, . . AN INQUIRY INTO THE Nature and Caufes OF THE WEALTH of NATIONS. VOL. II. Digitized by the Internet Archive in 2015 https://archive.org/details/inquiryintonatur02smit_0 A N INQUIRY INTO THE Nature and Caufes OF THE WEALTH of NATIONS. By ADAM SMITH, LL. D. and F. R. S. Formerly Profeflbr of Moral Philofophy in the Univerfity of Glasgow. V O L. II. LONDON: PRINTED FOR W. STR AH AN j AND T. CADELL, IN THE STRAND. MDCCLXXVI. The Reader is defired to correft with his Pen the two followin ERRATA, which in this Second Volume affect, the Senfe. Page 467, Line 6, counting from the Bottom; inftead of immoveable, read moveable. Page 483, Lines 3 and 4, counting from the Top; inftead of three killings a bufal, read three Jhillings and four-pence a. bujbeh *AVO« A N I N Q, U I R Y INTO THE NATURE and CAUSES OF THE. WEALTH of NATIONS. BOOK IV. Of Syftems of political Oeconomy. INTRODUCTION. TP^OLITICAL ceconomy, confidered as a branch of the fcience of book \r a ftatefman or legiflator, propofes two diftinct obiec~ts : firft, „ IV- . JUL. . Introduction. to provide a plentiful revenue or fubfiftence for the people, or more properly to enable them to provide fuch a revenue or fub- fiftence for themfelves ; and fecondly, to fupply the ftate or com- monwealth with a revenue fufricient for the publick fervices. It propofes to enrich both the people and the fovereign. The different progrefs of opulence in different ages and nations, has given occafion to two different fyffems of political ceconomy, with regard to enriching the people. The one may be called the fyftem of commerce, the other that of agriculture. I mall endeavour to explain both as fully and diftinc"tly as I can, and fhall begin with the fyftem of commerce. It is the modern fyftem, and is beft underftood in our own country and in our own times. Vol. II. B THE NATURE AND CAUSES OF CHAP. I. Of the "Principle of the commercial, or mercantile Syftem. BOOK / I ^HAT wealth confifts in money, or in gold and filver, is c-— v— j JL a popular notion which naturally allies from the double function of money, as the inftrurnent of commerce, and as the meafure of value. In confequence of its being the inftrument of commerce, when we have money we can more readily obtain whatever elfe we have occafion for, than by means of any other commodity. The great affair, we always find, is to get money. When that is obtained, there is no difficulty in making any fub- fequent purchafe. In confequence of its being the meafure of value, we eftimate that of all other commodities by the quantity of money which they will exchange for. We fay 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 faid to love money ; and a carelefs, a generous, or a profufe man, is faid to be indifferent about it. To grow rich is to get money * and wealth and money, in fhort, are in common language con- fidered as in every refpect fynonymous. A rich country, in the fame manner as a rich man, is fup- pofed to be a country abounding in money ; and to heap up gold and filver in any country is fuppofed to be the readieft way to enrich it. For fome time after the difcovery of America, the firft en- quiry of the Spaniards, when they arrived upon any unknown coaft, ufed to be, if there was any gold or filver to be found in the neighbourhood. By the information which they received, they judged whether it was worth while to make a fettlement there, or if the country was worth the conquering. Piano Carpino, a monk fenfc THE WEALTH OF NATIONS. fent ambaflador from the king of France to one of the fons of C HA p. the famous Gengis Khan, fays that the Tartars ufed frequently k_-^v~«j to afk him if there was plenty of flieep and oxen in the kingdom of France. Their enquiry had the fame object with that of the Spaniards. They wanted to know if the country was rich enough to be worth the conquering. Among the Tartars, as among all other nations of fhepherds, who are generally ignorant of the ufe of money, cattle are the inftruments of commerce and the meamres of value. Wealth, therefore, according to them, con- lifted in cattle, as according to the Spaniards it confuted in gold and filver. Of the two, the Tartar notion, perhaps, was the neareft to the truth. Mr. Locke remarks a diftincrion between money and other moveable goods. All other moveable goods, he fays, are of fo confumable a nature that the wealth which confifts in them cannot be much depended on, and a nation which abounds in them one year may, without any exportation, but merely by their own wafte and extravagance, be in great want of them the next. Money, on the contrary, is a fteady 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 wafted and con- fumed. Gold and filver, therefore, are, according to him, the moft folid and fubftantial part of the moveable wealth of a nation, and to multiply thofe metals ought, he thinks, upon that account, to be the great objecl of its political ceconomy. Others admit that if a nation could be feparated from all the world, it would be of no confequence how much, or how little money circulated in it. The confumable goods which were cir- culated by means of this money, would only be exchanged for a greater or a fmaller number of pieces ; but the real wealth or B 2 poverty THE NATURE AND CAUSES OF K poverty of the country, they allow, would depend altogether upon -J the abundance or fcarcity of thofe confumable goods. But it is otherwife, they think, with countries which have connections with foreign nations, and which are obliged to cany on foreign wars, and to maintain fleets and armies in diftant countries. This, they fay, cannot be done, but by fending abroad money to pay them with > and a nation cannot fend much money abroad, unlefs it has a good deal at home. Every fuch nation, therefore, mufl endeavour in time of peace to accumulate gold and filver, that, when occafion requires, it may have wherewithal to carry on foreign wars. In confequence of thefe popular notions, all the different nations of Europe have ftudied, though to little purpofe, every poffible means of accumulating gold and filver in their refpective countries. Spain and Portugal, the proprietors of the principal mines which fupply Europe with thofe medals, have either prohibited their expor- tation under the fevereft penalties, or fubjected it to a confiderable duty. The like prohibition feems antiently to have made a part of the policy of moil other European nations. It is even to be found, where we mould expect leaft of all to find it, in fome old Scotch acts of parliament, which forbid under heavy penalties the car- rying gold or filver forth of the kingdom. The like policy antiently took place both in France and England. When thofe countries became commercial, the merchants found this prohibition, upon many occafions, extreamly inconvenient. They could frequently buy more advantageoufly with gold and filver than with any other commodity, the foreign goods which they wanted either to import into their own, or to carry to fome other foreign country. They remonftrated, therefore, againft this prohibition as hurtful to trade. They THE WEALTH OF NATIONS. They reprefented, firft, that the exportation of gold and filver CHAP, in order to purchafe foreign goods, did not always diminish the u— y-*» quantity of thofe metals in the kingdom. That, on the contrary* it might frequently increafe it ; becaufe if the confumption of foreign goods was not thereby increafed in the country, thofe goods might be re-exported to foreign countries, and being there fold for a large profit, might bring back much more treamre than was originally fent out to purchafe them. Mr. Mun com- pares this operation of foreign trade to the feed time and harveft of agriculture. " If we only behold," fays he, " the actions of *< the hufbandman in the feed time when he cafteth away much " good corn into the ground, we mail account him rather a madman ** than a hufbandman. But when we confider his labours in- *' the harveft, which is the end of his endeavours, we fhall find *' the worth and plentiful increafe of his actions." They reprefented, fecondly, that this prohibition could not hinder the exportation of gold and filver, which, on account of the fmallnefs of their bulk" in proportion to their value, could eafily be fmuggled abroad. That this exportation could only be prevented by a proper attention to, 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 was necef- farily paid to it in gold and filver, and thereby increafed the quan- tity of thofe metals in the kingdom. But that when it imported to a greater value than it exported, a contrary balance became due to foreign nations, which was neceffarily paid to them in the fame manner, and thereby diminifhed that quantity. That in this cafe to prohibit the exportation of thofe metals could not prevent it, but only, by making it more dangerous, render it more expenfive. That the exchange was thereby turned more againft the country which owed the balance, than it otherwife might have been ; the merchant who purchafed a bill upon the foreign country being obliged 6 THE NATURE AND CAUSES OF B O O K obliged to pay the banker who fold it, not only for the natural v-^J rlfk, trouble and expence of fending the money thither, but for the extraordinary rifk arifmg from the prohibition. But that the more the exchange was againft any country, the more the balance of trade became neceffarily againft it ; the money of that country becoming neceflarily of fo much lefs value, in comparifon with that of the country to which the balance was due. That if the exchange between England and Holland, for example, was five per cent, againft England, it would require a hundred and five ounces of filler in England to purchafe a bill for a hundred ounces of filver in Holland : that a hundred and five ounces of filver in England, therefore, would be worth only a hundred ounces of filver in Holland, and would purchafe only a proportionable quan- tity of Dutch goods : but that a hundred ounces of filver in Hol- land, on the contrary, would be worth a hundred and five ounces in England, and would purchafe a proportionable quantity of Englifh goods : That the Englifh goods which were fold to Holland would be fold fo much cheaper ; and the Dutch goods which were fold to England, fo much dearer, by the difference of the ex- change ; that the one would draw fo much lefs Dutch money to England, and the other fo much more Englifh money to Holland, as this difference amounted to : and that the balance of trade, therefore, would neceffarily be fo much more againft England, and would require a greater balance of gold and filver to be ex- ported to Holland. Those arguments were partly folid and partly fophiftical. They were folid fo far as they alTerted that the exportation of gold and filver in trade might frequently be advantageous to the country. They were folid too in aflerting that no prohibition could prevent their exportation, when private people found any advantage in ex- porting them. Eut they were fophiftical in fuppofing, that either to THE WEALTH OF NATIONS. to preferve or to augment the quantity of thofe metals required C more the attention of government, than to preferve or to augment u the quantity of any other ufeful commodities, which the freedom of trade, without any fuch attention, never fails to fupply in the proper quantity. They were fophiftical too, perhaps, in affert- ing that the high price of exchange neceffarily increafed, what they called, the unfavourable balance of trade, or occafioned the ex- portation of a greater quantity of gold and filver. That high price, indeed, was extremely difadvantageous to the merchants who had any money to pay in foreign countries. They paid fo much dearer for the bills which their bankers granted them upon thofe countries. But though the rifk arifing from the prohibition might occafion fome extraordinary expence to the bankers, it would not neceffarily carry any more money ou; of the country. This expence would generally be all laid out in the country, in fmug- gling the money out of it, and could feldom occafion the export- ation of a fingle fix-pence beyond the precife fum drawn for. The high price of exchange too would naturally difpofe the mer- chants to endeavour to make their exports nearly balance their im- ports, in order that they might have this high exchange to pay upon as fmall a fum as poffible. The high price of exchange, therefore, would tend, not to increafe, but to diminiih, what they called, the unfavourable balance of trade, and confequently the exportation of gold and filver. Such as they were, however, thofe arguments convinced the people to whom they were addreffed. They were addreffed by merchants to parliaments, and to the councils of princes, to nobles and to country gentlemen ; by thofe who were fuppofed to> underftand trade, to thofe who were confeious to themfelves that they knew nothing about the matter. That foreign trade enriched the country, experience demonflrated to the nobles and country 4 gentlemen, 8 THE NATURE AND CAUSES OF B 9«P K gentlemen, as well as to the merchants ; but how, or in what t— — v—— * manner, none of them well knew. The merchants knew perfectly in what manner it enriched themfelves. It was their bulinefs to know it. But to know in what manner it enriched the country, was no part of their bufinefs. This fubject never came into their confideration, but when they had occalion to apply to their country for fome change in the laws relating to foreign trade. It then became neceffary to fay fomething about the beneficial effects of foreign trade, and the manner in which thofe effects were obftructed by the laws as they then flood. To the judges who were to decide the bufinefs, it appeared a moft fatisfactory account of the matter, when they were told that foreign trade brought money into the country, but that the laws in queftion hindered it from bringing fo much as it otherwife would do. Thofe arguments therefore produced the wifhed-for effect. The prohibition of exporting gold and filver v/as in France and England confined to the coin of thofe refpective countries. The exportation of foreign coin and of bullion was made free. In Holland, and in fome other places, this liberty was extended even to the coin of the country. The attention of government v/as turned away from guarding againfl the exportation of gold and filver, to watch over the balance of trade, as the only caufe which could occafion any augmentation or diminution of thofe metals. From one fruitlefs care it was turned away to an- other care much more intricate, much more embarraffing, and juft equally fruitlefs. The title of Mun's book, England's Treafure in Foreign Trade, became a fundamental maxim in the political ceconomy, not of England only, but of all other commercial countries. The inland or home trade, the moft important of all, the trade in which an equal capital affords the greater! revenue and -creates the greater!: employment to the people of the country, was .confidered as fubfidiary only to foreign trade. It neither brought money into the country, it was faid, nor carried any out of it. The THE WEALTH OF NATIONS. The country therefore could never become either richer or poorer by fC means of it, except fo far as its profperity or -decay might indirectly influence the ftate of foreign trade. A country that has no mines of its own muft undoubtedly draw its gold and filver from foreign countries, in the fame manner as one that has no vineyards of its own muft draw its wines. It does not feem neceflary, however, that the attention of government mould 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 occafion for j and a country that has wherewithal to buy gold and filver, will never be in want of thofe metals. They are to be bought for. a certain price like all other commodities, and as they are the price of all other commodities, fo all other com- modities are the price of thofe metals. We truft with perfecl fecu- rity that the freedom of trade, without any attention of govern- ment, will always fupply us with the wine which we have occafion for : and we may truft with equal fecurity that it will always fup- ply us with all the gold and filver which we can afford to purchafe or to employ, either in circulating our commodities or in other ufes. The quantity of every commodity which human induftry can either purchafe or produce, naturally regulates itfelf in every country according to the effectual demand, or according to the demand of thofe who are willing to pay the whole rent, labour, and profits which muft be paid in order to prepare and bring it to market. But no commodities regulate themfelves more eafily or more exactly accord- ing to this effectual demand than gold and filver j becaufe on account of the fmall bulk and great value of thofe metals, no commodities can be more eafily tranfported from one place to another, from the .places where they are cheap, to thofe where they are dear, from the Vol. II. C places to THE NATURE AND CAUSES OF B K P^aces where they exceed, to thofe where they fall ftiort of this ef- ^ fectual demand. If there was in England, for example, art effectual demand for an additional quantity of gold, a packet-boat could bring from Lifibon, or from wherever elfe it was to be had, fifty tuns of gold, which could be coined into more than five mil- lions of guineas. But if there was an effectual demand for grain to the fame value, to import it would require, at five guineas a tun, a million of tuns of fhipping, or a thoufand fhips of a thoufand tuns each. The navy of England would not be fuf- ficient. When the quantity of gold and filver imported into any country- exceeds the effectual demand, no vigilance of government can prevent their exportation. All the fanguinary laws of Spain and Portugal are not able to keep their gold and filver at home. The continual importations from Peru and Brazil exceed the effectual demand of thofe countries, and fink the price of thofe metals there below that in the neighbouring countries. If, on the contrary* in any particular country their quantity fell fhort of the effectual demand, fo as to raife their price above that in the neighbouring countries, the government would have no occafion to take any pains to import them. If it was even to take pains to prevent their importation, it would not be able to effectuate it. Thofe metals, when the Spartans had got wherewithal to purchafe them, broke through all the barriers which the laws of Lycurgus oppofed to their entrance into Lacedemon. All the fanguinary laws of the cuftoms, are not able to prevent the importation of the teas of the Dutch and Gottenburg Eaft India companies ; becaufe fomewhat cheaper than thofe of the Britifh company. A pound of tea, however, is about a hundred times the bulk of one of the higher!: prices, fixteen fhillings, that is commonly paid for it in filver, and more than two thoufand times the bulk of the 4 fame THE WEALTH OF NATIONS ii fame price in gold, and confequently juft fo many times more dif- CHAP, ficult to fmuggle. <— -v'-— < It is partly owing to the eafy tranfportation of gold and filver from the places where they abound to thofe where they are wanted, that the price of thofe metals does not fluctuate continually like that of the greater part of other commodities, which are hindered by their bulk from fhifting their fituation, when the market happens to be either over or underftocked with them. The price of thofe metals, indeed, is not altogether exempted from variation, but the changes to which it is liable are generally flow, gradual, and uni- form. In Europe, for example, it is fuppofed, without much foundation perhaps, that, during the courfe of the prefent and preceeding century, they have been conftantly but gradually fink- ing in their value, on account of the continual importations from the Spanifh Weft Indies. But to make any fudden change in the price of gold and filver, fo as to raife or lower at once, fenfibly and remarkably, the money price of all other commodities, re- quires fuch a revolution in commerce as that occafioned by the difcovery of America. If notwithstanding all this, gold and filver fliould at any time fall fhort in a country which has wherewithal to purchafe them, there are more expedients for fupplying their place, than that of almoft any other commodity. If the materials of manufacture are wanted, induftry muft flop. If pro virions are wanted, the people muft ftarve. But if money is wanted, barter will fupply its place, though with a good deal of inconveniency. Buying and felling upon credit, and the different dealers compenfating their credits with one another, once a month or once a year, will fupply it with lefs inconveniency. A well regulated paper money will fupply it, not only without any inconveniency, but with very C 2 great 12 THE NATURE AND CAUSES OF' BOOK great advantages. Upon every account, therefore, the attention v-*-*-' of government never was fo unnecefiarily employed, as when di* reeled to watch over the prefervation or increafe of the quantity of money in any country. . No complaint, however, is more common than that of a fcarrit^ of money. Money, like wine, muft always be fcarce with thofe v/ho have neither wherewithal to buy it; nor credit to borrow iti Thofe who have either, , will feldom be in want either of the money,' or of the wine which they have occafion for. This complaint; however, of the fcarcity of money, is not always confined to im- provident fpendthrifts. It, is-, fometimes general through a whole mercantile town, and the country in * its neighbourhood. Over- trading is the. common caufe of it. Sober men, whofe projects have been difproportioned to their capitals, are as likely to have neither wherewithal to buy money, nor credit to borrowit, as pro- digals whofe. expence has been difproportioned to their revenues Before their projects can be brought to bear, their flock is gone, and their credit with it. They run about. every where to borrow money, and every body tells them that they have none to lend. Even fuchJ general complaints of the fcarcity of money do not always prove that the ufual number of gold and filver pieces are not circulating in the country, but that many people want thofe pieces who have nothing to give for them. When the profits of trade happen to be greater than ordinary, overtrading, becomes a general error both among great, and fmall dealers. They do not always fend more; money abroad than ufual, but they buy upon credit both at home and abroad, an unufual quantity, of goods, which they fend to- fome diftant 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 pur- chafe money, or give folid fecurity for borrowing. It is not any- fcarcity THE WEALTH OF NATIONS. fearcity of gold and filver, but the difficulty which fuch people find C in- borrowing, and which their creditors find in getting payment, w that occafions the general complaint of the fearcity of money. It would be too ridiculous to go about ferioufly to prove, that wealth does not confift in money, or in gold and filver > but in what money purchafes, and is valuable only for purchafing.. Money, no doubt, makes always a part of the national capital ; ; but it has already been fliown that it generally makes but a fmali part, . and always the moft unprofitable part of it. It is not becaufe wealth confifts more efTentlally in money than in. s goods, that the merchant finds it generally more eafy to buy goods with money,, than to buy money with goods ; but becaufe money is the known and eftablifhed inftrument of commerce, for which, every thing is readily given in exchange, but which is not always with equal readinefs to be got in exchange for every thing. The greater part of goods befides are more periihable than money, and Ire may frequently fuftain a much greater lofs by keeping them* When his goods are upon hand too, he is more liable to fuch demands for money , as he may not be able to anfwer, than when he has got their price in his coffers. Over and above all this* his profit arifes more directly from felling than from buying, , and he is upon all thefe 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 warehoufe, may fometimes be ruined ' by not being able, to fell them in time, a nation or country is not liable to the fame accident. The whole capital of a merchant frequently confifls in psrifhable goods deftined for purchafing money. But it is but a very fmall part of the annual produce of the land and labour of a country which can ever be deftined for purchafing gold and filver from ) 4 THE NATURE AND CAUSES OF BOOK from their neighbours. The far greater part is circulated and cJ^~ i confumed among themfelves ; and even of the furplus which is fent abroad, the greater part is generally deftined for the purchafe of other foreign goods. Though gold and filver, therefore, could not be had in exchange for the goods deftined to purchafe them, the nation would not be ruined. It might, indeed, fufFer fome lofs and inconveniency, and be forced upon fome of thofe expe- dients which are neceffary for fupplying the place of money. The annual produce of its land and labour, however, would be the fame, or very nearly the fame, as ufual, becaufe the fame, or very nearly the fame consumable capital would be employed in maintaining it. And though goods do not always draw money fo readily as money draws goods, in the long-run they draw it more neceflarily than even it draws them. Goods caa ferve many other purpofes befides purchafing money, but money can ferve no other purpofe befides purchafing goods. Money, therefore, neceflarily runs after goods, but goods do not always or neceflarily run after money. The man who buys, does not always mean to fell again, but frequently to ufe or to confume j whereas he who fells, always means to buy again. The one may frequently have done the whole, but the other can never have done more than the one-half of his bufinefs. It is not for its own fake that men defire money, but for the fake of what they can purchafe with it. Consumable commodities, it is faid, arefoon deftroyed; where- as gold and filver are of a more durable nature, and, were it not for this continual exportation, might be accumulated for ages to- gether, to the incredible augmentation of the real wealth of the country. Nothing, therefore, it is pretended, can be more dif- advantageous to any country, than the trade which confifts in the exchange of fuch lading for fuch perifhable commodities. We do not, however, reckon that trade difadvantageous which confifts in THE WEALTH OF NATIONS J5 in the exchange of the hardware of England for the wines of c HjA p- France ; and yet hardware is a very durable commodity, and was t^-^—J 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 fuch utenfils is in every country neceffarily limited by the ufe which there is for them ; that it would be abfurd to have more pots and pans than were neceffary for cooking the victuals ufually con fumed there j and that if the quantity of victuals were to in- creafe, the number of pots and pans would readily increafe along with it, a part of the increafed quantity of victuals being employed in purchafing them, or in maintaining an additional number of workmen whofe bufinefs it was to make them. It mould as readily occur that the quantity of gold and filver is in every country limited by the ufe which there is for thofe metals that their ufe confirms in circulating commodities as coin, and in affording a fpecies of houfhold furniture as plate ; that . the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it : increafe that value, and immediately a part of it will be fent abroad to purchase, wherever it is to be had, the additional quantity of coin requifite for circulating them : that the quantity of plate is regulated by the number and wealth of thofe private families who chufe to indulge themfelves in that fort of magnificence : increafe the number and wealth of fuch families, and a part of this increafed wealth will moft probably be employed in purchafing, wherever it is to be found, an addi- tional quantity of plate : that to attempt to increafe the wealth of any country, either by introducing or by detaining in it an unnecefTary quantity of gold and filver, is as abfurd as it would be to attempt to increafe the good cheer of private families, by obliging them to keep an unnecefTary number of kitchen utenfils. As the expence of purchafing thofe unnecefTary utenfils would diminifh inftead THE NATURE -AND CAUSES OF inftead of increafmg either the quantity or goodnefs of the family provifions ; fo the expence of purchafing an unneceffary quantity of gold and . filver mull, in every country, as neceffarily diminifh. the wealth which feeds, cloaths and lodges, which maintains and employs the people. Gold and filver, whether in the fhape of coin or of plate, are utenfils, it mull: be remembered, as much as the furniture of the kitchen. Increafe the ufe for them, increafe the confumable commodities which are to be circulated, managed and prepared by means of them, and you will infallibly increafe the quantity ; but if you attempt, by extraordinary means, to in- creafe the quantity, you will as infallibly diminifh the ufe and even the quantity too, which in thofe metals can never be greater than what the ufe requires. Were they ever to be accumulated beyond this quantity, their tranfportation is fo eafy, and the lofs which attends their lying idle and unemployed fo great, that no law could prevent their being immediately fent out of the country. It is not always neceffary to accumulate gold and filver, in order to enable a country to carry on foreign wars, and to main- tain fleets and armies in diftant countries. Fleets and armies are maintained, not with gold and filver, but with confumable goods. The nation which, from the annual produce of its domeftic induftry, from the annual revenue arifing out of its lands, labour and con- fumable (lock, has wherewithal to purchafe thofe confumable goods in diftant countries, can maintain foreign wars there. A nation may purchafe the pay and provifions of an army in a diftant country three different v/ays ; by fending abroad either, firft, fome part of its accumulated gold and filver ; or, fecondly, fome part of the annual produce of its manufactures ; or laft of all, fome part of its annual rude produce. 7 The THE WEALTH OF NATIONS. i The gold and (liver which can properly beconfidered as accumu- CHAP, lated or ftored up in any country, may be diftinguifhed into three v— -v^j parts ; nrft, the circulating money ; fecondly, the plate of private families ; and laft of all, the money which may have been collected by many years parfimony, and laid up in the treafury of the prince. It can feidom happen that much can be fpared from the circulating money of the country ; becaufe in that there can feidom be much redundancy. The value of goods annually bought and fold in any country requires a certain quantity of money to circulate and diftribute them to their proper confumers, and can give employment to no more. The channel of circulation neceffa- rily draws to itfelf a fum fafficient to fill it, and never admits any more. Something, however, is generally withdrawn from this channel in the cafe of foreign war. Ey the great number of people who are maintained abroad, fewer are maintained at home. Fewer goods are circulated there, and lefs money becomes neceffary to circulate them. An extraordinary quantity of paper money, of fome fort or other too, fuch as exchequer notes, navy bills, and bank bills in England, is generally iffued upon fuch occafions, and by fupplying the place of circulating gold and filver, gives an opportunity of fending a greater quantity of it abroad. All this, however, could afford but a poorrefource for maintaining a foreign war, of great expence and feveral years duration. The melting down the plate of private families, has upon every occaiion been found a ftill more infignincant one. The French, in the beginning of the lafr war, did not derive fo much advantage from this expedient as to compenfate the lofa of the fafhion. The accumulated treafures of the prince have, in former times, afforded a much greater and more lafting refource. In the prefent times, if you except the king of Prufiia, to accumulate treafure feems to be no part of the policy of European princes. Vol. II. D Th* •i8 THE NATURE AND CAUSES OF BOOK The funds which maintained the foreign wars of the prefent y-^j ^century, the moll: expeniive perhaps which hiftory records, feem to have had little dependency upon the exportation either of the circulating money, or of the plate of private families, or of the treafure of the prince. The laft French war coft Great Britain upwards of ninety millions, including not only the feventy-five millions of new debt that was contracted, but the additional two {hillings in the pound land tax, and what was annually borrowed of the finking fund. More than two-thirds of this expence was laid out in diftant countries ; in Germany, Portugal, America, in the ports of the Mediterranean, in the Eaft and Weft Indies. The kings of England had no accumulated treafure. We never heard of any extraordinary quantity of plate being melted down. The circulating gold and filver of the country had not been fup- pofed to exceed eighteen millions. Since the late recoinage of the gold, however, it is believed to have been a good deal under-rated. 'Let us fuppofe, therefore, according to the exaggerated computation of Mr. Horfely, that, gold and lilver together, it amounted to thirty millions. Had the war been carried on, by means of our money, the whole of it muft, even according to this computation, have been fent out and returned again at leaft twice, in a period of between fix and feven years. Should this be fuppofed, it would afford the moft decifive argument to demonftrate how unnecefTary it is for government to watch over the prefervation of money, fince upon this fuppofition the whole money of the country muft have gone from it and returned to it again, two different times in fo fhort a period, without any body's knowing any thing of the matter. The channel of circulation, however, never appeared more empty than ufual daring any part of this period. Few peo- ple wanted money who had wherewithal to pay for it. The profits of foreign trade, indeed, were greater than ufual during the whole war; but efpecially towards the end of it. This occafioned, what it always cccafions, a general overtrading in all the ports of Great Britain ; and this again occafioned the ufual complaint of the 4 fcarcity f THE WEALTH OF NATIONS. 19 fcarcity of money, which always follows overtrading. Many CHAP-, people wanted it, who had neither wherewithal to buy it, nor credit v— *~ v— — ' to borrow it ; and becaufe the debtors found it difficult to borrow, the creditors found it difficult to get payment. Gold and filver, however, were generally to be had for their value, by thofe who had that value to give for them. The enormous expence of the late war, therefore, mud: have been chiefly defrayed, not by the exportation of gold and filver, but by that of Britifh commodities of fome kind or other. When the government, or thofe who acted under them, contracted with a merchant for a remittance to fome foreign country, he would naturally endeavour to pay his foreign correfpondent, upon whom he had granted a bill, by fending abroad rather commodities than gold and filver. If the commodities of Great Britain were not in demand in that country, he would endeavour to fend them to fome other country, in which he could purchafe a bill upon that country. The tranfportation of commodities, when properly fluted to the market, is always attended with a confiderable profit ; whereas that of gold and filver is fcarce ever attended with any. When thofe metals are fent abroad in order to purchafe foreign commodities, the merchant's profit arifes, not from the purchafe, but from the fale of the returns. But when they are fent abroad merely to pay a debt, he gets no returns, and confequently 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 'filver. The great quantity of Britifh goods ex- ported during the courfe of the late war, without bringing back any returns, is accordingly remarked by the author of The Prefer* t State of the Nation. Besides the three forts of gold and filver above mentioned, there as in all great commercial countries a good deal of bullion alter- D 2 nately THE NATURE AND CAUSES OF nately imported and exported for the purpofes of foreign trade. This bullion, as it circulates among different commercial countries in the fame manner as the national coin circulates in every particular country, may be confidered as the money of the great mercantile republick. The national coin receives its movement and di- rection from the commodities circulated within the precincts of each particular country : the money of the mercantile republick, from thofe circulated between different countries. Both are em- ployed in facilitating exchanges, the one between different indivi- duals of the fame, the other between thofe of different nations. Part of this money of the great mercantile republick may have been, and' probably was, employed in carrying on the late war. Iii time of a general war, it is natural to fuppofe that a movement and direction fhould be impreffed upon it, different from what it ufuaily follows in profound peace ; that it fhould circulate more about the feat of the war, and be more employed in purchafing there, and in the neighbouring countries, the pay and provifions of the different armies. But whatever part of this money of the mercantile republick, Great Britain may have annually em- ployed in this manner, it muft have been annually purchafed, either with Britifh commodities, or with fomething elfe that had been pur- chafed with them ; which ftill brings us back to commodities, to the annual produce of the land and labour of the country, as the ultimate refources which enabled us to carry on the war. It is natural indeed to fuppofe, that fo great an annual expence muft have been de- frayed from a great annual produce. The expence of 1761, for example, amounted to more than nineteen millions. No accumulation could have fupported fo great an annual profufion. There is no annual produce even of gold and fdver which could have fupported it. The whole gold and filver annually im- ported into both Spain and Portugal, according- to the beft accounts, does not commonly much exceed fix millions fterling, which, THE WEALTH OF NATIONS. which, in fome years, would fcarce have paid four months expence of the late war. The commodities moft proper for being tranfported to diftant? countries, in order to purchafe there, either the pay and provifibns of an army, or fome part of the money of the mercantile republick to be employed in purchafmg them, feem to be the finer and more improved manufactures ; fuch as contain a great value in a fmall bulk, and can, therefore, be exported to a great diftance at little exDence. A country whofe induxhy produces a great annual furplus of fuch manufactures, which are ufually exported to foreign countries, may carry on for many years a very expenfive foreign war, without either exporting any confiderable quantity of gold and filver, or even having any fuch quantity to export. A con- fiderable part of the annual furplus of its manufactures muff, indeed, in this cafe be exported, without bringing back any returns. Some part of it, however, may "frill continue to bring back a return. The manufacturers, during the war, will have a double demand upon them, and be called upon, firfl, to work up goods to be fent abroad, for paying the bills drawn upon foreign countries for the pay and provifions of the army; and, fecondly, to work up fuch as are neceffary for purchafmg the common returns that had ufually been confumed in the country. In the midft of the moft deflructive foreign war, therefore, the greater part of manufactures may frequently flourim greatly ; and, on the contrary, they may. decline on the return of the peace; They may flouriih amidfl: the- ruin of their country, and begin to decay upon the return of its profperity. The different flate of many different branches of the Britifh manufactures during the late war, and for fome time after the peace, may ferve as an illuftration of what has been juft now faid, , No THE NATURE AND CAUSES OF No foreign war of great expence or duration could conveniently be carried on by the exportation of the rude produce of the foil. The expence of fending fuch a quantity of it to a foreign country as might pmchafe the pay and provifions of an army, would be too great. Few countries too produce much more rude produce than what is fufficient for the fubfifrence of their own inhabitants. To fend abroad any great quantity of it therefore, would be to fend abroad a part of the neceffary fubfiftencc of the people. It is otherwife with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the fur- plus part of their work is exported. Mr. Hume frequently takes notice of the inability of the antient kings of England to carry on, without interruption, any foreign war of long duration. The Englifh, in thofe days, had nothing wherewithal to purchafe the pay and provifions of their armies in foreign countries, but either the rude produce of the foil, of which no confiderable part could be fpared from the home confumption, or a few manufactures of the coarfeft kind, of which, as well as of the rude produce, the tranf- portation was too expenfive. This inability did not arife from the want of money, but of the finer and more improved manufactures. Buying and felling was tranfacled by means of money in England then, as well as now. The quantity of circulating money muft have borne the fame proportion to the number and value of pur- chafes and fales ufually tranfacled at that time, which it does to thofe tranfacled at prefcnt ; or rather it mufc have borne a greater proportion, becaufe there was then no paper, which now occupies a great part of the employment of gold and filver. Among nations to whom commerce and manufactures are little known, the fovereign, upon extraordinary occafions, can feldom draw any cmfiderable aid from his fubjects, for reafons which fhall be explained hereafter. It is in fuch countries, therefore, that he generally endeavours to accumulate a treafure, as the only refource againfc fuch emergencies. Independant of this necefllty, he is in fuch THE WEALTH OF NATIONS. fuch a fituation naturally difpofed to the parfimony requifite for accumulation. - In that fimple ftate, the expence even of a fove- reign is not directed by the vanity which delights in the gaudy, finery of a court, but is employed in bounty to his tenants, and hof- pitality to his retainers. But bounty and hofpitality very feldom lead to extravagance j though vanity almoft always does. Every Tartar chief, accordingly, has a treafure. The treafures of Ma- zepa, chief of the Coffacks in the Ukraine, the famous ally of Charles the Xllth, are faid to have been very great. The French kings of the Merovingian race had all treafures. When they divided their kingdom among their different, children, they divided their treafure too. The Saxon princes, and the fir ft kings after the conqueft, feem likewife to have accumulated treafures. The firft exploit of every new reign was commonly to feize the treafure of the preceeding king, as the moft effential meafure for lecuring the fucceffion. The fovereigns of improved, and com- mercial countries are not under the fame necefiity of accumulating treafures, becaufe they can generally draw from their ftibjecls ex- traordinary aids upon extraordinary occafions. They are likewife lefs difpofed to do fo. They naturally, perhaps neceffarily, follow the mode of the times, and their expence comes to be regulated by the fame extravagant, vanity which directs that of all the other great proprietors in their dominions. The infignificant pageantry of their court becomes every day more brilliant, and the expence. of it not only prevents accumulation, but frequently encroaches . upon the funds deftined for more necefTary expences. What Dercyllidas faid of the court of Perfia, may be applied to that of feveral European princes, that he faw there much, fplendor. but little ftrength, and many fervants but few foldiers. The importation of gold and filver is not the principal, much fcfs* the fole benefit which a nation derives from its foreign trade. Between THE NATURE AND CAUSES OF K Between whatever places foreign trade is carried on, they all of *-j them derive two diflinct benefits from it. It carries out that fur- plus part of the produce of their land and labour for which there is no demand among them, and brings back in return for it fome- thing elfe for which there is a demand. It gives a value to their fiiperfluitics, by exchanging them for fomething elfe, which may fatisfy a part of their wants, and increafe their enjoyments. By means of it, the narr-ownefs of the home market does not hinder the divifion of labour in any particular branch of art or manu- facture from being carried to the higheft perfection. By opening a more extenfive market for whatever part of the produce of their labour may exceed the home confumption, it encourages them to improve its productive powers, and to augment its annual produce to the utmoft, and thereby increafe the real revenue and wealth of the fociety. Thefe great and important fervices foreign trade is continually 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 refides generally derives the greatest, as he is generally more employed in fupplying the wants, and carrying out the fuperfluities of his own, than of any other par- ticular country. To import the gold and filver which may be wanted, into the countries which have no mines, is, no doubt, a part of the bufmefs of foreign commerce. It is, however, a moft infig- riificarit part of it. A country which carried on foreign trade merely upon this account, could fcarce have occafion to freight a fhip in a century. It is not by the importation of gold and filver, that the dif- covery of America has enriched Europe. By the abundance of the American mines, thofe metals have become cheaper. A fervice of plate can now be purchafed for about a third part of the corn, or a third part of the labour, which it would have colt in the 7 fifteenth THE WEALTH OF NATIONS. fifteenth century. With the fame annual expence of labour and c commodities, Europe can annually purchafe about three times the quantity of plate which it could have purchafed at that time. But when a commodity comes to be fold for a third part of what had been its ufual price, not only thofe who purchafed it before can purchafe three times their former quantity, but it is brought down to the level of a much greater number of purcha- iers ; ; perhaps to more than ten, perhaps to more than twenty times the former number. So that there may be in Europe at prefent, not only more than three times, but more than twenty or thirty times, the quantity of plate which would have been in it, even in its prefent. ftate of improvement, had the difcovery of the American mines never been made. So far Europe has, no doubt, gained a real con veniency, .though furely a very trifling one. The cheapnefs of gold and filver renders thofe metals rather lefs fit for the purpofes of money than they were before. In order to make the fame purchafes, we muft load ourfelves with a greater quantity of them, and carry about a (hilling in our pocket where a groat would have done before. . It is difficult to fay which is moft trifling, this inconveniency, or the oppofitre conveniency. Neither the one nor the other could have made any very efTential change in the ftate -of Europe. The difcovery of America, how- ever, certainly made a moft efTential one. By opening a new and inexhauftible market to all the commodities of Europe, it gave occafion to new • divifions of labour and improvements of art, which,- in the narrow circle of the antient 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 im- proved, and its produce increafed in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants. The commodities of Europe were almoft all new to America, and many of thofe of- America were new to Europe. Vol. II. E A new 2<5 THE NATURE AND CAUSES OF BOOK A new fett of exchanges, therefore, began to take place which haS c— y-*-» never been thought of before, and which mould naturally have proved as advantageous to the new, as it certainly did to the old continent. The favage injuftice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and ^eftruclive to feveral of thofe unfortunate countries. The difcovery of a paffage to the Eaft Indies, by the Cape of Good Hope, which happened much about the fame time, opened, perhaps, a (till more extenfive range to foreign commerce than even that of America, notwithstanding the greater diftance. There were but two nations in America, in any refpect fuperior to favages, and thefe were deftroyed almoft as foon as discovered. The .reft were mere favages. But the empires of China, Indoftan, Japan, as well as feveral others in the Eaft Indies, without having richer mines of gold or filver, were in every other respect much richer, better cultivated, and more advanced in all arts and manufactures than either Mexico or Peru, even though we mould credit, what plainly deferves no credit, the exaggerated accounts of the Spanifh writers, concerning the antient ftate of thofe empires. But rich and civilized nations can always exchange to a much greater value with one another, than with favages and barbarians. Europe, however, has hitherto derived much lefs advantage from its com- merce with the Eaft Indies, than from that with America. The Portuguefe monopolifed the Eaft India trade tothemfelves for about a century, and it was only indirectly and through them, that the .other nations of Europe could either fend out or receive any goods from that country. When the Dutch, in the beginning of the raft century, began to encroach upon them, they vefteel their whole Eaft India commerce in an exclufive company. The Englifh, French, Swedes, and Danes, have all followed their example, fo that no great nation in Europe has ever yet had the benefit of a free THE WEALTH OF NATIONS. free commerce to the Eaft Indies. No other reafon need be afligned why it has never been fo advantageous as the trade to America, which, between almoft every nation of Europe and its own colonies, is free to all its fubjects. The exclufive privileges of thofe Eaft India companies, their great riches, the great favour and protection which thefe have procured them from their refpective governments, have excited much envy againft them. This envy has frequently re- prefented their trade as altogether pernicious, on account of the great quantities of filver, 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 filver, , might, indeed, tend to impoverifh Europe in general, but not the particular country from which it was carried on ; becaufe, 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 juft now examining. It is, therefore, unneceffary to fay any thing further about either. By the annual exportation of filver to the Eaft" Indies, plate is probably fomewhat dearer in Europe than it other- wife might have been and coined filver probably purchafes a larger quantity both of labour and commodities. The former of thefe two effects is a very fmall lofs, the latter a very fmall advantage ; both too infignificant to deferve any part of the publick attention. The trade to the Eaft Indies, by opening a market to the com- modities of Europe, or, what comes nearly to the fame thing, to the gold and filver which is purchafed with thofe commodities, muft neceffarily tend to increafe the annual production of European commodities, and confequently the real wealth and revenue of Europe. That it has hitherto increafed them fo little, is pro- bably owing to the restraints which it every where labours under* 1 THOUGHT THE NATURE AND CAUSES OF I thought it neceffary, though at the hazard of being tedious, to examine at full length this popular notion that wealth confifts in money, or in gold and filver. Money in common language, as I have already obfcrved, frequently fignifies wealth ; and this ambiguity of expreflion has rendered this popular notion fo fa- miliar to us, that even they, who -are convinced of its abfurdity* are very apt to forget their own principles, and in the courfe of their reafonings to take it for granted as a certain and undeniable -truth. Some of the beft Englifh writers upon commerce fet out with obferving, that the wealth of a country confifts, not in its gold and filver only, but in its lands, houfes, and confumable goods of all different kinds. In the courfe of their reafonings, however, the lands, houfes, and confumable goods feem to flip out of their memory, and the ftrain of their argument frequently fuppofes that all wealth confifts in gold and filver, and that to •multiply thofe metals is the great object of national induftry and commerce. •The two principles being eftablifhed, however, that wealth confifted in gold and filver, and that thofe 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 neceffarily .became the great object, of political ceconomy to diminifh as, much as poflible the importation of foreign goods for home-confump- tion, and to increafe as much as poflible the exportation of the pro- duce of domeftick induftry. Its two great engines for enriching the country, therefore, were reftraints upon importation, and en- .couragements to exportation. The reftraints upon importation were of two kinds. Fpr st, -reftraints upon the importation of fuch ■■foreign goods for home-confumption as could be produced at home, from what- ..ever, country they were imported. 7 Secondly, THE WEALTH OF NATIONS. Second-ly, reftraints upon the importation of goods of almoft C all kinds from thofe particular countries with which the balance of <— trade was fuppofed to be difadvantageous. Those different reftraints confided fometimes in high duties, and fometimes in abfolute prohibitions. Exportation was encouraged fometimes by drawbacks, fome- times by bounties, fometimes by advantageous treaties of com- merce with foreign ftates, and fometimes by the eftablifhment of colonies in diftant countries. Drawbacks were given upon two different occafions. When the home-manufaclures were fubje6l to any duty or excife, either the whole or a part of it was frequently drawn back upon their exportation; and when foreign goods liable to a duty were im- ported, in order to be exported again, either the whole or a part of this duty was fometimes given back upon fuch expor- tation. Bounties were given for the encouragement either of fome beginning manufactures, or of fuch forts of induftry of other kinds as were fuppofed to deferve particular favour. By advantageous treaties of commerce, particular privileges were procured in fome foreign ftate for the goods and merchants of the country, beyond what were granted to thofe of other countries. By the eftablimment of colonies in diftant countries, not only particular privileges, but a monopoly was frequently procured for THE 'NATURE AND CAUSES OF for the goods and merchants of the country which eftablifhed them. The two forts of reftraints upon importation above mentioned, together with thefe four encouragements to exportation, conftitute the fix principal means by which the commercial fyftem propofes to increafe the quantity of gold and filver in any country by turning the balance of trade in its favour. I fhall coniider each of them in a particular chapter, and without taking much further notice of their fuppofed tendency to bring money into the country, I fhall examine chiefly what are likely to be the effects of each of them upon the annual produce of its induftry. According as they tend either to increafe or diminifh the value of this annual produce, they mi] ft evidently tend either to increafe or diminifh the real wealth and revenue of the country. THE WEALTH OF NATIONS. 3* CHAP. II. Of Reftraints upon the Importation of fuch Goods from Foreign Countries as can be produced at Home. BY reftraining either by high duties or by abfolute prohibitions CHAP, the importation of fuch goods from foreign countries as can ^.^L^ be produced at home, the monopoly of the home-market is more or lefs fecured to the domeftick induftry employed in producing them. Thus the prohibition of importing either live cattle or fait provifions from foreign countries fecures to the graziers of Great Britain the monopoly of the home-market for butchers- meat. The high duties upon the importation of corn, which in times of moderate plenty amount to a prohibition, give a like ad- vantage to the growers of that commodity. The prohibition of the importation of foreign woollens is equally favourable to the woollen manufacturers. The filk manufacture, though altogether employed upon foreign materials, has lately obtained the fame advantage. The linen manufacture has not yet obtained it, but is making great ftrides towards it. Many other forts of manu- facturers have, in the fame manner, obtained in Great Britain* either altogether, or very nearly a monopoly againft their coun- trymen. That this monopoly of the home-market frequently gives great encouragement to that particular fpecies of induftry which enjoys it, and frequently turns towards that employment a greater fhare of both the labour and flock of the fociety than v/ould otherwife have gone to it, cannot be doubted. But whether it tends either to THE NATURE AND CAUSES OF to increafe the general induftry of the fociety, or to give it the moft advantageous direction, is not, perhaps, altogether fo cer^ tain. The general induftry of the fociety never can exceed what the capital of the fociety can employ. As the number of workmen that can be kept in employment by any particular perfon muft bear a certain proportion to his capital, fo the number of thofe that can • be continually employed by all the members of a great . fociety muft bear a certain proportion to the whole capital of that fociety, , and never can exceed that proportion. No regulation of commerce can increafe the quantity of induftry in any fociety beyond what its capital can maintain. It can only divert a part of it into a . di- rection into which it might not otherwife have gone 3. and it is by no means certain that this artificial direction is likely to be more advantageous to the fociety than that into which, it would have gone, of its own accord." . Every individual is continually exerting himfelf to find out the moft advantageous employment for whatever capital he can com- mand. It is his own advantage, indeed, and not that of the fo- ciety, which he has in view. But the ftudy of his own advantage naturally, or rather neceffarily leads him to prefer that employment which is moft advantageous to the fociety. First, every individual endeavours to employ his capital as near home as he can, and confequently as much as he can in the fupport of domeftick induftry ; provided always that he can thereby obtain the ordinary, or not a great deal lefs than the ordinary pro- fits of ftock. Thus upon equal or nearly equal profits, every wholefale mer- chant naturally prefers the home-trade to the foreign trade of confumption, THE WEALTH OF NATIONS. 33 confumption, and the foreign trade of confumption to the carrying c H A P. trade. In the home-trade his capital is never fo long out of his u-y—J < fight as it frequently is in the foreign trade of confumption. He can know better the character and fituation of the perfons whom he trufts, and if he mould happen to be deceived, he knows better the laws of the country from which he muft feek redrefs. 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 neceffarily brought home, or placed under his own immediate view and com- mand. The capital which an Amfterdam merchant employs in carrying corn from Konnigfberg to Lifbon, and fruit and wine from Lifbon to Konnigfberg, muft generally be the one-half of it at Konnigfberg and the other half at Lifbon. No part of it need ever come to Amfterdam. The natural refidence of fuch a merchant fhould either be at Konnigfberg or Liibon, and it can only be fome very particular circumftances which can make him prefer the refidence of Amfterdam. The uneafinefs, however, which he feels at being feparated fo far from his capital, generally determines him to bring part both of the Konnigfberg goods which he deftines for the market of Lifbon, and of the Lifbon goods which he deftines for that of Konnigfberg, to Amfterdam : and though this neceffarily fubjects him to a double charge of load- ing and unloading, as well as to the payment of fome duties and cuftoms, yet for the fake of having fome part of his capital always under his own view and command, he willingly fubmits to this extraordinary charge; and it is in this manner that every country which has any confiderable fliare of the carrying trade» becomes always the emporium or general market for the goods of all the different countries whofe trade it carries on. The mer- chant, in order to fave a fecond loading and unloading, endeavours always to fell in the home-market as much of the goods of all thofe different countries as he can, and thus, fo far as he can, to Vol. II. F convert 34 THE NATURE AND CAUSES OF BOOK convert his carrying trade into a foreign trade of confumption. v-v~» A merchant, in the fame manner, who is engaged in the foreign trade of confumption, when he collects goods for foreign markets, will always be glad, upon equal or nearly equal profits, to fell as great a part of them at home as he can. He faves himfelf the rilk and trouble of exportation, when fo far as he can, he thus converts his foreign trade of confumption into a home-trade. Home is in this manner the center, if I may fay fo, round which the capitals of the inhabitants of every country are continually cir- culating, and towards which they are always tending, though by particular caufes they may fometimes be driven off and repelled from it towards more diftant employments. But a capital em-' ployed in the home-trade, it has already been mown, neceffarily puts into motion a greater quantity of domeftick induftry, and gives revenue and employment to a greater number of the inha- bitants of the country, than an equal capital employed in the foreign trade of confumption : and one employed in the foreign trade of confumption has the fame advantage 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 it is likely to afford the greater!: fupport to domeftick induftry, and to give revenue and employ- ment to the greateft number of the people of his own country. Secondly, every individual who employs his capital in the fupport of domeftick induftry, neceffarily endeavours fo to direct that induftry, that its produce may be of the greater!: poflible value. The produce of induftry is what it adds to the fubjec~t or ma- terials upon which it is employed. In proportion as the value of this produce is great or fmall, fo will likewife be the profits of the employer. But it is only for the fake of profit that any man em- ploys THE WEALTH OF NATIONS. ploys a capital in the fupport of induftry j and he will always, there- C fore, endeavour to employ it in the fupport of that induftry of u which the produce is likely to be of the greateft value, or to exchange for the greateft quantity either of money or of other goods. But the annual revenue of every fociety is always precifely equal to the exchangeable value of the whole annual produce of its in- duftry, or rather is precifely the fame thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the fupport of domeftick induftry, and fo to direct that induftry that its produce may be of the greateft value; every individual neceflarily labours to render the annual re- venue of the fociety as great as he can. He generally, indeed, neither intends to promote the publick intereft, nor knows how much he is promoting it. By preferring the fupport of domeftick to that of foreign induftry he intends only his own fecurity ; and by directing that induftry in fuch a manner as its produce may be of the greateft value, he intends only his own gain, and he is in this, as in many other cafes, led by an invifible hand to promote an end which was no part of his intention. Nor is it always the worfe for the fociety that it was no part of it. By purfuing his own intereft he frequently promotes that of the fociety more effectually than when he really intends to promote it. I have never known much good done by thofe who affected to trade for the publick good. Jt is an affec- tation, indeed, not very common among merchants, and very few words need be employed in difiuading them from it. What is the fpecies of domeftick induftry which his capital can employ, and of which the produce is likely to be of the greateft value, every individual, it is evident, can, in his local fituation, judge much better than any ftatefman or lawgiver can do for him. F 2 The .£ THE NATURE AND CAUSES OF BOOK The ftatefman, who fhould attempt to direct private people in what t, manner they ought to employ their capitals, would not only load himfelf with a moft unnecelTary attention, but aflume an authority which could fafely be trufted, not only to no fingle perfon, but to no council or fenate whatever, and which would no where be fo dangerous as in the hands of a man who had folly and pre- fumption enough to fancy himfelf fit to exercife it. To give the monopoly of the home-market to the produce of domeftick induftry, in any particular art or manufacture, is in fome meafure to direct private people in what manner they ought to employ their capitals, and muft, in almoft all cafes, be either a ufelefsor a hurtful regulation. If the produce of domeftick can be brought there as cheap as that of foreign induftry, the regulation is evidently ufelefs. If it cannot, it muft generally be hurtful. It is the maxim of every prudent mafter of a family, never to at- tempt to make at home what it will coft him more to make than to buy. The taylor does not attempt to make his own fhoes, but buys them of the fhoemaker. The fhoemaker does not attempt to make his own cloaths, but employs a taylor. The farmer at- tempts to make neither the one nor the other, but employs thofe different artificers. All of them find it for their intereft to employ their whole induftry in a way in which they have fome advantage over their neighbours, and to purchafe with a part of its produce, or what is the fame thing, with the price of a part of it, whatever elfe they have occafion for. What is prudence in the conduct of every private family, can fcarce be folly in that of a great kingdom. If a foreign coun- try can fupply us with a commodity cheaper than we ourfelves can make it, better buy it of them with fome part of the pro- duce of our own induftry, employed in a way in which we have fome THE WEALTH OF NATIONS. fome advantage. The general induftry of the country, being C always in proportion to the capital which employs it, will not u thereby be diminifhed, no more than that of the above-mentioned artificers j but only left to find out the way in which it can be employed with the greateft advantage. It is certainly not em- ployed to the greateft advantage, when it is thus directed to- wards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or lefs diminifhed, 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 fuppofition, that commodity could be purchafed from foreign countries cheaper than it can be made at home. It could, therefore, have been purchafed with a part only of the commodities, or, what is the fame thing, with a part only of the price of the commodities, which the induftry employed by an equal capital, would have produced at home, had it been left to follow its natural courfe. The induftry of the country, therefore, is thus turned away from a more, to a lefs advantageous employment^ and the exchangeable value of its annual produce, inftead of being increafed, according to the intention of the lawgiver, muft necef- farily be diminifhed by every fuch regulation* By means of fuch regulations, indeed, a particular manufacture may fometimes be acquired fooner than it could have been otherwife, and after a certain time may be made at home as cheap or cheaper than in the foreign country. But though the induftry of the ibciety may be thus carried with advantage into a particular channel fooner than it could have been otherwife, it will by no means follow that the fum total either of its induftry or of its revenue can ever be augmented by any fuch regulation. The induftry of the fociety can augment only in proportion as its capital augments ? and its capital can augment only in proportion to what can be gradually faved out of its revenue. But the immediate effect of 8 every 3* THE NATURE AND CAUSES OF BOOK every fuch regulation is to diminiih its revenue, and what diminimes v — v-^j its revenue, is certainly not very likely to augment its capital fafter than it would have augmented of its own accord, had both capital and induftry been left to find out their natural employments. Though for want of fuch regulations the fociety fliould never acquire the propofed manufacture, it would not, upon that account, neceffarily be the poorer in any one period of its duration, in every period of its duration its whole capital and induftry might ftill have been employed, though upon different objects, in the manner that was molt advantageous at the time. In every period its revenue might have been the greater! which its capital could afford, and both capital and revenue might have been augmenting with the greater!: poIRble rapidity. The natural advantages which one country has over another in producing particular commodities are fometimes fo great, that it is acknowledged by all the world to be in vain to ftruggle with them, I3y means of glaffes, hotbeds, and hotwalls, very good grapes can be raifed in Scotland, and very good wine too can be made of them at about thirty times the expence for which at lead: equally good can be brought from foreign countries. Would it be a reafonable 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 manifeff abfurdity in turning towards any em- ployment, thirty times more of the capital and induftry of the country, than would be neceffary to purchafe from foreign countries an equal quantity of the commodities wanted, there rauft be an abfurdity, though not altogether fo glaring, yet exactly of the fame kind, in turning towards any fuch employment a thirtieth, or even a three hundredth part more of either. Whether the ad- vantages which one country has over another, be natural or ac- quired, « THE WEALTH OF NATIONS. 3< quired, is in this refpect of no confequence. As long as the one C HA P. country has thofe advantages, and the other wants them, it will Ur-v--H 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 exercifes another trade, and yet they both find it more advantageous to buy of one ano- ther, than to make what does not belong to their particular trades. Merchants and manufacturers are the people who derive the greater!: advantage from this monopoly of the home market. The prohibition of the importation of foreign cattle, and of fait provifions, together with the high duties upon foreign corn, which in times of moderate plenty amount to a prohibition, are not near fo advantageous to the graziers and farmers of Great Britain, as other regulations of the fame kind are to its merchants and manu- facturers. Manufactures, thofe of the finer kind elpecially, are more eafily tranfported from one country to another than corn or cattle. It is in the fetching and carrying manufactures, accords ingly, that foreign trade is chiefly employed. In manufactures, a very fmall advantage will enable foreigners to underfeli our own workmen, even in the home market. It will require a very great one to enable them to do fo in the rude produce of the foil. If the free importation of foreign manufactures was permitted, feverai of the home manufactures would probably fuffer, and fome of of them, perhaps, go to ruin altogether, and a confiderable part of the ftock and induftry at prefent employed in them, would be forced to find out fome other employment. But the freeft im- portation of the rude produce of the foil could have no fuch effect upon the agriculture of the country. If the importation of foreign cattle, for example, was made ever fo free, fo few could be imported, that the grazing trade of Great Britain THE NATURE AND CAUSES OF K Britain could be little affected by it. Live cattle are, perhaps, the «-> only commodity of which the transportation is more expenfive by fea than by land. By land they carry themfelves to market. By fea, not only the cattle, but their food and their water too rauft be carried at no fmall expence and inconveniency. The fhort fea between Ireland and Great Britain, indeed, renders the importation of Irifh cattle more eafy. 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 intereft. of the graziers of Great Britain. Thofe parts of Great Britain which border upon the Irifh fea are all grazing countries. Irifli cattle could never be imported for their ufe, but muff be drove through thofe very extenfive countries, at no fmall expence and in- conveniency, before they could arrive at their proper market. Fat cattle could not be drove fo far. Lean cattle, therefore, only could be imported, and fuch importation could interfere, not with the intereft 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 fmall number of Irifh cattle imported fmce their importation was permitted, together with the good price at which lean cattle ftill continue to fell, feem to demonftrate that even the breeding countries of Great Britain are never likely to be much affected by the free importation of Irifh cattle. The common people of Ireland, indeed, are faid to have fometimes oppofed with violence the exportation of their cattle. But if the exporters had found any great advantage in continuing the trade, they could eafily, when the law was on their fide, have conquered this mobbifh oppofition. Feeding and fattening countries, befides, muft always be highly improved, whereas breeding countries are generally un- cultivated. The high price of lean cattle, by augmenting the value of THE WEALTH OF NATIONS. 4i of uncultivated land, is like a bounty againft improvement. To CHAP, any country which was highly improved throughout, it would be v— -» more advantageous to import its lean cattle than to breed them. The province of Holland, accordingly, is faid to follow this maxim at prefent. The mountains of Scotland, Wales, and Northumberland, indeed, are countries not capable of much im-^ provement, and feem deftined by nature to be the breeding coun- tries of Great Britain. The freeft importation of foreign cattle could have no other effect than to hinder thofe breeding countries from taking advantage of the increafing population and improve- ment of the reft of the kingdom, from raifmg their price to an exorbitant height, and from laying a real tax upon all the more improved and cultivated parts of the country. The freeft importation of fait provifions, in the fame manner, could have as little effect upon the intereft of the graziers of Great Britain as that of live cattle. Salt provifions are not only a very bulky commodity, but when compared with frefh meat, they are a commodity both of worfe quality, and as they coft more labour and expence, of higher price. They could never, therefore, come into competition with the frefh meat, though they might with the fait provifions of the country. They might be ufed for victualling mips for diftant voyages, and fuch like ufes, but could never make any confiderable part of the food of the people. The fmall quantity of fait provifions imported from Ire- land fmce 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 fenfibly affected by it. Even the free importation of foreign corn could very little affect the intereft of the farmers of Great Britain. Corn is a much more bulky commodity than butcher's-meat. A pound of Vol. H. G wheat THE NATURE AND CAUSES OF K wheat at a penny is as dear as a pound of butcher's-meat at four- ~> pence. The fmall quantity of foreign corn imported even in times of the greateft fcarcity, may fatisfy our farmers that they can have nothing to fear from the freeft 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 thoufand feven hundred and twenty- eight quarters of all forts of grain, and does not exceed the five hundredth and feventy-one part of the annual confumption. But as the bounty upon corn occalions a greater exportation in years of plenty, fo it muft of confequence occafion a greater importation in years of fcarcity, than would otherwife take place. By means of it, the plenty of one year does not compenfate the fcarcity of another, and as the average quantity exported is neceffarily aug- mented by it, fo muft likewife, in the actual ftate of tillage, the average quantity imported. If there was no bounty, as lefs corn- would be exported, fo it is probable that one year with another, lefs would be imported than at prefent. The corn merchants, the fetchers and carriers of corn, between Great Britain and foreign countries, would have much lefs employment, and might fuffer confiderably ; but the country gentlemen and farmers could fuffer very little. It is in the corn merchants accordingly, rather than in the country gentlemen and farmers, that I have obferved the greateft anxiety for the renewal and continuation of the bounty. Country gentlemen and farmers are, to their great honour, of all people, the leaft fubject to the wretched fpirit of monopoly. The undertaker of a great manufactory is fometimes alarmed if another work of the fame kind is eftablifhed within twenty miles of him. The Dutch undertaker of the woollen manufacture at Abbeville, ftipulated that no work of the fame kind mould be eftablimed within thirty leagues of that city. Farmers and country gentlemen THE WEALTH OF NATIONS. 43 gentlemen, on the contrary, are generally difpofed rather to promote c A p- than to obftruct the cultivation and improvement of their neigh- C- «J bours farms and eftates. They have no fecrets, fuch as thofe of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours, and of extending as far as poflible any new practice which they have found to be advan- tageous. Pius £>ucjlus, fays old Cato, JlabiliJJimufque, minime- que invidiofus ; minimeque male cogitantes funt, qui in eo Jludio occupati funt. Country gentleman and farmers, difperfed in dif- ferent parts of the country, cannot fo eafily combine as merchants and manufacturers, who being collected into towns, and accuftomed to that exclufive corporation fpirit which prevails in them, na- turally endeavour to obtain againft all their countrymen, the fame exclufive privilege which they generally poffefs againft the inhabitants of their refpective towns. They accordingly feem to have been the original inventors of thofe reftraints upon the im- portation of foreign goods, which fecure to them the monopoly of the home market. It. was probably in imitation of them, and to put themfelves upon a level with thofe, who, they found were difpofed to opprefs them, that the country gentlemen and farmers of Great Britain fo far forgot the generolity which is na- tural to their ftation, as to demand the exclufive privilege of fupplying their countrymen with corn and butcher's-meat. They did not perhaps take time to confider, how much lefs their intereft could be affected by the freedom of trade, than that of the people whofe 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 induftry of the country (hall at no time exceed what the rude produce of its own foil can maintain. There THE NATURE AND CAUSES OF There feem, however, to be two cafes in which it will generally be advantageous to lay forae burden upon foreign, for the encou- ragement of domeflick induftry. The firft is when fome particular fort of induftry is necefTary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its failors and fhipping. The act of navigation, therefore, very properly endeavours to give the failors and fhipping of Great Britain the monopoly of the trade of their own country, in fome cafes, by abfolute prohibitions, and in others by heavy burdens upon the fhipping of foreign countries. The following are the principal difpofitions of this act : First, all mips, of which the owners, m afters, and three- fourths of the mariners are not Britifh fubjects, are prohibited, upon pain of forfeiting (hip and cargo, from trading to the Britifh fettlements and plantations, or from being employed in the coafl- ing trade of Great Britain. Secondly, a great variety of the moft bulky articles of im- portation can be brought into Great Britain only, either in fuch fhips as are above defcribed, or in fhips of the country where thofe goods are produced, and of which the owners, matters, and three-fourths of the mariners are of that particular country ; and when imported even in mips of this latter kind, they are fubjecr to double aliens duty. If imported in fhips of any other country, the penalty is forfeiture of fhip and cargo. When this act was made, the Dutch were, what they {till 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^ THE WEALTH OF NATIONS. Thirdly, a great variety of the moft bulky articles of im- C portation are prohibited from being imported, even in Britifh mips, <- from any country but that in which they are produced •, under pnin of forfeiting fhip and cargo. This regulation too was probably intended againfl the Dutch. Holland was then, as now, the great emporium for all European goods, and by this regulation, Britifh (hips were hindered from loading in Holland the goods of any other European country. Fourthly, fait fifth of all kinds, whale-fins, whale-bone, oil and blubber, not caught by and cured on board Britifh. vefl'els, when imported into Great Britain, are fubjecled to double aliens duty. The Dutch, as they are frill the principal, were then the only fifhers in Europe that attempted to fupply foreign nations with nth. By this regulation, a very heavy burden was laid upon their fupplying Great Britain. When the act of navigation was made, though England and Holland were not actually at war, the moft violent animofity fubfifled between the two nations. It had begun during the government of the long parliament which firft framed this act, and it broke out foon after in the Dutch wars during that of the Protector and of Charles the lid. It is not impoffible, therefore, that fome of the regulations of this famous act may have proceeded from national animofity. They are as wife, however, as if they had all been dictated by the moft deliberate wifdom. National ani- mofity at that particular time aimed at the very fame object which the moft deliberate wifdom would have recommended, the dimi- nution of the naval power of Holland, the only naval power which could endanger the fecurity of England.. * The act of navigation is not favourable to foreign commerce,, ©r to the growth of that opulence which can arife from it. The inter.efti THE NATURE AND CAUSES OF K intereft of a nation in its commercial relations to foreign nations ~j is, like that of a merchant with regard to the different people with whom he deals, to buy as cheap and to fell as dear as poffible. But it will be moft likely to buy cheap, when by the moft perfect free- dom of trade it encourages all nations to bring to it the goods which it has occafion to purchafe ; and, for the fame reafon, it will .be moft likely to fell dear, when its markets are thus filled with the greater!: number of buyers. The act of navigation, it is true, lays no burden upon foreign {hips that come to export the produce of Britifh induftry. Even the antient aliens duty, which ufed to be paid upon all goods exported as well as imported, has, by feverai fubfequent 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 fell, they cannot always afford to come to buy ; becaufe coming without a cargo, they mult lofe the freight from their own country to Great Britain. By diminifhing the number of feliers, therefore, we neceffarily diminifli that of buyers, and are thus likely not only to buy foreign goods dearer, but to fell our own cheaper, than if there was a more perfect freedom of trade. As defence, however, is of much more importance than opulence, the acl of navigation is, perhaps, trie wifeft of all the commercial regulations of England. The fecond cafe, in which it will generally be advantageous to lay fome burden upon foreign for the encouragement of domeftick induftry, is, when fome tax is impofed at home upon the produce of the latter. In this cafe, it feems reafonable that an equal tax fhould be impofed upon the like produce of the former. This would not give the monopoly of the home market to domeftick ' induftry, nor turn towards a particular employment a greater fhare of the ftock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally THE WEALTH OF NATIONS. 47 go to it from being turned away by the tax, into a lefs natural c HA P. direction, and would leave the competition between foreign and u^-y--H domeftick induftry, after the tax, as nearly as poffible upon the fame footing as before it. In Great Britain, when any fuch tax is laid upon the produce of domeftick induftry, it is ufual at the fame time, in order to ftop the clamorous complaints of our merchants and manufacturers, that they will be underfold at home, to lay a much heavier duty upon the importation of all foreign goods of the fame kind. This fecond limitation of the freedom of trade according to1 feme people fhould, upon fome occalions, be extended much further than to the precife foreign commodities which could come into competition with thofe which had been taxed at home. When the neceflaries of life have been taxed in any country, it becomes proper,, they pretend, to tax not only the like neceffaries of life imported, from other countries, but all forts of foreign goods which can come into competition with any thing that is the produce of domeftick induftry. Subfiftence, they fay, becomes neceflarily dearer in confequence of fuch taxes ; and the price of labour muft always rife with the price of the labourers fubfiftence. Every com- modity, therefore, which is the produce of domeftick induftry^ though not immediately taxed itfelf, becomes dearer in confequence of fuch taxes, becaufe the labour which produces it becomes fo. Such taxes, therefore, are really equivalent, they fay, to a tax upon every particular commodity produced at home. In order to put domeftick upon the fame footing with foreign induftry, therefore, it becomes neceflary, they think, to lay fome duty upon every foreign commodity, equal to this enhancement of the price of the home commodities with which it can come into com- petition;. Whether THE NATURE AND CAUSES OF K Whether taxes upon the neceuaries of life, fuch as thofe in -j Great Britain upon malt, beer, foap, fait, leather, candles, &c. neceffarily raife the price of labour, and confequently that of all other commodities, I fhall confider hereafter, when I come to treat of taxes. Suppofing, however, in the mean time, that they have this effect, and they have it undoubtedly, this general enhancement of the price of all commodities, in confequence of that of labour, is a cafe which differs in the two following refpects from that of a particular commodity, of which the price was enhanced by a particular tax immediately impofed upon it. First, it might always be known with great exacTnefs how far the price of fuch a commodity could be enhanced by fuch 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 exactnefs. It would be impoffible, therefore, to proportion with any tolerable exaclnefs the tax upon every foreign to this enhancement of the price of every home commodity. Secondly, taxes upon the necelTaries of life have nearly the fame effect upon the circumftances of the people as a poor foil and a bad climate. Provifions are thereby rendered dearer in the fame manner as if it required extraordinary labour and expence to raife them. As in the natural fcarcity arihng from foil and cli- mate, it would be abfurd to direct the people in what manner they ought to employ their capitals and induftry, fo it is likewife in thc artificial fcarcity arifing from fuch taxes. To be left to accommo-. date, as well as they could, their induftry to their. fituation, and to find out thofe employments in which, notwithstanding their un- favourable circumftances, they might have fome advantage either in the THE WEALTH OF NATIONS. 49 die home, or in the foreign market, is what in both cafes, would CIJjAt>' evidently be moft for their advantage. To lay a new tax upon them, v»- 1 becaufe they are already overburdened with taxes, and becaufe they already pay too dear for the neceflaries of life, to make them likewife pay too dear for the greater part of other commodities, is certainly a moft abfurd way of making amends. Such taxes, when they have grown up to a certain height, are a curfe equal to the barrennefs of the earth and the inclemency of the heavens ; and yet it is in the richeft and moft induftrious coun- tries that they have been moft generally impofed. No other coun- tries could fupport fo great a diforder. As the ftrongeft bodies only can live and enjoy health, under an unwholefome regimen; fo the nations only, that in every fort of induftry have the greateft natural and acquired advantages, can fubfift and profper under fuch taxes. Holland is the country in Europe in which they abound moft, and which from peculiar circumftances continues to profper, not by means of them, as has been moft abfurdly fuppofed, but in fpite of them. As there are two cafes in which it will generally be advantage- ous to lay fome burden upon foreign, for the encouragement of domeftick induftry ; fo there are two others in which it may fome- times 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 reftore that free importation after it has been for fome time interrupted. The cafe in which it may fometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods, is, when fome foreign nation reftrains by high duties ©r prohibitions the importation of fome of our manufactures into Vol. II. H their ;o THE NATURE AND CAUSES OF B O O Kl their country. Revenge in this cafe naturally dictates retaliation, uJ%t^-j and that we fhould impofe the like duties and prohibitions upon the importation of fome or all of their manufactures into ours. Nations, accordingly, feldom fail to retaliate in this manner. The French have been particularly forward to favour their own manufactures by reftraining the importation of fuch foreign goods as could come into competition with them. In this conlifted a great part of the policy of Mr. Colbert, who, notwithstanding his great abilities, feems in this cafe to have been impofed upon by the fophiftry of merchants and manufacturers, who are always demand- ing a monopoly againft their countrymen. It is at prefent the opinion of the moft intelligent men in France that his operations of this kind have not been beneficial to his country. That minifter' by the tarif of 1 667, impofed very high duties upon a great num- ber of foreign manufactures. Upon his refufing 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 feems to have been in part occafioned by this commercial difpute. The peace of Nimeguen put an end to it in 1678, by moderating fome of thofe duties in favour of the Dutch, who in confequence took off their prohibition. It was about the fame time that the French and Englifh began mutually to opprefs each other's induftry, by the like duties and prohibitions, of which the French> however, feem to have fet the firft example. The fpirit of hof- tility which has fubfifted between the two nations ever fince, has hitherto hindered them from being moderated on either fide. In 1697 the Englifh prohibited the importation of bonelace, the manufacture of Flanders. The government of that country, at that time under the dominion of Spain, prohibited in return the importation of Englilh woollens. In 1700, the prohibition of importing bonelace into England, was taken off upon condition that the importation of Englifh woollens into Flanders mould be put on the fame footing as before. There THE WEALTH OF NATIONS. There may be good policy in retaliations of this kind, when cl there is a probability that they will procure the repeal of the high fee duties or prohibitions complained of. The recovery of a great foreign market will generally more than compenfate the tranfitory inconveniency of paying dearer during a fhort time for fome forts of goods. To judge whether fuch retaliations are likely to produce fuch an effect, does not, perhaps, belong fo much to the fcience of a legiflator, whofe deliberations ought to be governed by general principles which are always the fame, as to the fkill of that in- fidious and crafty animal, vulgarly called a ftatefman or politician, whofe councils are directed by the momentary fluctuations of affairs. When there is no probability that any fuch repeal can be procured, it feems a bad method of compenfating the injury done to certain claffes of our people, to do another injury ourfelves both to thofe clalTes and to almofl all the other claffes of them. When our neighbours prohibit fome manufacture of ours, we generally pro- hibit, not only the fame, for that alone would feldom affect them confiderably, but fome other manufacture of theirs. This may no doubt give encouragement to fome particular clafs of workmen among ourfelves, and by excluding fome of their rivals, may en- able them to raife their price in the home market. Thofe work- men, however, who fuffered by our neighbours prohibition will not be benefited by ours. On the contrary, they, and almoft all the other claffes of our citizens will thereby be obliged to pay dearer than before for certain goods. Every fuch law, therefore, impofes a real tax upon the whole country, not in favour of that particular clafs of workmen who were injured by our neighbours prohibition, but of fome other clafs. The cafe in which it may fometimes be a matter of deliberation how far or in what manner it is proper to reftore the free impor- tation of foreign goods, after it has been for fome time interrupted, H 2 is, ■2 THE NATURE AND CAUSES OF BOOK is, when particular manufactures, by means of high duties or l^^-j prohibitions upon all foreign goods which can come into compe- tition with them, have been fo far extended as to employ a great multitude of hands. Humanity may in this cafe require that the freedom of trade mould be reftored only by flow gradations, and with a good deal of referve and circumfpeftion. Were thofe high duties and prohibitions taken away all at once, cheaper foreign goods of the fame kind might be poured fo fad into the home market, as to deprive all at once many thoufands of our people of their or- dinary employment and means of fubfidence. The diforder which this would occafion might no doubt be very confiderable. It would in all probability, however, be much lefs than is commonly ima- gined,, for the two following reafons : First, all thofe manufactures, of which any part is commonly exported to other European countries without a bounty, could be very little affected by the freed importation of foreign goods. Sucli manufactures mud be fold as cheap abroad as any other foreign goods of the fame quality and kind, and confequently mud be fold cheaper at home. They would dill, therefore, keep poffeffion of the home market, and though a capricious man of fafliion might fometimes prefer foreign wares, merely becaufe they were foreign, to cheaper and better goods of the fame kind that were made at home, this folly could from the nature of things extend to fo few, that it could make no fenlible impreflion 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 hard- ware, are annually exported to other European countries without any bounty, and thefe are the manufactures which employ the greated number of hands. The filk, perhaps, is the manufacture which would fuffer the mod by this freedom of trade, and after it the linen, though the latter much lefs than the former. Secondly, THE WEALTH OF NATIONS. Secondly, though a great number of people mould, by thus C reftoring the freedom of trade, be thrown all at once out of their u ordinary employment and common method of fubfiftence, it would by no means follow that they would thereby be deprived either of employment or fubfiitence. By the reduction of the army and navy at the end of the late war more than a hundred thoufand foldiers and feamen, a number equal to what is employed in the greateft manu- factures, were all at once thrown out of their ordinary employ- ment y but, though they no doubt fuffered fome inconveniency, they were not thereby deprived of all employment and fubfiftence. The greater part of the feamen, it is probable, gradually betook themfelves to the merchants fervice as they could find occafion, and in the mean time both they and the foldiers were abforbed in the great mafs of the people, and employed in a great variety of occupations. Not only no great convulfion, but no fenfible dis- order arofe from fo great a change in the Situation of more than a hundred thoufand men, all accuftomed to the ufe of arms, and many of them to rapine and plunder. The number of vagrants was fcarce anywhere fenfibly increafed by it, even the wages of labour were not reduced by it in any occupation, fo far as I have been able to learn, except in that of feamen in the merchant fer- vice. But if we compare together the habits of a foldier and of any fort of manufacturer, we mall find that thofe of the latter do not tend fo much to difqualify him from being employed in a new trade, as thofe of the former from being employed in any. The manufacturer has always been accuftomed to look for his fubfiftence from his labour only : the foldier to expect it from his pay. Appli- cation and induftry have been familiar to the one; idlenefs and dif- fipation to the other. But it is furely much eafierto change the" direction of induftry from one fort of labour to another, than to turn idlenefs and diflipation to any. To the greater part of manufactures befides, it has already been obferved, there are other collateral; THE NATURE AND CAUSES OF collateral manufactures of fo fimilar a nature, that a workman can eafily transfer his induftry from one of them to another. The greater part of fuch workmen too are occafionally employed in country labour. The flock which employed them in a particular manufacture before, will ftill remain in the country to employ an equal number of people in fome other way. The capital of the country remaining the fame, the demand for labour will likewife be the fame, or very nearly the fame, though it may be exerted in different places and for different occupations. Soldiers and fea- men, indeed, when difcharged from the kings fervice, are at liberty to exercife any trade, within any town or place of Great Britain or Ireland. Let the fame natural liberty of exercifing what fpecies of induftry they pleafe be reftored to all his majefty's fubjects, in the fame manner as to foldiers and feamen that is, break down the exclusive privileges of corporations, and repeal the ftatute of apprenticefhip, both which are real encroachments upon natural liberty, and add to thefe the repeal of the law of fettlements, fo that a poor workman, when thrown out of employment either in one trade or in one place, may feek for it in another trade or in another place, without the fear either of a profecution or of a removal, and neither the publick nor the individuals will fuffer much more from the occafional difbanding fome particular claffes of manufacturers, than from that of foldiers. Our manufacturers have 210 doubt great merit with their country, but they cannot have more than thofe who defend it with their blood, nor deferve to be treated with more delicacy. To expect, indeed, that the freedom of trade fhould ever be entirely reftored in Great Britain, is as abfurd as to expect that an Oceana or Utopea fhould ever be eftablifhed in it. Not only the prejudices of the publick, but what is much more unconquerable, the private interefts of many individuals irrefiftably oppofe it. Were the 8 officers THE WEALTH OF NATIONS. officers of the army to oppofe with the fame zeal and unanimity C any reduction in the number of forces, with whicli matter manu- u facturers fet themfelves againft every law that is likely to increafe the number of their rivals in the home market, were the former to animate their foldiers in the fame manner as the latter enflame their workmen to attack with violence and outrage the propofers of any fuch regulation, to attempt to reduce the army would be as dangerous as it has now become to attempt to diminifh in any refpect the monopoly which our manufacturers have obtained againft us. This monopoly has fo much increafed the number of fome particular tribes of them, that, like an overgrown {land- ing army, they have become formidable to the government, and upon many occafions intimidate the legislature. The member of parliament who fupports every propofal for strengthening this mo- nopoly, is fure to acquire not only the reputation of understanding trade, but great popularity and influence with an order 'of men whofe numbers and wealth render them of great importance. If he oppofes them, on the contrary, and ftill more if he has authority enough to be able to thwart them, neither the raoft acknowledged probity, nor the highest rank, nor the greatest publick fervices can protect him from the most infamous abufe and detraction, from perfonal infults, nor fometimes from real danger, arifing from the infolent outrage of furious and difappointed monopolists. The undertaker of a great manufacture who, by the home markets being fuddenly laid open to the competition of foreigners,, fhould be obliged to abandon his trade, would no doubt naffer very considerably. That part of his capital which had usually been employed in purchafing materials and in paying his workmen, might, without much difficulty, perhaps, find another employment, But that part of it which was fixed in workhoufes, and in the in- struments of trade, could fcarce be difpofed of without confiderable- lofs; . THE NATURE AND CAUSES, Sec. K lofs. The equitable regard, therefore, to his intereft requires that > changes of this kind fhould never be introduced fuddenly, but flowly, gradually, and after a very long warning. The legiflature were it poffible that its deliberations could be always directed, not by the clamorous importunity of partial interefts, but by an extenfive view of the general good, ought upon this very account perhaps, to be particularly careful neither to eftablifh any new monopolies of this kind, nor to extend further thofe which are already eftablifhed. Every fuch regulation introduces fome degree of real diforder into the conftitution of the ftate, which it will be difficult afterwards to cure without occafioning another dif- order. How far it may be proper to impofe taxes upon the importation of foreign goods, in order, not to prevent their importation, but to raife a revenue for government, I mall confider hereafter when I come to treat of taxes. Taxes impofed with a view to prevent, or even to diminifli importation, are evidently as deftru&ive of the revenue of the cuftoms as of the freedom of trade. THE WEALTH OF NATIONS. SI CHAP. III. Of the extraordinary Rejlraints upon the Importation of Goods of ahnoft all Kinds, from thofe Countries with which the Balance is fuppofed to be difadvantageous . Hp O lay extraordinary reftraints upon the importation of goods CHAP. of almoft all kinds, from thofe particular countries with u -y* J which the balance of trade is fuppofed to be difadvantageous, is the fecond expedient by which the commercial fyftem propofes to in- creafe the quantity of gold and filver. Thus in Great Britain higher duties are laid upon the wines of France than upon thofe of Portugal. German linen may be imported upon paying certain duties ; but French linen is altogether prohibited. The principles which I have been examining, took their origin from private intereft and the fpirit of monopoly : thofe which I am going to examine from national prejudice and animofity. They are, accordingly, as might well be expected, ftill more unreafonable. They are fo, even upon the principles of the commercial fyftem. First, though it were certain that in the cafe 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 fuch a trade would be difadvantageous to England, or that the general balance of its whole trade would thereby be turned more againft it. If the wines of France are better and cheaper than thofe of Portugal, or its linens than thofe of Germany, it would be more advantageous for Great Britain to purchafe both the wine and the foreign linen which it had occafion for of France, than of Portugal and Ger- many. Though the value of the annual importations from France would thereby be greatly augmented, the value of the whole annual importations would be diminifhed, in proportion as the French Vol. II. I goods THE NATURE AND CAUSES OF K goods of the fame quality were cheaper than thofe of the other tw& countries. This would be the cafe, even upon the fuppofition that the whole French goods imported were to be confumed in Great Britain. But, fecondly, a great part of them might be re-exported to other countries, where, being fold with profit, they might bring back a return equal in value, perhaps, to the prime coft of the whole French goods imported. What has frequently been faid of the Earl: India trade might poflibly be true of the French ; that though the greater part of Eaft India goods were bought with gold and filver, the re-exportation of a part of them to other countries, brought back more gold and filver to that which carried on the trade than the prime cofl of the whole amounted to. One of the moft important branches of the Dutch trade, at prefent, confifts in the carriage of French goods to other European countries. A great part even of the French wine drank in Great Britain is clandeftinely 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 fame duties as thofe of other Euro- pean nations, to be drawn back upon exportation, England might have fome fhare of a trade which is found fo advantageous to Holland. Thirdly, and laftly, there is no certain criterion by which we can determine on which fide what is called the balance between any two countries lies, or which of them exports to the greater!: value. National prejudice and animofity, prompted always by the private intereft of particular traders, are the principles which generally di- rect our judgement upon all queftions concerning it. There are two criterions, however, which have frequently been appealed to upon fuch occafions, the cuftom-houfe books and the courfe of ex- change. THE WEALTH OF NATIONS. change. The cuftoin-houfe books, I think, it is now generally ac- C knowledged, area very uncertain criterion, on account of the inac- curacy of the valuation at which the greater part of goods are rated in thern. The courfe of exchange, at leaft, as it has hitherto been eftimated, is, perhaps, almoft equally fo. When the exchange between two places, fuch as London and Paris, is at par,, it is faid to be a fign that the debts due from Lon- don to Paris are compenfated by thofe due from Paris to London. On the contrary, when a premium is paid at London for a bill upon Paris, it is faid to be a fign that the debts due from London to Paris are not compenfated by thofe due from Paris to London, but that a balance in money muft be fent out from the latter place ; for the rifk, trouble, and expence of exporting which, the pre- mium is both demanded and given. But the ordinary Hate of debt and credit between thofe two cities muft neceflarily be regulated, it is faid, by the ordinary courfe of their dealings with one another. When neither of them imports from the other to a greater amount than it exports to it, the debts and credits of each may compenfate one another. But when one of them imports from the other to a greater value than it exports to it, the former neceflarily becomes indebted to the latter in a greater fum than the latter becomes in- debted to it : the debts and credits of each do not compenfate one another, and money muft be fent out from that place of which the debts over-balance the credits. The common courfe of ex- change, therefore, being an indication of the ordinary ftate of debt and credit between two places, muft likewife be an indication of the ordinary courfe of their exports and imports, as thefe necefla- rily regulate that ftate. But though this doctrine, of which fome part is, perhaps, not a little doubtful, were fuppofed ever fo certain, the manner in which the par of exchange has hitherto been computed, renders uncer- tain every conclufion that has ever yet been drawn from it. I a When THE NATURE AND CAUSES OF K When for a fum of money paid in England, containing, accord- ing to the ftandard of the Englifli mint, a certain number of ounces of pure filver, you receive a bill for a fum of money to be paid in France, containing, according to the ftandard of the French mint, an equal number of ounces of pure filver, exchange is faid to be at par between England and France. When you pay more, you are fuppofed to give a premium, and exchange is faid to be againft England, and in favour of France. When you pay lefs, you are fuppofed to get a premium, and exchange is faid to be againft France, and in favour of England-. But, fi'rft we cannot always judge of the value of the current money of different countries by the ftandards of their refpective mints. In fome it is more, in others it is lefs worn, dipt, and otherwife degenerated from that ftandard. 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 pine filver which it ought to contain, but to that which it actually does contain. Before the reformation of the filver coin in king William's time, exchange between England and Holland, computed, in the ufual manner, according. to the ftandards of their refpective mints, was five and twenty per cent, againft England. But the value of the cur- rent coin of England, as we learn from Mr. Lowndes, was at that time rather more than five and twenty per cent, below its ftandard value. The real exchange, therefore, may even at that time have been in favour of England,, notwithstanding the computed exchange was fo much againft it ; a fmaller number of ounces of pure filver, actually paid in England, may have purchafed' a bill for a greater number of ounces of pure filver to be paid in Holland, and the man who was fuppofed to give, may in reality have got the premium. The French coin was, before the late reformation of the Englifh gold coin, much lefs worn than the Englifli, and was, perhaps, two or three THE WEALTH OF NATIONS. three per cent, nearer its ftandard. If the computed exchange c with France, therefore, was not more than two or three per cent, againft England, the real exchange might have been in its favour. Since the reformation of the gold coin, the exchange has been con- ftantly in favour of England, and againft France. Secondly, in fome countries, the expence 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 de- rives fome revenue from the coinage. In England, it is defrayed by the government, and if you carry a pound weight of ftandard filver to the mint, you get back fixty-two {hillings, containing a pound weight of the like ftandard filver. In France, a duty of eight per cent, is deducted for the coinage, which not only defrays the ex- pence of it, but affords a fmall revenue to the government. In England, as the coinage cofts nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanfhip as you pay for it, adds to the value, in the fame manner as to that of wrought plate. A fum of French money, therefore, containing a certain weight of pure filver, is more valuable than a Sum of Englifh money contain- ing an equal weight of pure filver, and muft require more bullion,, or other commodities to purchafe it. Though the current coin of the two countries, therefore, were equally near the ftandards of their refpective mints, a fum of Englifh money could not well pur- chafe a fum of French money, containing an equal number of ounces of pure filver,, nor confequently a bill upon France for fuch a fum. If for fuch a bill no more additional money was paid than what was fufficient to compenfate the expence of the French coin- age, the real exchange might be at par between the two countries, their debts and credits might mutually compenfate one another,, while, the computed exchange was considerably in favour of France. If THE NATURE AND CAUSES OF K If left than this was- pa-id, the real exchange might be in favour of England, while the computed was in favour of France. Thirdly, and laftly, in fome places, as at Amfterdam, Ham- burgh, Venice, 6cc. foreign bills of exchange are paid in what they call bank money ; while in others, as at London, Lifbon, Antwerp, Leghorn, 6cc. they are paid in the common currency of the coun- try. What is called bank money is always of more value than the fame nominal fum of common currency. A thoufand guilders in the bank of Amfterdam, for example, are of more value than a thoufand guilders of Amfterdam currency. The difference between them is called the agio of the bank, which, at Amfterdam, is gene- rally about five per cent. Suppofmg the current money of two countries equally near to the ftandard of their refpeclive 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 ex- change may be in favour of that which pays in bank money, though the real exchange mould be in favour of that which pays in cur- rent money ; for the fame reafon that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own ftandard, though the real exchange fhould be in favour of that which pays in worfe. The computed exchange, before the late reformation of the gold coin, was generally againft London with Amfterdam, Hamburgh, Venice, and, I believe, with all other places which pay in what is called bank money. It will by no means follow, however, that the real exchange was againft it. Since the reformation of the gold coin, it has been in favour of London even with thofe places. The computed exchange has gene- rally been in favour of London with Lifbon, Antwerp, Leghorn, and, if you except France, I believe, with moft other parts of Europe that pay in common currency j and it is not improbable that the real exchange was fo too. 8 THE WEALTH OF NATIONS. Digrejjion concerning Banks of Depojit, particularly concerning that of Amfterdam, TH E currency of a great ftate, fuch as France or England, generally confifts almoft entirely of its own coin. Should this currency, therefore, be at any time worn, dipt, or otherwife degraded below its ftandard value, the ftate by a reformation of its coin can effectually re-eftabliftt its currency. But the currency of a fmall ftate, fuch as Genoa or Hamburgh, can feldom confift altogether in its own coin, but muft be made up, in a great mea- fure, of the coins of all the neighbouring ftates with which its in- habitants have a continual intercourfe. Such a ftate, 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 fum, of what is in its own nature fo uncertain, muft render the exchange always very much againft fuch a ftate, its cur- rency being, in all foreign ftates, neceflarily valued even below what it is worth. In order to remedy the inconvenience to which this difadvanta- geous exchange muft have fubjected their merchants, fuch fmall ftates, when they began to attend to the intercft of trade, have frequently enacted, that foreign bills of exchange of a certain value mould be paid, not in common currency, but by an order upon, or by a transfer in the books of a certain bank, eftablifhed upon the credit, and under the protection of the ftate ; this bank being al- ways obliged to pay, in good and true money, exactly according to the ftandard of the ftate. The banks of Venice, Genoa, Amfter- dam, Hamburgh, and Nuremberg, feem to have been all originally eftablifhed with this view, though fome of them may have after- wards THE NATURE AND CAUSES OF wards been made fubfervient to other purpofes. The money of fuch banks being better than the common currency of the coun- try, neceflarily bore an agio, which was greater or fmaller, accord- ing as the currency was fuppofed to be more or lefs degraded below the ftandard .of the ftate. The agio of the bank of Hamburgh, for example, which is faid to be commonly about fourteen per cent, is the fuppofed difference between the good ftandard money of the ftate and the dipt, worn, and diminifli.ed currency poured into it from all the neighbouring ftates. Before 1609 the great quantity of dipt and worn foreign coin., •which the extenfive trade of Amfterdam brought from all parts of Europe, reduced the value of its currency about nine per cent, below that of good money frefh from the mint. Such money no fooner appeared than it was melted down or carried away, as it al- ways is in fuch circumftances. The merchants, with plenty of currency, could not always find a fufhcient quantity of good money to pay their bills of exchange; and the value of thofe bills, in fpite of feveral regulations which were made to prevent it, became in a great meafure uncertain. In order to remedy thefe inconveniencies, a bank was eftablifhed 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 ftandard money of the country, deduct- ing only fo much as was necefTary for defraying the expence of coinage, and the other necefTary expence of management. For the value which remained after this fmall deduction was made, it gave a credit in its books. This credit was called bank money, which, as it reprefented money exactly according to the ftandard of the mint, was always of the fame real value, and intrinficaljy worth more than current money. It was at the fame time enacted, that all THE WEALTH OF NATIONS. all bills drawn upon or negociated at Amfterdam of the value of C fix hundred gilders and upwards mould be paid in bank money, <~ which at once took away all uncertainty in the value of thofe bills. Every merchant, in confequence of this regulation, was obliged to keep an account with the bank in order to pay his fo- reign bills of exchange, which neceflarily occafioned a certain de- mand for bank money. Bank money, over and above both its intrinnc fuperiority to currency, and the additional value which this demand neceflarily gives it, has likewife fome other advantages. It is fecure from fire, robbery, and other accidents ; the city of Amfcerdam is bound for it ; it can be paid away by a fimple transfer, without the trouble of counting, or the rifk of tranfporting it from one place to another. In confequence of thofe different advantages, it feems from the beginning to have borne an agio, and it is ge- nerally believed that all the money originally depofited in the bank was allowed to remain there, nobody caring to demand pay- ment of a debt which he could fell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lofe this premium. As a milling frefh from the mint will buy no more goods in the market than one of our common worn millings, fo the good and true money which might be brought from the coffers of the bank into thofe of a private perfon, being mixed and confounded with the common currency of the country, would be of no more value than that currency, from which it could no longer be readily diftinguifhed. While it remained in the coffers of the bank, its fuperiority was known and afcertained. When it had come into thofe of a private perfon, its fuperiority could not well be afcertained without more trouble than perhaps the difference was worth. By being brought from the coffers of the bank, befides, it lofi all the other advantages of bank money ; Vol. II. K its to THE NATURE AND CAUSES OF B O p K its fecurity, its eafy and fafe transferability, its ufe in paying fo~ c— y-*"-1 reign bills of exchange. LOver and above all this, it could not be brought from thofe coffers, as it will appear by and by, without previoufly paying for the keeping. Those depofits of coin, or which the bank was bound to re- ftore in coin, conftituted the original capital of the bank, or the whole value of what was reprefented by what is called bank mo- ney. At prefent they are fuppofed to conftitute but a very fmall part of it. In order to facilitate the trade in bullion, the bank has been for thefe many years in the practice of giving credit in its books upon depofits of gold and lilver bullion. This credit is generally about five per cent, below the mint price of fuch bullion. The bank grants at the fame time what is called a recipice or re~ ceipt, intitling the perfon who makes the depofit, or the bearer, to take out the bullion again at any time within fix months, upon re-transferring to the bank a quantity of bank money equal to that for which credit had been given in its books when the depofit was made, and upon paying one-fourth per cent, for the keeping, if the depofit was in filver ; and one-half per cent, if it was in gold j but at the fame time declaring, that in default of fuch pay- ment, and upon the expiration of this term, the depofit lliould 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 dqfofit may be confidered as a fort of warehoufe rent ; and why this warehoufe rent fhould be fo much dearer for gold than for filver, feveral different reafons have been affigned. The finenefs of gold, it has been faid, is more difficult to be afcertained than that of filver. Frauds are more eafily practifed, and occafion a greater lofs in the more precious metal. Silver, befides, being the ftandard metal, the ftate, it has been faid. THE WEALTH OF NATIONS. /aid, wifhes to encourage more the making of depofits of filver c than of thofe of gold. .- Deposits of bullion are mod: commonly made when the price is fomewhat lower than ordinary ; and they are taken put again when it happens to rife. In Holland the market price of bullion is generally above the mint price, for the fame reafon that it was fo in England before the late reformation of the gold coin. The difference is faid to be commonly from about fix to fixteen flivers upon the mark, or eight ounces of filver of eleven parts fine, and one part alloy. The bank price, or the credit which the bank gives for depofits of fuch. filver (when made in foreign coin, of which the finenefs is well known and afcertained, fuch as Mexico dollars) is twenty-two gilders, the mark; the mint price is about twenty -three gilders; and the market price is from twenty-three gilders fix, to twenty-three gilders fixteen ftivers, or from two to three per cent, above the mintprice.* The Proportions between the bank price, the mint price, and the market price of gold bullion, arenearly thefame. A perfon can generally fell his receipt for the difference between the mint price of bullion and the market price. A receipt for bullion is almofl K 2 always * The following are the prices at which the bank of Amfterdam at prefent (Sepi terriber, 1775) receives bullion and coin of different kinds. SILVER. Mexico dollars "1 Gilders. French crowns i B— 22 per mark. Englifh filver coin J Mexico dollars new coin - 21 10 Ducatoons - - - - _ 3 Rix dollars ----- 28 Bar filver containing f| fine filver zr per mark, and in this proportion down to | fke, on which 5 gilders are given. Fine bars, 23 per mark, GOLD THE NATURE AND CAUSES OF BOOK always worth fomething, and it very feldom happens, therefore, <— — that any body iuffers his receipt to expire, or allows his bullion ta - fall to the bank at the price at which it had been received, either by not taking it out before the end of the fix months, or by neg- lecting to pay the one-fourth or one-half per cent, in order to ob- tain a new receipt for another fix months. This, however, though it happens feldom, is faid to happen fometimes, and more frequently with regard to gold than with regard to iilver, on ac- count of the higher warehoufe-rent which is paid far the keeping of the more precious metal.. The perfon who by making a depofit of bullion obtains both a bank credit and a receipt, pays his bills of exchange as they be- come due with his bank credit ; and either fells or keeps his re- ceipt according as he judges that the price of bullion is likely to rife or to fall. The receipt and the bank credit feldom keep long together, and there is no occahon that they mould. The perfon who has a receipt, and who wants to take out bullion, finds al- ways plenty of bank credits, or bank money to buy at the ordi- nary price ; and the perfon 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 con- stitute two different forts of creditors againft the bank. The holder of a receipt cannot draw out the bullion for which it is granted* GOLD. Portugal coin "1 Guineas > B — 310 per mark. Louis d'ors new J Ditto old - - - 300 New ducats - - - 4 19 8 per ducat. Bar or ingot gold is received in proportion to its finenefs compared with the above foreign gold coin. Upon fine bars the bank gives 3+0 per mark. In general, how. ever, fomething more is given upon coin of a known finenefs, than upon gold and filver bars, of which , the finenefs cannot be afcertained but by a procefs of melt- ing and afTaying. THE WEALTH OF NATIONS granted, without re-afligning to the bank a fum of bank money equal to the price at which the bullion had been received. If he has no bank money of his own, he muft purchafe it of thofe who have it. The owner of bank money cannot draw out bul- lion without producing to the bank receipts for the quantity which he wants. If he has none of his own, he muft buy them of thofe who have them. The holder of a receipt, when he purchafes bank money, purchafes 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 pur- chafes a receipt, purchafes the power of taking out a quantity of bullion of which the market price is commonly from two to three per cent, above the mint price. The price which he pays for it, therefore, is paid likewife 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 depofits of the coin current in the country, the bank grants receipts likewife as well as bank credits but thofe re- ceipts are frequently of no value, and will bring no price in the market. Upon ducatoons, for example, which in the currency pafs for three gilders three flivers each, the bank gives a credit of three gilders only, or five per cent, below their current value. It grants a receipt likewife intitling the bearer to take out the num- ber of ducatoons depofited at any time within fix months, upon paying one-fourth per cent, for the keeping. This receipt will frequently bring no price in the market, Three gilders bank mo- ney generally fell in the market for three gilders three flivers, the full value of the decatoons if they were taken out of the bank ; and before they can be taken out, one-fourth per cent, muft be paid Z THE NATURE AND CAUSES OF ii O B K paid for the keeping, which would be mere lofs to the holder of the" * receipt. If the agio of the bank, however, fhould at any time fall to three per cent, fuch receipts might bring fome price in the market, and might fell for one and three-fourths per cent. But the agio of the bank being now generally about five per cent, inch receipts are frequently allowed to expire, or as they exprefs it, to fall to the bank. The receipts which are given for depofits of gold ducats fall to it yet more frequently,- becaufe a higher ware - houfe-rent, or one-half per cent, muft be paid for the keeping of them before they can be taken out again. The five per cent, which the bank gains, when depofits either of coin or bullion are allowed to fall to it, may be conndered as the warehoufe-rent for the perpetual keeping of fuch depofits. The fum of bank money for which the receipts are expired muft be very confiderable. It muft comprehend the whole origi- nal capital of the bank, which, it is generally fuppofed, has been allowed to remain there from the time it was flrft depofited, no- body caring either to renew his receipt or to take out his depofit, as, for the reafons already afligned, neither the one nor the other could be done without lofs. But whatever may be the amount of this fum, the proportion which it bears to the whole mafs of bank money is fuppofed to be very fmall. The bank of Amfterdam has for thefe many years paft been the great warehoufe of Europe for bul- lion, for which the receipts are very feldom allowed to expire, or, as they exprefs 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 fuppofed to have been created, for thefe many years paft, by fuch depofits 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 fmaller mafs of bank money, for which the receipts are expired, is mixed and confounded with the much 8 greater THE WEALTH OF NATIONS. greater mafs for which they are itill in force; fo that, though there may be a confiderable fum of bank money, for which there are no receipts, there is no fpecific fum or portion of it, which may not at any time be demanded by one. The bank cannot be debtor to two perfons for the fame 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 dif- ficulty in getting one to buy at the market price, which generally correfponds with the price at which he can fell, the coin or bullion it in titles him to take out of the bank.. It might be otherwife during a public calamity; an invafion, for example, fuch 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 raife their price to an exorbitant height. The holders of them might form extravagant expectations, and, infread of two or three per cent, demand half the bank money for which credit had been given upon the depofits that the receipts had refpeclively been granted for. The enemy, informed of the conftitution of the bank, might even buy them up in order to prevent the carry- ing away of the treafure. In fuch emergencies, the bank, it is fuppofed, would break through its ordinary rule of making pay- ment only to the holders of receipts. The holders of receipts,, who had no bank money, mufl have received within two. or three per cent, of the value of the depofit for which their refpective re- ceipt^ had been granted. The bank, therefore, it is faid, would, in this cafe make no fcruple of paying, either with money or bul- lion, the full value of what the owners of bank money who could get no receipts, were credited for in its bocks • paying at the fame time two or three per cent, to fuch holders of receipts as had no bank money, that being the whole value which in this ftate of things could juftly be fuppofed due to them, Even. F2 THE NATURE AND CAUSES OP BOOK Even in ordinary and quiet times it is the intereft of the holders of receipts to deprefs the agio, in order either to buy bank money (and confequently the bullion, which their receipts would then enable them to take out of the bank) fo much cheaper, or to fell their receipts to thofe who have bank money, and who want to take out bullion, fo 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 intereft of the owners of bank money, on the contrary, to raife the agio, in order either to fell their bank money fo much dearer, or to buy a receipt fo much cheaper. To prevent the ftock jobbing tricks which thofe oppofite interefts might fometimes occafion, the bank has of late years come to the refolution to fell at all times bank money for currency, at five per cent, agio, and to buy it in again at four per cent. agio. In confequence of this refolution, the agio can never either rife above five, or fink 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 refolution was taken , the market price of bank money ufed fometimes to rife fo high as nine per <cent. agio, and fometimes to fink fo low as par, according as oppofite interefts happened to influence the market. The bank of Amfterdam profefles to lend out no part of what ■is depofited with it, but, for every gilder for which it gives credit in its books, to keep in its repofitories the value of a gilder either in money or bullion. That it keeps in its repofitories 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 conti- nually going from it and returning to it again, cannot well be doubted. But whether it does fo likewife with regard to that part of THE WEALTH OF NATIONS. 73 of its capital, for which the receipts are long ago expired, for which c J A p« in ordinary and quiet times it cannot be called upon, and which 1 — v~— «i in reality is very likely to remain with it for ever, or as long as the States of the United Provinces fubfift, may perhaps appear more uncertain. At Amfterdam, however, no point of faith is better eftablifhed than that for every gilder, circulated as bank mo- ney, there is a correfpondent gilder in gold or filver to be found in the treafure of the bank. The city is guarantee that it mould be fo. The bank is under the direction of the four reigning burgo- mafters, who are changed every year. Each new fett of burgo- mafters vifits the treafure, compares it with the books, receives it upon oath, and delivers it over, with the fame awful folemnity, to the fett which fucceeds it ; and in that fober and religious country oaths are not yet difregarded. A rotation of this kind feems alone a fufBcient fecurity againft any practices which cannot be avowed. Amidft all the revolutions which faction has ever occafioned in the government of Amfterdam, the prevailing party has at no time accufed their predeceffors of infidelity in the administration of the bank. No accufation could have affected more deeply the reputa- tion and fortune of the difgraced party, and if fuch an accufation could have been Supported, we may be allured that it would have been brought. In 1672, when the French king was at Utrecht, the bank of Amfterdam paid fo readily as left no doubt of the fide- lity with which it had obferved its engagements. Some of the pieces which were then brought from its repofitories appeared to have been fcorched with the fire which happened in the town-houfe foon after the bank was eftablifhed. Thofe pieces, therefore, muft have lain there from that time. What may be the amount of the treafure in the bank is a ques- tion which has long employed the Speculations of the curious. No- thing but conjecture can be offered concerning it. It is generally reckoned that there are about two thoufand people who keep Vol. II. L accounts THE NATURE AND CAUSES OF accounts with the bank, and allowing them to have, one with ano- ther, the value of fifteen hundred pounds fterling lying upon their refpeclive accounts, (a very large allowance) the whole quantity of bank money, and confequently of treafure in the bank, will amount to about three millions fterling, or, at eleven gilders the pound fter- ling, thirty-three millions of gilders ; a great fum, and fufficient to carry on a very extenfive circulation, but vaftly below the extra- vagant ideas which fome people have formed of this treafure. The city of Amfterdam derives a confiderable revenue from the bank. Befides what may be called the warehoufe-rent above-men- tioned, each perfon, upon firft opening an account with the bank, pays a fee of ten gilders ; and for every new account three gilders three ftivers ; for every transfer two ftivers j and if the transfer is for lefs than three hundred gilders, fix ftivers, in order to difcou- rage the multiplicity of fmall tranfactions. The perfon who neg- lects to balance his account twice in the year forfeits twenty-five gilders. The perfon who orders a transfer for more than is upon his account, is obliged to pay three per cent, for the fum over- drawn, and his order is fet afide into the bargain. The bank is fuppofed too to make a confiderable profit by the fale of the foreign coin or bullion which fometimes falls to it by the expiring of re- ceipts, and which is always kept till it can be fold with advantage. It makes a profit likewife by felling bank money at five per cent, agio, and buying it in at four. Thefe different emoluments amount to a good deal more than what is neceflary for paying the falaries of officers, and defraying the expence of management. What is paid for the keeping of bullion upon receipts, is alone fup- pofed to amount to a neat annual revenue of between one hundred and fifty thoufand and two hundred thoufand gilders. Public utility, however, and not revenue, was the original object of this inftitu- tion. Its object was to relieve the merchants from the inconveni- ence of a difadvantageous exchange. The revenue which has ari- fen BOOK IV. THE WEALTH OF NATIONS. fen from it was unforefeen, and may be confidered as accidental. But it is now time to return from this long digreffion, into which I have been infenfibly led in endeavouring to explain the reafons why the exchange between the countries which pay in what is called bank money, and thofe which pay in common currency, mould generally appear to be in favour of the former, and againfc the latter. The former pay in a fpecies of money of which the intrin- fic value is always the fame, and exactly agreeable to the ftandard of their refpective mints ; the latter in a fpecies of money of which the intrinfic value is continually varying, and is almoft always more or lefs below that ftandard. But though the computed exchange muft generally be in favour of the former, the real exchange may frequently be in favour of the latter. [End of the Digreffion concerning Banks of DepoJitJ] Though the computed exchange between any two places were m every refpect the fame with the real, it would not always fol- low that what is called the. balance of trade was in favour of that place which had the ordinary courfe of exchange in its favour. The ordinary courfe of exchange might, indeed, in this cafe, be a tolerable indication of the ordinary ftate of debt and credit between them, and mow which of the two countries ufually had occafion to fend out money to the other. But the ordinary (late of debt and credit between any two places is not always entirely regu- lated by the ordinary courfe of their dealings with one another, but is influenced by that of the dealings cf both with many other countries. If it was ufual, for example, for the merchants of England to pay the goods which they buy from Hamburgh, Dant- zick, Riga, &c. by bills upon Holland, the ordinary ftate of debt and credit between England and Holland would not be entirely regulated by the ordinary courfe of the dealings of thofe two coun- tries with one another, but would be influenced by that of Eng- land with thofe other places. England might, in this cafe, be annually obliged to fend out money to Holland, though its annual L 2 exports THE NATURE AND CAUSES OF exports to that country exceeded the annual value of its imports from it, and though what is called the balance of trade was very much in favour of England. Hitherto I have been endeavouring to fhew, even upo» the principles of the commercial fyftem, how unnecefTary it is to lay extraordinary reftraints upon the importation of goods from thofe countries with which the balance of trade is fuppofed to be difad- vantageous. Nothing, however, can be more abfurd than this whole doc- trine of the balance of trade, upon which, not only thefe reftraints^ but almoft all the other regulations of commerce are founded. When two places trade with one another, this doctrine fuppofes that, if the balance be even, neither of them either lofes or gains ; but if it leans in any degree to one fide, that one of them lofes^ and the other gains in proportion to its declenfion from the exact equi- librium. Both fuppofitions are falfe. A trade which is forced by means of bounties and monopolies, may be, and commonly is dif- advantageous to the country in whofe favour it is meant to be efta- blifhed, as I mail endeavour to fhew hereafter. But that trade which, without force or conftraint, is naturally and regularly car- ried on between any two places, is always advantageous, though not always equally fo, to both. By advantage or gain, I underftand, not the increafe of the quantity of gold and filver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increafe of the annual revenue of its inhabitants. If the balance be even, and if the trade between the two places confift altogether in the exchange of their native commodities, they will, upon moft occafions, not only both gain, but they will gain equally, or very near equally : each will in this cafe afford a market for a part of the furplus produce of the other : each will replace THE WEALTH OF NATIONS. replace a capital which had been employed in raifing this part of c the furplus produce of the other, and which had been diftributed u among, and given revenue and maintenance to a certain number of its inhabitants. Some part of the inhabitants of each there- fore will indirectly derive their revenue and maintenance from the other. As the commodities exchanged too are fuppofed to be of equal value, fo the two capitals employed in the trade will, upon rnofl occafions, be equal, or very nearly equal ; and both being employed in railing the native commodities of the two countries, the revenue and maintenance which their diftribution 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 fmaller in proportion to the extent of their dealings. If thefe mould annually amount to an hundred thoufand pounds, for example, or to a million on each fide, each of them would afford an annual revenue, in the one cafe, of an hundred thoufand pounds, in the other, of a million, to the inhabitants of the other, If their trade mould be of fuch a nature that one of them ex- ported to the other nothing but native commodities, while the returns of that other confifled altogether in foreign goods ; the balance, in this cafe, would ftill be fuppofed even, commodities being paid for with commodities. They would, in this cafe too, both gain, but they would not gain equally ; and the inhabitants of the country which exported nothing but native commodities would derive the greateft revenue from the trade. If England, for exam- ple, mould import from France nothing but the native commodi- ties of that country, and, not having fuch commodities of its own as were in demand there, mould annually repay them by fending thither a large quantity of foreign goods, tobacco, we mall fuppofe, and Eaft India goods j this trade, though it would give fome revenue to the inhabitants of both countries,, would give more.- THE NATURE AND CAUSES OF more to thofe of France than to thofe of England. The whole French capital annually employed in it would annually be diftri- buted among the people of France. But that part of the Englifli capital only which was employed in producing the Englifh commo- dities with which thofe foreign goods were purchafed, would be annually diftributed among the people of England. The greater part of it would replace the capitals which had been employed in Virginia, Indoftan, and China, and which had given revenue and maintenance to the inhabitants of thofe difrant 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 Englifh capital would the revenue of the people of England. France would in this cafe carry on a direct foreign trade of confumption with England ; whereas England would carry on a round-about trade of the fame kind with France. The different effects of a capital employed in the direct, and of ons employed in the round-about foreign trade of confumption, have already been fully explained. There is not, probably, between any two countries, a trade which confifts altogether in the exchange either of native commo- dities on both fides, or of native commodities on one fide and of foreign goods on the other. Almoft all countries exchange with one another partly native and partly foreign goods. That coun- try, however, in whofe cargoes there is the greater! proportion of native, and the leafr. of foreign goods, will always be the prin- cipal gainer. If it was not with tobacco and Ean: India goods, but with gold and filver, that England paid for the commodities annually imported from France, the balance, in this cafe, would be fuppofed uneven, commodities not being paid for with commo- dities, but with gold and filver. The trade, however, would, in this cafe, as in the foregoing, give fome revenue to the inhabitants 3 • of THE WEALTH OF NATIONS. 79 of both countries, but more to thofe of France than to thofe of c p« England. It would give fome revenue to thofe of England. The u- capital which had been employed in producing the Englifh goods that purchafed this gold and filver, the capital which had been diftributed among, and given revenue to certain inhabitants of England, would thereby be replaced, and enabled to continue that employment. The whole capital of England would no more be diminifhed by this exportation of gold and filver, than by the expor- tation of an equal value of any other goods. On the contrary, it would, in moft cafes, be augmented. No goods are fent abroad but thofe for which the demand is fuppofed to be greater abroad than at home, and of which the returns confequently, it is expect- ed, will be of more value at home than the commodities export- ed. If the tobacco which, in England, is worth only a hundred thoufand pounds, when fent to France will purchafe wine which is, in England, worth a hundred and ten thoufand pounds, the exchange will augment the capital of England by ten thoufand pounds. If a hundred thoufand pounds of Englifli gold, in the fame manner, purchafe French wine which, in England, is worth a hundred and ten thoufand, this exchange will equally augment the capital of England by ten thoufand pounds. As a merchant who has a hundred and ten thoufand pounds worth of wine in his cellar, is a richer man than he who has only a hundred thoufand pounds worth of tobacco in his warehoufe, fo is he likewife a richer man than he who has only a hundred thoufand pounds worth of gold in his coffers. He can put into motion a greater quantity of induftry, and give revenue, maintenance, and employ- ment, 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 induflry which can be annually maintained in it, is equal to what all thofe different capi- tals can maintain. Both the capital of the country, therefore, and So THE NATURE AND CAUSES OF BOOK and the quantity of induftry which can be annually maintained in v~' it, mull generally be augmented by this exchange. It would, indeed, be more advantageous for England that it could purchafe the wines of France with its own hardware and broad-cloth, than with either the tobacco of Virginia, or the gold and filver of Brazil and Peru. A direct foreign trade of confumption is always more advantageous than a round-about one. Eut a round-about foreign trade of confumption which is carried on with gold and filver, does not feem to be lefs advantageous than any other equally round- about one. Neither is a country which has no mines more likely to be exhaufted of gold and filver by this annual exportation of thofe metals, than one which does not grow tobacco by the like annual exportation of that plant. As a country which has where- withal to buy tobacco will never be long in want of it, fo nei- ther will one be long in want of gold and fdver which has where- withal to purchafe thofe metals. It is a lofmg trade, it is faid, which a workman carries on with the alehoufe ; and the trade which a manufacturing nation would naturally carry on with a wine country, may be confidered as a trade of the fame nature. I anfwer, that the trade with the alehoufe is not neceffarily a loling trade. In its own nature it is juft as advantageous as any other, though, perhaps, fomewhat more liable to be abufed. The employment of a brewer, and even that of a retailer of fermented liquors, are as neceffary divifions of labour as any other. It will generally be more advantageous for a workman to buy of the brewer the quantity he has occafion for than to make it himfelf, and if he is a poor workman, it will ge- nerally be more advantageous for him to buy it by little and little of the retailer, than a large quantity of the brewer. He may no doubt buy too much of either, as he may of any other dealers in his neighbourhood, of the butcher, if he is a glutton, or of the draper, if he affects to be a beau among his companions. It is advan- THE WEALTH OF NATIONS. advantageous to the great body of workmen notwithstanding, that C H^A P. all thefe trades fhould be free, though this freedom may be abufed <, — v — i in all of them, and is more likely to be fo, perhaps, in fome than in others. Though individuals, befides, may fometimes ruin their fortunes by an exceflive confumption of fermented liquors, there feems to be no riik that a nation mould do fo. Though in every country there are many people who fpend upon fuch liquors more than they can afford, there are always many more who fpend lefs. It deferves to be remarked too that, if we confult experience, the cheapnefs of wine feems to be a caufe, not of drunkennefs, but of fobriety. The inhabitants of the wine countries are in ge- neral the fobereft people in Europe ; witnefs the Spaniards, the Italians, and the inhabitants of the fouthern provinces of France. People are feldom guilty of excefs in what is their daily fare. Nobody affects the character of liberality and good fellowfhip, by being profufe of a liquor which is as cheap as fmall beer. On the contrary, in the countries which from either exceflive heat or cold produce no grapes, and where wine confequently is dear and a rarity, drunkennefs is a common vice, as among the northern nations, and all thofe who live between the tropicks, the negroes* for example, on the coaft of Guinea. When a French regiment comes from fome of the northern provinces of France, where wine is fomewhat dear, to be quartered in the fouthern, where it is very cheap, the foldiers, I have frequently heard it obferved, are at firft debauched by the cheapnefs and novelty of good wine j but after a few months refidence, the greater part of them become as fober as the reft of the inhabitants. Were the duties upon foreign wines, and the excifes upon malt, beer, and ale, to he taken away all at once, it might, in the fame manner, occafion in Great Britain a pretty general and temporary drunkennefs among the middling and inferior ranks of people, which would -probably be foon followed by a permanent and almoft umverfal Vol. IL M fobriety. THE NATURE AND CAUSES OF K fobriety. At prefent drunkennefs is by no means the vice of peo- -J pie of fafhion, or of thofe who can eafily afford the molt expen- live liquors. A gentleman drunk with ale, has fcarce ever been feen among us. The restraints upon the wine trade in Great Britain befides, do not fo much feem calculated to hinder the people from going, if I may fay fo, to the aiehoufe, as from going where they can buy the beft and cheaper!: liquor. They favour the wine trade of Portugal, and difcourage that of France. The Portuguefe, it is faid, indeed, are better cuftomers for our manufactures than the French, and mould therefore be encou- raged in preference to them. As they give us their cuftom, it is pretended, v/e Ihould give them our's. The fneaking arts of un- derling tradefmen are thus erected into political maxims for the conduct of a great empire : for it is the moft underling tradefmen only who make it a rule to employ chiefly their own cuftomers, A great trader purchafes his goods always where they are cheapefl and beft, without regard to any little intereft of this kind. By fuch maxims as thefe, however, nations have been taught that their i ntereft confuted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the profperity of all the nations with which it trades, and to con- fider their gain as its own lofs. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendfiiip, has become the moft fertile fource of difcord and animofity. The capricious ambition of kings and minifters has not, during the prefent and the preceeding century, been more fatal to the repofe of Europe than the impertinent jealoufy of merchants and manufacturers. The violence and injuftice ©f the rulers of mankind is an ancient evil, for which, I am afraid the nature of human affairs can fcarce admit of a remedy. But the mean rapacity, the monopolizing fpirit of merchants and manu- facturers, THE WEALTH OF NATIONS facturers, who neither are, nor ought to be the rulers of man- C HA P. kind, though it cannot perhaps be corrected, may very eafily be u-— y— «J prevented from difturbing the tranquillity of any body but themfelves.. That it was the fpirit of monopoly which originally both in- vented and propagated this doctrine, cannot be doubted ; and they who firft taught it were by no means fuch fools as they who be- lieved it. In every country it always is and rauft be the intereft of the great body of the people to buy whatever they want of thofc who fell it cheapen:. The propofition is fo very manifeft, that it feems ridiculous to take any pains to prove it ; nor could it ever have been called in queftion had not the interefted fophiftry of merchants and manufacturers confounded the common fenfe of mankind. Their intereft is, in this refpect, directly oppofite to that of the great body of the people. As it is the intereft of the freemen of a corporation to hinder the reft of the inhabitants from employing any workmen but themfelves, fo it is the intereft of the merchants and manufacturers of every country to fecure to themfelves the monopoly of the home market. Hence in Great Britain and in moft other European countries the extraordi- nary duties upon almoft all goods imported by alien merchants. H^ence the high duties and prohibitions upon all thofe foreign manufactures which can come into competition with our own. Hence too the extraordinary reftraints upon the importation of almoft all forts of goods from thofe countries with which the ba- lance of trade is fuppofed to be difadvantageous ; that is, from thofe againft whom national animohty happens to be moft vio- lently inflamed. The wealth of a neighbouring nation, however, though danger- ous in war and politicks, is certainly advantageous in trade. In a M 2 flat* THE NATURE AND CAUSES OF B O^PK ftate of hoftility it may enable our enemies to maintain fleets and' — — . — ; armies fuperior to our own but in a ftate of peace and commerce it muft likewife enable them to exchange with us to a greater' value, and to afford a better market, either for the immediate produce of our own induftry, or for whatever is purchafed with that produce. As a rich man is likely to be a better cuftomer to the induftrious people in his neighbourhood, than a poor, fo is likewife a rich nation. A rich man, indeed, who is himfelf a manufacturer, is a very dangerous neighbour to allthofe who deal in the fame way. All the reft of the neighbourhood, however, by far the greateft number, profit by the good* market which his ex- pence affords them. They even profit by his underfilling the poorer workmen who deal in the lame way with him. The ma- nufacturers of a rich nation, in the fame manner, may no doubt' be very dangerous rivals to thofe of their neighbours. This very competition, however, is advantageous to the great body of the people, who profit greatly befides by the good market which the great expence of fuch a nation affords them in every other way. Private people who want to make a fortune, never think of retir- ing to the remote and poor provinces of the country, but refort either to the capital or to fome 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, fome fhare of it may fall to them. The fame maxims which would in this man- ner direct the common fenfe of one, or ten. or twenty indivi- duals, fhould regulate the judgement of one, or ten, or twenty millions, and mould make a whole nation regard the riches of its neighbours, as a probable caufe and cccafion for itfelf to acquire riches. A nation that would enrich itfelf by foreign trade i& certainly moft likely to do fo when its neighbours are all rich, induftrious, and commercial nations. A great nation furrounded on THE WEALTH OF NATIONS. 85 ©n all fides by wandering favages and poor barbarians might, no C H A P. doubt, acquire riches by the cultivation of its own lands, and by u— y-w its own interior commerce, but not by foreign trade. It feems to have been in this manner that the ancient Egyptians and the modern Chinefe acquired their great wealth. The ancient Egyp- tians, it is faid, neglected foreign commerce, and the modern Chinefe, it is known, hold it in the utmoft contempt, and fcarce deign to afford it the decent protection of the laws. The modern maxims of foreign commerce, by aiming at the impoverifhment of all our neighbours, fo far as they are capable of producing their intended effect, tend to render that very commerce infigni-- ficantand contemptible.. There is no commercial country in Europe of which the- approaching ruin has not frequently been foretold by the pre- tended doctors of this fyftem, from an unfavourable balance of trade. After all the anxiety however which they have excited about this, after all the vain" attempts of almoft all trading nations to turn that balance in their own favour and againft. their neigh- bours, it does not appear that any one nation in Europe has been in any refpect impoverifhed by this caufe. Every town and coun- try, on the contrary, in proportion as they have opened their ports to all nations inftead of being ruined by this free trade, as the principles of the commercial fyftem would lead us to ex- pect, have been enriched by it. Though there are in Europe, indeed, a few towns which in fome refpects deferve the name of free ports, there is no country which does fo. Holland, perhaps, approaches the neareft to this character of any, though flill very remote from it ; and Holland, it is acknowledged, not only derives Jts whole wealth, but a great part of its neceffary fubfiftence, from -' foreign trade. There • THE NATURE AND CAUSES OF There is another balance indeed, which has already been ex- plained> very different from the balance of trade, and which, according as it happens to be either favourable or unfavourable, necefTarily occafions the profperity or decay of every nation. This is the balance of the annual produce and confumpti.;;i. If the exchangeable value of the annual produce, it has already been obferved, exceeds that of the annual confumption, the capital of the fociety muft annually increafe in proportion to this excefs. The fociety in this cafe lives within its revenue, and what is annually faved out of its revenue, is naturally added to its capi- tal, and employed fo as to increafe ftill further the annual pro- duce. If the exchangeable value of the annual produce, on the contrary, fall fhort of the annual confumption, the capital of the fociety mud annually decay in proportion tc this deficiency. The expence of the fociety in this cafe exceeds its revenue, and necefTarily encroaches upon its capital. Its capital, therefore, muft necefTarily decay, and together with it, the exchangeable value of the annual produce of its induftry. This balance of produce and confumption 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 improve- ment may be either gradually increafmg or gradually of caying. The balance of produce and confumption may be conftantly in favour of a nation, though what is called the balance of trade be generally againfl: it. A nation may import to a greater value than it exports for half a century, perhaps, together the gold and filver which comes into it during all this time may be all im- mediately fent out of it ; its circulating coin may gradually decay, different THE WEALTH OF NATIONS. different forts of paper money being fubftituted in its place, and c even the debts too which it contracts in the principal nations with whom it deals may be gradually increafing ; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour may, during the fame period, have been increafing in a much greater proportion. The ftate of our North American colonies, and the trade which they carried on with Great Britain, before the commencement of the late diflurbances, may ferve as a proof that this is by no means an impoflible fuppofition. CHAP. IV. Of Drawbacks, MERCHANTS and manufacturers are not contented with the monopoly of the home market, but delire likewife the mod extenfive foreign fale for their goods. Their country has no jurifdiction in foreign nations, and therefore can feldom procure them any monopoly there. They are generally obliged therefore to content themfelves with petitioning for certain encouragements to exportation. Of thefe encouragements what are called Drawbacks feem to be the moft reafonable. To allow the merchant to draw back upon exportation, either the whole or a part of whatever excife or in- land duty is impofed upon domeflick induftry, can never occafion the exportation of a greater quantity of goods than what would have been exported had no duty been impofed. Such encourage- ments do not tend to turn towards any particular employment a greater mare of the capital of the country, than what would go to 88 THE NATURE AND CAUSES OF 1 BOOK to It of its own accord, but only to hinder the duty from driving j^y^j away any part of that mare to other employments. They tend not to overturn that balance which naturally eftablifhes itfelf among all the various employments of the fociety ; but to hinder it from being overturned by the duty. They tend not to deftroy but to preferve, what it is in moft cafes advantageous to pre- serve, the natural divifion and diftribution of labour in the ibciety. The fame thing may be faid of the drawacks upon the re-expor- tation of foreign goods imported which in Great Britain generally amount to by much the largeft part of the duty upon importation. Half the duties impofed by what is called the old fublidy, are drawn back univerfally, except upon goods exported to the Britifh plan- tations ; and frequently the whole, almoft always a part of thofe impofed by later fubfidies and imports. Drawbacks were, per- haps, originally granted for the encouragement of the carrying trade, which, as the freight of the fhips is frequently paid by fo- reigners in money, was fuppofed to be peculiarly fitted for bring- ing gold and filver into the country. But though the carrying trade certainly deferves no peculiar encouragement, though the motive of the inftitution was, perhaps, abundantly fooliih, the inftitution itfelf feems reafonable enough. Such drawbacks cannot force into this trade a greater mare 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 thofe duties. The carrying trade, though it deferves no preference, ought not to be precluded, but to be left free like all other trades. It is a neceflary refource for thofe .capitals which cannot find employment either in the agriculture or in the manufactures of the country, either in its home trade or in #ts foreign trade of confumntion. 8 the WEALTH OF NATIONS. 89 The revenue of the cuftoms, inftead of fuffering, profits from c H fuch drawbacks, by that part of the duty which is retain If the whole duties had been retained, the foreign goods upon which they are paid, could feldom have been exported, confequently imported, for want of a market. The duties, therefore, of which a part is retained, would never have been paid. These reafons feem fufncLently to juftify drawbacks, ; -would juftify them, though the whole duties, whether upon the produce of domeftick induftry, or upon foreign goods, were always drawn back upon exportation. The revenue of excife would in this cafe, indeed, fuffer a little, and that of the cuftoms agood deal more ; but the natural balance of induftry, the natural divifion and diftribution of labour, which is always more or lefs difturbed by fuch duties, would be more nearly re-eftablimed by fuch a regulation. These reafons, however, will juftify drawbacks only upon ex- porting goods to thofe countries which are altogether foreign and independent, not to thofe in which our merchants and manu- facturers enjoy a monopoly. A drawback, for example, upon the exportation of European goods to our American colonies, will not always occafion a greater exportation than what would have taken place without it. By means of the monopoly which our merchants and manufacturers enjoy there, the fame quantity might frequently, perhaps, be fent thither, though the whole duties were retained. The drawback, therefore, may frequently be nine lofs to the revenue of excife and cuftoms, without altering the ftate of the trade, or rendering it in any refpect more exten- five. How far fuch drawbacks can be juftifted, as a proper en- couragement to the induftry of our colonies, or how far it is Vol. II. N advantageous THE NATURE AND CAUSES OF BOOK advantageous to the mother country, that they mould be exempted from taxes which are paid by all the reft of their fellow fubjects, will appear hereafter when I come to treat of colonies. Drawbacks however, it muft always be underftood, are ufeful only in thofe cafes in which the goods for the exportation of which they are given, are really exported to fome foreign country ; and: not clandeftinely reimported into cur own. That fome drawbacks,, particularly thofe upon tobacco, have frequently been abufed in this manner, and have given occafion to many frauds equally hurtful; both to the revenue and to the fair trader, is well known. CHAP. V. Of Bounties. BOUNTIES upon exportation are, in Great Britain, fre- quently petitioned for, and fometimes granted to the produce of particular branches of domeftick induftry. By means of them our merchants and manufacturers, it is pretended, will be enabled to fell their goods as cheap or cheaper than their rivals in the foreign market. A greater quantity, it is faid, will thus be export- ed, and the balance of trade confequently turned more in favour of our own country. W e 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 coun- trymen. The next beft expedient, it has been thought, therefore, is to pay them for buying. It is in this manner that the mercan- tile fyftem propofes to enrich the whole country, and to put money into all our pockets by means of the balance of trade. Bounties, THE WEALTH OF NATIONS. Bounties, it is allowed, ought to be given to thofe branches of C H A P. trade only which cannot be carried on without them. But every u-— v-^J branch of trade in which the merchant can fell his goods for a price which replaces to him, with the ordinary profits of ftock, the whole capital employed in preparing and lending them to mar- ket, can be carried on without a bounty. Every fuch 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. Thofe trades only require bounties in which the merchant is obliged to fell his goods for a price which does not replace to him his capital, together with the ordinary profit; o in which he is obliged to fell them for lefs than it really cofts hi to fend them to market. The bounty is given in order to m ik \ up this lofs, and to encourage him to continue, or perhaps to b gin, a trade of which the expence is fuppofed to be greater than the returns, of which every operation eats up a part of the capi- tal employed in it, and which is of fuch a nature, that, if all other trades refembled it, there would foon be no capital left in the country. The trades, it is to be obferved, which are carried on by means of bounties, are the only ones which can be carried on between two nations for any confiderable time together, in fuch a manner as that one of them mall always and regularly lofe, or fell its goods for lefs than it really cofts to fend them to market. But if the bounty did not repay to the merchant what he would otherwife lofe upon the price of his goods, his own intereft would foon oblige him to employ his ftock in another way, or to find out a trade in which the m ice of the goods would replace to him, with the ordi- nary profit, the capital employed in fending them to market. The effect of bounties, like that of all the other expedients of the mer- cantile lyftem, can only be to force the trade of a country into a N 2 channel 2 THE NATURE AND CAUSES OF BOOK channel much lefs advantageous than that in which it would. natu- v— v — -> rally run of its own accord. The ingenious and well informed author of the tracts upon the corn trade has mown very clearly, that fmce the bounty upon the exportation of corn was firft eflablifhed, the price of the corn exported, valued moderately enough, has exceeded that of the corn imported, valued very high, by a much greater fum than the amount of the whole bounties which have been paid during that period. This, he imagines, upon the true principles of the mer- cantile fyflem, is a clear proof that this forced corn trade is bene- ficial to the nation the value of the exportation exceeding that of the importation by a much greater fum than the whole extraor- dinary expence which the publick has been at in order to get it exported. He does not confider that this extraordinary expence, or the bounty, is the fmalleft part of the expence which the exporta- tion of corn really cofls the fociety. The capital which the far- mer employed in raifing it muft likewife be taken into the account. Unlefs the price of the corn when fold in the foreign markets re- places, not only the bounty, but this capital, together with the ordinary profits of flock, the fociety is a lofer by the difference, or the national flock is fo much diminifhed. But the very reafon for which it has been thought neceflary to grant a bounty is the fup- pofed infufHciency of the price to do this. The/ average price of corn, it has been faid, has fallen confider- ably fince the efcablifhment of the bounty. That the average price of corn began to fall fomewhat towards the end of the lafl cen- tury, and has continued to do fo during the courfe of the fixty- four firft years of the prefent, I have already endeavoured to mow. But this event, fuppofmg it to be as real as I believe it to be, muft have happened in fpite of the bounty, and cannot pofiibly have happened in conference of it. In THE WEALTH OF NATIONS. 93 In years of plenty, it has already been obferved, the bounty, by C HA p. occafioning an extraordinary exportation, neceflarily keeps up the <— ~«y- — j price of corn in the home market above what it would naturally fall to. To do fo was the avowed purpofe of the inftitution. In years of fcarcity, though the bounty is frequently fufpended, yet the great exportation which it occafions in years of plenty, muft frequently hinder more or lefs the plenty of one year from relieving the fcarcity of another. Both in years of plenty, and in years of fcarcity, therefore, the bounty neceflarily tends to raife the money price of corn fomewhat higher than it otherwife would be in the: home market. That, in the actual ftate of tillage, the bounty muft neceflarily have this tendency, will not, I apprehend, be difputed by any rea<- fonable perfon. But it has been thought by many people, that by fecuring to the farmer a better price than he could otherwife expect in the actual ftate of tillage, it tends to encourage tillage ; and that the confequent incrcafe of corn may, in a long period of years, lower its price more than the bounty can raife it in the actual ftate which tillage may, at the end of that period, happen to be in. I answer, that this might be the cafe if the effect of the bounty was to raife the real price of corn, or to enable the farmer with an equal quantity of it to maintain a greater number of labourers in the fame manner, whether liberal, moderate, or fcanty, that other labourers are commonly maintained in his neighbourhood. But neither the bounty, it is evident, nor any other human inftitution, can have any fuch effect. It is not the real, but the nominal price of corn only, which can be at all affected by the bounty. The real effect of the bounty is not fo much to raife the real value of corn, as to degrade the real value of filverj or to make an equal quantity of it exchange for a fmaller quantity, not only of corn 3 THE NATURE AND CAUSES OF corn, but of all other commodities : for the money price of corn regulates that of all other commodities. It regulates the money price of labour, which muft always be fuch as to enable the labourer to purchafe a quantity of corn fuf- ficient to maintain him and his family either in the liberal, mode- rate, or fcanty manner in which the advancing, ftationary, or de- clining circumftances of the fociety oblige his employers to main- tain him. It regulates the money price of all the other parts of the rude produce of land, which, in every period of improvement, mull: bear a certain proportion to that of corn, though this proportion is different in different periods. It regulates, for example, the money price of grafs and hay, of butcher's meat, of horfes, and the maintenance of horfes, of land carriage confequently, or of the greater part of the inland commerce of the country. By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of all manufac- tures. By regulating the money price of labour, it regulates that of manufacturing art and indufhy. And by regulating both, it regulates that of the compleat manufacture. The money price of labour, and of every thing that is the produce either of land or labour, muff necefiarily either rife or fall in proportion to the mo- ney price of corn. Though in confequence of the bounty, therefore, the farmer ihould be enabled to fell his corn for four millings the bufhel in- •ftead of three and lixpence, and to pay his landlord a money rent proportionable to this rife in the money price of his produce ; yet, if in confequence of this rife in the price of corn, four millings will purchafe no more goods of any other kind than three and fix- pence THE WEALTH OF NATIONS. 95 pence would have done before, neither the circumftances of the c ^A p- farmer, nor thofe of the landlord, will be in the fmalleft degree u— v-— J mended by this change. The farmer will not be able to cultivate better : the landlord will not be able to live better. That degradation in the value of filver 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 confequence to any particular country. The confeauent rife of all money prices, though it does not make thofe who receive them really richer, does not make them really poorer. A fervice of plate becomes really cheaper, and every thing elfe re- mains precifely of the fame real value as before. But that degradation in the value of filver which, being the effect either of the peculiar fltuation, or of the political inftitu- tions of a particular country, takes place only in that country, is a matter of very great confequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rife in the money price of all commodities, which is in this cafe peculiar to that country, tends to difcourage more or lefs every fort of indufhy which is carried on within it, and to enable foreign nations, by furnifhing almoft all forts of goods for a fmaller quantity of filver than its own workmen can afford to do, . to underfeil them, not. only in the foreign, but even in the home market. It is the peculiar fltuation of Spain and Portugal, as proprietors of the mines, to be the diftributors of gold and filver to all the other countries of Europe. Thofe metals ought naturally, there- fore, to be fomewhat cheaper in Spain and Portugal than in any other part of Europe. The difference, however, . fhould be no v more THE NATURE AND CAUSES OF K more than the amount of the freight and infurance ; and, on ac- count of the great value and fmall bulk of thofe metals, their freight is no great matter^ and their infurance is the fame as that of any other goods of equal value. Spain and Portugal, there- fore, could fuffer very little from their peculiar fituation, if they •did not aggravate its difadvantages by their political inftitutions. Spain by taxing, and Portugal by prohibiting the exportation of gold and filver, load that exportation with the expence of fmug- gling, and raife the value of thofe metals in other countries fo much more above what it is in their own, by the whole amount of this expence. When you dam up a ftream of water, as foon as the dam is full, as much water muft run over the dam -head as if there was no dam at all. The prohibition of exportation can- not detain a greater quantity of gold and filver in Spain and Por- tugal 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 filver. When they have got this quantity the dam is full, and the whole ftream which flows in afterwards muft run over. The annual exportation of gold and filver from Spain and Portugal accordingly is, by all accounts, notwithstanding thefe reftraints, very near equal to the whole annual importation. As the water, however, muft always be deeper behind the dam-head than before it, fo the quantity cf gold and filver which thefe reftraints detain in Spain and Por- tugal muft, in proportion to the annual produce of their land and labour, be greater that what is to be found in other countries. The higher and ftronger the dam-head, the greater muft 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 guard- ed, the more vigilant and fevere the police which looks after the .execution of the law, the greater muft be the difference in the 8 propor- THE WEALTH OF NATIONS. 9; proportion of gold and filver to the annual produce of the land CHAP, and labour of Spain and Portugal, and to that of other countries. u~y~— ' It is faid accordingly to be very eonfiderable, and that you fre- quently find there a profufion of plate in houfes, where there is nothing elfe which would, in other countries, be thought fuitable or correfpondent to this fort of magnificence. The cheapnefs of gold and filver, or, what is the fame thing, the dearnefs of all commodities, which is the necefTary effect of this redundancy of the precious metals, difcourages both the agriculture and manufac- tures of Spain and Portugal, and enables foreign nations to fupply them with many forts of rude, and with almoft all forts of manu- factured produce, for a fmaller quantity of gold and filver than what they themfelves can either raife or make them for at home. 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 thofe metals which would otherwife flow over other countries, they keep up their value in thofe other countries fomewhat above what it otherwife would be, and thereby give thofe countries a double advan- tage in their commerce with Spain and Portugal. Open the flood- gates and there will prefently be lefs water above, and more below, the dam-head, and it will foon come to a level in both places. Remove the tax and the prohibition, and as the quantity of gold and filver will diminifih confiderably in Spain and Portugal, fo it will increafe fomewhat in other countries, and the value of thofe metals, their proportion to the annual produce of land and labour, will foon come to a level, or very near to a level, in all. The lofs which Spain and Portugal could fuftain by this exportation of their gold and filver 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 exprefted or reprefented by a fmaller quantity of filver than before : but their real value would Vol. It O be 98 THE NATURE AND CAUSES OF B O O K be the fame as before, and would be fufficient to maintain, com- mand, and employ, the fame quantity of labour. As the nomi- nal value of their goods would fall, the real value of what re- mained of their gold and filver would rife, and a fmaller quantity of thofe metals would anfwer all the fame purpofes of commerce and circulation which had employed a greater quantity before. The gold and filver which would go abroad would not go abroad for nothing, but would bring back an equal value of goods of fome kind or another. Thofe goods too would not be all matters of mere luxury and expence, to be confumed by idle people who pro- duce nothing in return for their confumption. As the real wealth and revenue of idle people would not be augmented by this extraor- dinary exportation of gold and filver, fo neither would their con- fumption be much augmented by it. Thofe goods would, proba- bly, the greater part of them, and certainly fome part of them, confift In materials, tools, and provifions, for the employment and maintenance of induftrious people, who would reproduce, with a profit, the full value of their confumption. A part of the dead ftock of the fociety would thus be turned into active ftock, and would put into motion a greater quantity of induftry 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 induftry being thus relieved from one of the moft opprefiive burdens which it at pre- fent labours under. The bounty upon the exportation of corn neceffarily ope- rates exactly in the fame way as this abfurd policy of Spain and Portugal. Whatever be the actual ftate of tillage, it renders our corn fomewhat dearer in the home market than it otherwife would be in that ftate, and fomewhat cheaper in the foreign ; and as the average money price of corn regulates more or lefs that of all THE WEALTH OF NATIONS. all other commodities, it lowers the value of filver confiderably in c the one, and tends to raife it a little in the other. It enables u» foreigners, the Dutch in particular, not only to eat our corn cheaper than they otherwife could do, but fometimes to eat it cheaper than even our own people can do upon the fame occa- fions; as we are allured by an excellent authority, that of Sir Mathew Decker. It hinders our own workmen from furnifhing their goods for fo fmall a quantity of filver as they otherwife might do ; and enables the Dutch to furnifh their's for a fmaller. It tends to render our manufactures fomewhat dearer in every market, and their's fomewhat cheaper than .they otherwife would be, and confequently to give their induftry a double advantage over our own. »fidoiq ,bhjow ;€boo§ aiorlT Si vjdi ^srtnamgtrB ddutn ad xxoi?t3niui The bounty, as it raifes in the home market, not the real, but only 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 filver which it will exchange for, it difcourages our manufactures without rendering the fmalleft real fer vice either to our farmers or country gentlemen. It puts, indeed, a little more money into the pockets of both, and it will perhaps be fomewhat difficult to perfuade the greater part of them that this is not rendering them a very real fervice. But if this money links in its value, in the quantity of labour, provifions, and commodities of all different kinds which it is capable of pur- chafing, as much as it rifes in its quantity, the fervice will be merely nominal and imaginary. There is, perhaps, but one fet of men in the whole com- monwealth to whom the bounty either was or could be really ferviceable. Thefe were the corn merchants, the exporters and importers of corn. In years of plenty the bounty necefiarily O 2 occafioned TOO THE NATURE AND CAUSES OF B Op K occafioned a greater exportation than would otherwife have taken v — ; place ; and by hindering the plenty of one year from relieving tht fcarcity of another, it occafioned in years of fcarcity a greater importation than would otherwife have been neceffary. It in- creafed the bufinefs of the corn merchant in both, and in years of fcarcity it not only enabled him to import a greater quantity, but to fell it for a better price, and confequently with a greater profit than he could otherwife have made, if the plenty of one year had not been more or lefs hindered from relieving the fcar- city of another. It is in this fett of men, accordingly, that I have obferved the greater!: zeal for the continuance or renewal of i » in ifrfwr suiftf r. -iiio-j riocu) I > fl 4 fin ejmioj 10 the bounty.. Our country gentlemen, when they impofed the high duties upon the importation of foreign corn, which in times of moderate plenty amount to a prohibition, and when they eftablifhed the bounty, feem to have imitated the conduct of our manufacturers. By the one inftitution, they fecured to themfelves the monopoly of the home market, and by the other they endeavoured to prevent that market from ever being overftocked with their commodity. By both they endeavoured to raife its real value, in the fame man- ner as our manufacturers had, by the like inftitutions, raifed the real value of many different forts of manufactured goods. They did not perhaps attend to the great and effential difference which nature has eftablifhed between corn and almofl every other fort 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 fell their goods for fomewhat a better price than they otherwife could get for them, you raife, not only the nomi- nal, but the real price of thofe goods. You render them equiva- lent to a greater quantity of labour and fubfiftence, you increafe, not only the nominal, but the real profit, the real wealth and revenue THE WEALTH OF NATIONS. m revenue of thofe manufaaurers, and you enable them either to C! HA % live better themfelves, or to employ a greater quantity of labour in thofe particular manufaftures. You really encourage thofe manufactures, and direct towards them a greater quantity of the induftry of the country, than what would probably go to them of its own accord. But when by the like inftitutions you raife the nominal or money price of corn, you do not raife its real value. You do not increafe the real wealth, the real revenue either of our farmers or country gentlemen. You do not encou- rage the growth of corn, becaufe you do not enable them to maintain and employ more labourers in raifmg it. The nature of things has (lamped upon corn a real value which no human inftitution can alter. No bounty upon exportation, no monopoly of the home market can raife it. The freeft 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 par- ticular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or fcanty, in which labour is commonly maintained in that place. Woollen* or linen cloth are not the regulating commodities by which the real value of all other commodities muft be finally meafured and determined. Corn is. The real value of every other commodity is finally meafured 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 thofe variations in its average money price, which fometimes occur from one century to- another. It is the real value of filver which varies with them. Bounties upon the exportation of any home-made commodity are liable, firft, to that general objection which may be made to all the different expedients of the mercantile fyftem ; the objection of forcing fome part of the. induftry of the country into a channel le& 02 THE NATURE AND CAUSES OF qpi q | rf AK' O H T J X 4 W £ ! rf BOOK lefs advantageous than that in which it would run of its own v*— » accord: and, fecondly, to the particular objection of forcing it, not .only into a channel that is lefs advantageous, but into one that is actually difadvantageous ; the trade which cannot be carried on but by means of a bounty being neceffarily a lofing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no refpect promote the railing of that par- ticular commodity of which it was meant to encourage the produc- tion. When our country gentlemen, therefore, demanded the efta- blifhment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not ail with that com- pleat comprehenfion of their own intereft which commonly directs the conduct of thofe two other orders of people. They loaded the publick revenue with a very conliderable expence ; but they did not in any refpect increafe the real value of their own commodity, and by lowering fomewhat the real value of filver they difcouraged in fome degree the general induftry of the country, and inftead of advancing, retarded more or lefs the improvement of their own lands, which necefiarily depends upon the general induftry of the country. To encourage the production of any commodity, a bounty upon production, one fhould imagine, would have a more direct operation than one upon exportation. It has, however, been more rarely granted. The prejudices eftablifhed by the commer- cial fyftem have taught us to believe that national wealth arifes more immediately from exportation than from production. It ■has been more favoured accordingly, as the more immediate means of bringing money into the country. Bounties upon production, it has been laid too, have been found by experience more liable to frauds than thofe upon exportation. How far this is true, I know not. That bounties upon exportation have been abufed to many fraudulent 8 THE WEALTH OF NATIONS. fraudulent purpofes, is very well known. But it is not the intereft C of merchants and manufacturers, the great inventors of all thefe u expedients, that the home market mould be overftocked with their goods, an event which a bounty upon production might fome- times occafion. A bounty upon exportation, by enabling them to fend abroad the furplus part, and to keep up the price of what remains in the home market, effectually prevents this. Of all the expedients of the mercantile fyftem, accordingly, it is the one of which they are the fondeft. I have known the different under- takers of fome particular works agree privately among themfelves 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 fucceeded fo well that it more than doubled the price of their goods in the home market, notwithstanding a very confider- able increafe in the produce. The operation of the bounty upon corn mult 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 fome particular occafions. The encourage- ments given to the white-herring and whale-fifheries may, perhaps, be confidered as fomewhat of this nature. They tend directly to render the goods cheaper in the home market than they otherwife would be in the actual ftate of production. In other refpects their effects are the fame as thofe of bounties upon exportation. By means of them a part of the capital of the country is em- ployed in bringing goods to market, of which the price does not repay the cony together with the ordinary profits of ftock. But though the bounties to thofe fiffieries do not contribute to the opulence of the nation, they may perhaps be defended as con- ducing to its defence, by augmenting the number of its failors and {flipping. This may frequently be done by means of fuch bounties,. THE NATURE AND CAUSES OF K bounties, at a much fmaller expence than by keeping up a great {landing navy, if I may ufe fuch an expremon, in time of peace, in the fame manner as a Handing army. Some other bounties may be vindicated perhaps upon the fame principle. It is of importance that the kingdom mould depend as little as pofiible upon its neighbours for the manufactures neceffary for its defence -y and if thefe cannot otherwife be main- tained at home, it is reafonable that all other branches of induftry mould be taxed in order to fupport them. The bounties upon the importation of naval Itores from America, upon Britifh made fail-cloth, and upon Britifh made gunpowder, may perhaps all three be vindicated upon this principle. The firft is a bounty upon the production of America, for the ufe of Great Britain. The two others are bounties upon exportation. What is called a bounty is fometimes no more than a -drawback, and confequently is not liable to the fame objections as what is properly a bounty. The bounty, for example, upon refined (agar exported may be confidered as a drawback of the duties upon the brown and mufcovado fugars, from which it is made. The bounty upon wrought lilk exported, a drawback of the duties upon raw and thrown filk imported. The bounty upon gun- powder exported, a drawback of the duties upon brimitone and faltpetre imported. In the language of the cuftoms thofe allow- ances only are called drawbacks, which are given upon goods exported in the fame form in which they are imported. When that form has been altered by manufacture of any kind, they are called bounties- Premiums given by the publick to artifls and manufacturers who excell in their particular occupations, are not liable to the fame objections as bounties. By encouraging extraordinary dex- terity THE WEALTH OF NATIONS. 10 terity and ingenuity, they ferve to keep up the emulation of the CHAP, workmen actually employed in thofe refpe&ive occupations, i t~*4 and are not confiderable enough to turn towards any one of them „ a greater fliare of the capital of the country than what would go to it of its own accord. Their tendency is not rto overturn the natural balance of employments, but to render the work which is done in each as perfect and compleat as pofTible. The expence of premiums, befides, is very trifling ; that of bounties very great. The bounty upon corn alone has fometimes coft the publick in one year, more than three hundred thoufand pounds. Bounties are fometimes called premiums, as drawbacks are fometimes called bounties. But we mufl in all cafes attend to the nature of the thing, without paying any regard to the word. I cannot conclude this chapter concerning bounties, with- out obferving that the praifes which have been beftowed upon the law which eftablimes the bounty upon the exportation of corn, and upon that fyftem of regulations which is connected with it, are altogether unmerited. A particular examination of the nature of the corn trade, and of the principal Rritifh laws which relate to it, will fufficiently demonftrate the truth of this affertion. The great importance of this fubject. rauft jiutify the length of the digreffion. The trade of the corn merchant is compofed of four different branches, which, though they may fometimes be all carried on by the fame perfon, are in their own nature four feparate and diftincr. trades. Thefe are, firft, the trade of the inland dealer ; fecondly, that of the merchant importer for home confumption; thirdly, that of the merchant exporter of home produce for foreign con- fumption ; and, fourthly, that of the merchant carrier, or of the importer of corn in order to export it again. Vol. II. . P I. The 106 THE NATURE AND CAUSES OF B l v° ^ * ^HE ^ntere^- °^ ^ n"dand dealer, and that of the great body < — r— J of the people, how oppofite foever they may at firft fight appear, are, even in years of the greateft fcarcity, exactly the fame. It is his intereft to raife the price of his corn as high as the real fcarcity of the feafon requires, and it can never be his intereft to raife it higher. By raifing the price he difcourages thexonfumption, and puts every body more or lefs, but particularly the inferior ranks of people, upon thrift and good management. If, by raifing it too high, he difcourages the confumption fo much that the fupply of the feafon is likely to go beyond the confumption of the feafon, and to laft for fome time after the next crop begins to come in,, he runs the hazard, not only of lofing a considerable part of his corn by natural caufes, but of being obliged to fell what remains of it for much lefs than what he might have had for it feveral months before. If by not raifing the price high enough he difcourages the confumption fo little, that the fupply of the feafon is likely to fall fhort of the confumption of the feafon, he not only lofes a part of the profit which he might otherwife have made, but he expofes the people to fuffer before the end of the feafon, inftead of the hard- ihips of a dearth, the dreadful horrors of a famine. It is the intereft of the people that their daily, weekly, and monthly con- fumption, mould be proportioned as exactly as poffible to the fup- ply of the feafon. The intereft of the inland corn dealer is the fame. Ey fupply ing them, as nearly as he can judge, in this pro- portion, he is likely to fell all his corn for the higheft price, and with the greateft profit ; and his knowledge of the ftate of the crop, and of his daily, weekly, and monthly fales, enable him to judge, with more or lefs accuracy, how far they really are fupplied in this manner. Without intending the intereft of the people, he is neceftarily led, by a regard to his own intereft, to treat them, even in years of fcarcity, pretty much In the fame manner as the pru- dent mafter of a veftel is fometimes obliged to treat his crew. When he THE WEALTH OF NATIONS. he forefees that provifions are likely to run fhort, he puts them C HA P. upon fhort allowance. Though from excefs of caution he mould u— v~» fometimes do this without any real neceffity, yet all the inconveni- encies which his crew can thereby fuffer are inconfiderable in com- parifon of the danger, mifery, and ruin, to which they might fometimes be expofed by a lefs provident conduct. Though from excefs of avarice, in the fame manner, the inland corn merchant fhould fometimes raife the price of his corn fomewhat higher than the fcarcity of the feafon requires, yet all the inconveniencies which the people can fuffer from this conduct, which effectually fecures them from a famine in the end of the feafon, are inconfiderable in comparifon of what they might have been expofed to by a more liberal way of dealing in the beginning of it. The corn merchant himfelf is likely to fuffer the moft by this excefs of avarice ; not only from the indignation which it generally excites againft him, but, though he fhould efcape the effects of this indignation, from the quantity of corn which it neceffarily leaves upon his hands in the end of the feafon, and which, if the next feafon happens to prove favourable, he muff always fell for a much lower price than be might otherwife have had. Were it poftible, indeed, for one great company of merchants to poffefs themfelves of the whole crop of an extenfive country, it might, perhaps, be their intereft to deal with it as the Dutch are laid to do with the fpiceries of the Molluccas, to deftroy or throw away a confiderable part of it, in order to keep up the price of the reft. But it is fcarce poffible, even by the violence of law, to efta- blifh fuch an extenfive monopoly with regard to corn ; and, where- ever the law leaves the trade free, it is of all commodities the leaft liable to be engroffed or monopolifed 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 P 2 pur- THE NATURE AND CAUSES OF BOOK purchanng, but, fbppofmg they were capable of purchasing it, the ^.-t-1,,j manner in which it is produced renders this- purchafe altogetheir impracticable. As in every civilized country it is the commodity of which the annual confumption is the greater!, fo a greater quan- tity of induftry is annually employed in producing, corn than in producing any other commodity. When it firft comes from the ground too* it is neeeffarily divided among a greater number of owners than any other commodity ; and thefe owners can never be collected into one place like a number of independent manufactu- rers, but are neeeffarily fcattered through all the different corners- of the country. Thefe firft owners either immediately fupply the cpnfumers in their own neighbourhood, or they fupply other inland dealers who fupply thofe confumers. The inland dealers in corn, therefore,, including both the farmer and the baker, are neeeffa- rily more numerous than the dealers in any other commodity, and their difperfed fituation renders it altogether impoffible for them to enter into any general combination. If in a year of fcarcity, there- fore, any of them fhould find that he had a good deal more corn upon hand than, at the current price, he could hope to difpofe of before the end of the feafon, he would never think of keeping up this price to his own lofs, and to the fole 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 fame mo- tives, the fame interefts, which would thus regulate the conduct of any one dealer, would regulate that of every other, and oblige them all in general to fell their corn at the price which, according to the beft of their judgement, was moft fuitable to the fcarcity or plenty of the feafon. Whoever examines, with attention, the hiftory of the dearths and famines which have afflicted any part of Europe, during either the courfe of the prefent or that of the two preceeding centuries, of THE WEALTH OF NATIONS. of feveral of which we have pretty exact accounts, will find, I c believe, that a dearth never has arifen from any combination among <c the inland dealers in corn, nor from any other caufe but a real fear- city, occafioned fometimes perhaps, and in fome particular places, by the wafte of war, but in by far the greateft number of cafes, by the fault of the feafons and that a famine has never arifen from any other caufe but the violence of government attempting, by improper means, to remedy the inconveniencies of a dearth. In an extenfive corn country, between all the different parts of which there is a free commerce and communication, the fcarcity occafioned by the raoft unfavourable feafons can never be fo great as to produce a famine and the fcantieft crop, if managed with frugality and ceconomy, will maintain, through the year, the fame number of people that are commonly fed in a more affluent man- ner by one of moderate plenty. The feafons raoft unfavourable to the crop are thofe of exceflive drought or exceflive rain. But, as corn grows equally upon high and low lands, upon grounds that are difpofed to be too wet, and upon thofe that are difpofed 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 feafon the crop is a good deal lefs than in one more properly tempered, yet in both what is loft in one part of the country is in fome meafure compenfated by what is gained in the other. In rice countries, where the crop not only requires a very moift foil, but where in a certain period of its growing it muft be laid under water, the effects of a drought are much more dif- mal. Even in fuch countries, however, the drought is, perhaps, fcarce ever fo univerfal as neceffarily to occafion a famine, if the government would allow a free trade. The drought in Bengal, a few years ago, might probably have occafioned a very great dearth. Some improper regulations, fome injudicious reftraints impofed by the no THE NATURE AND CAUSES OF B oo K the fervants of the Eaft India Company upon the rice trade, con-» u— v-— ' tributed, perhaps, to turn that dearth into a famine. When the government, in order to remedy the inconveniencies of a dearth, orders all the dealers to fell their corn at what it fup- pofes a reafonable price, it either hinders them from bringing it to market, which may fometimes produce a famine, even in the begin- ning of the feafon ; or if they bring it thither, it enables the peo- ple, and thereby encourages them to confume it fo faft, as mull neceffarily produce a famine before the end of the feafon. The unlimited, unreftrained freedom of the corn trade, as it is the only effectual preventative of the miferies of a famine, fo it is the beft palliative of the inconveniencies of a dearth ; for the incon- veniencies of a real fcarcity cannot be remedied j they can only be palliated. No trade deferves more the full protection of the law, and no trade requires it fo much ; becaufe no trade is fo much ex- pofed to popular odium. In years of fcarcity the inferior ranks of people impute their diftrefs to the avarice of the corn merchant, who becomes the ob- ject of their hatred and indignation. Inftead of making profit upon fuch occafions, therefore, he is often in danger of being utterly ruined, and of having his magazines plundered and de- ftroyed by their violence, it is in years of fcarcity, however, when prices are high, that the corn merchant expects to make his principal profit. He is generally in contract with fome farmers to furnifh him for a certain number of years with a certain quan- tity of corn at a certain price. This contract price is fettled ac- cording to what is fuppofed to be the moderate and reafonable, that is, the ordinary or average price, which, before the late years of fcarcity, was commonly about eight and twenty millings for the quarter of wheat, and for that of other grain in proportion. 8 In THE WEALTH OF NATIONS. in In years of fcarcity, therefore, the corn merchant buys a great part of c ^A p» Iiis corn for the ordinary price, and fells it for a much higher. That u^v--— > this extraordinary profit, however, is no more than fufiicient to put his trade upon a fair level with other trades, and to compen- fate the many lofles which he fuftains upon other occafions, both from the perifhable nature of the commodity itfelf, and from the frequent and unforefeen fluctuations of its price, feems evident enough, from this fingle circumftance, that great fortunes are as feldom made in this as in any other trade. The popular odium, however, which attends it in years of fcarcity, the only years in which it can be very profitable, renders people of character and fortune averfe to enter into it. It is abandoned to an inferior fett of dealers and millers, bakers, mealmen and meal factors, toge- ther with a number of wretched huckfters, are almoft the only middle people that, in the home market, come between the grower and the confumer.. The ancient policy of Europe, inftead of difcountenancing this popular odium againfb a trade fo beneficial to the publick, feems, on the contrary, to have authorifed and encouraged it. By the 5th and 6th of Edward VI. cap. 14. it was enacted, That whoever fhould buy any corn or grain with intent to fell it again, fhould be reputed an unlawful engrofTer, and fhould, for the nift fault, fuffer two months imprifonment, and forfeit the value of the corn j for the fecond, fuffer fix months imprifon- ment, and forfeit double the value ; and for the third, be fet in the pillory, fuffer imprifonment during the king's pleafure, and forfeit all his goods and chattels. The antient policy of mofl other parts of Europe was no better than that of England. Ous- THE NATURE AND CAUSES OF Our anceftors feem 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 himfelf. They endeavoured, therefore, to annihilate his trade altogether. They even endeavoured to hinder as much as poffible any middle man of any kind from coming in between the grower and the confumer ; and this was the meaning of the many reftraints which they impofed upon the trade of thofe whom they called kidders or carriers of corn, a trade which nobody was allowed to exercife without a licence afcertaining his qualifications as a man of probity and fair dealing. The authority of three juftices of the peace was, by the ftatute of Edward VI. neceffary, in order to grant this licence. But even this reftraint was afterwards thought infufficie'nt, and by a ftatute of Elizabeth, the privilege of granting it was confined to the quarter-feflions. The antient policy of Europe endeavoured in this manner to regulate agriculture, the great trade of the country, by maxims quite different from thofe which it eftablimed with regard to ma- nufactures, the great trade of the towns. By leaving the farmer no other cuftomers but either the confumer or his immediate factors, the kidders and carriers of corn, it endeavoured to force him to exercife the trade, not only of a farmer, but of a corn merchant or corn retailer. On the contrary, it in many cafes prohibited the manufacturer from exercifing the trade of a fhop- keeper, or from felling his own goods by retail. It meant by the one law to promote the general intereft of the country, or to ren- der corn cheap, without, perhaps, its being well underftood how this was to be done. By the other it meant to promote that of a particular order of men, the fhopkeepers, who would be fo much THE WEALTH OF NATIONS. much underfold by the manufacturer, it was fuppofed, that their c trade would be ruined if he was allowed to retail at all. <— The manufacturer, however, though he had been allowed to keep a fhop, and to fell his own goods by retail, could not have underfold the common fhopkeeper. Whatever part of his capital he might have placed in his (hop, he mull have withdrawn it from his manufacture. In order to carry on his bufmefs on a level with that of other people, as he muft have had the profit of a manufacturer on the one part, fo he muft have had that of a fhopkeeper upon the other. Let us fuppofe, for example, that in the particular town where he lived, ten per cent, was the ordi- nary profit both of manufacturing and fhopkeeping flock ; he muft in this cafe have charged upon every piece of his own goods which he fold in his fhop, a profit of twenty per cent. When he carried them from his workhoufe to his fhop, he muft have valued them at the price for which he could have fold them to a dealer or fhopkeeper, who would have bought them by wholefale. If he valued them lower, he loft a part of the profit of his manu- facturing capital. When again he fold them from his fhop, unlefs he got the fame price at which a fhopkeeper would have fold them, he loft a part of the profit of his fhopkeeping capital. Though he might appear, therefore, to make a double profit upon the fame piece of goods, yet as thefe goods made fuccefllvely a part of two diftinct capitals, he made but a fingle profit upon the whole capital employed about them ; and if he made lefs than this profit, he was a lofer, or did not employ his whole capital with the fame advantage as the greater part of his neighbours. What the manufacturer was prohibited to do, the farmer was in fome meafure enjoined to do j to divide his capital between two different employments ; to keep one part of it in his grana- Vol. II. ries [14 THE NATURE AND CAUSES OF BOOK lies and flack yard, for fupplying the occafional demands of the u-^— j market and to employ the other in the cultivation of his land. But as he could not afford to employ the latter for lefs than the ordinary profits of farming flock, fo he could as little afford to employ the former for lefs than the ordinary profits of mercantile flock. Whether the flock which really carried on the bufinefs of the corn merchant belonged to the perfon who was called a farmer, or to the perfon who was called a corn merchant, an equal profit was in both cafes requifite, in order to indemnify its owner 'for employing it in this manner; in order to put his bufinefs upon a level with other trades, and in order to hinder him from having an interefl to change it as foon as poffible for fome other. The farmer, therefore, who was thus forced to exercife the trade of a corn merchant, could not afford to fell his corn cheaper than any other corn merchant would have been obliged to do in the cafe of a free competition. The dealer who can employ his whole flock in one fingle "branch of bufinefs, has an advantage of the fame kind with the workman who can employ his whole labour in one fingle opera- tion. As the latter acquires a dexterity which enables him, with the fame two hands, to perform a much greater quantity of work; fo the former acquires fo eafy and ready a method of tranfacling his bufinefs, of buying and difpofing of his goods, that with the fame capital he can tranfa£l a much greater quan- tity of bufinefs. As the one can commonly afford his work a good deal cheaper, fo the other can commonly afford his goods fome- what cheaper than if his flock and attention wrere both employed about a greater variety of objects. The greater part of manu- facturers could not afford to retail their own goods fo cheap as a vigilant and active fhopkeeper, whofe fole bufinefs it was to buy them by wholefale, and to retail them again. The greater part of farmers could ftill lefs afford to retail their own corn, or to fupply the I CL 23 3 U AO Ciyih 2L2L U T A VT. 3. R T THE WEALTH OF NATIONS, the inhabitants of a town, at perhaps tour or five miles diftance from the greater part of them, fo cheap as a vigilant and active corn merchant, whofe fole bufinefs it was to purchafe corn by wholefale, to collect it into a great magazine, and to retail it The law which prohibited the manufacturer from exercifmg the trade of a fhopkeeper, endeavoured to force this divifion in the employment of ftock to go on falter than it might otherwife have done. The law which obliged the farmer to exercife the trade of a corn merchant, endeavoured to hinder it from going on fo faft. Both laws were evident violations of natural liberty, and there- fore unjuft ; and they were both too as impoliticly as they were unjuft. It is the intereft of every fociety, that things of this kind fhould never either be forced or obftructed. The man who em- ploys either his labour or his ftock in a greater variety of ways than his fituation renders neceffary, can never hurt his neigh- bour by underfelhng him. He may hurt himfelf, and he gene- rally does fo. Jack of all trades will never be rich, fays the proverb. But the law ought always to truft people with the care of their own intereft, as in their local fituations they muft gene- rally be able to judge better of it than the legiflator can do. The law, however, which obliged the farmer to exercife the trade of a corn merchant, was by far the moft pernicious of the two. It obftructed, not only that divificn in the employment of ftock which is fo advantageous to every fociety, but it obftructed likewife the improvement and cultivation of the land. By oblig- ing the farmer to carry on two trades inftead of one, it forced hir.i to divide his capital into two parts, of which one only could he employed in cultivation. But if he had been at liberty to fell his whole crop to a corn merchant as faft as he could threfh it out, Q^2 his THE NATURE AND CAUSES OF B ?v* K ^s w^e capitaI might have returned immediately to the land, ' and have been employed in buying more cattle, and hiring more fervants, in order to improve and cultivate it better. But by being obliged to fell his corn by retail, he was obliged to keep a great part of his capital in his granaries and fcack yard through the year, and could not, therefore, cultivate fo well as with the fame capital he might other wife have done. This law,, therefore, neceflarily obftructed the improvement of the land, and, inflead of tending to render corn cheaper, muft have tended to render it fcarcer, and therefore dearer, than it would otherwife have been. After the bufmefs of the farmer, that of the corn merchant is in reality the trade which, if properly protected and encou- raged, would contribute the mod to the raifing of corn. It would fupport the trade of the farmer in the fame manner as the trade of the wholefale dealer fupports that of the manu- facturer. The wholefale dealer, by affording a ready market to the ma- nufacturer, by taking his goods off his hand as faft as he can make them, and by fometimes even advancing their price to him before he has made them, enables him to keep his whole capital, and fometimes even more than his whole capital, conftantly em- ployed in manufacturing, and confequently to manufacture a much greater quantity of goods than if he was obliged to dif- pofe of them himfelf to the immediate confumers, or even to the retailers. As the capital of the wholefale merchant too is ge- nerally fufficient to replace that of many manufacturers, this in- tercourse between him and them interefts the owner of a large capital to fupport the owners of a great number of fmall ones, and to afTift them in thofe loffes and misfortunes which midit otherwife prove ruinous to them. 8 An - THE WEALTH OF NATIONS. 117 An intercourfe of the fame kind univerfally eflablifhed between CH^AP. the farmers and the corn merchants, would be attended with • v-*-» effects equally beneficial to the farmers. They would be enabled to keep their whole capitals, and even more than their whole capitals, conflantly employed in cultivation. In cafe of any of thofe accidents, to which no trade is more liable than theirs, they would find in their ordinary cuflomer, the wealthy corn merchant, a perfon who had both an interefl to fupport them, and the ability to do it, and they would not, as at prefent, be entirely dependent upon the forbearance of their landlord, or the mercy of his fie ward. Were it poffible, as perhaps it is not, to eftablifh this intercourfe univerfally, and all at once, were it pof- fible to turn all at once the whole farming flock of the kingdom to its proper bufinefs, the cultivation of land, withdrawing it from every other employment into which any part of it may be at prefent diverted, and were it poffible, in order to fupport and aflifl upon occafion the operations of this great flock, to provide all at once another flock almofl equally great, it is not perhaps very eafy to imagine how great, how extenfive, and how fudden would be the improvement which this change of circumflances would alone produce upon the whole face of the country. The flatute of Edward VI. therefore, by prohibiting as much as poffible any middle man from coming in between the grower and the confumer, endeavoured to annihilate a trade of which the free exercife is not only the befl palliative of the inconveniencies of a dearth, but the befl preventative of that calamity : after the trade of the farmer, no trade contributing fo mucli to the grow- ing of corn as that of the corn merchant.. The rigour of this law was afterwards foftened by feveral fubfequent ftatutes, which fuccefllvely permitted the engroffing of corn when the price of wheat fhould not exceed twenty, twenty- four, thirty- two, and forty fhillings the quarter. At lafly by the 15th ou .87EOITAP1. 10 HJJAHW 3HT US THE NATURE AND CAUSES OF BOOK i5th of Charles II. e. 7. the engrofiing or buying of com in w~,j order to fell it again, as long as the price of wheat did not exceed forty-eight (hillings the quarter, and that of other grain in pro- portion, was declared lawful to all perfons not being foreftaikrs, that is, not felling again in the fame market within three months. All the freedom which the trade of the inland corn dealer has ever yet enjoyed, was bellowed upon it by this ftatute. The ftatute of the twelfth of the prefent king, which repeals ahnofr. all the other antient laws againfr. engrofTers and foreftallers, does not repeal the reftriclions of thuVparticular ftatute, which there- fore ftill continue in force. This ftatute, however, authorizes in fome meafure two very abfurd popular prejudices. , . , . ,m,,ljf First, it fuppofes that when the price of wheat has rifen fo high as forty-eight millings the quarter, and that of other grain in proportion, corn is likely to be fo engroffed as to hurt the people. But from what has been already faid, it feems evident enough that corn can at no price be fo engroffed by the inland dealers as to hurt the people ; and forty- eight millings the quarter befides, though it may be confidered as a very high price, yet in years of fcarcity it is a price which frequently takes place immediately after harveft, when fcarce any part of the new crop can be fold off, and when it is impoflible even for ignorance to fuppofe that any part of it can be fo engrorTed as to hurt the people. Secondly, it fuppofes that there is a certain price at which corn is likely to be forcftalled, that is, bought up in order to be fold again foon after in the fame market, fo as to hurt the people. But if a mer- chant ever buys up corn, either going to a particular market or in a particular market, in order to fell it again foon after in the fame mar- ket, THE WEALTH OF NATIONS. 119 ^6 338TJA3 fWA ■3^UTAM. 3HT . 811 ket, it mud be becaufe he judges that the market cannot be fo libe- c p« rally fupplied through the whole feafon as upon that particular occa- ^ — ■r—-' fion, and that the price, therefore, muftfoon rife. If he judges wrong in this, and if the price does not rife, he not only lofes the whole profit of the ftock which he employs in this manner, but a part of the ftock itfelf, by the expence and lofs which necefiarily attends the ftoring and keeping of corn. He hurts himfelf, therefore, much more effentially than he can hurt even the particular people whom he may hinder from fupplying themfelves upon that particu- lar market day, becaufe they may afterwards fupply themfelves juft as cheap upon any other market day. If he judges right, inftead of hurting the great body of the people, he renders them a moft im- portant fervice. By making them feel the inconveniencies of a dearth fomewhat earlier than they otherwife might do, he prevents their feeling them afterwards fo feverely as they certainly would do, if the cheapnefs of price encouraged them to confume fafter than fuited the real fcarcity of the feafon. When the fcarcity is real, the beft thing that can be done for the people is to divide the inconveniencies of it as equally as poftible through all the diffe- rent months, and weeks, and days of the year. The intereft of the corn merchant makes him ftudy to do this as exactly as he can ; and as no other perfon can have either the fame intereft, or. the fame knowledge, or the fame abilities to do it lb exactly as he, this moft important operation of commerce ought to be ti lifted entirely to him ; or, in other words, the corn trade, fo far at leaft as concerns the fupply of the home market, ought to be left per- fectly free. The popular fear of engrofting and foreftalling maybe com- pared to the popular terrors and fufpicions of witchcraft. The unfortunate wretches accufed of this latter crime were not more innocent of the misfortunes imputed to them, than thofe who have 120 THE NATURE AND CAUSES OF 13 O O fC have been accufed of the former. The law which put an end to vJ^-^i all profecutions againft witchcraft, which put it out of any man's power to gratify his own malice by acculing his neighbour of that imaginary crime, feems effectually to have put an end to thofe fears and fufpicions, by taking away the great caufe which encouraged and fupported them. The law which fhould reftore entire freedom to the inland trade of corn, would probably prove as effectual to put an end to the popular fears of engrofllng and forestalling. The 15th of Charles II. c. 7. however, with all its imperfec- tions, has perhaps contributed more both to the plentiful supply of the home market, and to the increafe of tillage, than any other law in the statute book. It is from this law that the inland com trade has derived all the liberty and protection which it has ever yet enjoyed ; and both the fupply of the home market, and the inte- rest 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 forts of grain imported into Great Britain to that of all forts of grain confumed, it has been computed by the author of the tracts upon the corn trade, does not exceed that of one to five hundred and feventy. For supplying the home market, therefore, the importance of the inland trade muff be to that of the importation trade as five hun- dred and feventy to one. The average quantity of all forts of grain exported from Great Britain does not, according to the fame 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 muff be to that of the exportation trade as thirty to one. I HAVE THE WEALTH OF NATIONS. 12 I 11 ave no great faith in political arithmctick, and I mean not CHAP, to warrant the exactnefs of either of thefe computations. I men- u-^v-^si. tion them only in order to fhow of how much lefs confequence, in , the opinion of the moft judicious and experienced perfons, the fo- reign trade of corn is than the home trade. The great cheapnefs of corn in the years immediately preceeding the eftablifhment of the bounty, may perhaps, with reafon, be afcribed in fome meafure to the operation of this ffatute of Charles II. which had been en- acted about five and twenty years before, and which had there- fore full time to produce its effect* A very few words will fufficiently explain all that I have to fay concerning the other three branches of the corn trade. II. The trade of the merchant importer of foreign corn for home confumption, evidently contributes to the immediate fupply of the home market, and muff fo far be immediately beneficial to the great body of the people. It tends, indeed, to lower fomewhat the average money price of corn, but not to diminifh 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 gentle- men would, probably, one year with another, get lefs money for their corn than they do at prefent, when importation is at mofl times in effect prohibited ; but the money which they got would be of more value, would, buy more goods of all other kinds, and would employ more labour. Their real wealth, their real revenue, therefore, would be the fame as at prefent, though it might be expreffed by a fmaller quantity of filver ; and they would neither be difabled nor difcouraged from cultivating corn as much as they do at prefent. On the contrary, as the rife in the real value of fil- ver, in confequence of lowering the money price of corn, lowers fomewhat the money price of all other commodities, it gives the Vol. II. R induftry THE NATURE AND CAUSES OF BOOK induftry of the country where it takes place fome advantage in all \i — foreign markets, and thereby tends to encourage and increafe that indufhy. But the extent of the home market for corn muft be in proportion to the general induftry of the country where it grows, or to the number of thofe who produce fomething elfe, and there- fore have fomething elfe, or what comes to the fame thing, the price of fomething elfe, to give in exchange for corn. But in every country the home market, as it is the neareft and moft conve- nient, fo is it likewife the greateft and moft important market for corn. That rife in the real value of filver, therefore, which is the effect of lowering the average money price of corn, tends to en- large the greater!: and moft important market for corn, and thereby to encourage, inftead of difcouraging, its growth, vjrnod ydi ioi j^'ieoi oih hnsJxa oi &bw fibiiio srfj doidw lo By the 226. of Charles II. c. 13. the importation of wheat, whenever the price in the home market did not exceed fifty-three fhillings and four pence the quarter, was fubjected to a duty of fixteen fhillings the quarter ; and to a duty of eight millings whenever the price did not exceed four pounds. The former of thefe two prices has, for more than a century paft, taken place only in times of very great fcarcity and the latter has, fo far as I know, not taken place at all. Yet, till wheat had rifen above this latter price, it was by this ftatute fubjecled to a very high duty; and, till it had rifen above the former, to a duty which amounted to a prohibition. The importation of other forts of grain was reftrained by duties proportionably high. The diftrefs which, in years of fcarcity, the ftricf execution of this ftatute might have brought upon the people, would probably have been very great. But, upon fuch occaiions, its execution was generally fufpended by temporary ftatutes, which permitted, for a limited time, the importation of foreign corn. The neceiiity of thefe THE WEALTH OF NATIONS. 123 rbefe temporary ftatutes fnfficiently demonftrates the impropriety C H^A P. of this general one. u— y— J x%i 9d fiufii moo *ir>> radium '-amorl sHt trwi*^ -fit - v^ftobAI :«v- . These reftraints upon importation, though prior to the efta- blilhmcnt of the bounty, were dictated by the fame fpirit, by the fame principles, which afterwards enacted that regulation. How hurtful foever in themfelves, thefe or fome other reftraints upon importation became neceffary in confequence of that regulation. If, when wheat was either below forty-eight fhillings the quarter, or not much above it, foreign corn could have been imported either duty flee, or upon paying only a fmall duty, it might have been exported again, with the benefit of the bounty, to the great lofs of the publick revenue, and to the intire perverfion of the inftitution, 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 confumption, certainly does not contribute directly to the plen- tiful fupply of the home market. It does fo, however, indirectly. From whatever fource this fupply may be ufually drawn, whether from home growth or from foreign importation, unlefs more corn is either ufually grown, or ufually imported into the country, than what is ufually confumed in it, the fupply of the home market can never be very plentiful. But, unlefs the furplus can, in all ordinary cafes, be exported, the growers will be careful never to grow more, and the importers never to import more, than what the bare confumption of the home market requires. -That market will very feldom be overftocked but it will generally be under- ftocked, the people, whofe bufinefs it is to fupply it, being gene- rally afraid left their goods mould be left upon their hands. The prohibition of exportation limits the improvement and culti- vation of the country to what the fupply of its own inhabitants R 2 requires. THE NATURE AND CAUSES OF requires. The freedom of exportation enables it to extend its cul- tivation for the fupply of foreign nations. -uncqml to Itr3iiior>.£ujo5lib aril \8. .taahcm smod sdi ni riiijwb By the 12th of Charles II. c. 4. the exportation of corn was permitted whenever the price of wheat did not exceed forty {hil- lings the quarter, and that of other grain in proportion. By the 15th of the fame prince this liberty was extended till the price of wheat exceeded forty- eight {hillings the quarter; and by the 2 2d, to all higher prices. A poundage, indeed, was to be paid to the king upon fuch exportation. But all grain was rated fo low in the book of rates, that this poundage amounted only upon wheat to a fhilling, upon oats to four-pence, and upon all other grain to lixpence the quarter. By the 1 ft of William and Mary, the act which ertablifhed the bounty, this fmall duty was virtually taken off whenever the price of wheat did not exceed forty- eight mil«- lings the quarter; and by the 1 ith and 12th of William ill. c. 2.0^ it was exprefsly 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 laft of thefe ftatutes, corn could be engroffed at any price for exportation ; but it could not be en- groiTed for inland fale, except when the price did not exceed forty- eight millings the quarter. The intereft of the inland dealer, how- ever, it has already been mown, can never be oppofite to that of the great body of the people. That of the merchant exporter may, and in fact fometimes is. If, while his own country labours under a dearth, a neighbouring country mould be afflicted with a famine, it might be his intereft to carry corn to the latter country in fuch quantities as might very much aggravate the calamities of the dearth. The plentiful fupply of the home market was not the direct object of thofe ftatutes 3 but, under the pretence of encou- raging THE WEALTH OF NATIONS. raging agriculture, to raife the money price of corn as high as pof- C fible, and thereby to occafion, as much as poflible, a conftant ^ dearth in the home market. By the difcouragement of importa- tion, the fupply of that market, even in times of great fcarcity, was confined to the home growth and by the encouragement of exportation, when the price was fo high as forty-eight millings the quarter, that market was not, even in times of confiderable fcar- city, 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, expe- dients to which GreatBritain has been obliged fo frequently to have recourfe, fufficiently demonftrate the impropriety of her general fyftem. Had that fyftem been good, fhe would not fo frequently have been reduced to the neceffity of departing from it. -JmV }d§iVyrio'i b^xd toft bib \o sbnq srfo iwarre^w tic Were all nations to follow the liberal fyftem of free exporta- tion and free importation, the different" ftates into which a great continent was divided would fo far refemble the different provinces of a great empire. As among the different provinces of a great empire the freedom of the inland trade appears, both from reafon and experience, not only the beft palliative of a dearth, but the: moft effect ual preventative of a famine j fo would the freedom of the exportation and importation trade be among the different ftates ; into which a great continent was divided. The larger the conti- nent, the eafier the communication through all the different parts of it, both by land and by water, the lefs would any one particu- lar part of it ever be expofed to either of thefe calamities, the fcarcity of any one country being more likely to be relieved by the plenty of fome other. But very few countries have entirely adopted this • liberal fyftem. The freedom of the corn trade is aim oft every where more or lefs reftrained, and, in many countries, is confined, by fuch abfurd regulations, as frequently aggravate the unavoidable misfortune of a dearth into the dreadful calamity of a famine,. . The.' 126 THE NATURE AND CAUSES OF B O O K The demand of fuch countries for corn may frequently become fo i^J-y^j great and fo urgent, that a fmall ftate in their neighbourhood, which happened at the fame time to be labouring under fome de- cree of dearth, could not venture to fupply them without expofmg itfelf to the like dreadful calamity. The very bad policy of one country may thus render it in fome meafure dangerous and impru- dent to eftablifh what would otherwife be the beft policy in ano- ther. The unlimited freedom of exportation, however, would be much lefs dangerous in great ftates, in which the growth being much greater, the fupply could feldom be much affecled by any quantity of corn that was likely to be exported. In a Swifs can- ton, or in fome of the little ftates of Italy, it may, perhaps, fome- times be neceflary to reftrain the exportation of corn. In fuch great countries as France or England it fcarce ever can. To hin- der, befides, the farmer from fending his goods at all times to the beft market, is evidently to facrifice the ordinary laws of juftice to an idea of public utility, to a fort of reafons of ftate ; an aft of legi- flative authority which ought to be exercifed only, which can be pardoned only in cafes of the moft urgent neceftity. 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 every where be compared to the laws concerning religion. The people feel themfelves fo much inte_ refted in what relates either to their fubfiftence in this life, or to their happinefs in a life to come, that government muft yield to their prejudices, and, in order to preferve the public tranquillity, efta- blifh. that fyftem which they approve of. It is upon this account, perhaps, that we fo feldom find a reafonable fyftem eftablifhed with regard to either of thofe 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 THE WEALTH OF NATIONS. plentiful fupply of the home market. It is not indeed the direct purpofe of his trade to fell his corn there. But he will generally he willing to do fo, and even for a good deal lefs money than he might expect, in a foreign market ; becaufe he faves in this manner the expence of loading and unloading, of freight and infurance. The inhabitants of the country which, by means of the carrying trade, becomes the magazine and ftorehoufe for the fupply of other countries, can very feldom be in want them- felves. 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 raife fome- what the real value of filver. The carrying trade was in effect, prohibited in Great Britain upon all ordinary occafions, by the high duties upon the im- portation of foreign corn ; and upon extraordinary occafions, when a fcarcity made it neceffary to fufpend thofe duties by tem- porary ftatutes, exportation was always prohibited. By this fyftem of laws, therefore, the carrying trade was in effecT: prohibited upon all occafions. That fyftem of laws, therefore, which is connected with the eftablifhment of the bounty, feems to deferve no part of the praife which has been beftowed upon it. The improvement and profperity of Great Britain, which has been fo often afcribed to thofe laws, may very eafily be accounted for by other caufes. That fecurity which the laws in Great Britain give to every man that he fhall enjoy the fruits of his own labour, is alone fufficient to make any country flourim, notwithstanding thefe and twenty other abfurd regulations of commerce ; and this fecurity was perfected by the revolution, much about the fame time that the bounty was eftablifhed. The natural effort of every individual 8 to THE NATURE AND CAUSES OF BOOK to better his own condition, when fuffered to exert itfelf with. . , freedom and fecurity, is fo powerful a principle that it is alone, and without any affiftance, not only capable of carrying on the fociety to wealth and profperity, but of furmounting a hundred impertinent obftructions with which the folly of human laws too often incumbers its operations; though the effect of thefe ob- ftructions is always more or lefs either to encroach upon its free- dom, or to diminifh its fecurity. In Great Britain induftry is perfectly fecure 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 greateft profperity and improve- ment of Great Britain, has been pofterior to that fyftem of laws which is connected with the bounty, we mutt not upon that account impute it to thofe laws. It has been pofterior likewife to the national debt. But the national debt has moil afluredly not been the caufe of it. Though the fyftem of laws which is connected with the bounty, has exactly the fame tendency with the police of Spain and Portugal ; to lower fomewhat the value of the precious metals in the country where it takes place j yet Great Britain is certainly one of the richeft countries in Europe, while Spain and Portugal are perhaps among the moil beggarly. This difference of fituation, however, may eafily be accounted for from two dif- ferent caufes. Firft, the tax in Spain, the prohibition in Portu- gal of exporting gold and filver, and the vigilant police which watches over the execution of thofe laws, mull, in two very poor countries, which between them import annually upwards of fix millions fterling, operate, not only more directly, but much more forcibly in reducing the value of thofe metals there, than the corn laws can do in Great Britain. And, fecondly, this bad policy is not in thofe countries counter-balanced by the general liberty THE WEALTH OF NATIONS. liberty and fecurity of the people. Indttftry is there neither free C H P. nor fecure, and the civil and ecclefiaftical governments of both -v-*-^ Spain and Portugal, are fuch as would alone be fufficient to per- petuate their prefent ftate of poverty, even though their regula- tions of commerce were as wife as the greater part of them are abfurd and foolifh. The 13th of the prefent king, c. 43. feems to have eftablifhed a new fyftem with regard to the corn laws, in many refpects better than the ancient one, but in one refpect perhaps not quite fo good. By this ftatute the high duties upon importation for home coiifumption are taken off as foon as the price of wheat is fo high as forty-eight fhillings the quarter, and inftead of them a fmall duty is impofed of only fixpenceupon the quarter of wheat, and upon that of other grain in proportion. The home market is in this manner not fo totally excluded from foreign fupplies as it was before. . By the fame ftatute the old bounty of five fhillings upon the quarter of wheat ceafes when the price rifes fo high as forty- four millings, and upon that of other grain in proportion. The bounties too upon the coarfer forts of grain are reduced fome- what lower than they were before, even at the prices at which they take place. If bounties are as improper as 1 have en- deavoured to prove them to be, the- fooner they ceafe and the lower they are, fo much the better. ...Th£ .fame ftatute permits at all prices the importation of corn in order, to be exported again, duty free % provided it is in the meantime lodged in the king's w'arehoufe. This liberty indeed extends to. ..no more thaji twenty-five of the different ports of Vol. IT. S 4 Great s3o THE NATURE AND CAUSES OF B CK> K Great Britain. They are, however, the principal ones, and there- v«*-v— -j may not perhaps be warehoufes proper for this purpofe in the greater part of the others. Some provifion is thus made for the eftabliihment of the carrying trade* •-diil fii* fe.jhv _--'it*-.r vtfo'itBtt idrijo io afcoo^-ad* sh/Boad- So far this law feems evidently an improvement upon the antient fyftem. But by the fame law exportation, is prohibited as foon as the price of wheat riles to forty- four mil lings the quarter, and that of other grain in proportion. The price feems to be a good deal too low, and there feems to be an impropriety befides in flopping ex- portation altogether, at the very fame price at which that bounty which was given in order to force it, is withdrawn. The bounty ought certainly either to have been withdrawn at a much lower price, or exportation ought to have been allowed at a much higher. So far,, therefore, this law feems to be inferior to the ancient fyftem. Of treaties of commerce. [i£l vldjsdoici ion iixw 'in .oo fifaitti t?iiw*i3o^o Ji XfjOcii i?''jfcPfli* WH E N a nation binds itfelf 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 coun- try from duties to which it fubjecls thofe of all others, the country, or at leaft the merchants and manufacturers of the country, whofe commerce is fo favoured, muft neceffarily derive | great THE WEALTH OF NATIONS. great advantage from the treaty. Thofe merchants and manufac- c ^A P. turers enjoy a fort of monopoly in the country which is fo indul* J gent to them. That country becomes a market both more ex- tenfive and more advantageous for their goods : more extenfive, becaufe the goods of other nations being either excluded or fub- jected to heavier duties, it takes off a greater quantity of theirs : more advantageous, becaufe the merchants of the favoured coun- try, enjoying a fort of monopoly there, will often fell their goods for a better price than if expofed to the free competition of all other nations. Jbsd woog b ad ot zmttl 3Di*iq 3fl X .nomoqorq m nierg isrlJQ. to Such treaties, however, though they may be advantageous to the merchants and manufacturers of the favoured, are neceflariiy difadvantageous to thofe of the favouring country. A monopoly is thus granted againft them to a foreign nation : and they muft frequently buy the foreign goods they have occafion for dearer than if the free competition of other nations was admitted. That part of its own produce with which fuch a nation purchafes foreign goods » muft confequently be fold cheaper, becaufe when two things are ex- changed for one another, the cheapnefs of the one is a neceflary confequence, or rather is the fame thing with the dearnefs of the other. The exchangeable value of its annual produce, therefore, is likely to be diminifhed by every fuch treaty. This diminution, however, can fcarce amount to any pofitive lofs, but only to a lefiening of the gain which it might otherwife make. Though it fells its goods cheaper than it otherwife might do, it will not probably fell them for lefs than they coft j nor, as in the cafe of bounties, for a price which will not replace the capital employed in bringing them to market, together with the ordinary profits of ftock. The trade could not go on long if it did. Even the favouring coun- try, therefore, may ftill gain by the trade, though - lefs than it there was a free competition.. S z Some THE NATURE AND CAUSES OF Some treaties of commerce, however, have been fuppofed ad- vantageous upon principles very different from thefe and a com- mercial country has fometimes granted a monopoly of this kind againft Itfelf to certain goods of a foreign nation, becaufe it expected that in the whole commerce between them, it would annually fell more than it would buy, and that a balance in gold and fdver would be annually returned to it. It is upon this principle that the treaty of commerce between England and Por- tugal, concluded in 1703 by Mr. Methuen, has been fo much commended. The following is a literal tranflation of that treaty; which confifts of three articles only. ART. I. His facred royal majefty of Portugal promifes, both in his own name, and that of his fucceffors, to admit, for ever hereafter* into Portugal, the woollen cloths, and the reft of the woollen manufactures of the Britifli, as was accuftomed, till they were prohibited by the law ; neverthelefs upon this condition : ART. II. That is to fay, that her facred royal majefty of Great Britain fnall, in her own name, and that of her fucceflors, be obliged for ever hereafter, to admit the wines of the growth of Portu- gal into Britain j fo that at no time, whether there mall be peace or war between the kingdoms of Britain and France, any thing more fhall be demanded for thefe wines by the name of cuftom or duty, or by whatfoever other title, directly or indirectly, whe- ther they mall be imported into Great Britain in pipes or hogf- heads, or other calks, than what mall be demanded for the like quantity or meafure of French wine, deducting or abating a third- part of the cuftom or duty. But if at any time this deduction or abatement of cuftoms, which is to be made as aforefaid, fhall in any THE WEALTH OF NATIONS. *33 any manner be attempted and prejudiced, it fhall be juft and c y^P. lawful for his facred royal majcfty of Portugal, again to pro- hibit the woollen cloths, and the reft of the Britifli woollen manufactures. art. nr. The moft excellent lords the plenipotentiaries promife and take upon themfelves, that their above-named mafters fhall ratify this treaty, and within the fpace of two months, the ratifications mail be exchanged. By this treaty the crown of Portugal becomes bound to admit the Englifh woollens upon the fame footing as before the prohi- bition, that is, not to raife the duties which had been paid before that time. But it does not become bound to admit them upon any better terms than thofe 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 thofe of France, the wines moft likely to come into competition with them. So far this treaty, therefore, is evidently advantageous to Portu- gal, and difadvantageous to Great Britain. It has been celebrated, however, as a mafter-piece of the commercial policy of England. Portugal receives annually from the Brazils a greater quantity of gold than can be employed in its domeftick commerce, whether in the fhape of coin or of plate. The furplus is too valuable to be allowed to lie idle and locked up in coffers, and as it can find no advantageous market at home, it muft, notwithstanding any prohibition, be fent abroad and exchanged for fomething for which there is a more advan- tageous market at home. A large fhare of it comes annually to England, in return either for Englifh goods, or for thofe of other European .8M0ITAH ^O.HTJAEW 3 HT 134 THE NATURE AND CAUSES OF ,4 A H D V }uS .larho io hciiA, srnol to. zboog sldEmulnoD 10I basimloxa 11 x|rj K European nations that receive their returns through England, v— v— — ' Mr. Baretti was informed that the weekly packet-boat from Liibon brings, one week with another, more than fifty thoufand pounds in gold to England. The fum had probably been exag- gerated. It would amount to more than two millions fix hun- dred thoufand pounds a year, which is more than the Brazils are fuppofed to afford. y ! ii ' t to ^*pli^ili(8i'rik.fi' "il .i&fbb -stb":tsi .-flfilll .3CK>' X)vr merchants were fome years a,go 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 folicitation, 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, ufually moft intereftc.d in celebrating the Portugal trade, were then rather difpofed to reprefent it as lefs advantageous than it had .commonly been imagined. The far greater part, almoft 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 compenfating the value of the Britim. goods fent thither. Let us fuppofe, however, that the whole was on account of Great Britain, and that it amounted to a ftill greater fum than Mr. Baretti feems .to imagine : this trade would not, upon that account, be more advantageous than any other in which for the fame value fent out, we received an equal value of consum- able goods in return. It is but a very fmall part of this importation which, it can be fuppofed, is employed as an annual addition either to the plate op to the coin of the kingdom. The reft mult all be fent abroad and exchanged THE WEALTH OF NATIONS- 10 2 3 80 AO- QMA HflUTAVI fHT exchanged for confumable goods of fome kind or other. But if C thofe confumable goods were purchafed directly with the produce of Englifh induftry, it would be more for the advantage of England than firft to purchafe with that produce the gold of Portugal, and afterwards to purchafe with that gold thofe confumable goods. A direct foreign trade of confumption is always more advantageous than a round-about one ; and to bring the fame value of foreign goods to the home market, requires a much fmaller capital in the one than in the other. If a fmaller (hare of its induftry, there- fore, had been employed in producing goods fit for the Portugal market, and a greater in producing thofe fit for the other markets where thofe confumable 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 ufe, and the confumable goods, would, in this way,, employ a much fmaller capital than at prelent. There would be a fpare capital, therefore, to be employed for other purpofes, in, exciting an additional quantity of induftry, and in railing a greater annual produce.. Though- Britain were entirely excluded from the Portugal trade, it could find very little difficulty in procuring all the annual fup- plies of gold which it wants, either for the purpofes of plate, or of coin, or of foreign tiade. Gold, like every other commodity, is always fomewhere or another to be got for its value by thofe who have that value to give for it. The annual furplus of gold in Por- tugal, befides, would ftill be fent abroad, and, though not carried away by Great Britain, would be carried away by fome other nation, which would be glad to fell it again for its price, in the fame man- ner as Great Britain does at prefent. In buying gold of Portu- gal, indeed, we buy it at the firft hand whereas, in buying it of any other nation, except Spain, we ftiould buy it at the fecond, and THE NATURE AND CAUSES OF K and might pay fomewhat dearer. This difference, however, -* would furely be too infignificant to deferve the publick attention. Almost all our gold, it is faid, comes from Portugal. With other nations the balance of trade is either againft us, or not much in our favour. But we fhould remember, that the more gold we import from one country, the lefs we muft neceffarily import from all others. The effectual demand for gold, like that for every other commodity, is in every country limited to a certain quan- tity. If nine-tenths of this quantity are imported from one coun- try, there remains a tenth only to be imported from all others. The more gold befides that is annually imported from fome parti- cular countries, over and above what is requifite for plate and for coin, the more muff neceffarily be exported to fome others ; and the more, that mod infignificant object of modern policy, the ba- lance of trade, appears to be in our favour with fome particular countries, the more it muft neceffarily appear to be againft us with many others. It was upon this filly notion, however, that England could not fubfift without the Portugal trade, that, towards the end of the hte W'li/. Fiance and Spain, without pretending either offence or provocation, required the king of Portugal to exclude all Bri- tifli (hips from his ports, and for the fecurity of this exciufion, to receive into them . French or Spanifh garrifons. Had the king of Portugal fubmitted to thofe ignominious terms which his brother-in-law- the king of Spain propofed to him, Britain would have been freed from a much greater inconvcniency than the lofs of the Portugal trade, the. burden of fupporting a very weak ally, fo unprovided of every thing for his own defence, that the whole power of England, had it been directed to that ffngle purpofe, could fcarce perhaps have defended him for another campaign. THE WEALTH OF NATIONS. campaign. The lofs of the Portugal trade would, no doubt, have occafioned a confiderable embarraflment 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 confided all the inconveniency which England could have fuffered from this notable piece of commercial policy. - The great annual importation of gold and filver is neither for the purpofe of plate nor of coin, but of foreign trade. A round- about foreign trade of confumption can be carried on more advan- tageoufly by means of thefe metals than of almoft any other goods. As they are the univerfal inftruments of commerce, they are more readily received in return for all commodities than anv other goods ; and on account of their fmall bulk and great value, it colts lefs to tranfport them backward and forwards from one place to another than almoft any other fort of merchandize, and they lofe lefs of their value by being fo tranfported. Of all the commodities, therefore, which are bought in one foreign country, for no other purpofe but to be fold or exchanged again for fome other goods in another, there are none fo convenient as gold and filver. In facilitating all the different round-about foreign trades of confumption which are carried on in Great Britain, confifts the principal advantage of the Portugal trade; and though it is not a capital advantage, it is, no doubt, a confiderable one. That any annual addition which, it can reafonably be fup- pofed, is made either to the plate or to the coin of the kingdom, could require but a very fmall annual importation of gold and filver, feems evident enough i and, though we had no direct trade with Portugal, this fmall quantity could always, fomewhere or another, be very eafily got. Though the goldfmiths trade be very confiderable in Great Bri~ tain, the far greater part of the new plate which they annually Vol. II. T felJ^ THE NATURE AND CAUSES OF fell, is made from other old plate melted down; fo that the addi- tion annually made to the whole plate of the kingdom cannot be very great, and could require but a very fmall annual importation. It is the fame cafe with 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 thoufand pounds a year in gold, was an annual addition to the money before current in the kingdom. In a country where the expence of the coinage is defrayed by the govern- ment, the value of the coin, even when it contains its full itandard weight of gold and filver, can never be much greater than that of an equal quantity of thole metals uncoined ; becaufe it requires 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 filver an equal quantity of thofe metals in coin. But, in every country, the greater part of the current coin is almoft always more or lefs worn, or otherwife degenerated from its ftandard. In Great Britain it was, before the late reformation, a good deal fo, the gold being more than two per cent, and the filver more than eight per cent, below its ftand- ard weight. But if forty-four guineas and a half, containing their full ftandard weight, a pound weight of gold, could purchafe very little more than a pound weight of uncoined gold, forty-four guineas and a half wanting a part of their weight could not pur- chafe a pound weight, and fomething was to be added in order to make up the deficiency. The current price of gold bullion at market, therefore, inftead of being the fame with the mint price, or 46I. 14s. 6d. was then about 47I. 14s. and fometimes about forty- eight pounds. When the greater part of the coin, however, was in this degenerate condition, forty-four guineas and a half, frefli from the mint, would purchafe no more goods in the market than any other ordinary guineas, becaufe when they come into the cof- fers of the merchant, being confounded with other money, they could THE WEALTH OF NATIONS. could not afterwards be diftinguifhed without more trouble than the difference was worth. Like other guineas they were worth no more than 46 1. 14s. 6d. If thrown into the melting pot, how- ever, they produced, without any fenfible lofs, a pound weight of ftandard gold, which could be fold at any time for between 47I. 14s. and 48 1. either in gold or filver, as fit for all the purpofes of coin as that which had been melted down. There was an evident pro- fit, therefore, in melting down new coined money, and it was done fo inftantaneoufly, that no precaution of government could prevent it. The operations of the mint were, upon this account, fomewhat like the web of Penelope the work that was done in the day was undone in the night. The mint was employed, not fo much in making daily additions to the coin, as in replacing the very beft part of it which was daily melted down. iue i3.vl/l .BflB-Bjiog: bsruoajiii fk> -{jum-: -j ^ns io\ ^Tc^oiq >ot -yss^w Were the private people, who carry their gold and filver to the mint, to pay themfelves for the coinage, it would add to the value of thofe metals in the fame manner as the fafhion does to that of plate. Coined gold and filver would be more valuable than uncoined. The feignorage, if it was not exorbitant, would add to the bullion the whole value of the duty ; becaufe, the government having every where the exclufive 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 expence requifite' for coinage, falfe 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 fo great a quantity of counterfeit money as might reduce the value of the government money. In France, however, though the feignorage is eight per cent, no fenfible inconveniency of this kind is found to arife from it. The dangers to which a falfe coiner is every where expofed, if he lives in the count4-y of which he coun- Dflfo riiiw. bbaudfcty , li terfbIts THE NATURE AND CAUSES OF K terfeits the coin, and to which his agents or correfpondents are -j expofed if he lives in a foreign country, are by far too great to he incurred for the fake of a profit of fix or feven per cent. The feignorage in France raifes the value of the coin higher than in proportion to the quantity of pure gold which it contains. Thus by the edict of January, 1726, *the mint price of fine gold of twenty-four carats was fixed at feven hundred and forty livres, nine fous 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 ftandard gold, therefore, is worth no more than about fix hundred and feventy-one .livres ten deniers. But in France this mark of ftandard gold is coined into thirty Louis d' ors of twenty-four livres each, or into feven hundred and twenty livres. The coinage, therefore, increafes the value of a mark of ftandard gold bullion, by the difference between fix hundred and feventy-one livres ten, deniers and feven hundred and twenty livres ; or by forty-eight livres, nineteen fous, and two deniers. A seignor age will, in many cafes, take away altogether, and will, in all cafes, diminifh the profit of melting down the new coin. This profit always arifes from the difference between the quan- tity of bullion which the common currency ought to contain, and that which it actually does contain. If this difference is lefs than the feignorage, there will be lofs inftead of profit. If it is equal to the feignorage, there will neither be profit nor lofs. If it is greater than the feignorage, there will indeed be fome profit, but * See Diclionaire des Monnoies, torn. i. article Seigneurage, p. 489. par M. Abot cle Bazinghen, Confeiller-Comiffaire en la Cour des Monnoies a Paris. lefs THE WEALTH OF NATIONS.] 141 lefs than if there was no feignorage. If, before the late reforma- c ytA p# tion of the gold coin, for example, there had been a feignorage of c — *— 5* five per cent, upon the coinage, there would have been a lofs of three per cent, upon the melting down of the gold coin. If the feignorage had been two per cent, there would have been neither profit nor lofs. If the feignorage had been one per cent, there would have been a profit, but of one per cent, only inftead of two per cent. Wherever money is received by tale, therefore, and not by weight, a feignorage is the moll effectual preventative of the. melting down of the coin, and, for the fame reafon, of its expor- tation. It is the ben: and heavieft pieces that are commonly either melted down or exported ; becaufe it is upon fuch that the largeft profits are made. The law for the encouragement of the coinage, by rendering it duty-free, was firft enacted, during the reign of Charles If. for a limited time and afterwards continued, by different prolonga- tions, till 1769, when it was rendered perpetual. The bank of England, in order to replenifh their coffers with money, are fre~ quently obliged to carry bullion to the mint ; and it was more for their intereft, they probably imagined, that the coinage mould be at the expence of the government, than at their own. It was*, probably, out of complaifmce to this great company that the go- vernment agreed to render this law perpetual; Should the cuftom of weighing gold, however, come to be difufed, as it is very likely to- be on account of its inconveniency fhould the gold coin o§ 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 fome other occafions, miftaken their own inte- reft not a little. Before the late re-coinage, when the gold currency of Eng- land was two per cent, below its ftandard weight, as there was.- 8 no THE NATURE AND CAUSES OF K no feignorage, it was two per cent, below the value of that ■j quantity of ftandard gold bullion which it ought to have con- tained. When this great company, therefore, bought gold bul- lion 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 feignorage of two per cent, upon the coinage, the common gold currency, though two per cent, below its ftand- ard weight, would notwithftanding have been equal in value to the quantity of ftandard gold which it ought to have contained ; the value of the fafhion compenfating in this cafe the diminution of the weight. They would indeed have had the feignorage to pay, which being two per cent, their lofs upon the whole tranf- aclion would have been two per cent, exactly the fame, but no greater than it actually was. If the feignorage had been five per cent, and the gold cur- rency only two per cent, below its ftandard weight, the bank would in this cafe have gained three per cent, upon the price of the bullion ; but as they would have had a feignorage of five per cent, to pay upon the coinage, their lofs upon the whole tranfac- tion would, in the fame manner, have been exactly two per cent. If the feignorage had been only one per cent, and the gold currency two per cent, below its ftandard weight, the bank would in this cafe have loft only one per cent, upon the price of the bullion ; but as they would likewife have had a feignorage of one per cent, to pay, their lofs upon the whole tranfaction would have been exactly two per cent, in the fame manner as in all other cafes. If there was a reafonable feignorage, while at the fame time the coin contained its full ftandard weight, as it has done very nearly THE WEALTH OF NATIONS nearly fince the late re-coinage, whatever the bank might lofe by C the feignorage, they would gain upon the price of the bullion ; u and whatever they might gain upon the price of the bullion, they ,would lofe by the feignorage. They would neither lofe nor gain, therefore, upon the whole tranfaction, and they would in this, as in all the foregoing cafes, be exactly in the fame fituation as if there was no feignorage. When the tax upon a commodity is fb moderate as not to encourage fmuggling, 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 laft purchafer or confumer. But money is a commodity with regard to which every man is a merchant. Nobody buys it but in order to fell it again ; and with regard to it there is in ordinary cafes no laft purchafer or confumer. When the tax upon coin- age, therefore, is fo moderate as not to encourage falfe coin- ing, though every body advances the tax, nobody finally pays it; becaufe every body gets it back in the advanced value of the coin. A moderate feignorage, therefore, would not in any cafe augment the expence of the bank, or of any other private per- fons who carry their bullion to the mint in order to be coined, and the want of a moderate feignorage does not in any cafe dimi- nifh it. Whether there is or is not a feignorage, if the currency contains its full ftandard weight, the coinage cofts nothing to any body, and if it is fhoit of that weight, the coinage muft always coft the difference between the quantity of bullion which ought to be contained in it, and that which actually is con- tained in it. The government, therefore, when it defrays the expence of coinage, not only incurrs fome fmall expence, but lofes fome final! THE NATURE AND CAUSES OF fmall revenue which it might get by a proper duty j and neither the bank nor any other private perfons are in the fmalleft degree benefited by this ufelefs piece of public generality. The directors of the bank, however, would probably be unwilling to agree to the impofition of a feignorage upon the authority of a fpeculation which promifes them no gain, but only pretends to in- fure them from any lofs. In the prefent (late of the gold coin, and as long as it continues to be received by weight, they cer- tainly would gain nothing by fuch a change. But if the cuftora of weighing the gold coin mould ever go into difufe, as it is very likely to do, and if the gold coin fnould ever fall into the fame ftate of degradation in which it was before the late re-coinage, the gain, or more properly the favings of the bank, in confequence of the impofition of a feignorage, would probably be very confi- derable. The bank of England is the only company which fends any confiderable quantity of bulhcn to the mint, and the bur- den of the annual coinage falls entirely or almoft entirely upon it. If this annual coinage had nothing to do but to repair the unavoidable lofles and neceffary tear and wear of the coin, it •could feldom exceed fifty thoufand or at moft a hundred thoufand pounds. But when the coin is degraded below its ftandard weight, the annual coinage muff, befides 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 dur- ing the ten or twelve years immediately preceeding the late refor- mation of the gold coin, the annual coinage amounted at an average to more than eight hundred and fifty thoufand pounds. But if there had been a feignorage of four or five per cent, upon the gold coin, it would probably, even in the ftate in which things then were, have put an effectual ftop to the bufmefs both of exportation and of the melting pot. The bank, inftead of lofmg every THE WEALTH OF NATIONS, g*, every year about two and a half per cent, upon the bullion CHAP, which was to be coined into more than eight hundred and fifty w-y- J thoufand pounds, or incurring an annual lofs of more than twenty one thoufand two hundred and fifty pounds, would not probably have incurred the tenth part of that lofs. The revenue allotted by parliament for defraying the expence of the coinage is but fourteen thoufand pounds a year, and the real expence which it cofts the government, or the fees of the officers of the mint, do not upon ordinary occafions, I am allured, exceed the half of that fum. The faving of fo very fmall a fum, or even the gaining of another which could not well be mUch larger, are objects too inconfiderable, it may be thought, to deferve the ferious attention of government. But the faving of eighteen or twenty thoufand pounds a year in cafe of an event which is not improbable, which has frequently hap- pened before, and which is very likely to. happen again, is finely an object which well deferves the ferious attention even of fo great a company as the bank of England. Some of the foregoing reafonings and obfervations might per- haps have been more properly placed in thofe chapters of the firlt book which treat of the origin and ufe of money, and of the difference between the real and the nominal price of com- modities. But as the law for the encouragement of coinage de- rives its origin from thofe vulgar prejudices which have been in- troduced by the mercantile fyftem I judged it more proper to referve them for this chapter. Nothing could be more agreeable to the fpirit of that fyftem than a fort of bounty upon the pro- duction of money, the very thing which, it fuppofes, conftitutes tiie wealth of every nation. It is one of its many admirable ex- pedients for enriching the country. Vol. II. U THE NATURE AND CAUSES 0«P skj"^c#j$.jfjd' H^D,gniiboH;' .ylb iad?om «jlt %> .JflskKp:^ CHAP. VII. 0/* Colo?iiest Part First. motives for ejlablijhing new colonies. TH E intereft which occafioned the firft fettlement of the different European colonies in America and the Weft Indies, was not altogether fo plain and diftincl as that which directed the eftablifhment of thofe of antient Greece and Rome. All the different ftates of antient Greece poffeffed, each of them, but a very fmall territory, and when the people in any one of them multiplied beyond what that territory could eafily main- tain, a part of them were fent in queft of a new habitation in, fome remote and diftant part of the world j the warlike neigh- bours who furrounded them on all fides, rendering it difficult for any of them to enlarge very much its territory at home. The colonies of the Dorians reforted chiefly to Italy and Sicily, which in the times preceeding the foundation of Rome, were inhabited by barbarous and uncivilized nations : thofe of the lonians and Eolians, the two other great tribes of the Greeks, to Afia minor and the iflands of the Egean fea, of which the inhabitants feem at that time to have been pretty much in the fame ftate as thofe of Sicily and Italy. The mother city, though fhe confidered the colony as a child, at all times entitled to great favour and affift- ance, and owing in return much gratitude and refpect, yet con- fidered it as an emancipated child over whom fhe pretended to claim no direct authority or jurifdiction. The colony fettled its own form of government, enacted its own laws, elected its own magi- ftrates, and made peace or war with its neighbours as an inde- pendant ftate which had no occafion to wait for the approbation or 146 BOOK IV. THE WEALTH OF NATIONS. or confent of the mother city. Nothing can be more plain and c diflinc~l than the interefl which directed every fuch eflablifhment. Rome, like mofl of the other antient republicks, was originally founded upon an Agrarian law, which divided the publick territory in a certain proportion among the different citizens who compofed the ftate. The courfe of human affairs, by marriage, by fuccef- fion, and by alienation, neceflanly deranged this original divi- fion, and frequently threw the lands, which had been allotted for the maintenance of many different families, into the poneflion of a fingle perfon. To remedy this diforder, for fuch it was fup- pofed to be, a law was made, reftricling the quantity of land which any citizen could poffefs to five hundred jugera, about three hundred and fifty Englifh acres. This law, however, though we read of its having been executed upon one or two occafions, was either neglected or evaded, and the inequality of fortunes went on continually increafing. The greater part of the citizens had no land, and without it the manners and cuftoms of thofe times ren- dered it difficult for a freeman to maintain his independancy. In the prefent times, though a poor man has no land, of his own, if he has a little flock, he may either farm the lands of another, or he may carry on fome little retail trade ; and if he has no flock, he may find employment either as a country labourer, or as an artifi- cer. But, among the antient Romans, the lands of the rich were all cultivated by flaves, who wrought under an overfeer, who was likewife a flave ; fo 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 Haves of the rich for the benefit of their mailers, whofe wealth, authority and protection, made it difficult for a poor free- man to maintain the competition againft them. The citizens, therefore, who had no land, had fcarce any other means of fubfiil- U 2 ence THE NATURE AND CAUSES OF ence but the bounties of the candidates at the annual elections. The tribunes, when they had a mind to animate the people againil the rich and the great, put them in mind of the antient divifion. of lands, and reprefented that law which reftricted this fort of pri- vate property as the fundamental law of the republick. The peo- ple 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 fatisfy them in fome meafure, therefore, they fre- quently propofed to fend out a new colony. But conquering Rome was> even upon fuch occafions, under no neceffity of turning out her citizens to feek their fortune, if one may fay fo± through the wide world, without knowing where they were to fettle. She affigned them lands generally in the conquered provinces of Italy, where, being within the dominions of the republick, they could: never form any independent ftate; but were at beft but a fort of corporation, which, though it had the power of enacting bye-laws for its own government, was at all times fubject to the correction, jurifdiction, and legillative authority of the mother city. The fending out a colony of this kind, not only gave fome fatisfaction to the people, but often eftablifhed a fort of garrifon too in a newly conquered province, of which the obedience might other- wife have been doubtful. A Roman colony, therefore, whether we confider the nature of the eftablifliment itfelf, or the motives for making it, was altogether different from a Greek one. The words accordingly, which in the original- languages denote thofe different eftablimments, have very different meanings. The latin word' (Colonia) fignifies fimply a plantation. The Greek word (wn-oiKia) on the contrary, fignifies a feparation of dwelling, a departure from home, a going out of the houfe. But, though the Roman colo- nies were in many refpects different from the Greek ones, the inte- reft which prompted to eftablilh them was equally plain and di- ftinct. Both inftitutions derived their origin either from irrefifta- ble neceffity, or from clear and evident utility. The THE WEALTH OF NATIONS. 149 The eftablifhment of the European colonies in America and the C HA P. Weft Indies arofe from no neceflity j and though the utility which v — ^ has refulted from them has been very great, it is not altogether fo clear and evident. It was not underftood at their firft eftablifli- ment, and was not the motive either of that eftablifliment or of the difcoveries which gave occafion to it, and the nature, extent, and limits of that utility are not, perhaps, well underftood at this day.. srnoX snnofjprtoD iw9.\ .^noioD wan £ Juo i^roi 01 d^ickjo'hj ^uiVJV'^ . The Venetians, during the fourteenth and fifteenth centuries,, carried on a very advantageous commerce in fpiceries, and other Eaft India goods, which they diftributed among the other nations of Europe. They purchafed them in Egypt, at that time under the dominion of the Mammeluks, the enemies of the Turks, of whom the Venetians were the enemies and this union of intereft, affifted by the money of Venice, formed fiich a conne&ion, as gave the Venetians almofl a monopoly of the trade. The great profits of the Venetians tempted the avidity of the Portugueze. They had been endeavouring, during the courfe of the fifteenth century, to find out by fea a way to the countries from which the Moors brought them ivory and gold duft acrofs the De- fart. They difcovered the Madeiras, the Canaries, the Azores, the Cape de Verd iflands, the coafl of Guinea, that of Congo, Angola, and Loango, and, finally, the Cape of Good Hope. They had long wifhed to (hare in the profitable traffic of the Venetians, and this laft difcovery opened to them a probable profpecl: of doing fo. In 1497, Vafco de Gama failed from the port of Lifbon with a fleet of four fhips, and, after a navigation of eleven months, arrived upon the coaft of Indoftan, and thus compleated a courfe of dif- coveries which had been purfued with great fteadinefs> and with very little interruption, for near a century together. Some. 5o THE NATURE AND CAUSES OF BOO K Some years before this, while the expectations of Europe were u — iHM in fufpence about the projects of the Portugueze, of which the fuccefs appeared yet to be doubtful, a Genoefe pilot formed the yet more daring project: of failing to the Eaft Indies by the weft. The fituation of thofe countries was at that time very imperfectly- known in Europe. The few European travellers who had been there had magnified the diftance j perhaps through fimplicity and ignorance, what was really very great appearing almoft infinite to thofe who could not meafure it ; or, perhaps, in order to increafe fomewhat more the marvellous of their own adventures in vifiting regions fo immenfely remote £rom Europe. The longer the way was by the Eaft, Columbus very juftly concluded, the fliorter it would be by the Weft. He propofed, therefore, to take that way, as both the fhorteft and the fureft, and he had the good fortune to convince Ifabella of Caftile of the probability of his project. He failed from the port of Palos in Auguft 1492, near five years be- fore the expedition of Vafco de Gama fet out from Portugal, and, after a voyage of between two and three months, difcovered firft fome of the fmall Bahama or Lucayan iflands, and afterwards the great hland of St. Domingo. But the countries which Columbus difcovered, either in this or in any of his fubfequent voyages, had no refemblance to thofe which he had gone in queft of. Inftead of the wealth, cultiva- tion, and populoufnefs of China and Indoftan, he found, in St. Domingo, and in all the other parts of the new world which he ever vifited, nothing but a country quite covered with wood, uncul- tivated, and inhabited only by fome tribes of naked and miferable favages. He was not very willing, however, to believe that they were not the fame with fome of the countries defcribed by Marco Polo, the firft European who had vifited, or at leaft had left be- hind him, any defcription of China or the Eaft Indies ; and a very THE WEALTH OF NATIONS. flight refemblance, fuch as that which he found between the name C HA P. of Cibao, a mountain in St. Domingo, and that of Cipango, men- u«-y-^j tioned by Marco Polo, was frequently fufficient to make him return to this favourite prepoffeflion, though contrary to the clearer! evidence. In his letters to Ferdinand and Ifabella he called the countries which he had difcovered the Indies, He entertained no doubt but that they were the extremity of thofe which had been defcribed by Marco Polo, and that they were not very diftant from the Ganges, or from the countries which had been conquered by Alexander. Even when at laft convinced that they were different, he ftill flat- tered himfelf that thofe rich countries were at no great diftance, and, in a fubfequent voyage, accordingly, went in queft of them along, the coaft of Terra Firma, and towards the ifthmus of Darien. In confequence of this miftake of Columbus, the name of the Indies has ftuck to thofe unfortunate countries ever fince; and when it was at laft clearly difcovered that the new were altogether different from the old Indies, the former were called the Weft in contradiftinc~tion to the latter, which were called the Eaft Indies. It was of importance to Columbus, however, that the coun- tries which he had difcovered, whatever they were, mould be rep re- fented to the court of Spain as of very great confequence; and, in what conftitutes the real riches of every country, the animal and vegetable productions of the foil, there was at that time nothing which could well juftify fuch a reprefentation of them. The Cori, fomething between a rat and a rabbit, and fuppofed by Mr. Buffo n to be the fame with the Aperea of Brazil, was the largeft viviparous quadruped in St. Domingo. This fpecies feems never to have been very numerous, and the dogs and cats of the Spaniards are faid to have long ago almoft entirely extirpated it, as well :52 THE NATURE AND CAUSES OF BOOK well as fome other tribes of a (till fmaller fize. Thefe, however, IV 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 induftry not very abundant, was not altogether fo fcanty* It confifted in Indian corn, yams, potatoes, bananes, &c. plants which were then altogether unknown in Europe, and which have never fince been very much efteemed in it, or fuppofed to yield a fuftenance equal to what is flrawn from the common forts of grain and pulfe, which have been cultivated in this part of the world time out of mind. The cotton plant indeed afforded the material of a very im- portant manufacture, and was at that time to Europeans un- doubtedly the moll valuable of all the vegetable productions of thofe iflands. But though in the end of the fifteenth century the muflins and other cotton goods of the Eafl Indies were much efteemed in every part of Europe, the cotton manufacture itfelf was not cultivated in any part of it. Even this production there- fore, could not at that time appear in the eyes of Europeans to be of very great confequence. Finding nothing either in the animals or vegetables of the newly difcovered countries, which could juftify a very advantageous reprefentation of them, Columbus turned his view towards their minerals ; and in the richnefs of the productions of this third kingdom, he flattered himfelf, he had found a full compenfation for the infignificancy of thofe of the other two. The little bits of gold with which the inhabitants ornamented their drefs, and which, he was informed, they frequently found in the rivu- lets and torrents that fell from the mountains, were fufficient to fatisfy THE WEALTH OF NATIONS. fatisfy him that thofe moun.ains abounded with the richer!: gold c mines. St. Domingo, therefore, was reprefented as a country abounding with gold, and, upon that account, (according to the prejudices not only of the prefent times, but of thofe times) an inexliauftible fource of real wealth to the crown and kingdom of Spain. When Columbus, upon his return from his firfr. voyage, was introduced with a fort of triumphal honours to the fovereigns of Caftile and Arragon, the principal productions of the coun- tries which he had difcovered were carried in folemn proceflion before him. The only valuable part of them confrfted in fome little fillets, bracelets, and other ornaments of gold, and in fome bales of cotton. The reft were mere objects of vulgar wonder and curionty ; fome reeds of an extraordinary fize, fome birds of a very beautiful plumage, and fome fluffed {kins of the huge alligator and manati ; all of which were preceeded by fix or feven of the wretched natives, whofe lingular colour and appearance added greatly to the novelty of the {hew. In confequence of the reprefentations of Columbus, the council of Caftile determined to take poueflion of countries of which the inhabitants were plainly incapable of defending themfelves. The pious purpofe of converting them to chriftianity fanclified the injuffice of the project. But the hope of finding treafures of gold there, was the fole motive which prompted to undertake it ; and to give this motive the greater weight, it was propofed by Columbus that the half of all the gold and filver that fhould be found there mould belong to the crown. This pro- pofal was approved of by the council. As foaig as the whole or the far greater part of the gold, which the drrc adventurers imported into Europe, was got by fo very e&fy a method as the plundering of the defencelefs natives, it wa^ iwt psinaps very difficult to pay even this heavy tax. But Vol. II. X when E54 THE NATURE AND CAUSES OF BOOK when the natives were once fairly ftript of all that they had, u— y-^ which, in St. Domingo, and in all the other countries difcovered by Columbus, was done compleatly in fix or eight years, and when in order to find more it had become necefiary to dig for it in the mines, there was no longer any poffibility of paying this tax. The rigorous exaction of it, accordingly, firft occa- fioned, it is faid, the total abandoning of the mines of St. Do- mingo, which have never been wrought fince. It was foon re- duced therefore to a third ; then to a fifth ; afterwards to a tenth, and at laft to a twentieth part of the grofs produce of the gold mines. The tax upon filver, indeed, ftill continues to be a fifth of the grofs produce. But the firft adventurers do not appear to have been much interefted about filver. Nothing lefs precious than gold feemed worthy of their attention. All the other enterprizes of the Spaniards in the new world, fubfequent to thofe of Columbus, feem to have been prompted by the fame motive. It was the facred thirft of gold that carried Oieda, Nicueffa, and Vafco Nugnes de Balboa, to the ifthmus of Darien, that carried Cortez to Mexico, and Almagro and Piz- zarro to Chili and Peru. When thofe adventurers, arrived upon any unknown coaft, their firft enquiry 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 fettle in it. Of all thofe expenfive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more perfectly ruin- ous than the fearch after new filver and gold mines. It is perhaps the moft difadvantageous lottery in the world, or the one in which the gain of thofe who draw the prizes bears the leaft proportion to the lofs of thofe who draw the blanks : for though the prizes are THE WEALTH OF NATIONS. are few and the blanks; many, the common price of a ticket is ^HAP, the whole fortune of a very rich man. Projects of mining, in- t — v— — * ftead of replacing the capital employed in them, together with the ordinary profits of ftock, commonly abforb both capital and profit. They are the projects, therefore, to which of all others a prudent law- giver, who delired to increafe the capital of his nation, would leaft chufe to give any extraordinary encourage- ment, or to turn towards them a greater (hare of that capital than what would go to them of its own accord. Such in reality 'u> the abfurd confidence which almoft all men have in their own good fortune, that wherever there is the leaft probability of fuc- cefs, too great a fhare of it is apt to go to them of its own accord. But though the judgement of fober reafon and experience con- cerning fuch projects has always been extreamly unfavourable, that of human avidity has commonly been quite otherwife. The fame paffion which has fuggefted to fo many people the abfurd idea of the philofopher's ftone, has fuggefted to others the equally abfurd one of immenfe rich mines of gold and filver. They did not confider that the value of thofe metals has, in all ages and nations, arifen chiefly from their fcarcity, and that their fcarcity has arifen from the very fmall quantities of them which nature lias any where depofited in one place, from the hard and intract- able fJoftances with which fire has almoft every where furrounded thofe fmall quantities, and confequently from the labour and ex- pence which are every where neceffary in order to penetrate to and get at them. They flattered themfelves that veins of thofe- metals might in many places be found as large and as abundant as thofe which are commonly found of lead, or copper, or tin, or iron. The dream of Sir Walter Raleigh concerning the goki.ii city and country of Eldorado, may fatisfy us that even wife men X 2 are [56 THE NATURE AND CAUSES OF BOOK are not always exempt from fuch ftrange detufions. More than a c—y^ hundred years after the death of that great man, thejefait Gumila was ftill convinced of the reality of that wonderful country, and exprefTed with great warmth, and I dare to fay, with great fin- eerity, how happy he mould be to carry the light of the gofpel to a people who could fo well reward the pious labours of their miflionary. In the countries firft difcovered by the Spaniards, no gold or lilver mines are at prefent known which are fuppofed to be worth* the working. The quantities of thofe metals which the firft ad- venturers are faid to have found there, had probably been very much magnified, as well as the fertility of the mines which' were wrought immediately after the firft difcovery. What thofe adven- turers were reported to have found, however, was fufflcient to enftame the avidity of all their countrymen. Every Spaniard who failed to America expected to find an Eldorado. Fortune too did upon this what fhe has done upon very few other occafions. She realized in fome meafure the extravagant hopes of her votaries,, and in the difcovery and conqueft of Mexico and Peru (of which the one happened about thirty, the other about forty years after the firft expedition of Columbus) fhe prefented them with fome- thing not very unlike that profufion of the precious metals which they fought for. A project of commerce to the Eaft Indies, therefore, gave occafion to the firft difcovery of the Weft. A project of con- queft gave occafion to all the eftabliihments of the Spaniards in thofe newly difcovered countries. The motive which excited them to this conqueft v/as a project of gold and filver mines j and a courfe of accidents, which no human wifdom could forefee, ren- dered this project much more fuccefsful than the undertakers had any reafonable grounds for expecting. The THE WEALTH OF NATIONS. The firft adventurers of all the other nations of Europe, who C attempted to make fettlements in America, were animated by the like chimerical views ; but they were not equally fuccefsful. It was more than a hundred years after the firft fettlement of the Brazils, before any filver, gold, or diamond mines were difcovered there. In the Englifh, French, Dutch and Danifli colonies, none have ever yet been difcovered at leaft none that are at prefect fuppofed to be worth the working. The firft Englifh fettlers in North America, however, offered a fifth of all the gold and filver which <fhould be found there, to the king as a motive for granting them their patents. In the patents to Sir Walter Raleigh, to the I^on- don and Plymouth companies, to the council of Plymouth, &c. this fifth was accordingly refer ved to the crown. To the expecta- tion of finding gold and filver mines, thole firft fettlers too joined ^that of difcovering a north weft paffage to the Eaft Indies. They have hitherto been difappointed in both. Part Second. Caufcs of the prosperity of new colonics. /TpH E colony of a civilized nation which takes poffeflion, either of a wafte country, or of one fo thinly inhabited, that the natives eafily give place to the new fettlers, advances more rapidly to wealth and greatnefs than any other human fociety.. The colonifts carry out with them a knowledge of agriculture and of other ufeful arts, fuperior to what can grow up of its own accord in the courfe of many centuries among favage and barbarous nations. They carry out with them too the habit of fubordination,. iome notion of the regular government which takes place in their own country, of the fyftem of laws which fupport it, and of a re- gular admmiftration of juftice ; and they naturally eftabliih fome- thing of the fame kind in the new fettlement. But among favage 8 and ,5* THE NATURE AND CAUSES OF BOOK ,and barbarous nations, the natural progrefs of law and govern- v^-y^j ment is ftill flower than the natural progrefs of arts, after law and government have been fo far eftablifhed, as is neceflary for their pro- tection. Every colonift gets more land than he can poftlbly cul- tivate. He has no rent, and fcarce any taxes to pay. No landlord fhares with him in its produce, and the fliare of the fovereign is commonly but a trifle. He has every motive to render as great as poflible a produce, which is thus to be almoft entirely his own. But his land is commonly fo extenfive, that with all his own in- duftry, and with all the induftry of other people whom he can get to employ, he canfeldom make it produce the tenth part of what it is capable of producing. He is eager, therefore, to collect la- bourers from all quarters, and to reward them with the moll liberal wages. But thole liberal wages, joined to the plenty and cheap- nefs of land, foon make thofe labourers leave him in order to be- come landlords themfelves, and to reward, with equal liberality, other labourers, who foon leave them for the fame reafon that they left their firft mailer. 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 eitab'ifh themfelves in the fame man- ner as their fathers did before them. In other countries, rent and profit eat up wages, and the two fupenor orders of people opprefs the inferior one. But in new co- lonies, the intereft of the two fuperior orders obliges them to treat the inferior one with more generofity and humanity ; at ler.ft, where that inferior one is not in a ftate of flavery. Wade lands, of the greaceft natural fertility, are to be had for a trifle. The increafe of revenue which the proprietor, who is always the undertaker, ex- pects THE WEALTH OF NATIONS. pects from their improvement, conftitutes his profit ; which in thefe C circumftances 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 difproportion between the great extent of the land and the fmall number of the people, which com- monly takes place in new colonies, makes it difficult for him to get this labour. He does not, therefore, difpute about wages, but is willing to employ labour at any price. The high wages of labour encourage population. The cheapnefs and plenty of good land encourage improvement, and enable the proprietor to pay thofe high wages. In thofe wages confifts almoft the whok price of the land; and though they are high, confidered as the wages of labour, they are low, confidered as the price of what is fo very valuable. What encourages the progrefs of population and improvement, encou- rages that of real wealth and greatnefs. The progrefs of many of the antient Greek colonies towards wealth and greatnefs, feems accordingly to have ,been very rapid. In the courfe of a century or two, feveral of them appear to have rivalled and even to have lurpafled their mother cities. Syracufe and Aggrigentum in Sicily, Tarentum and Locri in Italy, Ephe- fus and Miletus in lefTer Afia, appear by all accounts to have been* at leaft, equal to any of the cities of antient Greece. Though po- fteripr in their eftablimment, yet all the arts of refinement, philo- fophy, poetry, and eloquence, feem to have been cultivated as early, and to have been improved as highly in them, as in any part of the mother country. The fchools of the two oldeft Greek philofo- phers, thofe of Thales and Pythagoras, were eftablimed, it is re- markable, not in antient Greece, but the one in. an Afiatick, the other in an Italian colony. All thofe colonies had eftablL, ed them- felves in countries inhabited by favage and barbarous nations, who eafily gave place to the new fettlers. They had plenty of good land, and as they were altogether independent of the mother city, they were 160 THE NATURE AND CAUSES OF BOOK vvere at liberty to manage their own affairs in the way that they u—y-»~ » judged was moft fuitable to their own interert. The hiftory of the Roman colonies is by no means fo bril- liant. Some of them indeed, fuch as Florence, have in the courfe of many ages, and after the fall of the mother city, grown up to be confiderable ftates. But the progrefs of no one of them feems ever to have been very rapid. They vvere a'l efhblhhed in conquered provinces, which in molt, cafes had been fully inhabited before. The quantity of land afligned to each coloniit was feidom very confiderable, 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 moll fuitable to their own intereft. In the plenty of good land, the European colonies efrablimed in America and the Weft-Indies refemble, and even greatly furpafs thofeof antient Greece.' In their dependency upon the mother ftate, they refemble thofe of antient Rome ; but their great diftance from Europe has in all of them alleviated more or lefs the effects of this dependency. Their fituation has placed them lefs in the view and lefs in the power of their mother country. In purfuing their in- tereit their own way, their conduct has, upon many occafions, been over-looked, either becaufe not known or not underftood in Europe; and upon fome occafions it has been fairly fuffered and fubmitted to, becaufe their diftance rendered it difficult to reftrain it. Even the violent and arbitrary government of Spain has, upon many occafions, been obliged to recall or foften the orders w;;ich had hptn given for the government of its colonies, for fear of a general infurrection. The progrefs of all the European colonies in wealth, population and improvement, has accordingly been very great. The THE WEALTH OF NATIONS. l6l The crown of Spain, by its fhare of the gold and filver, derived C H A P. fome revenue from its colonies, from the moment of their nrft efta- v— -y-»J blifhment. It was a revenue too, of a nature to excite in human avidity the moft extravagant expectations of ftill greater riches. The Spanifli colonies, therefore, from the moment of their nrft efta- blifnment, attracted very much the attention of their mother coun- try ; while thofe of the other European nations were for a long time in a great meafure neglected. The former did not, perhaps, thrive the better in confequence of this attention ; nor the latter the worfe in confequence of this neglect. In proportion to the extent of the country which they in fome meafure poflefs, the Spanifli co- lonies are confidered as lefs populous and thriving than thofe of almoft any other European nation. The progrefs even of the Spa- nifli colonies, however, in population and improvement, has cer- tainly been very rapid and very great. The city of Lima, founded fmce the conqueft, is reprefented by Ulloa, as containing fifty thoufand inhabitants near thirty years ago. Quito, which had been but a miferable hamlet of Indians, is reprefented by the fame author as in his time equally populous. Gemelli Carreri, a pre- tended traveller, it is faid, indeed, but who feems every where to have written upon extreme good information, reprefents the city of Mexico as containing a hundred thoufand inhabitants ; a num- ber which, in fpite of all the exaggerations of the Spanifli writers, is, probably, more than five times greater than what it contained in the time of Montezuma. Thefe numbers exceed greatly thofe of Bolton, New York and Philadelphia, the three greater!: cities of the Englifh colonies. Before the conqueft of the Spaniards there were no cattle fit for draught, either in Mexico or Peru. The lama was their only beaft of burden, and its ftiength feems to have been a good deal inferior to that of a common afs. The plough was un- known among them. They were ignorant of the ufe of iron. They had no coined money, nor any eftabliftied inftrument of commerce of any kind. Their commerce was carried on by barter. A fort Vol. II. Y of THE NATURE AND CAUSES OF BOOK of wooden fpade was their principal inftrument of agriculture, Sharp ftones ferved them for knives and hatchets to cut with ; tifli bones and the hard finews of certain animals ferved them for nee- dles to few with ; and thefe feem to have been their principal inftru- ments of trade. In this flate of things, it feems impoffible, that either of thofe empires could have been fo much improved or fo well cultivated as at prefent, when they are plentifully furniuhed with all forts of European cattle, and when the ufe of iron, of the plough* and of many of the arts of Europe, has been introduced among them. But the populoufnefs of every country muft be in propor- tion to the degree of its improvement and cultivation. In fpite of the cruel deitruction of the natives which, followed the conqueft, thele two great empires are, probably, more populous now than they ever were before, and the people are furely very different for we muft acknowledge, I apprehend, that the Spanifh Creoles are. in many refpects fuperior to the antient Indians. After the fettlements of the Spaniards, that of the Portugueze in Brazil is the oldeft of any European nation in America. But as for a long time after the firft difcovery, neither gold nor filver mines were found in it, and as it afforded, upon that account, little cr no revenue to the crown,, it was for a long time in a great meafure neglected ; and during this ft ate 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 poflerfion of feven of the fourteen provinces into which it is divided. They expected foon to conquer the other feven, when Portugal recovered its independency by the elevation of the family of Braganza to the throne. The Dutch then, as enemies to the Spaniards, became friends to the Portugueze, who were likewife 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 8 not THE WEALTH OF NATIONS. 16 not worth difputing about with fuch good allies. But the Dutch CHAP, government foon began to opprefs the Portugueze colonifls, who, u--v--— 1 inftead of amufmg themfelves with complaints, took arms againft their new matters, and by their own valour and refolution, with the connivance indeed, but without any avowed affiltance from the mother country, drove them out of Brazil. The Dutch, therefore> finding it impoflible to keep any part of the country to themfelves, were contented that it lhould be entirely reftored to the crown of Portugal. In this colony there are faid to be more than fix hun- dred thoufand people, either Portugueze or defcended from Portu- gueze, Creoles, mulattoes, and a mixed race between Portugueze and Brazilians. No one colony in America is fuppofed to contain fo great a number of people of European extraction. Towards the end of the fifteenth, and during the greater part of the fixteenth century, Spain and Portugal were the two great naval powers upon the ocean ; for though the commerce of Venice ex- tended to every part of Europe, its fleets had fcarce ever failed be- yond the Mediterranean. The Spaniards, in virtue of the . firil difcovery, claimed all America as their own and though they could not hinder fo great a naval power as that of Portugal from fet- tling in Brazil, fuch was, at that time, the terror of their name, that the greater part of the other nations of Europe were afraid to eftablifli themfelves in any other part of that great continent. The French, who attempted to fettle in Florida, were all murdered by the Spaniards. But the declenfion of the naval power of this latter nation, in confequence of the defeat or mifcarriage of, what they called their Invincible Armada, which happened towards the end of the fixteenth century, put it out of their power to obftruct. any lon- ger the fettiemento of the other European nations. In the courfe of the feventeenth century, therefore, the Englim, French, Dutch, Danes and Swedes, all the great nations who had any ports upon the ocean, attempted to make fome fettlements in the new world. Y 2 The THE NATURE AND CAUSES OF The Swedes eftablifhed themfclves in New Jerfey ; and the number of Swedifh families ftill to be found there, fufficientiy demonftrates* that this colony was very likely to profper, had it been protected by the mother country. But being neglected by Sweden, it was foon fwallowed up by the Dutch colony of New York, which again in 1674, fell under the dominion of the Englifh. The fmall iflands of St. Thomas and Santa Cruz are the only countries in the new world that have ever been poiTeffed by the Danes. Thefe little fettlements too were under the government of an exclufive company, which had the fole right, both of purchafing the furplus produce of the colonifts, and of fupplying them with fuch goods of other countries as they wanted, and which, therefore, both in its purchafes and fales, had not only the power of opprefling them, but the greateft temptation to do fo. The government of ari exclufive company of merchants is, perhaps, the worft of all govern- ments for any country whatever. It was not, however, able to ftop altogether the progrefs of thefe colonies, though it rendered it more flow and languid. The late king of Denmark diflblved this company, and iince that time the profperity of thefe colonies has been very great. The Dutch fettlements in the Weft, as well as thofe in the Eaft Indies, were originally put under the government of an exclufive company. The progrefs of fome of them, therefore, though it has been confiderable, in comparifon with that of almoft any coun- try that has been long peopled and eftablifhed, has been languid and flow in comparifon with that of the greater part of new colonies. The colony of Surinam, though very confiderable, is ftill inferior to the greater part of the fugar colonies of the other European nations. The colony of Nova Belgia, now divided into the two provinces of New York and New Jerfey, would pro- bably have foon become confiderable too, even though it had re- mained THE WEALTH OF NATIONS. 265 mainecl under the government of the Dutch. The plenty and CyII^p* cheapnefs of good land are fuch powerful caufes of profperity, that u-y-^J the very worft government is fcarce capable of checking altogether the efficacy of their operation. The great diftance too from the mother country would enable the colonifts to evade more or lefs by fmuggling the monopoly which the company enjoyed againii them. At prefent the company allows all Dutch fhips to trade to Surinam upon paying two and- a half per cent, upon the value of their cargo for a licence and only referves to itfelf exclufively the direct trade from Africa to America, which confifts almoft entirely in the flave trade. This relaxation in the exclufive privileges of the company, is probably the principal caufe of that degree of profperity which that colony at prefent enjoys. Curacoa and Euftatia, the two principal iflands belonging to the Dutch, are free ports open to the fhips of all nations ; and this freedom, in the midft of better colonies whofe ports are open to thofe of one nation only, has been the great caufe of the profperity of thofe two barren iilands. The French colony of Canada was, during the greater part of the laft century, and fome part of the prefent, under the govern- ment of an exclufive company. Under fo unfavourable an admi- nistration its progrefs was necefTarily very flow in comparifon with that of other new colonies ; but it became much more rapid when this company was diflblved after the fall of what is called the Mifiifiipi fcheme. When the Enghfh got pofTeffion of this country, they found in it near double the number of inhabitants which father Char- levoix had affigned to it between twenty and thirty years before. That jefuit had travelled over the whole country, and had no in- clination to reprefent it as lefs confiderable than it really was. The French colony of St. Domingo was eftablimed by pirates and free-booters, who, for a long time, neither required the pro- 1 tection5 ,64 THE NATURE AND CAUSES OF BOOK tection, nor acknowledged the authority of France ; and when the <.J^u race of banditti became fo far citizens as to acknowledge this au- thority, it was for a long time neceflary to exercife it with very great gentlenefs. During this period the population and improve- ment of this colony encreafed very faft. Even the oppreflion of the exclufive company to which it was for fome time fubjec~red, with all the other colonies of France, though it no doubt retarded, had not been able to flop its progrefs altogether. The courfe of its profperity returned as foon as it was relieved from that oppreflion. It is now the moft important of the fugar colonies of the Weft Indies, and its produce is faid to be greater than that of all the Englifh fugar colonies put together. The other fugar colonies of France are in general all very thriving, i But there are no colonies of which the progrefs has been more rapid than that of the Englifh in North America. *' -tO. fifi'il 1 13VilfiSJXSl t VlliJ lOi t*riti3jil£l.; ^flQltfiflSJlfi 33i£}luOJst Plenty of good land, and liberty to manage their own affairs their own way, feem to be the two great caufes of the profperity of all new colonies. In the plenty of good land the Englifh colonies of North Ame- rica, though, no doubt, very abundantly provided, are, however, in- ferior to thofe of the Spaniards and Portugueze, and not fuperior to fome of thofe pofTefTed by the French before the late war. But the political inftitutions of the Englifh colonies have been more favour- able to the improvement and cultivation of this land, than thofe pf any of the other three nations. First, the engroffing of uncultivated land, though it has by no means been prevented altogether, has been more reftrained in the Englifh colonies than in any other. The colony law which im- pofes THE WEALTH OF NATIONS. ' t6j pofes upon every proprietor the obligation of improving and culti- C HA P. vating, within a limited time, a certain proportion of his lands, and u^v~? which, in cafe of failure, declares thofe negle&ed lands gran table to any other perfon •, though it has not, perhaps, been very ftriclly executed, has, however, had fome effec-1. Secondly, in Penfylvania there is no right of primogeniture, and lands, like moveables, are divided equally among all the chil- dren of the family. In three of the provinces of New England the oldeft has only a double fhare, as in the Mofaical law. Though in thofe provinces, therefore, too great a quantity of land mould fometimes be engrorfed by a particular individual,, it is. likely, in the courfe of a generation or two, to be fufficiently divided again* In the other Englifli colonies, indeed, the right of primogeniture takes place, as in the law of England. But in all the Englifh co- jonies the tenure of their lands, which are all held by free focage, facilitates alienation, and the grantee of any extenfive tract of land generally finds it for his intereft to alienate, as faft as he can, the greater part of it, referving only a frnall quit- rent. In the Spanifh and Portugueze colonies, what is called the right of Mayo- razzo * takes place in the fucceflion- of all thofe great eflates to which any title of honour is annexed.. Such eflates go all to one perfon, and are in effect entailed and unalienable. The French colonies, indeed, are fubjecx to the cuitom of Paris, which, in the inheritance of land, is much more favourable to the younger chil- dren than the law of England. But, in the French colonies, if any part of an eftate, held by the noble tenure of chivalry and homage, is alienated, it is,, for a limited time, fubject to the right of redemption, either by the heir of the fuperior or by the heir of the family ; and all the larger! eftates of the country are held by fuch noble tenures, which neceffarily embarrafs alienation. But, in a new colony, a great uncultivated eftate is likely to be much more * Jus Mayoratus,. THE NATURE AND CAUSES OF more fpeedily divided by alienation than by fucceffion. The engroff- ing, however, of uncultivated land, it has already been obferved, is the greater! obftruction to its improvement and cultivation ; and the labour that is employed in the improvement and cultivation of land, affords the greater!: and moll valuable produce to the fociety. Its produce, in this cafe, pays not only its own wages, and the profit of the flock which employs it, but the rent of the land too upon which it is employed. The labour of the Englifh colonifis, therefore, being more employed in the improvement and cultiva- tion of land, is likely to afford a greater and more valuable pro- duce than that of any of the other three nations, which, by the engroffing of land, is more or lefs diverted towards other employ- ments. Thirdly, the labour of the Englifh colonifis is not only likely to afford a greater and more valuable produce, but, in confequence of the moderation of their taxes, a greater proportion of this produce belongs to themfelves, which they may flore up and employ in put- ting into motion a fiill greater quantity of labour. The Englifh colonifis have never yet contributed any thing towards the defence of the mother country, or towards the fupport of its civil govern- ment. They themfelves, on the contrary, have hitherto been de- fended almoft entirely at the expence of the mother country. But the expence of fleets and armies is out of all proportion greater than the neceffary expence of civil government. The expence of their own civil government has always been very moderate. It has gene- rally been confined to what was neceffary for paying competent falaries to the governor, to the judges, and to fome other officers of police, and for maintaining a few of the moll ufeful publick works. The expence of the civil eftabliihment of Maflachufcts Bay, before the commencement of the prefent difturbances, ufed to be but about i8,oool. a year. That of New Hampfhire and Rhode THE WEALTH OF NATIONS. Rhode I (land 3,5001. each. That of Connecticut 4,0001. That c^^p* of New York and Penfilvania 4,5001. each. That of New Jerfey v—- 1,200 1. That of Virginia and South Carolina 8,000 1. each. The civil eftablifhment of Nova Scotia and Georgia are partly fupported by an annual grant of parliament. But Nova Scotia pays, be- fides, about 7,000!. a year towards the publick expences of the colony ; and Georgia about 2,qool. 3 year. All the different civil eftablifliments in North America, in fhort, exclufive of thofe of Maryland and North Carolina, of which no exact account has been got, did not, before the commencement of the prefent distur- bances, cofl the inhabitants above 64,7001. a year j an ever me- morable example at how fmall an expence three millions of people may not only be governed, but well governed. The mod impor- tant part of the expence of government, indeed, that of defence and protection, has conftantly 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 afTembly, &c. though fufficiently decent, is not accompanied with any expenfive pomp or parade. Their ecclefiaftical 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 contri- butions of the people. The power of Spain and Portugal, on the contrary, derives fome fupport from the taxes levied upon their colo- nies. France, indeed, has never drawn any considerable revenue from its colonies, the taxes which it levies upon them being gene- rally fpent among them. But the colony government of all thefe three nations is conducted upon a much more expenfive plan, and is > accompanied with a much more expenfive ceremonial. The lums fpent 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 colonifts upon thofe particular occafions, , Vol. II. Z but. THE NATURE AND CAUSES OF but they ferve to introduce among them the habit of vanity and expence upon all other occafions. They are not only very grievous occafional taxes, but they contribute to eftablifh perpetual taxes of the fame kind ftill more grievous ; the ruinous taxes of private luxury and extravagance. In the colonies of all thofe three nations too the ecclefiaftical government is extremely oppreflive. Tithes take place in all of them, and are levied with the utmoft rigour in thofe of Spain and Portugal. All of them befides are oppreffed with a numerous race of mendicant friars, whofe beggary being not only licenfed, but confecrated by religion, is a raoft grievous tax upon the poor people^ who are moft carefully taught that it is a duty to give, and a very great fin to refufe them their charity. Over and above all this the clergy are, in all of them, the greateft engroffers of land. Fourthly, in the difpofal of their furplus produce, or of what is over and above their own confumption, the Englifh colonies have been more favoured, and have been allowed a more extenfive mar- ket than thofe of any other European nation. Every European nation has endeavoured more or lefs to monopolize to itfelf the commerce of its colonies, and, upon that account, has prohibited the mips of foreign nations from trading to them, and has pro- hibited them from importing European goods from any foreign nation. But the manner in which this monopoly has been exercifed in different nations has been very different. Some nations have given up the whole commerce of their colo- nies to an exclufive company, of whom the colonilts were obliged to buy all fuch European goods as they wanted, and to whom they were obliged to fell the whole of their own furplus produce. It was the intereft of the company, therefore, not only to fell the for- mer as dear, and to buy the latter as cheap as poITible, but to buy no THE WEALTH OF NATIONS. no more of the latter, even at this low price, than what they C could difpofe of for a very high price in Europe. It was their intereft, not only to degrade in all cafes the value of the furplus produce of the colony, but in many cafes to difcourage and keep down the natural increafe of its quantity. Of all the expedients that can well be contrived to ftunt the natural growth of a new colony, that of an exclufive company is undoubtedly the moft effectual. This, however, has been the policy of Holland, though their company in the courfe of the prefent century, has given up in many refpects the exertion of their exclufive privilege. This- too was the policy of Denmark till the reign of the late king. It has occafionally been the policy of France, and of late, fince 1755, after it had been abandoned by all other nations, on ac- count of its abfurdity, it has become the policy of Portugal with regard at leafl to two of the principal provinces of Brazil, Fer- numbuco and Marannon. Other nations, without eftablifhing an exclufive company, have confined the whole commerce of their colonies to a parti- cular port of the mother country, from whence no fhip was allowed to fail, but either in a fleet and at a particular feafon, or, if fingle, in confequence of a particular licence, which in moft cafes 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 feafon and in the proper vefTels. But as all the different merchants, who joined their fto.clts in order to fit out thofe licenfed vefTels, would find it for their intereft to act in concert, the trade which was carried on in this manner would necefTarily be conducted very nearly upon the fame principles as that of an exclufive company. The profit of thofe merchants would be almoft equally exorbi- tant and oppreffive. The colonies would be ill fupplied, and Z 2. would ,7a THE NATURE AND CAUSES OF BOOK would be obliged both to buy very dear, and to fell very cheap. This, i^J^L^j however, has always been the policy of Spain, and the price of all European goods, accordingly, is faid to be enormous in the Spanifh Weft Indies. At Quito, we are told by Ulloa, a pound of iron fells for about four and fixpence, and a pound of fteel for about fix and nine-pence fterling. But it is chiefly in order to purchafe European goods, that the colonies part with their own produce. The more, therefore, they pay for the one, the Ids they really get for the other, and the dearnefs of the one is the fame thing with the cheapnefs of the other. The policy of Por- tugal is in this refpecl the fame as that of Spain, with regard to all its colonies, except Fernambuco and Marannon, and with regard to thefe it has lately adopted a ftill worfe. Other nations leave the trade of their colonies free to all their fubjecls who may carry it on from all the different ports of the mother country, and who have occafion for no other licence than the common difpatches of the cuftomhoufe. In this cafe the number and difperfed fituation of the different traders ren- ders it impolfible for them to enter into any general combination* and their competition is fufficient to hinder them from making very exorbitant profits. Under fb liberal a policy the colonies are enabled both to fell their own produce and to buy the goods of Europe at a reafonable price. But fince the dilfolution of the Plymouth company, when our colonies were but in their in- fancy, this has always been the policy of England. It has ge- nerally too been that of France, and it has been uniformly fo fince the dilfolution of what, in England, is commonly called their Mifli- fippi company. The profits of the trade therefore which France and England carry on with their colonies, though no doubt fomewhat higher than if the competition was free to all other nations, are, however, by no means exorbitant; and then rice of European goods accordingly is not extravagantly high in the greater part of the colonies of either of thofe nations. In THE WEALTH OF NATIONS. In the exportation of their own furplus produce too it is only c with regard to certain commodities that the colonies of Great Bri- tain are confined to the market of the mother country. Thefe commodities having been enumerated in the Act of navigation and in fome other fubfequent acls, have upon that account been called enumerated commodities. The reft are called non - enumerated and may be" exported directly to other countries, provided it is in Britifh or Plantation mips of which the owners and three-fourths of the mariners are Britifh fubjecls. Among the non-enumerated commodities are fome of the moft important productions of America and the Weft Indies; grain of all forts, lumber, fait provifions, fifh, fugar, and rum. Grain is naturally the firft and principal object of the cul- ture of all new colonies. By allowing them a very extenfive market for it, the law encourages them to extend this culture much beyond the confumption of a thinly inhabited country, and thus to provide beforehand an ample fubfiftence for a con- tinually increafmg population. In a country quite covered with wood, where timber con- fequently is of little or no value, the expence of clearing the ground is the principal obftacle to improvement. By allowing the colonies a very extenfive market for their lumber, the law endeavours to facilitate improvement by raifing the price of a commodity which would otherwife be of little value, and thereby enabling them to make fome profit of what would otherwife be meer expence. In a country neither half peopled nor half cultivated, cattle naturally multiply beyond the confumption of the inhabitants, and are often upon that account of little or no value. But it is iiecefTary9 \ 74 THE NATURE AND CAUSES OF BOOK neceffary, it has already been fhewn, that the price of cattle mould u-i^— i 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 fhapes, dead and alive, a very extenhve market, the law endeavotirs to raife the value of a commodity of which the high price is fo very effential to improvement. The good effects of this liberty, however, muff be fomewhat diminifti- ed by the 4th of George III. c. 15. which puts hides and fkins among the enumerated commodities, and thereby tends to reduce the value of American cattle. To increafe the fhipping and naval power of Great Britain, by the extenfion of the fifheries of our colonies, is an object which the legiflature feems to have had almoft conftantly in view. Thofe filheries, upon this account, have had all the encouragement which freedom can give them, and they have flourifhed accordingly. The New-England fifhery in particular was, before the late diftur- bances, one of the mod important, perhaps, in the world. The whale-fifhery which, notwithstanding an extravagant bounty, is in Great Britain carried on to fo little purpofe, 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. Fifh 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 173 1, upon a reprefenta- tion of the fugar planters, its exportation was permitted to all parts of the world. The reftrictions, however, with which this liberty was granted, joined to the high price of fugar in Great Britain, have rendered it, in a great meafure, ineffectual. Great Britain 9 and THE WEALTH OF NATIONS »75 and her colonies, (till continue to be almoft the fole market for all C HA p. the fugar produced in the Britifh plantations. Their confumption u ■■ » —*«J increafes.fo faft that, though in confequence of the increafing im- provement of Jamaica as well as of the ceded iflands, the importation of fugar has increafed very greatly within thefe twenty years, the exportation to foreign countries is faid to be not much greater than before. Rum is a very important article in the trade which the Americans carry on to the coaft of Africa, from which they bring back negroe flaves in return. If the whole furplus produce of America in grain of all forts, in fait provifions and in fifh, 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 induftry of our own people. It was probably not fo much from any regard to the intereft of America, as from a jealoufy of this interference, that thofe 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 fait provifions has, in the ordinary ftate 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 fouth of Cape Finifterre. By the 6th of George III. c. 52. all non-enumerated commodities were fubjected to the like re- ftriclion. The parts of Europe which lie fouth of Cape Finifterre, are not manufacturing countries, and we were lefs jealous of the colony mips carrying home from them any manufactures which could interfere with our own. , The THE NATURE AND CAUSES OF The enumerated commodities are of two forts : firft, fuch as- are either the peculiar produce of America, or as cannot be pro- duced, or at leaft are not produced in the mother country. Of this kind are melaffes, coffee, cacao-nuts, tobacco, pimento, ginger, whale-fins, raw filk, cotton-wool, beaver, and other peltry of America, indigo, fuftick, and other dying woods : fe- condly, fuch as are not the peculiar produce of America, but which are and may be produced in the mother country, though not in fuch quantities as to fupply the greater part of her demand, which is principally fupplied from foreign countries. Of this kind are all naval ftores, malts, yards, and bowfprits, tar, pitch, and turpentine, pig and bar iron, copper ore, hides and fkins, pot and pearl afhes. The largeh; importation of commodities of the firft kind could not difcourage the growth or interfere with the fale 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 in the plantations, and confequently to fell them with a better profit at home, but to eftablifh between the plantations and foreign countries an advan- tageous carrying trade, of which Great Britain was neceffarily to be the center or emporium, as the European country into which thofe commodities were firft to be imported. The importation of commodities of the fecond kind might be fo managed too, it was fuppofed, as to interfere, not with the fale of thofe of the fame kind which were produced at home, but with that of thofe which were imported from foreign countries ; becaufe, by means of proper duties, they might be rendered always fomewhat dearer than the former, and yet a good deal cheaper than the latter. By confining fuch commodities to the home market, therefore, it was. propofed to difcourage the produce, not of Great Britain, but of fome foreign countries with which the balance of trade was believed to be unfavourable to Great Britain. 8 The THE WEALTH OF NATIONS J77 The prohibition of exporting from the colonies, to any other ^'y^1*' country but Great Britain, mails, yards, and bowfprits, tar, pitch, and turpentine, naturally tended to lower the price of timber in the colonies, and confequently to increafe the expence of clearing their lands, the principal obftacle to their improve- ment. But about the beginning of the prefent century, in 1703, the pitch and tar company of Sweden endeavoured to raife the price of their commodities to Great Britain, by prohibiting their exportation, except in their own mips, at their own price, and in fuch quantities as they thought proper. In order to counteract this notable piece of mercantile policy, and to render herfelf as much as pofnble independent4, not only^of Sweden, but of all the other northern powers, Great Britain gave a bounty upon the importation of naval ftores from America, and the effect of this bounty was to raife 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 fame time, their joint effect was rather to encourage than to difcourage the clearing of land in America. Though pig and bar iron too have been put among the enu- merated commodities, yet as, when imported from America, they are exempted from confiderable duties to which they are fubject when imported from any other country, the one part of the regu- lation contributes more to encourage the erection of furnaces in America, than the other to difcourage it. There is no manufacture which occafions fo great a confumption of wood as a furnace, or which can contribute fo much to the clearing of a country overgrown with it. The tendency of fome of thefe regulations to raife the value of timber in America, and, thereby, to facilitate the clearing of the land, was neither, perhaps, intended nor underftood by Vol. II. A a the ,7g THE NATURE AND CAUSES OF BOOK the legiflature. Though their beneficial effects, however, have u — been in this refpect accidental, they have not upon that account been kfs real. imfatlB ^nivfib \d usguVio x^^'^" The moft perfect freedom of trade is permitted between the Britifli colonies of America and the Weft Indies, both in the enume- rated and in the non-enumerated commodities. Thofe colonies are now become fo populous and thriving, that each of them finds in fome of the others a great and extenfive market for every pare 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 ftate, or in what may be called the very firft ftage of manufacture. The more advanced or more refined manufactures even of the colony produce, the merchants and manufacturers of Great Britain chufe to referve to themfelves, and have prevailed upon the legiflature to prevent their eftablifh- ment in the colonies, fometimes by high duties, and fometimes by abfolute prohibitions. While, for example, Mulkovado fugars from the Britifh plan- tations, pay upon importation only 6s. 4.6. the hundred weight; white fugars pay 1 1. is. id.; and refined, either double or fingle, in loaves 4I. 2s. $d. &l When thofe high duties were impofed, Great Britain was the fole, and fhe frill continues to be the principal market to which the fugars of the Britifh colonies could be exported. They amounted, therefore, to a prohibition, at firft of claying or refin- ing fugar for any foreign market, and at prefent 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 fugar accord- ingly, THE WEALTH OF NATIONS. 179 ingly, though it has flourifhed in all the fugar colonies of France, has c H>- J ffi been little cultivated in any of thofe of England, except for the market v-— * of the colonies themfelves. While Grenada was in the hands of the French, there was a refinery of fugar by claying, at leaft, upon almoft every plantation. Since it fell into thofe of the Englifh, almcfl all works of this kind have been given up, and there are at prefent, October 1773, I am affured, not above two or three remaining in the ifland. At prefent, however, by an indulgence of the cuftom- houfe, clayed or refined fugar, if reduced from loaves into powder, is commonly imported as Mufkovado. While Great Britain encourages in America the manufactures of pig and bar iron, by exempting them from duties to which the like commodities are fubject when imported from any other country, fhe impofes an abfolute prohibition upon the erection of fteel furnaces and flit-mills in any of her American plantations. She will not fuffer her colonifts to work in thofe more refined manufactures even for their own confumption j but infifts upon their purchaflng of her merchants and manufacturers all goods of this kind which they have occafion for. She prohibits the exportation from one province to another by water, and even the carriage by land upon horfe-back or in a cart, of hats, of wools and woollen goods, of the produce of America ; a regulation which effectually prevents the eftablifhment of any manufacture of fuch commodities for diftant fale, and confines the induftry of her colonifts in this way to fuch coarfe and houfhold manufactures, as a private family commonly makes for its own ufe, or for that of fome of its neighbours in the fame province. To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their frock A a 2 and THE NATURE AND CAUSES OF B OO K and induftry in the way that they judge moft advantageous to them- u— v^— » felves, is a manifeft violation of the moft facred rights of mankind, Unjuft, however, as fuch prohibitions may be, they have not hitherto been very hurtful to the colonies. Land is ftill fo cheap, and, confequently, labour fo dear among them, that they can import from the mother country,, almoft all the more refined or more, advanced manufactures cheaper than they could make them for themfelves. Though they had not, therefore, been prohibited from- eftablifhing fuch manufactures, yet in their prefent ftate of improve- ment, a regard to their own intereft would, probably, have pre- vented them from doing fo. In their prefent ftate of improvement, thofe prohibitions, perhaps, without cramping their induftry, . or reftraining it from any employment to which it would have gone of its own accord, are only impertinent badges of flavery impofed upon them, without any fufficient reafon, by the groundlefs jealouiy: of the merchants and manufacturers of the mother country. In a more advanced ftate they might be really oppreflive and infup- portable, TtflufoxS SnVilsh^ri oJ'fcatatftbs gr lived fusfrtd' ?B3*i^ bri£ * zanjnjjo;? Great Britain too, as me confines to her own market fome of the moft important productions of the colonies, fo in compenfation me gives to fome of them an advantage in that market ; fometimes by impofing higher duties upon the like productions when imported from other countries, and fometimes by giving bounties upon their importation from the colonies. In the firft way fhe gives an advan- tage in the home market to the fugar, tobacco and iron of her own colonies, and in the fecond, to their raw filk, to their hemp and flax, to their indigo, to their naval ftores, and to their building timber. This fecond way of encouraging the colony produce by bounties upon importation, is, fo far as I have been able to learn, peculiar to Great Britain. The firft is not. Portugal does not content herfelf with impofing higher duties upon the importation of tobacco THE WEALTH OF NATIONS 181 tobacco from any other country, but prohibits it under the fevered c ^ p* penalties. ora sdt }o aohzl v— — ^ ohsriiid ton'svisrl prh ^d.^Bm. gnotfidirloiq dssft tfavaWbii tfiujrf J With regard to *he importation of goods from Europe, England has likewife dealt more liberally with her colonies than any other nation.' i>"lOfH ^O -)l»**7.*)i SlO/Tl 3fU -lifi JjOfnlB ^YljfiL'Oti "ISflJOtn 3X11 TUCi* Great Britain allows a part, almoft always the half, generally a larger portion, and fometimes 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 inde-. pendent foreign country, it was eafy to forefee, would receive them if they came- to it loaded with the heavy duties to which, almoft all foreign goods are fubjected on their importation into- Great Britain. Unlefs, therefore, fome part of thofe duties was drawn back upon exportation, there was an end of the carrying trade; a trade fo much favoured by the mercantile fyftem.. -qiilnj brifi avSbiqqfe /<i.W# r&ifyfi^brtri* \i#'Jtwh& tnom Our- colonies, however, are by no means independent foreign countries ; and Great Britain having affumed to herfelf the exclufive right of fupplying them with all goods from Europe, might have forced them (in the fame manner as other countries have done their colonies) to receive fuch goods, loaded with all the fame duties which they paid in the mother country. But, on the contrary, till 1763, the fame 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 George 1 1 Id, c. 15. this indulgence was. a good deal abated, and it was enacted, «« That no part of the duty called the old fubfidy fhould be drawn " back for any goods of the growth, production, or manufacture ** of Europe or the Eaft Indies, which fhould be exported from *« this kingdom to any Britifh colony or plantation in America ; tf wines, white cailicoes and muflins excepted." Before this law* many different forts of foreign goods might have been bought 4 cheaper ,B2 THE NATURE AND CAUSES OF a a w ri s-.AAt» e ft^d perl hiil vlflo/nrnot) si ii fiifiJiiS l£3iO 3iufo£WnBrn B OO K cheaper in the plantations than in the mother country j and fome v-^« J may ftill. Of the greater part of the regulations concerning the colony trade, the merchants who carry it on, it muft be obferved, have been the principal advifers. We muft not wonder, therefore, if in the greater part of them, their intereft has been more confidered than either that of the colonies or that of the mother country. In their exclufive privilege of fupplying the colonies with all the goods which they wanted from Europe, and of purchafing all fuch parts of their furplus produce as could not interfere with any of the trades which they themfelves carried on at home, the intereft of the colonies was facrificed to the intereft of thofe merchants. In allowing the fame drawbacks upon the re-exportation of the greater part of European and Eaft India goods to the colonies, as upon their re-exportation to any independent country, the intereft of the mother country was facrificed to it, even according to the mercantile ideas of that intereft. It was for the intereft of the merchants to pay as little as poflible, for the foreign goods which they fent to the colonies, and, confequently, to get back as much as poflible of the duties which they advanced upon their importation into Great Britain. They might thereby be enabled to lell in the colonies, either the fame quantity of goods with a greater profit, or a greater quantity with the fame profit, and, confequently, to gain fomething either in the one way or the other. It was, likewife, for the intereft of the colonies to get all fuch goods as cheap and in as great abundance as poflible. But this might not always be for the intereft of the mother country. She might frequently fuffer both in her revenue, by giving back a great part of the duties which had been paid upon the importation of fuch goods and in her manu- factures, by being underfold in the colony market, in confequence of the eafy terms upon which foreign manufactures could be carried thither by means of thofe drawbacks. The progrefs of the linen 8 manufacture THE WEALTH OF NATIONS, 18 manufacture of Great Britain, it is commonly faid, has been a good CHAP, deal retarded by the drawbacks upon the re-exportation of German l ,j 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 fame mercantile fpirit as that of other nations, it has, however, upon the whole, been lefs illiberal and opprefllve than that of any of them. In every thing, except their foreign trade, the liberty of the Englifli colonifts to manage their own affairs their own way is com pleat. It is in every refpect equal to that of their fellow citizens at home, and is fecured in the fame manner, by an affembly of the reprefen- tatives of the people, who claim the fole right of impofing taxes for the fupport of the colony government. The authority of this affembly over-awes the executive power, and neither the meaner!: nor the moft obnoxious colonifl, as long as he obeys the law, has any thing to fear from the refentment either of the governour or of any other civil or military officer in the province. The colony afTembiies, though, like the houfe of commons in England, they are not always a very equal reprefentation of the people, yet as the executive power either has not the means to corrupt them, or, on account of the fupport which it receives from the mother country, is not under the neceflity of doing fo, they are perhaps in general more influenced by the inclinations of their confti- tuents. The councils, which, in the colony legislatures, corre- fpond to the Houfe of Lords in Great Britain, are not compofed of an hereditary nobility. In fome of the colonies, as in three of the governments of New England, thofe councils are not appointed by the king, but chofen by the reprefentatives of the people. In none of the Englifh colonies is there any hereditary nobility. In all of them, indeed, as in all other free countries, the defendant of an old colony family is more refpecled than an upftart or ,x84 THE NATURE AND CAUSES OF BOOK of equal merit and fortune : but he is only more refpected, and t__ ^y~, j he has no privileges by which he can be troublefome to his neigh- bours. Before the commencement of the prefent difturbances, the colony affemblies had not only the legiilative, but a part of the executive power. In Connecticut and Rhode illand, they elected the governor. In the other colonies they appointed the revenue officers who -collected the taxes impofed by thofe refpective alfemblies, to whom thofe officers were immediately refponlible. There is more equality, therefore, among theEnglifh colonifts than among the inha- bitants of the mother country. Their manners are more republican, and their governments, thofe of three of the provinces of New England in particular, have hitherto been more republican too. « The abfolute governments of Spain, Portugal, and France, on the contrary, take place in their colonies ; and the difcretionary powers which fuch governments commonly delegate to all their inferior officers are, on account of the great diftance, naturally exercifed there with more than ordinary violence. Under all abfolute governments there is more liberty in the capital than in any other part of the country. The fovereign himfelf can never have either intereft or inclination to pervert the order of juftice, or to opprefs the great "body of the people. In the capital his pre- fence over-awes more or lefs all his inferior officers, who in the remoter provinces, from whence the complaints of the people are lefs likely to reach him, can exercife their tyranny with much more fafety. But the European colonies in America are more remote than the molt diftant provinces of the greateft empires which had ever been known before. The government of the Englifh colo- nies is perhaps the only one which, fince the world began, could give perfect fecurity to the inhabitants of fo very diftant a pro- vince. The adminiftration of the French colonies, however, has always been conducted with more gentlenefs and moderation than that of the Spanifh and Portugueze. This fupsriority of conduct is THE WEALTH OF NATIONS. 18c ^ fa. . . , , . v! im Ui a w $;a< is fuitable both to the character of the French nation, and to what CHAP. VIL forms the character of every nation, the nature of their govern- ment, which though arbitrary and violent in comparifon with that of Great Britain, is legal and free in comparifon with thofe of Spain and Portugal. It is in the progrefs of the North American colonies, however, that the fuperiority of the Englifh policy chiefly appears. The progrefs of the fugar colonies of France has been at leaft equal, perhaps fuperior, to that of the greater part of thofe of England j and yet the fugar colonies of England enjoy a free government nearly of the fame kind with that which takes place in her colonies of North America. But the fugar colonies of France are not dis- couraged, like thofe of England, from refining their own fugar ; and, what is of ftill greater importance, the genius of their govern- ment naturally introduces a better management of their negro flaves. In all European colonies the culture of the fugar cane is carried on by negro flaves. The conftitution of thofe who have been born in the temperate climate of Europe could not, it is fup- pofed, fupport the labour of digging the ground under the burn- ing fun of the Weft Indies ; and the culture of the fugar cane, as it is managed at prefent, is all hand labour, though, in the opi- nion of many, the drill plough might be introduced into it with great advantage. But, as the profit and fuccefs of the cultiva- tion which is carried on by means of cattle, depend very much upon the good management of thofe cattle • fo the profit and fuc- cefs of that which is carried on by flaves, muft depend equally upon the good management of thofe flaves; and in the good manage- ment of their flaves the French planters, I think it is generally allowed, are fuperior to the Englifh. . The law, fo far as it gives Vol. II. B b fome i86 THE NATURE AND CAUSES OF B 00 K fome weak protection to the flave againft the violence of his mafter, u — t?mj is likely to be better executed in a colony where the government is in a great meafure arbitrary, than in one where it is altogether free. In every country where the unfortunate law of flavery is eftabliflied, the magiftrate, when he protects the flave, intermeddles in fome meafure in the management of the private property of the mafter ; and, in a free country, where the mafter is perhaps either a mem- ber of the colony affembly, or an elector of fuch a member, he dare not do this but with the greater!: caution and circumfpection. The refpect which he is obliged to pay to the mafter, renders it more difficult for him to protect the flave. But in a country where the government is in a great meafure arbitrary, where it is ufual for the magiftrate to intermeddle even in the management of the pri- vate property of individuals, and to fend them, perhaps, a lettre de cachet if they do not manage it according to his liking, it is much eafier for him to give fome protection to the flave -y and common humanity naturally difpofes him to do fo. The protection of the magiftrate renders the flave lefs contemptible in the eyes of his mafter, who is thereby induced to confider him with more regard, and to treat him with more gentlenefs. Gentle ufage renders the flave not only more faithful, but more intelligent, and therefore, upon a double account, more ufeful. He approaches more to the condition of a free fervant, and may poflefs fome degree of inte- grity and attachment to his mafter's intereft, virtues which fre- quently belong to free fervants, but which never can belong to a flave, who is treated as flaves commonly are in countries where the mafter is perfectly free and fecure. That the condition of a flave is better under an arbitrary thafi under a free government, is, I believe, fupported by the hiftory of all ages and nations. In the Roman hiftory, the firft time we read of the magiftrate interpofing to protect the flave from the violence - of THE WEALTH OF NATIONS of his mafler, is under the emperors. When Vedius Pollio, in the prefence of Auguflus, ordered one of his flaves, who had com- mitted a flight fault, to be cut into pieces and thrown into his fifti pond in order to feed his fifties, the emperor commanded him, with indignation, to emancipate immediately, not only that Have, but all the others that belonged to him. Under the republick no magillrate could have had authority enough to protect the flave, much lefs to punifh the mailer. The flock, it is to be obferved, which has improved the fugar colonies of France, particularly the great colony of St. Domingo, has been raifed almofl entirely from the gradual improvement and cultivation of thofe colonies. It has been almoft altogether the produce of the foil and induflry of the colonifls, or, what comes to the fame thing, the price of that produce gradually accumulated by good management, and employed in raifmg a flill greater pro- duce. But the flock which has improved and cultivated the fugar colonies of England has, a great part of it, been fent out from England, and has by no means been altogether the produce of the foil and induflry of the colonifls. The profperity of the Englifh fugar colonies has been, in a great meafure, owing to the great riches of England, of which a part has overflowed, if one may fay fo, upon thofe colonies. But the profperity of the fugar colonies of France has been entirely owing to the good conduct of the colonifls, which mufl therefore have had fome fuperiority over that of the Englifh ; and this fuperiority has been remarked in nothing fo much as in the good management of their flaves. Such 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 boafl of, either in the original eftablifhment, or in the fubfecjuent profpe- rity of the colonies of America. B b 2 Folly i88 THE NATURE AND CAUSES OF BOOK Folly and injuftice feem to have been the principles which u— v^— » prefided over and directed the firft project of eftablifliing thofe colonies; the folly of hunting after gold and filver mines, and the injuftice of coveting the pofTefllon of a country whofe harmlefs natives, far from having ever injured the people of Europe, had received the firft adventurers with every mark of kindnefs and hofpitality. The adventurers, indeed, who formed fome of the later efta- blifhments, joined, to the chimerical projecl of finding gold and filver mines, other motives more reafonable and more laudable ; but even thefe motives do very little honour to the policy of Europe. The Englifh puritans, perfecuted at home, fled for freedom to America, and eftablifhed there the four governments of New Eng- land. The Englifh catholicks, treated with equal injuftice, efta- blifhed that of Maryland } the Quakers, that of Penfylvania. The Portugueze Jews, perfecuted by the inquifition, ftript of their for- tunes, and banifhed to Brazil, introduced, by their example, fome fort of order and induftry among the tranfported felons and {trum- pets, by whom that colony was originally peopled, and taught them the culture of the fugar cane. Upon all thefe different occa- fions it was, not the wifdom and policy, but the diforder and inju- ftice of the European governments, which peopled and cultivated America. In effectuating fome of the moft important of thefe eftablifli- ments, the different governments of Europe had as little merit as in projecting them. The conqueft of Mexico was the projecl, not of the council of Spain, but of a governor of Cuba ; and it was effectuated by the fpirit of the bold adventurer to whom it was entrufted, THE WEALTH OF NATIONS. 189 entrufted, in fpite of every thing which that governor, who foon CHAP, repented of having trufted fuch a perfon, could do to thwart it. u— v-^-> The conquerors of Chili and Peru, and of almoft all the other Spanilh fettlements upon the continent of America, carried out with them no other publick encouragement, but a general per- miflion to make fettlements and conquefts in the name of the king of Spain. Thofe adventures were all at the private rifk and ex- pence of the adventurers. The government of Spain contributed fcarce any thing to any of them. That of England contributed as little towards effectuating the eftablifhment of fome of its moft important colonies in North America. When thofe eftablifhments were effectuated, and had become fo confiderable as to attract: the attention of the mother country, the firft regulations which me made with regard to them had always in view to fecure to herfelf the monopoly of their commerce ; to confine their market, and to enlarge her own at their expence, and, confequently, rather to damp and difcourage, than to quicken and forward the courfe of their profperity. In the different ways in which this monopoly has been exercifed, confifts one of the moft effential differences in the policy of the different European nations with regard to their colonies. The beft of them all, that of Eng- land, is only fomewhat lefs illiberal and oppreffive than that of any of the reft. In what way, therefore, has the policy of Europe contributed either to the firfl: eftablifhment, or to the prefent grandeur of the colo- nies of America ? In one way, and in one way only, it has contri- buted a good deal. Magna virum Mater f It bred and formed the men who were capable of atchieving fuch great actions, and of laying the foundation of fo great an empire 3 and there is no other quarter of the world of which the policy is capable of forming, . . , :.;.!• or THE NATURE AND CAUSES OF K or has ever actually and in fact formed fuch men. The colo- o nies owe to the policy of Europe the education and great views of their active and enterprizing founders ; and fome of the greateft and moft important of them, owe to it fcarce any thing elfe. Part Third. Of the Advantages which Europe has derived from the Difcovery of America, and from that of a Pqflage to the Eaji Indies by the Cape of Good Hope. g U C H are the advantages which the colonies of America hav£ derived from the policy of Europe. What are thofe which Europe has derived from the difcovery and colonization of America ? Those advantages may be divided, firft, into the general advan- tages which Europe, confidered as one great country, has derived from thofe great events ; and, fecondly, into the particular advan- tages which each colonizing country has derived from the colonies which particularly belong to it, in confequence of the authority or dominion which it exercifes over them. The general advantages which Europe, confidered as one great country, has derived from the difcovery and colonization of Ame- rica, confift, firft, in the increafe of its enjoyments ; and, fecond- ly, in the augmentation of its induftry. The furplus produce of America, imported into Europe, fur- nifhes the inhabitants of this great continent with a variety of commodities which they could not otherwife have pofleffed, fome for conveniency and ufe, fome for pleafure, and fome for orna- ment, and thereby contributes to increafe their enjoyments. 8 The THE WEALTH OF NATIONS. The difcovery and colonization of America, it will readily be 0 H A Pi allowed, have contributed to augment the induftry, firft, of all the w-v-^J countries which trade to it directly ; fuch as Spain, Portugal, France, and England; and, fecondly, of all thofe which, without trading to it directly, fend, through the medium of other coun- tries, goods to it of their own produce; fuch as Auftrian Flan- ders, and fome provinces of Germany, which, through the medium of the countries before mentioned, fend to it a considerable quan- tity of linen and other goods. All fuch countries have evidently gained a more extenfive market for their furplus produce, and muft confequently have been encouraged to increafe its quantity. But, that thofe great events mould likewife have contributed to encourage the induftry of countries, fuch as Hungary and Poland, which may never, perhaps, have fent a fingle commodity of their own produce to America, is not, perhaps, altogether fo evident. That thofe events have done fo, however, cannot be doubted. Some part of the produce of America is confumed in Hungary and Po- land, and there is fome demand there for the fugar, chocolate, and tobacco, of that new quarter of the world. But thofe commodi- ties muft be purchafed with fomething which is either the produce of the induftry of Hungary and Poland, or with fomething which had been purchafed with fome part of that produce. Thofe com- modities of America are new values, new equivalents, introduced into Hungary and Poland,, to be exchanged there for the furplus produce of thofe countries. By being carried thither they create a new and more extenfive market for that furplus produce. They raife its value, and thereby contribute to encourage its increafe. Though no part of it may ever be carried to America, it may be carried to other countries which purchafe it with a part of their ihare of the furplus 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 furplus produce of America,. Thqsb THE NATURE AND CAUSES OF Those great events may even have contributed to increafe the enjoyments, and to augment the induftry of countries which, not only never fent any commodities to America, but never received any from it. Even fuch countries may have received a greater abun- dance of other commodities from countries of which the furplus produce had been augmented by means of the American trade. This greater abundance, as it muft neceflarily have increafed their enjoyments, fo it muft likewife have augmented their induftry. A greater number of new equivalents of fome kind or other muft have been prefented to them to be exchanged for the furplus produce of that induftry. A more extenfive market muft have been created for that furplus produce, fo as to raife its value, and thereby encourage its increafe. The mafs of commodities annu- ally thrown into the great circle of European commerce, and by its various revolutions annually diftributed among all the different nations comprehended within it, muft have been augmented by the whole furplus produce of America. A greater fhare of this greater mafs, therefore, is likely to have fallen to each of thofe nations, to have increafed their enjoyments, and augmented their induftry. The exclufive trade of the mother countries tends to diminifh, or, at leaft, to keep down below what they would otherwife rife to, both the enjoyments and induftry of all thofe nations in general, and of the American colonies in particular. It is a dead weight upon the action of one of the great fprings which puts into mo- tion a great part of the bufinefs of mankind. By rendering the colony produce dearer in all other countries it leffens its confump- tion, and thereby cramps the induftry of the colonies, and both the enjoyments and the induftry of all other countries, which both enjoy lefs when they pay more for what they enjoy, and produce lefs when they get lefs for what they produce. By rendering the produce of all other countries dearer in the colonies, it cramps, in THE WEALTH OF NATIONS. 193 fn the fame manner, the induftry of all other countries, and both C HAP. the enjoyments and the induftry of the colonies. It is a clog v^-v-^-J which, for the fuppofed benefit of fome particular countries, em- barrafTes the pleafures, and encumbers the induftry of all other countries ; but of the colonies more than of any other. It only excludes, as much as poffible, all other countries from one parti- cular market ; but it confines, as much as poflible, 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 fhut up. The furplus produce of the colonies, however, is the original fource of all that increafe of enjoyments and induftry which Europe derives from the difcovery and colonization of Ame- rica; and the exclufive trade of the mother countries tends to render this fource much iefs abundant than it otherwife would be. The particular advantages which each colonizing country derives from the colonies which particularly belong to it, are of two diffe- rent kinds ; firft, thofe common advantages which every empire derives from the provinces fubje£t to its dominion; and, fecondly, thofe peculiar advantages which are fuppofed to refult from pro- vinces of fo very peculiar a nature as the European colonies of America. The common advantages which every empire derives from the provinces, fubject to its dominion, confift, firft, in the military force which they furnifli for its defence ; and, fecondly, in the revenue which they furnifti for the fupport of its civil govern- ment. 1 he Roman colonies furnimed occaiionally both the one and the other. The Greek colonies, fometimes, furniftied a mili- tary force ; but feldom any revenue. They feldom acknowledged themfelves fubjedt to the dominion of the mother city. They were generally her allies in war, but very feldom her fubjecb in peace. Vol. II. C c The THE NATURE AND CAUSES OF K The European colonies of America have never yet furnifhed any military force for the defence of the mother country. Their military force has never yet been fufficient for their own defence j and in the different wars in which the mother countries have been engaged, the defence of their colonies has generally occafioned a very confiderable diffraction of the military force of thofe countries. In this refpect, therefore, all the European colonies have, without exception, been a caufe rather of weaknefs than of (Irength to their refpec- tive mother countries. The colonies of Spain and Portugal only have contributed any revenue towards the defence of the mother country, or the fup- port of her civil government. The taxes winch have been levied upon thofe of other European nations, upon thofe of England in particular, have feldom been equal to the expence laid out upon them in time of peace, and never fufficient to defray that which they occafioned in time of war. Such colonies, therefore, have been a fource of expence and not of revenue to their refpective mother countries. The advantages of fuch colonies to their refpective mother countries, confift altogether in thofe peculiar advantages which are fuppofed to refult from provinces of fo very peculiar a nature as the European colonies of America ; and the exclufive trade, it is acknowledged, is the fole fource of all thofe peculiar advantages. In confequence of this exclufive trade, all that part of the furplus produce of the Engiifh colonies, for example, which confifts in what are called enumerated commodities, can be fent to no other country but England. Other countries mull after- wards buy it of her. It muft be cheaper therefore in England than it can be in any other country, and muft contribute more to increafe THE WEALTH OF NATIONS. 195 increafe the enjoyments of England, than thofe of any other C HAP. country. It muft likewife contribute more to encourage her in- u-v-*J duftry. For all thofe parts of her own furplus produce which England exchanges for thofe enumerated commodities, (lie muft get a better price than any other country can get for the like parts of theirs when they exchange them for the fame commodities. The manufactures of England, for example, will purchafe a greater quantity of the fugar and tobacco of her own colonies, than the like manufactures of other countries can purchafe of that fugar and tobacco. So far, therefore, as the manufactures of England and thofe of other countries are both to be exchanged for the fugar and tobacco of the Englifh colonies, this fuperiority of price gives an encouragement to the former, beyond what the latter can in thefe circumftances enjoy. The exclufive trade of the colonies, there- fore, as it diminifhes, or, at leaft, keeps down below what they would otherwife rife to, both the enjoyments and the induftry of the countries which do not pofTefs it; fo it gives an evident advantage to the countries which do pofTefs it over thofe other countries. This advantage, however, will, perhaps, be found to be rather what may be called a relative than an abfolute advantage ; and to give a fuperiority to the country which enjoys it, rather by depref- fmg the induftry and produce of other countries, than by raifing thofe of that particular country above what they would naturally rife to in the cafe of a 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 fells a confiderable part of it. But had France, and all other European countries been, at all times, allowed a free trade C c 2 to 196 THE NATURE AND CAUSES OF B OO K to Maryland and Virginia, the tobacco of thofe colonies might, by u — » — *j this time, have come cheaper than it actually does, not onlv to alt thofe other countries, but likewife to England. The produce of tobacco, in confequence of a market fo much more extenfive than any which it has hitherto enjoyed, might, and probably would, by this time, have been fo much increafed as to reduce the profits of a tobacco plantation to their natural level with thofe of a corn planta- tion, which, it is fuppofed, they are (till fomewhat above. The price of tobacco might, and probably would, by this time, have fallen fomewhat lower than it is at prefent. An equal quantity of the commodities either of England, or of thofe other countries, might have purchafed in Maryland and Virginia a greater quantity of tobacco than it can do at prefent, and, confequently, have been fold there for fo much a better price. So far as that weed, there- fore, can, by its cheapnefs and abundance, increafe the enjoyments or augment the induftry either of England or of any other country, it would, probably, in the cafe of a free trade, have produced both thefe effects in fomewhat a greater degree than it can do at prefent.. England, indeed, would not in this cafe have had any advantage over other countries. She might have bought the tobacco of her colonies fomewhat cheaper, and, confequently, have fold fome of her own commodities fomewhat dearer than fhe actually does. But fiie could neither have bought the one cheaper nor fold the other dearer than any other country might have done. She might, perhaps, have gained an abfolute, but fhe would certainly have loft 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 poflible other nations from any fhare in it, England, there are very probable reafons for believing, has not only facrifked a part of the abfolute advantage which fhe, as THE WEALTH OF NATIONS. as well as every oilier nation, might have derived from that trade, but has fubje&cd herfelf both to an abfolute and