  and 


1  In  tins  passage  the  author  is  inclined 
to  withdraw  a  little  of  that  laudation 
which  he  previously  bestowed  on  the  Act 
of  Navigation.  It  does  not  appear  that 
the  nation  grew  in  mercantile  strength 
by  that  Act,  but  in  spite  of  it.  Nay, 
alter  it  had  been  established  long  enough 


to  bring  about  whatever  results  might 
have  been  expected  from  it,  the  Dutch 
navy  was  so  far  from  being  depressed, 
that,  for  the  first  and  last  time,  it  in¬ 
flicted  humiliating  losses  on  the  British 
marine. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


179 


f 


improvement.  The  island  of  Barbadoes,  in  short,  was  the  only 
British  colony  of  any  consequence  of  which  the  condition  at  that 
time  bore  any  resemblance  to  what  it  is  at  present.  The  trade 
of  the  colonies,  of  which  England,  even  for  some  time  after  the  Act 
of  Navigation,  enjoyed  but  a  part  (for  the  Act  of  Navigation  was 
not  very  strictly  executed  till  several  years  after  it  was  enacted), 
could  not  at  that  time  be  the  cause  of  the  great  trade  of  England, 
nor  of  the  great  naval  power  which  was  supported  by  that  trade. 
The  trade  which  at  that  time  supported  that  great  naval  power 
was  the  trade  of  Europe,  and  of  the  countries  which  lie  round  the 
Mediterranean  Sea.  But  the  share  which  Great  Britain  at  present 
enjoys  of  that  trade  could  not  support  any  such  great  naval  power. 
Had  the  growing  trade  of  the  colonies  been  left  free  to  all  nations, 
whatever  share  of  it  might  have  fallen  to  Great  Britain  (and  a  very 
considerable  share  would  probably  have  fallen  to  her),  must  have 
been  all  an  addition  to  this  great  trade  of  which  she  was  before  in 
possession.  In  consequence  of  the  monopoly,  the  increase  of  the 
colony  trade  has  not  so  much  occasioned  an  addition  to  the 
trade  which  Great  Britain  had  before,  as  a  total  change  in  its 
direction. 

Secondly,  this  monopoly  has  necessarily  contributed  to  keep  up 
the  rate  of  profit  in  all  the  different  branches  of  British  trade  higher 
than  it  naturally  would  have  been  had  all  nations  been  allowed 
a  free  trade  to  the  British  colonies. 

The  monopoly  of  the  colony  trade,  as  it  necessarily  drew  towards 
that  trade  a  greater  proportion  of  the  capital  of  Great  Britain  than 
what  would  have  gone  to  it  of  its  own  accord  ;  so  by  the  expulsion 
of  all  foreign  capitals  it  necessarily  reduced  the  whole  quantity  of 
capital  employed  in  that  trade  below  what  it  naturally  would  have 
been  in  the  case  of  a  free  trade.  But,  by  lessening  the  competition 
of  capitals  in  that  branch  of  trade,  it  necessarily  raised  the  rate  of 
profit  in  that  branch.  By  lessening  too  the  competition  of  British 
capitals  in  all  other  branches  of  trade,  it  necessarily  raised  the  rate 
of  British  profit  in  all  those  other  branches.  Whatever  may  have 
been,  at  any  particular  period,  since  the  establishment  of  the  Act  of 
Navigation,  the  state  or  extent  of  the  mercantile  capital  of  Great 
Britain,  the  monopoly  of  the  colony  trade  must,  during  the  con¬ 
tinuance  of  that  state,  have  raised  the  ordinary  rate  of  British 
profit  higher  than  it  otherwise  would  have  been  both  in  that  and 


180 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


in  all  the  other  branches  of  British  trade.  If,  since  the  establish¬ 
ment  of  the  Act  of  Navigation,  the  ordinary  rate  of  British  profit 
has  fallen  considerably,  as  it  certainly  has,  it  must  have  fallen  still 
lower,  had  not  the  monopoly  established  by  that  Act  contributed  to 
keep  it  up. 

But  whatever  raises  in  any  country  the  ordinary  rate  of  profit 
higher  than  it  otherwise  would  be,  necessarily  subjects  that  country 
both  to  an  absolute  and  to  a  relative  disadvantage  in  every  branch 
of  trade  of  which  she  has  not  the  monopoly. 

It  subjects  her  to  an  absolute  disadvantage ;  because  in  such 
branches  of  trade  her  merchants  cannot  get  this  greater  profit, 
without  selling  dearer  than  they  otherwise  would  do  both  the  goods 
of  foreign  countries  which  they  import  into  their  own,  and  the 
goods  of  their  own  country  which  they  export  to  foreign  countries. 
Their  own  country  must  both  buy  dearer  and  sell  dearer ;  must 
both  buy  less  and  sell  less ;  must  both  enjoy  less  and  produce  less, 
than  she  otherwise  would  do. 

It  subjects  her  to  a  relative  disadvantage ;  because  in  such 
branches  of  trade  it  sets  other  countries  which  are  not  subject  to 
the  same  absolute  disadvantage,  either  more  above  her  or  less  below 
her  than  they  otherwise  would  be.  It  enables  them  both  to  enjoy 
more  and  to  produce  more  in  proportion  to  what  she  enjoys  and 
produces.  It  renders  their  superiority  greater  or  their  inferiority 
less  than  it  otherwise  would  be.  By  raising  the  price  of  her 
produce  above  what  it  otherwise  would  be,  it  enables  the  merchants 
of  other  countries  to  undersell  her  in  foreign  markets,  and  thereby 
to  justle  her  out  of  almost  all  those  branches  of  trade  of  which  she 
has  not  the  monopoly. 

Our  merchants  frequently  complain  of  the  high  wages  of  British 
labour  as  the  cause  of  their  manufactures  being  undersold  in  foreign 
markets  ;  but  they  are  silent  about  the  high  profits  of  stock.  They 
complain  of  the  extravagant  gain  of  other  people ;  but  they  say 
nothing  of  their  own.  The  high  profits  of  British  stock,  however, 
may  contribute  towards  raising  the  price  of  British  manufactures  in 
many  cases  as  much,  and  in  some  perhaps  more,  than  the  high 
wages  of  British  labour. 

It  is  in  this  manner  that  the  capital  of  Great  Britain,  one  may 
justly  say,  has  partty  been  drawn  and  partly  been  driven  from  the 
greater  part  of  the  different  branches  of  trade  of  which  she  has  not 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


181 


the  monopoly;  from  the  trade  of  Europe  in  particular,  aud  from 
that  of  the  countries  which  lie  round  the  Mediterranean  Sea. 

It  has  partly  been  drawn  from  those  branches  of  trade ;  by  the 
attraction  of  superior  profit  in  the  colony  trade  in  consequence  of 
the  continual  increase  of  that  trade,  and  of  the  continual  insuf¬ 
ficiency  of  the  capital  which  had  carried  it  on  one  year  to  carry  it 
on  the  next. 

It  has  partly  been  driven  from  them ;  by  the  advantage  which 
the  high  rate  of  profit,  established  in  Great  Britain,  gives  to  other 
countries,  in  all  the  different  branches  of  trade  of  which  Great 
Britain  has  not  the  monopoly. 

As  the  monopoly  of  the  colony  trade  has  drawn  from  those  other 
branches  a  part  of  the  British  capital  which  would  otherwise  have  been 
employed  in  them,  so  it  has  forced  into  them  many  foreign  capitals 
which  would  never  have  gone  to  them,  had  they  not  been  expelled 
from  the  colony  trade.  In  those  other  branches  of  trade  it  has 
diminished  the  competition  of  British  capitals,  and  thereby  raised 
the  rate  of  British  profit  higher  than  it  otherwise  would  have  been. 
On  the  contrary,  it  has  increased  the  competition  of  foreign  capitals, 
and  thereby  sunk  the  rate  of  foreign  profit  lower  than  it  otherwise 
would  have  been.  Both  in  the  one  way  and  in  the  other  it  must 
evidently  have  subjected  Great  Britain  to  a  relative  disadvantage  in 
all  those  other  branches  of  trade. 

The  colony  trade,  however,  it  may  perhaps  be  said,  is  more 
advantageous  to  Great  Britain  than  any  other ;  and  the  monopoly, 
by  forcing  into  that  trade  a  greater  proportion  of  the  capital  of 
Great  Britain  than  what  would  otherwise  have  gone  to  it,  has 
turned  that  capital  into  an  employment  more  advantageous  to  the 
country  than  any  other  which  it  could  have  found. 

The  most  advantageous  employment  of  any  capital  to  the  country 
to  which  it  belongs,  is  that  which  maintains  there  the  greatest 
quantity  of  productive  labour,  and  increases  the  most  the  annual 
produce  of  the  land  and  labour  of  that  country.  But  the  quantity 
of  productive  labour  which  any  capital  employed  in  the  foreign 
trade  of  consumption  can  maintain,  is  exactly  in  proportion,  it  has 
been  shown  in  the  Second  Book,  to  the  frequency  of  its  returns.  A 
capital  of  a  thousand  pounds,  for  example,  employed  in  a  foreign 
trade  of  consumption,  of  which  the  returns  are  made  regularly  once 
in  the  year,  can  keep  in  constant  employment,  in  the  country  to 


182 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


which  it  belongs,  a  quantity  of  productive  labour  equal  to  what 
a  thousand  pounds  can  maintain  there  for  a  year.  If  the  returns 
are  made  twice  or  thrice  in  the  year,  it  can  keep  in  constant  em¬ 
ployment  a  quantity  of  productive  labour  equal  to  what  two  or 
three  thousand  pounds  can  maintain  there  for  a  year.  A  foreign 
trade  of  consumption  carried  on  with  a  neighbouring,  is  upon  this 
account,  in  general,  more  advantageous  than  one  carried  on  with 
a  distant  country;  and  for  the  same  reason  a  direct  foreign  trade  of 
consumption,  as  it  has  likewise  been  shown  in  the  Second  Book,  is 
in  creneral  more  advantageous  than  a  round-about  one. 

But  the  monopoly  of  the  colony  trade,  so  far  as  it  has  operated 
upon  the  emplo}rment  of  Hie  capital  of  Great  Britain,  has  in  all 
cases  forced  some  part  of  it  from  a  foreign  trade  of  consumption 
carried  on  with  a  neighbouring,  to  one  carried  on  with  a  more 
distant  country,  and  in  many  cases  from  a  direct  foreign  trade 
of  consumption  to  a  round-about  one. 

First,  the  monopoly  of  the  colony  trade  has  in  all  cases  forced 
some  part  of  the  capital  of  Great  Britain  from  a  foreign  trade  of 
consumption  carried  on  with  a  neighbouring,  to  one  carried  on  with 
a  more  distant  country. 

It  has,  in  all  cases,  forced  some  part  of  that  capital  from  the 
trade  with  Europe,  and  with  the  countries  which  lie  round  the 
Mediterranean  Sea,  to  that  with  the  more  distant  regions  of 
America  and  the  West  Indies,  from  which  the  returns  are  neces¬ 
sarily  less  frequent,  not  only  on  account  of  the  greater  distance, 
but  on  account  of  the  peculiar  circumstances  of  those  countries. 
New  colonies,  it  has  already  been  observed,  are  always  under¬ 
stocked.  Their  capital  is  always  much  less  than  what  they  could 
employ  with  great  profit  and  advantage  in  the  improvement  and 
cultivation  of  their  land.  They  have  a  constant  demand,  therefore, 
for  more  capital  than  they  have  of  their  own ;  and,  in  order  to 

(supply  the  deficiency  of  their  own,  they  endeavour  to  borrow  as 
much  as  they  can  of  the  mother  country,  to  whom  they  are,  there¬ 
fore,  always  in  debt.  The  most  common  way  in  which  the  colonists 
contract  this  debt,  is  not  by  borrowing  upon  bond  of  the  rich 
people  of  the  mother  country,  though  they  sometimes  do  this  too, 
but  by  running  as  much  in  arrear  to  their  correspondents,  who 
supply  them  with  goods  from  Europe,  as  those  correspondents  will 
allow  them.  Their  annual  returns  frequently  do  not  amount  to 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


183 


more  than  a  third,  and  sometimes  not  to  so  great  a  proportion  of 
what  they  owe.  The  whole  capital,  therefore,  which  their  cor¬ 
respondents  advance  to  them  is  seldom  returned  to  Britain  in  less 
than  three,  and  sometimes  not  in  less  than  four  or  five  years.  But 
a  British  capital  of  a  thousand  pounds,  for  example,  which  is  re¬ 
turned  to  Great  Britain  only  once  in  five  years,  can  keep  in  con¬ 
stant  employment  only  one-fifth  part  of  the  British  industry  which 
it  could  maintain  if  the  whole  was  returned  once  in  the  year ;  and, 
instead  of  the  quantity  of  industry  which  a  thousand  pounds  could 
maintain  for  a  year,  can  keep  in  constant  employment  the  quantity 
only  which  two  hundred  pounds  can  maintain  for  a  year.  The 
planter,  no  doubt,  by  the  high  price  which  he  pays  for  the  goods 
from  Europe,  by  the  interest  upon  the  bills  which  he  grants  at 
distant  dates,  and  by  the  commission  upon  the  renewal  of  those 
which  he  grants  at  near  dates,  makes  up,  and  probably  more  than 
makes  up,  all  the  loss  which  his  correspondent  can  sustain  by  this 
delay.  But,  though  he  may  make  up  the  loss  of  his  correspondent, 
he  cannot  make  up  that  of  Great  Britain.  In  a  trade  of  which  the 
returns  are  very  distant,  the  profit  of  the  merchant  may  be  as  great 
or  greater  than  in  one  in  which  they  are  very  frequent  and  near ; 
but  the  advantage  of  the  country  in  which  he  resides,  the  quantity 
of  productive  labour  constantly  maintained  there,  the  annual 
produce  of  the  land  and  labour,  must  always  be  much  less.  That 
the  returns  of  the  trade  to  America,  and  still  more  those  of  that 
to  the  West  Indies,  are,  in  general,  not  only  more  distant,  but 
more  irregular,  and  more  uncertain  too,  than  those  of  the  trade 
to  any  part  of  Europe,  or  even  of  the  countries  which  lie  round  the 
Mediterranean  Sea,  will  readily  be  allowed,  I  imagine,  by  every¬ 
body  who  has  any  experience  of  those  different  branches  of  trade. 

Secondly,  the  monopoly  of  the  colony  trade  has,  in  many  cases, 
forced  some  part  of  the  capital  of  Great  Britain  from  a  direct 
foreign  trade  of  consumption  into  a  round-about  one. 

Among  the  enumerated  commodities  which  can  be  sent  to  no 
other  market  but  Great  Britain,  there  are  several  of  which  the 
quantity  exceeds  very  much  the  consumption  of  Great  Britain, 
and  of  which  a  part,  therefore,  must  be  exported  to  other  countries. 
But  this  cannot  be  done  without  forcing  some  part  of  the  capital 
of  Great  Britain  into  a  round-about  foreign  trade  of  consumption. 
Maryland  and  Virginia,  for  example,  send  annually  to  Great  Britain 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


184 


upwards  of  ninety-six  thousand  hogsheads  of  tobacco,  and  the  con¬ 
sumption  of  Great  Britain  is  said  not  to  exceed  fourteen  thousand. 
Upwards  of  eiglity-two  thousand  hogsheads,  therefore,  must  be 
exported  to  other  countries,  to  France,  to  Holland,  and  to  the 
countries  which  lie  round  the  Baltic  and  Mediterranean  Seas. 
But  that  part  of  the  capital  of  Great  Britain  which  brings  those 
eighty-two  thousand  hogsheads  to  Great  Britain,  which  re-exports 
them  from  thence  to  those  other  countries,  and  which  brings  back 
from  those  other  countries  to  Great  Britain  either  goods  or  money 
in  return,  is  employed  in  a  round-about  foreign  trade  of  con¬ 
sumption,  and  is  necessarily  forced  into  this  employment  in  order 
to  dispose  of  this  great  surplus.  If  we  would  compute  in  how 
many  years  the  whole  of  this  capital  is  likely  to  come  back  to 
Great  Britain,  we  must  add  to  the  distance  of  the  American  returns 
that  of  the  returns  from  those  other  countries.  If,  in  the  direct 
foreign  trade  of  consumption  which  we  carry  on  with  America, 
the  whole  capital  employed  frequently  does  not  come  back  in  less 
than  three  or  four  years ;  the  whole  capital  employed  in  this  round¬ 
about  one  is  not  likely  to  come  back  in  less  than  four  or  five. 
If  the  one  can  keep  in  constant  employment  but  a  third  or  a  fourth 
part  of  the  domestic  industry  which  could  be  maintained  by  a 
capital  returned  once  in  the  year,  the  other  can  keep  in  constant 
employment  but  a  fourth  or  a  fifth  part  of  that  industry.  At  some 
of  the  outports  a  credit  is  commonly  given  to  those  foreign  corre¬ 
spondents  to  whom  they  export  their  tobacco.  At  the  port  of 
London,  indeed,  it  is  commonly  sold  for  ready  money.  The  rule 
is,  Weigh  a?id  pay.  At  the  port  of  London,  therefore,  the  final 
returns  of  the  whole  round-about  trade  are  more  distant  than  the 
returns  from  America  by  the  time  only  which  the  goods  may  lie 
unsold  in  the  warehouse  ;  where,  however,  they  may  sometimes  lie 
long  enough.  But,  had  not  the  colonies  been  confined  to  the 
market  of  Great  Britain  for  the  sale  of  their  tobacco,  very  little 
more  of  it  would  probably  have  come  to  us  than  what  was  necessary 
for  the  home  consumption.1  The  goods  which  Great  Britain  pur- 

1  It  does  not  follow  that  a  country  trade,  the  more  will  such  a  determina- 

which  assumes  no  monopoly  of  import,  tion  take  place.  This  country  has  now 
and  puts  imported  goods  at  no  disad-  become  the  entrepdt  of  many  important 
vantage  on  their  exportation,  will  cease  objects  of  commerce,  as  cotton,  wool,  and 
to  become  an  entrepot,  in  other  words,  metals.  Before  long,  it  will  be  the  entre* 
to  appropriate  a  large  share  of  the  carry-  pot  of  corn, 
ing  trade.  On  the  contrary,  the  freer  the 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


185 


chases  at  present  for  her  own  consumption  with  the  great  surplus 
of  tobacco  which  she  exports  to  other  countries,  she  would,  in  this 
case,  probably  have  purchased  with  the  immediate  produce  of  her 
own  industry,  or  with  some  part  of  her  own  manufactures.  That 
produce,  those  manufactures,  instead  of  being  almost  entirely  suited 
to  one  great  market,  as  at  present,  would  probably  have  been  fitted 
to  a  great  number  of  smaller  markets.  Instead  of  one  great  round- 
about  foreign  trade  of  consumption,  Great  Britain  would  probably 
have  carried  on  a  great  number  of  small  direct  foreign  trades  of  the 
same  kind.  On  account  of  the  frequency  of  the  returns,  a  part, 
and  probably  but  a  small  part,  perhaps  not  above  a  third  or  a 
fourth  of  the  capital  which  at  present  carries  on  this  great  round- 
about  trade,  might  have  been  sufficient  to  carry  on  all  those  small 
direct  ones,  might  have  kept  in  constant  employment  an  equal 
quantity  of  British  industry,  and  have  equally  supported  the  annual 
produce  of  the  land  and  labour  of  Great  Britain.  All  the  purposes 
of  this  trade  being  in  this  manner  answered  by  a  much  smaller 
capital,  there  would  have  been  a  large  spare  capital  to  apply  to 
other  purposes ;  to  improve  the  lands,  to  increase  the  manufac¬ 
tures,  and  to  extend  the  commerce  of  Great  Britain ;  to  come  into 
competition  at  least  with  the  other  British  capitals  employed  in 
all  those  different  ways,  to  reduce  the  rate  of  profit  in  them 
all,  and  thereby  to  give  to  Great  Britain,  in  all  of  them,  a  supe¬ 
riority  over  other  countries  still  greater  than  what  she  at  present 
enjoys. 

The  monopoly  of  the  colony  trade  too  has  forced  some  part  of 
the  capital  of  Great  Britain  from  all  foreign  trade  of  consumption 
to  a  carrying  trade  ;  and,  consequently,  from  supporting  more  or 
less  the  industry  of  Great  Britain,  to  be  employed  altogether  in 
supporting  partly  that  of  the  colonies,  and  partly  that  of  some 
other  countries. 

The  goods,  for  example,  which  are  annually  purchased  with  the 
great  surplus  of  eighty-two  thousand  hogsheads  of  tobacco  annually 
re-exported  from  Great  Britain,  are  not  all  consumed  in  Great 
Britain.  Part  of  them,  linen  from  Germany  and  Holland,  for 
example,  is  returned  to  the  colonies  for  their  particular  consumption. 
But  that  part  of  the  capital  of  Great  Britain  which  buys  the 
tobacco  with  which  this  linen  is  afterwards  bought,  is  necessarily 
withdrawn  from  supporting  the  industry  of  Great  Britain,  to  be 


186 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


employed  altogether  in  supporting,  partly  that  of  the  colonies,  and 
partly  that  of  the  particular  countries  who  pay  for  this  tobacco 
with  the  produce  of  their  own  industry. 

The  monopoly  of  the  colony  trade  besides,  by  forcing  towards 
it  a  much  greater  proportion  of  the  capital  of  Great  Britain  than 
what  would  naturally  have  gone  to  it,  seems  to  have  broken  alto¬ 
gether  that  natural  balance  which  would  otherwise  have  taken 
place  among  all  the  different  branches  of  British  industry.  The 
industry  of  Great  Britain,  instead  of  being  accommodated  to  a 
great  number  of  small  markets,  has  been  principally  suited  to  one 
great  market.  Her  commerce,  instead  of  running  in  a  great 
number  of  small  channels,  has  been  taught  to  run  principally  in 
one  great  channel.  But  the  whole  system  of  her  industry  and 
commerce  has  thereby  been  rendered  less  secure ;  the  whole  state 
of  her  body  politic  less  healthful,  than  it  otherwise  would  have 
been.  In  her  present  condition,  Great  Britain  resembles  one  of 
those  unwholesome  bodies  in  which  some  of  the  vital  parts  are 
overgrown,  and  which;  upon  that  account;  are  liable  to  many 
dangerous  disorders  scarce  incident  to  those  in  which  all  the  parts 
are  more  properly  proportioned.  A  small  stop  in  that  great 
blood-vessel,  which  has  been  artificially  swelled  beyond  its  natural 
dimensions,  and  through  which  an  unnatural  proportion  of  the 
industry  and  commerce  of  the  country  has  been  forced  to  circulate, 
is  very  likely  to  bring  on  the  most  dangerous  disorders  upon  the 
whole  body  politic.  The  expectation  of  a  rupture  with  the  colonies, 
accordingly,  has  struck  the  people  of  Great  Britain  with  more 
terror  than  they  ever  felt  for  a  Spanish  armada  or  a  French  in¬ 
vasion.  It  was  this  terror,  whether  well  or  ill  grounded,  which 
rendered  the  repeal  of  the  Stamp  Act,  among  the  merchants  at 
least,  a  popular  measure.  In  the  total  exclusion  from  the  colony 
market,  was  it  to  last  only  for  a  few  years,  the  greater  part  of 
our  merchants  used  to  fancy  that  they  foresaw  an  entire  stop  to 
their  trade  ;  the  greater  part  of  our  master  manufacturers,  the 
entire  ruin  of  their  business  ;  and  the  greater  part  of  our  workmen, 
an  end  of  their  employment.  A  rupture  with  any  of  our  neigh¬ 
bours  upon  the  Continent,  though  likely  too  to  occasion  some  stop 
or  interruption  in  the  employments  of  some  of  all  these  different 
orders  of  people,  is  foreseen  however,  without  any  such  general 
emotion.  The  blood,  of  which  the  circulation  is  stopped  in  some 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


187 


of  the  smaller  vessels,  easily  disgorges  itself  into  the  greater, 
without  occasioning  any  dangerous  disorder ;  but,  when  it  is 
stopped  in  any  of  the  greater  vessels,  convulsions,  apoplexy,  or 
death  are  the  immediate  and  unavoidable  consequences.  If  but 
one  of  those  overgrown  manufactures,  which  by  means  either  of 
bounties,  or  of  the  monopoly  of  the  home  and  colony  markets, 
have  been  artificially  raised  up  to  an  unnatural  height,  finds  some 
small  stop  or  interruption  in  its  employment,  it  frequently  occasions 
a  mutiny  and  disorder  alarming  to  Government,  and  embarrassing 
even  to  the  deliberations  of  the  Legislature.  How  great,  there¬ 
fore,  wTould  be  the  disorder  and  confusion,  it  was  thought,  which 
must  necessarily  be  occasioned  by  a  sudden  and  entire  stop  in 
the  employment  of  so  great  a  proportion  of  our  principal  manu¬ 
facturers  ! 

Some  moderate  and  gradual  relaxation  of  the  laws  which  give 
to  Great  Britain  the  exclusive  trade  to  the  colonies,  till  it  is 
rendered  in  a  great  measure  free,  seems  to  be  the  only  expedient 
which  can,  in  all  future  times,  deliver  her  from  this  danger,  which 
can  enable  her  or  even  force  her  to  withdraw  some  part  of  her 
capital  from  this  overgrown  employment,  and  to  turn  it,  though 
with  less  profit,  towards  other  employments ;  and  which,  by 
gradually  diminishing  one  branch  of  her  industry  and  gradually 
increasing  all  the  rest,  can  by  degrees  restore  all  the  different 
branches  of  it  to  that  natural,  healthful,  and  proper  proportion 
which  perfect  liberty  necessarily  establishes,  and  which  perfect 
liberty  can  alone  preserve.  To  open  the  colony  trade  all  at  once 
to  all  nations,  might  not  only  occasion  some  transitory  incon- 
veniency,  but  a  great  permanent  loss  to  the  greater  part  of  those 
whose  industry  or  capital  is  at  present  engaged  in  it.  The  sudden 
loss  of  the  emploj^ment  even  of  the  ships  which  import  the  eighty- 
two  thousand  hogsheads  of  tobacco,  which  are  over  and  above  the 
consumption  of  Great  Britain,  might  alone  be  felt  very  sensibly. 
Such  are  the  unfortunate  effects  of  all  the  regulations  of  the  mer¬ 
cantile  system !  They  not  only  introduce  very  dangerous  disorders 
into  the  state  of  the  body  politic,  but  disorders  which  it  is  often 
difficult  to  remedy,  without  occasioning,  for  a  time  at  least,  still 
greater  disorders.  In  what  manner,  therefore,  the  colony  trade 
ought  gradually  to  be  opened ;  what  are  the  restraints  which  ought 
first,  and  what  are  those  which  ought  last  to  be  taken  away ;  or 


188 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


in  what  manner  the  natural  system  of  perfect  liberty  and  justice 
ought  gradually  to  be  restored,  we  must  leave  to  the  wisdom  of 
future  statesmen  and  legislators  to  determine.1 

Five  different  events,  unforeseen  and  unthought  of,  have  very 
fortunately  concurred  to  hinder  Great  Britain  from  feeling,  so  sen¬ 
sibly  as  it  was  generally  expected  she  would,  the  total  exclusion 
which  has  now  taken  place  for  more  than  a  year  (from  the  1st  of 
December,  1774)  from  a  very  important  branch  of  the  colony  trade, 
that  of  the  twelve  associated  provinces  of  North  America.  First, 
those  colonies,  in  preparing  themselves  for  their  non-importation 
agreement,  drained  Great  Britain  completely  of  all  the  commodities 
which  were  fit  for  their  market :  secondly,  the  extraordinary  de¬ 
mand  of  the  Spanish  Flota  has,  this  year,  drained  Germany  and 
the  North  of  many  commodities,  linen  in  particular,  which  used  to 
come  into  competition,  even  in  the  British  market,  with  the  manu¬ 
factures  of  Great  Britain  :  thirdly,  the  peace  between  Russia  and 
Turkey  has  occasioned  an  extraordinary  demand  from  the  Turkey 
market,  which,  during  the  distress  of  the  country,  and  while  a 
Russian  fleet  was  cruizing  in  the  Archipelago,  had  been  very 
poorly  supplied :  fourthly,  the  demand  of  the  north  of  Europe  for 
the  manufactures  of  Great  Britain  has  been  increasing  from  year 
to  year  for  some  time  past :  and,  fifthly,  the  late  partition  and  con¬ 
sequential  pacification  of  Poland,  by  opening  the  market  of  that 
great  country,  have  this  year  added  an  extraordinary  demand  from 
thence  to  the  increasing  demand  of  the  North.  These  events  are 
all,  except  the  fourth,  in  their  nature  transitory  and  accidental,  and 
the  exclusion  from  so  important  a  branch  of  the  colony  trade,  if 
unfortunately  it  should  continue  much  longer,  may  still  occasion  some 
degree  of  distress.  This  distress,  however,  as  it  will  come  on 
gradually,  will  be  felt  much  less  severely  than  if  it  had  come  on  all 
at  once  ;  and,  in  the  meantime,  the  industry  and  capital  of  the 
country  may  find  a  new  employment  and  direction,  so  as  to  prevent 
this  distress  from  ever  rising  to  any  considerable  height. 

1  In  point  of  fact,  changes  like  those  for  the  employment  of  capital  which  it 
which  the  Author  could  not  but  feel  opens,  rapidly  counterpoise  these  transient 
alarmed  at,  have  not  produced  the  mis-  inconveniences,  even  if  they  do  not  in¬ 
chiefs  anticipated  from  them.  Every  stantly  obviate  them.  Vested  interests 
concession  to  commercial  freedom  is  are  alarmed  at  change,  but  it  is  not 
followed  by  an  increase  of  commercial  rarely  the  case  that  these  very  interests 
activity.  There  may  follow  on  it  some  find  the  change  incomparably  more  bene- 
little  local  difficulty  or  distress  ;  but  the  ficent  than  the  ancient  restriction, 
energy  which  it  awakens,  the  channels 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


189 


The  monopoly  of  the  colony  trade,  therefore,  so  far  as  it  has 
turned  towards  that  trade  a  greater  proportion  of  the  capital  of 
Great  Britain  than  what  would  otherwise  have  gone  to  it,  has  in 
all  cases  turned  it,  from  a  foreign  trade  of  consumption  with  a 
neighbouring,  into  one  with  a  more  distant  country;  in  many  cases, 
from  a  direct  foreign  trade  of  consumption,  into  a  round-about  one ; 
and  in  some  cases,  from  all  foreign  trade  of  consumption,  into  a 
carrying  trade.  In  has  in  all  cases,  therefore,  turned  it,  from  a 
direction  in  which  it  would  have  maintained  a  greater  quantity  of 
productive  labour,  into  one  in  which  it  can  maintain  a  much  smaller 
quantity.  By  suiting,  besides,  to  one  particular  market  only,  so 
great  a  part  of  the  industry  and  commerce  of  Great  Britain,  it  has 
rendered  the  whole  state  of  that  industry  and  commerce  more  pre¬ 
carious  and  less  secure,  than  if  their  produce  had  been  accommodated 
to  a  greater  variety  of  markets. 

We  must  carefully  distinguish  between  the  effects  of  the  colony 
trade  and  those  of  the  monopoly  of  that  trade.  The  former  are 
always  and  necessarily  beneficial ;  the  latter  always  and  necessarily 
hurtful.  But  the  former  are  so  beneficial,  that  the  colony  trade, 
though  subject  to  a  monopoly,  and  notwithstanding  the  hurtful 
effects  of  that  monopoly,  is  still  upon  the  whole  beneficial,  and 
greatly  beneficial ;  though  a  good  deal  less  so  than  it  otherwise 
would  be. 

The  effect  of  the  colony  trade  in  its  natural  and  free  state,  is  to 
open  a  great  though  distant  market  for  such  parts  of  the  produce 
of  British  industry  as  may  exceed  the  demand  of  the  markets  nearer 
home,  of  those  of  Europe,  and  of  the  countries  which  lie  round  the 
Mediterranean  Sea.  In  its  natural  and  free  state,  the  colony  trade, 
without  drawing  from  those  markets  any  part  of  the  produce  which 
had  ever  been  sent  to  them,  encourages  Great  Britain  to  increase 
the  surplus  continually,  by  continually  presenting  new  equivalents 
to  be  exchanged  for  it.  In  its  natural  and  free  state,  the  colony 
trade  tends  to  increase  the  quantity  of  productive  labour  in  Great 
Britain,  but  without  altering  in  any  respect  the  direction  of  that 
which  had  been  employed  there  before.  In  the  natural  and  free 
state  of  the  colony  trade,  the  competition  of  all  other  nations  would 
hinder  the  rate  of  profit  from  rising  above  the  common  level  either 
in  the  new  market  or  in  the  new  employment.  The  new  market, 
without  drawing  anything  from  the  old  one,  would  create,  if  one 


190 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


may  say  so,  a  new  produce  for  its  own  supply ;  and  that  new  pro¬ 
duce  would  constitute  a  new  capital  for  carrying  on  the  new 
employment,  which  in  the  same  manner  would  draw  nothing  from 
the  old  one. 

The  monopoly  of  the  colony  trade,  on  the  contrary,  by  excluding 
the  competition  of  other  nations,  and  thereby  raising  the  rate  of 
profit  both  in  the  new  market  and  in  the  new  employment,,  draws 
produce  from  the  old  market  and  capital  from  the  old  employment. 
To  augment  our  share  of  the  colony  trade  beyond  what  it  other¬ 
wise  would  be,  is  the  avowed  purpose  of  the  monopoly.  If  our 
share  of  that  trade  were  to  be  no  greater  with  than  it  would  have 
been  without  the  monopoly,  there  could  have  been  no  reason  for 
establishing  the  monopoly.  But  whatever  forces  into  a  branch  of 
trade  of  which  the  returns  are  slower  and  more  distant  than  those 
of  the  greater  part  of  other  trades,  a  greater  proportion  of  the 
capital  of  any  country  than  what  of  its  own  accord  would  go  to 
that  branch,  necessarily  renders  the  whole  quantity  of  productive 
labour  annually  maintained  there,  the  whole  annual  produce  of  the 
land  and  labour  of  that  country,  less  than  they  otherwise  would  be. 
It  keeps  down  the  revenue  of  the  inhabitants  of  that  country 
below  what  it  would  naturally  rise  to,  and  thereby  diminishes  their 
power  of  accumulation.  It  not  only  hinders,  at  all  times,  their 
capital  from  maintaining  so  great  a  quantity  of  productive  labour 
as  it  would  otherwise  maintain,  but  it  hinders  it  from  increasing  so 
fast  as  it  would  otherwise  increase,  and  consequently  from  main¬ 
taining  a  still  greater  quantity  of  productive  labour. 

The  natural  good  effects  of  the  colony  trade,  however,  more  than 
counterbalance  to  Great  Britain  the  bad  effects  of  the  monopoly,  so 
that,  monopoly  and  all  together,  that  trade,  even  as  it  is  carried  on 
at  present,  is  not  only  advantageous,  but  greatly  advantageous. 
The  new  market  and  the  new  employment  which  are  opened  by 
the  colony  trade,  are  of  much  greater  extent  than  that  portion  of 
the  old  market  and  of  the  old  employment  which  is  lost  by  the 
monopoly.  The  new  produce  and  the  new  capital  which  has  been 
created,  if  one  may  say  so,  by  the  colony  trade,  maintain  in  Great 
Britain  a  greater  quantity  of  productive  labour  than  what  can  have 
been  thrown  out  of  employment  by  the  revulsion  of  capital  from 
other  trades  of  which  the  returns  are  more  frequent.  If  the  colony 
trade,  however,  even  as  it  is  carried  on  at  present,  is  advantageous 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


191 


to  Great  Britain,  it  is  not  by  means  of  the  monopoly,  but  in  spite 
of  the  monopoly. 

It  is  rather  for  the  manufactured  than  for  the  rude  produce  of 
Europe  that  the  colony  trade  opens  a  new  market.  Agriculture 
is  the  proper  business  of  all  new  colonies ;  a  business  which  the 
cheapness  of  land  renders  more  advantageous  than  any  other. 
They  abound,  therefore,  in  the  rude  produce  of  land,  and  instead  of 
importing  it  from  other  countries,  they  have  generally  a  large  sur¬ 
plus  to  export.  In  new  colonies,  agriculture  either  draws  hands 
from  all  other  employments,  or  keeps  them  from  going  to  any  other 
employment.  There  are  few  hands  to  spare  for  the  necessary,  and 
none  for  the  ornamental  manufactures.  The  greater  part  of  the 
manufactures  of  both  kinds,  they  find  it  cheaper  to  purchase  of  other 
countries  than  to  make  for  themselves.  It  is  chiefly  by  encouraging 
the  manufactures  of  Europe  that  the  colony  trade  indirectly  en¬ 
courages  its  agriculture.  The  manufacturers  of  Europe,  to  whom 
that  trade  gives  employment,  constitute  a  new  market  for  the 
produce  of  the  land  ;  and  the  most  advantageous  of  all  markets — 
the  home  market  for  the  corn  and  cattle,  for  the  bread  and 
butcher’s-meat  of  Europe — is  thus  greatly  extended  by  means  of 
the  trade  to  America. 

But  that  the  monopoly  of  the  trade  of  populous  and  thriving 
colonies  is  not  alone  sufficient  to  establish,  or  even  to  maintain 
manufactures  in  any  country,  the  examples  of  Spain  and  Portugal 
sufficiently  demonstrate.  Spain  and  Portugal  were  manufacturing 
countries  before  they  had  any  considerable  colonies.  Since  they 
had  the  richest  and  most  fertile  in  the  world,  they  have  both  ceased 
to  be  so. 

In  Spain  and  Portugal,  the  bad  effects  of  the  monopoly,  aggra¬ 
vated  by  other  causes,  have,  perhaps,  nearly  overbalanced  the 
natural  good  effects  of  the  colony  trade.  These  causes  seem  to  be, 
other  monopolies  of  different  kinds  ;  the  degradation  of  the  value 
of  gold  and  silver  below  what  it  is  in  most  other  countries  ;  the 
exclusion  from  foreign  markets  by  improper  taxes  upon  exportation, 
and  the  narrowing  of  the  home  market,  by  still  more  improper 
taxes  upon  the  transportation  of  goods  from  one  part  of  the  country 
to  another ;  but  above  all,  that  irregular  and  partial  administration 
of  justice,  which  often  protects  the  rich  and  powerful  debtor  from 
the  pursuit  of  his  injured  creditor,  and  which  makes  the  industrious 


192 


THE  NATURE  AND  CA USES  OF 


BOOK  IV. 


I 


|  ' 


part  of  the  nation  afraid  to  prepare  goods  for  the  consumption  of 
those  haughty  and  great  men,  to  whom  they  dare  not  refuse  to  sell 
upon  credit,  and  from  whom  they  are  altogether  uncertain  of 
repayment. 

In  England,  on  the  contrary,  the  natural  good  effects  of  the 
colony  trade,  assisted  by  other  causes,  have  in  a  great  measure 
conquered  the  bad  effects  of  the  monopoly.  These  causes  seem  to 
be,  the  general  liberty  of  trade,  which,  notwithstanding  some 
restraints,  is  at  least  equal,  perhaps  superior,  to  what  it  is  in  any 
other  country ;  the  liberty  of  exporting,  duty  free,  almost  all  sorts 
of  goods  which  are  the  produce  of  domestic  industry,  to  almost  any 
foreign  country ;  and  what,  perhaps,  is  of  still  greater  importance, 
the  unbounded  liberty  of  transporting  them  from  any  one  part  of 
our  own  country  to  any  other,  without  being  obliged  to  give  any 
account  to  any  public  office,  without  being  liable  to  question  or 
examination  of  any  kind ;  but  above  all,  that  equal  and  impartial 
administration  of  justice  which  renders  the  rights  of  the  meanest 
British  subject  respectable  to  the  greatest,  and  which,  by  securing 
to  every  man  the  fruits  of  his  own  industry,  gives  the  greatest  and 
most  effectual  encouragement  to  every  sort  of  industry. 

If  the  manufactures  of  Great  Britain,  however,  have  been 
advanced,  as  they  certainly  have,  by  the  colony  trade,  it  has  not 
been  by  means  of  the  monopoly  of  that  trade,  but  in  spite  of  the 
monopoly.  The  effect  of  the  monopoly  has  been,  not  to  augment 
the  quantity,  but  to  alter  the  quality  and  shape  of  a  part  of  the 
manufactures  of  Great  Britain,  and  to  accommodate  to  a  market, 
from  which  the  returns  are  slow  and  distant,  what  would  otherwise 
have  been  accommodated  to  one  from  which  the  returns  are  frequent 
and  near.  Its  effect  has  consequently  been  to  turn  a  part  of  the 
capital  of  Great  Britain  from  an  employment  in  which  it  would 
have  maintained  a  greater  quantity  of  manufacturing  industry,  to 
one  in  which  it  maintains  a  much  smaller,  and  thereby  to  diminish, 
instead  of  increasing,  the  whole  quantity  of  manufacturing  industry 
maintained  in  Great  Britain. 

The  monopoly  of  the  colony  trade,  therefore,  like  all  the  other 
mean  and  malignant  expedients  of  the  mercantile  sjTstem,  depresses 
the  industry  of  all  other  countries,  but  chiefly  that  of  the  colonies, 
without  in  the  least  increasing,  but  on  the  contrary  diminishing, 
that  of  the  country  in  whose  favour  it  is  established. 


CHAP.  VII. 


THE  WEALTH  OF  NATION'S . 


193 


The  monopoly  hinders  the  capital  of  that  country,  whatever  may 
at  any  particular  time  be  the  extent  of  that  capital,  from  maintain¬ 
ing  so  great  a  quantity  of  productive  labour  as  it  would  otherwise 
maintain,  and  from  affording  so  great  a  revenue  to  the  industrious 
inhabitants  as  it  would  otherwise  afford.  But  as  capital  can  be 
increased  only  by  savings  from  revenue,  the  monopoly,  by  hindering 
it  from  affording  so  great  a  revenue  as  it  would  otherwise  afford, 
necessarily  hinders  it  from  increasing  so  fast  as  it  would  otherwise 
increase,  and  consequently  from  maintaining  a  still  greater  quantity 
of  productive  labour,  and  affording  a  still  greater  revenue  to  the 
industrious  inhabitants  of  that  country.  One  great  original  source 
of  revenue,  therefore,  the  wages  of  labour,  the  monopoly  must  neces¬ 
sarily  have  rendered  at  all  times  less  abundant  than  it  otherwise 
would  have  been. 

By  raising  the  rate  of  mercantile  profit,  the  monopoly  discourages 
the  improvement  of  land.  The  profit  of  improvement  depends  upon 
the  difference  between  what  the  land  actually  produces,  and  what, 
by  the  application  of  a  certain  capital,  it  can  be  made  to  produce. 
If  this  difference  affords  a  greater  profit  than  what  can  be  drawn 
from  an  equal  capital  in  any  mercantile  employment,  the  improve¬ 
ment  of  land  will  draw  capital  from  all  mercantile  employments. 
If  the  profit  is  less,  mercantile  employments  will  draw  capital  from 
the  improvement  of  land.  Whatever  therefore  raises  the  rate  of  mer¬ 
cantile  profit,  either  lessens  the  superiority  or  increases  the  inferiority 
of  the  profit  of  improvement ;  and  in  the  one  case  hinders  capital 
from  going  to  improvement,  and  in  the  other  draws  capital  from  it. 
But  by  discouraging  improvement,  the  monopoly  necessarily  retards 
the  natural  increase  of  another  great  original  source  of  revenue,  the 
rent  of  land.  By  raising  the  rate  of  profit  too  the  monopoly  neces¬ 
sarily  keeps  up  the  market  rate  of  interest  higher  than  it  otherwise 
would  be.  But  the  price  of  land  in  proportion  to  the  rent  which  it 
affords,  the  number  of  years’  purchase  which  is  commonly  paid  for 
it,  necessarily  falls  as  the  rate  of  interest  rises,  and  rises  as  the  rate 
of  interest  falls.  The  monopoly,  therefore,  hurts  the  interest  of  the 
landlord  two  different  ways,  by  retarding  the  natural  increase,  first, 
of  his  rent,  and  secondly,  of  the  price  which  he  would  get  for  his 
land  in  proportion  to  the  rent  which  it  affords.1 

1  This  statement  of  Adam  Smith  is,  may  be  doubted  whether  the  rate  of  mer- 
to  say  the  least,  exceedingly  dubious.  It  cantile  profit  was  heightened  by  the 


194 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


The  monopoly,  indeed,  raises  the  rate  of  mercantile  profit,  and 
thereby  augments  somewhat  the  gain  of  our  merchants.  But  as  it 
obstructs  the  natural  increase  of  capital,  it  tends  rather  to  diminish 
than  to  increase  the  sum  total  of  the  revenue  which  the  inhabitants 
of  the  country  derive  from  the  profits  of  stock ;  a  small  profit  upon 
a  great  capital  generally  affording  a  greater  revenue  than  a  great 
profit  upon  a  small  one.  The  monopoly  raises  the  rate  of  profit,  but 
it  hinders  the  sum  of  profit  from  rising  so  high  as  it  otherwise 
would  do. 

All  the  original  sources  of  revenue,  the  wages  of  labour,  the  rent 
of  land,  and  the  profits  of  stock,  the  monopoly  renders  much  less 
abundant  than  they  otherwise  would  be.  To  promote  the  little 
interest  of  one  little  order  of  men  in  one  country,  it  hurts  the  in¬ 
terest  of  all  other  orders  of  men  in  that  country,  and  of  all  men  in 
all  other  countries. 

It  is  solely  by  raising  the  ordinary  rate  of  profit  that  the  mono¬ 
poly  either  has  proved  or  could  prove  advantageous  to  any  one  par¬ 
ticular  order  of  men.  But  besides  all  the  bad  effects  to  the  country 
■  in.  general,  which  have  already  been  mentioned  as  necessarily  result¬ 
ing  from  a  high  rate  of  profit,  there  is  one  more  fatal,  perhaps,  than 
all  these  put  together,  but  which,  if  we  may  judge  from  experience, 
is  inseparably  connected  with  it.  The  high  rate  of  profit  seems 
everywhere  to  destroy  that  parsimony  which  in  other  circumstances 
is  natural  to  the  character  of  the  merchant.  When  profits  are  high, 
that  sober  virtue  seems  to  be  superfluous,  and  expensive  luxury  to 
suit  better  the  affluence  of  his  situation.  But  the  owners  of  the 
great  mercantile  capitals  are  necessarily  the  leaders  and  conductors 
of  the  whole  industry  of  every  nation,  and  their  example  has  a  much 
greater  influence  upon  the  manners  of  the  whole  industrious  part  of 
it  than  that  of  any  other  order  of  men.  If  his  employer  is  atten¬ 
tive  and  parsimonious,  the  workman  is  very  likely  to  be  so  too ; 
but  if  the  master  is  dissolute  and  disorderly,  the  servant,  who  shapes 


monopoly  of  the  colony  trade,  although 
it  may  be  conceded  that  this  monopoly 
starved  capital  by  driving  it  from  its 
natural  objects  into  those  which  were 
factitious.  But  the  rent  of  land  and  the 
rate  of  interest  are  closely  allied,  and  it 
cannot  be  doubted  that  when  profit  is 
high,  population  abundant,  and  agricul¬ 
ture  progressive,  rents  increase,  or,  what 


is  the  same  thing,  land  rises  in  value. 
That  rents  did  rise,  and  land  did  greatly 
increase  in  value  during  the  first  half  of 
the  eighteenth  century,  is  perfectly  certain. 
The  rise,  we  admit,  was  not  due  to  the 
monopoly,  but  in  spite  of  it.  But  the 
rent  of  land  is  not  the  result  of  one  cause, 
such  as  the  rate  of  profit,  but  of  a  com¬ 
plexity  of  causes  operating  together. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


195 


his  work  according  to  the  pattern  which  his  master  prescribes  to 
him,  will  shape  his  life  too  according  to  the  example  which  he  sets 
him.  Accumulation  is  thus  prevented  in  the  hands  of  all  those 
who  are  naturally  the  most  disposed  to  accumulate ;  and  the  funds 
destined  for  the  maintenance  of  productive  labour  receive  no 
augmentation  from  the  revenue  of  those  who  ought  naturally  to 
augment  them  the  most.  The  capital  of  the  country,  instead  of 
increasing,  gradually  dwindles  away,  and  the  quantity  of  produc¬ 
tive  labour  maintained  in  it  grows  every  day  less  and  less.  Have 
the  exorbitant  profits  of  the  merchants  of  Cadiz  and  Lisbon 
augmented  the  capital  of  Spain  and  Portugal?  Have  they  alle¬ 
viated  the  poverty,  have  they  promoted  the  industry  of  those  two 
beggarly  countries  ?  Such  has  been  the  tone  of  mercantile  expense 
in  those  two  trading  cities,  that  those  exorbitant  profits,  far  from 
augmenting  the  general  capital  of  the  country,  seem  scarce  to  have 
been  sufficient  to  keep  up  the  capitals  upon  which  they  were  made. 
Foreign  capitals  are  every  day  intruding  themselves,  if  I  may  say 
so,  more  and  more  into  the  trade  of  Cadiz  and  Lisbon.  It  is  to 
expel  those  foreign  capitals  from  a  trade  which  their  own  grows 
every  day  more  and  more  insufficient  for  carrying  on,  that  the 
Spaniards  and  Portuguese  endeavour  every  day  to  straiten  more 
and  more  the  galling  bands  of  their  absurd  monopoly.  Compare 
the  mercantile  manners  of  Cadiz  and  Lisbon  with  those  of  Amster¬ 
dam,  and  you  will  be  sensible  how  differently  the  conduct  and 
character  of  merchants  are  affected  by  the  high  and  by  the  low 
profits  of  stock.  The  merchants  of  London,  indeed,  have  not  yet 
generally  become  such  magnificent  lords  as  those  of  Cadiz  and 
Lisbon ;  but  neither  are  they  in  general  such  attentive  and  parsi¬ 
monious  burghers  as  those  of  Amsterdam.  They  are  supposed, 
however,  many  of  them,  to  be  a  good  deal  richer  than  the  greater 
part  of  the  former,  and  not  quite  so  rich  as  many  of  the  latter. 
But  the  rate  of  their  profit  is  commonly  much  lower  than  that  of 
the  former,  and  a  good  deal  higher  than  that  of  the  latter.  ‘Light 
come  light  go/  says  the  proverb ;  and  the  ordinary  tone  of  expense 
seems  everywhere  to  be  regulated,  not  so  much  according  to  the 
real  ability  of  spending,  as  to  the  supposed  facility  of  getting  money 
to  spend. 

'  It  is  thus  that  the  single  advantage  which  the  monopoly  procures 


196 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


to  a  single  order  of  men  is  in  many  different  ways  hurtful  to  the 
general  interest  of  the  country. 

.  To  found  a  great  empire  for  the  sole  purpose  of  raising  up  a 

>eople  of  customers,  may  at  first  sight  appear  a  project  fit  only  for 
a  nation  of  shopkeepers.  It  is,  however,  a  project  altogether  unfit 
for  a  nation  of  shopkeepers,  but  extremely  fit  for  a  nation  whose 
government  is  influenced  by  shopkeepers.  Such  statesmen,  and 
such  statesmen  only,  are  capable  of  fancying  that  they  will  find  some 
advantage  in  employing  the  blood  and  treasure  of  their  fellow- 
citizens  to  found  and  maintain  such  an  empire.  Say  to  a  shopkeeper, 
‘  Buy  me  a  good  estate,  and  I  shall  always  buy  my  clothes  at  your 
shop,  even  though  I  should  pay  somewhat  dearer  than  what  I  can 
have  them  for  at  other  shops and  you  will  not  find  him  very  for¬ 
ward  to  embrace  your  proposal.  But  should  any  other  person  buy 
you  such  an  estate,  the  shopkeeper  would  be  much  obliged  to  your 
benefactor  if  he  would  enjoin  you  to  buy  all  your  clothes  at  his 
shop.  England  purchased  for  some  of  her  subjects,  who  found 
 uneasy  at  home,  a  great  estate  in  a  distant  country. 
The  price,  indeed,  was  very  small,  and  instead  of  thirty  years’  pur¬ 
chase,  the  ordinary  price  of  land  in  the  present  times,  it  amounted 
to  little  more  than  the  expense  of  the  different  equipments  which 
made  the  first  discovery,  reconnoitred  the  coast,  and  took  a  fictitious 
possession  of  the  country.  The  land  was  good  and  of  great  extent, 
and  the  cultivators  having  plenty  of  good  ground  to  work  upon,  and 
being  for  some  time  at  liberty  to  sell  their  produce  where  they  pleased, 
became  in  the  course  of  little  more  than  thirty  or  forty  years  (between 
1620  and  1660)  so  numerous  and  thriving  a  people,  that  the  shop¬ 
keepers  and  other  traders  of  England  wished  to  secure  to  themselves 
the  monopoly  of  their  custom.  Without  pretending,  therefore,  that 
they  had  paid  any  part,  either  of  the  original  purchase-money,  or  of 
the  subsequent  expense  of  improvement,  they  petitioned  the  Parlia¬ 
ment  that  the  cultivators  of  America  might  for  the  future  be  con¬ 
fined  to  their  shop :  first,  for  buying  all  the  goods  which  they 
wanted  from  Europe  ;  and,  secondly,  for  selling  all  such  parts  of 
their  own  produce  as  those  traders  might  find  it  convenient  to  buy. 
For  they  did  not  find  it  convenient  to  buy  every  part  of  it.  Some 
parts  of  it  imported  into  England  might  have  interfered  with  some 
of  the  trades  which  they  themselves  carried  on  at  home.  Those 
particular  parts  of  it,  therefore,  they  were  willing  that  the  colonists 


i 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


197 


should  sell  where  they  could ;  the  farther  off  the  better ;  and  upon 
that  account  proposed  that  their  market  should  be  confined  to  the 
countries  south  of  Cape  Finisterre.  A  clause  in  the  famous  Act  of 
Navigation  established  this  truly  shopkeeper  proposal  into  a  law. 

The  maintenance  of  this  monopoly  has  hitherto  been  the  principal, 
or  more  properly  perhaps  the  sole  end  and  purpose  of  the  dominion 
which  Great  Britain  assumes  over  her  colonies.  In  the  exclusive 
trade,  it  is  supposed,  consists  the  great  advantage  of  provinces, 
which  have  never  yet  afforded  either  revenue  or  military  force  for 
the  support  of  the  civil  government,  or  the  defence  of  the  mother 
country.  The  monopoly  is  the  principal  badge  of  their  dependency, 
and  it  is  the  sole  fruit  which  has  hitherto  been  gathered  from  that 
dependency.  Whatever  expense  Great  Britain  has  hitherto  laid  out 
in  maintaining  this  dependency,  has  really  been  laid  out  in  order  to 
support  this  monopoly.  The  expense  of  the  ordinary  peace  estab¬ 
lishment  of  the  colonies  amounted,  before  the  commencement  of  the 
present  disturbances,  to  the  pay  of  twenty  regiments  of  foot ;  to  the 
expense  of  the  artillery,  stores,  and  extraordinary  provisions  with 
which  it  was  necessary  to  supply  them ;  and  to  the  expense  of  a 
very  considerable  naval  force  which  was  constantly  kept  up,  in  order 
to  guard,  from  the  smuggling  vessels  of  other  nations,  the  immense 
coast  of  North  America,  and  that  of  our  West  Indian  Islands.  The 
whole  expense  of  this  peace  establishment  was  a  charge  upon  the 
revenue  of  Great  Britain,  and  was,  at  the  same  time,  the  smallest 
part  of  what  the  dominion  of  the  colonies  has  cost  the  mother 
country.  If  we  would  know  the  amount  of  the  whole,  we  must  add 
to  the  annual  expense  of  this  peace  establishment  the  interest  of  the 
sums  which,  in  consequence  of  her  considering  her  colonies  as  pro¬ 
vinces  subject  to  her  dominion,  Great  Britain  has  upon  different 
occasions  laid  out  upon  their  defence.  We  must  add  to  it,  in  par¬ 
ticular,  the  whole  expense  of  the  late  war,  and  a  great  part  of  that 
of  the  war  which  preceded  it.  The  late  war  was  altogether  a  colony 
quarrel,  and  the  whole  expense  of  it,  in  whatever  part  of  the  world 
it  may  have  been  laid  out,  whether  in  Germany  or  the  East  Indies, 
ought  justly  to  be  stated  to  the  account  of  the  colonies.  It  amounted 
to  more  than  ninety  millions  Stirling,  including  not  only  the  new 
debt  which  was  contracted,  but  the  two  shillings  in  the  pound 
additional  land-tax,  and  the  sums  which  were  every  year  borrowed 
from  the  sinking  fund.  The  Spanish  war  which  began  in  1739  was 


198 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


principally  a  colony  quarrel.  Its  principal  object  was  to  prevent 
the  search  of  the  colony  ships  which  carried  on  a  contraband  trade 
with  the  Spanish  main.1  This  whole  expense  is,  in  reality,  a  bounty 
which  has  been  given  in  order  to  support  a  monopoly.  The  pre¬ 
tended  purpose  of  it  was  to  encourage  the  manufactures  and  to 
increase  the  commerce  of  Great  Britain.  But  its  real  effect  has 
been  to  raise  the  rate  of  mercantile  profit,  and  to  enable  our  mer¬ 
chants  to  turn  into  a  branch  of  trade,  of  which  the  returns  are  more 
slow  and  distant  than  those  of  the  greater  part  of  other  trades, 
a  greater  proportion  of  their  capital  than  they  otherwise  would 
have  done ;  two  events  which,  if  a  bounty  could  have  prevented,  it 
might  perhaps  have  been  very  well  worth  while  to  give  such  a 
bounty. 

Under  the  present  system  of  management,  therefore,  Great 
Britain  derives  nothing  but  loss  from  the  dominion  which  she 
assumes  over  her  colonies. 

To  propose  that  Great  Britain  should  voluntarily  give  up  all 
authority  over  her  colonies,  and  leave  them  to  elect  their  own 
magistrates,  to  enact  their  own  laws,  and  to  make  peace  and  war  as 
they  might  think  proper,  would  be  to  propose  such  a  measure  as 
never  was  and  never  will  be  adopted  by  any  nation  in  the  world. 
No  nation  ever  voluntarily  gave  up  the  dominion  of  any  province, 
how  troublesome  soever  it  might  be  to  govern  it,  and  how  small 
soever  the  revenue  which  it  afforded  might  be  in  proportion  to  the 
expense  which  it  occasioned.2  Such  sacrifices,  though  they  might 
frequently  be  agreeable  to  the  interest,  are  always  mortifying  to  the 
pride  of  every  nation,  and,  what  is  perhaps  of  still  greater  con¬ 
sequence,  they  are  always  contrary  to  the  private  interest  of  the 
governing  part  of  it,  who  would  thereby  be  deprived  of  the  disposal 
of  many  places  of  trust  and  profit,  of  many  opportunities  of  ac¬ 
quiring  wealth  and  distinction,  which  the  possession  of  the  most  tur¬ 
bulent,  and,  to  the  great  body  of  the  people,  the  most  unprofitable 


1  Walpole  resisted  by  every  means  in 
liis  power  the  breach  with  Spain.  The 
peace  of  Utrecht  contained  the  Assiento 
contract,  by  which  a  single  ship  was  al¬ 
lowed  to  trade  between  Great  Britain  and 
the  Spanish  possessions  of  Western  South 
America.  The  merchants  resented  this 
limitation,  and  took  to  smuggling.  To 
obviate  this,  the  Spanish  government 
claimed  the  right  of  search,  and  the  dis¬ 


pute  about  this  right  gave  occasion  to 
the  war.  The  people  too  were  goaded 
into  madness  by  the  fictitious  or  exag¬ 
gerated  story  of  Jenkins’  ears. 

2  We  have  learned,  and  are  still  learn¬ 
ing,  more  wisdom  than  Smith  gave  this 
country  credit  for  a  century  ago.  At 
least,  we  are  beginning  to  understand  the 
nature  of  the  bargain  which  we  make 
with  our  colonies  or  dependencies. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


199 


province  seldom  fails  to  afford.  The  most  visionary  enthusiast 
would  scarce  be  capable  of  proposing  such  a  measure,  with  any 
serious  hopes  at  least  of  its  ever  being  adopted.  If  it  was  adopted, 
however,  Great  Britain  would  not  only  be  immediately  freed  from 
the  whole  annual  expense  of  the  peace  establishment  of  the  colonies, 
but  might  settle  with  them  such  a  treaty  of  commerce  as  would 
effectually  secure  to  her  a  free  trade,  more  advantageous  to  the 
great  body  of  the  people,  though  less  so  to  the  merchants,  than  the 
monopoly  which  she  at  present  enjoys.  By  thus  parting  good 
friends,  the  natural  aiffection  of  the  colonies  to  the  mother  country, 
which,  perhaps,  our  late  dissensions  have  well  nigh  extinguished, 
would  quickly  revive.  It  might  dispose  them  not  only  to  respect, 
for  whole  centuries  together,  that  treaty  of  commerce  which  they 
had  concluded  with  us  at  parting,  but  to  favour  us  in  war  as  well 
as  in  trade,  and,  instead  of  turbulent  and  factious  subjects,  to 
become  our  most  faithful,  affectionate,  and  generous  allies ;  and  the 
same  sort  of  parental  affection  on  the  one  hand,  and  filial  respect  on 
the  other,  might  revive  between  Great  Britain  and  her  colonies, 
which  used  to  subsist  between  those  of  ancient  Greece  and  the 
mother  city  from  which  they  descended.1 

In  order  to  render  any  province  advantageous  to  the  empire  to 
which  *it  belongs,  it  ought  to  afford,  in  time  of  peace,  a  revenue 
to  the  public  sufficient  not  only  for  defraying  the  whole  expense  of 
its  own  peace  establishment,  but  for  contributing  its  proportion  to  the 
support  of  the  general  government  of  the  empire.  Every  province 
necessarily  contributes,  more  or  less,  to  increase  the  expense  of  that 
general  government.  If  any  particular  province,  therefore,  does  not 
contribute  its  share  towards  defraying  this  expense,  an  unequal 
burden  must  be  thrown  upon  some  other  part  of  the  empire.  The 
extraordinary  revenue  too  which  every  province  affords  to  the  public 
in  time  of  war,  ought,  from  parity  of  reason,  to  bear  the  same  pro¬ 
portion  to  the  extraordinary  revenue  of  the  whole  empire  which 


1  Nothing  can  be  more  true  than  the 
observations  in  the  text.  The  United 
States  have  grown  from  three  to  forty 
millions,  but  the  animosities  which  were 
kindled  by  the  War  of  Independence  have 
hardly  been  extinguished.  The  Ameri¬ 
can  people  are  one  with  us  in  descent,  in 
customs,  with  the  exception  of  some  social 
differences,  in  laws,  in  literature,  and 


always  look  with  veneration  on  the 
country  from  which  they  have  sprung 
and  the  associations  which  it  preserves. 
But  political  bitterness  still  rankles,  and 
the  relations  which  might  have  been,  as 
the  author  says,  like  those  between  the 
colonies  of  ancient  Greece  and  the  mother 
cities,  have  occasionally  more  nearly  re¬ 
sembled  those  of  Corinth  and  Corcyra. 


200 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


its  ordinary  revenue  does  in  time  of  peace.  That  neither  the 
ordinary  nor  extraordinary  revenue  which  Great  Britain  derives 
from  her  colonies  bears  this  proportion  to  the  whole  revenue  of 
the  British  empire,  will  readily  be  allowed.  The  monopoly,  it 
has  been  supposed,  indeed,  by  increasing  the  private  revenue  of 
the  people  of  Great  Britain,  and  thereby  enabling  them  to  pay 
greater  taxes,  compensates  the  deficiency  of  the  public  revenue  of 
the  colonies.  But  this  monopoly,  I  have  endeavoured  to  show, 
though  a  very  grievous  tax  upon  the  colonies,  and  though  it  may 
increase  the  revenue  of  a  particular  order  of  men  in  Great  Britain, 
diminishes  instead  of  increasing  that  of  the  great  body  of  the 
people,  and  consequently  diminishes  instead  of  increasing  the  ability 
of  the  great  body  of  the  people  to  pay  taxes.  The  men  too  whose 
revenue  the  monopoly  increases,  constitute  a  particular  order,  which 
it  is  both  absolutely  impossible  to  tax  beyond  the  proportion  of 
other  orders,  and  extremely  impolitic  even  to  attempt  to  tax  beyond 
that  proportion,  as  I  shall  endeavour  to  show  in  the  following  Book. 
No  particular  resource,  therefore,  can  be  drawn  from  this  particular 
order. 

The  colonies  may  be  taxed  either  by  their  own  assemblies,  or  by 
the  Parliament  of  Great  Britain. 

That  the  colony  assemblies  can  ever  be  so  managed  as  to  levy 
upon  their  constituents  a  public  revenue  sufficient  not  only  to  main¬ 
tain  at  all  times  their  own  civil  and  military  establishment,  but  to 
pay  their  proper  proportion  of  the  expense  of  the  general  govern¬ 
ment  of  the  British  empire,  seems  not  very  probable.  It  was  a 
long  time  before  even  the  parliament  of  England,  though  placed 
immediately  under  the  eye  of  the  sovereign,  could  be  brought  under 
such  a  system  of  management,  or  could  be  rendered  sufficiently 
liberal  in  their  grants  for  supporting  the  civil  and  military  estab¬ 
lishments  even  of  their  own  country.  It  was  only  by  distributing 
among  the  particular  members  of  Parliament  a  great  part  either  of 
the  offices  or  of  the  disposal  of  the  offices  arising  from  this  civil 
and  military  establishment,  that  such  a  system  of  management 
could  be  established  even  with  regard  to  the  Parliament  of  England. 
But  the  distance  of  the  colony  assemblies  from  the  eye  of  the 
sovereign,  their  number,  their  dispersed  situation,  and  their  various 
constitutions,  would  render  it  very  difficult  to  manage  them  in  the 
same  manner,  even  though  the  sovereign  had  the  same  means  of 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


201 


doing  it ;  and  those  means  are  wanting.  It  would  be  absolutely 
impossible  to  distribute  among  all  the  leading  members  of  all 
the  colony  assemblies  such  a  share,  either  of  the  offices  or  of  the 
disposal  of  the  offices  arising  from  the  general  government  of  the 
British  empire,  as  to  dispose  them  to  give  up  their  popularity  at 
home  and  to  tax  their  constituents  for  the  support  of  that  general 
government,  of  which  almost  the  whole  emoluments  were  to  be  di¬ 
vided  among  people  who  were  strangers  to  them.  The  unavoidable 
ignorance  of  administration,  besides,  concerning  the  relative  im¬ 
portance  of  the  different  members  of  those  different  assemblies,  the 
offences  which  must  frequently  be  given,  the  blunders  which  must 
constantly  be  committed  in  attempting  to  manage  them  in  this 
manner,  seems  to  render  such  a  system  of  management  altogether 
impracticable  in  regard  to  them. 

The  colony  assemblies,  besides,  cannot  be  supposed  the  proper 
judges  of  what  is  necessary  for  the  defence  and  support  of  the 
whole  empire.  The  care  of  that  defence  and  support  is  not  en¬ 
trusted  to  them.  It  is  not  their  business,  and  they  have  no  regular 
means  of  information  concerning  it.  The  assembly  of  a  province, 
like  the  vestry  of  a  parish,  may  judge  very  properly  concerning  the 
affairs  of  its  own  particular  district,  but  can  have  no  proper  means 
of  judging  concerning  those  of  the  whole  empire.  It  cannot  even 
judge  properly  concerning  the  proportion  which  its  own  province 
bears  to  the  whole  empire,  or  concerning  the  relative  degree  of  its 
wealth  and  importance,  compared  with  the  other  provinces  ;  be¬ 
cause  those  other  provinces  are  not  under  the  inspection  and  super¬ 
intendency  of  the  assembly  of  a  particular  province.  What  is 
necessary  for  the  defence  and  support  of  the  whole  empire,  and  in 
what  proportion  each  part  ought  to  contribute,  can  be  judged  of 
only  by  that  assembly  which  inspects  and  superintends  the  affairs 
of  the  whole  empire. 

It  has  been  proposed,  accordingly,  that  the  colonies  should  be 
taxed  by  requisition,  the  Parliament  of  Great  Britain  determining 
the  sum  which  each  colony  ought  to  pay,  and  the  provincial 
assembly  assessing  and  levying  it  in  the  way  that  suited  best  the 
circumstances  of  the  province.  What  concerned  the  whole  empire 
wrould  in  this  way  be  determined  by  the  assembly  which  inspects 
and  superintends  the  affairs  of  the  whole  empire  ;  and  the  provincial 
affairs  of  each  colony  might  still  be  regulated  by  its  own  assembly. 


202 


THE  NATURE  AND  CAUSES  OF 


book:  iy. 


Though  the  colonies  should  in  this  case  have  no  representatives  in 
the  British  Parliament,  yet,  if  we  may  judge  by  experience,  there  is 
no  probability  that  the  parliamentary  requisition  would  be  un¬ 
reasonable.  The  Parliament  of  England  has  not  upon  any  occasion 
shown  the  smallest  disposition  to  overburden  those  parts  of  the 
empire  which  are  not  represented  in  Parliament.  The  islands  of 
Guernsey  and  Jersey,  without  any  means  of  resisting  the  authority 
of  Parliament,  are  more  lightly  taxed  than  any  part  of  Great  Britain. 
Parliament  in  attempting  to  exercise  its  supposed  right,  whether 
well  or  ill  grounded,  of  taxing  the  colonies,  has  never  hitherto 
demanded  of  them  anything  which  even  approached  to  a  just  pro¬ 
portion  to  what  was  paid  by  their  fellow-subjects  at  home.  If  the 
contribution  of  the  colonies,  besides,  was  to  rise  or  fall  in  propor¬ 
tion  to  the  rise  or  fall  of  the  land-tax,  Parliament  could  not  tax 
them  without  taxing  at  the  same  time  its  own  constituents,  and 
the  colonies  might  in  this  case  be  considered  as  virtually  represented 
in  Parliament. 

Examples  are  not  wanting  of  empires  in  which  all  the  different 
provinces  are  not  taxed,  if  I  may  be  allowed  the  expression,  in  one 
mass,  but  in  which  the  sovereign  regulates  the  sum  which  each 
province  ought  to  pay,  and  in  some  provinces  assesses  and  levies  it 
as  he  thinks  proper,  while  in  others  he  leaves  it  to  be  assessed  and 
levied  as  the  respective  states  of  each  province  shall  determine.  In 
some  provinces  of  France  the  king  not  only  imposes  what  taxes  he 
thinks  proper,  but  assesses  and  levies  them  in  the  way  he  thinks 
proper.  From  others  he  demands  a  certain  sum,  but  leaves  it  to 
the  states  of  each  province  to  assess  and  levy  that  sum  as  they 
think  proper.  According  to  the  scheme  of  taxing  by  requisition, 
the  Parliament  of  Great  Britain  would  stand  nearly  in  the  same 
situation  towards  the  colony  assemblies  as  the  King  of  France 
does  towards  the  states  of  those  provinces  which  still  enjoy  the 
privilege  of  having  states  of  their  own,  the  provinces  of  France 
which  are  supposed  to  be  the  best  governed. 

But  though,  according  to  this  scheme,  the  colonies  could  have  no 
just  reason  to  fear  that  their  share  of  the  public  burdens  should  ever 
exceed  the  proper  proportion  to  that  of  their  fellow-citizens  at  home, 
Great  Britain  might  have  just  reason  to  fear  that  it  never  would 
amount  to  that  proper  proportion.  The  Parliament  of  Great  Bri¬ 
tain  has  not  for  some  time  past  had  the  same  established  authority 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


203 


in  the  colonies  which  the  French  king*  has  in  those  provinces  of 
France  which  still  enjoy  the  privilege  of  having  states  of  their  own. 
The  colony  assemblies,  if  they  were  not  very  favourably  disposed 
(and  unless  more  skilfully  managed  than  they  ever  have  been 
hitherto,  they  are  not  very  likely  to  be  so)  might  still  find  many 
pretences  for  evading  or  rejecting  the  most  reasonable  requisitions 
of  Parliament.  A  French  war  breaks  out,  we  shall  suppose ;  ten 
millions  must  immediately  be  raised,  in  order  to  defend  the  seat  of 
empire.  This  sum  must  be  borrowed  upon  the  credit  of  some 
parliamentary  fund  mortgaged  for  paying  the  interest.  Part  of 
this  fund  Parliament  proposes  to  raise  by  a  tax  to  be  levied  in 
Great  Britain,  and  part  of  it  ’by  a  requisition  to  all  the  different 
colony  assemblies  of  America  and  the  West  Indies.  Would  people 
readily  advance  their  money  upon  the  credit  of  a  fund  which  partly 
depended  upon  the  good-humour  of  all  those  assemblies,  far  distant 
from  the  seat  of  the  war,  and  sometimes  perhaps  thinking  themselves 
not  much  concerned  in  the  event  of  it?  Upon  such  a  fund  no 
more  money  would  probably  be  advanced  than  what  the  tax  to  be 
levied  in  Great  Britain  might  be  supposed  to  answer  for.  The 
whole  burden  of  the  debt  contracted  on  account  of  the  war  would 
in  this  manner  fall,  as  it  always  has  done  hitherto,  upon  Great 
Britain ;  upon  a  part  of  the  empire,  and  not  upon  the  whole  empire. 
Great  Britain  is,  perhaps,  since  the  world  began,  the  only  state 
which,  as  it  has  extended  its  empire,  has  only  increased  its  expense 
without  once  augmenting  its  resources.  Other  states  have  generally 
disburdened  themselves  upon  their  subject  and  subordinate  pro¬ 
vinces  of  the  most  considerable  part  of  the  expense  of  defending  the 
empire.  Great  Britain  has  hitherto  suffered  her  subject  and  sub¬ 
ordinate  provinces  to  disburden  themselves  upon  her  of  almost  this 
whole  expense.  In  order  to  put  Great  Britain  upon  a  footing  of 
equality  with  her  own  colonies,  which  the  law  has  hitherto  sup¬ 
posed  to  be  subject  and  subordinate,  it  seems  necessary,  upon  the 
scheme  of  taxing  them  by  parliamentary  requisition,  that  Parlia¬ 
ment  should  have  some  means  of  rendering  its  requisitions  imme¬ 
diately  effectual,  in  case  the  colony  assemblies  should  attempt  to 
evade  or  reject  them ;  and  what  those  means  are  it  is  not  very  easy 
to  conceive,  and  it  has  not  yet  been  explained. 

Should  the  Parliament  of  Great  Britain,  at  the  same  time,  be  ever 
fully  established  in  the  right  of  taxing  the  colonies,  even  independent 


204 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


of  the  consent  of  their  own  assemblies,  the  importance  of  those 
assemblies  would  from  that  moment  be  at  an  end,  and  with  it,  that 
of  all  the  leading  men  of  British  America.  Men  desire  to  have 
some  share  in  the  management  of  public  affairs  chiefly  on  account 
of  the  importance  which  it  gives  them.  Upon  the  power  which 
the  greater  part  of  the  leading  men,  the  natural  aristocracy  of 
every  country,  have  of  preserving  or  defending  their  respective 
importance,  depends  the  stability  and  duration  of  every  system  of 
free  government.  In  the  attacks  which  those  leading  men  are 
continually  making  upon  the  importance  of  one  another,  and  in  the 
defence  of  their  own,  consists  the  whole  play  of  domestic  faction 
and  ambition.  The  leading  men  of  America,  like  those  of  all  other 
countries,  desire  to  preserve  their  own  importance.  They  feel,  or 
imagine,  that  if  their  assemblies,  which  they  are  fond  of  calling 
Parliaments,  and  of  considering  as  equal  in  authority  to  the  Parlia¬ 
ment  of  Great  Britain,  should  be  so  far  degraded  as  to  become  the 
humble  ministers  and  executive  officers  of  that  Parliament,  the 
greater  part  of  their  own  importance  would  be  at  an  end.  They 
have  rejected,  therefore,  the  proposal  of  being  taxed  by  parliamentary 
requisition,  and,  like  other  ambitious  and  high-spirited  men,  have 
rather  chosen  to  draw  the  sword  in  defence  of  their  own  im- 

the  declension  of  the  Roman  republic,  the  allies  of 
Rome,  who  had  borne  the  principal  burden  of  defending  the  state 
and  extending  the  empire,  demanded  to  be  admitted  to  all  the 
privileges  of  Roman  citizens.  Upon  being  refused,  the  social  war 
broke  out.  During  the  course  of  that  war,  Rome  granted  those 
privileges  to  the  greater  part  of  them,  one  by  one,  and  in  proportion 
as  they  detached  themselves  from  the  general  confederacy.  The 
Parliament  of  Great  Britain  insists  upon  taxing  the  colonies ;  and 
they  refuse  to  be  taxed  by  a  Parliament  in  which  they  are  not 
represented.  If  to  each  colony,  which  should  detach  itself  from  the 
general  confederacy,  Great  Britain  should  allow  such  a  number  of 
representatives  as  suited  the  proportion  of  what  it  contributed  to 
the  public  revenue  of  the  empire,  in  consequence  of  its  being  sub¬ 
jected  to  the  some  taxes,  and  in  compensation  admitted  to  the  same 
freedom  of  trade  with  its  fellow-subjects  at  home — the  number  of 

1  For  the  expansion  of  this  reasoning  Parliaments  in  matters  of  imperial  policy, 
as  to  the  effect  of  subordinating  colonial  see  Mr. Goldwin  Smith’s  ‘The  Empire.’ 


portance.1 

Towards 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


205 


its  representatives  to  be  augmented  as  the  proportion  of  its  contri¬ 
bution  might  afterwards  augment — a  new  method  of  acquiring 
importance,  a  new  and  more  dazzling  object  of  ambition  would  be 
presented  to  the  leading  men  of  each  colony.  Instead  of  piddling 
for  the  little  prizes  which  are  to  be  found  in  what  may  be  called 
the  paltry  raffle  of  colony  faction,  they  might  then  hope,  from  the 
presumption  which  men  naturally  have  in  their  own  ability  and 
good  fortune,  to  draw  some  of  the  great  prizes  which  sometimes 
come  from  the  wheel  of  the  great  state  lottery  of  British  politics. 
Unless  this  or  some  other  method  is  fallen  upon  (and  there  seems 
to  be  none  more  obvious  than  this),  of  preserving  the  importance 
and  of  gratifying  the  ambition  of  the  leading  men  of  America,  it  is 
not  very  probable  that  they  will  ever  voluntarily  submit  to  us ;  and 
we  ought  to  consider  that  the  blood  which  must  be  shed  in  forcing 
them  to  do  so,  is,  every  drop  of  it,  the  blood  either  of  those  who 
are,  or  of  those  whom  we  wish  to  have  for  our  fellow-citizens. 
They  are  very  weak  who  flatter  themselves  that,  in  the  state  to 
which  things  have  come,  our  colonies  will  be  easily  conquered  by 
force  alone.  The  persons  who  now  govern  the  resolutions  of  what 
they  call  their  Continental  Congress,  feel  in  themselves  at  this 
moment  a  degree  of  importance  which,  perhaps,  the  greatest 
subjects  in  Europe  scarce  feel.  From  shopkeepers,  tradesmen,  and 
attorneys,  they  are  become  statesmen  and  legislators,  and  are 
employed  in  contriving  a  new  form  of  government  for  an  extensive 
empire,  which,  they  flatter  themselves,  will  become,  and  which, 
indeed,  seems  very  likely  to  become,  one  of  the  greatest  and 
most  formidable  that  ever  was  in  the  world.  Five  hundred 
different  people,  perhaps,  who  in  different  ways  act  immediately 
under  the  continental  congress ;  and  five  hundred  thousand, 
perhaps,  who  act  under  those  five  hundred,  all  feel  in  the  same 
manner  a  proportionable  rise  in  their  own  importance.  Almost 
every  individual  of  the  governing  party  in  America  fills  at  present, 
in  his  own  fancy,  a  station  superior,  not  only  to  what  he  had  ever 
filled  before,  but  to  what  he  had  ever  expected  to  fill ;  and  unless 
some  new  object  of  ambition  is  presented  either  to  him  or  to  his 
leaders,  if  he  has  the  ordinary  spirit  of  a  man,  he  will  die  in  defence 
of  that  station. 

It  is  a  remark  of  the  President  Henaut 1  that  we  now  read  with 
1  Histoire  de  France,  vol.  i.  p.  473.  Edit.  1768. 


206 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


pleasure  tlie  account  of  many  little  transactions  of  tlie  Ligue,  which 
when  they  happened  were  not  perhaps  considered  as  very  important 
pieces  of  news.  But  every  man  then,  says  he,  fancied  himself  of 
some  importance  ;  and  the  innumerable  memoirs  which  have  come 
down  to  us  from  those  times,  were,  the  greater  part  of  them,  written 
by  people  who  took  pleasure  in  recording  and  magnifying  events 
in  which  they  flattered  themselves  they  had  been  considerable 
actors.  How  obstinately  the  city  of  Paris  upon  that  occasion 
defended  itself,  what  a  dreadful  famine  it  supported  rather  than 
submit  to  the  best  and  afterwards  the  most  beloved  of  all  the 
French  kings,  is  well  known.  The  greater  part  of  the  citizens, 
or  those  who  governed  the  greater  part  of  them,  fought  in  defence 
of  their  own  importance,  which  they  foresaw  was  to  be  at  an  end 
whenever  the  ancient  government  should  be  re-established.  Our 
colonies,  unless  they  can  be  induced  to  consent  to  a  union,  are  very 
likely  to  defend  themselves  against  the  best  of  all  mother  countries, 
as  obstinately  as  the  city  of  Paris  did  against  one  of  the  best  of 
kings. 

The  idea  of  representation  was  unknown  in  ancient  times.  When 
the  people  of  one  state  wore  admitted  to  the  right  of  citizenship  in 
another,  they  had  no  other  means  of  exercising  that  right  but  by 
coming  in  a  body  to  vote  and  deliberate  with  the  people  of  that  other 
state.  The  admission  of  the  greater  part  of  the  inhabitants  of  Italy 
to  the  privileges  of  Roman  citizens  completely  ruined  the  Roman 
republic.  It  was  no  longer  possible  to  distinguish  between  who 
was  and  who  was  not  a  Roman  citizen.  No  tribe  could  know  its 
own  members.  A  rabble  of  any  kind  could  be  introduced  into  the 
assemblies  of  the  people,  could  drive  out  the  real  citizens,  and 
decide  upon  the  affairs  of  the  republic  as  if  they  themselves  had  been 
such.  But  though  America  was  to  send  fifty  or  sixty  new  repre¬ 
sentatives  to  Parliament,  the  door-keeper  of  the  House  of  Commons 
could  not  find  any  great  difficulty  in  distinguishing  between  who 
was  and  who  was  not  a  member.  Though  the  Roman  constitution, 
therefore,  was  necessarily  ruined  by  the  union  of  Rome  with  the 
allied  states  of  Italy,  there  is  not  the  least  probability  that  the 
British  constitution  would  be  hurt  by  the  union  of  Great  Britain 
with  her  colonies.  That  constitution,  on  the  contrary,  would  be 
completed  by  it;  and  seems  to  be  imperfect  without  it.  The 
assembly  which  deliberates  and  decides  concerning  the  affairs  of 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


207 


every  part  of  the  empire,  in  order  to  be  properly  informed,  ought 
certainly  to  have  representatives  from  every  part  of  it.  That  this 
union,  however,  could  be  easily  effectuated,  or  that  difficulties  and 
great  difficulties  might  not  occur  in  the  execution,  I  do  not  pretend. 
I  have  yet  heard  ^of  none,  however,  which  appear  insurmountable. 
The  principal  perhaps  arise,  not  from  the  nature  of  things,  but 
from  the  prejudices  and  opinions  of  the  people  both  on  this  and  on 
the  other  side  of  the  Atlantic. 

We,  on  this  side  the  water,  are  afraid  lest  the  multitude  of 
American  representatives  should  overturn  the  balance  of  the  con¬ 
stitution,  and  increase  too  much  either  the  influence  of  the  Crown 
on  the  one  hand,  or  the  force  of  the  democracy  on  the  other.  But 
if  the  number  of  American  representatives  was  to  be  in  proportion 
to  the  produce  of  American  taxation,  the  number  of  people  to  be 
managed  would  increase  exactly  in  proportion  to  the  means  of 
managing  them;  and  the  means  of  managing,  to  the  number  of 
people  to  be  managed.  The  monarchical  and  democratical  parts  of 
the  constitution  would,  after  the  union,  stand  exactly  in  the  same 
degree  of  relative  force  with  regard  to  one  another  as  they  had  done 
before. 

The  people  on  the  other  side  of  the  water  are  afraid  lest  their 
distance  from  the  seat  of  government  might  expose  them  to  many 
oppressions.  But  their  representatives  in  Parliament,  of  which  the 
number  ought  from  the  first  to  be  considerable,  would  easily  be 
able  to  protect  them  from  all  oppression.  The  distance  could  not 
much  weaken  the  dependency  of  the  representative  upon  the  con¬ 
stituent,  and  the  former  would  still  feel  that  he  owed  his  seat  in 
Parliament,  and  all  the  consequence  which  he  derived  from  it,  to 
the  good-will  of  the  latter.  It  would  be  the  interest  of  the  former, 
therefore,  to  cultivate  that  good-will  by  complaining,  with  all  the 
authority  of  a  member  of  the  Legislature,  of  every  outrage  which 
any  civil  or  military  officer  might  be  guilty  of  in  those  remote 
parts  of  the  empire.  The  distance  of  America  from  the  seat  of 
government,  besides,  the  natives  of  that  country  might  flatter 
themselves,  with  some  appearance  of  reason  too,  would  not  be  of 
very  long  continuance.  Such  has  hitherto  been  the  rapid  progress 
of  that  country  in  wealth,  population  and  improvement,  that  in  the 
course  of  little  more  than  a  century,  perhaps,  the  produce  of 
American  might  exceed  that  of  British  taxation.  The  seat  of  the 


208 


THE  NATURE  AND  CAUSES  OF 


book  rv. 


empire  would  then  naturally  remove  itself  to  that  part  of  the  empire 
which  contributed  most  to  the  general  defence  and  support  of  the 
whole. 

The  discovery  of  America,  and  that  of  a  passage  to  the  East 
Indies  by  the  Cape  of  Good  Hope,  are  the  two  greatest  and  most 
important  events  recorded  in  the  history  of  mankind.  Their  con¬ 
sequences  have  already  been  very  great :  but,  in  the  short  period 
of  between  two  and  three  centuries  which  has  elapsed  since  these 
discoveries  were  made,  it  is  impossible  that  the  whole  extent  of 
their  consequences  can  have  been  seen.  What  benefits  or  what 
misfortunes  to  mankind  may  hereafter  result  from  those  great  events, 
no  human  wisdom  can  foresee.  By  uniting,  in  some  measure,  the 
most  distant  parts  of  the  world,  by  enabling  them  to  relieve  one 
another’s  wants,  to  increase  one  another’s  enjoyments,  and  to 
encourage  one  another’s  industry,  their  general  tendency  would 
seem  to  be  beneficial.  To  the  natives,  however,  both  of  the  East 
and  West  Indies,  all  the  commercial  benefits  which  can  have 
resulted  from  those  events  have  been  sunk  and  lost  in  the  dreadful 
misfortunes  which  they  have  occasioned.  These  misfortunes, 
however,  seem  to  have  arisen  rather  from  accident  than  from  any¬ 
thing  in  the  nature  of  those  events  themselves.  At  the  particular 
time  when  these  discoveries  were  made,  the  superiority  of  force 
happened  to  be  so  great  on  the  side  of  the  Europeans,  that  they 
were  enabled  to  commit  with  impunity  every  sort  of  injustice  in 
those  remote  countries.  Hereafter,  perhaps,  the  natives  of  those 
countries  may  grow  stronger,  or  those  of  Europe  may  grow  weaker, 
and  the  inhabitants  of  all  the  different  quarters  of  the  world  may 
arrive  at  that  equality  of  courage  and  force  which,  by  inspiring 
mutual  fear,  can  alone  overawe  the  injustice  of  independent  nations 
into  some  sort  of  respect  for  the  rights  of  one  another.  But 
nothing  seems  more  likely  to  establish  this  equality  of  force  than 
that  mutual  communication  of  knowledge  and  of  all  sorts  of  im¬ 
provements  which  an  extensive  commerce  from  all  countries  to  all 
countries  naturally,  or  rather  necessarily,  carries  along  with  it. 

In  the  meantime,  one  of  the  principal  effects  of  those  discoveries 
has  been  to  raise  the  merchant  system  to  a  degree  of  splendour 
and  glory  which  it  could  never  otherwise  have  attained  to.  It  is 
the  object  of  that  system  to  enrich  a  great  nation  rather  by  trade 
and  manufactures  than  by  the  improvement  and  cultivation  of 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


209 


land,  ratlier  by  the  industry  of  the  towns  than  by  that  of  the 
country.  But,  in  consequence  of  those  discoveries,  the  commercial 
towns  of  Europe,  instead  of  being  the  manufacturers  and  carriers 
for  but  a  very  small  part  of  the  world  (that  part  of  Europe  which 
is  washed  by  the  Atlantic  Ocean,  and  the  countries  which  lie  round 
the  Baltic  and  Mediterranean  Seas),  have  now  become  the  manu¬ 
facturers  for  the  numerous  and  thriving  cultivators  of  America, 
and  the  carriers,  and  in  some  respects  the  manufacturers  too, 
for  almost  all  the  different  nations  of  Asia,  Africa,  and  America. 
Two  new  worlds  have  been  opened  to  their  industry,  each  of 
them  much  greater  and  more  extensive  than  the  old  one,  and  the 
market  of  one  of  them  is  growing  still  greater  and  greater  every 
day.1 

The  countries  which  possess  the  colonies  of  America,  and  which 
trade  directly  to  the  East  Indies,  enjoy,  indeed,  the  whole  show 
and  splendour  of  this  great  commerce.  Other  countries,  however, 
notwithstanding  all  the  invidious  restraints  by  which  it  is  meant 
to  exclude  them,  frequently  enjoy  a  greater  share  of  the  real  benefit 
of  it.  The  colonies  of  Spain  and  Portugal,  for  example,  give  more 
real  encouragement  to  the  industry  of  other  countries  than  to  that 
of  Spain  and  Portugal.  In  the  single  article  of  linen  alone  the 
consumption  of  those  colonies  amounts,  it  is  said,  but  I  do  not 
pretend  to  warrant  the  quantity,  to  more  than  three  millions 
sterling  a  year.  But  this  great  consumption  is  almost  entirely 
supplied  by  France,  Flanders,  Holland,  and  Germany.  Spain  and 
Portugal  furnish  but  a  small  part  of  it.  The  capital  which  sup¬ 
plies  the  colonies  with  this  great  quantity  of  linen  is  annually 
distributed  among  and  furnishes  a  revenue  to  the  inhabitants  of 
those  other  countries.  The  profits  of  it  only  are  spent  in  Spain 
and  Portugal,  where  they  help  to  support  the  sumptuous  profusion 
of  the  merchants  of  Cadiz  and  Lisbon. 


1  The  prominence  which  Europe,  and 
especially  Great  Britain,  has  in  the  mar¬ 
kets  of  the  world,  though  it  has  been 
supported  by  long  occupation,  is  really 
due  to  physical  causes.  The  great  mass 
of  dry  land  is  in  the  northern  hemisphere 
and  in  Europe.  The  climate  of  this 
region,  owing  also  to  natural  causes,  is 
milder  and  more  equable  than  that  of 

VOL.  II. 


the  southern  hemisphere.  Great  Britain 
itself  has,  in  the  vicinity  of  this  great 
area  of  inhabited  land,  a  nearer  com¬ 
munication  with  all  parts  of  the  civilised 
world,  or,  indeed,  of  that  which  would 
be  civilised,  than  any  other  place.  There 
are  other  circumstances,  too,  equally  na¬ 
tural  which  aid  the  position  which  this 
country  occupies. 


P 


210 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


Even  the  regulations  by  which  each  nation  endeavours  to  secure 
to  itself  the  exclusive  trade  of  its  own  colonies,  are  frequently  more 
hurtful  to  the  countries  in  favour  of  which  they  are  established  than 
to  those  against  which  they  are  established.  The  unjust  oppression 
of  the  industry  of  other  countries  falls  back,  if  I  may  say  so,  upon 
the  heads  of  the  oppressors,  and  crushes  their  industry  more  than 
it  does  that  of  those  other  countries.  By  those  regulations,  for 
example,  the  merchant  of  Hamburg  must  send  the  linen  which 
he  destines  for  the  American  market  to  London,  and  he  must 
bring  back  from  thence  the  tobacco  which  he  destines  for  the 
German  market ;  because  he  can  neither  send  the  one  directly  to 
America,  nor  bring  back  the  other  directly  from  thence.  By  this 
restraint  he  is  probably  obliged  to  sell  the  one  somewhat  cheaper, 
and  to  buy  the  other  somewhat  dearer  than  he  otherwise  might 
have  done;  and  his  profits  are  probably  somewhat  abridged  by 
means  of  it.  In  this  trade,  however,  between  Hamburg  and 
London,  he  certainly  receives  the  returns  of  his  capital  much 
more  quickly  than  he  could  possibly  have  done  in  the  direct  trade 
to  America,  even  though  we  should  suppose,  what  is  by  no  means 
the  case,  that  the  payments  of  America  were  as  punctual  as  those 
of  London.  In  the  trade,  therefore,  to  which  those  regulations 
confine  the  merchant  of  Hamburg,  his  capital  can  keep  in  constant 
employment  a  much  greater  quantity  of  German  industry  than  it 
possibly  could  have  done  in  the  trade  from  which  he  is  excluded. 
Though  the  one  employment,  therefore,  may  to  him  perhaps  be 
less  profitable  than  the  other,  it  cannot  be  less  advantageous  to 
his  country.  It  is  quite  otherwise  with  the  employment  into 
which  the  monopoly  naturally  attracts,  if  I  may  say  so,  the  capital 
of  the  London  merchant.  That  employment  may,  perhaps,  be 
more  profitable  to  him  than  the  greater  part  of  other  employments, 
but,  on  account  of  the  slowness  of  the  returns,  it  cannot  be  more 
advantageous  to  his  country. 

After  all  the  unjust  attempts,  therefore,  of  every  country  in 
Europe  to  engross  to  itself  the  whole  advantage  of  the  trade  of 
its  own  colonies,  no  country  has  yet  been  able  to  engross  to  itself 
anything  but  the  expense  of  supporting  in  time  of  peace  and  of 
defending  in  time  of  war  the  oppressive  authority  which  it  assumes 
over  them.  The  inconveniences  resulting  from  the  possession  of 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS . 


211 


its  colonies,  every  country  has  engrossed  to  itself  completely.  The 
advantages  resulting  from  their  trade  it  has  been  obliged  to  share 
with  many  other  countries.1 

At  first  sight,  no  doubt,  the  monopoly  of  the  great  commerce 
of  America  naturally  seems  to  be  an  acquisition  of  the  highest 
value.  To  the  undiscerning  eye  of  giddy  ambition,  it  naturally 
presents  itself  amidst  the  confused  scramble  of  politics  and  war 
as  a  very  dazzling  object  to  fight  for.  The  dazzling  splendour  of 
the  object,  however,  the  immense  greatness  of  the  commerce,  is 
the  very  quality  which  renders  the  monopoly  of  it  hurtful,  or  which 
makes  one  employment,  in  its  own  nature  necessarily  less  advan¬ 
tageous  to  the  country  than  the  greater  part  of  other  employments, 
absorb  a  much  greater  proportion  of  the  capital  of  the  country 
than  what  would  otherwise  have  gone  to  it. 

The  mercantile  stock  of  every  country,  it  has  been  shown  in 
the  Second  Book,2  naturally  seeks,  if  one  may  say  so,  the  employ¬ 
ment  most  advantageous  to  that  country.  If  it  is  employed  in 
the  carrying  trade,  the  country  to  which  it  belongs  becomes  the 
emporium  of  the  goods  of  all  the  countries  whose  trade  that  stock 
carries  on.  But  the  owner  of  that  stock  necessarily  wishes  to 
dispose  of  as  great  a  part  of  those  goods  as  he  can  at  home.  He 
thereby  saves  himself  the  trouble,  risk,  and  expense  of  exporta¬ 
tion,  and  he  will  upon  that  account  be  glad  to  sell  them  at  home, 
not  only  for  a  much  smaller  price,  but  with  somewhat  a  smaller 
profit  than  he  might  expect  to  make  by  sending  them  abroad. 
He  naturally,  therefore,  endeavours  as  much  as  he  can  to  turn  his 
carrying  trade  into  a  foreign  trade  of  consumption.  If  his  stock 
again  is  employed  in  a  foreign  trade  of  consumption,  he  will,  for 
the  same  reason,  be  glad  to  dispose  of  at  home  as  great  a  part 
as  he  can  of  the  home  goods,  which  he  collects  in  order  to  export 
to  some  foreign  market,  and  he  will  thus  endeavour,  as  much  as 
he  can,  to  turn  his  foreign  trade  of  consumption  into  a  home  trade. 
The  mercantile  stock  of  every  country  naturally  courts  in  this 
manner  the  near,  and  shuns  the  distant  employment;  naturally 
courts  the  employment  in  which  the  returns  are  frequent,  and 
shuns  that  in  which  they  are  distant  and  slow ;  naturally  courts 

1  For  the  loss  which  the  obligations  of  mother  country,  see  as  before,  Mr.  Gold- 
government  and  defence  bring  on  the  win  Smith’s  ‘  The  Empire. ’  2  eli.  v. 


212 


TIIE  NATURE  AND  CAUSES  OF 


BOOK  IT. 


tlie  employment  in  which  it  can  maintain  the  greatest  quantity 
of  productive  labour  in  the  country  to  which  it  belongs,  or  in 
which  its  owner  resides,  and  shuns  that  in  which  it  can  main¬ 
tain  there  the  smallest  quantity.  It  naturally  courts  the  em¬ 
ployment  which  in  ordinary  cases  is  most  advantageous,  and 
shuns  that  which  in  ordinary  cases  is  least  advantageous  to  that 
country. 

But  if  in  any  of  those  distant  employments,  which  in  ordinary 
cases  are  less  advantageous  to  the  country,  the  profit  should  happen 
to  rise  somewhat  higher  than  what  is  sufficient  to  balance  the 
natural  preference  which  is  given  to  nearer  employments,  this 
superiority  of  profit  will  draw  stock  from  those  nearer  employ¬ 
ments,  till  the  profits  of  all  return  to  their  proper  level.  This 
1 — superiority  of  profit,  however,  is  a  proof  that  in  the  actual  cir¬ 
cumstances  of  the  society,  those  distant  employments  are  somewhat 
understocked  in  proportion  to  other  employments,  and  that  the 
stock  of  the  society  is  not  distributed  in  the  properest  manner 
among  all  the  different  employments  carried  on  in  it.  It  is  a 
proof  that  something  is  either  bought  cheaper  or  sold  dearer  than 
it  ought  to  be,  and  that  some  particular  class  of  citizens  is  more 
or  less  oppressed  either  by  paying  more  or  by  getting  less  than 
what  is  suitable  to  that  equality,  which  ought  to  take  place,  and 
which  naturally  does  take  place,  among  all  the  different  classes 
of  them.  Though  the  same  capital  never  will  maintain  the  same 
quantity  of  productive  labour  in  a  distant  as  in  a  near  employ¬ 
ment,  yet  a  distant  employment  may  be  as  necessary  for  the 
welfare  of  the  society  as  a  near  one ;  the  goods  which  the  distant 
employment  deals  in  being  necessary,  perhaps,  for  carrying  on 
many  of  the  nearer  employments.  But  if  the  profits  of  those 
who  deal  in  such  goods  are  above  their  proper  level,  those 
goods  will  be  sold  dearer  than  they  ought  to  be,  or  somewhat 
above  their  natural  price,  and  all  those  engaged  in  the  nearer 
employments  will  be  more  or  less  oppressed  by  this  high  price. 
Their  interest,  therefore,  in  this  case  requires  that  some  stock 
should  be  withdrawn  from  those  nearer  employments,  and  turned 
towards  that  distant  one,  in  order  to  reduce  its  profits  to  their 
proper  level,  and  the  price  of  the  goods  which  it  deals  in  to  their 
natural  price.  In  this  extraordinary  case,  the  public  interest  re¬ 
quires  that  some  stock  should  be  withdrawn  from  those  employ- 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


213 


ments  which  in  ordinary  cases  are  more  advantageous,  and  turned 
towards  one  which  in  ordinary  cases  is  less  advantageous  to 
the  public;  and  in  this  extraordinary  case,  the  natural  interests 
and  inclinations  of  men  coincide  as  exactly  with  the  public  in¬ 
terest  as  in  all  other  ordinary  cases,  and  lead  them  to  with¬ 
draw  stock  from  the  near,  and  to  turn  it  towards  the  distant 
employment. 

It  is  thus  that  the  private  interests  and  passions  of  individuals 
naturally  dispose  them  to  turn  their  stock  towards  the  employ¬ 
ments  which  in  ordinary  cases  are  most  advantageous  to  the 
society.  But  if  from  this  natural  preference  they  should  turn  too 
much  of  it  towards  those  employments,  the  fall  of  profit  in  them 
and  the  rise  of  it  in  all  others  immediately  dispose  them  to  alter 
this  faulty  distribution.  Without  any  intervention  of  law,  there¬ 
fore,  the  private  interests  and  passions  of  men  naturally  lead  them 
to  divide  and  distribute  the  stock  of  every  society,  among  all  the 
different  employments  carried  on  in  it,  as  nearly  as  possible  in 
the  proportion  which  is  most  agreeable  to  the  interest  of  the  whole 
society. 

All  the  different  regulations  of  the  mercantile  system  necessarily 
derange  more  or  less  this  natural  and  most  advantageous  distri¬ 
bution  of  stock.  But  those  which  concern  the  trade  to  America 
and  the  East  Indies  derange  it,  perhaps,  more  than  any  other  ; 
because  the  trade  to  those  two  great  continents  absorbs  a  greater 
quantity  of  stock  than  any  two  other  branches  of  trade.  The 
regulations,  however,  by  which  this  derangement  is  effected  in 
those  two  different  branches  of  trade  are  not  altogether  the  same. 
Monopoly  is  the  great  engine  of  both  ;  but  it  is  a  different  sort 
of  monopoly.  Monopoly  of  one  kind  or  another,  indeed,  seems 
to  be  the  sole  engine  of  the  mercantile  system. 

In  the  trade  to  America,  every  nation  endeavours  to  engross  as 
much  as  possible  the  whole  market  of  its  own  colonies,  by  fairly 
excluding  all  other  nations  from  any  direct  trade  to  them.  During 
the  greater  part  of  the  sixteenth  century,  the  Portuguese  endea¬ 
voured  to  manage  the  trade  to  the  East  Indies  in  the  same  manner, 
by  claiming  the  sole  right  of  sailing  in  the  Indian  seas,  on  account 
of  the  merit  of  having  first  found  out  the  road  to  them.  The  Dutch 
still  continue  to  exclude  all  other  European  nations  from  any  direct 
trade  to  their  spice  islands.  Monopolies  of  this  kind  are  evidently 


214 


THE  NATURE  AND  CAUSES  OF 


BOOK  IT. 


established  against  all  other  European  nations,  who  are  thereby  not 
only  excluded  from  a  trade  to  which  it  might  be  convenient  for 
them  to  turn  some  part  of  their  stock,  but  are  obliged  to  buy  the 
goods  which  that  trade  deals  in  somewhat  dearer,  than  if  they  could 
import  them  themselves  directly  from  the  countries  which  produce 
them. 

But  since  the  fall  of  the  power  of  Portugal,  no  European  nation 
has  claimed  the  exclusive  right  of  sailing  in  the  Indian  seas,  of 
which  the  principal  ports  are  now  open  to  the  ships  of  all  European 
nations.  Except  in  Portugal,  however,  and  within  these  few  years 
in  France, .  the  trade  to  the  East  Indies  has  in  every  European 
country  been  subjected  to  an  exclusive  company,  Monopolies  of 
this  kind  are  properly  established  against  the  very  nation  which 
erects  them.  The  greater  part  of  that  nation  are  thereby  not  only 
excluded  from  a  trade  to  which  it  might  be  convenient  for  them  to 
turn  some  part  of  their  stock,  but  are  obliged  to  buy  the  goods 
which  that  trade  deals  in,  somewhat  dearer  than  if  it  was  open  and 
free  to  all  their  countrymen.  Since  the  establishment  of  the  English 
East  India  Company,  for  example,  the  other  inhabitants  of  England, 
over  and  above  being  excluded  from  the  trade,  must  have  paid  in 
the  price  of  the  East  India  goods  which  they  have  consumed,  not 
only  for  all  the  extraordinary  profits  which  the  Company  may  have 
made  upon  those  goods  in  consequence  of  their  monopoly,  but  for 
all  the  extraordinary  waste  which  the  fraud  and  abuse,  inseparable 
from  the  management  of  the  affairs  of  so  great  a  Company,  must 
necessarily  have  occasioned.  The  absurdity  of  this  second  kind 
of  monopoly,  therefore,  is  much  more  manifest  than  that  of  the 
first.1 

Both  these  kinds  of  monopolies  derange  more  or  less  the  natural 
distribution  of  the  stock  of  the  society;  but  they  do  not  always 
derange  it  in  the  same  way. 

Monopolies  of  the  first  kind  always  attract  to  the  particular 


1  No  better  proof  can  be  found  of  the 
truth  which  the  text  inculcates,  than  the 
great  fall  in  the  price  of  Eastern  pro¬ 
duce,  of  freights  to  and  from  the  regions 
formerly  occupied  by  the  great  Company’s 
monopoly,  and  the  shortening  of  the  time 
consumed  in  voyages,  since  that  monopoly 
has  been  broken  up.  It  is  impossible  to 
estimate  the  loss  which  this  country 


sustained  under  the  system,  partly  in 
the  price  of  the  produce,  partly  in  the 
discouragement  which  the  exclusive  trade 
in  question  put  upon  home  industry.  It 
is  no  small  evidence  of  Adam  Smith’s 
sagacity,  that  he  exposed  so  early  and  so 
fully  the  mischievous  character  of  this 
privilege  of  sole  trade  conferred  on  a 
joint-stock  company. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


215 


trade  in  which  they  are  established  a  greater  proportion  of  the 
stock  of  the  society  than  what  would  go  to  that  trade  of  its  own 
accord. 

Monopolies  of  the  second  kind  may  sometimes  attract  stock 
towards  the  particular  trade  in  which  they  are  established,  and 
sometimes  repel  it  from  that  trade  according  to  different  circum¬ 
stances.  In  poor  countries,  they  naturally  attract  towards  that 
trade  more  stock  than  would  otherwise  go  to  it.  In  rich  countries, 
they  naturally  repel  from  it  a  good  deal  of  stock  which  would 
otherwise  go  to  it. 

Such  poor  countries  as  Sweden  and  Denmark,  for  example,  would 
probably  have  never  sent  a  single  ship  to  the  East  Indies,  had  not 
the  trade  been  subjected  to  an  exclusive  company.  The  establish¬ 
ment  of  such  a  company  necessarily  encourages  adventurers.  Their 
monopoly  secures  them  against  all  competitors  in  the  home  market, 
and  they  have  the  same  chance  for  foreign  markets  with  the  traders 
of  other  nations.  Their  monopoly  shows  them  the  certainty  of  a 
great  profit  upon  a  considerable  quantity  of  goods,  and  the  chance 
of  a  considerable  profit  upon  a  great  quantity.1  Without  such  ex¬ 
traordinary  encouragement,  the  poor  traders  of  such  poor  countries 
would  probably  never  have  thought  of  hazarding  their  small  capitals 
in  so  very  distant  and  uncertain  an  adventure  as  the  trade  to  the 
East  Indies  must  naturally  have  appeared  to  them. 

Such  a  rich  country  as  Holland,  on  the  contrary,  would  probably, 
in  the  case  of  a  free  trade,  send  many  more  ships  to  the  East  Indies 
than  it  actually  does.  The  limited  stock  of  the  Dutch  East  India 
Company  probably  repels  from  that  trade  many  great  mercantile 
capitals  which  would  otherwise  go  to  it.  The  mercantile  capital  of 
Holland  is  so  great  that  it  is,  as  it  were,  continually  overflowing, 
sometimes  into  the  public  funds  of  foreign  countries,  sometimes  into 
loans  to  private  traders  and  adventurers  of  foreign  countries,  some¬ 
times  into  the  most  round-about  foreign  trades  of  consumption,  and 
sometimes  into  the  carrying  trade.  All  near  employments  being 
completely  filled  up,  all  the  capital  which  can  be  placed  in  them 

1  It  may  be  doubted  whether  this  trade  monopoly  with  the  East,  enjoyed 
*  chance  of  a  considerable  profit  ’  did  not  by  any  company,  has  ever  satisfied  those 
lower  the  real  profit  attained,  in  just  the  who  have  obtained  it,  but  that  all  these 
same  way  that  the  value  of  every  chance  companies,  though  they  may  have  some- 
is  over-estimated  by  those  who  are  led  by  times  succeeded  as  conquerors,  have  in- 
it.  At  any  rate,  it  is  certain  that  no  variably  failed  as  traders. 


216 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


with  any  tolerable  profit  being  already  placed  in  them,  the  capital 
of  Holland  necessarily  flows  towards  the  most  distant  employments.1 
The  trade  to  the  East  Indies,  if  it  was  altogether  free,  would  pro¬ 
bably  absorb  the  greater  part  of  this  redundant  capital.  The  East 
Indies  offer  a  market  both  for  the  manufacturers  of  Europe  and  for 
the  gold  and  silver  as  well  as  for  several  other  productions  of 
America,  greater  and  more  extensive  than  both  Europe  and  America 
put  together. 

Every  derangement  of  the  natural  distribution  of  stock  is 
necessarily  hurtful  to  the  society  in  which  it  takes  place ;  whether 
it  be  by  repelling  from  a  particular  trade  the  stock  which  would 
otherwise  go  to  it,  or  by  attracting  towards  a  particular  trade  that 
which  would  not  otherwise  come  to  it.  If,  without  any  exclusive 
company,  the  trade  of  Holland  to  the  East  Indies  would  be  greater 
than  it  actually  is,  that  country  must  suffer  a  considerable  loss  by 
part  of  its  capital  being  excluded  from  the  employment  most  con¬ 
venient  for  that  part.  And  in  the  same  manner,  if,  without  an 
exclusive  company,  the  trade  of  Sweden  and  Denmark  to  the  East 
Indies  would  be  less  than  it  actually  is,  or,  what  perhaps  is  more 
probable,  would  not  exist  at  all,  those  two  countries  must  likewise 
suffer  a  considerable  loss  by  part  of  their  capital  being  drawn  into 
an  employment  which  must  be  more  or  less  unsuitable  to  their 
present  circumstances.  Better  for  them,  perhaps,  in  their  present 
circumstances,  to  buy  East  India  goods  of  other  nations,  even 
though  they  should  pay  somewhat  dearer,  than  to  turn  so  great  a 
part  of  their  small  capital  to  so  very  distant  a  trade,  in  which  the 
returns  are  so  very  slow,  in  which  that  capital  can  maintain  so 
small  a  quantity  of  productive  labour  at  home,  where  productive 
labour  is  so  much  wanted,  where  so  little  is  done,  and  where  so 
much  is  to  do. 

Though  without  an  exclusive  company,  therefore,  a  particular 
country  should  not  be  able  to  carry  on  any  direct  trade  to  the  East 
Indies,  it  will  not  from  thence  follow  that  such  a  company  ought  to 


1  This  passage  contains  the  germ  of  the 
theory  subsequently  developed  by  Mr. 
Mill,  as  to  the  tendency  of  profits  to  a 
minimum,  and  the  necessity  that  there 
exists,  under  such  circumstances,  that 
fresh  channels  should  be  dug  for  capital 
at  home,  by  the  discovery  of  improve¬ 
ments  in  production,  and  in  the  employ¬ 


ment  of  other  capital  in  foreign  advances. 
In  point  of  fact,  the  emigration  of  super¬ 
fluous  capital  is  as  advantageous  as  the 
emigration  of  superfluous  labour.  The 
misfortune  is,  that  there  is  no  harmony 
in  their  respective  movements,  but  that 
the  emigration  of  men  is  wasteful,  and 
that  of  capital  inconsiderate  or  timid. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


217 


be  established  there,,  but  only  that  such  a  country  ought  not  in 
these  circumstances  to  trade  directly  to  the  East  Indies.  That  such 
companies  are  not  in  general  necessary  for  carrying  on  the  East 
India  trade,  is  sufficiently  demonstrated  by  the  experience  of  the 
Portuguese,  who  enjoyed  almost  the  whole  of  it  for  more  than  a 
century  together  without  any  exclusive  company. 

No  private  merchant,  it  has  been  said,  could  well  have  capital 
sufficient  to  maintain  factors  and  agents  in  the  different  ports  of  the 
East  Indies,  in  order  to  provide  goods  for  the  ships  which  he  might 
occasionally  send  thither ;  and  yet,  unless  he  was  able  to  do  this, 
the  difficulty  of  finding  a  cargo  might  frequently  make  his  ships 
lose  the  season  for  returning,  and  the  expense  of  so  long  a  delay 
would  not  only  eat  up  the  whole  profit  of  the  adventure,  but  fre¬ 
quently  occasion  a  very  considerable  loss.  This  argument,  however, 
if  it  proved  anything  at  all,  would  prove  that  no  one  great  branch 
of  trade  could  be  carried  on  without  an  exclusive  company,  which  is 
contrary  to  the  experience  of  all  nations.  There  is  no  great  branch 
of  trade  in  which  the  capital  of  any  one  private  merchant  is  suffi¬ 
cient  for  carrying  on  all  the  subordinate  branches  which  must  be 
carried  on  in  order  to  carry  on  the  principal  one.  But  when  a 
nation  is  ripe  for  any  great  branch  of  trade,  some  merchants  na¬ 
turally  turn  their  capitals  towards  the  principal,  and  some  towards 
the  subordinate  branches  of  it ;  and  though  all  the  different  branches 
of  it  are  in  this  manner  carried  on,  yet  it  very  seldom  happens  that 
they  are  all  carried  on  by  the  capital  of  one  private  merchant.  If  a 
nation,  therefore,  is  ripe  for  the  East  India  trade,  a  certain  portion 
of  its  capital  will  naturally  divide  itself  among  all  the  different 
branches  of  that  trade.  Some  of  its  merchants  will  find  it  for  their 
interest  to  reside  in  the  East  Indies,  and  to  employ  their  capitals 
there  in  providing  goods  for  the  ships  which  are  to  be  sent  out  by 
other  merchants  who  reside  in  Europe.  The  settlements  which 
different  European  nations  have  obtained  in  the  East  Indies,  if  they 
were  taken  from  the  exclusive  companies  to  which  they  at  present 
belong  and  put  under  the  immediate  protection  of  the  sovereign, 
would  render  this  residence  both  safe  and  easy,  at  least  to  the  mer¬ 
chants  of  the  particular  nations  to  whom  those  settlements  belong. 
If  at  any  particular  time  that  part  of  the  capital  of  any  country 
which  of  its  own  accord  tended  and  inclined,  if  I  may  say  so, 
towards  the  East  India  trade,  was  not  sufficient  for  carrying  on 


218 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


all  those  different  branches  of  it,  it  would  be  a  proof  that,  at  that 
particular  time,  that  country  was  not  ripe  for  that  trade,  and  that 
it  would  do  better  to  buy  for  some  time,  even  at  a  higher  price, 
from  other  European  nations,  the  East  India  goods  it  had  occasion 
for,  than  to  import  them  itself  directly  from  the  East  Indies.  What 
it  might  lose  by  the  high  price  of  those  goods  could  seldom  be 
equal  to  the  loss  which  it  would  sustain  by  the  distraction  of  a 
large  portion  of  its  capital  from  other  employments  more  necessary, 
or  more  useful,  or  more  suitable  to  its  circumstances  and  situation, 
than  a  direct  trade  to  the  East  Indies. 

Though  the  Europeans  possess  many  considerable  settlements 
both  upon  the  coast  of  Africa  and  in  the  East  Indies,  they  have 
not  yet  established  in  either  of  those  countries  such  numerous  and 
thriving  colonies  as  those  in  the  islands  and  continent  of  America. 
Africa,  however,  as  well  as  several  of  the  countries  comprehended 
under  the  general  name  of  the  East  Indies,  are  inhabited  by  bar¬ 
barous  nations.  But  those  nations  were  by  no  means  so  weak  and 
defenceless  as  the  miserable  and  helpless  Americans ;  and  in  pro¬ 
portion  to  the  natural  fertility  of  the  countries  which  they  in¬ 
habited,  they  were  besides  much  more  populous.  The  most 
barbarous  nations  either  of  Africa  or  of  the  East  Indies  were 
shepherds;  even  the  Hottentots  were  so.  But  the  natives  of  every 
part  of  America,  except  Mexico  and  Peru,  wTere  only  hunters;  and 
the  difference  is  very  great  between  the  number  of  shepherds  and 
that  of  hunters  whom  the  same  extent  of  equally  fertile  territory 
can  maintain.  In  Africa  and  the  East  Indies,  therefore,  it  was  more 
difficult  to  displace  the  natives,  and  to  extend  the  European  planta¬ 
tions  over  the  greater  part  of  the  lands  of  the  original  inhabitants. 
The  genius  of  exclusive  companies,  besides,  is  unfavourable,  it  has 
already  been  observed,  to  the  growth  of  new  colonies,  and  has  pro¬ 
bably  been  the  principal  cause  of  the  little  progress  which  they 
have  made  in  the  East  Indies.  The  Portuguese  carried  on  the 
trade  both  to  Africa  and  the  East  Indies  without  any  exclusive 
companies,  and  their  settlements  at  Congo,  Angola,  and  Benguela 
on  the  coast  of  Africa,  and  at  Goa  in  the  East  Indies,  though  much 
depressed  by  superstition  and  every  sort  of  bad  government,  yet 
bear  some  faint  resemblance  to  the  colonies  of  America,  and  are 
partly  inhabited  by  Portuguese  who  have  been  established  there  for 
several  generations.  The  Dutch  settlements  at  the  Cape  of  Good 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


219 


Hope  and  at  Batavia  are  at  present  the  most  considerable  colonies 
which  the  Europeans  have  established  either  in  Africa  or  in  the 
East  Indies,  and  both  these  settlements  are  peculiarly  fortunate  in 
their  situation.  The  Cape  of  Good  Hope  was  inhabited  by  a  race 
of  people  almost  as  barbarous  and  quite  as  incapable  of  defending* 
themselves  as  the  natives  of  America.  It  is  besides  the  half-way 
house,  if  one  may  say  so,  between  Europe  and  the  East  Indies,  at 
which  almost  every  European  ship  makes  some  stay  both  in  going 
and  returning.  The  supplying  of  those  ships  with  every  sort  of 
fresh  provisions,  with  fruit  and  sometimes  with  wine,  affords  alone 
a  very  extensive  market  for  the  surplus  produce  of  the  colonists. 
What  the  Cape  of  Good  Hope  is  between  Europe  and  every  part  of 
the  East  Indies,  Batavia  is  between  the  principal  countries  of  the 
East  Indies.  It  lies  upon  the  most  frequented  road  from  Hindostan 
to  China  and  Japan,  and  is  nearly  about  midway  upon  that  road. 
Almost  all  the  ships  too  that  sail  between  Europe  and  China  touch 
at  Batavia ;  and  it  is,  over  and  above  all  this,  the  centre  and  prin¬ 
cipal  mart  of  what  is  called  the  country  trade  of  the  East  Indies ; 
not  only  of  that  part  of  it  which  is  carried  on  by  Europeans,  but  of 
that  which  is  carried  on  by  the  native  Indians;  and  vessels  navi¬ 
gated  by  the  inhabitants  of  China  and  Japan,  of  Tonquin,  Malacca, 
Cochin-China,  and  the  Island  of  Celebes,  are  frequently  to  be  seen 
in  its  port.  Such  advantageous  situations  have  enabled  those  two 
colonies  to  surmount  all  the  obstacles  which  the  oppressive  genius 
of  an  exclusive  company  may  have  occasionally  opposed  to  their 
growth.  They  have  enabled  Batavia  to  surmount  the  additional 
disadvantage  of  perhaps  the  most  unwholesome  climate  in  the 
world. 

The  English  and  Dutch  companies,  though  they  have  established 
no  considerable  colonies,  except  the  two  above  mentioned,  have  both 
made  considerable  conquests  in  the  East  Indies.  But  in  the  manner 
in  which  they  both  govern  their  new  subjects,  the  natural  genius 
of  an  exclusive  company  has  shown  itself  most  distinctly.  In  the 
spice  islands,  the  Dutch  are  said  to  burn  all  the  spiceries  which  a 
fertile  season  produces  beyond  what  they  expect  to  dispose  of  in 
Europe  with  such  a  profit  as  they  think  sufficient.  In  the  islands 
where  they  have  no  settlements,  they  give  a  premium  to  those  who 
collect  the  young  blossoms  and  green  leaves  of  the  clove  and  nut¬ 
meg  trees  which  naturally  grow  there,  but  which  this  savage  policy 


220 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


has  now,  it  is  said,  almost  completely  extirpated.  Even  in  the  islands 
where  they  have  settlements  they  have  very  much  reduced,  it  is 
said,  the  number  of  those  trees.  If  the  produce  even  of  their  own 
islands  was  much  greater  than  what  suited  their  market,  the 
natives,  they  suspect,  might  find  means  to  convey  some  part  of 
it  to  other  nations ;  and  the  best  way,  they  imagine,  to  secure 
their  own  monopoly,  is  to  take  care  that  no  more  shall  grow  than 
what  they  themselves  carry  to  market.  By  different  arts  of 
oppression  they  have  reduced  the  population  of  several  of  the 
Moluccas  nearly  to  the  number  which  is  sufficient  to  supply  with 
fresh  provisions  and  other  necessaries  of  life  their  own  insignificant 
garrisons,  and  such  of  their  ships  as  occasionally  come  there  for 
a  cargo  of  spices.  Under  the  government  even  of  the  Portuguese, 
however,  those  islands  are  said  to  have  been  tolerably  well  inhabited. 
The  English  company  have  not  yet  had  time  to  establish  in  Bengal 
so  perfectly  destructive  a  system.  The  plan  of  their  government, 
however,  has  had  exactly  the  same  tendency.  It  has  not  been 
uncommon,  I  am  well  assured,  for  the  chief,  that  is,  the  first  clerk 
of  a  factory,  to  order  a  peasant  to  plough  up  a  rich  field  of  poppies, 
and  sow  it  with  rice  or  some  other  grain.  The  pretence  was,  to 
prevent  a  scarcity  of  provisions ;  but  the  real  reason,  to  give  the 
chief  an  opportunity  of  selling  at  a  better  price  a  large  quantity  of 
opium,  which  he  happened  then  to  have  upon  hand.  Upon  other 
occasions  the  order  has  been  reversed,  and  a  rich  field  of  rice  or 
other  grain  has  been  ploughed  up,  in  order  to  make  room  for  a 
plantation  of  poppies  ;  when  the  chief  foresaw  that  extraordinary 
profit  was  likely  to  be  made  by  opium.  The  servants  of  the 
company  have  upon  several  occasions  attempted  to  establish  in  their 
own  favour  the  monopoly  of  some  of  the  most  important  branches, 
not  only  of  the  foreign,  but  of  the  inland  trade  of  the  country. 
Had  they  been  allowed  to  go  on,  it  is  impossible  that  they  should 
not  at  some  time  or  another  have  attempted  to  restrain  the  pro¬ 
duction  of  the  particular  articles  of  which  they  had  thus  usurped 
the  monopoly,  not  only  to  the  quantity  which  they  themselves 
could  purchase,  but  to  that  which  they  could  expect  to  sell  with 
such  a  profit  as  they  might  think  sufficient.  In  the  course  of  a 
century  or  two,  the  policy  of  the  English  company  would  in  this 
manner  have  probably  proved  as  completely  destructive  as  that  of 
the  Dutch. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


221 


Nothing,  however,  can  be  more  directly  contrary  to  the  real 
interest  of  those  companies,  considered  as  the  sovereigns  of  the 
countries  which  they  have  conquered,  than  this  destructive  plan. 
In  almost  all  countries  the  revenue  of  the  sovereign  is  drawn  from  / 
that  of  the  people.  The  greater  the  revenue  of  the  people,  there¬ 
fore,  the  greater  the  annual  produce  of  their  land  and  labour,  the 
more  they  can  afford  to  the  sovereign.1  It  is  his  interest,  therefore, 
to  increase  as  much  as  possible  that  annual  produce.  But  if  this 
is  the  interest  of  every  sovereign,  it  is  peculiarly  so  of  one  whose 
revenue,  like  that  of  the  sovereign  of  Bengal,  arises  chiefly  from 
a  land-rent.  That  rent  must  necessarily  be  in  proportion  to  the 
quantity  and  value  of  the  produce,  and  both  the  one  and  the  other 
must  depend  upon  the  extent  of  the  market.  The  quantity  will 
always  be  suited  with  more  or  less  exactness  to  the  consumption  of 
those  who  can  aford  to  pay  for  it,  and  the  price  which  they  will 
pay  will  always  be  in  proportion  to  the  eagerness  of  their  com¬ 
petition.  It  is  the  interest  of  such  a  sovereign,  therefore,  to  open 
the  most  extensive  market  for  the  produce  of  his  country,  to  allow 
the  most  perfect  freedom  of  commerce,  in  order  to  increase  as  much 
as  possible  the  number  and  the  competition  of  buyers  ;  and  upon 
this  account  to  abolish,  not  only  all  monopolies,  but  all  restraints 
upon  the  transportation  of  the  home  produce  from  one  part  of  the 
country  to  another,  upon  its  exportation  to  foreign  countries,  or 
upon  the  importation  of  goods  of  any  kind  for  which  it  can  be 
exchanged.  He  is  in  this  manner  most  likely  to  increase  both  the 
quantity  and  value  of  that  produce,  and  consequently  of  his  own 
share  of  it,  or  of  his  own  revenue. 

But  a  company  of  merchants  are,  it  seems,  incapable  of  con¬ 
sidering  themselves  as  sovereigns,  even  after  they  have  become  such.\ 
Trade,  or  buying  in  order  to  sell  again,  they  still  consider  as  their 
principal  business,  and,  by  a  strange  absurdity,  regard  the  character 
of  the  sovereign  as  but  an  appendix  to  that  of  the  merchant,  as 
something  which  ought  to  be  made  subservient  to  it,  or  by  means 


1  This  is  not  only  the  fact,  but  it  is 
also  true,  that  the  revenue  of  the  sove¬ 
reign  can  be  derived  only  from  that 
excess  of  income  over  expenditure  which 
can  be  devoted  to  saving.  It  is  therefore 
the  first  interest  of  a  government,  in  so 
far  as  it  requires  a  revenue,  to  facilitate 
the  power  of  purchase  which  wages  give 


the  mass  of  the  community.  But  this  re¬ 
sult  is  best  obtained  by  freedom  of  trade, 
with  what  freedom  of  trade  implies — a 
cheapening  of  articles  to  the  lowest 
possible  amount  which  production  can 
effect  and  the  competition  of  merchants 
can  assure.  All  limitations  on  trade 
imply  artificial  dearness. 


222 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


SI 

;e 


L 


of  which  they  may  be  enabled  to  buy  cheaper  in  India,  and  thereby 
to  sell  with  a  better  profit  in  Europe.  They  endeavour  for  this 
purpose  to  keep  out  as  much  as  possible  all  competitors  from  the 
market  of  the  countries  which  are  subject  to  their  government,  and 
consequently  to  reduce,  at  least,  some  part  of  the  surplus  produce 
of  those  countries  to  what  is  barely  sufficient  for  supplying  their 
own  demand,  or  to  what  they  can  expect  to  sell  in  Europe  with 
such  a  profit  as  they  may  think  reasonable.  Their  mercantile 
habits  draw  them  in  thi&  manner,  almost  necessarily,  though 
perhaps  insensibly,  to  prefer  upon  all  ordinary  occasions  the  little 
and  transitory  profit  of  the  monopolist  to  the  great  and  permanent 
revenue  of  the  sovereign,  and  would  gradually  lead  them  to  treat 
the  countries  subject  to  their  government  nearly  as  the  Dutch  treat 
the  Moluccas.  It  is  the  interest  of  the  East  India  Company,  con¬ 
sidered  as  sovereigns,  that  the  European  goods  which  are  carried  to 
their  Indian  dominions  should  be  sold  there  as  cheap  as  possible  ; 
and  that  the  Indian  goods  which  are  brought  from  thence  should 
bring  there  as  good  a  price,  or  should  be  sold  there  as  dear  as 
possible.  But  the  reverse  of  this  is  their  interest  as  merchants. 
As  sovereigns,  their  interest  is  exactly  the  same  with  that  of  the 
country  which  they  govern.  As  merchants,  their  interest  is  directly 
opposite  to  that  interest.1 

But  if  the  genius  of  such  a  government,  even  as  to  what  concerns 
its  direction  in  Europe,  is  in  this  manner  essentially  and  perhaps 
incurably  faulty,  that  of  its  administration  in  India  is  still  more  so. 
That  administration  is  necessarily  composed  of  a  council  of  mer¬ 
chants,  a  profession  no  doubt  extremely  respectable,  but  which  in 
no  country  in  the  world  carries  along  with  it  that  sort  of  authority 
which  naturally  overawes  the  people,  and  without  force  commands 
their  willing  obedience.  Such  a  council  can  command  obedience 
only  by  the  military  force  with  which  they  are  accompanied,  and 
their  government  is  therefore  necessarily  military  and  despotical. 


1  Only  opposed  from  a  short-sighted 
view  of  what  constitutes  mercantile  in¬ 
terest.  The  interest  of  merchants  con¬ 
sists  quite  as  much  in  multiplying  their 
customers,  in  extending  the  area  of 
demand  and  supply,  as  that  of  govern¬ 
ments  can  do.  The  Company  in  Smith’s 
time  fell  into  the  error  which  was  common 
to  administrations  and  traders,  that  of 
attempting  to  secure  artificially  a  high 


rate  of  profit  on  certain  transactions  by 
artificially  inflating  prices.  But  they 
forgot  or  did  not  see,  that  while  they 
got  one  customer  at  a  good  or  high  price, 
the  same  price  lost  them  a  hundred 
others,  whose  contributions  would  have 
been,  in  the  aggregate,  vastly  more  valu¬ 
able  than  a  high  profit  on  a  solitary 
case. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


223 


Their  proper  business,  however,  is  that  of  merchants.  It  is  to  sell, 
upon  their  master’s  account,  the  European  goods  consigned  to  them, 
and  to  buy  in  return  Indian  goods  for  the  European  market.  It  is 
to  sell  the  one  as  dear  and  to  buy  the  other  as  cheap  as  possible, 
and  consequently  to  exclude  as  much  as  possible  all  rivals  from  the 
particular  market  where  they  keep  their  shop.  The  genius  of  the 
administration,  therefore,  so  far  as  concerns  the  trade  of  the  com¬ 
pany,  is  the  same  as  that  of  the  direction.  It  tends  to  make 
government  subservient  to  the  interest  of  monopoly,  and  conse¬ 
quently  to  stunt  the  natural  growth  of  some  parts  at  least  of  the 
surplus  produce  of  the  country  to  what  is  barely  sufficient  for 
answering  the  demand  of  the  company. 

All  the  members  of  the  administration,  besides,  trade,  more  or 
less  upon  their  own  account,  and  it  is  in  vain  to  prohibit  them 
from  doing  so.  Nothing  can  be  more  completely  foolish  than  to 
expect  that  the  clerks  of  a  great  counting-house  at  ten  thousand 
miles  distance,  and  consequently  almost  quite  out  of  sight,  should, 
upon  a  simple  order  from  their  masters,  give  up  at  once  doing  any 
sort  of  business  upon  their  own  account,  abandon  for  ever  all  hopes 
of  making  a  fortune,  of  which  they  have  the  means  in  their  hands, 
and  content  themselves  with  the  moderate  salaries  which  those 
ipasters  allow  them,  and  which,  moderate  as  they  are,  can  seldom 
be  augmented,  being  commonly  as  large  as  the  real  profits  of  the 
company  trade  can  afford.  In  such  circumstances,  to  prohibit  the 
„  servants  of  the  company  from  trading  upon  their  own  account  can 
have  scarce  any  other  effect  than  to  enable  the  superior  servants, 
under  pretence  of  executing  their  masters’  orders,  to  oppress  such  of 
the  inferior  ones  as  have  had  the  misfortune  to  fall  under  their 
displeasure.  The  servants  naturally  endeavour  to  establish  the  same 
monopoly  in  favour  of  their  own  private  trade  as  of  the  public  trade 
of  the  company.  If  they  are  suffered  to  act  as  they  could  wish, 
they  will  establish  this  monopoly  openly  and  directly,  by  fairly 
prohibiting  all  other  people  from  trading  in  the  articles  in  which 
they  choose  to  deal ;  and  this,  perhaps,  is  the  best  and  least 
oppressive  way  of  establishing  it.  But  if,  by  an  order  from 
Europe,  they  are  prohibited  from  doing  this,  they  will,  notwith¬ 
standing,  endeavour  to  establish  a  monopoly  of  the  same  kind, 
secretly  and  indirectly,  in  a  way  that  is  much  more  destructive  to 
the  country.  They  will  employ  the  whole  authority  of  government, 


224 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


and  pervert  the  administration  of  justice,  in  order  to  harass  and 
ruin  those  who  interfere  with  them  in  any  branch  of  commerce 
which,  by  means  of  agents,  either  concealed,  or  at  least  not 
publicly  avowed,  they  may  choose  to  carry  on.1  But  the  private 
trade  of  the  servants  will  naturally  extend  to  a  much  greater 
variety  of  articles  than  the  public  trade  of  the  company.  The 
public  trade  of  the  company  extends  no  farther  than  the 
trade  with  Europe,  and  comprehends  a  part  only  of  the  foreign 
trade  of  the  country;  but  the  private  trade  of  the  servants  may 
extend  to  all  the  different  branches  both  of  its  inland  and 
foreign  trade.  The  monopoly  of  the  company  can  tend  only  to 
stunt  the  natural  growth  of  that  part  of  the  surplus  produce  which, 
in  the  case  of  a  free  trade,  would  be  exported  to  Europe.  That  of 
the  servants  tends  to  stunt  the  natural  growth  of  every  part  of  the 
produce  in  which  they  choose  to  deal,  of  what  is  destined  for  home 
consumption,  as  well  as  of  what  is  destined  for  exportation ;  and 
consequently  to  degrade  the  cultivation  of  the  whole  country,  and 
to  reduce  the  number  of  its  inhabitants.  It  tends  to  reduce  the 
quantity  of  every  sort  of  produce,  even  that  of  the  necessaries  of 
life,  whenever  the  servants  of  the  company  choose  to  deal  in  them, 
to  what  those  servants  can  both  afford  to  buy  and  expect  to  sell 
with  such  a  profit  as  pleases  them. 

From  the  nature  of  their  situation  too  the  servants  must  be  more 
disposed  to  support  with  rigorous  severity  their  own  interest  against 
that  of  the  country  which  they  govern,  than  their  masters  can  be 
to  support  theirs.  The  country  belongs  to  their  masters,  who 
cannot  avoid  having  some  regard  for  the  interest  of  what  belongs 
to  them.  But  it  does  not  belong  to  the  servants.  The  real  interest 
of  their  masters,  if  they  were  capable  of  understanding  it,  is  the 
same  with  that  of  the  country,*  and  it  is  from  ignorance  chiefly, 
and  the  meanness  of  mercantile  prejudice,  that  they  ever  oppress  it. 
But  the  real  interest  of  the  servants  is  by  no  means  the  same  with 
that  of  the  country,  and  the  most  perfect  information  would  not  ne¬ 
cessarily  put  an  end  to  their  oppressions.  The  regulations  accord¬ 
ingly  which  have  been  sent  out  from  Europe,  though  they  have 
been  frequently  weak,  have  upon  most  occasions  been  well-meaning. 

1  See  on  this  subject  Macaulay’s  Life  same  with  that  of  the  country,  in  the 
of  Lord  Clyde.  government  of  which  his  vote  gives  him 

*  The  interest  of  every  proprietor  of  some  influence.  See  Book  V.  chap.  i. 
India  Stock,  however,  is  by  no  means  the  part  iii. 


CHAP.  VII. 


THE  WEALTH  OF  NATIONS. 


225 


More  intelligence  and  perhaps  less  good-meaning  has  sometimes 
appeared  in  those  established  by  the  servants  in  India.  It  is  a  very 
singular  government  in  which  every  member  of  the  administration 
wishes  to  get  out  of  the  country,  and  consequently  to  have  done 
with  the  government,  as  soon  as  he  can,  and  to  whose  interest,  the 
day  after  he  has  left  it  and  carried  his  whole  fortune  with  him, 
it  is  perfectly  indifferent  though  the  whole  country  was  swallowed 
up  by  an  earthquake. 

I  mean  not,  however,  by  anything  which  I  have  here  said,  to 
throw  any  odious  imputation  upon  the  general  character  of  the 
servants  of  the  East  India  Company,  and  much  less  upon  that  of 
any  particular  persons.  It  is  the  system  of  government,  the  situa¬ 
tion  in  which  they  are  placed,  that  I  mean  to  censure;  not  the 
character  of  those  who  have  acted  in  it.  They  acted  as  their  situa¬ 
tion  naturally  directed,  and  they  who  have  clamoured  the  loudest 
against  them  would,  probably,  not  have  acted  better  themselves. 
In  war  and  negotiation,  the  Councils  of  Madras  and  Calcutta  have 
upon  several  occasions  conducted  themselves  with  a  resolution  and 
decisive  wisdom  which  would  have  done  honour  to  the  senate  of 
Rome  in  the  best  days  of  that  republic.  The  members  of  those 
Councils,  however,  had  been  bred  to  professions  very  different  from 
war  and  politics.  But  their  situation  alone,  without  education, 
experience,  or  even  example,  seems  to  have  formed  in  them  all 
at  once  the  great  qualities  which  it  required,  and  to  have  inspired 
them  both  with  abilities  and  virtues  which  they  themselves  could 
not  well  know  that  they  possessed.  If  upon  some  occasions,  there¬ 
fore,  it  has  animated  them  to  actions  of  magnanimity  which  could 
not  well  have  been  expected  from  them,  we  should  not  wonder  if 
upon  others  it  has  prompted  them  to  exploits  of  somewhat  a 
different  nature.1 

Such  exclusive  companies,  therefore,  are  nuisances  in  every  re¬ 
spect;  always  more  or  less  inconvenient  to  the  countries  in  which 
they  are  established,  and  destructive  to  those  which  have  the  mis¬ 
fortune  to  fall  under  their  government. 

1  It  is  plain  that  in  this  passage  Smith  which  that  extraordinary  genius  created 
must  have  had  the  career  of  Clive  before  the  British  Empire  in  India, 
his  mind,  and  the  circumstances  under 


Q 


VOL.  II. 


226 


THE  NATURE  AND  CAUSES  OF 


BOOK  1Y. 


CHAPTER  YIII. 

CONCLUSION  OF  THE  MERCANTILE  SYSTEM. 

THOUGH  the  encouragement  of  exportation  and  the  dis¬ 
couragement  of  importation  are  the  two  great  engines  by 
which  the  mercantile  system  proposes  to  enrich  every  country, 
yet,  with  regard  to  some  particular  commodities,  it  seems  to  follow 
an  opposite  plan :  to  discourage  exportation  and  to  encourage  im¬ 
portation.  Its  ultimate  object,  however,  it  pretends,  is  always  the 
same — to  enrich  the  country  by  an  advantageous  balance  of  trade. 
It  discourages  the  exportation  of  the  materials  of  manufacture,  and 
of  the  instruments  of  trade,  in  order  to  give  our  own  workmen  an 
advantage,  and  to  enable  them  to  undersell  those  of  other  nations 
in  all  foreign  markets ;  and  by  restraining,  in  this  manner,  the 
exportation  of  a  few  commodities,  of  no  great  price,  it  proposes  to 
occasion  a  much  greater  and  more  valuable  exportation  of  others. 
It  encourages  the  importation  of  the  materials  of  manufacture,  in 
order  that  our  own  people  may  be  enabled  to  work  them  up  more 
cheaply,  and  thereby  prevent  a  greater  and  more  valuable  impor¬ 
tation  of  the  manufactured  commodities.  I  do  not  observe,  at  least 
in  our  Statute  Book,  any  encouragement  given  to  the  importation 
of  the  instruments  of  trade.  When  manufactures  have  advanced 
to  a  certain  pitch  of  greatness,  the  fabrication  of  the  instruments  of 
trade  becomes  itself  the  object  of  a  great  number  of  very  important 
manufactures.  To  give  any  particular  encouragement  to  the  im¬ 
portation  of  such  instruments,  would  interfere  too  much  with  the 
interest  of  those  manufactures.  Such  importation,  therefore,  in¬ 
stead  of  being  encouraged,  has  frequently  been  prohibited.  Thus 
the  importation  of  wool  cards,  except  from  Ireland,  or  when 
brought  in  as  wreck  or  prize  goods,  was  prohibited  by  the  3rd 
of  Edward  IY ;  which  prohibition  was  renewed  by  the  39th  of 
Elizabeth,  and  has  been  continued  and  rendered  perpetual  by  sub¬ 
sequent  laws. 

The  importation  of  the  materials  of  manufacture  has  sometimes 
been  encouraged  by  an  exemption  from  the  duties  to  which  other 
goods  are  subject,  and  sometimes  by  bounties. 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


22  7 


The  importation  of  sheep’s  wool  from  several  different  countries, 
of  cotton  wool  from  all  countries,  of  undressed  flax,  of  the  greater 
part  of  dyeing  drugs,  of  the  greater  part  of  undressed  hides  from 
Ireland  or  the  British  colonies,  of  seal  skins  from  the  British  Green¬ 
land  fishery,  of  pig  and  bar  iron  from  the  British  colonies,  as  well 
as  of  several  other  materials  of  manufacture,  has  been  encouraged 
by  an  exemption  from  all  duties,  if  properly  entered  at  the  Custom 
House.  The  private  interest  of  our  merchants  and  manufacturers 
may,  perhaps,  have  extorted  from  the  Legislature  these  exemptions, 
as  well  as  the  greater  part  of  our  other  commercial  regulations. 
They  are,  however,  perfectly  just  and  reasonable,  and  if,  con¬ 
sistently  with  the  necessities  of  the  State,  they  could  be  extended 
to  all  the  other  materials  of  manufacture,  the  public  would  cer¬ 
tainly  be  a  gainer. 

The  avidity  of  our  great  manufacturers,  however,  has  in  some 
cases  extended  these  exemptions  a  good  deal  beyond  what  can 
justly  be  considered  as  the  rude  materials  of  their  work.  By  the 
24th  George  II,  chap.  46,  a  small  duty  of  only  one  penny  the  pound 
was  imposed  upon  the  importation  of  foreign  brown  linen  yarn, 
instead  of  much  higher  duties  to  which  it  had  been  subjected 
before,  viz.  of  sixpence  the  pound  upon  sail  yarn,  of  one  shilling 
the  pound  upon  all  French  and  Dutch  yarn,  and  of  two  pound 
thirteen  shillings  and  fourpence  upon  the  hundredweight  of  all 
spruce  or  Muscovia  yarn.  But  our  manufacturers  were  not  long 
satisfied  with  this  reduction.  By  the  29th  of  the  same  king, 
chap.  1 5,  the  same  law  which  gave  a  bounty  upon  the  exportation 
of  British  and  Irish  linen  of  which  the  price  did  not  exceed  eighteen- 
pence  the  yard,  even  this  small  duty  upon  the  importation  of  brown 
linen  yarn  was  taken  away.  In  the  different  operations,  however, 
which  are  necessary  for  the  preparation  of  linen  yarn,  a  good  deal 
more  industry  is  employed  than  in  the  subsequent  operation  of 
preparing  linen  cloth  from  linen  yarn.  To  say  nothing  of  the 
industry  of  the  flax-growers  and  flax-dressers,  three  or  four  spinners, 
at  least,  are  necessary  in  order  to  keep  one  weaver  in  constant 
employment ;  and  more  than  four-fifths  of  the  whole  quantity  of 
labour,  necessary  for  the  preparation  of  linen  cloth,  is  employed  in 
that  of  linen  yarn ;  but  our  spinners  are  poor  people,  women  com¬ 
monly,  scattered  about  in  all  different  parts  of  the  country,  without 
support  or  protection.  It  is  not  by  the  sale  of  their  work,  but  by 

Q  % 


228 


THE  NATURE  AND  CAUSES  OF  t 


BOOK  IV. 


that  of  the  complete  work  of  the  weavers,  that  our  great  master 
manufacturers  make  their  profits.  As  it  is  their  interest  to  sell 
the  complete  manufacture  as  dear,  so  is  it  to  buy  the  materials 
as  cheap  as  possible.  By  extorting  from  the  Legislature  bounties 
upon  the  exportation  of  their  own  linen,  high  duties  upon  the 
importation  of  all  foreign  linen,  and  a  total  prohibition  of  the  home 
consumption  of  some  sorts  of  French  linen,  they  endeavour  to  sell 
their  own  goods  as  dear  as  possible.  By  encouraging  the  impor¬ 
tation  of  foreign  linen  yarn,  and  thereby  bringing  it  into  com¬ 
petition  with  that  which  is  made  by  our  own  people,  they  endeavour 
to  buy  the  work  of  the  poor  spinners  as  cheap  as  possible.  They 
are  as  intent  to  keep  down  the  wages  of  their  own  weavers  as  the 
earnings  of  the  poor  spinners,  and  it  is  by  no  means  for  the  benefit 
of  the  workman  that  they  endeavour  either  to  raise  the  price  of 
the  complete  work,  or  to  lower  that  of  the  rude  materials.  It  is 
the  industry  which  is  carried  on  for  the  benefit  of  the  rich  and  the 
powerful  that  is  principally  encouraged  by  our  mercantile  system. 
That  which  is  carried  on  for  the  benefit  of  the  poor  and  the  in¬ 
digent  is,  too  often,  either  neglected  or  oppressed. 

Both  the  bounty  upon  the  exportation  of  linen,  and  the  exemp¬ 
tion  from  duty  upon  the  importation  of  foreign  yarn,  which  were 
granted  only  for  fifteen  years,  but  continued  by  two  different  pro¬ 
longations,  expire  with  the  end  of  the  session  of  Parliament  which 
shall  immediately  follow  the  24th  of  June,  1786. 

The  encouragement  given  to  the  importation  of  the  materials  of 
manufacture  by  bounties  has  been  principally  confined  to  such  as 
were  imported  from  our  American  plantations. 

The  first  bounties  of  this  kind  were  those  granted,  about  the 
beginning  of  the  present  century,  upon  the  importation  of  naval 
stores  from  America.  Under  this  denomination  were  comprehended 
timber  fit  for  masts,  yards,  and  bowsprits ;  hemp,  tar,  pitch,  and 
turpentine.  The  bounty,  however,  of  one  pound  the  ton  upon 
masting  timber,  and  that  of  six  pounds  the  ton  upon  hemp,  were 
extended  to  such  as  should  be  imported  into  England  from  Scot¬ 
land.  Both  these  bounties  continued  without  any  variation,  at  the 
same  rate,  till  they  were  severally  allowed  to  expire ;  that  upon 
hemp  on  the  1st  of  January,  1741,  and  that  upon  masting- timber 
at  the  end  of  the  session  of  Parliament  immediately  following  the 
24th  of  June,  1781. 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


229* 


The  bounties  upon  the  importation  of  tar,  pitch,  and  turpentine 
underwent,  during  their  continuance,  several  alterations.  Originally 
that  upon  tar  was  four  pounds  the  ton  ;  that  upon  pitch,  the  same  ; 
and  that  upon  turpentine,  three  pounds  the  ton.  The  bounty  of 
four  pounds  the  ton  upon  tar  was  afterwards  confined  to  such  as 
had  been  prepared  in  a  particular  manner;  that  upon  other  good, 
clean,  and  merchantable  tar  was  reduced  to  two  pounds  four  shil¬ 
lings  the  ton.  The  bounty  upon  pitch  was  likewise  reduced  to  one 
pound,  and  that  upon  turpentine  to  one  pound  ten  shillings  the  ton. 

The  second  bounty  upon  the  importation  of  any  of  the  materials 
of  manufacture,  according  to  the  order  of  time,  was  that  granted  by 
the  2 1st  George  II,  chap.  30,  upon  the  importation  of  Indigo  from 
the  British  plantations.  When  the  plantation  indigo  was  worth 
three-fourths  of  the  price  of  the  best  French  indigo,  it  was  by  this 
Act  entitled  to  a  bounty  of  sixpence  the  pound.  This  bounty, 
which,  like  most  others,  was  granted  only  for  a  limited  time,  was 
continued  by  several  prolongations,  but  was  reduced  to  fourpence 
the  pound.  It  was  allowed  to  expire  with  the  end  of  the  session 
of  Parliament  which  followed  the  25th  March,  1781. 

The  third  bounty  of  this  kind  was  that  granted  (much  about  the 
time  that  we  were  beginning  sometimes  to  court  and  sometimes  to 
quarrel  with  our  American  colonies)  by  the  4th  George  III,  chap.  26, 
upon  the  importation  of  hemp,  or  undressed  flax,  from  the  British 
plantations.  This  bounty  was  granted  for  twenty-one  years,  from 
the  24th  June,  1764,  to  the  24th  June,  1785.  For  the  first  seven 
years  it  was  to  be  at  the  rate  of  eight  pounds  the  ton,  for  the  second 
at  six  pounds,  and  for  the  third  at  four  pounds.  It  was  not  ex¬ 
tended  to  Scotland,  of  which  the  climate  (although  hemp  is  some¬ 
times  raised  there  in  small  quantities,  and  of  an  inferior  quality)  is 
not  very  fit  for  that  produce.  Such  a  bounty  upon  the  importation 
of  Scotch  flax  into  England  would  have  been  too  great  a  dis¬ 
couragement  to  the  native  produce  of  the  southern  part  of  the 
United  Kingdom. 

The  fourth  bounty  of  this  kind  was  that  granted  by  the  5th  Geo. 
Ill,  chap.  45,  upon  the  importation  of  wood  from  America.  It 
was  granted  for  nine  years,  from  the  1st  January,  17665  to  the 
1st  January,  1775.  During  the  first  three  years,  it  was  to  be  for 
every  hundred  and  twenty  good  deals,  at  the  rate  of  one  pound ; 
and  for  every  load  containing  fifty  cubic  feet  of  other  squared 


230 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV, 


timber  at  tlie  rate  of  twelve  shillings.  For  the  second  three  years, 
it  was  for  deals,  to  be  at  the  rate  of  fifteen  shillings,  and  for  other 
squared  timber,  at  the  rate  of  eight  shillings ;  and  for  the  third 
three  years,  it  was  for  deals,  to  be  at  the  rate  of  ten  shillings,  and 
for  other  squared  timber,  at  the  rate  of  five  shillings. 

The  fifth  bounty  of  this  kind  was  that  granted  by  the  9th  Geo. 
Ill,  chap.  38,  upon  the  importation  of  raw  silk  from  the  British 
plantations.  It  was  granted  for  twenty-one  years,  from  the  1st 
January,  1770,  to  the  1st  January,  1791.  For  the  first  seven  years 
it  was  to  be  at  the  rate  of  twenty-five  pounds  for  every  hundred 
pounds’  value;  for  the  second,  at  twenty  pounds  ;  and  for  the  third, 
at  fifteen  pounds.  The  management  of  the  silk-worm,  and  the 
preparation  of  silk,  requires  so  much  hand  labour ;  and  labour  is  so 
very  dear  in  America,  that  even  this  great  bounty,  I  have  been  in¬ 
formed,  was  not  likely  to  produce  any  considerable  effect. 

The  sixth  bounty  of  this  kind  was  that  granted  by  nth  Geo. 
Ill,  chap.  50,  for  the  importation  of  pipe,  hogshead,  and  barrel 
staves  and  heading  from  the  British  plantations.  It  was  granted 
for  nine  years,  from  1st  January,  1772,  to  the  1st  January,  1781. 
For  the  first  three  years,  it  was  for  a  certain  quantity  of  each,  to 
be  at  the  rate  of  six  pounds ;  for  the  second  three  years,  at  four 
pounds  ;  and  for  the  third  three  years,  at  two  pounds. 

The  seventh,  and  last  bounty  of  this  kind,  was  that  granted  by 
the  19th  Geo.  Ill,  chap.  37,  upon  the  importation  of  hemp  from 
Ireland.  It  was  granted  in  the  same  manner  as  that  for  the  impor¬ 
tation  of  hemp  and  undressed  flax  from  America,  for  twenty-one 
years,  from  the  34th  June,  1779,  to  the  24th  June,  1800.  This 
term  is  divided,  likewise,  into  three  periods  of  seven  years  each  ; 
and  in  each  of  those  periods,  the  rate  of  the  Irish  bounty  is  the 
same  with  that  of  the  American.  It  does  not,  however,  like  the 
American  bounty,  extend  to  the  importation  of  undressed  flax.  It 
would  have  been  too  great  a  discouragement  to  the  cultivation  of 
that  plant  in  Great  Britain.  When  this  last  bounty  was  granted, 
the  British  and  Irish  Legislatures  were  not  in  much  better  humour 
with  one  another  than  the  British  and  American  had  been  before. 
But  this  boon  to  Ireland,  it  is  to  be  hoped,  has  been  granted  under 
more  fortunate  auspices  than  all  those  to  America. 

The  same  commodities  upon  which  we  thus  gave  bounties,  when 
imported  from  America,  were  subjected  to  considerable  duties  when 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS . 


231 


imported  from  any  other  country.  The  interest  of  our  American 
colonies  was  regarded  as  the  same  with  that  of  the  mother  country. 
Their  wealth  was  considered  as  our  wealth.  Whatever  money  was 
sent  out  to  them,  it  was  said,  came  all  back  to  us  by  the  balance  of 
trade,  and  we  could  never  become  a  farthing  the  poorer  by  any  ex¬ 
pense  which  we  could  lay  out  upon  them.  They  were  our  own  in 
every  respect,  and  it  was  an  expense  lead  out  upon  the  improvement 
of  our  own  property,  and  for  the  profitable  employment  of  our  own 
people.  It  is  unnecessary,  I  apprehend,  at  present  to  say  anything 
further,  in  order  to  expose,  the  folly  of  a  system,  which  fatal  expe¬ 
rience  has  now  sufficiently  exposed.  Had  our  American  colonies 
really  been  a  part  of  Great  Britain,  those  bounties  might  have  been 
considered  as  bounties  upon  production,  and  would  still  have  been 
liable  to  all  the  objections  to  which  such  bounties  are  liable,  but  to 
no  other. 

The  exportation  of  the  materials  of  manufacture  is  sometimes 
discouraged  by  absolute  prohibitions,  and  sometimes  by  high 
duties. 

Our  woollen  manufacturers  have  been  more  successful  than  any 
other  class  of  workmen  in  persuading  the  Legislature  that  the 
prosperity  of  the  nation  depended  upon  the  success  and  extension 
of  their  particular  business.  They  have  not  only  obtained  a  mono¬ 
poly  against  the  consumers  by  an  absolute  prohibition  of  importing 
woollen  cloths  from  any  foreign  country,  but  they  have  likewise 
obtained  another  monopoly  against  the  sheep  farmers  and  growers 
of  wool,  by  a  similar  prohibition  of  the  exportation  of  live  sheep 
and  wool.  The  severity  of  many  of  the  laws  which  have  been 
enacted  for  the  security  of  the  revenue  is  very  justly  complained  of, 
as  imposing  heavy  penalties  upon  actions  which,  antecedent  to  the 
statutes  that  declared  them  to  be  crimes,  had  always  been  under¬ 
stood  to  be  innocent.  But  the  cruellest  of  our  revenue  laws,  I  will 
venture  to  affirm,  are  mild  and  gentle  in  comparison  of  some  of 
those  which  the  clamour  of  our  merchants  and  manufacturers  has 
extorted  from  the  Legislature,  for  the  support  of  their  own  absurd 
and  oppressive  monopolies.  Like  the  laws  of  Draco,  these  laws 
may  he  said  to  be  all  written  in  blood. 

By  the  8th  of  Elizabeth,  c.  3,  the  exporter  of  sheep,  lambs  or 
rams,  was  for  the  first  offence  to  forfeit  all  his  goods  for  ever,  to 
suffer  a  year’s  imprisonment,  and  then  to  have  his  left  hand  cut  off 


232 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


in  a  market  town  upon  a  market  day,  to  be  there  nailed  up ;  and 
for  the  second  offence  to  be  adjudged  a  felon,  and  to  suffer  death 
accordingly.  To  prevent  the  breed  of  our  sheep  from  being  propa¬ 
gated  in  foreign  countries,  seems  to  have  been  the  object  of  this 
law.  By  the  13th  and  14th  of  Charles  II,  c.  18,  the  exportation 
of  wool  was  made  felony,  and  the  exporter  subjected  to  the  same 
penalties  and  forfeitures  as  a  felon. 

For  the  honour  of  the  national  humanity,  it  is  to  be  hoped  that 
neither  of  these  statutes  were  ever  executed.  The  first  of  them, 
however,  so  far  as  I  know,  has  never  been  directly  repealed,  and 
Serjeant  Hawkins1  seems  to  consider  it  as  still  in  force.  It  may 
however,  perhaps,  be  considered  as  virtually  repealed  by  the  12th 
of  Charles  IF,  c.  32,  s.  3,  which,  without  expressly  taking  away  the 
penalties  imposed  by  former  statutes,  imposes  a  new  penalty,  viz. 
That  of  twenty  shillings  for  every  sheep  exported,  or  attempted  to 
be  exported,  together  with  the  forfeiture  of  the  sheep  and  of  the 
owner's  share  of  the  ship.  The  second  of  them  was  expressly 
repealed  by  the  7th  and  8th  of  William  III,  c.  28,  s.  4.  By  which 
it  is  declared  that,  ‘  Whereas  the  statute  of  the  13th  and  14th  of 
King  Charles  II,  made  against  the  exportation  of  wool,  among 
other  things  in  the  said  Act  mentioned,  doth  enact  the  same  to  be 
deemed  felony ;  by  the  severity  of  which  penalty  the  prosecution  of 
offenders  hath  not  been  so  effectually  put  in  execution:  Be  it,  there¬ 
fore,  enacted  by’ the  authority  foresaid,  that  so  much  of  the  said  Act 
which  relates  to  the  making  the  said  offence  felony,  be  repealed  and 
made  void/ 

The  penalties,  however,  which  are  either  imposed  by  this  milder 
statute,  or  which,  though  imposed  by  former  statutes,  are  not 
repealed  by  this  one,  are  still  sufficiently  severe.  Besides  the  for¬ 
feiture  of  the  goods,  the  exporter  incurs  the  penalty  of  three  shil¬ 
lings  for  every  pound  weight  of  wool  either  exported  or  attempted 
to  be  exported,  that  is,  about  four  or  five  times  the  value.  Any 
merchant  or  other  person  convicted  of  this  offence  is  disabled  from 
requiring  any  debt  or  account  belonging  to  him  from  any  factor  or 
other  person.  Let  his  fortune  be  what  it  will,  whether  he  is  or  is 
not  able  to  pay  those  heavy  penalties,  the  law  means  to  ruin  him 
completely.  But  as.  the  morals  of  the  great  body  of  the  people  are 
not  yet  so  corrupt  as  those  of  the  contrivers  of  this  statute,  I  have 

1  Pleas  of  the  Crown,  i.  195. 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


233 


not  heard  that  any  advantage  has  ever  been  taken  of  this  clause. 
If  the  person  convicted  of  this  offence  is  not  able  to  pay  the  penal¬ 
ties  within  three  months  after  judgment,  he  is  to  be  transported 
for  seven  years,  and  if  he  returns  before  the  expiration  of  that  term, 
he  is  liable  to  the  pains  of  felony,  without  benefit  of  clergy.  The 
owner  of  the  ship  knowing  this  offence  forfeits  all  his  interest  in 
the  ship  and  furniture.  The  master  and  mariners  knowing  this 
offence  forfeit  all  their  goods  and  chattels,  and  suffer  three  months* 
imprisonment.  By  a  subsequent  statute  the  master  suffers  six 
months’  imprisonment. 

In  order  to  prevent  exportation,  the  whole  inland  commerce  of 
wool  is  laid  under  very  burdensome  and  oppressive  restrictions. 
It  cannot  be  packed  in  any  box,  barrel,  cask,  case,  chest,  or  any 
other  package,  but  only  in  packs  of  leather  or  pack-cloth,  on  which 
must  be  marked  on  the  outside  the  words  wool  or  yarn ,  in  large 
letters  not  less  than  three  inches  long,  on  pain  of  forfeiting  the 
same  and  the  package,  and  three  shillings  for  every  pound  weight, 
to  be  paid  by  the  owner  or  packer.  It  cannot  be  loaded  on  any 
horse  or  cart,  or  carried  by  land  within  five  miles  of  the  coast, 
but  between  sunrising  and  sunsetting,  on  pain  of  forfeiting  the 
same,  the  horses  and  carriages.  The  hundred  next  adjoining  to 
the  sea-coast,  out  of  or  through  which  the  wool  is  carried  or 
exported,  forfeits  twenty  pounds  if  the  wool  is  under  the  value 
of  ten  pounds ;  and  if  of  greater  value,  then  treble  that  value, 
together  with  treble  costs,  to  be  sued  for  within  the  year.  The 
execution  to  be  against  any  two  of  the  inhabitants  whom  the 
sessions  must  reimburse  by  an  assessment  on  the  other  inhabitants, 
as  in  the  cases  of  robbery.  And  if  any  person  compounds  with 
the  hundred  for  less  than  this  penalty,  he  is  to  be  imprisoned  for 
five  years,  and  any  other  person  may  prosecute.  These  regulations 
take  place  through  the  whole  kingdom. 

But  in  the  particular  counties  of  Kent  and  Sussex  the  restric¬ 
tions  are  still  more  troublesome.  Every  owner  of  wool  within  ten 
miles  of  the  sea-coast  must  give  an  account  in  writing,  three  days 
after  shearing,  to  the  next  officer  of  the  customs,  of  the  number 
of  his  fleeces,  and  of  the  places  wdiere  they  are  lodged.  And 
before  he  removes  any  part  of  them  he  must  give  the  like  notice 
of  the  number  and  wTeight  of  the  fleeces,  and  of  the  name  and 
abode  of  the  person  to  whom  they  are  sold,  and  of  the  place  to 


234 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


which  it  is  intended  they  should  be  carried.  No  person  within 
fifteen  miles  of  the  sea,  in  the  said  counties,  can  buy  any  wool 
before  he  enters  into  bond  to  the  king*,  that  no  part  of  the  wool 
which  he  shall  so  buy  shall  be  sold  by  him  to  any  other  person 
within  fifteen  miles  of  the  sea.  If  any  wool  is  found  carrying 
towards  the  sea-side  in  the  said  counties,  unless  it  has  been 
entered  and  security  given  as  aforesaid,  it  is  forfeited,  and  the 
offender  also  forfeits  three  shillings  for  every  pound  weight.  If 
any  person  lays  any  wool,  not  entered  as  aforesaid,  within  fifteen 
miles  of  the  sea,  it  must  be  seized  and  forfeited ;  and  if,  after  such 
seizure,  any  person  shall  claim  the  same,  he  must  give  security  to 
the  Exchequer,  that  if  he  is  cast  upon  trial  he  shall  pay  treble 
costs,  besides  all  other  penalties. 

When  such  restrictions  are  imposed  upon  the  inland  trade,  the 
coasting  trade,  we  may  believe,  cannot  be  left  very  free.  Every 
owner  of  wool  who  carrieth  or  causeth  to  be  carried  any  wool  to 
any  port  or  place  on  the  sea-coast,  fin  order  to  be  from  thence 
transported  by  sea  to  any  other  place  or  port  on  the  coast,  must 
first  cause  an  entry  thereof  to  be  made  at  the  port  from  whence 
it  is  intended  to  be  conveyed,  containing  the  weight,  marks,  and 
number  of  the  packages  before  he  brings  the  same  within  five 
miles  of  that  port,  on  pain  of  forfeiting  the  same,  and  also  the 
horses,  carts,  and  other  carriages ;  and  also  of  suffering  and  for¬ 
feiting,  as  by  the  other  laws  in  force  against  the  exportation  of 
wool.  This  law,  however  (ist  Will.  Ill,  c.  32),  is  so  very  indulgent 
as  to  declare,  that  ‘ this  shall  not  hinder  any  person  from  carrying 
his  wool  home  from  the  place  of  shearing,  though  it  be  within 
five  miles  of  the  sea,  provided  that  in  ten  days  after  shearing, 
and  before  he  remove  the  wool,  he  do  under  his  hand  certify  to 
the  next  officer  of  the  customs  the  true  number  of  fleeces,  and 
where  it  is  housed ;  and  do  not  remove  the  same,  without  certi¬ 
fying  to  such  officer,  under  his  hand,  his  intention  so  to  do,  three 
days  before.’  Bond  must  be  given  that  the  wool  to  be  carried 
coastways  is  to  be  landed  at  the  particular  port  for  which  it  is 
entered  outwards  ;  and  if  any  part  of  it  is  landed  without  the 
presence  of  an  officer,  not  only  the  forfeiture  of  the  wool  is  in¬ 
curred  as  in  other  goods,  but  the  usual  additional  penalty  of  three 
shillings  for  every  pound  weight  is  likewise  incurred. 

Our  woollen  manufacturers,  in  order  to  justify  their  demand  of 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS . 


235 


such  extraordinary  restrictions  and  regulations,  confidently  asserted 
that  English  wool  was  of  a  peculiar  quality,  superior  to  that  of  any 
other  country;  that  the  wool  of  other  countries  could  not,  without 
some  mixture  of  it,  be  wrought  up  info  any  tolerable  manufacture  ; 
that  fine  cloth  could  not  be  made  without  it ;  that  England,  there¬ 
fore,  if  the  exportation  of  it  could  be  totally  prevented,  could 
monopolize  to  herself  almost  the  whole  woollen  trade  of  the  world  ; 
and  thus,  having  no  rivals,  could  sell  at  what  price  she  pleased,  and 
in  a  short  time  acquire  the  most  incredible  degree  of  wealth  by  the 
most  advantageous  balance  of  trade.  This  doctrine,  like  most  other 
doctrines  which  are  confidently  asserted  by  any  considerable  number 
of  people,  was,  and  still  continues  to  be,  most  implicitly  believed  by 
a  much  greater  number ;  by  almost  all  those  who  are  either  un¬ 
acquainted  with  the  woollen  trade,  or  who  have  not  made  particular 
inquiries.  It  is,  however,  so  perfectly  false  that  English  wool  is  in 
any  respect  necessary  for  the  making  of  fine  cloth,  that  it  is  alto¬ 
gether  unfit  for  it.  Fine  cloth  is  made  altogether  of  Spanish  wool. 
English  wool  cannot  be  even  so  mixed  with  Spanish  wool  as  to 
enter  into  the  composition  without  spoiling  and  degrading  in  some 
degree  the  fabric  of  the  cloth. 

It  has  been  shown  in  the  foregoing  part  of  this  work,  that  the 
effect  of  these  regulations  has  been  to  depress  the  price  of  English 
wool,  not  only  below  what  it  naturally  would  be  in  the  present 
times,  but  very  much  below  what  it  actually  was  in  the  time  of 
Edward  III.  The  price  of  Scotch  wool,  when  in  consequence  of 
the  Union  it  became  subject  to  the  same  regulations,  is  said  to  have 
fallen  about  one-half.  It  is  observed  by  the  very  accurate  and 
intelligent  author  on  the  Memoirs  of  Wool,  the  Rev.  Mr.  John 
Smith,  that  the  price  of  the  best  English  wool  in  England  is 
generally  below  what  wool  of  a  very  inferior  quality  commonly 
sells  for  in  the  market  of  Amsterdam.1  To  depress  the  price  of  this 
commodity  below  what  may  be  called  its  natural  and  proper  price, 
was  the  avowed  purpose  of  those  regulations ;  and  there  seems  to 
be  no  doubt  of  their  having  produced  the  effect  that  was  expected 
from  them. 

This  reduction  of  price,  it  may  perhaps  be  thought,  by  dis¬ 
couraging  the  growing  of  wool,  must  have  reduced  very  much 
the  annual  produce  of  that  commodity,  though  not  below  what  it 

1  Smith’s  Memoirs  of  Wool,  vol.  ii.  p.  215. 


236 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


formerly  was,  yet  below  what,  in  the  present  state  of  things,  it 
probably  would  have  been,  bad  it,  in  consequence  of  an  open  and 
free  market,  been  allowed  to  rise  to  the  natural  and  proper  price. 

I  am,  however,  disposed  to  believe  that  the  quantity  of  the  annual 
produce  cannot  have  been  much,  though  it  may  perhaps  have  been 
a  little,  affected  by  these  regulations.  The  growing  of  wool  is  not 
the  chief  purpose  for  which  the  sheep  farmer  employs  his  industry 
and  stock.  He  expects  his  profit,  not  so  much  from  the  price  of 
the  fleece,  as  from  that  of  the  carcase  ;  and  the  average  or  ordinary 
price  of  the  latter  must  even  in  many  cases  make  up  to  him  what¬ 
ever  deficiency  there  may  be  in  the  average  or  ordinary  price  of  the 
former.  It  has  been  observed  in  the  foregoing  part  of  this  work,1 
that  £  Whatever  regulations  tend  to  sink  the  price,  either  of  wool 
or  of  raw  hides,  below  what  it  naturally  would  be,  must,  in  an 
improved  and  cultivated  country,  have  some  tendency  to  raise  the 
price  of  butcherVmeat.  The  price  both  of  the  great  and  small 
cattle  which  are  fed  on  improved  and  cultivated  land,  must  be 
sufficient  to  pay  the  rent  which  the  landlord  and  the  profit  which 
the  farmer  has  reason  to  expect  from  improved  and  cultivated  land. 
If  it  is  not,  they  will  soon  cease  to  feed  them.  Whatever  part  of 
this  price,  therefore,  is  not  paid  by  the  wool  and  the  hide,  must  be 
paid  by  the  carcase.  The  less  there  is  paid  for  the  one,  the  more 
must  be  paid  for  the  other.  In  what  manner  this  price  is  to  be 
divided  upon  the  different  parts  of  the  beast  is  indifferent  to  the 
landlords  and  farmers,  provided  it  is  all  paid  to  them.  In  an  im¬ 
proved  and  cultivated  country,  therefore,  their  interest  as  landlords 
and  farmers  cannot  be  much  affected  by  such  regulations,  though 
their  interest  as  consumers  may,  by  the  rise  in  the  price  of  pro¬ 
visions.’  According  to  this  reasoning,  therefore,  this  degradation 
in  the  price  of  wool  is  not  likely,  in  an  improved  and  cultivated 
country,  to  occasion  any  diminution  in  the  annual  produce  of  that 
commodity,  except  so  far  as,  by  raising  the  price  of  mutton,  it  may 
somewhat  diminish  the  demand  for,  and  consequently  the  pro¬ 
duction  of,  that  particular  species  of  butcher’s-meat.  Its  effect, 
however,  even  in  this  way,  it  is  probable,  is  not  very  considerable. 

But  though  its  effect  upon  the  quantity  of  the  annual  produce 
may  not  have  been  very  considerable,  its  effects  upon  the  quality, 
it  may  perhaps  be  thought,  must  necessarily  have  been  very  great. 

1  Book  I.  chap,  ii,  (vol.  i.  p.  345). 


CHAP.  Till, 


THE  WEALTH  OF  NATIONS. 


23  7 


The  degradation  in  the  quality  of  English  wool,  if  not  below  what  it 
was  in  former  times,  yet  below  what  it  naturally  would  have  been  in 
the  present  state  of  improvement  and  cultivation,  must  have  been, 
it  may  perhaps  be  supposed,  very  nearly  in  proportion  to  the  degra¬ 
dation  of  price.  As  the  quality  depends  upon  the  breed,  upon  the 
pasture,  and  upon  the  management  and  cleanliness  of  the  sheep 
during  the  whole  progress  of  the  growth  of  the  fleece,  the  attention 
to  these  circumstances,  it  may  naturally  enough  be  imagined,  can 
never  be  greater  than  in  proportion  to  the  recompense  which  the 
price  of  the  fleece  is  likely  to  make  for  the  labour  and  expense 
which  that  attention  requires.  It  happens,  however,  that  the  good¬ 
ness  of  the  fleece  depends  in  a  great  measure  upon  the  health, 
growth,  and  bulk  of  the  animal ;  the  same  attention  which  is  neces¬ 
sary  for  the  improvement  of  the  carcase,  is,  in  some  respects, 
sufficient  for  that  of  the  fleece.  Notwithstanding  the  degradation 
of  price,  English  wool  is  said  to  have  been  improved  considerably 
during  the  course  even  of  the  present  century.  The  improvement 
might  perhaps  have  been  greater  if  the  price  had  been  better ;  but 
the  lowness  of  price,  though  it  may  have  obstructed,  yet  certainly 
it  has  not  altogether  prevented  that  improvement. 

The  violence  of  these  regulations,  therefore,  seems  to  have  affected 
neither  the  quantity  nor  the  quality  of  the  annual  produce  of  wool 
so  much  as  it  might  have  been  expected  to  do  (though  I  think  it 
probable  that  it  may  have  affected  the  latter  a  good  deal  more  than 
the  former)  ;  and  the  interest  of  the  growers  of  wool,  though  it 
must  have  been  hurt  in  some  degree,  seems,  upon  the  whole,  to  have 
been  much  less  hurt  than  could  well  have  been  imagined. 

These  considerations,  however,  will  not  justify  the  absolute  pro¬ 
hibition  of  the  exportation  of  wool ;  but  they  will  fully  justify  the 
imposition  of  a  considerable  tax  upon  that  exportation. 

To  hurt  in  any  degree  the  interest  of  any  one  order  of  citizens, 
for  no  other  purpose  but  to  promote  that  of  some  other,  is  evidently 
contrary  to  that  justice  and  equality  of  treatment  which  the 
sovereign  owes  to  all  the  different  orders  of  his  subjects.  .  But 
the  prohibition  certainly  hurts,  in  some  degree,  the  interest  of  the 
growers  of  wool,  for  no  other  purpose  but  to  promote  that  of  the 
manufacturers. 

Every  different  order  of  citizens  is  bound  to  contribute  to  the 
support  of  the  sovereign  or  commonwealth.  A  tax  of  five,  or  even 


238 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


of  ten  shillings  upon  the  exportation  of  every  tod  of  wool,  would 
produce  a  very  considerable  revenue  to  the  sovereign.  It  would 
hurt  the  interest  of  the  growers  somewhat  less  than  the  prohibition, 
because  it  would  not  probably  lower  the  price  of  wool  quite  so 
much.  It  would  afford  a  sufficient  advantage  to  the  manufacturer, 
because,  though  he  might  not  buy  his  wool  altogether  so  cheap  as 
under  the  prohibition,  he  would  still  buy  it,  at  least,  five  or  ten 
shillings  cheaper  than  any  foreign  manufacturer  could  buy  it,  be¬ 
sides  saving  the  freight  and  insurance,  which  the  other  would  be 
obliged  to  pay.  It  is  scarce  possible  to  devise  a  tax  which  could 
produce  any  considerable  revenue  to  the  sovereign,  and  at  the  same 
time  occasion  so  little  inconveniency  to  anybody.1 

The  prohibition,  notwithstanding  all  the  penalties  which  guard 
it,  does  not  prevent  the  exportation  of  wool.  It  is  exported,  it  is 
well  known,  in  great  quantities.  The  great  difference  between  the 
price  in  the  home  and  that  in  the  foreign  market,  presents  such  a 
temptation  to  smuggling,  that  all  the  rigour  of  the  law  cannot  pre¬ 
vent  it.  This  illegal  exportation  is  advantageous  to  nobody  but  the 
smuggler.  A  legal  exportation  subject  to  a  tax,  by  affording  a  re¬ 
venue  to  the  sovereign,  and  thereby  saving  the  imposition  of  some 
other,  perhaps,  more  burdensome  and  inconvenient  taxes,  might 
prove  advantageous  to  all  the  different  subjects  of  the  State. 

The  exportation  of  fuller’s  earth,  or  fuller’s  clay,  supposed  to  be 
necessary  for  preparing  and  cleansing  the  woollen  manufactures,  has 
been  subjected  to  nearly  the  same  penalties  as  the  exportation  of 
wool.  Even  tobacco-pipe  clay,  though  acknowledged  to  be  dif¬ 
ferent  from  fuller’s  clay,  yet,  on  account  of  their  resemblance,  and 
because  fuller’s  clay  might  sometimes  be  exported  as  tobacco-pipe 
clay,  has  been  laid  under  the  same  prohibitions  and  penalties. 

By  the  13th  and  14th  of  Charles  II,  chap.  7,  the  exportation,  not 


1  Such  an  export  duty  would  have  been 
only  an  alternative  of  evils.  It  is  very 
rarely  the  case  that  export  duties  can  be 
made  to  fall  on  the  country  importing  the 
commodity.  The  only  circumstances  in 
which  they  are  effectual,  is  when  a  coun¬ 
try  has  a  monopoly  of  produce  in  an 
article  for  which  no  substitute  can  be 
found,  which  is  in  demand,  and  in  the 
use  of  which  no  economy  is  possible.  It 
is  needless  to  say  that  such  articles  are, 
and  must  be,  very  few.  In  all  other 
cases,  the  effect  of  an  export  duty  is  to 


check  the  consumption  of  that  on  which 
the  duty  is  levied,  and  thereby  to  induce 
an  artificial  barrenness  in  its  production, 
by  excluding  from  the  market  those  quan¬ 
tities,  the  production  of  which  has  been, 
before  the  duty  was  levied,  carried  on 
under  the  most  disadvantageous  circum¬ 
stances.  Smith  has  shown  what  was  the 
effect  of  the  prohibition  in  lowering  the 
price  of  wool.  To  have  allowed  its  expor¬ 
tation  under  a  duty  would  have  only 
lightened  the  evil,  without  removing  it. 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


239 


only  of  raw  hides,  but  of  tanned  leather,  except  in  the  shape  of 
boots,  shoes,  or  slippers,  was  prohibited ;  and  the  law  gave  a  mono¬ 
poly  to  our  bootmakers  and  shoemakers,  not  only  against  our 
graziers,  but  against  our  tanners.  By  subsequent  statutes  our 
tanners  have  got  themselves  exempted  from  this  monopoly,  upon 
paying  a  small  tax  of  only  one  shilling  on  the  hundredweight  of 
tanned  leather,  weighing  one  hundred  and  twelve  pounds.  They  have 
obtained  likewise  the  drawback  of  two- thirds  of  the  excise  duties 
imposed  upon  their  commodity,  even  when  exported  without  further 
manufacture.  All  manufactures  of  leather  may  be  exported  duty 
free ;  and  the  exporter  is  besides  entitled  to  the  drawback  of  the 
whole  duties  of  excise.  Our  graziers  still  continue  subject  to  the 
old  monopoly.  Graziers  separated  from  one  another,  and  dispersed 
through  all  the  different  corners  of  the  country,  cannot,  without 
great  difficulty,  combine  together,  for  the  purpose  either  of  imposing 
monopolies  upon  their  fellow-citizens,  or  of  exempting  themselves 
from  such,  as  may  have  been  imposed  upon  them  by  other  people. 
Manufacturers  of  all  kinds,  collected  together  in  numerous  bodies  in 
all  great  cities,  easily  can.  Even  the  horns  of  cattle  are  prohibited 
to  be  exported ;  and  the  two  insignificant  trades  of  the  horner  and 
combmaker  enjoy,  in  this  respect,  a  monopoly  against  the  graziers. 

Restraints,  either  by  prohibitions  or  by  taxes,  upon  the  exporta¬ 
tion  of  goods  which  are  partially  but  not  completely  manufactured, 
are  not  peculiar  to  the  manufacture  of  leather.  As  long  as  any¬ 
thing  remains  to  be  done,  in  order  to  fit  any  commodity  for  imme¬ 
diate  use  and  consumption,  our  manufacturers  think  that  they  them¬ 
selves  ought  to  have  the  doing  of  it.  Woollen  yarn  and  worsted 
are  prohibited  to  be  exported  under  the  same  penalties  as  wool. 
Even  white  cloths  are  subject  to  a  duty  upon  exportation,  and  our 
dyers  have  so  far  obtained  a  monopoly  against  our  clothiers.  Our 
clothiers  would  probably  have  been  able  to  defend  themselves  against 
it,  but  it  happens  that  the  greater  part  of  our  principal  clothiers  are 
themselves  likewise  dyers.  Watch-cases,  clock-cases,  and  dial-plates 
for  clocks  and  watches,  have  been  prohibited  to  be  exported.  Our 
clockmakers  and  watchmakers  are,  it  seems,  unwilling  that  the  price 
of  this  sort  of  workmanship  should  be  raised  upon  them  by  the  com¬ 
petition  of  foreigners. 

By  some  old  statutes  of  Edward  III,  Henry  VIII,  and  Ed¬ 
ward  VI,  the  exportation  of  all  metals  was  prohibited.  Lead  and 


240 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


tin  were  alone  excepted,  probably  on  account  of  the  great  abund¬ 
ance  of  those  metals,  in  the  exportation  of  which  a  considerable 
part  of  the  trade  of  the  kingdom  in  those  days  consisted.  For  the 
encouragement  of  the  mining  trade,  the  5th  of  William  and  Mary, 
chap.  17,  exempted  from  this  prohibition  iron,  copper,  and  mundic 
metal  made  from  British  ore.  The  exportation  of  all  sorts  of 
copper  bars,  foreign  as  well  as  British,  was  afterwards  permitted 
by  the  9th  and  10th  of  William  III,  chap.  26.  The  exportation  of 
unmanufactured  brass,  of  what  is  called  gun-metal,  bell-metal,  and 
shroff-metal,  still  continues  to  be  prohibited.  Brass  manufactures 
of  all  sorts  may  be  exported  duty  free. 

The  exportation  of  the  materials  of  manufacture,  where  it  is  not 
altogether  prohibited,  is  in  many  cases  subjected  to  considerable 
duties. 

By  the  8th  George  I,  chap.  15,  the  exportation  of  all  goods,  the 
produce  or  manufacture  of  Great  Britain,  upon  which  any  duties 
had  been  imposed  by  former  statutes,  was  rendered  duty  free.  The 
following  goods,  however,  were  excepted : — alum,  lead,  lead  ore, 
tin,  tanned  leather,  copperas,  coals,  wool  cards,  white  woollen  cloths, 
lapis  calaminaris,  skins  of  all  sorts,  glue,  coney  hair  or  wool,  hare’s 
wool,  hair  of  all  sorts,  horses,  and  litharge  of  lead.  If  you  except 
horses,  all  these  are  either  materials  of  manufacture,  or  incomplete 
manufactures  (which  may  be  considered  as  materials  for  still  further 
manufacture),  or  instruments  of  trade.  This  statute  leaves  them 
subject  to  all  the  old  duties  which  had  ever  been  imposed  upon, 
them,  the  old  subsidy  and  one  per  cent,  outwards. 

By  the  same  statute,  a  great  number  of  foreign  drugs  for  dyers’ 
use  are  exempted  from  all  duties  upon  importation.  Each  of  them, 
however,  is  afterwards  subjected  to  a  certain  duty,  not  indeed  a  very 
heavy  one,  upon  exportation.  Our  dyers,  it  seems,  while  they 
thought  it  for  their  interest  to  encourage  the  importation  of  those 
drugs,  by  an  exemption  from  all  duties,  thought  it  likewise  for 
their  interest  to  throw  some  small  discouragement  upon  their  ex¬ 
portation.  The  avidity,  however,  which  suggested  this  notable 
piece  of  mercantile  ingenuity,  most  probably  disappointed  itself  of 
its  object.  It  necessarily  taught  the  importers  to  be  more  careful 
than  they  might  otherwise  have  been,  that  their  importation  should 
not  exceed  what  was  necessary  for  the  supply  of  the  home  market. 
The  home  market  was  at  all  times  likely  to  be  more  scantily  sup-* 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


241 


plied ;  the  commodities  were  at  all  times  likely  to  be  somewhat 
dearer  there  than  they  would  have  been  had  the  exportation  been 
rendered  as  free  as  the  importation. 

By  the  above-mentioned  statute,  gum  senega,  or  gum  arabic, 
being  among  the  enumerated  dyeing  drugs,  might  be  imported  duty 
free.  They  were  subjected,  indeed,  to  a  small  poundage  duty, 
amounting  only  to  threepence  in  the  hundredweight  upon  their  re¬ 
exportation.  France  enjoyed,  at  that  time,  an  exclusive  trade  to 
the  country  most  productive  of  those  drugs,  that  which  lies  in  the 
neighbourhood  of  the  Senegal ;  and  the  British  market  could  not 
easily  be  supplied  by  the  immediate  importation  of  them  from  the 
place  of  growth.  By  the  25th  Geo.  II,  therefore,  gum  senega  was 
allowed  to  be  imported  (contrary  to  the  general  dispositions  of  the 
Act  of  Navigation)  from  any  part  of  Europe.  As  the  law,  however, 
did  not  mean  to  encourage  this  species  of  trade,  so  contrary  to  the 
general  principles  of  the  mercantile  policy  of  England,  it  imposed 
a  duty  of  ten  shillings  the  hundredweight  upon  such  importation, 
and  no  part  of  this  duty  was  to  be  afterwards  drawn  back  upon  its 
exportation.  The  successful  war  which  began  in  1755  gave  Great 
Britain  the  same  exclusive  trade  to  those  countries  which  France 
had  enjoyed  before.  Our  manufacturers,  as  soon  as  the  peace  was 
made,  endeavoured  to  avail  themselves  of  this  advantage,  and  to 
establish  a  monopoly  in  their  own  favour,  both  against  the  growers, 
and  against  the  importers  of  this  commodity.  By  the  5th  Geo.  Ill, 
therefore,  chap.  37,  the  exportation  of  gum  senega  from  his  Ma¬ 
jesty’s  dominions  in  Africa  was  confined  to  Great  Britain,  and  was 
subjected  to  all  the  same  restrictions,  regulations,  forfeitures,  and 
penalties  as  that  of  the  enumerated  commodities  of  the  British 
colonies  in  America  and  the  West  Indies.  Its  importation,  indeed, 
was  subjected  to  a  small  duty  of  sixpence  the  hundredweight,  but 
its  re-exportation  was  subjected  to  the  enormous  duty  of  <£1  10 s. 
the  hundredweight.  It  was  the  intention  of  our  manufacturers 
that  the  whole  produce  of  those  countries  should  be  imported  into 
Great  Britain,  and  in  order  that  they  themselves  might  be  enabled 
to  buy  it  at  their  own  price,  that  no  part  of  it  should  be  exported 
again,  but  at  such  an  expense  as  would  sufficiently  discourage  that 
exportation.  Their  avidity,  however,  upon  this,  as  well  as  upon 
many  other  occasions,  disappointed  itself  of  its  object.  This  enor¬ 
mous  duty  presented  such  a  temptation  to  smuggling,  that  great 
VOL.  11. 


n 


242 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


quantities  of  this  commodity  were  clandestinely  exported,  probably 
to  all  the  manufacturing  countries  of  Europe,  but  particularly  to 
Holland,  not  only  from  Great  Britain  but  from  Africa.  Upon  this 
account,  by  the  14th  Geo.  Ill,  chap.  10,  this  duty  of  exportation 
was  reduced  to  five  shillings  the  hundredweight. 

In  the  book  of  rates,  according  to  which  the  old  subsidy  was 
levied,  beaver  skins  were  estimated  at  six  shillings  and  eightpence 
a  piece,  and  the  different  subsidies  and  imposts,  which  before  the 
year  1722  had  been  laid  upon  their  importation,  amounted  to  one- 
fifth  part  of  the  rate,  or  to  sixteenpence  upon  each  skin ;  all  of 
which,  except  half  the  old  subsidy,  amounting  only  to  twopence, 
was  drawn  back  upon  exportation.  This  duty  upon  the  importation 
of  so  important  a  material  of  manufacture  had  been  thought  too 
high,  and,  in  the  year  1722,  the  rate  was  reduced  to  two  shillings 
and  sixpence,  which  reduced  the  duty  upon  importation  to  sixpence, 
and  of  this  only  one-half  was  to  be  drawn  back  upon  exportation. 
The  same  successful  war  put  the  country  most  productive  of  beaver 
under  the  dominion  of  Great  Britain,  and  beaver  skins  being  among 
the  enumerated  commodities,  their  exportation  from  America  was 
consequently  confined  to  the  market  of  Great  Britain.  Our  manu¬ 
facturers  soon  bethought  themselves  of  the  advantage  which  they 
might  make  of  this  circumstance,  and  in  the  year  1764,  the  duty 
upon  the  importation  of  beaver  skin  was  reduced  to  one  penny,  but 
the  duty  upon  exportation  was  raised  to  sevenpence  each  skin,  with¬ 
out  any  drawback  of  the  duty  upon  importation.  By  the  same 
law,  a  duty  of  eighteenpence  the  pound  was  imposed  upon  the  ex¬ 
portation  of  beaver  wool  or  wombs,  without  making  any  alteration 
in  the  duty  upon  the  importation  of  that  commodity,  which,  when 
imported  by  British  and  in  British  shipping,  amounted  at  that  time 
to  between  fourpence  and  fivepence  the  piece. 

Coals  may  be  considered  both  as  a  material  of  manufacture  and 
as  an  instrument  of  trade.  Heavy  duties,  accordingly,  have  been 
imposed  upon  their  exportation,  amounting  at  present  (1783)  to 
more  than  five  shillings  the  ton,  or  to  more  than  fifteen  shillings  the 
chaldron,  Newcastle  measure ;  which  is  in  most  cases  more  than 
the  original  value  of  the  commodity  at  the  coal  pit,  or  even  at  the 
shipping  port  for  exportation. 

The  exportation,  however,  of  the  instruments  of  trade,  properly 
so  called,  is  commonly  restrained,  not  by  high  duties,  but  by  abso- 


CHAP.  VIII. 


THE  WEALTH  OF  NATIONS. 


243 


lute  prohibitions-.  Thus  by  the  7th  and  8th  of  Will.  Ill,  chap.  20, 
sect.  8,  the  exportation  of  frames  or  engines  for  knitting  gloves  or 
stockings  is  prohibited  under  the  penalty,  not  only  of  the  forfeiture 
of  such  frames  or  engines,  so  exported,  or  attempted  to  be  exported, 
but  of  <^40,  one-half  to  the  King,  the  other  to  the  person  who  shall 
inform  or  sue  for  the  same.  In  the  same  manner,  by  the  14th 
Geo.  Ill,  chap.  7 1 5  the  exportation  to  foreign  parts  of  any  utensils 
made  use  of  in  the  cotton,  linen,  woollen,  and  silk  manufactures,  is 
prohibited  under  the  penalty,  not  only  of  the  forfeiture  of  such 
utensils,  but  of  <9^200,  to  be  paid  by  the  person  who  shall  offend  in 
this  manner,  and  likewise  of  sE 200  to  be  paid  by  the  master  of  the 
ship  who  shall  knowingly  suffer  such  utensils  to  be  loaded  on  board 
his  ship. 

When  such  heavy  penalties  were  imposed  upon  the  exportation  of 
the  dead  instruments  of  trade,  it  could  not  well  be  expected  that 
the  living  instrument,  the  artificer,  should  be  allowed  to  go  free. 
Accordingly,  by  the  5th  Geo.  I,  chap.  27,  the  person  who  shall  be 
convicted  of  enticing  any  artificer  of  or  in  any  of  the  manufactures 
of  Great  Britain,  to  go  into  any  foreign  parts  in  order  to  practise 
or  teach  his  trade,  is  liable  for  the  first  offence  to  be  fined  in  any 
sum  not  exceeding  sEioo,  and  to  three  months’  imprisonment,  and 
until  the  fine  shall  be  paid ;  and  for  the  second  offence,  to  be  fined 
in  any  sum  at  the  discretion  of  the  court,  and  to  imprisonment 
for  twelve  months,  and  until  the  fine  shall  be  paid.  By  the  23rd 
Geo.  II,  chap.  13,  this  penalty  is  increased  for  the  first  offence  to 
=E$oo  for  every  artificer  so  enticed,  and  to  twelve  months’  imprison¬ 
ment,  and  until  the  fine  shall  be  paid  ;  and  for  the  second  offence  to 
^T,ooo,  and  to  two  years’  imprisonment,  and  until  the  fine  shall  be 
paid. 

By  the  former  of  those  two  statutes,  upon  proof  that  any  person 
has  been  enticing  any  artificer,  or  that  any  artificer  has  promised  or 
contracted  to  go  into  foreign  parts  for  the  purposes  aforesaid,  such 
artificer  may  be  obliged  to  give  security  at  the  discretion  of  the 
court,  that  he  shall  not  go  beyond  the  seas,  and  may  be  committed 
to  prison  until  he  give  such  security. 

If  any  artificer  has  gone  beyond  the  seas,  and  is  exercising  or 
teaching  his  trade  in  any  foreign  country,  upon  warning  being 
given  to  him  by  any  of  his  Majesty’s  ministers  or  consuls  abroad,  or 
by  one  of  his  Majesty’s  Secretaries  of  State  for  the  time  being,  if 


244 


TEE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


lie  does  not,  within  six  months  after  such  warning,  return  into  this 
realm,  and  from  thenceforth  abide  and  inhabit  continually  within 
the  same,  he  is  from  thenceforth  declared  incapable  of  taking  any 
legacy  devised  to  him  within  this  kingdom,  or  of  being  executor  or 
administrator  to  any  person,  or  of  taking  any  lands  within  this 
kingdom  by  descent,  devise,  or  purchase.  He  likewise  forfeits  to 
the  king  all  his  lands,  goods,  and  chattels,  is  declared  an  alien  in 
every  respect,  and  is  put  out  of  the  king’s  protection. 

It  is  unnecessary,  I  imagine,  to  observe,  how  contrary  such  regu¬ 
lations  are  to  the  boasted  liberty  of  the  subject,  of  which  we  affect 
to  be  so  very  jealous;  but  which,  in  this  case,  is  so  plainly  sacrificed 
to  the  futile  interests  of  our  merchants  and  manufacturers. 

The  laudable  motive  of  all  these  regulations  is  to  extend  our 
own  manufactures,  not  by  their  own  improvement,  but  by  the 
depression  of  those  of  all  our  neighbours,  and  by  putting  an  end, 
as  much  as  possible,  to  the  troublesome  competition  of  such  odious 
and  disagreeable  rivals.  Our  master  manufacturers  think  it  rea¬ 
sonable  that  they  themselves  should  have  the  monopoly  of  the 
ingenuity  of  all  their  countrymen.  Though  by  restraining,  in 
some  trades,  the  number  of  apprentices  which  can  be  employed  at 
one  time,  and  by  imposing  the  necessity  of  a  long  apprenticeship 
in  all  trades,  they  endeavour,  all  of  them,  to  confine  the  knowledge 
of  their  respective  employments  to  as  small  a  number  as  possible ; 
they  are  unwilling,  however,  that  any  part  of  this  small  number 
should  go  abroad  to  instruct  foreigners. 

Consumption  is  the  sole  end  and  purpose  of  all  production ;  and 

theTnterest  of  the  producer  ought  to  be  attended  to,  only  so  far  as  it 

may  be  necessary  for  promoting  that  of  the  consumer.  The  maxim 
is  so  perfectly  self-evident,  that  it  would  be  absurd  to  attempt  to 

prove  it.  But  in  the  mercantile  system,  the  interest  of  the  con¬ 
sumer  is  almost  constantly  sacrificed  to  that  of  the  producer ;  and 
it  seems  to  consider  production,  and  not  consumption,  as  the 

ultimate  end  and  object  of  all  industry  and  commerce. 

In  the  restraints  upon  the  importation  of  all  foreign  commodities 
which  can  come  into  competition  with  those  of  our  own  growth 
or  manufacture,  the  interest  of  the  home  consumer  is  evidently 
sacrificed  to  that  of  the  producer.  It  is  altogether  for  the  benefit 
of  the  latter,  that  the  former  is  obliged  to  pay  that  enhancement 
of  price  which  this  monopoly  almost  always  occasions. 


CHAP.  VIII. 


TIIE  WEALTH  OF  NATIONS . 


245 


It  is  altogether  for  the  benefit  of  the  producer  that  bounties  are 
granted  upon  the  exportation  of  some  of  his  productions.  The 
home  consumer  is  obliged  to  pay,  first,  the  tax  which  is  necessary 
for  paying  the  bounty;  and,  secondly,  the  still  greater  tax  which 
necessarily  arises  from  the  enhancement  of  the  price  of  the  com¬ 
modity  in  the  home  market. 

By  the  famous  treaty  of  commerce  with  Portugal,  the  consumer 
is  prevented  by  high  duties  from  purchasing  of  a  neighbouring 
country  a  commodity  which  our  own  climate  does  not  produce, 
but  is  obliged  to  purchase  it  of  a  distant  country,  though  it  is 
acknowledged  that  the  commodity  of  the  distant  country  is  of  a 
worse  quality  than  that  of  the  near  one.  The  home  consumer  is 
obliged  to  submit  to  this  inconvenieney,  in  order  that  the  producer 
may  import  into  the  distant  country  some  of  his  productions 
upon  more  advantageous  terms  than  he  would  otherwise  have  been 
allowed  to  do.  The  consumer,  too,  is  obliged  to  pay  whatever 
enhancement  in  the  price  of  those  very  productions  this  forced  ex¬ 
portation  may  occasion  in  the  home  market. 


management  of  our  American  and  West  Indian  colonies,  the  interest 
of  the  home  consumer  has  been  sacrificed  to  that  of  the  producer 
with  a  more  extravagant  profusion  than  in  all  our  other  commercial 
regulations.  A  great  empire  has  been  established  for  the  sole  j 
purpose  of  raising  up  a  nation  of  customers  who  should  be  obliged 
to  buy  from  the  shops  of  our  different  producers  all  the  goods 
with  which  these  could  supply  them.  For  the  sake  of  that  little 
enhancement  of  price  which  this  monopoly  might  afford  our  pro¬ 
ducers,  the  home  consumers  have  been  burdened  with  the  whole 
expense  of  maintaining  and  defending  that  empire.  For  this 
purpose,  and  for  this  purpose  only,  in  the  two  last  wars,  more  than 
two  hundred  millions  have  been  spent,  and  a  new  debt  of  more 
than  a  hundred  and  seventy  millions  has  been  contracted  over  and 
above  all  that  had  been  expended  for  the  same  purpose  in  former 
wars.  The  interest  of  this  debt  alone  is  not  only  greater  than 
the  whole  extraordinary  profit  which,  it  ever  could  be  pretended, 
was  made  by  the  monopoly  of  the  colony  trade,  but  than  the  whole 
value  of  that  trade,  or  than  the  whole  value  of  the  goods,  which  at 
an  average  have  been  annually  exported  to  the  colonies. 

It  cannot  be  very  difficult  to  determine  who  have  been  the  con- 


246 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


trivers  of  this  whole  mercantile  system :  not  the  consumers^-.we 
may  believe,  whose  interest  has  been  entirely  neglected,  but  the 

producers  whose  interest  has  been  so  carefully  attended  to ;  and 

among  this  latter  class  our  merchants  and  manufacturers  have  been 

by  far  tlie  principal  architects.  In  the  mercantile  regulations, 

which  have  been  taken  notice  of  in  this  chapter,  the  interest  of 

our  manufacturers  has  been  most  peculiarly  attended  to ;  and  the 

interest,  not  so  much  of  the  consumers  as  that  of  some  other  sets 

of  producers,  has  been  sacrificed  to  it.1 


CHAPTER  IX. 

OF  THE  AGEICULTURAL  SYSTEMS,  OR  OF  THOSE  SYSTEMS  OF  POLITICAL 
ECONOMY  WHICH  REPRESENT  THE  PRODUCE  OF  LAND  AS  EITHER  THE 
SOLE  OR  THE  PRINCIPAL  SOURCE  OF  THE  REVENUE  AND  WEALTH  OF 
EVERY  COUNTRY. 

THE  agricultural  systems  of  political  economy  will  not  require 
so  long  an  explanation  as  that  which  I  have  thought  it 
necessary  to  bestow  upon  the  mercantile  or  commercial  system. 

That  system  which  represents,  the  produce  of  land  as  the  sole 
source  of  the  revenue  and  wealth  of  every  country,  has,  so  far  as  I 

know,  never  been  adopted  by  any  nation,  and  it  at  present  exists 

only  in  the  speculations1  of  a  few  men  of  great  learning  and  in¬ 
genuity  in  France.  //\t  would  not,  surely,  be  worth  while  to 

examine  at  great  ltmgth  the  errors  of  a  system  which  never  has 

A? 

1  It  is  almost  superfluous  to  say,  that 
all  the  restrictions  complained  of  in  the 
text  have  been  removed,  and  that  mainly 
by  the  persistent  representations  of  that 
very  mercantile  class  which  Adam  Smith 
charges,  and  apparently  with  justice, 
with  instituting  the  system  for  their 
personal  benefit.  The  fact  is,  they  found 
out  in  course  of  time,  that  the  restric¬ 
tions  which  they  had  imposed  were  not 
to  their  own  advantage,  but  that  they 
produced  effects  which  were  highly  de¬ 


trimental  to  trade.  The  chapter,  how¬ 
ever,  is  historically  instructive  in  the 
highest  degree,  partly  because  it  shows 
how  radically  wrong  were  the  views 
entertained  by  statesmen  and  merchants 
a  century  ago,  partly  because  the  errors 
committed  by  our  forefathers  are  being 
reproduced  in  the  fiscal  and  economical 
policy  of  the  United  States  and  our  own 
colonies,  where  the  mischief  is  greater, 
and  the  error  more  indefensible. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


24  7 


done,  and  probably  never  will  do  any  harm  in  any  part  of  the 
world.  I  shall  endeavour  to  explain,  however,  as  distinctly  as  I 
can,  the  great  outlines  of  this  very  ingenious  system. 

M.  Colbert,  the  famous  Minister  of  Louis  XIY,  was  a  man  of 
probity,  of  great  industry  and  knowledge  of  detail ;  of  great 
experience  and  acuteness  in  the  examination  of  public  accounts,  and 
of  abilities,  in  short,  every  way  fitted  for  introducing  method  and 
good  order  into  the  collection  and  expenditure  of  the  public  revenue. 
That  Minister  had  unfortunately  embraced  all  the  prejudices  of  the 
mercantile  system,  in  its  nature  and  essence  a  system  of  restraint 
and  regulation,  and  such  as  could  scarce  fail  to  be  agreeable  to  a 
laborious  and  plodding  man  of  business,  who  had  been  accustomed 
to  regulate  the  different  departments  of  public  offices,  and  to 
establish  the  necessary  checks  and  controls  for  confining  each  to  its 
proper  sphere.  The  industry  and  commerce  of  a  great  country  lie 
endeavoured  to  regulate  upon  the  same  model  as  the  departments  of 
a  public  office ;  and  instead  of  allowing  every  man  to  pursue  his 
own  interest  his  own  way,  upon  the  liberal  plan  of  equality,  liberty, 
and  justice,  he  bestowed  upon  certain  branches  of  industry  extra¬ 
ordinary  privileges,  while  he  laid  others  under  as  extraordinary  re¬ 
straints.  He  was  not  only  disposed,  like  other  European  Ministers, 
to  encourage  more  the  industry  of  the  towns  than  that  of  the 
country,  but,  in  order  to  support  the  industry  of  the  towns,  he  was 
willing  even  to  depress  and  keep  down  that  of  the  country.  In 
order  to  render  provisions  cheap  to  the  inhabitants  of  the  towns, 
and  thereby  to  encourage  manufactures  and  foreign  commerce,  he 
prohibited  altogether  the  exportation  of  corn,  and  thus  excluded  the 
inhabitants  of  the  country  from  every  foreign  market  for  by  far  the 
most  important  part  of  the  produce  of  their  industry.  This  prohi¬ 
bition,  joined  to  the  restraints  imposed  by  the  ancient  provincial 
laws  of  France  upon  the  transportation  of  corn  from  one  province  to 
another,  and  to  the  arbitrary  and  degrading  taxes  which  are  levied 
upon  the  cultivators  in  almost  all  the  provinces,  discouraged  and 
kept  down  the  agriculture  of  that  country  very  much  below  the 
state  to  which  it  would  naturally  have  risen  in  so  very  fertile  a  soil 
and  so  very  happy  a  climate.  This  state  of  discouragement  and 
depression  was  felt  more  or  less  in  every  different  part  of  the 
country,  and  many  different  inquiries  were  set  on  foot  concerning 
the  causes  of  it.  One  of  those  causes  appeared  to  be  the  preference 


248 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


£ 


given,  by  the  institutions  of  M.  Colbert,  to  the  industry  of  the 
towns  above  that  of  the  country. 

If  the  rod  be  bent  too  much  one  way,  says  the  proverb,  in  order 
to  make  it  straight  you  must  bend  it  as  much  the  other.  The 
Trench  philosophers,  who  have  proposed  the  system  which  repre¬ 
sents  agriculture  as  the  sole  source  of  the  revenue  and  wealth  of 
every  country,  seem  to  have  adopted  this  proverbial  maxim ;  and 
as  in  the  plan  of  M.  Colbert  the  industry  of  the  towns  was  certainly 
overvalued  in  comparison  with  that  of  the  country,  so  in  their 
.system  it  seems  to  be  as  certainly  undervalued. 

The  different  orders  of  people  who  have  ever  been  supposed  to^ 
contribute  in  any  respect  towards  the  annual  produce  of  the  land 
and  labour  of  the  country,  they  divide  into  three  classes.  The 
first  is  the  class  of  the  proprietors  of  land ;  the  second  is  the 
class  of  the  cultivators,  of  farmers  and  country  labourers,  whom 
they  honour  with  the  peculiar  application  of  the  productive  class ; 
the  third  is  the  class  of  artificers,  manufacturers,  and  merchants, 
whom  they  endeavour  to  degrade  by  the  humiliating  appellation  of  j 
the  barren  or  unproductive  class.1 

The  class  of  proprietors  contributes  to  the  annual  produce  by  the 
expense  which  they  may  occasionally  lay  out  upon  the  improvement 
of  the  land,  upon  the  buildings,  drains,  enclosures,  and  other 
ameliorations  which  they  may  either  make  or  maintain  upon  it, 
and  by  means  of  which  the  cultivators  are  enabled,  with  the  same 
capital,  to  raise  a  greater  produce,  and  consequently  to  pay  a 
greater  rent.  This  advanced  rent  may  be  considered  as  the  in¬ 
terest  or  profit  due  to  the  proprietor  upon  the  expense  or  capital 
which  he  thus  employs  in  the  improvement  of  his  land.  Such 
expenses  are  in  this  system  called  ground  expenses  (depenseb 
fonder  es). 

4 

The  cultivators  or  farmers  contribute  to  the  annual  produce  by 
what  are  in  this  system  called  the  original  and  annual  expenses 
{defenses  primitives  et  depenses  annuelles )  which  they  lay  out  upon 
the  cultivation  of  the  land.  The  original  expenses  consist  in  the 
instruments  of  husbandry,  in  the  stock  of  cattle,  in  the  seed,  and  in 


1  ‘  Voilh.  maintenant  la  socidttS  partagde 
en  trois  classes  :  la  classe  des  labourers, 
k  laquelle  on  peut  conserver  le  nom  de 
classe  product  rice  ;  la  classe  des  artisans 
et  autres  stipendtis  des  produits  de  la 
terre ;  et  la  classe  des  proprictaires.  On 


peut  distinguer  les  deux  classes  non  dis- 
ponibles  en  classe  productrice  qui  est 
celle  des  cultivateurs,  et  classe  sterile  qui 
comprend  tous  les  autres  membres  sti¬ 
pend's  de  la  society.’  Turgot,  Sur  la 
Formation,  &c.,  15  -18. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


249 


the  maintenance  of  the  farmer’s  family,  servants  and  cattle,  during* 
at  least  a  great  part  of  the  first  year  of  his  occupancy,  or  till  he  can 
receive  some  return  from  the  land.  The  annual  expenses  consist 
in  the  seed,  in  the  wear  and  tear  of  the  implements  of  husbandry, 
and  in  the  annual  maintenance  of  the  farmer’s  servants  and  cattle, 
and  of  his  family  too,  so  far  as  any  part  of  them  can  be  con¬ 
sidered  as  servants  employed  in  cultivation.  That  part  of  the 
produce  of  the  land  which  remains  to  him  after  paying  the  rent, 
ought  to  be  sufficient,  first,  to  replace  to  him  within  a  reasonable 
time,  at  least  during  the  term  of  his  occupancy,  the  whole  of  his 
original  expenses,  together  with  the  ordinary  profits  of  stock  ;  and, 
secondly,  to  replace  to  him  annually  the  whole  of  his  annual  ex¬ 
penses,  together  likewise  with  the  ordinary  profits  of  stock.  Those 
two  sorts  of  expenses  are  two  capitals  which  the  farmer  employs  in 
cultivation ;  and  unless  they  are  regularly  restored  to  him,  together 
with  a  reasonable  profit,  he  cannot  carry  on  his  employment  upon  a 
level  with  other  employments,  but,  from  a  regard  to  his  own  in¬ 
terest,  must  desert  it  as  soon  as  possible,  and  seek  some  other. 
That  part  of  the  produce  of  the  land  which  is  thus  necessary  for 
enabling  the  farmer  to  continue  his  business,  ought  to  be  considered 
as  a  fund  sacred  to  cultivation,  which  if  the  landlord  violates  he 
necessarily  reduces  the  produce  of  his  own  land,  and  in  a  few  years 
not  only  disables  the  farmer  from  paying  this  racked  rent,  but  from 
paying  the  reasonable  rent  which  he  might  otherwise  have  got  for 
his  land.  The  rent  which  properly  belongs  to  the  landlord,  is  no 
more  than  the  net  produce  which  remains  after  paying  in  the  com- 
pletest  manner  all  the  necessary  expenses  which  must  be  previously 
laid  out  in  order  to  raise  the  gross,  or  the  whole  produce.  It  is 
because  the  labour  of  the  cultivators,  over  and  above  paying  com¬ 
pletely  all  those  necessary  expenses,  affords  a  net  produce 1  of  this 
kind,  that  this  class  of  people  are  in  this  system  peculiarly  distin¬ 
guished  by  the  honourable  appellation  of  the  productive  class. 
Their  original  and  annual  expenses  are  for  the  same  reason  called, 
in  this  system,  productive  expenses,  because,  over  and  above  re¬ 
placing  their  own  value,  they  occasion  the  annual  reproduction  of 
this  net  produce. 

The  ground  expenses,  as  they  are  called,  or  what  the  landlord 
lays  out  upon  the  improvement  of  his  land,  are  in  this  system,  too, 

1  ‘Produit  net.’  Turgot,  passim. 


250 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


honoured  with  the  appellation  of  productive  expenses.  Till  the 
whole  of  those  expenses,  together  with  the  ordinary  profits  of  stock, 
have  been  completely  repaid  to  him  by  the  advanced  rent  which  he 
gets  for  his  land,  that  advanced  rent  ought  to  be  regarded  as  sacred 
and  inviolable,  both  by  the  church  and  by  the  king;  ought  to  be 
subject  neither  to  tithe  nor  to  taxation.  If  it  is  otherwise,  by  dis¬ 
couraging  the  improvement  of  land,  the  church  discourages  the 
future  increase  of  her  own  tithes,  and  the  king  the  future  increase 
of  his  own  taxes.  As  in  a  well-ordered  state  of  things,  therefore, 
those  ground  expenses,  over  and  above  reproducing  in  the  com- 
pletest  manner  their  own  value,  occasion  likewise  after  a  certain 
time  a  reproduction  of  a  net  produce,  they  are  in  this  system  con¬ 
sidered  as  productive  expenses. 

The  ground  expenses  of  the  landlord,  however,  together  with  the 
original  and  the  annual  expenses  of  the  farmer,  are  the  only  three 
sorts  of  expenses  which  in  this  system  are  considered  as  productive. 
All  other  expenses  and  all  other  orders  of  people,  even  those  who  in 
the  common  apprehensions  of  men  are  regarded  as  the  most  produc¬ 
tive,  are  in  this  account  of  things  represented  as  altogether  barren 
and  unproductive. 

Artificers  and  manufacturers,  in  particular,  whose  industry,  in  the 
common  apprehensions  of  men,  increases  so  much  the  value  of  the 
rude  produce  of  land,  are  in  this  system  represented  as  a  class  of 
people  altogether  barren  and  unproductive.  Their  labour,  it  is 
said,  replaces  only  the  stock  which  employs  them,  together  with  its 
ordinary  profits.  That  stock  consists  in  the  materials,  tools,  and 
wages  advanced  to  them  by  their  employer,  and  is  the  fund 
destined  for  their  employment  and  maintenance.  Its  profits  are 
the  fund  destined  for  the  maintenance  of  their  employer.  Their 
employer,  as  he  advances  to  them  the  stock  of  materials,  tools,  and 
wages  necessary  for  their  employment,  so  he  advances  to  himself 
what  is  necessary  for  his  own  maintenance,  and  this  maintenance 
he  generally  proportions  to  the  profit  which  he  expects  to  make 
by  the  price  of  their  work.  Unless  its  price  repays  to  him  the 
maintenance  which  he  advances  to  himself,  as  well  as  the  materials, 
tools,  and  wages  which  he  advances  to  his  workmen,  it  evidently 
does  not  repay  to  him  the  whole  expense  which  he  lays  out  upon  it. 
The  profits  of  manufacturing  stock,  therefore,  are  not,  like  the  rent 
!  of  land,  a  net  produce  which  remains  after  completely  repaying 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


251 


the  whole  expense  which  must  be  laid  out  in  order  to  obtain  themT^ 
The  stock  of  the  farmer  yields  him  a  profit  as  w7ell  as  that  of  the 
master  manufacturer  ;  and  it  yields  a  rent  likewise  to  another 
person,  which  that  of  the  master  manufacturer  does  not.  The 
expense,  therefore,  laid  out  in  employing  and  maintaining  artificers 
and  manufacturers,  does  no  more  than  continue,  if  one  may  say  so, 
the  existence  of  its  own  value,  and  does  not  produce  any  new  value. 
It  is  therefore  altogether  a  barren  and  unproductive  expense.  The 
expense,  on  the  contrary,  laid  out  in  employing  farmers  and  country 
labourers,  over  and  above  continuing  the  existence  of  its  own  value, 
produces  a  new  value,  the  rent  of  the  landlord.  It  is  therefore  aj 
productive  expense. 

Mercantile  stock  is  equally  barren  and  unproductive  with  manu¬ 
facturing  stock.  It  only  continues  the  existence  of  its  own  value, 
without  producing  any  new  value.  Its  profits  are  only  the  repay¬ 
ment  of  the  maintenance  which  its  employer  advances  to  himself 
during  the  time  that  he  employs  it,  or  till  he  receives  the  returns  of 
it.  They  are  only  the  repayment  of  a  part  of  the  expense  which 
must  be  laid  out  in  employing  it. 

The  labour  of  artificers  and  manufacturers  never  adds  anything  1 
to  the  value  of  the  whole  annual  amount  of  the  rude  produce  of  the 
land.  It  adds  indeed  greatly  to  the  value  of  some  particular  parts 
of  it.  But  the  consumption  which  in  the  meantime  it  occasions  ot 
other  parts,  is  precisely  equal  to  the  value  which  it  adds  to  those 
parts;  so  that  the  value  of  the  wdiole  amount  is  not,  at  any  one 
moment  of  time,  in  the  least  augmented  by  it.  The  person  who 
wTorks  the  lace  of  a  pair  of  fine  ruffles,  for  example,  will  sometimes 
raise  the  value  of  perhaps  a  pennyworth  of  flax  to  thirty  pounds 
sterling.  But  though  at  first  sight  he  appears  thereby  to  multiply 
the  value  of  a  part  of  the  rude  produce  about  seven  thousand  and 
two  hundred  times,  he  in  reality  adds  nothing  to  the  value  of  the 
whole  annual  amount  of  the  rude  produce.  The  working  of  that 
lace  costs  him  perhaps  two  years-’  labour.  The  thirty  pounds  which 
he  gets  for  it  when  it  is  finished,  is  no  more  than  the  repayment 
of  the  subsistence  which  he  advances  to  himself  during  the  two 
years  that  he  is  employed  about  it.  The  value  which,  by  every 
day’s,  month’s,  or  year's  labour  he  adds  to  the  flax,  does  no  more 
than  replace  the  value  of  his  own  consumption  during  that  day, 
month,  or  year.  At  no  moment  of  time,  therefore,  does  he  add 


252 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


anything*  to  the  value  of  the  whole  annual  amount  of  the  rude 
produce  of  the  land  ;  the  portion  of  that  produce  which  he  is 
continually  consuming  being  always  equal  to  the  value  which  he  is 
continually  producing.  The  extreme  poverty  of  the  greater  part  of 
the  persons  employed  in  this  expensive,  though  trifling  manu¬ 
facture,  may  satisfy  us  that  the  price  of  their  work  does  not  in 
ordinarv  cases  exceed  the  value  of  their  subsistence.  It  is  other- 

t/ 

wise  with  the  work  of  farmers  and  country  labourers.  The  rent  of 
the  landlord  is  value,  which,  in  ordinary  cases,  it  is  continually 
producing,  over  and  above  replacing,  in  the  most  complete  manner, 
the  whole  consumption,  the  whole  expense  laid  out  upon  the  employ¬ 
ment  and  maintenance  both  of  the  workmen  and  of  their  employers. 

Artificers,  manufacturers,  and  merchants  can  augment  the 
revenue  and  wealth  of  their  society  by  parsimony  only;  or,  as  it  is 
expressed  in  this  system,  by  privation,  that  is,  by  depriving  them¬ 
selves  of  a  part  of  the  funds  destined  for  their  own  subsistence. 
They  annually  reproduce  nothing  but  those  funds.  Unless,  there¬ 
fore,  they  annually  save  some  part  of  them,  unless  they  annually 
deprive  themselves  of  the  enjoyment  of  some  part  of  them,  the 
revenue  and  wealth  of  their  society  can  never  be  in  the  smallest 
degree  augmented  by  means  of  their  industry.  Farmers  and 
country  labourers,  on  the  contrary,  may  enjoy  completely  the 
whole  funds  destined  for  their  own  subsistence,  and  yet  augment  at 
the  same  time  the  revenue  and  wealth  of  their  society.  Over  and 
above  what  is  destined  for  their  own  subsistence,  their  industry 
annually  affords  a  net  produce,  of  which  the  augmentation 
necessarily  augments  the  revenue  and  wealth  of  their  society. 
Nations,  therefore,  which,  like  France  or  England,  consist  in 
a  great  measure  of  proprietors  and  cultivators,  can  be  enriched 
by  industry  and  enjoyment.  Nations,  on  the  contrary,  which,  like 
Holland  and  Hamburg,  are  composed  chiefly  of  merchants,  arti¬ 
ficers,  and  manufacturers,  can  grow  rich  only  through  parsimony 
and  privation.1  As  the  interest  of  nations  so  differently  circum- 


1  No  one  is,  or  ever  will  be,  enriched 
by  anything  but  parsimony.  Whether 
privation  is  also  necessary,  depends  on 
the  means  and  the  necessities  of  those 
who  do  save.  Nor  is  the  contrast  be¬ 
tween  the  moral  and  social  tendencies 
of  the  respective  classes  alluded  to  in 
the  text  more  accurate.  It  was  not  true 


of  either  England  or  France  when  the 
Economists  wrote,  it  is  still  farther  from 
the  truth  at  present.  Smith  criticises 
the  notion  that  a  nation  of  farmers  can 
grow  rich  without  parsimony,  but  he 
constantly  affirms  the  ideal  virtues  of  an 
agricultural  people. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


253 


stanced  is  very  different,  so  is  likewise  the  common  character  of 
the  people.  In  those  of  the  former  kind,  liberality,  frankness,  and 
good  fellowship  naturally  make  a  part  of  that  common  character. 
In  the  latter,  narrowness,  meanness,  and  a  selfish  disposition,  averse 
to  all  social  pleasure  and  enjoyment. 

The  unproductive  class,  that  of  merchants,  artificers,  and  manu¬ 
facturers,  is  maintained  and  employed  altogether  at  the  expense  of 
the  two  other  classes — of  that  of  proprietors,  and  of  that  of  culti¬ 
vators.  They  furnish  it  both  with  the  materials  of  its  work  and 
with  the  fund  of  its  subsistence,  with  the  corn  and  cattle  which  it 
consumes  while  it  is  employed  about  that  work.  The  proprietors 
and  cultivators  finally  pay  both  the  wages  of  all  the  workmen  of 
the  unproductive  class,  and  the  profits  of  all  their  employers. 
Those  workmen  and  their  employers  are  properly  the  servants  of 
the  proprietors  and  cultivators.  They  are  only  servants  who  work 
without  doors,  as  menial  servants  work  within.  Both  the  one  and 
the  other,  however,  are  equally  maintained  at  the  expense  of  the 
same  masters.  The  labour  of  both  is  equally  unproductive.  It 
adds  nothing  to  the  value  of  the  sum  total  of  the  rude  produce  of 
the  land.  Instead  of  increasing  the  value  of  that  sum  total,  it  is 
a  charge  and  expense  which  must  be  paid  out  of  it. 

Q’he  unproductive  class,  however,  is  not  only  useful,  but  greatly 
useful  to  the  other  two  classes.  By  means  of  the  industry  of 
merchants,  artificers,  and  manufacturers,  the  proprietors  and  culti¬ 
vators  can  purchase  both  the  foreign  goods  and  the  manufactured 
produce  of  their  own  country  which  they  have  occasion  for,  with  the 
produce  of  a  much  smaller  quantity  of  their  own  labour  than  what 
they  would  be  obliged  to  employ  if  they  were  to  attempt,  in  an 
awkward  and  unskilful  manner,  either  to  import  the  one  or  to  make 
the  other  for  their  own  use.  By  means  of  the  unproductive  class, 
the  cultivators  are  delivered  from  many  cares  which  would  other¬ 
wise  distract  their  attention  from  the  cultivation  of  landTJ  The 
superiority  of  produce,  which,  in  consequence  of  this  undivided 
attention,  they  are  enabled  to  raise,  is  fully  sufficient  to  pay  the 
whole  expense  which  the  maintenance  and  employment  of  the 
unproductive  class  costs  either  the  proprietors  or  themselves.  The 
industry  of  merchants,  artificers,  and  manufacturers,  though  in  its 
own  nature  altogether  unproductive,  yet  contributes  in  this  manner 
indirectly  to  increase  the  produce  of  the  land.  It  increases  the 


254 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


productive  powers  of  productive  labour,  by  leaving  it  at  liberty  to 
confine  itself  to  its  proper  employment,  the  cultivation  of  land ; 
and  the  plough  goes  frequently  the  easier  and  the  better  by  means 
of  the  labour  of  the  man  whose  business  is  most  remote  from  the 
plough. 

It  can  never  be  the  interest  of  the  proprietors  and  cultivators  to 
restrain  or  to  discourage  in  any  respect  the  industry  of  merchants, 
artificers,  and  manufacturers.  The  greater  the  liberty  which  this 
unproductive  class  enjoys,  the  greater  will  be  the  competition  in  all 
the  different  trades  which  compose  it,  and  the  cheaper  will  the 
other  two  classes  be  supplied,  both  with  foreign  goods  and  with 
the  manufactured  produce  of  their  own  country. 

can  never  be  the  interest  of  the  unproductive  class  to  oppress 
the  other  two  classes.  It  is  the  surplus  produce  of  the  land,  or 
what  remains  after  deducting  the  maintenance,  first,  of  the 
cultivators,  and  afterwards  of  the  proprietors,  that  maintains  and 
employs  the  unproductive  class?\  The  greater  this  surplus,  the 
greater  must  likewise  be  the  maintenance  and  employment  of  that 
class.  The  establishment  of  perfect  justice,  of  perfect  liberty,  and 
of  perfect  equality,  is  the  very  simple  secret  which  most  effectually 
secures  the  highest  degree  of  prosperity  to  all  the  three  classes. 

The  merchants,  artificers,  and  manufacturers  of  those  mercantile 
j'  states  which,  like  Holland  and  Hamburg,  consist  chiefly  of  this 
unproductive  class,  are  in  the  same  manner  maintained  and  em¬ 
ployed  altogether  at  the  expense  of  the  proprietors  and  cultivators 
of  land.  The  only  difference  is,  that  those  proprietors  and  culti¬ 
vators  are,  the  greater  part  of  them,  placed  at  a  most  inconvenient 
distance  from  the  merchants,  artificers,  and  manufacturers  whom 
they  supply  with  the  materials  of  their  work  and  the  fund  of  their 
subsistence,  are  the  inhabitants  of  other  countries,  and  the  subjects 
f  of  other  governments. 

1 —  Such  mercantile  states,  however,  are  not  only  useful,  but  greatly 
useful  to  the  inhabitants  of  those  other  countries.  They  fill  up,  in 
some  measure,  a  very  important  void,  and  supply  the  place  of  the 
merchants,  artificers,  and  manufacturers  whom  the  inhabitants  of 
those  countries  ought  to  find  at  home,  but  whom,  from  some  defect 
in  their  policy,  they  do  not  find  at  home. 

It  can  never  be  the  interest  of  those  landed  nations,  if  I  may  call 
them  so,  to  discourage  or  distress  the  industry  of  such  mercantile 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


255 


states,  by  imposing  high  duties  upon  their  trade,  or  upon  the  com¬ 
modities  which  they  furnish.  Such  duties,  by  rendering  those 
commodities  dearer,  could  serve  only  to  sink  the  real  value  of  the 
surplus  produce  of  their  own  land,  with  which,  or,  what  comes  to 
the  same  thing,  with  the  price  of  which  those  commodities  are 
purchased.  Such  duties  could  serve  only  to  discourage  the  increase 
of  that  surplus  produce,  and  consequently  the  improvement  and 
cultivation  of  their  own  land.  The  most  effectual  expedient,  on  the 
contrary,  for  raising  the  value  of  that  surplus  produce,  for  en¬ 
couraging  its  increase,  and  consequently  the  improvement  and 
cultivation  of  their  own  land,  would  be  to  allow  the  most  perfect 
freedom  to  the  trade  of  all  such  mercantile  nations. 

This  perfect  freedom  of  trade  would  even  be  the  most  effectual 
expedient  for  supplying  them,  in  due  time,  with  all  the  artificers, 
manufacturers,  and  merchants  whom  they  wanted  at  home,  and  for 
filling  up  in  the  properest  and  most  advantageous  manner  that 
very  important  void  which  they  felt  there. 

The  continual  increase  of  the  surplus  produce  of  their  land 
would,  in  due  time,  create  a  greater  capital  than  what  could  be 
employed  with  the  ordinary  rate  of  profit  in  the  improvement  and 
cultivation  of  land  ;  and  the  surplus  part  of  it  would  naturally  turn 
itself  to  the  employment  of  artificers  and  manufacturers  at  home. 
But  those  artificers  and  manufacturers,  finding  at  home  both  the 
materials  of  their  work  and  the  fund  of  their  subsistence,  might 
immediately,  even  with  much  less  art  and  skill,  be  able  to  work  as 
cheap  as  the  like  artificers  and  manufacturers  of  such  mercantile 
states,  who  had  both  to  bring  from  a  great  distance.  Even  though, 
from  want  of  art  and  skill,  they  might  not  for  some  time  be  able  to 
work  as  cheap,  yet,  finding  a  market  at  home,  they  might  be 
able  to  sell  their  work  there  as  cheap  as  that  of  the  artificers  and 
manufacturers  of  such  mercantile  states,  which  could  not  be  brought 
to  that  market  but  from  so  great  a  distance  ;  and  as  their  art  and 
skill  improved,  they  would  soon  be  able  to  sell  it  cheaper.  The 
artificers  and  manufacturers  of  such  mercantile  states,  therefore, 
would  immediately  be  rivalled  in  the  market  of  those  landed 
nations,  and  soon  after  undersold  and  justled  out  of  it  altogether. 
The  cheapness  of  the  manufactures  of  those  landed  nations,  in 
consequence  of  the  gradual  improvements  of  art  and  skill,  would, 
in  due  time,  extend  their  sale  beyond  the  home  market,  and  carry 


256 


THE  NATURE  AND  CAUSES  OF 


BOOK  IY. 


them  to  many  foreign  markets,  from  which  they  would  in  the  same 
manner  gradually  justle  out  many  of  the  manufactures  of  such 
mercantile  nations. 

This  continual  increase  both  of  the  rude  and  manufactured 
produce  of  those  landed  nations  would  in  due  time  create  a  greater 
capital  than  could,  with  the  ordinary  rate  of  profit,  be  employed 
either  in  agriculture  or  in  manufactures.  The  surplus  of  this 
capital  would  naturally  turn  itself  to  foreign  trade,  and  be  em¬ 
ployed  in  exporting  to  foreign  countries  such  parts  of  the  rude 
and  manufactured  produce  of  its  own  country  as  exceeded  the 
demand  of  the  home  market.  In  the  exportation  of  the  produce  of 
their  own  country,  the  merchants  of  a  landed  nation  would  have  an 
advantage  of  the  same  kind  over  those  of  mercantile  nations,  which 
its  artificers  and  manufacturers  had  over  the  artificers  and  manu¬ 
facturers  of  such  nations :  the  advantage  of  finding  at  home  that 
cargo,  and  those  stores  and  provisions,  which  the  others  were 
obliged  to  seek  for  at  a  distance.  With  inferior  art  and  skill  in 
navigation,  therefore,  they  would  be  able  to  sell  that  cargo  as 
cheap  in  foreign  markets  as  the  merchants  of  such  mercantile 
nations ;  and  with  equal  art  and  skill  they  would  be  able  to  sell  it 
cheaper.  They  would  soon,  therefore,  rival  those  mercantile  nations 
in  this  branch  of  foreign  trade,  and  in  due  time  would  justle  them 
out  of  it  altogether. 

According  to  this  liberal  and  generous  system,  therefore,  the 
^most  advantageous  method  in  which  a  landed  nation  can  raise  up 
artificers,  manufacturers,  and  merchants  of  its  own,  is  to  grant  the 
most  perfect  freedom  of  trade  to  the  artificers,  manufacturers,  nnd 
merchants  of  all  other  nations.  It  thereby  raises  the  value  of  the 
surplus  produce  of  its  own  land,  of  which  the  continual  increase 
gradually  establishes  a  fund  which  in  due  time  necessarily  raises 
up  all  the  artificers,  manufacturers,  and  merchants  whom  it  has 
^occasion  for. 

When  a  landed  nation,  on  the  contrary,  oppresses  either  by  high 
duties  or  by  prohibitions  the  trade  of  foreign  nations,  it  necessarily 
hurts  its  own  interest  in  two  different  ways.  First,  by  raising  the 
price  of  all  foreign  goods  and  of  all  sorts  of  manufactures,  it 
necessarily  sinks  the  real  value  of  the  surplus  produce  of  its  own 
land,  with  which,  or,  what  comes  to  the  same  thing,  with  the  price 
of  which,  it  purchases  those  foreign  goods  and  .manufactures. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


257 


Secondly,  by  giving  a  sort  of  monopoly  of  the  home  market  to  its 
own  merchants,  artificers,  and  manufacturers,  it  raises  the  rate  of 
mercantile  and  manufacturing  profit  in  proportion  to  that  of  agri¬ 
cultural  profit,  and  consequently  either  draws  from  agriculture  a 
part  of  the  capital  which  had  before  been  employed  in  it,  or  hinders 
from  going  to  it  a  part  of  what  would  otherwise  have  gone  to  it. 
This  policy,  therefore,  discourages  agriculture  in  two  different  ways  : 
first,  by  sinking  the  real  value  of  its  produce,  and  thereby  lowering 
the  rate  of  its  profit ;  and,  secondly,  by  raising  the  rate  of  profit  in 
all  other  employments.  Agriculture  is  rendered  less  advantageous, 
and  trade  and  manufactures  more  advantageous  than  they  otherwise 
would  be ;  and  every  man  is  tempted  by  his  own  interest  to  turn, 
as  much  as  he  can,  both  his  capital  and  his  industry  from  the  former 
to  the  latter  employments. 

Though,  by  this  oppressive  policy,  a  landed  nation  should  be  able 
to  raise  up  artificers,  manufacturers,  and  merchants  of  its  own, 
somewhat  sooner  than  it  could  do  by  the  freedom  of  trade — a  matter, 
however,  which  is  not  a  little  doubtful — yet  it  would  raise  them  up, 
if  one  may  say  so,  prematurely,  and  before  it  was  perfectly  ripe  for 
them.  By  raising  up  too  hastily  one  species  of  industry,  it  would 
depress  another  more  valuable  species  of  industry.  By  raising  up 
too  hastily  a  species  of  industry  which  only  replaces  the  stock  which 
employs  it,  together  with  the  ordinary  profit,  it  would  depress  a 
species  of  industry  which,  over  and  above  replacing  that  stock  with 
its  profit,  affords  likewise  a  net  produce,  a  free  rent  to  the  landlord. 
It  would  depress  productive  labour,  by  encouraging  too  hastily  that 
labour  which  is  altogether  barren  and  unproductive. 

In  what  manner,  according  to  this  system,  the  sum  total  of  the 
annual  produce  of  the  land  is  distributed  among  the  three  classes 
above  mentioned,  and  in  what  manner  the  labour  of  the  unproduc¬ 
tive  class  does  no  more  than  replace  the  value  of  its  own  consump¬ 
tion,  without  increasing  in  any  respect  the  value  of  that  sum  total, 
is  represented  by  M.  Quesnai,  the  very  ingenious  and  profound  author 
of  this  system,  in  some  arithmetical  formularies.  The  first  of  these 
formularies,  which  by  way  of  eminence  he  peculiarly  distinguishes 
by  the  name  of  the  Economical  Table,  represents  the  manner  in 
which  he  supposes  this  distribution  takes  place,  in  a  state  of  the 
most  perfect  liberty,  and  therefore  of  the  highest  prosperity;  in 
a  state  where  the  annual  produce  is  such  as  to  afford  the  greatest 

VOL.  II.  s 


258 


THE  NATURE  AND  CAUSES  OF  book  iv. 

possible  net  produce,  and  where  each  class  enjoys  its  proper  share  of 
the  whole  annual  produce.1  Some  subsequent  formularies  represent 
the  manner  in  which  he  supposes  this  distribution  is  made  in  different 
states  of  restraint  and  regulation ;  in  which  either  the  class  of  proprie¬ 
tors,  or  the  barren  and  unproductive  class,  is  more  favoured  than 
the  class  of  cultivators,  and  in  which  either  the  one  or  the  other 
encroaches  more  or  less  upon  the  share  which  ought  properly  to 
belong  to  this  productive  class.  Every  such  encroachment,  every  viola¬ 
tion  of  that  natural  distribution,  which  the  most  perfect  liberty  would 
establish,  must,  according  to  this  system,  necessarily  degrade  more  or 
less,  from  one  year  to  another,  the  value  and  sum  total  of  the  annual 
produce,  and  must  necessarily  occasion  a  gradual  declension  in  the 
real  wealth  and  revenue  of  the  society;  a  declension  of  which  the 
progress  must  be  quicker  or  slower,  according  to  the  degree  of  this 
encroachment,  according  as  that  natural  distribution,  which  the 
most  perfect  liberty  would  establish,  is  more  or  less  violated.  Those 
subsequent  formularies  represent  the  different  degrees  of  declension, 
which,  according  to  this  system,  correspond  to  the  different  degrees 
in  which  this  natural  distribution  of  things  is  violated. 

Some  speculative  physicians  seem  to  have  imagined  that  the 
health  of  the  human  body  could  be  preserved  only  by  a  certain  pre¬ 
cise  regimen  of  diet  and  exercise,  of  which  every,  the  smallest, 
violation  necessarily  occasioned  some  degree  of  disease  or  disorder 
proportioned  to  the  degree  of  the  violation.  Experience,  however, 
would  seem  to  show  that  the  human  body  frequently  preserves,  to 
all  appearance  at  least,  the  most  perfect  state  of  health  under  a  vast 
variety  of  different  regimens  ;  even  under  some  which  are  generally 
believed  to  be  very  far  from  being  perfectly  wholesome.  But  the 
healthful  state  of  the  human  body,  it  would  seem,  contains  in  itself 
some  unknown  principle  of  preservation,  capable  either  of  preventing 
or  of  correcting,  in  many  respects,  the  bad  effects  even  of  a  very 
faulty  regimen.  M.  Quesnai,  who  was  himself  a  physician,  and  a 
very  speculative  physician,  seems  to  have  entertained  a  notion  of 
the  same  kind  concerning  the  political  body,  and  to  have  imagined 
that  it  would  thrive  and  prosper  only  under  a  certain- precise  regi¬ 
men,  the  exact  regimen  of  perfect  liberty  and  perfect  justice.  He 
seems  not  to  have  considered  that  in  the  political  body,  the  natural 
effort  which  every  man  is  continually  making  to  better  his  own 

1  Analyse  du  Tableau  ^conomique. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


259 


condition  is  a  principle  of  preservation  capable  of  preventing  and/ 
correcting,  in  many  respects,  the  bad  effects  of  a  political  economy 
in  some  degree  both  partial  and  oppressive.  Such  a  political 
economy,  though  it  no  doubt  retards  more  or  less,  is  not  always 
capable  of  stopping  altogether  the  natural  progress  of  a  nation 
towards  wealth  and  prosperity,  and  still  less  of  making  it  go  back¬ 
wards.  -If  a  nation  could  not  prosper  without  the  enjoyment  of 
perfect  liberty  and  perfect  justice,  there  is  not  in  the  world  a  nation 
which  could  ever  have  prospered.  In  the  political  body,  however, 
the  wisdom  of  nature  has  fortunately  made  ample  provision  for 
remedying  many  of  the  bad  effects  of  the  folly  and  injustice  of 
man ;  in  the  same  manner  as  it  has  done  in  the  natural  body  for 
remedying  those  of  his  sloth  and  intemperance.  J 

The  capital  error  of  this  svstem»  however,  seems  to  lie  in  its 

representing  the  class  of  artificers,  manufacturers,  and  merchants 

^altogether  barren  and  unproductive^The  following  observations 

may  serve  to  show  the  impropriety  of  this  representation. 

First,  This  class,  it  is  acknowledged,  reproduces  annually  the  value 
of  its  own  annual  consumption,  and  continues,  at  least,  the  existence 
of  the  stock  or  capital  which  maintains  and  employs  it.  But  upon 
this  account  alone  the  denomination  of  barren  or  unproductive 
should  seem  to  be  very  improperly  applied  to  it.  We  should  not  call 
a  marriage  barren  or  unproductive,  though  it  produced  only  a  son 
and  a  daughter,  to  replace  the  father  and  mother,  and  though  it 
did  not  increase  the  number  of  the  human  species,  but  only  con¬ 
tinued  it  as  it  was  before.  Farmers  and  country  labourers,  indeed, 
over  and  above  the  stock  which  maintains  and  employs  them, 
reproduce  annually  a  net  produce,  a  free  rent  to  the  landlord.  As 
a  marriage  which  affords  three  children  is  certainly  more  productive 
than  one  which  affords  only  two,  so  the  labour  of  farmers  and 
country  labourers  is  certainly  more  productive  than  that  of 
merchants,  artificers,  and  manufacturers.  The  superior  produce 
of  the  one  class,  however,  does  not  render  the  other  barren  or 
unproductive. 

Secondly,  It  seems,  upon  this  account,  altogether  improper  to 
consider  artificers,  manufacturers,  and  merchants  in  the  same  light 
as  menial  servants.  The  labour  of  menial  servants  does  not  con¬ 
tinue  the  existence  of  the  fund  which  maintains  and  employs  them. 
Their  maintenance  and  employment  is  altogether  at  the  expense  of 


260 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


their  masters,  and  the  work  which  they  perform  is  not  of  a  nature 
to  repay  that  expense.  That  work  consists  in  services  which  perish 
generally  in  the  very  instant  of  their  performance,  and  does  not  fix  or 
realise  itself  in  any  vendible  commodity  which  can  replace  the  value 
of  their  wages  and  maintenance.  The  labour,  on  the  contrary,  of 
artificers,  manufacturers,  and  merchants,  naturally  does  fix  and 
realise  itself  in  some  such  vendible  commodity.  It  is  upon  this 
account  that,  in  the  chapter  in  which  I  treat  of  productive  and 
unproductive  labour,1  I  have  classed  artificers,  manufacturers,  and 
merchants  among  the  productive  labourers,  and  menial  servants 
among  the  barren  or  unproductive. 

Thirdly,  It  seems,  upon  every  supposition,  improper  to  say  that 
the  labour  of  artificers,  manufacturers,  and  merchants  does  not 
increase  the  real  revenue  of  the  society.  Though  we  should  suppose, 
for  example,  as  it  seems  to  be  supposed  in  this  system,  that  the 
value  of  the  daily,  monthly,  and  yearly  consumption  of  this  class 
was  exactly  equal  to  that  of  its  daily,  monthly,  and  yearly  produc¬ 
tion,  yet  it  would  not  from  thence  follow  that  its  labour  added 
nothing  to  the  real  revenue,  to  the  real  value  of  the  annual  produce 
of  the  land  and  labour  of  the  society.  An  artificer,  for  example,  who, 
in  the  first  six  months  after  harvest,  executes  ten  pounds’  worth  of 
work,  though  he  should  in  the  same  time  consume  ten  pounds’  worth 
of  corn  and  other  necessaries,  yet  really  adds  the  value  of  ten  pounds 
to  the  annual  produce  of  the  land  and  labour  of  the  society.  While 
he  has  been  consuming  a  half-yearly  revenue  of  ten  pounds’  worth 
of  corn  and  other  necessaries,  he  has  produced  an  equal  value  of 
work  capable  of  purchasing,  either  to  himself  or  to  some  other 
person,  an  equal  half-yearly  revenue.  The  value,  therefore,  of  what 
has  been  consumed  and  produced  during  these  six  months  is  equal, 
not  to  ten,  but  to  twenty  pounds.  It  is  possible,  indeed,  that  no 
more  than  ten  pounds’  worth  of  this  value  may  ever  have  existed  at 
any  one  moment  of  time.  But  if  the  ten  pounds’  worth  of  corn  and 
other  necessaries,  which  were  consumed  by  the  artificer,  had  been 
consumed  by  a  soldier  or  by  a  menial  servant,  the  value  of  that  part 
of  the  annual  produce  which  existed  at  the  end  of  the  six  months, 
would  have  been  ten  pounds  less  than  it  actually  is  in  consequence  of 
the  labour  of  the  artificer.  Though  the  value  of  what  the  artificer 
produces,  therefore,  should  not  at  any  one  moment  of  time  be  sup- 

1  Book  II.  chap.  iii. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


261 


posed  greater  than  the  value  he  consumes,  yet  at  every  moment  of 
time  the  actually  existing  value  of  goods  in  the  market  is,  in  con-  i 
sequence  of  what  he  produces,  greater  than  it  otherwise  would  be.1  ' 

When  the  patrons  of  this  system  assert  that  the  consumption  of 
artificers,  manufacturers,  and  merchants  is  equal  to  the  value  of 
what  they  produce,  they  probably  mean  no  more  than  that  their 
revenue,  or  the  fund  destined  for  their  consumption,  is  equal  to  it.  But 
if  they  had  expressed  themselves  more  accurately,  and  only  asserted 
that  the  revenue  of  this  class  was  equal  to  the  value  of  what  they 
produced,  it  might  readily  have  occurred  to  the  reader,  that  what 
would  naturally  be  saved  out  of  this  revenue  must  necessarily 
increase  more  or  less  the  real  wealth  of  the  society.  In  order, 
therefore,  to  make  out  something  like  an  argument,  it  was  necessary 
that  they  should  express  themselves  as  they  have  done ;  and  this 
argument,  even  supposing  things  actually  were  as  it  seems  to  presume 
them  to  be,  turns  out  to  be  a  very  inconclusive  one. 

Fourthly,  Farmers  and  country  labourers  can  no  more  augment, 
without  parsimony,  the  real  revenue,  the  annual  produce  of  the  land 
and  labour  of  their  society,  than  artificers,  manufacturers,  and  mer¬ 
chants.  The  annual  produce  of  the  land  and  labour  of  any  society  can 
be  augmented  only  in  two  ways :  either,  first,  by  some  improvement 
in  the  productive  powers  of  the  useful  labour  actually  maintained  with¬ 
in  it ;  or,  secondly,  by  some  increase  in  the  quantity  of  that  labour. 

The  improvement  in  the  productive  powers  of  useful  labour 
depends,  first,  upon  the  improvement  in  the  ability  of  the  workman  ; 
and,  secondly,  upon  that  of  the  machinery  with  which  he  works. 
But  the  labour  of  artificers  and  manufacturers,  as  it  is  capable  of 
being  more  subdivided,  and  the  labour  of  each  workman  reduced  to 
a  greater  simplicity  of  operation,  than  that  of  farmers  and  country 


1  The  question  is,  has  the  labour  of  the 
artisan  added  to  the  real  wealth  of  society  ? 
And  the  answer  must  be  in  the  affirma¬ 
tive,  even  if,  as  is  presumed,  the  addition 
to  the  money  value  of  the  artisan’s  pro¬ 
duct  is  no  more  than  the  money  value  of 
the  food  which  he  has  consumed  during 
the  process.  It  is  inevitably  the  case, 
however,  that  the  money  value  of  his  pro¬ 
duct  is  greater,  on  the  average,  than  the 
cost  of  production,  else  the  labour  would 
not  be  undertaken.  The  profit  which 
accompanies  the  artisan’s  labour  is  at 
once  the  impulse  to  the  labour,  and  the 


estimate  which  society  puts  on  the  pro¬ 
duct  of  the  labour  itself.  Without  this 
anticipation,  labour  would  not  be  set  in 
motion ;  without  this  confirmation  which 
the  operation  of  exchange  gives  of  the 
value  which  is  embodied  in  the  product 
by  labour,  the  employment  of  labour  in 
this  direction  would  cease.  The  saving 
of  such  artisans  is  parsimony  exercised 
not  upon  the  means  of  bare  subsistence 
and  other  elements  of  necessary  cost,  but 
on  the  profit  which  remains  over  and 
above  this  cost. 


262 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


labourers,  so  it  is  likewise  capable  of  both  these  sorts  of  improve¬ 
ment  in  a  much  higher  degree.*  In  this  respect,  therefore,  the 
class  of  cultivators  can  have  no  sort  of  advantage  over  that  of  arti¬ 
ficers  and  manufacturers. 

The  increase  in  the  quantity  of  useful  labour  actually  employed 
within  any  society,  must  depend  altogether  upon  the  increase  of  the 
capital  which  employs  it ;  and  the  increase  of  that  capital  again 
must  be  exactly  equal  to  the  amount  of  the  savings  from  the 
revenue,  either  of  the  particular  persons  who  manage  and  direct  the 
employment  of  that  capital,  or  of  some  other  persons  who  lend  it' 
to  them.  If  merchants,  artificers,  and  manufacturers  are,  as  this 
system  seems  to  suppose,  naturally  more  inclined  to  parsimony  and 
saving  than  proprietors  and  cultivators,  they  are,  so  far,  more  likely 
to  augment  the  quantity  of  useful  labour  employed  within  their 
society,  and  consequently  to  increase  its  real  revenue,  the  annual 
produce  of  its  land  and  labour. 

Fifthly  and  lastly,  though  the  revenue  of  the  inhabitants  of  every 
country  was  supposed  to  consist  altogether,  as  this  system  seems  to 
suppose,  in  the  quantity  of  subsistence  which  their  industry  could 
procure  to  them,  yet,  even  upon  this  supposition,  the  revenue  of  a 
trading  and  manufacturing  country  must,  other  things  being  equal, 
always  be  much  greater  than  that  of  one  without  trade  or  manufac¬ 
tures.  By  means  of  trade  and  manufactures,  a  greater  quantity  of 
subsistence  can  be  annually  imported  into  a  particular  country  than 
what  its  own  lands,  in  the  actual  state  of  their  cultivation, 
could  afford.  The  inhabitants  of  a  town,  though  they  frequently 
possess  no  lands  of  their  own,  yet  draw  to  themselves  by  their 
industry  such  a  quantity  of  the  rude  produce  of  the  lands  of 
other  people  as  supplies  them,  not  only  with  the  materials  of 
their  work,  but  with  the  fund  of  their  subsistence.  What  a  town 
always  is  with  regard  to  the  country  in  its  neighbourhood,  one 
independent  state  or  country  may  frequently  be  with  regard  to 
other  independent  states  or  countries.  It  is  thus  that  Holland 
draws  a  great  part  of  its  subsistence  from  other  countries ;  live 
cattle  from  Holstein  and  Jutland,  and  corn  from  almost  all  the 
different  countries  of  Europe.  A  small  quantity  of  manufactured 
produce  purchases  a  great  quantity  of  rude  produce.  A  trading 
and  manufacturing  country,  therefore,  naturally  purchases  with  a 

*  See  Book  I.  chap.  i. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


263 


small  part  of  its  manufactured  produce  a  great  part  of  the  rude  pro¬ 
duce  of  other  countries ;  while,  on  the  contrary,  a  country  without 
trade  and  manufactures  is  generally  obliged  to  purchase,  at  the 
expense  of  a  great  part  of  its  rude  produce,  a  very  small  part  of  the 
manufactured  produce  of  other  countries.  The  one  exports  what 
can  subsist  and  accommodate  but  a  very  few,  and  imports  the  sub¬ 
sistence  and  accommodation  of  a  great  number;  the  other  exports 
the  accommodation  and  subsistence  of  a  great  number,  and  imports 
that  of  a  very  few  only.  The  inhabitants  of  the  one  must  always 
enjoy  a  much  greater  quantity  of  subsistence  than  what  their  own 
lands,  in  the  actual  state  of  their  cultivation,  could  afford.  The 
inhabitants  of  the  other  must  always  enjoy  a  much  smaller  quantity. 

This  system,  howevei\_3vith.jalLit^  imperfections.  isT  pprhaps,  the 
nearest  approximation  to  the  truth  that  has  vet  been  published  1 

an— ■— — — — —— .———mi.  .  >  ■  -rl  - ■ .  .v  .  ■—  r  tft -  .  t;  .  ■  ■„  .  „■  i  - - 1  -  . ■  ■■ .- 

upon  the  subject  of  political  economy,  and_is  uj>pn  that  account  well 

worth  the  consideration  of  every  man  who  wishes  to  examine  with 

attention  the  principles  of  that  very  important  science.  Though  ip  : 

- *T  ’  '.MIT  -  ■  —  . . . -  -  — ■  ....  —  .  .  ■  ■  .  .  —  . .  . ■  _ : ;s!. .  ■■  ^  I 

representing  the  labour  which  is  employed  upon  land  as  the  only  j 

productive  labour,  the  notions  which  it  inculcates  are  perhaps  too  | 

narrow  and  confined ;  yet  in  representing  the  wealth  of  nations  as 

consisting,  not  in  the  unconsumable  riches  of  money,  but  in  the  / 

consumable  goods  annually  reproduced  by  the  labour  of  the  society, 

and  in  representing  perfect  liberty  as  the  only  effectual  expedient 

for  rendering  this  annual  reproduction  the  greatest  possible,  its  doc¬ 

trine  seems  to  be  in  every  respect  as  just  as  it  is  generous  and  j 
liberal,  its  followers  are  very  numerous ;  and  as  men  are  fond  of 
paradoxes,  and  of  appearing  to  understand  what  surpasses  the  com¬ 
prehension  of  ordinary  people,  the  paradox  which  it  maintains,  con¬ 
cerning  the  unproductive  nature  of  manufacturing  labour,  has  not 
perhaps  contributed  a  little  to  increase  the  number  of  its  admirers. 
They  have  for  some  years  past  made  a  pretty  considerable  sect, 
distinguished  in  the  French  republic  of  letters  by  the  name  of  ‘  The 
Economists.’  Their  works  have  certainly  been  of  some  service  to 
their  country;  not  only  by  bringing  into  general  discussion  many 
subjects  which  had  never  been  well  examined  before,  but  by  influ¬ 
encing  in  some  measure  the  public  administration  in  favour  of 
agriculture.  It  has  been  in  consequence  of  their  representations, 
accordingly,  that  the  agriculture  of  France  has  been  delivered  from 
several  of  the  oppressions  which  it  before  laboured  under.  The 


264 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV* 


term  during  which  such  a  lease  can  be  granted,  as  will  be  valid 
against  every  future  purchaser  or  proprietor  of  land,  has  been  pro¬ 
longed  from  nine  to  twenty-seven  years.  The  ancient  provincial 
restraints  upon  the  transportation  of  corn  from  one  province  of  the 
kingdom  to  another,  have  been  entirely  taken  away,  and  the  liberty 
of  exporting  it  to  all  foreign  countries  has  been  established  as  the 
common  law  of  the  kingdom  in  all  ordinary  cases.  This  sect,  in 
their  works,  which  are  very  numerous,  and  which  treat  not  only  of 
what  is  properly  called  Political  Economy,  or  of  the  nature  and 
causes  of  the  wealth  of  nations,  but  of  every  other  branch  of  the 
system  of  civil  government,  all  follow  implicitly,  and  without  any 
sensible  variation,  the  doctrine  of  M.  Quesnai.  There  is  upon  this 
account  little  variety  in  the  greater  part  of  their  works.  The  most 
distinct  and  best  connected  account  of  this  doctrine  is  to  be  found 
in  a  little  book  written  by  M.  Mercier  de  la  Piviere,  sometime 
Intendant  of  Martinico,  entitled  ‘  The  Natural  and  Essential  Order 
of  Political  Societies.’1  The  admiration  of  this  whole  sect  for  their 
master,  who  was  himself  a  man  of  the  greatest  modesty  and  sim¬ 
plicity,  is  not  inferior  to  that  of  any  of  the  ancient  philosophers 
for  the  founders  of  their  respective  systems.  c  There  have  been, 
since  the  world  began,’  says  a  very  diligent  and  respectable  author, 
the  Marquis  de  Mirabeau,2  ‘three  great  inventions  which  have 
principally  given  stability  to  political  societies,  independent  of  many 
other  inventions  which  have  enriched  and  adorned  them.  The  first 
is  the  invention  of  writing,  which  alone  gives  human  nature  the 
power  of  transmitting,  without  alteration,  its  laws,  its  contracts,  its 
annals,  and  its  discoveries ;  the  second  is  the  invention  of  money, 
which  binds  together  all  the  relations  between  civilised  societies ; 
the  third  is  the  Economical  Table,  the  result  of  the  other  two, 
which  completes  them  both  by  perfecting  their  object :  the  great 
discovery  of  our  age,  but  of  which  our  posterity  will  reap  the  benefit. 

As  the  political  economy  of  the  nations  of  modern  Europe  has 
been  more  favourable  to  manufactures  and  foreign  trade,  the  in¬ 
dustry  of  the  towns,  than  to  agriculture,  the  industry  of  the  country, 

1  Edited  by  Daire,  and  published  in  generally  deserving  of  the  name  which 

Gillaumin’s  series  of  Political  Econo-  is  given  to  one  of  them,  viz.  ‘  Ennuyeux 
mists.  ^  fatras,’  Smith  must  have  over-estimated 

2  This  writer,  the  father  of  a  more  this  author.  I  have  not  been  able  to  dis- 
eminent  person,  was  a  follower  of  Du  cover  the  passage  in  L’Ami  des  Homines, 
Quesnai,  and  the  author  of  several  works  or  Thdorie  de  lTmpot,  which  I  have  found 
on  Political  Economy.  If  his  works  were  in  the  Bodleian. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


265 


so  that  of  other  nations  has  followed  a  different  plan,  and  has  been 
more  favourable  to  agriculture  than  to  manufactures  and  foreign  trade. 

The  policy  of  China  favours  agriculture  more  than  all  other 
employments.  In  China,  the  condition  of  a  labourer  is  said  to  be 
as  much  superior  to  that  of  an  artificer,  as  in  most  parts  of  Europe 
that  of  an  artificer  is  to  that  of  a  labourer.  In  China,  the  great 
ambition  of  every  man  is  to  get  possession  of  some  little  bit  of  land, 
either  in  property  or  in  lease ;  and  leases  are  there  said  to  be 
granted  upon  very  moderate  terms,  and  to  be  sufficiently  secured  to 
the  lessees.  The  Chinese  have  little  respect  for  foreign  trade.  Your 
beggarly  commerce !  was  the  language  in  which  the  mandarins  of 
Pekin  used  to  talk  to  Mr.  De  Lange,  the  Russian  envoy,  concerning 
it.*  Except  with  Japan,  the  Chinese  carry  on,  themselves,  and  in 
their  own  bottoms,  little  or  no  foreign  trade;  and  it  is  only  into 
one  or  two  ports  of  their  kingdom  that  they  even  admit  the  ships 
of  foreign  nations.  Foreign  trade,  therefore,  is,  in  China,  every 
way  confined  within  a  much  narrower  circle  than  that  to  which  it 
would  naturally  extend  itself,  if  more  freedom  was  allowed  to  it, 
either  in  their  own  ships,  or  in  those  of  foreign  nations. 

Manufactures,  as  in  a  small  bulk  they  frequently  contain  a  great 
value,  and  can  upon  that  account  be  transported  at  less  expense 
from  one  country  to  another  than  most  parts  of  rude  produce,  are, 
in  almost  all  countries,  the  principal  support  of  foreign  trade.  In 
countries,  besides,  less  extensive  and  less  favourably  circumstanced 
for  interior  commerce  than  China,  they  generally  require  the  support 
of  foreign  trade.  Without  an  extensive  foreign  market,  they  could 
not  well  flourish,  either  in  countries  so  moderately  extensive  as  to 
afford  but  a  narrow  home  market,  or  in  countries  where  the  com¬ 
munication  between  one  province  and  another  was  so  difficult  as  to 
render  it  impossible  for  the  goods  of  any  particular  place  to  enjoy 
the  whole  of  that  home  market  which  the  country  could  afford. 
The  perfection  of  manufacturing  industry,  it  must  be  remembered, 
depends  altogether  upon  the  division  of  labour ;  and  the  degree  to 
which  the  division  of  labour  can  be  introduced  into  any  manufac¬ 
ture,  is  necessarily  regulated,  it  has  already  been  shown,  by  the 
extent  of  the  market.  But  the  great  extent  of  the  empire  of  China, 
the  vast  multitude  of  its  inhabitants,  the  variety  of  climate,  and 
consequently  of  productions  in  its  different  provinces,  and  the  easy 

*  See  the  Journal  of  Mr.  De  Lange,  in  Bell’s  Travels,  vol.  ii.  pp.  258,  2  76,  293. 


266 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


communication  by  means  of  water-carriage  between  the  greater  part 
of  them,  render  the  home  market  of  that  country  of  so  great  extent 
as  to  be  alone  sufficient  to  support  very  great  manufactures,  and 
to  admit  of  very  considerable  subdivisions  of  labour.  The  home 
market  of  China  is,  perhaps,  in  extent  not  much  inferior  to  the 
market  of  all  the  different  countries  of  Europe  put  together.  A  more 
extensive  foreign  trade,  however,  which  to  this  great  home  market 
added  the  foreign  market  of  all  the  rest  of  the  world,  especially  if 
any  considerable  part  of  this  trade  was  carried  on  in  Chinese  ships, 
could  scarce  fail  to  increase  very  much  the  manufactures  of  China, 
and  to  improve  very  much  the  productive  powers  of  its  manufac¬ 
turing  industry.  By  a  more  extensive  navigation,  the  Chinese  would 
naturally  learn  the  art  of  using  and  constructing  themselves  all  the 
different  machines  made  use  of  in  other  countries,  as  well  as  the  other 
improvements  of  art  and  industry  which  are  practised  in  all  the 
different  parts  of  the  world.  Upon  their  present  plan,  they  have 
little  opportunity  of  improving  themselves  by  the  example  of  any 
other  nation,  except  that  of  the  Japanese. 

The  policy  of  ancient  Egypt  too,  and  that  of  the  Gentoo  govern¬ 
ment  of  Hindostan,  seem  to  have  favoured  agriculture  more  than 
all  other  employments. 

Both  in  ancient  Egypt  and  Hindostan,  the  whole  body  of  the 
people  was  divided  into  different  castes  or  tribes,  each  of  which 
was  confined,  from  father  to  son,  to  a  particular  employment  or 
class  of  employments.  The  son  of  a  priest  was  necessarily  a  priest  ; 
the  son  of  a  soldier,  a  soldier ;  the  son  of  a  labourer,  a  labourer ; 
the  son  of  a  weaver,  a  weaver;  the  son  of  a  tailor,  a  tailor,  &c. 
In  both  countries  the  caste  of  the  priests  held  the  highest  rank, 
and  that  of  the  soldiers  the  next ;  and  in  both  countries  the  caste 
of  the  farmers  and  labourers  was  superior  to  the  casts  of  merchants 
and  manufacturers. 

The  government  of  both  countries  was  particularly  attentive  to 
the  interest  of  agriculture.  The  works  constructed  by  the  ancient 
sovereigns  of  Egypt  for  the  proper  distribution  of  the  waters  of 
the  Nile  were  famous  in  antiquity;  and  the  ruined  remains  of 
some  of  them  are  still  the  admiration  of  travellers.  Those  of  the 
same  kind  which  were  constructed  by  the  ancient  sovereigns  of 
Hindostan  for  the  proper  distribution  of  the  waters  of  the  Ganges 
as  well  as  of  many  other  rivers,  though  they  have  been  less  cele- 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


267 


brated,  seem  to  have  been  equally  great.  Both  countries,  accord¬ 
ingly,  though  subject  occasionally  to  dearths,  have  been  famous 
for  their  great  fertility.  Though  both  were  extremely  populous, 
yet,  in  years  of  modern  plenty,  they  were  both  able  to  export  great 
quantities  of  grain  to  their  neighbours. 

The  ancient  Egyptians  had  a  superstitious  aversion  to  the  sea; 
and  as  the  Gentoo  religion  does  not  permit  its  followers  to  light 
a  fire,  nor  consequently  to  dress  any  victuals  upon  the  water,  it 
in  effect  prohibits  them  from  all  distant  sea  voyages.  Both  the 
Egyptians  and  Indians  must  have  depended  almost  altogether  upon 
the  navigation  of  other  nations  for  the  exportation  of  their  surplus 
produce  ;  and  this  dependency,  as  it  must  have  confined  the  market, 
so  it  must  have  discouraged  the  increase  of  this  surplus  produce. 
It  must  have  discouraged  too  the  increase  of  the  manufactured 
produce  more  than  that  of  the  rude  produce.  Manufactures  re¬ 
quire  a  much  more  extensive  market  than  the  most  important 
parts  of  the  rude  produce  of  the  land.  A  single  shoemaker  will 
make  more  than  three  hundred  pairs  of  shoes  in  the  year ;  and  his 
own  family  will  not  perhaps  wear  out  six  pairs.  Unless  therefore 
he  has  the  custom  of  at  least  fifty  such  families  as  his  own,  he 
cannot  dispose  of  the  whole  produce  of  his  own  labour.  The  most 
numerous  class  of  artificers  will  seldom,  in  a  large  country,  make 
more  than  one  in  fifty  or  one  in  a  hundred  of  the  whole  number 
of  families  contained  in  it.  But  in  such  large  countries  as  France 
and  England,  the  number  of  people  employed  in  agriculture  has 
by  some  authors  been  computed  at  a  half,  by  others  at  a  third,  and 
by  no  author  that  I  know  of  at  less  than  a  fifth  of  the  whole 
inhabitants  of  the  country.  But  as  the  produce  of  the  agriculture 
of  both  France  and  England  is,  the  far  greater  part  of  it,  consumed 
at  home,  each  person  employed  in  it  must,  according  to  these 
computations,  require  little  more  than  the  custom  of  one,  two, 
or,  at  most,  of  four  such  families  as  his  own,  in  order  to  dispose 
of  the  whole  produce  of  his  own  labour.  Agriculture,  therefore, 
can  support  itself  under  the  discouragement  of  a  confined  market, 
much  better  than  manufactures.  In  both  ancient  Egypt  and  Hin- 
dostan,  indeed,  the  confinement  of  the  foreign  market  was  in  some 
measure  compensated  by  the  conveniency  of  many  inland  naviga¬ 
tions,  which  opened,  in  the  most  advantageous  manner,  the  whole 
extent  of  the  home  market  to  every  part  of  the  produce  of  every 


268 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


different  district  of  those  countries.  The  great  extent  of  Hindostan 

, 

too  rendered  the  home  market  of  that  country  very  great,  and 
sufficient  to  support  a  great  variety  of  manufactures.  But  the 
small  extent  of  ancient  Egypt,  which  was  never  equal  to  England, 
must  at  all  times  have  rendered  the  home  market  of  that  country 
too  narrow  for  supporting  any  great  variety  of  manufactures. 
Bengal,  accordingly,  the  province  of  Hindostan,  which  commonly 
exports  the  greatest  quantity  of  rice,  has  always  been  more  re¬ 
markable  for  the  exportation  of  a  great  variety  of  manufactures 
than  for  that  of  its  grain.  Ancient  Egypt,  on  the  contrary,  though 
it  exported  some  manufactures,  fine  linen  in  particular,  as  well 
as  some  other  goods,  was  always  most  distinguished  for  its  great 
exportation  of  grain.  It  was  long  the  granary  of  the  Boman 
Empire. 

The  sovereigns  of  China,  of  ancient  Egypt,  and  of  the  different 
kingdoms  into  which  Hindostan  has  at  different  times  been  divided, 
have  always  derived  the  whole,  or  by  far  the  most  considerable 
part,  of  their  revenue  from  some  sort  of  land-tax  or  land-rent. 
This  land-tax  or  land-rent,  like  the  tithe  in  Europe,  consisted  in 
a  certain  proportion,  a  fifth,  it  is  said,  of  the  produce  of  the  land, 
which  was  either  delivered  in  kind,  or  paid  in  money,  according 
to  a  certain  valuation,  and  which  therefore  varied  from  year  to 
year  according  to  all  the  variations  of  the  produce.  It  was  natural, 
therefore,  that  the  sovereigns  of  those  countries  should  be  particu¬ 
larly  attentive  to  the  interests  of  agriculture,  upon  the  prosperity 
or  declension  of  which  immediately  depended  the  yearly  increase 
or  diminution  of  their  own  revenue. 

The  policy  of  the  ancient  republics  of  Greece,  and  that  of  Rome, 
though  it  honoured  agriculture  more  than  manufactures  or  foreign 
trade,  yet  seems  rather  to  have  discouraged  the  latter  employ¬ 
ments  than  to  have  given  any  direct  or  intentional  encouragement 
to  the  former.  In  several  of  the  ancient  states  of  Greece,  foreign 
trade  was  prohibited  altogether;  and  in  several  others  the  employ¬ 
ments  of  artificers  and  manufacturers  were  considered  as  hurtful 
to  the  strength  and  agility  of  the  human  body,  as  rendering  it 
incapable  of  those  habits  which  their  military  and  gymnastic  ex¬ 
ercises  endeavoured  to  form  in  it,  and  as  thereby  disqualifying  it 
more  or  less  for  undergoing  the  fatigues  and  encountering  the 
dangers  of  war.  Such  occupations  were  considered  as  fit  only  for 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


269 


slaves,  and  the  free  citizens  of  the  state  were  prohibited  from 
exercising  them.  Even  in  those  states  where  no  such  prohibition 
took  place,  as  in  Rome  and  Athens,  the  great  body  of  the  people 
were  in  effect  excluded  from  all  the  trades  which  are  now  com¬ 
monly  exercised  by  the  lower  sort  of  the  inhabitants  of  towns. 
Such  trades  were,  at  Athens  and  Rome,  all  occupied  by  the  slaves 

of  the  rich,  who  exercised  them  for  the  benefit  of  their  masters, 

\ 

whose  wealth,  power,  and  protection  made  it  almost  impossible 
for  a  poor  freeman  to  find  a  market  for  his  work  when  it  came 
into  competition  with  that  of  the  slaves  of  the  rich.  Slaves, 
however,  are  very  seldom  inventive ;  and  all  the  most  important 
improvements,  either  in  machinery,  or  in  the  arrangement  and  dis¬ 
tribution  of  work  which  facilitate  and  abridge  labour,  have  been 
the  discoveries  of  freemen.1  Should  a  slave  propose  any  improve¬ 
ment  of  this  kind,  his  master  would  be  very  apt  to  consider  the 
proposal  as  the  suggestion  of  laziness  and  a  desire  to  save  his 
own  labour  at  the  master’s  expense.  The  poor  slave,  instead  of 
reward,  would  probably  meet  with  much  abuse,  perhaps  with  some 
punishment.  In  the  manufactures  carried  on  by  slaves,  therefore, 
more  labour  must  generally  have  been  employed  to  execute  the 
same  quantity  of  work,  than  in  those  carried  on  by  freemen.  The 
work  of  the  former  must,  upon  that  account,  generally  have  been 
dearer  than  that  of  the  latter.  The  Hungarian  mines,  it  is  re¬ 
marked  by  M.  Montesquieu,2  though  not  richer,  have  always  been 
wrought  with  less  expense,  and  therefore  with  more  profit,  than 
the  Turkish  mines  in  their  neighbourhood.  The  Turkish  mines 
are  wrought  by  slaves,  and  the  arms  of  those  slaves  are  the  only 
machines  which  the  Turks  have  ever  thought  of  employing.  The 
Hungarian  mines  are  wrought  by  freemen,  who  employ  a  great 
deal  of  machinery,  by  which  they  facilitate  and  abridge  their  own 
labour.  From  the  very  little  that  is  known  about  the  price  of 


1  There  can,  it  seems,  be  little  doubt 
that  the  scanty  progress  which  ancient 
civilisation  made  in  mechanical  science 
(the  chief  means  by  which  labour  is  eco¬ 
nomised),  is  to  be  explained  by  the  pre¬ 
valence  of  slavery.  Where  labour  is 
degraded  in  the  persons  of  those  who 
exercise  it,  it  will  not  betake  itself  to 
those  means  of  shortening  and  economis¬ 
ing  it  which  have  been  adopted  with  such 
signal  success  in  modern  civilisation. 


But  had  the  mechanical  increased  in 
antiquity  as  fully  as  the  fine  arts  did, 
the  incursion  of  the  barbarians  would  have 
been  foiled  as  successfully  as  a  similar 
irruption  would  be  in  our  own  days. 

3  ‘  Les  Mines  des  Turcs  dans  le  Bannat 
de  Temeswar  ^toient  plus  riches  que 
celles  de  Hongrie,  et  elles  ne  produisoient 
pas  tant,  parce  qu’ils  n’imaginoient  jamais 
que  les  bras  de  leurs  Esclaves.’  Esprit 
des  Loix,  lib.  xv.  chap.  viii. 


270  THE  NATURE  AND  CAUSES  OF  book  iy. 

manufactures  in  the  times  of  the  Greeks  and  Romans,  it  would 
appear  that  those  of  the  finer  sort  were  excessively  dear.  Silk 
sold  for  its  weight  in  gold.  It  was  not,  indeed,  in  those  times  a 
European  manufacture ;  and  as  it  was  all  brought  from  the  East 
Indies,  the  distance  of  the  carriage  may  in  some  measure  account 
for  the  greatness  of  the  price.  The  price,  however,  which  a  lady, 
it  is  said,  would  sometimes  pay  for  a  piece  of  very  fine  linen, 
seems  to  have  been  equally  extravagant ;  and  as  linen  was  always 
either  a  European,  or,  at  farthest,  an  Egyptian  manufacture,  this 
high  price  can  be  accounted  for  only  by  the  great  expense  of  the 
labour  which  must  have  been  employed  about  it,  and  the  expense 
of  this  labour  again  could  arise  from  nothing  but  the  awkwardness 
of  the  machinery  which  it  made  use  of.  The  price  of  fine  woollens, 
too,  though  not  quite  so  extravagant,  seems  however  to  have  been 
much  above  that  of  the  present  times.  Some  cloths,  we  are  told 
by  Pliny,  dyed  in  a  particular  manner,  cost  a  hundred  denarii, 
or  three  pounds  six  shillings  and  eightpence  the  pound  weight.* 
Others  dyed  in  another  manner  cost  a  thousand  denarii  the  pound 
weight,  or  thirty-three  pounds  six  shillings  and  eightpence.  (The 
Roman  pound,  it  must  be  remembered,  contained  only  twelve  of 
our  avoirdupois  ounces.)  This  high  price,  indeed,  seems  to  have 
been  principally  owing  to  the  dye.  But  had  not  the  cloths  them¬ 
selves  been  much  dearer  than  any  which  are  made  in  the  present 
times,  so  very  expensive  a  dye  would  not  probably  have  been 
bestowed  upon  them.  The  disproportion  would  have  been  too 
great  between  the  value  of  the  accessory  and  that  of  the  principal. 
The  price  mentioned  by  the  same  author  f  of  some  Triclinaria^ 
a  sort  of  woollen  pillows  or  cushions  make  use  of  to  lean  upon  as 
they  reclined  upon  their  couches  at  table,  passes  all  credibility; 
some  of  them  being  said  to  have  cost  more  than  thirty  thousand, 
others  more  than  three  hundred  thousand  pounds.  This  high 
price  too  is  not  said  to  have  arisen  from  the  dye.  In  the  dress 
of  the  people  of  fashion  of  both  sexes,  there  seems  to  have  been 
much  less  variety,  it  is  observed  by  Dr.  Arbuthnot,  in  ancient 
than  in  modern  times ;  and  the  very  little  variety  which  we  find 
in  that  of  the  ancient  statues  confirms  his  observation.  He  infers 
from  this,  that  their  dress  must  upon  the  whole  have  been  cheaper 
than  ours ;  but  the  conclusion  does  not  seem  to  follow.  When 

*  Plin.  1.  ix.  c.  39. 


t  lb.  1.  viii.  c.  48. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


271 


the  expense  of  fashionable  dress  is  very  great,  the  variety  must 
be  very  small ;  but  when,  by  the  improvements  in  the  productive 
powers  of  manufacturing  art  and  industry,  the  expense  of  any  one 
dress  comes  to  be  very  moderate,  the  variety  will  naturally  be  very 
great.  The  rich  not  being  able  to  distinguish  themselves  by  the 
expense  of  any  one  dress,  will  naturally  endeavour  to  do  so  by 
the  multitude  and  variety  of  their  dresses. 

The  greatest  and  most  important  branch  of  the  commerce  of 
every  nation,  it  has  already  been  observed,  is  that  which  is  carried 
on  between  the  inhabitants  of  the  town  and  those  of  the  country. 
The  inhabitants  of  the  town  draw  from  the  country  the  rude 
produce  which  constitutes  both  the  materials  of  their  work  and 
the  fund  of  their  subsistence ;  and  they  pay  for  this  rude  produce 
by  sending  back  to  the  country  a  certain  portion  of  it  manufactured 
and  prepared  for  immediate  use.  The  trade  which  is  carried  on 
between  these  two  different  sets  of  people,  consists  ultimately  in 
a  certain  quantity  of  rude  produce  exchanged  for  a  certain  quantity 
of  manufactured  produce.  The  dearer  the  latter,  therefore,  the 
cheaper  the  former ;  and  whatever  tends  in  any  country  to  raise 
the  price  of  manufactured  produce,  tends  to  lower  that  of  the 
rude  produce  of  the  land,  and  thereby  to  discourage  agriculture. 
The  smaller  the  quantity  of  manufactured  produce  which  any  given 
quantity  of  rude  produce,  or,  what  comes  to  the  same  thing,  which 
the  price  of  any  given  quantity  of  rude  produce  is  capable  of  pur¬ 
chasing,  the  smaller  the  exchangeable  value  of  that  given  quantity 
of  rude  produce,  the  smaller  the  encouragement  which  either  the 
landlord  has  to  increase  its  quantity  by  improving,  or  the  farmer 
by  cultivating  the  land.  Whatever,  besides,  tends  to  diminish 
in  any  country  the  number  of  artificers  and  manufacturers,  tends 
to  diminish  the  home  market,  the  most  important  of  all  markets 
for  the  rude  produce  of  the  land,  and  thereby  still  further  to 
discourage  agriculture. 

Those  systems,  therefore,  which  preferring  agriculture  to  all  other 
employments,  in  order  to  promote  it,  impose  restraints  upon  manu¬ 
factures  and  foreign  trade,  act  contrary  to  the  very  end  which  they 
propose,  and  indirectly  discourage  that  very  species  of  industry 
which  they  mean  to  promote.1  They  are  so  far,  perhaps,  more 

1  The  check  which  a  mercantile  theory  the  fact  that  manufactures  cannot  be 
may  impose  on  agriculture  is  limited  by  expanded  except  as  agriculture  progres- 


272 


THE  NATURE  AND  CAUSES  OF 


BOOK  IV. 


inconsistent  than  even  the  mercantile  system.  That  system,  by 
encouraging* 1  manufactures  and  foreign  trade  more  than  agricul¬ 
ture,  turns  a  certain  portion  of  the  capital  of  the  society  from 
supporting  a  more  advantageous,  to  support  a  less  advantageous 
species  of  industry.  But  still  it  really  and  in  the  end  encourages 
that  species  of  industry  which  it  means  to  promote.  Those  agri¬ 
cultural  systems,  on  the  contrary,  really  and  in  the  end  discourage 
their  own  favourite  species  of  industry. 
r  It  is  thus  that  every  system  which  endeavours,  either  by  extra- 
*  ordinary  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.  It  retards,  instead  of 
accelerating,  the  progress  of  the  society  towards  real  wealth  and 
greatness ;  and  diminishes,  instead  of  increasing,  the  real  value  of 
j  ^the  annual  produce  of  its  land  and  labour. 

All  systems  either  of  preference  or  of  restraint,  therefore,  being 
thus  completely  taken  away,  the  obvious  and  simple  system  of  natural 
liberty  establishes  itself  of  its  own  accord.  Every  man,  as  long  as 
he  does  not  violate  the  laws  of  justice,  is  left  perfectly  free  to 
pursue  his  own  interest  his  own  way,  and  to  bring  both  his  industry 
and  capital  into  competition  with  those  of  any  other  man,  or  order 
of  men.  The  sovereign  is  completely  discharged  from  a  duty,  in. 

the  attempting  to  perform  which  he  must  always  be  exposed  to 

innumerable  delusions,  and  for  the  proper  performance  of  which  no 

human  wisdom  or  knowledge  could  ever  be  sufficient,; — the  duty  of 

superintending  the  industry  of  private  people,  and  of  directing  it 

towards  the  employments  most  suitable  to  the  interest  of  the 

society.  According  to  the  system  of  natural  liberty,  the  sovereign 
has  only  three  duties  to  attend  to  ;  three  duties  of  great  import¬ 

ance,  indeed,  but  plain  and  intelligible  to  common  understandings : 

l  first,  the  duty  of  protecting  the  society  from  the  violence  and 

- ■—  » 

sively  supplies  the  means  of  maintenance  in  the  next  place,  injures  agriculture 
to  manufacturers  by  its  progressive  im-  itself  by  discouraging  that  demand  for 
provements  in  production.  But  any  sys-  its  produce  which  a  prosperous  manu- 
tem  which  attempts  to  discourage  manu-  factory  stimulates.  The  landowner  has 
factures  in  the  interest  of  agriculture,  gained  largely  in  this  country  by  the 
inflicts,  in  the  first  place,  a  wrong  on  abolition  of  laws  designed  for  his  special 
those  who  purchase  manufactures,  and  benefit. 


CHAP.  IX. 


THE  WEALTH  OF  NATIONS. 


273 


invasion  of  other  independent  societies ;  secondly,  the  duty  of  pro¬ 
tecting,  as  far  as  possible,  every  member  of  the  society  from  the 
injustice  or  oppression  of  every  other  member  of  it,  or  the  duty  of 
establishing  an  exact  administration  of  justice  ;  and,  thirdly,  the 
duty  of  erecting  and  maintaining  certain  public  works  and  certain 
public  institutions,  which  it  can  never  be  for  the  Interest  of  any 
individual,  or  small  number  of  individuals,  to  erect  and  maintain  ; 
because  the  profit  could  never  repay  the  expense  to  any  individual 
or  small  number  of  individuals,  though  it  may  frequently  do  much  j 
more  than  repay  it  to  a  great  society. 

The  proper  performance  of  those  several  duties  of  the  sovereign 
necessarily  supposes  a  certain  expense ;  and  this  expense  again 
necessarily  requires  a  certain  revenue  to  support  it.  In  the  fol¬ 
lowing  Book,  therefore,  I  shall  endeavour  to  explain,  first,  what 
are  the  necessary  expenses  of  the  sovereign  or  commonwealth  ;  and 
which  of  those  expenses  ought  to  be  defrayed  by  the  general  con¬ 
tribution  of  the  whole  society  ;  and  which  of  them,  by  that  of  some 
particular  part  only,  or  of  some  particular  members  of  the  society  : 
secondly,  what  are  the  different  methods  in  which  the  whole  society 
may  be  made  to  contribute  towards  defraying  the  expenses  in¬ 
cumbent  on  the  whole  society,  and  what  are  the  principal  advan¬ 
tages  and  inconveniences  of  each  of  those  methods ;  and,  thirdly, 
what  are  the  reasons  and  causes  which  have  induced  almost  all 
modern  governments  to  mortgage  some  part  of  this  revenue,  or  to 
contract  debts,  and  what  have  been,  the  effects  of  those  debts  upon 
the  real  wealth,  the  annual  produce  of  the  land  and  labour  of  the 
society.  The  following  Book,  therefore,  will  naturally  be  divided 
into  three  chapters. 


T 


VOL.  II. 


t 


1 


BOOK  Y. 

/ 


OF  THE  REVENUE  OF  THE  SOVEREIGN  OR 
COMMONWEALTH. 

CHAPTER  I.  .  ' 

OF  THE  EXPENSES  OF  THE  SOVEREIGN  OR  COMMONWEALTH. 

% 

PART  I. 

Of  the  Expense  of  Defence. 

THE  first  duty  of  the  sovereign,  that  of  protecting  the  society 
from  the  violence  and  invasion  of  other  independent  societies, 
can  be  performed  only  by  means  of  a  military  force.  But  the 
expense  both  of  preparing  this  military  force  in  time  of  peace,  and 
of  employing  it  in  time  of  war,  is  very  different  in  the  different 
states  of  society,  in  the  different  periods  of  improvement. 

Among  nations  of  hunters,  the  lowest  and  rudest  state  of  so¬ 
ciety,  such  as  we  find  it  among  the  native  tribes  of  North  America, 
every  man  is  a  warrior  as  well  as  a  hunter.  When  he  goes  to  war, 
either  to  defend  his  society,  or  to  revenge  the  injuries  whicli  have 
been  done  to  it  by  other  societies,  he  maintains  himself  by  his  own 
labour,  in  the  same  manner  as  when  he  lives  at  home.  His  so¬ 
ciety  (for  in  this  state  of  things  there  is  properly  neither  sovereign 
nor  commonwealth)  is  at  no  sort  of  expense,  either  to  prepare  him 
for  the  field,  or  to  maintain  him  while  he  is  in  it. 

Among  nations  of  shepherds,  a  more  advanced  state  of  society, 
such  as  we  find  it  among  the  Tartars  and  Arabs,  every^  man  is, 
in  the  same  manner,  a  warrior.  Such  nations  have  commonly  no 
fixed  habitation,  but  live,  either  in  tents,  or  in  a  sort  of  covered 
waggons,  which  are  easily  transported  from  place  to  place.  The 
whole  tribe  or  nation  changes  its  situation  according  to  the  different 
seasons  of  the  year,  as  well  as  according  to  other  accidents.  When 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


275 


its  herds  and  flocks  have  consumed  the  forage  of  one  part  of  the 
country  it  removes  to  another,  and  from  that  to  a  third.  In  the 
dry  season  it  comes  down  to  the  banks  of  the  rivers,  in  the  wet 
season  it  retires  to  the  upper  country.  When  such  a  nation  goes 
to  war,  the  warriors  will  not  trust  their  herds  and  flocks  to  the 
feeble  defence  of  their  old  men,  their  women  and  children  ;  and 
their  old  men,  their  women  and  children,  will  not  be  left  behind 
without  defence  and  without  subsistence.  The  whole  nation,  be¬ 
sides,  being  accustomed  to  a  wandering  life,  even  in  time  of  peace, 
easily  takes  the  field  in  time  of  war.  Whether  it  marches  as  an 
army,  or  moves  about  as  a  company  of  herdsmen,  the  way  of  life 
is  nearly  the  same,  though  the  object  proposed  by  it  be  very  dif¬ 
ferent.  They  all  go  to  war  together,  therefore,  and  every  one  does 
as  well  as  he  can.  Among  the  Tartars,  even  the  women  have 
been  frequently  known  to  engage  in  battle.  If  they  conquer, 
whatever  belongs  to  the  hostile  tribe  is  the  recompense  of  the 
victory;  but  if  they  are  vanquished,  all  is  lost,  and  not  only 
their  herds  and  flocks,  but  their  women  and  children,  become  the 
booty  of  the  conqueror.  Even  the  greater  part  of  those  who 
survive  the  action  are  obliged  to  submit  to  him  for  the  sake  of 
immediate  subsistence.  The  rest  are  commonly  dissipated  and 
dispersed  in  the  desert. 

The  ordinary  life,  the  ordinary  exercises  of  a  Tartar  or  Arab, 
prepare  him  sufficiently  for  war.  Running,  wrestling,  cudgel¬ 
playing,  throwing  the  javelin,  drawing  the  bow,  &c.,  are  the 
common  pastimes  of  those  who  live  in  the  open  air,  and  are  all 
of  them  the  images  of  war.  When  a  Tartar  or  Arab  actually  goes 
to  war,  he  is  maintained,  by  his  own  herds  and  flocks  which  he 
carries  with  him,  in  the  same  manner  as  in  peace.  His  chief  or 
sovereign  (for  those  nations  have  all  chiefs  or  sovereigns)  is  at 
no  sort  of  expense  in  preparing  him  for  the  field  ;  and  when  he 
is  in  it,  the  chance  of  plunder  is  the  only  pay  which  he  either 
expects  or  requires. 

An  army  of  hunters  can  seldom  exceed  two  or  three  hundred 
men.  The  precarious  subsistence  which  the  chase  affords  could 
seldom  allow  a  greater  number  to  keep  together  for  any  consider¬ 
able  time.  An  army  of  shepherds,  on  the  contrary,  may  sometimes 
amount  to  two  or  three  hundred  thousand.  As  long  as  nothing 
stops  their  progress,  as  long  as  they  can  go  on  from  one  district, 


276 


THE  NATURE  AND  CAUSES  OF 


BOOK  V. 


of  which  they  have  consumed  the  forage,  to  another  which  is  yet 
entire,  there  seems  to  be  scarce  any  limit  to  the  numbers  who  can 
march  on  together.  A  nation  of  hunters  can  never  be  formidable 
to  the  civilised  nations  in  their  neighbourhood.  A  nation  of  shep¬ 
herds  may.  Nothing  can  be  more  contemptible  than  an  Indian 
war  in  North  America.  Nothing,  on  the  contrary,  can  be  more 
dreadful  than  a  Tartar  invasion  has  frequently  been  in  Asia.  The 
judgment  of  Thucydides,1  that  both  Europe  and  Asia  could  not 
resist  the  Scythians  united,  has  been  verified  by  the  experience 
of  all  ages.  The  inhabitants  of  the  extensive  but  defenceless  plains 
of  Scythia  or  Tartary  have  been  frequently  united  under  the 
dominion  of  the  chief  of  some  conquering  horde  or  clan,  and  the 
havoc  and  devastation  of  Asia  have  always  signalised  their  union. 
The  inhabitants  of  the  inhospitable  deserts  of  Arabia,  the  other 
great  nation  of  shepherds,  have  never  been  united  but  once,  under 
Mahomet  and  his  immediate  successors.  Their  union,  which  was 
more  the  effect  of  religious  enthusiasm  than  of  conquest,  was 
signalised  in  the  same  manner.  If  the  hunting  nations  of  America 
should  ever  become  shepherds,  their  neighbourhood  would  be  much 
more  dangerous  to  the  European  colonies  than  it  is  at  present. 

In  a  yet  more  advanced  state  of  society,  among  those  nations 
of  husbandmen  who  have  little  foreign  commerce  and  no  other 
manufactures  but  those  coarse  and  household  ones  which  almost 
every  private  family  prepares  for  its  own  use,  every  man,  in  the 
same  manner,  either  is  a  w7arrior,  or  easily  becomes  such.  They 
who  live  by  agriculture  generally  pass  the  whole  day  in  the  open 
air,  exposed  to  all  the  inclemencies  of  the  seasons.  The  hardiness 
of  their  ordinary  life  prepares  them  for  the  fatigues  of  war,  to 
some  of  which  their  necessary  occupations  bear  a  great  analogy. 
The  necessary  occupation  of  a  ditcher  prepares  him  to  work  in 
the  trenches,  and  to  fortify  a  camp  as  well  as  to  enclose  a  field. 
The  ordinary  pastimes  of  such  husbandmen  are  the  same  as  those 
of  shepherds,  and  are  in  the  same  manner  the  images  of  war.  But 
as  husbandmen  have  less  leisure  than  shepherds,  they  are  not  so 
frequently  employed  in  those  pastimes.  They  are  soldiers,  but 
soldiers  not  quite  so  much  masters  of  their  exercise.  Such  as  they 
are,  however,  it  seldom  costs  the  sovereign  or  commonwealth  any 
expense  to  prepare  them  for  the  field. 

1  ii-  97* 


CHAP.  I. 


THE  WEALTH  OF  NATION'S. 


277 


Agriculture,  even  in  its  rudest  and  lowest  state,  supposes  a 
settlement — some  sort  of  fixed  habitation  which  cannot  be  aban¬ 
doned  without  a  great  loss.  When  a  nation  of  mere  husbandmen, 
therefore,  goes  to  war,  the  whole  people  cannot  take  the  field 
together.  The  old  men,  the  women  and  children,  at  least,  must 
remain  at  home  to  take  care  of  the  habitation.  All  the  men  of 
the  military  age,  however,  may  take  the  field,  and,  in  small  nations 
of  this  kind,  have  frequently  done  so.  In  every  nation  the  men 
of  the  military  age  are  supposed  to  amount  to  about  a  fourth  or 
a  fifth  part  of  the  whole  body  of  the  people.  If  the  campaign, 
too,  should  begin  after  seed-time,  and  end  before  harvest,  both  the 
husbandman  and  his  principal  labourers  can  be  spared  from  the 
farm  without  much  loss.  He  trusts  that  the  work  which  must 
be  done  in  the  meantime  can  be  well  enough  executed  by  the 
old  men,  the  women,  and  the  children.  He  is  not  unwilling, 
therefore,  to  serve  without  pay  during  a  short  campaign,  and  it 
frequently  costs  the  sovereign  or  commonwealth  as  little  to  main¬ 
tain  him  in  tbe  field  as  to  prepare  him  for  it'.  The  citizens  of 
all  the  different  states  of  ancient  Greece  seem  to  have  served  in 
this  manner  till  after  the  second  Persian  war;  and  the  people  of 
Peloponnesus  till  after  the  Peloponnesian  war.  The  Peloponnesians, 
Thucydides1  observes,  generally  left  the  field  in  the  summer,  and 
returned  home  to  reap  the  harvest.  The  Roman  people,  under 
their  kings,  and  during  the  first  ages  of  the  republic,  served  in 
the  same  manner.  It  was  not  till  the  siege  of  Yeii  that  they 
who  stayed  at  home  began  to  contribute  something  towards  main¬ 
taining  those  who  went  to  war.  In  the  European  monarchies, 
which  were  founded  upon  the  ruins  of  the  Roman  Empire,  both 
before  and  for  some  time  after  the  establishment  of  what  is  pro¬ 
perly  called  the  feudal  law,  the  great  lords,  with  all  their  immediate 
dependants,  used  to  serve  the  Crown  at  their  own  expense.  In 
the  field,  in  the  same  manner  as  at  home,  they  maintained  them¬ 
selves  by  their  own  revenue,  and  not  by  any  stipend  or  pay  which 
they  received  from  the  king  upon  that  particular  occasion. 

In  a  more  advanced  state  of  society,  two  different  causes  con¬ 
tribute  to  render  it  altogether  impossible  that  they  who  take  the 
field  should  maintain  themselves  at  their  own  expense.  Those  two 

1  Such  was  always  the  practice  of  the  Peloponnesians  during  the  war,  till  they 
fortified  Decelea. 


I 


278 


THE  NATURE  AND  CAUSES  OF 


BOOK  V, 


causes  are,  the  progress  of  manufactures,  and  the  improvement  in 
the  art  of  war. 

Though  a  husbandman  should  be  employed  in  an  expedition, 
provided  it  begins  after  seed-time  and  ends  before  harvest,  the 
interruption  of  his  business  will  not  always  occasion  any  con¬ 
siderable  diminution  of  his  revenue.  Without  the  intervention  of 
his  labour,  Nature  does  herself  the  greater  part  of  the  work  which 
remains  to  be  done.  But  the  moment  that  an  artificer,  a  smith,  a 
carpenter,  or  a  weaver,  for  example,  quits  his  workhouse,  the  sole 
source  of  his  revenue  is  completely  dried  up.  Nature  does  nothing 
for  him,  he  does  all  for  himself.  When  he  takes  the  field,  therefore, 
in  defence  of  the  public,  as  he  has  no  revenue  to  maintain  himself, 
he  must  necessarily  be  maintained  by  the  public.  But  in  a  country 
of  which  a  great  part  of  the  inhabitants  are  artificers  and  manufac¬ 
turers,  a  great  part  of  the  people  who  go  to  war  must  be  drawn 
from  those  classes,  and  must  therefore  be  maintained  by  the  public 
as  long  as  they  are  employed  in  its  service. 

When  the  art  of  war  too  has  gradually  grown  up  to  be  a  very 
intricate  and  complicated  science,  when  the  event  of  war  ceases  to 
be  determined,  as  in  the  first  ages  of  society,  by  a  single  irregular 
skirmish  or  battle,  but  when  the  contest  is  generally  spun  out 
through  several  different  campaigns,  each  of  which  lasts  during  the 
greater  part  of  the  year,  it  becomes  universally  necessary  that  the 
public  should  maintain  those  who  serve  the  public  in  war,  at  least 
while  they  are  employed  in  that  service.  Whatever  in  time  of  peace 
might  be  the  ordinary  occupation  of  those  wdio  go  to  war,  so  very 
tedious  and  expensive  a  service  would  otherwise  be  by  far  too  heavy 
a  burden  upon  them.  After  the  second  Persian  war,  accordingly, 
the  armies  of  Athens  seem  to  have  been  generally  composed  of 
mercenary  troops ;  consisting,  indeed,  partly  of  citizens,  but  partly 
too  of  foreigners  ;  and  all  of  them  equally  hired  and  paid  at  the 
expense  of  the  state.  From  the  time  of  the  siege  of  Veii,  the 
armies  of  Borne  received  pay  for  their  service  during  the  time 
which  they  remained  in  the  field.  Under  the  feudal  governments 
the  military  service  both  of  the  great  lords  and  their  immediate 
dependants  was,  after  a  certain  period,  universally  exchanged  for  a 
payment  in  money,  which  was  employed  to  maintain  those  who 
served  in  their  stead. 

The  number  of  those  who  can  go  to  war,  in  proportion  to  the 


CHAP.  I. 


THE  WEALTH  OF  NA  TIONS. 


279 


whole  number  of  the  people,  is  necessarily  much  smaller  in  a 
civilised  than  in  a  rude  state  of  society.  In  a  civilised  society,  as 
the  soldiers  are  maintained  altogether  by  the  labour  of  those  who 
are  not  soldiers,  the  number  of  the  former  can  never  exceed  what 
the  latter  can  maintain,  over  and  above  maintaining,  in  a  manner 
suitable  to  their  respective  stations,  both  themselves  and  the  other 
officers  of  government  and  law  whom  they  are  obliged  to  main¬ 
tain.  In  the  little  agrarian  states  of  ancient  Greece,  a  fourth  or  a 
fifth  part  of  the  whole  body  of  the  people  considered  themselves 
as  soldiers,  and  would  sometimes,  it  is  said,  take  the  field.  Among 
the  civilised  nations  of  modern  Europe,  it  is  commonly  computed 
that  not  more  than  one  hundredth  part  of  the  inhabitants  of  any 
country  can  be  employed  as  soldiers,  without  ruin  to  the  country 
which  pays  the  expense  of  their  service. 

The  expense  of  preparing  the  army  for  the  field  seems  not  to 
have  become  considerable  in  any  nation  till  long  after  that  of 
maintaining  it  in  the  field  had  devolved  entirely  upon  the  sovereign 
or  commonwealth.  In  all  the  different  republics  of  ancient  Greece, 
to  learn  his  military  exercises  was  a  necessary  part  of  education 
imposed  by  the  state  upon  every  free  citizen.  In  every  city  there 
seems  to  have  been  a  public  field,  in  which,  under  the  protection  of 
the  public  magistrate,  the  young  people  were  taught  their  different 
exercises  by  different  masters.  In  this  very  simple  institution  con¬ 
sisted  the  whole  expense  which  any  Grecian  state  seems  ever  to 
have  been  at  in  preparing  its  citizens  for  war.  In  ancient  Rome 
the  exercises  of  the  Campus  Martius  answered  the  same  purpose 
with  those  of  the  Gymnasium  in  ancient  Greece.  Under  the  feudal 
governments,  the  many  public  ordinances  that  the  citizens  of  every 
district  should  practise  archery  as  well  as  several  other  military 
exercises,  were  intended  for  promoting  the  same  purpose,  but  do  not 
seem  to  have  promoted  it  so  well.  Either  from  want^ofjnierest  in 
the  ^officers  entrusted  with  the  execution  of  those  ordinances,  or 
from  some  other  cause,  they  appear  to  have  been  universally 
neglected ;  and  in  the  progress  of  all  those  governments,  military 
exercises  seem  to  have  gone  gradually  into  disuse  among  the  great 
body  of  the  people. 

In  the  republics  of  ancient  Greece  and  Rome,  during  the  whole 
period  of  their  existence,  and  under  the  feudal  governments  for  a 
considerable  time  after  their  first  establishment,  the  trade  of  a 


280 


THE  NATURE  AND  CAUSES  OF 


book  y. 


soldier  was  not  a  separate  distinct  trade,  which  constituted  the  sole 
or  principal  occupation  of  a  particular  class  of  citizens.  Every 
subject  of  the  state,  whatever  might  be  the  ordinary  trade  or  occu¬ 
pation  by  which  he  gained  his  livelihood,  considered  himself,  upon 
all  ordinary  occasions,  as  fit  likewise  to  exercise  the  trade  of  a 
soldier,  and  upon  many  extraordinary  occasions  as  bound  to  exer¬ 
cise  it. 

The  art  of  war,  however,  as  it  is  certainly  the  noblest  of  all  arts, 
so  in  the  progress  of  improvement  it  necessarily  becomes  one  of  the 
most  complicated  among  them.  The  state  of  the  mechanical,  as 
well  as  of  some  other  arts,  with  which  it  is  necessarily  connected, 
determines  the  degree  of  perfection  to  which  it  is  capable  of  being 
carried  at  any  particular  time.  But  in  order  to  carry  it  to  this 
degree  of  perfection,  it  is  necessary  that  it  should  become  the  sole 
or  principal  occupation  of  a  particular  class  of  citizens,  and  the 
division  of  labour  is  as  necessary  for  the  improvement  of  this  as  of 
every  other  art.  Into  other  arts  the  division  of  labour  is  naturally 
introduced  by  the  prudence  of  individuals,  who  find  that  they  pro¬ 
mote  their  private  interest  better  by  confining  themselves  to  a  par¬ 
ticular  trade,  than  by  exercising  a  great  number.  But  it  is  the 
wisdom  of  the  state  only  which  can  render  the  trade  of  the  soldier 
only  a  particular  trade  separate  and  distinct  from  all  others.  A 
private  citizen  who,  in  time  of  profound  peace,  and  without  any 
particular  encouragement  from  the  public,  should  spend  the  greater 
part  of  his  time  in  military  exercises,  might,  no  doubt,  both  im¬ 
prove  himself  very  much  in  them,  and  amuse  himself  very  well;  but 
he  certainly  would  not  promote  his  own  interest.  It  is  the  wisdom 
of  the  state  only  which  can  render  it  for  his  interest  to  give  up  the 
greater  part  of  his  time  to  this  peculiar  occupation ;  and  states 
have  not  always  had  this  wisdom,  even  when  their  circumstances 
had  become  such  that  the  preservation  of  their  existence  required 
that  they  should  have  it. 

A  shepherd  has  a  great  deal  of  leisure ;  a  husbandman,  in  the 
rude  state  of  husbandry,  has  some  ;  an  artificer  or  manufacturer  has 
none  at  all.  The  first  may,  without  any  loss,  employ  a  great  deal 
of  his  time  in  martial  exercises;  the  second  may  employ  some  part 
of  it ;  but  the  last  cannot  employ  a  single  hour  in  them  without 
some  loss,  and  his  attention  to  his  own  interest  naturally  leads  him 
to  neglect  them  altogether.  These  improvements  in  husbandry  too, 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


281 


which  the  progress  of  arts  and  manufactures  necessarily  introduces, 
leave  the  husbandman  as  little  leisure  as  the  artificer.  Military 
exercises  come  to  be  as  much  neglected  by  the  inhabitants  of  the 
couhtry~asI  by  those  of  "the  tOWil,  aj!frf]^greatll)ody  of  the  people 
becomes  altogether  unwarlike.  That  wealth,  at  the  same  time, 
whicfTalways  follows  the  improvements  of  agriculture  and  manufac¬ 
tures,  and  which  in  reality  is  no  more  than  the  accumulated  produce 
of  those  improvements,  provokes  the  invasion  of  all  their  neigh¬ 
bours.  An  industrious,  and  upon  that  account  a  wealthy  nation,  is 
of  all  nations  the  most  likely  to  be  attacked  ;  and  unless  the  state 
takes  some  new  measures  for  the  public  defence,  the  natural  habits  of 
the  people  render  them  altogether  incapable  of  defending  themselves. 

In  these  circumstances,  there  seem  to  be  but  two  methods  by 
which  the  state  can  make  any  tolerable  provision  for  the  public 
defence. 

It  may  either,  first,  by  means  of  a  very  rigorous  police,  and  in 
spite  of  the  whole  bent  of  the  interest,  genius,  and  inclinations  of 
the  people,  enforce  the  practice  of  military  exercises,  and  oblige 
either  all  the  citizens  of  the  military  age,  or  a  certain  number  of 
them,  to  join  in  some  measure  the  trade  of  a  soldier  to  whatever 
other  trade  or  profession  they  may  happen  to  carry  on. 

Or,  secondly,  by  maintaining  and  employing  a  certain  number  of 
citizens  in  the  constant  practice  of  military  exercises,  it  may  render 
the  trade  of  a  soldier  a  particular  trade,  separate  and  distinct  from 
all  others. 

If  the  state  has  recourse  to  the  first  of  those  two  expedients,  its 
military  force  is  said  to  consist  in  a  militia  ;  if  to  the  second,  it  is  said 
to  consist  in  a  standing  army.  The  practice  of  military  exercises  is 
the  sole  or  principal  occupation  of  the  soldiers  of  a  standing  army, 
and  the  maintenance  or  pay  which  the  state  affords  them  is  the 
principal  and  ordinary  fund  of  their  subsistence.  The  practice  of 
military  exercises  is  only  the  occasional  occupation  of  the  soldiers  of 
a  militia,  and  they  derive  the  principal  and  ordinary  fund  of  their 
subsistence  from  some  other  occupation.  In  a  militia,  the  character 
of  the  labourer,  artificer,  or  tradesman  predominates  over  that  of 
the  soldier;  in  a  standing  army,  that  of  the  soldier  predominates 
over  every  other  character ;  and  in  this  distinction  seems  to  consist 
the  essential  difference  between  those  two  different  species  of  mili¬ 
tary  force. 


282 


THE  NATURE  AND  CAUSES  OF 


book  v. 


Militias  have  been  of  several  different  kinds.  In  some  countries, 
the  citizens  destined  for  defending*  the  state  seem  to  have  been 
exercised  only,  without  being,  if  I  may  say  so,  regimented ;  that  is, 
without  being  divided  into  separate  and  distinct  bodies  of  troops, 
each  of  which  performed  its  exercises  under  its  own  proper  and 
permanent  officers.  In  the  republics  of  ancient  Greece  and  Rome, 
each  citizen,  as  long  as  he  remained  at  home,  seems  to  have  prac¬ 
tised  his  exercises  either  separately  and  independently,  or  with  such 
of  his  equals  as  he  liked  best ;  and  not  to  have  been  attached  to  any 
particular  body  of  troops  till  he  was  actually  called  upon  to  take  the 
field.  In  other  countries,  the  militia  has  not  only  been  exercised, 
but  regimented.  In  England,  in  Switzerland,  and,  I  believe,  in  every 
other  country  of  modern  Europe,  where  any  imperfect  military  force 
of  this  kind  has  been  established,  every  militiaman  is,  even  in  time 
of  peace,  attached  to  a  particular  body  of  troops,  which  performs  its 
exercises  under  its  own  proper  and  permanent  officers. 

Before  the  invention  of  fire-arms,  that  army  was  superior  in 
’  which  the  soldiers  had,  each  individually,  the  greatest  skill  and 
dexterity  in  the  use  of  their  arms.  Strength  and  agility  of  body 
were  of  the  highest  consequence,  and  commonly  determined  the  fate 
of  battles.  But  this  skill  and  dexterity  in  the  use  of  their  arms 
could  be  acquired  only  in  the  same  manner  as  fencing  is  at  present, 
by  practising,  not  in  great  bodies,  but  each  man  separately,  in  a 
particular  school,  under  a  particular  master,  or  with  his  own  par¬ 
ticular  equals  and  companions.  Since  the  invention  of  fire-arms, 
strength  and  agility  of  body,  or  even  extraordinary  dexterity  and 
skill  in  the  use  of  arms,  though  they  are  far  from  being  of  no  con¬ 
sequence,  are,  however,  of  less  consequence.  The  nature  of  the 
weapon,  though  it  by  no  means  puts  the  awkward  upon  a  level  with 
the  skilful,  puts  him  more  nearly  so  than  he  ever  was  before.  All 
the  dexterity  and  skill,  it  is  supposed,  which  are  necessary  for 
using  it,  can  be  well  enough  acquired  by  practising  in  great 
bodies.1 


1  It  used  to  be  estimated,  before  arms 
of  precision  were  introduced  into  modern 
warfare,  that  it  took  the  weig’ht  of  an 
enemy’s  body  in  bullets  to  kill  him.  Of 
late  years,  however,  this  state  of  things 
has  been  reversed,  and  the  ancient  theory 
of  war,  combined  of  course  with  the  ap¬ 


pliances  of  modern  discipline,  has  been 
nearly  restored,  as  far  as  the  individual 
efficiency  of  the  soldier  goes.  In  short, 
it  has  rendered  it  necessary  that  the  in¬ 
telligence,  quickness,  and  presence  of 
mind  possessed  by  the  ancient  soldier 
should  be  present  in  his  modern  counter- 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


283 


Regularity,  order,  and  prompt  obedience  to  command,  are  qualities 
which,  in  modern  armies,  are  of  more  importance  towards  deter¬ 
mining  the  fate  of  battles,  than  the  dexterity  and  skill  of  the 
soldiers  in  the  use  of  their  arms.  But  the  noise  of  fire-arms,  the 
smoke,  and  the  invisible  death  to  which  every  man  feels  himself 
every  moment  exposed,  as  soon  as  he  comes  within  cannon-shot, 
and  frequently  a  long  time  before  the  battle  can  be  well  said  to  be 
engaged,  must  render  it  very  difficult  to  maintain  any  considerable 
degree  of  this  regularity,  order,  and  prompt  obedience,  even  in  the 
beginning  of  a  modern  battle.  In  an  ancient  battle  there  was  no 
noise  but  what  arose  from  the  human  voice;  there  was  no  smoke, 
there  was  no  invisible  cause  of  wounds  or  death.  Every  man,  till 
some  mortal  weapon  actualy  did  approach  him,  saw  clearly  that  no 
such  weapon  was  near  him.  In  these  circumstances,  and  among 
troops  who  had  some  confidence  in  their  own  skill  and  dexterity  in 
the  use  of  their  arms,  it  must  have  been  a  good  deal  less  difficult  to 
preserve  some  degree  of  regularity  and  order,  not  only  in  the 
beginning,  but  through  the  whole  progress  of  an  ancient  battle,  and 
till  one  of  the  two  armies  was  fairly  defeated.  But  the  habits  of 
regularity,  order,  and  prompt  obedience  to  command,  can  be 
acquired  only  by  troops  which  are  exercised  in  great  bodies. 

A  militia,  however,  in  whatever  manner  it  may  be  either  dis¬ 
ciplined  or  exercised,  must  always  be  much  inferior  to  a  well- 
disciplined  and  well-exercised  standing  army. 

The  soldiers,  who  are  exercised  only  once  a  week,  or  once  a 
month,  can  never  be  so  expert  in  the  use  of  their  arms  as  those 
who  are  exercised  every  day,  or  every  other  day;  and  though  this 
circumstance  may  not  be  of  so  much  consequence  in  modern  as  it 
was  in  ancient  times,  yet  the  acknowledged  superiority  of  the 
Prussian  troops,  owing,  it  is  said,  very  much  to  their  superior 
expertness  in  their  exercise,  may  satisfy  us  that  it  is,  even  at  this 
day,  of  very  considerable  consequence.1 

The  soldiers,  who  are  bound  to  obey  their  officer  only  once  a 


part.  Obedience,  regularity,  and  order, 
the  qualities  on  which  Smith  comments, 
are  not  less  necessary,  but  they  were  also 
necessary  in  those  ancient  tactics  of 
which  we  have  historical  evidence. 

1  The  author  was  of  course  adverting 
to  the  perfection  into  which  Frederic  the 


Great  had  brought  his  army  during  the 
middle  of  the  last  century.  (See  below, 
page  289.)  The  decline  of  the  Prussian 
force,  its  restoration,  and  its  remarkable 
effectiveness  in  our  own  day,  are  pheno¬ 
mena  of  singular  military  interest. 


284 


THE  NATURE  AND  CAUSES  OF 


BOOK  V. 


L 

A 


week  or  once  a  month,  and  who  are  at  all  other  times  at  liberty  to 
manage  their  own  affairs  their  own  way,  without  being  in  any 
respect  accountable  to  him,  can  never  be  under  the  same  awe  in  his 
presence,  can  never  have  the  same  disposition  to  ready  obedience, 
with  those  whose  whole  life  and  conduct  are  every  day  directed  by 
him,  and  who  every  day  even  rise  and  go  to  bed,  or  at  least  retire 
to  their  quarters,  according  to  his  orders.  In  what  is  called  dis- 
e i pline,  qjAn-4h^4ndjd^  ready  obedience,  a  militia  musF"aTways  be 
still  more  inferior  to  a  standing, ^xmyy-than  it  may  sometimes  be  in 
what  is  called  the  manual  exercise,  or  in  the  management  and  use 
of  its  arms.  But  in  modern  war  the  habit  of  ready  and  instant 
obedience  is  of  much  greater  consequence  than  a  considerable  supe¬ 
riority  in  the  management  of  arms. 

Those  militias  which,  like  the  Tarter  or  Arab  militia,  go  to  war 
under  the  same  chieftains  whom  they  are  accustomed  to  obey  in 
peace,  are  by  far  the  best.  In  respect  for  their  officers,  in  the  habit 
of  ready  obedience,  they  approach  nearest  to  standing  armies.  The 
Highland  militia,  when  it  served  under  its  own  chieftains,  had  some 
advantage  of  the  same  kind.  As  the  Highlanders,  however,  were 
not  wandering,  but  stationary  shepherds,  as  they  had  all  a  fixed 
habitation,  and  were  not,  in  peaceable  times,  accustomed  to  follow 
their  chieftain  from  place  to  place;  so  in  time  of  war  they  were 
less  willing  to  follow  him  to  any  considerable  distance,  or  to  con¬ 
tinue  for  any  long  time  in  the  field.  When  they  had  acquired  any 
booty  they  were  eager  to  return  home,  and  his  authority  was 
seldom  sufficient  to  detain  them.  In  point  of  obedience  they  were 
always  much  inferior  to  what  is  reported  of  the  Tartars  and  Arabs. 
As  the  Highlanders  too,  from  their  stationary  life,  spend  less  of  their 
time  in  the  open  air,  they  were  always  less  accustomed  to  military 
exercises,  and  were  less  expert  in  the  use  of  their  arms  than  the 
Tartars  and  Arabs  are  said  to  be. 


A  militia  of  any  kind,  it  must  be  observed,  however,  which  has 
served  for  several  successive  campaigns  in  the  field,  becomes  in 
every  respect  a  standing  army.  The  soldiers  are  every  day  exercised 
in  the  use  of  their  arms,  and,  being  constantly  under  the  command 
of  their  officers,  are  habituated  to  the  same  prompt  obedience  which 
takes  place  in  standing  armies.  What  they  were  before  they  took 
the  field,  is  of  little  importance.  They  necessarily  become  in  every 
respect  a  standing  army,  after  they  have  passed  a  few  campaigns  in 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


285 


it.  Should  the  war  in  America  drag  out  through  another  campaign, 
the  American  militia  may  become  in  every  respect  a  match  for  that 
standing  army,  of  which  the  valour  appeared,  in  the  last  war,  at 
least  not  inferior  to  that  of  the  hardiest  veterans  of  France  and 
Spain. 

This  distinction  being  well  understood,  the  history  of  all  ages,  it 
will  be  found,  bears  testimony  to  the  irresistible  superiority  which 
a  well-regulated  standing  army  has  over  a  militia.  _  « 

One  of  the  first  standing  armies  of  which  we  have  any  distinct 
account,  in  any  well-authenticated  history,  is  that  of  Philip  of 
Macedon.  His  frequent  wars  with  the  Thracians,  Illyrians,  Thessa¬ 
lians,  and  some  of  the  Greek  cities  in  the  neighbourhood  of  Macedon, 
gradually  formed  his  troops,  which  in  the  beginning  were  probably 
militia,  to  the  exact  discipline  of  a  standing  army.  When  he  was 
at  peace,  which  he  was  very  seldom,  and  never  for  any  long  time 
together,  he  was  careful  not  to  disband  that  army.  It  vanquished 
and  subdued,  after  a  long  and  violent  struggle  indeed,  the  gallant 
and  well-exercised  militias  of  the  principal  republics  of  ancient 
Greece ;  and  afterwards,  with  very  little  struggle,  the  effeminate 
and  ill-exercised  militia  of  the  great  Persian  empire.  The  fall  of 
the  Greek  republics  and  of  the  Persian  empire  was  the  effect  of 
the  irresistible  superiority  which  a  standing  army  has  over  every 
sort  of  militia.  It  is  the  first  great  revolution  in  the  affairs  of 
mankind  of  which  history  has  preserved  any  distinct  or  circum¬ 
stantial  account. 

The  fall  of  Carthage,  and  the  consequent  elevation  of  Rome,  is 
the  second.  All  the  varieties  in  the  fortune  of  those  two  famous 
republics  may  very  well  be  accounted  for  from  the  same  cause. 

From  the  end  of  the  first  to  the  beginning  of  the  second  Cartha¬ 
ginian  war,  the  armies  of  Carthage  were  continually  in  the  field, 
and  employed  under  three  great  generals,  who  succeeded  one  another 
in  the  command — Hamilcar,  his  son-in-law  Hasdrubal,  and  his  son 
Hannibal ;  first  in  chastising  their  own  rebellious  slaves,  afterwards 
in  subduing  the  revolted  nations  of  Africa,  and,  lastly,  in  conquering 
the  great  kingdom  of  Spain.  The  army  which  Hannibal  led  from 
Spain  into  Italy  must  necessarily,  in  those  different  wars,  have  been 
gradually  formed  to  the  exact  discipline  of  a  standing  army.  The 
Romans,  in  the  meantime,  though  they  had  not  beGn  altogether  at 
peace,  yet  they  had  not,  during  this  period,  been  engaged  in  any 


286 


THE  NATURE  AND  CAUSES  OF 


book  v. 


war  of  very  great  consequence  ;  and  their  military  discipline,  it  is 
generally  said,  was  a  good  deal  relaxed.  The  Roman  armies  which 
Hannibal  encountered  at  Trebia,  Thrasymenus,  and  Cannae,  were 
militia  opposed  to  a  standing  army.  This  circumstance,  it  is  pro¬ 
bable,  contributed  more  than  any  other  to  determine  the  fate  of 
those  battles. 

The  standing  army  which  Hannibal  left  behind  him  in  Spain  had 
the  like  superiority  over  the  militia  which  the  Romans  sent  to 
oppose  it,  and  in  a  few  years,  under  the  command  of  his  brother, 
the  younger  Hasdrubal,  expelled  them  almost  entirely  from  that 
country. 

Hannibal  was  ill  supplied  from  home.  The  Roman  militia,  being 
continually  in  the  field,  became  in  the  progress  of  the  war  a  well- 
disciplined  and  well-exercised  standing  army;  and  the  superiority 
of  Hannibal  grew  every  day  less  and  less.  Hasdrubal  judged  it 
necessary  to  lead  the  whole,  or  almost  the  whole  of  the  standing 
army  which  he  commanded  in  Spain,  to  the  assistance  of  his  brother 
in  Italy.  In  his  march  he  is  said  to  have  been  misled  by  his 
guides ;  and  in  a  country  which  he  did  not  know,  was  surprised 
and  attacked  by  another  standing  army,  in  every  respect  equal  or 
superior  to  his  own,  and  was  entirely  defeated. 

When  Hasdrubal  had  left  Spain,  the  great  Scipio  found  nothing 
to  oppose  him  but  a  militia  inferior  to  his  own.  He  conquered 
and  subdued  that  militia,  and,  in  the  course  of  the  war,  his  own 
militia  necessarily  became  a  well-disciplined  and  well- exercised 
standing  army.  That  standing  army  was  afterwards  carried  to 
Africa,  where  it  found  nothing  but  a  militia  to  oppose  it.  In  order 
to  defend  Carthage  it  became  necessary  to  recall  the  standing  army 
of  Hannibal.  The  disheartened  and  frequently  defeated  African 
militia  joined  it,  and,  at  the  battle  of  Zama,  composed  the  greater 
part  of  the  troops  of  Hannibal.  The  event  of  that  day  determined 
the  fate  of  the  two  rival  republics. 

From  the  end  of  the  second  Carthaginian  war  till  the  fall  of  the 
Roman  republic,  the  armies  of  Rome  were  in  every  respect  standing 
armies.  The  standing  army  of  Macedon  made  some  resistance  to 
their  arms.  In  the  height  of  their  grandeur,  it  cost  them  two 
great  wars  and  three  great  battles  to  subdue  that  little  kingdom ; 
of  which  the  conquest  would  probably  have  been  still  more  difficult, 
had  it  not  been  for  the  cowardice  of  its  last  king.  The  militias  of 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


287 


all  the  civilised  nations  of  the  ancient  world,  of  Greece,  of  Syria, 
and  of  Egypt,  made  but  a  feeble  resistance  to  the  standing  armies 
of  Rome.  The  militias  of  some  barbarous  nations  defended  them¬ 
selves  much  better.  The  Scythian  or  Tartar  militia,,  which  Mithri- 
dates  drew  from  the  countries  north  of  the  Euxine  and  Caspian 
seas,  were  the  most  formidable  enemies  whom  the  Romans  had  to 
encounter  after  the  second  Carthaginian  war.  The  Parthian  and 
German  militias  too  were  always  respectable,  and,  upon  several 
occasions,  gained  very  considerable  advantages  over  the  Roman 
armies.  In  general,  however,  and  when  the  Roman  armies  were 
well  commanded,  they  appear  to  have  been  very  much  superior ; 
and  if  the  Romans  did  not  pursue  the  final  conquest  either  of 
Parthia  or  Germany,  it  was  probably  because  they  judged  that  it 
was  not  worth  while  to  add  those  two  barbarous  countries  to  an 
empire  which  was  already  too  large.  The  ancient  Parthians  appear 
to  have  been  a  nation  of  Scythian  or  Tartar  extraction,  and  to  have 
always  retained  a  good  deal  of  the  manners  of  their  ancestors.  The 
ancient  Germans  were,  like  the  Scythians  or  Tartars,  a  nation  of 
wandering  shepherds,  who  went  to  war  under  the  same  chiefs 
whom  they  were  accustomed  to  follow  in  peace.  Their  militia  was 
exactly  of  the  same  kind  with  that  of  the  Scythians  or  Tartars,  from 
whom  too  they  were  probably  descended. 

Many  different  causes  contributed  to  relax  the  discipline  of  the 
Roman  armies.  Its  extreme  severity  was,  perhaps,  one  of  those 
causes.  In  the  days  of  their  grandeur,  when  no  enemy  appeared 
capable  of  opposing  them,  their  heavy  armour  was  laid  aside  as 
unnecessarily  burdensome,  their  laborious  exercises  were  neglected 
as  unnecessarily  toilsome.  Under  the  Roman  emperors,  besides, 
the  standing  armies  of  Rome,  those  particularly  which  guarded  the 
German  and  Pannonian  frontiers,  became  dangerous  to  their  masters, 
against  whom  they  used  frequently  to  set  up  their  own  generals. 
In  order  to  render  them  less  formidable,  according  to  some  authors, 
Diocletian,  according  to  others,  Constantine,  first  withdrew  them 
from  the  frontier,  where  they  had  always  before  been  encamped  in 
great  bodies,  generally  of  two  or  three  legions  each,  and  dispersed 
them  in  small  bodies  through  the  different  provincial  towns,  from 
whence  they  were  scarce  ever  removed,  but  when  it  became  neces¬ 
sary  to  repel  an  invasion.  Small  bodies  of  soldiers  quartered  in 
trading  and  manufacturing  towns,  and  seldom  removed  from  those 


288 


THE  NATURE  AND  CAUSES  OF 


book  y. 


quarters,  became  themselves  traders,  artificers,  and  manufacturers. 
The  civil  came  to  predominate  over  the  military  character ;  and  the 
standing  armies  of  Rome  gradually  degenerated  into  a  corrupt, 
neglected,  and  undisciplined  militia,  incapable  of  resisting  the  attack 
of  the  German  and  Scythian  militias,  which  soon  afterwards  invaded 
the  western  empire.  It  was  only  by  hiring  the  militia  of  some  of 
those  nations,  to  oppose  to  that  of  others,  that  the  emperors 
were  for  some  time  able  to  defend  themselves.1  The  fall  of 
the  western  empire  is  the  third  great  revolution  in  the  affairs  of 
mankind,  of  which  ancient  history  has  preserved  any  distinct  or 
circumstantial  account.  It  was  brought  about  by  the  irresistible 
superiority  which  the  militia  of  a  barbarous  has  over  that  of  a 
civilised  nation  ;  which  the  militia  of  a  nation  of  shepherds  has 
over  that  of  a  nation  of  husbandmen,  artificers,  and  manufacturers. 
The  victories  which  have  been  gained  by  militias  have  generally 
been^^Q^VGl^i^11^111^  militias  in  exercise 

and  discipline  inferior  to  themselves.  Such  were  the  victories 
which  the  Greek  militia  gained  over  that  of  the  Persian  empire  ; 
and  such  too  were  those  which  in  later  times  the  Swiss  militia 
gained  over  that  of  the  Austrians  and  Burgundians. 

The  military  force  of  the  German  and  Scythian  nations  who 
established  themselves  upon  the  ruins  of  the  western  empire, 
continued  for  some  time  to  be  of  the  same  kind  in  their  new 
settlements,  as  it  had  been  in  their  original  country.  It  was  a 
militia  of  shepherds  and  husbandmen,  which,  in  time  of  war,  took 
the  field  under  the  command  of  the  chieftains  whom  it  was  accus¬ 
tomed  to  obey  in  peace.  It  was,  therefore,  tolerably  well  exercised, 
and  tolerably  well  disciplined.  As  art  and  industry  advanced, 
however,  the  authority  of  the  chieftains  gradually  decayed,  and  the 
great  body  of  the  people  had  less  time  to  spare  for  military  exercise. 
Both  the  discipline  and  the  exercise  of  the  feudal  militia,  therefore, 
went  gradually  to  ruin,  and  standing  armies  were  gradually  in¬ 
troduced  to  supply  the  place  of  it.  When  the  expedient  of  a 


1  It  is  possible  that  the  degeneracy 
which  the  text  comments  on  was  due  in 
great  degree  to  the  causes  alleged.  But 
the  Roman  empire  was  exhausted  as 
much  by  the  oppressive  taxation  which 
the  centralisation  of  the  government 
made  necessary,  as  by  the  decline  of 
military  discipline.  (See  Guizot’s  Repre¬ 


sentative  Government  in  Europe,  Lec¬ 
ture  22;  Gibbon,  chap,  x.)  It  was 
impossible  that  any  resources  could  be 
permanently  able  to  make  head  against 
the  grinding  despotism  to  which  the 
provincials  of  the  Roman  empire  were 
subjected. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


289 


standing  army,  besides,  had  once  been  adopted  by  one  civilised 
nation,  it  became  necessary  that  all  its  neighbours  should  follow 
the  example.  They  soon  found  that  their  safety  depended  upon 
their  doing  so,  and  that  their  own  militia  was  altogether  incapable 
of  resisting  the  attack  of  such  an  army£j 

The  soldiers  of  a  standing  army,  though  they  may  never  have 
seen  an  enemy,  yet  have  frequently  appeared  to  possess  all  the 
courage  of  veteran  troops,  and  the  very  moment  that  they  took  the 
field  to  have  been  fit  to  face  the  hardiest  and  most  experienced 
veterans.  In  1 756,  when  the  Russian  army  marched  into  Poland, 
the  valour  of  the  Russian  soldiers  did  not  appear  inferior  to  that  of 
the  Prussians,  at  that  time  supposed  to  be  the  hardiest  and  most 
experienced  veterans  in  Europe.  The  Russian  empire,  however, 
had  enjoyed  a  profound  peace  for  near  twenty  years  before,  and 
could  at  that  time  have  very  few  soldiers  who  had  ever  seen  an 
enemy.  When  the  Spanish  war  broke  out  in  1739?  England  had 
enjoyed  a  profound  peace  for  about  eight  and  twenty  years.  The 
valour  of  her  soldiers,  however,  far  from  being  corrupted  by  that 
long  peace,  was  never  more  distinguished  than  in  the  attempt  upon 
Carthagena,  the  first  unfortunate  exploit  of  that  unfortunate  war. 
In  a  long  peace,  the  generals,  perhaps,  may  sometimes  forget  their 
skill ;  but,  where  a  well-regulated  standing  army  has  been  kept  up, 
the  soldj ers  seem  — 

When  a  cjvilisefhnatiqndepends  for  its  defence  upon  a  militia,  it 
is  at  alTtimes  exposed_fo  be  conquered  by  any  barbarous  nation 
which  happens  tobejxLits^eighRourhoad^ I  The  frequent  conquests 
of  all  the  civilisS  countries  in  Asia  by  the  Tartars,  sufficiently 
demonstrates  the  natural  superiority  which  the  militia  of  a  barbarous 
has  over  that  of  a  civilised  nation.  A  well-regulated  standing  army 
is  superior  to  every  militia.  Such  an  army,  as  it  can  best  be 
maintained  by  an  opulent  and  civilised  nation,  so  it  can  alone  defend 
such  a  nation  against  the  invasion  of  a  poor  and  barbarous  neigh¬ 
bour.  It  is  only  by  means  of  a  standing  army,  therefore,  that  the 
civilisation  of  any  country  can  be  perpetuated,  or  even  preserved  for 
any  considerable  time. 

As  it  is  only  by  means  of  a  well-regulated  standing  army  that 
a  civilised  country  can  be  defended,  so  it  is  only  by  means  of  it  that 
a  barbarous  country  can  be  suddenly  and  tolerably  civilised.  A 
standing  army  establishes,  with  an  irresistible  force,  the  law  of  the 


I 


290 


THE  NATURE  AND  CAUSES  OF 


book  v. 


sovereign  through  the  remotest  provinces  of  the  empire,  and  main¬ 
tains  some  degreeji^^  m  countries  which  could 

not  otherwise  admit  of  any.  Whoever  examines,  with  attention, 
the  improvements  which  Peter  the  Great  introduced  into  the 
Russian  empire,  will  find  that  they  almost  all  resolve  themselves 
into  the  establishment  of  a  well-regulated  standing  army.  It  is 
the  instrument  which  executes  and  maintains  all  his  other  regula¬ 
tions.  That  degree  of  order  and  internal  peace,  which  that  empire 
has  ever  since  enjoyed,  is  altogether  owing  to  the  influence  of  that 
army.1 

Men  of  republican  principles  have  been  jealous  of  a  standing 
army  as  dangerous  to  liberty.  It  certainly  is  so,  wherever  the 
interest  of  the  general  and  that  of  the  principal  officers  are  not 
necessarily  connected  with  the  support  of  the  constitution  of  the 
State.  The  standing  army  of  Caesar  destroyed  the  Roman  republic. 
The  standing  army  of  Cromwell  turned  the  Long  Parliament  out  of 
doors.  But  where  the  sovereign  is  himself  the  general,  and  the 
principal  nobility  and  gentry  of  the  country  the  chief  officers  of 
the  army ;  where  the  military  force  is  placed  under  the  command  of 
those  who  have  the  greatest  interest  in  the  support  of  the  civil 
authority,  because  they  have  themselves  the  greatest  share  of  that 
authority,  a  standing  army  can  never  be  dangerous  to  liberty.  On 
tfie- contrary,  it  may  in  some  cases  be  favourable  to  liberty.  The 
security  which  it  gives  to  the  sovereign  renders  unnecessary  that 
troublesome  jealousy  which,  in  some  modern  republics,  seems  to 
watch  over  the  minutest  actions,  and  to  be  at  all  times  ready  to 
disturb  the  peace  of  every  citizen.  Where  the  security  of  the 
magistrate,  though  supported  by  the  principal  people  of  the 
country,  is  endangered  by  every  popular  discontent ;  where  a  small 
tumult  is  capable  of  bringing  about  in  a  few  hours  a  great  revolu¬ 
tion,  the  whole  authority  of  government  must  be  employed  to 
support  and  punish  every  murmur  and  complaint  against  it.  To 
a  sovereign,  on  the  contrary,  who  feels  himself  supported,  not  only 
by  the  natural  aristocracy  of  the  country,  but  by  a  well-regulated 


1  But,  on  the  other  hand,  the  ultimate 
progress  of  a  country  which  owes  its 
political  organisation  to  the  control  of 
an  army  is  arrested  by  the  cause  which 
gives,  or  appears  to  give,  solidity  to  the 
constitution.  The  reason  is  to  be  found 
in  the  centralisation  of  power,  the  cor¬ 


ruption  of  officials,  the  impossibility  of 
checking  malpractices,  and  the  general 
lack  of  energy  which  characterises  a 
country  which  is  over-governed,  and 
which  is  never  so  much  over-governed 
as  when  its  affairs  are  directed  from  a 
military  bureau. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


291 


standing  army,  the  rudest,  the  most  groundless,  and  the  most 
licentious  remonstrances  can  give  little  disturbance.  He  can  safely 
pardon  or  neglect  them,  and  his  consciousness  of  his  own  superiority 
naturally  disposes  him  to  do  so.  That  degree  of  liberty  which 
approaches  to  licentiousness  can  be  tolerated  only  in  countries 
where  the  sovereign  is  secured  by  a  well-regulated  standing  army. 
It  is  in  such  countries  only  that  the  public  safety  does  not  require 
that  the  sovereign  should  be  trusted  with  any  discretionary  power, 
for  suppressing  even  the  impertinent  wantonness  of  this  licentious 
liberty.1 

The  first  duty  of  the  sovereign,  therefore,  that  of  defending  the 
society  from  the  violence  and  injustice  of  other  independent  societies, 
grows  gradually  more  and  more  expensive  as  the  society  advances 
in  civilisation.  The  military  force  of  the  society,  which  originally 
cost  the  sovereign  no  expense  either  in  time  of  peace  or  in  time  of 
war,  must,  in  the  progress  of  improvement,  first  be  maintained  by 
him  in  time  of  war,  and  afterwards  even  in  time  of  peace. 

The  great  change  introduced  into  the  art  of  war  by  the  invention 
of  fire-arms,  has  enhanced  still  further  both  the  expense  of  exercising 
and  disciplining  any  particular  number  of  soldiers  in  time  of  peace, 
and  that  of  employing  them  in  time  of  war.  Both  their  arms  and 
their  ammunition  are  become  more  expensive.  A  musket  is  a  more 
expensive  machine  than  a  javelin  or  a  bow  and  arrows  ;  a  cannon  or 
a  mortar  than  a  balista  or  a  catapulta.  The  powder  which  is  spent 
in  a  modern  review  is  lost  irrecoverably,  and  occasions  a  very 
considerable  expense.  The  javelins  and  arrows  which  were  thrown 
or  shot  in  an  ancient  one,  could  easily  be  picked  up  again,  and  were 
besides  of  very  little  value.  The  cannon  and  the  mortar  are  not 
only  much  dearer,  but  much  heavier  machines  than  the  balista  or 
catapulta,  and  require  a  greater  expense,  not  only  to  prepare  them 
for  the  field,  but  to  carry  them  to  it.  As  the  superiority  of  the 
modern  artillery  too,  over  that  of  the  ancients,  is  very  great,  it  has 


1  Adam  Smith  was  intimate  with 
Hume,  and  here,  at  least,  adopted  his 
political  tenets.  There  was  much  in  the 
history  of  his  own  time  which  justified, 
or  appeared  to  justify,  the  view  that 
liberty  is  incompatible  with  the  absence 
of  a  powerful  executive,  aided  by  an 
army,  for  the  republics  of  the  time  were 
rather  nominal  than  real,  rather  oligar¬ 
chical  than  democratic  in  their  constitu¬ 


tion.  The  history  however  of  the  Ameri¬ 
can  Union  is  clear  proof  of  how  compatible 
are  public  liberty  and  the  devotion  of  a 
whole  nation  to  the  pursuits  of  peace.  A 
general  determination  to  obey  and  uphold 
the  law,  is  a  far  stronger  guarantee  of 
liberty  and  order  than  any  military 
organisation  whatever,  on  which  a  sove¬ 
reign  or  an  administration  can  rely. 


U  2, 


292 


THE  NATURE  AND  CAUSES  OF 


BOOK  Y. 


become  much  more  difficult,  and  consequently  much  more  expensive, 
to  fortify  a  town  so  as  to  resist  even  for  a  few  weeks  the  attack  of 
that  superior  artillery.  In  modern  times,  many  different  causes 
contribute  to  render  the  defence  of  the  society  more  expensive. 
The  unavoidable  effects  of  the  natural  progress  of  improvement 
have,  in  this  respect,  been  a  good  deal  enhanced  by  a  great  revolu¬ 
tion  in  the  art  of  war,  to  which  a  mere  accident,  the  invention  of 
gunpowder,  seems  to  have  given  occasion. 

In  modern  war,  the  great  expense  of  fire-arms  gives  an  evident 
advantage  to  the  nation  which  can  best  afford  that  expense ;  and 
consequently,  to  an  opulent  and  civilised,  over  a  poor  and  barbarous 
nation.  In  ancient  times,  the  opulent  and  civilised  found  it  difficult 
to  defend  themselves  against  the  poor  and  barbarous  nations.  In 
modern  times,  the  poor  and  barbarous  find  it  difficult  to  defend 
themselves  against  the  opulent  and  civilised.  The  invention  of 
fire-arms,  an  invention  which  at  first  sight  appears  to  be  so 
pernicious,  is  certainly  favourable  both  to  the  permanency  and  to 
the  extension  of  civilisation.1 


PART  II. 


Of  the  Expense  of  Justice. 


The  second  duty  of  the  sovereign,  that  of  protecting,  as  far  as 
possible,  every  member  of  the  society  from  the  injustice  or  oppres¬ 
sion  of  every  other  member  of  it,  or  the  duty  of  establishing  an 
exact  administration  of  justice,  requires  too  very  different  degrees 
of  expense  in  the  different  periods'of  society. 

Among  nations  of  hunters,  as  there  is  scarce  any  property,  or  at 
least  none  that  exceeds  the  value  of  two  or  three  days’  labour ;  so 
there  is  seldom  any  established  magistrate  or  any  regular  adminis- 


1  The  expense  of  warfare  has  increased 
enormously  since  the  time  in  which 
Smith  wrote.  The  small  arms  of  our 
day  are,  in  fact,  machines  made  with  the 
most  perfect  nicety,  and  large  guns  are 
manufactured  upon  calculations  of  the 
most  elaborate  precision.  Simultaneously 
with  the  science  of  attack  in  war,  has 
progressed  even  more  notably  that  of 
defence.  War  has  not  only  become  more 
costly,  but  much  more  difficult.  Bat 
nothing  is  more  characteristic  of  modern 


society  than  the  enormous  cost  at  which 
the  machinery  of  defence  is  maintained. 
It  was  calculated  that  the  cost  of  war 
within  1853  and  1866  was  £1,91 3,000,000, 
and  at  the  present  time  (1880)  the  annual 
charges  of  the  war  budgets  of  Europe 
have  risen  from  1 1 7  to  161  millions 
stei’ling.  To  these  must  be  added  the 
increase  in  the  national  debts  of  Europe 
from  1865  to  1879,  viz.  £1,697,850,000, 
or  at  4  per  cent,  an  annual  burden  of 
£67,914,000. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


293 


tration  of  justice.  Men  who  have  no  property  can  injure  one 
another  only  in  their  persons  or  reputations.  But  when  one  man 
kills,  wounds,  beats,  or  defames  another,  though  he  to  whom  the 
injury  is  done  suffers,  he  who  does  it  receives  no  benefit.  It  is 
otherwise  with  the  injuries  to  property.  The  benefit  of  the  person 
who  does  the  injury  is  often  equal  to  the  loss  of  him  who  suffers  it. 
Envy,  malice,  or  resentment  are  the  only  passions  which  can 

j 

prompt  one  man  to  injure  another  in  his  person  or  reputation. 
But  the  greater  part  of  men  are  not  very  frequently  under  the 
influence  of  those  passions ;  and  the  very  worst  men  are  so  only 
occasionally.  As  their  gratification  too,  how  agreeable  soever  it 
may  be  to  certain  characters,  is  not  attended  with  any  real  or 
permanent  advantage,  it  is  in  the  greater  part  of  men  commonly 
restrained  by  prudential  considerations.  Men  may  live  together  in 
society  with  some  tolerable  degree  of  security,  though  there  is  no 
civil  magistrate  to  protect  them  from  the  injustice  of  those  passions. 
But  avarice  and  ambition  in  the  rich,  in  the  poor  the  hatred  of 
labour  and  the  love  of  present  ease  and  enjoyment,  are  the  passions 
which  prompt  to  invade  property — passions  much  more  steady  in 
their  operation*  and  much  more  universal  in  their  influence. 
Wherever  there  is  great  property  there  is  great  inequality.  For 
one  very  rich  man,  there  must  be  at  least  five  hundred  poor,  and 
the  affluence  of  the  few  supposes  the  indigence  of  the  many.  The 
affluence  of  the  rich  excites  the  indignation  of  the  poor,  who  are 
often  both  driven  by  want,  and  prompted  by  envy,  to  invade  his 
possessions.  It  is  only  under  the  shelter  of  the  civil  magistrate 
that  the  owner  of  that  valuable  property,  which  is  acquired  by  the 
labour  of  many  years,  or  perhaps  of  many  successive  generations, 
can  sleep  a  single  night  in  security.  He  is  at  all  times  surrounded 
by  unknown  enemies,  whom,  though  he  never  provoked,  he  can 
never  appease,  and  from  whose  injustice  he  can  be  protected  only 
by  the  powerful  arm  of  the  civil  magistrate  continually  held  up  to 
chastise  it.  The  acquisition  of  valuable  and  extensive  property, 
therefore,  necessarily  requires  the  establishment  of  civil  government. 
Where  there  is  no  property,  or  at  least  none  that  exceeds  the  value 
of  two  or  three  days5  labour,  civil  government  is  not  so  necessary. 

Civil  government  supposes  a  certain  subordination.  But  as  the 
necessity  of  civil  government  gradually  grows  up  with  the  acquisi¬ 
tion  of  valuable  property,  so  the  principal  causes  which  naturally 


294  THE  NATURE  AND  CAUSES  OF  book  y. 

\ 

introduce  subordination  gradually  grow  up  with  the  growth  of  that 
valuable  property. 

The  causes  or  circumstances  which  naturally  introduce  subordina¬ 
tion,  or  which  naturally,  and  antecedent  to  any  civil  situation,  give 
some  men  some  superiority  over  the  greater  part  of  their  brethren, 
seem  to  be  four  in  number. 

The  first  of  those  causes  or  circumstances  is  the  superiority  of 
personal  qualifications — of  strength,  beauty,  and  agility  of  body ;  of 
wisdom  and  virtue,  of  prudence,  justice,  fortitude,  and  moderation 
of  mind.  The  qualifications  of  the  body,  unless  supported  by  those 
of  the  mind,  can  give  little  authority  in  any  period  of  society.  He 
is  a  very  strong  man  who,  by  mere  strength  of  body,  can  force  two 
weak  ones  to  obey  him.  The  qualifications  of  the  mind  can  alone 
give  very  great  authority.  They  are,  however,  invisible  qualities  ; 
always  disputable,  and  generally  disputed.  No  society,  whether 
barbarous  or  civilised,  has  ever  found  it  convenient  to  settle  the 
rules  of  precedency,  of  rank  and  subordination,  according  to  those 
invisible  qualities,  but  according  to  something  that  is  more  plain 
and  palpable. 

The  second  of  those  causes  or  circumstances  is  the  superiority  of 
age.  An  old  man,  provided  his  age  is  not  so  far  advanced  as  to 
give  suspicion  of  dotage,  is  everywhere  more  respected  than  a  young 
man  of  equal  rank,  fortune,  and  abilities.  Among  nations  of  hunters, 
such  as  the  native  tribes  of  North  America,  age  is  the  sole  founda¬ 
tion  of  rank  and  precedency.  Among  them,  father  is  the  appellation 
of  a  superior  ;  brother,  of  an  equal ;  and  son,  of  an  inferior.  In  the 
most  opulent  and  civilised  nations,  age  regulates  rank  among  those 
who  are  in  every  other  respect  equal,  and  among  whom,  therefore, 
there  is  nothing  else  to  regulate  it.  Among  brothers  and  among 
sisters,  the  eldest  always  take  place  ;  and  in  the  succession  of  the 
paternal  estate  everything  which  cannot  be  divided,  but  must  go 
entire  to  one  person,  such  as  a  title  of  honour,  is  in  most  cases  given 
to  the  eldest.  Age  is  a  plain  and  palpable  quality  which  admits  of 
no  dispute. 

The  third  of  those  causes  or  circumstances  is  the  superiority  of 
fortune.  The  authority  of  riches,  however,  though  great  in  every 
age  of  society,  is  perhaps  greatest  in  the  rudest  age  of  society  which 
admits  of  any  considerable  inequality  of  fortune.  A  Tartar  chief, 
the  increase  of  whose  herds  and  flocks  is  sufficient  to  maintain  a 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


295 


thousand  men,  cannot  well  employ  that  increase  in  any  other  way 
than  in  maintaining  a  thousand  men.  The  rude  state  of  his  society 
does  not  afford  him  any  manufactured  produce,  any  trinkets  or 
baubles  of  any  kind,  for  which  he  can  exchange  that  part  of  his 
rude  produce  which  is  over  and  above  his  own  consumption.  The 
thousand  men  whom  he  thus  maintains,  depending  entirely  upon 
him  for  their  subsistence,  must  both  obey  his  orders  in  war,  and 
submit  to  his  jurisdiction  in  peace.  He  is  necessarily  both  their 
general  and  their  judge,  and  his  chieftainship  is  the  necessary  effect 
of  the  superiority  of  his  fortune.  In  an  opulent  and  civilised 
society,  a  man  may  possess  a  much  greater  fortune,  and  yet  not  be 
able  to  command  a  dozen  of  people.  Though  the  produce  of  his 
estate  may  be  sufficient  to  maintain,  and  may  perhaps  actually 
maintain,  more  than  a  thousand  people,  yet  as  those  people  pay  for 
everything  which  they  get  from  him,  as  he  gives  scarce  anything 
to  anybody  but  in  exchange  for  an  equivalent,  there  is  scarce  any¬ 
body  who  considers  himself  as  entirely  dependent  upon  him,  and 
his  authority  extends  only  over  a  few  menial  servants.  The  au¬ 
thority  of  fortune,  however,  is  very  great  even  in  an  opulent  and 
civilised  society.  That  it  is  much  greater  than  that,  either  of  age, 
or  of  personal  qualities,  has  been  the  constant  complaint  of  every 
period  of  society  which  admitted  of  any  considerable  inequality  of 
fortune.  The  first  period  of  society,  that  of  hunters,  admits  of  no 
such  inequality.  Universal  poverty  establishes  there  universal 
equality,  and  the  superiority,  either  of  age  or  of  personal  qualities, 
are  the  feeble  but  the  sole  foundations  of  authority  and  subordina¬ 
tion.  There  is  therefore  little  or  no  authority  or  subordination  in 
this  period  of  society.  The  second  period  of  society,  that  of  shep¬ 
herds,  admits  of  very  great  inequalities  of  fortune,  and  there  is  no 
period  in  which  the  superiority  of  fortune  gives  so  great  authority 
to  those  who  possess  it.  There  is  no  period  accordingly  in  which 
authority  and  subordination  are  more  perfectly  established.  The 
authority  of  an  Arabian  scherif  is  very  great ;  that  of  a  Tartar  khan 
altogether  despotical. 

The  fourth  of  those  causes  or  circumstances  is  the  superiority  of 
birth.  Superiority  of  birth  supposes  an  ancient  superiority  of  for¬ 
tune  in  the  family  of  the  person  who  claims  it.  All  families  are 
equally  ancient ;  and  the  ancestors  of  the  prince,  though  they  may 
be  better  known,  cannot  well  be  more  numerous  than  those  of  the 


296 


TEE  NATURE  AND  CAUSES  OF 


BOOK  V. 


beggar.  Antiquity  of  family  means  everywhere  the  antiquity  either 
of  wealth,  or  of  that  greatness  which  is  commonly  either  founded 
upon  wealth,  or  accompanied  with  it.  Upstart  greatness  is  every¬ 
where  less  respected  than  ancient  greatness.  The  hatred  of  usurpers, 
the  love  of  the  family  of  an  ancient  monarch,  are,  in  a  great  measure, 
founded  upon  the  contempt  which  men  naturally  have  for  the  former, 
and  upon  their  veneration  for  the  latter.  As  a  military  officer  sub¬ 
mits  without  reluctance  to  the  authority  of  a  superior  by  whom  he 
has  always  been  commanded,  but  cannot  bear  that  his  inferior  should 
be  set  over  his  head  ;  so  men  easily  submit  to  a  family  to  whom 
they  and  their  ancestors  have  always  submitted,  but  are  fired  with 
indignation  when  another  family,  in  whom  they  had  never  acknow¬ 
ledged  any  such  superiority,  assumes  a  dominion  over  them. 

The  distinction  of  birth,  being  subsequent  to  the  inequality  of 
fortune,  can  have  no  place  in  nations  of  hunters,  among  whom  all 
men,  being  equal  in  fortune,  must  likewise  be  very  nearly  equal  in 
birth.  The  son  of  a  wise  and  brave  man  may  indeed,  even  among 
them,  be  somewhat  more  respected  than  a  man  of  equal  merit  who 
has  the  misfortune  to  be  the  son  of  a  fool  or  a  coward.  The  dif¬ 
ference,  however,  will  not  be  very  great ;  and  [there  never  was,  I 
believe,  a  great  family  in  the  world  whose  illustration  was  entirely 
derived  from  the  inheritance  of  wisdom  and  virtue.! 

The  distinction  of  birth  not  only  may,  but  always  does  take  place 
among  nations  of  shepherds.  Such  nations  are  always  strangers  to 
every  sort  of  luxury,  and  great  wealth  can  scarce  ever  be  dissipated 
among  them  by  improvident  profusion.  There  are  no  nations  ac¬ 
cordingly  who  abound  more  in  families  revered  and  honoured  on 
account  of  their  descent  from  a  long  race  of  great  and  illustrious 
ancestors ;  because  there  are  no  nations  among  whom  wealth  is 
likely  to  continue  longer  in  the  same  families. 

Birth  and  fortune  are  evidently  the  two  circumstances  which 
principally  set  one  man  above  another.  They  are  the  two  great 
sources  of  personal  distinction,  and  are  therefore  the  principal  causes 
which  naturally  establish  authority  and  subordination  among  men. 
Among  nations  of  shepherds,  both  those  causes  operate  wTith  their 
full  force.  The  great  shepherd  or  herdsman,  respected  on  account  of 
his  great  wealth,  and  of  the  great  number  of  those  who  depend  upon 
him  for  subsistence,  and  revered  on  account  of  the  nobleness  of  his 
birth  and  of  the  immemorial  antiquity  of  his  illustrious  family,  has 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


297 


a  natural  authority  over  all  the  inferior  shepherds  or  herdsmen  of 
his  horde  or  clan.  He  can  command  the  united  force  of  a  greater 
number  of  people  than  any  of  them.  His  military  power  is  greater 
than  that  of  any  of  them.  In  time  of  war,  they  are  all  of  them 
naturally  disposed  to  muster  themselves  under  his  banner,  rather 
than  under  that  of  any  other  person,  and  his  birth  and  fortune  thus 
naturally  procure  to  him  some  sort  of  executive  power.  By  com¬ 
manding  too  the  united  force  of  a  greater  number  of  people  than 
any  of  them,  he  is  best  able  to  compel  any  one  of  them  who  may 
have  injured  another  to  compensate  the  wrong.  He  is  the  person, 
therefore,  to  whom  all  those  who  are  too  weak  to  defend  themselves 
naturally  look  up  for  protection.  It  is  to  him  that  they  naturally 
complain  of  the  injuries  which  they  imagine  have  been  done  to 
them,  and  his  interposition  in  such  cases  is  more  easily  submitted 
to,  even  by  the  person  complained  of,  than  that  of  any  other  person 
would  be.  His  birth  and  fortune  thus  naturally  procure  him  some 
sort  of  judicial  authority. 

It  is  in  the  age  of  shepherds,  in  the  second  period  of  society,  that 
the  inequality  of  fortune  first  begins  to  take  place,  and  introduces 
among  men  a  degree  of  authority  and  subordination  which  could 
not  possibly  exist  before.  It  thereby  introduces  some  degree  of 
that  civil  government  which  is  indispensably  necessary  for  its  own 
preservation;  and  it  seems  to  do  this  naturally,  and  even  inde¬ 
pendent  of  the  consideration  of  that  necessity.  The  consideration 
of  that  necessity  comes  no  doubt  afterwards  to  contribute  very  much 
to  maintain  and  secure  that  authority  and  subordination.  The  rich, 
in  particular,  are  necessarily  interested  to  support  that  order  of 
things,  which  can  alone  secure  them  in  the  possession  of  their  own 
advantages.  Men  of  inferior  wealth  combine  to  defend  those  of 
superior  wealth  in  the  possession  of  their  property,  in  order  that 
men  of  superior  wealth  may  combine  to  defend  them  in  the  posses¬ 
sion  of  theirs.  All  the  inferior  shepherds  and  herdsmen  feel  that 
the  security  of  their  own  herds  and  flocks  depends  upon  the  security 
of  those  of  the  great  shepherd  or  herdsman  ;  that  the  maintenance 
of  their  lesser  authority  depends  upon  that  of  his  greater  authority, 
and  that  upon  their  subordination  to  him  depends  his  power  of 
keeping  their  inferiors  in  subordination  to  them.  They  constitute 
a  sort  of  little  nobility,  who  feel  themselves  interested  to  defend  the 
property  and  to  support  the  authority  of  their  own  little  sovereign, 


298 


THE  NATURE  AND  CAUSES  OF 


BOOK  V. 


in  order  that  he  maybe  able  to  defend  their  property  and  to  support 
their  authority.  Civil  government,  so  far  as  it  is  instituted  for  the 
security  of  property,  is  in  reality  instituted  for  the  defence  of  the 
rich  against  the  poor,  or  of  those  who  have  some  property  against 
those  who  have  none  at  all. 

The  judicial  authority  of  such  a  sovereign,  however,  far  from 
being  a  cause  of  expense,  was  for  a  long  time  a  source  of  revenue  to 
him.  The  persons  who  applied  to  him  for  justice  were  always 
willing  to  pay  for  it,  and  a  present  never  failed  to  accompany  a 
petition.  After  the  authority  of  the  sovereign  too  was  thoroughly 
established,  the  person  found  guilty,  over  and  above  the  satisfaction 
which  he  was  obliged  to  make  to  the  party,  was  likewise  forced  to 
pay  an  amercement  to  the  sovereign.  He  had  given  trouble,  he 
had  disturbed,  he  had  broke  the  peace  of  his  lord  the  king,  and  for 
those  offences  an  amercement  was  thought  due.  In  the  Tartar 
governments  of  Asia,  in  the  governments  of  Europe  which  were 
founded  by  the  German  and  Scythian  nations  who  overturned  the 
Roman  Empire,  the  administration  of  justice  was  a  considerable 
source  of  revenue,  both  to  the  sovereign,  and  to  all  the  lesser  chiefs 
or  lords  who  exercised  under  him  any  particular  jurisdiction,  either 
over  some  particular  tribe  or  clan,  or  over  some  particular  territory 
or  district.  Originally  both  the  sovereign  and  the  inferior  chiefs 
used  to  exercise  this  jurisdiction  in  their  own  persons  ;  afterwards 
they  universally  found  it  convenient  to  delegate  it  to  some  substitute, 
bailiff,  or  judge.  This  substitute,  however,  was  still  obliged  to 
account  to  his  principal  or  constituent  for  the  profits  of  the  juris¬ 
diction.  Whoever  reads  the  instructions*  which  were  given  to  the 
judges  of  the  circuit  in  the  time  of  Henry  II,  will  see  clearly  that 
those  judges  were  a  sort  of  itinerant  factors,  sent  round  the  country 
for  the  purpose  of  levying  eertain  branches  of  the  king’s  revenue. 
In  those  days,  the  administration  of  justice  not  only  afforded  a  cer¬ 
tain  revenue  to  the  sovereign,  but  to  procure  this  revenue  seems  to 
have  been  one  of  the  principal  advantages  which  he  proposed  to 
obtain  by  the  administration  of  justice. 

This  scheme  of  making  the  administration  of  justice  subservient 
to  the  purposes  of  revenue,  could  scarce  fail  to  be  productive  of 
several  very  gross  abuses.  The  person  who  applied  for  justice  with 
a  large  present  in  his  hand,  was  likely  to  get  more  than  justice ; 

*  They  are  to  be  found  in  Tyrrell’s  History  of  England. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


299 


while  he  who  applied  for  it  with  a  small  one,  was  likely  to  get  some¬ 
thing  less.  Justice  too  might  frequently  be  dela}^ed,  in  order  that 
this  present  might  be  repeated.  The  amercement,  besides,  of  the 
person  complained  of,  might  frequently  suggest  a  very  strong  reason 
for  finding  him  in  the  wrong,  even  when  he  had  not  really  been  so. 
That  such  abuses  were  far  from  being  uncommon,  the  ancient  his¬ 
tory  of  every  country  in  Europe  bears  witness. 

When  the  sovereign  or  chief  exercised  his  judicial  authority  in 
his  own  person,  how  much  soever  he  might  abuse  it,  it  must  have 
been  scarce  possible  to  get  any  redress ;  because  there  could  seldom 
be  anybody  powerful  enough  to  call  him  to  account.  When  he 
exercised  it  by  a  bailiff,  indeed,  redress  might  sometimes  be  had.  If 
it  was  for  his  own  benefit  only  that  the  bailiff  had  been  guilty  of 
any  act  of  injustice,  the  sovereign  himself  might  not  always  be 
unwilling  to  punish  him,  or  to  oblige  him  to  repair  the  wrong. 
But  if  it  was  for  the  benefit  of  his  sovereign,  if  it  was  in  order  to 
make  court  to  the  person  who  appointed  him  and  who  might  prefer 
him,  that  he  had  committed  any  act  of  oppression,  redress  would 
upon  most  occasions  be  as  impossible  as  if  the  sovereign  had  com¬ 
mitted  it  himself.  In  all  barbarous  governments,  accordingly,  in 
all  those  ancient  governments  of  Europe  in  particular,  which  were 
founded  upon  the  ruins  of  the  Homan  empire,  the  administration  of 
justice  appears  for  a  long  time  to  have  been  extremely  corrupt ;  far 
from  being  quite  equal  and  impartial  even  under  the  best  monarchs, 
and  altogether  profligate  under  the  worst. 

Among  nations  of  shepherds,  where  the  sovereign  or  chief  is  only 
the  greatest  shepherd  or  herdsman  of  the  horde  or  clan,  he  is  main¬ 
tained  in  the  same  manner  as  any  of  his  vassals  or  subjects,  by  the 
increase  of  his  own  herds  or  flocks.  Among  those  nations  of  hus¬ 
bandmen  who  are  but  just  come  out  of  the  shepherd  state,  and  who 
are  not  much  advanced  beyond  that  state,  such  as  the  Greek 
tribes  appear  to  have  been  about  the  time  of  the  Trojan  war,  and 
our  German  and  Scythian  ancestors  when  they  first  settled  upon 
the  ruins  of  the  Western  Empire,  the  sovereign  or  chief  is,  in  the 
same  manner,  only  the  greatest  landlord  of  the  country,  and  is 
maintained,  in  the  same  manner  as  any  other  landlord,  by  a  revenue 
derived  from  his  own  private  estate,  or  from  what,  in  modern  Europe, 
was  called  the  demesne  of  the  Crown.  His  subjects,  upon  ordinary 
occasions,  contribute  nothing  to  his  support,  except  when,  in  order 


300 


TEE  NATURE  AND  CAUSES  OF 


BOOK  V. 


to  protect  them  from  the  oppression  of  some  of  their  fellow-subjects, 
they  stand  in  need  of  his  authority.  The  presents  which  they 
make  him  upon  such  occasions,  constitute  the  whole  ordinary  revenue, 
the  whole  of  the  emoluments  which,  except  perhaps  upon  some  very 
extraordinary  emergencies,  he  derives  from  his  dominion  over  them. 
When  Agamemnon,  in  Homer,  offers  to  Achilles  for  his  friendship 
the  sovereignty  of  seven  Greek  cities,  the  sole  advantage  which  he 
mentions  as  likely  to  be  derived  from  it  was,  that  the  p»eople  would 
honour  him  with  presents.1  As  long  as  such  presents,  as  long  as 
the  emoluments  of  justice,  or  what  may  be  called  the  fees  of  court, 
constituted  in  this  manner  the  whole  ordinary  revenue  which  the 
sovereign  derived  from  his  sovereignty,  it  could  not  well  be  expected, 
it  could  not  even  decently  be  proposed  that  he  should  give  them  up 
altogether.  It  might,  and  it  frequently  was  proposed,  that  he 
should  regulate  and  ascertain  them.  But  after  they  had  been  so 
regulated  and  ascertained,  how  to  hinder  a  person  who  was  all- 
powerful  from  extending  them  beyond  those  regulations,  was  still 
very  difficult,  not  to  say  impossible.  During  the  continuance  of 
this  state  of  things,  therefore,  the  corruption  of  justice,  naturally 
resulting  from  the  arbitrary  and  uncertain  nature  of  those  presents, 
scarce  admitted  of  any  effectual  remedy. 

But  when  from  different  causes,  chiefly  from  the  continually 
increasing  expense  of  defending  the  nation  against  the  invasion  of 
other  nations,  the  private  estate  of  the  sovereign  had  become  alto¬ 
gether  insufficient  for  defraying  the  expense  of  the  sovereignty,  and 
when  it  had  become  necessary  that  thfr  people  should,  for  their 
own  security,  contribute  towards  this  expense  by  taxes  of  different 
kinds,  it  seems  to  have  been  very  commonly  stipulated  that  no  pre¬ 
sent  for  the  administration  of  justice  should,  under  any  pretence,  be 
accepted  either  by  the  sovereign,  or  by  his-  bailiffs  and  substitutes, 
the  judges.  Those  presents,  it  seems  to  have  been  supposed,  could 
more  easily  be  abolished  altogether  than  effectually  regulated  and 
ascertained.  Fixed  salaries  were  appointed  to  the  judges,  which 
were  supposed  to  compensate  to  them  the  loss  of  whatever  might 
have  been  their  share  of  the  ancient  emoluments  of  justice  ;  as  the 
taxes  more  than  compensated  to  the  sovereign  the  loss  of  his. 
J ustice  was  then  said  to  be  administered  gratis. 

Justice,  however,  never  was  in  reality  administered  gratis  in  any 

1  Iliad,  ix.  291  sqq. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS.' 


301 


country.  Lawyers  and  attorneys,  at  least,  must  always  be  paid  by 
the  parties ;  and,  if  they  were  not,  they  would  perform  their  duty 
still  worse  than  they  actually  perform  it.  The  fees  annually  paid 
to  lawyers  and  attorneys  amount,  in  every  court,  to  a  much  greater 
sum  than  the  salaries  of  the  judges.  The  circumstance  of  those 
salaries  being  paid  by  the  Crown,  can  nowhere  much  diminish  the 
necessary  expense  of  a  law-suit.  But  it  was  not  so  much  to  diminish 
the  expense,  as  to  prevent  the  corruption  of  justice,  that  the  judges 
were  prohibited  from  receiving  any  present  or  fee  from  the  parties. 

The  office  of  judge  is  in  itself  so  very  honourable,  that  men  are 
willing  to  accept  of  it,  though  accompanied  with  very  small  emolu¬ 
ments.  The  inferior  office  of  justice  of  peace,  though  attended  with 
a  good  deal  of  trouble,  and  in  most  cases  with  no  emoluments  at  all, 
is  an  object  of  ambition  to  the  greater  part  of  our  country  gentle¬ 
men.  The  salaries  of  all  the  different  judges,  high  and  low,  together 
with  the  whole  expense  of  the  administration  and  execution  of 
justice,  even  where  it  is  not  managed  with  very  good  economy, 
makes,  in  any  civilised  country,  but  a  very  inconsiderable  part  of 
the  whole  expense  of  government. 

The  whole  expense  of  justice  too  might  easily  be  defrayed  by  the 
fees  of  court ;  and,  without  exposing  the  administration  of  justice  to 
any  real  hazard  of  corruption,  the  public  revenue  might  thus  be 
entirely  discharged  from  a  certain,  though  perhaps  but  a  small, 
incumbrance.  It  is  difficult  to  regulate  the  fees  of  court  effectually, 
where  a  person  so  powerful  as  the  sovereign  is  to  share  in  them, 
and  to  derive  any  considerable  part  of  his  revenue  from  them.  It 
is  very  easy,  where  the  judge  is  the  principal  person  who  can  reap 
any  benefit  from  them.  The  law  can  very  easily  oblige  the  judge 
to  respect  the  regulation,  though  it  might  not  always  be  able  to 
make  the  sovereign  respect  it.  Where  the  fees  of  court  are  precisely 
regulated  and  ascertained,  where  they  are  all  paid  at  once,  at  a  cer¬ 
tain  period  of  every  process,  into  the  hands  of  a  cashier  or  receiver, 
to  be  by  him  distributed  in  certain  known  proportions  among  the 
different  judges  after  the  process  is  decided,  and  not  till  it  is  decided, 
there  seems  to  be  no  more  danger  of  corruption  than  where  such 
fees  are  prohibited  altogether.  Those  fees,  without  occasioning  any 
considerable  increase  in  the  expense  of  a  law-suit,  might  be  rendered 
fully  sufficient  for  defraying  the  whole  expense  of  justice.  By  not 
being  paid  to  the  judges  till  the  process  was  determined,  they  might 


302 


THE  NATURE  AND  CAUSES  OF 


book  y. 


be  some  incitement  to  the  diligence  of  the  court  in  examining  and 
deciding  it.  In  courts  which  consisted  of  a  considerable  number  of 
judges,  by  proportioning  the  share  of  each  judge  to  the  number  of 
hours  and  days  which  he  had  employed  in  examining  the  process, 
either  in  the  court  or  in  a  committee  by  order  of  the  court,  those 
fees  might  give  some  encouragement  to  the  diligence  of  each  par¬ 
ticular  judge.  Public  services  are  never  better  performed  than 
when  their  reward  comes  only  in  consequence  of  their  being  per¬ 
formed,  and  is  proportioned  to  the  diligence  employed  in  performing 
them.  In  the  different  parliaments  of  France,  the  fees  of  court 
(called  epices  and  vacations)  constitute  the  far  greater  part  of  the 
emoluments  of  the  judges.  After  all  deductions  are  made,  the  net 
salary  paid  by  the  Crown  to  a  counsellor  or  judge  in  the  parliament 
of  Toulouse,  in  rank  and  dignity  the  second  parliament  of  the  king¬ 
dom,  amounts  only  to  a  hundred  and  fifty  livres,  about  six  pounds 
eleven  shillings  sterling  a  year.  About  seven  years  ago  that  sum 
was  in  the  same  place  the  ordinary  yearly  wages  of  a  common  foot¬ 
man.  The  distribution  of  those  epices  too  is  according  to  the 
diligence  of  the  judges.  A  diligent  judge  gains  a  comfortable, 
though  moderate,  revenue  by  his  office;  an  idle  one  gets  little  more 
than  his  salary.  Those  parliaments  are  perhaps,  in  many  respects, 
not  very  convenient  courts  of  justice  ;  but  they  have  never  been 
accused  ;  they  seem  never  even  to  have  been  suspected  of  corruption. 

The  fees  of  court  seem  originally  to  have  been  the  principal  sup¬ 
port  of  the  different  courts  of  justice  in  England.  Each  court 
endeavoured  to  draw  to  itself  as  much  business  as  it  could,  and  was, 
upon  that  account,  willing  to  take  cognisance  of  many  suits  which 
were  not  originally  intended  to  fall  under  its  jurisdiction.  The 
Court  of  King’s  Bench,  instituted  for  the  trial  of  criminal  causes 
only,  took  cognisance  of  civil  suits ;  the  plaintiff  pretending  that 
the  defendant,  in  not  doing  him  justice,  had  been  guilty  of  some 
trespass  or  misdemeanour.  The  Court  of  Exchequer,  instituted  for 
the  levying  of  the  king’s  revenue,  and  for  enforcing  the  payment  of 
such  debts  only  as  were  due  to  the  king,  took  cognisance  of  all 
other  contract  debts ;  the  plaintiff  alleging  that  he  could  not  pay 
the  king,  because  the  defendant  would  not  pay  him.  In  conse¬ 
quence  of  such  fictions  it  came,  in  many  cases,  to  depend  altogether 
upon  the  parties  before  what  court  they  would  choose  to  have  their 
cause  tried  ;  and  each  court  endeavoured,  by  superior  despatch  and 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


303 


impartiality,  to  draw  to  itself  as  many  causes  as  it  could.  The  pre¬ 
sent  admirable  constitution  of  the  courts  of  justice  in  England  was, 
perhaps,  originally  in  a  great  measure  formed  by  this  emulation, 
which  anciently  took  place  between  their  respective  judges ;  each 
judge  endeavouring  to  give,  in  his  own  court,  the  speediest  and 
most  effectual  remedy,  which  the  law  would  admit,  for  every  sort  of 
injustice.  Originally  the  courts  of  law  gave  damages  only  for  breach 
of  contract.  The  Court  of  Chancery,  as  a  court  of  conscience,  first 
took  upon  it  to  enforce  the  specific  performance  of  agreements.  When 
the  breach  of  contract  consisted  in  the  non-payment  of  money,  the 
damage  sustained  could  be  compensated  in  no  other  way  than  by 
ordering  payment,  which  was  equivalent  to  a  specific  performance  of 
the  agreement.  In  such  cases,  therefore,  the  remedy  of  the  courts 
of  law  was  sufficient.  It  was  not  so  in  others.  When  the  tenant 
sued  his  lord  for  having  unjustly  ousted  him  of  his  lease,  the  damages 
which  he  recovered  were  by  no  means  equivalent  to  the  possession 
of  the  land.  Such  causes  therefore,  for  some  time,  went  all  to  the 
Court  of  Chancery,  to  the  no  small  loss  of  the  courts  of  law.  It 
was  to  draw  back  such  causes  to  themselves  that  the  courts  of  law 
are  said  to  have  invented  the  artificial  and  fictitious  writ  of  eject¬ 
ment,  the  most  effectual  remedy  for  an  unjust  ouster  or  dispossession 
of  land.1 

A  stamp-duty  upon  the  law  proceedings  of  each  particular  court, 
to  be  levied  by  that  court,  and  applied  towards  the  maintenance  of 
the  judges  and  other  officers  belonging  to  it,  might,  in  the  same 
manner,  afford  a  revenue  sufficient  for  defraying  the  expense  of  the 
administration  of  justice,  without  bringing  any  burden  upon  the 
general  revenue  of  the  society.  The  judges  indeed  might,  in  this 
case,  be  under  the  temptation  of  multiplying  unnecessarily  the  pro¬ 
ceedings  upon  every  cause,  in  order  to  increase,  as  much  as  possible, 


1  It  seems  that  originally  the  choice  of 
court  in  which  an  action  was  tried  was 
optional,  each  court  having  some  process 
effectual  enough  to  constrain  obedience 
to  its  decrees,  and  being  careful  to  en¬ 
courage  business  by  the  speed  and  equity 
of  its  decisions,  or  by  some  other  recom¬ 
mendation.  The  use  of  the  papal  curia 
was  no  doubt  founded  on  the  fair  adminis¬ 
tration  of  justice  at  that  court,  and  the 
supremacy  of  the  different  tribunals  in 
which  the  common  law  was  administered 
was  not  so  much  achieved  by  positive 


enactment  as  by  the  means  which  these 
courts  had  at  their  disposal  in  order  to 
punish  contempt  or  disobedience.  It  is 
notorious  that  the  writ  of  mandamus  by 
which  the  Court  of  King’s  Bench  vindi¬ 
cated  its  authority,  and  that  of  subpoena  by 
which  Chancery  constrains  an  appearance, 
were  inventions  of  lawyers ;  originally 
intended  to  draw  business  to  the  court, 
and  sustained  by  authority  in  order  to 
effect  a  general  subordination  to  central 
power,  and  that  they  were  not  manifesta¬ 
tions  of  any  high*  theory  of  jurisprudence. 


304 


THE  NATURE  AND  CAUSES  OF 


BOOK  V. 


the  produce  of  such  a  stamp-duty.  It  has  been  the  custom  in 
modern  Europe  to  regulate,  upon  most  occasions,  the  payment  of 
the  attorneys  and  clerks  of  court,  according  to  the  number  of  pages 
which  they  had  occasion  to  write  ;  the  court,  however,  requiring 
that  each  page  should  contain  so  many  lines,  and  each  line  so  many 
words.  In  order  to  increase  their  payment,  the  attorneys  and  clerks 
have  contrived  to  multiply  words  beyond  all  necessity,  to  the  cor¬ 
ruption  of  the  law  language  of,  I  believe,  every  court  of  justice  in 
Europe.  A  like  temptation  might  perhaps  occasion  a  like  corrup¬ 
tion  in  the  form  of  law  proceedings. 

But  whether  the  administration  of  justice  be  so  contrived  as  to 
defray  its  own  expense,  or  whether  the  judges  be  maintained  by 
fixed  salaries  paid  to  them  from  some  other  fund,  it  does  not  seem 
necessary  that  the  person  or  persons  entrusted  with  the  executive 
power  should  be  charged  with  the  management  of  that  fund,  or 
with  the  payment  of  those  salaries.  That  fund  might  arise  from 
the  rent  of  landed  estates,  the  management  of  each  estate  being 
entrusted  to  the  particular  court  which  was  to  be  maintained  by  it. 
That  fund  might  arise  even  from  the  interest  of  a  sum  of  money, 
the  lending  out  of  which  might,  in  the  same  manner,  be  entrusted 
to  the  court  which  was  to  be  maintained  by  it.  A  part,  though 
indeed  but  a  small  part,  of  the  salary  of  the  judges  of  the  Court  of 
Session  in  Scotland,  arises  from  the  interest  of  a  sum  of  money. 
The  necessary  instability  of  such  a  fund  seems,  however,  to  render 
it  an  improper  one  for  the  maintenance  of  an  institution  which 
ought  to  last  for  ever. 

The  separation  of  the  judicial  from  the  executive  power  seems 
originally  to  have  arisen  from  the  increasing  business  of  the  society, 
in  consequence  of  its  increasing  improvement.  The  administration  of 
justice  became  so  laborious  and  so  complicated  a  duty  as  to  require 
the  undivided  attention  of  the  persons  to  whom  it  was  entrusted. 
The  person  entrusted  with  the  executive  power,  not  having  leisure 
to  attend  to  the  decision  of  private  causes  himself,  a  deputy  was 
appointed  to  decide  them  in  his  stead.  In  the  progress  of  the 
Homan  greatness,  the  consul  was  too  much  occupied  with  the  poli¬ 
tical  affairs  of  the  state  to  attend  to  the  administration  of  justice. 
A  praetor,  therefore,  was  appointed  to  administer  it  in  his  stead. 
In  the  progress  of  the  European  monarchies  which  were  founded 
upon  the  ruins  of  the  Roman  empire,  the  sovereigns  and  the  great 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


305 


lords  came  universally  to  consider  the  administration  of  justice  as 
an  office  both  too  laborious  and  too  ignoble  for  them  to  execute  in 
their  own  persons.  They  universally,  therefore,  discharged  them¬ 
selves  of  it  by  appointing  a  deputy,  bailiff,  or  judg^e.1 

When  the  judicial  is  united  to  the  executive  power,  it  is  scarce 
possible  that  justice  should  not  frequently  be  sacrificed  to  what  is 
vulgarly  called  politics.  The  persons  entrusted  with  the  great 
interests  of  the  state  may,  even  without  any  corrupt  views,  some¬ 
times  imagine  it  necessary  to  sacrifice  to  those  interests  the  rights 
of  a  private  man.  But  upon  the  impartial  administration  of  justice 
depends  the  liberty  of  every  individual,  the  sense  which  he  has  of 
his  own  security.  In  order  to  make  every  individual  feel  himself 
perfectly  secure  in  the  possession  of  every  right  which  belongs  to 
him,  it  is  not  only  necessary  that  the  judicial  should  be  separated 
from  the  executive  power,  but  that  it  should  be  rendered  as  much 
as  possible  independent  of  that  power.  The  judge  should  not  be 
liable  to  be  removed  from  his  office  according  to  the  caprice  of  that 
power.  The  regular  payment  of  his  salary  should  not  depend  upon 
the  good-will,  or  even  upon  the  good  economy,  of  that  power. 


PART  III. 


Of  the  Expense  of  Fublic  Works  and  Public  Institutions . 


The  third  and  last  duty  of  the  sovereign  or  commonwealth  is 
that  of  erecting  and  maintaining  those  public  institutions  and  those 
public  works,  which,  though  they  may  be  in  the  highest  degree 
advantageous  to  a  great  society,  are,  however,  of  such  a  nature, 
that  the  profit  could  never  repay  the  expense  to  any  individual 
or  small  number  of  individuals,  and  which  it,  therefore,  cannot 
be  expected  that  any  individual  or  small  number  of  individuals 
should  erect  or  maintain.  The  performance  of  this  duty  requires  too 
very  different  degrees  of  expense  in  the  different  periods  of  society. 

After  the  public  institutions  and  public  works  necessary  for  the 
defence  of  the  society,  and  for  the  administration  of  justice,  both  of 


1  For  some  facts  as  to  the  administra-  turies  ago,  see  the  Editor’s  Agriculture 

tion  of  justice  in  the  lowest  courts,  which  and  Prices,  vol.  i.  chap.  6. 

were  customary  in  this  country  five  cen- 

VOL.  II. 


X 


306 


THE  NATURE  AND  CAUSES  OF 


book  v. 


which  have  already  been  mentioned,  the  other  works  and  institu¬ 
tions  of  this  kind  are  chiefly  those  for  facilitating  the  commerce  of 
the  society,  and  those  for  promoting  the  instruction  of  the  people. 
The  institutions  for  instruction  are  of  two  kinds :  those  for  the 
education  of  the  youth,  and  those  for  the  instruction  of  people  of 
all  ages.  The  consideration  of  the  manner  in  which  the  expense  of 
those  different  sorts  of  public  works  and  institutions  may  be  most 
properly  defrayed,  will  divide  this  Third  Part  of  the  present  chapter 
into  three  different  articles.1 


Article  I. 


Of  the  Public  Works  and  Institutions  for  facilitating  the  Commerce 

of  the  Society. 

And  first ,  of  those  which  are  necessary  for  facilitating  Commerce 

in  general. 


That  the  erection  and  maintenance  of  the  public  works  which 
facilitate  the  commerce  of  any  country,  such  as  good  roads,  bridges. 
navigable  canals,  harbours,  &c.  must  require  very  different  degrees 
of  expense  in  the  different  periods  of  society,  is  evident  without  any 
proof.  The  expense  of  making  and  maintaining  the  public  roads  of 
any  country  must  evidently  increase  with  the  annual  produce  of  the 
land  and  labour  of  that  country,  or  with  the  quantity  and  weight  of 


1  A  government  may,  or  should,  in¬ 
terfere  with  the  ordinary  process  of  pro¬ 
duction  and  exchange  in  three  cases : — 
I.  When  the  state  can  perform  a  service 
at  a  far  better  and  cheaper  rate  than  any 
private  individual  or  company  can,  and 
when  there  are  sufficient  checks  fur¬ 
nished  against  mismanagement  in  per¬ 
forming  the  service.  An  example  of  this 
kind  is  the  Post-office.  2.  When  the 
service  rendered  or  work  done  is  of  great 
immediate  or  ultimate  value,  but  when 
the  community  at  large  is  unable  or 
unwilling  to  appreciate  and  recompense 
the  service,  or  when  the  person  rendering 
the  service  is  otherwise  unable  to  ap¬ 
propriate  any  advantage  to  himself.  This 
class  of  cases  comprise  endowments 
granted  or  permitted  by  government  in 
aid  of  education,  learning,  science  or  art. 
3.  When  the  habits  of  association  and 


enterprise  in  a  community  are  too  weak 
to  enable  the  community  to  obtain  those' 
great  works  on  which  the  material  pro¬ 
gress  of  a  society  depends.  This  de¬ 
ficiency  is  matter  of  degree,  and  should 
be  met  proportionately  by  government. 
In  this  country,  for  example,  roads, 
canals,  and  railways  have  almost  invaria¬ 
bly  been  constructed  by  private  enter¬ 
prise;  but  they  have  been  rarely  thus 
effected  in  foreign  countries,  the  state 
having  assisted  in  many  cases,  and  having 
altogether  accomplished  the  work  in  more. 
In  general,  however,  the  interference  of 
government  is,  when  it  can  be  avoided, 
to  be  deprecated.  There  is  nothing  in 
which  an  over-governed  country  is  more 
mischievously  over-governed  than  under 
those  circumstances  in  which  an  adminis¬ 
tration  is  perpetually  undertaking  the 
initiative  in  industrial  enterprises. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


307 


the  goods  which  it  becomes  necessary  to  fetch  and  carry  upon  those 
roads.  The  strength  of  a  bridge  must  be  suited  to  the  number  and 
weight  of  the  carriages  which  are  likely  to  pass  over  it ;  the  depth 
and  the  supply  of  water  for  a  navigable  canal  must  be  proportioned 
to  the  number  and  tonnage  of  the  lighters  which  are  likely  to  carry 
goods  upon  it ;  the  extent  of  a  harbour  to  the  number  of  the  ship¬ 
ping  which  are  likely  to  take  shelter  in  it. 

It  does  not  seem  necessary  that  the  expense  of  those  public 
works  should  be  defrayed  from  that  public  revenue,  as  it  is  com¬ 
monly  called,  of  which  the  collection  and  application  is  in  most 
countries  assigned  to  the  executive  power.  The  greater  part  of 
such  public  works  may  easily  be  so  managed  as  to  afford  a  particular 
revenue  sufficient  for  defraying  their  own  expense,  without  bringing 
any  burden  upon  the  general  revenue  of  the  society. 

A  highway,  a  bridge,  a  navigable  canal,  for  example,  may  in 
most  cases  be  both  made  and  maintained  by  a  small  toll  upon  the 
carriages  which  make  use  of  them ;  a  harbour,  by  a  moderate  port- 
duty  upon  the  tonnage  of  the  shipping  which  load  or  unload  in  it. 
The  coinage,  another  institution  for  facilitating  commerce,  in  many 
countries  not  only  defrays  its  own  expense,  but  affords  a  small 
revenue  or  seignorage  to  the  sovereign.  The  Post-office,  another 
institution  for  the  same  purpose,  over  and  above  defraying  its  own 
expense,  affords  in  almost  all  countries  a  very  considerable  revenue 
to  the  sovereign. 

When  the  carriages  which  pass  over  a  highway  or  a  bridge,  and 

the  lighters  which  sail  upon  a  navigable  canal,  pay  toll  in  propor¬ 

tion  to  their  weight  or  their  tonnage,  they  pay  for  the  maintenance 
of  those  public  works  exactly  in  proportion  to  the  wear  and  tear 

which  they  occasion  of  them.  It  seems  scarce  possible  to  invent  a 
more  equitable  way  of  maintaining  such  works.  This  tax  or  toll, 
too,  though  it  is  advanced  by  the  carrier,  is  finally  paid  by  the 

consumer,  to  whom  it  must  always  be  charged  in  the  price  of  the 

goods.  As  the  expense  of  carriage,  however,  is  very  much  reduced 
by  means  of  such  public  works,  the  goods,  notwithstanding  the  toll, 

come  cheaper  to  the  consumer  than  they  could  otherwise  have  done; 

their  price  not  being  so  much  raised  by  the  toll,  as  it  is  lowered  by 

the  cheapness  of  the  carriage.  The  person  who  finally  pays  this 
tax,  therefore,  gains  by  the  application  more  than  he  loses  by  the 

payment  of  it.  His  payment  is  exactly  in  proportion  to  his  gain, 

x  % 


308 


TEE  NATURE  AND  CAUSES  OF 


BOOK  V. 


It  is  in  reality  no  more  than  a  part  of  that  gain  which  he  is  obliged 
to  give  up  in  order  to  get  the  rest.  It  seems  impossible  to  imagine 
a  more  equitable  method  of  raising  a  tax. 

When  the  toll  upon  carriages  of  luxury,  upon  coaches,  post- 
chaises,  &c.,  is  made  somewhat  higher  in  proportion  to  their  weight 
than  upon  carriages  of  necessary  use,  such  as  carts,  waggons,  &c., 
the  indolence  and  vanity  of  the  rich  is  made  to  contribute  in  a  very 
easy  manner  to  the  relief  of  the  poor,  by  rendering  cheaper  the 
transportation  of  heavy  goods  to  all  the  differents  parts  of  the 
country. 

When  high  roads,  bridges,  canals,  &c.  are  in  this  manner  made 
and  supported  by  the  commerce  which  is  carried  on  by  means  of 
them,  they  can  be  made  only  where  that  commerce  requires  them, 
and  consequently  where  it  is  proper  to  make  them.  Their  expense 
too,  their  grandeur  and  magnificence,  must  be  suited  to  what  that 
commerce  can  afford  to  pay.  They  must  be  made  consequently 
as  it  is  proper  to  make  them.  A  magnificent  high  road  cannot  be 
made  through  a  desert  country  where  there  is  little  or  no  commerce, 
or  merely  because  it  happens  to  lead  to  the  country  villa  of  the 
intendant  of  the  province,  or  to  that  of  some  great  lord  to  whom 
the  intendant  finds  it  convenient  to  make  his  court.  A  great 
bridge  cannot  be  thrown  over  a  river  at  a  place  where  nobody 
passes,  or  merely  to  embellish  the  view  from  the  windows  of  a 
neighbouring  palace  :  things  which  sometimes  happen,  in  countries 
where  works  of  this  kind  are  carried  on  by  any  other  revenue  than 
that  which  they  themselves  are  capable  of  affording. 

In  several  different  parts  of  Europe  the  toll  or  lock-duty  upon  a 
canal  is  the  property  of  private  persons,  whose  private  interest 
obliges  them  to  keep  up  the  canal.  If  it  is  not  kept  in  tolerable 
order,  the  navigation  necessarily  ceases  altogether,  and  along  with 
it  the  whole  profit  which  they  can  make  by  the  tolls.  If  those  tolls 
were  put  under  the  management  of  commissioners,  who  had  them¬ 
selves  no  interest  in  them,  they  might  be  less  attentive  to  the  main¬ 
tenance  of  the  works  which  produced  them.  The  canal  of  Langue¬ 
doc  cost  the  King  of  France  and  the  province  upwards  of  thirteen 
millions  of  livres,  which  (at  twenty-eight  livres  the  mark  of  silver, 
the  value  of  French  money  in  the  end  of  the  last  century)  amounted 
to  upwards  of  nine  hundred  thousand  pounds  sterling.  When  that 
great  work  was  finished,  the  most  likely  method,  it  was  found,  of 


CHAP,  I. 


THE  WEALTH  OF  NATIONS, 


309 


keeping  it  in  constant  repair  was  to  make  a  present  of  the  tolls  to 
Riquet,  the  engineer,  who  planned  and  conducted  the  work.  Those 
tolls  constitute  at  present  a  very  large  estate  to  the  different 
branches  of  the  family  of  that  gentleman,  who  have,  therefore, 
a  great  interest  to  keep  the  work  in  constant  repair.  But  had  those 
tolls  been  put  under  the  management  of  commissioners,  who  had  no 
such  interest,  they  might  perhaps  have  been  dissipated  in  orna¬ 
mental  and  unnecessary  expenses,  while  the  most  essential  parts  of 
the  work  were  allowed  to  go  to  ruin. 

The  tolls  for  the  maintenance  of  a  high  road  cannot  with  any 
safety  be  made  the  property  of  private  persons.  A  high  road, 
though  entirely  neglected,  does  not  become  altogether  impassable, 
though  a  canal  does.  The  proprietors  of  the  tolls  upon  a  high  % 
road,  therefore,  might  neglect  altogether  the  repair  of  the  road, 
and  yet  continue  to  levy  very  nearly  the  same  tolls.  It  is  proper, 
therefore,  that  the  tolls  for  the  maintenance  of  such  a  work  should 
be  put  under  the  management  of  commissioners  or  trustees. 

In  Great  Britain,  the  abuses  which  the  trustees  have  committed 
in  the  management  of  those  tolls,  have  in  many  cases  been  very 
justly  complained  of.  At  many  turnpikes,  it  has  been  said,  the 
money  levied  is  more  than  double  of  what  is  necessary  for  executing, 
in  the  completest  manner,  the  work  which  is  often  executed  in  a 
very  slovenly  manner,  and  sometimes  not  executed  at  all.1  The 
system  of  repairing  the  high  roads  by  tolls  of  this  kind,  it  must  be 
observed,  is  not  of  very  long  standing.  We  should  not  wonder, 
therefore,  if  it  has  not  yet  been  brought  to  that  degree  of  perfection 
of  which  it  seems  capable.  If  mean  and  improper  persons  are 
frequently  appointed  trustees,  and  if  proper  courts  of  inspection 
and  account  have  not  yet  been  established  for  controlling  their 
conduct,  and  for  reducing  the  tolls  to  what  is  barely  sufficient  for 
executing  the  work  to  be  done  by  them,  the  recency  of  the 
institution  both  accounts  and  apologises  for  those  defects,  of  which, 
by  the  wisdom  of  Parliament,  the  greater  part  may  in  due  time  be 
gradually  remedied. 

The  money  levied  at  the  different  turnpikes  in  Great  Britain  is 
supposed  to  exceed  so  much  what  is  necessary  for  repairing  the 
roads,  that  the  savings  which,  with  proper  economy,  might  be 

1  For  the  state  of  the  roads  a  century  ago,  even  when  tolls  were  levied,  see 
Smollett’s  Humphrey  Clinker. 


310 


TIIE  NATURE  AND  CAUSES  OF 


BOOK  V. 


made  from  it,  have  been  considered,  even  by  some  ministers,  as 
a  very  great  resource  which  might  at  some  time  or  another  be 
applied  to  the  exigencies  of  the  state.  Government,  it  has  been 
said,  by  taking  the  management  of  the  turnpikes  into  its  own 
hands,  and  by  employing  the  soldiers,  who  would  work  for  a  very 
small  addition  to  their  pay,  could  keep  the  roads  in  good  order  at 
a  much  less  expense  than  it  can  be  done  by  trustees,  who  have  no 
other  workmen  to  employ  but  such  as  derive  their  whole  sub¬ 
sistence  from  their  wages.  A  great  revenue,  half  a  million, 
perhaps,*  it  has  been  pretended,  might  in  this  manner  be  gained 
without  laying  any  new  burden  upon  the  people ;  and  the  turnpike 
roads  might  be  made  to  contribute  to  the  general  expense  of  the 
state,  in  the  same  manner  as  the  Post-office  does  at  present. 

That  a  considerable  revenue  might  be  gained  in  this  manner  I 
have  no  doubt,  though  probably  not  near  so  much  as  the  projectors 
of  this  plan  have  supposed.  The  plan  itself,  however,  seems  liable 
to  several  very  important  objections. 

First,  if  the  tolls  which  are  levied  at  the  turnpikes  should  ever 
be  considered  as  one  of  the  resources  for  supplying  the  exigencies  of 
the  state,  they  would  certainly  be  augmented  as  those  exigencies 
were  supposed  to  require.  According  to  the  policy  of  Great  Britain, 
therefore,  they  would  probably  be  augmented  very  fast.  The 
facility  with  which  a  great  revenue  could  be  drawn  from  them, 
would  probably  encourage  administration  to  recur  very  frequently 
to  this  resource.  Though  it  may,  perhaps,  be  more  than  doubtful 
whether  half  a  million  could  by  any  economy  be  saved  out  of  the 
present  tolls,  it  can  scarce  be  doubted  but  that  a  million  might  be 
saved  out  of  them,  if  they  were  doubled  ;  and  perhaps  two  millions, 
if  they  were  tripled.*!*  This  great  revenue  too  might  be  levied 
without  the  appointment  of  a  single  new  officer  to  collect  and 
receive  it.  But  the  turnpike  tolls  being  continually  augmented 
in  this  manner,  instead  of  facilitating  the  inland  commerce  of  the 
country,  as  at  present,  would  soon  become  a  very  great  incum¬ 
brance  upon  it.  The  expense  of  transporting  all  heavy  goods  from 


*  Since  publishing  the  two  first  editions 
of  this  book,  I  have  got  good  reasons  to 
believe  that  all  the  turnpike  tolls  levied 
in  Great  Britain  do  not  produce  a  net 
revenue  that  amounts  to  half  a  million ; 
a  sum  which,  under  the  management  of 


Government,  would  not  be  sufficient  to 
keep  in  repair  five  of  the  principal  roads 
in  the  kingdom. 

+  I  have  now  good  reasons  to  believe 
that  all  these  conjectural  sums  are  by 
much  too  large. 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


311 


one  part  of  the  country  to  another  would  soon  be  so  much  increased, 
the  market  for  all  such  goods,  consequently,  would  soon  be  so  much 
narrowed,  that  their  production  would  be  in  a  great  measure  dis¬ 
couraged,  and  the  most  important  branches  of  the  domestic  industry 
of  the  country  annihilated  altogether. 

Secondly,  a  tax  upon  carriages  in  proportion  to  their  weight, 
though  a  very  equal  tax  when  applied  to  the  sole  purpose  of 
repairing  the  roads,  is  a  very  unequal  one  when  applied  to  any 
other  purpose,  or  to  supply  the  common  exigencies  of  the  state. 
When  it  is  applied  to  the  sole  purpose  above  mentioned,  each 
carriage  is  supposed  to  pay  exactly  for  the  wear  and  tear  which 
that  carriage  occasions  of  the  roads;  but  when  it  is  applied  to  any 
other  purpose,  each  carriage  is  supposed  to  pay  for  more  than  that 
wear  and  tear,  and  contributes  to  the  supply  of  some  other  exigency 
of  the  state.  But  as  the  turnpike  toll  raises  the  price  of  goods  in 
proportion  to  their  weight  and  not  to  their  value,  it  is  chiefly  paid 
by  the  consumers  of  coarse  and  bulky,  not  by  those  of  precious  and 
light  commodities.  Whatever  exigency  of  the  state  therefore  this 
tax  might  be  intended  to  supply,  that  exigency  would  be  chiefly 
supplied  at  the  expense  of  the  poor,  not  of  the  rich  ;  at  the  expense 
of  those  who  are  least  able  to  supply  it,  not  of  those  who  are  most 
able. 

Thirdly,  if  Government  should  at  any  time  neglect  the  reparation 
of  the  high  roads,  it  would  be  still  more  difficult  than  it  is  at 
present  to  compel  the  proper  application  of  any  part  of  the  turnpike 
tolls.  A  large  revenue  might  thus  be  levied  upon  the  people, 
without  any  part  of  it  being  applied  to  the  only  purpose  to  which 
a  revenue  levied  in  this  manner  ought  ever  to  be  applied.  If  the 
meanness  and  poverty  of  the  trustees  of  turnpike  roads  render  it 
sometimes  difficult  at  present  to  oblige  them  to  repair  their  wrong, 
their  wealth  and  greatness  would  render  it  ten  times  more  so  in  the 
case  which  is  here  supposed. 

In  France,  the  funds  destined  for  the  reparation  of  the  high  roads 
are  under  the  immediate  direction  of  the  executive  power.  Those 
funds  consist,  partly  in  a  certain  number  of  days^  labour  which  the 
country  people  are  in  most  parts  of  Europe  obliged  to  give  to  the 
reparation  of  the  highways,  and  partly  in  such  a  portion  of  the 
general  revenue  of  the  state  as  the  king  chooses  to  spare  from  his 
other  expenses. 


312 


THE  NATURE  AND  CAUSES  OF 


book  v. 


By  the  ancient  law  of  France,  as  well  as  by  that  of  most  other 
parts  of  Europe,  the  labour  of  the  country  people  was  under  the 
direction  of  a  local  or  provincial  magistracy,  which  had  no  im¬ 
mediate  dependency  upon  the  king’s  council ;  but  by  the  present 
practice,  both  the  labour  of  the  country  people,  and  whatever  other 
fund  the  king  may  choose  to  assign  for  the  reparation  of  the  high 
roads  in  any  particular  province  or  generality,  are  entirely  under 
the  management  of  the  intendant,  an  officer  who  is  appointed  and 
removed  by  the  king's  council,  who  receives  his  orders  from  it,  and 
is  in  constant  correspondence  with  it.  In  the  progress  of  des¬ 
potism  the  authority  of  the  executive  power  gradually  absorbs  that 
of  every  other  power  in  the  state,  and  assumes  to  itself  the  manage¬ 
ment  of  every  branch  of  revenue  which  is  destined  for  any  public 
purpose.  In  France,  however,  the  great  post-roads,  the  roads 
which  make  the  communication  between  the  principal  towns  of 
the  kingdom,  are  in  general  kept  in  good  order,  and  in  some 
provinces  are  even  a  good  deal  superior  to  the  greater  part  of  the 
turnpike  roads  of  England.  But  what  we  call  the  cross-roads,  that 
is,  the  far  greater  part  of  the  roads  in  the  country,  are  entirely 
neglected,  and  are  in  many  places  absolutely  impassable  for  any 
heavy  carriage.  In  some  places  it  is  even  dangerous  to  travel  on 
horseback,  and  mules  are  the  only  conveyance  which  can  safely  be 
trusted.  The  proud  minister  of  an  ostentatious  court  may  fre¬ 
quently  take  pleasure  in  executing  a  work  of  splendour  and 
magnificence,  such  as  a  great  highway  which  is  frequently  seen 
by  the  principal  nobility,  whose  applauses  not  only  flatter  his 
vanity,  but  even  contribute  to  support  his  interest  at  court.  But 
to  execute  a  great  number  of  little  works,  in  which  nothing  that 
can  be  done  can  make  any  great  appearance,  or  excite  the  smallest 
degree  of  admiration  in  any  traveller,  and  which,  in  short,  have 
nothing  to  recommend  them  but  their  extreme  utility,  is  a  business 
which  appears  in  every  respect  too  mean  and  paltry  to  merit  the 
attention  of  so  great  a  magistrate.  Under  such  an  administration, 
therefore,  such  works  are  almost  always  entirely  neglected. 

In  China,  and  in  several  other  governments  of  Asia,  the  executive 
power  charges  itself  both  with  the  reparation  of  the  high  roads  and 
with  the  maintenance  of  the  navigable  canals.  In  the  instructions 
which  are  given  to  the  governor  of  each  province,  those  objects,  it 
is  said,  are  constantly  recommended  to  him,  and  the  judgment 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


313 


which  the  court  forms  of  his  conduct  is  very  much  regulated  by 
the  attention  which  he  appears  to  have  paid  to  this  part  of  his 
instructions.  This  branch  of  public  police  accordingly  is  said  to  be 
very  much  attended  to  in  all  those  countries,  but  particularly  in 
China,  where  the  high  roads,  and  still  more  the  navigable  canals, 
it  is  pretended,  exceed  very  much  everything  of  the  same  kind 
which  is  known  in  Europe.  The  accounts  of  those  works,  however, 
which  have  been  transmitted  to  Europe,  have  generally  been  drawn 
up  by  weak  and  wondering  travellers  ;  frequently  by  stupid  and 
lying  missionaries.  If  they  had  been  examined  by  more  intelligent 
eyes,  and  if  the  accounts  of  them  had  been  reported  by  more  faithful 
witnesses,  they  would  not,  perhaps,  appear  to  be  so  wonderful. 
The  account  which  Bernier  1  gives  of  some  works  of  this  kind  in 
Hindostan  falls  very  much  short  of  what  had  been  reported  of  them 
by  other  travellers,  more  disposed  to  the  marvellous  than  he  was. 
It  may  too,  perhaps,  be  in  those  countries,  as  it  is  in  France,  where 
the  great  roads,  the  great  communications  which  are  likely  to  be 
the  subjects  of  conversation  at  the  court  and  in  the  capital,  are 
attended  to,  and  all  the  rest  neglected.  In  China,  besides,  in 
Hindostan,  and  in  several  other  governments  of  Asia,  the  revenue 
of  the  sovereign  arises  almost  altogether  from  a  land-tax  or  land- 
rent,  which  rises  or  falls  with  the  rise  and  fall  of  the  annual 
produce  of  the  land.  The  great  interest  of  the  sovereign,  there- 
*  fore,  his  revenue,  is  in  such  countries  necessarily  and  immediately 
connected  with  the  cultivation  of  land,  with  the  greatness  of  its 
produce,  and  with  the  value  of  its  produce.  But  in  order  to  render 
that  produce  both  as  great  and  as  valuable  as  possible,  it  is 
necessary  to  procure  to  it  as  extensive  a  market  as  possible,  and 
consequently  to  establish  the  freest,  the  easiest,  and  the  least 
expensive  communication  between  all  the  different  parts  of  the 
country;  which  can  be  done  only  by  means  of  the  best  roads 
and  the  best  navigable  canals.  But  the  revenue  of  the  sovereign 
does  not,  in  any  part  of  Europe,  arise  chiefly  from  a  land-tax  or 
land-rent.  In  all  the  great  kingdoms  of  Europe,  perhaps,  the 
greater  part  of  it  may  ultimately  depend  upon  the  produce  of  the 
land ;  but  that  dependency  is  neither  so  immediate  nor  so  evident. 
In  Europe,  therefore,  the  sovereign  does  not  feel  himself  so  directly 

1  The  Revolution  of  the  Empire  of  the  Great  Mogul :  A  Letter  to  Colbert  on  the 
Extent  of  Hindostan,  &c. 


314 


TEE  NATURE  AND  CAUSES  OF 

i 


BOOK  V. 


called  upon  to  promote  the  increase,  both  in  quantity  and  value,  of 
the  produce  of  the  land,  or,  by  maintaining*  good  roads  and  canals, 
to  provide  the  most  extensive  market  for  that  produce.  Though 
it  should  be  true,  therefore,  what  I  apprehend  is  not  a  little 
doubtful,  that  in  some  parts  of  Asia  this  department  of  the  public 
police  is  very  properly  managed  by  the  executive  power,  there 
is  not  the  least  probability  that,  during  the  present  state  of 
things,  it  could  be  tolerably  managed  by  that  power  in  any  part 
of  Europe. 

Even  those  public  works  which  are  of  such  a  nature  that  they 
cannot  afford  any  revenue  for  maintaining  themselves,  but  of  which 
the  conveniency  is  nearly  confined  to  some  particular  place  or  dis¬ 
trict,  are  always  better  maintained  by  a  local  or  provincial  revenue, 
under  the  management  of  a  local  and  provincial  administration, 
than  by  the  general  revenue  of  the  state,  of  which  the  executive 
power  must  always  have  the  management.  Were  the  streets  of 
London  to  be  lighted  and  paved  at  the  expense  of  the  Treasury,  is 
there  any  probability  that  they  would  be  so  well  lighted  and  paved 
as  they  are  at  present,  or  even  at  so  small  an  expense  ?  The  expense, 
besides,  instead  of  being  raised  by  a  local  tax  upon  the  inhabitants 
of  each  particular  street,  parish,  or  district  in  London,  would,  in  this 
case,  be  defrayed  out  of  the  general  revenue  of  the  state,  and  would 
consequently  be  raised  by  a  tax  upon  all  the  inhabitants  of  the 
kingdom,  of  whom  the  greater  part  derive  no  sort  of  benefit  from 
the  lighting  and  paving  of  the  streets  of  London. 

The  abuses  which  sometimes  creep  into  the  local  and  provincial 
administration  of  a  local  and  provincial  revenue,  how  enormous 
soever  they  may  appear,  are  in  reality,  however,  almost  always  very 
trifling,  in  comparison  of  those  which  commonly  take  place  in 
the  administration  and  expenditure  of  the  revenue  of  a  great 
empire.  They  are,  besides,  much  more  easily  corrected.  Under 
the  local  or  provincial  administration  of  the  justices  of  the  peace  in 
Great  Britain,  the  six  days’  labour  which  the  country  people  are 
obliged  to  give  to  the  reparation  of  the  highways  is  not  always 
perhaps  very  judiciously  applied,  but  it  is  scarce  ever  exacted  with 
any  circumstance  of  cruelty  or  oppression.  In  France,  under  the 
administration  of  the  intendants,  the  application  is  not  always  more 
judicious,  and  the  exaction  is  frequently  the  most  cruel  and  oppres¬ 
sive.  Such  corvees,  as  they  are  called,  make  one  of  the  principal 


L 


CHAP.  I. 


THE  WEALTH  OF  NATIONS. 


315 


instruments  of  tyranny  by  which  those  officers  chastise  any  parish 
or  communaute  which  has  had  the  misfortune  to  fall  under  their 
displeasure. 


Of  the  Fuhlic  Works  and  Institutions  which  are  necessary  for 
facilitating  particular  Branches  of  Commerce. 

The  object  of  the  public  works  and  institutions  above  men¬ 
tioned  is  to  facilitate  commerce  in  general.  But,  in  order  to  faci¬ 
litate  some  particular  branches  of  it,  particular  institutions  are 
necessary,  which  again  require  a  particular  and  extraordinary 
expense. 

Some  particular  branches  of  commerce,  which  are  carried  on  with 
barbarous  and  uncivilised  nations,  require  extraordinary  protection. 
An  ordinary  store  or  counting-house  could  give  little  security  to 
the  goods  of  the  merchants  wdio  trade  to  the  western  coast  of 
Africa.  To  defend  them  from  the  barbarous  natives,  it  is  necessary 
that  the  place  where  they  are  deposited  should  be,  in  some  measure, 
fortified. ;  The  disorders  in  the  Government  of  Hindostan  have 
been  supposed  to  render  a  like  precaution  necessary  even  among 
that  mild  and  gentle  people  ;  and  it  was  under  pretence  of  securing 
their  persons  and  property  from  violence,  that  both  the  English 
and  French  East  India  Companies  were  allowed  to  erect  the  first 
forts  which  they  possessed  in  that  country.  Among  other  nations, 
whose  vigorous  government  will  suffer  no  strangers  to  possess  any 
fortified  place  within  their  territory,  it  may  be  necessary  to  main¬ 
tain  some  ambassador,  minister,  or  consul,  who  may  both  decide, 
according  to  their  ow7n  customs,  the  differences  arising  among  his 
own  countrymen,  and,  in  their  disputes  with  the  natives,  may,  by 
means  of  his  public  character,  interfere  with  more  authority,  and 
afford  them  a  more  powerful  protection,  than  they  could  expect 
from  any  private  man.  The  interests  of  commerce  have  frequently 
made  it  necessary  to  maintain  ministers  in  foreign  countries,  where 
the  purposes,  either  of  war  or  alliance,  would  not  have  required 
any.  The  commerce  of  the  Turkey  Company  first  occasioned 
the  establishment  of  an  ordinary  ambassador  at  Constantinople. 
The  first  English  embassies  to  Russia  arose  altogether  from  com¬ 
mercial  interests.  The  constant  interference  with  those  interests 
necessarily  occasioned  between  the  subjects  of  the  different  states  of 


316 


THE  NATURE  AND  CAUSES  OF 


BOOK  Y. 


Europe,  lias  probably  introduced  the  custom  of  keepings  in  all 
neighbouring  countries,  ambassadors  or.  ministers  constantly  resi¬ 
dent  even  in  the  time  of  peace.  This  custom,  unknown  to  ancient 
times,  seems  not  to  be  older  than  the  end  of  the  fifteenth  or  be¬ 
ginning  of  the  sixteenth  century;  that  is,  than  the  time  when 
commerce  first  began  to  extend  itself  to  the  greater  part  of  the 
nations  of  Europe,  and  when  they  first  began  to  attend  to  its 
interests. 

It  seems  not  unreasonable,  that  the  extraordinary  expense,  which 

the  protection  of  any  particular  branch  of  commerce  may  occasion. 

should  be  defrayed  by  a  moderate  tax  upon  that  particular  branch  ; 
by  a  moderate  fine,  for  example,  to  be  paid  by  the  traders  when 

they  first  enter  into  it,  or,  what  is  more  equal,  by  a  particular  duty 
of  so  much  per  cent,  upon  the  goods  which  they  either  import  into, 
or  export  out  of,  the  particular  countries  with  which  it  is  carried  on. 
The  protection  of  trade  in  general  from  pirates  and  freebooters  is 
said  to  have  given  occasion  to  the  first  institution  of  the  duties  of 
customs.  But  if  it  was  thought  reasonable  to  lay  a  general  tax 
upon  trade,  in  order  to  defray  the  expense  of  protecting  trade  in 
general,  it  should  seem  equally  reasonable  to  lay  a  particular  tax 
upon  a  particular  branch  of  trade,  in  order  to  defray  the  extra¬ 
ordinary  expense  of  protecting  that  branch. 

The  protection  of  trade  in  general  has  always  been  considered  as 
essential  to  the  defence  of  the  commonwealth,  and,  upon  that 
account,  a  necessary  part  of  the  duty  of  the  executive  power..  The 
collection  and  application  of  the  general  duties  of  customs,  there¬ 
fore,  have  always  been  left  to  that  power.  But  the  protection  of 
any  particular  branch  of  trade  is  a  part  of  the  general  protection  of 
trade  ;  a  part,  therefore,. of  the  duty  of  that  power;  and  if  nations 
always  acted  consistently,  the  particular  duties  levied  for  the  pur¬ 
poses  of  such  particular  protection  should  always  have  been  left 
equally  to  its  disposal.  But  in  this  respect,  as  well  as  in  many 
others,  nations  have  not  always  acted  consistently;  and  in  the 
greater  part  of  the  commercial  states  of  Europe,  particular  com¬ 
panies  of  merchants  have  had  the  address  to  persuade  the  Legis¬ 
lature  to  entrust  to  them  the  performance  of  this  part  of  the  duty 
of  the  sovereign,  together  with  all  the  powers  which  are  necessarily 
connected  with  it. 

These  companies,  though  they  may,  perhaps,  have  been  useful  for 


CHAP.  I. 


THE  WEALTH  OF  NATIONS.