An Inquiry into the Nature and Causes of the Wealth of Nations
by Adam Smith
Contents
INTRODUCTION AND PLAN OF THE WORK.
BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE
POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAPTER I. OF THE DIVISION OF LABOUR. CHAPTER II. OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR. CHAPTER III. THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET. CHAPTER IV. OF THE ORIGIN AND USE OF MONEY. CHAPTER V. OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY. CHAPTER VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES. CHAPTER VII. OF THE NATURAL AND MARKET PRICE OF COMMODITIES. CHAPTER VIII. OF THE WAGES OF LABOUR. CHAPTER IX. OF THE PROFITS OF STOCK. CHAPTER X. OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK.
CHAPTER XI. OF THE RENT OF LAND.
BOOK II. OF THE NATURE, ACCUMULATION, AND
EMPLOYMENT OF STOCK. CHAPTER I. OF THE DIVISION OF STOCK. CHAPTER II. OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL. CHAPTER III. OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR. CHAPTER IV. OF STOCK LENT AT INTEREST. CHAPTER V. OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.
BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN
DIFFERENT NATIONS CHAPTER I. OF THE NATURAL PROGRESS OF OPULENCE. CHAPTER II. OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE. CHAPTER III. OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE. CHAPTER IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY.
BOOK IV. OF SYSTEMS OF POLITICAL ECONOMY.
CHAPTER I. OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM. CHAPTER II. OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME. CHAPTER III. OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS. CHAPTER IV. OF DRAWBACKS. CHAPTER V. OF BOUNTIES. CHAPTER VI. OF TREATIES OF COMMERCE. CHAPTER VII. OF COLONIES. CHAPTER VIII. CONCLUSION OF THE MERCANTILE SYSTEM. CHAPTER IX. OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY.
BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH
CHAPTER I. OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH. CHAPTER II. OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY.
CHAPTER III. OF PUBLIC DEBTS.
INTRODUCTION AND PLAN OF THE WORK.
The annual labour of every nation is the fund which originally supplies it
with all the necessaries and conveniencies of life which it annually
consumes, and which consist always either in the immediate produce of that
labour, or in what is purchased with that produce from other nations.
According, therefore, as this produce, or what is purchased with it, bears
a greater or smaller proportion to the number of those who are to consume
it, the nation will be better or worse supplied with all the necessaries
and conveniencies for which it has occasion.
But this proportion must in every nation be regulated by two different
circumstances: first, by the skill, dexterity, and judgment with which its
labour is generally applied; and, secondly, by the proportion between the
number of those who are employed in useful labour, and that of those who
are not so employed. Whatever be the soil, climate, or extent of territory
of any particular nation, the abundance or scantiness of its annual supply
must, in that particular situation, depend upon those two circumstances.
The abundance or scantiness of this supply, too, seems to depend more upon
the former of those two circumstances than upon the latter. Among the
savage nations of hunters and fishers, every individual who is able to
work is more or less employed in useful labour, and endeavours to provide,
as well as he can, the necessaries and conveniencies of life, for himself,
and such of his family or tribe as are either too old, or too young, or
too infirm, to go a-hunting and fishing. Such nations, however, are so
miserably poor, that, from mere want, they are frequently reduced, or at
least think themselves reduced, to the necessity sometimes of directly
destroying, and sometimes of abandoning their infants, their old people,
and those afflicted with lingering diseases, to perish with hunger, or to
be devoured by wild beasts. Among civilized and thriving nations, on the
contrary, though a great number of people do not labour at all, many of
whom consume the produce of ten times, frequently of a hundred times, more
labour than the greater part of those who work; yet the produce of the
whole labour of the society is so great, that all are often abundantly
supplied; and a workman, even of the lowest and poorest order, if he is
frugal and industrious, may enjoy a greater share of the necessaries and
conveniencies of life than it is possible for any savage to acquire.
The causes of this improvement in the productive powers of labour, and the
order according to which its produce is naturally distributed among the
different ranks and conditions of men in the society, make the subject of
the first book of this Inquiry.
Whatever be the actual state of the skill, dexterity, and judgment, with
which labour is applied in any nation, the abundance or scantiness of its
annual supply must depend, during the continuance of that state, upon the
proportion between the number of those who are annually employed in useful
labour, and that of those who are not so employed. The number of useful
and productive labourers, it will hereafter appear, is everywhere in
proportion to the quantity of capital stock which is employed in setting
them to work, and to the particular way in which it is so employed. The
second book, therefore, treats of the nature of capital stock, of the
manner in which it is gradually accumulated, and of the different
quantities of labour which it puts into motion, according to the different
ways in which it is employed.
Nations tolerably well advanced as to skill, dexterity, and judgment, in
the application of labour, have followed very different plans in the
general conduct or direction of it; and those plans have not all been
equally favourable to the greatness of its produce. The policy of some
nations has given extraordinary encouragement to the industry of the
country; that of others to the industry of towns. Scarce any nation has
dealt equally and impartially with every sort of industry. Since the
down-fall of the Roman empire, the policy of Europe has been more
favourable to arts, manufactures, and commerce, the industry of towns,
than to agriculture, the Industry of the country. The circumstances which
seem to have introduced and established this policy are explained in the
third book.
Though those different plans were, perhaps, first introduced by the
private interests and prejudices of particular orders of men, without any
regard to, or foresight of, their consequences upon the general welfare of
the society; yet they have given occasion to very different theories of
political economy; of which some magnify the importance of that industry
which is carried on in towns, others of that which is carried on in the
country. Those theories have had a considerable influence, not only upon
the opinions of men of learning, but upon the public conduct of princes
and sovereign states. I have endeavoured, in the fourth book, to explain
as fully and distinctly as I can those different theories, and the
principal effects which they have produced in different ages and nations.
To explain in what has consisted the revenue of the great body of the
people, or what has been the nature of those funds, which, in different
ages and nations, have supplied their annual consumption, is the object of
these four first books. The fifth and last book treats of the revenue of
the sovereign, or commonwealth. In this book I have endeavoured to shew,
first, what are the necessary expenses of the sovereign, or commonwealth;
which of those expenses ought to be defrayed by the general contribution
of the whole society, and which of them, by that of some particular part
only, or of some particular members of it: secondly, what are the
different methods in which the whole society may be made to contribute
towards defraying the expenses incumbent on the whole society, and what
are the principal advantages and inconveniencies of each of those methods;
and, thirdly and lastly, what are the reasons and causes which have
induced almost all modern governments to mortgage some part of this
revenue, or to contract debts; and what have been the effects of those
debts upon the real wealth, the annual produce of the land and labour of
the society.
BOOK I.
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.
CHAPTER I.
OF THE DIVISION OF LABOUR.
The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is
anywhere directed, or applied, seem to have been the effects of the
division of labour. The effects of the division of labour, in the general
business of society, will be more easily understood, by considering in
what manner it operates in some particular manufactures. It is commonly
supposed to be carried furthest in some very trifling ones; not perhaps
that it really is carried further in them than in others of more
importance: but in those trifling manufactures which are destined to
supply the small wants of but a small number of people, the whole number
of workmen must necessarily be small; and those employed in every
different branch of the work can often be collected into the same
workhouse, and placed at once under the view of the spectator.
In those great manufactures, on the contrary, which are destined to supply
the great wants of the great body of the people, every different branch of
the work employs so great a number of workmen, that it is impossible to
collect them all into the same workhouse. We can seldom see more, at one
time, than those employed in one single branch. Though in such
manufactures, therefore, the work may really be divided into a much
greater number of parts, than in those of a more trifling nature, the
division is not near so obvious, and has accordingly been much less
observed.
To take an example, therefore, from a very trifling manufacture, but one
in which the division of labour has been very often taken notice of, the
trade of a pin-maker: a workman not educated to this business (which the
division of labour has rendered a distinct trade), nor acquainted with the
use of the machinery employed in it (to the invention of which the same
division of labour has probably given occasion), could scarce, perhaps,
with his utmost industry, make one pin in a day, and certainly could not
make twenty. But in the way in which this business is now carried on, not
only the whole work is a peculiar trade, but it is divided into a number
of branches, of which the greater part are likewise peculiar trades. One
man draws out the wire; another straights it; a third cuts it; a fourth
points it; a fifth grinds it at the top for receiving the head; to make
the head requires two or three distinct operations; to put it on is a
peculiar business; to whiten the pins is another; it is even a trade by
itself to put them into the paper; and the important business of making a
pin is, in this manner, divided into about eighteen distinct operations,
which, in some manufactories, are all performed by distinct hands, though
in others the same man will sometimes perform two or three of them. I have
seen a small manufactory of this kind, where ten men only were employed,
and where some of them consequently performed two or three distinct
operations. But though they were very poor, and therefore but
indifferently accommodated with the necessary machinery, they could, when
they exerted themselves, make among them about twelve pounds of pins in a
day. There are in a pound upwards of four thousand pins of a middling
size. Those ten persons, therefore, could make among them upwards of
forty-eight thousand pins in a day. Each person, therefore, making a tenth
part of forty-eight thousand pins, might be considered as making four
thousand eight hundred pins in a day. But if they had all wrought
separately and independently, and without any of them having been educated
to this peculiar business, they certainly could not each of them have made
twenty, perhaps not one pin in a day; that is, certainly, not the two
hundred and fortieth, perhaps not the four thousand eight hundredth, part
of what they are at present capable of performing, in consequence of a
proper division and combination of their different operations.
In every other art and manufacture, the effects of the division of labour
are similar to what they are in this very trifling one, though, in many of
them, the labour can neither be so much subdivided, nor reduced to so
great a simplicity of operation. The division of labour, however, so far
as it can be introduced, occasions, in every art, a proportionable
increase of the productive powers of labour. The separation of different
trades and employments from one another, seems to have taken place in
consequence of this advantage. This separation, too, is generally carried
furthest in those countries which enjoy the highest degree of industry and
improvement; what is the work of one man, in a rude state of society,
being generally that of several in an improved one. In every improved
society, the farmer is generally nothing but a farmer; the manufacturer,
nothing but a manufacturer. The labour, too, which is necessary to produce
any one complete manufacture, is almost always divided among a great
number of hands. How many different trades are employed in each branch of
the linen and woollen manufactures, from the growers of the flax and the
wool, to the bleachers and smoothers of the linen, or to the dyers and
dressers of the cloth! The nature of agriculture, indeed, does not admit
of so many subdivisions of labour, nor of so complete a separation of one
business from another, as manufactures. It is impossible to separate so
entirely the business of the grazier from that of the corn-farmer, as the
trade of the carpenter is commonly separated from that of the smith. The
spinner is almost always a distinct person from the weaver; but the
ploughman, the harrower, the sower of the seed, and the reaper of the
corn, are often the same. The occasions for those different sorts of
labour returning with the different seasons of the year, it is impossible
that one man should be constantly employed in any one of them. This
impossibility of making so complete and entire a separation of all the
different branches of labour employed in agriculture, is perhaps the
reason why the improvement of the productive powers of labour, in this
art, does not always keep pace with their improvement in manufactures. The
most opulent nations, indeed, generally excel all their neighbours in
agriculture as well as in manufactures; but they are commonly more
distinguished by their superiority in the latter than in the former. Their
lands are in general better cultivated, and having more labour and expense
bestowed upon them, produce more in proportion to the extent and natural
fertility of the ground. But this superiority of produce is seldom much
more than in proportion to the superiority of labour and expense. In
agriculture, the labour of the rich country is not always much more
productive than that of the poor; or, at least, it is never so much more
productive, as it commonly is in manufactures. The corn of the rich
country, therefore, will not always, in the same degree of goodness, come
cheaper to market than that of the poor. The corn of Poland, in the same
degree of goodness, is as cheap as that of France, notwithstanding the
superior opulence and improvement of the latter country. The corn of
France is, in the corn-provinces, fully as good, and in most years nearly
about the same price with the corn of England, though, in opulence and
improvement, France is perhaps inferior to England. The corn-lands of
England, however, are better cultivated than those of France, and the
corn-lands of France are said to be much better cultivated than those of
Poland. But though the poor country, notwithstanding the inferiority of
its cultivation, can, in some measure, rival the rich in the cheapness and
goodness of its corn, it can pretend to no such competition in its
manufactures, at least if those manufactures suit the soil, climate, and
situation, of the rich country. The silks of France are better and cheaper
than those of England, because the silk manufacture, at least under the
present high duties upon the importation of raw silk, does not so well
suit the climate of England as that of France. But the hardware and the
coarse woollens of England are beyond all comparison superior to those of
France, and much cheaper, too, in the same degree of goodness. In Poland
there are said to be scarce any manufactures of any kind, a few of those
coarser household manufactures excepted, without which no country can well
subsist.
This great increase in the quantity of work, which, in consequence of the
division of labour, the same number of people are capable of performing,
is owing to three different circumstances; first, to the increase of
dexterity in every particular workman; secondly, to the saving of the time
which is commonly lost in passing from one species of work to another;
and, lastly, to the invention of a great number of machines which
facilitate and abridge labour, and enable one man to do the work of many.
First, the improvement of the dexterity of the workmen, necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man’s business to some one simple operation, and
by making this operation the sole employment of his life, necessarily
increases very much the dexterity of the workman. A common smith, who,
though accustomed to handle the hammer, has never been used to make nails,
if, upon some particular occasion, he is obliged to attempt it, will
scarce, I am assured, be able to make above two or three hundred nails in
a day, and those, too, very bad ones. A smith who has been accustomed to
make nails, but whose sole or principal business has not been that of a
nailer, can seldom, with his utmost diligence, make more than eight
hundred or a thousand nails in a day. I have seen several boys, under
twenty years of age, who had never exercised any other trade but that of
making nails, and who, when they exerted themselves, could make, each of
them, upwards of two thousand three hundred nails in a day. The making of
a nail, however, is by no means one of the simplest operations. The same
person blows the bellows, stirs or mends the fire as there is occasion,
heats the iron, and forges every part of the nail: in forging the head,
too, he is obliged to change his tools. The different operations into
which the making of a pin, or of a metal button, is subdivided, are all of
them much more simple, and the dexterity of the person, of whose life it
has been the sole business to perform them, is usually much greater. The
rapidity with which some of the operations of those manufactures are
performed, exceeds what the human hand could, by those who had never seen
them, be supposed capable of acquiring.
Secondly, the advantage which is gained by saving the time commonly lost
in passing from one sort of work to another, is much greater than we
should at first view be apt to imagine it. It is impossible to pass very
quickly from one kind of work to another, that is carried on in a
different place, and with quite different tools. A country weaver, who
cultivates a small farm, must lose a good deal of time in passing from
his loom to the field, and from the field to his loom. When the two trades
can be carried on in the same workhouse, the loss of time is, no doubt,
much less. It is, even in this case, however, very considerable. A man
commonly saunters a little in turning his hand from one sort of employment
to another. When he first begins the new work, he is seldom very keen and
hearty; his mind, as they say, does not go to it, and for some time he
rather trifles than applies to good purpose. The habit of sauntering, and
of indolent careless application, which is naturally, or rather
necessarily, acquired by every country workman who is obliged to change
his work and his tools every half hour, and to apply his hand in twenty
different ways almost every day of his life, renders him almost always
slothful and lazy, and incapable of any vigorous application, even on the
most pressing occasions. Independent, therefore, of his deficiency in
point of dexterity, this cause alone must always reduce considerably the
quantity of work which he is capable of performing.
Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that the
invention of all those machines by which labour is so much facilitated and
abridged, seems to have been originally owing to the division of labour.
Men are much more likely to discover easier and readier methods of
attaining any object, when the whole attention of their minds is directed
towards that single object, than when it is dissipated among a great
variety of things. But, in consequence of the division of labour, the
whole of every man’s attention comes naturally to be directed towards some
one very simple object. It is naturally to be expected, therefore, that
some one or other of those who are employed in each particular branch of
labour should soon find out easier and readier methods of performing their
own particular work, whenever the nature of it admits of such improvement.
A great part of the machines made use of in those manufactures in which
labour is most subdivided, were originally the invention of common
workmen, who, being each of them employed in some very simple operation,
naturally turned their thoughts towards finding out easier and readier
methods of performing it. Whoever has been much accustomed to visit such
manufactures, must frequently have been shewn very pretty machines, which
were the inventions of such workmen, in order to facilitate and quicken
their own particular part of the work. In the first fire engines {this was
the current designation for steam engines}, a boy was constantly employed
to open and shut alternately the communication between the boiler and the
cylinder, according as the piston either ascended or descended. One of
those boys, who loved to play with his companions, observed that, by tying
a string from the handle of the valve which opened this communication to
another part of the machine, the valve would open and shut without his
assistance, and leave him at liberty to divert himself with his
play-fellows. One of the greatest improvements that has been made upon
this machine, since it was first invented, was in this manner the
discovery of a boy who wanted to save his own labour.
All the improvements in machinery, however, have by no means been the
inventions of those who had occasion to use the machines. Many
improvements have been made by the ingenuity of the makers of the
machines, when to make them became the business of a peculiar trade; and
some by that of those who are called philosophers, or men of speculation,
whose trade it is not to do any thing, but to observe every thing, and
who, upon that account, are often capable of combining together the powers
of the most distant and dissimilar objects in the progress of society,
philosophy or speculation becomes, like every other employment, the
principal or sole trade and occupation of a particular class of citizens.
Like every other employment, too, it is subdivided into a great number of
different branches, each of which affords occupation to a peculiar tribe
or class of philosophers; and this subdivision of employment in
philosophy, as well as in every other business, improves dexterity, and
saves time. Each individual becomes more expert in his own peculiar
branch, more work is done upon the whole, and the quantity of science is
considerably increased by it.
It is the great multiplication of the productions of all the different
arts, in consequence of the division of labour, which occasions, in a
well-governed society, that universal opulence which extends itself to the
lowest ranks of the people. Every workman has a great quantity of his own
work to dispose of beyond what he himself has occasion for; and every
other workman being exactly in the same situation, he is enabled to
exchange a great quantity of his own goods for a great quantity or, what
comes to the same thing, for the price of a great quantity of theirs. He
supplies them abundantly with what they have occasion for, and they
accommodate him as amply with what he has occasion for, and a general
plenty diffuses itself through all the different ranks of the society.
Observe the accommodation of the most common artificer or daylabourer in a
civilized and thriving country, and you will perceive that the number of
people, of whose industry a part, though but a small part, has been
employed in procuring him this accommodation, exceeds all computation. The
woollen coat, for example, which covers the day-labourer, as coarse and
rough as it may appear, is the produce of the joint labour of a great
multitude of workmen. The shepherd, the sorter of the wool, the
wool-comber or carder, the dyer, the scribbler, the spinner, the weaver,
the fuller, the dresser, with many others, must all join their different
arts in order to complete even this homely production. How many merchants
and carriers, besides, must have been employed in transporting the
materials from some of those workmen to others who often live in a very
distant part of the country? How much commerce and navigation in
particular, how many ship-builders, sailors, sail-makers, rope-makers,
must have been employed in order to bring together the different drugs
made use of by the dyer, which often come from the remotest corners of the
world? What a variety of labour, too, is necessary in order to produce the
tools of the meanest of those workmen! To say nothing of such complicated
machines as the ship of the sailor, the mill of the fuller, or even the
loom of the weaver, let us consider only what a variety of labour is
requisite in order to form that very simple machine, the shears with which
the shepherd clips the wool. The miner, the builder of the furnace for
smelting the ore, the feller of the timber, the burner of the charcoal to
be made use of in the smelting-house, the brickmaker, the bricklayer, the
workmen who attend the furnace, the millwright, the forger, the smith,
must all of them join their different arts in order to produce them. Were
we to examine, in the same manner, all the different parts of his dress
and household furniture, the coarse linen shirt which he wears next his
skin, the shoes which cover his feet, the bed which he lies on, and all
the different parts which compose it, the kitchen-grate at which he
prepares his victuals, the coals which he makes use of for that purpose,
dug from the bowels of the earth, and brought to him, perhaps, by a long
sea and a long land-carriage, all the other utensils of his kitchen, all
the furniture of his table, the knives and forks, the earthen or pewter
plates upon which he serves up and divides his victuals, the different
hands employed in preparing his bread and his beer, the glass window which
lets in the heat and the light, and keeps out the wind and the rain, with
all the knowledge and art requisite for preparing that beautiful and happy
invention, without which these northern parts of the world could scarce
have afforded a very comfortable habitation, together with the tools of
all the different workmen employed in producing those different
conveniencies; if we examine, I say, all these things, and consider what a
variety of labour is employed about each of them, we shall be sensible
that, without the assistance and co-operation of many thousands, the very
meanest person in a civilized country could not be provided, even
according to, what we very falsely imagine, the easy and simple manner in
which he is commonly accommodated. Compared, indeed, with the more
extravagant luxury of the great, his accommodation must no doubt appear
extremely simple and easy; and yet it may be true, perhaps, that the
accommodation of an European prince does not always so much exceed that of
an industrious and frugal peasant, as the accommodation of the latter
exceeds that of many an African king, the absolute masters of the lives
and liberties of ten thousand naked savages.
CHAPTER II.
OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR.
This division of labour, from which so many advantages are derived, is not
originally the effect of any human wisdom, which foresees and intends that
general opulence to which it gives occasion. It is the necessary, though
very slow and gradual, consequence of a certain propensity in human
nature, which has in view no such extensive utility; the propensity to
truck, barter, and exchange one thing for another.
Whether this propensity be one of those original principles in human
nature, of which no further account can be given, or whether, as seems
more probable, it be the necessary consequence of the faculties of reason
and speech, it belongs not to our present subject to inquire. It is common
to all men, and to be found in no other race of animals, which seem to
know neither this nor any other species of contracts. Two greyhounds, in
running down the same hare, have sometimes the appearance of acting in
some sort of concert. Each turns her towards his companion, or endeavours
to intercept her when his companion turns her towards himself. This,
however, is not the effect of any contract, but of the accidental
concurrence of their passions in the same object at that particular time.
Nobody ever saw a dog make a fair and deliberate exchange of one bone for
another with another dog. Nobody ever saw one animal, by its gestures and
natural cries signify to another, this is mine, that yours; I am willing
to give this for that. When an animal wants to obtain something either of
a man, or of another animal, it has no other means of persuasion, but to
gain the favour of those whose service it requires. A puppy fawns upon its
dam, and a spaniel endeavours, by a thousand attractions, to engage the
attention of its master who is at dinner, when it wants to be fed by him.
Man sometimes uses the same arts with his brethren, and when he has no
other means of engaging them to act according to his inclinations,
endeavours by every servile and fawning attention to obtain their good
will. He has not time, however, to do this upon every occasion. In
civilized society he stands at all times in need of the co-operation and
assistance of great multitudes, while his whole life is scarce sufficient
to gain the friendship of a few persons. In almost every other race of
animals, each individual, when it is grown up to maturity, is entirely
independent, and in its natural state has occasion for the assistance of
no other living creature. But man has almost constant occasion for the
help of his brethren, and it is in vain for him to expect it from their
benevolence only. He will be more likely to prevail if he can interest
their self-love in his favour, and shew them that it is for their own
advantage to do for him what he requires of them. Whoever offers to
another a bargain of any kind, proposes to do this. Give me that which I
want, and you shall have this which you want, is the meaning of every such
offer; and it is in this manner that we obtain from one another the far
greater part of those good offices which we stand in need of. It is not
from the benevolence of the butcher, the brewer, or the baker that we
expect our dinner, but from their regard to their own interest. We address
ourselves, not to their humanity, but to their self-love, and never talk
to them of our own necessities, but of their advantages. Nobody but a
beggar chooses to depend chiefly upon the benevolence of his
fellow-citizens. Even a beggar does not depend upon it entirely. The
charity of well-disposed people, indeed, supplies him with the whole fund
of his subsistence. But though this principle ultimately provides him with
all the necessaries of life which he has occasion for, it neither does nor
can provide him with them as he has occasion for them. The greater part of
his occasional wants are supplied in the same manner as those of other
people, by treaty, by barter, and by purchase. With the money which one
man gives him he purchases food. The old clothes which another bestows
upon him he exchanges for other clothes which suit him better, or for
lodging, or for food, or for money, with which he can buy either food,
clothes, or lodging, as he has occasion.
As it is by treaty, by barter, and by purchase, that we obtain from one
another the greater part of those mutual good offices which we stand in
need of, so it is this same trucking disposition which originally gives
occasion to the division of labour. In a tribe of hunters or shepherds, a
particular person makes bows and arrows, for example, with more readiness
and dexterity than any other. He frequently exchanges them for cattle or
for venison, with his companions; and he finds at last that he can, in
this manner, get more cattle and venison, than if he himself went to the
field to catch them. From a regard to his own interest, therefore, the
making of bows and arrows grows to be his chief business, and he becomes a
sort of armourer. Another excels in making the frames and covers of their
little huts or moveable houses. He is accustomed to be of use in this way
to his neighbours, who reward him in the same manner with cattle and with
venison, till at last he finds it his interest to dedicate himself
entirely to this employment, and to become a sort of house-carpenter. In
the same manner a third becomes a smith or a brazier; a fourth, a tanner
or dresser of hides or skins, the principal part of the clothing of
savages. And thus the certainty of being able to exchange all that surplus
part of the produce of his own labour, which is over and above his own
consumption, for such parts of the produce of other men’s labour as he may
have occasion for, encourages every man to apply himself to a particular
occupation, and to cultivate and bring to perfection whatever talent or
genius he may possess for that particular species of business.
The difference of natural talents in different men, is, in reality, much
less than we are aware of; and the very different genius which appears to
distinguish men of different professions, when grown up to maturity, is
not upon many occasions so much the cause, as the effect of the division
of labour. The difference between the most dissimilar characters, between
a philosopher and a common street porter, for example, seems to arise not
so much from nature, as from habit, custom, and education. When they came
in to the world, and for the first six or eight years of their existence,
they were, perhaps, very much alike, and neither their parents nor
play-fellows could perceive any remarkable difference. About that age, or
soon after, they come to be employed in very different occupations. The
difference of talents comes then to be taken notice of, and widens by
degrees, till at last the vanity of the philosopher is willing to
acknowledge scarce any resemblance. But without the disposition to truck,
barter, and exchange, every man must have procured to himself every
necessary and conveniency of life which he wanted. All must have had the
same duties to perform, and the same work to do, and there could have been
no such difference of employment as could alone give occasion to any great
difference of talents.
As it is this disposition which forms that difference of talents, so
remarkable among men of different professions, so it is this same
disposition which renders that difference useful. Many tribes of animals,
acknowledged to be all of the same species, derive from nature a much more
remarkable distinction of genius, than what, antecedent to custom and
education, appears to take place among men. By nature a philosopher is not
in genius and disposition half so different from a street porter, as a
mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last
from a shepherd’s dog. Those different tribes of animals, however, though
all of the same species are of scarce any use to one another. The strength
of the mastiff is not in the least supported either by the swiftness of
the greyhound, or by the sagacity of the spaniel, or by the docility of
the shepherd’s dog. The effects of those different geniuses and talents,
for want of the power or disposition to barter and exchange, cannot be
brought into a common stock, and do not in the least contribute to the
better accommodation and conveniency of the species. Each animal is still
obliged to support and defend itself, separately and independently, and
derives no sort of advantage from that variety of talents with which
nature has distinguished its fellows. Among men, on the contrary, the most
dissimilar geniuses are of use to one another; the different produces of
their respective talents, by the general disposition to truck, barter, and
exchange, being brought, as it were, into a common stock, where every man
may purchase whatever part of the produce of other men’s talents he has
occasion for.
CHAPTER III.
THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.
As it is the power of exchanging that gives occasion to the division of
labour, so the extent of this division must always be limited by the
extent of that power, or, in other words, by the extent of the market.
When the market is very small, no person can have any encouragement to
dedicate himself entirely to one employment, for want of the power to
exchange all that surplus part of the produce of his own labour, which is
over and above his own consumption, for such parts of the produce of other
men’s labour as he has occasion for.
There are some sorts of industry, even of the lowest kind, which can be
carried on nowhere but in a great town. A porter, for example, can find
employment and subsistence in no other place. A village is by much too
narrow a sphere for him; even an ordinary market-town is scarce large
enough to afford him constant occupation. In the lone houses and very
small villages which are scattered about in so desert a country as the
highlands of Scotland, every farmer must be butcher, baker, and brewer,
for his own family. In such situations we can scarce expect to find even a
smith, a carpenter, or a mason, within less than twenty miles of another
of the same trade. The scattered families that live at eight or ten miles
distance from the nearest of them, must learn to perform themselves a
great number of little pieces of work, for which, in more populous
countries, they would call in the assistance of those workmen. Country
workmen are almost everywhere obliged to apply themselves to all the
different branches of industry that have so much affinity to one another
as to be employed about the same sort of materials. A country carpenter
deals in every sort of work that is made of wood; a country smith in every
sort of work that is made of iron. The former is not only a carpenter, but
a joiner, a cabinet-maker, and even a carver in wood, as well as a
wheel-wright, a plough-wright, a cart and waggon-maker. The employments of
the latter are still more various. It is impossible there should be such a
trade as even that of a nailer in the remote and inland parts of the
highlands of Scotland. Such a workman at the rate of a thousand nails
a-day, and three hundred working days in the year, will make three hundred
thousand nails in the year. But in such a situation it would be impossible
to dispose of one thousand, that is, of one day’s work in the year. As by
means of water-carriage, a more extensive market is opened to every sort
of industry than what land-carriage alone can afford it, so it is upon the
sea-coast, and along the banks of navigable rivers, that industry of every
kind naturally begins to subdivide and improve itself, and it is
frequently not till a long time after that those improvements extend
themselves to the inland parts of the country. A broad-wheeled waggon,
attended by two men, and drawn by eight horses, in about six weeks time,
carries and brings back between London and Edinburgh near four ton weight
of goods. In about the same time a ship navigated by six or eight men, and
sailing between the ports of London and Leith, frequently carries and
brings back two hundred ton weight of goods. Six or eight men, therefore,
by the help of water-carriage, can carry and bring back, in the same time,
the same quantity of goods between London and Edinburgh as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried by the
cheapest land-carriage from London to Edinburgh, there must be charged the
maintenance of a hundred men for three weeks, and both the maintenance and
what is nearly equal to maintenance the wear and tear of four hundred
horses, as well as of fifty great waggons. Whereas, upon the same quantity
of goods carried by water, there is to be charged only the maintenance of
six or eight men, and the wear and tear of a ship of two hundred tons
burthen, together with the value of the superior risk, or the difference
of the insurance between land and water-carriage. Were there no other
communication between those two places, therefore, but by land-carriage,
as no goods could be transported from the one to the other, except such
whose price was very considerable in proportion to their weight, they
could carry on but a small part of that commerce which at present subsists
between them, and consequently could give but a small part of that
encouragement which they at present mutually afford to each other’s
industry. There could be little or no commerce of any kind between the
distant parts of the world. What goods could bear the expense of
land-carriage between London and Calcutta? Or if there were any so
precious as to be able to support this expense, with what safety could
they be transported through the territories of so many barbarous nations?
Those two cities, however, at present carry on a very considerable
commerce with each other, and by mutually affording a market, give a good
deal of encouragement to each other’s industry.
Since such, therefore, are the advantages of water-carriage, it is natural
that the first improvements of art and industry should be made where this
conveniency opens the whole world for a market to the produce of every
sort of labour, and that they should always be much later in extending
themselves into the inland parts of the country. The inland parts of the
country can for a long time have no other market for the greater part of
their goods, but the country which lies round about them, and separates
them from the sea-coast, and the great navigable rivers. The extent of the
market, therefore, must for a long time be in proportion to the riches and
populousness of that country, and consequently their improvement must
always be posterior to the improvement of that country. In our North
American colonies, the plantations have constantly followed either the
sea-coast or the banks of the navigable rivers, and have scarce anywhere
extended themselves to any considerable distance from both.
The nations that, according to the best authenticated history, appear to
have been first civilized, were those that dwelt round the coast of the
Mediterranean sea. That sea, by far the greatest inlet that is known in
the world, having no tides, nor consequently any waves, except such as are
caused by the wind only, was, by the smoothness of its surface, as well as
by the multitude of its islands, and the proximity of its neighbouring
shores, extremely favourable to the infant navigation of the world; when,
from their ignorance of the compass, men were afraid to quit the view of
the coast, and from the imperfection of the art of ship-building, to
abandon themselves to the boisterous waves of the ocean. To pass beyond
the pillars of Hercules, that is, to sail out of the straits of Gibraltar,
was, in the ancient world, long considered as a most wonderful and
dangerous exploit of navigation. It was late before even the Phoenicians
and Carthaginians, the most skilful navigators and ship-builders of those
old times, attempted it; and they were, for a long time, the only nations
that did attempt it.
Of all the countries on the coast of the Mediterranean sea, Egypt seems to
have been the first in which either agriculture or manufactures were
cultivated and improved to any considerable degree. Upper Egypt extends
itself nowhere above a few miles from the Nile; and in Lower Egypt, that
great river breaks itself into many different canals, which, with the
assistance of a little art, seem to have afforded a communication by
water-carriage, not only between all the great towns, but between all the
considerable villages, and even to many farm-houses in the country, nearly
in the same manner as the Rhine and the Maese do in Holland at present.
The extent and easiness of this inland navigation was probably one of the
principal causes of the early improvement of Egypt.
The improvements in agriculture and manufactures seem likewise to have
been of very great antiquity in the provinces of Bengal, in the East
Indies, and in some of the eastern provinces of China, though the great
extent of this antiquity is not authenticated by any histories of whose
authority we, in this part of the world, are well assured. In Bengal, the
Ganges, and several other great rivers, form a great number of navigable
canals, in the same manner as the Nile does in Egypt. In the eastern
provinces of China, too, several great rivers form, by their different
branches, a multitude of canals, and, by communicating with one another,
afford an inland navigation much more extensive than that either of the
Nile or the Ganges, or, perhaps, than both of them put together. It is
remarkable, that neither the ancient Egyptians, nor the Indians, nor the
Chinese, encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.
All the inland parts of Africa, and all that part of Asia which lies any
considerable way north of the Euxine and Caspian seas, the ancient
Scythia, the modern Tartary and Siberia, seem, in all ages of the world,
to have been in the same barbarous and uncivilized state in which we find
them at present. The sea of Tartary is the frozen ocean, which admits of
no navigation; and though some of the greatest rivers in the world run
through that country, they are at too great a distance from one another to
carry commerce and communication through the greater part of it. There are
in Africa none of those great inlets, such as the Baltic and Adriatic seas
in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and
the gulfs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry
maritime commerce into the interior parts of that great continent; and the
great rivers of Africa are at too great a distance from one another to
give occasion to any considerable inland navigation. The commerce,
besides, which any nation can carry on by means of a river which does not
break itself into any great number of branches or canals, and which runs
into another territory before it reaches the sea, can never be very
considerable, because it is always in the power of the nations who possess
that other territory to obstruct the communication between the upper
country and the sea. The navigation of the Danube is of very little use to
the different states of Bavaria, Austria, and Hungary, in comparison of
what it would be, if any of them possessed the whole of its course, till
it falls into the Black sea.
CHAPTER IV.
OF THE ORIGIN AND USE OF MONEY.
When the division of labour has been once thoroughly established, it is
but a very small part of a man’s wants which the produce of his own labour
can supply. He supplies the far greater part of them by exchanging that
surplus part of the produce of his own labour, which is over and above his
own consumption, for such parts of the produce of other men’s labour as he
has occasion for. Every man thus lives by exchanging, or becomes, in some
measure, a merchant, and the society itself grows to be what is properly a
commercial society.
But when the division of labour first began to take place, this power of
exchanging must frequently have been very much clogged and embarrassed in
its operations. One man, we shall suppose, has more of a certain commodity
than he himself has occasion for, while another has less. The former,
consequently, would be glad to dispose of; and the latter to purchase, a
part of this superfluity. But if this latter should chance to have nothing
that the former stands in need of, no exchange can be made between them.
The butcher has more meat in his shop than he himself can consume, and the
brewer and the baker would each of them be willing to purchase a part of
it. But they have nothing to offer in exchange, except the different
productions of their respective trades, and the butcher is already
provided with all the bread and beer which he has immediate occasion for.
No exchange can, in this case, be made between them. He cannot be their
merchant, nor they his customers; and they are all of them thus mutually
less serviceable to one another. In order to avoid the inconveniency of
such situations, every prudent man in every period of society, after the
first establishment of the division of labour, must naturally have
endeavoured to manage his affairs in such a manner, as to have at all
times by him, besides the peculiar produce of his own industry, a certain
quantity of some one commodity or other, such as he imagined few people
would be likely to refuse in exchange for the produce of their industry.
Many different commodities, it is probable, were successively both thought
of and employed for this purpose. In the rude ages of society, cattle are
said to have been the common instrument of commerce; and, though they must
have been a most inconvenient one, yet, in old times, we find things were
frequently valued according to the number of cattle which had been given
in exchange for them. The armour of Diomede, says Homer, cost only nine
oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the
common instrument of commerce and exchanges in Abyssinia; a species of
shells in some parts of the coast of India; dried cod at Newfoundland;
tobacco in Virginia; sugar in some of our West India colonies; hides or
dressed leather in some other countries; and there is at this day a
village in Scotland, where it is not uncommon, I am told, for a workman to
carry nails instead of money to the baker’s shop or the ale-house.
In all countries, however, men seem at last to have been determined by
irresistible reasons to give the preference, for this employment, to
metals above every other commodity. Metals can not only be kept with as
little loss as any other commodity, scarce any thing being less perishable
than they are, but they can likewise, without any loss, be divided into
any number of parts, as by fusion those parts can easily be re-united
again; a quality which no other equally durable commodities possess, and
which, more than any other quality, renders them fit to be the instruments
of commerce and circulation. The man who wanted to buy salt, for example,
and had nothing but cattle to give in exchange for it, must have been
obliged to buy salt to the value of a whole ox, or a whole sheep, at a
time. He could seldom buy less than this, because what he was to give for
it could seldom be divided without loss; and if he had a mind to buy more,
he must, for the same reasons, have been obliged to buy double or triple
the quantity, the value, to wit, of two or three oxen, or of two or three
sheep. If, on the contrary, instead of sheep or oxen, he had metals to
give in exchange for it, he could easily proportion the quantity of the
metal to the precise quantity of the commodity which he had immediate
occasion for.
Different metals have been made use of by different nations for this
purpose. Iron was the common instrument of commerce among the ancient
Spartans, copper among the ancient Romans, and gold and silver among all
rich and commercial nations.
Those metals seem originally to have been made use of for this purpose in
rude bars, without any stamp or coinage. Thus we are told by Pliny (Plin.
Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an ancient
historian, that, till the time of Servius Tullius, the Romans had no
coined money, but made use of unstamped bars of copper, to purchase
whatever they had occasion for. These rude bars, therefore, performed at
this time the function of money.
The use of metals in this rude state was attended with two very
considerable inconveniences; first, with the trouble of weighing, and
secondly, with that of assaying them. In the precious metals, where a
small difference in the quantity makes a great difference in the value,
even the business of weighing, with proper exactness, requires at least
very accurate weights and scales. The weighing of gold, in particular, is
an operation of some nicety in the coarser metals, indeed, where a small
error would be of little consequence, less accuracy would, no doubt, be
necessary. Yet we should find it excessively troublesome if every time a
poor man had occasion either to buy or sell a farthing’s worth of goods,
he was obliged to weigh the farthing. The operation of assaying is still
more difficult, still more tedious; and, unless a part of the metal is
fairly melted in the crucible, with proper dissolvents, any conclusion
that can be drawn from it is extremely uncertain. Before the institution
of coined money, however, unless they went through this tedious and
difficult operation, people must always have been liable to the grossest
frauds and impositions; and instead of a pound weight of pure silver, or
pure copper, might receive, in exchange for their goods, an adulterated
composition of the coarsest and cheapest materials, which had, however, in
their outward appearance, been made to resemble those metals. To prevent
such abuses, to facilitate exchanges, and thereby to encourage all sorts
of industry and commerce, it has been found necessary, in all countries
that have made any considerable advances towards improvement, to affix a
public stamp upon certain quantities of such particular metals, as were in
those countries commonly made use of to purchase goods. Hence the origin
of coined money, and of those public offices called mints; institutions
exactly of the same nature with those of the aulnagers and stamp-masters
of woollen and linen cloth. All of them are equally meant to ascertain, by
means of a public stamp, the quantity and uniform goodness of those
different commodities when brought to market.
The first public stamps of this kind that were affixed to the current
metals, seem in many cases to have been intended to ascertain, what it was
both most difficult and most important to ascertain, the goodness or
fineness of the metal, and to have resembled the sterling mark which is at
present affixed to plate and bars of silver, or the Spanish mark which is
sometimes affixed to ingots of gold, and which, being struck only upon one
side of the piece, and not covering the whole surface, ascertains the
fineness, but not the weight of the metal. Abraham weighs to Ephron the
four hundred shekels of silver which he had agreed to pay for the field of
Machpelah. They are said, however, to be the current money of the
merchant, and yet are received by weight, and not by tale, in the same
manner as ingots of gold and bars of silver are at present. The revenues
of the ancient Saxon kings of England are said to have been paid, not in
money, but in kind, that is, in victuals and provisions of all sorts.
William the Conqueror introduced the custom of paying them in money. This
money, however, was for a long time, received at the exchequer, by weight,
and not by tale.
The inconveniency and difficulty of weighing those metals with exactness,
gave occasion to the institution of coins, of which the stamp, covering
entirely both sides of the piece, and sometimes the edges too, was
supposed to ascertain not only the fineness, but the weight of the metal.
Such coins, therefore, were received by tale, as at present, without the
trouble of weighing.
The denominations of those coins seem originally to have expressed the
weight or quantity of metal contained in them. In the time of Servius
Tullius, who first coined money at Rome, the Roman as or pondo contained a
Roman pound of good copper. It was divided, in the same manner as our
Troyes pound, into twelve ounces, each of which contained a real ounce of
good copper. The English pound sterling, in the time of Edward I.
contained a pound, Tower weight, of silver of a known fineness. The Tower
pound seems to have been something more than the Roman pound, and
something less than the Troyes pound. This last was not introduced into
the mint of England till the 18th of Henry the VIII. The French livre
contained, in the time of Charlemagne, a pound, Troyes weight, of silver
of a known fineness. The fair of Troyes in Champaign was at that time
frequented by all the nations of Europe, and the weights and measures of
so famous a market were generally known and esteemed. The Scots money
pound contained, from the time of Alexander the First to that of Robert
Bruce, a pound of silver of the same weight and fineness with the English
pound sterling. English, French, and Scots pennies, too, contained all of
them originally a real penny-weight of silver, the twentieth part of an
ounce, and the two hundred-and-fortieth part of a pound. The shilling,
too, seems originally to have been the denomination of a weight. “When
wheat is at twelve shillings the quarter,” says an ancient statute of
Henry III. “then wastel bread of a farthing shall weigh eleven shillings
and fourpence”. The proportion, however, between the shilling, and either
the penny on the one hand, or the pound on the other, seems not to have
been so constant and uniform as that between the penny and the pound.
During the first race of the kings of France, the French sou or shilling
appears upon different occasions to have contained five, twelve, twenty,
and forty pennies. Among the ancient Saxons, a shilling appears at one
time to have contained only five pennies, and it is not improbable that it
may have been as variable among them as among their neighbours, the
ancient Franks. From the time of Charlemagne among the French, and from
that of William the Conqueror among the English, the proportion between
the pound, the shilling, and the penny, seems to have been uniformly the
same as at present, though the value of each has been very different; for
in every country of the world, I believe, the avarice and injustice of
princes and sovereign states, abusing the confidence of their subjects,
have by degrees diminished the real quantity of metal, which had been
originally contained in their coins. The Roman as, in the latter ages of
the republic, was reduced to the twenty-fourth part of its original value,
and, instead of weighing a pound, came to weigh only half an ounce. The
English pound and penny contain at present about a third only; the Scots
pound and penny about a thirty-sixth; and the French pound and penny about
a sixty-sixth part of their original value. By means of those operations,
the princes and sovereign states which performed them were enabled, in
appearance, to pay their debts and fulfil their engagements with a smaller
quantity of silver than would otherwise have been requisite. It was indeed
in appearance only; for their creditors were really defrauded of a part of
what was due to them. All other debtors in the state were allowed the same
privilege, and might pay with the same nominal sum of the new and debased
coin whatever they had borrowed in the old. Such operations, therefore,
have always proved favourable to the debtor, and ruinous to the creditor,
and have sometimes produced a greater and more universal revolution in the
fortunes of private persons, than could have been occasioned by a very
great public calamity.
It is in this manner that money has become, in all civilized nations, the
universal instrument of commerce, by the intervention of which goods of
all kinds are bought and sold, or exchanged for one another.
What are the rules which men naturally observe, in exchanging them either
for money, or for one another, I shall now proceed to examine. These rules
determine what may be called the relative or exchangeable value of goods.
The word VALUE, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and sometimes
the power of purchasing other goods which the possession of that object
conveys. The one may be called ‘value in use;’ the other, ‘value in
exchange.’ The things which have the greatest value in use have frequently
little or no value in exchange; and, on the contrary, those which have the
greatest value in exchange have frequently little or no value in use.
Nothing is more useful than water; but it will purchase scarce any thing;
scarce any thing can be had in exchange for it. A diamond, on the
contrary, has scarce any value in use; but a very great quantity of other
goods may frequently be had in exchange for it.
In order to investigate the principles which regulate the exchangeable
value of commodities, I shall endeavour to shew,
First, what is the real measure of this exchangeable value; or wherein
consists the real price of all commodities.
Secondly, what are the different parts of which this real price is
composed or made up.
And, lastly, what are the different circumstances which sometimes raise
some or all of these different parts of price above, and sometimes sink
them below, their natural or ordinary rate; or, what are the causes which
sometimes hinder the market price, that is, the actual price of
commodities, from coinciding exactly with what may be called their natural
price.
I shall endeavour to explain, as fully and distinctly as I can, those
three subjects in the three following chapters, for which I must very
earnestly entreat both the patience and attention of the reader: his
patience, in order to examine a detail which may, perhaps, in some places,
appear unnecessarily tedious; and his attention, in order to understand
what may perhaps, after the fullest explication which I am capable of
giving it, appear still in some degree obscure. I am always willing to run
some hazard of being tedious, in order to be sure that I am perspicuous;
and, after taking the utmost pains that I can to be perspicuous, some
obscurity may still appear to remain upon a subject, in its own nature
extremely abstracted.
CHAPTER V.
OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.
Every man is rich or poor according to the degree in which he can afford
to enjoy the necessaries, conveniencies, and amusements of human life. But
after the division of labour has once thoroughly taken place, it is but a
very small part of these with which a man’s own labour can supply him. The
far greater part of them he must derive from the labour of other people,
and he must be rich or poor according to the quantity of that labour which
he can command, or which he can afford to purchase. The value of any
commodity, therefore, to the person who possesses it, and who means not to
use or consume it himself, but to exchange it for other commodities, is
equal to the quantity of labour which it enables him to purchase or
command. Labour therefore, is the real measure of the exchangeable value
of all commodities.
The real price of every thing, what every thing really costs to the man
who wants to acquire it, is the toil and trouble of acquiring it. What
every thing is really worth to the man who has acquired it and who wants
to dispose of it, or exchange it for something else, is the toil and
trouble which it can save to himself, and which it can impose upon other
people. What is bought with money, or with goods, is purchased by labour,
as much as what we acquire by the toil of our own body. That money, or
those goods, indeed, save us this toil. They contain the value of a
certain quantity of labour, which we exchange for what is supposed at the
time to contain the value of an equal quantity. Labour was the first
price, the original purchase money that was paid for all things. It was
not by gold or by silver, but by labour, that all the wealth of the world
was originally purchased; and its value, to those who possess it, and who
want to exchange it for some new productions, is precisely equal to the
quantity of labour which it can enable them to purchase or command.
Wealth, as Mr Hobbes says, is power. But the person who either acquires,
or succeeds to a great fortune, does not necessarily acquire or succeed to
any political power, either civil or military. His fortune may, perhaps,
afford him the means of acquiring both; but the mere possession of that
fortune does not necessarily convey to him either. The power which that
possession immediately and directly conveys to him, is the power of
purchasing a certain command over all the labour, or over all the produce
of labour which is then in the market. His fortune is greater or less,
precisely in proportion to the extent of this power, or to the quantity
either of other men’s labour, or, what is the same thing, of the produce
of other men’s labour, which it enables him to purchase or command. The
exchangeable value of every thing must always be precisely equal to the
extent of this power which it conveys to its owner.
But though labour be the real measure of the exchangeable value of all
commodities, it is not that by which their value is commonly estimated. It
is often difficult to ascertain the proportion between two different
quantities of labour. The time spent in two different sorts of work will
not always alone determine this proportion. The different degrees of
hardship endured, and of ingenuity exercised, must likewise be taken into
account. There may be more labour in an hour’s hard work, than in two
hours easy business; or in an hour’s application to a trade which it cost
ten years labour to learn, than in a month’s industry, at an ordinary and
obvious employment. But it is not easy to find any accurate measure either
of hardship or ingenuity. In exchanging, indeed, the different productions
of different sorts of labour for one another, some allowance is commonly
made for both. It is adjusted, however, not by any accurate measure, but
by the higgling and bargaining of the market, according to that sort of
rough equality which, though not exact, is sufficient for carrying on the
business of common life.
Every commodity, besides, is more frequently exchanged for, and thereby
compared with, other commodities, than with labour. It is more natural,
therefore, to estimate its exchangeable value by the quantity of some
other commodity, than by that of the labour which it can produce. The
greater part of people, too, understand better what is meant by a quantity
of a particular commodity, than by a quantity of labour. The one is a
plain palpable object; the other an abstract notion, which though it can
be made sufficiently intelligible, is not altogether so natural and
obvious.
But when barter ceases, and money has become the common instrument of
commerce, every particular commodity is more frequently exchanged for
money than for any other commodity. The butcher seldom carries his beef or
his mutton to the baker or the brewer, in order to exchange them for bread
or for beer; but he carries them to the market, where he exchanges them
for money, and afterwards exchanges that money for bread and for beer. The
quantity of money which he gets for them regulates, too, the quantity of
bread and beer which he can afterwards purchase. It is more natural and
obvious to him, therefore, to estimate their value by the quantity of
money, the commodity for which he immediately exchanges them, than by that
of bread and beer, the commodities for which he can exchange them only by
the intervention of another commodity; and rather to say that his
butcher’s meat is worth three-pence or fourpence a-pound, than that it is
worth three or four pounds of bread, or three or four quarts of small
beer. Hence it comes to pass, that the exchangeable value of every
commodity is more frequently estimated by the quantity of money, than by
the quantity either of labour or of any other commodity which can be had
in exchange for it.
Gold and silver, however, like every other commodity, vary in their value;
are sometimes cheaper and sometimes dearer, sometimes of easier and
sometimes of more difficult purchase. The quantity of labour which any
particular quantity of them can purchase or command, or the quantity of
other goods which it will exchange for, depends always upon the fertility
or barrenness of the mines which happen to be known about the time when
such exchanges are made. The discovery of the abundant mines of America,
reduced, in the sixteenth century, the value of gold and silver in Europe
to about a third of what it had been before. As it cost less labour to
bring those metals from the mine to the market, so, when they were brought
thither, they could purchase or command less labour; and this revolution
in their value, though perhaps the greatest, is by no means the only one
of which history gives some account. But as a measure of quantity, such as
the natural foot, fathom, or handful, which is continually varying in its
own quantity, can never be an accurate measure of the quantity of other
things; so a commodity which is itself continually varying in its own
value, can never be an accurate measure of the value of other commodities.
Equal quantities of labour, at all times and places, may be said to be of
equal value to the labourer. In his ordinary state of health, strength,
and spirits; in the ordinary degree of his skill and dexterity, he must
always lay down the same portion of his ease, his liberty, and his
happiness. The price which he pays must always be the same, whatever may
be the quantity of goods which he receives in return for it. Of these,
indeed, it may sometimes purchase a greater and sometimes a smaller
quantity; but it is their value which varies, not that of the labour which
purchases them. At all times and places, that is dear which it is
difficult to come at, or which it costs much labour to acquire; and that
cheap which is to be had easily, or with very little labour. Labour alone,
therefore, never varying in its own value, is alone the ultimate and real
standard by which the value of all commodities can at all times and places
be estimated and compared. It is their real price; money is their nominal
price only.
But though equal quantities of labour are always of equal value to the
labourer, yet to the person who employs him they appear sometimes to be of
greater, and sometimes of smaller value. He purchases them sometimes with
a greater, and sometimes with a smaller quantity of goods, and to him the
price of labour seems to vary like that of all other things. It appears to
him dear in the one case, and cheap in the other. In reality, however, it
is the goods which are cheap in the one case, and dear in the other.
In this popular sense, therefore, labour, like commodities, may be said to
have a real and a nominal price. Its real price may be said to consist in
the quantity of the necessaries and conveniencies of life which are given
for it; its nominal price, in the quantity of money. The labourer is rich
or poor, is well or ill rewarded, in proportion to the real, not to the
nominal price of his labour.
The distinction between the real and the nominal price of commodities and
labour is not a matter of mere speculation, but may sometimes be of
considerable use in practice. The same real price is always of the same
value; but on account of the variations in the value of gold and silver,
the same nominal price is sometimes of very different values. When a
landed estate, therefore, is sold with a reservation of a perpetual rent,
if it is intended that this rent should always be of the same value, it is
of importance to the family in whose favour it is reserved, that it should
not consist in a particular sum of money. Its value would in this case be
liable to variations of two different kinds: first, to those which arise
from the different quantities of gold and silver which are contained at
different times in coin of the same denomination; and, secondly, to those
which arise from the different values of equal quantities of gold and
silver at different times.
Princes and sovereign states have frequently fancied that they had a
temporary interest to diminish the quantity of pure metal contained in
their coins; but they seldom have fancied that they had any to augment it.
The quantity of metal contained in the coins, I believe of all nations,
has accordingly been almost continually diminishing, and hardly ever
augmenting. Such variations, therefore, tend almost always to diminish the
value of a money rent.
The discovery of the mines of America diminished the value of gold and
silver in Europe. This diminution, it is commonly supposed, though I
apprehend without any certain proof, is still going on gradually, and is
likely to continue to do so for a long time. Upon this supposition,
therefore, such variations are more likely to diminish than to augment the
value of a money rent, even though it should be stipulated to be paid, not
in such a quantity of coined money of such a denomination (in so many
pounds sterling, for example), but in so many ounces, either of pure
silver, or of silver of a certain standard.
The rents which have been reserved in corn, have preserved their value
much better than those which have been reserved in money, even where the
denomination of the coin has not been altered. By the 18th of Elizabeth,
it was enacted, that a third of the rent of all college leases should be
reserved in corn, to be paid either in kind, or according to the current
prices at the nearest public market. The money arising from this corn
rent, though originally but a third of the whole, is, in the present
times, according to Dr Blackstone, commonly near double of what arises
from the other two-thirds. The old money rents of colleges must, according
to this account, have sunk almost to a fourth part of their ancient value,
or are worth little more than a fourth part of the corn which they were
formerly worth. But since the reign of Philip and Mary, the denomination
of the English coin has undergone little or no alteration, and the same
number of pounds, shillings, and pence, have contained very nearly the
same quantity of pure silver. This degradation, therefore, in the value of
the money rents of colleges, has arisen altogether from the degradation in
the price of silver.
When the degradation in the value of silver is combined with the
diminution of the quantity of it contained in the coin of the same
denomination, the loss is frequently still greater. In Scotland, where the
denomination of the coin has undergone much greater alterations than it
ever did in England, and in France, where it has undergone still greater
than it ever did in Scotland, some ancient rents, originally of
considerable value, have, in this manner, been reduced almost to nothing.
Equal quantities of labour will, at distant times, be purchased more
nearly with equal quantities of corn, the subsistence of the labourer,
than with equal quantities of gold and silver, or, perhaps, of any other
commodity. Equal quantities of corn, therefore, will, at distant times, be
more nearly of the same real value, or enable the possessor to purchase or
command more nearly the same quantity of the labour of other people. They
will do this, I say, more nearly than equal quantities of almost any other
commodity; for even equal quantities of corn will not do it exactly. The
subsistence of the labourer, or the real price of labour, as I shall
endeavour to shew hereafter, is very different upon different occasions;
more liberal in a society advancing to opulence, than in one that is
standing still, and in one that is standing still, than in one that is
going backwards. Every other commodity, however, will, at any particular
time, purchase a greater or smaller quantity of labour, in proportion to
the quantity of subsistence which it can purchase at that time. A rent,
therefore, reserved in corn, is liable only to the variations in the
quantity of labour which a certain quantity of corn can purchase. But a
rent reserved in any other commodity is liable, not only to the variations
in the quantity of labour which any particular quantity of corn can
purchase, but to the variations in the quantity of corn which can be
purchased by any particular quantity of that commodity.
Though the real value of a corn rent, it is to be observed, however,
varies much less from century to century than that of a money rent, it
varies much more from year to year. The money price of labour, as I shall
endeavour to shew hereafter, does not fluctuate from year to year with the
money price of corn, but seems to be everywhere accommodated, not to the
temporary or occasional, but to the average or ordinary price of that
necessary of life. The average or ordinary price of corn, again is
regulated, as I shall likewise endeavour to shew hereafter, by the value
of silver, by the richness or barrenness of the mines which supply the
market with that metal, or by the quantity of labour which must be
employed, and consequently of corn which must be consumed, in order to
bring any particular quantity of silver from the mine to the market. But
the value of silver, though it sometimes varies greatly from century to
century, seldom varies much from year to year, but frequently continues
the same, or very nearly the same, for half a century or a century
together. The ordinary or average money price of corn, therefore, may,
during so long a period, continue the same, or very nearly the same, too,
and along with it the money price of labour, provided, at least, the
society continues, in other respects, in the same, or nearly in the same,
condition. In the mean time, the temporary and occasional price of corn
may frequently be double one year of what it had been the year before, or
fluctuate, for example, from five-and-twenty to fifty shillings the
quarter. But when corn is at the latter price, not only the nominal, but
the real value of a corn rent, will be double of what it is when at the
former, or will command double the quantity either of labour, or of the
greater part of other commodities; the money price of labour, and along
with it that of most other things, continuing the same during all these
fluctuations.
Labour, therefore, it appears evidently, is the only universal, as well as
the only accurate, measure of value, or the only standard by which we can
compare the values of different commodities, at all times, and at all
places. We cannot estimate, it is allowed, the real value of different
commodities from century to century by the quantities of silver which were
given for them. We cannot estimate it from year to year by the quantities
of corn. By the quantities of labour, we can, with the greatest accuracy,
estimate it, both from century to century, and from year to year. From
century to century, corn is a better measure than silver, because, from
century to century, equal quantities of corn will command the same
quantity of labour more nearly than equal quantities of silver. From year
to year, on the contrary, silver is a better measure than corn, because
equal quantities of it will more nearly command the same quantity of
labour.
But though, in establishing perpetual rents, or even in letting very long
leases, it may be of use to distinguish between real and nominal price; it
is of none in buying and selling, the more common and ordinary
transactions of human life.
At the same time and place, the real and the nominal price of all
commodities are exactly in proportion to one another. The more or less
money you get for any commodity, in the London market, for example, the
more or less labour it will at that time and place enable you to purchase
or command. At the same time and place, therefore, money is the exact
measure of the real exchangeable value of all commodities. It is so,
however, at the same time and place only.
Though at distant places there is no regular proportion between the real
and the money price of commodities, yet the merchant who carries goods
from the one to the other, has nothing to consider but the money price, or
the difference between the quantity of silver for which he buys them, and
that for which he is likely to sell them. Half an ounce of silver at
Canton in China may command a greater quantity both of labour and of the
necessaries and conveniencies of life, than an ounce at London. A
commodity, therefore, which sells for half an ounce of silver at Canton,
may there be really dearer, of more real importance to the man who
possesses it there, than a commodity which sells for an ounce at London is
to the man who possesses it at London. If a London merchant, however, can
buy at Canton, for half an ounce of silver, a commodity which he can
afterwards sell at London for an ounce, he gains a hundred per cent. by
the bargain, just as much as if an ounce of silver was at London exactly
of the same value as at Canton. It is of no importance to him that half an
ounce of silver at Canton would have given him the command of more labour,
and of a greater quantity of the necessaries and conveniencies of life
than an ounce can do at London. An ounce at London will always give him
the command of double the quantity of all these, which half an ounce could
have done there, and this is precisely what he wants.
As it is the nominal or money price of goods, therefore, which finally
determines the prudence or imprudence of all purchases and sales, and
thereby regulates almost the whole business of common life in which price
is concerned, we cannot wonder that it should have been so much more
attended to than the real price.
In such a work as this, however, it may sometimes be of use to compare the
different real values of a particular commodity at different times and
places, or the different degrees of power over the labour of other people
which it may, upon different occasions, have given to those who possessed
it. We must in this case compare, not so much the different quantities of
silver for which it was commonly sold, as the different quantities or
labour which those different quantities of silver could have purchased.
But the current prices of labour, at distant times and places, can scarce
ever be known with any degree of exactness. Those of corn, though they
have in few places been regularly recorded, are in general better known,
and have been more frequently taken notice of by historians and other
writers. We must generally, therefore, content ourselves with them, not as
being always exactly in the same proportion as the current prices of
labour, but as being the nearest approximation which can commonly be had
to that proportion. I shall hereafter have occasion to make several
comparisons of this kind.
In the progress of industry, commercial nations have found it convenient
to coin several different metals into money; gold for larger payments,
silver for purchases of moderate value, and copper, or some other coarse
metal, for those of still smaller consideration, They have always,
however, considered one of those metals as more peculiarly the measure of
value than any of the other two; and this preference seems generally to
have been given to the metal which they happen first to make use of as the
instrument of commerce. Having once begun to use it as their standard,
which they must have done when they had no other money, they have
generally continued to do so even when the necessity was not the same.
The Romans are said to have had nothing but copper money till within five
years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
first began to coin silver. Copper, therefore, appears to have continued
always the measure of value in that republic. At Rome all accounts appear
to have been kept, and the value of all estates to have been computed,
either in asses or in sestertii. The as was always the denomination of a
copper coin. The word sestertius signifies two asses and a half. Though
the sestertius, therefore, was originally a silver coin, its value was
estimated in copper. At Rome, one who owed a great deal of money was said
to have a great deal of other people’s copper.
The northern nations who established themselves upon the ruins of the
Roman empire, seem to have had silver money from the first beginning of
their settlements, and not to have known either gold or copper coins for
several ages thereafter. There were silver coins in England in the time of
the Saxons; but there was little gold coined till the time of Edward III
nor any copper till that of James I. of Great Britain. In England,
therefore, and for the same reason, I believe, in all other modern nations
of Europe, all accounts are kept, and the value of all goods and of all
estates is generally computed, in silver: and when we mean to express the
amount of a person’s fortune, we seldom mention the number of guineas, but
the number of pounds sterling which we suppose would be given for it.
Originally, in all countries, I believe, a legal tender of payment could
be made only in the coin of that metal which was peculiarly considered as
the standard or measure of value. In England, gold was not considered as a
legal tender for a long time after it was coined into money. The
proportion between the values of gold and silver money was not fixed by
any public law or proclamation, but was left to be settled by the market.
If a debtor offered payment in gold, the creditor might either reject such
payment altogether, or accept of it at such a valuation of the gold as he
and his debtor could agree upon. Copper is not at present a legal tender,
except in the change of the smaller silver coins.
In this state of things, the distinction between the metal which was the
standard, and that which was not the standard, was something more than a
nominal distinction.
In process of time, and as people became gradually more familiar with the
use of the different metals in coin, and consequently better acquainted
with the proportion between their respective values, it has, in most
countries, I believe, been found convenient to ascertain this proportion,
and to declare by a public law, that a guinea, for example, of such a
weight and fineness, should exchange for one-and-twenty shillings, or be a
legal tender for a debt of that amount. In this state of things, and
during the continuance of any one regulated proportion of this kind, the
distinction between the metal, which is the standard, and that which is
not the standard, becomes little more than a nominal distinction.
In consequence of any change, however, in this regulated proportion, this
distinction becomes, or at least seems to become, something more than
nominal again. If the regulated value of a guinea, for example, was either
reduced to twenty, or raised to two-and-twenty shillings, all accounts
being kept, and almost all obligations for debt being expressed, in silver
money, the greater part of payments could in either case be made with the
same quantity of silver money as before; but would require very different
quantities of gold money; a greater in the one case, and a smaller in the
other. Silver would appear to be more invariable in its value than gold.
Silver would appear to measure the value of gold, and gold would not
appear to measure the value of silver. The value of gold would seem to
depend upon the quantity of silver which it would exchange for, and the
value of silver would not seem to depend upon the quantity of gold which
it would exchange for. This difference, however, would be altogether owing
to the custom of keeping accounts, and of expressing the amount of all
great and small sums rather in silver than in gold money. One of Mr
Drummond’s notes for five-and-twenty or fifty guineas would, after an
alteration of this kind, be still payable with five-and-twenty or fifty
guineas, in the same manner as before. It would, after such an alteration,
be payable with the same quantity of gold as before, but with very
different quantities of silver. In the payment of such a note, gold would
appear to be more invariable in its value than silver. Gold would appear
to measure the value of silver, and silver would not appear to measure the
value of gold. If the custom of keeping accounts, and of expressing
promissory-notes and other obligations for money, in this manner should
ever become general, gold, and not silver, would be considered as the
metal which was peculiarly the standard or measure of value.
In reality, during the continuance of any one regulated proportion between
the respective values of the different metals in coin, the value of the
most precious metal regulates the value of the whole coin. Twelve copper
pence contain half a pound avoirdupois of copper, of not the best quality,
which, before it is coined, is seldom worth seven-pence in silver. But as,
by the regulation, twelve such pence are ordered to exchange for a
shilling, they are in the market considered as worth a shilling, and a
shilling can at any time be had for them. Even before the late reformation
of the gold coin of Great Britain, the gold, that part of it at least
which circulated in London and its neighbourhood, was in general less
degraded below its standard weight than the greater part of the silver.
One-and-twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which, perhaps, indeed, was worn and defaced too,
but seldom so much so. The late regulations have brought the gold coin as
near, perhaps, to its standard weight as it is possible to bring the
current coin of any nation; and the order to receive no gold at the public
offices but by weight, is likely to preserve it so, as long as that order
is enforced. The silver coin still continues in the same worn and degraded
state as before the reformation of the cold coin. In the market, however,
one-and-twenty shillings of this degraded silver coin are still considered
as worth a guinea of this excellent gold coin.
The reformation of the gold coin has evidently raised the value of the
silver coin which can be exchanged for it.
In the English mint, a pound weight of gold is coined into forty-four
guineas and a half, which at one-and-twenty shillings the guinea, is equal
to forty-six pounds fourteen shillings and sixpence. An ounce of such gold
coin, therefore, is worth £ 3:17:10½ in silver. In England, no duty or
seignorage is paid upon the coinage, and he who carries a pound weight or
an ounce weight of standard gold bullion to the mint, gets back a pound
weight or an ounce weight of gold in coin, without any deduction. Three
pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of gold coin
which the mint gives in return for standard gold bullion.
Before the reformation of the gold coin, the price of standard gold
bullion in the market had, for many years, been upwards of £3:18s.
sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is
probable, in the worn and degraded gold coin, seldom containing more than
an ounce of standard gold. Since the reformation of the gold coin, the
market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce.
Before the reformation of the gold coin, the market price was always more
or less above the mint price. Since that reformation, the market price has
been constantly below the mint price. But that market price is the same
whether it is paid in gold or in silver coin. The late reformation of the
gold coin, therefore, has raised not only the value of the gold coin, but
likewise that of the silver coin in proportion to gold bullion, and
probably, too, in proportion to all other commodities; though the price of
the greater part of other commodities being influenced by so many other
causes, the rise in the value of either gold or silver coin in proportion
to them may not be so distinct and sensible.
In the English mint, a pound weight of standard silver bullion is coined
into sixty-two shillings, containing, in the same manner, a pound weight
of standard silver. Five shillings and twopence an ounce, therefore, is
said to be the mint price of silver in England, or the quantity of silver
coin which the mint gives in return for standard silver bullion. Before
the reformation of the gold coin, the market price of standard silver
bullion was, upon different occasions, five shillings and fourpence, five
shillings and fivepence, five shillings and sixpence, five shillings and
sevenpence, and very often five shillings and eightpence an ounce. Five
shillings and sevenpence, however, seems to have been the most common
price. Since the reformation of the gold coin, the market price of
standard silver bullion has fallen occasionally to five shillings and
threepence, five shillings and fourpence, and five shillings and fivepence
an ounce, which last price it has scarce ever exceeded. Though the market
price of silver bullion has fallen considerably since the reformation of
the gold coin, it has not fallen so low as the mint price.
In the proportion between the different metals in the English coin, as
copper is rated very much above its real value, so silver is rated
somewhat below it. In the market of Europe, in the French coin and in the
Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of
fine silver. In the English coin, it exchanges for about fifteen ounces,
that is, for more silver than it is worth, according to the common
estimation of Europe. But as the price of copper in bars is not, even in
England, raised by the high price of copper in English coin, so the price
of silver in bullion is not sunk by the low rate of silver in English
coin. Silver in bullion still preserves its proper proportion to gold, for
the same reason that copper in bars preserves its proper proportion to
silver.
Upon the reformation of the silver coin, in the reign of William III., the
price of silver bullion still continued to be somewhat above the mint
price. Mr Locke imputed this high price to the permission of exporting
silver bullion, and to the prohibition of exporting silver coin. This
permission of exporting, he said, rendered the demand for silver bullion
greater than the demand for silver coin. But the number of people who want
silver coin for the common uses of buying and selling at home, is surely
much greater than that of those who want silver bullion either for the use
of exportation or for any other use. There subsists at present a like
permission of exporting gold bullion, and a like prohibition of exporting
gold coin; and yet the price of gold bullion has fallen below the mint
price. But in the English coin, silver was then, in the same manner as
now, under-rated in proportion to gold; and the gold coin (which at that
time, too, was not supposed to require any reformation) regulated then, as
well as now, the real value of the whole coin. As the reformation of the
silver coin did not then reduce the price of silver bullion to the mint
price, it is not very probable that a like reformation will do so now.
Were the silver coin brought back as near to its standard weight as the
gold, a guinea, it is probable, would, according to the present
proportion, exchange for more silver in coin than it would purchase in
bullion. The silver coin containing its full standard weight, there would
in this case, be a profit in melting it down, in order, first to sell the
bullion for gold coin, and afterwards to exchange this gold coin for
silver coin, to be melted down in the same manner. Some alteration in the
present proportion seems to be the only method of preventing this
inconveniency.
The inconveniency, perhaps, would be less, if silver was rated in the coin
as much above its proper proportion to gold as it is at present rated
below it, provided it was at the same time enacted, that silver should not
be a legal tender for more than the change of a guinea, in the same manner
as copper is not a legal tender for more than the change of a shilling. No
creditor could, in this case, be cheated in consequence of the high
valuation of silver in coin; as no creditor can at present be cheated in
consequence of the high valuation of copper. The bankers only would suffer
by this regulation. When a run comes upon them, they sometimes endeavour
to gain time, by paying in sixpences, and they would be precluded by this
regulation from this discreditable method of evading immediate payment.
They would be obliged, in consequence, to keep at all times in their
coffers a greater quantity of cash than at present; and though this might,
no doubt, be a considerable inconveniency to them, it would, at the same
time, be a considerable security to their creditors.
Three pounds seventeen shillings and tenpence halfpenny (the mint price of
gold) certainly does not contain, even in our present excellent gold coin,
more than an ounce of standard gold, and it may be thought, therefore,
should not purchase more standard bullion. But gold in coin is more
convenient than gold in bullion; and though, in England, the coinage is
free, yet the gold which is carried in bullion to the mint, can seldom be
returned in coin to the owner till after a delay of several weeks. In the
present hurry of the mint, it could not be returned till after a delay of
several months. This delay is equivalent to a small duty, and renders gold
in coin somewhat more valuable than an equal quantity of gold in bullion.
If, in the English coin, silver was rated according to its proper
proportion to gold, the price of silver bullion would probably fall below
the mint price, even without any reformation of the silver coin; the value
even of the present worn and defaced silver coin being regulated by the
value of the excellent gold coin for which it can be changed.
A small seignorage or duty upon the coinage of both gold and silver, would
probably increase still more the superiority of those metals in coin above
an equal quantity of either of them in bullion. The coinage would, in this
case, increase the value of the metal coined in proportion to the extent
of this small duty, for the same reason that the fashion increases the
value of plate in proportion to the price of that fashion. The superiority
of coin above bullion would prevent the melting down of the coin, and
would discourage its exportation. If, upon any public exigency, it should
become necessary to export the coin, the greater part of it would soon
return again, of its own accord. Abroad, it could sell only for its weight
in bullion. At home, it would buy more than that weight. There would be a
profit, therefore, in bringing it home again. In France, a seignorage of
about eight per cent. is imposed upon the coinage, and the French coin,
when exported, is said to return home again, of its own accord.
The occasional fluctuations in the market price of gold and silver bullion
arise from the same causes as the like fluctuations in that of all other
commodities. The frequent loss of those metals from various accidents by
sea and by land, the continual waste of them in gilding and plating, in
lace and embroidery, in the wear and tear of coin, and in that of plate,
require, in all countries which possess no mines of their own, a continual
importation, in order to repair this loss and this waste. The merchant
importers, like all other merchants, we may believe, endeavour, as well as
they can, to suit their occasional importations to what they judge is
likely to be the immediate demand. With all their attention, however, they
sometimes overdo the business, and sometimes underdo it. When they import
more bullion than is wanted, rather than incur the risk and trouble of
exporting it again, they are sometimes willing to sell a part of it for
something less than the ordinary or average price. When, on the other
hand, they import less than is wanted, they get something more than this
price. But when, under all those occasional fluctuations, the market price
either of gold or silver bullion continues for several years together
steadily and constantly, either more or less above, or more or less below
the mint price, we may be assured that this steady and constant, either
superiority or inferiority of price, is the effect of something in the
state of the coin, which, at that time, renders a certain quantity of coin
either of more value or of less value than the precise quantity of bullion
which it ought to contain. The constancy and steadiness of the effect
supposes a proportionable constancy and steadiness in the cause.
The money of any particular country is, at any particular time and place,
more or less an accurate measure or value, according as the current coin
is more or less exactly agreeable to its standard, or contains more or
less exactly the precise quantity of pure gold or pure silver which it
ought to contain. If in England, for example, forty-four guineas and a
half contained exactly a pound weight of standard gold, or eleven ounces
of fine gold, and one ounce of alloy, the gold coin of England would be as
accurate a measure of the actual value of goods at any particular time and
place as the nature of the thing would admit. But if, by rubbing and
wearing, forty-four guineas and a half generally contain less than a pound
weight of standard gold, the diminution, however, being greater in some
pieces than in others, the measure of value comes to be liable to the same
sort of uncertainty to which all other weights and measures are commonly
exposed. As it rarely happens that these are exactly agreeable to their
standard, the merchant adjusts the price of his goods as well as he can,
not to what those weights and measures ought to be, but to what, upon an
average, he finds, by experience, they actually are. In consequence of a
like disorder in the coin, the price of goods comes, in the same manner,
to be adjusted, not to the quantity of pure gold or silver which the coin
ought to contain, but to that which, upon an average, it is found, by
experience, it actually does contain.
By the money price of goods, it is to be observed, I understand always the
quantity of pure gold or silver for which they are sold, without any
regard to the denomination of the coin. Six shillings and eight pence, for
example, in the time of Edward I., I consider as the same money price with
a pound sterling in the present times, because it contained, as nearly as
we can judge, the same quantity of pure silver.
CHAPTER VI.
OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
In that early and rude state of society which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can afford any rule for
exchanging them for one another. If among a nation of hunters, for
example, it usually costs twice the labour to kill a beaver which it does
to kill a deer, one beaver should naturally exchange for or be worth two
deer. It is natural that what is usually the produce of two days or two
hours labour, should be worth double of what is usually the produce of one
day’s or one hour’s labour.
If the one species of labour should be more severe than the other, some
allowance will naturally be made for this superior hardship; and the
produce of one hour’s labour in the one way may frequently exchange for
that of two hour’s labour in the other.
Or if the one species of labour requires an uncommon degree of dexterity
and ingenuity, the esteem which men have for such talents, will naturally
give a value to their produce, superior to what would be due to the time
employed about it. Such talents can seldom be acquired but in consequence
of long application, and the superior value of their produce may
frequently be no more than a reasonable compensation for the time and
labour which must be spent in acquiring them. In the advanced state of
society, allowances of this kind, for superior hardship and superior
skill, are commonly made in the wages of labour; and something of the same
kind must probably have taken place in its earliest and rudest period.
In this state of things, the whole produce of labour belongs to the
labourer; and the quantity of labour commonly employed in acquiring or
producing any commodity, is the only circumstance which can regulate the
quantity of labour which it ought commonly to purchase, command, or
exchange for.
As soon as stock has accumulated in the hands of particular persons, some
of them will naturally employ it in setting to work industrious people,
whom they will supply with materials and subsistence, in order to make a
profit by the sale of their work, or by what their labour adds to the
value of the materials. In exchanging the complete manufacture either for
money, for labour, or for other goods, over and above what may be
sufficient to pay the price of the materials, and the wages of the
workmen, something must be given for the profits of the undertaker of the
work, who hazards his stock in this adventure. The value which the workmen
add to the materials, therefore, resolves itself in this case into two
parts, of which the one pays their wages, the other the profits of their
employer upon the whole stock of materials and wages which he advanced. He
could have no interest to employ them, unless he expected from the sale of
their work something more than what was sufficient to replace his stock to
him; and he could have no interest to employ a great stock rather than a
small one, unless his profits were to bear some proportion to the extent
of his stock.
The profits of stock, it may perhaps be thought, are only a different name
for the wages of a particular sort of labour, the labour of inspection and
direction. They are, however, altogether different, are regulated by quite
different principles, and bear no proportion to the quantity, the
hardship, or the ingenuity of this supposed labour of inspection and
direction. They are regulated altogether by the value of the stock
employed, and are greater or smaller in proportion to the extent of this
stock. Let us suppose, for example, that in some particular place, where
the common annual profits of manufacturing stock are ten per cent. there
are two different manufactures, in each of which twenty workmen are
employed, at the rate of fifteen pounds a year each, or at the expense of
three hundred a-year in each manufactory. Let us suppose, too, that the
coarse materials annually wrought up in the one cost only seven hundred
pounds, while the finer materials in the other cost seven thousand. The
capital annually employed in the one will, in this case, amount only to
one thousand pounds; whereas that employed in the other will amount to
seven thousand three hundred pounds. At the rate of ten per cent.
therefore, the undertaker of the one will expect a yearly profit of about
one hundred pounds only; while that of the other will expect about seven
hundred and thirty pounds. But though their profits are so very different,
their labour of inspection and direction may be either altogether or very
nearly the same. In many great works, almost the whole labour of this kind
is committed to some principal clerk. His wages properly express the value
of this labour of inspection and direction. Though in settling them some
regard is had commonly, not only to his labour and skill, but to the trust
which is reposed in him, yet they never bear any regular proportion to the
capital of which he oversees the management; and the owner of this
capital, though he is thus discharged of almost all labour, still expects
that his profit should bear a regular proportion to his capital. In the
price of commodities, therefore, the profits of stock constitute a
component part altogether different from the wages of labour, and
regulated by quite different principles.
In this state of things, the whole produce of labour does not always
belong to the labourer. He must in most cases share it with the owner of
the stock which employs him. Neither is the quantity of labour commonly
employed in acquiring or producing any commodity, the only circumstance
which can regulate the quantity which it ought commonly to purchase,
command or exchange for. An additional quantity, it is evident, must be
due for the profits of the stock which advanced the wages and furnished
the materials of that labour.
As soon as the land of any country has all become private property, the
landlords, like all other men, love to reap where they never sowed, and
demand a rent even for its natural produce. The wood of the forest, the
grass of the field, and all the natural fruits of the earth, which, when
land was in common, cost the labourer only the trouble of gathering them,
come, even to him, to have an additional price fixed upon them. He must
then pay for the licence to gather them, and must give up to the landlord
a portion of what his labour either collects or produces. This portion,
or, what comes to the same thing, the price of this portion, constitutes
the rent of land, and in the price of the greater part of commodities,
makes a third component part.
The real value of all the different component parts of price, it must be
observed, is measured by the quantity of labour which they can, each of
them, purchase or command. Labour measures the value, not only of that
part of price which resolves itself into labour, but of that which
resolves itself into rent, and of that which resolves itself into profit.
In every society, the price of every commodity finally resolves itself
into some one or other, or all of those three parts; and in every improved
society, all the three enter, more or less, as component parts, into the
price of the far greater part of commodities.
In the price of corn, for example, one part pays the rent of the landlord,
another pays the wages or maintenance of the labourers and labouring
cattle employed in producing it, and the third pays the profit of the
farmer. These three parts seem either immediately or ultimately to make up
the whole price of corn. A fourth part, it may perhaps be thought is
necessary for replacing the stock of the farmer, or for compensating the
wear and tear of his labouring cattle, and other instruments of husbandry.
But it must be considered, that the price of any instrument of husbandry,
such as a labouring horse, is itself made up of the same time parts; the
rent of the land upon which he is reared, the labour of tending and
rearing him, and the profits of the farmer, who advances both the rent of
this land, and the wages of this labour. Though the price of the corn,
therefore, may pay the price as well as the maintenance of the horse, the
whole price still resolves itself, either immediately or ultimately, into
the same three parts of rent, labour, and profit.
In the price of flour or meal, we must add to the price of the corn, the
profits of the miller, and the wages of his servants; in the price of
bread, the profits of the baker, and the wages of his servants; and in the
price of both, the labour of transporting the corn from the house of the
farmer to that of the miller, and from that of the miller to that of the
baker, together with the profits of those who advance the wages of that
labour.
The price of flax resolves itself into the same three parts as that of
corn. In the price of linen we must add to this price the wages of the
flax-dresser, of the spinner, of the weaver, of the bleacher, etc.
together with the profits of their respective employers.
As any particular commodity comes to be more manufactured, that part of
the price which resolves itself into wages and profit, comes to be greater
in proportion to that which resolves itself into rent. In the progress of
the manufacture, not only the number of profits increase, but every
subsequent profit is greater than the foregoing; because the capital from
which it is derived must always be greater. The capital which employs the
weavers, for example, must be greater than that which employs the
spinners; because it not only replaces that capital with its profits, but
pays, besides, the wages of the weavers: and the profits must always bear
some proportion to the capital.
In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only: the
wages of labour, and the profits of stock; and a still smaller number, in
which it consists altogether in the wages of labour. In the price of
sea-fish, for example, one part pays the labour of the fisherman, and the
other the profits of the capital employed in the fishery. Rent very seldom
makes any part of it, though it does sometimes, as I shall shew hereafter.
It is otherwise, at least through the greater part of Europe, in river
fisheries. A salmon fishery pays a rent; and rent, though it cannot well
be called the rent of land, makes a part of the price of a salmon, as well
as wares and profit. In some parts of Scotland, a few poor people make a
trade of gathering, along the sea-shore, those little variegated stones
commonly known by the name of Scotch pebbles. The price which is paid to
them by the stone-cutter, is altogether the wages of their labour; neither
rent nor profit makes any part of it.
But the whole price of any commodity must still finally resolve itself
into some one or other or all of those three parts; as whatever part of it
remains after paying the rent of the land, and the price of the whole
labour employed in raising, manufacturing, and bringing it to market, must
necessarily be profit to somebody.
As the price or exchangeable value of every particular commodity, taken
separately, resolves itself into some one or other, or all of those three
parts; so that of all the commodities which compose the whole annual
produce of the labour of every country, taken complexly, must resolve
itself into the same three parts, and be parcelled out among different
inhabitants of the country, either as the wages of their labour, the
profits of their stock, or the rent of their land. The whole of what is
annually either collected or produced by the labour of every society, or,
what comes to the same thing, the whole price of it, is in this manner
originally distributed among some of its different members. Wages, profit,
and rent, are the three original sources of all revenue, as well as of all
exchangeable value. All other revenue is ultimately derived from some one
or other of these.
Whoever derives his revenue from a fund which is his own, must draw it
either from his labour, from his stock, or from his land. The revenue
derived from labour is called wages; that derived from stock, by the
person who manages or employs it, is called profit; that derived from it
by the person who does not employ it himself, but lends it to another, is
called the interest or the use of money. It is the compensation which the
borrower pays to the lender, for the profit which he has an opportunity of
making by the use of the money. Part of that profit naturally belongs to
the borrower, who runs the risk and takes the trouble of employing it, and
part to the lender, who affords him the opportunity of making this profit.
The interest of money is always a derivative revenue, which, if it is not
paid from the profit which is made by the use of the money, must be paid
from some other source of revenue, unless perhaps the borrower is a
spendthrift, who contracts a second debt in order to pay the interest of
the first. The revenue which proceeds altogether from land, is called
rent, and belongs to the landlord. The revenue of the farmer is derived
partly from his labour, and partly from his stock. To him, land is only
the instrument which enables him to earn the wages of this labour, and to
make the profits of this stock. All taxes, and all the revenue which is
founded upon them, all salaries, pensions, and annuities of every kind,
are ultimately derived from some one or other of those three original
sources of revenue, and are paid either immediately or mediately from the
wages of labour, the profits of stock, or the rent of land.
When those three different sorts of revenue belong to different persons,
they are readily distinguished; but when they belong to the same, they are
sometimes confounded with one another, at least in common language.
A gentleman who farms a part of his own estate, after paying the expense
of cultivation, should gain both the rent of the landlord and the profit
of the farmer. He is apt to denominate, however, his whole gain, profit,
and thus confounds rent with profit, at least in common language. The
greater part of our North American and West Indian planters are in this
situation. They farm, the greater part of them, their own estates: and
accordingly we seldom hear of the rent of a plantation, but frequently of
its profit.
Common farmers seldom employ any overseer to direct the general operations
of the farm. They generally, too, work a good deal with their own hands,
as ploughmen, harrowers, etc. What remains of the crop, after paying the
rent, therefore, should not only replace to them their stock employed in
cultivation, together with its ordinary profits, but pay them the wages
which are due to them, both as labourers and overseers. Whatever remains,
however, after paying the rent and keeping up the stock, is called profit.
But wages evidently make a part of it. The farmer, by saving these wages,
must necessarily gain them. Wages, therefore, are in this case confounded
with profit.
An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to market,
should gain both the wages of a journeyman who works under a master, and
the profit which that master makes by the sale of that journeyman’s work.
His whole gains, however, are commonly called profit, and wages are, in
this case, too, confounded with profit.
A gardener who cultivates his own garden with his own hands, unites in his
own person the three different characters, of landlord, farmer, and
labourer. His produce, therefore, should pay him the rent of the first,
the profit of the second, and the wages of the third. The whole, however,
is commonly considered as the earnings of his labour. Both rent and profit
are, in this case, confounded with wages.
As in a civilized country there are but few commodities of which the
exchangeable value arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so the annual produce of
its labour will always be sufficient to purchase or command a much greater
quantity of labour than what was employed in raising, preparing, and
bringing that produce to market. If the society were annually to employ
all the labour which it can annually purchase, as the quantity of labour
would increase greatly every year, so the produce of every succeeding year
would be of vastly greater value than that of the foregoing. But there is
no country in which the whole annual produce is employed in maintaining
the industrious. The idle everywhere consume a great part of it; and,
according to the different proportions in which it is annually divided
between those two different orders of people, its ordinary or average
value must either annually increase or diminish, or continue the same from
one year to another.
CHAPTER VII.
OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
There is in every society or neighbourhood an ordinary or average rate,
both of wages and profit, in every different employment of labour and
stock. This rate is naturally regulated, as I shall shew hereafter, partly
by the general circumstances of the society, their riches or poverty,
their advancing, stationary, or declining condition, and partly by the
particular nature of each employment.
There is likewise in every society or neighbourhood an ordinary or average
rate of rent, which is regulated, too, as I shall shew hereafter, partly
by the general circumstances of the society or neighbourhood in which the
land is situated, and partly by the natural or improved fertility of the
land.
These ordinary or average rates may be called the natural rates of wages,
profit and rent, at the time and place in which they commonly prevail.
When the price of any commodity is neither more nor less than what is
sufficient to pay the rent of the land, the wages of the labour, and the
profits of the stock employed in raising, preparing, and bringing it to
market, according to their natural rates, the commodity is then sold for
what may be called its natural price.
The commodity is then sold precisely for what it is worth, or for what it
really costs the person who brings it to market; for though, in common
language, what is called the prime cost of any commodity does not
comprehend the profit of the person who is to sell it again, yet, if he
sells it at a price which does not allow him the ordinary rate of profit
in his neighbourhood, he is evidently a loser by the trade; since, by
employing his stock in some other way, he might have made that profit. His
profit, besides, is his revenue, the proper fund of his subsistence. As,
while he is preparing and bringing the goods to market, he advances to his
workmen their wages, or their subsistence; so he advances to himself, in
the same manner, his own subsistence, which is generally suitable to the
profit which he may reasonably expect from the sale of his goods. Unless
they yield him this profit, therefore, they do not repay him what they may
very properly be said to have really cost him.
Though the price, therefore, which leaves him this profit, is not always
the lowest at which a dealer may sometimes sell his goods, it is the
lowest at which he is likely to sell them for any considerable time; at
least where there is perfect liberty, or where he may change his trade as
often as he pleases.
The actual price at which any commodity is commonly sold, is called its
market price. It may either be above, or below, or exactly the same with
its natural price.
The market price of every particular commodity is regulated by the
proportion between the quantity which is actually brought to market, and
the demand of those who are willing to pay the natural price of the
commodity, or the whole value of the rent, labour, and profit, which must
be paid in order to bring it thither. Such people may be called the
effectual demanders, and their demand the effectual demand; since it maybe
sufficient to effectuate the bringing of the commodity to market. It is
different from the absolute demand. A very poor man may be said, in some
sense, to have a demand for a coach and six; he might like to have it; but
his demand is not an effectual demand, as the commodity can never be
brought to market in order to satisfy it.
When the quantity of any commodity which is brought to market falls short
of the effectual demand, all those who are willing to pay the whole value
of the rent, wages, and profit, which must be paid in order to bring it
thither, cannot be supplied with the quantity which they want. Rather than
want it altogether, some of them will be willing to give more. A
competition will immediately begin among them, and the market price will
rise more or less above the natural price, according as either the
greatness of the deficiency, or the wealth and wanton luxury of the
competitors, happen to animate more or less the eagerness of the
competition. Among competitors of equal wealth and luxury, the same
deficiency will generally occasion a more or less eager competition,
according as the acquisition of the commodity happens to be of more or
less importance to them. Hence the exorbitant price of the necessaries of
life during the blockade of a town, or in a famine.
When the quantity brought to market exceeds the effectual demand, it
cannot be all sold to those who are willing to pay the whole value of the
rent, wages, and profit, which must be paid in order to bring it thither.
Some part must be sold to those who are willing to pay less, and the low
price which they give for it must reduce the price of the whole. The
market price will sink more or less below the natural price, according as
the greatness of the excess increases more or less the competition of the
sellers, or according as it happens to be more or less important to them
to get immediately rid of the commodity. The same excess in the
importation of perishable, will occasion a much greater competition than
in that of durable commodities; in the importation of oranges, for
example, than in that of old iron.
When the quantity brought to market is just sufficient to supply the
effectual demand, and no more, the market price naturally comes to be
either exactly, or as nearly as can be judged of, the same with the
natural price. The whole quantity upon hand can be disposed of for this
price, and can not be disposed of for more. The competition of the
different dealers obliges them all to accept of this price, but does not
oblige them to accept of less.
The quantity of every commodity brought to market naturally suits itself
to the effectual demand. It is the interest of all those who employ their
land, labour, or stock, in bringing any commodity to market, that the
quantity never should exceed the effectual demand; and it is the interest
of all other people that it never should fall short of that demand.
If at any time it exceeds the effectual demand, some of the component
parts of its price must be paid below their natural rate. If it is rent,
the interest of the landlords will immediately prompt them to withdraw a
part of their land; and if it is wages or profit, the interest of the
labourers in the one case, and of their employers in the other, will
prompt them to withdraw a part of their labour or stock, from this
employment. The quantity brought to market will soon be no more than
sufficient to supply the effectual demand. All the different parts of its
price will rise to their natural rate, and the whole price to its natural
price.
If, on the contrary, the quantity brought to market should at any time
fall short of the effectual demand, some of the component parts of its
price must rise above their natural rate. If it is rent, the interest of
all other landlords will naturally prompt them to prepare more land for
the raising of this commodity; if it is wages or profit, the interest of
all other labourers and dealers will soon prompt them to employ more
labour and stock in preparing and bringing it to market. The quantity
brought thither will soon be sufficient to supply the effectual demand.
All the different parts of its price will soon sink to their natural rate,
and the whole price to its natural price.
The natural price, therefore, is, as it were, the central price, to which
the prices of all commodities are continually gravitating. Different
accidents may sometimes keep them suspended a good deal above it, and
sometimes force them down even somewhat below it. But whatever may be the
obstacles which hinder them from settling in this centre of repose and
continuance, they are constantly tending towards it.
The whole quantity of industry annually employed in order to bring any
commodity to market, naturally suits itself in this manner to the
effectual demand. It naturally aims at bringing always that precise
quantity thither which may be sufficient to supply, and no more than
supply, that demand.
But, in some employments, the same quantity of industry will, in different
years, produce very different quantities of commodities; while, in others,
it will produce always the same, or very nearly the same. The same number
of labourers in husbandry will, in different years, produce very different
quantities of corn, wine, oil, hops, etc. But the same number of spinners
or weavers will every year produce the same, or very nearly the same,
quantity of linen and woollen cloth. It is only the average produce of the
one species of industry which can be suited, in any respect, to the
effectual demand; and as its actual produce is frequently much greater,
and frequently much less, than its average produce, the quantity of the
commodities brought to market will sometimes exceed a good deal, and
sometimes fall short a good deal, of the effectual demand. Even though
that demand, therefore, should continue always the same, their market
price will be liable to great fluctuations, will sometimes fall a good
deal below, and sometimes rise a good deal above, their natural price. In
the other species of industry, the produce of equal quantities of labour
being always the same, or very nearly the same, it can be more exactly
suited to the effectual demand. While that demand continues the same,
therefore, the market price of the commodities is likely to do so too, and
to be either altogether, or as nearly as can be judged of, the same with
the natural price. That the price of linen and woollen cloth is liable
neither to such frequent, nor to such great variations, as the price of
corn, every man’s experience will inform him. The price of the one species
of commodities varies only with the variations in the demand; that of the
other varies not only with the variations in the demand, but with the much
greater, and more frequent, variations in the quantity of what is brought
to market, in order to supply that demand.
The occasional and temporary fluctuations in the market price of any
commodity fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which resolves itself into
rent is less affected by them. A rent certain in money is not in the least
affected by them, either in its rate or in its value. A rent which
consists either in a certain proportion, or in a certain quantity, of the
rude produce, is no doubt affected in its yearly value by all the
occasional and temporary fluctuations in the market price of that rude
produce; but it is seldom affected by them in its yearly rate. In settling
the terms of the lease, the landlord and farmer endeavour, according to
their best judgment, to adjust that rate, not to the temporary and
occasional, but to the average and ordinary price of the produce.
Such fluctuations affect both the value and the rate, either of wages or
of profit, according as the market happens to be either overstocked or
understocked with commodities or with labour, with work done, or with work
to be done. A public mourning raises the price of black cloth (with which
the market is almost always understocked upon such occasions), and
augments the profits of the merchants who possess any considerable
quantity of it. It has no effect upon the wages of the weavers. The market
is understocked with commodities, not with labour, with work done, not
with work to be done. It raises the wages of journeymen tailors. The
market is here understocked with labour. There is an effectual demand for
more labour, for more work to be done, than can be had. It sinks the price
of coloured silks and cloths, and thereby reduces the profits of the
merchants who have any considerable quantity of them upon hand. It sinks,
too, the wages of the workmen employed in preparing such commodities, for
which all demand is stopped for six months, perhaps for a twelvemonth. The
market is here overstocked both with commodities and with labour.
But though the market price of every particular commodity is in this
manner continually gravitating, if one may say so, towards the natural
price; yet sometimes particular accidents, sometimes natural causes, and
sometimes particular regulations of policy, may, in many commodities, keep
up the market price, for a long time together, a good deal above the
natural price.
When, by an increase in the effectual demand, the market price of some
particular commodity happens to rise a good deal above the natural price,
those who employ their stocks in supplying that market, are generally
careful to conceal this change. If it was commonly known, their great
profit would tempt so many new rivals to employ their stocks in the same
way, that, the effectual demand being fully supplied, the market price
would soon be reduced to the natural price, and, perhaps, for some time
even below it. If the market is at a great distance from the residence of
those who supply it, they may sometimes be able to keep the secret for
several years together, and may so long enjoy their extraordinary profits
without any new rivals. Secrets of this kind, however, it must be
acknowledged, can seldom be long kept; and the extraordinary profit can
last very little longer than they are kept.
Secrets in manufactures are capable of being longer kept than secrets in
trade. A dyer who has found the means of producing a particular colour
with materials which cost only half the price of those commonly made use
of, may, with good management, enjoy the advantage of his discovery as
long as he lives, and even leave it as a legacy to his posterity. His
extraordinary gains arise from the high price which is paid for his
private labour. They properly consist in the high wages of that labour.
But as they are repeated upon every part of his stock, and as their whole
amount bears, upon that account, a regular proportion to it, they are
commonly considered as extraordinary profits of stock.
Such enhancements of the market price are evidently the effects of
particular accidents, of which, however, the operation may sometimes last
for many years together.
Some natural productions require such a singularity of soil and situation,
that all the land in a great country, which is fit for producing them, may
not be sufficient to supply the effectual demand. The whole quantity
brought to market, therefore, may be disposed of to those who are willing
to give more than what is sufficient to pay the rent of the land which
produced them, together with the wages of the labour and the profits of
the stock which were employed in preparing and bringing them to market,
according to their natural rates. Such commodities may continue for whole
centuries together to be sold at this high price; and that part of it
which resolves itself into the rent of land, is in this case the part
which is generally paid above its natural rate. The rent of the land which
affords such singular and esteemed productions, like the rent of some
vineyards in France of a peculiarly happy soil and situation, bears no
regular proportion to the rent of other equally fertile and equally well
cultivated land in its neighbourhood. The wages of the labour, and the
profits of the stock employed in bringing such commodities to market, on
the contrary, are seldom out of their natural proportion to those of the
other employments of labour and stock in their neighbourhood.
Such enhancements of the market price are evidently the effect of natural
causes, which may hinder the effectual demand from ever being fully
supplied, and which may continue, therefore, to operate for ever.
A monopoly granted either to an individual or to a trading company, has
the same effect as a secret in trade or manufactures. The monopolists, by
keeping the market constantly understocked by never fully supplying the
effectual demand, sell their commodities much above the natural price, and
raise their emoluments, whether they consist in wages or profit, greatly
above their natural rate.
The price of monopoly is upon every occasion the highest which can be got.
The natural price, or the price of free competition, on the contrary, is
the lowest which can be taken, not upon every occasion indeed, but for any
considerable time together. The one is upon every occasion the highest
which can be squeezed out of the buyers, or which it is supposed they will
consent to give; the other is the lowest which the sellers can commonly
afford to take, and at the same time continue their business.
The exclusive privileges of corporations, statutes of apprenticeship, and
all those laws which restrain in particular employments, the competition
to a smaller number than might otherwise go into them, have the same
tendency, though in a less degree. They are a sort of enlarged monopolies,
and may frequently, for ages together, and in whole classes of
employments, keep up the market price of particular commodities above the
natural price, and maintain both the wages of the labour and the profits
of the stock employed about them somewhat above their natural rate.
Such enhancements of the market price may last as long as the regulations
of policy which give occasion to them.
The market price of any particular commodity, though it may continue long
above, can seldom continue long below, its natural price. Whatever part of
it was paid below the natural rate, the persons whose interest it affected
would immediately feel the loss, and would immediately withdraw either so
much land or so much labour, or so much stock, from being employed about
it, that the quantity brought to market would soon be no more than
sufficient to supply the effectual demand. Its market price, therefore,
would soon rise to the natural price; this at least would be the case
where there was perfect liberty.
The same statutes of apprenticeship and other corporation laws, indeed,
which, when a manufacture is in prosperity, enable the workman to raise
his wages a good deal above their natural rate, sometimes oblige him, when
it decays, to let them down a good deal below it. As in the one case they
exclude many people from his employment, so in the other they exclude him
from many employments. The effect of such regulations, however, is not
near so durable in sinking the workman’s wages below, as in raising them
above their natural rate. Their operation in the one way may endure for
many centuries, but in the other it can last no longer than the lives of
some of the workmen who were bred to the business in the time of its
prosperity. When they are gone, the number of those who are afterwards
educated to the trade will naturally suit itself to the effectual demand.
The policy must be as violent as that of Indostan or ancient Egypt (where
every man was bound by a principle of religion to follow the occupation of
his father, and was supposed to commit the most horrid sacrilege if he
changed it for another), which can in any particular employment, and for
several generations together, sink either the wages of labour or the
profits of stock below their natural rate.
This is all that I think necessary to be observed at present concerning
the deviations, whether occasional or permanent, of the market price of
commodities from the natural price.
The natural price itself varies with the natural rate of each of its
component parts, of wages, profit, and rent; and in every society this
rate varies according to their circumstances, according to their riches or
poverty, their advancing, stationary, or declining condition. I shall, in
the four following chapters, endeavour to explain, as fully and distinctly
as I can, the causes of those different variations.
First, I shall endeavour to explain what are the circumstances which
naturally determine the rate of wages, and in what manner those
circumstances are affected by the riches or poverty, by the advancing,
stationary, or declining state of the society.
Secondly, I shall endeavour to shew what are the circumstances which
naturally determine the rate of profit; and in what manner, too, those
circumstances are affected by the like variations in the state of the
society.
Though pecuniary wages and profit are very different in the different
employments of labour and stock; yet a certain proportion seems commonly
to take place between both the pecuniary wages in all the different
employments of labour, and the pecuniary profits in all the different
employments of stock. This proportion, it will appear hereafter, depends
partly upon the nature of the different employments, and partly upon the
different laws and policy of the society in which they are carried on. But
though in many respects dependent upon the laws and policy, this
proportion seems to be little affected by the riches or poverty of that
society, by its advancing, stationary, or declining condition, but to
remain the same, or very nearly the same, in all those different states. I
shall, in the third place, endeavour to explain all the different
circumstances which regulate this proportion.
In the fourth and last place, I shall endeavour to shew what are the
circumstances which regulate the rent of land, and which either raise or
lower the real price of all the different substances which it produces.
CHAPTER VIII.
OF THE WAGES OF LABOUR.
The produce of labour constitutes the natural recompence or wages of
labour. In that original state of things which precedes both the
appropriation of land and the accumulation of stock, the whole produce of
labour belongs to the labourer. He has neither landlord nor master to
share with him.
Had this state continued, the wages of labour would have augmented with
all those improvements in its productive powers, to which the division of
labour gives occasion. All things would gradually have become cheaper.
They would have been produced by a smaller quantity of labour; and as the
commodities produced by equal quantities of labour would naturally in this
state of things be exchanged for one another, they would have been
purchased likewise with the produce of a smaller quantity.
But though all things would have become cheaper in reality, in appearance
many things might have become dearer, than before, or have been exchanged
for a greater quantity of other goods. Let us suppose, for example, that
in the greater part of employments the productive powers of labour had
been improved to tenfold, or that a day’s labour could produce ten times
the quantity of work which it had done originally; but that in a
particular employment they had been improved only to double, or that a
day’s labour could produce only twice the quantity of work which it had
done before. In exchanging the produce of a day’s labour in the greater
part of employments for that of a day’s labour in this particular one, ten
times the original quantity of work in them would purchase only twice the
original quantity in it. Any particular quantity in it, therefore, a pound
weight, for example, would appear to be five times dearer than before. In
reality, however, it would be twice as cheap. Though it required five
times the quantity of other goods to purchase it, it would require only
half the quantity of labour either to purchase or to produce it. The
acquisition, therefore, would be twice as easy as before.
But this original state of things, in which the labourer enjoyed the whole
produce of his own labour, could not last beyond the first introduction of
the appropriation of land and the accumulation of stock. It was at an end,
therefore, long before the most considerable improvements were made in the
productive powers of labour; and it would be to no purpose to trace
further what might have been its effects upon the recompence or wages of
labour.
As soon as land becomes private property, the landlord demands a share of
almost all the produce which the labourer can either raise or collect from
it. His rent makes the first deduction from the produce of the labour
which is employed upon land.
It seldom happens that the person who tills the ground has wherewithal to
maintain himself till he reaps the harvest. His maintenance is generally
advanced to him from the stock of a master, the farmer who employs him,
and who would have no interest to employ him, unless he was to share in
the produce of his labour, or unless his stock was to be replaced to him
with a profit. This profit makes a second deduction from the produce of
the labour which is employed upon land.
The produce of almost all other labour is liable to the like deduction of
profit. In all arts and manufactures, the greater part of the workmen
stand in need of a master, to advance them the materials of their work,
and their wages and maintenance, till it be completed. He shares in the
produce of their labour, or in the value which it adds to the materials
upon which it is bestowed; and in this share consists his profit.
It sometimes happens, indeed, that a single independent workman has stock
sufficient both to purchase the materials of his work, and to maintain
himself till it be completed. He is both master and workman, and enjoys
the whole produce of his own labour, or the whole value which it adds to
the materials upon which it is bestowed. It includes what are usually two
distinct revenues, belonging to two distinct persons, the profits of
stock, and the wages of labour.
Such cases, however, are not very frequent; and in every part of Europe
twenty workmen serve under a master for one that is independent, and the
wages of labour are everywhere understood to be, what they usually are,
when the labourer is one person, and the owner of the stock which employs
him another.
What are the common wages of labour, depends everywhere upon the contract
usually made between those two parties, whose interests are by no means
the same. The workmen desire to get as much, the masters to give as
little, as possible. The former are disposed to combine in order to raise,
the latter in order to lower, the wages of labour.
It is not, however, difficult to foresee which of the two parties must,
upon all ordinary occasions, have the advantage in the dispute, and force
the other into a compliance with their terms. The masters, being fewer in
number, can combine much more easily: and the law, besides, authorises, or
at least does not prohibit, their combinations, while it prohibits those
of the workmen. We have no acts of parliament against combining to lower
the price of work, but many against combining to raise it. In all such
disputes, the masters can hold out much longer. A landlord, a farmer, a
master manufacturer, or merchant, though they did not employ a single
workman, could generally live a year or two upon the stocks, which they
have already acquired. Many workmen could not subsist a week, few could
subsist a month, and scarce any a year, without employment. In the long
run, the workman may be as necessary to his master as his master is to
him; but the necessity is not so immediate.
We rarely hear, it has been said, of the combinations of masters, though
frequently of those of workmen. But whoever imagines, upon this account,
that masters rarely combine, is as ignorant of the world as of the
subject. Masters are always and everywhere in a sort of tacit, but
constant and uniform, combination, not to raise the wages of labour above
their actual rate. To violate this combination is everywhere a most
unpopular action, and a sort of reproach to a master among his neighbours
and equals. We seldom, indeed, hear of this combination, because it is the
usual, and, one may say, the natural state of things, which nobody ever
hears of. Masters, too, sometimes enter into particular combinations to
sink the wages of labour even below this rate. These are always conducted
with the utmost silence and secrecy till the moment of execution; and when
the workmen yield, as they sometimes do without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen, who sometimes, too, without any provocation of
this kind, combine, of their own accord, to raise the price of their
labour. Their usual pretences are, sometimes the high price of provisions,
sometimes the great profit which their masters make by their work. But
whether their combinations be offensive or defensive, they are always
abundantly heard of. In order to bring the point to a speedy decision,
they have always recourse to the loudest clamour, and sometimes to the
most shocking violence and outrage. They are desperate, and act with the
folly and extravagance of desperate men, who must either starve, or
frighten their masters into an immediate compliance with their demands.
The masters, upon these occasions, are just as clamorous upon the other
side, and never cease to call aloud for the assistance of the civil
magistrate, and the rigorous execution of those laws which have been
enacted with so much severity against the combination of servants,
labourers, and journeymen. The workmen, accordingly, very seldom derive
any advantage from the violence of those tumultuous combinations, which,
partly from the interposition of the civil magistrate, partly from the
superior steadiness of the masters, partly from the necessity which the
greater part of the workmen are under of submitting for the sake of
present subsistence, generally end in nothing but the punishment or ruin
of the ringleaders.
But though, in disputes with their workmen, masters must generally have
the advantage, there is, however, a certain rate, below which it seems
impossible to reduce, for any considerable time, the ordinary wages even
of the lowest species of labour.
A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be somewhat
more, otherwise it would be impossible for him to bring up a family, and
the race of such workmen could not last beyond the first generation. Mr
Cantillon seems, upon this account, to suppose that the lowest species of
common labourers must everywhere earn at least double their own
maintenance, in order that, one with another, they may be enabled to bring
up two children; the labour of the wife, on account of her necessary
attendance on the children, being supposed no more than sufficient to
provide for herself: But one half the children born, it is computed, die
before the age of manhood. The poorest labourers, therefore, according to
this account, must, one with another, attempt to rear at least four
children, in order that two may have an equal chance of living to that
age. But the necessary maintenance of four children, it is supposed, may
be nearly equal to that of one man. The labour of an able-bodied slave,
the same author adds, is computed to be worth double his maintenance; and
that of the meanest labourer, he thinks, cannot be worth less than that of
an able-bodied slave. Thus far at least seems certain, that, in order to
bring up a family, the labour of the husband and wife together must, even
in the lowest species of common labour, be able to earn something more
than what is precisely necessary for their own maintenance; but in what
proportion, whether in that above-mentioned, or any other, I shall not
take upon me to determine.
There are certain circumstances, however, which sometimes give the
labourers an advantage, and enable them to raise their wages considerably
above this rate, evidently the lowest which is consistent with common
humanity.
When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when every
year furnishes employment for a greater number than had been employed the
year before, the workmen have no occasion to combine in order to raise
their wages. The scarcity of hands occasions a competition among masters,
who bid against one another in order to get workmen, and thus voluntarily
break through the natural combination of masters not to raise wages. The
demand for those who live by wages, it is evident, cannot increase but in
proportion to the increase of the funds which are destined to the payment
of wages. These funds are of two kinds, first, the revenue which is over
and above what is necessary for the maintenance; and, secondly, the stock
which is over and above what is necessary for the employment of their
masters.
When the landlord, annuitant, or monied man, has a greater revenue than
what he judges sufficient to maintain his own family, he employs either
the whole or a part of the surplus in maintaining one or more menial
servants. Increase this surplus, and he will naturally increase the number
of those servants.
When an independent workman, such as a weaver or shoemaker, has got more
stock than what is sufficient to purchase the materials of his own work,
and to maintain himself till he can dispose of it, he naturally employs
one or more journeymen with the surplus, in order to make a profit by
their work. Increase this surplus, and he will naturally increase the
number of his journeymen.
The demand for those who live by wages, therefore, necessarily increases
with the increase of the revenue and stock of every country, and cannot
possibly increase without it. The increase of revenue and stock is the
increase of national wealth. The demand for those who live by wages,
therefore, naturally increases with the increase of national wealth, and
cannot possibly increase without it.
It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or in
those which are growing rich the fastest, that the wages of labour are
highest. England is certainly, in the present times, a much richer country
than any part of North America. The wages of labour, however, are much
higher in North America than in any part of England. In the province of
New York, common labourers earned in 1773, before the commencement of the
late disturbances, three shillings and sixpence currency, equal to two
shillings sterling, a-day; ship-carpenters, ten shillings and sixpence
currency, with a pint of rum, worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house-carpenters and bricklayers, eight
shillings currency, equal to four shillings and sixpence sterling;
journeymen tailors, five shillings currency, equal to about two shillings
and tenpence sterling. These prices are all above the London price; and
wages are said to be as high in the other colonies as in New York. The
price of provisions is everywhere in North America much lower than in
England. A dearth has never been known there. In the worst seasons they
have always had a sufficiency for themselves, though less for exportation.
If the money price of labour, therefore, be higher than it is anywhere in
the mother-country, its real price, the real command of the necessaries
and conveniencies of life which it conveys to the labourer, must be higher
in a still greater proportion.
But though North America is not yet so rich as England, it is much more
thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to
double in less than five hundred years. In the British colonies in North
America, it has been found that they double in twenty or five-and-twenty
years. Nor in the present times is this increase principally owing to the
continual importation of new inhabitants, but to the great multiplication
of the species. Those who live to old age, it is said, frequently see
there from fifty to a hundred, and sometimes many more, descendants from
their own body. Labour is there so well rewarded, that a numerous family
of children, instead of being a burden, is a source of opulence and
prosperity to the parents. The labour of each child, before it can leave
their house, is computed to be worth a hundred pounds clear gain to them.
A young widow with four or five young children, who, among the middling or
inferior ranks of people in Europe, would have so little chance for a
second husband, is there frequently courted as a sort of fortune. The
value of children is the greatest of all encouragements to marriage. We
cannot, therefore, wonder that the people in North America should
generally marry very young. Notwithstanding the great increase occasioned
by such early marriages, there is a continual complaint of the scarcity of
hands in North America. The demand for labourers, the funds destined for
maintaining them increase, it seems, still faster than they can find
labourers to employ.
Though the wealth of a country should be very great, yet if it has been
long stationary, we must not expect to find the wages of labour very high
in it. The funds destined for the payment of wages, the revenue and stock
of its inhabitants, may be of the greatest extent; but if they have
continued for several centuries of the same, or very nearly of the same
extent, the number of labourers employed every year could easily supply,
and even more than supply, the number wanted the following year. There
could seldom be any scarcity of hands, nor could the masters be obliged to
bid against one another in order to get them. The hands, on the contrary,
would, in this case, naturally multiply beyond their employment. There
would be a constant scarcity of employment, and the labourers would be
obliged to bid against one another in order to get it. If in such a
country the wages of labour had ever been more than sufficient to
maintain the labourer, and to enable him to bring up a family, the
competition of the labourers and the interest of the masters would soon
reduce them to the lowest rate which is consistent with common humanity.
China has been long one of the richest, that is, one of the most fertile,
best cultivated, most industrious, and most populous, countries in the
world. It seems, however, to have been long stationary. Marco Polo, who
visited it more than five hundred years ago, describes its cultivation,
industry, and populousness, almost in the same terms in which they are
described by travellers in the present times. It had, perhaps, even long
before his time, acquired that full complement of riches which the nature
of its laws and institutions permits it to acquire. The accounts of all
travellers, inconsistent in many other respects, agree in the low wages of
labour, and in the difficulty which a labourer finds in bringing up a
family in China. If by digging the ground a whole day he can get what will
purchase a small quantity of rice in the evening, he is contented. The
condition of artificers is, if possible, still worse. Instead of waiting
indolently in their work-houses for the calls of their customers, as in
Europe, they are continually running about the streets with the tools of
their respective trades, offering their services, and, as it were, begging
employment. The poverty of the lower ranks of people in China far
surpasses that of the most beggarly nations in Europe. In the
neighbourhood of Canton, many hundred, it is commonly said, many thousand
families have no habitation on the land, but live constantly in little
fishing-boats upon the rivers and canals. The subsistence which they find
there is so scanty, that they are eager to fish up the nastiest garbage
thrown overboard from any European ship. Any carrion, the carcase of a
dead dog or cat, for example, though half putrid and stinking, is as
welcome to them as the most wholesome food to the people of other
countries. Marriage is encouraged in China, not by the profitableness of
children, but by the liberty of destroying them. In all great towns,
several are every night exposed in the street, or drowned like puppies in
the water. The performance of this horrid office is even said to be the
avowed business by which some people earn their subsistence.
China, however, though it may, perhaps, stand still, does not seem to go
backwards. Its towns are nowhere deserted by their inhabitants. The lands
which had once been cultivated, are nowhere neglected. The same, or very
nearly the same, annual labour, must, therefore, continue to be performed,
and the funds destined for maintaining it must not, consequently, be
sensibly diminished. The lowest class of labourers, therefore,
notwithstanding their scanty subsistence, must some way or another make
shift to continue their race so far as to keep up their usual numbers.
But it would be otherwise in a country where the funds destined for the
maintenance of labour were sensibly decaying. Every year the demand for
servants and labourers would, in all the different classes of employments,
be less than it had been the year before. Many who had been bred in the
superior classes, not being able to find employment in their own business,
would be glad to seek it in the lowest. The lowest class being not only
overstocked with its own workmen, but with the overflowings of all the
other classes, the competition for employment would be so great in it, as
to reduce the wages of labour to the most miserable and scanty subsistence
of the labourer. Many would not be able to find employment even upon these
hard terms, but would either starve, or be driven to seek a subsistence,
either by begging, or by the perpetration perhaps, of the greatest
enormities. Want, famine, and mortality, would immediately prevail in that
class, and from thence extend themselves to all the superior classes, till
the number of inhabitants in the country was reduced to what could easily
be maintained by the revenue and stock which remained in it, and which had
escaped either the tyranny or calamity which had destroyed the rest. This,
perhaps, is nearly the present state of Bengal, and of some other of the
English settlements in the East Indies. In a fertile country, which had
before been much depopulated, where subsistence, consequently, should not
be very difficult, and where, notwithstanding, three or four hundred
thousand people die of hunger in one year, we may be assured that the funds
destined for the maintenance of the labouring poor are fast decaying. The
difference between the genius of the British constitution, which protects
and governs North America, and that of the mercantile company which
oppresses and domineers in the East Indies, cannot, perhaps, be better
illustrated than by the different state of those countries.
The liberal reward of labour, therefore, as it is the necessary effect, so
it is the natural symptom of increasing national wealth. The scanty
maintenance of the labouring poor, on the other hand, is the natural
symptom that things are at a stand, and their starving condition, that
they are going fast backwards.
In Great Britain, the wages of labour seem, in the present times, to be
evidently more than what is precisely necessary to enable the labourer to
bring up a family. In order to satisfy ourselves upon this point, it will
not be necessary to enter into any tedious or doubtful calculation of what
may be the lowest sum upon which it is possible to do this. There are many
plain symptoms, that the wages of labour are nowhere in this country
regulated by this lowest rate, which is consistent with common humanity.
First, in almost every part of Great Britain there is a distinction, even
in the lowest species of labour, between summer and winter wages. Summer
wages are always highest. But, on account of the extraordinary expense of
fuel, the maintenance of a family is most expensive in winter. Wages,
therefore, being highest when this expense is lowest, it seems evident
that they are not regulated by what is necessary for this expense, but by
the quantity and supposed value of the work. A labourer, it may be said,
indeed, ought to save part of his summer wages, in order to defray his
winter expense; and that, through the whole year, they do not exceed what
is necessary to maintain his family through the whole year. A slave,
however, or one absolutely dependent on us for immediate subsistence,
would not be treated in this manner. His daily subsistence would be
proportioned to his daily necessities.
Secondly, the wages of labour do not, in Great Britain, fluctuate with the
price of provisions. These vary everywhere from year to year, frequently
from month to month. But in many places, the money price of labour remains
uniformly the same, sometimes for half a century together. If, in these
places, therefore, the labouring poor can maintain their families in dear
years, they must be at their ease in times of moderate plenty, and in
affluence in those of extraordinary cheapness. The high price of
provisions during these ten years past, has not, in many parts of the
kingdom, been accompanied with any sensible rise in the money price of
labour. It has, indeed, in some; owing, probably, more to the increase of
the demand for labour, than to that of the price of provisions.
Thirdly, as the price of provisions varies more from year to year than the
wages of labour, so, on the other hand, the wages of labour vary more from
place to place than the price of provisions. The prices of bread and
butchers’ meat are generally the same, or very nearly the same, through
the greater part of the united kingdom. These, and most other things which
are sold by retail, the way in which the labouring poor buy all things,
are generally fully as cheap, or cheaper, in great towns than in the
remoter parts of the country, for reasons which I shall have occasion to
explain hereafter. But the wages of labour in a great town and its
neighbourhood are frequently a fourth or a fifth part, twenty or five-and—twenty
per cent. higher than at a few miles distance. Eighteen pence a day may be
reckoned the common price of labour in London and its neighbourhood. At a
few miles distance, it falls to fourteen and fifteen pence. Tenpence may
be reckoned its price in Edinburgh and its neighbourhood. At a few miles
distance, it falls to eightpence, the usual price of common labour through
the greater part of the low country of Scotland, where it varies a good
deal less than in England. Such a difference of prices, which, it seems,
is not always sufficient to transport a man from one parish to another,
would necessarily occasion so great a transportation of the most bulky
commodities, not only from one parish to another, but from one end of the
kingdom, almost from one end of the world to the other, as would soon
reduce them more nearly to a level. After all that has been said of the
levity and inconstancy of human nature, it appears evidently from
experience, that man is, of all sorts of luggage, the most difficult to be
transported. If the labouring poor, therefore, can maintain their families
in those parts of the kingdom where the price of labour is lowest, they
must be in affluence where it is highest.
Fourthly, the variations in the price of labour not only do not
correspond, either in place or time, with those in the price of
provisions, but they are frequently quite opposite.
Grain, the food of the common people, is dearer in Scotland than in
England, whence Scotland receives almost every year very large supplies.
But English corn must be sold dearer in Scotland, the country to which it
is brought, than in England, the country from which it comes; and in
proportion to its quality it cannot be sold dearer in Scotland than the
Scotch corn that comes to the same market in competition with it. The
quality of grain depends chiefly upon the quantity of flour or meal which
it yields at the mill; and, in this respect, English grain is so much
superior to the Scotch, that though often dearer in appearance, or in
proportion to the measure of its bulk, it is generally cheaper in reality,
or in proportion to its quality, or even to the measure of its weight. The
price of labour, on the contrary, is dearer in England than in Scotland.
If the labouring poor, therefore, can maintain their families in the one
part of the united kingdom, they must be in affluence in the other.
Oatmeal, indeed, supplies the common people in Scotland with the greatest
and the best part of their food, which is, in general, much inferior to
that of their neighbours of the same rank in England. This difference,
however, in the mode of their subsistence, is not the cause, but the
effect, of the difference in their wages; though, by a strange
misapprehension, I have frequently heard it represented as the cause. It
is not because one man keeps a coach, while his neighbour walks a-foot,
that the one is rich, and the other poor; but because the one is rich, he
keeps a coach, and because the other is poor, he walks a-foot.
During the course of the last century, taking one year with another, grain
was dearer in both parts of the united kingdom than during that of the
present. This is a matter of fact which cannot now admit of any reasonable
doubt; and the proof of it is, if possible, still more decisive with
regard to Scotland than with regard to England. It is in Scotland
supported by the evidence of the public fiars, annual valuations made upon
oath, according to the actual state of the markets, of all the different
sorts of grain in every different county of Scotland. If such direct proof
could require any collateral evidence to confirm it, I would observe, that
this has likewise been the case in France, and probably in most other
parts of Europe. With regard to France, there is the clearest proof. But
though it is certain, that in both parts of the united kingdom grain was
somewhat dearer in the last century than in the present, it is equally
certain that labour was much cheaper. If the labouring poor, therefore,
could bring up their families then, they must be much more at their ease
now. In the last century, the most usual day-wages of common labour
through the greater part of Scotland were sixpence in summer, and
fivepence in winter. Three shillings a-week, the same price, very nearly
still continues to be paid in some parts of the Highlands and Western
islands. Through the greater part of the Low country, the most usual wages
of common labour are now eight pence a-day; tenpence, sometimes a
shilling, about Edinburgh, in the counties which border upon England,
probably on account of that neighbourhood, and in a few other places where
there has lately been a considerable rise in the demand for labour, about
Glasgow, Carron, Ayrshire, etc. In England, the improvements of
agriculture, manufactures, and commerce, began much earlier than in
Scotland. The demand for labour, and consequently its price, must
necessarily have increased with those improvements. In the last century,
accordingly, as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since that
time, though, on account of the greater variety of wages paid there in
different places, it is more difficult to ascertain how much. In 1614, the
pay of a foot soldier was the same as in the present times, eightpence
a-day. When it was first established, it would naturally be regulated by
the usual wages of common labourers, the rank of people from which foot
soldiers are commonly drawn. Lord-chief-justice Hales, who wrote in the
time of Charles II. computes the necessary expense of a labourer’s family,
consisting of six persons, the father and mother, two children able to do
something, and two not able, at ten shillings a-week, or twenty-six pounds
a-year. If they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have enquired very
carefully into this subject {See his scheme for the maintenance of the
poor, in Burn’s History of the Poor Laws.}. In 1688, Mr Gregory King,
whose skill in political arithmetic is so much extolled by Dr Davenant,
computed the ordinary income of labourers and out-servants to be fifteen
pounds a-year to a family, which he supposed to consist, one with another,
of three and a half persons. His calculation, therefore, though different
in appearance, corresponds very nearly at bottom with that of Judge Hales.
Both suppose the weekly expense of such families to be about twenty-pence
a-head. Both the pecuniary income and expense of such families have
increased considerably since that time through the greater part of the
kingdom, in some places more, and in some less, though perhaps scarce
anywhere so much as some exaggerated accounts of the present wages of
labour have lately represented them to the public. The price of labour, it
must be observed, cannot be ascertained very accurately anywhere,
different prices being often paid at the same place and for the same sort
of labour, not only according to the different abilities of the workman,
but according to the easiness or hardness of the masters. Where wages are
not regulated by law, all that we can pretend to determine is, what are
the most usual; and experience seems to shew that law can never regulate
them properly, though it has often pretended to do so.
The real recompence of labour, the real quantity of the necessaries and
conveniencies of life which it can procure to the labourer, has, during
the course of the present century, increased perhaps in a still greater
proportion than its money price. Not only grain has become somewhat
cheaper, but many other things, from which the industrious poor derive an
agreeable and wholesome variety of food, have become a great deal cheaper.
Potatoes, for example, do not at present, through the greater part of the
kingdom, cost half the price which they used to do thirty or forty years
ago. The same thing may be said of turnips, carrots, cabbages; things
which were formerly never raised but by the spade, but which are now
commonly raised by the plough. All sort of garden stuff, too, has become
cheaper. The greater part of the apples, and even of the onions, consumed
in Great Britain, were, in the last century, imported from Flanders. The
great improvements in the coarser manufactories of both linen and woollen
cloth furnish the labourers with cheaper and better clothing; and those in
the manufactories of the coarser metals, with cheaper and better
instruments of trade, as well as with many agreeable and convenient pieces
of household furniture. Soap, salt, candles, leather, and fermented
liquors, have, indeed, become a good deal dearer, chiefly from the taxes
which have been laid upon them. The quantity of these, however, which the
labouring poor are under any necessity of consuming, is so very small, that
the increase in their price does not compensate the diminution in that of
so many other things. The common complaint, that luxury extends itself
even to the lowest ranks of the people, and that the labouring poor will
not now be contented with the same food, clothing, and lodging, which
satisfied them in former times, may convince us that it is not the money
price of labour only, but its real recompence, which has augmented.
Is this improvement in the circumstances of the lower ranks of the people
to be regarded as an advantage, or as an inconveniency, to the society?
The answer seems at first abundantly plain. Servants, labourers, and
workmen of different kinds, make up the far greater part of every great
political society. But what improves the circumstances of the greater
part, can never be regarded as any inconveniency to the whole. No society
can surely be flourishing and happy, of which the far greater part of the
members are poor and miserable. It is but equity, besides, that they who
feed, clothe, and lodge the whole body of the people, should have such a
share of the produce of their own labour as to be themselves tolerably
well fed, clothed, and lodged.
Poverty, though it no doubt discourages, does not always prevent,
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of fashion,
is very rare among those of inferior station. Luxury, in the fair sex,
while it inflames, perhaps, the passion for enjoyment, seems always to
weaken, and frequently to destroy altogether, the powers of generation.
But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced; but
in so cold a soil, and so severe a climate, soon withers and dies. It is
not uncommon, I have been frequently told, in the Highlands of Scotland,
for a mother who has born twenty children not to have two alive. Several
officers of great experience have assured me, that, so far from recruiting
their regiment, they have never been able to supply it with drums and
fifes, from all the soldiers’ children that were born in it. A greater
number of fine children, however, is seldom seen anywhere than about a
barrack of soldiers. Very few of them, it seems, arrive at the age of
thirteen or fourteen. In some places, one half the children die before
they are four years of age, in many places before they are seven, and in
almost all places before they are nine or ten. This great mortality,
however will everywhere be found chiefly among the children of the common
people, who cannot afford to tend them with the same care as those of
better station. Though their marriages are generally more fruitful than
those of people of fashion, a smaller proportion of their children arrive
at maturity. In foundling hospitals, and among the children brought up by
parish charities, the mortality is still greater than among those of the
common people.
Every species of animals naturally multiplies in proportion to the means
of their subsistence, and no species can ever multiply beyond it. But in
civilized society, it is only among the inferior ranks of people that the
scantiness of subsistence can set limits to the further multiplication of
the human species; and it can do so in no other way than by destroying a
great part of the children which their fruitful marriages produce.
The liberal reward of labour, by enabling them to provide better for their
children, and consequently to bring up a greater number, naturally tends
to widen and extend those limits. It deserves to be remarked, too, that it
necessarily does this as nearly as possible in the proportion which the
demand for labour requires. If this demand is continually increasing, the
reward of labour must necessarily encourage in such a manner the marriage
and multiplication of labourers, as may enable them to supply that
continually increasing demand by a continually increasing population. If
the reward should at any time be less than what was requisite for this
purpose, the deficiency of hands would soon raise it; and if it should at
any time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with labour
in the one case, and so much overstocked in the other, as would soon force
back its price to that proper rate which the circumstances of the society
required. It is in this manner that the demand for men, like that for any
other commodity, necessarily regulates the production of men, quickens it
when it goes on too slowly, and stops it when it advances too fast. It is
this demand which regulates and determines the state of propagation in all
the different countries of the world; in North America, in Europe, and in
China; which renders it rapidly progressive in the first, slow and gradual
in the second, and altogether stationary in the last.
The wear and tear of a slave, it has been said, is at the expense of his
master; but that of a free servant is at his own expense. The wear and
tear of the latter, however, is, in reality, as much at the expense of his
master as that of the former. The wages paid to journeymen and servants of
every kind must be such as may enable them, one with another to continue
the race of journeymen and servants, according as the increasing,
diminishing, or stationary demand of the society, may happen to require.
But though the wear and tear of a free servant be equally at the expense
of his master, it generally costs him much less than that of a slave. The
fund destined for replacing or repairing, if I may say so, the wear and
tear of the slave, is commonly managed by a negligent master or careless
overseer. That destined for performing the same office with regard to the
freeman is managed by the freeman himself. The disorders which generally
prevail in the economy of the rich, naturally introduce themselves into
the management of the former; the strict frugality and parsimonious
attention of the poor as naturally establish themselves in that of the
latter. Under such different management, the same purpose must require
very different degrees of expense to execute it. It appears, accordingly,
from the experience of all ages and nations, I believe, that the work done
by freemen comes cheaper in the end than that performed by slaves. It is
found to do so even at Boston, New-York, and Philadelphia, where the wages
of common labour are so very high.
The liberal reward of labour, therefore, as it is the effect of increasing
wealth, so it is the cause of increasing population. To complain of it, is
to lament over the necessary cause and effect of the greatest public
prosperity.
It deserves to be remarked, perhaps, that it is in the progressive state,
while the society is advancing to the further acquisition, rather than
when it has acquired its full complement of riches, that the condition of
the labouring poor, of the great body of the people, seems to be the
happiest and the most comfortable. It is hard in the stationary, and
miserable in the declining state. The progressive state is, in reality,
the cheerful and the hearty state to all the different orders of the
society; the stationary is dull; the declining melancholy.
The liberal reward of labour, as it encourages the propagation, so it
increases the industry of the common people. The wages of labour are the
encouragement of industry, which, like every other human quality, improves
in proportion to the encouragement it receives. A plentiful subsistence
increases the bodily strength of the labourer, and the comfortable hope of
bettering his condition, and of ending his days, perhaps, in ease and
plenty, animates him to exert that strength to the utmost. Where wages are
high, accordingly, we shall always find the workmen more active, diligent,
and expeditious, than where they are low; in England, for example, than in
Scotland; in the neighbourhood of great towns, than in remote country
places. Some workmen, indeed, when they can earn in four days what will
maintain them through the week, will be idle the other three. This,
however, is by no means the case with the greater part. Workmen, on the
contrary, when they are liberally paid by the piece, are very apt to
overwork themselves, and to ruin their health and constitution in a few
years. A carpenter in London, and in some other places, is not supposed to
last in his utmost vigour above eight years. Something of the same kind
happens in many other trades, in which the workmen are paid by the piece;
as they generally are in manufactures, and even in country labour,
wherever wages are higher than ordinary. Almost every class of artificers
is subject to some peculiar infirmity occasioned by excessive application
to their peculiar species of work. Ramuzzini, an eminent Italian
physician, has written a particular book concerning such diseases. We do
not reckon our soldiers the most industrious set of people among us; yet
when soldiers have been employed in some particular sorts of work, and
liberally paid by the piece, their officers have frequently been obliged
to stipulate with the undertaker, that they should not be allowed to earn
above a certain sum every day, according to the rate at which they were
paid. Till this stipulation was made, mutual emulation, and the desire of
greater gain, frequently prompted them to overwork themselves, and to hurt
their health by excessive labour. Excessive application, during four days
of the week, is frequently the real cause of the idleness of the other
three, so much and so loudly complained of. Great labour, either of mind
or body, continued for several days together is, in most men, naturally
followed by a great desire of relaxation, which, if not restrained by
force, or by some strong necessity, is almost irresistible. It is the call
of nature, which requires to be relieved by some indulgence, sometimes of
ease only, but sometimes too of dissipation and diversion. If it is not
complied with, the consequences are often dangerous and sometimes fatal,
and such as almost always, sooner or later, bring on the peculiar
infirmity of the trade. If masters would always listen to the dictates of
reason and humanity, they have frequently occasion rather to moderate,
than to animate the application of many of their workmen. It will be
found, I believe, in every sort of trade, that the man who works so
moderately, as to be able to work constantly, not only preserves his
health the longest, but, in the course of the year, executes the greatest
quantity of work.
In cheap years it is pretended, workmen are generally more idle, and in
dear times more industrious than ordinary. A plentiful subsistence,
therefore, it has been concluded, relaxes, and a scanty one quickens their
industry. That a little more plenty than ordinary may render some workmen
idle, cannot be well doubted; but that it should have this effect upon the
greater part, or that men in general should work better when they are ill
fed, than when they are well fed, when they are disheartened than when
they are in good spirits, when they are frequently sick than when they are
generally in good health, seems not very probable. Years of dearth, it is
to be observed, are generally among the common people years of sickness
and mortality, which cannot fail to diminish the produce of their
industry.
In years of plenty, servants frequently leave their masters, and trust
their subsistence to what they can make by their own industry. But the
same cheapness of provisions, by increasing the fund which is destined for
the maintenance of servants, encourages masters, farmers especially, to
employ a greater number. Farmers, upon such occasions, expect more profit
from their corn by maintaining a few more labouring servants, than by
selling it at a low price in the market. The demand for servants
increases, while the number of those who offer to supply that demand
diminishes. The price of labour, therefore, frequently rises in cheap
years.
In years of scarcity, the difficulty and uncertainty of subsistence make
all such people eager to return to service. But the high price of
provisions, by diminishing the funds destined for the maintenance of
servants, disposes masters rather to diminish than to increase the number
of those they have. In dear years, too, poor independent workmen
frequently consume the little stock with which they had used to supply
themselves with the materials of their work, and are obliged to become
journeymen for subsistence. More people want employment than easily get
it; many are willing to take it upon lower terms than ordinary; and the
wages of both servants and journeymen frequently sink in dear years.
Masters of all sorts, therefore, frequently make better bargains with
their servants in dear than in cheap years, and find them more humble and
dependent in the former than in the latter. They naturally, therefore,
commend the former as more favourable to industry. Landlords and farmers,
besides, two of the largest classes of masters, have another reason for
being pleased with dear years. The rents of the one, and the profits of
the other, depend very much upon the price of provisions. Nothing can be
more absurd, however, than to imagine that men in general should work less
when they work for themselves, than when they work for other people. A
poor independent workman will generally be more industrious than even a
journeyman who works by the piece. The one enjoys the whole produce of his
own industry, the other shares it with his master. The one, in his
separate independent state, is less liable to the temptations of bad
company, which, in large manufactories, so frequently ruin the morals of
the other. The superiority of the independent workman over those servants
who are hired by the month or by the year, and whose wages and maintenance
are the same, whether they do much or do little, is likely to be still
greater. Cheap years tend to increase the proportion of independent
workmen to journeymen and servants of all kinds, and dear years to
diminish it.
A French author of great knowledge and ingenuity, Mr Messance, receiver of
the tallies in the election of St Etienne, endeavours to shew that the
poor do more work in cheap than in dear years, by comparing the quantity
and value of the goods made upon those different occasions in three
different manufactures; one of coarse woollens, carried on at Elbeuf; one
of linen, and another of silk, both which extend through the whole
generality of Rouen. It appears from his account, which is copied from the
registers of the public offices, that the quantity and value of the goods
made in all those three manufactories has generally been greater in cheap
than in dear years, and that it has always been greatest in the cheapest,
and least in the dearest years. All the three seem to be stationary
manufactures, or which, though their produce may vary somewhat from year
to year, are, upon the whole, neither going backwards nor forwards.
The manufacture of linen in Scotland, and that of coarse woollens in the
West Riding of Yorkshire, are growing manufactures, of which the produce
is generally, though with some variations, increasing both in quantity and
value. Upon examining, however, the accounts which have been published of
their annual produce, I have not been able to observe that its variations
have had any sensible connection with the dearness or cheapness of the
seasons. In 1740, a year of great scarcity, both manufactures, indeed,
appear to have declined very considerably. But in 1756, another year of
great scarcity, the Scotch manufactures made more than ordinary advances.
The Yorkshire manufacture, indeed, declined, and its produce did not rise
to what it had been in 1755, till 1766, after the repeal of the American
stamp act. In that and the following year, it greatly exceeded what it had
ever been before, and it has continued to advance ever since.
The produce of all great manufactures for distant sale must necessarily
depend, not so much upon the dearness or cheapness of the seasons in the
countries where they are carried on, as upon the circumstances which
affect the demand in the countries where they are consumed; upon peace or
war, upon the prosperity or declension of other rival manufactures and
upon the good or bad humour of their principal customers. A great part of
the extraordinary work, besides, which is probably done in cheap years,
never enters the public registers of manufactures. The men-servants, who
leave their masters, become independent labourers. The women return to
their parents, and commonly spin, in order to make clothes for themselves
and their families. Even the independent workmen do not always work for
public sale, but are employed by some of their neighbours in manufactures
for family use. The produce of their labour, therefore, frequently makes
no figure in those public registers, of which the records are sometimes
published with so much parade, and from which our merchants and
manufacturers would often vainly pretend to announce the prosperity or
declension of the greatest empires.
Though the variations in the price of labour not only do not always
correspond with those in the price of provisions, but are frequently quite
opposite, we must not, upon this account, imagine that the price of
provisions has no influence upon that of labour. The money price of labour
is necessarily regulated by two circumstances; the demand for labour, and
the price of the necessaries and conveniencies of life. The demand for
labour, according as it happens to be increasing, stationary, or
declining, or to require an increasing, stationary, or declining
population, determines the quantities of the necessaries and conveniencies
of life which must be given to the labourer; and the money price of labour
is determined by what is requisite for purchasing this quantity. Though
the money price of labour, therefore, is sometimes high where the price of
provisions is low, it would be still higher, the demand continuing the
same, if the price of provisions was high.
It is because the demand for labour increases in years of sudden and
extraordinary plenty, and diminishes in those of sudden and extraordinary
scarcity, that the money price of labour sometimes rises in the one, and
sinks in the other.
In a year of sudden and extraordinary plenty, there are funds in the hands
of many of the employers of industry, sufficient to maintain and employ a
greater number of industrious people than had been employed the year
before; and this extraordinary number cannot always be had. Those masters,
therefore, who want more workmen, bid against one another, in order to get
them, which sometimes raises both the real and the money price of their
labour.
The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they had
been the year before. A considerable number of people are thrown out of
employment, who bid one against another, in order to get it, which
sometimes lowers both the real and the money price of labour. In 1740, a
year of extraordinary scarcity, many people were willing to work for bare
subsistence. In the succeeding years of plenty, it was more difficult to
get labourers and servants. The scarcity of a dear year, by diminishing
the demand for labour, tends to lower its price, as the high price of
provisions tends to raise it. The plenty of a cheap year, on the contrary,
by increasing the demand, tends to raise the price of labour, as the
cheapness of provisions tends to lower it. In the ordinary variations of
the prices of provisions, those two opposite causes seem to counterbalance
one another, which is probably, in part, the reason why the wages of
labour are everywhere so much more steady and permanent than the price of
provisions.
The increase in the wages of labour necessarily increases the price of
many commodities, by increasing that part of it which resolves itself into
wages, and so far tends to diminish their consumption, both at home and
abroad. The same cause, however, which raises the wages of labour, the
increase of stock, tends to increase its productive powers, and to make a
smaller quantity of labour produce a greater quantity of work. The owner
of the stock which employs a great number of labourers necessarily
endeavours, for his own advantage, to make such a proper division and
distribution of employment, that they may be enabled to produce the
greatest quantity of work possible. For the same reason, he endeavours to
supply them with the best machinery which either he or they can think of.
What takes place among the labourers in a particular workhouse, takes
place, for the same reason, among those of a great society. The greater
their number, the more they naturally divide themselves into different
classes and subdivisions of employments. More heads are occupied in
inventing the most proper machinery for executing the work of each, and it
is, therefore, more likely to be invented. There are many commodities,
therefore, which, in consequence of these improvements, come to be
price is more than compensated by the diminution of its quantity.
CHAPTER IX.
OF THE PROFITS OF STOCK.
The rise and fall in the profits of stock depend upon the same causes with
the rise and fall in the wages of labour, the increasing or declining
state of the wealth of the society; but those causes affect the one and
the other very differently.
The increase of stock, which raises wages, tends to lower profit. When the
stocks of many rich merchants are turned into the same trade, their mutual
competition naturally tends to lower its profit; and when there is a like
increase of stock in all the different trades carried on in the same
society, the same competition must produce the same effect in them all.
It is not easy, it has already been observed, to ascertain what are the
average wages of labour, even in a particular place, and at a particular
time. We can, even in this case, seldom determine more than what are the
most usual wages. But even this can seldom be done with regard to the
profits of stock. Profit is so very fluctuating, that the person who
carries on a particular trade, cannot always tell you himself what is the
average of his annual profit. It is affected, not only by every variation
of price in the commodities which he deals in, but by the good or bad
fortune both of his rivals and of his customers, and by a thousand other
accidents, to which goods, when carried either by sea or by land, or even
when stored in a warehouse, are liable. It varies, therefore, not only
from year to year, but from day to day, and almost from hour to hour. To
ascertain what is the average profit of all the different trades carried
on in a great kingdom, must be much more difficult; and to judge of what
it may have been formerly, or in remote periods of time, with any degree
of precision, must be altogether impossible.
But though it may be impossible to determine, with any degree of
precision, what are or were the average profits of stock, either in the
present or in ancient times, some notion may be formed of them from the
interest of money. It may be laid down as a maxim, that wherever a great
deal can be made by the use of money, a great deal will commonly be given
for the use of it; and that, wherever little can be made by it, less will
commonly he given for it. Accordingly, therefore, as the usual market rate
of interest varies in any country, we may be assured that the ordinary
profits of stock must vary with it, must sink as it sinks, and rise as it
rises. The progress of interest, therefore, may lead us to form some
notion of the progress of profit.
By the 37th of Henry VIII. all interest above ten per cent. was declared
unlawful. More, it seems, had sometimes been taken before that. In the
reign of Edward VI. religious zeal prohibited all interest. This
prohibition, however, like all others of the same kind, is said to have
produced no effect, and probably rather increased than diminished the evil
of usury. The statute of Henry VIII. was revived by the 13th of Elizabeth,
cap. 8. and ten per cent. continued to be the legal rate of interest till
the 21st of James I. when it was restricted to eight per cent. It was
reduced to six per cent. soon after the Restoration, and by the 12th of
Queen Anne, to five per cent. All these different statutory regulations
seem to have been made with great propriety. They seem to have followed,
and not to have gone before, the market rate of interest, or the rate at
which people of good credit usually borrowed. Since the time of Queen
Anne, five per cent. seems to have been rather above than below the market
rate. Before the late war, the government borrowed at three per cent.; and
people of good credit in the capital, and in many other parts of the
kingdom, at three and a-half, four, and four and a-half per cent.
Since the time of Henry VIII. the wealth and revenue of the country have
been continually advancing, and in the course of their progress, their
pace seems rather to have been gradually accelerated than retarded. They
seem not only to have been going on, but to have been going on faster and
faster. The wages of labour have been continually increasing during the
same period, and, in the greater part of the different branches of trade
and manufactures, the profits of stock have been diminishing.
It generally requires a greater stock to carry on any sort of trade in a
great town than in a country village. The great stocks employed in every
branch of trade, and the number of rich competitors, generally reduce the
rate of profit in the former below what it is in the latter. But the wages
of labour are generally higher in a great town than in a country village.
In a thriving town, the people who have great stocks to employ, frequently
cannot get the number of workmen they want, and therefore bid against one
another, in order to get as many as they can, which raises the wages of
labour, and lowers the profits of stock. In the remote parts of the
country, there is frequently not stock sufficient to employ all the
people, who therefore bid against one another, in order to get employment,
which lowers the wages of labour, and raises the profits of stock.
In Scotland, though the legal rate of interest is the same as in England,
the market rate is rather higher. People of the best credit there seldom
borrow under five per cent. Even private bankers in Edinburgh give four
per cent. upon their promissory-notes, of which payment, either in whole
or in part may be demanded at pleasure. Private bankers in London give no
interest for the money which is deposited with them. There are few trades
which cannot be carried on with a smaller stock in Scotland than in
England. The common rate of profit, therefore, must be somewhat greater.
The wages of labour, it has already been observed, are lower in Scotland
than in England. The country, too, is not only much poorer, but the steps
by which it advances to a better condition, for it is evidently advancing,
seem to be much slower and more tardy. The legal rate of interest in
France has not during the course of the present century, been always
regulated by the market rate {See Denisart, Article Taux des Interests,
tom. iii, p.13}. In 1720, interest was reduced from the twentieth to the
fiftieth penny, or from five to two per cent. In 1724, it was raised to
the thirtieth penny, or to three and a third per cent. In 1725, it was
again raised to the twentieth penny, or to five per cent. In 1766, during
the administration of Mr Laverdy, it was reduced to the twenty-fifth
penny, or to four per cent. The Abbé Terray raised it afterwards to the
old rate of five per cent. The supposed purpose of many of those violent
reductions of interest was to prepare the way for reducing that of the
public debts; a purpose which has sometimes been executed. France is,
perhaps, in the present times, not so rich a country as England; and
though the legal rate of interest has in France frequently been lower than
in England, the market rate has generally been higher; for there, as in
other countries, they have several very safe and easy methods of evading
the law. The profits of trade, I have been assured by British merchants
who had traded in both countries, are higher in France than in England;
and it is no doubt upon this account, that many British subjects chuse
rather to employ their capitals in a country where trade is in disgrace,
than in one where it is highly respected. The wages of labour are lower in
France than in England. When you go from Scotland to England, the
difference which you may remark between the dress and countenance of the
common people in the one country and in the other, sufficiently indicates
the difference in their condition. The contrast is still greater when you
return from France. France, though no doubt a richer country than
Scotland, seems not to be going forward so fast. It is a common and even a
popular opinion in the country, that it is going backwards; an opinion
which I apprehend, is ill-founded, even with regard to France, but which
nobody can possibly entertain with regard to Scotland, who sees the
country now, and who saw it twenty or thirty years ago.
The province of Holland, on the other hand, in proportion to the extent of
its territory and the number of its people, is a richer country than
England. The government there borrow at two per cent. and private people
of good credit at three. The wages of labour are said to be higher in
Holland than in England, and the Dutch, it is well known, trade upon lower
profits than any people in Europe. The trade of Holland, it has been
pretended by some people, is decaying, and it may perhaps be true that
some particular branches of it are so; but these symptoms seem to indicate
sufficiently that there is no general decay. When profit diminishes,
merchants are very apt to complain that trade decays, though the
diminution of profit is the natural effect of its prosperity, or of a
greater stock being employed in it than before. During the late war, the
Dutch gained the whole carrying trade of France, of which they still
retain a very large share. The great property which they possess both in
French and English funds, about forty millions, it is said in the latter
(in which, I suspect, however, there is a considerable exaggeration ), the
great sums which they lend to private people, in countries where the rate
of interest is higher than in their own, are circumstances which no doubt
demonstrate the redundancy of their stock, or that it has increased beyond
what they can employ with tolerable profit in the proper business of their
own country; but they do not demonstrate that that business has decreased.
As the capital of a private man, though acquired by a particular trade,
may increase beyond what he can employ in it, and yet that trade continue
to increase too, so may likewise the capital of a great nation.
In our North American and West Indian colonies, not only the wages of
labour, but the interest of money, and consequently the profits of stock,
are higher than in England. In the different colonies, both the legal and
the market rate of interest run from six to eight percent. High wages of
labour and high profits of stock, however, are things, perhaps, which
scarce ever go together, except in the peculiar circumstances of new
colonies. A new colony must always, for some time, be more understocked in
proportion to the extent of its territory, and more underpeopled in
proportion to the extent of its stock, than the greater part of other
countries. They have more land than they have stock to cultivate. What
they have, therefore, is applied to the cultivation only of what is most
fertile and most favourably situated, the land near the sea-shore, and
along the banks of navigable rivers. Such land, too, is frequently
purchased at a price below the value even of its natural produce. Stock
employed in the purchase and improvement of such lands, must yield a very
large profit, and, consequently, afford to pay a very large interest. Its
rapid accumulation in so profitable an employment enables the planter to
increase the number of his hands faster than he can find them in a new
settlement. Those whom he can find, therefore, are very liberally
rewarded. As the colony increases, the profits of stock gradually
diminish. When the most fertile and best situated lands have been all
occupied, less profit can be made by the cultivation of what is inferior
both in soil and situation, and less interest can be afforded for the
stock which is so employed. In the greater part of our colonies,
accordingly, both the legal and the market rate of interest have been
considerably reduced during the course of the present century. As riches,
improvement, and population, have increased, interest has declined. The
wages of labour do not sink with the profits of stock. The demand for
labour increases with the increase of stock, whatever be its profits; and
after these are diminished, stock may not only continue to increase, but
to increase much faster than before. It is with industrious nations, who
are advancing in the acquisition of riches, as with industrious
individuals. A great stock, though with small profits, generally increases
faster than a small stock with great profits. Money, says the proverb,
makes money. When you have got a little, it is often easy to get more. The
great difficulty is to get that little. The connection between the
increase of stock and that of industry, or of the demand for useful
labour, has partly been explained already, but will be explained more
fully hereafter, in treating of the accumulation of stock.
The acquisition of new territory, or of new branches of trade, may
sometimes raise the profits of stock, and with them the interest of money,
even in a country which is fast advancing in the acquisition of riches.
The stock of the country, not being sufficient for the whole accession of
business which such acquisitions present to the different people among
whom it is divided, is applied to those particular branches only which
afford the greatest profit. Part of what had before been employed in other
trades, is necessarily withdrawn from them, and turned into some of the
new and more profitable ones. In all those old trades, therefore, the
competition comes to be less than before. The market comes to be less
fully supplied with many different sorts of goods. Their price necessarily
rises more or less, and yields a greater profit to those who deal in them,
who can, therefore, afford to borrow at a higher interest. For some time
after the conclusion of the late war, not only private people of the best
credit, but some of the greatest companies in London, commonly borrowed at
five per cent. who, before that, had not been used to pay more than four,
and four and a half per cent. The great accession both of territory and
trade by our acquisitions in North America and the West Indies, will
sufficiently account for this, without supposing any diminution in the
capital stock of the society. So great an accession of new business to be
carried on by the old stock, must necessarily have diminished the quantity
employed in a great number of particular branches, in which the
competition being less, the profits must have been greater. I shall
hereafter have occasion to mention the reasons which dispose me to believe
that the capital stock of Great Britain was not diminished, even by the
enormous expense of the late war.
The diminution of the capital stock of the society, or of the funds
destined for the maintenance of industry, however, as it lowers the wages
of labour, so it raises the profits of stock, and consequently the
interest of money. By the wages of labour being lowered, the owners of
what stock remains in the society can bring their goods at less expense to
market than before; and less stock being employed in supplying the market
than before, they can sell them dearer. Their goods cost them less, and
they get more for them. Their profits, therefore, being augmented at both
ends, can well afford a large interest. The great fortunes so suddenly and
so easily acquired in Bengal and the other British settlements in the East
Indies, may satisfy us, that as the wages of labour are very low, so the
profits of stock are very high in those ruined countries. The interest of
money is proportionably so. In Bengal, money is frequently lent to the
farmers at forty, fifty, and sixty per cent. and the succeeding crop is
mortgaged for the payment. As the profits which can afford such an
interest must eat up almost the whole rent of the landlord, so such
enormous usury must in its turn eat up the greater part of those profits.
Before the fall of the Roman republic, a usury of the same kind seems to
have been common in the provinces, under the ruinous administration of
their proconsuls. The virtuous Brutus lent money in Cyprus at
eight-and-forty per cent. as we learn from the letters of Cicero.
In a country which had acquired that full complement of riches which the
nature of its soil and climate, and its situation with respect to other
countries, allowed it to acquire, which could, therefore, advance no
further, and which was not going backwards, both the wages of labour and
the profits of stock would probably be very low. In a country fully
peopled in proportion to what either its territory could maintain, or its
stock employ, the competition for employment would necessarily be so great
as to reduce the wages of labour to what was barely sufficient to keep up
the number of labourers, and the country being already fully peopled, that
number could never be augmented. In a country fully stocked in proportion
to all the business it had to transact, as great a quantity of stock would
be employed in every particular branch as the nature and extent of the
trade would admit. The competition, therefore, would everywhere be as
great, and, consequently, the ordinary profit as low as possible.
But, perhaps, no country has ever yet arrived at this degree of opulence.
China seems to have been long stationary, and had, probably, long ago
acquired that full complement of riches which is consistent with the
nature of its laws and institutions. But this complement may be much
inferior to what, with other laws and institutions, the nature of its
soil, climate, and situation, might admit of. A country which neglects or
despises foreign commerce, and which admits the vessel of foreign nations
into one or two of its ports only, cannot transact the same quantity of
business which it might do with different laws and institutions. In a
country, too, where, though the rich, or the owners of large capitals,
enjoy a good deal of security, the poor, or the owners of small capitals,
enjoy scarce any, but are liable, under the pretence of justice, to be
pillaged and plundered at any time by the inferior mandarins, the quantity
of stock employed in all the different branches of business transacted
within it, can never be equal to what the nature and extent of that
business might admit. In every different branch, the oppression of the
poor must establish the monopoly of the rich, who, by engrossing the whole
trade to themselves, will be able to make very large profits. Twelve per
cent. accordingly, is said to be the common interest of money in China,
and the ordinary profits of stock must be sufficient to afford this large
interest.
A defect in the law may sometimes raise the rate of interest considerably
above what the condition of the country, as to wealth or poverty, would
require. When the law does not enforce the performance of contracts, it
puts all borrowers nearly upon the same footing with bankrupts, or people
of doubtful credit, in better regulated countries. The uncertainty of
recovering his money makes the lender exact the same usurious interest
which is usually required from bankrupts. Among the barbarous nations who
overran the western provinces of the Roman empire, the performance of
contracts was left for many ages to the faith of the contracting parties.
The courts of justice of their kings seldom intermeddled in it. The high
rate of interest which took place in those ancient times, may, perhaps, be
partly accounted for from this cause.
When the law prohibits interest altogether, it does not prevent it. Many
people must borrow, and nobody will lend without such a consideration for
the use of their money as is suitable, not only to what can be made by the
use of it, but to the difficulty and danger of evading the law. The high
rate of interest among all Mahometan nations is accounted for by M.
Montesquieu, not from their poverty, but partly from this, and partly from
the difficulty of recovering the money.
The lowest ordinary rate of profit must always be something more than what
is sufficient to compensate the occasional losses to which every
employment of stock is exposed. It is this surplus only which is neat or
clear profit. What is called gross profit, comprehends frequently not only
this surplus, but what is retained for compensating such extraordinary
losses. The interest which the borrower can afford to pay is in proportion
to the clear profit only. The lowest ordinary rate of interest must, in
the same manner, be something more than sufficient to compensate the
occasional losses to which lending, even with tolerable prudence, is
exposed. Were it not, mere charity or friendship could be the only motives
for lending.
In a country which had acquired its full complement of riches, where, in
every particular branch of business, there was the greatest quantity of
stock that could be employed in it, as the ordinary rate of clear profit
would be very small, so the usual market rate of interest which could be
afforded out of it would be so low as to render it impossible for any but
the very wealthiest people to live upon the interest of their money. All
people of small or middling fortunes would be obliged to superintend
themselves the employment of their own stocks. It would be necessary that
almost every man should be a man of business, or engage in some sort of
trade. The province of Holland seems to be approaching near to this state.
It is there unfashionable not to be a man of business. Necessity makes it
usual for almost every man to be so, and custom everywhere regulates
fashion. As it is ridiculous not to dress, so is it, in some measure, not
to be employed like other people. As a man of a civil profession seems
awkward in a camp or a garrison, and is even in some danger of being
despised there, so does an idle man among men of business.
The highest ordinary rate of profit may be such as, in the price of the
greater part of commodities, eats up the whole of what should go to the
rent of the land, and leaves only what is sufficient to pay the labour of
preparing and bringing them to market, according to the lowest rate at
which labour can anywhere be paid, the bare subsistence of the labourer.
The workman must always have been fed in some way or other while he was
about the work, but the landlord may not always have been paid. The
profits of the trade which the servants of the East India Company carry on
in Bengal may not, perhaps, be very far from this rate.
The proportion which the usual market rate of interest ought to bear to
the ordinary rate of clear profit, necessarily varies as profit rises or
falls. Double interest is in Great Britain reckoned what the merchants
call a good, moderate, reasonable profit; terms which, I apprehend, mean
no more than a common and usual profit. In a country where the ordinary
rate of clear profit is eight or ten per cent. it may be reasonable that
one half of it should go to interest, wherever business is carried on with
borrowed money. The stock is at the risk of the borrower, who, as it were,
insures it to the lender; and four or five per cent. may, in the greater
part of trades, be both a sufficient profit upon the risk of this
insurance, and a sufficient recompence for the trouble of employing the
stock. But the proportion between interest and clear profit might not be
the same in countries where the ordinary rate of profit was either a good
deal lower, or a good deal higher. If it were a good deal lower, one half
of it, perhaps, could not be afforded for interest; and more might be
afforded if it were a good deal higher.
In countries which are fast advancing to riches, the low rate of profit
may, in the price of many commodities, compensate the high wages of
labour, and enable those countries to sell as cheap as their less thriving
neighbours, among whom the wages of labour may be lower.
In reality, high profits tend much more to raise the price of work than
high wages. If, in the linen manufacture, for example, the wages of the
different working people, the flax-dressers, the spinners, the weavers,
etc. should all of them be advanced twopence a-day, it would be necessary
to heighten the price of a piece of linen only by a number of twopences
equal to the number of people that had been employed about it, multiplied
by the number of days during which they had been so employed. That part of
the price of the commodity which resolved itself into the wages, would,
through all the different stages of the manufacture, rise only in
arithmetical proportion to this rise of wages. But if the profits of all
the different employers of those working people should be raised five per
cent. that part of the price of the commodity which resolved itself into
profit would, through all the different stages of the manufacture, rise in
geometrical proportion to this rise of profit. The employer of the flax
dressers would, in selling his flax, require an additional five per cent.
upon the whole value of the materials and wages which he advanced to his
workmen. The employer of the spinners would require an additional five per
cent. both upon the advanced price of the flax, and upon the wages of the
spinners. And the employer of the weavers would require alike five per
cent. both upon the advanced price of the linen-yarn, and upon the wages
of the weavers. In raising the price of commodities, the rise of wages
operates in the same manner as simple interest does in the accumulation of
debt. The rise of profit operates like compound interest. Our merchants
and master manufacturers complain much of the bad effects of high wages in
raising the price, and thereby lessening the sale of their goods, both at
home and abroad. They say nothing concerning the bad effects of high
profits; they are silent with regard to the pernicious effects of their
own gains; they complain only of those of other people.
CHAPTER X.
OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK.
The whole of the advantages and disadvantages of the different employments
of labour and stock, must, in the same neighbourhood, be either perfectly
equal, or continually tending to equality. If, in the same neighbourhood,
there was any employment evidently either more or less advantageous than
the rest, so many people would crowd into it in the one case, and so many
would desert it in the other, that its advantages would soon return to the
level of other employments. This, at least, would be the case in a society
where things were left to follow their natural course, where there was
perfect liberty, and where every man was perfectly free both to choose
what occupation he thought proper, and to change it as often as he thought
proper. Every man’s interest would prompt him to seek the advantageous,
and to shun the disadvantageous employment.
Pecuniary wages and profit, indeed, are everywhere in Europe extremely
different, according to the different employments of labour and stock. But
this difference arises, partly from certain circumstances in the
employments themselves, which, either really, or at least in the
imagination of men, make up for a small pecuniary gain in some, and
counterbalance a great one in others, and partly from the policy of
Europe, which nowhere leaves things at perfect liberty.
The particular consideration of those circumstances, and of that policy,
will divide this Chapter into two parts.
PART I. Inequalities arising from the nature of the employments
themselves.
The five following are the principal circumstances which, so far as I have
been able to observe, make up for a small pecuniary gain in some
employments, and counterbalance a great one in others. First, the
agreeableness or disagreeableness of the employments themselves; secondly,
the easiness and cheapness, or the difficulty and expense of learning
them; thirdly, the constancy or inconstancy of employment in them;
fourthly, the small or great trust which must be reposed in those who
exercise them; and, fifthly, the probability or improbability of success
in them.
First, the wages of labour vary with the ease or hardship, the cleanliness
or dirtiness, the honourableness or dishonourableness, of the employment.
Thus in most places, take the year round, a journeyman tailor earns less
than a journeyman weaver. His work is much easier. A journeyman weaver
earns less than a journeyman smith. His work is not always easier, but it
is much cleanlier. A journeyman blacksmith, though an artificer, seldom
earns so much in twelve hours, as a collier, who is only a labourer, does
in eight. His work is not quite so dirty, is less dangerous, and is
carried on in day-light, and above ground. Honour makes a great part of
the reward of all honourable professions. In point of pecuniary gain, all
things considered, they are generally under-recompensed, as I shall
endeavour to shew by and by. Disgrace has the contrary effect. The trade
of a butcher is a brutal and an odious business; but it is in most places
more profitable than the greater part of common trades. The most
detestable of all employments, that of public executioner, is, in
proportion to the quantity of work done, better paid than any common trade
whatever.
Hunting and fishing, the most important employments of mankind in the rude
state of society, become, in its advanced state, their most agreeable
amusements, and they pursue for pleasure what they once followed from
necessity. In the advanced state of society, therefore, they are all very
poor people who follow as a trade, what other people pursue as a pastime.
Fishermen have been so since the time of Theocritus. {See Idyllium xxi.}.
A poacher is everywhere a very poor man in Great Britain. In countries
where the rigour of the law suffers no poachers, the licensed hunter is
not in a much better condition. The natural taste for those employments
makes more people follow them, than can live comfortably by them; and the
produce of their labour, in proportion to its quantity, comes always too
cheap to market, to afford any thing but the most scanty subsistence to
the labourers.
Disagreeableness and disgrace affect the profits of stock in the same
manner as the wages of labour. The keeper of an inn or tavern, who is
never master of his own house, and who is exposed to the brutality of
every drunkard, exercises neither a very agreeable nor a very creditable
business. But there is scarce any common trade in which a small stock
yields so great a profit.
Secondly, the wages of labour vary with the easiness and cheapness, or the
difficulty and expense, of learning the business.
When any expensive machine is erected, the extraordinary work to be
performed by it before it is worn out, it must be expected, will replace
the capital laid out upon it, with at least the ordinary profits. A man
educated at the expense of much labour and time to any of those
employments which require extraordinary dexterity and skill, may be
compared to one of those expensive machines. The work which he learns to
perform, it must be expected, over and above the usual wages of common
labour, will replace to him the whole expense of his education, with at
least the ordinary profits of an equally valuable capital. It must do this
too in a reasonable time, regard being had to the very uncertain duration
of human life, in the same manner as to the more certain duration of the
machine.
The difference between the wages of skilled labour and those of common
labour, is founded upon this principle.
The policy of Europe considers the labour of all mechanics, artificers,
and manufacturers, as skilled labour; and that of all country labourers as
common labour. It seems to suppose that of the former to be of a more nice
and delicate nature than that of the latter. It is so perhaps in some
cases; but in the greater part it is quite otherwise, as I shall endeavour
to shew by and by. The laws and customs of Europe, therefore, in order to
qualify any person for exercising the one species of labour, impose the
necessity of an apprenticeship, though with different degrees of rigour in
different places. They leave the other free and open to every body. During
the continuance of the apprenticeship, the whole labour of the apprentice
belongs to his master. In the meantime he must, in many cases, be
maintained by his parents or relations, and, in almost all cases, must be
clothed by them. Some money, too, is commonly given to the master for
teaching him his trade. They who cannot give money, give time, or become
bound for more than the usual number of years; a consideration which,
though it is not always advantageous to the master, on account of the
usual idleness of apprentices, is always disadvantageous to the
apprentice. In country labour, on the contrary, the labourer, while he is
employed about the easier, learns the more difficult parts of his
business, and his own labour maintains him through all the different
stages of his employment. It is reasonable, therefore, that in Europe the
wages of mechanics, artificers, and manufacturers, should be somewhat
higher than those of common labourers. They are so accordingly, and their
superior gains make them, in most places, be considered as a superior rank
of people. This superiority, however, is generally very small: the daily
or weekly earnings of journeymen in the more common sorts of manufactures,
such as those of plain linen and woollen cloth, computed at an average,
are, in most places, very little more than the day-wages of common
labourers. Their employment, indeed, is more steady and uniform, and the
superiority of their earnings, taking the whole year together, may be
somewhat greater. It seems evidently, however, to be no greater than what
is sufficient to compensate the superior expense of their education.
Education in the ingenious arts, and in the liberal professions, is still
more tedious and expensive. The pecuniary recompence, therefore, of
painters and sculptors, of lawyers and physicians, ought to be much more
liberal; and it is so accordingly.
The profits of stock seem to be very little affected by the easiness or
difficulty of learning the trade in which it is employed. All the
different ways in which stock is commonly employed in great towns seem, in
reality, to be almost equally easy and equally difficult to learn. One
branch, either of foreign or domestic trade, cannot well be a much more
intricate business than another.
Thirdly, the wages of labour in different occupations vary with the
constancy or inconstancy of employment.
Employment is much more constant in some trades than in others. In the
greater part of manufactures, a journeyman maybe pretty sure of employment
almost every day in the year that he is able to work. A mason or
bricklayer, on the contrary, can work neither in hard frost nor in foul
weather, and his employment at all other times depends upon the occasional
calls of his customers. He is liable, in consequence, to be frequently
without any. What he earns, therefore, while he is employed, must not only
maintain him while he is idle, but make him some compensation for those
anxious and desponding moments which the thought of so precarious a
situation must sometimes occasion. Where the computed earnings of the
greater part of manufacturers, accordingly, are nearly upon a level with
the day-wages of common labourers, those of masons and bricklayers are
generally from one-half more to double those wages. Where common labourers
earn four or five shillings a-week, masons and bricklayers frequently earn
seven and eight; where the former earn six, the latter often earn nine and
ten; and where the former earn nine and ten, as in London, the latter
commonly earn fifteen and eighteen. No species of skilled labour, however,
seems more easy to learn than that of masons and bricklayers. Chairmen in
London, during the summer season, are said sometimes to be employed as
bricklayers. The high wages of those workmen, therefore, are not so much
the recompence of their skill, as the compensation for the inconstancy of
their employment.
A house-carpenter seems to exercise rather a nicer and a more ingenious
trade than a mason. In most places, however, for it is not universally so,
his day-wages are somewhat lower. His employment, though it depends much,
does not depend so entirely upon the occasional calls of his customers;
and it is not liable to be interrupted by the weather.
When the trades which generally afford constant employment, happen in a
particular place not to do so, the wages of the workmen always rise a good
deal above their ordinary proportion to those of common labour. In London,
almost all journeymen artificers are liable to be called upon and
dismissed by their masters from day to day, and from week to week, in the
same manner as day-labourers in other places. The lowest order of
artificers, journeymen tailors, accordingly, earn their half-a-crown
a-day, though eighteen pence may be reckoned the wages of common labour.
In small towns and country villages, the wages of journeymen tailors
frequently scarce equal those of common labour; but in London they are
often many weeks without employment, particularly during the summer.
When the inconstancy of employment is combined with the hardship,
disagreeableness, and dirtiness of the work, it sometimes raises the wages
of the most common labour above those of the most skilful artificers. A
collier working by the piece is supposed, at Newcastle, to earn commonly
about double, and, in many parts of Scotland, about three times, the wages
of common labour. His high wages arise altogether from the hardship,
disagreeableness, and dirtiness of his work. His employment may, upon most
occasions, be as constant as he pleases. The coal-heavers in London
exercise a trade which, in hardship, dirtiness, and disagreeableness,
almost equals that of colliers; and, from the unavoidable irregularity in
the arrivals of coal-ships, the employment of the greater part of them is
necessarily very inconstant. If colliers, therefore, commonly earn double
and triple the wages of common labour, it ought not to seem unreasonable
that coal-heavers should sometimes earn four and five times those wages.
In the inquiry made into their condition a few years ago, it was found
that, at the rate at which they were then paid, they could earn from six
to ten shillings a-day. Six shillings are about four times the wages of
common labour in London; and, in every particular trade, the lowest common
earnings may always be considered as those of the far greater number. How
extravagant soever those earnings may appear, if they were more than
sufficient to compensate all the disagreeable circumstances of the
business, there would soon be so great a number of competitors, as, in a
trade which has no exclusive privilege, would quickly reduce them to a
lower rate.
The constancy or inconstancy of employment cannot affect the ordinary
profits of stock in any particular trade. Whether the stock is or is not
constantly employed, depends, not upon the trade, but the trader.
Fourthly, the wages of labour vary according to the small or great trust
which must be reposed in the workmen.
The wages of goldsmiths and jewellers are everywhere superior to those of
many other workmen, not only of equal, but of much superior ingenuity, on
account of the precious materials with which they are entrusted. We trust
our health to the physician, our fortune, and sometimes our life and
reputation, to the lawyer and attorney. Such confidence could not safely
be reposed in people of a very mean or low condition. Their reward must be
such, therefore, as may give them that rank in the society which so
important a trust requires. The long time and the great expense which must
be laid out in their education, when combined with this circumstance,
necessarily enhance still further the price of their labour.
When a person employs only his own stock in trade, there is no trust; and
the credit which he may get from other people, depends, not upon the
nature of the trade, but upon their opinion of his fortune, probity and
prudence. The different rates of profit, therefore, in the different
branches of trade, cannot arise from the different degrees of trust
reposed in the traders.
Fifthly, the wages of labour in different employments vary according to
the probability or improbability of success in them.
The probability that any particular person shall ever be qualified for the
employments to which he is educated, is very different in different
occupations. In the greatest part of mechanic trades success is almost
certain; but very uncertain in the liberal professions. Put your son
apprentice to a shoemaker, there is little doubt of his learning to make a
pair of shoes; but send him to study the law, it as at least twenty to one
if he ever makes such proficiency as will enable him to live by the
business. In a perfectly fair lottery, those who draw the prizes ought to
gain all that is lost by those who draw the blanks. In a profession, where
twenty fail for one that succeeds, that one ought to gain all that should
have been gained by the unsuccessful twenty. The counsellor at law, who,
perhaps, at near forty years of age, begins to make something by his
profession, ought to receive the retribution, not only of his own so
tedious and expensive education, but of that of more than twenty others,
who are never likely to make any thing by it. How extravagant soever the
fees of counsellors at law may sometimes appear, their real retribution is
never equal to this. Compute, in any particular place, what is likely to
be annually gained, and what is likely to be annually spent, by all the
different workmen in any common trade, such as that of shoemakers or
weavers, and you will find that the former sum will generally exceed the
latter. But make the same computation with regard to all the counsellors
and students of law, in all the different Inns of Court, and you will find
that their annual gains bear but a very small proportion to their annual
expense, even though you rate the former as high, and the latter as low,
as can well be done. The lottery of the law, therefore, is very far from
being a perfectly fair lottery; and that as well as many other liberal and
honourable professions, is, in point of pecuniary gain, evidently
under-recompensed.
Those professions keep their level, however, with other occupations; and,
notwithstanding these discouragements, all the most generous and liberal
spirits are eager to crowd into them. Two different causes contribute to
recommend them. First, the desire of the reputation which attends upon
superior excellence in any of them; and, secondly, the natural confidence
which every man has, more or less, not only in his own abilities, but in
his own good fortune.
To excel in any profession, in which but few arrive at mediocrity, is the
most decisive mark of what is called genius, or superior talents. The
public admiration which attends upon such distinguished abilities makes
always a part of their reward; a greater or smaller, in proportion as it
is higher or lower in degree. It makes a considerable part of that reward
in the profession of physic; a still greater, perhaps, in that of law; in
poetry and philosophy it makes almost the whole.
There are some very agreeable and beautiful talents, of which the
possession commands a certain sort of admiration, but of which the
exercise, for the sake of gain, is considered, whether from reason or
prejudice, as a sort of public prostitution. The pecuniary recompence,
therefore, of those who exercise them in this manner, must be sufficient,
not only to pay for the time, labour, and expense of acquiring the
talents, but for the discredit which attends the employment of them as the
means of subsistence. The exorbitant rewards of players, opera-singers,
opera-dancers, etc. are founded upon those two principles; the rarity and
beauty of the talents, and the discredit of employing them in this manner.
It seems absurd at first sight, that we should despise their persons, and
yet reward their talents with the most profuse liberality. While we do the
one, however, we must of necessity do the other, Should the public opinion
or prejudice ever alter with regard to such occupations, their pecuniary
recompence would quickly diminish. More people would apply to them, and
the competition would quickly reduce the price of their labour. Such
talents, though far from being common, are by no means so rare as
imagined. Many people possess them in great perfection, who disdain to
make this use of them; and many more are capable of acquiring them, if any
thing could be made honourably by them.
The over-weening conceit which the greater part of men have of their own
abilities, is an ancient evil remarked by the philosophers and moralists
of all ages. Their absurd presumption in their own good fortune has been
less taken notice of. It is, however, if possible, still more universal.
There is no man living, who, when in tolerable health and spirits, has not
some share of it. The chance of gain is by every man more or less
over-valued, and the chance of loss is by most men under-valued, and by
scarce any man, who is in tolerable health and spirits, valued more than
it is worth.
That the chance of gain is naturally overvalued, we may learn from the
universal success of lotteries. The world neither ever saw, nor ever will
see, a perfectly fair lottery, or one in which the whole gain compensated
the whole loss; because the undertaker could make nothing by it. In the
state lotteries, the tickets are really not worth the price which is paid
by the original subscribers, and yet commonly sell in the market for
twenty, thirty, and sometimes forty per cent. advance. The vain hopes of
gaining some of the great prizes is the sole cause of this demand. The
soberest people scarce look upon it as a folly to pay a small sum for the
chance of gaining ten or twenty thousand pounds, though they know that
even that small sum is perhaps twenty or thirty per cent. more than the
chance is worth. In a lottery in which no prize exceeded twenty pounds,
though in other respects it approached much nearer to a perfectly fair one
than the common state lotteries, there would not be the same demand for
tickets. In order to have a better chance for some of the great prizes,
some people purchase several tickets; and others, small shares in a still
greater number. There is not, however, a more certain proposition in
mathematics, than that the more tickets you adventure upon, the more
likely you are to be a loser. Adventure upon all the tickets in the
lottery, and you lose for certain; and the greater the number of your
tickets, the nearer you approach to this certainty.
That the chance of loss is frequently undervalued, and scarce ever valued
more than it is worth, we may learn from the very moderate profit of
insurers. In order to make insurance, either from fire or sea-risk, a
trade at all, the common premium must be sufficient to compensate the
common losses, to pay the expense of management, and to afford such a
profit as might have been drawn from an equal capital employed in any
common trade. The person who pays no more than this, evidently pays no
more than the real value of the risk, or the lowest price at which he can
reasonably expect to insure it. But though many people have made a little
money by insurance, very few have made a great fortune; and, from this
consideration alone, it seems evident enough that the ordinary balance of
profit and loss is not more advantageous in this than in other common
trades, by which so many people make fortunes. Moderate, however, as the
premium of insurance commonly is, many people despise the risk too much to
care to pay it. Taking the whole kingdom at an average, nineteen houses in
twenty, or rather, perhaps, ninety-nine in a hundred, are not insured from
fire. Sea-risk is more alarming to the greater part of people; and the
proportion of ships insured to those not insured is much greater. Many
sail, however, at all seasons, and even in time of war, without any
insurance. This may sometimes, perhaps, be done without any imprudence.
When a great company, or even a great merchant, has twenty or thirty ships
at sea, they may, as it were, insure one another. The premium saved up on
them all may more than compensate such losses as they are likely to meet
with in the common course of chances. The neglect of insurance upon
shipping, however, in the same manner as upon houses, is, in most cases,
the effect of no such nice calculation, but of mere thoughtless rashness,
and presumptuous contempt of the risk.
The contempt of risk, and the presumptuous hope of success, are in no
period of life more active than at the age at which young people choose
their professions. How little the fear of misfortune is then capable of
balancing the hope of good luck, appears still more evidently in the
readiness of the common people to enlist as soldiers, or to go to sea,
than in the eagerness of those of better fashion to enter into what are
called the liberal professions.
What a common soldier may lose is obvious enough. Without regarding the
danger, however, young volunteers never enlist so readily as at the
beginning of a new war; and though they have scarce any chance of
preferment, they figure to themselves, in their youthful fancies, a
thousand occasions of acquiring honour and distinction which never occur.
These romantic hopes make the whole price of their blood. Their pay is
less than that of common labourers, and, in actual service, their fatigues
are much greater.
The lottery of the sea is not altogether so disadvantageous as that of the
army. The son of a creditable labourer or artificer may frequently go to
sea with his father’s consent; but if he enlists as a soldier, it is
always without it. Other people see some chance of his making something by
the one trade; nobody but himself sees any of his making any thing by the
other. The great admiral is less the object of public admiration than the
great general; and the highest success in the sea service promises a less
brilliant fortune and reputation than equal success in the land. The same
difference runs through all the inferior degrees of preferment in both. By
the rules of precedency, a captain in the navy ranks with a colonel in the
army; but he does not rank with him in the common estimation. As the great
prizes in the lottery are less, the smaller ones must be more numerous.
Common sailors, therefore, more frequently get some fortune and preferment
than common soldiers; and the hope of those prizes is what principally
recommends the trade. Though their skill and dexterity are much superior
to that of almost any artificers; and though their whole life is one
continual scene of hardship and danger; yet for all this dexterity and
skill, for all those hardships and dangers, while they remain in the
condition of common sailors, they receive scarce any other recompence but
the pleasure of exercising the one and of surmounting the other. Their
wages are not greater than those of common labourers at the port which
regulates the rate of seamen’s wages. As they are continually going from
port to port, the monthly pay of those who sail from all the different
ports of Great Britain, is more nearly upon a level than that of any other
workmen in those different places; and the rate of the port to and from
which the greatest number sail, that is, the port of London, regulates
that of all the rest. At London, the wages of the greater part of the
different classes of workmen are about double those of the same classes at
Edinburgh. But the sailors who sail from the port of London, seldom earn
above three or four shillings a month more than those who sail from the
port of Leith, and the difference is frequently not so great. In time of
peace, and in the merchant-service, the London price is from a guinea to
about seven-and-twenty shillings the calendar month. A common labourer in
London, at the rate of nine or ten shillings a week, may earn in the
calendar month from forty to five-and-forty shillings. The sailor, indeed,
over and above his pay, is supplied with provisions. Their value, however,
may not perhaps always exceed the difference between his pay and that of
the common labourer; and though it sometimes should, the excess will not
be clear gain to the sailor, because he cannot share it with his wife and
family, whom he must maintain out of his wages at home.
The dangers and hair-breadth escapes of a life of adventures, instead of
disheartening young people, seem frequently to recommend a trade to them.
A tender mother, among the inferior ranks of people, is often afraid to
send her son to school at a sea-port town, lest the sight of the ships,
and the conversation and adventures of the sailors, should entice him to
go to sea. The distant prospect of hazards, from which we can hope to
extricate ourselves by courage and address, is not disagreeable to us, and
does not raise the wages of labour in any employment. It is otherwise with
those in which courage and address can be of no avail. In trades which are
known to be very unwholesome, the wages of labour are always remarkably
high. Unwholesomeness is a species of disagreeableness, and its effects
upon the wages of labour are to be ranked under that general head.
In all the different employments of stock, the ordinary rate of profit
varies more or less with the certainty or uncertainty of the returns.
These are, in general, less uncertain in the inland than in the foreign
trade, and in some branches of foreign trade than in others; in the trade
to North America, for example, than in that to Jamaica. The ordinary rate
of profit always rises more or less with the risk. It does not, however,
seem to rise in proportion to it, or so as to compensate it completely.
Bankruptcies are most frequent in the most hazardous trades. The most
hazardous of all trades, that of a smuggler, though, when the adventure
succeeds, it is likewise the most profitable, is the infallible road to
bankruptcy. The presumptuous hope of success seems to act here as upon all
other occasions, and to entice so many adventurers into those hazardous
trades, that their competition reduces the profit below what is sufficient
to compensate the risk. To compensate it completely, the common returns
ought, over and above the ordinary profits of stock, not only to make up
for all occasional losses, but to afford a surplus profit to the
adventurers, of the same nature with the profit of insurers. But if the
common returns were sufficient for all this, bankruptcies would not be
more frequent in these than in other trades.
Of the five circumstances, therefore, which vary the wages of labour, two
only affect the profits of stock; the agreeableness or disagreeableness of
the business, and the risk or security with which it is attended. In point
of agreeableness or disagreeableness, there is little or no difference in
the far greater part of the different employments of stock, but a great
deal in those of labour; and the ordinary profit of stock, though it rises
with the risk, does not always seem to rise in proportion to it. It should
follow from all this, that, in the same society or neighbourhood, the
average and ordinary rates of profit in the different employments of stock
should be more nearly upon a level than the pecuniary wages of the
different sorts of labour.
They are so accordingly. The difference between the earnings of a common
labourer and those of a well employed lawyer or physician, is evidently
much greater than that between the ordinary profits in any two different
branches of trade. The apparent difference, besides, in the profits of
different trades, is generally a deception arising from our not always
distinguishing what ought to be considered as wages, from what ought to be
considered as profit.
Apothecaries’ profit is become a bye-word, denoting something uncommonly
extravagant. This great apparent profit, however, is frequently no more
than the reasonable wages of labour. The skill of an apothecary is a much
nicer and more delicate matter than that of any artificer whatever; and
the trust which is reposed in him is of much greater importance. He is the
physician of the poor in all cases, and of the rich when the distress or
danger is not very great. His reward, therefore, ought to be suitable to
his skill and his trust; and it arises generally from the price at which
he sells his drugs. But the whole drugs which the best employed apothecary
in a large market-town, will sell in a year, may not perhaps cost him
above thirty or forty pounds. Though he should sell them, therefore, for
three or four hundred, or at a thousand per cent. profit, this may
frequently be no more than the reasonable wages of his labour, charged, in
the only way in which he can charge them, upon the price of his drugs. The
greater part of the apparent profit is real wages disguised in the garb of
profit.
In a small sea-port town, a little grocer will make forty or fifty per
cent. upon a stock of a single hundred pounds, while a considerable
wholesale merchant in the same place will scarce make eight or ten per
cent. upon a stock of ten thousand. The trade of the grocer may be
necessary for the conveniency of the inhabitants, and the narrowness of
the market may not admit the employment of a larger capital in the
business. The man, however, must not only live by his trade, but live by
it suitably to the qualifications which it requires. Besides possessing a
little capital, he must be able to read, write, and account and must be a
tolerable judge, too, of perhaps fifty or sixty different sorts of goods,
their prices, qualities, and the markets where they are to be had
cheapest. He must have all the knowledge, in short, that is necessary for
a great merchant, which nothing hinders him from becoming but the want of
a sufficient capital. Thirty or forty pounds a year cannot be considered
as too great a recompence for the labour of a person so accomplished.
Deduct this from the seemingly great profits of his capital, and little
more will remain, perhaps, than the ordinary profits of stock. The greater
part of the apparent profit is, in this case too, real wages.
The difference between the apparent profit of the retail and that of the
wholesale trade, is much less in the capital than in small towns and
country villages. Where ten thousand pounds can be employed in the grocery
trade, the wages of the grocer’s labour must be a very trifling addition
to the real profits of so great a stock. The apparent profits of the
wealthy retailer, therefore, are there more nearly upon a level with those
of the wholesale merchant. It is upon this account that goods sold by
retail are generally as cheap, and frequently much cheaper, in the capital
than in small towns and country villages. Grocery goods, for example, are
generally much cheaper; bread and butchers’ meat frequently as cheap. It
costs no more to bring grocery goods to the great town than to the country
village; but it costs a great deal more to bring corn and cattle, as the
greater part of them must be brought from a much greater distance. The
prime cost of grocery goods, therefore, being the same in both places,
they are cheapest where the least profit is charged upon them. The prime
cost of bread and butchers’ meat is greater in the great town than in the
country village; and though the profit is less, therefore they are not
always cheaper there, but often equally cheap. In such articles as bread
and butchers’ meat, the same cause which diminishes apparent profit,
increases prime cost. The extent of the market, by giving employment to
greater stocks, diminishes apparent profit; but by requiring supplies from
a greater distance, it increases prime cost. This diminution of the one
and increase of the other, seem, in most cases, nearly to counterbalance
one another; which is probably the reason that, though the prices of corn
and cattle are commonly very different in different parts of the kingdom,
those of bread and butchers’ meat are generally very nearly the same
through the greater part of it.
Though the profits of stock, both in the wholesale and retail trade, are
generally less in the capital than in small towns and country villages,
yet great fortunes are frequently acquired from small beginnings in the
former, and scarce ever in the latter. In small towns and country
villages, on account of the narrowness of the market, trade cannot always
be extended as stock extends. In such places, therefore, though the rate
of a particular person’s profits may be very high, the sum or amount of
them can never be very great, nor consequently that of his annual
accumulation. In great towns, on the contrary, trade can be extended as
stock increases, and the credit of a frugal and thriving man increases
much faster than his stock. His trade is extended in proportion to the
amount of both; and the sum or amount of his profits is in proportion to
the extent of his trade, and his annual accumulation in proportion to the
amount of his profits. It seldom happens, however, that great fortunes are
made, even in great towns, by any one regular, established, and well-known
branch of business, but in consequence of a long life of industry,
frugality, and attention. Sudden fortunes, indeed, are sometimes made in
such places, by what is called the trade of speculation. The speculative
merchant exercises no one regular, established, or well-known branch of
business. He is a corn merchant this year, and a wine merchant the next,
and a sugar, tobacco, or tea merchant the year after. He enters into every
trade, when he foresees that it is likely to be more than commonly
profitable, and he quits it when he foresees that its profits are likely
to return to the level of other trades. His profits and losses, therefore,
can bear no regular proportion to those of any one established and
well-known branch of business. A bold adventurer may sometimes acquire a
considerable fortune by two or three successful speculations, but is just
as likely to lose one by two or three unsuccessful ones. This trade can be
carried on nowhere but in great towns. It is only in places of the most
extensive commerce and correspondence that the intelligence requisite for
it can be had.
The five circumstances above mentioned, though they occasion considerable
inequalities in the wages of labour and profits of stock, occasion none in
the whole of the advantages and disadvantages, real or imaginary, of the
different employments of either. The nature of those circumstances is
such, that they make up for a small pecuniary gain in some, and
counterbalance a great one in others.
In order, however, that this equality may take place in the whole of their
advantages or disadvantages, three things are requisite, even where there
is the most perfect freedom. First the employments must be well known and
long established in the neighbourhood; secondly, they must be in their
ordinary, or what may be called their natural state; and, thirdly, they
must be the sole or principal employments of those who occupy them.
First, this equality can take place only in those employments which are
well known, and have been long established in the neighbourhood.
Where all other circumstances are equal, wages are generally higher in new
than in old trades. When a projector attempts to establish a new
manufacture, he must at first entice his workmen from other employments,
by higher wages than they can either earn in their own trades, or than the
nature of his work would otherwise require; and a considerable time must
pass away before he can venture to reduce them to the common level.
Manufactures for which the demand arises altogether from fashion and
fancy, are continually changing, and seldom last long enough to be
considered as old established manufactures. Those, on the contrary, for
which the demand arises chiefly from use or necessity, are less liable to
change, and the same form or fabric may continue in demand for whole
centuries together. The wages of labour, therefore, are likely to be
higher in manufactures of the former, than in those of the latter kind.
Birmingham deals chiefly in manufactures of the former kind; Sheffield in
those of the latter; and the wages of labour in those two different places
are said to be suitable to this difference in the nature of their
manufactures.
The establishment of any new manufacture, of any new branch of commerce,
or of any new practice in agriculture, is always a speculation from which
the projector promises himself extraordinary profits. These profits
sometimes are very great, and sometimes, more frequently, perhaps, they
are quite otherwise; but, in general, they bear no regular proportion to
those of other old trades in the neighbourhood. If the project succeeds,
they are commonly at first very high. When the trade or practice becomes
thoroughly established and well known, the competition reduces them to the
level of other trades.
Secondly, this equality in the whole of the advantages and disadvantages
of the different employments of labour and stock, can take place only in
the ordinary, or what may be called the natural state of those
employments.
The demand for almost every different species of labour is sometimes
greater, and sometimes less than usual. In the one case, the advantages of
the employment rise above, in the other they fall below the common level.
The demand for country labour is greater at hay-time and harvest than
during the greater part of the year; and wages rise with the demand. In
time of war, when forty or fifty thousand sailors are forced from the
merchant service into that of the king, the demand for sailors to merchant
ships necessarily rises with their scarcity; and their wages, upon such
occasions, commonly rise from a guinea and seven-and-twenty shillings to
forty shillings and three pounds a-month. In a decaying manufacture, on
the contrary, many workmen, rather than quit their own trade, are
contented with smaller wages than would otherwise be suitable to the
nature of their employment.
The profits of stock vary with the price of the commodities in which it is
employed. As the price of any commodity rises above the ordinary or
average rate, the profits of at least some part of the stock that is
employed in bringing it to market, rise above their proper level, and as
it falls they sink below it. All commodities are more or less liable to
variations of price, but some are much more so than others. In all
commodities which are produced by human industry, the quantity of industry
annually employed is necessarily regulated by the annual demand, in such a
manner that the average annual produce may, as nearly as possible, be
equal to the average annual consumption. In some employments, it has
already been observed, the same quantity of industry will always produce
the same, or very nearly the same quantity of commodities. In the linen or
woollen manufactures, for example, the same number of hands will annually
work up very nearly the same quantity of linen and woollen cloth. The
variations in the market price of such commodities, therefore, can arise
only from some accidental variation in the demand. A public mourning
raises the price of black cloth. But as the demand for most sorts of plain
linen and woollen cloth is pretty uniform, so is likewise the price. But
there are other employments in which the same quantity of industry will
not always produce the same quantity of commodities. The same quantity of
industry, for example, will, in different years, produce very different
quantities of corn, wine, hops, sugar, tobacco, etc. The price of such
commodities, therefore, varies not only with the variations of demand, but
with the much greater and more frequent variations of quantity, and is
consequently extremely fluctuating; but the profit of some of the dealers
must necessarily fluctuate with the price of the commodities. The
operations of the speculative merchant are principally employed about such
commodities. He endeavours to buy them up when he foresees that their
price is likely to rise, and to sell them when it is likely to fall.
Thirdly, this equality in the whole of the advantages and disadvantages of
the different employments of labour and stock, can take place only in such
as are the sole or principal employments of those who occupy them.
When a person derives his subsistence from one employment, which does not
occupy the greater part of his time, in the intervals of his leisure he is
often willing to work at another for less wages than would otherwise suit
the nature of the employment.
There still subsists, in many parts of Scotland, a set of people called
cottars or cottagers, though they were more frequent some years ago than
they are now. They are a sort of out-servants of the landlords and
farmers. The usual reward which they receive from their master is a house,
a small garden for pot-herbs, as much grass as will feed a cow, and,
perhaps, an acre or two of bad arable land. When their master has occasion
for their labour, he gives them, besides, two pecks of oatmeal a-week,
worth about sixteen pence sterling. During a great part of the year, he
has little or no occasion for their labour, and the cultivation of their
own little possession is not sufficient to occupy the time which is left
at their own disposal. When such occupiers were more numerous than they
are at present, they are said to have been willing to give their spare
time for a very small recompence to any body, and to have wrought for less
wages than other labourers. In ancient times, they seem to have been
common all over Europe. In countries ill cultivated, and worse inhabited,
the greater part of landlords and farmers could not otherwise provide
themselves with the extraordinary number of hands which country labour
requires at certain seasons. The daily or weekly recompence which such
labourers occasionally received from their masters, was evidently not the
whole price of their labour. Their small tenement made a considerable part
of it. This daily or weekly recompence, however, seems to have been
considered as the whole of it, by many writers who have collected the
prices of labour and provisions in ancient times, and who have taken
pleasure in representing both as wonderfully low.
The produce of such labour comes frequently cheaper to market than would
otherwise be suitable to its nature. Stockings, in many parts of Scotland,
are knit much cheaper than they can anywhere be wrought upon the loom.
They are the work of servants and labourers who derive the principal part
of their subsistence from some other employment. More than a thousand pair
of Shetland stockings are annually imported into Leith, of which the price
is from fivepence to seven-pence a pair. At Lerwick, the small capital of
the Shetland islands, tenpence a-day, I have been assured, is a common
price of common labour. In the same islands, they knit worsted stockings
to the value of a guinea a pair and upwards.
The spinning of linen yarn is carried on in Scotland nearly in the same
way as the knitting of stockings, by servants, who are chiefly hired for
other purposes. They earn but a very scanty subsistence, who endeavour to
get their livelihood by either of those trades. In most parts of Scotland,
she is a good spinner who can earn twentypence a-week.
In opulent countries, the market is generally so extensive, that any one
trade is sufficient to employ the whole labour and stock of those who
occupy it. Instances of people living by one employment, and, at the same
time, deriving some little advantage from another, occur chiefly in poor
countries. The following instance, however, of something of the same kind,
is to be found in the capital of a very rich one. There is no city in
Europe, I believe, in which house-rent is dearer than in London, and yet I
know no capital in which a furnished apartment can be hired so cheap.
Lodging is not only much cheaper in London than in Paris; it is much
cheaper than in Edinburgh, of the same degree of goodness; and, what may
seem extraordinary, the dearness of house-rent is the cause of the
cheapness of lodging. The dearness of house-rent in London arises, not
only from those causes which render it dear in all great capitals, the
dearness of labour, the dearness of all the materials of building, which
must generally be brought from a great distance, and, above all, the
dearness of ground-rent, every landlord acting the part of a monopolist,
and frequently exacting a higher rent for a single acre of bad land in a
town, than can be had for a hundred of the best in the country; but it
arises in part from the peculiar manners and customs of the people, which
oblige every master of a family to hire a whole house from top to bottom.
A dwelling-house in England means every thing that is contained under the
same roof. In France, Scotland, and many other parts of Europe, it
frequently means no more than a single storey. A tradesman in London is
obliged to hire a whole house in that part of the town where his customers
live. His shop is upon the ground floor, and he and his family sleep in
the garret; and he endeavours to pay a part of his house-rent by letting
the two middle storeys to lodgers. He expects to maintain his family by
his trade, and not by his lodgers. Whereas at Paris and Edinburgh, people
who let lodgings have commonly no other means of subsistence; and the
price of the lodging must pay, not only the rent of the house, but the
whole expense of the family.
PART II.—Inequalities occasioned by the Policy of Europe.
Such are the inequalities in the whole of the advantages and disadvantages
of the different employments of labour and stock, which the defect of any
of the three requisites above mentioned must occasion, even where there is
the most perfect liberty. But the policy of Europe, by not leaving things
at perfect liberty, occasions other inequalities of much greater
importance.
It does this chiefly in the three following ways. First, by restraining
the competition in some employments to a smaller number than would
otherwise be disposed to enter into them; secondly, by increasing it in
others beyond what it naturally would be; and, thirdly, by obstructing the
free circulation of labour and stock, both from employment to employment,
and from place to place.
First, The policy of Europe occasions a very important inequality in the
whole of the advantages and disadvantages of the different employments of
labour and stock, by restraining the competition in some employments to a
smaller number than might otherwise be disposed to enter into them.
The exclusive privileges of corporations are the principal means it makes
use of for this purpose.
The exclusive privilege of an incorporated trade necessarily restrains the
competition, in the town where it is established, to those who are free of
the trade. To have served an apprenticeship in the town, under a master
properly qualified, is commonly the necessary requisite for obtaining this
freedom. The bye-laws of the corporation regulate sometimes the number of
apprentices which any master is allowed to have, and almost always the
number of years which each apprentice is obliged to serve. The intention
of both regulations is to restrain the competition to a much smaller
number than might otherwise be disposed to enter into the trade. The
limitation of the number of apprentices restrains it directly. A long term
of apprenticeship restrains it more indirectly, but as effectually, by
increasing the expense of education.
In Sheffield, no master cutler can have more than one apprentice at a
time, by a bye-law of the corporation. In Norfolk and Norwich, no master
weaver can have more than two apprentices, under pain of forfeiting five
pounds a-month to the king. No master hatter can have more than two
apprentices anywhere in England, or in the English plantations, under pain
of forfeiting; five pounds a-month, half to the king, and half to him who
shall sue in any court of record. Both these regulations, though they have
been confirmed by a public law of the kingdom, are evidently dictated by
the same corporation-spirit which enacted the bye-law of Sheffield. The
silk-weavers in London had scarce been incorporated a year, when they
enacted a bye-law, restraining any master from having more than two
apprentices at a time. It required a particular act of parliament to
rescind this bye-law.
Seven years seem anciently to have been, all over Europe, the usual term
established for the duration of apprenticeships in the greater part of
incorporated trades. All such incorporations were anciently called
universities, which, indeed, is the proper Latin name for any
incorporation whatever. The university of smiths, the university of
tailors, etc. are expressions which we commonly meet with in the old
charters of ancient towns. When those particular incorporations, which are
now peculiarly called universities, were first established, the term of
years which it was necessary to study, in order to obtain the degree of
master of arts, appears evidently to have been copied from the term of
apprenticeship in common trades, of which the incorporations were much
more ancient. As to have wrought seven years under a master properly
qualified, was necessary, in order to entitle any person to become a
master, and to have himself apprentices in a common trade; so to have
studied seven years under a master properly qualified, was necessary to
entitle him to become a master, teacher, or doctor (words anciently
synonymous), in the liberal arts, and to have scholars or apprentices
(words likewise originally synonymous) to study under him.
By the 5th of Elizabeth, commonly called the Statute of Apprenticeship, it
was enacted, that no person should, for the future, exercise any trade,
craft, or mystery, at that time exercised in England, unless he had
previously served to it an apprenticeship of seven years at least; and
what before had been the bye-law of many particular corporations, became
in England the general and public law of all trades carried on in market
towns. For though the words of the statute are very general, and seem
plainly to include the whole kingdom, by interpretation its operation has
been limited to market towns; it having been held that, in country
villages, a person may exercise several different trades, though he has
not served a seven years apprenticeship to each, they being necessary for
the conveniency of the inhabitants, and the number of people frequently
not being sufficient to supply each with a particular set of hands. By a
strict interpretation of the words, too, the operation of this statute has
been limited to those trades which were established in England before the
5th of Elizabeth, and has never been extended to such as have been
introduced since that time. This limitation has given occasion to several
distinctions, which, considered as rules of police, appear as foolish as
can well be imagined. It has been adjudged, for example, that a
coach-maker can neither himself make nor employ journeymen to make his
coach-wheels, but must buy them of a master wheel-wright; this latter
trade having been exercised in England before the 5th of Elizabeth. But a
wheel-wright, though he has never served an apprenticeship to a
coachmaker, may either himself make or employ journeymen to make coaches;
the trade of a coachmaker not being within the statute, because not
exercised in England at the time when it was made. The manufactures of
Manchester, Birmingham, and Wolverhampton, are many of them, upon this
account, not within the statute, not having been exercised in England
before the 5th of Elizabeth.
In France, the duration of apprenticeships is different in different towns
and in different trades. In Paris, five years is the term required in a
great number; but, before any person can be qualified to exercise the
trade as a master, he must, in many of them, serve five years more as a
journeyman. During this latter term, he is called the companion of his
master, and the term itself is called his companionship.
In Scotland, there is no general law which regulates universally the
duration of apprenticeships. The term is different in different
corporations. Where it is long, a part of it may generally be redeemed by
paying a small fine. In most towns, too, a very small fine is sufficient
to purchase the freedom of any corporation. The weavers of linen and
hempen cloth, the principal manufactures of the country, as well as all
other artificers subservient to them, wheel-makers, reel-makers, etc. may
exercise their trades in any town-corporate without paying any fine. In
all towns-corporate, all persons are free to sell butchers’ meat upon any
lawful day of the week. Three years is, in Scotland, a common term of
apprenticeship, even in some very nice trades; and, in general, I know of
no country in Europe, in which corporation laws are so little oppressive.
The property which every man has in his own labour, as it is the original
foundation of all other property, so it is the most sacred and inviolable.
The patrimony of a poor man lies in the strength and dexterity of his
hands; and to hinder him from employing this strength and dexterity in
what manner he thinks proper, without injury to his neighbour, is a plain
violation of this most sacred property. It is a manifest encroachment upon
the just liberty, both of the workman, and of those who might be disposed
to employ him. As it hinders the one from working at what he thinks
proper, so it hinders the others from employing whom they think proper. To
judge whether he is fit to be employed, may surely be trusted to the
discretion of the employers, whose interest it so much concerns. The
affected anxiety of the lawgiver, lest they should employ an improper
person, is evidently as impertinent as it is oppressive.
The institution of long apprenticeships can give no security that
insufficient workmanship shall not frequently be exposed to public sale.
When this is done, it is generally the effect of fraud, and not of
inability; and the longest apprenticeship can give no security against
fraud. Quite different regulations are necessary to prevent this abuse.
The sterling mark upon plate, and the stamps upon linen and woollen cloth,
give the purchaser much greater security than any statute of
apprenticeship. He generally looks at these, but never thinks it worth
while to enquire whether the workman had served a seven years
apprenticeship.
The institution of long apprenticeships has no tendency to form young
people to industry. A journeyman who works by the piece is likely to be
industrious, because he derives a benefit from every exertion of his
industry. An apprentice is likely to be idle, and almost always is so,
because he has no immediate interest to be otherwise. In the inferior
employments, the sweets of labour consist altogether in the recompence of
labour. They who are soonest in a condition to enjoy the sweets of it, are
likely soonest to conceive a relish for it, and to acquire the early habit
of industry. A young man naturally conceives an aversion to labour, when
for a long time he receives no benefit from it. The boys who are put out
apprentices from public charities are generally bound for more than the
usual number of years, and they generally turn out very idle and
worthless.
Apprenticeships were altogether unknown to the ancients. The reciprocal
duties of master and apprentice make a considerable article in every
modern code. The Roman law is perfectly silent with regard to them. I know
no Greek or Latin word (I might venture, I believe, to assert that there
is none) which expresses the idea we now annex to the word apprentice, a
servant bound to work at a particular trade for the benefit of a master,
during a term of years, upon condition that the master shall teach him
that trade.
Long apprenticeships are altogether unnecessary. The arts, which are much
superior to common trades, such as those of making clocks and watches,
contain no such mystery as to require a long course of instruction. The
first invention of such beautiful machines, indeed, and even that of some
of the instruments employed in making them, must no doubt have been the
work of deep thought and long time, and may justly be considered as among
the happiest efforts of human ingenuity. But when both have been fairly
invented, and are well understood, to explain to any young man, in the
completest manner, how to apply the instruments, and how to construct the
machines, cannot well require more than the lessons of a few weeks;
perhaps those of a few days might be sufficient. In the common mechanic
trades, those of a few days might certainly be sufficient. The dexterity
of hand, indeed, even in common trades, cannot be acquired without much
practice and experience. But a young man would practice with much more
diligence and attention, if from the beginning he wrought as a journeyman,
being paid in proportion to the little work which he could execute, and
paying in his turn for the materials which he might sometimes spoil
through awkwardness and inexperience. His education would generally in
this way be more effectual, and always less tedious and expensive. The
master, indeed, would be a loser. He would lose all the wages of the
apprentice, which he now saves, for seven years together. In the end,
perhaps, the apprentice himself would be a loser. In a trade so easily
learnt he would have more competitors, and his wages, when he came to be a
complete workman, would be much less than at present. The same increase of
competition would reduce the profits of the masters, as well as the wages
of workmen. The trades, the crafts, the mysteries, would all be losers.
But the public would be a gainer, the work of all artificers coming in
this way much cheaper to market.
It is to prevent this reduction of price, and consequently of wages and
profit, by restraining that free competition which would most certainly
occasion it, that all corporations, and the greater part of corporation
laws have been established. In order to erect a corporation, no other
authority in ancient times was requisite, in many parts of Europe, but
that of the town-corporate in which it was established. In England,
indeed, a charter from the king was likewise necessary. But this
prerogative of the crown seems to have been reserved rather for extorting
money from the subject, than for the defence of the common liberty against
such oppressive monopolies. Upon paying a fine to the king, the charter
seems generally to have been readily granted; and when any particular
class of artificers or traders thought proper to act as a corporation,
without a charter, such adulterine guilds, as they were called, were not
always disfranchised upon that account, but obliged to fine annually to
the king, for permission to exercise their usurped privileges {See Madox
Firma Burgi p. 26 etc.}. The immediate inspection of all corporations, and
of the bye-laws which they might think proper to enact for their own
government, belonged to the town-corporate in which they were established;
and whatever discipline was exercised over them, proceeded commonly, not
from the king, but from that greater incorporation of which those
subordinate ones were only parts or members.
The government of towns-corporate was altogether in the hands of traders
and artificers, and it was the manifest interest of every particular class
of them, to prevent the market from being overstocked, as they commonly
express it, with their own particular species of industry; which is in
reality to keep it always understocked. Each class was eager to establish
regulations proper for this purpose, and, provided it was allowed to do
so, was willing to consent that every other class should do the same. In
consequence of such regulations, indeed, each class was obliged to buy the
goods they had occasion for from every other within the town, somewhat
dearer than they otherwise might have done. But, in recompence, they were
enabled to sell their own just as much dearer; so that, so far it was as
broad as long, as they say; and in the dealings of the different classes
within the town with one another, none of them were losers by these
regulations. But in their dealings with the country they were all great
gainers; and in these latter dealings consist the whole trade which
supports and enriches every town.
Every town draws its whole subsistence, and all the materials of its
industry, from the country. It pays for these chiefly in two ways. First,
by sending back to the country a part of those materials wrought up and
manufactured; in which case, their price is augmented by the wages of the
workmen, and the profits of their masters or immediate employers;
secondly, by sending to it a part both of the rude and manufactured
produce, either of other countries, or of distant parts of the same
country, imported into the town; in which case, too, the original price of
those goods is augmented by the wages of the carriers or sailors, and by
the profits of the merchants who employ them. In what is gained upon the
first of those branches of commerce, consists the advantage which the town
makes by its manufactures; in what is gained upon the second, the
advantage of its inland and foreign trade. The wages of the workmen, and
the profits of their different employers, make up the whole of what is
gained upon both. Whatever regulations, therefore, tend to increase those
wages and profits beyond what they otherwise: would be, tend to enable the
town to purchase, with a smaller quantity of its labour, the produce of a
greater quantity of the labour of the country. They give the traders and
artificers in the town an advantage over the landlords, farmers, and
labourers, in the country, and break down that natural equality which
would otherwise take place in the commerce which is carried on between
them. The whole annual produce of the labour of the society is annually
divided between those two different sets of people. By means of those
regulations, a greater share of it is given to the inhabitants of the town
than would otherwise fall to them, and a less to those of the country.
The price which the town really pays for the provisions and materials
annually imported into it, is the quantity of manufactures and other goods
annually exported from it. The dearer the latter are sold, the cheaper the
former are bought. The industry of the town becomes more, and that of the
country less advantageous.
That the industry which is carried on in towns is, everywhere in Europe,
more advantageous than that which is carried on in the country, without
entering into any very nice computations, we may satisfy ourselves by one
very simple and obvious observation. In every country of Europe, we find
at least a hundred people who have acquired great fortunes, from small
beginnings, by trade and manufactures, the industry which properly belongs
to towns, for one who has done so by that which properly belongs to the
country, the raising of rude produce by the improvement and cultivation of
land. Industry, therefore, must be better rewarded, the wages of labour
and the profits of stock must evidently be greater, in the one situation
than in the other. But stock and labour naturally seek the most
advantageous employment. They naturally, therefore, resort as much as they
can to the town, and desert the country.
The inhabitants of a town being collected into one place, can easily
combine together. The most insignificant trades carried on in towns have,
accordingly, in some place or other, been incorporated; and even where
they have never been incorporated, yet the corporation-spirit, the
jealousy of strangers, the aversion to take apprentices, or to communicate
the secret of their trade, generally prevail in them, and often teach
them, by voluntary associations and agreements, to prevent that free
competition which they cannot prohibit by bye-laws. The trades which
employ but a small number of hands, run most easily into such
combinations. Half-a-dozen wool-combers, perhaps, are necessary to keep a
thousand spinners and weavers at work. By combining not to take
apprentices, they can not only engross the employment, but reduce the
whole manufacture into a sort of slavery to themselves, and raise the
price of their labour much above what is due to the nature of their work.
The inhabitants of the country, dispersed in distant places, cannot easily
combine together. They have not only never been incorporated, but the
incorporation spirit never has prevailed among them. No apprenticeship has
ever been thought necessary to qualify for husbandry, the great trade of
the country. After what are called the fine arts, and the liberal
professions, however, there is perhaps no trade which requires so great a
variety of knowledge and experience. The innumerable volumes which have
been written upon it in all languages, may satisfy us, that among the
wisest and most learned nations, it has never been regarded as a matter
very easily understood. And from all those volumes we shall in vain
attempt to collect that knowledge of its various and complicated
operations which is commonly possessed even by the common farmer; how
contemptuously soever the very contemptible authors of some of them may
sometimes affect to speak of him. There is scarce any common mechanic
trade, on the contrary, of which all the operations may not be as
completely and distinctly explained in a pamphlet of a very few pages, as
it is possible for words illustrated by figures to explain them. In the
history of the arts, now publishing by the French Academy of Sciences,
several of them are actually explained in this manner. The direction of
operations, besides, which must be varied with every change of the
weather, as well as with many other accidents, requires much more judgment
and discretion, than that of those which are always the same, or very
nearly the same.
Not only the art of the farmer, the general direction of the operations of
husbandry, but many inferior branches of country labour require much more
skill and experience than the greater part of mechanic trades. The man who
works upon brass and iron, works with instruments, and upon materials of
which the temper is always the same, or very nearly the same. But the man
who ploughs the ground with a team of horses or oxen, works with
instruments of which the health, strength, and temper, are very different
upon different occasions. The condition of the materials which he works
upon, too, is as variable as that of the instruments which he works with,
and both require to be managed with much judgment and discretion. The
common ploughman, though generally regarded as the pattern of stupidity
and ignorance, is seldom defective in this judgment and discretion. He is
less accustomed, indeed, to social intercourse, than the mechanic who
lives in a town. His voice and language are more uncouth, and more
difficult to be understood by those who are not used to them. His
understanding, however, being accustomed to consider a greater variety of
objects, is generally much superior to that of the other, whose whole
attention, from morning till night, is commonly occupied in performing one
or two very simple operations. How much the lower ranks of people in the
country are really superior to those of the town, is well known to every
man whom either business or curiosity has led to converse much with both.
In China and Indostan, accordingly, both the rank and the wages of country
labourers are said to be superior to those of the greater part of
artificers and manufacturers. They would probably be so everywhere, if
corporation laws and the corporation spirit did not prevent it.
The superiority which the industry of the towns has everywhere in Europe
over that of the country, is not altogether owing to corporations and
corporation laws. It is supported by many other regulations. The high
duties upon foreign manufactures, and upon all goods imported by alien
merchants, all tend to the same purpose. Corporation laws enable the
inhabitants of towns to raise their prices, without fearing to be
undersold by the free competition of their own countrymen. Those other
regulations secure them equally against that of foreigners. The
enhancement of price occasioned by both is everywhere finally paid by the
landlords, farmers, and labourers, of the country, who have seldom opposed
the establishment of such monopolies. They have commonly neither
inclination nor fitness to enter into combinations; and the clamour and
sophistry of merchants and manufacturers easily persuade them, that the
private interest of a part, and of a subordinate part, of the society, is
the general interest of the whole.
In Great Britain, the superiority of the industry of the towns over that
of the country seems to have been greater formerly than in the present
times. The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in agriculture to
those of trading and manufacturing stock, than they are said to have done
in the last century, or in the beginning of the present. This change may
be regarded as the necessary, though very late consequence of the
extraordinary encouragement given to the industry of the towns. The stocks
accumulated in them come in time to be so great, that it can no longer be
employed with the ancient profit in that species of industry which is
peculiar to them. That industry has its limits like every other; and the
increase of stock, by increasing the competition, necessarily reduces the
profit. The lowering of profit in the town forces out stock to the
country, where, by creating a new demand for country labour, it
necessarily raises its wages. It then spreads itself, if I my say so, over
the face of the land, and, by being employed in agriculture, is in part
restored to the country, at the expense of which, in a great measure, it
had originally been accumulated in the town. That everywhere in Europe the
greatest improvements of the country have been owing to such over flowings
of the stock originally accumulated in the towns, I shall endeavour to
shew hereafter, and at the same time to demonstrate, that though some
countries have, by this course, attained to a considerable degree of
opulence, it is in itself necessarily slow, uncertain, liable to be
disturbed and interrupted by innumerable accidents, and, in every respect,
contrary to the order of nature and of reason. The interests, prejudices,
laws, and customs, which have given occasion to it, I shall endeavour to
explain as fully and distinctly as I can in the third and fourth books of
this Inquiry.
People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the public,
or in some contrivance to raise prices. It is impossible, indeed, to
prevent such meetings, by any law which either could be executed, or would
be consistent with liberty and justice. But though the law cannot hinder
people of the same trade from sometimes assembling together, it ought to
do nothing to facilitate such assemblies, much less to render them
necessary.
A regulation which obliges all those of the same trade in a particular
town to enter their names and places of abode in a public register,
facilitates such assemblies. It connects individuals who might never
otherwise be known to one another, and gives every man of the trade a
direction where to find every other man of it.
A regulation which enables those of the same trade to tax themselves, in
order to provide for their poor, their sick, their widows and orphans, by
giving them a common interest to manage, renders such assemblies
necessary.
An incorporation not only renders them necessary, but makes the act of the
majority binding upon the whole. In a free trade, an effectual combination
cannot be established but by the unanimous consent of every single trader,
and it cannot last longer than every single trader continues of the same
mind. The majority of a corporation can enact a bye-law, with proper
penalties, which will limit the competition more effectually and more
durably than any voluntary combination whatever.
The pretence that corporations are necessary for the better government of
the trade, is without any foundation. The real and effectual discipline
which is exercised over a workman, is not that of his corporation, but
that of his customers. It is the fear of losing their employment which
restrains his frauds and corrects his negligence. An exclusive corporation
necessarily weakens the force of this discipline. A particular set of
workmen must then be employed, let them behave well or ill. It is upon
this account that, in many large incorporated towns, no tolerable workmen
are to be found, even in some of the most necessary trades. If you would
have your work tolerably executed, it must be done in the suburbs, where
the workmen, having no exclusive privilege, have nothing but their
character to depend upon, and you must then smuggle it into the town as
well as you can.
It is in this manner that the policy of Europe, by restraining the
competition in some employments to a smaller number than would otherwise
be disposed to enter into them, occasions a very important inequality in
the whole of the advantages and disadvantages of the different employments
of labour and stock.
Secondly, the policy of Europe, by increasing the competition in some
employments beyond what it naturally would be, occasions another
inequality, of an opposite kind, in the whole of the advantages and
disadvantages of the different employments of labour and stock.
It has been considered as of so much importance that a proper number of
young people should be educated for certain professions, that sometimes
the public, and sometimes the piety of private founders, have established
many pensions, scholarships, exhibitions, bursaries, etc. for this
purpose, which draw many more people into those trades than could
otherwise pretend to follow them. In all Christian countries, I believe,
the education of the greater part of churchmen is paid for in this
manner. Very few of them are educated altogether at their own expense.
The long, tedious, and expensive education, therefore, of those who are,
will not always procure them a suitable reward, the church being crowded
with people, who, in order to get employment, are willing to accept of a
much smaller recompence than what such an education would otherwise have
entitled them to; and in this manner the competition of the poor takes
away the reward of the rich. It would be indecent, no doubt, to compare
either a curate or a chaplain with a journeyman in any common trade. The
pay of a curate or chaplain, however, may very properly be considered as
of the same nature with the wages of a journeyman. They are all three
paid for their work according to the contract which they may happen to
make with their respective superiors. Till after the middle of the
fourteenth century, five merks, containing about as much silver as ten
pounds of our present money, was in England the usual pay of a curate or
a stipendiary parish priest, as we find it regulated by the decrees of
several different national councils. At the same period, fourpence a-day,
containing the same quantity of silver as a shilling of our present
money, was declared to be the pay of a master mason; and threepence
a-day, equal to ninepence of our present money, that of a journeyman
mason. {See the Statute of Labourers, 25, Ed. III.} The wages of both
these labourers, therefore, supposing them to have been constantly
employed, were much superior to those of the curate. The wages of the
master mason, supposing him to have been without employment one-third of
the year, would have fully equalled them. By the 12th of Queen Anne, c.
12. it is declared, “That whereas, for want of sufficient
maintenance and encouragement to curates, the cures have, in several
places, been meanly supplied, the bishop is, therefore, empowered to
appoint, by writing under his hand and seal, a sufficient certain stipend
or allowance, not exceeding fifty, and not less than twenty pounds
a-year”. Forty pounds a-year is reckoned at present very good pay
for a curate; and, notwithstanding this act of parliament, there are many
curacies under twenty pounds a-year. There are journeymen shoemakers in
London who earn forty pounds a-year, and there is scarce an industrious
workman of any kind in that metropolis who does not earn more than
twenty. This last sum, indeed, does not exceed what is frequently earned
by common labourers in many country parishes. Whenever the law has
attempted to regulate the wages of workmen, it has always been rather to
lower them than to raise them. But the law has, upon many occasions,
attempted to raise the wages of curates, and, for the dignity of the
church, to oblige the rectors of parishes to give them more than the
wretched maintenance which they themselves might be willing to accept of.
And, in both cases, the law seems to have been equally ineffectual, and
has never either been able to raise the wages of curates, or to sink
those of labourers to the degree that was intended; because it has never
been able to hinder either the one from being willing to accept of less
than the legal allowance, on account of the indigence of their situation
and the multitude of their competitors, or the other from receiving more,
on account of the contrary competition of those who expected to derive
either profit or pleasure from employing them.
The great benefices and other ecclesiastical dignities support the honour
of the church, notwithstanding the mean circumstances of some of its
inferior members. The respect paid to the profession, too, makes some
compensation even to them for the meanness of their pecuniary recompence.
In England, and in all Roman catholic countries, the lottery of the church
is in reality much more advantageous than is necessary. The example of the
churches of Scotland, of Geneva, and of several other protestant churches,
may satisfy us, that in so creditable a profession, in which education is
so easily procured, the hopes of much more moderate benefices will draw a
sufficient number of learned, decent, and respectable men into holy
orders.
In professions in which there are no benefices, such as law and physic, if
an equal proportion of people were educated at the public expense, the
competition would soon be so great as to sink very much their pecuniary
reward. It might then not be worth any man’s while to educate his son to
either of those professions at his own expense. They would be entirely
abandoned to such as had been educated by those public charities, whose
numbers and necessities would oblige them in general to content themselves
with a very miserable recompence, to the entire degradation of the now
respectable professions of law and physic.
That unprosperous race of men, commonly called men of letters, are pretty
much in the situation which lawyers and physicians probably would be in,
upon the foregoing supposition. In every part of Europe, the greater part
of them have been educated for the church, but have been hindered by
different reasons from entering into holy orders. They have generally,
therefore, been educated at the public expense; and their numbers are
everywhere so great, as commonly to reduce the price of their labour to a
very paltry recompence.
Before the invention of the art of printing, the only employment by which
a man of letters could make any thing by his talents, was that of a public
or private teacher, or by communicating to other people the curious and
useful knowledge which he had acquired himself; and this is still surely a
more honourable, a more useful, and, in general, even a more profitable
employment than that other of writing for a bookseller, to which the art
of printing has given occasion. The time and study, the genius, knowledge,
and application requisite to qualify an eminent teacher of the sciences,
are at least equal to what is necessary for the greatest practitioners in
law and physic. But the usual reward of the eminent teacher bears no
proportion to that of the lawyer or physician, because the trade of the
one is crowded with indigent people, who have been brought up to it at the
public expense; whereas those of the other two are encumbered with very
few who have not been educated at their own. The usual recompence,
however, of public and private teachers, small as it may appear, would
undoubtedly be less than it is, if the competition of those yet more
indigent men of letters, who write for bread, was not taken out of the
market. Before the invention of the art of printing, a scholar and a
beggar seem to have been terms very nearly synonymous. The different
governors of the universities, before that time, appear to have often
granted licences to their scholars to beg.
In ancient times, before any charities of this kind had been established
for the education of indigent people to the learned professions, the
rewards of eminent teachers appear to have been much more considerable.
Isocrates, in what is called his discourse against the sophists,
reproaches the teachers of his own times with inconsistency. “They make
the most magnificent promises to their scholars,” says he, “and undertake
to teach them to be wise, to be happy, and to be just; and, in return for
so important a service, they stipulate the paltry reward of four or five
minae.” “They who teach wisdom,” continues he, “ought certainly to be wise
themselves; but if any man were to sell such a bargain for such a price,
he would be convicted of the most evident folly.” He certainly does not
mean here to exaggerate the reward, and we may be assured that it was not
less than he represents it. Four minae were equal to thirteen pounds six
shillings and eightpence; five minae to sixteen pounds thirteen shillings
and fourpence. Something not less than the largest of those two sums,
therefore, must at that time have been usually paid to the most eminent
teachers at Athens. Isocrates himself demanded ten minae, or £ 33:6:8 from
each scholar. When he taught at Athens, he is said to have had a hundred
scholars. I understand this to be the number whom he taught at one time,
or who attended what we would call one course of lectures; a number which
will not appear extraordinary from so great a city to so famous a teacher,
who taught, too, what was at that time the most fashionable of all
sciences, rhetoric. He must have made, therefore, by each course of
lectures, a thousand minae, or £ 3335:6:8. A thousand minae, accordingly,
is said by Plutarch, in another place, to have been his didactron, or
usual price of teaching. Many other eminent teachers in those times appear
to have acquired great fortunes. Georgias made a present to the temple of
Delphi of his own statue in solid gold. We must not, I presume, suppose
that it was as large as the life. His way of living, as well as that of
Hippias and Protagoras, two other eminent teachers of those times, is
represented by Plato as splendid, even to ostentation. Plato himself is
said to have lived with a good deal of magnificence. Aristotle, after
having been tutor to Alexander, and most munificently rewarded, as it is
universally agreed, both by him and his father, Philip, thought it worth
while, notwithstanding, to return to Athens, in order to resume the
teaching of his school. Teachers of the sciences were probably in those
times less common than they came to be in an age or two afterwards, when
the competition had probably somewhat reduced both the price of their
labour and the admiration for their persons. The most eminent of them,
however, appear always to have enjoyed a degree of consideration much
superior to any of the like profession in the present times. The Athenians
sent Carneades the academic, and Diogenes the stoic, upon a solemn embassy
to Rome; and though their city had then declined from its former grandeur,
it was still an independent and considerable republic.
Carneades, too, was a Babylonian by birth; and as there never was a people
more jealous of admitting foreigners to public offices than the Athenians,
their consideration for him must have been very great.
This inequality is, upon the whole, perhaps rather advantageous than
hurtful to the public. It may somewhat degrade the profession of a public
teacher; but the cheapness of literary education is surely an advantage
which greatly overbalances this trifling inconveniency. The public, too,
might derive still greater benefit from it, if the constitution of those
schools and colleges, in which education is carried on, was more
reasonable than it is at present through the greater part of Europe.
Thirdly, the policy of Europe, by obstructing the free circulation of
labour and stock, both from employment to employment, and from place to
place, occasions, in some cases, a very inconvenient inequality in the
whole of the advantages and disadvantages of their different employments.
The statute of apprenticeship obstructs the free circulation of labour
from one employment to another, even in the same place. The exclusive
privileges of corporations obstruct it from one place to another, even in
the same employment.
It frequently happens, that while high wages are given to the workmen in
one manufacture, those in another are obliged to content themselves with
bare subsistence. The one is in an advancing state, and has therefore a
continual demand for new hands; the other is in a declining state, and the
superabundance of hands is continually increasing. Those two manufactures
may sometimes be in the same town, and sometimes in the same
neighbourhood, without being able to lend the least assistance to one
another. The statute of apprenticeship may oppose it in the one case, and
both that and an exclusive corporation in the other. In many different
manufactures, however, the operations are so much alike, that the workmen
could easily change trades with one another, if those absurd laws did not
hinder them. The arts of weaving plain linen and plain silk, for example,
are almost entirely the same. That of weaving plain woollen is somewhat
different; but the difference is so insignificant, that either a linen or
a silk weaver might become a tolerable workman in a very few days. If any
of those three capital manufactures, therefore, were decaying, the workmen
might find a resource in one of the other two which was in a more
prosperous condition; and their wages would neither rise too high in the
thriving, nor sink too low in the decaying manufacture. The linen
manufacture, indeed, is in England, by a particular statute, open to every
body; but as it is not much cultivated through the greater part of the
country, it can afford no general resource to the work men of other
decaying manufactures, who, wherever the statute of apprenticeship takes
place, have no other choice, but either to come upon the parish, or to
work as common labourers; for which, by their habits, they are much worse
qualified than for any sort of manufacture that bears any resemblance to
their own. They generally, therefore, chuse to come upon the parish.
Whatever obstructs the free circulation of labour from one employment to
another, obstructs that of stock likewise; the quantity of stock which can
be employed in any branch of business depending very much upon that of the
labour which can be employed in it. Corporation laws, however, give less
obstruction to the free circulation of stock from one place to another,
than to that of labour. It is everywhere much easier for a wealthy
merchant to obtain the privilege of trading in a town-corporate, than for
a poor artificer to obtain that of working in it.
The obstruction which corporation laws give to the free circulation of
labour is common, I believe, to every part of Europe. That which is given
to it by the poor laws is, so far as I know, peculiar to England. It
consists in the difficulty which a poor man finds in obtaining a
settlement, or even in being allowed to exercise his industry in any
parish but that to which he belongs. It is the labour of artificers and
manufacturers only of which the free circulation is obstructed by
corporation laws. The difficulty of obtaining settlements obstructs even
that of common labour. It may be worth while to give some account of the
rise, progress, and present state of this disorder, the greatest, perhaps,
of any in the police of England.
When, by the destruction of monasteries, the poor had been deprived of the
charity of those religious houses, after some other ineffectual attempts
for their relief, it was enacted, by the 43d of Elizabeth, c. 2. that
every parish should be bound to provide for its own poor, and that
overseers of the poor should be annually appointed, who, with the
church-wardens, should raise, by a parish rate, competent sums for this
purpose.
By this statute, the necessity of providing for their own poor was
indispensably imposed upon every parish. Who were to be considered as the
poor of each parish became, therefore, a question of some importance. This
question, after some variation, was at last determined by the 13th and
14th of Charles II. when it was enacted, that forty days undisturbed
residence should gain any person a settlement in any parish; but that
within that time it should be lawful for two justices of the peace, upon
complaint made by the church-wardens or overseers of the poor, to remove
any new inhabitant to the parish where he was last legally settled; unless
he either rented a tenement of ten pounds a-year, or could give such
security for the discharge of the parish where he was then living, as
those justices should judge sufficient.
Some frauds, it is said, were committed in consequence of this statute;
parish officers sometimes bribing their own poor to go clandestinely to
another parish, and, by keeping themselves concealed for forty days, to
gain a settlement there, to the discharge of that to which they properly
belonged. It was enacted, therefore, by the 1st of James II. that the
forty days undisturbed residence of any person necessary to gain a
settlement, should be accounted only from the time of his delivering
notice, in writing, of the place of his abode and the number of his
family, to one of the church-wardens or overseers of the parish where he
came to dwell.
But parish officers, it seems, were not always more honest with regard to
their own than they had been with regard to other parishes, and sometimes
connived at such intrusions, receiving the notice, and taking no proper
steps in consequence of it. As every person in a parish, therefore, was
supposed to have an interest to prevent as much as possible their being
burdened by such intruders, it was further enacted by the 3rd of William
III. that the forty days residence should be accounted only from the
publication of such notice in writing on Sunday in the church, immediately
after divine service.
“After all,” says Doctor Burn, “this kind of settlement, by continuing
forty days after publication of notice in writing, is very seldom
obtained; and the design of the acts is not so much for gaining of
settlements, as for the avoiding of them by persons coming into a parish
clandestinely, for the giving of notice is only putting a force upon the
parish to remove. But if a person’s situation is such, that it is doubtful
whether he is actually removable or not, he shall, by giving of notice,
compel the parish either to allow him a settlement uncontested, by
suffering him to continue forty days, or by removing him to try the
right.”
This statute, therefore, rendered it almost impracticable for a poor man
to gain a new settlement in the old way, by forty days inhabitancy. But
that it might not appear to preclude altogether the common people of one
parish from ever establishing themselves with security in another, it
appointed four other ways by which a settlement might be gained without
any notice delivered or published. The first was, by being taxed to parish
rates and paying them; the second, by being elected into an annual parish
office, and serving in it a year; the third, by serving an apprenticeship
in the parish; the fourth, by being hired into service there for a year,
and continuing in the same service during the whole of it. Nobody can gain
a settlement by either of the two first ways, but by the public deed of
the whole parish, who are too well aware of the consequences to adopt any
new-comer, who has nothing but his labour to support him, either by taxing
him to parish rates, or by electing him into a parish office.
No married man can well gain any settlement in either of the two last
ways. An apprentice is scarce ever married; and it is expressly enacted,
that no married servant shall gain any settlement by being hired for a
year. The principal effect of introducing settlement by service, has been
to put out in a great measure the old fashion of hiring for a year; which
before had been so customary in England, that even at this day, if no
particular term is agreed upon, the law intends that every servant is
hired for a year. But masters are not always willing to give their
servants a settlement by hiring them in this manner; and servants are not
always willing to be so hired, because, as every last settlement
discharges all the foregoing, they might thereby lose their original
settlement in the places of their nativity, the habitation of their
parents and relations.
No independent workman, it is evident, whether labourer or artificer, is
likely to gain any new settlement, either by apprenticeship or by service.
When such a person, therefore, carried his industry to a new parish, he
was liable to be removed, how healthy and industrious soever, at the
caprice of any churchwarden or overseer, unless he either rented a
tenement of ten pounds a-year, a thing impossible for one who has nothing
but his labour to live by, or could give such security for the discharge
of the parish as two justices of the peace should judge sufficient.
What security they shall require, indeed, is left altogether to their
discretion; but they cannot well require less than thirty pounds, it
having been enacted, that the purchase even of a freehold estate of less
than thirty pounds value, shall not gain any person a settlement, as not
being sufficient for the discharge of the parish. But this is a security
which scarce any man who lives by labour can give; and much greater
security is frequently demanded.
In order to restore, in some measure, that free circulation of labour
which those different statutes had almost entirely taken away, the
invention of certificates was fallen upon. By the 8th and 9th of William
III. it was enacted that if any person should bring a certificate from the
parish where he was last legally settled, subscribed by the church-wardens
and overseers of the poor, and allowed by two justices of the peace, that
every other parish should be obliged to receive him; that he should not be
removable merely upon account of his being likely to become chargeable,
but only upon his becoming actually chargeable; and that then the parish
which granted the certificate should be obliged to pay the expense both of
his maintenance and of his removal. And in order to give the most perfect
security to the parish where such certificated man should come to reside,
it was further enacted by the same statute, that he should gain no
settlement there by any means whatever, except either by renting a
tenement of ten pounds a-year, or by serving upon his own account in an
annual parish office for one whole year; and consequently neither by
notice nor by service, nor by apprenticeship, nor by paying parish rates.
By the 12th of Queen Anne, too, stat. 1, c.18, it was further enacted,
that neither the servants nor apprentices of such certificated man should
gain any settlement in the parish where he resided under such certificate.
How far this invention has restored that free circulation of labour, which
the preceding statutes had almost entirely taken away, we may learn from
the following very judicious observation of Doctor Burn. “It is obvious,”
says he, “that there are divers good reasons for requiring certificates
with persons coming to settle in any place; namely, that persons residing
under them can gain no settlement, neither by apprenticeship, nor by
service, nor by giving notice, nor by paying parish rates; that they can
settle neither apprentices nor servants; that if they become chargeable,
it is certainly known whither to remove them, and the parish shall be paid
for the removal, and for their maintenance in the mean time; and that, if
they fall sick, and cannot be removed, the parish which gave the
certificate must maintain them; none of all which can be without a
certificate. Which reasons will hold proportionably for parishes not
granting certificates in ordinary cases; for it is far more than an equal
chance, but that they will have the certificated persons again, and in a
worse condition.” The moral of this observation seems to be, that
certificates ought always to be required by the parish where any poor man
comes to reside, and that they ought very seldom to be granted by that
which he purposes to leave. “There is somewhat of hardship in this matter
of certificates,” says the same very intelligent author, in his History of
the Poor Laws, “by putting it in the power of a parish officer to imprison
a man as it were for life, however inconvenient it may be for him to
continue at that place where he has had the misfortune to acquire what is
called a settlement, or whatever advantage he may propose himself by
living elsewhere.”
Though a certificate carries along with it no testimonial of good
behaviour, and certifies nothing but that the person belongs to the parish
to which he really does belong, it is altogether discretionary in the
parish officers either to grant or to refuse it. A mandamus was once moved
for, says Doctor Burn, to compel the church-wardens and overseers to sign
a certificate; but the Court of King’s Bench rejected the motion as a very
strange attempt.
The very unequal price of labour which we frequently find in England, in
places at no great distance from one another, is probably owing to the
obstruction which the law of settlements gives to a poor man who would
carry his industry from one parish to another without a certificate. A
single man, indeed who is healthy and industrious, may sometimes reside by
sufferance without one; but a man with a wife and family who should
attempt to do so, would, in most parishes, be sure of being removed; and,
if the single man should afterwards marry, he would generally be removed
likewise. The scarcity of hands in one parish, therefore, cannot always be
relieved by their superabundance in another, as it is constantly in
Scotland, and I believe, in all other countries where there is no
difficulty of settlement. In such countries, though wages may sometimes
rise a little in the neighbourhood of a great town, or wherever else there
is an extraordinary demand for labour, and sink gradually as the distance
from such places increases, till they fall back to the common rate of the
country; yet we never meet with those sudden and unaccountable differences
in the wages of neighbouring places which we sometimes find in England,
where it is often more difficult for a poor man to pass the artificial
boundary of a parish, than an arm of the sea, or a ridge of high
mountains, natural boundaries which sometimes separate very distinctly
different rates of wages in other countries.
To remove a man who has committed no misdemeanour, from the parish where
he chooses to reside, is an evident violation of natural liberty and
justice. The common people of England, however, so jealous of their
liberty, but like the common people of most other countries, never rightly
understanding wherein it consists, have now, for more than a century
together, suffered themselves to be exposed to this oppression without a
remedy. Though men of reflection, too, have sometimes complained of the
law of settlements as a public grievance; yet it has never been the object
of any general popular clamour, such as that against general warrants, an
abusive practice undoubtedly, but such a one as was not likely to occasion
any general oppression. There is scarce a poor man in England, of forty
years of age, I will venture to say, who has not, in some part of his
life, felt himself most cruelly oppressed by this ill-contrived law of
settlements.
I shall conclude this long chapter with observing, that though anciently
it was usual to rate wages, first by general laws extending over the whole
kingdom, and afterwards by particular orders of the justices of peace in
every particular county, both these practices have now gone entirely into
disuse. “By the experience of above four hundred years,” says Doctor Burn,
“it seems time to lay aside all endeavours to bring under strict
regulations, what in its own nature seems incapable of minute limitation;
for if all persons in the same kind of work were to receive equal wages,
there would be no emulation, and no room left for industry or ingenuity.”
Particular acts of parliament, however, still attempt sometimes to
regulate wages in particular trades, and in particular places. Thus the
8th of George III. prohibits, under heavy penalties, all master tailors in
London, and five miles round it, from giving, and their workmen from
accepting, more than two shillings and sevenpence halfpenny a-day, except
in the case of a general mourning. Whenever the legislature attempts to
regulate the differences between masters and their workmen, its
counsellors are always the masters. When the regulation, therefore, is in
favour of the workmen, it is always just and equitable; but it is
sometimes otherwise when in favour of the masters. Thus the law which
obliges the masters in several different trades to pay their workmen in
money, and not in goods, is quite just and equitable. It imposes no real
hardship upon the masters. It only obliges them to pay that value in
money, which they pretended to pay, but did not always really pay, in
goods. This law is in favour of the workmen; but the 8th of George III. is
in favour of the masters. When masters combine together, in order to
reduce the wages of their workmen, they commonly enter into a private bond
or agreement, not to give more than a certain wage, under a certain
penalty. Were the workmen to enter into a contrary combination of the same
kind, not to accept of a certain wage, under a certain penalty, the law
would punish them very severely; and, if it dealt impartially, it would
treat the masters in the same manner. But the 8th of George III. enforces
by law that very regulation which masters sometimes attempt to establish
by such combinations. The complaint of the workmen, that it puts the
ablest and most industrious upon the same footing with an ordinary
workman, seems perfectly well founded.
In ancient times, too, it was usual to attempt to regulate the profits of
merchants and other dealers, by regulating the price of provisions and
ether goods. The assize of bread is, so far as I know, the only remnant of
this ancient usage. Where there is an exclusive corporation, it may,
perhaps, be proper to regulate the price of the first necessary of life;
but, where there is none, the competition will regulate it much better
than any assize. The method of fixing the assize of bread, established by
the 31st of George II. could not be put in practice in Scotland, on
account of a defect in the law, its execution depending upon the office of
clerk of the market, which does not exist there. This defect was not
remedied till the third of George III. The want of an assize occasioned no
sensible inconveniency; and the establishment of one in the few places
where it has yet taken place has produced no sensible advantage. In the
greater part of the towns in Scotland, however, there is an incorporation
of bakers, who claim exclusive privileges, though they are not very
strictly guarded. The proportion between the different rates, both of
wages and profit, in the different employments of labour and stock, seems
not to be much affected, as has already been observed, by the riches or
poverty, the advancing, stationary, or declining state of the society.
Such revolutions in the public welfare, though they affect the general
rates both of wages and profit, must, in the end, affect them equally in
all different employments. The proportion between them, therefore, must
remain the same, and cannot well be altered, at least for any considerable
time, by any such revolutions.
CHAPTER XI.
OF THE RENT OF LAND.
Rent, considered as the price paid for the use of land, is naturally the
highest which the tenant can afford to pay in the actual circumstances of
the land. In adjusting the terms of the lease, the landlord endeavours to
leave him no greater share of the produce than what is sufficient to keep
up the stock from which he furnishes the seed, pays the labour, and
purchases and maintains the cattle and other instruments of husbandry,
together with the ordinary profits of farming stock in the neighbourhood.
This is evidently the smallest share with which the tenant can content
himself, without being a loser, and the landlord seldom means to leave him
any more. Whatever part of the produce, or, what is the same thing,
whatever part of its price, is over and above this share, he naturally
endeavours to reserve to himself as the rent of his land, which is
evidently the highest the tenant can afford to pay in the actual
circumstances of the land. Sometimes, indeed, the liberality, more
frequently the ignorance, of the landlord, makes him accept of somewhat
less than this portion; and sometimes, too, though more rarely, the
ignorance of the tenant makes him undertake to pay somewhat more, or to
content himself with somewhat less, than the ordinary profits of farming
stock in the neighbourhood. This portion, however, may still be considered
as the natural rent of land, or the rent at which it is naturally meant
that land should, for the most part, be let.
The rent of land, it may be thought, is frequently no more than a
reasonable profit or interest for the stock laid out by the landlord upon
its improvement. This, no doubt, may be partly the case upon some
occasions; for it can scarce ever be more than partly the case. The
landlord demands a rent even for unimproved land, and the supposed
interest or profit upon the expense of improvement is generally an
addition to this original rent. Those improvements, besides, are not
always made by the stock of the landlord, but sometimes by that of the
tenant. When the lease comes to be renewed, however, the landlord commonly
demands the same augmentation of rent as if they had been all made by his
own.
He sometimes demands rent for what is altogether incapable of human
improvements. Kelp is a species of sea-weed, which, when burnt, yields an
alkaline salt, useful for making glass, soap, and for several other
purposes. It grows in several parts of Great Britain, particularly in
Scotland, upon such rocks only as lie within the high-water mark, which
are twice every day covered with the sea, and of which the produce,
therefore, was never augmented by human industry. The landlord, however,
whose estate is bounded by a kelp shore of this kind, demands a rent for
it as much as for his corn-fields.
The sea in the neighbourhood of the islands of Shetland is more than
commonly abundant in fish, which makes a great part of the subsistence of
their inhabitants. But, in order to profit by the produce of the water,
they must have a habitation upon the neighbouring land. The rent of the
landlord is in proportion, not to what the farmer can make by the land,
but to what he can make both by the land and the water. It is partly paid
in sea-fish; and one of the very few instances in which rent makes a part
of the price of that commodity, is to be found in that country.
The rent of land, therefore, considered as the price paid for the use of
the land, is naturally a monopoly price. It is not at all proportioned to
what the landlord may have laid out upon the improvement of the land, or
to what he can afford to take, but to what the farmer can afford to give.
Such parts only of the produce of land can commonly be brought to market,
of which the ordinary price is sufficient to replace the stock which must
be employed in bringing them thither, together with its ordinary profits.
If the ordinary price is more than this, the surplus part of it will
naturally go to the rent of the land. If it is not more, though the
commodity may be brought to market, it can afford no rent to the landlord.
Whether the price is, or is not more, depends upon the demand.
There are some parts of the produce of land, for which the demand must
always be such as to afford a greater price than what is sufficient to
bring them to market; and there are others for which it either may or may
not be such as to afford this greater price. The former must always afford
a rent to the landlord. The latter sometimes may and sometimes may not,
according to different circumstances.
Rent, it is to be observed, therefore, enters into the composition of the
price of commodities in a different way from wages and profit. High or low
wages and profit are the causes of high or low price; high or low rent is
the effect of it. It is because high or low wages and profit must be paid,
in order to bring a particular commodity to market, that its price is high
or low. But it is because its price is high or low, a great deal more, or
very little more, or no more, than what is sufficient to pay those wages
and profit, that it affords a high rent, or a low rent, or no rent at all.
The particular consideration, first, of those parts of the produce of land
which always afford some rent; secondly, of those which sometimes may and
sometimes may not afford rent; and, thirdly, of the variations which, in
the different periods of improvement, naturally take place in the relative
value of those two different sorts of rude produce, when compared both
with one another and with manufactured commodities, will divide this
chapter into three parts.
PART I.—Of the Produce of Land which always affords Rent.
As men, like all other animals, naturally multiply in proportion to the
means of their subsistence, food is always more or less in demand. It can
always purchase or command a greater or smaller quantity of labour, and
somebody can always be found who is willing to do something in order to
obtain it. The quantity of labour, indeed, which it can purchase, is not
always equal to what it could maintain, if managed in the most economical
manner, on account of the high wages which are sometimes given to labour;
but it can always purchase such a quantity of labour as it can maintain,
according to the rate at which that sort of labour is commonly maintained
in the neighbourhood.
But land, in almost any situation, produces a greater quantity of food
than what is sufficient to maintain all the labour necessary for bringing
it to market, in the most liberal way in which that labour is ever
maintained. The surplus, too, is always more than sufficient to replace
the stock which employed that labour, together with its profits.
Something, therefore, always remains for a rent to the landlord.
The most desert moors in Norway and Scotland produce some sort of pasture
for cattle, of which the milk and the increase are always more than
sufficient, not only to maintain all the labour necessary for tending
them, and to pay the ordinary profit to the farmer or the owner of the
herd or flock, but to afford some small rent to the landlord. The rent
increases in proportion to the goodness of the pasture. The same extent of
ground not only maintains a greater number of cattle, but as they are
brought within a smaller compass, less labour becomes requisite to tend
them, and to collect their produce. The landlord gains both ways; by the
increase of the produce, and by the diminution of the labour which must be
maintained out of it.
The rent of land not only varies with its fertility, whatever be its
produce, but with its situation, whatever be its fertility. Land in the
neighbourhood of a town gives a greater rent than land equally fertile in
a distant part of the country. Though it may cost no more labour to
cultivate the one than the other, it must always cost more to bring the
produce of the distant land to market. A greater quantity of labour,
therefore, must be maintained out of it; and the surplus, from which are
drawn both the profit of the farmer and the rent of the landlord, must be
diminished. But in remote parts of the country, the rate of profit, as has
already been shewn, is generally higher than in the neighbourhood of a
large town. A smaller proportion of this diminished surplus, therefore,
must belong to the landlord.
Good roads, canals, and navigable rivers, by diminishing the expense of
carriage, put the remote parts of the country more nearly upon a level
with those in the neighbourhood of the town. They are upon that account
the greatest of all improvements. They encourage the cultivation of the
remote, which must always be the most extensive circle of the country.
They are advantageous to the town by breaking down the monopoly of the
country in its neighbourhood. They are advantageous even to that part of
the country. Though they introduce some rival commodities into the old
market, they open many new markets to its produce. Monopoly, besides, is a
great enemy to good management, which can never be universally
established, but in consequence of that free and universal competition
which forces every body to have recourse to it for the sake of self
defence. It is not more than fifty years ago, that some of the counties in
the neighbourhood of London petitioned the parliament against the
extension of the turnpike roads into the remoter counties. Those remoter
counties, they pretended, from the cheapness of labour, would be able to
sell their grass and corn cheaper in the London market than themselves,
and would thereby reduce their rents, and ruin their cultivation. Their
rents, however, have risen, and their cultivation has been improved since
that time.
A corn field of moderate fertility produces a much greater quantity of
food for man, than the best pasture of equal extent. Though its
cultivation requires much more labour, yet the surplus which remains after
replacing the seed and maintaining all that labour, is likewise much
greater. If a pound of butcher’s meat, therefore, was never supposed to be
worth more than a pound of bread, this greater surplus would everywhere be
of greater value and constitute a greater fund, both for the profit of the
farmer and the rent of the landlord. It seems to have done so universally
in the rude beginnings of agriculture.
But the relative values of those two different species of food, bread and
butcher’s meat, are very different in the different periods of
agriculture. In its rude beginnings, the unimproved wilds, which then
occupy the far greater part of the country, are all abandoned to cattle.
There is more butcher’s meat than bread; and bread, therefore, is the food
for which there is the greatest competition, and which consequently brings
the greatest price. At Buenos Ayres, we are told by Ulloa, four reals,
one-and-twenty pence halfpenny sterling, was, forty or fifty years ago,
the ordinary price of an ox, chosen from a herd of two or three hundred.
He says nothing of the price of bread, probably because he found nothing
remarkable about it. An ox there, he says, costs little more than the
labour of catching him. But corn can nowhere be raised without a great
deal of labour; and in a country which lies upon the river Plate, at that
time the direct road from Europe to the silver mines of Potosi, the
money-price of labour could be very cheap. It is otherwise when
cultivation is extended over the greater part of the country. There is
then more bread than butcher’s meat. The competition changes its
direction, and the price of butcher’s meat becomes greater than the price
of bread.
By the extension, besides, of cultivation, the unimproved wilds become
insufficient to supply the demand for butcher’s meat. A great part of the
cultivated lands must be employed in rearing and fattening cattle; of
which the price, therefore, must be sufficient to pay, not only the labour
necessary for tending them, but the rent which the landlord, and the
profit which the farmer, could have drawn from such land employed in
tillage. The cattle bred upon the most uncultivated moors, when brought to
the same market, are, in proportion to their weight or goodness, sold at
the same price as those which are reared upon the most improved land. The
proprietors of those moors profit by it, and raise the rent of their land
in proportion to the price of their cattle. It is not more than a century
ago, that in many parts of the Highlands of Scotland, butcher’s meat was
as cheap or cheaper than even bread made of oatmeal. The Union opened the
market of England to the Highland cattle. Their ordinary price, at
present, is about three times greater than at the beginning of the
century, and the rents of many Highland estates have been tripled and
quadrupled in the same time. In almost every part of Great Britain, a
pound of the best butcher’s meat is, in the present times, generally worth
more than two pounds of the best white bread; and in plentiful years it is
sometimes worth three or four pounds.
It is thus that, in the progress of improvement, the rent and profit of
unimproved pasture come to be regulated in some measure by the rent and
profit of what is improved, and these again by the rent and profit of
corn. Corn is an annual crop; butcher’s meat, a crop which requires four
or five years to grow. As an acre of land, therefore, will produce a much
smaller quantity of the one species of food than of the other, the
inferiority of the quantity must be compensated by the superiority of the
price. If it was more than compensated, more corn-land would be turned
into pasture; and if it was not compensated, part of what was in pasture
would be brought back into corn.
This equality, however, between the rent and profit of grass and those of
corn; of the land of which the immediate produce is food for cattle, and
of that of which the immediate produce is food for men, must be understood
to take place only through the greater part of the improved lands of a
great country. In some particular local situations it is quite otherwise,
and the rent and profit of grass are much superior to what can be made by
corn.
Thus, in the neighbourhood of a great town, the demand for milk, and for
forage to horses, frequently contribute, together with the high price of
butcher’s meat, to raise the value of grass above what may be called its
natural proportion to that of corn. This local advantage, it is evident,
cannot be communicated to the lands at a distance.
Particular circumstances have sometimes rendered some countries so
populous, that the whole territory, like the lands in the neighbourhood of
a great town, has not been sufficient to produce both the grass and the
corn necessary for the subsistence of their inhabitants. Their lands,
therefore, have been principally employed in the production of grass, the
more bulky commodity, and which cannot be so easily brought from a great
distance; and corn, the food of the great body of the people, has been
chiefly imported from foreign countries. Holland is at present in this
situation; and a considerable part of ancient Italy seems to have been so
during the prosperity of the Romans. To feed well, old Cato said, as we
are told by Cicero, was the first and most profitable thing in the
management of a private estate; to feed tolerably well, the second; and to
feed ill, the third. To plough, he ranked only in the fourth place of
profit and advantage. Tillage, indeed, in that part of ancient Italy which
lay in the neighbour hood of Rome, must have been very much discouraged by
the distributions of corn which were frequently made to the people, either
gratuitously, or at a very low price. This corn was brought from the
conquered provinces, of which several, instead of taxes, were obliged to
furnish a tenth part of their produce at a stated price, about sixpence
a-peck, to the republic. The low price at which this corn was distributed
to the people, must necessarily have sunk the price of what could be
brought to the Roman market from Latium, or the ancient territory of Rome,
and must have discouraged its cultivation in that country.
In an open country, too, of which the principal produce is corn, a
well-inclosed piece of grass will frequently rent higher than any corn
field in its neighbourhood. It is convenient for the maintenance of the
cattle employed in the cultivation of the corn; and its high rent is, in
this case, not so properly paid from the value of its own produce, as from
that of the corn lands which are cultivated by means of it. It is likely
to fall, if ever the neighbouring lands are completely inclosed. The
present high rent of inclosed land in Scotland seems owing to the scarcity
of inclosure, and will probably last no longer than that scarcity. The
advantage of inclosure is greater for pasture than for corn. It saves the
labour of guarding the cattle, which feed better, too, when they are not
liable to be disturbed by their keeper or his dog.
But where there is no local advantage of this kind, the rent and profit of
corn, or whatever else is the common vegetable food of the people, must
naturally regulate upon the land which is fit for producing it, the rent
and profit of pasture.
The use of the artificial grasses, of turnips, carrots, cabbages, and the
other expedients which have been fallen upon to make an equal quantity of
land feed a greater number of cattle than when in natural grass, should
somewhat reduce, it might be expected, the superiority which, in an
improved country, the price of butcher’s meat naturally has over that of
bread. It seems accordingly to have done so; and there is some reason for
believing that, at least in the London market, the price of butcher’s
meat, in proportion to the price of bread, is a good deal lower in the
present times than it was in the beginning of the last century.
In the Appendix to the life of Prince Henry, Doctor Birch has given us an
account of the prices of butcher’s meat as commonly paid by that prince.
It is there said, that the four quarters of an ox, weighing six hundred
pounds, usually cost him nine pounds ten shillings, or thereabouts; that
is thirty-one shillings and eight-pence per hundred pounds weight. Prince
Henry died on the 6th of November 1612, in the nineteenth year of his age.
In March 1764, there was a parliamentary inquiry into the causes of the
high price of provisions at that time. It was then, among other proof to
the same purpose, given in evidence by a Virginia merchant, that in March
1763, he had victualled his ships for twentyfour or twenty-five shillings
the hundred weight of beef, which he considered as the ordinary price;
whereas, in that dear year, he had paid twenty-seven shillings for the
same weight and sort. This high price in 1764 is, however, four shillings
and eight-pence cheaper than the ordinary price paid by Prince Henry; and
it is the best beef only, it must be observed, which is fit to be salted
for those distant voyages.
The price paid by Prince Henry amounts to 3d. ⅘ths per pound weight of
the whole carcase, coarse and choice pieces taken together; and at that
rate the choice pieces could not have been sold by retail for less than
4½d. or 5d. the pound.
In the parliamentary inquiry in 1764, the witnesses stated the price of
the choice pieces of the best beef to be to the consumer 4d. and 4½d. the
pound; and the coarse pieces in general to be from seven farthings to 2½d.
and 2¾d.; and this, they said, was in general one halfpenny dearer than
the same sort of pieces had usually been sold in the month of March. But
even this high price is still a good deal cheaper than what we can well
suppose the ordinary retail price to have been in the time of Prince
Henry.
During the first twelve years of the last century, the average price of
the best wheat at the Windsor market was £ 1:18:3½d. the quarter of nine
Winchester bushels.
But in the twelve years preceding 1764 including that year, the average
price of the same measure of the best wheat at the same market was £
2:1:9½d.
In the first twelve years of the last century, therefore, wheat appears to
have been a good deal cheaper, and butcher’s meat a good deal dearer, than
in the twelve years preceding 1764, including that year.
In all great countries, the greater part of the cultivated lands are
employed in producing either food for men or food for cattle. The rent and
profit of these regulate the rent and profit of all other cultivated land.
If any particular produce afforded less, the land would soon be turned
into corn or pasture; and if any afforded more, some part of the lands in
corn or pasture would soon be turned to that produce.
Those productions, indeed, which require either a greater original expense
of improvement, or a greater annual expense of cultivation in order to fit
the land for them, appear commonly to afford, the one a greater rent, the
other a greater profit, than corn or pasture. This superiority, however,
will seldom be found to amount to more than a reasonable interest or
compensation for this superior expense.
In a hop garden, a fruit garden, a kitchen garden, both the rent of the
landlord, and the profit of the farmer, are generally greater than in
acorn or grass field. But to bring the ground into this condition requires
more expense. Hence a greater rent becomes due to the landlord. It
requires, too, a more attentive and skilful management. Hence a greater
profit becomes due to the farmer. The crop, too, at least in the hop and
fruit garden, is more precarious. Its price, therefore, besides
compensating all occasional losses, must afford something like the profit
of insurance. The circumstances of gardeners, generally mean, and always
moderate, may satisfy us that their great ingenuity is not commonly
over-recompensed. Their delightful art is practised by so many rich people
for amusement, that little advantage is to be made by those who practise
it for profit; because the persons who should naturally be their best
customers, supply themselves with all their most precious productions.
The advantage which the landlord derives from such improvements, seems at
no time to have been greater than what was sufficient to compensate the
original expense of making them. In the ancient husbandry, after the
vineyard, a well-watered kitchen garden seems to have been the part of the
farm which was supposed to yield the most valuable produce. But
Democritus, who wrote upon husbandry about two thousand years ago, and who
was regarded by the ancients as one of the fathers of the art, thought
they did not act wisely who inclosed a kitchen garden. The profit, he
said, would not compensate the expense of a stone-wall: and bricks (he
meant, I suppose, bricks baked in the sun) mouldered with the rain and the
winter-storm, and required continual repairs. Columella, who reports this
judgment of Democritus, does not controvert it, but proposes a very frugal
method of inclosing with a hedge of brambles and briars, which he says he
had found by experience to be both a lasting and an impenetrable fence;
but which, it seems, was not commonly known in the time of Democritus.
Palladius adopts the opinion of Columella, which had before been
recommended by Varro. In the judgment of those ancient improvers, the
produce of a kitchen garden had, it seems, been little more than
sufficient to pay the extraordinary culture and the expense of watering;
for in countries so near the sun, it was thought proper, in those times as
in the present, to have the command of a stream of water, which could be
conducted to every bed in the garden. Through the greater part of Europe,
a kitchen garden is not at present supposed to deserve a better inclosure
than that recommended by Columella. In Great Britain, and some other
northern countries, the finer fruits cannot be brought to perfection but
by the assistance of a wall. Their price, therefore, in such countries,
must be sufficient to pay the expense of building and maintaining what
they cannot be had without. The fruit-wall frequently surrounds the
kitchen garden, which thus enjoys the benefit of an inclosure which its
own produce could seldom pay for.
That the vineyard, when properly planted and brought to perfection, was
the most valuable part of the farm, seems to have been an undoubted maxim
in the ancient agriculture, as it is in the modern, through all the wine
countries. But whether it was advantageous to plant a new vineyard, was a
matter of dispute among the ancient Italian husbandmen, as we learn from
Columella. He decides, like a true lover of all curious cultivation, in
favour of the vineyard; and endeavours to shew, by a comparison of the
profit and expense, that it was a most advantageous improvement. Such
comparisons, however, between the profit and expense of new projects are
commonly very fallacious; and in nothing more so than in agriculture. Had
the gain actually made by such plantations been commonly as great as he
imagined it might have been, there could have been no dispute about it.
The same point is frequently at this day a matter of controversy in the
wine countries. Their writers on agriculture, indeed, the lovers and
promoters of high cultivation, seem generally disposed to decide with
Columella in favour of the vineyard. In France, the anxiety of the
proprietors of the old vineyards to prevent the planting of any new ones,
seems to favour their opinion, and to indicate a consciousness in those
who must have the experience, that this species of cultivation is at
present in that country more profitable than any other. It seems, at the
same time, however, to indicate another opinion, that this superior profit
can last no longer than the laws which at present restrain the free
cultivation of the vine. In 1731, they obtained an order of council,
prohibiting both the planting of new vineyards, and the renewal of these
old ones, of which the cultivation had been interrupted for two years,
without a particular permission from the king, to be granted only in
consequence of an information from the intendant of the province,
certifying that he had examined the land, and that it was incapable of any
other culture. The pretence of this order was the scarcity of corn and
pasture, and the superabundance of wine. But had this superabundance been
real, it would, without any order of council, have effectually prevented
the plantation of new vineyards, by reducing the profits of this species
of cultivation below their natural proportion to those of corn and
pasture. With regard to the supposed scarcity of corn occasioned by the
multiplication of vineyards, corn is nowhere in France more carefully
cultivated than in the wine provinces, where the land is fit for producing
it: as in Burgundy, Guienne, and the Upper Languedoc. The numerous hands
employed in the one species of cultivation necessarily encourage the
other, by affording a ready market for its produce. To diminish the number
of those who are capable of paying it, is surely a most unpromising
expedient for encouraging the cultivation of corn. It is like the policy
which would promote agriculture, by discouraging manufactures.
The rent and profit of those productions, therefore, which require either
a greater original expense of improvement in order to fit the land for
them, or a greater annual expense of cultivation, though often much
superior to those of corn and pasture, yet when they do no more than
compensate such extraordinary expense, are in reality regulated by the
rent and profit of those common crops.
It sometimes happens, indeed, that the quantity of land which can be
fitted for some particular produce, is too small to supply the effectual
demand. The whole produce can be disposed of to those who are willing to
give somewhat more than what is sufficient to pay the whole rent, wages,
and profit, necessary for raising and bringing it to market, according to
their natural rates, or according to the rates at which they are paid in
the greater part of other cultivated land. The surplus part of the price
which remains after defraying the whole expense of improvement and
cultivation, may commonly, in this case, and in this case only, bear no
regular proportion to the like surplus in corn or pasture, but may exceed
it in almost any degree; and the greater part of this excess naturally
goes to the rent of the landlord.
The usual and natural proportion, for example, between the rent and profit
of wine, and those of corn and pasture, must be understood to take place
only with regard to those vineyards which produce nothing but good common
wine, such as can be raised almost anywhere, upon any light, gravelly, or
sandy soil, and which has nothing to recommend it but its strength and
wholesomeness. It is with such vineyards only, that the common land of the
country can be brought into competition; for with those of a peculiar
quality it is evident that it cannot.
The vine is more affected by the difference of soils than any other
fruit-tree. From some it derives a flavour which no culture or management
can equal, it is supposed, upon any other. This flavour, real or
imaginary, is sometimes peculiar to the produce of a few vineyards;
sometimes it extends through the greater part of a small district, and
sometimes through a considerable part of a large province. The whole
quantity of such wines that is brought to market falls short of the
effectual demand, or the demand of those who would be willing to pay the
whole rent, profit, and wages, necessary for preparing and bringing them
thither, according to the ordinary rate, or according to the rate at which
they are paid in common vineyards. The whole quantity, therefore, can be
disposed of to those who are willing to pay more, which necessarily raises
their price above that of common wine. The difference is greater or less,
according as the fashionableness and scarcity of the wine render the
competition of the buyers more or less eager. Whatever it be, the greater
part of it goes to the rent of the landlord. For though such vineyards are
in general more carefully cultivated than most others, the high price of
the wine seems to be, not so much the effect, as the cause of this careful
cultivation. In so valuable a produce, the loss occasioned by negligence
is so great, as to force even the most careless to attention. A small part
of this high price, therefore, is sufficient to pay the wages of the
extraordinary labour bestowed upon their cultivation, and the profits of
the extraordinary stock which puts that labour into motion.
The sugar colonies possessed by the European nations in the West Indies
may be compared to those precious vineyards. Their whole produce falls
short of the effectual demand of Europe, and can be disposed of to those
who are willing to give more than what is sufficient to pay the whole
rent, profit, and wages, necessary for preparing and bringing it to
market, according to the rate at which they are commonly paid by any other
produce. In Cochin China, the finest white sugar generally sells for three
piastres the quintal, about thirteen shillings and sixpence of our money,
as we are told by Mr Poivre {Voyages d’un Philosophe.}, a very careful
observer of the agriculture of that country. What is there called the
quintal, weighs from a hundred and fifty to two hundred Paris pounds, or a
hundred and seventy-five Paris pounds at a medium, which reduces the price
of the hundred weight English to about eight shillings sterling; not a
fourth part of what is commonly paid for the brown or muscovada sugars
imported from our colonies, and not a sixth part of what is paid for the
finest white sugar. The greater part of the cultivated lands in Cochin
China are employed in producing corn and rice, the food of the great body
of the people. The respective prices of corn, rice, and sugar, are there
probably in the natural proportion, or in that which naturally takes place
in the different crops of the greater part of cultivated land, and which
recompenses the landlord and farmer, as nearly as can be computed,
according to what is usually the original expense of improvement, and the
annual expense of cultivation. But in our sugar colonies, the price of
sugar bears no such proportion to that of the produce of a rice or corn
field either in Europe or America. It is commonly said that a sugar
planter expects that the rum and the molasses should defray the whole
expense of his cultivation, and that his sugar should be all clear profit.
If this be true, for I pretend not to affirm it, it is as if a corn farmer
expected to defray the expense of his cultivation with the chaff and the
straw, and that the grain should be all clear profit. We see frequently
societies of merchants in London, and other trading towns, purchase waste
lands in our sugar colonies, which they expect to improve and cultivate
with profit, by means of factors and agents, notwithstanding the great
distance and the uncertain returns, from the defective administration of
justice in those countries. Nobody will attempt to improve and cultivate
in the same manner the most fertile lands of Scotland, Ireland, or the
corn provinces of North America, though, from the more exact
administration of justice in these countries, more regular returns might
be expected.
In Virginia and Maryland, the cultivation of tobacco is preferred, as most
profitable, to that of corn. Tobacco might be cultivated with advantage
through the greater part of Europe; but, in almost every part of Europe,
it has become a principal subject of taxation; and to collect a tax from
every different farm in the country where this plant might happen to be
cultivated, would be more difficult, it has been supposed, than to levy
one upon its importation at the custom-house. The cultivation of tobacco
has, upon this account, been most absurdly prohibited through the greater
part of Europe, which necessarily gives a sort of monopoly to the
countries where it is allowed; and as Virginia and Maryland produce the
greatest quantity of it, they share largely, though with some competitors,
in the advantage of this monopoly. The cultivation of tobacco, however,
seems not to be so advantageous as that of sugar. I have never even heard
of any tobacco plantation that was improved and cultivated by the capital
of merchants who resided in Great Britain; and our tobacco colonies send
us home no such wealthy planters as we see frequently arrive from our
sugar islands. Though, from the preference given in those colonies to the
cultivation of tobacco above that of corn, it would appear that the
effectual demand of Europe for tobacco is not completely supplied, it
probably is more nearly so than that for sugar; and though the present
price of tobacco is probably more than sufficient to pay the whole rent,
wages, and profit, necessary for preparing and bringing it to market,
according to the rate at which they are commonly paid in corn land, it
must not be so much more as the present price of sugar. Our tobacco
planters, accordingly, have shewn the same fear of the superabundance of
tobacco, which the proprietors of the old vineyards in France have of the
superabundance of wine. By act of assembly, they have restrained its
cultivation to six thousand plants, supposed to yield a thousand weight of
tobacco, for every negro between sixteen and sixty years of age. Such a
negro, over and above this quantity of tobacco, can manage, they reckon,
four acres of Indian corn. To prevent the market from being overstocked,
too, they have sometimes, in plentiful years, we are told by Dr Douglas
{Douglas’s Summary, vol. ii. p. 379, 373.} (I suspect he has been ill
informed), burnt a certain quantity of tobacco for every negro, in the
same manner as the Dutch are said to do of spices. If such violent methods
are necessary to keep up the present price of tobacco, the superior
advantage of its culture over that of corn, if it still has any, will not
probably be of long continuance.
It is in this manner that the rent of the cultivated land, of which the
produce is human food, regulates the rent of the greater part of other
cultivated land. No particular produce can long afford less, because the
land would immediately be turned to another use; and if any particular
produce commonly affords more, it is because the quantity of land which
can be fitted for it is too small to supply the effectual demand.
In Europe, corn is the principal produce of land, which serves immediately
for human food. Except in particular situations, therefore, the rent of
corn land regulates in Europe that of all other cultivated land. Britain
need envy neither the vineyards of France, nor the olive plantations of
Italy. Except in particular situations, the value of these is regulated by
that of corn, in which the fertility of Britain is not much inferior to
that of either of those two countries.
If, in any country, the common and favourite vegetable food of the people
should be drawn from a plant of which the most common land, with the same,
or nearly the same culture, produced a much greater quantity than the most
fertile does of corn; the rent of the landlord, or the surplus quantity of
food which would remain to him, after paying the labour, and replacing the
stock of the farmer, together with its ordinary profits, would necessarily
be much greater. Whatever was the rate at which labour was commonly
maintained in that country, this greater surplus could always maintain a
greater quantity of it, and, consequently, enable the landlord to purchase
or command a greater quantity of it. The real value of his rent, his real
power and authority, his command of the necessaries and conveniencies of
life with which the labour of other people could supply him, would
necessarily be much greater.
A rice field produces a much greater quantity of food than the most
fertile corn field. Two crops in the year, from thirty to sixty bushels
each, are said to be the ordinary produce of an acre. Though its
cultivation, therefore, requires more labour, a much greater surplus
remains after maintaining all that labour. In those rice countries,
therefore, where rice is the common and favourite vegetable food of the
people, and where the cultivators are chiefly maintained with it, a
greater share of this greater surplus should belong to the landlord than
in corn countries. In Carolina, where the planters, as in other British
colonies, are generally both farmers and landlords, and where rent,
consequently, is confounded with profit, the cultivation of rice is found
to be more profitable than that of corn, though their fields produce only
one crop in the year, and though, from the prevalence of the customs of
Europe, rice is not there the common and favourite vegetable food of the
people.
A good rice field is a bog at all seasons, and at one season a bog covered
with water. It is unfit either for corn, or pasture, or vineyard, or,
indeed, for any other vegetable produce that is very useful to men; and
the lands which are fit for those purposes are not fit for rice. Even in
the rice countries, therefore, the rent of rice lands cannot regulate the
rent of the other cultivated land which can never be turned to that
produce.
The food produced by a field of potatoes is not inferior in quantity to
that produced by a field of rice, and much superior to what is produced by
a field of wheat. Twelve thousand weight of potatoes from an acre of land
is not a greater produce than two thousand weight of wheat. The food or
solid nourishment, indeed, which can be drawn from each of those two
plants, is not altogether in proportion to their weight, on account of the
watery nature of potatoes. Allowing, however, half the weight of this root
to go to water, a very large allowance, such an acre of potatoes will
still produce six thousand weight of solid nourishment, three times the
quantity produced by the acre of wheat. An acre of potatoes is cultivated
with less expense than an acre of wheat; the fallow, which generally
precedes the sowing of wheat, more than compensating the hoeing and other
extraordinary culture which is always given to potatoes. Should this root
ever become in any part of Europe, like rice in some rice countries, the
common and favourite vegetable food of the people, so as to occupy the
same proportion of the lands in tillage, which wheat and other sorts of
grain for human food do at present, the same quantity of cultivated land
would maintain a much greater number of people; and the labourers being
generally fed with potatoes, a greater surplus would remain after
replacing all the stock, and maintaining all the labour employed in
cultivation. A greater share of this surplus, too, would belong to the
landlord. Population would increase, and rents would rise much beyond what
they are at present.
The land which is fit for potatoes, is fit for almost every other useful
vegetable. If they occupied the same proportion of cultivated land which
corn does at present, they would regulate, in the same manner, the rent of
the greater part of other cultivated land.
In some parts of Lancashire, it is pretended, I have been told, that bread
of oatmeal is a heartier food for labouring people than wheaten bread, and
I have frequently heard the same doctrine held in Scotland. I am, however,
somewhat doubtful of the truth of it. The common people in Scotland, who
are fed with oatmeal, are in general neither so strong nor so handsome as
the same rank of people in England, who are fed with wheaten bread. They
neither work so well, nor look so well; and as there is not the same
difference between the people of fashion in the two countries, experience
would seem to shew, that the food of the common people in Scotland is not
so suitable to the human constitution as that of their neighbours of the
same rank in England. But it seems to be otherwise with potatoes. The
chairmen, porters, and coal-heavers in London, and those unfortunate women
who live by prostitution, the strongest men and the most beautiful women
perhaps in the British dominions, are said to be, the greater part of
them, from the lowest rank of people in Ireland, who are generally fed
with this root. No food can afford a more decisive proof of its nourishing
quality, or of its being peculiarly suitable to the health of the human
constitution.
It is difficult to preserve potatoes through the year, and impossible to
store them like corn, for two or three years together. The fear of not
being able to sell them before they rot, discourages their cultivation,
and is, perhaps, the chief obstacle to their ever becoming in any great
country, like bread, the principal vegetable food of all the different
ranks of the people.
PART II.—Of the Produce of Land, which sometimes does, and sometimes
does not, afford Rent.
Human food seems to be the only produce of land, which always and
necessarily affords some rent to the landlord. Other sorts of produce
sometimes may, and sometimes may not, according to different
circumstances.
After food, clothing and lodging are the two great wants of mankind.
Land, in its original rude state, can afford the materials of clothing and
lodging to a much greater number of people than it can feed. In its
improved state, it can sometimes feed a greater number of people than it
can supply with those materials; at least in the way in which they require
them, and are willing to pay for them. In the one state, therefore, there
is always a superabundance of these materials, which are frequently, upon
that account, of little or no value. In the other, there is often a
scarcity, which necessarily augments their value. In the one state, a
great part of them is thrown away as useless and the price of what is used
is considered as equal only to the labour and expense of fitting it for
use, and can, therefore, afford no rent to the landlord. In the other,
they are all made use of, and there is frequently a demand for more than
can be had. Somebody is always willing to give more for every part of
them, than what is sufficient to pay the expense of bringing them to
market. Their price, therefore, can always afford some rent to the
landlord.
The skins of the larger animals were the original materials of clothing.
Among nations of hunters and shepherds, therefore, whose food consists
chiefly in the flesh of those animals, everyman, by providing himself with
food, provides himself with the materials of more clothing than he can
wear. If there was no foreign commerce, the greater part of them would be
thrown away as things of no value. This was probably the case among the
hunting nations of North America, before their country was discovered by
the Europeans, with whom they now exchange their surplus peltry, for
blankets, fire-arms, and brandy, which gives it some value. In the present
commercial state of the known world, the most barbarous nations, I
believe, among whom land property is established, have some foreign
commerce of this kind, and find among their wealthier neighbours such a
demand for all the materials of clothing, which their land produces, and
which can neither be wrought up nor consumed at home, as raises their
price above what it costs to send them to those wealthier neighbours. It
affords, therefore, some rent to the landlord. When the greater part of
the Highland cattle were consumed on their own hills, the exportation of
their hides made the most considerable article of the commerce of that
country, and what they were exchanged for afforded some addition to the
rent of the Highland estates. The wool of England, which in old times,
could neither be consumed nor wrought up at home, found a market in the
then wealthier and more industrious country of Flanders, and its price
afforded something to the rent of the land which produced it. In countries
not better cultivated than England was then, or than the Highlands of
Scotland are now, and which had no foreign commerce, the materials of
clothing would evidently be so superabundant, that a great part of them
would be thrown away as useless, and no part could afford any rent to the
landlord.
The materials of lodging cannot always be transported to so great a
distance as those of clothing, and do not so readily become an object of
foreign commerce. When they are superabundant in the country which
produces them, it frequently happens, even in the present commercial state
of the world, that they are of no value to the landlord. A good stone
quarry in the neighbourhood of London would afford a considerable rent. In
many parts of Scotland and Wales it affords none. Barren timber for
building is of great value in a populous and well-cultivated country, and
the land which produces it affords a considerable rent. But in many parts
of North America, the landlord would be much obliged to any body who would
carry away the greater part of his large trees. In some parts of the
Highlands of Scotland, the bark is the only part of the wood which, for
want of roads and water-carriage, can be sent to market; the timber is
left to rot upon the ground. When the materials of lodging are so
superabundant, the part made use of is worth only the labour and expense
of fitting it for that use. It affords no rent to the landlord, who
generally grants the use of it to whoever takes the trouble of asking it.
The demand of wealthier nations, however, sometimes enables him to get a
rent for it. The paving of the streets of London has enabled the owners of
some barren rocks on the coast of Scotland to draw a rent from what never
afforded any before. The woods of Norway, and of the coasts of the Baltic,
find a market in many parts of Great Britain, which they could not find at
home, and thereby afford some rent to their proprietors.
Countries are populous, not in proportion to the number of people whom
their produce can clothe and lodge, but in proportion to that of those
whom it can feed. When food is provided, it is easy to find the necessary
clothing and lodging. But though these are at hand, it may often be
difficult to find food. In some parts of the British dominions, what is
called a house may be built by one day’s labour of one man. The simplest
species of clothing, the skins of animals, require somewhat more labour to
dress and prepare them for use. They do not, however, require a great
deal. Among savage or barbarous nations, a hundredth, or little more than
a hundredth part of the labour of the whole year, will be sufficient to
provide them with such clothing and lodging as satisfy the greater part of
the people. All the other ninety-nine parts are frequently no more than
enough to provide them with food.
But when, by the improvement and cultivation of land, the labour of one
family can provide food for two, the labour of half the society becomes
sufficient to provide food for the whole. The other half, therefore, or at
least the greater part of them, can be employed in providing other things,
or in satisfying the other wants and fancies of mankind. Clothing and
lodging, household furniture, and what is called equipage, are the
principal objects of the greater part of those wants and fancies. The rich
man consumes no more food than his poor neighbour. In quality it may be
very different, and to select and prepare it may require more labour and
art; but in quantity it is very nearly the same. But compare the spacious
palace and great wardrobe of the one, with the hovel and the few rags of
the other, and you will be sensible that the difference between their
clothing, lodging, and household furniture, is almost as great in quantity
as it is in quality. The desire of food is limited in every man by the
narrow capacity of the human stomach; but the desire of the conveniencies
and ornaments of building, dress, equipage, and household furniture, seems
to have no limit or certain boundary. Those, therefore, who have the
command of more food than they themselves can consume, are always willing
to exchange the surplus, or, what is the same thing, the price of it, for
gratifications of this other kind. What is over and above satisfying the
limited desire, is given for the amusement of those desires which cannot
be satisfied, but seem to be altogether endless. The poor, in order to
obtain food, exert themselves to gratify those fancies of the rich; and to
obtain it more certainly, they vie with one another in the cheapness and
perfection of their work. The number of workmen increases with the
increasing quantity of food, or with the growing improvement and
cultivation of the lands; and as the nature of their business admits of
the utmost subdivisions of labour, the quantity of materials which they
can work up, increases in a much greater proportion than their numbers.
Hence arises a demand for every sort of material which human invention can
employ, either usefully or ornamentally, in building, dress, equipage, or
household furniture; for the fossils and minerals contained in the bowels
of the earth, the precious metals, and the precious stones.
Food is, in this manner, not only the original source of rent, but every
other part of the produce of land which afterwards affords rent, derives
that part of its value from the improvement of the powers of labour in
producing food, by means of the improvement and cultivation of land.
Those other parts of the produce of land, however, which afterwards afford
rent, do not afford it always. Even in improved and cultivated countries,
the demand for them is not always such as to afford a greater price than
what is sufficient to pay the labour, and replace, together with its
ordinary profits, the stock which must be employed in bringing them to
market. Whether it is or is not such, depends upon different
circumstances.
Whether a coal mine, for example, can afford any rent, depends partly upon
its fertility, and partly upon its situation.
A mine of any kind may be said to be either fertile or barren, according
as the quantity of mineral which can be brought from it by a certain
quantity of labour, is greater or less than what can be brought by an
equal quantity from the greater part of other mines of the same kind.
Some coal mines, advantageously situated, cannot be wrought on account of
their barrenness. The produce does not pay the expense. They can afford
neither profit nor rent.
There are some, of which the produce is barely sufficient to pay the
labour, and replace, together with its ordinary profits, the stock
employed in working them. They afford some profit to the undertaker of the
work, but no rent to the landlord. They can be wrought advantageously by
nobody but the landlord, who, being himself the undertaker of the work,
gets the ordinary profit of the capital which he employs in it. Many coal
mines in Scotland are wrought in this manner, and can be wrought in no
other. The landlord will allow nobody else to work them without paying
some rent, and nobody can afford to pay any.
Other coal mines in the same country, sufficiently fertile, cannot be
wrought on account of their situation. A quantity of mineral, sufficient
to defray the expense of working, could be brought from the mine by the
ordinary, or even less than the ordinary quantity of labour: but in an
inland country, thinly inhabited, and without either good roads or
water-carriage, this quantity could not be sold.
Coals are a less agreeable fuel than wood: they are said too to be less
wholesome. The expense of coals, therefore, at the place where they are
consumed, must generally be somewhat less than that of wood.
The price of wood, again, varies with the state of agriculture, nearly in
the same manner, and exactly for the same reason, as the price of cattle.
In its rude beginnings, the greater part of every country is covered with
wood, which is then a mere incumbrance, of no value to the landlord, who
would gladly give it to any body for the cutting. As agriculture advances,
the woods are partly cleared by the progress of tillage, and partly go to
decay in consequence of the increased number of cattle. These, though they
do not increase in the same proportion as corn, which is altogether the
acquisition of human industry, yet multiply under the care and protection
of men, who store up in the season of plenty what may maintain them in
that of scarcity; who, through the whole year, furnish them with a greater
quantity of food than uncultivated nature provides for them; and who, by
destroying and extirpating their enemies, secure them in the free
enjoyment of all that she provides. Numerous herds of cattle, when allowed
to wander through the woods, though they do not destroy the old trees,
hinder any young ones from coming up; so that, in the course of a century
or two, the whole forest goes to ruin. The scarcity of wood then raises
its price. It affords a good rent; and the landlord sometimes finds that
he can scarce employ his best lands more advantageously than in growing
barren timber, of which the greatness of the profit often compensates the
lateness of the returns. This seems, in the present times, to be nearly
the state of things in several parts of Great Britain, where the profit of
planting is found to be equal to that of either corn or pasture. The
advantage which the landlord derives from planting can nowhere exceed, at
least for any considerable time, the rent which these could afford him;
and in an inland country, which is highly cultivated, it will frequently
not fall much short of this rent. Upon the sea-coast of a well-improved
country, indeed, if coals can conveniently be had for fuel, it may
sometimes be cheaper to bring barren timber for building from less
cultivated foreign countries than to raise it at home. In the new town of
Edinburgh, built within these few years, there is not, perhaps, a single
stick of Scotch timber.
Whatever may be the price of wood, if that of coals is such that the
expense of a coal fire is nearly equal to that of a wood one we may be
assured, that at that place, and in these circumstances, the price of
coals is as high as it can be. It seems to be so in some of the inland
parts of England, particularly in Oxfordshire, where it is usual, even in
the fires of the common people, to mix coals and wood together, and where
the difference in the expense of those two sorts of fuel cannot,
therefore, be very great. Coals, in the coal countries, are everywhere
much below this highest price. If they were not, they could not bear the
expense of a distant carriage, either by land or by water. A small
quantity only could be sold; and the coal masters and the coal proprietors
find it more for their interest to sell a great quantity at a price
somewhat above the lowest, than a small quantity at the highest. The most
fertile coal mine, too, regulates the price of coals at all the other
mines in its neighbourhood. Both the proprietor and the undertaker of the
work find, the one that he can get a greater rent, the other that he can
get a greater profit, by somewhat underselling all their neighbours. Their
neighbours are soon obliged to sell at the same price, though they cannot
so well afford it, and though it always diminishes, and sometimes takes
away altogether, both their rent and their profit. Some works are
abandoned altogether; others can afford no rent, and can be wrought only
by the proprietor.
The lowest price at which coals can be sold for any considerable time, is,
like that of all other commodities, the price which is barely sufficient
to replace, together with its ordinary profits, the stock which must be
employed in bringing them to market. At a coal mine for which the landlord
can get no rent, but, which he must either work himself or let it alone
altogether, the price of coals must generally be nearly about this price.
Rent, even where coals afford one, has generally a smaller share in their
price than in that of most other parts of the rude produce of land. The
rent of an estate above ground, commonly amounts to what is supposed to be
a third of the gross produce; and it is generally a rent certain and
independent of the occasional variations in the crop. In coal mines, a
fifth of the gross produce is a very great rent, a tenth the common rent;
and it is seldom a rent certain, but depends upon the occasional
variations in the produce. These are so great, that in a country where
thirty years purchase is considered as a moderate price for the property
of a landed estate, ten years purchase is regarded as a good price for
that of a coal mine.
The value of a coal mine to the proprietor, frequently depends as much
upon its situation as upon its fertility. That of a metallic mine depends
more upon its fertility, and less upon its situation. The coarse, and
still more the precious metals, when separated from the ore, are so
valuable, that they can generally bear the expense of a very long land,
and of the most distant sea carriage. Their market is not confined to the
countries in the neighbourhood of the mine, but extends to the whole
world. The copper of Japan makes an article of commerce in Europe; the
iron of Spain in that of Chili and Peru. The silver of Peru finds its way,
not only to Europe, but from Europe to China.
The price of coals in Westmoreland or Shropshire can have little effect on
their price at Newcastle; and their price in the Lionnois can have none at
all. The productions of such distant coal mines can never be brought into
competition with one another. But the productions of the most distant
metallic mines frequently may, and in fact commonly are.
The price, therefore, of the coarse, and still more that of the precious
metals, at the most fertile mines in the world, must necessarily more or
less affect their price at every other in it. The price of copper in Japan
must have some influence upon its price at the copper mines in Europe. The
price of silver in Peru, or the quantity either of labour or of other
goods which it will purchase there, must have some influence on its price,
not only at the silver mines of Europe, but at those of China. After the
discovery of the mines of Peru, the silver mines of Europe were, the
greater part of them, abandoned. The value of silver was so much reduced,
that their produce could no longer pay the expense of working them, or
replace, with a profit, the food, clothes, lodging, and other necessaries
which were consumed in that operation. This was the case, too, with the
mines of Cuba and St. Domingo, and even with the ancient mines of Peru,
after the discovery of those of Potosi. The price of every metal, at every
mine, therefore, being regulated in some measure by its price at the most
fertile mine in the world that is actually wrought, it can, at the greater
part of mines, do very little more than pay the expense of working, and
can seldom afford a very high rent to the landlord. Rent accordingly,
seems at the greater part of mines to have but a small share in the price
of the coarse, and a still smaller in that of the precious metals. Labour
and profit make up the greater part of both.
A sixth part of the gross produce may be reckoned the average rent of the
tin mines of Cornwall, the most fertile that are known in the world, as we
are told by the Rev. Mr Borlace, vice-warden of the stannaries. Some, he
says, afford more, and some do not afford so much. A sixth part of the
gross produce is the rent, too, of several very fertile lead mines in
Scotland.
In the silver mines of Peru, we are told by Frezier and Ulloa, the
proprietor frequently exacts no other acknowledgment from the undertaker
of the mine, but that he will grind the ore at his mill, paying him the
ordinary multure or price of grinding. Till 1736, indeed, the tax of the
king of Spain amounted to one fifth of the standard silver, which till
then might be considered as the real rent of the greater part of the
silver mines of Peru, the richest which have been known in the world. If
there had been no tax, this fifth would naturally have belonged to the
landlord, and many mines might have been wrought which could not then be
wrought, because they could not afford this tax. The tax of the duke of
Cornwall upon tin is supposed to amount to more than five per cent. or one
twentieth part of the value; and whatever may be his proportion, it would
naturally, too, belong to the proprietor of the mine, if tin was duty
free. But if you add one twentieth to one sixth, you will find that the
whole average rent of the tin mines of Cornwall, was to the whole average
rent of the silver mines of Peru, as thirteen to twelve. But the silver
mines of Peru are not now able to pay even this low rent; and the tax upon
silver was, in 1736, reduced from one fifth to one tenth. Even this tax
upon silver, too, gives more temptation to smuggling than the tax of one
twentieth upon tin; and smuggling must be much easier in the precious than
in the bulky commodity. The tax of the king of Spain, accordingly, is said
to be very ill paid, and that of the duke of Cornwall very well. Rent,
therefore, it is probable, makes a greater part of the price of tin at the
most fertile tin mines than it does of silver at the most fertile silver
mines in the world. After replacing the stock employed in working those
different mines, together with its ordinary profits, the residue which
remains to the proprietor is greater, it seems, in the coarse, than in the
precious metal.
Neither are the profits of the undertakers of silver mines commonly very
great in Peru. The same most respectable and well-informed authors
acquaint us, that when any person undertakes to work a new mine in Peru,
he is universally looked upon as a man destined to bankruptcy and ruin,
and is upon that account shunned and avoided by every body. Mining, it
seems, is considered there in the same light as here, as a lottery, in
which the prizes do not compensate the blanks, though the greatness of
some tempts many adventurers to throw away their fortunes in such
unprosperous projects.
As the sovereign, however, derives a considerable part of his revenue from
the produce of silver mines, the law in Peru gives every possible
encouragement to the discovery and working of new ones. Whoever discovers
a new mine, is entitled to measure off two hundred and forty-six feet in
length, according to what he supposes to be the direction of the vein, and
half as much in breadth. He becomes proprietor of this portion of the
mine, and can work it without paving any acknowledgment to the landlord.
The interest of the duke of Cornwall has given occasion to a regulation
nearly of the same kind in that ancient dutchy. In waste and uninclosed
lands, any person who discovers a tin mine may mark out its limits to a
certain extent, which is called bounding a mine. The bounder becomes the
real proprietor of the mine, and may either work it himself, or give it in
lease to another, without the consent of the owner of the land, to whom,
however, a very small acknowledgment must be paid upon working it. In both
regulations, the sacred rights of private property are sacrificed to the
supposed interests of public revenue.
The same encouragement is given in Peru to the discovery and working of
new gold mines; and in gold the king’s tax amounts only to a twentieth
part of the standard rental. It was once a fifth, and afterwards a tenth,
as in silver; but it was found that the work could not bear even the
lowest of these two taxes. If it is rare, however, say the same authors,
Frezier and Ulloa, to find a person who has made his fortune by a silver,
it is still much rarer to find one who has done so by a gold mine. This
twentieth part seems to be the whole rent which is paid by the greater
part of the gold mines of Chili and Peru. Gold, too, is much more liable
to be smuggled than even silver; not only on account of the superior value
of the metal in proportion to its bulk, but on account of the peculiar way
in which nature produces it. Silver is very seldom found virgin, but, like
most other metals, is generally mineralized with some other body, from
which it is impossible to separate it in such quantities as will pay for
the expense, but by a very laborious and tedious operation, which cannot
well be carried on but in work-houses erected for the purpose, and,
therefore, exposed to the inspection of the king’s officers. Gold, on the
contrary, is almost always found virgin. It is sometimes found in pieces
of some bulk; and, even when mixed, in small and almost insensible
particles, with sand, earth, and other extraneous bodies, it can be
separated from them by a very short and simple operation, which can be
carried on in any private house by any body who is possessed of a small
quantity of mercury. If the king’s tax, therefore, is but ill paid upon
silver, it is likely to be much worse paid upon gold; and rent must make a
much smaller part of the price of gold than that of silver.
The lowest price at which the precious metals can be sold, or the smallest
quantity of other goods for which they can be exchanged, during any
considerable time, is regulated by the same principles which fix the
lowest ordinary price of all other goods. The stock which must commonly be
employed, the food, clothes, and lodging, which must commonly be consumed
in bringing them from the mine to the market, determine it. It must at
least be sufficient to replace that stock, with the ordinary profits.
Their highest price, however, seems not to be necessarily determined by
any thing but the actual scarcity or plenty of these metals themselves. It
is not determined by that of any other commodity, in the same manner as
the price of coals is by that of wood, beyond which no scarcity can ever
raise it. Increase the scarcity of gold to a certain degree, and the
smallest bit of it may become more precious than a diamond, and exchange
for a greater quantity of other goods.
The demand for those metals arises partly from their utility, and partly
from their beauty. If you except iron, they are more useful than, perhaps,
any other metal. As they are less liable to rust and impurity, they can
more easily be kept clean; and the utensils, either of the table or the
kitchen, are often, upon that account, more agreeable when made of them. A
silver boiler is more cleanly than a lead, copper, or tin one; and the
same quality would render a gold boiler still better than a silver one.
Their principal merit, however, arises from their beauty, which renders
them peculiarly fit for the ornaments of dress and furniture. No paint or
dye can give so splendid a colour as gilding. The merit of their beauty is
greatly enhanced by their scarcity. With the greater part of rich people,
the chief enjoyment of riches consists in the parade of riches; which, in
their eye, is never so complete as when they appear to possess those
decisive marks of opulence which nobody can possess but themselves. In
their eyes, the merit of an object, which is in any degree either useful
or beautiful, is greatly enhanced by its scarcity, or by the great labour
which it requires to collect any considerable quantity of it; a labour
which nobody can afford to pay but themselves. Such objects they are
willing to purchase at a higher price than things much more beautiful and
useful, but more common. These qualities of utility, beauty, and scarcity,
are the original foundation of the high price of those metals, or of the
great quantity of other goods for which they can everywhere be exchanged.
This value was antecedent to, and independent of their being employed as
coin, and was the quality which fitted them for that employment. That
employment, however, by occasioning a new demand, and by diminishing the
quantity which could be employed in any other way, may have afterwards
contributed to keep up or increase their value.
The demand for the precious stones arises altogether from their beauty.
They are of no use but as ornaments; and the merit of their beauty is
greatly enhanced by their scarcity, or by the difficulty and expense of
getting them from the mine. Wages and profit accordingly make up, upon
most occasions, almost the whole of the high price. Rent comes in but for
a very small share, frequently for no share; and the most fertile mines
only afford any considerable rent. When Tavernier, a jeweller, visited the
diamond mines of Golconda and Visiapour, he was informed that the
sovereign of the country, for whose benefit they were wrought, had ordered
all of them to be shut up except those which yielded the largest and
finest stones. The other, it seems, were to the proprietor not worth the
working.
As the prices, both of the precious metals and of the precious stones, is
regulated all over the world by their price at the most fertile mine in
it, the rent which a mine of either can afford to its proprietor is in
proportion, not to its absolute, but to what may be called its relative
fertility, or to its superiority over other mines of the same kind. If new
mines were discovered, as much superior to those of Potosi, as they were
superior to those of Europe, the value of silver might be so much degraded
as to render even the mines of Potosi not worth the working. Before the
discovery of the Spanish West Indies, the most fertile mines in Europe may
have afforded as great a rent to their proprietors as the richest mines in
Peru do at present. Though the quantity of silver was much less, it might
have exchanged for an equal quantity of other goods, and the proprietor’s
share might have enabled him to purchase or command an equal quantity
either of labour or of commodities.
The value, both of the produce and of the rent, the real revenue which
they afforded, both to the public and to the proprietor, might have been
the same.
The most abundant mines, either of the precious metals, or of the precious
stones, could add little to the wealth of the world. A produce, of which
the value is principally derived from its scarcity, is necessarily
degraded by its abundance. A service of plate, and the other frivolous
ornaments of dress and furniture, could be purchased for a smaller
quantity of commodities; and in this would consist the sole advantage
which the world could derive from that abundance.
It is otherwise in estates above ground. The value, both of their produce
and of their rent, is in proportion to their absolute, and not to their
relative fertility. The land which produces a certain quantity of food,
clothes, and lodging, can always feed, clothe, and lodge, a certain number
of people; and whatever may be the proportion of the landlord, it will
always give him a proportionable command of the labour of those people,
and of the commodities with which that labour can supply him. The value of
the most barren land is not diminished by the neighbourhood of the most
fertile. On the contrary, it is generally increased by it. The great
number of people maintained by the fertile lands afford a market to many
parts of the produce of the barren, which they could never have found
among those whom their own produce could maintain.
Whatever increases the fertility of land in producing food, increases not
only the value of the lands upon which the improvement is bestowed, but
contributes likewise to increase that of many other lands, by creating a
new demand for their produce. That abundance of food, of which, in
consequence of the improvement of land, many people have the disposal
beyond what they themselves can consume, is the great cause of the demand,
both for the precious metals and the precious stones, as well as for every
other conveniency and ornament of dress, lodging, household furniture, and
equipage. Food not only constitutes the principal part of the riches of
the world, but it is the abundance of food which gives the principal part
of their value to many other sorts of riches. The poor inhabitants of Cuba
and St. Domingo, when they were first discovered by the Spaniards, used to
wear little bits of gold as ornaments in their hair and other parts of
their dress. They seemed to value them as we would do any little pebbles
of somewhat more than ordinary beauty, and to consider them as just worth
the picking up, but not worth the refusing to any body who asked them,
They gave them to their new guests at the first request, without seeming
to think that they had made them any very valuable present. They were
astonished to observe the rage of the Spaniards to obtain them; and had no
notion that there could anywhere be a country in which many people had the
disposal of so great a superfluity of food; so scanty always among
themselves, that, for a very small quantity of those glittering baubles,
they would willingly give as much as might maintain a whole family for
many years. Could they have been made to understand this, the passion of
the Spaniards would not have surprised them.
PART III.—Of the variations in the Proportion between the respective
Values of that sort of Produce which always affords Rent, and of that
which sometimes does, and sometimes does not, afford Rent.
The increasing abundance of food, in consequence of the increasing
improvement and cultivation, must necessarily increase the demand for
every part of the produce of land which is not food, and which can be
applied either to use or to ornament. In the whole progress of
improvement, it might, therefore, be expected there should be only one
variation in the comparative values of those two different sorts of
produce. The value of that sort which sometimes does, and sometimes does
not afford rent, should constantly rise in proportion to that which always
affords some rent. As art and industry advance, the materials of clothing
and lodging, the useful fossils and materials of the earth, the precious
metals and the precious stones, should gradually come to be more and more
in demand, should gradually exchange for a greater and a greater quantity
of food; or, in other words, should gradually become dearer and dearer.
This, accordingly, has been the case with most of these things upon most
occasions, and would have been the case with all of them upon all
occasions, if particular accidents had not, upon some occasions, increased
the supply of some of them in a still greater proportion than the demand.
The value of a free-stone quarry, for example, will necessarily increase
with the increasing improvement and population of the country round about
it, especially if it should be the only one in the neighbourhood. But the
value of a silver mine, even though there should not be another within a
thousand miles of it, will not necessarily increase with the improvement
of the country in which it is situated. The market for the produce of a
free-stone quarry can seldom extend more than a few miles round about it,
and the demand must generally be in proportion to the improvement and
population of that small district; but the market for the produce of a
silver mine may extend over the whole known world. Unless the world in
general, therefore, be advancing in improvement and population, the demand
for silver might not be at all increased by the improvement even of a
large country in the neighbourhood of the mine. Even though the world in
general were improving, yet if, in the course of its improvements, new
mines should be discovered, much more fertile than any which had been
known before, though the demand for silver would necessarily increase, yet
the supply might increase in so much a greater proportion, that the real
price of that metal might gradually fall; that is, any given quantity, a
pound weight of it, for example, might gradually purchase or command a
smaller and a smaller quantity of labour, or exchange for a smaller and a
smaller quantity of corn, the principal part of the subsistence of the
labourer.
The great market for silver is the commercial and civilized part of the
world.
If, by the general progress of improvement, the demand of this market
should increase, while, at the same time, the supply did not increase in
the same proportion, the value of silver would gradually rise in
proportion to that of corn. Any given quantity of silver would exchange
for a greater and a greater quantity of corn; or, in other words, the
average money price of corn would gradually become cheaper and cheaper.
If, on the contrary, the supply, by some accident, should increase, for
many years together, in a greater proportion than the demand, that metal
would gradually become cheaper and cheaper; or, in other words, the
average money price of corn would, in spite of all improvements, gradually
become dearer and dearer.
But if, on the other hand, the supply of that metal should increase nearly
in the same proportion as the demand, it would continue to purchase or
exchange for nearly the same quantity of corn; and the average money price
of corn would, in spite of all improvements. continue very nearly the
same.
These three seem to exhaust all the possible combinations of events which
can happen in the progress of improvement; and during the course of the
four centuries preceding the present, if we may judge by what has happened
both in France and Great Britain, each of those three different
combinations seems to have taken place in the European market, and nearly
in the same order, too, in which I have here set them down.
_Digression concerning the Variations in the value of Silver during the
Course of the Four last Centuries._
First Period.—In 1350, and for some time before, the average price
of the quarter of wheat in England seems not to have been estimated lower
than four ounces of silver, Tower weight, equal to about twenty shillings
of our present money. From this price it seems to have fallen gradually to
two ounces of silver, equal to about ten shillings of our present money,
the price at which we find it estimated in the beginning of the sixteenth
century, and at which it seems to have continued to be estimated till
about 1570.
In 1350, being the 25th of Edward III. was enacted what is called the
Statute of Labourers. In the preamble, it complains much of the insolence
of servants, who endeavoured to raise their wages upon their masters. It
therefore ordains, that all servants and labourers should, for the future,
be contented with the same wages and liveries (liveries in those times
signified not only clothes, but provisions) which they had been accustomed
to receive in the 20th year of the king, and the four preceding years;
that, upon this account, their livery-wheat should nowhere be estimated
higher than tenpence a-bushel, and that it should always be in the option
of the master to deliver them either the wheat or the money. Tenpence:
a-bushel, therefore, had, in the 25th of Edward III. been reckoned a very
moderate price of wheat, since it required a particular statute to oblige
servants to accept of it in exchange for their usual livery of provisions;
and it had been reckoned a reasonable price ten years before that, or in
the 16th year of the king, the term to which the statute refers. But in
the 16th year of Edward III. tenpence contained about half an ounce of
silver, Tower weight, and was nearly equal to half-a-crown of our present
money. Four ounces of silver, Tower weight, therefore, equal to six
shillings and eightpence of the money of those times, and to near twenty
shillings of that of the present, must have been reckoned a moderate price
for the quarter of eight bushels.
This statute is surely a better evidence of what was reckoned, in those
times, a moderate price of grain, than the prices of some particular
years, which have generally been recorded by historians and other writers,
on account of their extraordinary dearness or cheapness, and from which,
therefore, it is difficult to form any judgment concerning what may have
been the ordinary price. There are, besides, other reasons for believing
that, in the beginning of the fourteenth century, and for some time
before, the common price of wheat was not less than four ounces of silver
the quarter, and that of other grain in proportion.
In 1309, Ralph de Born, prior of St Augustine’s, Canterbury, gave a feast
upon his installation-day, of which William Thorn has preserved, not only
the bill of fare, but the prices of many particulars. In that feast were
consumed, 1st, fifty-three quarters of wheat, which cost nineteen pounds,
or seven shillings, and twopence a-quarter, equal to about one-and-twenty
shillings and sixpence of our present money; 2dly, fifty-eight quarters of
malt, which cost seventeen pounds ten shillings, or six shillings
a-quarter, equal to about eighteen shillings of our present money; 3dly,
twenty quarters of oats, which cost four pounds, or four shillings
a-quarter, equal to about twelve shillings of our present money. The
prices of malt and oats seem here to be higher than their ordinary
proportion to the price of wheat.
These prices are not recorded, on account of their extraordinary dearness
or cheapness, but are mentioned accidentally, as the prices actually paid
for large quantities of grain consumed at a feast, which was famous for
its magnificence.
In 1262, being the 51st of Henry III. was revived an ancient statute,
called the assize of bread and ale, which, the king says in the preamble,
had been made in the times of his progenitors, some time kings of England.
It is probably, therefore, as old at least as the time of his grandfather,
Henry II. and may have been as old as the Conquest. It regulates the price
of bread according as the prices of wheat may happen to be, from one
shilling to twenty shillings the quarter of the money of those times. But
statutes of this kind are generally presumed to provide with equal care
for all deviations from the middle price, for those below it, as well as
for those above it. Ten shillings, therefore, containing six ounces of
silver, Tower weight, and equal to about thirty shillings of our present
money, must, upon this supposition, have been reckoned the middle price of
the quarter of wheat when this statute was first enacted, and must have
continued to be so in the 51st of Henry III. We cannot, therefore, be very
wrong in supposing that the middle price was not less than one-third of
the highest price at which this statute regulates the price of bread, or
than six shillings and eightpence of the money of those times, containing
four ounces of silver, Tower weight.
From these different facts, therefore, we seem to have some reason to
conclude that, about the middle of the fourteenth century, and for a
considerable time before, the average or ordinary price of the quarter of
wheat was not supposed to be less than four ounces of silver, Tower
weight.
From about the middle of the fourteenth to the beginning of the sixteenth
century, what was reckoned the reasonable and moderate, that is, the
ordinary or average price of wheat, seems to have sunk gradually to about
one half of this price; so as at last to have fallen to about two ounces
of silver, Tower weight, equal to about ten shillings of our present
money. It continued to be estimated at this price till about 1570.
In the household book of Henry, the fifth earl of Northumberland, drawn up
in 1512 there are two different estimations of wheat. In one of them it is
computed at six shilling and eightpence the quarter, in the other at five
shillings and eightpence only. In 1512, six shillings and eightpence
contained only two ounces of silver, Tower weight, and were equal to about
ten shillings of our present money.
From the 25th of Edward III. to the beginning of the reign of Elizabeth,
during the space of more than two hundred years, six shillings and
eightpence, it appears from several different statutes, had continued to
be considered as what is called the moderate and reasonable, that is, the
ordinary or average price of wheat. The quantity of silver, however,
contained in that nominal sum was, during the course of this period,
continually diminishing in consequence of some alterations which were made
in the coin. But the increase of the value of silver had, it seems, so far
compensated the diminution of the quantity of it contained in the same
nominal sum, that the legislature did not think it worth while to attend
to this circumstance.
Thus, in 1436, it was enacted, that wheat might be exported without a
licence when the price was so low as six shillings and eightpence: and in
1463, it was enacted, that no wheat should be imported if the price was
not above six shillings and eightpence the quarter: The legislature had
imagined, that when the price was so low, there could be no inconveniency
in exportation, but that when it rose higher, it became prudent to allow
of importation. Six shillings and eightpence, therefore, containing about
the same quantity of silver as thirteen shillings and fourpence of our
present money (one-third part less than the same nominal sum contained in
the time of Edward III), had, in those times, been considered as what is
called the moderate and reasonable price of wheat.
In 1554, by the 1st and 2nd of Philip and Mary, and in 1558, by the 1st of
Elizabeth, the exportation of wheat was in the same manner prohibited,
whenever the price of the quarter should exceed six shillings and
eightpence, which did not then contain two penny worth more silver than
the same nominal sum does at present. But it had soon been found, that to
restrain the exportation of wheat till the price was so very low, was, in
reality, to prohibit it altogether. In 1562, therefore, by the 5th of
Elizabeth, the exportation of wheat was allowed from certain ports,
whenever the price of the quarter should not exceed ten shillings,
containing nearly the same quantity of silver as the like nominal sum does
at present. This price had at this time, therefore, been considered as
what is called the moderate and reasonable price of wheat. It agrees
nearly with the estimation of the Northumberland book in 1512.
That in France the average price of grain was, in the same manner, much
lower in the end of the fifteenth and beginning of the sixteenth century,
than in the two centuries preceding, has been observed both by Mr Dupré de
St Maur, and by the elegant author of the Essay on the Policy of Grain.
Its price, during the same period, had probably sunk in the same manner
through the greater part of Europe.
This rise in the value of silver, in proportion to that of corn, may
either have been owing altogether to the increase of the demand for that
metal, in consequence of increasing improvement and cultivation, the
supply, in the mean time, continuing the same as before; or, the demand
continuing the same as before, it may have been owing altogether to the
gradual diminution of the supply: the greater part of the mines which were
then known in the world being much exhausted, and, consequently, the
expense of working them much increased; or it may have been owing partly
to the one, and partly to the other of those two circumstances. In the end
of the fifteenth and beginning of the sixteenth centuries, the greater
part of Europe was approaching towards a more settled form of government
than it had enjoyed for several ages before. The increase of security
would naturally increase industry and improvement; and the demand for the
precious metals, as well as for every other luxury and ornament, would
naturally increase with the increase of riches. A greater annual produce
would require a greater quantity of coin to circulate it; and a greater
number of rich people would require a greater quantity of plate and other
ornaments of silver. It is natural to suppose, too, that the greater part
of the mines which then supplied the European market with silver might be
a good deal exhausted, and have become more expensive in the working. They
had been wrought, many of them, from the time of the Romans.
It has been the opinion, however, of the greater part of those who have
written upon the prices of commodities in ancient times, that, from the
Conquest, perhaps from the invasion of Julius Caesar, till the discovery
of the mines of America, the value of silver was continually diminishing.
This opinion they seem to have been led into, partly by the observations
which they had occasion to make upon the prices both of corn and of some
other parts of the rude produce of land, and partly by the popular notion,
that as the quantity of silver naturally increases in every country with
the increase of wealth, so its value diminishes as it quantity increases.
In their observations upon the prices of corn, three different
circumstances seem frequently to have misled them.
First, in ancient times, almost all rents were paid in kind; in a certain
quantity of corn, cattle, poultry, etc. It sometimes happened, however,
that the landlord would stipulate, that he should be at liberty to demand
of the tenant, either the annual payment in kind or a certain sum of money
instead of it. The price at which the payment in kind was in this manner
exchanged for a certain sum of money, is in Scotland called the conversion
price. As the option is always in the landlord to take either the
substance or the price, it is necessary, for the safety of the tenant,
that the conversion price should rather be below than above the average
market price. In many places, accordingly, it is not much above one half
of this price. Through the greater part of Scotland this custom still
continues with regard to poultry, and in some places with regard to
cattle. It might probably have continued to take place, too, with regard
to corn, had not the institution of the public fiars put an end to it.
These are annual valuations, according to the judgment of an assize, of
the average price of all the different sorts of grain, and of all the
different qualities of each, according to the actual market price in every
different county. This institution rendered it sufficiently safe for the
tenant, and much more convenient for the landlord, to convert, as they
call it, the corn rent, rather at what should happen to be the price of
the fiars of each year, than at any certain fixed price. But the writers
who have collected the prices of corn in ancient times seem frequently to
have mistaken what is called in Scotland the conversion price for the
actual market price. Fleetwood acknowledges, upon one occasion, that he
had made this mistake. As he wrote his book, however, for a particular
purpose, he does not think proper to make this acknowledgment till after
transcribing this conversion price fifteen times. The price is eight
shillings the quarter of wheat. This sum in 1423, the year at which he
begins with it, contained the same quantity of silver as sixteen shillings
of our present money. But in 1562, the year at which he ends with it, it
contained no more than the same nominal sum does at present.
Secondly, they have been misled by the slovenly manner in which some
ancient statutes of assize had been sometimes transcribed by lazy copiers,
and sometimes, perhaps, actually composed by the legislature.
The ancient statutes of assize seem to have begun always with determining
what ought to be the price of bread and ale when the price of wheat and
barley were at the lowest; and to have proceeded gradually to determine
what it ought to be, according as the prices of those two sorts of grain
should gradually rise above this lowest price. But the transcribers of
those statutes seem frequently to have thought it sufficient to copy the
regulation as far as the three or four first and lowest prices; saving in
this manner their own labour, and judging, I suppose, that this was enough
to show what proportion ought to be observed in all higher prices.
Thus, in the assize of bread and ale, of the 51st of Henry III. the price
of bread was regulated according to the different prices of wheat, from
one shilling to twenty shillings the quarter of the money of those times.
But in the manuscripts from which all the different editions of the
statutes, preceding that of Mr Ruffhead, were printed, the copiers had
never transcribed this regulation beyond the price of twelve shillings.
Several writers, therefore, being misled by this faulty transcription,
very naturally conclude that the middle price, or six shillings the
quarter, equal to about eighteen shillings of our present money, was the
ordinary or average price of wheat at that time.
In the statute of Tumbrel and Pillory, enacted nearly about the same time,
the price of ale is regulated according to every sixpence rise in the
price of barley, from two shillings, to four shillings the quarter. That
four shillings, however, was not considered as the highest price to which
barley might frequently rise in those times, and that these prices were
only given as an example of the proportion which ought to be observed in
all other prices, whether higher or lower, we may infer from the last
words of the statute: “Et sic deinceps crescetur vel diminuetur per sex
denarios.” The expression is very slovenly, but the meaning is plain
enough, “that the price of ale is in this manner to be increased or
diminished according to every sixpence rise or fall in the price of
barley.” In the composition of this statute, the legislature itself seems
to have been as negligent as the copiers were in the transcription of the
other.
In an ancient manuscript of the Regiam Majestatem, an old Scotch law book,
there is a statute of assize, in which the price of bread is regulated
according to all the different prices of wheat, from tenpence to three
shillings the Scotch boll, equal to about half an English quarter. Three
shillings Scotch, at the time when this assize is supposed to have been
enacted, were equal to about nine shillings sterling of our present money.
Mr Ruddiman seems {See his Preface to Anderson’s Diplomata Scotiae.} to
conclude from this, that three shillings was the highest price to which
wheat ever rose in those times, and that tenpence, a shilling, or at most
two shillings, were the ordinary prices. Upon consulting the manuscript,
however, it appears evidently, that all these prices are only set down as
examples of the proportion which ought to be observed between the
respective prices of wheat and bread. The last words of the statute are
“reliqua judicabis secundum praescripta, habendo respectum ad pretium
bladi.”—“You shall judge of the remaining cases, according to what
is above written, having respect to the price of corn.”
Thirdly, they seem to have been misled too, by the very low price at which
wheat was sometimes sold in very ancient times; and to have imagined, that
as its lowest price was then much lower than in later times its ordinary
price must likewise have been much lower. They might have found, however,
that in those ancient times its highest price was fully as much above, as
its lowest price was below any thing that had ever been known in later
times. Thus, in 1270, Fleetwood gives us two prices of the quarter of
wheat. The one is four pounds sixteen shillings of the money of those
times, equal to fourteen pounds eight shillings of that of the present;
the other is six pounds eight shillings, equal to nineteen pounds four
shillings of our present money. No price can be found in the end of the
fifteenth, or beginning of the sixteenth century, which approaches to the
extravagance of these. The price of corn, though at all times liable to
variation varies most in those turbulent and disorderly societies, in
which the interruption of all commerce and communication hinders the
plenty of one part of the country from relieving the scarcity of another.
In the disorderly state of England under the Plantagenets, who governed it
from about the middle of the twelfth till towards the end of the fifteenth
century, one district might be in plenty, while another, at no great
distance, by having its crop destroyed, either by some accident of the
seasons, or by the incursion of some neighbouring baron, might be
suffering all the horrors of a famine; and yet if the lands of some
hostile lord were interposed between them, the one might not be able to
give the least assistance to the other. Under the vigorous administration
of the Tudors, who governed England during the latter part of the
fifteenth, and through the whole of the sixteenth century, no baron was
powerful enough to dare to disturb the public security.
The reader will find at the end of this chapter all the prices of wheat
which have been collected by Fleetwood, from 1202 to 1597, both inclusive,
reduced to the money of the present times, and digested, according to the
order of time, into seven divisions of twelve years each. At the end of
each division, too, he will find the average price of the twelve years of
which it consists. In that long period of time, Fleetwood has been able to
collect the prices of no more than eighty years; so that four years are
wanting to make out the last twelve years. I have added, therefore, from
the accounts of Eton college, the prices of 1598, 1599, 1600, and 1601. It
is the only addition which I have made. The reader will see, that from the
beginning of the thirteenth till after the middle of the sixteenth
century, the average price of each twelve years grows gradually lower and
lower; and that towards the end of the sixteenth century it begins to rise
again. The prices, indeed, which Fleetwood has been able to collect, seem
to have been those chiefly which were remarkable for extraordinary
dearness or cheapness; and I do not pretend that any very certain
conclusion can be drawn from them. So far, however, as they prove any
thing at all, they confirm the account which I have been endeavouring to
give. Fleetwood himself, however, seems, with most other writers, to have
believed, that, during all this period, the value of silver, in
consequence of its increasing abundance, was continually diminishing. The
prices of corn, which he himself has collected, certainly do not agree
with this opinion. They agree perfectly with that of Mr Dupré de St Maur,
and with that which I have been endeavouring to explain. Bishop Fleetwood
and Mr Dupré de St Maur are the two authors who seem to have collected,
with the greatest diligence and fidelity, the prices of things in ancient
times. It is somewhat curious that, though their opinions are so very
different, their facts, so far as they relate to the price of corn at
least, should coincide so very exactly.
It is not, however, so much from the low price of corn, as from that of
some other parts of the rude produce of land, that the most judicious
writers have inferred the great value of silver in those very ancient
times. Corn, it has been said, being a sort of manufacture, was, in those
rude ages, much dearer in proportion than the greater part of other
commodities; it is meant, I suppose, than the greater part of
unmanufactured commodities, such as cattle, poultry, game of all kinds,
etc. That in those times of poverty and barbarism these were
proportionably much cheaper than corn, is undoubtedly true. But this
cheapness was not the effect of the high value of silver, but of the low
value of those commodities. It was not because silver would in such times
purchase or represent a greater quantity of labour, but because such
commodities would purchase or represent a much smaller quantity than in
times of more opulence and improvement. Silver must certainly be cheaper
in Spanish America than in Europe; in the country where it is produced,
than in the country to which it is brought, at the expense of a long
carriage both by land and by sea, of a freight, and an insurance.
One-and-twenty pence halfpenny sterling, however, we are told by Ulloa,
was, not many years ago, at Buenos Ayres, the price of an ox chosen from a
herd of three or four hundred. Sixteen shillings sterling, we are told by
Mr Byron, was the price of a good horse in the capital of Chili. In a
country naturally fertile, but of which the far greater part is altogether
uncultivated, cattle, poultry, game of all kinds, etc. as they can be
acquired with a very small quantity of labour, so they will purchase or
command but a very small quantity. The low money price for which they may
be sold, is no proof that the real value of silver is there very high, but
that the real value of those commodities is very low.
Labour, it must always be remembered, and not any particular commodity, or
set of commodities, is the real measure of the value both of silver and of
all other commodities.
But in countries almost waste, or but thinly inhabited, cattle, poultry,
game of all kinds, etc. as they are the spontaneous productions of Nature,
so she frequently produces them in much greater quantities than the
consumption of the inhabitants requires. In such a state of things, the
supply commonly exceeds the demand. In different states of society, in
different states of improvement, therefore, such commodities will
represent, or be equivalent, to very different quantities of labour.
In every state of society, in every stage of improvement, corn is the
production of human industry. But the average produce of every sort of
industry is always suited, more or less exactly, to the average
consumption; the average supply to the average demand. In every different
stage of improvement, besides, the raising of equal quantities of corn in
the same soil and climate, will, at an average, require nearly equal
quantities of labour; or, what comes to the same thing, the price of
nearly equal quantities; the continual increase of the productive powers
of labour, in an improved state of cultivation, being more or less
counterbalanced by the continual increasing price of cattle, the principal
instruments of agriculture. Upon all these accounts, therefore, we may
rest assured, that equal quantities of corn will, in every state of
society, in every stage of improvement, more nearly represent, or be
equivalent to, equal quantities of labour, than equal quantities of any
other part of the rude produce of land. Corn, accordingly, it has already
been observed, is, in all the different stages of wealth and improvement,
a more accurate measure of value than any other commodity or set of
commodities. In all those different stages, therefore, we can judge better
of the real value of silver, by comparing it with corn, than by comparing
it with any other commodity or set of commodities.
Corn, besides, or whatever else is the common and favourite vegetable food
of the people, constitutes, in every civilized country, the principal part
of the subsistence of the labourer. In consequence of the extension of
agriculture, the land of every country produces a much greater quantity of
vegetable than of animal food, and the labourer everywhere lives chiefly
upon the wholesome food that is cheapest and most abundant. Butcher’s
meat, except in the most thriving countries, or where labour is most
highly rewarded, makes but an insignificant part of his subsistence;
poultry makes a still smaller part of it, and game no part of it. In
France, and even in Scotland, where labour is somewhat better rewarded
than in France, the labouring poor seldom eat butcher’s meat, except upon
holidays, and other extraordinary occasions. The money price of labour,
therefore, depends much more upon the average money price of corn, the
subsistence of the labourer, than upon that of butcher’s meat, or of any
other part of the rude produce of land. The real value of gold and silver,
therefore, the real quantity of labour which they can purchase or command,
depends much more upon the quantity of corn which they can purchase or
command, than upon that of butcher’s meat, or any other part of the rude
produce of land.
Such slight observations, however, upon the prices either of corn or of
other commodities, would not probably have misled so many intelligent
authors, had they not been influenced at the same time by the popular
notion, that as the quantity of silver naturally increases in every
country with the increase of wealth, so its value diminishes as its
quantity increases. This notion, however, seems to be altogether
groundless.
The quantity of the precious metals may increase in any country from two
different causes; either, first, from the increased abundance of the mines
which supply it; or, secondly, from the increased wealth of the people,
from the increased produce of their annual labour. The first of these
causes is no doubt necessarily connected with the diminution of the value
of the precious metals; but the second is not.
When more abundant mines are discovered, a greater quantity of the
precious metals is brought to market; and the quantity of the necessaries
and conveniencies of life for which they must be exchanged being the same
as before, equal quantities of the metals must be exchanged for smaller
quantities of commodities. So far, therefore, as the increase of the
quantity of the precious metals in any country arises from the increased
abundance of the mines, it is necessarily connected with some diminution
of their value.
When, on the contrary, the wealth of any country increases, when the
annual produce of its labour becomes gradually greater and greater, a
greater quantity of coin becomes necessary in order to circulate a greater
quantity of commodities: and the people, as they can afford it, as they
have more commodities to give for it, will naturally purchase a greater
and a greater quantity of plate. The quantity of their coin will increase
from necessity; the quantity of their plate from vanity and ostentation,
or from the same reason that the quantity of fine statues, pictures, and
of every other luxury and curiosity, is likely to increase among them. But
as statuaries and painters are not likely to be worse rewarded in times of
wealth and prosperity, than in times of poverty and depression, so gold
and silver are not likely to be worse paid for.
The price of gold and silver, when the accidental discovery of more
abundant mines does not keep it down, as it naturally rises with the
wealth of every country, so, whatever be the state of the mines, it is at
all times naturally higher in a rich than in a poor country. Gold and
silver, like all other commodities, naturally seek the market where the
best price is given for them, and the best price is commonly given for
every thing in the country which can best afford it. Labour, it must be
remembered, is the ultimate price which is paid for every thing; and in
countries where labour is equally well rewarded, the money price of labour
will be in proportion to that of the subsistence of the labourer. But gold
and silver will naturally exchange for a greater quantity of subsistence
in a rich than in a poor country; in a country which abounds with
subsistence, than in one which is but indifferently supplied with it. If
the two countries are at a great distance, the difference may be very
great; because, though the metals naturally fly from the worse to the
better market, yet it may be difficult to transport them in such
quantities as to bring their price nearly to a level in both. If the
countries are near, the difference will be smaller, and may sometimes be
scarce perceptible; because in this case the transportation will be easy.
China is a much richer country than any part of Europe, and the difference
between the price of subsistence in China and in Europe is very great.
Rice in China is much cheaper than wheat is any where in Europe. England
is a much richer country than Scotland, but the difference between the
money price of corn in those two countries is much smaller, and is but
just perceptible. In proportion to the quantity or measure, Scotch corn
generally appears to be a good deal cheaper than English; but, in
proportion to its quality, it is certainly somewhat dearer. Scotland
receives almost every year very large supplies from England, and every
commodity must commonly be somewhat dearer in the country to which it is
brought than in that from which it comes. English corn, therefore, must be
dearer in Scotland than in England; and yet in proportion to its quality,
or to the quantity and goodness of the flour or meal which can be made
from it, it cannot commonly be sold higher there than the Scotch corn
which comes to market in competition with it.
The difference between the money price of labour in China and in Europe,
is still greater than that between the money price of subsistence; because
the real recompence of labour is higher in Europe than in China, the
greater part of Europe being in an improving state, while China seems to
be standing still. The money price of labour is lower in Scotland than in
England, because the real recompence of labour is much lower: Scotland,
though advancing to greater wealth, advances much more slowly than
England. The frequency of emigration from Scotland, and the rarity of it
from England, sufficiently prove that the demand for labour is very
different in the two countries. The proportion between the real recompence
of labour in different countries, it must be remembered, is naturally
regulated, not by their actual wealth or poverty, but by their advancing,
stationary, or declining condition.
Gold and silver, as they are naturally of the greatest value among the
richest, so they are naturally of the least value among the poorest
nations. Among savages, the poorest of all nations, they are scarce of any
value.
In great towns, corn is always dearer than in remote parts of the country.
This, however, is the effect, not of the real cheapness of silver, but of
the real dearness of corn. It does not cost less labour to bring silver to
the great town than to the remote parts of the country; but it costs a
great deal more to bring corn.
In some very rich and commercial countries, such as Holland and the
territory of Genoa, corn is dear for the same reason that it is dear in
great towns. They do not produce enough to maintain their inhabitants.
They are rich in the industry and skill of their artificers and
manufacturers, in every sort of machinery which can facilitate and abridge
labour; in shipping, and in all the other instruments and means of
carriage and commerce: but they are poor in corn, which, as it must be
brought to them from distant countries, must, by an addition to its price,
pay for the carriage from those countries. It does not cost less labour to
bring silver to Amsterdam than to Dantzic; but it costs a great deal more
to bring corn. The real cost of silver must be nearly the same in both
places; but that of corn must be very different. Diminish the real
opulence either of Holland or of the territory of Genoa, while the number
of their inhabitants remains the same; diminish their power of supplying
themselves from distant countries; and the price of corn, instead of
sinking with that diminution in the quantity of their silver, which must
necessarily accompany this declension, either as its cause or as its
effect, will rise to the price of a famine. When we are in want of
necessaries, we must part with all superfluities, of which the value, as
it rises in times of opulence and prosperity, so it sinks in times of
poverty and distress. It is otherwise with necessaries. Their real price,
the quantity of labour which they can purchase or command, rises in times
of poverty and distress, and sinks in times of opulence and prosperity,
which are always times of great abundance; for they could not otherwise be
times of opulence and prosperity. Corn is a necessary, silver is only a
superfluity.
Whatever, therefore, may have been the increase in the quantity of the
precious metals, which, during the period between the middle of the
fourteenth and that of the sixteenth century, arose from the increase of
wealth and improvement, it could have no tendency to diminish their value,
either in Great Britain, or in my other part of Europe. If those who have
collected the prices of things in ancient times, therefore, had, during
this period, no reason to infer the diminution of the value of silver from
any observations which they had made upon the prices either of corn, or of
other commodities, they had still less reason to infer it from any
supposed increase of wealth and improvement.
Second Period.—But how various soever may have been the opinions of
the learned concerning the progress of the value of silver during the
first period, they are unanimous concerning it during the second.
From about 1570 to about 1640, during a period of about seventy years, the
variation in the proportion between the value of silver and that of corn
held a quite opposite course. Silver sunk in its real value, or would
exchange for a smaller quantity of labour than before; and corn rose in
its nominal price, and, instead of being commonly sold for about two
ounces of silver the quarter, or about ten shillings of our present money,
came to be sold for six and eight ounces of silver the quarter, or about
thirty and forty shillings of our present money.
The discovery of the abundant mines of America seems to have been the sole
cause of this diminution in the value of silver, in proportion to that of
corn. It is accounted for, accordingly, in the same manner by every body;
and there never has been any dispute, either about the fact, or about the
cause of it. The greater part of Europe was, during this period, advancing
in industry and improvement, and the demand for silver must consequently
have been increasing; but the increase of the supply had, it seems, so far
exceeded that of the demand, that the value of that metal sunk
considerably. The discovery of the mines of America, it is to be observed,
does not seem to have had any very sensible effect upon the prices of
things in England till after 1570; though even the mines of Potosi had
been discovered more than twenty years before.
From 1595 to 1620, both inclusive, the average price of the quarter of
nine bushels of the best wheat, at Windsor market, appears, from the
accounts of Eton college, to have been £ 2:1:6 ⁹⁄₁₃. From which sum,
neglecting the fraction, and deducting a ninth, or 4s. 7 ⅓d., the price
of the quarter of eight bushels comes out to have been £ 1:16:10 ⅔. And
from this sum, neglecting likewise the fraction, and deducting a ninth, or
4s. 1 ⅑d., for the difference between the price of the best wheat and
that of the middle wheat, the price of the middle wheat comes out to have
been about £ 1:12:8 ⁸⁄₉, or about six ounces and one-third of an ounce of
silver.
From 1621 to 1636, both inclusive, the average price of the same measure
of the best wheat, at the same market, appears, from the same accounts, to
have been £ 2:10s.; from which, making the like deductions as in the
foregoing case, the average price of the quarter of eight bushels of
middle wheat comes out to have been £ 1:19:6, or about seven ounces and
two-thirds of an ounce of silver.
Third Period.—Between 1630 and 1640, or about 1636, the effect of
the discovery of the mines of America, in reducing the value of silver,
appears to have been completed, and the value of that metal seems never to
have sunk lower in proportion to that of corn than it was about that time.
It seems to have risen somewhat in the course of the present century, and
it had probably begun to do so, even some time before the end of the last.
From 1637 to 1700, both inclusive, being the sixty-four last years of the
last century the average price of the quarter of nine bushels of the best
wheat, at Windsor market, appears, from the same accounts, to have been £
2:11:0 ⅓, which is only 1s. 0 ⅓d. dearer than it had been during the
sixteen years before. But, in the course of these sixty-four years, there
happened two events, which must have produced a much greater scarcity of
corn than what the course of the seasons would otherwise have occasioned,
and which, therefore, without supposing any further reduction in the
value of silver, will much more than account for this very small
enhancement of price.
The first of these events was the civil war, which, by discouraging
tillage and interrupting commerce, must have raised the price of corn much
above what the course of the seasons would otherwise have occasioned. It
must have had this effect, more or less, at all the different markets in
the kingdom, but particularly at those in the neighbourhood of London,
which require to be supplied from the greatest distance. In 1648,
accordingly, the price of the best wheat, at Windsor market, appears, from
the same accounts, to have been £ 4:5s., and, in 1649, to have been £ 4,
the quarter of nine bushels. The excess of those two years above £ 2:10s.
(the average price of the sixteen years preceding 1637) is £ 3:5s., which,
divided among the sixty four last years of the last century, will alone
very nearly account for that small enhancement of price which seems to
have taken place in them. These, however, though the highest, are by no
means the only high prices which seem to have been occasioned by the civil
wars.
The second event was the bounty upon the exportation of corn, granted in
1688. The bounty, it has been thought by many people, by encouraging
tillage, may, in a long course of years, have occasioned a greater
abundance, and, consequently, a greater cheapness of corn in the home
market, than what would otherwise have taken place there. How far the
bounty could produce this effect at any time I shall examine hereafter: I
shall only observe at present, that between 1688 and 1700, it had not time
to produce any such effect. During this short period, its only effect must
have been, by encouraging the exportation of the surplus produce of every
year, and thereby hindering the abundance of one year from compensating
the scarcity of another, to raise the price in the home market. The
scarcity which prevailed in England, from 1693 to 1699, both inclusive,
though no doubt principally owing to the badness of the seasons, and,
therefore, extending through a considerable part of Europe, must have been
somewhat enhanced by the bounty. In 1699, accordingly, the further
exportation of corn was prohibited for nine months.
There was a third event which occurred in the course of the same period,
and which, though it could not occasion any scarcity of corn, nor,
perhaps, any augmentation in the real quantity of silver which was usually
paid for it, must necessarily have occasioned some augmentation in the
nominal sum. This event was the great debasement of the silver coin, by
clipping and wearing. This evil had begun in the reign of Charles II. and
had gone on continually increasing till 1695; at which time, as we may
learn from Mr Lowndes, the current silver coin was, at an average, near
five-and-twenty per cent. below its standard value. But the nominal sum
which constitutes the market price of every commodity is necessarily
regulated, not so much by the quantity of silver, which, according to the
standard, ought to be contained in it, as by that which, it is found by
experience, actually is contained in it. This nominal sum, therefore, is
necessarily higher when the coin is much debased by clipping and wearing,
than when near to its standard value.
In the course of the present century, the silver coin has not at any time
been more below its standard weight than it is at present. But though very
much defaced, its value has been kept up by that of the gold coin, for
which it is exchanged. For though, before the late recoinage, the gold
coin was a good deal defaced too, it was less so than the silver. In 1695,
on the contrary, the value of the silver coin was not kept up by the gold
coin; a guinea then commonly exchanging for thirty shillings of the worn
and clipt silver. Before the late recoinage of the gold, the price of
silver bullion was seldom higher than five shillings and sevenpence an
ounce, which is but fivepence above the mint price. But in 1695, the
common price of silver bullion was six shillings and fivepence an ounce,
{Lowndes’s Essay on the Silver Coin, 68.} which is fifteen pence above the
mint price. Even before the late recoinage of the gold, therefore, the
coin, gold and silver together, when compared with silver bullion, was not
supposed to be more than eight per cent. below its standard value, In
1695, on the contrary, it had been supposed to be near five-and-twenty per
cent. below that value. But in the beginning of the present century, that
is, immediately after the great recoinage in King William’s time, the
greater part of the current silver coin must have been still nearer to its
standard weight than it is at present. In the course of the present
century, too, there has been no great public calamity, such as a civil
war, which could either discourage tillage, or interrupt the interior
commerce of the country. And though the bounty which has taken place
through the greater part of this century, must always raise the price of
corn somewhat higher than it otherwise would be in the actual state of
tillage; yet, as in the course of this century, the bounty has had full
time to produce all the good effects commonly imputed to it to encourage
tillage, and thereby to increase the quantity of corn in the home market,
it may, upon the principles of a system which I shall explain and examine
hereafter, be supposed to have done something to lower the price of that
commodity the one way, as well as to raise it the other. It is by many
people supposed to have done more. In the sixty-four years of the present
century, accordingly, the average price of the quarter of nine bushels of
the best wheat, at Windsor market, appears, by the accounts of Eton
college, to have been £ 2:0:6 ¹⁰⁄₃₂, which is about ten shillings and
sixpence, or more than five-and-twenty percent. cheaper than it had been
during the sixty-four last years of the last century; and about nine
shillings and sixpence cheaper than it had been during the sixteen years
preceding 1636, when the discovery of the abundant mines of America may be
supposed to have produced its full effect; and about one shilling cheaper
than it had been in the twenty-six years preceding 1620, before that
discovery can well be supposed to have produced its full effect. According
to this account, the average price of middle wheat, during these
sixty-four first years of the present century, comes out to have been
about thirty-two shillings the quarter of eight bushels.
The value of silver, therefore, seems to have risen somewhat in proportion
to that of corn during the course of the present century, and it had
probably begun to do so even some time before the end of the last.
In 1687, the price of the quarter of nine bushels of the best wheat, at
Windsor market, was £ 1:5:2, the lowest price at which it had ever been
from 1595.
In 1688, Mr Gregory King, a man famous for his knowledge in matters of
this kind, estimated the average price of wheat, in years of moderate
plenty, to be to the grower 3s. 6d. the bushel, or eight-and-twenty
shillings the quarter. The grower’s price I understand to be the same with
what is sometimes called the contract price, or the price at which a
farmer contracts for a certain number of years to deliver a certain
quantity of corn to a dealer. As a contract of this kind saves the farmer
the expense and trouble of marketing, the contract price is generally
lower than what is supposed to be the average market price. Mr King had
judged eight-and-twenty shillings the quarter to be at that time the
ordinary contract price in years of moderate plenty. Before the scarcity
occasioned by the late extraordinary course of bad seasons, it was, I have
been assured, the ordinary contract price in all common years.
In 1688 was granted the parliamentary bounty upon the exportation of corn.
The country gentlemen, who then composed a still greater proportion of the
legislature than they do at present, had felt that the money price of corn
was falling. The bounty was an expedient to raise it artificially to the
high price at which it had frequently been sold in the times of Charles I.
and II. It was to take place, therefore, till wheat was so high as
fortyeight shillings the quarter; that is, twenty shillings, or 5-7ths
dearer than Mr King had, in that very year, estimated the grower’s price
to be in times of moderate plenty. If his calculations deserve any part of
the reputation which they have obtained very universally, eight-and-forty
shillings the quarter was a price which, without some such expedient as
the bounty, could not at that time be expected, except in years of
extraordinary scarcity. But the government of King William was not then
fully settled. It was in no condition to refuse anything to the country
gentlemen, from whom it was, at that very time, soliciting the first
establishment of the annual land-tax.
The value of silver, therefore, in proportion to that of corn, had
probably risen somewhat before the end of the last century; and it seems
to have continued to do so during the course of the greater part of the
present, though the necessary operation of the bounty must have hindered
that rise from being so sensible as it otherwise would have been in the
actual state of tillage.
In plentiful years, the bounty, by occasioning an extraordinary
exportation, necessarily raises the price of corn above what it otherwise
would be in those years. To encourage tillage, by keeping up the price of
corn, even in the most plentiful years, was the avowed end of the
institution.
In years of great scarcity, indeed, the bounty has generally been
suspended. It must, however, have had some effect upon the prices of many
of those years. By the extraordinary exportation which it occasions in
years of plenty, it must frequently hinder the plenty of one year from
compensating the scarcity of another.
Both in years of plenty and in years of scarcity, therefore, the bounty
raises the price of corn above what it naturally would be in the actual
state of tillage. If during the sixty-four first years of the present
century, therefore, the average price has been lower than during the
sixty-four last years of the last century, it must, in the same state of
tillage, have been much more so, had it not been for this operation of the
bounty.
But, without the bounty, it may be said the state of tillage would not
have been the same. What may have been the effects of this institution
upon the agriculture of the country, I shall endeavour to explain
hereafter, when I come to treat particularly of bounties. I shall only
observe at present, that this rise in the value of silver, in proportion
to that of corn, has not been peculiar to England. It has been observed to
have taken place in France during the same period, and nearly in the same
proportion, too, by three very faithful, diligent, and laborious
collectors of the prices of corn, Mr Dupré de St Maur, Mr Messance, and
the author of the Essay on the Police of Grain. But in France, till 1764,
the exportation of grain was by law prohibited; and it is somewhat
difficult to suppose, that nearly the same diminution of price which took
place in one country, notwithstanding this prohibition, should, in
another, be owing to the extraordinary encouragement given to exportation.
It would be more proper, perhaps, to consider this variation in the
average money price of corn as the effect rather of some gradual rise in
the real value of silver in the European market, than of any fall in the
real average value of corn. Corn, it has already been observed, is, at
distant periods of time, a more accurate measure of value than either
silver or, perhaps, any other commodity. When, after the discovery of the
abundant mines of America, corn rose to three and four times its former
money price, this change was universally ascribed, not to any rise in the
real value of corn, but to a fall in the real value of silver. If, during
the sixty-four first years of the present century, therefore, the average
money price of corn has fallen somewhat below what it had been during the
greater part of the last century, we should, in the same manner, impute
this change, not to any fall in the real value of corn, but to some rise
in the real value of silver in the European market.
The high price of corn during these ten or twelve years past, indeed, has
occasioned a suspicion that the real value of silver still continues to
fall in the European market. This high price of corn, however, seems
evidently to have been the effect of the extraordinary unfavourableness of
the seasons, and ought, therefore, to be regarded, not as a permanent, but
as a transitory and occasional event. The seasons, for these ten or twelve
years past, have been unfavourable through the greater part of Europe; and
the disorders of Poland have very much increased the scarcity in all those
countries, which, in dear years, used to be supplied from that market. So
long a course of bad seasons, though not a very common event, is by no
means a singular one; and whoever has inquired much into the history of
the prices of corn in former times, will be at no loss to recollect
several other examples of the same kind. Ten years of extraordinary
scarcity, besides, are not more wonderful than ten years of extraordinary
plenty. The low price of corn, from 1741 to 1750, both inclusive, may very
well be set in opposition to its high price during these last eight or ten
years. From 1741 to 1750, the average price of the quarter of nine bushels
of the best wheat, at Windsor market, it appears from the accounts of Eton
college, was only £ 1:13:9 ⅘, which is nearly 6s.3d. below the average
price of the sixty-four first years of the present century. The average
price of the quarter of eight bushels of middle wheat comes out, according
to this account, to have been, during these ten years, only £ 1:6:8.
Between 1741 and 1750, however, the bounty must have hindered the price of
corn from falling so low in the home market as it naturally would have
done. During these ten years, the quantity of all sorts of grain exported,
it appears from the custom-house books, amounted to no less than 8,029,156
quarters, one bushel. The bounty paid for this amounted to £
1,514,962:17:4 ½. In 1749, accordingly, Mr Pelham, at that time prime
minister, observed to the house of commons, that, for the three years
preceding, a very extraordinary sum had been paid as bounty for the
exportation of corn. He had good reason to make this observation, and in
the following year he might have had still better. In that single year,
the bounty paid amounted to no less than £ 324,176:10:6. {See Tracts on
the Corn Trade, Tract 3,} It is unnecessary to observe how much this
forced exportation must have raised the price of corn above what it
otherwise would have been in the home market.
At the end of the accounts annexed to this chapter the reader will find
the particular account of those ten years separated from the rest. He will
find there, too, the particular account of the preceding ten years, of
which the average is likewise below, though not so much below, the general
average of the sixty-four first years of the century. The year 1740,
however, was a year of extraordinary scarcity. These twenty years
preceding 1750 may very well be set in opposition to the twenty preceding
1770. As the former were a good deal below the general average of the
century, notwithstanding the intervention of one or two dear years; so the
latter have been a good deal above it, notwithstanding the intervention of
one or two cheap ones, of 1759, for example. If the former have not been
as much below the general average as the latter have been above it, we
ought probably to impute it to the bounty. The change has evidently been
too sudden to be ascribed to any change in the value of silver, which is
always slow and gradual. The suddenness of the effect can be accounted for
only by a cause which can operate suddenly, the accidental variations of
the seasons.
The money price of labour in Great Britain has, indeed, risen during the
course of the present century. This, however, seems to be the effect, not
so much of any diminution in the value of silver in the European market,
as of an increase in the demand for labour in Great Britain, arising from
the great, and almost universal prosperity of the country. In France, a
country not altogether so prosperous, the money price of labour has, since
the middle of the last century, been observed to sink gradually with the
average money price of corn. Both in the last century and in the present,
the day wages of common labour are there said to have been pretty
uniformly about the twentieth part of the average price of the septier of
wheat; a measure which contains a little more than four Winchester
bushels. In Great Britain, the real recompence of labour, it has already
been shewn, the real quantities of the necessaries and conveniencies of
life which are given to the labourer, has increased considerably during
the course of the present century. The rise in its money price seems to
have been the effect, not of any diminution of the value of silver in the
general market of Europe, but of a rise in the real price of labour, in
the particular market of Great Britain, owing to the peculiarly happy
circumstances of the country.
For some time after the first discovery of America, silver would continue
to sell at its former, or not much below its former price. The profits of
mining would for some time be very great, and much above their natural
rate. Those who imported that metal into Europe, however, would soon find
that the whole annual importation could not be disposed of at this high
price. Silver would gradually exchange for a smaller and a smaller
quantity of goods. Its price would sink gradually lower and lower, till it
fell to its natural price; or to what was just sufficient to pay,
according to their natural rates, the wages of the labour, the profits of
the stock, and the rent of the land, which must be paid in order to bring
it from the mine to the market. In the greater part of the silver mines of
Peru, the tax of the king of Spain, amounting to a tenth of the gross
produce, eats up, it has already been observed, the whole rent of the
land. This tax was originally a half; it soon afterwards fell to a third,
then to a fifth, and at last to a tenth, at which late it still continues.
In the greater part of the silver mines of Peru, this, it seems, is all
that remains, after replacing the stock of the undertaker of the work,
together with its ordinary profits; and it seems to be universally
acknowledged that these profits, which were once very high, are now as low
as they can well be, consistently with carrying on the works.
The tax of the king of Spain was reduced to a fifth of the registered
silver in 1504 {Solorzano, vol, ii.}, one-and-forty years before 1545, the
date of the discovery of the mines of Potosi. In the course of ninety
years, or before 1636, these mines, the most fertile in all America, had
time sufficient to produce their full effect, or to reduce the value of
silver in the European market as low as it could well fall, while it
continued to pay this tax to the king of Spain. Ninety years is time
sufficient to reduce any commodity, of which there is no monopoly, to its
natural price, or to the lowest price at which, while it pays a particular
tax, it can continue to be sold for any considerable time together.
The price of silver in the European market might, perhaps, have fallen
still lower, and it might have become necessary either to reduce the tax
upon it, not only to one-tenth, as in 1736, but to one twentieth, in the
same manner as that upon gold, or to give up working the greater part of
the American mines which are now wrought. The gradual increase of the
demand for silver, or the gradual enlargement of the market for the
produce of the silver mines of America, is probably the cause which has
prevented this from happening, and which has not only kept up the value of
silver in the European market, but has perhaps even raised it somewhat
higher than it was about the middle of the last century.
Since the first discovery of America, the market for the produce of its
silver mines has been growing gradually more and more extensive.
First, the market of Europe has become gradually more and more extensive.
Since the discovery of America, the greater part of Europe has been much
improved. England, Holland, France, and Germany; even Sweden, Denmark, and
Russia, have all advanced considerably, both in agriculture and in
manufactures. Italy seems not to have gone backwards. The fall of Italy
preceded the conquest of Peru. Since that time it seems rather to have
recovered a little. Spain and Portugal, indeed, are supposed to have gone
backwards. Portugal, however, is but a very small part of Europe, and the
declension of Spain is not, perhaps, so great as is commonly imagined. In
the beginning of the sixteenth century, Spain was a very poor country,
even in comparison with France, which has been so much improved since that
time. It was the well known remark of the emperor Charles V. who had
travelled so frequently through both countries, that every thing abounded
in France, but that every thing was wanting in Spain. The increasing
produce of the agriculture and manufactures of Europe must necessarily
have required a gradual increase in the quantity of silver coin to
circulate it; and the increasing number of wealthy individuals must have
required the like increase in the quantity of their plate and other
ornaments of silver.
Secondly, America is itself a new market, for the produce of its own
silver mines; and as its advances in agriculture, industry, and
population, are much more rapid than those of the most thriving countries
in Europe, its demand must increase much more rapidly. The English
colonies are altogether a new market, which, partly for coin, and partly
for plate, requires a continual augmenting supply of silver through a
great continent where there never was any demand before. The greater part,
too, of the Spanish and Portuguese colonies, are altogether new markets.
New Granada, the Yucatan, Paraguay, and the Brazils, were, before
discovered by the Europeans, inhabited by savage nations, who had neither
arts nor agriculture. A considerable degree of both has now been
introduced into all of them. Even Mexico and Peru, though they cannot be
considered as altogether new markets, are certainly much more extensive
ones than they ever were before. After all the wonderful tales which have
been published concerning the splendid state of those countries in ancient
times, whoever reads, with any degree of sober judgment, the history of
their first discovery and conquest, will evidently discern that, in arts,
agriculture, and commerce, their inhabitants were much more ignorant than
the Tartars of the Ukraine are at present. Even the Peruvians, the more
civilized nation of the two, though they made use of gold and silver as
ornaments, had no coined money of any kind. Their whole commerce was
carried on by barter, and there was accordingly scarce any division of
labour among them. Those who cultivated the ground, were obliged to build
their own houses, to make their own household furniture, their own
clothes, shoes, and instruments of agriculture. The few artificers among
them are said to have been all maintained by the sovereign, the nobles,
and the priests, and were probably their servants or slaves. All the
ancient arts of Mexico and Peru have never furnished one single
manufacture to Europe. The Spanish armies, though they scarce ever
exceeded five hundred men, and frequently did not amount to half that
number, found almost everywhere great difficulty in procuring subsistence.
The famines which they are said to have occasioned almost wherever they
went, in countries, too, which at the same time are represented as very
populous and well cultivated, sufficiently demonstrate that the story of
this populousness and high cultivation is in a great measure fabulous. The
Spanish colonies are under a government in many respects less favourable
to agriculture, improvement, and population, than that of the English
colonies. They seem, however, to be advancing in all those much more
rapidly than any country in Europe. In a fertile soil and happy climate,
the great abundance and cheapness of land, a circumstance common to all
new colonies, is, it seems, so great an advantage, as to compensate many
defects in civil government. Frezier, who visited Peru in 1713, represents
Lima as containing between twenty-five and twenty-eight thousand
inhabitants. Ulloa, who resided in the same country between 1740 and 1746,
represents it as containing more than fifty thousand. The difference in
their accounts of the populousness of several other principal towns of
Chili and Peru is nearly the same; and as there seems to be no reason to
doubt of the good information of either, it marks an increase which is
scarce inferior to that of the English colonies. America, therefore, is a
new market for the produce of its own silver mines, of which the demand
must increase much more rapidly than that of the most thriving country in
Europe.
Thirdly, the East Indies is another market for the produce of the silver
mines of America, and a market which, from the time of the first discovery
of those mines, has been continually taking off a greater and a greater
quantity of silver. Since that time, the direct trade between America and
the East Indies, which is carried on by means of the Acapulco ships, has
been continually augmenting, and the indirect intercourse by the way of
Europe has been augmenting in a still greater proportion. During the
sixteenth century, the Portuguese were the only European nation who
carried on any regular trade to the East Indies. In the last years of that
century, the Dutch began to encroach upon this monopoly, and in a few
years expelled them from their principal settlements in India. During the
greater part of the last century, those two nations divided the most
considerable part of the East India trade between them; the trade of the
Dutch continually augmenting in a still greater proportion than that of
the Portuguese declined. The English and French carried on some trade with
India in the last century, but it has been greatly augmented in the course
of the present. The East India trade of the Swedes and Danes began in the
course of the present century. Even the Muscovites now trade regularly
with China, by a sort of caravans which go over land through Siberia and
Tartary to Pekin. The East India trade of all these nations, if we except
that of the French, which the last war had well nigh annihilated, has been
almost continually augmenting. The increasing consumptions of East India
goods in Europe is, it seems, so great, as to afford a gradual increase of
employment to them all. Tea, for example, was a drug very little used in
Europe, before the middle of the last century. At present, the value of
the tea annually imported by the English East India company, for the use
of their own countrymen, amounts to more than a million and a half a year;
and even this is not enough; a great deal more being constantly smuggled
into the country from the ports of Holland, from Gottenburgh in Sweden,
and from the coast of France, too, as long as the French East India
company was in prosperity. The consumption of the porcelain of China, of
the spiceries of the Moluccas, of the piece goods of Bengal, and of
innumerable other articles, has increased very nearly in a like
proportion. The tonnage, accordingly, of all the European shipping
employed in the East India trade, at any one time during the last century,
was not, perhaps, much greater than that of the English East India company
before the late reduction of their shipping.
But in the East Indies, particularly in China and Indostan, the value of
the precious metals, when the Europeans first began to trade to those
countries, was much higher than in Europe; and it still continues to be
so. In rice countries, which generally yield two, sometimes three crops in
the year, each of them more plentiful than any common crop of corn, the
abundance of food must be much greater than in any corn country of equal
extent. Such countries are accordingly much more populous. In them, too,
the rich, having a greater superabundance of food to dispose of beyond
what they themselves can consume, have the means of purchasing a much
greater quantity of the labour of other people. The retinue of a grandee
in China or Indostan accordingly is, by all accounts, much more numerous
and splendid than that of the richest subjects in Europe. The same
superabundance of food, of which they have the disposal, enables them to
give a greater quantity of it for all those singular and rare productions
which nature furnishes but in very small quantities; such as the precious
metals and the precious stones, the great objects of the competition of
the rich. Though the mines, therefore, which supplied the Indian market,
had been as abundant as those which supplied the European, such
commodities would naturally exchange for a greater quantity of food in
India than in Europe. But the mines which supplied the Indian market with
the precious metals seem to have been a good deal less abundant, and those
which supplied it with the precious stones a good deal more so, than the
mines which supplied the European. The precious metals, therefore, would
naturally exchange in India for a somewhat greater quantity of the
precious stones, and for a much greater quantity of food than in Europe.
The money price of diamonds, the greatest of all superfluities, would be
somewhat lower, and that of food, the first of all necessaries, a great
deal lower in the one country than in the other. But the real price of
labour, the real quantity of the necessaries of life which is given to the
labourer, it has already been observed, is lower both in China and
Indostan, the two great markets of India, than it is through the greater
part of Europe. The wages of the labourer will there purchase a smaller
quantity of food: and as the money price of food is much lower in India
than in Europe, the money price of labour is there lower upon a double
account; upon account both of the small quantity of food which it will
purchase, and of the low price of that food. But in countries of equal art
and industry, the money price of the greater part of manufactures will be
in proportion to the money price of labour; and in manufacturing art and
industry, China and Indostan, though inferior, seem not to be much
inferior to any part of Europe. The money price of the greater part of
manufactures, therefore, will naturally be much lower in those great
empires than it is anywhere in Europe. Through the greater part of Europe,
too, the expense of land-carriage increases very much both the real and
nominal price of most manufactures. It costs more labour, and therefore
more money, to bring first the materials, and afterwards the complete
manufacture to market. In China and Indostan, the extent and variety of
inland navigations save the greater part of this labour, and consequently
of this money, and thereby reduce still lower both the real and the
nominal price of the greater part of their manufactures. Upon all these
accounts, the precious metals are a commodity which it always has been,
and still continues to be, extremely advantageous to carry from Europe to
India. There is scarce any commodity which brings a better price there; or
which, in proportion to the quantity of labour and commodities which it
costs in Europe, will purchase or command a greater quantity of labour and
commodities in India. It is more advantageous, too, to carry silver
thither than gold; because in China, and the greater part of the other
markets of India, the proportion between fine silver and fine gold is but
as ten, or at most as twelve to one; whereas in Europe it is as fourteen
or fifteen to one. In China, and the greater part of the other markets of
India, ten, or at most twelve ounces of silver, will purchase an ounce of
gold; in Europe, it requires from fourteen to fifteen ounces. In the
cargoes, therefore, of the greater part of European ships which sail to
India, silver has generally been one of the most valuable articles. It is
the most valuable article in the Acapulco ships which sail to Manilla. The
silver of the new continent seems, in this manner, to be one of the
principal commodities by which the commerce between the two extremities of
the old one is carried on; and it is by means of it, in a great measure,
that those distant parts of the world are connected with one another.
In order to supply so very widely extended a market, the quantity of
silver annually brought from the mines must not only be sufficient to
support that continued increase, both of coin and of plate, which is
required in all thriving countries; but to repair that continual waste and
consumption of silver which takes place in all countries where that metal
is used.
The continual consumption of the precious metals in coin by wearing, and
in plate both by wearing and cleaning, is very sensible; and in
commodities of which the use is so very widely extended, would alone
require a very great annual supply. The consumption of those metals in
some particular manufactures, though it may not perhaps be greater upon
the whole than this gradual consumption, is, however, much more sensible,
as it is much more rapid. In the manufactures of Birmingham alone, the
quantity of gold and silver annually employed in gilding and plating, and
thereby disqualified from ever afterwards appearing in the shape of those
metals, is said to amount to more than fifty thousand pounds sterling. We
may from thence form some notion how great must be the annual consumption
in all the different parts of the world, either in manufactures of the
same kind with those of Birmingham, or in laces, embroideries, gold and
silver stuffs, the gilding of books, furniture, etc. A considerable
quantity, too, must be annually lost in transporting those metals from one
place to another both by sea and by land. In the greater part of the
governments of Asia, besides, the almost universal custom of concealing
treasures in the bowels of the earth, of which the knowledge frequently
dies with the person who makes the concealment, must occasion the loss of
a still greater quantity.
The quantity of gold and silver imported at both Cadiz and Lisbon
(including not only what comes under register, but what may be supposed to
be smuggled) amounts, according to the best accounts, to about six
millions sterling a-year.
According to Mr Meggens {Postscript to the Universal Merchant p. 15 and
16. This postscript was not printed till 1756, three years after the
publication of the book, which has never had a second edition. The
postscript is, therefore, to be found in few copies; it corrects several
errors in the book.}, the annual importation of the precious metals into
Spain, at an average of six years, viz. from 1748 to 1753, both inclusive,
and into Portugal, at an average of seven years, viz. from 1747 to 1753,
both inclusive, amounted in silver to 1,101,107 pounds weight, and in gold
to 49,940 pounds weight. The silver, at sixty two shillings the pound
troy, amounts to £ 3,413,431:10s. sterling. The gold, at forty-four
guineas and a half the pound troy, amounts to £ 2,333,446:14s. sterling.
Both together amount to £ 5,746,878:4s. sterling. The account of what was
imported under register, he assures us, is exact. He gives us the detail
of the particular places from which the gold and silver were brought, and
of the particular quantity of each metal, which, according to the
register, each of them afforded. He makes an allowance, too, for the
quantity of each metal which, he supposes, may have been smuggled. The
great experience of this judicious merchant renders his opinion of
considerable weight.
According to the eloquent, and sometimes well-informed, author of the
Philosophical and Political History of the Establishment of the Europeans
in the two Indies, the annual importation of registered gold and silver
into Spain, at an average of eleven years, viz. from 1754 to 1764, both
inclusive, amounted to 13,984,185 ⅗ piastres of ten reals. On account of
what may have been smuggled, however, the whole annual importation, he
supposes, may have amounted to seventeen millions of piastres, which, at
4s. 6d. the piastre, is equal to £ 3,825,000 sterling. He gives the
detail, too, of the particular places from which the gold and silver were
brought, and of the particular quantities of each metal, which according
to the register, each of them afforded. He informs us, too, that if we
were to judge of the quantity of gold annually imported from the Brazils
to Lisbon, by the amount of the tax paid to the king of Portugal, which it
seems, is one-fifth of the standard metal, we might value it at eighteen
millions of cruzadoes, or forty-five millions of French livres, equal to
about twenty millions sterling. On account of what may have been smuggled,
however, we may safely, he says, add to this sum an eighth more, or £
250,000 sterling, so that the whole will amount to £ 2,250,000 sterling.
According to this account, therefore, the whole annual importation of the
precious metals into both Spain and Portugal, mounts to about £ 6,075,000
sterling.
Several other very well authenticated, though manuscript accounts, I have
been assured, agree in making this whole annual importation amount, at an
average, to about six millions sterling; sometimes a little more,
sometimes a little less.
The annual importation of the precious metals into Cadiz and Lisbon,
indeed, is not equal to the whole annual produce of the mines of America.
Some part is sent annually by the Acapulco ships to Manilla; some part is
employed in a contraband trade, which the Spanish colonies carry on with
those of other European nations; and some part, no doubt, remains in the
country. The mines of America, besides, are by no means the only gold and
silver mines in the world. They, are, however, by far the most abundant.
The produce of all the other mines which are known is insignificant, it is
acknowledged, in comparison with theirs; and the far greater part of
their produce, it is likewise acknowledged, is annually imported into
Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of
fifty thousand pounds a-year, is equal to the hundred-and-twentieth part
of this annual importation, at the rate of six millions a-year. The whole
annual consumption of gold and silver, therefore, in all the different
countries of the world where those metals are used, may, perhaps, be
nearly equal to the whole annual produce. The remainder may be no more
than sufficient to supply the increasing demand of all thriving countries.
It may even have fallen so far short of this demand, as somewhat to raise
the price of those metals in the European market.
The quantity of brass and iron annually brought from the mine to the
market, is out of all proportion greater than that of gold and silver. We
do not, however, upon this account, imagine that those coarse metals are
likely to multiply beyond the demand, or to become gradually cheaper and
cheaper. Why should we imagine that the precious metals are likely to do
so? The coarse metals, indeed, though harder, are put to much harder uses,
and, as they are of less value, less care is employed in their
preservation. The precious metals, however, are not necessarily immortal
any more than they, but are liable, too, to be lost, wasted, and consumed,
in a great variety of ways.
The price of all metals, though liable to slow and gradual variations,
varies less from year to year than that of almost any other part of the
rude produce of land: and the price of the precious metals is even less
liable to sudden variations than that of the coarse ones. The durableness
of metals is the foundation of this extraordinary steadiness of price. The
corn which was brought to market last year will be all, or almost all,
consumed, long before the end of this year. But some part of the iron
which was brought from the mine two or three hundred years ago, may be
still in use, and, perhaps, some part of the gold which was brought from
it two or three thousand years ago. The different masses of corn, which,
in different years, must supply the consumption of the world, will always
be nearly in proportion to the respective produce of those different
years. But the proportion between the different masses of iron which may
be in use in two different years, will be very little affected by any
accidental difference in the produce of the iron mines of those two years;
and the proportion between the masses of gold will be still less affected
by any such difference in the produce of the gold mines. Though the
produce of the greater part of metallic mines, therefore, varies, perhaps,
still more from year to year than that of the greater part of corn fields,
those variations have not the same effect upon the price of the one
species of commodities as upon that of the other.
_Variations in the Proportion between the respective Values of Gold and
Silver._
Before the discovery of the mines of America, the value of fine gold to
fine silver was regulated in the different mines of Europe, between the
proportions of one to ten and one to twelve; that is, an ounce of fine
gold was supposed to be worth from ten to twelve ounces of fine silver.
About the middle of the last century, it came to be regulated, between the
proportions of one to fourteen and one to fifteen; that is, an ounce of
fine gold came to be supposed worth between fourteen and fifteen ounces of
fine silver. Gold rose in its nominal value, or in the quantity of silver
which was given for it. Both metals sunk in their real value, or in the
quantity of labour which they could purchase; but silver sunk more than
gold. Though both the gold and silver mines of America exceeded in
fertility all those which had ever been known before, the fertility of the
silver mines had, it seems, been proportionally still greater than that of
the gold ones.
The great quantities of silver carried annually from Europe to India,
have, in some of the English settlements, gradually reduced the value of
that metal in proportion to gold. In the mint of Calcutta, an ounce of
fine gold is supposed to be worth fifteen ounces of fine silver, in the
same manner as in Europe. It is in the mint, perhaps, rated too high for
the value which it bears in the market of Bengal. In China, the proportion
of gold to silver still continues as one to ten, or one to twelve. In
Japan, it is said to be as one to eight.
The proportion between the quantities of gold and silver annually imported
into Europe, according to Mr Meggens’ account, is as one to twenty-two
nearly; that is, for one ounce of gold there are imported a little more
than twenty-two ounces of silver. The great quantity of silver sent
annually to the East Indies reduces, he supposes, the quantities of those
metals which remain in Europe to the proportion of one to fourteen or
fifteen, the proportion of their values. The proportion between their
values, he seems to think, must necessarily be the same as that between
their quantities, and would therefore be as one to twenty-two, were it not
for this greater exportation of silver.
But the ordinary proportion between the respective values of two
commodities is not necessarily the same as that between the quantities of
them which are commonly in the market. The price of an ox, reckoned at ten
guineas, is about three score times the price of a lamb, reckoned at 3s.
6d. It would be absurd, however, to infer from thence, that there are
commonly in the market three score lambs for one ox; and it would be just
as absurd to infer, because an ounce of gold will commonly purchase from
fourteen or fifteen ounces of silver, that there are commonly in the
market only fourteen or fifteen ounces of silver for one ounce of gold.
The quantity of silver commonly in the market, it is probable, is much
greater in proportion to that of gold, than the value of a certain
quantity of gold is to that of an equal quantity of silver. The whole
quantity of a cheap commodity brought to market is commonly not only
greater, but of greater value, than the whole quantity of a dear one. The
whole quantity of bread annually brought to market, is not only greater,
but of greater value, than the whole quantity of butcher’s meat; the whole
quantity of butcher’s meat, than the whole quantity of poultry; and the
whole quantity of poultry, than the whole quantity of wild fowl. There are
so many more purchasers for the cheap than for the dear commodity, that,
not only a greater quantity of it, but a greater value can commonly be
disposed of. The whole quantity, therefore, of the cheap commodity, must
commonly be greater in proportion to the whole quantity of the dear one,
than the value of a certain quantity of the dear one, is to the value of
an equal quantity of the cheap one. When we compare the precious metals
with one another, silver is a cheap, and gold a dear commodity. We ought
naturally to expect, therefore, that there should always be in the market,
not only a greater quantity, but a greater value of silver than of gold.
Let any man, who has a little of both, compare his own silver with his
gold plate, and he will probably find, that not only the quantity, but the
value of the former, greatly exceeds that of the latter. Many people,
besides, have a good deal of silver who have no gold plate, which, even
with those who have it, is generally confined to watch-cases, snuff-boxes,
and such like trinkets, of which the whole amount is seldom of great
value. In the British coin, indeed, the value of the gold preponderates
greatly, but it is not so in that of all countries. In the coin of some
countries, the value of the two metals is nearly equal. In the Scotch
coin, before the union with England, the gold preponderated very little,
though it did somewhat {See Ruddiman’s Preface to Anderson’s Diplomata,
etc. Scotiae.}, as it appears by the accounts of the mint. In the coin of
many countries the silver preponderates. In France, the largest sums are
commonly paid in that metal, and it is there difficult to get more gold
than what is necessary to carry about in your pocket. The superior value,
however, of the silver plate above that of the gold, which takes place in
all countries, will much more than compensate the preponderancy of the
gold coin above the silver, which takes place only in some countries.
Though, in one sense of the word, silver always has been, and probably
always will be, much cheaper than gold; yet, in another sense, gold may
perhaps, in the present state of the Spanish market, be said to be
somewhat cheaper than silver. A commodity may be said to be dear or cheap
not only according to the absolute greatness or smallness of its usual
price, but according as that price is more or less above the lowest for
which it is possible to bring it to market for any considerable time
together. This lowest price is that which barely replaces, with a moderate
profit, the stock which must be employed in bringing the commodity
thither. It is the price which affords nothing to the landlord, of which
rent makes not any component part, but which resolves itself altogether
into wages and profit. But, in the present state of the Spanish market,
gold is certainly somewhat nearer to this lowest price than silver. The
tax of the king of Spain upon gold is only one-twentieth part of the
standard metal, or five per cent.; whereas his tax upon silver amounts to
one-tenth part of it, or to ten per cent. In these taxes, too, it has
already been observed, consists the whole rent of the greater part of the
gold and silver mines of Spanish America; and that upon gold is still
worse paid than that upon silver. The profits of the undertakers of gold
mines, too, as they more rarely make a fortune, must, in general, be still
more moderate than those of the undertakers of silver mines. The price of
Spanish gold, therefore, as it affords both less rent and less profit,
must, in the Spanish market, be somewhat nearer to the lowest price for
which it is possible to bring it thither, than the price of Spanish
silver. When all expenses are computed, the whole quantity of the one
metal, it would seem, cannot, in the Spanish market, be disposed of so
advantageously as the whole quantity of the other. The tax, indeed, of the
king of Portugal upon the gold of the Brazils, is the same with the
ancient tax of the king of Spain upon the silver of Mexico and Peru; or
one-fifth part of the standard metal. It may therefore be uncertain,
whether, to the general market of Europe, the whole mass of American gold
comes at a price nearer to the lowest for which it is possible to bring it
thither, than the whole mass of American silver.
The price of diamonds and other precious stones may, perhaps, be still
nearer to the lowest price at which it is possible to bring them to
market, than even the price of gold.
Though it is not very probable that any part of a tax, which is not only
imposed upon one of the most proper subjects of taxation, a mere luxury
and superfluity, but which affords so very important a revenue as the tax
upon silver, will ever be given up as long as it is possible to pay it;
yet the same impossibility of paying it, which, in 1736. made it necessary
to reduce it from one-fifth to one-tenth, may in time make it necessary to
reduce it still further; in the same manner as it made it necessary to
reduce the tax upon gold to one-twentieth. That the silver mines of
Spanish America, like all other mines, become gradually more expensive in
the working, on account of the greater depths at which it is necessary to
carry on the works, and of the greater expense of drawing out the water,
and of supplying them with fresh air at those depths, is acknowledged by
everybody who has inquired into the state of those mines.
These causes, which are equivalent to a growing scarcity of silver (for a
commodity may be said to grow scarcer when it becomes more difficult and
expensive to collect a certain quantity of it), must, in time, produce one
or other of the three following events: The increase of the expense must
either, first, be compensated altogether by a proportionable increase in
the price of the metal; or, secondly, it must be compensated altogether by
a proportionable diminution of the tax upon silver; or, thirdly, it must
be compensated partly by the one and partly by the other of those two
expedients. This third event is very possible. As gold rose in its price
in proportion to silver, notwithstanding a great diminution of the tax
upon gold, so silver might rise in its price in proportion to labour and
commodities, notwithstanding an equal diminution of the tax upon silver.
Such successive reductions of the tax, however, though they may not
prevent altogether, must certainly retard, more or less, the rise of the
value of silver in the European market. In consequence of such reductions,
many mines may be wrought which could not be wrought before, because they
could not afford to pay the old tax; and the quantity of silver annually
brought to market, must always be somewhat greater, and, therefore, the
value of any given quantity somewhat less, than it otherwise would have
been. In consequence of the reduction in 1736, the value of silver in the
European market, though it may not at this day be lower than before that
reduction, is, probably, at least ten per cent. lower than it would have
been, had the court of Spain continued to exact the old tax. That,
notwithstanding this reduction, the value of silver has, during the course
of the present century, begun to rise somewhat in the European market, the
facts and arguments which have been alleged above, dispose me to believe,
or more properly to suspect and conjecture; for the best opinion which I
can form upon this subject, scarce, perhaps, deserves the name of belief.
The rise, indeed, supposing there has been any, has hitherto been so very
small, that after all that has been said, it may, perhaps, appear to many
people uncertain, not only whether this event has actually taken place,
but whether the contrary may not have taken place, or whether the value of
silver may not still continue to fall in the European market.
It must be observed, however, that whatever may be the supposed annual
importation of gold and silver, there must be a certain period at which
the annual consumption of those metals will be equal to that annual
importation. Their consumption must increase as their mass increases, or
rather in a much greater proportion. As their mass increases, their value
diminishes. They are more used, and less cared for, and their consumption
consequently increases in a greater proportion than their mass. After a
certain period, therefore, the annual consumption of those metals must, in
this manner, become equal to their annual importation, provided that
importation is not continually increasing; which, in the present times, is
not supposed to be the case.
If, when the annual consumption has become equal to the annual
importation, the annual importation should gradually diminish, the annual
consumption may, for some time, exceed the annual importation. The mass of
those metals may gradually and insensibly diminish, and their value
gradually and insensibly rise, till the annual importation becoming again
stationary, the annual consumption will gradually and insensibly
accommodate itself to what that annual importation can maintain.
_Grounds of the suspicion that the Value of Silver still continues to
decrease._
The increase of the wealth of Europe, and the popular notion, that as the
quantity of the precious metals naturally increases with the increase of
wealth, so their value diminishes as their quantity increases, may,
perhaps, dispose many people to believe that their value still continues
to fall in the European market; and the still gradually increasing price
of many parts of the rude produce of land may confirm them still farther
in this opinion.
That that increase in the quantity of the precious metals, which arises in
any country from the increase of wealth, has no tendency to diminish their
value, I have endeavoured to shew already. Gold and silver naturally
resort to a rich country, for the same reason that all sorts of luxuries
and curiosities resort to it; not because they are cheaper there than in
poorer countries, but because they are dearer, or because a better price
is given for them. It is the superiority of price which attracts them; and
as soon as that superiority ceases, they necessarily cease to go thither.
If you except corn, and such other vegetables as are raised altogether by
human industry, that all other sorts of rude produce, cattle, poultry,
game of all kinds, the useful fossils and minerals of the earth, etc.
naturally grow dearer, as the society advances in wealth and improvement,
I have endeavoured to shew already. Though such commodities, therefore,
come to exchange for a greater quantity of silver than before, it will not
from thence follow that silver has become really cheaper, or will purchase
less labour than before; but that such commodities have become really
dearer, or will purchase more labour than before. It is not their nominal
price only, but their real price, which rises in the progress of
improvement. The rise of their nominal price is the effect, not of any
degradation of the value of silver, but of the rise in their real price.
_Different Effects of the Progress of Improvement upon three different
sorts of rude Produce._
These different sorts of rude produce may be divided into three classes.
The first comprehends those which it is scarce in the power of human
industry to multiply at all. The second, those which it can multiply in
proportion to the demand. The third, those in which the efficacy of
industry is either limited or uncertain. In the progress of wealth and
improvement, the real price of the first may rise to any degree of
extravagance, and seems not to be limited by any certain boundary. That of
the second, though it may rise greatly, has, however, a certain boundary,
beyond which it cannot well pass for any considerable time together. That
of the third, though its natural tendency is to rise in the progress of
improvement, yet in the same degree of improvement it may sometimes happen
even to fall, sometimes to continue the same, and sometimes to rise more
or less, according as different accidents render the efforts of human
industry, in multiplying this sort of rude produce, more or less
successful.
First Sort.—The first sort of rude produce, of which the price rises
in the progress of improvement, is that which it is scarce in the power of
human industry to multiply at all. It consists in those things which
nature produces only in certain quantities, and which being of a very
perishable nature, it is impossible to accumulate together the produce of
many different seasons. Such are the greater part of rare and singular
birds and fishes, many different sorts of game, almost all wild-fowl, all
birds of passage in particular, as well as many other things. When wealth,
and the luxury which accompanies it, increase, the demand for these is
likely to increase with them, and no effort of human industry may be able
to increase the supply much beyond what it was before this increase of the
demand. The quantity of such commodities, therefore, remaining the same,
or nearly the same, while the competition to purchase them is continually
increasing, their price may rise to any degree of extravagance, and seems
not to be limited by any certain boundary. If woodcocks should become so
fashionable as to sell for twenty guineas a-piece, no effort of human
industry could increase the number of those brought to market, much beyond
what it is at present. The high price paid by the Romans, in the time of
their greatest grandeur, for rare birds and fishes, may in this manner
easily be accounted for. These prices were not the effects of the low
value of silver in those times, but of the high value of such rarities and
curiosities as human industry could not multiply at pleasure. The real
value of silver was higher at Rome, for sometime before, and after the
fall of the republic, than it is through the greater part of Europe at
present. Three sestertii equal to about sixpence sterling, was the price
which the republic paid for the modius or peck of the tithe wheat of
Sicily. This price, however, was probably below the average market price,
the obligation to deliver their wheat at this rate being considered as a
tax upon the Sicilian farmers. When the Romans, therefore, had occasion to
order more corn than the tithe of wheat amounted to, they were bound by
capitulation to pay for the surplus at the rate of four sestertii, or
eightpence sterling the peck; and this had probably been reckoned the
moderate and reasonable, that is, the ordinary or average contract price
of those times; it is equal to about one-and-twenty shillings the quarter.
Eight-and-twenty shillings the quarter was, before the late years of
scarcity, the ordinary contract price of English wheat, which in quality
is inferior to the Sicilian, and generally sells for a lower price in the
European market. The value of silver, therefore, in those ancient times,
must have been to its value in the present, as three to four inversely;
that is, three ounces of silver would then have purchased the same
quantity of labour and commodities which four ounces will do at present.
When we read in Pliny, therefore, that Seius {Lib. X, c. 29.} bought a
white nightingale, as a present for the empress Agrippina, at the price of
six thousand sestertii, equal to about fifty pounds of our present money;
and that Asinius Celer {Lib. IX, c. 17.} purchased a surmullet at the
price of eight thousand sestertii, equal to about sixty-six pounds
thirteen shillings and fourpence of our present money; the extravagance of
those prices, how much soever it may surprise us, is apt, notwithstanding,
to appear to us about one third less than it really was. Their real price,
the quantity of labour and subsistence which was given away for them, was
about one-third more than their nominal price is apt to express to us in
the present times. Seius gave for the nightingale the command of a
quantity of labour and subsistence, equal to what £ 66:13: 4d. would
purchase in the present times; and Asinius Celer gave for a surmullet the
command of a quantity equal to what £ 88:17: 9d. would purchase. What
occasioned the extravagance of those high prices was, not so much the
abundance of silver, as the abundance of labour and subsistence, of which
those Romans had the disposal, beyond what was necessary for their own
use. The quantity of silver, of which they had the disposal, was a good
deal less than what the command of the same quantity of labour and
subsistence would have procured to them in the present times.
Second sort.—The second sort of rude produce, of which the price
rises in the progress of improvement, is that which human industry can
multiply in proportion to the demand. It consists in those useful plants
and animals, which, in uncultivated countries, nature produces with such
profuse abundance, that they are of little or no value, and which, as
cultivation advances, are therefore forced to give place to some more
profitable produce. During a long period in the progress of improvement,
the quantity of these is continually diminishing, while, at the same time,
the demand for them is continually increasing. Their real value,
therefore, the real quantity of labour which they will purchase or
command, gradually rises, till at last it gets so high as to render them
as profitable a produce as any thing else which human industry can raise
upon the most fertile and best cultivated land. When it has got so high,
it cannot well go higher. If it did, more land and more industry would
soon be employed to increase their quantity.
When the price of cattle, for example, rises so high, that it is as
profitable to cultivate land in order to raise food for them as in order
to raise food for man, it cannot well go higher. If it did, more corn land
would soon be turned into pasture. The extension of tillage, by
diminishing the quantity of wild pasture, diminishes the quantity of
butcher’s meat, which the country naturally produces without labour or
cultivation; and, by increasing the number of those who have either corn,
or, what comes to the same thing, the price of corn, to give in exchange
for it, increases the demand. The price of butcher’s meat, therefore, and,
consequently, of cattle, must gradually rise, till it gets so high, that
it becomes as profitable to employ the most fertile and best cultivated
lands in raising food for them as in raising corn. But it must always be
late in the progress of improvement before tillage can be so far extended
as to raise the price of cattle to this height; and, till it has got to
this height, if the country is advancing at all, their price must be
continually rising. There are, perhaps, some parts of Europe in which the
price of cattle has not yet got to this height. It had not got to this
height in any part of Scotland before the Union. Had the Scotch cattle
been always confined to the market of Scotland, in a country in which the
quantity of land, which can be applied to no other purpose but the feeding
of cattle, is so great in proportion to what can be applied to other
purposes, it is scarce possible, perhaps, that their price could ever have
risen so high as to render it profitable to cultivate land for the sake of
feeding them. In England, the price of cattle, it has already been
observed, seems, in the neighbourhood of London, to have got to this
height about the beginning of the last century; but it was much later,
probably, before it got through the greater part of the remoter counties,
in some of which, perhaps, it may scarce yet have got to it. Of all the
different substances, however, which compose this second sort of rude
produce, cattle is, perhaps, that of which the price, in the progress of
improvement, rises first to this height.
Till the price of cattle, indeed, has got to this height, it seems scarce
possible that the greater part, even of those lands which are capable of
the highest cultivation, can be completely cultivated. In all farms too
distant from any town to carry manure from it, that is, in the far greater
part of those of every extensive country, the quantity of well cultivated
land must be in proportion to the quantity of manure which the farm itself
produces; and this, again, must be in proportion to the stock of cattle
which are maintained upon it. The land is manured, either by pasturing the
cattle upon it, or by feeding them in the stable, and from thence carrying
out their dung to it. But unless the price of the cattle be sufficient to
pay both the rent and profit of cultivated land, the farmer cannot afford
to pasture them upon it; and he can still less afford to feed them in the
stable. It is with the produce of improved and cultivated land only that
cattle can be fed in the stable; because, to collect the scanty and
scattered produce of waste and unimproved lands, would require too much
labour, and be too expensive. If the price of the cattle, therefore, is
not sufficient to pay for the produce of improved and cultivated land,
when they are allowed to pasture it, that price will be still less
sufficient to pay for that produce, when it must be collected with a good
deal of additional labour, and brought into the stable to them. In these
circumstances, therefore, no more cattle can with profit be fed in the
stable than what are necessary for tillage. But these can never afford
manure enough for keeping constantly in good condition all the lands which
they are capable of cultivating. What they afford, being insufficient for
the whole farm, will naturally be reserved for the lands to which it can
be most advantageously or conveniently applied; the most fertile, or
those, perhaps, in the neighbourhood of the farm-yard. These, therefore,
will be kept constantly in good condition, and fit for tillage. The rest
will, the greater part of them, be allowed to lie waste, producing scarce
any thing but some miserable pasture, just sufficient to keep alive a few
straggling, half-starved cattle; the farm, though much overstocked in
proportion to what would be necessary for its complete cultivation, being
very frequently overstocked in proportion to its actual produce. A portion
of this waste land, however, after having been pastured in this wretched
manner for six or seven years together, may be ploughed up, when it will
yield, perhaps, a poor crop or two of bad oats, or of some other coarse
grain; and then, being entirely exhausted, it must be rested and pastured
again as before, and another portion ploughed up, to be in the same manner
exhausted and rested again in its turn. Such, accordingly, was the general
system of management all over the low country of Scotland before the
Union. The lands which were kept constantly well manured and in good
condition seldom exceeded a third or fourth part of the whole farm, and
sometimes did not amount to a fifth or a sixth part of it. The rest were
never manured, but a certain portion of them was in its turn,
notwithstanding, regularly cultivated and exhausted. Under this system of
management, it is evident, even that part of the lands of Scotland which
is capable of good cultivation, could produce but little in comparison of
what it may be capable of producing. But how disadvantageous soever this
system may appear, yet, before the Union, the low price of cattle seems to
have rendered it almost unavoidable. If, notwithstanding a great rise in
the price, it still continues to prevail through a considerable part of
the country, it is owing in many places, no doubt, to ignorance and
attachment to old customs, but, in most places, to the unavoidable
obstructions which the natural course of things opposes to the immediate
or speedy establishment of a better system: first, to the poverty of the
tenants, to their not having yet had time to acquire a stock of cattle
sufficient to cultivate their lands more completely, the same rise of
price, which would render it advantageous for them to maintain a greater
stock, rendering it more difficult for them to acquire it; and, secondly,
to their not having yet had time to put their lands in condition to
maintain this greater stock properly, supposing they were capable of
acquiring it. The increase of stock and the improvement of land are two
events which must go hand in hand, and of which the one can nowhere much
outrun the other. Without some increase of stock, there can be scarce any
improvement of land, but there can be no considerable increase of stock,
but in consequence of a considerable improvement of land; because
otherwise the land could not maintain it. These natural obstructions to
the establishment of a better system, cannot be removed but by a long
course of frugality and industry; and half a century or a century more,
perhaps, must pass away before the old system, which is wearing out
gradually, can be completely abolished through all the different parts of
the country. Of all the commercial advantages, however, which Scotland has
derived from the Union with England, this rise in the price of cattle is,
perhaps, the greatest. It has not only raised the value of all highland
estates, but it has, perhaps, been the principal cause of the improvement
of the low country.
In all new colonies, the great quantity of waste land, which can for many
years be applied to no other purpose but the feeding of cattle, soon
renders them extremely abundant; and in every thing great cheapness is the
necessary consequence of great abundance. Though all the cattle of the
European colonies in America were originally carried from Europe, they
soon multiplied so much there, and became of so little value, that even
horses were allowed to run wild in the woods, without any owner thinking
it worth while to claim them. It must be a long time after the first
establishment of such colonies, before it can become profitable to feed
cattle upon the produce of cultivated land. The same causes, therefore,
the want of manure, and the disproportion between the stock employed in
cultivation and the land which it is destined to cultivate, are likely to
introduce there a system of husbandry, not unlike that which still
continues to take place in so many parts of Scotland. Mr Kalm, the Swedish
traveller, when he gives an account of the husbandry of some of the
English colonies in North America, as he found it in 1749, observes,
accordingly, that he can with difficulty discover there the character of
the English nation, so well skilled in all the different branches of
agriculture. They make scarce any manure for their corn fields, he says;
but when one piece of ground has been exhausted by continual cropping,
they clear and cultivate another piece of fresh land; and when that is
exhausted, proceed to a third. Their cattle are allowed to wander through
the woods and other uncultivated grounds, where they are half-starved;
having long ago extirpated almost all the annual grasses, by cropping them
too early in the spring, before they had time to form their flowers, or to
shed their seeds. {Kalm’s Travels, vol 1, pp. 343, 344.} The annual
grasses were, it seems, the best natural grasses in that part of North
America; and when the Europeans first settled there, they used to grow
very thick, and to rise three or four feet high. A piece of ground which,
when he wrote, could not maintain one cow, would in former times, he was
assured, have maintained four, each of which would have given four times
the quantity of milk which that one was capable of giving. The poorness of
the pasture had, in his opinion, occasioned the degradation of their
cattle, which degenerated sensibly from one generation to another. They
were probably not unlike that stunted breed which was common all over
Scotland thirty or forty years ago, and which is now so much mended
through the greater part of the low country, not so much by a change of
the breed, though that expedient has been employed in some places, as by a
more plentiful method of feeding them.
Though it is late, therefore, in the progress of improvement, before
cattle can bring such a price as to render it profitable to cultivate land
for the sake of feeding them; yet of all the different parts which compose
this second sort of rude produce, they are perhaps the first which bring
this price; because, till they bring it, it seems impossible that
improvement can be brought near even to that degree of perfection to which
it has arrived in many parts of Europe.
As cattle are among the first, so perhaps venison is among the last parts
of this sort of rude produce which bring this price. The price of venison
in Great Britain, how extravagant soever it may appear, is not near
sufficient to compensate the expense of a deer park, as is well known to
all those who have had any experience in the feeding of deer. If it was
otherwise, the feeding of deer would soon become an article of common
farming, in the same manner as the feeding of those small birds, called
turdi, was among the ancient Romans. Varro and Columella assure us, that
it was a most profitable article. The fattening of ortolans, birds of
passage which arrive lean in the country, is said to be so in some parts
of France. If venison continues in fashion, and the wealth and luxury of
Great Britain increase as they have done for some time past, its price may
very probably rise still higher than it is at present.
Between that period in the progress of improvement, which brings to its
height the price of so necessary an article as cattle, and that which
brings to it the price of such a superfluity as venison, there is a very
long interval, in the course of which many other sorts of rude produce
gradually arrive at their highest price, some sooner and some later,
according to different circumstances.
Thus, in every farm, the offals of the barn and stable will maintain a
certain number of poultry. These, as they are fed with what would
otherwise be lost, are a mere save-all; and as they cost the farmer scarce
any thing, so he can afford to sell them for very little. Almost all that
he gets is pure gain, and their price can scarce be so low as to
discourage him from feeding this number. But in countries ill cultivated,
and therefore but thinly inhabited, the poultry, which are thus raised
without expense, are often fully sufficient to supply the whole demand. In
this state of things, therefore, they are often as cheap as butcher’s
meat, or any other sort of animal food. But the whole quantity of poultry
which the farm in this manner produces without expense, must always be
much smaller than the whole quantity of butcher’s meat which is reared
upon it; and in times of wealth and luxury, what is rare, with only nearly
equal merit, is always preferred to what is common. As wealth and luxury
increase, therefore, in consequence of improvement and cultivation, the
price of poultry gradually rises above that of butcher’s meat, till at
last it gets so high, that it becomes profitable to cultivate land for the
sake of feeding them. When it has got to this height, it cannot well go
higher. If it did, more land would soon be turned to this purpose. In
several provinces of France, the feeding of poultry is considered as a
very important article in rural economy, and sufficiently profitable to
encourage the farmer to raise a considerable quantity of Indian corn and
buckwheat for this purpose. A middling farmer will there sometimes have
four hundred fowls in his yard. The feeding of poultry seems scarce yet to
be generally considered as a matter of so much importance in England. They
are certainly, however, dearer in England than in France, as England
receives considerable supplies from France. In the progress of
improvements, the period at which every particular sort of animal food is
dearest, must naturally be that which immediately precedes the general
practice of cultivating land for the sake of raising it. For some time
before this practice becomes general, the scarcity must necessarily raise
the price. After it has become general, new methods of feeding are
commonly fallen upon, which enable the farmer to raise upon the same
quantity of ground a much greater quantity of that particular sort of
animal food. The plenty not only obliges him to sell cheaper, but, in
consequence of these improvements, he can afford to sell cheaper; for if
he could not afford it, the plenty would not be of long continuance. It
has been probably in this manner that the introduction of clover, turnips,
carrots, cabbages, etc. has contributed to sink the common price of
butcher’s meat in the London market, somewhat below what it was about the
beginning of the last century.
The hog, that finds his food among ordure, and greedily devours many
things rejected by every other useful animal, is, like poultry, originally
kept as a save-all. As long as the number of such animals, which can thus
be reared at little or no expense, is fully sufficient to supply the
demand, this sort of butcher’s meat comes to market at a much lower price
than any other. But when the demand rises beyond what this quantity can
supply, when it becomes necessary to raise food on purpose for feeding and
fattening hogs, in the same manner as for feeding and fattening other
cattle, the price necessarily rises, and becomes proportionably either
higher or lower than that of other butcher’s meat, according as the nature
of the country, and the state of its agriculture, happen to render the
feeding of hogs more or less expensive than that of other cattle. In
France, according to Mr Buffon, the price of pork is nearly equal to that
of beef. In most parts of Great Britain it is at present somewhat higher.
The great rise in the price both of hogs and poultry, has, in Great
Britain, been frequently imputed to the diminution of the number of
cottagers and other small occupiers of land; an event which has in every
part of Europe been the immediate forerunner of improvement and better
cultivation, but which at the same time may have contributed to raise the
price of those articles, both somewhat sooner and somewhat faster than it
would otherwise have risen. As the poorest family can often maintain a cat
or a dog without any expense, so the poorest occupiers of land can
commonly maintain a few poultry, or a sow and a few pigs, at very little.
The little offals of their own table, their whey, skimmed milk, and butter
milk, supply those animals with a part of their food, and they find the
rest in the neighbouring fields, without doing any sensible damage to any
body. By diminishing the number of those small occupiers, therefore, the
quantity of this sort of provisions, which is thus produced at little or
no expense, must certainly have been a good deal diminished, and their
price must consequently have been raised both sooner and faster than it
would otherwise have risen. Sooner or later, however, in the progress of
improvement, it must at any rate have risen to the utmost height to which
it is capable of rising; or to the price which pays the labour and expense
of cultivating the land which furnishes them with food, as well as these
are paid upon the greater part of other cultivated land.
The business of the dairy, like the feeding of hogs and poultry, is
originally carried on as a save-all. The cattle necessarily kept upon the
farm produce more milk than either the rearing of their own young, or the
consumption of the farmer’s family requires; and they produce most at one
particular season. But of all the productions of land, milk is perhaps the
most perishable. In the warm season, when it is most abundant, it will
scarce keep four-and-twenty hours. The farmer, by making it into fresh
butter, stores a small part of it for a week; by making it into salt
butter, for a year; and by making it into cheese, he stores a much greater
part of it for several years. Part of all these is reserved for the use of
his own family; the rest goes to market, in order to find the best price
which is to be had, and which can scarce be so low is to discourage him
from sending thither whatever is over and above the use of his own family.
If it is very low indeed, he will be likely to manage his dairy in a very
slovenly and dirty manner, and will scarce, perhaps, think it worth while
to have a particular room or building on purpose for it, but will suffer
the business to be carried on amidst the smoke, filth, and nastiness of
his own kitchen, as was the case of almost all the farmers’ dairies in
Scotland thirty or forty years ago, and as is the case of many of them
still. The same causes which gradually raise the price of butcher’s meat,
the increase of the demand, and, in consequence of the improvement of the
country, the diminution of the quantity which can be fed at little or no
expense, raise, in the same manner, that of the produce of the dairy, of
which the price naturally connects with that of butcher’s meat, or with
the expense of feeding cattle. The increase of price pays for more labour,
care, and cleanliness. The dairy becomes more worthy of the farmer’s
attention, and the quality of its produce gradually improves. The price at
last gets so high, that it becomes worth while to employ some of the most
fertile and best cultivated lands in feeding cattle merely for the purpose
of the dairy; and when it has got to this height, it cannot well go
higher. If it did, more land would soon be turned to this purpose. It
seems to have got to this height through the greater part of England,
where much good land is commonly employed in this manner. If you except
the neighbourhood of a few considerable towns, it seems not yet to have
got to this height anywhere in Scotland, where common farmers seldom
employ much good land in raising food for cattle, merely for the purpose
of the dairy. The price of the produce, though it has risen very
considerably within these few years, is probably still too low to admit of
it. The inferiority of the quality, indeed, compared with that of the
produce of English dairies, is fully equal to that of the price. But this
inferiority of quality is, perhaps, rather the effect of this lowness of
price, than the cause of it. Though the quality was much better, the
greater part of what is brought to market could not, I apprehend, in the
present circumstances of the country, be disposed of at a much better
price; and the present price, it is probable, would not pay the expense of
the land and labour necessary for producing a much better quality. Through
the greater part of England, notwithstanding the superiority of price, the
dairy is not reckoned a more profitable employment of land than the
raising of corn, or the fattening of cattle, the two great objects of
agriculture. Through the greater part of Scotland, therefore, it cannot
yet be even so profitable.
The lands of no country, it is evident, can ever be completely cultivated
and improved, till once the price of every produce, which human industry
is obliged to raise upon them, has got so high as to pay for the expense
of complete improvement and cultivation. In order to do this, the price of
each particular produce must be sufficient, first, to pay the rent of good
corn land, as it is that which regulates the rent of the greater part of
other cultivated land; and, secondly, to pay the labour and expense of the
farmer, as well as they are commonly paid upon good corn land; or, in
other words, to replace with the ordinary profits the stock which he
employs about it. This rise in the price of each particular produce; must
evidently be previous to the improvement and cultivation of the land which
is destined for raising it. Gain is the end of all improvement; and
nothing could deserve that name, of which loss was to be the necessary
consequence. But loss must be the necessary consequence of improving land
for the sake of a produce of which the price could never bring back the
expense. If the complete improvement and cultivation of the country be, as
it most certainly is, the greatest of all public advantages, this rise in
the price of all those different sorts of rude produce, instead of being
considered as a public calamity, ought to be regarded as the necessary
forerunner and attendant of the greatest of all public advantages.
This rise, too, in the nominal or money price of all those different sorts
of rude produce, has been the effect, not of any degradation in the value
of silver, but of a rise in their real price. They have become worth, not
only a greater quantity of silver, but a greater quantity of labour and
subsistence than before. As it costs a greater quantity of labour and
subsistence to bring them to market, so, when they are brought thither
they represent, or are equivalent to a greater quantity.
Third Sort.—The third and last sort of rude produce, of which the
price naturally rises in the progress of improvement, is that in which the
efficacy of human industry, in augmenting the quantity, is either limited
or uncertain. Though the real price of this sort of rude produce,
therefore, naturally tends to rise in the progress of improvement, yet,
according as different accidents happen to render the efforts of human
industry more or less successful in augmenting the quantity, it may happen
sometimes even to fall, sometimes to continue the same, in very different
periods of improvement, and sometimes to rise more or less in the same
period.
There are some sorts of rude produce which nature has rendered a kind of
appendages to other sorts; so that the quantity of the one which any
country can afford, is necessarily limited by that of the other. The
quantity of wool or of raw hides, for example, which any country can
afford, is necessarily limited by the number of great and small cattle
that are kept in it. The state of its improvement, and the nature of its
agriculture, again necessarily determine this number.
The same causes which, in the progress of improvement, gradually raise the
price of butcher’s meat, should have the same effect, it may be thought,
upon the prices of wool and raw hides, and raise them, too, nearly in the
same proportion. It probably would be so, if, in the rude beginnings of
improvement, the market for the latter commodities was confined within as
narrow bounds as that for the former. But the extent of their respective
markets is commonly extremely different.
The market for butcher’s meat is almost everywhere confined to the country
which produces it. Ireland, and some part of British America, indeed,
carry on a considerable trade in salt provisions; but they are, I believe,
the only countries in the commercial world which do so, or which export to
other countries any considerable part of their butcher’s meat.
The market for wool and raw hides, on the contrary, is, in the rude
beginnings of improvement, very seldom confined to the country which
produces them. They can easily be transported to distant countries; wool
without any preparation, and raw hides with very little; and as they are
the materials of many manufactures, the industry of other countries may
occasion a demand for them, though that of the country which produces them
might not occasion any.
In countries ill cultivated, and therefore but thinly inhabited, the price
of the wool and the hide bears always a much greater proportion to that of
the whole beast, than in countries where, improvement and population being
further advanced, there is more demand for butcher’s meat. Mr Hume
observes, that in the Saxon times, the fleece was estimated at two-fifths
of the value of the whole sheep and that this was much above the
proportion of its present estimation. In some provinces of Spain, I have
been assured, the sheep is frequently killed merely for the sake of the
fleece and the tallow. The carcase is often left to rot upon the ground,
or to be devoured by beasts and birds of prey. If this sometimes happens
even in Spain, it happens almost constantly in Chili, at Buenos Ayres, and
in many other parts of Spanish America, where the horned cattle are almost
constantly killed merely for the sake of the hide and the tallow. This,
too, used to happen almost constantly in Hispaniola, while it was infested
by the buccaneers, and before the settlement, improvement, and
populousness of the French plantations ( which now extend round the coast
of almost the whole western half of the island) had given some value to
the cattle of the Spaniards, who still continue to possess, not only the
eastern part of the coast, but the whole inland mountainous part of the
country.
Though, in the progress of improvement and population, the price of the
whole beast necessarily rises, yet the price of the carcase is likely to
be much more affected by this rise than that of the wool and the hide. The
market for the carcase being in the rude state of society confined always
to the country which produces it, must necessarily be extended in
proportion to the improvement and population of that country. But the
market for the wool and the hides, even of a barbarous country, often
extending to the whole commercial world, it can very seldom be enlarged in
the same proportion. The state of the whole commercial world can seldom be
much affected by the improvement of any particular country; and the market
for such commodities may remain the same, or very nearly the same, after
such improvements, as before. It should, however, in the natural course of
things, rather, upon the whole, be somewhat extended in consequence of
them. If the manufactures, especially, of which those commodities are the
materials, should ever come to flourish in the country, the market, though
it might not be much enlarged, would at least be brought much nearer to
the place of growth than before; and the price of those materials might at
least be increased by what had usually been the expense of transporting
them to distant countries. Though it might not rise, therefore, in the
same proportion as that of butcher’s meat, it ought naturally to rise
somewhat, and it ought certainly not to fall.
In England, however, notwithstanding the flourishing state of its woollen
manufacture, the price of English wool has fallen very considerably since
the time of Edward III. There are many authentic records which demonstrate
that, during the reign of that prince (towards the middle of the
fourteenth century, or about 1339), what was reckoned the moderate and
reasonable price of the tod, or twenty-eight pounds of English wool, was
not less than ten shillings of the money of those times {See Smith’s
Memoirs of Wool, vol. i c. 5, 6, 7. also vol. ii.}, containing, at the
rate of twenty-pence the ounce, six ounces of silver, Tower weight, equal
to about thirty shillings of our present money. In the present times,
one-and-twenty shillings the tod may be reckoned a good price for very
good English wool. The money price of wool, therefore, in the time of
Edward III. was to its money price in the present times as ten to seven.
The superiority of its real price was still greater. At the rate of six
shillings and eightpence the quarter, ten shillings was in those ancient
times the price of twelve bushels of wheat. At the rate of twenty-eight
shillings the quarter, one-and-twenty shillings is in the present times
the price of six bushels only. The proportion between the real price of
ancient and modern times, therefore, is as twelve to six, or as two to
one. In those ancient times, a tod of wool would have purchased twice the
quantity of subsistence which it will purchase at present, and
consequently twice the quantity of labour, if the real recompence of
labour had been the same in both periods.
This degradation, both in the real and nominal value of wool, could never
have happened in consequence of the natural course of things. It has
accordingly been the effect of violence and artifice. First, of the
absolute prohibition of exporting wool from England: secondly, of the
permission of importing it from Spain, duty free: thirdly, of the
prohibition of exporting it from Ireland to another country but England.
In consequence of these regulations, the market for English wool, instead
of being somewhat extended, in consequence of the improvement of England,
has been confined to the home market, where the wool of several other
countries is allowed to come into competition with it, and where that of
Ireland is forced into competition with it. As the woollen manufactures,
too, of Ireland, are fully as much discouraged as is consistent with
justice and fair dealing, the Irish can work up but a smaller part of
their own wool at home, and are therefore obliged to send a greater
proportion of it to Great Britain, the only market they are allowed.
I have not been able to find any such authentic records concerning the
price of raw hides in ancient times. Wool was commonly paid as a subsidy
to the king, and its valuation in that subsidy ascertains, at least in
some degree, what was its ordinary price. But this seems not to have been
the case with raw hides. Fleetwood, however, from an account in 1425,
between the prior of Burcester Oxford and one of his canons, gives us
their price, at least as it was stated upon that particular occasion, viz.
five ox hides at twelve shillings; five cow hides at seven shillings and
threepence; thirtysix sheep skins of two years old at nine shillings;
sixteen calf skins at two shillings. In 1425, twelve shillings contained
about the same quantity of silver as four-and-twenty shillings of our
present money. An ox hide, therefore, was in this account valued at the
same quantity of silver as 4s. ⅘ths of our present money. Its nominal
price was a good deal lower than at present. But at the rate of six
shillings and eightpence the quarter, twelve shillings would in those
times have purchased fourteen bushels and four-fifths of a bushel of
wheat, which, at three and sixpence the bushel, would in the present times
cost 51s. 4d. An ox hide, therefore, would in those times have purchased
as much corn as ten shillings and threepence would purchase at present.
Its real value was equal to ten shillings and threepence of our present
money. In those ancient times, when the cattle were half starved during
the greater part of the winter, we cannot suppose that they were of a very
large size. An ox hide which weighs four stone of sixteen pounds of
avoirdupois, is not in the present times reckoned a bad one; and in those
ancient times would probably have been reckoned a very good one. But at
half-a-crown the stone, which at this moment (February 1773) I understand
to be the common price, such a hide would at present cost only ten
shillings. Through its nominal price, therefore, is higher in the present
than it was in those ancient times, its real price, the real quantity of
subsistence which it will purchase or command, is rather somewhat lower.
The price of cow hides, as stated in the above account, is nearly in the
common proportion to that of ox hides. That of sheep skins is a good deal
above it. They had probably been sold with the wool. That of calves skins,
on the contrary, is greatly below it. In countries where the price of
cattle is very low, the calves, which are not intended to be reared in
order to keep up the stock, are generally killed very young, as was the
case in Scotland twenty or thirty years ago. It saves the milk, which
their price would not pay for. Their skins, therefore, are commonly good
for little.
The price of raw hides is a good deal lower at present than it was a few
years ago; owing probably to the taking off the duty upon seal skins, and
to the allowing, for a limited time, the importation of raw hides from
Ireland, and from the plantations, duty free, which was done in 1769. Take
the whole of the present century at an average, their real price has
probably been somewhat higher than it was in those ancient times. The
nature of the commodity renders it not quite so proper for being
transported to distant markets as wool. It suffers more by keeping. A
salted hide is reckoned inferior to a fresh one, and sells for a lower
price. This circumstance must necessarily have some tendency to sink the
price of raw hides produced in a country which does not manufacture them,
but is obliged to export them, and comparatively to raise that of those
produced in a country which does manufacture them. It must have some
tendency to sink their price in a barbarous, and to raise it in an
improved and manufacturing country. It must have had some tendency,
therefore, to sink it in ancient, and to raise it in modern times. Our
tanners, besides, have not been quite so successful as our clothiers, in
convincing the wisdom of the nation, that the safety of the commonwealth
depends upon the prosperity of their particular manufacture. They have
accordingly been much less favoured. The exportation of raw hides has,
indeed, been prohibited, and declared a nuisance; but their importation
from foreign countries has been subjected to a duty; and though this duty
has been taken off from those of Ireland and the plantations (for the
limited time of five years only), yet Ireland has not been confined to the
market of Great Britain for the sale of its surplus hides, or of those
which are not manufactured at home. The hides of common cattle have, but
within these few years, been put among the enumerated commodities which
the plantations can send nowhere but to the mother country; neither has
the commerce of Ireland been in this case oppressed hitherto, in order to
support the manufactures of Great Britain.
Whatever regulations tend to sink the price, either of wool or of raw
hides, below what it naturally would be, must, in an improved and
cultivated country, have some tendency to raise the price of butcher’s
meat. The price both of the great and small cattle, which are fed on
improved and cultivated land, must be sufficient to pay the rent which the
landlord, and the profit which the farmer, has reason to expect from
improved and cultivated land. If it is not, they will soon cease to feed
them. Whatever part of this price, therefore, is not paid by the wool and
the hide, must be paid by the carcase. The less there is paid for the one,
the more must be paid for the other. In what manner this price is to be
divided upon the different parts of the beast, is indifferent to the
landlords and farmers, provided it is all paid to them. In an improved and
cultivated country, therefore, their interest as landlords and farmers
cannot be much affected by such regulations, though their interest as
consumers may, by the rise in the price of provisions. It would be quite
otherwise, however, in an unimproved and uncultivated country, where the
greater part of the lands could be applied to no other purpose but the
feeding of cattle, and where the wool and the hide made the principal part
of the value of those cattle. Their interest as landlords and farmers
would in this case be very deeply affected by such regulations, and their
interest as consumers very little. The fall in the price of the wool and
the hide would not in this case raise the price of the carcase; because
the greater part of the lands of the country being applicable to no other
purpose but the feeding of cattle, the same number would still continue to
be fed. The same quantity of butcher’s meat would still come to market.
The demand for it would be no greater than before. Its price, therefore,
would be the same as before. The whole price of cattle would fall, and
along with it both the rent and the profit of all those lands of which
cattle was the principal produce, that is, of the greater part of the
lands of the country. The perpetual prohibition of the exportation of
wool, which is commonly, but very falsely, ascribed to Edward III., would,
in the then circumstances of the country, have been the most destructive
regulation which could well have been thought of. It would not only have
reduced the actual value of the greater part of the lands in the kingdom,
but by reducing the price of the most important species of small cattle,
it would have retarded very much its subsequent improvement.
The wool of Scotland fell very considerably in its price in consequence of
the union with England, by which it was excluded from the great market of
Europe, and confined to the narrow one of Great Britain. The value of the
greater part of the lands in the southern counties of Scotland, which are
chiefly a sheep country, would have been very deeply affected by this
event, had not the rise in the price of butcher’s meat fully compensated
the fall in the price of wool.
As the efficacy of human industry, in increasing the quantity either of
wool or of raw hides, is limited, so far as it depends upon the produce of
the country where it is exerted; so it is uncertain so far as it depends
upon the produce of other countries. It so far depends not so much upon
the quantity which they produce, as upon that which they do not
manufacture; and upon the restraints which they may or may not think
proper to impose upon the exportation of this sort of rude produce. These
circumstances, as they are altogether independent of domestic industry, so
they necessarily render the efficacy of its efforts more or less
uncertain. In multiplying this sort of rude produce, therefore, the
efficacy of human industry is not only limited, but uncertain.
In multiplying another very important sort of rude produce, the quantity
of fish that is brought to market, it is likewise both limited and
uncertain. It is limited by the local situation of the country, by the
proximity or distance of its different provinces from the sea, by the
number of its lakes and rivers, and by what may be called the fertility or
barrenness of those seas, lakes, and rivers, as to this sort of rude
produce. As population increases, as the annual produce of the land and
labour of the country grows greater and greater, there come to be more
buyers of fish; and those buyers, too, have a greater quantity and variety
of other goods, or, what is the same thing, the price of a greater
quantity and variety of other goods, to buy with. But it will generally be
impossible to supply the great and extended market, without employing a
quantity of labour greater than in proportion to what had been requisite
for supplying the narrow and confined one. A market which, from requiring
only one thousand, comes to require annually ten thousand ton of fish, can
seldom be supplied, without employing more than ten times the quantity of
labour which had before been sufficient to supply it. The fish must
generally be sought for at a greater distance, larger vessels must be
employed, and more expensive machinery of every kind made use of. The real
price of this commodity, therefore, naturally rises in the progress of
improvement. It has accordingly done so, I believe, more or less in every
country.
Though the success of a particular day’s fishing may be a very uncertain
matter, yet the local situation of the country being supposed, the general
efficacy of industry in bringing a certain quantity of fish to market,
taking the course of a year, or of several years together, it may,
perhaps, be thought is certain enough; and it, no doubt, is so. As it
depends more, however, upon the local situation of the country, than upon
the state of its wealth and industry; as upon this account it may in
different countries be the same in very different periods of improvement,
and very different in the same period; its connection with the state of
improvement is uncertain; and it is of this sort of uncertainty that I am
here speaking.
In increasing the quantity of the different minerals and metals which are
drawn from the bowels of the earth, that of the more precious ones
particularly, the efficacy of human industry seems not to be limited, but
to be altogether uncertain.
The quantity of the precious metals which is to be found in any country,
is not limited by any thing in its local situation, such as the fertility
or barrenness of its own mines. Those metals frequently abound in
countries which possess no mines. Their quantity, in every particular
country, seems to depend upon two different circumstances; first, upon its
power of purchasing, upon the state of its industry, upon the annual
produce of its land and labour, in consequence of which it can afford to
employ a greater or a smaller quantity of labour and subsistence, in
bringing or purchasing such superfluities as gold and silver, either from
its own mines, or from those of other countries; and, secondly, upon the
fertility or barrenness of the mines which may happen at any particular
time to supply the commercial world with those metals. The quantity of
those metals in the countries most remote from the mines, must be more or
less affected by this fertility or barrenness, on account of the easy and
cheap transportation of those metals, of their small bulk and great value.
Their quantity in China and Indostan must have been more or less affected
by the abundance of the mines of America.
So far as their quantity in any particular country depends upon the former
of those two circumstances (the power of purchasing), their real price,
like that of all other luxuries and superfluities, is likely to rise with
the wealth and improvement of the country, and to fall with its poverty
and depression. Countries which have a great quantity of labour and
subsistence to spare, can afford to purchase any particular quantity of
those metals at the expense of a greater quantity of labour and
subsistence, than countries which have less to spare.
So far as their quantity in any particular country depends upon the latter
of those two circumstances (the fertility or barrenness of the mines which
happen to supply the commercial world), their real price, the real
quantity of labour and subsistence which they will purchase or exchange
for, will, no doubt, sink more or less in proportion to the fertility, and
rise in proportion to the barrenness of those mines.
The fertility or barrenness of the mines, however, which may happen at any
particular time to supply the commercial world, is a circumstance which,
it is evident, may have no sort of connection with the state of industry
in a particular country. It seems even to have no very necessary
connection with that of the world in general. As arts and commerce,
indeed, gradually spread themselves over a greater and a greater part of
the earth, the search for new mines, being extended over a wider surface,
may have somewhat a better chance for being successful than when confined
within narrower bounds. The discovery of new mines, however, as the old
ones come to be gradually exhausted, is a matter of the greatest
uncertainty, and such as no human skill or industry can insure. All
indications, it is acknowledged, are doubtful; and the actual discovery
and successful working of a new mine can alone ascertain the reality of
its value, or even of its existence. In this search there seem to be no
certain limits, either to the possible success, or to the possible
disappointment of human industry. In the course of a century or two, it is
possible that new mines may be discovered, more fertile than any that have
ever yet been known; and it is just equally possible, that the most
fertile mine then known may be more barren than any that was wrought
before the discovery of the mines of America. Whether the one or the other
of those two events may happen to take place, is of very little importance
to the real wealth and prosperity of the world, to the real value of the
annual produce of the land and labour of mankind. Its nominal value, the
quantity of gold and silver by which this annual produce could be
expressed or represented, would, no doubt, be very different; but its real
value, the real quantity of labour which it could purchase or command,
would be precisely the same. A shilling might, in the one case, represent
no more labour than a penny does at present; and a penny, in the other,
might represent as much as a shilling does now. But in the one case, he
who had a shilling in his pocket would be no richer than he who has a
penny at present; and in the other, he who had a penny would be just as
rich as he who has a shilling now. The cheapness and abundance of gold and
silver plate would be the sole advantage which the world could derive from
the one event; and the dearness and scarcity of those trifling
superfluities, the only inconveniency it could suffer from the other.
Conclusion of the Digression concerning the Variations in the Value of
Silver.
The greater part of the writers who have collected the money price of
things in ancient times, seem to have considered the low money price of
corn, and of goods in general, or, in other words, the high value of gold
and silver, as a proof, not only of the scarcity of those metals, but of
the poverty and barbarism of the country at the time when it took place.
This notion is connected with the system of political economy, which
represents national wealth as consisting in the abundance and national
poverty in the scarcity, of gold and silver; a system which I shall
endeavour to explain and examine at great length in the fourth book of
this Inquiry. I shall only observe at present, that the high value of the
precious metals can be no proof of the poverty or barbarism of any
particular country at the time when it took place. It is a proof only of
the barrenness of the mines which happened at that time to supply the
commercial world. A poor country, as it cannot afford to buy more, so it
can as little afford to pay dearer for gold and silver than a rich one;
and the value of those metals, therefore, is not likely to be higher in
the former than in the latter. In China, a country much richer than any
part of Europe, the value of the precious metals is much higher than in
any part of Europe. As the wealth of Europe, indeed, has increased greatly
since the discovery of the mines of America, so the value of gold and
silver has gradually diminished. This diminution of their value, however,
has not been owing to the increase of the real wealth of Europe, of the
annual produce of its land and labour, but to the accidental discovery of
more abundant mines than any that were known before. The increase of the
quantity of gold and silver in Europe, and the increase of its
manufactures and agriculture, are two events which, though they have
happened nearly about the same time, yet have arisen from very different
causes, and have scarce any natural connection with one another. The one
has arisen from a mere accident, in which neither prudence nor policy
either had or could have any share; the other, from the fall of the feudal
system, and from the establishment of a government which afforded to
industry the only encouragement which it requires, some tolerable security
that it shall enjoy the fruits of its own labour. Poland, where the feudal
system still continues to take place, is at this day as beggarly a country
as it was before the discovery of America. The money price of corn,
however, has risen; the real value of the precious metals has fallen in
Poland, in the same manner as in other parts of Europe. Their quantity,
therefore, must have increased there as in other places, and nearly in the
same proportion to the annual produce of its land and labour. This
increase of the quantity of those metals, however, has not, it seems,
increased that annual produce, has neither improved the manufactures and
agriculture of the country, nor mended the circumstances of its
inhabitants. Spain and Portugal, the countries which possess the mines,
are, after Poland, perhaps the two most beggarly countries in Europe. The
value of the precious metals, however, must be lower in Spain and Portugal
than in any other part of Europe, as they come from those countries to all
other parts of Europe, loaded, not only with a freight and an insurance,
but with the expense of smuggling, their exportation being either
prohibited or subjected to a duty. In proportion to the annual produce of
the land and labour, therefore, their quantity must be greater in those
countries than in any other part of Europe; those countries, however, are
poorer than the greater part of Europe. Though the feudal system has been
abolished in Spain and Portugal, it has not been succeeded by a much
better.
As the low value of gold and silver, therefore, is no proof of the wealth
and flourishing state of the country where it takes place; so neither is
their high value, or the low money price either of goods in general, or of
corn in particular, any proof of its poverty and barbarism.
But though the low money price, either of goods in general, or of corn in
particular, be no proof of the poverty or barbarism of the times, the low
money price of some particular sorts of goods, such as cattle, poultry,
game of all kinds, etc. in proportion to that of corn, is a most decisive
one. It clearly demonstrates, first, their great abundance in proportion
to that of corn, and, consequently, the great extent of the land which
they occupied in proportion to what was occupied by corn; and, secondly,
the low value of this land in proportion to that of corn land, and,
consequently, the uncultivated and unimproved state of the far greater
part of the lands of the country. It clearly demonstrates, that the stock
and population of the country did not bear the same proportion to the
extent of its territory, which they commonly do in civilized countries;
and that society was at that time, and in that country, but in its
infancy. From the high or low money price, either of goods in general, or
of corn in particular, we can infer only, that the mines, which at that
time happened to supply the commercial world with gold and silver, were
fertile or barren, not that the country was rich or poor. But from the
high or low money price of some sorts of goods in proportion to that of
others, we can infer, with a degree of probability that approaches almost
to certainty, that it was rich or poor, that the greater part of its lands
were improved or unimproved, and that it was either in a more or less
barbarous state, or in a more or less civilized one.
Any rise in the money price of goods which proceeded altogether from the
degradation of the value of silver, would affect all sorts of goods
equally, and raise their price universally, a third, or a fourth, or a
fifth part higher, according as silver happened to lose a third, or a
fourth, or a fifth part of its former value. But the rise in the price of
provisions, which has been the subject of so much reasoning and
conversation, does not affect all sorts of provisions equally. Taking the
course of the present century at an average, the price of corn, it is
acknowledged, even by those who account for this rise by the degradation
of the value of silver, has risen much less than that of some other sorts
of provisions. The rise in the price of those other sorts of provisions,
therefore, cannot be owing altogether to the degradation of the value of
silver. Some other causes must be taken into the account; and those which
have been above assigned, will, perhaps, without having recourse to the
supposed degradation of the value of silver, sufficiently explain this
rise in those particular sorts of provisions, of which the price has
actually risen in proportion to that of corn.
As to the price of corn itself, it has, during the sixty-four first years
of the present century, and before the late extraordinary course of bad
seasons, been somewhat lower than it was during the sixty-four last years
of the preceding century. This fact is attested, not only by the accounts
of Windsor market, but by the public fiars of all the different counties
of Scotland, and by the accounts of several different markets in France,
which have been collected with great diligence and fidelity by Mr
Messance, and by Mr Dupré de St Maur. The evidence is more complete than
could well have been expected in a matter which is naturally so very
difficult to be ascertained.
As to the high price of corn during these last ten or twelve years, it can
be sufficiently accounted for from the badness of the seasons, without
supposing any degradation in the value of silver.
The opinion, therefore, that silver is continually sinking in its value,
seems not to be founded upon any good observations, either upon the prices
of corn, or upon those of other provisions.
The same quantity of silver, it may perhaps be said, will, in the present
times, even according to the account which has been here given, purchase a
much smaller quantity of several sorts of provisions than it would have
done during some part of the last century; and to ascertain whether this
change be owing to a rise in the value of those goods, or to a fall in the
value of silver, is only to establish a vain and useless distinction,
which can be of no sort of service to the man who has only a certain
quantity of silver to go to market with, or a certain fixed revenue in
money. I certainly do not pretend that the knowledge of this distinction
will enable him to buy cheaper. It may not, however, upon that account be
altogether useless.
It may be of some use to the public, by affording an easy proof of the
prosperous condition of the country. If the rise in the price of some
sorts of provisions be owing altogether to a fall in the value of silver,
it is owing to a circumstance, from which nothing can be inferred but the
fertility of the American mines. The real wealth of the country, the
annual produce of its land and labour, may, notwithstanding this
circumstance, be either gradually declining, as in Portugal and Poland; or
gradually advancing, as in most other parts of Europe. But if this rise in
the price of some sorts of provisions be owing to a rise in the real value
of the land which produces them, to its increased fertility, or, in
consequence of more extended improvement and good cultivation, to its
having been rendered fit for producing corn; it is owing to a circumstance
which indicates, in the clearest manner, the prosperous and advancing
state of the country. The land constitutes by far the greatest, the most
important, and the most durable part of the wealth of every extensive
country. It may surely be of some use, or, at least, it may give some
satisfaction to the public, to have so decisive a proof of the increasing
value of by far the greatest, the most important, and the most durable
part of its wealth.
It may, too, be of some use to the public, in regulating the pecuniary
reward of some of its inferior servants. If this rise in the price of some
sorts of provisions be owing to a fall in the value of silver, their
pecuniary reward, provided it was not too large before, ought certainly to
be augmented in proportion to the extent of this fall. If it is not
augmented, their real recompence will evidently be so much diminished. But
if this rise of price is owing to the increased value, in consequence of
the improved fertility of the land which produces such provisions, it
becomes a much nicer matter to judge, either in what proportion any
pecuniary reward ought to be augmented, or whether it ought to be
augmented at all. The extension of improvement and cultivation, as it
necessarily raises more or less, in proportion to the price of corn, that
of every sort of animal food, so it as necessarily lowers that of, I
believe, every sort of vegetable food. It raises the price of animal food;
because a great part of the land which produces it, being rendered fit for
producing corn, must afford to the landlord and farmer the rent and
profit of corn land. It lowers the price of vegetable food; because, by
increasing the fertility of the land, it increases its abundance. The
improvements of agriculture, too, introduce many sorts of vegetable food,
which requiring less land, and not more labour than corn, come much
cheaper to market. Such are potatoes and maize, or what is called Indian
corn, the two most important improvements which the agriculture of Europe,
perhaps, which Europe itself, has received from the great extension of its
commerce and navigation. Many sorts of vegetable food, besides, which in
the rude state of agriculture are confined to the kitchen-garden, and
raised only by the spade, come, in its improved state, to be introduced
into common fields, and to be raised by the plough; such as turnips,
carrots, cabbages, etc. If, in the progress of improvement, therefore, the
real price of one species of food necessarily rises, that of another as
necessarily falls; and it becomes a matter of more nicety to judge how far
the rise in the one may be compensated by the fall in the other. When the
real price of butcher’s meat has once got to its height (which, with
regard to every sort, except perhaps that of hogs flesh, it seems to have
done through a great part of England more than a century ago), any rise
which can afterwards happen in that of any other sort of animal food,
cannot much affect the circumstances of the inferior ranks of people. The
circumstances of the poor, through a great part of England, cannot surely
be so much distressed by any rise in the price of poultry, fish,
wild-fowl, or venison, as they must be relieved by the fall in that of
potatoes.
In the present season of scarcity, the high price of corn no doubt
distresses the poor. But in times of moderate plenty, when corn is at its
ordinary or average price, the natural rise in the price of any other sort
of rude produce cannot much affect them. They suffer more, perhaps, by the
artificial rise which has been occasioned by taxes in the price of some
manufactured commodities, as of salt, soap, leather, candles, malt, beer,
ale, etc.
_Effects of the Progress of Improvement upon the real Price of
Manufactures._
It is the natural effect of improvement, however, to diminish gradually
the real price of almost all manufactures. That of the manufacturing
workmanship diminishes, perhaps, in all of them without exception. In
consequence of better machinery, of greater dexterity, and of a more
proper division and distribution of work, all of which are the natural
effects of improvement, a much smaller quantity of labour becomes
requisite for executing any particular piece of work; and though, in
consequence of the flourishing circumstances of the society, the real
price of labour should rise very considerably, yet the great diminution of
the quantity will generally much more than compensate the greatest rise
which can happen in the price.
There are, indeed, a few manufactures, in which the necessary rise in the
real price of the rude materials will more than compensate all the
advantages which improvement can introduce into the execution of the work.
In carpenters’ and joiners’ work, and in the coarser sort of cabinet work,
the necessary rise in the real price of barren timber, in consequence of
the improvement of land, will more than compensate all the advantages
which can be derived from the best machinery, the greatest dexterity, and
the most proper division and distribution of work.
But in all cases in which the real price of the rude material either does
not rise at all, or does not rise very much, that of the manufactured
commodity sinks very considerably.
This diminution of price has, in the course of the present and preceding
century, been most remarkable in those manufactures of which the materials
are the coarser metals. A better movement of a watch, than about the
middle of the last century could have been bought for twenty pounds, may
now perhaps be had for twenty shillings. In the work of cutlers and
locksmiths, in all the toys which are made of the coarser metals, and in
all those goods which are commonly known by the name of Birmingham and
Sheffield ware, there has been, during the same period, a very great
reduction of price, though not altogether so great as in watch-work. It
has, however, been sufficient to astonish the workmen of every other part
of Europe, who in many cases acknowledge that they can produce no work of
equal goodness for double or even for triple the price. There are perhaps
no manufactures, in which the division of labour can be carried further,
or in which the machinery employed admits of a greater variety of
improvements, than those of which the materials are the coarser metals.
In the clothing manufacture there has, during the same period, been no
such sensible reduction of price. The price of superfine cloth, I have
been assured, on the contrary, has, within these five-and-twenty or thirty
years, risen somewhat in proportion to its quality, owing, it was said, to
a considerable rise in the price of the material, which consists
altogether of Spanish wool. That of the Yorkshire cloth, which is made
altogether of English wool, is said, indeed, during the course of the
present century, to have fallen a good deal in proportion to its quality.
Quality, however, is so very disputable a matter, that I look upon all
information of this kind as somewhat uncertain. In the clothing
manufacture, the division of labour is nearly the same now as it was a
century ago, and the machinery employed is not very different. There may,
however, have been some small improvements in both, which may have
occasioned some reduction of price.
But the reduction will appear much more sensible and undeniable, if we
compare the price of this manufacture in the present times with what it
was in a much remoter period, towards the end of the fifteenth century,
when the labour was probably much less subdivided, and the machinery
employed much more imperfect, than it is at present.
In 1487, being the 4th of Henry VII., it was enacted, that “whosoever
shall sell by retail a broad yard of the finest scarlet grained, or of
other grained cloth of the finest making, above sixteen shillings, shall
forfeit forty shillings for every yard so sold.” Sixteen shillings,
therefore, containing about the same quantity of silver as four-and-twenty
shillings of our present money, was, at that time, reckoned not an
unreasonable price for a yard of the finest cloth; and as this is a
sumptuary law, such cloth, it is probable, had usually been sold somewhat
dearer. A guinea may be reckoned the highest price in the present times.
Even though the quality of the cloths, therefore, should be supposed
equal, and that of the present times is most probably much superior, yet,
even upon this supposition, the money price of the finest cloth appears to
have been considerably reduced since the end of the fifteenth century. But
its real price has been much more reduced. Six shillings and eightpence
was then, and long afterwards, reckoned the average price of a quarter of
wheat. Sixteen shillings, therefore, was the price of two quarters and
more than three bushels of wheat. Valuing a quarter of wheat in the
present times at eight-and-twenty shillings, the real price of a yard of
fine cloth must, in those times, have been equal to at least three pounds
six shillings and sixpence of our present money. The man who bought it
must have parted with the command of a quantity of labour and subsistence
equal to what that sum would purchase in the present times.
The reduction in the real price of the coarse manufacture, though
considerable, has not been so great as in that of the fine.
In 1463, being the 3rd of Edward IV. it was enacted, that “no servant in
husbandry nor common labourer, nor servant to any artificer inhabiting out
of a city or burgh, shall use or wear in their clothing any cloth above
two shillings the broad yard.” In the 3rd of Edward IV., two shillings
contained very nearly the same quantity of silver as four of our present
money. But the Yorkshire cloth which is now sold at four shillings the
yard, is probably much superior to any that was then made for the wearing
of the very poorest order of common servants. Even the money price of
their clothing, therefore, may, in proportion to the quality, be somewhat
cheaper in the present than it was in those ancient times. The real price
is certainly a good deal cheaper. Tenpence was then reckoned what is
called the moderate and reasonable price of a bushel of wheat. Two
shillings, therefore, was the price of two bushels and near two pecks of
wheat, which in the present times, at three shillings and sixpence the
bushel, would be worth eight shillings and ninepence. For a yard of this
cloth the poor servant must have parted with the power of purchasing a
quantity of subsistence equal to what eight shillings and ninepence would
purchase in the present times. This is a sumptuary law, too, restraining
the luxury and extravagance of the poor. Their clothing, therefore, had
commonly been much more expensive.
The same order of people are, by the same law, prohibited from wearing
hose, of which the price should exceed fourteen-pence the pair, equal to
about eight-and-twenty pence of our present money. But fourteen-pence was
in those times the price of a bushel and near two pecks of wheat; which in
the present times, at three and sixpence the bushel, would cost five
shillings and threepence. We should in the present times consider this as
a very high price for a pair of stockings to a servant of the poorest and
lowest order. He must however, in those times, have paid what was really
equivalent to this price for them.
In the time of Edward IV. the art of knitting stockings was probably not
known in any part of Europe. Their hose were made of common cloth, which
may have been one of the causes of their dearness. The first person that
wore stockings in England is said to have been Queen Elizabeth. She
received them as a present from the Spanish ambassador.
Both in the coarse and in the fine woollen manufacture, the machinery
employed was much more imperfect in those ancient, than it is in the
present times. It has since received three very capital improvements,
besides, probably, many smaller ones, of which it may be difficult to
ascertain either the number or the importance. The three capital
improvements are, first, the exchange of the rock and spindle for the
spinning-wheel, which, with the same quantity of labour, will perform more
than double the quantity of work. Secondly, the use of several very
ingenious machines, which facilitate and abridge, in a still greater
proportion, the winding of the worsted and woollen yarn, or the proper
arrangement of the warp and woof before they are put into the loom; an
operation which, previous to the invention of those machines, must have
been extremely tedious and troublesome. Thirdly, the employment of the
fulling-mill for thickening the cloth, instead of treading it in water.
Neither wind nor water mills of any kind were known in England so early as
the beginning of the sixteenth century, nor, so far as I know, in any
other part of Europe north of the Alps. They had been introduced into
Italy some time before.
The consideration of these circumstances may, perhaps, in some measure,
explain to us why the real price both of the coarse and of the fine
manufacture was so much higher in those ancient than it is in the present
times. It cost a greater quantity of labour to bring the goods to market.
When they were brought thither, therefore, they must have purchased, or
exchanged for the price of, a greater quantity.
The coarse manufacture probably was, in those ancient times, carried on in
England in the same manner as it always has been in countries where arts
and manufactures are in their infancy. It was probably a household
manufacture, in which every different part of the work was occasionally
performed by all the different members of almost every private family, but
so as to be their work only when they had nothing else to do, and not to
be the principal business from which any of them derived the greater part
of their subsistence. The work which is performed in this manner, it has
already been observed, comes always much cheaper to market than that which
is the principal or sole fund of the workman’s subsistence. The fine
manufacture, on the other hand, was not, in those times, carried on in
England, but in the rich and commercial country of Flanders; and it was
probably conducted then, in the same manner as now, by people who derived
the whole, or the principal part of their subsistence from it. It was,
besides, a foreign manufacture, and must have paid some duty, the ancient
custom of tonnage and poundage at least, to the king. This duty, indeed,
would not probably be very great. It was not then the policy of Europe to
restrain, by high duties, the importation of foreign manufactures, but
rather to encourage it, in order that merchants might be enabled to
supply, at as easy a rate as possible, the great men with the
conveniencies and luxuries which they wanted, and which the industry of
their own country could not afford them.
The consideration of these circumstances may, perhaps, in some measure
explain to us why, in those ancient times, the real price of the coarse
manufacture was, in proportion to that of the fine, so much lower than in
the present times.
Conclusion of the Chapter.
I shall conclude this very long chapter with observing, that every
improvement in the circumstances of the society tends, either directly or
indirectly, to raise the real rent of land to increase the real wealth of
the landlord, his power of purchasing the labour, or the produce of the
labour of other people.
The extension of improvement and cultivation tends to raise it directly.
The landlord’s share of the produce necessarily increases with the
increase of the produce.
That rise in the real price of those parts of the rude produce of land,
which is first the effect of the extended improvement and cultivation, and
afterwards the cause of their being still further extended, the rise in
the price of cattle, for example, tends, too, to raise the rent of land
directly, and in a still greater proportion. The real value of the
landlord’s share, his real command of the labour of other people, not only
rises with the real value of the produce, but the proportion of his share
to the whole produce rises with it.
That produce, after the rise in its real price, requires no more labour to
collect it than before. A smaller proportion of it will, therefore, be
sufficient to replace, with the ordinary profit, the stock which employs
that labour. A greater proportion of it must consequently belong to the
landlord.
All those improvements in the productive powers of labour, which tend
directly to reduce the rent price of manufactures, tend indirectly to
raise the real rent of land. The landlord exchanges that part of his rude
produce, which is over and above his own consumption, or, what comes to
the same thing, the price of that part of it, for manufactured produce.
Whatever reduces the real price of the latter, raises that of the former.
An equal quantity of the former becomes thereby equivalent to a greater
quantity of the latter; and the landlord is enabled to purchase a greater
quantity of the conveniencies, ornaments, or luxuries which he has
occasion for.
Every increase in the real wealth of the society, every increase in the
quantity of useful labour employed within it, tends indirectly to raise
the real rent of land. A certain proportion of this labour naturally goes
to the land. A greater number of men and cattle are employed in its
cultivation, the produce increases with the increase of the stock which is
thus employed in raising it, and the rent increases with the produce.
The contrary circumstances, the neglect of cultivation and improvement,
the fall in the real price of any part of the rude produce of land, the
rise in the real price of manufactures from the decay of manufacturing art
and industry, the declension of the real wealth of the society, all tend,
on the other hand, to lower the real rent of land, to reduce the real
wealth of the landlord, to diminish his power of purchasing either the
labour, or the produce of the labour, of other people.
The whole annual produce of the land and labour of every country, or, what
comes to the same thing, the whole price of that annual produce, naturally
divides itself, it has already been observed, into three parts; the rent
of land, the wages of labour, and the profits of stock; and constitutes a
revenue to three different orders of people; to those who live by rent, to
those who live by wages, and to those who live by profit. These are the
three great, original, and constituent, orders of every civilized society,
from whose revenue that of every other order is ultimately derived.
The interest of the first of those three great orders, it appears from
what has been just now said, is strictly and inseparably connected with
the general interest of the society. Whatever either promotes or obstructs
the one, necessarily promotes or obstructs the other. When the public
deliberates concerning any regulation of commerce or police, the
proprietors of land never can mislead it, with a view to promote the
interest of their own particular order; at least, if they have any
tolerable knowledge of that interest. They are, indeed, too often
defective in this tolerable knowledge. They are the only one of the three
orders whose revenue costs them neither labour nor care, but comes to
them, as it were, of its own accord, and independent of any plan or
project of their own. That indolence which is the natural effect of the
ease and security of their situation, renders them too often, not only
ignorant, but incapable of that application of mind, which is necessary in
order to foresee and understand the consequence of any public regulation.
The interest of the second order, that of those who live by wages, is as
strictly connected with the interest of the society as that of the first.
The wages of the labourer, it has already been shewn, are never so high as
when the demand for labour is continually rising, or when the quantity
employed is every year increasing considerably. When this real wealth of
the society becomes stationary, his wages are soon reduced to what is
barely enough to enable him to bring up a family, or to continue the race
of labourers. When the society declines, they fall even below this. The
order of proprietors may perhaps gain more by the prosperity of the
society than that of labourers; but there is no order that suffers so
cruelly from its decline. But though the interest of the labourer is
strictly connected with that of the society, he is incapable either of
comprehending that interest, or of understanding its connexion with his
own. His condition leaves him no time to receive the necessary
information, and his education and habits are commonly such as to render
him unfit to judge, even though he was fully informed. In the public
deliberations, therefore, his voice is little heard, and less regarded;
except upon particular occasions, when his clamour is animated, set on,
and supported by his employers, not for his, but their own particular
purposes.
His employers constitute the third order, that of those who live by
profit. It is the stock that is employed for the sake of profit, which
puts into motion the greater part of the useful labour of every society.
The plans and projects of the employers of stock regulate and direct all
the most important operation of labour, and profit is the end proposed by
all those plans and projects. But the rate of profit does not, like rent
and wages, rise with the prosperity, and fall with the declension of the
society. On the contrary, it is naturally low in rich, and high in poor
countries, and it is always highest in the countries which are going
fastest to ruin. The interest of this third order, therefore, has not the
same connexion with the general interest of the society, as that of the
other two. Merchants and master manufacturers are, in this order, the two
classes of people who commonly employ the largest capitals, and who by
their wealth draw to themselves the greatest share of the public
consideration. As during their whole lives they are engaged in plans and
projects, they have frequently more acuteness of understanding than the
greater part of country gentlemen. As their thoughts, however, are
commonly exercised rather about the interest of their own particular
branch of business. than about that of the society, their judgment, even
when given with the greatest candour (which it has not been upon every
occasion), is much more to be depended upon with regard to the former of
those two objects, than with regard to the latter. Their superiority over
the country gentleman is, not so much in their knowledge of the public
interest, as in their having a better knowledge of their own interest than
he has of his. It is by this superior knowledge of their own interest that
they have frequently imposed upon his generosity, and persuaded him to
give up both his own interest and that of the public, from a very simple
but honest conviction, that their interest, and not his, was the interest
of the public. The interest of the dealers, however, in any particular
branch of trade or manufactures, is always in some respects different
from, and even opposite to, that of the public. To widen the market, and
to narrow the competition, is always the interest of the dealers. To widen
the market may frequently be agreeable enough to the interest of the
public; but to narrow the competition must always be against it, and can
only serve to enable the dealers, by raising their profits above what they
naturally would be, to levy, for their own benefit, an absurd tax upon the
rest of their fellow-citizens. The proposal of any new law or regulation
of commerce which comes from this order, ought always to be listened to
with great precaution, and ought never to be adopted till after having
been long and carefully examined, not only with the most scrupulous, but
with the most suspicious attention. It comes from an order of men, whose
interest is never exactly the same with that of the public, who have
generally an interest to deceive and even to oppress the public, and who
accordingly have, upon many occasions, both deceived and oppressed it.
# PRICES OF WHEAT
Year Prices/Quarter Average of different Average prices of in each year prices in one year each year in money of 1776
£ s d £ s d £ s d
1202 0 12 0 1 16 0 1205 0 12 0 0 13 4 0 13 5 2 0 3 0 15 0 1223 0 12 0 1 16 0 1237 0 3 4 0 10 0 1243 0 2 0 0 6 0 1244 0 2 0 0 6 0 1246 0 16 0 2 8 0 1247 0 13 5 2 0 0 1257 1 4 0 3 12 0 1258 1 0 0 0 15 0 0 17 0 2 11 0 0 16 0 1270 4 16 0 6 8 0 5 12 0 16 16 0 1286 0 2 8 0 16 0 0 9 4 1 8 0 Total 35 9 3 Average 2 19 1¼
1287 0 3 4 0 10 0 1288 0 0 8 0 1 0 0 1 4 0 1 6 0 1 8 0 3 0¼ 0 9 1¾ 0 2 0 0 3 4 0 9 4 1289 0 12 0 0 6 0 0 2 0 0 10 1½ 1 10 4½ 0 10 8 1 0 0 1290 0 16 0 2 8 0 1294 0 16 0 2 8 0 1302 0 4 0 0 12 0 1309 0 7 2 1 1 6 1315 1 0 0 3 0 0 1316 1 0 0 1 10 0 1 10 6 4 11 6 1 12 0 2 0 0 1317 2 4 0 0 14 0 2 13 0 1 19 6 5 18 6 4 0 0 0 6 8 1336 0 2 0 0 6 0 1338 0 3 4 0 10 0 Total 23 4 11¼ Average 1 18 8
1339 0 9 0 1 7 0 1349 0 2 0 0 5 2 1359 1 6 8 3 2 2 1361 0 2 0 0 4 8 1363 0 15 0 1 15 0 1369 1 0 0 1 4 0 1 2 0 2 9 4 1379 0 4 0 0 9 4 1387 0 2 0 0 4 8 1390 0 13 4 0 14 0 0 14 5 1 13 7 0 16 0 1401 0 16 0 1 17 6 1407 0 4 4¾ 0 3 4 0 3 10 0 8 10 1416 0 16 0 1 12 0 Total 15 9 4 Average 1 5 9½
1423 0 8 0 0 1425 0 4 0 0 1434 1 6 8 4 1435 0 5 4 8 1439 1 0 0 1 6 8 1 3 4 2 6 8 1440 1 4 0 2 8 0 1444 0 4 4 0 4 2 0 4 8 0 4 0 1445 0 4 6 0 9 0 1447 0 8 0 0 16 0 1448 0 6 8 0 13 4 1449 0 5 0 0 10 0 1451 0 8 0 0 16 0 Total 12 15 4 Average 1 1 3⅓
1453 0 5 4 0 10 8 1455 0 1 2 0 2 4 1457 0 7 8 1 15 4 1459 0 5 0 0 10 0 1460 0 8 0 0 16 0 1463 0 2 0 0 1 10 0 3 8 0 1 8 1464 0 6 8 0 10 0 1486 1 4 0 1 17 0 1491 0 14 8 1 2 0 1494 0 4 0 0 6 0 1495 0 3 4 0 5 0 1497 1 0 0 1 11 0 Total 8 9 0 Average 0 14 1
1499 0 4 0 0 6 0 1504 0 5 8 0 8 6 1521 1 0 0 1 10 0 1551 0 8 0 0 8 0 1553 0 8 0 0 8 0 1554 0 8 0 0 8 0 1555 0 8 0 0 8 0 1556 0 8 0 0 8 0 1557 0 8 0 0 4 0 0 17 8½ 0 17 8½ 0 5 0 2 13 4 1558 0 8 0 0 8 0 1559 0 8 0 0 8 0 1560 0 8 0 0 8 0 Total 6 0 2½ Average 0 10 0½
1561 0 8 0 0 8 0 1562 0 8 0 0 8 0 1574 2 16 0 1 4 0 2 0 0 2 0 0 1587 3 4 0 3 4 0 1594 2 16 0 2 16 0 1595 2 13 0 2 13 0 1596 4 0 0 4 0 0 1597 5 4 0 4 0 0 4 12 0 4 12 0 1598 2 16 8 2 16 8 1599 1 19 2 1 19 8 1600 1 17 8 1 17 8 1601 1 14 10 1 14 10 Total 28 9 4 Average 2 7 5½
PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST PRICED WHEAT
AT WINDSOR MARKET, ON LADY DAY AND MICHAELMAS, FROM 1595 TO 1764 BOTH
INCLUSIVE; THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST
PRICES OF THESE TWO MARKET DAYS.
£ s d
1595 2 0 0 1596 2 8 0 1597 3 9 6 1598 2 16 8 1599 1 19 2 1600 1 17 8 1601 1 14 10 1602 1 9 4 1603 1 15 4 1604 1 10 8 1605 1 15 10 1606 1 13 0 1607 1 16 8 1608 2 16 8 1609 2 10 0 1610 1 15 10 1611 1 18 8 1612 2 2 4 1613 2 8 8 1614 2 1 8½ 1615 1 18 8 1616 2 0 4 1617 2 8 8 1618 2 6 8 1619 1 15 4 1620 1 10 4 26)54 0 6½ Average 2 1 6¾
1621 1 10 4 1622 2 18 8 1623 2 12 0 1624 2 8 0 1625 2 12 0 1626 2 9 4 1627 1 16 0 1628 1 8 0 1629 2 2 0 1630 2 15 8 1631 3 8 0 1632 2 13 4 1633 2 18 0 1634 2 16 0 1635 2 16 0 1636 2 16 8 16)40 0 0 Average 2 10 0
1637 2 13 0 1638 2 17 4 1639 2 4 10 1640 2 4 8 1641 2 8 0 1646 2 8 0 1647 3 13 0 1648 4 5 0 1649 4 0 0 1650 3 16 8 1651 3 13 4 1652 2 9 6 1653 1 15 6 1654 1 6 0 1655 1 13 4 1656 2 3 0 1657 2 6 8 1658 3 5 0 1659 3 6 0 1660 2 16 6 1661 3 10 0 1662 3 14 0 1663 2 17 0 1664 2 0 6 1665 2 9 4 1666 1 16 0 1667 1 16 0 1668 2 0 0 1669 2 4 4 1670 2 1 8 1671 2 2 0 1672 2 1 0 1673 2 6 8 1674 3 8 8 1675 3 4 8 1676 1 18 0 1677 2 2 0 1678 2 19 0 1679 3 0 0 1680 2 5 0 1681 2 6 8 1682 2 4 0 1683 2 0 0 1684 2 4 0 1685 2 6 8 1686 1 14 0 1687 1 5 2 1688 2 6 0 1689 1 10 0 1690 1 14 8 1691 1 14 0 1692 2 6 8 1693 3 7 8 1694 3 4 0 1695 2 13 0 1696 3 11 0 1697 3 0 0 1698 3 8 4 1699 3 4 0 1700 2 0 0 60) 153 1 8 Average 2 11 0⅓
1701 1 17 8 1702 1 9 6 1703 1 16 0 1704 2 6 6 1705 1 10 0 1706 1 6 0 1707 1 8 6 1708 2 1 6 1709 3 18 6 1710 3 18 0 1711 2 14 0 1712 2 6 4 1713 2 11 0 1714 2 10 4 1715 2 3 0 1716 2 8 0 1717 2 5 8 1718 1 18 10 1719 1 15 0 1720 1 17 0 1721 1 17 6 1722 1 16 0 1723 1 14 8 1724 1 17 0 1725 2 8 6 1726 2 6 0 1727 2 2 0 1728 2 14 6 1729 2 6 10 1730 1 16 6 1731 1 12 10 1 12 10 1732 1 6 8 1 6 8 1733 1 8 4 1 8 4 1734 1 18 10 1 18 10 1735 2 3 0 2 3 0 1736 2 0 4 2 0 4 1737 1 18 0 1 18 0 1738 1 15 6 1 15 6 1739 1 18 6 1 18 6 1740 2 10 8 2 10 8 10) 18 12 8 1 17 3½
1741 2 6 8 2 6 8 1742 1 14 0 1 14 0 1743 1 4 10 1 4 10 1744 1 4 10 1 4 10 1745 1 7 6 1 7 6 1746 1 19 0 1 19 0 1747 1 14 10 1 14 10 1748 1 17 0 1 17 0 1749 1 17 0 1 17 0 1750 1 12 6 1 12 6 10) 16 18 2 1 13 9¾
1751 1 18 6 1752 2 1 10 1753 2 4 8 1754 1 13 8 1755 1 14 10 1756 2 5 3 1757 3 0 0 1758 2 10 0 1759 1 19 10 1760 1 16 6 1761 1 10 3 1762 1 19 0 1763 2 0 9 1764 2 6 9 64) 129 13 6 Average 2 0 6¾
BOOK II.
OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.
INTRODUCTION.
In that rude state of society, in which there is no division of labour, in
which exchanges are seldom made, and in which every man provides every
thing for himself, it is not necessary that any stock should be
accumulated, or stored up before-hand, in order to carry on the business
of the society. Every man endeavours to supply, by his own industry, his
own occasional wants, as they occur. When he is hungry, he goes to the
forest to hunt; when his coat is worn out, he clothes himself with the
skin of the first large animal he kills: and when his hut begins to go to
ruin, he repairs it, as well as he can, with the trees and the turf that
are nearest it.
But when the division of labour has once been thoroughly introduced, the
produce of a man’s own labour can supply but a very small part of his
occasional wants. The far greater part of them are supplied by the produce
of other men’s labour, which he purchases with the produce, or, what is
the same thing, with the price of the produce, of his own. But this
purchase cannot be made till such time as the produce of his own labour
has not only been completed, but sold. A stock of goods of different
kinds, therefore, must be stored up somewhere, sufficient to maintain him,
and to supply him with the materials and tools of his work, till such time
at least as both these events can be brought about. A weaver cannot apply
himself entirely to his peculiar business, unless there is before-hand
stored up somewhere, either in his own possession, or in that of some
other person, a stock sufficient to maintain him, and to supply him with
the materials and tools of his work, till he has not only completed, but
sold his web. This accumulation must evidently be previous to his applying
his industry for so long a time to such a peculiar business.
As the accumulation of stock must, in the nature of things, be previous to
the division of labour, so labour can be more and more subdivided in
proportion only as stock is previously more and more accumulated. The
quantity of materials which the same number of people can work up,
increases in a great proportion as labour comes to be more and more
subdivided; and as the operations of each workman are gradually reduced to
a greater degree of simplicity, a variety of new machines come to be
invented for facilitating and abridging those operations. As the division
of labour advances, therefore, in order to give constant employment to an
equal number of workmen, an equal stock of provisions, and a greater stock
of materials and tools than what would have been necessary in a ruder
state of things, must be accumulated before-hand. But the number of
workmen in every branch of business generally increases with the division
of labour in that branch; or rather it is the increase of their number
which enables them to class and subdivide themselves in this manner.
As the accumulation of stock is previously necessary for carrying on this
great improvement in the productive powers of labour, so that accumulation
naturally leads to this improvement. The person who employs his stock in
maintaining labour, necessarily wishes to employ it in such a manner as to
produce as great a quantity of work as possible. He endeavours, therefore,
both to make among his workmen the most proper distribution of employment,
and to furnish them with the best machines which he can either invent or
afford to purchase. His abilities, in both these respects, are generally
in proportion to the extent of his stock, or to the number of people whom
it can employ. The quantity of industry, therefore, not only increases in
every country with the increase of the stock which employs it, but, in
consequence of that increase, the same quantity of industry produces a
much greater quantity of work.
Such are in general the effects of the increase of stock upon industry and
its productive powers.
In the following book, I have endeavoured to explain the nature of stock,
the effects of its accumulation into capital of different kinds, and the
effects of the different employments of those capitals. This book is
divided into five chapters. In the first chapter, I have endeavoured to
shew what are the different parts or branches into which the stock, either
of an individual, or of a great society, naturally divides itself. In the
second, I have endeavoured to explain the nature and operation of money,
considered as a particular branch of the general stock of the society. The
stock which is accumulated into a capital, may either be employed by the
person to whom it belongs, or it may be lent to some other person. In the
third and fourth chapters, I have endeavoured to examine the manner in
which it operates in both these situations. The fifth and last chapter
treats of the different effects which the different employments of capital
immediately produce upon the quantity, both of national industry, and of
the annual produce of land and labour.
CHAPTER I.
OF THE DIVISION OF STOCK.
When the stock which a man possesses is no more than sufficient to
maintain him for a few days or a few weeks, he seldom thinks of deriving
any revenue from it. He consumes it as sparingly as he can, and
endeavours, by his labour, to acquire something which may supply its place
before it be consumed altogether. His revenue is, in this case, derived
from his labour only. This is the state of the greater part of the
labouring poor in all countries.
But when he possesses stock sufficient to maintain him for months or
years, he naturally endeavours to derive a revenue from the greater part
of it, reserving only so much for his immediate consumption as may
maintain him till this revenue begins to come in. His whole stock,
therefore, is distinguished into two parts. That part which he expects is
to afford him this revenue is called his capital. The other is that which
supplies his immediate consumption, and which consists either, first, in
that portion of his whole stock which was originally reserved for this
purpose; or, secondly, in his revenue, from whatever source derived, as it
gradually comes in; or, thirdly, in such things as had been purchased by
either of these in former years, and which are not yet entirely consumed,
such as a stock of clothes, household furniture, and the like. In one or
other, or all of these three articles, consists the stock which men
commonly reserve for their own immediate consumption.
There are two different ways in which a capital may be employed so as to
yield a revenue or profit to its employer.
First, it may be employed in raising, manufacturing, or purchasing goods,
and selling them again with a profit. The capital employed in this manner
yields no revenue or profit to its employer, while it either remains in
his possession, or continues in the same shape. The goods of the merchant
yield him no revenue or profit till he sells them for money, and the money
yields him as little till it is again exchanged for goods. His capital is
continually going from him in one shape, and returning to him in another;
and it is only by means of such circulation, or successive changes, that
it can yield him any profit. Such capitals, therefore, may very properly
be called circulating capitals.
Secondly, it may be employed in the improvement of land, in the purchase
of useful machines and instruments of trade, or in such like things as
yield a revenue or profit without changing masters, or circulating any
further. Such capitals, therefore, may very properly be called fixed
capitals.
Different occupations require very different proportions between the fixed
and circulating capitals employed in them.
The capital of a merchant, for example, is altogether a circulating
capital. He has occasion for no machines or instruments of trade, unless
his shop or warehouse be considered as such.
Some part of the capital of every master artificer or manufacturer must be
fixed in the instruments of his trade. This part, however, is very small
in some, and very great in others, A master tailor requires no other
instruments of trade but a parcel of needles. Those of the master
shoemaker are a little, though but a very little, more expensive. Those of
the weaver rise a good deal above those of the shoemaker. The far greater
part of the capital of all such master artificers, however, is circulated
either in the wages of their workmen, or in the price of their materials,
and repaid, with a profit, by the price of the work.
In other works a much greater fixed capital is required. In a great
iron-work, for example, the furnace for melting the ore, the forge, the
slit-mill, are instruments of trade which cannot be erected without a very
great expense. In coal works, and mines of every kind, the machinery
necessary, both for drawing out the water, and for other purposes, is
frequently still more expensive.
That part of the capital of the farmer which is employed in the
instruments of agriculture is a fixed, that which is employed in the wages
and maintenance of his labouring servants is a circulating capital. He
makes a profit of the one by keeping it in his own possession, and of the
other by parting with it. The price or value of his labouring cattle is a
fixed capital, in the same manner as that of the instruments of husbandry;
their maintenance is a circulating capital, in the same manner as that of
the labouring servants. The farmer makes his profit by keeping the
labouring cattle, and by parting with their maintenance. Both the price
and the maintenance of the cattle which are bought in and fattened, not
for labour, but for sale, are a circulating capital. The farmer makes his
profit by parting with them. A flock of sheep or a herd of cattle, that,
in a breeding country, is brought in neither for labour nor for sale, but
in order to make a profit by their wool, by their milk, and by their
increase, is a fixed capital. The profit is made by keeping them. Their
maintenance is a circulating capital. The profit is made by parting with
it; and it comes back with both its own profit and the profit upon the
whole price of the cattle, in the price of the wool, the milk, and the
increase. The whole value of the seed, too, is properly a fixed capital.
Though it goes backwards and forwards between the ground and the granary,
it never changes masters, and therefore does not properly circulate. The
farmer makes his profit, not by its sale, but by its increase.
The general stock of any country or society is the same with that of all
its inhabitants or members; and, therefore, naturally divides itself into
the same three portions, each of which has a distinct function or office.
The first is that portion which is reserved for immediate consumption, and
of which the characteristic is, that it affords no revenue or profit. It
consists in the stock of food, clothes, household furniture, etc. which
have been purchased by their proper consumers, but which are not yet
entirely consumed. The whole stock of mere dwelling-houses, too,
subsisting at any one time in the country, make a part of this first
portion. The stock that is laid out in a house, if it is to be the
dwelling-house of the proprietor, ceases from that moment to serve in the
function of a capital, or to afford any revenue to its owner. A
dwelling-house, as such, contributes nothing to the revenue of its
inhabitant; and though it is, no doubt, extremely useful to him, it is as
his clothes and household furniture are useful to him, which, however,
make a part of his expense, and not of his revenue. If it is to be let to
a tenant for rent, as the house itself can produce nothing, the tenant
must always pay the rent out of some other revenue, which he derives,
either from labour, or stock, or land. Though a house, therefore, may
yield a revenue to its proprietor, and thereby serve in the function of a
capital to him, it cannot yield any to the public, nor serve in the
function of a capital to it, and the revenue of the whole body of the
people can never be in the smallest degree increased by it. Clothes and
household furniture, in the same manner, sometimes yield a revenue, and
thereby serve in the function of a capital to particular persons. In
countries where masquerades are common, it is a trade to let out
masquerade dresses for a night. Upholsterers frequently let furniture by
the month or by the year. Undertakers let the furniture of funerals by the
day and by the week. Many people let furnished houses, and get a rent, not
only for the use of the house, but for that of the furniture. The revenue,
however, which is derived from such things, must always be ultimately
drawn from some other source of revenue. Of all parts of the stock, either
of an individual or of a society, reserved for immediate consumption, what
is laid out in houses is most slowly consumed. A stock of clothes may last
several years; a stock of furniture half a century or a century; but a
stock of houses, well built and properly taken care of, may last many
centuries. Though the period of their total consumption, however, is more
distant, they are still as really a stock reserved for immediate
consumption as either clothes or household furniture.
The second of the three portions into which the general stock of the
society divides itself, is the fixed capital; of which the characteristic
is, that it affords a revenue or profit without circulating or changing
masters. It consists chiefly of the four following articles.
First, of all useful machines and instruments of trade, which facilitate
and abridge labour.
Secondly, of all those profitable buildings which are the means of
procuring a revenue, not only to the proprietor who lets them for a rent,
but to the person who possesses them, and pays that rent for them; such as
shops, warehouses, work-houses, farm-houses, with all their necessary
buildings, stables, granaries, etc. These are very different from mere
dwelling-houses. They are a sort of instruments of trade, and may be
considered in the same light.
Thirdly, of the improvements of land, of what has been profitably laid out
in clearing, draining, inclosing, manuring, and reducing it into the
condition most proper for tillage and culture. An improved farm may very
justly be regarded in the same light as those useful machines which
facilitate and abridge labour, and by means of which an equal circulating
capital can afford a much greater revenue to its employer. An improved
farm is equally advantageous and more durable than any of those machines,
frequently requiring no other repairs than the most profitable application
of the farmer’s capital employed in cultivating it.
Fourthly, of the acquired and useful abilities of all the inhabitants and
members of the society. The acquisition of such talents, by the
maintenance of the acquirer during his education, study, or
apprenticeship, always costs a real expense, which is a capital fixed and
realized, as it were, in his person. Those talents, as they make a part of
his fortune, so do they likewise that of the society to which he belongs.
The improved dexterity of a workman may be considered in the same light as
a machine or instrument of trade which facilitates and abridges labour,
and which, though it costs a certain expense, repays that expense with a
profit.
The third and last of the three portions into which the general stock of
the society naturally divides itself, is the circulating capital, of which
the characteristic is, that it affords a revenue only by circulating or
changing masters. It is composed likewise of four parts.
First, of the money, by means of which all the other three are circulated
and distributed to their proper consumers.
Secondly, of the stock of provisions which are in the possession of the
butcher, the grazier, the farmer, the corn-merchant, the brewer, etc. and
from the sale of which they expect to derive a profit.
Thirdly, of the materials, whether altogether rude, or more or less
manufactured, of clothes, furniture, and building which are not yet made
up into any of those three shapes, but which remain in the hands of the
growers, the manufacturers, the mercers, and drapers, the
timber-merchants, the carpenters and joiners, the brick-makers, etc.
Fourthly, and lastly, of the work which is made up and completed, but
which is still in the hands of the merchant and manufacturer, and not yet
disposed of or distributed to the proper consumers; such as the finished
work which we frequently find ready made in the shops of the smith, the
cabinet-maker, the goldsmith, the jeweller, the china-merchant, etc. The
circulating capital consists, in this manner, of the provisions,
materials, and finished work of all kinds that are in the hands of their
respective dealers, and of the money that is necessary for circulating and
distributing them to those who are finally to use or to consume them.
Of these four parts, three—provisions, materials, and finished work,
are either annually or in a longer or shorter period, regularly withdrawn
from it, and placed either in the fixed capital, or in the stock reserved
for immediate consumption.
Every fixed capital is both originally derived from, and requires to be
continually supported by, a circulating capital. All useful machines and
instruments of trade are originally derived from a circulating capital,
which furnishes the materials of which they are made, and the maintenance
of the workmen who make them. They require, too, a capital of the same
kind to keep them in constant repair.
No fixed capital can yield any revenue but by means of a circulating
capital. The most useful machines and instruments of trade will produce
nothing, without the circulating capital, which affords the materials they
are employed upon, and the maintenance of the workmen who employ them.
Land, however improved, will yield no revenue without a circulating
capital, which maintains the labourers who cultivate and collect its
produce.
To maintain and augment the stock which may be reserved for immediate
consumption, is the sole end and purpose both of the fixed and circulating
capitals. It is this stock which feeds, clothes, and lodges the people.
Their riches or poverty depend upon the abundant or sparing supplies which
those two capitals can afford to the stock reserved for immediate
consumption.
So great a part of the circulating capital being continually withdrawn
from it, in order to be placed in the other two branches of the general
stock of the society, it must in its turn require continual supplies
without which it would soon cease to exist. These supplies are principally
drawn from three sources; the produce of land, of mines, and of fisheries.
These afford continual supplies of provisions and materials, of which part
is afterwards wrought up into finished work and by which are replaced the
provisions, materials, and finished work, continually withdrawn from the
circulating capital. From mines, too, is drawn what is necessary for
maintaining and augmenting that part of it which consists in money. For
though, in the ordinary course of business, this part is not, like the
other three, necessarily withdrawn from it, in order to be placed in the
other two branches of the general stock of the society, it must, however,
like all other things, be wasted and worn out at last, and sometimes, too,
be either lost or sent abroad, and must, therefore, require continual,
though no doubt much smaller supplies.
Land, mines, and fisheries, require all both a fixed and circulating
capital to cultivate them; and their produce replaces, with a profit not
only those capitals, but all the others in the society. Thus the farmer
annually replaces to the manufacturer the provisions which he had
consumed, and the materials which he had wrought up the year before; and
the manufacturer replaces to the farmer the finished work which he had
wasted and worn out in the same time. This is the real exchange that is
annually made between those two orders of people, though it seldom happens
that the rude produce of the one, and the manufactured produce of the
other, are directly bartered for one another; because it seldom happens
that the farmer sells his corn and his cattle, his flax and his wool, to
the very same person of whom he chuses to purchase the clothes, furniture,
and instruments of trade, which he wants. He sells, therefore, his rude
produce for money, with which he can purchase, wherever it is to be had,
the manufactured produce he has occasion for. Land even replaces, in part
at least, the capitals with which fisheries and mines are cultivated. It
is the produce of land which draws the fish from the waters; and it is the
produce of the surface of the earth which extracts the minerals from its
bowels.
The produce of land, mines, and fisheries, when their natural fertility is
equal, is in proportion to the extent and proper application of the
capitals employed about them. When the capitals are equal, and equally
well applied, it is in proportion to their natural fertility.
In all countries where there is a tolerable security, every man of common
understanding will endeavour to employ whatever stock he can command, in
procuring either present enjoyment or future profit. If it is employed in
procuring present enjoyment, it is a stock reserved for immediate
consumption. If it is employed in procuring future profit, it must procure
this profit either by staying with him, or by going from him. In the one
case it is a fixed, in the other it is a circulating capital. A man must
be perfectly crazy, who, where there is a tolerable security, does not
employ all the stock which he commands, whether it be his own, or borrowed
of other people, in some one or other of those three ways.
In those unfortunate countries, indeed, where men are continually afraid
of the violence of their superiors, they frequently bury or conceal a
great part of their stock, in order to have it always at hand to carry
with them to some place of safety, in case of their being threatened with
any of those disasters to which they consider themselves at all times
exposed. This is said to be a common practice in Turkey, in Indostan, and,
I believe, in most other governments of Asia. It seems to have been a
common practice among our ancestors during the violence of the feudal
government. Treasure-trove was, in those times, considered as no
contemptible part of the revenue of the greatest sovereigns in Europe. It
consisted in such treasure as was found concealed in the earth, and to
which no particular person could prove any right. This was regarded, in
those times, as so important an object, that it was always considered as
belonging to the sovereign, and neither to the finder nor to the
proprietor of the land, unless the right to it had been conveyed to the
latter by an express clause in his charter. It was put upon the same
footing with gold and silver mines, which, without a special clause in the
charter, were never supposed to be comprehended in the general grant of
the lands, though mines of lead, copper, tin, and coal were, as things of
smaller consequence.
CHAPTER II.
OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL.
It has been shown in the First Book, that the price of the greater part of
commodities resolves itself into three parts, of which one pays the wages
of the labour, another the profits of the stock, and a third the rent of
the land which had been employed in producing and bringing them to market:
that there are, indeed, some commodities of which the price is made up of
two of those parts only, the wages of labour, and the profits of stock;
and a very few in which it consists altogether in one, the wages of
labour; but that the price of every commodity necessarily resolves itself
into some one or other, or all, of those three parts; every part of it
which goes neither to rent nor to wages, being necessarily profit to some
body.
Since this is the case, it has been observed, with regard to every
particular commodity, taken separately, it must be so with regard to all
the commodities which compose the whole annual produce of the land and
labour of every country, taken complexly. The whole price or exchangeable
value of that annual produce must resolve itself into the same three
parts, and be parcelled out among the different inhabitants of the
country, either as the wages of their labour, the profits of their stock,
or the rent of their land.
But though the whole value of the annual produce of the land and labour of
every country, is thus divided among, and constitutes a revenue to, its
different inhabitants; yet, as in the rent of a private estate, we
distinguish between the gross rent and the neat rent, so may we likewise
in the revenue of all the inhabitants of a great country.
The gross rent of a private estate comprehends whatever is paid by the
farmer; the neat rent, what remains free to the landlord, after deducting
the expense of management, of repairs, and all other necessary charges; or
what, without hurting his estate, he can afford to place in his stock
reserved for immediate consumption, or to spend upon his table, equipage,
the ornaments of his house and furniture, his private enjoyments and
amusements. His real wealth is in proportion, not to his gross, but to his
neat rent.
The gross revenue of all the inhabitants of a great country comprehends
the whole annual produce of their land and labour; the neat revenue, what
remains free to them, after deducting the expense of maintaining first,
their fixed, and, secondly, their circulating capital, or what, without
encroaching upon their capital, they can place in their stock reserved for
immediate consumption, or spend upon their subsistence, conveniencies, and
amusements. Their real wealth, too, is in proportion, not to their gross,
but to their neat revenue.
The whole expense of maintaining the fixed capital must evidently be
excluded from the neat revenue of the society. Neither the materials
necessary for supporting their useful machines and instruments of trade,
their profitable buildings, etc. nor the produce of the labour necessary
for fashioning those materials into the proper form, can ever make any
part of it. The price of that labour may indeed make a part of it; as the
workmen so employed may place the whole value of their wages in their
stock reserved for immediate consumption. But in other sorts of labour,
both the price and the produce go to this stock; the price to that of the
workmen, the produce to that of other people, whose subsistence,
conveniencies, and amusements, are augmented by the labour of those
workmen.
The intention of the fixed capital is to increase the productive powers of
labour, or to enable the same number of labourers to perform a much
greater quantity of work. In a farm where all the necessary buildings,
fences, drains, communications, etc. are in the most perfect good order,
the same number of labourers and labouring cattle will raise a much
greater produce, than in one of equal extent and equally good ground, but
not furnished with equal conveniencies. In manufactures, the same number
of hands, assisted with the best machinery, will work up a much greater
quantity of goods than with more imperfect instruments of trade. The
expense which is properly laid out upon a fixed capital of any kind, is
always repaid with great profit, and increases the annual produce by a
much greater value than that of the support which such improvements
require. This support, however, still requires a certain portion of that
produce. A certain quantity of materials, and the labour of a certain
number of workmen, both of which might have been immediately employed to
augment the food, clothing, and lodging, the subsistence and conveniencies
of the society, are thus diverted to another employment, highly
advantageous indeed, but still different from this one. It is upon this
account that all such improvements in mechanics, as enable the same number
of workmen to perform an equal quantity of work with cheaper and simpler
machinery than had been usual before, are always regarded as advantageous
to every society. A certain quantity of materials, and the labour of a
certain number of workmen, which had before been employed in supporting a
more complex and expensive machinery, can afterwards be applied to augment
the quantity of work which that or any other machinery is useful only for
performing. The undertaker of some great manufactory, who employs a
thousand a-year in the maintenance of his machinery, if he can reduce this
expense to five hundred, will naturally employ the other five hundred in
purchasing an additional quantity of materials, to be wrought up by an
additional number of workmen. The quantity of that work, therefore, which
his machinery was useful only for performing, will naturally be augmented,
and with it all the advantage and conveniency which the society can derive
from that work.
The expense of maintaining the fixed capital in a great country, may very
properly be compared to that of repairs in a private estate. The expense
of repairs may frequently be necessary for supporting the produce of the
estate, and consequently both the gross and the neat rent of the landlord.
When by a more proper direction, however, it can be diminished without
occasioning any diminution of produce, the gross rent remains at least the
same as before, and the neat rent is necessarily augmented.
But though the whole expense of maintaining the fixed capital is thus
necessarily excluded from the neat revenue of the society, it is not the
same case with that of maintaining the circulating capital. Of the four
parts of which this latter capital is composed, money, provisions,
materials, and finished work, the three last, it has already been
observed, are regularly withdrawn from it, and placed either in the fixed
capital of the society, or in their stock reserved for immediate
consumption. Whatever portion of those consumable goods is not employed in
maintaining the former, goes all to the latter, and makes a part of the
neat revenue of the society. The maintenance of those three parts of the
circulating capital, therefore, withdraws no portion of the annual produce
from the neat revenue of the society, besides what is necessary for
maintaining the fixed capital.
The circulating capital of a society is in this respect different from
that of an individual. That of an individual is totally excluded from
making any part of his neat revenue, which must consist altogether in his
profits. But though the circulating capital of every individual makes a
part of that of the society to which he belongs, it is not upon that
account totally excluded from making a part likewise of their neat
revenue. Though the whole goods in a merchant’s shop must by no means be
placed in his own stock reserved for immediate consumption, they may in
that of other people, who, from a revenue derived from other funds, may
regularly replace their value to him, together with its profits, without
occasioning any diminution either of his capital or of theirs.
Money, therefore, is the only part of the circulating capital of a
society, of which the maintenance can occasion any diminution in their
neat revenue.
The fixed capital, and that part of the circulating capital which consists
in money, so far as they affect the revenue of the society, bear a very
great resemblance to one another.
First, as those machines and instruments of trade, etc. require a certain
expense, first to erect them, and afterwards to support them, both which
expenses, though they make a part of the gross, are deductions from the
neat revenue of the society; so the stock of money which circulates in any
country must require a certain expense, first to collect it, and
afterwards to support it; both which expenses, though they make a part of
the gross, are, in the same manner, deductions from the neat revenue of
the society. A certain quantity of very valuable materials, gold and
silver, and of very curious labour, instead of augmenting the stock
reserved for immediate consumption, the subsistence, conveniencies, and
amusements of individuals, is employed in supporting that great but
expensive instrument of commerce, by means of which every individual in
the society has his subsistence, conveniencies, and amusements, regularly
distributed to him in their proper proportions.
Secondly, as the machines and instruments of trade, etc. which compose the
fixed capital either of an individual or of a society, make no part either
of the gross or of the neat revenue of either; so money, by means of which
the whole revenue of the society is regularly distributed among all its
different members, makes itself no part of that revenue. The great wheel
of circulation is altogether different from the goods which are circulated
by means of it. The revenue of the society consists altogether in those
goods, and not in the wheel which circulates them. In computing either the
gross or the neat revenue of any society, we must always, from the whole
annual circulation of money and goods, deduct the whole value of the
money, of which not a single farthing can ever make any part of either.
It is the ambiguity of language only which can make this proposition
appear either doubtful or paradoxical. When properly explained and
understood, it is almost self-evident.
When we talk of any particular sum of money, we sometimes mean nothing but
the metal pieces of which it is composed, and sometimes we include in our
meaning some obscure reference to the goods which can be had in exchange
for it, or to the power of purchasing which the possession of it conveys.
Thus, when we say that the circulating money of England has been computed
at eighteen millions, we mean only to express the amount of the metal
pieces, which some writers have computed, or rather have supposed, to
circulate in that country. But when we say that a man is worth fifty or a
hundred pounds a-year, we mean commonly to express, not only the amount of
the metal pieces which are annually paid to him, but the value of the
goods which he can annually purchase or consume; we mean commonly to
ascertain what is or ought to be his way of living, or the quantity and
quality of the necessaries and conveniencies of life in which he can with
propriety indulge himself.
When, by any particular sum of money, we mean not only to express the
amount of the metal pieces of which it is composed, but to include in its
signification some obscure reference to the goods which can be had in
exchange for them, the wealth or revenue which it in this case denotes, is
equal only to one of the two values which are thus intimated somewhat
ambiguously by the same word, and to the latter more properly than to the
former, to the money’s worth more properly than to the money.
Thus, if a guinea be the weekly pension of a particular person, he can in
the course of the week purchase with it a certain quantity of subsistence,
conveniencies, and amusements. In proportion as this quantity is great or
small, so are his real riches, his real weekly revenue. His weekly revenue
is certainly not equal both to the guinea and to what can be purchased
with it, but only to one or other of those two equal values, and to the
latter more properly than to the former, to the guinea’s worth rather than
to the guinea.
If the pension of such a person was paid to him, not in gold, but in a
weekly bill for a guinea, his revenue surely would not so properly consist
in the piece of paper, as in what he could get for it. A guinea may be
considered as a bill for a certain quantity of necessaries and
conveniencies upon all the tradesmen in the neighbourhood. The revenue of
the person to whom it is paid, does not so properly consist in the piece
of gold, as in what he can get for it, or in what he can exchange it for.
If it could be exchanged for nothing, it would, like a bill upon a
bankrupt, be of no more value than the most useless piece of paper.
Though the weekly or yearly revenue of all the different inhabitants of
any country, in the same manner, may be, and in reality frequently is,
paid to them in money, their real riches, however, the real weekly or
yearly revenue of all of them taken together, must always be great or
small, in proportion to the quantity of consumable goods which they can
all of them purchase with this money. The whole revenue of all of them
taken together is evidently not equal to both the money and the consumable
goods, but only to one or other of those two values, and to the latter
more properly than to the former.
Though we frequently, therefore, express a person’s revenue by the metal
pieces which are annually paid to him, it is because the amount of those
pieces regulates the extent of his power of purchasing, or the value of
the goods which he can annually afford to consume. We still consider his
revenue as consisting in this power of purchasing or consuming, and not in
the pieces which convey it.
But if this is sufficiently evident, even with regard to an individual, it
is still more so with regard to a society. The amount of the metal pieces
which are annually paid to an individual, is often precisely equal to his
revenue, and is upon that account the shortest and best expression of its
value. But the amount of the metal pieces which circulate in a society,
can never be equal to the revenue of all its members. As the same guinea
which pays the weekly pension of one man to-day, may pay that of another
to-morrow, and that of a third the day thereafter, the amount of the metal
pieces which annually circulate in any country, must always be of much
less value than the whole money pensions annually paid with them. But the
power of purchasing, or the goods which can successively be bought with
the whole of those money pensions, as they are successively paid, must
always be precisely of the same value with those pensions; as must
likewise be the revenue of the different persons to whom they are paid.
That revenue, therefore, cannot consist in those metal pieces, of which
the amount is so much inferior to its value, but in the power of
purchasing, in the goods which can successively be bought with them as
they circulate from hand to hand.
Money, therefore, the great wheel of circulation, the great instrument of
commerce, like all other instruments of trade, though it makes a part, and
a very valuable part, of the capital, makes no part of the revenue of the
society to which it belongs; and though the metal pieces of which it is
composed, in the course of their annual circulation, distribute to every
man the revenue which properly belongs to him, they make themselves no
part of that revenue.
Thirdly, and lastly, the machines and instruments of trade, etc. which
compose the fixed capital, bear this further resemblance to that part of
the circulating capital which consists in money; that as every saving in
the expense of erecting and supporting those machines, which does not
diminish the introductive powers of labour, is an improvement of the neat
revenue of the society; so every saving in the expense of collecting and
supporting that part of the circulating capital which consists in money is
an improvement of exactly the same kind.
It is sufficiently obvious, and it has partly, too, been explained
already, in what manner every saving in the expense of supporting the
fixed capital is an improvement of the neat revenue of the society. The
whole capital of the undertaker of every work is necessarily divided
between his fixed and his circulating capital. While his whole capital
remains the same, the smaller the one part, the greater must necessarily
be the other. It is the circulating capital which furnishes the materials
and wages of labour, and puts industry into motion. Every saving,
therefore, in the expense of maintaining the fixed capital, which does not
diminish the productive powers of labour, must increase the fund which
puts industry into motion, and consequently the annual produce of land and
labour, the real revenue of every society.
The substitution of paper in the room of gold and silver money, replaces a
very expensive instrument of commerce with one much less costly, and
sometimes equally convenient. Circulation comes to be carried on by a new
wheel, which it costs less both to erect and to maintain than the old one.
But in what manner this operation is performed, and in what manner it
tends to increase either the gross or the neat revenue of the society, is
not altogether so obvious, and may therefore require some further
explication.
There are several different sorts of paper money; but the circulating
notes of banks and bankers are the species which is best known, and which
seems best adapted for this purpose.
When the people of any particular country have such confidence in the
fortune, probity and prudence of a particular banker, as to believe that
he is always ready to pay upon demand such of his promissory notes as are
likely to be at any time presented to him, those notes come to have the
same currency as gold and silver money, from the confidence that such
money can at any time be had for them.
A particular banker lends among his customers his own promissory notes,
to the extent, we shall suppose, of a hundred thousand pounds. As those
notes serve all the purposes of money, his debtors pay him the same
interest as if he had lent them so much money. This interest is the
source of his gain. Though some of those notes are continually coming
back upon him for payment, part of them continue to circulate for months
and years together. Though he has generally in circulation, therefore,
notes to the extent of a hundred thousand pounds, twenty thousand pounds
in gold and silver may, frequently, be a sufficient provision for
answering occasional demands. By this operation, therefore, twenty
thousand pounds in gold and silver perform all the functions which a
hundred thousand could otherwise have performed. The same exchanges may
be made, the same quantity of consumable goods may be circulated and
distributed to their proper consumers, by means of his promissory notes,
to the value of a hundred thousand pounds, as by an equal value of gold
and silver money. Eighty thousand pounds of gold and silver, therefore,
can in this manner be spared from the circulation of the country; and if
different operations of the same kind should, at the same time, be
carried on by many different banks and bankers, the whole circulation may
thus be conducted with a fifth part only of the gold and silver which
would otherwise have been requisite.
Let us suppose, for example, that the whole circulating money of some
particular country amounted, at a particular time, to one million
sterling, that sum being then sufficient for circulating the whole annual
produce of their land and labour; let us suppose, too, that some time
thereafter, different banks and bankers issued promissory notes payable to
the bearer, to the extent of one million, reserving in their different
coffers two hundred thousand pounds for answering occasional demands;
there would remain, therefore, in circulation, eight hundred thousand
pounds in gold and silver, and a million of bank notes, or eighteen
hundred thousand pounds of paper and money together. But the annual
produce of the land and labour of the country had before required only one
million to circulate and distribute it to its proper consumers, and that
annual produce cannot be immediately augmented by those operations of
banking. One million, therefore, will be sufficient to circulate it after
them. The goods to be bought and sold being precisely the same as before,
the same quantity of money will be sufficient for buying and selling them.
The channel of circulation, if I may be allowed such an expression, will
remain precisely the same as before. One million we have supposed
sufficient to fill that channel. Whatever, therefore, is poured into it
beyond this sum, cannot run into it, but must overflow. One million eight
hundred thousand pounds are poured into it. Eight hundred thousand pounds,
therefore, must overflow, that sum being over and above what can be
employed in the circulation of the country. But though this sum cannot be
employed at home, it is too valuable to be allowed to lie idle. It will,
therefore, be sent abroad, in order to seek that profitable employment
which it cannot find at home. But the paper cannot go abroad; because at a
distance from the banks which issue it, and from the country in which
payment of it can be exacted by law, it will not be received in common
payments. Gold and silver, therefore, to the amount of eight hundred
thousand pounds, will be sent abroad, and the channel of home circulation
will remain filled with a million of paper instead of a million of those
metals which filled it before.
But though so great a quantity of gold and silver is thus sent abroad, we
must not imagine that it is sent abroad for nothing, or that its
proprietors make a present of it to foreign nations. They will exchange it
for foreign goods of some kind or another, in order to supply the
consumption either of some other foreign country, or of their own.
If they employ it in purchasing goods in one foreign country, in order to
supply the consumption of another, or in what is called the carrying
trade, whatever profit they make will be in addition to the neat revenue
of their own country. It is like a new fund, created for carrying on a new
trade; domestic business being now transacted by paper, and the gold and
silver being converted into a fund for this new trade.
If they employ it in purchasing foreign goods for home consumption, they
may either, first, purchase such goods as are likely to be consumed by
idle people, who produce nothing, such as foreign wines, foreign silks,
etc.; or, secondly, they may purchase an additional stock of materials,
tools, and provisions, in order to maintain and employ an additional
number of industrious people, who reproduce, with a profit, the value of
their annual consumption.
So far as it is employed in the first way, it promotes prodigality,
increases expense and consumption, without increasing production, or
establishing any permanent fund for supporting that expense, and is in
every respect hurtful to the society.
So far as it is employed in the second way, it promotes industry; and
though it increases the consumption of the society, it provides a
permanent fund for supporting that consumption; the people who consume
reproducing, with a profit, the whole value of their annual consumption.
The gross revenue of the society, the annual produce of their land and
labour, is increased by the whole value which the labour of those workmen
adds to the materials upon which they are employed, and their neat revenue
by what remains of this value, after deducting what is necessary for
supporting the tools and instruments of their trade.
That the greater part of the gold and silver which being forced abroad by
those operations of banking, is employed in purchasing foreign goods for
home consumption, is, and must be, employed in purchasing those of this
second kind, seems not only probable, but almost unavoidable. Though some
particular men may sometimes increase their expense very considerably,
though their revenue does not increase at all, we maybe assured that no
class or order of men ever does so; because, though the principles of
common prudence do not always govern the conduct of every individual, they
always influence that of the majority of every class or order. But the
revenue of idle people, considered as a class or order, cannot, in the
smallest degree, be increased by those operations of banking. Their
expense in general, therefore, cannot be much increased by them, though
that of a few individuals among them may, and in reality sometimes is. The
demand of idle people, therefore, for foreign goods, being the same, or
very nearly the same as before, a very small part of the money which,
being forced abroad by those operations of banking, is employed in
purchasing foreign goods for home consumption, is likely to be employed in
purchasing those for their use. The greater part of it will naturally be
destined for the employment of industry, and not for the maintenance of
idleness.
When we compute the quantity of industry which the circulating capital of
any society can employ, we must always have regard to those parts of it
only which consist in provisions, materials, and finished work; the other,
which consists in money, and which serves only to circulate those three,
must always be deducted. In order to put industry into motion, three
things are requisite; materials to work upon, tools to work with, and the
wages or recompence for the sake of which the work is done. Money is
neither a material to work upon, nor a tool to work with; and though the
wages of the workman are commonly paid to him in money, his real revenue,
like that of all other men, consists, not in the money, but in the money’s
worth; not in the metal pieces, but in what can be got for them.
The quantity of industry which any capital can employ, must evidently be
equal to the number of workmen whom it can supply with materials, tools,
and a maintenance suitable to the nature of the work. Money may be
requisite for purchasing the materials and tools of the work, as well as
the maintenance of the workmen; but the quantity of industry which the
whole capital can employ, is certainly not equal both to the money which
purchases, and to the materials, tools, and maintenance, which are
purchased with it, but only to one or other of those two values, and to
the latter more properly than to the former.
When paper is substituted in the room of gold and silver money, the
quantity of the materials, tools, and maintenance, which the whole
circulating capital can supply, may be increased by the whole value of
gold and silver which used to be employed in purchasing them. The whole
value of the great wheel of circulation and distribution is added to the
goods which are circulated and distributed by means of it. The operation,
in some measure, resembles that of the undertaker of some great work, who,
in consequence of some improvement in mechanics, takes down his old
machinery, and adds the difference between its price and that of the new
to his circulating capital, to the fund from which he furnishes materials
and wages to his workmen.
What is the proportion which the circulating money of any country bears to
the whole value of the annual produce circulated by means of it, it is
perhaps impossible to determine. It has been computed by different authors
at a fifth, at a tenth, at a twentieth, and at a thirtieth, part of that
value. But how small soever the proportion which the circulating money may
bear to the whole value of the annual produce, as but a part, and
frequently but a small part, of that produce, is ever destined for the
maintenance of industry, it must always bear a very considerable
proportion to that part. When, therefore, by the substitution of paper,
the gold and silver necessary for circulation is reduced to, perhaps, a
fifth part of the former quantity, if the value of only the greater part
of the other four-fifths be added to the funds which are destined for the
maintenance of industry, it must make a very considerable addition to the
quantity of that industry, and, consequently, to the value of the annual
produce of land and labour.
An operation of this kind has, within these five-and-twenty or thirty
years, been performed in Scotland, by the erection of new banking
companies in almost every considerable town, and even in some country
villages. The effects of it have been precisely those above described. The
business of the country is almost entirely carried on by means of the
paper of those different banking companies, with which purchases and
payments of all kinds are commonly made. Silver very seldom appears,
except in the change of a twenty shilling bank note, and gold still
seldomer. But though the conduct of all those different companies has not
been unexceptionable, and has accordingly required an act of parliament to
regulate it, the country, notwithstanding, has evidently derived great
benefit from their trade. I have heard it asserted, that the trade of the
city of Glasgow doubled in about fifteen years after the first erection of
the banks there; and that the trade of Scotland has more than quadrupled
since the first erection of the two public banks at Edinburgh; of which
the one, called the Bank of Scotland, was established by act of parliament
in 1695, and the other, called the Royal Bank, by royal charter in 1727.
Whether the trade, either of Scotland in general, or of the city of
Glasgow in particular, has really increased in so great a proportion,
during so short a period, I do not pretend to know. If either of them has
increased in this proportion, it seems to be an effect too great to be
accounted for by the sole operation of this cause. That the trade and
industry of Scotland, however, have increased very considerably during
this period, and that the banks have contributed a good deal to this
increase, cannot be doubted.
The value of the silver money which circulated in Scotland before the
Union in 1707, and which, immediately after it, was brought into the Bank
of Scotland, in order to be recoined, amounted to £411,117: 10: 9
sterling. No account has been got of the gold coin; but it appears from
the ancient accounts of the mint of Scotland, that the value of the gold
annually coined somewhat exceeded that of the silver. There were a good
many people, too, upon this occasion, who, from a diffidence of repayment,
did not bring their silver into the Bank of Scotland; and there was,
besides, some English coin, which was not called in. The whole value of
the gold and silver, therefore, which circulated in Scotland before the
Union, cannot be estimated at less than a million sterling. It seems to
have constituted almost the whole circulation of that country; for though
the circulation of the Bank of Scotland, which had then no rival, was
considerable, it seems to have made but a very small part of the whole. In
the present times, the whole circulation of Scotland cannot be estimated
at less than two millions, of which that part which consists in gold and
silver, most probably, does not amount to half a million. But though the
circulating gold and silver of Scotland have suffered so great a
diminution during this period, its real riches and prosperity do not
appear to have suffered any. Its agriculture, manufactures, and trade, on
the contrary, the annual produce of its land and labour, have evidently
been augmented.
It is chiefly by discounting bills of exchange, that is, by advancing
money upon them before they are due, that the greater part of banks and
bankers issue their promissory notes. They deduct always, upon whatever
sum they advance, the legal interest till the bill shall become due. The
payment of the bill, when it becomes due, replaces to the bank the value
of what had been advanced, together with a clear profit of the interest.
The banker, who advances to the merchant whose bill he discounts, not gold
and silver, but his own promissory notes, has the advantage of being able
to discount to a greater amount by the whole value of his promissory
notes, which he finds, by experience, are commonly in circulation. He is
thereby enabled to make his clear gain of interest on so much a larger
sum.
The commerce of Scotland, which at present is not very great, was still
more inconsiderable when the two first banking companies were established;
and those companies would have had but little trade, had they confined
their business to the discounting of bills of exchange. They invented,
therefore, another method of issuing their promissory notes; by granting
what they call cash accounts, that is, by giving credit, to the extent of
a certain sum (two or three thousand pounds for example), to any
individual who could procure two persons of undoubted credit and good
landed estate to become surety for him, that whatever money should be
advanced to him, within the sum for which the credit had been given,
should be repaid upon demand, together with the legal interest. Credits of
this kind are, I believe, commonly granted by banks and bankers in all
different parts of the world. But the easy terms upon which the Scotch
banking companies accept of repayment are, so far as I know, peculiar to
them, and have perhaps been the principal cause, both of the great trade
of those companies, and of the benefit which the country has received from
it.
Whoever has a credit of this kind with one of those companies, and borrows
a thousand pounds upon it, for example, may repay this sum piece-meal, by
twenty and thirty pounds at a time, the company discounting a
proportionable part of the interest of the great sum, from the day on
which each of those small sums is paid in, till the whole be in this
manner repaid. All merchants, therefore, and almost all men of business,
find it convenient to keep such cash accounts with them, and are thereby
interested to promote the trade of those companies, by readily receiving
their notes in all payments, and by encouraging all those with whom they
have any influence to do the same. The banks, when their customers apply
to them for money, generally advance it to them in their own promissory
notes. These the merchants pay away to the manufacturers for goods, the
manufacturers to the farmers for materials and provisions, the farmers to
their landlords for rent; the landlords repay them to the merchants for
the conveniencies and luxuries with which they supply them, and the
merchants again return them to the banks, in order to balance their cash
accounts, or to replace what they may have borrowed of them; and thus
almost the whole money business of the country is transacted by means of
them. Hence the great trade of those companies.
By means of those cash accounts, every merchant can, without imprudence,
carry on a greater trade than he otherwise could do. If there are two
merchants, one in London and the other in Edinburgh, who employ equal
stocks in the same branch of trade, the Edinburgh merchant can, without
imprudence, carry on a greater trade, and give employment to a greater
number of people, than the London merchant. The London merchant must
always keep by him a considerable sum of money, either in his own coffers,
or in those of his banker, who gives him no interest for it, in order to
answer the demands continually coming upon him for payment of the goods
which he purchases upon credit. Let the ordinary amount of this sum be
supposed five hundred pounds; the value of the goods in his warehouse must
always be less, by five hundred pounds, than it would have been, had he
not been obliged to keep such a sum unemployed. Let us suppose that he
generally disposes of his whole stock upon hand, or of goods to the value
of his whole stock upon hand, once in the year. By being obliged to keep
so great a sum unemployed, he must sell in a year five hundred pounds
worth less goods than he might otherwise have done. His annual profits
must be less by all that he could have made by the sale of five hundred
pounds worth more goods; and the number of people employed in preparing
his goods for the market must be less by all those that five hundred
pounds more stock could have employed. The merchant in Edinburgh, on the
other hand, keeps no money unemployed for answering such occasional
demands. When they actually come upon him, he satisfies them from his cash
account with the bank, and gradually replaces the sum borrowed with the
money or paper which comes in from the occasional sales of his goods. With
the same stock, therefore, he can, without imprudence, have at all times
in his warehouse a larger quantity of goods than the London merchant; and
can thereby both make a greater profit himself, and give constant
employment to a greater number of industrious people who prepare those
goods for the market. Hence the great benefit which the country has
derived from this trade.
The facility of discounting bills of exchange, it may be thought, indeed,
gives the English merchants a conveniency equivalent to the cash accounts
of the Scotch merchants. But the Scotch merchants, it must be remembered,
can discount their bills of exchange as easily as the English merchants;
and have, besides, the additional conveniency of their cash accounts.
The whole paper money of every kind which can easily circulate in any
country, never can exceed the value of the gold and silver, of which it
supplies the place, or which (the commerce being supposed the same) would
circulate there, if there was no paper money. If twenty shilling notes,
for example, are the lowest paper money current in Scotland, the whole of
that currency which can easily circulate there, cannot exceed the sum of
gold and silver which would be necessary for transacting the annual
exchanges of twenty shillings value and upwards usually transacted within
that country. Should the circulating paper at any time exceed that sum, as
the excess could neither be sent abroad nor be employed in the circulation
of the country, it must immediately return upon the banks, to be exchanged
for gold and silver. Many people would immediately perceive that they had
more of this paper than was necessary for transacting their business at
home; and as they could not send it abroad, they would immediately demand
payment for it from the banks. When this superfluous paper was converted
into gold and silver, they could easily find a use for it, by sending it
abroad; but they could find none while it remained in the shape of paper.
There would immediately, therefore, be a run upon the banks to the whole
extent of this superfluous paper, and if they showed any difficulty or
backwardness in payment, to a much greater extent; the alarm which this
would occasion necessarily increasing the run.
Over and above the expenses which are common to every branch of trade,
such as the expense of house-rent, the wages of servants, clerks,
accountants, etc. the expenses peculiar to a bank consist chiefly in two
articles: first, in the expense of keeping at all times in its coffers,
for answering the occasional demands of the holders of its notes, a large
sum of money, of which it loses the interest; and, secondly, in the
expense of replenishing those coffers as fast as they are emptied by
answering such occasional demands.
A banking company which issues more paper than can be employed in the
circulation of the country, and of which the excess is continually
returning upon them for payment, ought to increase the quantity of gold
and silver which they keep at all times in their coffers, not only in
proportion to this excessive increase of their circulation, but in a much
greater proportion; their notes returning upon them much faster than in
proportion to the excess of their quantity. Such a company, therefore,
ought to increase the first article of their expense, not only in
proportion to this forced increase of their business, but in a much
greater proportion.
The coffers of such a company, too, though they ought to be filled much
fuller, yet must empty themselves much faster than if their business was
confined within more reasonable bounds, and must require not only a more
violent, but a more constant and uninterrupted exertion of expense, in
order to replenish them, The coin, too, which is thus continually drawn in
such large quantities from their coffers, cannot be employed in the
circulation of the country. It comes in place of a paper which is over and
above what can be employed in that circulation, and is, therefore, over
and above what can be employed in it too. But as that coin will not be
allowed to lie idle, it must, in one shape or another, be sent abroad, in
order to find that profitable employment which it cannot find at home; and
this continual exportation of gold and silver, by enhancing the
difficulty, must necessarily enhance still farther the expense of the
bank, in finding new gold and silver in order to replenish those coffers,
which empty themselves so very rapidly. Such a company, therefore, must in
proportion to this forced increase of their business, increase the second
article of their expense still more than the first.
Let us suppose that all the paper of a particular bank, which the
circulation of the country can easily absorb and employ, amounts exactly
to forty thousand pounds, and that, for answering occasional demands, this
bank is obliged to keep at all times in its coffers ten thousand pounds in
gold and silver. Should this bank attempt to circulate forty-four thousand
pounds, the four thousand pounds which are over and above what the
circulation can easily absorb and employ, will return upon it almost as
fast as they are issued. For answering occasional demands, therefore, this
bank ought to keep at all times in its coffers, not eleven thousand pounds
only, but fourteen thousand pounds. It will thus gain nothing by the
interest of the four thousand pounds excessive circulation; and it will
lose the whole expense of continually collecting four thousand pounds in
gold and silver, which will be continually going out of its coffers as
fast as they are brought into them.
Had every particular banking company always understood and attended to its
own particular interest, the circulation never could have been overstocked
with paper money. But every particular banking company has not always
understood or attended to its own particular interest, and the circulation
has frequently been overstocked with paper money.
By issuing too great a quantity of paper, of which the excess was
continually returning, in order to be exchanged for gold and silver, the
Bank of England was for many years together obliged to coin gold to the
extent of between eight hundred thousand pounds and a million a-year; or,
at an average, about eight hundred and fifty thousand pounds. For this
great coinage, the bank (in consequence of the worn and degraded state into
which the gold coin had fallen a few years ago) was frequently obliged to
purchase gold bullion at the high price of four pounds an ounce, which it
soon after issued in coin at £3:17:10 ½ an ounce, losing in this manner
between two and a half and three per cent. upon the coinage of so very
large a sum. Though the bank, therefore, paid no seignorage, though the
government was properly at the expense of this coinage, this liberality of
government did not prevent altogether the expense of the bank.
The Scotch banks, in consequence of an excess of the same kind, were all
obliged to employ constantly agents at London to collect money for them,
at an expense which was seldom below one and a half or two per cent. This
money was sent down by the waggon, and insured by the carriers at an
additional expense of three quarters per cent. or fifteen shillings on the
hundred pounds. Those agents were not always able to replenish the coffers
of their employers so fast as they were emptied. In this case, the
resource of the banks was, to draw upon their correspondents in London
bills of exchange, to the extent of the sum which they wanted. When those
correspondents afterwards drew upon them for the payment of this sum,
together with the interest and commission, some of those banks, from the
distress into which their excessive circulation had thrown them, had
sometimes no other means of satisfying this draught, but by drawing a
second set of bills, either upon the same, or upon some other
correspondents in London; and the same sum, or rather bills for the same
sum, would in this manner make sometimes more than two or three journeys;
the debtor bank paying always the interest and commission upon the whole
accumulated sum. Even those Scotch banks which never distinguished
themselves by their extreme imprudence, were sometimes obliged to employ
this ruinous resource.
The gold coin which was paid out, either by the Bank of England or by the
Scotch banks, in exchange for that part of their paper which was over and
above what could be employed in the circulation of the country, being
likewise over and above what could be employed in that circulation, was
sometimes sent abroad in the shape of coin, sometimes melted down and sent
abroad in the shape of bullion, and sometimes melted down and sold to the
Bank of England at the high price of four pounds an ounce. It was the
newest, the heaviest, and the best pieces only, which were carefully
picked out of the whole coin, and either sent abroad or melted down. At
home, and while they remained in the shape of coin, those heavy pieces
were of no more value than the light; but they were of more value abroad,
or when melted down into bullion at home. The Bank of England,
notwithstanding their great annual coinage, found, to their astonishment,
that there was every year the same scarcity of coin as there had been the
year before; and that, notwithstanding the great quantity of good and new
coin which was every year issued from the bank, the state of the coin,
instead of growing better and better, became every year worse and worse.
Every year they found themselves under the necessity of coining nearly the
same quantity of gold as they had coined the year before; and from the
continual rise in the price of gold bullion, in consequence of the
continual wearing and clipping of the coin, the expense of this great
annual coinage became, every year, greater and greater. The Bank of
England, it is to be observed, by supplying its own coffers with coin, is
indirectly obliged to supply the whole kingdom, into which coin is
continually flowing from those coffers in a great variety of ways.
Whatever coin, therefore, was wanted to support this excessive circulation
both of Scotch and English paper money, whatever vacuities this excessive
circulation occasioned in the necessary coin of the kingdom, the Bank of
England was obliged to supply them. The Scotch banks, no doubt, paid all
of them very dearly for their own imprudence and inattention: but the Bank
of England paid very dearly, not only for its own imprudence, but for the
much greater imprudence of almost all the Scotch banks.
The over-trading of some bold projectors in both parts of the united
kingdom, was the original cause of this excessive circulation of paper
money.
What a bank can with propriety advance to a merchant or undertaker of any
kind, is not either the whole capital with which he trades, or even any
considerable part of that capital; but that part of it only which he would
otherwise be obliged to keep by him unemployed and in ready money, for
answering occasional demands. If the paper money which the bank advances
never exceeds this value, it can never exceed the value of the gold and
silver which would necessarily circulate in the country if there was no
paper money; it can never exceed the quantity which the circulation of the
country can easily absorb and employ.
When a bank discounts to a merchant a real bill of exchange, drawn by a
real creditor upon a real debtor, and which, as soon as it becomes due, is
really paid by that debtor; it only advances to him a part of the value
which he would otherwise be obliged to keep by him unemployed and in ready
money, for answering occasional demands. The payment of the bill, when it
becomes due, replaces to the bank the value of what it had advanced,
together with the interest. The coffers of the bank, so far as its
dealings are confined to such customers, resemble a water-pond, from
which, though a stream is continually running out, yet another is
continually running in, fully equal to that which runs out; so that,
without any further care or attention, the pond keeps always equally, or
very near equally full. Little or no expense can ever be necessary for
replenishing the coffers of such a bank.
A merchant, without over-trading, may frequently have occasion for a sum
of ready money, even when he has no bills to discount. When a bank,
besides discounting his bills, advances him likewise, upon such occasions,
such sums upon his cash account, and accepts of a piece-meal repayment, as
the money comes in from the occasional sale of his goods, upon the easy
terms of the banking companies of Scotland; it dispenses him entirely from
the necessity of keeping any part of his stock by him unemployed and in
ready money for answering occasional demands. When such demands actually
come upon him, he can answer them sufficiently from his cash account. The
bank, however, in dealing with such customers, ought to observe with great
attention, whether, in the course of some short period (of four, five,
six, or eight months, for example), the sum of the repayments which it
commonly receives from them, is, or is not, fully equal to that of the
advances which it commonly makes to them. If, within the course of such
short periods, the sum of the repayments from certain customers is, upon
most occasions, fully equal to that of the advances, it may safely
continue to deal with such customers. Though the stream which is in this
case continually running out from its coffers may be very large, that
which is continually running into them must be at least equally large, so
that, without any further care or attention, those coffers are likely to
be always equally or very near equally full, and scarce ever to require
any extraordinary expense to replenish them. If, on the contrary, the sum
of the repayments from certain other customers, falls commonly very much
short of the advances which it makes to them, it cannot with any safety
continue to deal with such customers, at least if they continue to deal
with it in this manner. The stream which is in this case continually
running out from its coffers, is necessarily much larger than that which
is continually running in; so that, unless they are replenished by some
great and continual effort of expense, those coffers must soon be
exhausted altogether.
The banking companies of Scotland, accordingly, were for a long time very
careful to require frequent and regular repayments from all their
customers, and did not care to deal with any person, whatever might be his
fortune or credit, who did not make, what they called, frequent and
regular operations with them. By this attention, besides saving almost
entirely the extraordinary expense of replenishing their coffers, they
gained two other very considerable advantages.
First, by this attention they were enabled to make some tolerable judgment
concerning the thriving or declining circumstances of their debtors,
without being obliged to look out for any other evidence besides what
their own books afforded them; men being, for the most part, either
regular or irregular in their repayments, according as their circumstances
are either thriving or declining. A private man who lends out his money to
perhaps half a dozen or a dozen of debtors, may, either by himself or his
agents, observe and inquire both constantly and carefully into the conduct
and situation of each of them. But a banking company, which lends money to
perhaps five hundred different people, and of which the attention is
continually occupied by objects of a very different kind, can have no
regular information concerning the conduct and circumstances of the
greater part of its debtors, beyond what its own books afford it. In
requiring frequent and regular repayments from all their customers, the
banking companies of Scotland had probably this advantage in view.
Secondly, by this attention they secured themselves from the possibility
of issuing more paper money than what the circulation of the country could
easily absorb and employ. When they observed, that within moderate periods
of time, the repayments of a particular customer were, upon most
occasions, fully equal to the advances which they had made to him, they
might be assured that the paper money which they had advanced to him had
not, at any time, exceeded the quantity of gold and silver which he would
otherwise have been obliged to keep by him for answering occasional
demands; and that, consequently, the paper money, which they had
circulated by his means, had not at any time exceeded the quantity of gold
and silver which would have circulated in the country, had there been no
paper money. The frequency, regularity, and amount of his repayments,
would sufficiently demonstrate that the amount of their advances had at no
time exceeded that part of his capital which he would otherwise have been
obliged to keep by him unemployed, and in ready money, for answering
occasional demands; that is, for the purpose of keeping the rest of his
capital in constant employment. It is this part of his capital only which,
within moderate periods of time, is continually returning to every dealer
in the shape of money, whether paper or coin, and continually going from
him in the same shape. If the advances of the bank had commonly exceeded
this part of his capital, the ordinary amount of his repayments could not,
within moderate periods of time, have equalled the ordinary amount of its
advances. The stream which, by means of his dealings, was continually
running into the coffers of the bank, could not have been equal to the
stream which, by means of the same dealings was continually running out.
The advances of the bank paper, by exceeding the quantity of gold and
silver which, had there been no such advances, he would have been obliged
to keep by him for answering occasional demands, might soon come to exceed
the whole quantity of gold and silver which ( the commerce being supposed
the same ) would have circulated in the country, had there been no paper
money; and, consequently, to exceed the quantity which the circulation of
the country could easily absorb and employ; and the excess of this paper
money would immediately have returned upon the bank, in order to be
exchanged for gold and silver. This second advantage, though equally real,
was not, perhaps, so well understood by all the different banking
companies in Scotland as the first.
When, partly by the conveniency of discounting bills, and partly by that
of cash accounts, the creditable traders of any country can be dispensed
from the necessity of keeping any part of their stock by them unemployed,
and in ready money, for answering occasional demands, they can reasonably
expect no farther assistance from hanks and bankers, who, when they have
gone thus far, cannot, consistently with their own interest and safety, go
farther. A bank cannot, consistently with its own interest, advance to a
trader the whole, or even the greater part of the circulating capital with
which he trades; because, though that capital is continually returning to
him in the shape of money, and going from him in the same shape, yet the
whole of the returns is too distant from the whole of the outgoings, and
the sum of his repayments could not equal the sum of his advances within
such moderate periods of time as suit the conveniency of a bank. Still
less could a bank afford to advance him any considerable part of his fixed
capital; of the capital which the undertaker of an iron forge, for
example, employs in erecting his forge and smelting-houses, his
work-houses, and warehouses, the dwelling-houses of his workmen, etc.; of
the capital which the undertaker of a mine employs in sinking his shafts,
in erecting engines for drawing out the water, in making roads and
waggon-ways, etc.; of the capital which the person who undertakes to
improve land employs in clearing, draining, inclosing, manuring, and
ploughing waste and uncultivated fields; in building farmhouses, with all
their necessary appendages of stables, granaries, etc. The returns of the
fixed capital are, in almost all cases, much slower than those of the
circulating capital: and such expenses, even when laid out with the
greatest prudence and judgment, very seldom return to the undertaker till
after a period of many years, a period by far too distant to suit the
conveniency of a bank. Traders and other undertakers may, no doubt with
great propriety, carry on a very considerable part of their projects with
borrowed money. In justice to their creditors, however, their own capital
ought in this case to be sufficient to insure, if I may say so, the
capital of those creditors; or to render it extremely improbable that
those creditors should incur any loss, even though the success of the
project should fall very much short of the expectation of the projectors.
Even with this precaution, too, the money which is borrowed, and which it
is meant should not be repaid till after a period of several years, ought
not to be borrowed of a bank, but ought to be borrowed upon bond or
mortgage, of such private people as propose to live upon the interest of
their money, without taking the trouble themselves to employ the capital,
and who are, upon that account, willing to lend that capital to such
people of good credit as are likely to keep it for several years. A bank,
indeed, which lends its money without the expense of stamped paper, or of
attorneys’ fees for drawing bonds and mortgages, and which accepts of
repayment upon the easy terms of the banking companies of Scotland, would,
no doubt, be a very convenient creditor to such traders and undertakers.
But such traders and undertakers would surely be most inconvenient debtors
to such a bank.
It is now more than five and twenty years since the paper money issued by
the different banking companies of Scotland was fully equal, or rather was
somewhat more than fully equal, to what the circulation of the country
could easily absorb and employ. Those companies, therefore, had so long
ago given all the assistance to the traders and other undertakers of
Scotland which it is possible for banks and bankers, consistently with
their own interest, to give. They had even done somewhat more. They had
over-traded a little, and had brought upon themselves that loss, or at
least that diminution of profit, which, in this particular business, never
fails to attend the smallest degree of over-trading. Those traders and
other undertakers, having got so much assistance from banks and bankers,
wished to get still more. The banks, they seem to have thought, could
extend their credits to whatever sum might be wanted, without incurring
any other expense besides that of a few reams of paper. They complained of
the contracted views and dastardly spirit of the directors of those banks,
which did not, they said, extend their credits in proportion to the
extension of the trade of the country; meaning, no doubt, by the extension
of that trade, the extension of their own projects beyond what they could
carry on either with their own capital, or with what they had credit to
borrow of private people in the usual way of bond or mortgage. The banks,
they seem to have thought, were in honour bound to supply the deficiency,
and to provide them with all the capital which they wanted to trade with.
The banks, however, were of a different opinion; and upon their refusing
to extend their credits, some of those traders had recourse to an
expedient which, for a time, served their purpose, though at a much
greater expense, yet as effectually as the utmost extension of bank
credits could have done. This expedient was no other than the well known
shift of drawing and redrawing; the shift to which unfortunate traders
have sometimes recourse, when they are upon the brink of bankruptcy. The
practice of raising money in this manner had been long known in England;
and, during the course of the late war, when the high profits of trade
afforded a great temptation to over-trading, is said to have been carried
on to a very great extent. From England it was brought into Scotland,
where, in proportion to the very limited commerce, and to the very
moderate capital of the country, it was soon carried on to a much greater
extent than it ever had been in England.
The practice of drawing and redrawing is so well known to all men of
business, that it may, perhaps, be thought unnecessary to give any account
of it. But as this book may come into the hands of many people who are not
men of business, and as the effects of this practice upon the banking
trade are not, perhaps, generally understood, even by men of business
themselves, I shall endeavour to explain it as distinctly as I can.
The customs of merchants, which were established when the barbarous laws
of Europe did not enforce the performance of their contracts, and which,
during the course of the two last centuries, have been adopted into the
laws of all European nations, have given such extraordinary privileges to
bills of exchange, that money is more readily advanced upon them than upon
any other species of obligation; especially when they are made payable
within so short a period as two or three months after their date. If, when
the bill becomes due, the acceptor does not pay it as soon as it is
presented, he becomes from that moment a bankrupt. The bill is protested,
and returns upon the drawer, who, if he does not immediately pay it,
becomes likewise a bankrupt. If, before it came to the person who presents
it to the acceptor for payment, it had passed through the hands of several
other persons, who had successively advanced to one another the contents
of it, either in money or goods, and who, to express that each of them had
in his turn received those contents, had all of them in their order
indorsed, that is, written their names upon the back of the bill; each
indorser becomes in his turn liable to the owner of the bill for those
contents, and, if he fails to pay, he becomes too, from that moment, a
bankrupt. Though the drawer, acceptor, and indorsers of the bill, should
all of them be persons of doubtful credit; yet, still the shortness of the
date gives some security to the owner of the bill. Though all of them may
be very likely to become bankrupts, it is a chance if they all become so
in so short a time. The house is crazy, says a weary traveller to himself,
and will not stand very long; but it is a chance if it falls to-night, and
I will venture, therefore, to sleep in it to-night.
The trader A in Edinburgh, we shall suppose, draws a bill upon B in
London, payable two months after date. In reality B in London owes nothing
to A in Edinburgh; but he agrees to accept of A’s bill, upon condition,
that before the term of payment he shall redraw upon A in Edinburgh for
the same sum, together with the interest and a commission, another bill,
payable likewise two months after date. B accordingly, before the
expiration of the first two months, redraws this bill upon A in Edinburgh;
who, again before the expiration of the second two months, draws a second
bill upon B in London, payable likewise two months after date; and before
the expiration of the third two months, B in London redraws upon A in
Edinburgh another bill payable also two months after date. This practice
has sometimes gone on, not only for several months, but for several years
together, the bill always returning upon A in Edinburgh with the
accumulated interest and commission of all the former bills. The interest
was five per cent. in the year, and the commission was never less than one
half per cent. on each draught. This commission being repeated more than
six times in the year, whatever money A might raise by this expedient
might necessarily have cost him something more than eight per cent. in the
year and sometimes a great deal more, when either the price of the
commission happened to rise, or when he was obliged to pay compound
interest upon the interest and commission of former bills. This practice
was called raising money by circulation.
In a country where the ordinary profits of stock, in the greater part of
mercantile projects, are supposed to run between six and ten per cent. it
must have been a very fortunate speculation, of which the returns could
not only repay the enormous expense at which the money was thus borrowed
for carrying it on, but afford, besides, a good surplus profit to the
projector. Many vast and extensive projects, however, were undertaken, and
for several years carried on, without any other fund to support them
besides what was raised at this enormous expense. The projectors, no
doubt, had in their golden dreams the most distinct vision of this great
profit. Upon their awakening, however, either at the end of their
projects, or when they were no longer able to carry them on, they very
seldom, I believe, had the good fortune to find it.
{The method described in the text was by no means either the most common
or the most expensive one in which those adventurers sometimes raised
money by circulation. It frequently happened, that A in Edinburgh would
enable B in London to pay the first bill of exchange, by drawing, a few
days before it became due, a second bill at three months date upon the
same B in London. This bill, being payable to his own order, A sold in
Edinburgh at par; and with its contents purchased bills upon London,
payable at sight to the order of B, to whom he sent them by the post.
Towards the end of the late war, the exchange between Edinburgh and London
was frequently three per cent. against Edinburgh, and those bills at sight
must frequently have cost A that premium. This transaction, therefore,
being repeated at least four times in the year, and being loaded with a
commission of at least one half per cent. upon each repetition, must at
that period have cost A, at least, fourteen per cent. in the year. At
other times A would enable to discharge the first bill of exchange, by
drawing, a few days before it became due, a second bill at two months
date, not upon B, but upon some third person, C, for example, in London.
This other bill was made payable to the order of B, who, upon its being
accepted by C, discounted it with some banker in London; and A enabled C
to discharge it, by drawing, a few day’s before it became due, a third
bill likewise at two months date, sometimes upon his first correspondent
B, and sometimes upon some fourth or fifth person, D or E, for example.
This third bill was made payable to the order of C, who, as soon as it was
accepted, discounted it in the same manner with some banker in London.
Such operations being repeated at least six times in the year, and being
loaded with a commission of at least one half per cent. upon each
repetition, together with the legal interest of five per cent. this method
of raising money, in the same manner as that described in the text, must
have cost A something more than eight per cent. By saving, however, the
exchange between Edinburgh and London, it was less expensive than that
mentioned in the foregoing part of this note; but then it required an
established credit with more houses than one in London, an advantage which
many of these adventurers could not always find it easy to procure.}
The bills which A in Edinburgh drew upon B in London, he regularly
discounted two months before they were due, with some bank or banker in
Edinburgh; and the bills which B in London redrew upon A in Edinburgh, he
as regularly discounted, either with the Bank of England, or with some
other banker in London. Whatever was advanced upon such circulating bills
was in Edinburgh advanced in the paper of the Scotch banks; and in London,
when they were discounted at the Bank of England in the paper of that
bank. Though the bills upon which this paper had been advanced were all of
them repaid in their turn as soon as they became due, yet the value which
had been really advanced upon the first bill was never really returned to
the banks which advanced it; because, before each bill became due, another
bill was always drawn to somewhat a greater amount than the bill which was
soon to be paid: and the discounting of this other bill was essentially
necessary towards the payment of that which was soon to be due. This
payment, therefore, was altogether fictitious. The stream which, by means
of those circulating bills of exchange, had once been made to run out from
the coffers of the banks, was never replaced by any stream which really
ran into them.
The paper which was issued upon those circulating bills of exchange
amounted, upon many occasions, to the whole fund destined for carrying on
some vast and extensive project of agriculture, commerce, or manufactures;
and not merely to that part of it which, had there been no paper money,
the projector would have been obliged to keep by him unemployed, and in
ready money, for answering occasional demands. The greater part of this
paper was, consequently, over and above the value of the gold and silver
which would have circulated in the country, had there been no paper money.
It was over and above, therefore, what the circulation of the country
could easily absorb and employ, and upon that account, immediately
returned upon the banks, in order to be exchanged for gold and silver,
which they were to find as they could. It was a capital which those
projectors had very artfully contrived to draw from those banks, not only
without their knowledge or deliberate consent, but for some time, perhaps,
without their having the most distant suspicion that they had really
advanced it.
When two people, who are continually drawing and redrawing upon one
another, discount their bills always with the same banker, he must
immediately discover what they are about, and see clearly that they are
trading, not with any capital of their own, but with the capital which he
advances to them. But this discovery is not altogether so easy when they
discount their bills sometimes with one banker, and sometimes with
another, and when the two same persons do not constantly draw and redraw
upon one another, but occasionally run the round of a great circle of
projectors, who find it for their interest to assist one another in this
method of raising money and to render it, upon that account, as difficult
as possible to distinguish between a real and a fictitious bill of
exchange, between a bill drawn by a real creditor upon a real debtor, and
a bill for which there was properly no real creditor but the bank which
discounted it, nor any real debtor but the projector who made use of the
money. When a banker had even made this discovery, he might sometimes make
it too late, and might find that he had already discounted the bills of
those projectors to so great an extent, that, by refusing to discount any
more, he would necessarily make them all bankrupts; and thus by ruining
them, might perhaps ruin himself. For his own interest and safety,
therefore, he might find it necessary, in this very perilous situation, to
go on for some time, endeavouring, however, to withdraw gradually, and,
upon that account, making every day greater and greater difficulties about
discounting, in order to force these projectors by degrees to have
recourse, either to other bankers, or to other methods of raising money:
so as that he himself might, as soon as possible, get out of the circle.
The difficulties, accordingly, which the Bank of England, which the
principal bankers in London, and which even the more prudent Scotch banks
began, after a certain time, and when all of them had already gone too
far, to make about discounting, not only alarmed, but enraged, in the
highest degree, those projectors. Their own distress, of which this
prudent and necessary reserve of the banks was, no doubt, the immediate
occasion, they called the distress of the country; and this distress of
the country, they said, was altogether owing to the ignorance,
pusillanimity, and bad conduct of the banks, which did not give a
sufficiently liberal aid to the spirited undertakings of those who exerted
themselves in order to beautify, improve, and enrich the country. It was
the duty of the banks, they seemed to think, to lend for as long a time,
and to as great an extent, as they might wish to borrow. The banks,
however, by refusing in this manner to give more credit to those to whom
they had already given a great deal too much, took the only method by
which it was now possible to save either their own credit, or the public
credit of the country.
In the midst of this clamour and distress, a new bank was established in
Scotland, for the express purpose of relieving the distress of the
country. The design was generous; but the execution was imprudent, and the
nature and causes of the distress which it meant to relieve, were not,
perhaps, well understood. This bank was more liberal than any other had
ever been, both in granting cash-accounts, and in discounting bills of
exchange. With regard to the latter, it seems to have made scarce any
distinction between real and circulating bills, but to have discounted all
equally. It was the avowed principle of this bank to advance upon any
reasonable security, the whole capital which was to be employed in those
improvements of which the returns are the most slow and distant, such as
the improvements of land. To promote such improvements was even said to be
the chief of the public-spirited purposes for which it was instituted. By
its liberality in granting cash-accounts, and in discounting bills of
exchange, it, no doubt, issued great quantities of its bank notes. But
those bank notes being, the greater part of them, over and above what the
circulation of the country could easily absorb and employ, returned upon
it, in order to be exchanged for gold and silver, as fast as they were
issued. Its coffers were never well filled. The capital which had been
subscribed to this bank, at two different subscriptions, amounted to one
hundred and sixty thousand pounds, of which eighty per cent. only was paid
up. This sum ought to have been paid in at several different instalments.
A great part of the proprietors, when they paid in their first instalment,
opened a cash-account with the bank; and the directors, thinking
themselves obliged to treat their own proprietors with the same liberality
with which they treated all other men, allowed many of them to borrow upon
this cash-account what they paid in upon all their subsequent instalments.
Such payments, therefore, only put into one coffer what had the moment
before been taken out of another. But had the coffers of this bank been
filled ever so well, its excessive circulation must have emptied them
faster than they could have been replenished by any other expedient but
the ruinous one of drawing upon London; and when the bill became due,
paying it, together with interest and commission, by another draught upon
the same place. Its coffers having been filled so very ill, it is said to
have been driven to this resource within a very few months after it began
to do business. The estates of the proprietors of this bank were worth
several millions, and, by their subscription to the original bond or
contract of the bank, were really pledged for answering all its
engagements. By means of the great credit which so great a pledge
necessarily gave it, it was, notwithstanding its too liberal conduct,
enabled to carry on business for more than two years. When it was obliged
to stop, it had in the circulation about two hundred thousand pounds in
bank notes. In order to support the circulation of those notes, which were
continually returning upon it as fast as they were issued, it had been
constantly in the practice of drawing bills of exchange upon London, of
which the number and value were continually increasing, and, when it
stopt, amounted to upwards of six hundred thousand pounds. This bank,
therefore, had, in little more than the course of two years, advanced to
different people upwards of eight hundred thousand pounds at five per
cent. Upon the two hundred thousand pounds which it circulated in bank
notes, this five per cent. might perhaps be considered as a clear gain,
without any other deduction besides the expense of management. But upon
upwards of six hundred thousand pounds, for which it was continually
drawing bills of exchange upon London, it was paying, in the way of
interest and commission, upwards of eight per cent. and was consequently
losing more than three per cent. upon more than three fourths of all its
dealings.
The operations of this bank seem to have produced effects quite opposite
to those which were intended by the particular persons who planned and
directed it. They seem to have intended to support the spirited
undertakings, for as such they considered them, which were at that time
carrying on in different parts of the country; and, at the same time, by
drawing the whole banking business to themselves, to supplant all the
other Scotch banks, particularly those established at Edinburgh, whose
backwardness in discounting bills of exchange had given some offence. This
bank, no doubt, gave some temporary relief to those projectors, and
enabled them to carry on their projects for about two years longer than
they could otherwise have done. But it thereby only enabled them to get so
much deeper into debt; so that, when ruin came, it fell so much the
heavier both upon them and upon their creditors. The operations of this
bank, therefore, instead of relieving, in reality aggravated in the
long-run the distress which those projectors had brought both upon
themselves and upon their country. It would have been much better for
themselves, their creditors, and their country, had the greater part of
them been obliged to stop two years sooner than they actually did. The
temporary relief, however, which this bank afforded to those projectors,
proved a real and permanent relief to the other Scotch banks. All the
dealers in circulating bills of exchange, which those other banks had
become so backward in discounting, had recourse to this new bank, where
they were received with open arms. Those other banks, therefore, were
enabled to get very easily out of that fatal circle, from which they could
not otherwise have disengaged themselves without incurring a considerable
loss, and perhaps, too, even some degree of discredit.
In the long-run, therefore, the operations of this bank increased the real
distress of the country, which it meant to relieve; and effectually
relieved, from a very great distress, those rivals whom it meant to
supplant.
At the first setting out of this bank, it was the opinion of some people,
that how fast soever its coffers might be emptied, it might easily
replenish them, by raising money upon the securities of those to whom it
had advanced its paper. Experience, I believe, soon convinced them that
this method of raising money was by much too slow to answer their purpose;
and that coffers which originally were so ill filled, and which emptied
themselves so very fast, could be replenished by no other expedient but
the ruinous one of drawing bills upon London, and when they became due,
paying them by other draughts on the same place, with accumulated interest
and commission. But though they had been able by this method to raise
money as fast as they wanted it, yet, instead of making a profit, they
must have suffered a loss of every such operation; so that in the long-run
they must have ruined themselves as a mercantile company, though perhaps
not so soon as by the more expensive practice of drawing and redrawing.
They could still have made nothing by the interest of the paper, which,
being over and above what the circulation of the country could absorb and
employ, returned upon them in order to be exchanged for gold and silver,
as fast as they issued it; and for the payment of which they were
themselves continually obliged to borrow money. On the contrary, the whole
expense of this borrowing, of employing agents to look out for people who
had money to lend, of negotiating with those people, and of drawing the
proper bond or assignment, must have fallen upon them, and have been so
much clear loss upon the balance of their accounts. The project of
replenishing their coffers in this manner may be compared to that of a man
who had a water-pond from which a stream was continually running out, and
into which no stream was continually running, but who proposed to keep it
always equally full, by employing a number of people to go continually
with buckets to a well at some miles distance, in order to bring water to
replenish it.
But though this operation had proved not only practicable, but profitable
to the bank, as a mercantile company; yet the country could have derived
no benefit front it, but, on the contrary, must have suffered a very
considerable loss by it. This operation could not augment, in the smallest
degree, the quantity of money to be lent. It could only have erected this
bank into a sort of general loan office for the whole country. Those who
wanted to borrow must have applied to this bank, instead of applying to
the private persons who had lent it their money. But a bank which lends
money, perhaps to five hundred different people, the greater part of whom
its directors can know very little about, is not likely to be more
judicious in the choice of its debtors than a private person who lends out
his money among a few people whom he knows, and in whose sober and frugal
conduct he thinks he has good reason to confide. The debtors of such a
bank as that whose conduct I have been giving some account of were likely,
the greater part of them, to be chimerical projectors, the drawers and
redrawers of circulating bills of exchange, who would employ the money in
extravagant undertakings, which, with all the assistance that could be
given them, they would probably never be able to complete, and which, if
they should be completed, would never repay the expense which they had
really cost, would never afford a fund capable of maintaining a quantity
of labour equal to that which had been employed about them. The sober and
frugal debtors of private persons, on the contrary, would be more likely
to employ the money borrowed in sober undertakings which were proportioned
to their capitals, and which, though they might have less of the grand and
the marvellous, would have more of the solid and the profitable; which
would repay with a large profit whatever had been laid out upon them, and
which would thus afford a fund capable of maintaining a much greater
quantity of labour than that which had been employed about them. The
success of this operation, therefore, without increasing in the smallest
degree the capital of the country, would only have transferred a great
part of it from prudent and profitable to imprudent and unprofitable
undertakings.
That the industry of Scotland languished for want of money to employ it,
was the opinion of the famous Mr Law. By establishing a bank of a
particular kind, which he seems to have imagined might issue paper to the
amount of the whole value of all the lands in the country, he proposed to
remedy this want of money. The parliament of Scotland, when he first
proposed his project, did not think proper to adopt it. It was afterwards
adopted, with some variations, by the Duke of Orleans, at that time regent
of France. The idea of the possibility of multiplying paper money to
almost any extent was the real foundation of what is called the
Mississippi scheme, the most extravagant project, both of banking and
stock-jobbing, that perhaps the world ever saw. The different operations
of this scheme are explained so fully, so clearly, and with so much order
and distinctness, by Mr Du Verney, in his Examination of the Political
Reflections upon commerce and finances of Mr Du Tot, that I shall not give
any account of them. The principles upon which it was founded are
explained by Mr Law himself, in a discourse concerning money and trade,
which he published in Scotland when he first proposed his project. The
splendid but visionary ideas which are set forth in that and some other
works upon the same principles, still continue to make an impression upon
many people, and have, perhaps, in part, contributed to that excess of
banking, which has of late been complained of, both in Scotland and in
other places.
The Bank of England is the greatest bank of circulation in Europe. It was
incorporated, in pursuance of an act of parliament, by a charter under the
great seal, dated the 27th of July 1694. It at that time advanced to
government the sum of £1,200,000 for an annuity of £100,000, or for £
96,000 a-year, interest at the rate of eight per cent. and £4,000 a-year for
the expense of management. The credit of the new government, established
by the Revolution, we may believe, must have been very low, when it was
obliged to borrow at so high an interest.
In 1697, the bank was allowed to enlarge its capital stock, by an
ingraftment of £1,001,171:10s. Its whole capital stock, therefore,
amounted at this time to £2,201,171: 10s. This ingraftment is said to have
been for the support of public credit. In 1696, tallies had been at forty,
and fifty, and sixty, per cent. discount, and bank notes at twenty per
cent. {James Postlethwaite’s History of the Public Revenue, p.301.} During
the great re-coinage of the silver, which was going on at this time, the
bank had thought proper to discontinue the payment of its notes, which
necessarily occasioned their discredit.
In pursuance of the 7th Anne, c. 7, the bank advanced and paid into the
exchequer the sum of £400,000; making in all the sum of £1,600,000, which
it had advanced upon its original annuity of £96,000 interest, and £4,000
for expense of management. In 1708, therefore, the credit of government
was as good as that of private persons, since it could borrow at six per
cent. interest, the common legal and market rate of those times. In
pursuance of the same act, the bank cancelled exchequer bills to the
amount of £ 1,775,027: 17s: 10½d. at six per cent. interest, and was at
the same time allowed to take in subscriptions for doubling its capital.
In 1703, therefore, the capital of the bank amounted to £4,402,343; and it
had advanced to government the sum of £3,375,027:17:10½d.
By a call of fifteen per cent. in 1709, there was paid in, and made stock,
£ 656,204:1:9d.; and by another of ten per cent. in 1710, £501,448:12:11d.
In consequence of those two calls, therefore, the bank capital amounted to
£ 5,559,995:14:8d.
In pursuance of the 3rd George I. c.8, the bank delivered up two millions
of exchequer Bills to be cancelled. It had at this time, therefore,
advanced to government £5,375,027:17 10d. In pursuance of the 8th George
I. c.21, the bank purchased of the South-sea company, stock to the amount
of £4,000,000: and in 1722, in consequence of the subscriptions which it
had taken in for enabling it to make this purchase, its capital stock was
increased by £ 3,400,000. At this time, therefore, the bank had advanced
to the public £ 9,375,027 17s. 10½d.; and its capital stock amounted only
to £ 8,959,995:14:8d. It was upon this occasion that the sum which the
bank had advanced to the public, and for which it received interest, began
first to exceed its capital stock, or the sum for which it paid a dividend
to the proprietors of bank stock; or, in other words, that the bank began
to have an undivided capital, over and above its divided one. It has
continued to have an undivided capital of the same kind ever since. In
1746, the bank had, upon different occasions, advanced to the public
£11,686,800, and its divided capital had been raised by different calls
and subscriptions to £ 10,780,000. The state of those two sums has
continued to be the same ever since. In pursuance of the 4th of George
III. c.25, the bank agreed to pay to government for the renewal of its
charter £110,000, without interest or re-payment. This sum, therefore did
not increase either of those two other sums.
The dividend of the bank has varied according to the variations in the
rate of the interest which it has, at different times, received for the
money it had advanced to the public, as well as according to other
circumstances. This rate of interest has gradually been reduced from eight
to three per cent. For some years past, the bank dividend has been at five
and a half per cent.
The stability of the bank of England is equal to that of the British
government. All that it has advanced to the public must be lost before its
creditors can sustain any loss. No other banking company in England can be
established by act of parliament, or can consist of more than six members.
It acts, not only as an ordinary bank, but as a great engine of state. It
receives and pays the greater part of the annuities which are due to the
creditors of the public; it circulates exchequer bills; and it advances to
government the annual amount of the land and malt taxes, which are
frequently not paid up till some years thereafter. In these different
operations, its duty to the public may sometimes have obliged it, without
any fault of its directors, to overstock the circulation with paper money.
It likewise discounts merchants’ bills, and has, upon several different
occasions, supported the credit of the principal houses, not only of
England, but of Hamburgh and Holland. Upon one occasion, in 1763, it is
said to have advanced for this purpose, in one week, about £1,600,000, a
great part of it in bullion. I do not, however, pretend to warrant either
the greatness of the sum, or the shortness of the time. Upon other
occasions, this great company has been reduced to the necessity of paying
in sixpences.
It is not by augmenting the capital of the country, but by rendering a
greater part of that capital active and productive than would otherwise be
so, that the most judicious operations of banking can increase the
industry of the country. That part of his capital which a dealer is
obliged to keep by him unemployed and in ready money, for answering
occasional demands, is so much dead stock, which, so long as it remains in
this situation, produces nothing, either to him or to his country. The
judicious operations of banking enable him to convert this dead stock into
active and productive stock; into materials to work upon; into tools to
work with; and into provisions and subsistence to work for; into stock
which produces something both to himself and to his country. The gold and
silver money which circulates in any country, and by means of which, the
produce of its land and labour is annually circulated and distributed to
the proper consumers, is, in the same manner as the ready money of the
dealer, all dead stock. It is a very valuable part of the capital of the
country, which produces nothing to the country. The judicious operations
of banking, by substituting paper in the room of a great part of this gold
and silver, enable the country to convert a great part of this dead stock
into active and productive stock; into stock which produces something to
the country. The gold and silver money which circulates in any country may
very properly be compared to a highway, which, while it circulates and
carries to market all the grass and corn of the country, produces itself
not a single pile of either. The judicious operations of banking, by
providing, if I may be allowed so violent a metaphor, a sort of waggon-way
through the air, enable the country to convert, as it were, a great part
of its highways into good pastures, and corn fields, and thereby to
increase, very considerably, the annual produce of its land and labour.
The commerce and industry of the country, however, it must be
acknowledged, though they may be somewhat augmented, cannot be altogether
so secure, when they are thus, as it were, suspended upon the Daedalian
wings of paper money, as when they travel about upon the solid ground of
gold and silver. Over and above the accidents to which they are exposed
from the unskilfulness of the conductors of this paper money, they are
liable to several others, from which no prudence or skill of those
conductors can guard them.
An unsuccessful war, for example, in which the enemy got possession of the
capital, and consequently of that treasure which supported the credit of
the paper money, would occasion a much greater confusion in a country
where the whole circulation was carried on by paper, than in one where the
greater part of it was carried on by gold and silver. The usual instrument
of commerce having lost its value, no exchanges could be made but either
by barter or upon credit. All taxes having been usually paid in paper
money, the prince would not have wherewithal either to pay his troops, or
to furnish his magazines; and the state of the country would be much more
irretrievable than if the greater part of its circulation had consisted in
gold and silver. A prince, anxious to maintain his dominions at all times
in the state in which he can most easily defend them, ought upon this
account to guard not only against that excessive multiplication of paper
money which ruins the very banks which issue it, but even against that
multiplication of it which enables them to fill the greater part of the
circulation of the country with it.
The circulation of every country may be considered as divided into two
different branches; the circulation of the dealers with one another, and
the circulation between the dealers and the consumers. Though the same
pieces of money, whether paper or metal, may be employed sometimes in the
one circulation and sometimes in the other; yet as both are constantly
going on at the same time, each requires a certain stock of money, of one
kind or another, to carry it on. The value of the goods circulated between
the different dealers never can exceed the value of those circulated
between the dealers and the consumers; whatever is bought by the dealers
being ultimately destined to be sold to the consumers. The circulation
between the dealers, as it is carried on by wholesale, requires generally
a pretty large sum for every particular transaction. That between the
dealers and the consumers, on the contrary, as it is generally carried on
by retail, frequently requires but very small ones, a shilling, or even a
halfpenny, being often sufficient. But small sums circulate much faster
than large ones. A shilling changes masters more frequently than a guinea,
and a halfpenny more frequently than a shilling. Though the annual
purchases of all the consumers, therefore, are at least equal in value to
those of all the dealers, they can generally be transacted with a much
smaller quantity of money; the same pieces, by a more rapid circulation,
serving as the instrument of many more purchases of the one kind than of
the other.
Paper money may be so regulated as either to confine itself very much to
the circulation between the different dealers, or to extend itself
likewise to a great part of that between the dealers and the consumers.
Where no bank notes are circulated under £10 value, as in London, paper
money confines itself very much to the circulation between the dealers.
When a ten pound bank note comes into the hands of a consumer, he is
generally obliged to change it at the first shop where he has occasion to
purchase five shillings worth of goods; so that it often returns into the
hands of a dealer before the consumer has spent the fortieth part of the
money. Where bank notes are issued for so small sums as 20s. as in
Scotland, paper money extends itself to a considerable part of the
circulation between dealers and consumers. Before the Act of parliament
which put a stop to the circulation of ten and five shilling notes, it
filled a still greater part of that circulation. In the currencies of
North America, paper was commonly issued for so small a sum as a shilling,
and filled almost the whole of that circulation. In some paper currencies
of Yorkshire, it was issued even for so small a sum as a sixpence.
Where the issuing of bank notes for such very small sums is allowed, and
commonly practised, many mean people are both enabled and encouraged to
become bankers. A person whose promissory note for £5, or even for 20s.
would be rejected by every body, will get it to be received without
scruple when it is issued for so small a sum as a sixpence. But the
frequent bankruptcies to which such beggarly bankers must be liable, may
occasion a very considerable inconveniency, and sometimes even a very
great calamity, to many poor people who had received their notes in
payment.
It were better, perhaps, that no bank notes were issued in any part of the
kingdom for a smaller sum than £5. Paper money would then, probably,
confine itself, in every part of the kingdom, to the circulation between
the different dealers, as much as it does at present in London, where no
bank notes are issued under £10 value; £5 being, in most part of the
kingdom, a sum which, though it will purchase, perhaps, little more than
half the quantity of goods, is as much considered, and is as seldom spent
all at once, as £10 are amidst the profuse expense of London.
Where paper money, it is to be observed, is pretty much confined to the
circulation between dealers and dealers, as at London, there is always
plenty of gold and silver. Where it extends itself to a considerable part
of the circulation between dealers and consumers, as in Scotland, and
still more in North America, it banishes gold and silver almost entirely
from the country; almost all the ordinary transactions of its interior
commerce being thus carried on by paper. The suppression of ten and five
shilling bank notes, somewhat relieved the scarcity of gold and silver in
Scotland; and the suppression of twenty shilling notes will probably
relieve it still more. Those metals are said to have become more abundant
in America, since the suppression of some of their paper currencies. They
are said, likewise, to have been more abundant before the institution of
those currencies.
Though paper money should be pretty much confined to the circulation
between dealers and dealers, yet banks and bankers might still be able to
give nearly the same assistance to the industry and commerce of the
country, as they had done when paper money filled almost the whole
circulation. The ready money which a dealer is obliged to keep by him, for
answering occasional demands, is destined altogether for the circulation
between himself and other dealers of whom he buys goods. He has no
occasion to keep any by him for the circulation between himself and the
consumers, who are his customers, and who bring ready money to him,
instead of taking any from him. Though no paper money, therefore, was
allowed to be issued, but for such sums as would confine it pretty much to
the circulation between dealers and dealers; yet partly by discounting
real bills of exchange, and partly by lending upon cash-accounts, banks
and bankers might still be able to relieve the greater part of those
dealers from the necessity of keeping any considerable part of their stock
by them unemployed, and in ready money, for answering occasional demands.
They might still be able to give the utmost assistance which banks and
bankers can with propriety give to traders of every kind.
To restrain private people, it may be said, from receiving in payment the
promissory notes of a banker for any sum, whether great or small, when
they themselves are willing to receive them; or, to restrain a banker from
issuing such notes, when all his neighbours are willing to accept of them,
is a manifest violation of that natural liberty, which it is the proper
business of law not to infringe, but to support. Such regulations may, no
doubt, be considered as in some respect a violation of natural liberty.
But those exertions of the natural liberty of a few individuals, which
might endanger the security of the whole society, are, and ought to be,
restrained by the laws of all governments; of the most free, as well as or
the most despotical. The obligation of building party walls, in order to
prevent the communication of fire, is a violation of natural liberty,
exactly of the same kind with the regulations of the banking trade which
are here proposed.
A paper money, consisting in bank notes, issued by people of undoubted
credit, payable upon demand, without any condition, and, in fact, always
readily paid as soon as presented, is, in every respect, equal in value to
gold and silver money, since gold and silver money can at anytime be had
for it. Whatever is either bought or sold for such paper, must necessarily
be bought or sold as cheap as it could have been for gold and silver.
The increase of paper money, it has been said, by augmenting the quantity,
and consequently diminishing the value, of the whole currency, necessarily
augments the money price of commodities. But as the quantity of gold and
silver, which is taken from the currency, is always equal to the quantity
of paper which is added to it, paper money does not necessarily increase
the quantity of the whole currency. From the beginning of the last century
to the present time, provisions never were cheaper in Scotland than in
1759, though, from the circulation of ten and five shilling bank notes,
there was then more paper money in the country than at present. The
proportion between the price of provisions in Scotland and that in England
is the same now as before the great multiplication of banking companies in
Scotland. Corn is, upon most occasions, fully as cheap in England as in
France, though there is a great deal of paper money in England, and scarce
any in France. In 1751 and 1752, when Mr Hume published his Political
Discourses, and soon after the great multiplication of paper money in
Scotland, there was a very sensible rise in the price of provisions,
owing, probably, to the badness of the seasons, and not to the
multiplication of paper money.
It would be otherwise, indeed, with a paper money, consisting in
promissory notes, of which the immediate payment depended, in any respect,
either upon the good will of those who issued them, or upon a condition
which the holder of the notes might not always have it in his power to
fulfil, or of which the payment was not exigible till after a certain
number of years, and which, in the mean time, bore no interest. Such a
paper money would, no doubt, fall more or less below the value of gold and
silver, according as the difficulty or uncertainty of obtaining immediate
payment was supposed to be greater or less, or according to the greater or
less distance of time at which payment was exigible.
Some years ago the different banking companies of Scotland were in the
practice of inserting into their bank notes, what they called an optional
clause; by which they promised payment to the bearer, either as soon as
the note should be presented, or, in the option of the directors, six
months after such presentment, together with the legal interest for the
said six months. The directors of some of those banks sometimes took
advantage of this optional clause, and sometimes threatened those who
demanded gold and silver in exchange for a considerable number of their
notes, that they would take advantage of it, unless such demanders would
content themselves with a part of what they demanded. The promissory notes
of those banking companies constituted, at that time, the far greater part
of the currency of Scotland, which this uncertainty of payment necessarily
degraded below value of gold and silver money. During the continuance of
this abuse (which prevailed chiefly in 1762, 1763, and 1764), while the
exchange between London and Carlisle was at par, that between London and
Dumfries would sometimes be four per cent. against Dumfries, though this
town is not thirty miles distant from Carlisle. But at Carlisle, bills
were paid in gold and silver; whereas at Dumfries they were paid in Scotch
bank notes; and the uncertainty of getting these bank notes exchanged for
gold and silver coin, had thus degraded them four per cent. below the
value of that coin. The same act of parliament which suppressed ten and
five shilling bank notes, suppressed likewise this optional clause, and
thereby restored the exchange between England and Scotland to its natural
rate, or to what the course of trade and remittances might happen to make
it.
In the paper currencies of Yorkshire, the payment of so small a sum as 6d.
sometimes depended upon the condition, that the holder of the note should
bring the change of a guinea to the person who issued it; a condition
which the holders of such notes might frequently find it very difficult to
fulfil, and which must have degraded this currency below the value of gold
and silver money. An act of parliament, accordingly, declared all such
clauses unlawful, and suppressed, in the same manner as in Scotland, all
promissory notes, payable to the bearer, under 20s. value.
The paper currencies of North America consisted, not in bank notes payable
to the bearer on demand, but in a government paper, of which the payment
was not exigible till several years after it was issued; and though the
colony governments paid no interest to the holders of this paper, they
declared it to be, and in fact rendered it, a legal tender of payment for
the full value for which it was issued. But allowing the colony security
to be perfectly good, £100, payable fifteen years hence, for example, in a
country where interest is at six per cent., is worth little more than £40
ready money. To oblige a creditor, therefore, to accept of this as full
payment for a debt of £100, actually paid down in ready money, was an act
of such violent injustice, as has scarce, perhaps, been attempted by the
government of any other country which pretended to be free. It bears the
evident marks of having originally been, what the honest and downright
Doctor Douglas assures us it was, a scheme of fraudulent debtors to cheat
their creditors. The government of Pennsylvania, indeed, pretended, upon
their first emission of paper money, in 1722, to render their paper of
equal value with gold and silver, by enacting penalties against all those
who made any difference in the price of their goods when they sold them
for a colony paper, and when they sold them for gold and silver, a
regulation equally tyrannical, but much less, effectual, than that which
it was meant to support. A positive law may render a shilling a legal
tender for a guinea, because it may direct the courts of justice to
discharge the debtor who has made that tender; but no positive law can
oblige a person who sells goods, and who is at liberty to sell or not to
sell as he pleases, to accept of a shilling as equivalent to a guinea in
the price of them. Notwithstanding any regulation of this kind, it
appeared, by the course of exchange with Great Britain, that £100 sterling
was occasionally considered as equivalent, in some of the colonies, to
£130, and in others to so great a sum as £1100 currency; this difference
in the value arising from the difference in the quantity of paper emitted
in the different colonies, and in the distance and probability of the term
of its final discharge and redemption.
No law, therefore, could be more equitable than the act of parliament, so
unjustly complained of in the colonies, which declared, that no paper
currency to be emitted there in time coming, should be a legal tender of
payment.
Pennsylvania was always more moderate in its emissions of paper money than
any other of our colonies. Its paper currency, accordingly, is said never
to have sunk below the value of the gold and silver which was current in
the colony before the first emission of its paper money. Before that
emission, the colony had raised the denomination of its coin, and had, by
act of assembly, ordered 5s. sterling to pass in the colonies for 6s:3d.,
and afterwards for 6s:8d. A pound, colony currency, therefore, even when
that currency was gold and silver, was more than thirty per cent. below
the value of £1 sterling; and when that currency was turned into paper, it
was seldom much more than thirty per cent. below that value. The pretence
for raising the denomination of the coin was to prevent the exportation of
gold and silver, by making equal quantities of those metals pass for
greater sums in the colony than they did in the mother country. It was
found, however, that the price of all goods from the mother country rose
exactly in proportion as they raised the denomination of their coin, so
that their gold and silver were exported as fast as ever.
The paper of each colony being received in the payment of the provincial
taxes, for the full value for which it had been issued, it necessarily
derived from this use some additional value, over and above what it would
have had, from the real or supposed distance of the term of its final
discharge and redemption. This additional value was greater or less,
according as the quantity of paper issued was more or less above what
could be employed in the payment of the taxes of the particular colony
which issued it. It was in all the colonies very much above what could be
employed in this manner.
A prince, who should enact that a certain proportion of his taxes should
be paid in a paper money of a certain kind, might thereby give a certain
value to this paper money, even though the term of its final discharge and
redemption should depend altogether upon the will of the prince. If the
bank which issued this paper was careful to keep the quantity of it always
somewhat below what could easily be employed in this manner, the demand
for it might be such as to make it even bear a premium, or sell for
somewhat more in the market than the quantity of gold or silver currency
for which it was issued. Some people account in this manner for what is
called the agio of the bank of Amsterdam, or for the superiority of bank
money over current money, though this bank money, as they pretend, cannot
be taken out of the bank at the will of the owner. The greater part of
foreign bills of exchange must be paid in bank money, that is, by a
transfer in the books of the bank; and the directors of the bank, they
allege, are careful to keep the whole quantity of bank money always below
what this use occasions a demand for. It is upon this account, they say,
the bank money sells for a premium, or bears an agio of four or five per
cent. above the same nominal sum of the gold and silver currency of the
country. This account of the bank of Amsterdam, however, it will appear
hereafter, is in a great measure chimerical.
A paper currency which falls below the value of gold and silver coin, does
not thereby sink the value of those metals, or occasion equal quantities
of them to exchange for a smaller quantity of goods of any other kind. The
proportion between the value of gold and silver and that of goods of any
other kind, depends in all cases, not upon the nature and quantity of any
particular paper money, which may be current in any particular country,
but upon the richness or poverty of the mines, which happen at any
particular time to supply the great market of the commercial world with
those metals. It depends upon the proportion between the quantity of
labour which is necessary in order to bring a certain quantity of gold and
silver to market, and that which is necessary in order to bring thither a
certain quantity of any other sort of goods.
If bankers are restrained from issuing any circulating bank notes, or
notes payable to the bearer, for less than a certain sum; and if they are
subjected to the obligation of an immediate and unconditional payment of
such bank notes as soon as presented, their trade may, with safety to the
public, be rendered in all other respects perfectly free. The late
multiplication of banking companies in both parts of the united kingdom,
an event by which many people have been much alarmed, instead of
diminishing, increases the security of the public. It obliges all of them
to be more circumspect in their conduct, and, by not extending their
currency beyond its due proportion to their cash, to guard themselves
against those malicious runs, which the rivalship of so many competitors
is always ready to bring upon them. It restrains the circulation of each
particular company within a narrower circle, and reduces their circulating
notes to a smaller number. By dividing the whole circulation into a
greater number of parts, the failure of any one company, an accident
which, in the course of things, must sometimes happen, becomes of less
consequence to the public. This free competition, too, obliges all bankers
to be more liberal in their dealings with their customers, lest their
rivals should carry them away. In general, if any branch of trade, or any
division of labour, be advantageous to the public, the freer and more
general the competition, it will always be the more so.
CHAPTER III.
OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR.
There is one sort of labour which adds to the value of the subject upon
which it is bestowed; there is another which has no such effect. The
former as it produces a value, may be called productive, the latter,
unproductive labour. {Some French authors of great learning and ingenuity
have used those words in a different sense. In the last chapter of the
fourth book, I shall endeavour to shew that their sense is an improper
one.} Thus the labour of a manufacturer adds generally to the value of the
materials which he works upon, that of his own maintenance, and of his
master’s profit. The labour of a menial servant, on the contrary, adds to
the value of nothing. Though the manufacturer has his wages advanced to
him by his master, he in reality costs him no expense, the value of those
wages being generally restored, together with a profit, in the improved
value of the subject upon which his labour is bestowed. But the
maintenance of a menial servant never is restored. A man grows rich by
employing a multitude of manufacturers; he grows poor by maintaining a
multitude or menial servants. The labour of the latter, however, has its
value, and deserves its reward as well as that of the former. But the
labour of the manufacturer fixes and realizes itself in some particular
subject or vendible commodity, which lasts for some time at least after
that labour is past. It is, as it were, a certain quantity of labour
stocked and stored up, to be employed, if necessary, upon some other
occasion. That subject, or, what is the same thing, the price of that
subject, can afterwards, if necessary, put into motion a quantity of
labour equal to that which had originally produced it. The labour of the
menial servant, on the contrary, does not fix or realize itself in any
particular subject or vendible commodity. His services generally perish in
the very instant of their performance, and seldom leave any trace of value
behind them, for which an equal quantity of service could afterwards be
procured.
The labour of some of the most respectable orders in the society is, like
that of menial servants, unproductive of any value, and does not fix or
realize itself in any permanent subject, or vendible commodity, which
endures after that labour is past, and for which an equal quantity of
labour could afterwards be procured. The sovereign, for example, with all
the officers both of justice and war who serve under him, the whole army
and navy, are unproductive labourers. They are the servants of the public,
and are maintained by a part of the annual produce of the industry of
other people. Their service, how honourable, how useful, or how necessary
soever, produces nothing for which an equal quantity of service can
afterwards be procured. The protection, security, and defence, of the
commonwealth, the effect of their labour this year, will not purchase its
protection, security, and defence, for the year to come. In the same class
must be ranked, some both of the gravest and most important, and some of
the most frivolous professions; churchmen, lawyers, physicians, men of
letters of all kinds; players, buffoons, musicians, opera-singers,
opera-dancers, etc. The labour of the meanest of these has a certain
value, regulated by the very same principles which regulate that of every
other sort of labour; and that of the noblest and most useful, produces
nothing which could afterwards purchase or procure an equal quantity of
labour. Like the declamation of the actor, the harangue of the orator, or
the tune of the musician, the work of all of them perishes in the very
instant of its production.
Both productive and unproductive labourers, and those who do not labour at
all, are all equally maintained by the annual produce of the land and
labour of the country. This produce, how great soever, can never be
infinite, but must have certain limits. According, therefore, as a smaller
or greater proportion of it is in any one year employed in maintaining
unproductive hands, the more in the one case, and the less in the other,
will remain for the productive, and the next year’s produce will be
greater or smaller accordingly; the whole annual produce, if we except the
spontaneous productions of the earth, being the effect of productive
labour.
Though the whole annual produce of the land and labour of every country is
no doubt ultimately destined for supplying the consumption of its
inhabitants, and for procuring a revenue to them; yet when it first comes
either from the ground, or from the hands of the productive labourers, it
naturally divides itself into two parts. One of them, and frequently the
largest, is, in the first place, destined for replacing a capital, or for
renewing the provisions, materials, and finished work, which had been
withdrawn from a capital; the other for constituting a revenue either to
the owner of this capital, as the profit of his stock, or to some other
person, as the rent of his land. Thus, of the produce of land, one part
replaces the capital of the farmer; the other pays his profit and the rent
of the landlord; and thus constitutes a revenue both to the owner of this
capital, as the profits of his stock, and to some other person as the rent
of his land. Of the produce of a great manufactory, in the same manner,
one part, and that always the largest, replaces the capital of the
undertaker of the work; the other pays his profit, and thus constitutes a
revenue to the owner of this capital.
That part of the annual produce of the land and labour of any country
which replaces a capital, never is immediately employed to maintain any
but productive hands. It pays the wages of productive labour only. That
which is immediately destined for constituting a revenue, either as profit
or as rent, may maintain indifferently either productive or unproductive
hands.
Whatever part of his stock a man employs as a capital, he always expects
it to be replaced to him with a profit. He employs it, therefore, in
maintaining productive hands only; and after having served in the function
of a capital to him, it constitutes a revenue to them. Whenever he employs
any part of it in maintaining unproductive hands of any kind, that part is
from that moment withdrawn from his capital, and placed in his stock
reserved for immediate consumption.
Unproductive labourers, and those who do not labour at all, are all
maintained by revenue; either, first, by that part of the annual produce
which is originally destined for constituting a revenue to some particular
persons, either as the rent of land, or as the profits of stock; or,
secondly, by that part which, though originally destined for replacing a
capital, and for maintaining productive labourers only, yet when it comes
into their hands, whatever part of it is over and above their necessary
subsistence, may be employed in maintaining indifferently either
productive or unproductive hands. Thus, not only the great landlord or the
rich merchant, but even the common workman, if his wages are considerable,
may maintain a menial servant; or he may sometimes go to a play or a
puppet-show, and so contribute his share towards maintaining one set of
unproductive labourers; or he may pay some taxes, and thus help to
maintain another set, more honourable and useful, indeed, but equally
unproductive. No part of the annual produce, however, which had been
originally destined to replace a capital, is ever directed towards
maintaining unproductive hands, till after it has put into motion its full
complement of productive labour, or all that it could put into motion in
the way in which it was employed. The workman must have earned his wages
by work done, before he can employ any part of them in this manner. That
part, too, is generally but a small one. It is his spare revenue only, of
which productive labourers have seldom a great deal. They generally have
some, however; and in the payment of taxes, the greatness of their number
may compensate, in some measure, the smallness of their contribution. The
rent of land and the profits of stock are everywhere, therefore, the
principal sources from which unproductive hands derive their subsistence.
These are the two sorts of revenue of which the owners have generally most
to spare. They might both maintain indifferently, either productive or
unproductive hands. They seem, however, to have some predilection for the
latter. The expense of a great lord feeds generally more idle than
industrious people. The rich merchant, though with his capital he
maintains industrious people only, yet by his expense, that is, by the
employment of his revenue, he feeds commonly the very same sort as the
great lord.
The proportion, therefore, between the productive and unproductive hands,
depends very much in every country upon the proportion between that part
of the annual produce, which, as soon as it comes either from the ground,
or from the hands of the productive labourers, is destined for replacing a
capital, and that which is destined for constituting a revenue, either as
rent or as profit. This proportion is very different in rich from what it
is in poor countries.
Thus, at present, in the opulent countries of Europe, a very large,
frequently the largest, portion of the produce of the land, is destined
for replacing the capital of the rich and independent farmer; the other
for paying his profits, and the rent of the landlord. But anciently,
during the prevalency of the feudal government, a very small portion of
the produce was sufficient to replace the capital employed in cultivation.
It consisted commonly in a few wretched cattle, maintained altogether by
the spontaneous produce of uncultivated land, and which might, therefore,
be considered as a part of that spontaneous produce. It generally, too,
belonged to the landlord, and was by him advanced to the occupiers of the
land. All the rest of the produce properly belonged to him too, either as
rent for his land, or as profit upon this paltry capital. The occupiers of
land were generally bond-men, whose persons and effects were equally his
property. Those who were not bond-men were tenants at will; and though the
rent which they paid was often nominally little more than a quit-rent, it
really amounted to the whole produce of the land. Their lord could at all
times command their labour in peace and their service in war. Though they
lived at a distance from his house, they were equally dependent upon him
as his retainers who lived in it. But the whole produce of the land
undoubtedly belongs to him, who can dispose of the labour and service of
all those whom it maintains. In the present state of Europe, the share of
the landlord seldom exceeds a third, sometimes not a fourth part of the
whole produce of the land. The rent of land, however, in all the improved
parts of the country, has been tripled and quadrupled since those ancient
times; and this third or fourth part of the annual produce is, it seems,
three or four times greater than the whole had been before. In the
progress of improvement, rent, though it increases in proportion to the
extent, diminishes in proportion to the produce of the land.
In the opulent countries of Europe, great capitals are at present employed
in trade and manufactures. In the ancient state, the little trade that was
stirring, and the few homely and coarse manufactures that were carried on,
required but very small capitals. These, however, must have yielded very
large profits. The rate of interest was nowhere less than ten per cent.
and their profits must have been sufficient to afford this great interest.
At present, the rate of interest, in the improved parts of Europe, is
nowhere higher than six per cent.; and in some of the most improved, it is
so low as four, three, and two per cent. Though that part of the revenue
of the inhabitants which is derived from the profits of stock, is always
much greater in rich than in poor countries, it is because the stock is
much greater; in proportion to the stock, the profits are generally much
less.
That part of the annual produce, therefore, which, as soon as it comes
either from the ground, or from the hands of the productive labourers, is
destined for replacing a capital, is not only much greater in rich than in
poor countries, but bears a much greater proportion to that which is
immediately destined for constituting a revenue either as rent or as
profit. The funds destined for the maintenance of productive labour are
not only much greater in the former than in the latter, but bear a much
greater proportion to those which, though they may be employed to maintain
either productive or unproductive hands, have generally a predilection for
the latter.
The proportion between those different funds necessarily determines in
every country the general character of the inhabitants as to industry or
idleness. We are more industrious than our forefathers, because, in the
present times, the funds destined for the maintenance of industry are much
greater in proportion to those which are likely to be employed in the
maintenance of idleness, than they were two or three centuries ago. Our
ancestors were idle for want of a sufficient encouragement to industry. It
is better, says the proverb, to play for nothing, than to work for
nothing. In mercantile and manufacturing towns, where the inferior ranks
of people are chiefly maintained by the employment of capital, they are in
general industrious, sober, and thriving; as in many English, and in most
Dutch towns. In those towns which are principally supported by the
constant or occasional residence of a court, and in which the inferior
ranks of people are chiefly maintained by the spending of revenue, they
are in general idle, dissolute, and poor; as at Rome, Versailles,
Compeigne, and Fontainbleau. If you except Rouen and Bourdeaux, there is
little trade or industry in any of the parliament towns of France; and the
inferior ranks of people, being chiefly maintained by the expense of the
members of the courts of justice, and of those who come to plead before
them, are in general idle and poor. The great trade of Rouen and Bourdeaux
seems to be altogether the effect of their situation. Rouen is necessarily
the entrepot of almost all the goods which are brought either from foreign
countries, or from the maritime provinces of France, for the consumption
of the great city of Paris. Bourdeaux is, in the same manner, the entrepot
of the wines which grow upon the banks of the Garronne, and of the rivers
which run into it, one of the richest wine countries in the world, and
which seems to produce the wine fittest for exportation, or best suited to
the taste of foreign nations. Such advantageous situations necessarily
attract a great capital by the great employment which they afford it; and
the employment of this capital is the cause of the industry of those two
cities. In the other parliament towns of France, very little more capital
seems to be employed than what is necessary for supplying their own
consumption; that is, little more than the smallest capital which can be
employed in them. The same thing may be said of Paris, Madrid, and Vienna.
Of those three cities, Paris is by far the most industrious, but Paris
itself is the principal market of all the manufactures established at
Paris, and its own consumption is the principal object of all the trade
which it carries on. London, Lisbon, and Copenhagen, are, perhaps, the
only three cities in Europe, which are both the constant residence of a
court, and can at the same time be considered as trading cities, or as
cities which trade not only for their own consumption, but for that of
other cities and countries. The situation of all the three is extremely
advantageous, and naturally fits them to be the entrepots of a great part
of the goods destined for the consumption of distant places. In a city
where a great revenue is spent, to employ with advantage a capital for any
other purpose than for supplying the consumption of that city, is probably
more difficult than in one in which the inferior ranks of people have no
other maintenance but what they derive from the employment of such a
capital. The idleness of the greater part of the people who are maintained
by the expense of revenue, corrupts, it is probable, the industry of those
who ought to be maintained by the employment of capital, and renders it
less advantageous to employ a capital there than in other places. There
was little trade or industry in Edinburgh before the Union. When the
Scotch parliament was no longer to be assembled in it, when it ceased to
be the necessary residence of the principal nobility and gentry of
Scotland, it became a city of some trade and industry. It still continues,
however, to be the residence of the principal courts of justice in
Scotland, of the boards of customs and excise, etc. A considerable
revenue, therefore, still continues to be spent in it. In trade and
industry, it is much inferior to Glasgow, of which the inhabitants are
chiefly maintained by the employment of capital. The inhabitants of a
large village, it has sometimes been observed, after having made
considerable progress in manufactures, have become idle and poor, in
consequence of a great lord’s having taken up his residence in their
neighbourhood.
The proportion between capital and revenue, therefore, seems everywhere to
regulate the proportion between industry and idleness. Wherever capital
predominates, industry prevails; wherever revenue, idleness. Every
increase or diminution of capital, therefore, naturally tends to increase
or diminish the real quantity of industry, the number of productive hands,
and consequently the exchangeable value of the annual produce of the land
and labour of the country, the real wealth and revenue of all its
inhabitants.
Capitals are increased by parsimony, and diminished by prodigality and
misconduct.
Whatever a person saves from his revenue he adds to his capital, and
either employs it himself in maintaining an additional number of
productive hands, or enables some other person to do so, by lending it to
him for an interest, that is, for a share of the profits. As the capital
of an individual can be increased only by what he saves from his annual
revenue or his annual gains, so the capital of a society, which is the
same with that of all the individuals who compose it, can be increased
only in the same manner.
Parsimony, and not industry, is the immediate cause of the increase of
capital. Industry, indeed, provides the subject which parsimony
accumulates; but whatever industry might acquire, if parsimony did not
save and store up, the capital would never be the greater.
Parsimony, by increasing the fund which is destined for the maintenance of
productive hands, tends to increase the number of those hands whose labour
adds to the value of the subject upon which it is bestowed. It tends,
therefore, to increase the exchangeable value of the annual produce of the
land and labour of the country. It puts into motion an additional quantity
of industry, which gives an additional value to the annual produce.
What is annually saved, is as regularly consumed as what is annually
spent, and nearly in the same time too: but it is consumed by a different
set of people. That portion of his revenue which a rich man annually
spends, is, in most cases, consumed by idle guests and menial servants,
who leave nothing behind them in return for their consumption. That
portion which he annually saves, as, for the sake of the profit, it is
immediately employed as a capital, is consumed in the same manner, and
nearly in the same time too, but by a different set of people: by
labourers, manufacturers, and artificers, who reproduce, with a profit,
the value of their annual consumption. His revenue, we shall suppose, is
paid him in money. Had he spent the whole, the food, clothing, and
lodging, which the whole could have purchased, would have been distributed
among the former set of people. By saving a part of it, as that part is,
for the sake of the profit, immediately employed as a capital, either by
himself or by some other person, the food, clothing, and lodging, which
may be purchased with it, are necessarily reserved for the latter. The
consumption is the same, but the consumers are different.
By what a frugal man annually saves, he not only affords maintenance to an
additional number of productive hands, for that of the ensuing year, but
like the founder of a public work-house he establishes, as it were, a
perpetual fund for the maintenance of an equal number in all times to
come. The perpetual allotment and destination of this fund, indeed, is not
always guarded by any positive law, by any trust-right or deed of
mortmain. It is always guarded, however, by a very powerful principle, the
plain and evident interest of every individual to whom any share of it
shall ever belong. No part of it can ever afterwards be employed to
maintain any but productive hands, without an evident loss to the person
who thus perverts it from its proper destination.
The prodigal perverts it in this manner: By not confining his expense
within his income, he encroaches upon his capital. Like him who perverts
the revenues of some pious foundation to profane purposes, he pays the
wages of idleness with those funds which the frugality of his forefathers
had, as it were, consecrated to the maintenance of industry. By
diminishing the funds destined for the employment of productive labour, he
necessarily diminishes, so far as it depends upon him, the quantity of
that labour which adds a value to the subject upon which it is bestowed,
and, consequently, the value of the annual produce of the land and labour
of the whole country, the real wealth and revenue of its inhabitants. If
the prodigality of some were not compensated by the frugality of others,
the conduct of every prodigal, by feeding the idle with the bread of the
industrious, would tend not only to beggar himself, but to impoverish his
country.
Though the expense of the prodigal should be altogether in home made, and
no part of it in foreign commodities, its effect upon the productive funds
of the society would still be the same. Every year there would still be a
certain quantity of food and clothing, which ought to have maintained
productive, employed in maintaining unproductive hands. Every year,
therefore, there would still be some diminution in what would otherwise
have been the value of the annual produce of the land and labour of the
country.
This expense, it may be said, indeed, not being in foreign goods, and not
occasioning any exportation of gold and silver, the same quantity of money
would remain in the country as before. But if the quantity of food and
clothing which were thus consumed by unproductive, had been distributed
among productive hands, they would have reproduced, together with a
profit, the full value of their consumption. The same quantity of money
would, in this case, equally have remained in the country, and there
would, besides, have been a reproduction of an equal value of consumable
goods. There would have been two values instead of one.
The same quantity of money, besides, can not long remain in any country in
which the value of the annual produce diminishes. The sole use of money is
to circulate consumable goods. By means of it, provisions, materials, and
finished work, are bought and sold, and distributed to their proper
consumers. The quantity of money, therefore, which can be annually
employed in any country, must be determined by the value of the consumable
goods annually circulated within it. These must consist, either in the
immediate produce of the land and labour of the country itself, or in
something which had been purchased with some part of that produce. Their
value, therefore, must diminish as the value of that produce diminishes,
and along with it the quantity of money which can be employed in
circulating them. But the money which, by this annual diminution of
produce, is annually thrown out of domestic circulation, will not be
allowed to lie idle. The interest of whoever possesses it requires that it
should be employed; but having no employment at home, it will, in spite of
all laws and prohibitions, be sent abroad, and employed in purchasing
consumable goods, which may be of some use at home. Its annual exportation
will, in this manner, continue for some time to add something to the
annual consumption of the country beyond the value of its own annual
produce. What in the days of its prosperity had been saved from that
annual produce, and employed in purchasing gold and silver, will
contribute, for some little time, to support its consumption in adversity.
The exportation of gold and silver is, in this case, not the cause, but
the effect of its declension, and may even, for some little time,
alleviate the misery of that declension.
The quantity of money, on the contrary, must in every country naturally
increase as the value of the annual produce increases. The value of the
consumable goods annually circulated within the society being greater,
will require a greater quantity of money to circulate them. A part of the
increased produce, therefore, will naturally be employed in purchasing,
wherever it is to be had, the additional quantity of gold and silver
necessary for circulating the rest. The increase of those metals will, in
this case, be the effect, not the cause, of the public prosperity. Gold
and silver are purchased everywhere in the same manner. The food,
clothing, and lodging, the revenue and maintenance, of all those whose
labour or stock is employed in bringing them from the mine to the market,
is the price paid for them in Peru as well as in England. The country
which has this price to pay, will never belong without the quantity of
those metals which it has occasion for; and no country will ever long
retain a quantity which it has no occasion for.
Whatever, therefore, we may imagine the real wealth and revenue of a
country to consist in, whether in the value of the annual produce of its
land and labour, as plain reason seems to dictate, or in the quantity of
the precious metals which circulate within it, as vulgar prejudices
suppose; in either view of the matter, every prodigal appears to be a
public enemy, and every frugal man a public benefactor.
The effects of misconduct are often the same as those of prodigality.
Every injudicious and unsuccessful project in agriculture, mines,
fisheries, trade, or manufactures, tends in the same manner to diminish
the funds destined for the maintenance of productive labour. In every such
project, though the capital is consumed by productive hands only, yet as,
by the injudicious manner in which they are employed, they do not
reproduce the full value of their consumption, there must always be some
diminution in what would otherwise have been the productive funds of the
society.
It can seldom happen, indeed, that the circumstances of a great nation can
be much affected either by the prodigality or misconduct of individuals;
the profusion or imprudence of some being always more than compensated by
the frugality and good conduct of others.
With regard to profusion, the principle which prompts to expense is the
passion for present enjoyment; which, though sometimes violent and very
difficult to be restrained, is in general only momentary and occasional.
But the principle which prompts to save, is the desire of bettering our
condition; a desire which, though generally calm and dispassionate, comes
with us from the womb, and never leaves us till we go into the grave. In
the whole interval which separates those two moments, there is scarce,
perhaps, a single instance, in which any man is so perfectly and
completely satisfied with his situation, as to be without any wish of
alteration or improvement of any kind. An augmentation of fortune is the
means by which the greater part of men propose and wish to better their
condition. It is the means the most vulgar and the most obvious; and the
most likely way of augmenting their fortune, is to save and accumulate
some part of what they acquire, either regularly and annually, or upon
some extraordinary occasion. Though the principle of expense, therefore,
prevails in almost all men upon some occasions, and in some men upon
almost all occasions; yet in the greater part of men, taking the whole
course of their life at an average, the principle of frugality seems not
only to predominate, but to predominate very greatly.
With regard to misconduct, the number of prudent and successful
undertakings is everywhere much greater than that of injudicious and
unsuccessful ones. After all our complaints of the frequency of
bankruptcies, the unhappy men who fall into this misfortune, make but a
very small part of the whole number engaged in trade, and all other sorts
of business; not much more, perhaps, than one in a thousand. Bankruptcy
is, perhaps, the greatest and most humiliating calamity which can befal an
innocent man. The greater part of men, therefore, are sufficiently careful
to avoid it. Some, indeed, do not avoid it; as some do not avoid the
gallows.
Great nations are never impoverished by private, though they sometimes are
by public prodigality and misconduct. The whole, or almost the whole
public revenue is, in most countries, employed in maintaining unproductive
hands. Such are the people who compose a numerous and splendid court, a
great ecclesiastical establishment, great fleets and armies, who in time
of peace produce nothing, and in time of war acquire nothing which can
compensate the expense of maintaining them, even while the war lasts. Such
people, as they themselves produce nothing, are all maintained by the
produce of other men’s labour. When multiplied, therefore, to an
unnecessary number, they may in a particular year consume so great a share
of this produce, as not to leave a sufficiency for maintaining the
productive labourers, who should reproduce it next year. The next year’s
produce, therefore, will be less than that of the foregoing; and if the
same disorder should continue, that of the third year will be still less
than that of the second. Those unproductive hands who should be maintained
by a part only of the spare revenue of the people, may consume so great a
share of their whole revenue, and thereby oblige so great a number to
encroach upon their capitals, upon the funds destined for the maintenance
of productive labour, that all the frugality and good conduct of
individuals may not be able to compensate the waste and degradation of
produce occasioned by this violent and forced encroachment.
This frugality and good conduct, however, is, upon most occasions, it
appears from experience, sufficient to compensate, not only the private
prodigality and misconduct of individuals, but the public extravagance of
government. The uniform, constant, and uninterrupted effort of every man
to better his condition, the principle from which public and national, as
well as private opulence is originally derived, is frequently powerful
enough to maintain the natural progress of things towards improvement, in
spite both of the extravagance of government, and of the greatest errors
of administration. Like the unknown principle of animal life, it
frequently restores health and vigour to the constitution, in spite not
only of the disease, but of the absurd prescriptions of the doctor.
The annual produce of the land and labour of any nation can be increased
in its value by no other means, but by increasing either the number of its
productive labourers, or the productive powers of those labourers who had
before been employed. The number of its productive labourers, it is
evident, can never be much increased, but in consequence of an increase of
capital, or of the funds destined for maintaining them. The productive
powers of the same number of labourers cannot be increased, but in
consequence either of some addition and improvement to those machines and
instruments which facilitate and abridge labour, or of more proper
division and distribution of employment. In either case, an additional
capital is almost always required. It is by means of an additional capital
only, that the undertaker of any work can either provide his workmen with
better machinery, or make a more proper distribution of employment among
them. When the work to be done consists of a number of parts, to keep
every man constantly employed in one way, requires a much greater capital
than where every man is occasionally employed in every different part of
the work. When we compare, therefore, the state of a nation at two
different periods, and find that the annual produce of its land and labour
is evidently greater at the latter than at the former, that its lands are
better cultivated, its manufactures more numerous and more flourishing,
and its trade more extensive; we may be assured that its capital must have
increased during the interval between those two periods, and that more
must have been added to it by the good conduct of some, than had been
taken from it either by the private misconduct of others, or by the public
extravagance of government. But we shall find this to have been the case
of almost all nations, in all tolerably quiet and peaceable times, even of
those who have not enjoyed the most prudent and parsimonious governments.
To form a right judgment of it, indeed, we must compare the state of the
country at periods somewhat distant from one another. The progress is
frequently so gradual, that, at near periods, the improvement is not only
not sensible, but, from the declension either of certain branches of
industry, or of certain districts of the country, things which sometimes
happen, though the country in general is in great prosperity, there
frequently arises a suspicion, that the riches and industry of the whole
are decaying.
The annual produce of the land and labour of England, for example, is
certainly much greater than it was a little more than a century ago, at
the restoration of Charles II. Though at present few people, I believe,
doubt of this, yet during this period five years have seldom passed away,
in which some book or pamphlet has not been published, written, too, with
such abilities as to gain some authority with the public, and pretending
to demonstrate that the wealth of the nation was fast declining; that the
country was depopulated, agriculture neglected, manufactures decaying, and
trade undone. Nor have these publications been all party pamphlets, the
wretched offspring of falsehood and venality. Many of them have been
written by very candid and very intelligent people, who wrote nothing but
what they believed, and for no other reason but because they believed it.
The annual produce of the land and labour of England, again, was certainly
much greater at the Restoration than we can suppose it to have been about
a hundred years before, at the accession of Elizabeth. At this period,
too, we have all reason to believe, the country was much more advanced in
improvement, than it had been about a century before, towards the close of
the dissensions between the houses of York and Lancaster. Even then it
was, probably, in a better condition than it had been at the Norman
conquest: and at the Norman conquest, than during the confusion of the
Saxon heptarchy. Even at this early period, it was certainly a more
improved country than at the invasion of Julius Caesar, when its
inhabitants were nearly in the same state with the savages in North
America.
In each of those periods, however, there was not only much private and
public profusion, many expensive and unnecessary wars, great perversion of
the annual produce from maintaining productive to maintain unproductive
hands; but sometimes, in the confusion of civil discord, such absolute
waste and destruction of stock, as might be supposed, not only to retard,
as it certainly did, the natural accumulation of riches, but to have left
the country, at the end of the period, poorer than at the beginning. Thus,
in the happiest and most fortunate period of them all, that which has
passed since the Restoration, how many disorders and misfortunes have
occurred, which, could they have been foreseen, not only the
impoverishment, but the total ruin of the country would have been expected
from them? The fire and the plague of London, the two Dutch wars, the
disorders of the revolution, the war in Ireland, the four expensive French
wars of 1688, 1701, 1742, and 1756, together with the two rebellions of
1715 and 1745. In the course of the four French wars, the nation has
contracted more than £145,000,000 of debt, over and above all the other
extraordinary annual expense which they occasioned; so that the whole
cannot be computed at less than £200,000,000. So great a share of the
annual produce of the land and labour of the country, has, since the
Revolution, been employed upon different occasions, in maintaining an
extraordinary number of unproductive hands. But had not those wars given
this particular direction to so large a capital, the greater part of it
would naturally have been employed in maintaining productive hands, whose
labour would have replaced, with a profit, the whole value of their
consumption. The value of the annual produce of the land and labour of the
country would have been considerably increased by it every year, and every
years increase would have augmented still more that of the following year.
More houses would have been built, more lands would have been improved,
and those which had been improved before would have been better
cultivated; more manufactures would have been established, and those which
had been established before would have been more extended; and to what
height the real wealth and revenue of the country might by this time have
been raised, it is not perhaps very easy even to imagine.
But though the profusion of government must undoubtedly have retarded the
natural progress of England towards wealth and improvement, it has not
been able to stop it. The annual produce of its land and labour is
undoubtedly much greater at present than it was either at the Restoration
or at the Revolution. The capital, therefore, annually employed in
cultivating this land, and in maintaining this labour, must likewise be
much greater. In the midst of all the exactions of government, this
capital has been silently and gradually accumulated by the private
frugality and good conduct of individuals, by their universal, continual,
and uninterrupted effort to better their own condition. It is this effort,
protected by law, and allowed by liberty to exert itself in the manner
that is most advantageous, which has maintained the progress of England
towards opulence and improvement in almost all former times, and which, it
is to be hoped, will do so in all future times. England, however, as it
has never been blessed with a very parsimonious government, so parsimony
has at no time been the characteristic virtue of its inhabitants. It is
the highest impertinence and presumption, therefore, in kings and
ministers to pretend to watch over the economy of private people, and to
restrain their expense, either by sumptuary laws, or by prohibiting the
importation of foreign luxuries. They are themselves always, and without
any exception, the greatest spendthrifts in the society. Let them look
well after their own expense, and they may safely trust private people
with theirs. If their own extravagance does not ruin the state, that of
the subject never will.
As frugality increases, and prodigality diminishes, the public capital, so
the conduct of those whose expense just equals their revenue, without
either accumulating or encroaching, neither increases nor diminishes it.
Some modes of expense, however, seem to contribute more to the growth of
public opulence than others.
The revenue of an individual may be spent, either in things which are
consumed immediately, and in which one day’s expense can neither alleviate
nor support that of another; or it may be spent in things mere durable,
which can therefore be accumulated, and in which every day’s expense may,
as he chooses, either alleviate, or support and heighten, the effect of
that of the following day. A man of fortune, for example, may either spend
his revenue in a profuse and sumptuous table, and in maintaining a great
number of menial servants, and a multitude of dogs and horses; or,
contenting himself with a frugal table, and few attendants, he may lay out
the greater part of it in adorning his house or his country villa, in
useful or ornamental buildings, in useful or ornamental furniture, in
collecting books, statues, pictures; or in things more frivolous, jewels,
baubles, ingenious trinkets of different kinds; or, what is most trifling
of all, in amassing a great wardrobe of fine clothes, like the favourite
and minister of a great prince who died a few years ago. Were two men of
equal fortune to spend their revenue, the one chiefly in the one way, the
other in the other, the magnificence of the person whose expense had been
chiefly in durable commodities, would be continually increasing, every
day’s expense contributing something to support and heighten the effect of
that of the following day; that of the other, on the contrary, would be no
greater at the end of the period than at the beginning. The former too
would, at the end of the period, be the richer man of the two. He would
have a stock of goods of some kind or other, which, though it might not be
worth all that it cost, would always be worth something. No trace or
vestige of the expense of the latter would remain, and the effects of ten
or twenty years’ profusion would be as completely annihilated as if they
had never existed.
As the one mode of expense is more favourable than the other to the
opulence of an individual, so is it likewise to that of a nation. The
houses, the furniture, the clothing of the rich, in a little time, become
useful to the inferior and middling ranks of people. They are able to
purchase them when their superiors grow weary of them; and the general
accommodation of the whole people is thus gradually improved, when this
mode of expense becomes universal among men of fortune. In countries which
have long been rich, you will frequently find the inferior ranks of people
in possession both of houses and furniture perfectly good and entire, but
of which neither the one could have been built, nor the other have been
made for their use. What was formerly a seat of the family of Seymour, is
now an inn upon the Bath road. The marriage-bed of James I. of Great
Britain, which his queen brought with her from Denmark, as a present fit
for a sovereign to make to a sovereign, was, a few years ago, the ornament
of an alehouse at Dunfermline. In some ancient cities, which either have
been long stationary, or have gone somewhat to decay, you will sometimes
scarce find a single house which could have been built for its present
inhabitants. If you go into those houses, too, you will frequently find
many excellent, though antiquated pieces of furniture, which are still
very fit for use, and which could as little have been made for them. Noble
palaces, magnificent villas, great collections of books, statues,
pictures, and other curiosities, are frequently both an ornament and an
honour, not only to the neighbourhood, but to the whole country to which
they belong. Versailles is an ornament and an honour to France, Stowe and
Wilton to England. Italy still continues to command some sort of
veneration, by the number of monuments of this kind which it possesses,
though the wealth which produced them has decayed, and though the genius
which planned them seems to be extinguished, perhaps from not having the
same employment.
The expense, too, which is laid out in durable commodities, is favourable
not only to accumulation, but to frugality. If a person should at any time
exceed in it, he can easily reform without exposing himself to the censure
of the public. To reduce very much the number of his servants, to reform
his table from great profusion to great frugality, to lay down his
equipage after he has once set it up, are changes which cannot escape the
observation of his neighbours, and which are supposed to imply some
acknowledgment of preceding bad conduct. Few, therefore, of those who have
once been so unfortunate as to launch out too far into this sort of
expense, have afterwards the courage to reform, till ruin and bankruptcy
oblige them. But if a person has, at any time, been at too great an
expense in building, in furniture, in books, or pictures, no imprudence
can be inferred from his changing his conduct. These are things in which
further expense is frequently rendered unnecessary by former expense; and
when a person stops short, he appears to do so, not because he has
exceeded his fortune, but because he has satisfied his fancy.
The expense, besides, that is laid out in durable commodities, gives
maintenance, commonly, to a greater number of people than that which is
employed in the most profuse hospitality. Of two or three hundred weight
of provisions, which may sometimes be served up at a great festival, one
half, perhaps, is thrown to the dunghill, and there is always a great deal
wasted and abused. But if the expense of this entertainment had been
employed in setting to work masons, carpenters, upholsterers, mechanics,
etc. a quantity of provisions of equal value would have been distributed
among a still greater number of people, who would have bought them in
pennyworths and pound weights, and not have lost or thrown away a single
ounce of them. In the one way, besides, this expense maintains productive,
in the other unproductive hands. In the one way, therefore, it increases,
in the other it does not increase the exchangeable value of the annual
produce of the land and labour of the country.
I would not, however, by all this, be understood to mean, that the one
species of expense always betokens a more liberal or generous spirit than
the other. When a man of fortune spends his revenue chiefly in
hospitality, he shares the greater part of it with his friends and
companions; but when he employs it in purchasing such durable commodities,
he often spends the whole upon his own person, and gives nothing to any
body without an equivalent. The latter species of expense, therefore,
especially when directed towards frivolous objects, the little ornaments
of dress and furniture, jewels, trinkets, gew-gaws, frequently indicates,
not only a trifling, but a base and selfish disposition. All that I mean
is, that the one sort of expense, as it always occasions some accumulation
of valuable commodities, as it is more favourable to private frugality,
and, consequently, to the increase of the public capital, and as it
maintains productive rather than unproductive hands, conduces more than
the other to the growth of public opulence.
CHAPTER IV.
OF STOCK LENT AT INTEREST.
The stock which is lent at interest is always considered as a capital by
the lender. He expects that in due time it is to be restored to him, and
that, in the mean time, the borrower is to pay him a certain annual rent
for the use of it. The borrower may use it either as a capital, or as a
stock reserved for immediate consumption. If he uses it as a capital, he
employs it in the maintenance of productive labourers, who reproduce the
value, with a profit. He can, in this case, both restore the capital, and
pay the interest, without alienating or encroaching upon any other source
of revenue. If he uses it as a stock reserved for immediate consumption,
he acts the part of a prodigal, and dissipates, in the maintenance of the
idle, what was destined for the support of the industrious. He can, in
this case, neither restore the capital nor pay the interest, without
either alienating or encroaching upon some other source of revenue, such
as the property or the rent of land.
The stock which is lent at interest is, no doubt, occasionally employed in
both these ways, but in the former much more frequently than in the
latter. The man who borrows in order to spend will soon be ruined, and he
who lends to him will generally have occasion to repent of his folly. To
borrow or to lend for such a purpose, therefore, is, in all cases, where
gross usury is out of the question, contrary to the interest of both
parties; and though it no doubt happens sometimes, that people do both the
one and the other, yet, from the regard that all men have for their own
interest, we may be assured, that it cannot happen so very frequently as
we are sometimes apt to imagine. Ask any rich man of common prudence, to
which of the two sorts of people he has lent the greater part of his
stock, to those who he thinks will employ it profitably, or to those who
will spend it idly, and he will laugh at you for proposing the question.
Even among borrowers, therefore, not the people in the world most famous
for frugality, the number of the frugal and industrious surpasses
considerably that of the prodigal and idle.
The only people to whom stock is commonly lent, without their being
expected to make any very profitable use of it, are country gentlemen, who
borrow upon mortgage. Even they scarce ever borrow merely to spend. What
they borrow, one may say, is commonly spent before they borrow it. They
have generally consumed so great a quantity of goods, advanced to them
upon credit by shop-keepers and tradesmen, that they find it necessary to
borrow at interest, in order to pay the debt. The capital borrowed
replaces the capitals of those shop-keepers and tradesmen which the
country gentlemen could not have replaced from the rents of their estates.
It is not properly borrowed in order to be spent, but in order to replace
a capital which had been spent before.
Almost all loans at interest are made in money, either of paper, or of
gold and silver; but what the borrower really wants, and what the lender
readily supplies him with, is not the money, but the money’s worth, or the
goods which it can purchase. If he wants it as a stock for immediate
consumption, it is those goods only which he can place in that stock. If
he wants it as a capital for employing industry, it is from those goods
only that the industrious can be furnished with the tools, materials, and
maintenance necessary for carrying on their work. By means of the loan,
the lender, as it were, assigns to the borrower his right to a certain
portion of the annual produce of the land and labour of the country, to be
employed as the borrower pleases.
The quantity of stock, therefore, or, as it is commonly expressed, of
money, which can be lent at interest in any country, is not regulated by
the value of the money, whether paper or coin, which serves as the
instrument of the different loans made in that country, but by the value
of that part of the annual produce, which, as soon as it comes either from
the ground, or from the hands of the productive labourers, is destined,
not only for replacing a capital, but such a capital as the owner does not
care to be at the trouble of employing himself. As such capitals are
commonly lent out and paid back in money, they constitute what is called
the monied interest. It is distinct, not only from the landed, but from
the trading and manufacturing interests, as in these last the owners
themselves employ their own capitals. Even in the monied interest,
however, the money is, as it were, but the deed of assignment, which
conveys from one hand to another those capitals which the owners do not
care to employ themselves. Those capitals may be greater, in almost any
proportion, than the amount of the money which serves as the instrument of
their conveyance; the same pieces of money successively serving for many
different loans, as well as for many different purchases. A, for example,
lends to W £1000, with which W immediately purchases of B £1000 worth of
goods. B having no occasion for the money himself, lends the identical
pieces to X, with which X immediately purchases of C another £1000 worth
of goods. C, in the same manner, and for the same reason, lends them to Y,
who again purchases goods with them of D. In this manner, the same pieces,
either of coin or of paper, may, in the course of a few days, serve as the
Instrument of three different loans, and of three different purchases,
each of which is, in value, equal to the whole amount of those pieces.
What the three monied men, A, B, and C, assigned to the three borrowers,
W, X, and Y, is the power of making those purchases. In this power consist
both the value and the use of the loans. The stock lent by the three
monied men is equal to the value of the goods which can be purchased with
it, and is three times greater than that of the money with which the
purchases are made. Those loans, however, may be all perfectly well
secured, the goods purchased by the different debtors being so employed
as, in due time, to bring back, with a profit, an equal value either of
coin or of paper. And as the same pieces of money can thus serve as the
instrument of different loans to three, or, for the same reason, to thirty
times their value, so they may likewise successively serve as the
instrument of repayment.
A capital lent at interest may, in this manner, be considered as an
assignment, from the lender to the borrower, of a certain considerable
portion of the annual produce, upon condition that the burrower in return
shall, during the continuance of the loan, annually assign to the lender a
small portion, called the interest; and, at the end of it, a portion
equally considerable with that which had originally been assigned to him,
called the repayment. Though money, either coin or paper, serves generally
as the deed of assignment, both to the smaller and to the more
considerable portion, it is itself altogether different from what is
assigned by it.
In proportion as that share of the annual produce which, as soon as it
comes either from the ground, or from the hands of the productive
labourers, is destined for replacing a capital, increases in any country,
what is called the monied interest naturally increases with it. The
increase of those particular capitals from which the owners wish to derive
a revenue, without being at the trouble of employing them themselves,
naturally accompanies the general increase of capitals; or, in other
words, as stock increases, the quantity of stock to be lent at interest
grows gradually greater and greater.
As the quantity of stock to be lent at interest increases, the interest,
or the price which must be paid for the use of that stock, necessarily
diminishes, not only from those general causes which make the market price
of things commonly diminish as their quantity increases, but from other
causes which are peculiar to this particular case. As capitals increase in
any country, the profits which can be made by employing them necessarily
diminish. It becomes gradually more and more difficult to find within the
country a profitable method of employing any new capital. There arises, in
consequence, a competition between different capitals, the owner of one
endeavouring to get possession of that employment which is occupied by
another; but, upon most occasions, he can hope to justle that other out of
this employment by no other means but by dealing upon more reasonable
terms. He must not only sell what he deals in somewhat cheaper, but, in
order to get it to sell, he must sometimes, too, buy it dearer. The demand
for productive labour, by the increase of the funds which are destined for
maintaining it, grows every day greater and greater. Labourers easily find
employment; but the owners of capitals find it difficult to get labourers
to employ. Their competition raises the wages of labour, and sinks the
profits of stock. But when the profits which can be made by the use of a
capital are in this manner diminished, as it were, at both ends, the price
which can be paid for the use of it, that is, the rate of interest, must
necessarily be diminished with them.
Mr Locke, Mr Lawe, and Mr Montesquieu, as well as many other writers, seem
to have imagined that the increase of the quantity of gold and silver, in
consequence of the discovery of the Spanish West Indies, was the real
cause of the lowering of the rate of interest through the greater part of
Europe. Those metals, they say, having become of less value themselves,
the use of any particular portion of them necessarily became of less value
too, and, consequently, the price which could be paid for it. This notion,
which at first sight seems so plausible, has been so fully exposed by Mr
Hume, that it is, perhaps, unnecessary to say any thing more about it. The
following very short and plain argument, however, may serve to explain
more distinctly the fallacy which seems to have misled those gentlemen.
Before the discovery of the Spanish West Indies, ten per cent. seems to
have been the common rate of interest through the greater part of Europe.
It has since that time, in different countries, sunk to six, five, four,
and three per cent. Let us suppose, that in every particular country the
value of silver has sunk precisely in the same proportion as the rate of
interest; and that in those countries, for example, where interest has
been reduced from ten to five per cent. the same quantity of silver can
now purchase just half the quantity of goods which it could have purchased
before. This supposition will not, I believe, be found anywhere agreeable
to the truth; but it is the most favourable to the opinion which we are
going to examine; and, even upon this supposition, it is utterly
impossible that the lowering of the value of silver could have the
smallest tendency to lower the rate of interest. If £100 are in those
countries now of no more value than £50 were then, £10 must now be of no
more value than £5 were then. Whatever were the causes which lowered the
value of the capital, the same must necessarily have lowered that of the
interest, and exactly in the same proportion. The proportion between the
value of the capital and that of the interest must have remained the same,
though the rate had never been altered. By altering the rate, on the
contrary, the proportion between those two values is necessarily altered.
If £100 now are worth no more than £50 were then, £5 now can be worth no
more than £2:10s. were then. By reducing the rate of interest, therefore,
from ten to five per cent. we give for the use of a capital, which is
supposed to be equal to one half of its former value, an interest which is
equal to one fourth only of the value of the former interest.
An increase in the quantity of silver, while that of the commodities
circulated by means of it remained the same, could have no other effect
than to diminish the value of that metal. The nominal value of all sorts
of goods would be greater, but their real value would be precisely the
same as before. They would be exchanged for a greater number of pieces of
silver; but the quantity of labour which they could command, the number of
people whom they could maintain and employ, would be precisely the same.
The capital of the country would be the same, though a greater number of
pieces might be requisite for conveying any equal portion of it from one
hand to another. The deeds of assignment, like the conveyances of a
verbose attorney, would be more cumbersome; but the thing assigned would
be precisely the same as before, and could produce only the same effects.
The funds for maintaining productive labour being the same, the demand for
it would be the same. Its price or wages, therefore, though nominally
greater, would really be the same. They would be paid in a greater number
of pieces of silver, but they would purchase only the same quantity of
goods. The profits of stock would be the same, both nominally and really.
The wages of labour are commonly computed by the quantity of silver which
is paid to the labourer. When that is increased, therefore, his wages
appear to be increased, though they may sometimes be no greater than
before. But the profits of stock are not computed by the number of pieces
of silver with which they are paid, but by the proportion which those
pieces bear to the whole capital employed. Thus, in a particular country,
5s. a-week are said to be the common wages of labour, and ten per cent.
the common profits of stock; but the whole capital of the country being
the same as before, the competition between the different capitals of
individuals into which it was divided would likewise be the same. They
would all trade with the same advantages and disadvantages. The common
proportion between capital and profit, therefore, would be the same, and
consequently the common interest of money; what can commonly be given for
the use of money being necessarily regulated by what can commonly be made
by the use of it.
Any increase in the quantity of commodities annually circulated within the
country, while that of the money which circulated them remained the same,
would, on the contrary, produce many other important effects, besides that
of raising the value of the money. The capital of the country, though it
might nominally be the same, would really be augmented. It might continue
to be expressed by the same quantity of money, but it would command a
greater quantity of labour. The quantity of productive labour which it
could maintain and employ would be increased, and consequently the demand
for that labour. Its wages would naturally rise with the demand, and yet
might appear to sink. They might be paid with a smaller quantity of money,
but that smaller quantity might purchase a greater quantity of goods than
a greater had done before. The profits of stock would be diminished, both
really and in appearance. The whole capital of the country being
augmented, the competition between the different capitals of which it was
composed would naturally be augmented along with it. The owners of those
particular capitals would be obliged to content themselves with a smaller
proportion of the produce of that labour which their respective capitals
employed. The interest of money, keeping pace always with the profits of
stock, might, in this manner, be greatly diminished, though the value of
money, or the quantity of goods which any particular sum could purchase,
was greatly augmented.
In some countries the interest of money has been prohibited by law. But as
something can everywhere be made by the use of money, something ought
everywhere to be paid for the use of it. This regulation, instead of
preventing, has been found from experience to increase the evil of usury.
The debtor being obliged to pay, not only for the use of the money, but
for the risk which his creditor runs by accepting a compensation for that
use, he is obliged, if one may say so, to insure his creditor from the
penalties of usury.
In countries where interest is permitted, the law in order to prevent the
extortion of usury, generally fixes the highest rate which can be taken
without incurring a penalty. This rate ought always to be somewhat above
the lowest market price, or the price which is commonly paid for the use
of money by those who can give the most undoubted security. If this legal
rate should be fixed below the lowest market rate, the effects of this
fixation must be nearly the same as those of a total prohibition of
interest. The creditor will not lend his money for less than the use of it
is worth, and the debtor must pay him for the risk which he runs by
accepting the full value of that use. If it is fixed precisely at the
lowest market price, it ruins, with honest people who respect the laws of
their country, the credit of all those who cannot give the very best
security, and obliges them to have recourse to exorbitant usurers. In a
country such as Great Britain, where money is lent to government at three
per cent. and to private people, upon good security, at four and four and
a-half, the present legal rate, five per cent. is perhaps as proper as
any.
The legal rate, it is to be observed, though it ought to be somewhat
above, ought not to be much above the lowest market rate. If the legal
rate of interest in Great Britain, for example, was fixed so high as eight
or ten per cent. the greater part of the money which was to be lent, would
be lent to prodigals and projectors, who alone would be willing to give
this high interest. Sober people, who will give for the use of money no
more than a part of what they are likely to make by the use of it, would
not venture into the competition. A great part of the capital of the
country would thus be kept out of the hands which were most likely to make
a profitable and advantageous use of it, and thrown into those which were
most likely to waste and destroy it. Where the legal rate of interest, on
the contrary, is fixed but a very little above the lowest market rate,
sober people are universally preferred, as borrowers, to prodigals and
projectors. The person who lends money gets nearly as much interest from
the former as he dares to take from the latter, and his money is much
safer in the hands of the one set of people than in those of the other. A
great part of the capital of the country is thus thrown into the hands in
which it is most likely to be employed with advantage.
No law can reduce the common rate of interest below the lowest ordinary
market rate at the time when that law is made. Notwithstanding the edict
of 1766, by which the French king attempted to reduce the rate of interest
from five to four per cent. money continued to be lent in France at five
per cent. the law being evaded in several different ways.
The ordinary market price of land, it is to be observed, depends
everywhere upon the ordinary market rate of interest. The person who has a
capital from which he wishes to derive a revenue, without taking the
trouble to employ it himself, deliberates whether he should buy land with
it, or lend it out at interest. The superior security of land, together
with some other advantages which almost everywhere attend upon this
species of property, will generally dispose him to content himself with a
smaller revenue from land, than what he might have by lending out his
money at interest. These advantages are sufficient to compensate a certain
difference of revenue; but they will compensate a certain difference only;
and if the rent of land should fall short of the interest of money by a
greater difference, nobody would buy land, which would soon reduce its
ordinary price. On the contrary, if the advantages should much more than
compensate the difference, everybody would buy land, which again would
soon raise its ordinary price. When interest was at ten per cent. land was
commonly sold for ten or twelve years purchase. As interest sunk to six,
five, and four per cent. the price of land rose to twenty,
five-and-twenty, and thirty years purchase. The market rate of interest is
higher in France than in England, and the common price of land is lower.
In England it commonly sells at thirty, in France at twenty years
purchase.
CHAPTER V.
OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.
Though all capitals are destined for the maintenance of productive labour
only, yet the quantity of that labour which equal capitals are capable of
putting into motion, varies extremely according to the diversity of their
employment; as does likewise the value which that employment adds to the
annual produce of the land and labour of the country.
A capital may be employed in four different ways; either, first, in
procuring the rude produce annually required for the use and consumption
of the society; or, secondly, in manufacturing and preparing that rude
produce for immediate use and consumption; or, thirdly in transporting
either the rude or manufactured produce from the places where they abound
to those where they are wanted; or, lastly, in dividing particular
portions of either into such small parcels as suit the occasional demands
of those who want them. In the first way are employed the capitals of all
those who undertake improvement or cultivation of lands, mines, or
fisheries; in the second, those of all master manufacturers; in the third,
those of all wholesale merchants; and in the fourth, those of all
retailers. It is difficult to conceive that a capital should be employed
in any way which may not be classed under some one or other of those four.
Each of those four methods of employing a capital is essentially
necessary, either to the existence or extension of the other three, or to
the general conveniency of the society.
Unless a capital was employed in furnishing rude produce to a certain
degree of abundance, neither manufactures nor trade of any kind could
exist.
Unless a capital was employed in manufacturing that part of the rude
produce which requires a good deal of preparation before it can be fit for
use and consumption, it either would never be produced, because there
could be no demand for it; or if it was produced spontaneously, it would
be of no value in exchange, and could add nothing to the wealth of the
society.
Unless a capital was employed in transporting either the rude or
manufactured produce from the places where it abounds to those where it is
wanted, no more of either could be produced than was necessary for the
consumption of the neighbourhood. The capital of the merchant exchanges
the surplus produce of one place for that of another, and thus encourages
the industry, and increases the enjoyments of both.
Unless a capital was employed in breaking and dividing certain portions
either of the rude or manufactured produce into such small parcels as suit
the occasional demands of those who want them, every man would be obliged
to purchase a greater quantity of the goods he wanted than his immediate
occasions required. If there was no such trade as a butcher, for example,
every man would be obliged to purchase a whole ox or a whole sheep at a
time. This would generally be inconvenient to the rich, and much more so
to the poor. If a poor workman was obliged to purchase a month’s or six
months’ provisions at a time, a great part of the stock which he employs
as a capital in the instruments of his trade, or in the furniture of his
shop, and which yields him a revenue, he would be forced to place in that
part of his stock which is reserved for immediate consumption, and which
yields him no revenue. Nothing can be more convenient for such a person
than to be able to purchase his subsistence from day to day, or even from
hour to hour, as he wants it. He is thereby enabled to employ almost his
whole stock as a capital. He is thus enabled to furnish work to a greater
value; and the profit which he makes by it in this way much more than
compensates the additional price which the profit of the retailer imposes
upon the goods. The prejudices of some political writers against
shopkeepers and tradesmen are altogether without foundation. So far is it
from being necessary either to tax them, or to restrict their numbers,
that they can never be multiplied so as to hurt the public, though they
may so as to hurt one another. The quantity of grocery goods, for example,
which can be sold in a particular town, is limited by the demand of that
town and its neighbourhood. The capital, therefore, which can be employed
in the grocery trade, cannot exceed what is sufficient to purchase that
quantity. If this capital is divided between two different grocers, their
competition will tend to make both of them sell cheaper than if it were in
the hands of one only; and if it were divided among twenty, their
competition would be just so much the greater, and the chance of their
combining together, in order to raise the price, just so much the less.
Their competition might, perhaps, ruin some of themselves; but to take
care of this, is the business of the parties concerned, and it may safely
be trusted to their discretion. It can never hurt either the consumer or
the producer; on the contrary, it must tend to make the retailers both
sell cheaper and buy dearer, than if the whole trade was monopolised by
one or two persons. Some of them, perhaps, may sometimes decoy a weak
customer to buy what he has no occasion for. This evil, however, is of too
little importance to deserve the public attention, nor would it
necessarily be prevented by restricting their numbers. It is not the
multitude of alehouses, to give the must suspicious example, that
occasions a general disposition to drunkenness among the common people;
but that disposition, arising from other causes, necessarily gives
employment to a multitude of alehouses.
The persons whose capitals are employed in any of those four ways, are
themselves productive labourers. Their labour, when properly directed,
fixes and realizes itself in the subject or vendible commodity upon which
it is bestowed, and generally adds to its price the value at least of
their own maintenance and consumption. The profits of the farmer, of the
manufacturer, of the merchant, and retailer, are all drawn from the price
of the goods which the two first produce, and the two last buy and sell.
Equal capitals, however, employed in each of those four different ways,
will immediately put into motion very different quantities of productive
labour; and augment, too, in very different proportions, the value of the
annual produce of the land and labour of the society to which they belong.
The capital of the retailer replaces, together with its profits, that of
the merchant of whom he purchases goods, and thereby enables him to
continue his business. The retailer himself is the only productive
labourer whom it immediately employs. In his profit consists the whole
value which its employment adds to the annual produce of the land and
labour of the society.
The capital of the wholesale merchant replaces, together with their
profits, the capitals of the farmers and manufacturers of whom he
purchases the rude and manufactured produce which he deals in, and thereby
enables them to continue their respective trades. It is by this service
chiefly that he contributes indirectly to support the productive labour of
the society, and to increase the value of its annual produce. His capital
employs, too, the sailors and carriers who transport his goods from one
place to another; and it augments the price of those goods by the value,
not only of his profits, but of their wages. This is all the productive
labour which it immediately puts into motion, and all the value which it
immediately adds to the annual produce. Its operation in both these
respects is a good deal superior to that of the capital of the retailer.
Part of the capital of the master manufacturer is employed as a fixed
capital in the instruments of his trade, and replaces, together with its
profits, that of some other artificer of whom he purchases them. Part of
his circulating capital is employed in purchasing materials, and replaces,
with their profits, the capitals of the farmers and miners of whom he
purchases them. But a great part of it is always, either annually, or in a
much shorter period, distributed among the different workmen whom he
employs. It augments the value of those materials by their wages, and by
their masters’ profits upon the whole stock of wages, materials, and
instruments of trade employed in the business. It puts immediately into
motion, therefore, a much greater quantity of productive labour, and adds
a much greater value to the annual produce of the land and labour of the
society, than an equal capital in the hands of any wholesale merchant.
No equal capital puts into motion a greater quantity of productive labour
than that of the farmer. Not only his labouring servants, but his
labouring cattle, are productive labourers. In agriculture, too, Nature
labours along with man; and though her labour costs no expense, its
produce has its value, as well as that of the most expensive workmen. The
most important operations of agriculture seem intended, not so much to
increase, though they do that too, as to direct the fertility of Nature
towards the production of the plants most profitable to man. A field
overgrown with briars and brambles, may frequently produce as great a
quantity of vegetables as the best cultivated vineyard or corn field.
Planting and tillage frequently regulate more than they animate the active
fertility of Nature; and after all their labour, a great part of the work
always remains to be done by her. The labourers and labouring cattle,
therefore, employed in agriculture, not only occasion, like the workmen in
manufactures, the reproduction of a value equal to their own consumption,
or to the capital which employs them, together with its owner’s profits,
but of a much greater value. Over and above the capital of the farmer, and
all its profits, they regularly occasion the reproduction of the rent of
the landlord. This rent may be considered as the produce of those powers
of Nature, the use of which the landlord lends to the farmer. It is
greater or smaller, according to the supposed extent of those powers, or,
in other words, according to the supposed natural or improved fertility of
the land. It is the work of Nature which remains, after deducting or
compensating every thing which can be regarded as the work of man. It is
seldom less than a fourth, and frequently more than a third, of the whole
produce. No equal quantity of productive labour employed in manufactures,
can ever occasion so great reproduction. In them Nature does nothing; man
does all; and the reproduction must always be in proportion to the
strength of the agents that occasion it. The capital employed in
agriculture, therefore, not only puts into motion a greater quantity of
productive labour than any equal capital employed in manufactures; but in
proportion, too, to the quantity of productive labour which it employs, it
adds a much greater value to the annual produce of the land and labour of
the country, to the real wealth and revenue of its inhabitants. Of all the
ways in which a capital can be employed, it is by far the most
advantageous to society.
The capitals employed in the agriculture and in the retail trade of any
society, must always reside within that society. Their employment is
confined almost to a precise spot, to the farm, and to the shop of the
retailer. They must generally, too, though there are some exceptions to
this, belong to resident members of the society.
The capital of a wholesale merchant, on the contrary, seems to have no
fixed or necessary residence anywhere, but may wander about from place to
place, according as it can either buy cheap or sell dear.
The capital of the manufacturer must, no doubt, reside where the
manufacture is carried on; but where this shall be, is not always
necessarily determined. It may frequently be at a great distance, both
from the place where the materials grow, and from that where the complete
manufacture is consumed. Lyons is very distant, both from the places which
afford the materials of its manufactures, and from those which consume
them. The people of fashion in Sicily are clothed in silks made in other
countries, from the materials which their own produces. Part of the wool
of Spain is manufactured in Great Britain, and some part of that cloth is
afterwards sent back to Spain.
Whether the merchant whose capital exports the surplus produce of any
society, be a native or a foreigner, is of very little importance. If he
is a foreigner, the number of their productive labourers is necessarily
less than if he had been a native, by one man only; and the value of their
annual produce, by the profits of that one man. The sailors or carriers
whom he employs, may still belong indifferently either to his country, or
to their country, or to some third country, in the same manner as if he
had been a native. The capital of a foreigner gives a value to their
surplus produce equally with that of a native, by exchanging it for
something for which there is a demand at home. It as effectually replaces
the capital of the person who produces that surplus, and as effectually
enables him to continue his business, the service by which the capital of
a wholesale merchant chiefly contributes to support the productive labour,
and to augment the value of the annual produce of the society to which he
belongs.
It is of more consequence that the capital of the manufacturer should
reside within the country. It necessarily puts into motion a greater
quantity of productive labour, and adds a greater value to the annual
produce of the land and labour of the society. It may, however, be very
useful to the country, though it should not reside within it. The capitals
of the British manufacturers who work up the flax and hemp annually
imported from the coasts of the Baltic, are surely very useful to the
countries which produce them. Those materials are a part of the surplus
produce of those countries, which, unless it was annually exchanged for
something which is in demand there, would be of no value, and would soon
cease to be produced. The merchants who export it, replace the capitals of
the people who produce it, and thereby encourage them to continue the
production; and the British manufacturers replace the capitals of those
merchants.
A particular country, in the same manner as a particular person, may
frequently not have capital sufficient both to improve and cultivate all
its lands, to manufacture and prepare their whole rude produce for
immediate use and consumption, and to transport the surplus part either of
the rude or manufactured produce to those distant markets, where it can be
exchanged for something for which there is a demand at home. The
inhabitants of many different parts of Great Britain have not capital
sufficient to improve and cultivate all their lands. The wool of the
southern counties of Scotland is, a great part of it, after a long land
carriage through very bad roads, manufactured in Yorkshire, for want of a
capital to manufacture it at home. There are many little manufacturing
towns in Great Britain, of which the inhabitants have not capital
sufficient to transport the produce of their own industry to those distant
markets where there is demand and consumption for it. If there are any
merchants among them, they are, properly, only the agents of wealthier
merchants who reside in some of the great commercial cities.
When the capital of any country is not sufficient for all those three
purposes, in proportion as a greater share of it is employed in
agriculture, the greater will be the quantity of productive labour which
it puts into motion within the country; as will likewise be the value
which its employment adds to the annual produce of the land and labour of
the society. After agriculture, the capital employed in manufactures puts
into motion the greatest quantity of productive labour, and adds the
greatest value to the annual produce. That which is employed in the trade
of exportation has the least effect of any of the three.
The country, indeed, which has not capital sufficient for all those three
purposes, has not arrived at that degree of opulence for which it seems
naturally destined. To attempt, however, prematurely, and with an
insufficient capital, to do all the three, is certainly not the shortest
way for a society, no more than it would be for an individual, to acquire
a sufficient one. The capital of all the individuals of a nation has its
limits, in the same manner as that of a single individual, and is capable
of executing only certain purposes. The capital of all the individuals of
a nation is increased in the same manner as that of a single individual,
by their continually accumulating and adding to it whatever they save out
of their revenue. It is likely to increase the fastest, therefore, when it
is employed in the way that affords the greatest revenue to all the
inhabitants or the country, as they will thus be enabled to make the
greatest savings. But the revenue of all the inhabitants of the country is
necessarily in proportion to the value of the annual produce of their land
and labour.
It has been the principal cause of the rapid progress of our American
colonies towards wealth and greatness, that almost their whole capitals
have hitherto been employed in agriculture. They have no manufactures,
those household and coarser manufactures excepted, which necessarily
accompany the progress of agriculture, and which are the work of the women
and children in every private family. The greater part, both of the
exportation and coasting trade of America, is carried on by the capitals
of merchants who reside in Great Britain. Even the stores and warehouses
from which goods are retailed in some provinces, particularly in Virginia
and Maryland, belong many of them to merchants who reside in the mother
country, and afford one of the few instances of the retail trade of a
society being carried on by the capitals of those who are not resident
members of it. Were the Americans, either by combination, or by any other
sort of violence, to stop the importation of European manufactures, and,
by thus giving a monopoly to such of their own countrymen as could
manufacture the like goods, divert any considerable part of their capital
into this employment, they would retard, instead of accelerating, the
further increase in the value of their annual produce, and would obstruct,
instead of promoting, the progress of their country towards real wealth
and greatness. This would be still more the case, were they to attempt, in
the same manner, to monopolize to themselves their whole exportation
trade.
The course of human prosperity, indeed, seems scarce ever to have been of
so long continuance as to enable any great country to acquire capital
sufficient for all those three purposes; unless, perhaps, we give credit
to the wonderful accounts of the wealth and cultivation of China, of those
of ancient Egypt, and of the ancient state of Indostan. Even those three
countries, the wealthiest, according to all accounts, that ever were in
the world, are chiefly renowned for their superiority in agriculture and
manufactures. They do not appear to have been eminent for foreign trade.
The ancient Egyptians had a superstitious antipathy to the sea; a
superstition nearly of the same kind prevails among the Indians; and the
Chinese have never excelled in foreign commerce. The greater part of the
surplus produce of all those three countries seems to have been always
exported by foreigners, who gave in exchange for it something else, for
which they found a demand there, frequently gold and silver.
It is thus that the same capital will in any country put into motion a
greater or smaller quantity of productive labour, and add a greater or
smaller value to the annual produce of its land and labour, according to
the different proportions in which it is employed in agriculture,
manufactures, and wholesale trade. The difference, too, is very great,
according to the different sorts of wholesale trade in which any part of
it is employed.
All wholesale trade, all buying in order to sell again by wholesale, maybe
reduced to three different sorts: the home trade, the foreign trade of
consumption, and the carrying trade. The home trade is employed in
purchasing in one part of the same country, and selling in another, the
produce of the industry of that country. It comprehends both the inland
and the coasting trade. The foreign trade of consumption is employed in
purchasing foreign goods for home consumption. The carrying trade is
employed in transacting the commerce of foreign countries, or in carrying
the surplus produce of one to another.
The capital which is employed in purchasing in one part of the country, in
order to sell in another, the produce of the industry of that country,
generally replaces, by every such operation, two distinct capitals, that
had both been employed in the agriculture or manufactures of that country,
and thereby enables them to continue that employment. When it sends out
from the residence of the merchant a certain value of commodities, it
generally brings back in return at least an equal value of other
commodities. When both are the produce of domestic industry, it
necessarily replaces, by every such operation, two distinct capitals,
which had both been employed in supporting productive labour, and thereby
enables them to continue that support. The capital which sends Scotch
manufactures to London, and brings back English corn and manufactures to
Edinburgh, necessarily replaces, by every such operation, two British
capitals, which had both been employed in the agriculture or manufactures
of Great Britain.
The capital employed in purchasing foreign goods for home consumption,
when this purchase is made with the produce of domestic industry,
replaces, too, by every such operation, two distinct capitals; but one of
them only is employed in supporting domestic industry. The capital which
sends British goods to Portugal, and brings back Portuguese goods to Great
Britain, replaces, by every such operation, only one British capital. The
other is a Portuguese one. Though the returns, therefore, of the foreign
trade of consumption, should be as quick as those of the home trade, the
capital employed in it will give but one half of the encouragement to the
industry or productive labour of the country.
But the returns of the foreign trade of consumption are very seldom so
quick as those of the home trade. The returns of the home trade generally
come in before the end of the year, and sometimes three or four times in
the year. The returns of the foreign trade of consumption seldom come in
before the end of the year, and sometimes not till after two or three
years. A capital, therefore, employed in the home trade, will sometimes
make twelve operations, or be sent out and returned twelve times, before a
capital employed in the foreign trade of consumption has made one. If the
capitals are equal, therefore, the one will give four-and-twenty times
more encouragement and support to the industry of the country than the
other.
The foreign goods for home consumption may sometimes be purchased, not
with the produce of domestic industry but with some other foreign goods.
These last, however, must have been purchased, either immediately with the
produce of domestic industry, or with something else that had been
purchased with it; for, the case of war and conquest excepted, foreign
goods can never be acquired, but in exchange for something that had been
produced at home, either immediately, or after two or more different
exchanges. The effects, therefore, of a capital employed in such a
round-about foreign trade of consumption, are, in every respect, the same
as those of one employed in the most direct trade of the same kind, except
that the final returns are likely to be still more distant, as they must
depend upon the returns of two or three distinct foreign trades. If the
hemp and flax of Riga are purchased with the tobacco of Virginia, which
had been purchased with British manufactures, the merchant must wait for
the returns of two distinct foreign trades, before he can employ the same
capital in repurchasing a like quantity of British manufactures. If the
tobacco of Virginia had been purchased, not with British manufactures, but
with the sugar and rum of Jamaica, which had been purchased with those
manufactures, he must wait for the returns of three. If those two or three
distinct foreign trades should happen to be carried on by two or three
distinct merchants, of whom the second buys the goods imported by the
first, and the third buys those imported by the second, in order to export
them again, each merchant, indeed, will, in this case, receive the returns
of his own capital more quickly; but the final returns of the whole
capital employed in the trade will be just as slow as ever. Whether the
whole capital employed in such a round about trade belong to one merchant
or to three, can make no difference with regard to the country, though it
may with regard to the particular merchants. Three times a greater capital
must in both cases be employed, in order to exchange a certain value of
British manufactures for a certain quantity of flax and hemp, than would
have been necessary, had the manufactures and the flax and hemp been
directly exchanged for one another. The whole capital employed, therefore,
in such a round-about foreign trade of consumption, will generally give
less encouragement and support to the productive labour of the country,
than an equal capital employed in a more direct trade of the same kind.
Whatever be the foreign commodity with which the foreign goods for home
consumption are purchased, it can occasion no essential difference, either
in the nature of the trade, or in the encouragement and support which it
can give to the productive labour of the country from which it is carried
on. If they are purchased with the gold of Brazil, for example, or with
the silver of Peru, this gold and silver, like the tobacco of Virginia,
must have been purchased with something that either was the produce of the
industry of the country, or that had been purchased with something else
that was so. So far, therefore, as the productive labour of the country is
concerned, the foreign trade of consumption, which is carried on by means
of gold and silver, has all the advantages and all the inconveniencies of
any other equally round-about foreign trade of consumption; and will
replace, just as fast, or just as slow, the capital which is immediately
employed in supporting that productive labour. It seems even to have one
advantage over any other equally round-about foreign trade. The
transportation of those metals from one place to another, on account of
their small bulk and great value, is less expensive than that of almost
any other foreign goods of equal value. Their freight is much less, and
their insurance not greater; and no goods, besides, are less liable to
suffer by the carriage. An equal quantity of foreign goods, therefore, may
frequently be purchased with a smaller quantity of the produce of domestic
industry, by the intervention of gold and silver, than by that of any
other foreign goods. The demand of the country may frequently, in this
manner, be supplied more completely, and at a smaller expense, than in any
other. Whether, by the continual exportation of those metals, a trade of
this kind is likely to impoverish the country from which it is carried on
in any other way, I shall have occasion to examine at great length
hereafter.
That part of the capital of any country which is employed in the carrying
trade, is altogether withdrawn from supporting the productive labour of
that particular country, to support that of some foreign countries. Though
it may replace, by every operation, two distinct capitals, yet neither of
them belongs to that particular country. The capital of the Dutch
merchant, which carries the corn of Poland to Portugal, and brings back
the fruits and wines of Portugal to Poland, replaces by every such
operation two capitals, neither of which had been employed in supporting
the productive labour of Holland; but one of them in supporting that of
Poland, and the other that of Portugal. The profits only return regularly
to Holland, and constitute the whole addition which this trade necessarily
makes to the annual produce of the land and labour of that country. When,
indeed, the carrying trade of any particular country is carried on with
the ships and sailors of that country, that part of the capital employed
in it which pays the freight is distributed among, and puts into motion, a
certain number of productive labourers of that country. Almost all nations
that have had any considerable share of the carrying trade have, in fact,
carried it on in this manner. The trade itself has probably derived its
name from it, the people of such countries being the carriers to other
countries. It does not, however, seem essential to the nature of the trade
that it should be so. A Dutch merchant may, for example, employ his
capital in transacting the commerce of Poland and Portugal, by carrying
part of the surplus produce of the one to the other, not in Dutch, but in
British bottoms. It maybe presumed, that he actually does so upon some
particular occasions. It is upon this account, however, that the carrying
trade has been supposed peculiarly advantageous to such a country as Great
Britain, of which the defence and security depend upon the number of its
sailors and shipping. But the same capital may employ as many sailors and
shipping, either in the foreign trade of consumption, or even in the home
trade, when carried on by coasting vessels, as it could in the carrying
trade. The number of sailors and shipping which any particular capital can
employ, does not depend upon the nature of the trade, but partly upon the
bulk of the goods, in proportion to their value, and partly upon the
distance of the ports between which they are to be carried; chiefly upon
the former of those two circumstances. The coal trade from Newcastle to
London, for example, employs more shipping than all the carrying trade of
England, though the ports are at no great distance. To force, therefore,
by extraordinary encouragements, a larger share of the capital of any
country into the carrying trade, than what would naturally go to it, will
not always necessarily increase the shipping of that country.
The capital, therefore, employed in the home trade of any country, will
generally give encouragement and support to a greater quantity of
productive labour in that country, and increase the value of its annual
produce, more than an equal capital employed in the foreign trade of
consumption; and the capital employed in this latter trade has, in both
these respects, a still greater advantage over an equal capital employed
in the carrying trade. The riches, and so far as power depends upon
riches, the power of every country must always be in proportion to the
value of its annual produce, the fund from which all taxes must ultimately
be paid. But the great object of the political economy of every country,
is to increase the riches and power of that country. It ought, therefore,
to give no preference nor superior encouragement to the foreign trade of
consumption above the home trade, nor to the carrying trade above either
of the other two. It ought neither to force nor to allure into either of
those two channels a greater share of the capital of the country, than
what would naturally flow into them of its own accord.
Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of things,
without any constraint or violence, naturally introduces it.
When the produce of any particular branch of industry exceeds what the
demand of the country requires, the surplus must be sent abroad, and
exchanged for something for which there is a demand at home. Without such
exportation, a part of the productive labour of the country must cease,
and the value of its annual produce diminish. The land and labour of Great
Britain produce generally more corn, woollens, and hardware, than the
demand of the home market requires. The surplus part of them, therefore,
must be sent abroad, and exchanged for something for which there is a
demand at home. It is only by means of such exportation, that this surplus
can acquire a value sufficient to compensate the labour and expense of
producing it. The neighbourhood of the sea-coast, and the banks of all
navigable rivers, are advantageous situations for industry, only because
they facilitate the exportation and exchange of such surplus produce for
something else which is more in demand there.
When the foreign goods which are thus purchased with the surplus produce
of domestic industry exceed the demand of the home market, the surplus
part of them must be sent abroad again, and exchanged for something more
in demand at home. About 96,000 hogsheads of tobacco are annually
purchased in Virginia and Maryland with a part of the surplus produce of
British industry. But the demand of Great Britain does not require,
perhaps, more than 14,000. If the remaining 82,000, therefore, could not
be sent abroad, and exchanged for something more in demand at home, the
importation of them must cease immediately, and with it the productive
labour of all those inhabitants of Great Britain who are at present
employed in preparing the goods with which these 82,000 hogsheads are
annually purchased. Those goods, which are part of the produce of the land
and labour of Great Britain, having no market at home, and being deprived
of that which they had abroad, must cease to be produced. The most
round-about foreign trade of consumption, therefore, may, upon some
occasions, be as necessary for supporting the productive labour of the
country, and the value of its annual produce, as the most direct.
When the capital stock of any country is increased to such a degree that
it cannot be all employed in supplying the consumption, and supporting the
productive labour of that particular country, the surplus part of it
naturally disgorges itself into the carrying trade, and is employed in
performing the same offices to other countries. The carrying trade is the
natural effect and symptom of great national wealth; but it does not seem
to be the natural cause of it. Those statesmen who have been disposed to
favour it with particular encouragement, seem to have mistaken the effect
and symptom for the cause. Holland, in proportion to the extent of the
land and the number of its inhabitants, by far the richest country in
Europe, has accordingly the greatest share of the carrying trade of
Europe. England, perhaps the second richest country of Europe, is likewise
supposed to have a considerable share in it; though what commonly passes
for the carrying trade of England will frequently, perhaps, be found to be
no more than a round-about foreign trade of consumption. Such are, in a
great measure, the trades which carry the goods of the East and West
Indies and of America to the different European markets. Those goods are
generally purchased, either immediately with the produce of British
industry, or with something else which had been purchased with that
produce, and the final returns of those trades are generally used or
consumed in Great Britain. The trade which is carried on in British
bottoms between the different ports of the Mediterranean, and some trade
of the same kind carried on by British merchants between the different
ports of India, make, perhaps, the principal branches of what is properly
the carrying trade of Great Britain.
The extent of the home trade, and of the capital which can be employed in
it, is necessarily limited by the value of the surplus produce of all
those distant places within the country which have occasion to exchange
their respective productions with one another; that of the foreign trade
of consumption, by the value of the surplus produce of the whole country,
and of what can be purchased with it; that of the carrying trade, by the
value of the surplus produce of all the different countries in the world.
Its possible extent, therefore, is in a manner infinite in comparison of
that of the other two, and is capable of absorbing the greatest capitals.
The consideration of his own private profit is the sole motive which
determines the owner of any capital to employ it either in agriculture, in
manufactures, or in some particular branch of the wholesale or retail
trade. The different quantities of productive labour which it may put into
motion, and the different values which it may add to the annual produce of
the land and labour of the society, according as it is employed in one or
other of those different ways, never enter into his thoughts. In
countries, therefore, where agriculture is the most profitable of all
employments, and farming and improving the most direct roads to a splendid
fortune, the capitals of individuals will naturally be employed in the
manner most advantageous to the whole society. The profits of agriculture,
however, seem to have no superiority over those of other employments in
any part of Europe. Projectors, indeed, in every corner of it, have,
within these few years, amused the public with most magnificent accounts
of the profits to be made by the cultivation and improvement of land.
Without entering into any particular discussion of their calculations, a
very simple observation may satisfy us that the result of them must be
false. We see, every day, the most splendid fortunes, that have been
acquired in the course of a single life, by trade and manufactures,
frequently from a very small capital, sometimes from no capital. A single
instance of such a fortune, acquired by agriculture in the same time, and
from such a capital, has not, perhaps, occurred in Europe, during the
course of the present century. In all the great countries of Europe,
however, much good land still remains uncultivated; and the greater part
of what is cultivated, is far from being improved to the degree of which
it is capable. Agriculture, therefore, is almost everywhere capable of
absorbing a much greater capital than has ever yet been employed in it.
What circumstances in the policy of Europe have given the trades which are
carried on in towns so great an advantage over that which is carried on in
the country, that private persons frequently find it more for their
advantage to employ their capitals in the most distant carrying trades of
Asia and America than in the improvement and cultivation of the most
fertile fields in their own neighbourhood, I shall endeavour to explain at
full length in the two following books.
BOOK III.
OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS
CHAPTER I.
OF THE NATURAL PROGRESS OF OPULENCE.
The great commerce of every civilized society is that carried on between
the inhabitants of the town and those of the country. It consists in the
exchange of rude for manufactured produce, either immediately, or by the
intervention of money, or of some sort of paper which represents money.
The country supplies the town with the means of subsistence and the
materials of manufacture. The town repays this supply, by sending back a
part of the manufactured produce to the inhabitants of the country. The
town, in which there neither is nor can be any reproduction of substances,
may very properly be said to gain its whole wealth and subsistence from
the country. We must not, however, upon this account, imagine that the
gain of the town is the loss of the country. The gains of both are mutual
and reciprocal, and the division of labour is in this, as in all other
cases, advantageous to all the different persons employed in the various
occupations into which it is subdivided. The inhabitants of the country
purchase of the town a greater quantity of manufactured goods with the
produce of a much smaller quantity of their own labour, than they must
have employed had they attempted to prepare them themselves. The town
affords a market for the surplus produce of the country, or what is over
and above the maintenance of the cultivators; and it is there that the
inhabitants of the country exchange it for something else which is in
demand among them. The greater the number and revenue of the inhabitants
of the town, the more extensive is the market which it affords to those of
the country; and the more extensive that market, it is always the more
advantageous to a great number. The corn which grows within a mile of the
town, sells there for the same price with that which comes from twenty
miles distance. But the price of the latter must, generally, not only pay
the expense of raising it and bringing it to market, but afford, too, the
ordinary profits of agriculture to the farmer. The proprietors and
cultivators of the country, therefore, which lies in the neighbourhood of
the town, over and above the ordinary profits of agriculture, gain, in the
price of what they sell, the whole value of the carriage of the like
produce that is brought from more distant parts; and they save, besides,
the whole value of this carriage in the price of what they buy. Compare
the cultivation of the lands in the neighbourhood of any considerable
town, with that of those which lie at some distance from it, and you will
easily satisfy yourself how much the country is benefited by the commerce
of the town. Among all the absurd speculations that have been propagated
concerning the balance of trade, it has never been pretended that either
the country loses by its commerce with the town, or the town by that with
the country which maintains it.
As subsistence is, in the nature of things, prior to conveniency and
luxury, so the industry which procures the former, must necessarily be
prior to that which ministers to the latter. The cultivation and
improvement of the country, therefore, which affords subsistence, must,
necessarily, be prior to the increase of the town, which furnishes only
the means of conveniency and luxury. It is the surplus produce of the
country only, or what is over and above the maintenance of the
cultivators, that constitutes the subsistence of the town, which can
therefore increase only with the increase of the surplus produce. The
town, indeed, may not always derive its whole subsistence from the country
in its neighbourhood, or even from the territory to which it belongs, but
from very distant countries; and this, though it forms no exception from
the general rule, has occasioned considerable variations in the progress
of opulence in different ages and nations.
That order of things which necessity imposes, in general, though not in
every particular country, is in every particular country promoted by the
natural inclinations of man. If human institutions had never thwarted
those natural inclinations, the towns could nowhere have increased beyond
what the improvement and cultivation of the territory in which they were
situated could support; till such time, at least, as the whole of that
territory was completely cultivated and improved. Upon equal, or nearly
equal profits, most men will choose to employ their capitals, rather in
the improvement and cultivation of land, than either in manufactures or in
foreign trade. The man who employs his capital in land, has it more under
his view and command; and his fortune is much less liable to accidents
than that of the trader, who is obliged frequently to commit it, not only
to the winds and the waves, but to the more uncertain elements of human
folly and injustice, by giving great credits, in distant countries, to men
with whose character and situation he can seldom be thoroughly acquainted.
The capital of the landlord, on the contrary, which is fixed in the
improvement of his land, seems to be as well secured as the nature of
human affairs can admit of. The beauty of the country, besides, the
pleasure of a country life, the tranquillity of mind which it promises,
and, wherever the injustice of human laws does not disturb it, the
independency which it really affords, have charms that, more or less,
attract everybody; and as to cultivate the ground was the original
destination of man, so, in every stage of his existence, he seems to
retain a predilection for this primitive employment.
Without the assistance of some artificers, indeed, the cultivation of land
cannot be carried on, but with great inconveniency and continual
interruption. Smiths, carpenters, wheelwrights and ploughwrights, masons
and bricklayers, tanners, shoemakers, and tailors, are people whose
service the farmer has frequent occasion for. Such artificers, too, stand
occasionally in need of the assistance of one another; and as their
residence is not, like that of the farmer, necessarily tied down to a
precise spot, they naturally settle in the neighbourhood of one another,
and thus form a small town or village. The butcher, the brewer, and the
baker, soon join them, together with many other artificers and retailers,
necessary or useful for supplying their occasional wants, and who
contribute still further to augment the town. The inhabitants of the town,
and those of the country, are mutually the servants of one another. The
town is a continual fair or market, to which the inhabitants of the
country resort, in order to exchange their rude for manufactured produce.
It is this commerce which supplies the inhabitants of the town, both with
the materials of their work, and the means of their subsistence. The
quantity of the finished work which they sell to the inhabitants of the
country, necessarily regulates the quantity of the materials and
provisions which they buy. Neither their employment nor subsistence,
therefore, can augment, but in proportion to the augmentation of the
demand from the country for finished work; and this demand can augment
only in proportion to the extension of improvement and cultivation. Had
human institutions, therefore, never disturbed the natural course of
things, the progressive wealth and increase of the towns would, in every
political society, be consequential, and in proportion to the improvement
and cultivation of the territory of country.
In our North American colonies, where uncultivated land is still to be had
upon easy terms, no manufactures for distant sale have ever yet been
established in any of their towns. When an artificer has acquired a little
more stock than is necessary for carrying on his own business in supplying
the neighbouring country, he does not, in North America, attempt to
establish with it a manufacture for more distant sale, but employs it in
the purchase and improvement of uncultivated land. From artificer he
becomes planter; and neither the large wages nor the easy subsistence
which that country affords to artificers, can bribe him rather to work for
other people than for himself. He feels that an artificer is the servant
of his customers, from whom he derives his subsistence; but that a planter
who cultivates his own land, and derives his necessary subsistence from
the labour of his own family, is really a master, and independent of all
the world.
In countries, on the contrary, where there is either no uncultivated land,
or none that can be had upon easy terms, every artificer who has acquired
more stock than he can employ in the occasional jobs of the neighbourhood,
endeavours to prepare work for more distant sale. The smith erects some
sort of iron, the weaver some sort of linen or woollen manufactory. Those
different manufactures come, in process of time, to be gradually
subdivided, and thereby improved and refined in a great variety of ways,
which may easily be conceived, and which it is therefore unnecessary to
explain any farther.
In seeking for employment to a capital, manufactures are, upon equal or
nearly equal profits, naturally preferred to foreign commerce, for the
same reason that agriculture is naturally preferred to manufactures. As
the capital of the landlord or farmer is more secure than that of the
manufacturer, so the capital of the manufacturer, being at all times more
within his view and command, is more secure than that of the foreign
merchant. In every period, indeed, of every society, the surplus part both
of the rude and manufactured produce, or that for which there is no demand
at home, must be sent abroad, in order to be exchanged for something for
which there is some demand at home. But whether the capital which carries
this surplus produce abroad be a foreign or a domestic one, is of very
little importance. If the society has not acquired sufficient capital,
both to cultivate all its lands, and to manufacture in the completest
manner the whole of its rude produce, there is even a considerable
advantage that the rude produce should be exported by a foreign capital,
in order that the whole stock of the society may be employed in more
useful purposes. The wealth of ancient Egypt, that of China and Indostan,
sufficiently demonstrate that a nation may attain a very high degree of
opulence, though the greater part of its exportation trade be carried on
by foreigners. The progress of our North American and West Indian
colonies, would have been much less rapid, had no capital but what
belonged to themselves been employed in exporting their surplus produce.
According to the natural course of things, therefore, the greater part of
the capital of every growing society is, first, directed to agriculture,
afterwards to manufactures, and, last of all, to foreign commerce. This
order of things is so very natural, that in every society that had any
territory, it has always, I believe, been in some degree observed. Some of
their lands must have been cultivated before any considerable towns could
be established, and some sort of coarse industry of the manufacturing kind
must have been carried on in those towns, before they could well think of
employing themselves in foreign commerce.
But though this natural order of things must have taken place in some
degree in every such society, it has, in all the modern states of Europe,
been in many respects entirely inverted. The foreign commerce of some of
their cities has introduced all their finer manufactures, or such as were
fit for distant sale; and manufactures and foreign commerce together have
given birth to the principal improvements of agriculture. The manners and
customs which the nature of their original government introduced, and
which remained after that government was greatly altered, necessarily
forced them into this unnatural and retrograde order.
CHAPTER II.
OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE.
When the German and Scythian nations overran the western provinces of the
Roman empire, the confusions which followed so great a revolution lasted
for several centuries. The rapine and violence which the barbarians
exercised against the ancient inhabitants, interrupted the commerce
between the towns and the country. The towns were deserted, and the
country was left uncultivated; and the western provinces of Europe, which
had enjoyed a considerable degree of opulence under the Roman empire, sunk
into the lowest state of poverty and barbarism. During the continuance of
those confusions, the chiefs and principal leaders of those nations
acquired, or usurped to themselves, the greater part of the lands of those
countries. A great part of them was uncultivated; but no part of them,
whether cultivated or uncultivated, was left without a proprietor. All of
them were engrossed, and the greater part by a few great proprietors.
This original engrossing of uncultivated lands, though a great, might have
been but a transitory evil. They might soon have been divided again, and
broke into small parcels, either by succession or by alienation. The law
of primogeniture hindered them from being divided by succession; the
introduction of entails prevented their being broke into small parcels by
alienation.
When land, like moveables, is considered as the means only of subsistence
and enjoyment, the natural law of succession divides it, like them, among
all the children of the family; of all of whom the subsistence and
enjoyment may be supposed equally dear to the father. This natural law of
succession, accordingly, took place among the Romans who made no more
distinction between elder and younger, between male and female, in the
inheritance of lands, than we do in the distribution of moveables. But
when land was considered as the means, not of subsistence merely, but of
power and protection, it was thought better that it should descend
undivided to one. In those disorderly times, every great landlord was a
sort of petty prince. His tenants were his subjects. He was their judge,
and in some respects their legislator in peace and their leader in war. He
made war according to his own discretion, frequently against his
neighbours, and sometimes against his sovereign. The security of a landed
estate, therefore, the protection which its owner could afford to those
who dwelt on it, depended upon its greatness. To divide it was to ruin it,
and to expose every part of it to be oppressed and swallowed up by the
incursions of its neighbours. The law of primogeniture, therefore, came to
take place, not immediately indeed, but in process of time, in the
succession of landed estates, for the same reason that it has generally
taken place in that of monarchies, though not always at their first
institution. That the power, and consequently the security of the
monarchy, may not be weakened by division, it must descend entire to one
of the children. To which of them so important a preference shall be
given, must be determined by some general rule, founded not upon the
doubtful distinctions of personal merit, but upon some plain and evident
difference which can admit of no dispute. Among the children of the same
family there can be no indisputable difference but that of sex, and that
of age. The male sex is universally preferred to the female; and when all
other things are equal, the elder everywhere takes place of the younger.
Hence the origin of the right of primogeniture, and of what is called
lineal succession.
Laws frequently continue in force long after the circumstances which first
gave occasion to them, and which could alone render them reasonable, are
no more. In the present state of Europe, the proprietor of a single acre
of land is as perfectly secure in his possession as the proprietor of
100,000. The right of primogeniture, however, still continues to be
respected; and as of all institutions it is the fittest to support the
pride of family distinctions, it is still likely to endure for many
centuries. In every other respect, nothing can be more contrary to the
real interest of a numerous family, than a right which, in order to enrich
one, beggars all the rest of the children.
Entails are the natural consequences of the law of primogeniture. They
were introduced to preserve a certain lineal succession, of which the law
of primogeniture first gave the idea, and to hinder any part of the
original estate from being carried out of the proposed line, either by
gift, or device, or alienation; either by the folly, or by the misfortune
of any of its successive owners. They were altogether unknown to the
Romans. Neither their substitutions, nor fidei commisses, bear any
resemblance to entails, though some French lawyers have thought proper to
dress the modern institution in the language and garb of those ancient
ones.
When great landed estates were a sort of principalities, entails might not
be unreasonable. Like what are called the fundamental laws of some
monarchies, they might frequently hinder the security of thousands from
being endangered by the caprice or extravagance of one man. But in the
present state of Europe, when small as well as great estates derive their
security from the laws of their country, nothing can be more completely
absurd. They are founded upon the most absurd of all suppositions, the
supposition that every successive generation of men have not an equal
right to the earth, and to all that it possesses; but that the property of
the present generation should be restrained and regulated according to the
fancy of those who died, perhaps five hundred years ago. Entails, however,
are still respected, through the greater part of Europe; In those
countries, particularly, in which noble birth is a necessary qualification
for the enjoyment either of civil or military honours. Entails are thought
necessary for maintaining this exclusive privilege of the nobility to the
great offices and honours of their country; and that order having usurped
one unjust advantage over the rest of their fellow-citizens, lest their
poverty should render it ridiculous, it is thought reasonable that they
should have another. The common law of England, indeed, is said to abhor
perpetuities, and they are accordingly more restricted there than in any
other European monarchy; though even England is not altogether without
them. In Scotland, more than one fifth, perhaps more than one third part
of the whole lands in the country, are at present supposed to be under
strict entail.
Great tracts of uncultivated land were in this manner not only engrossed
by particular families, but the possibility of their being divided again
was as much as possible precluded for ever. It seldom happens, however,
that a great proprietor is a great improver. In the disorderly times which
gave birth to those barbarous institutions, the great proprietor was
sufficiently employed in defending his own territories, or in extending
his jurisdiction and authority over those of his neighbours. He had no
leisure to attend to the cultivation and improvement of land. When the
establishment of law and order afforded him this leisure, he often wanted
the inclination, and almost always the requisite abilities. If the expense
of his house and person either equalled or exceeded his revenue, as it did
very frequently, he had no stock to employ in this manner. If he was an
economist, he generally found it more profitable to employ his annual
savings in new purchases than in the improvement of his old estate. To
improve land with profit, like all other commercial projects, requires an
exact attention to small savings and small gains, of which a man born to a
great fortune, even though naturally frugal, is very seldom capable. The
situation of such a person naturally disposes him to attend rather to
ornament, which pleases his fancy, than to profit, for which he has so
little occasion. The elegance of his dress, of his equipage, of his house
and household furniture, are objects which, from his infancy, he has been
accustomed to have some anxiety about. The turn of mind which this habit
naturally forms, follows him when he comes to think of the improvement of
land. He embellishes, perhaps, four or five hundred acres in the
neighbourhood of his house, at ten times the expense which the land is
worth after all his improvements; and finds, that if he was to improve his
whole estate in the same manner, and he has little taste for any other, he
would be a bankrupt before he had finished the tenth part of it. There
still remain, in both parts of the united kingdom, some great estates
which have continued, without interruption, in the hands of the same
family since the times of feudal anarchy. Compare the present condition of
those estates with the possessions of the small proprietors in their
neighbourhood, and you will require no other argument to convince you how
unfavourable such extensive property is to improvement.
If little improvement was to be expected from such great proprietors,
still less was to be hoped for from those who occupied the land under
them. In the ancient state of Europe, the occupiers of land were all
tenants at will. They were all, or almost all, slaves, but their slavery
was of a milder kind than that known among the ancient Greeks and Romans,
or even in our West Indian colonies. They were supposed to belong more
directly to the land than to their master. They could, therefore, be sold
with it, but not separately. They could marry, provided it was with the
consent of their master; and he could not afterwards dissolve the marriage
by selling the man and wife to different persons. If he maimed or murdered
any of them, he was liable to some penalty, though generally but to a
small one. They were not, however, capable of acquiring property. Whatever
they acquired was acquired to their master, and he could take it from them
at pleasure. Whatever cultivation and improvement could be carried on by
means of such slaves, was properly carried on by their master. It was at
his expense. The seed, the cattle, and the instruments of husbandry, were
all his. It was for his benefit. Such slaves could acquire nothing but
their daily maintenance. It was properly the proprietor himself,
therefore, that in this case occupied his own lands, and cultivated them
by his own bondmen. This species of slavery still subsists in Russia,
Poland, Hungary, Bohemia, Moravia, and other parts of Germany. It is only
in the western and south-western provinces of Europe that it has gradually
been abolished altogether.
But if great improvements are seldom to be expected from great
proprietors, they are least of all to be expected when they employ slaves
for their workmen. The experience of all ages and nations, I believe,
demonstrates that the work done by slaves, though it appears to cost only
their maintenance, is in the end the dearest of any. A person who can
acquire no property can have no other interest but to eat as much and to
labour as little as possible. Whatever work he does beyond what is
sufficient to purchase his own maintenance, can be squeezed out of him by
violence only, and not by any interest of his own. In ancient Italy, how
much the cultivation of corn degenerated, how unprofitable it became to
the master, when it fell under the management of slaves, is remarked both
by Pliny and Columella. In the time of Aristotle, it had not been much
better in ancient Greece. Speaking of the ideal republic described in the
laws of Plato, to maintain 5000 idle men (the number of warriors supposed
necessary for its defence), together with their women and servants, would
require, he says, a territory of boundless extent and fertility, like the
plains of Babylon.
The pride of man makes him love to domineer, and nothing mortifies him so
much as to be obliged to condescend to persuade his inferiors. Wherever
the law allows it, and the nature of the work can afford it, therefore, he
will generally prefer the service of slaves to that of freemen. The
planting of sugar and tobacco can afford the expense of slave cultivation.
The raising of corn, it seems, in the present times, cannot. In the
English colonies, of which the principal produce is corn, the far greater
part of the work is done by freemen. The late resolution of the Quakers in
Pennsylvania, to set at liberty all their negro slaves, may satisfy us
that their number cannot be very great. Had they made any considerable
part of their property, such a resolution could never have been agreed to.
In our sugar colonies., on the contrary, the whole work is done by slaves,
and in our tobacco colonies a very great part of it. The profits of a
sugar plantation in any of our West Indian colonies, are generally much
greater than those of any other cultivation that is known either in Europe
or America; and the profits of a tobacco plantation, though inferior to
those of sugar, are superior to those of corn, as has already been
observed. Both can afford the expense of slave cultivation but sugar can
afford it still better than tobacco. The number of negroes, accordingly,
is much greater, in proportion to that of whites, in our sugar than in our
tobacco colonies.
To the slave cultivators of ancient times gradually succeeded a species of
farmers, known at present in France by the name of metayers. They are
called in Latin Coloni Partiarii. They have been so long in disuse in
England, that at present I know no English name for them. The proprietor
furnished them with the seed, cattle, and instruments of husbandry, the
whole stock, in short, necessary for cultivating the farm. The produce was
divided equally between the proprietor and the farmer, after setting aside
what was judged necessary for keeping up the stock, which was restored to
the proprietor, when the farmer either quitted or was turned out of the
farm.
Land occupied by such tenants is properly cultivated at the expense of the
proprietors, as much as that occupied by slaves. There is, however, one
very essential difference between them. Such tenants, being freemen, are
capable of acquiring property; and having a certain proportion of the
produce of the land, they have a plain interest that the whole produce
should be as great as possible, in order that their own proportion may be
so. A slave, on the contrary, who can acquire nothing but his maintenance,
consults his own ease, by making the land produce as little as possible
over and above that maintenance. It is probable that it was partly upon
account of this advantage, and partly upon account of the encroachments
which the sovereigns, always jealous of the great lords, gradually
encouraged their villains to make upon their authority, and which seem, at
least, to have been such as rendered this species of servitude altogether
inconvenient, that tenure in villanage gradually wore out through the
greater part of Europe. The time and manner, however, in which so
important a revolution was brought about, is one of the most obscure
points in modern history. The church of Rome claims great merit in it; and
it is certain, that so early as the twelfth century, Alexander III.
published a bull for the general emancipation of slaves. It seems,
however, to have been rather a pious exhortation, than a law to which
exact obedience was required from the faithful. Slavery continued to take
place almost universally for several centuries afterwards, till it was
gradually abolished by the joint operation of the two interests above
mentioned; that of the proprietor on the one hand, and that of the
sovereign on the other. A villain, enfranchised, and at the same time
allowed to continue in possession of the land, having no stock of his own,
could cultivate it only by means of what the landlord advanced to him, and
must therefore have been what the French call a metayer.
It could never, however, be the interest even of this last species of
cultivators, to lay out, in the further improvement of the land, any part
of the little stock which they might save from their own share of the
produce; because the landlord, who laid out nothing, was to get one half
of whatever it produced. The tithe, which is but a tenth of the produce,
is found to be a very great hindrance to improvement. A tax, therefore,
which amounted to one half, must have been an effectual bar to it. It
might be the interest of a metayer to make the land produce as much as
could be brought out of it by means of the stock furnished by the
proprietor; but it could never be his interest to mix any part of his own
with it. In France, where five parts out of six of the whole kingdom are
said to be still occupied by this species of cultivators, the proprietors
complain, that their metayers take every opportunity of employing their
master’s cattle rather in carriage than in cultivation; because, in the
one case, they get the whole profits to themselves, in the other they
share them with their landlord. This species of tenants still subsists in
some parts of Scotland. They are called steel-bow tenants. Those ancient
English tenants, who are said by Chief-Baron Gilbert and Dr Blackstone to
have been rather bailiffs of the landlord than farmers, properly so
called, were probably of the same kind.
To this species of tenantry succeeded, though by very slow degrees,
farmers, properly so called, who cultivated the land with their own stock,
paying a rent certain to the landlord. When such farmers have a lease for
a term of years, they may sometimes find it for their interest to lay out
part of their capital in the further improvement of the farm; because they
may sometimes expect to recover it, with a large profit, before the
expiration of the lease. The possession, even of such farmers, however,
was long extremely precarious, and still is so in many parts of Europe.
They could, before the expiration of their term, be legally ousted of
their leases by a new purchaser; in England, even, by the fictitious
action of a common recovery. If they were turned out illegally by the
violence of their master, the action by which they obtained redress was
extremely imperfect. It did not always reinstate them in the possession of
the land, but gave them damages, which never amounted to a real loss. Even
in England, the country, perhaps of Europe, where the yeomanry has always
been most respected, it was not till about the 14th of Henry VII. that the
action of ejectment was invented, by which the tenant recovers, not
damages only, but possession, and in which his claim is not necessarily
concluded by the uncertain decision of a single assize. This action has
been found so effectual a remedy, that, in the modern practice, when the
landlord has occasion to sue for the possession of the land, he seldom
makes use of the actions which properly belong to him as a landlord, the
writ of right or the writ of entry, but sues in the name of his tenant, by
the writ of ejectment. In England, therefore the security of the tenant is
equal to that of the proprietor. In England, besides, a lease for life of
forty shillings a-year value is a freehold, and entitles the lessee to a
vote for a member of parliament; and as a great part of the yeomanry have
freeholds of this kind, the whole order becomes respectable to their
landlords, on account of the political consideration which this gives
them. There is, I believe, nowhere in Europe, except in England, any
instance of the tenant building upon the land of which he had no lease,
and trusting that the honour of his landlord would take no advantage of so
important an improvement. Those laws and customs, so favourable to the
yeomanry, have perhaps contributed more to the present grandeur of
England, than all their boasted regulations of commerce taken together.
The law which secures the longest leases against successors of every kind,
is, so far as I know, peculiar to Great Britain. It was introduced into
Scotland so early as 1449, by a law of James II. Its beneficial influence,
however, has been much obstructed by entails; the heirs of entail being
generally restrained from letting leases for any long term of years,
frequently for more than one year. A late act of parliament has, in this
respect, somewhat slackened their fetters, though they are still by much
too strait. In Scotland, besides, as no leasehold gives a vote for a
member of parliament, the yeomanry are upon this account less respectable
to their landlords than in England.
In other parts of Europe, after it was found convenient to secure tenants
both against heirs and purchasers, the term of their security was still
limited to a very short period; in France, for example, to nine years from
the commencement of the lease. It has in that country, indeed, been lately
extended to twentyseven, a period still too short to encourage the tenant
to make the most important improvements. The proprietors of land were
anciently the legislators of every part of Europe. The laws relating to
land, therefore, were all calculated for what they supposed the interest
of the proprietor. It was for his interest, they had imagined, that no
lease granted by any of his predecessors should hinder him from enjoying,
during a long term of years, the full value of his land. Avarice and
injustice are always short-sighted, and they did not foresee how much this
regulation must obstruct improvement, and thereby hurt, in the long-run,
the real interest of the landlord.
The farmers, too, besides paying the rent, were anciently, it was
supposed, bound to perform a great number of services to the landlord,
which were seldom either specified in the lease, or regulated by any
precise rule, but by the use and wont of the manor or barony. These
services, therefore, being almost entirely arbitrary, subjected the tenant
to many vexations. In Scotland the abolition of all services not precisely
stipulated in the lease, has, in the course of a few years, very much
altered for the better the condition of the yeomanry of that country.
The public services to which the yeomanry were bound, were not less
arbitrary than the private ones. To make and maintain the high roads, a
servitude which still subsists, I believe, everywhere, though with
different degrees of oppression in different countries, was not the only
one. When the king’s troops, when his household, or his officers of any
kind, passed through any part of the country, the yeomanry were bound to
provide them with horses, carriages, and provisions, at a price regulated
by the purveyor. Great Britain is, I believe, the only monarchy in Europe
where the oppression of purveyance has been entirely abolished. It still
subsists in France and Germany.
The public taxes, to which they were subject, were as irregular and
oppressive as the services. The ancient lords, though extremely unwilling
to grant, themselves, any pecuniary aid to their sovereign, easily allowed
him to tallage, as they called it, their tenants, and had not knowledge
enough to foresee how much this must, in the end, affect their own
revenue. The taille, as it still subsists in France may serve as an
example of those ancient tallages. It is a tax upon the supposed profits
of the farmer, which they estimate by the stock that he has upon the farm.
It is his interest, therefore, to appear to have as little as possible,
and consequently to employ as little as possible in its cultivation, and
none in its improvement. Should any stock happen to accumulate in the
hands of a French farmer, the taille is almost equal to a prohibition of
its ever being employed upon the land. This tax, besides, is supposed to
dishonour whoever is subject to it, and to degrade him below, not only the
rank of a gentleman, but that of a burgher; and whoever rents the lands of
another becomes subject to it. No gentleman, nor even any burgher, who has
stock, will submit to this degradation. This tax, therefore, not only
hinders the stock which accumulates upon the land from being employed in
its improvement, but drives away all other stock from it. The ancient
tenths and fifteenths, so usual in England in former times, seem, so far
as they affected the land, to have been taxes of the same nature with the
taille.
Under all these discouragements, little improvement could be expected from
the occupiers of land. That order of people, with all the liberty and
security which law can give, must always improve under great disadvantage.
The farmer, compared with the proprietor, is as a merchant who trades with
burrowed money, compared with one who trades with his own. The stock of
both may improve; but that of the one, with only equal good conduct, must
always improve more slowly than that of the other, on account of the large
share of the profits which is consumed by the interest of the loan. The
lands cultivated by the farmer must, in the same manner, with only equal
good conduct, be improved more slowly than those cultivated by the
proprietor, on account of the large share of the produce which is consumed
in the rent, and which, had the farmer been proprietor, he might have
employed in the further improvement of the land. The station of a farmer,
besides, is, from the nature of things, inferior to that of a proprietor.
Through the greater part of Europe, the yeomanry are regarded as an
inferior rank of people, even to the better sort of tradesmen and
mechanics, and in all parts of Europe to the great merchants and master
manufacturers. It can seldom happen, therefore, that a man of any
considerable stock should quit the superior, in order to place himself in
an inferior station. Even in the present state of Europe, therefore,
little stock is likely to go from any other profession to the improvement
of land in the way of farming. More does, perhaps, in Great Britain than
in any other country, though even there the great stocks which are in some
places employed in farming, have generally been acquired by fanning, the
trade, perhaps, in which, of all others, stock is commonly acquired most
slowly. After small proprietors, however, rich and great farmers are in
every country the principal improvers. There are more such, perhaps, in
England than in any other European monarchy. In the republican governments
of Holland, and of Berne in Switzerland, the farmers are said to be not
inferior to those of England.
The ancient policy of Europe was, over and above all this, unfavourable to
the improvement and cultivation of land, whether carried on by the
proprietor or by the farmer; first, by the general prohibition of the
exportation of corn, without a special licence, which seems to have been a
very universal regulation; and, secondly, by the restraints which were
laid upon the inland commerce, not only of corn, but of almost every other
part of the produce of the farm, by the absurd laws against engrossers,
regraters, and forestallers, and by the privileges of fairs and markets.
It has already been observed in what manner the prohibition of the
exportation of corn, together with some encouragement given to the
importation of foreign corn, obstructed the cultivation of ancient Italy,
naturally the most fertile country in Europe, and at that time the seat of
the greatest empire in the world. To what degree such restraints upon the
inland commerce of this commodity, joined to the general prohibition of
exportation, must have discouraged the cultivation of countries less
fertile, and less favourably circumstanced, it is not, perhaps, very easy
to imagine.
CHAPTER III.
OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE.
The inhabitants of cities and towns were, after the fall of the Roman
empire, not more favoured than those of the country. They consisted,
indeed, of a very different order of people from the first inhabitants of
the ancient republics of Greece and Italy. These last were composed
chiefly of the proprietors of lands, among whom the public territory was
originally divided, and who found it convenient to build their houses in
the neighbourhood of one another, and to surround them with a wall, for
the sake of common defence. After the fall of the Roman empire, on the
contrary, the proprietors of land seem generally to have lived in
fortified castles on their own estates, and in the midst of their own
tenants and dependants. The towns were chiefly inhabited by tradesmen and
mechanics, who seem, in those days, to have been of servile, or very
nearly of servile condition. The privileges which we find granted by
ancient charters to the inhabitants of some of the principal towns in
Europe, sufficiently show what they were before those grants. The people
to whom it is granted as a privilege, that they might give away their own
daughters in marriage without the consent of their lord, that upon their
death their own children, and not their lord, should succeed to their
goods, and that they might dispose of their own effects by will, must,
before those grants, have been either altogether, or very nearly, in the
same state of villanage with the occupiers of land in the country.
They seem, indeed, to have been a very poor, mean set of people, who
seemed to travel about with their goods from place to place, and from fair
to fair, like the hawkers and pedlars of the present times. In all the
different countries of Europe then, in the same manner as in several of
the Tartar governments of Asia at present, taxes used to be levied upon
the persons and goods of travellers, when they passed through certain
manors, when they went over certain bridges, when they carried about their
goods from place to place in a fair, when they erected in it a booth or
stall to sell them in. These different taxes were known in England by the
names of passage, pontage, lastage, and stallage. Sometimes the king,
sometimes a great lord, who had, it seems, upon some occasions, authority
to do this, would grant to particular traders, to such particularly as
lived in their own demesnes, a general exemption from such taxes. Such
traders, though in other respects of servile, or very nearly of servile
condition, were upon this account called free traders. They, in return,
usually paid to their protector a sort of annual poll-tax. In those days
protection was seldom granted without a valuable consideration, and this
tax might perhaps be considered as compensation for what their patrons
might lose by their exemption from other taxes. At first, both those
poll-taxes and those exemptions seem to have been altogether personal, and
to have affected only particular individuals, during either their lives,
or the pleasure of their protectors. In the very imperfect accounts which
have been published from Doomsday-book, of several of the towns of
England, mention is frequently made, sometimes of the tax which particular
burghers paid, each of them, either to the king, or to some other great
lord, for this sort of protection, and sometimes of the general amount
only of all those taxes. {see Brady’s Historical Treatise of Cities and
Boroughs, p. 3. etc.}
But how servile soever may have been originally the condition of the
inhabitants of the towns, it appears evidently, that they arrived at
liberty and independency much earlier than the occupiers of land in the
country. That part of the king’s revenue which arose from such poll-taxes
in any particular town, used commonly to be let in farm, during a term of
years, for a rent certain, sometimes to the sheriff of the county, and
sometimes to other persons. The burghers themselves frequently got credit
enough to be admitted to farm the revenues of this sort which arose out of
their own town, they becoming jointly and severally answerable for the
whole rent. {See Madox, Firma Burgi, p. 18; also History of the Exchequer,
chap. 10, sect. v, p. 223, first edition.} To let a farm in this manner,
was quite agreeable to the usual economy of, I believe, the sovereigns of
all the different countries of Europe, who used frequently to let whole
manors to all the tenants of those manors, they becoming jointly and
severally answerable for the whole rent; but in return being allowed to
collect it in their own way, and to pay it into the king’s exchequer by
the hands of their own bailiff, and being thus altogether freed from the
insolence of the king’s officers; a circumstance in those days regarded as
of the greatest importance.
At first, the farm of the town was probably let to the burghers, in the
same manner as it had been to other farmers, for a term of years only. In
process of time, however, it seems to have become the general practice to
grant it to them in fee, that is for ever, reserving a rent certain, never
afterwards to be augmented. The payment having thus become perpetual, the
exemptions, in return, for which it was made, naturally became perpetual
too. Those exemptions, therefore, ceased to be personal, and could not
afterwards be considered as belonging to individuals, as individuals, but
as burghers of a particular burgh, which, upon this account, was called a
free burgh, for the same reason that they had been called free burghers or
free traders.
Along with this grant, the important privileges, above mentioned, that
they might give away their own daughters in marriage, that their children
should succeed to them, and that they might dispose of their own effects
by will, were generally bestowed upon the burghers of the town to whom it
was given. Whether such privileges had before been usually granted, along
with the freedom of trade, to particular burghers, as individuals, I know
not. I reckon it not improbable that they were, though I cannot produce
any direct evidence of it. But however this may have been, the principal
attributes of villanage and slavery being thus taken away from them, they
now at least became really free, in our present sense of the word freedom.
Nor was this all. They were generally at the same time erected into a
commonalty or corporation, with the privilege of having magistrates and a
town-council of their own, of making bye-laws for their own government, of
building walls for their own defence, and of reducing all their
inhabitants under a sort of military discipline, by obliging them to watch
and ward; that is, as anciently understood, to guard and defend those
walls against all attacks and surprises, by night as well as by day. In
England they were generally exempted from suit to the hundred and county
courts: and all such pleas as should arise among them, the pleas of the
crown excepted, were left to the decision of their own magistrates. In
other countries, much greater and more extensive jurisdictions were
frequently granted to them. {See Madox, Firma Burgi. See also Pfeffel in
the Remarkable events under Frederick II. and his Successors of the House
of Suabia.}
It might, probably, be necessary to grant to such towns as were admitted
to farm their own revenues, some sort of compulsive jurisdiction to oblige
their own citizens to make payment. In those disorderly times, it might
have been extremely inconvenient to have left them to seek this sort of
justice from any other tribunal. But it must seem extraordinary, that the
sovereigns of all the different countries of Europe should have exchanged
in this manner for a rent certain, never more to be augmented, that branch
of their revenue, which was, perhaps, of all others, the most likely to be
improved by the natural course of things, without either expense or
attention of their own; and that they should, besides, have in this manner
voluntarily erected a sort of independent republics in the heart of their
own dominions.
In order to understand this, it must be remembered, that, in those days,
the sovereign of perhaps no country in Europe was able to protect, through
the whole extent of his dominions, the weaker part of his subjects from
the oppression of the great lords. Those whom the law could not protect,
and who were not strong enough to defend themselves, were obliged either
to have recourse to the protection of some great lord, and in order to
obtain it, to become either his slaves or vassals; or to enter into a
league of mutual defence for the common protection of one another. The
inhabitants of cities and burghs, considered as single individuals, had no
power to defend themselves; but by entering into a league of mutual
defence with their neighbours, they were capable of making no contemptible
resistance. The lords despised the burghers, whom they considered not only
as a different order, but as a parcel of emancipated slaves, almost of a
different species from themselves. The wealth of the burghers never failed
to provoke their envy and indignation, and they plundered them upon every
occasion without mercy or remorse. The burghers naturally hated and feared
the lords. The king hated and feared them too; but though, perhaps, he
might despise, he had no reason either to hate or fear the burghers.
Mutual interest, therefore, disposed them to support the king, and the
king to support them against the lords. They were the enemies of his
enemies, and it was his interest to render them as secure and independent
of those enemies as he could. By granting them magistrates of their own,
the privilege of making bye-laws for their own government, that of
building walls for their own defence, and that of reducing all their
inhabitants under a sort of military discipline, he gave them all the
means of security and independency of the barons which it was in his power
to bestow. Without the establishment of some regular government of this
kind, without some authority to compel their inhabitants to act according
to some certain plan or system, no voluntary league of mutual defence
could either have afforded them any permanent security, or have enabled
them to give the king any considerable support. By granting them the farm
of their own town in fee, he took away from those whom he wished to have
for his friends, and, if one may say so, for his allies, all ground of
jealousy and suspicion, that he was ever afterwards to oppress them,
either by raising the farm-rent of their town, or by granting it to some
other farmer.
The princes who lived upon the worst terms with their barons, seem
accordingly to have been the most liberal in grants of this kind to their
burghs. King John of England, for example, appears to have been a most
munificent benefactor to his towns. {See Madox.} Philip I. of France lost
all authority over his barons. Towards the end of his reign, his son
Lewis, known afterwards by the name of Lewis the Fat, consulted, according
to Father Daniel, with the bishops of the royal demesnes, concerning the
most proper means of restraining the violence of the great lords. Their
advice consisted of two different proposals. One was to erect a new order
of jurisdiction, by establishing magistrates and a town-council in every
considerable town of his demesnes. The other was to form a new militia, by
making the inhabitants of those towns, under the command of their own
magistrates, march out upon proper occasions to the assistance of the
king. It is from this period, according to the French antiquarians, that
we are to date the institution of the magistrates and councils of cities
in France. It was during the unprosperous reigns of the princes of the
house of Suabia, that the greater part of the free towns of Germany
received the first grants of their privileges, and that the famous
Hanseatic league first became formidable. {See Pfeffel.}
The militia of the cities seems, in those times, not to have been inferior
to that of the country; and as they could be more readily assembled upon
any sudden occasion, they frequently had the advantage in their disputes
with the neighbouring lords. In countries such as Italy or Switzerland, in
which, on account either of their distance from the principal seat of
government, of the natural strength of the country itself, or of some
other reason, the sovereign came to lose the whole of his authority; the
cities generally became independent republics, and conquered all the
nobility in their neighbourhood; obliging them to pull down their castles
in the country, and to live, like other peaceable inhabitants, in the
city. This is the short history of the republic of Berne, as well as of
several other cities in Switzerland. If you except Venice, for of that
city the history is somewhat different, it is the history of all the
considerable Italian republics, of which so great a number arose and
perished between the end of the twelfth and the beginning of the sixteenth
century.
In countries such as France and England, where the authority of the
sovereign, though frequently very low, never was destroyed altogether, the
cities had no opportunity of becoming entirely independent. They became,
however, so considerable, that the sovereign could impose no tax upon
them, besides the stated farm-rent of the town, without their own consent.
They were, therefore, called upon to send deputies to the general assembly
of the states of the kingdom, where they might join with the clergy and
the barons in granting, upon urgent occasions, some extraordinary aid to
the king. Being generally, too, more favourable to his power, their
deputies seem sometimes to have been employed by him as a counterbalance
in those assemblies to the authority of the great lords. Hence the origin
of the representation of burghs in the states-general of all great
monarchies in Europe.
Order and good government, and along with them the liberty and security of
individuals, were in this manner established in cities, at a time when the
occupiers of land in the country, were exposed to every sort of violence.
But men in this defenceless state naturally content themselves with their
necessary subsistence; because, to acquire more, might only tempt the
injustice of their oppressors. On the contrary, when they are secure of
enjoying the fruits of their industry, they naturally exert it to better
their condition, and to acquire not only the necessaries, but the
conveniencies and elegancies of life. That industry, therefore, which aims
at something more than necessary subsistence, was established in cities
long before it was commonly practised by the occupiers of land in the
country. If, in the hands of a poor cultivator, oppressed with the
servitude of villanage, some little stock should accumulate, he would
naturally conceal it with great care from his master, to whom it would
otherwise have belonged, and take the first opportunity of running away to
a town. The law was at that time so indulgent to the inhabitants of towns,
and so desirous of diminishing the authority of the lords over those of
the country, that if he could conceal himself there from the pursuit of
his lord for a year, he was free for ever. Whatever stock, therefore,
accumulated in the hands of the industrious part of the inhabitants of the
country, naturally took refuge in cities, as the only sanctuaries in which
it could be secure to the person that acquired it.
The inhabitants of a city, it is true, must always ultimately derive their
subsistence, and the whole materials and means of their industry, from the
country. But those of a city, situated near either the sea-coast or the
banks of a navigable river, are not necessarily confined to derive them
from the country in their neighbourhood. They have a much wider range, and
may draw them from the most remote corners of the world, either in
exchange for the manufactured produce of their own industry, or by
performing the office of carriers between distant countries, and
exchanging the produce of one for that of another. A city might, in this
manner, grow up to great wealth and splendour, while not only the country
in its neighbourhood, but all those to which it traded, were in poverty
and wretchedness. Each of those countries, perhaps, taken singly, could
afford it but a small part, either of its subsistence or of its
employment; but all of them taken together, could afford it both a great
subsistence and a great employment. There were, however, within the narrow
circle of the commerce of those times, some countries that were opulent
and industrious. Such was the Greek empire as long as it subsisted, and
that of the Saracens during the reigns of the Abassides. Such, too, was
Egypt till it was conquered by the Turks, some part of the coast of
Barbary, and all those provinces of Spain which were under the government
of the Moors.
The cities of Italy seem to have been the first in Europe which were
raised by commerce to any considerable degree of opulence. Italy lay in
the centre of what was at that time the improved and civilized part of the
world. The crusades, too, though, by the great waste of stock and
destruction of inhabitants which they occasioned, they must necessarily
have retarded the progress of the greater part of Europe, were extremely
favourable to that of some Italian cities. The great armies which marched
from all parts to the conquest of the Holy Land, gave extraordinary
encouragement to the shipping of Venice, Genoa, and Pisa, sometimes in
transporting them thither, and always in supplying them with provisions.
They were the commissaries, if one may say so, of those armies; and the
most destructive frenzy that ever befel the European nations, was a source
of opulence to those republics.
The inhabitants of trading cities, by importing the improved manufactures
and expensive luxuries of richer countries, afforded some food to the
vanity of the great proprietors, who eagerly purchased them with great
quantities of the rude produce of their own lands. The commerce of a great
part of Europe in those times, accordingly, consisted chiefly in the
exchange of their own rude, for the manufactured produce of more civilized
nations. Thus the wool of England used to be exchanged for the wines of
France, and the fine cloths of Flanders, in the same manner as the corn in
Poland is at this day, exchanged for the wines and brandies of France, and
for the silks and velvets of France and Italy.
A taste for the finer and more improved manufactures was, in this manner,
introduced by foreign commerce into countries where no such works were
carried on. But when this taste became so general as to occasion a
considerable demand, the merchants, in order to save the expense of
carriage, naturally endeavoured to establish some manufactures of the same
kind in their own country. Hence the origin of the first manufactures for
distant sale, that seem to have been established in the western provinces
of Europe, after the fall of the Roman empire.
No large country, it must be observed, ever did or could subsist without
some sort of manufactures being carried on in it; and when it is said of
any such country that it has no manufactures, it must always be understood
of the finer and more improved, or of such as are fit for distant sale. In
every large country both the clothing and household furniture or the far
greater part of the people, are the produce of their own industry. This is
even more universally the case in those poor countries which are commonly
said to have no manufactures, than in those rich ones that are said to
abound in them. In the latter you will generally find, both in the clothes
and household furniture of the lowest rank of people, a much greater
proportion of foreign productions than in the former.
Those manufactures which are fit for distant sale, seem to have been
introduced into different countries in two different ways.
Sometimes they have been introduced in the manner above mentioned, by the
violent operation, if one may say so, of the stocks of particular
merchants and undertakers, who established them in imitation of some
foreign manufactures of the same kind. Such manufactures, therefore, are
the offspring of foreign commerce; and such seem to have been the ancient
manufactures of silks, velvets, and brocades, which flourished in Lucca
during the thirteenth century. They were banished from thence by the
tyranny of one of Machiavel’s heroes, Castruccio Castracani. In 1310, nine
hundred families were driven out of Lucca, of whom thirty-one retired to
Venice, and offered to introduce there the silk manufacture. {See Sandi
Istoria civile de Vinezia, part 2 vol. i, page 247 and 256.} Their offer
was accepted, many privileges were conferred upon them, and they began the
manufacture with three hundred workmen. Such, too, seem to have been the
manufactures of fine cloths that anciently flourished in Flanders, and
which were introduced into England in the beginning of the reign of
Elizabeth, and such are the present silk manufactures of Lyons and
Spitalfields. Manufactures introduced in this manner are generally
employed upon foreign materials, being imitations of foreign manufactures.
When the Venetian manufacture was first established, the materials were
all brought from Sicily and the Levant. The more ancient manufacture of
Lucca was likewise carried on with foreign materials. The cultivation of
mulberry trees, and the breeding of silk-worms, seem not to have been
common in the northern parts of Italy before the sixteenth century. Those
arts were not introduced into France till the reign of Charles IX. The
manufactures of Flanders were carried on chiefly with Spanish and English
wool. Spanish wool was the material, not of the first woollen manufacture
of England, but of the first that was fit for distant sale. More than one
half the materials of the Lyons manufacture is at this day foreign silk;
when it was first established, the whole, or very nearly the whole, was
so. No part of the materials of the Spitalfields manufacture is ever
likely to be the produce of England. The seat of such manufactures, as
they are generally introduced by the scheme and project of a few
individuals, is sometimes established in a maritime city, and sometimes in
an inland town, according as their interest, judgment, or caprice, happen
to determine.
At other times, manufactures for distant sale grow up naturally, and as it
were of their own accord, by the gradual refinement of those household and
coarser manufactures which must at all times be carried on even in the
poorest and rudest countries. Such manufactures are generally employed
upon the materials which the country produces, and they seem frequently to
have been first refined and improved in such inland countries as were not,
indeed, at a very great, but at a considerable distance from the
sea-coast, and sometimes even from all water carriage. An inland country,
naturally fertile and easily cultivated, produces a great surplus of
provisions beyond what is necessary for maintaining the cultivators; and
on account of the expense of land carriage, and inconveniency of river
navigation, it may frequently be difficult to send this surplus abroad.
Abundance, therefore, renders provisions cheap, and encourages a great
number of workmen to settle in the neighbourhood, who find that their
industry can there procure them more of the necessaries and conveniencies
of life than in other places. They work up the materials of manufacture
which the land produces, and exchange their finished work, or, what is the
same thing, the price of it, for more materials and provisions. They give
a new value to the surplus part of the rude produce, by saving the expense
of carrying it to the water-side, or to some distant market; and they
furnish the cultivators with something in exchange for it that is either
useful or agreeable to them, upon easier terms than they could have
obtained it before. The cultivators get a better price for their surplus
produce, and can purchase cheaper other conveniencies which they have
occasion for. They are thus both encouraged and enabled to increase this
surplus produce by a further improvement and better cultivation of the
land; and as the fertility of the land had given birth to the manufacture,
so the progress of the manufacture re-acts upon the land, and increases
still further its fertility. The manufacturers first supply the
neighbourhood, and afterwards, as their work improves and refines, more
distant markets. For though neither the rude produce, nor even the coarse
manufacture, could, without the greatest difficulty, support the expense
of a considerable land-carriage, the refined and improved manufacture
easily may. In a small bulk it frequently contains the price of a great
quantity of rude produce. A piece of fine cloth, for example which weighs
only eighty pounds, contains in it the price, not only of eighty pounds
weight of wool, but sometimes of several thousand weight of corn, the
maintenance of the different working people, and of their immediate
employers. The corn which could with difficulty have been carried abroad
in its own shape, is in this manner virtually exported in that of the
complete manufacture, and may easily be sent to the remotest corners of
the world. In this manner have grown up naturally, and, as it were, of
their own accord, the manufactures of Leeds, Halifax, Sheffield,
Birmingham, and Wolverhampton. Such manufactures are the offspring of
agriculture. In the modern history of Europe, their extension and
improvement have generally been posterior to those which were the
offspring of foreign commerce. England was noted for the manufacture of
fine cloths made of Spanish wool, more than a century before any of those
which now flourish in the places above mentioned were fit for foreign
sale. The extension and improvement of these last could not take place but
in consequence of the extension and improvement of agriculture, the last
and greatest effect of foreign commerce, and of the manufactures
immediately introduced by it, and which I shall now proceed to explain.
CHAPTER IV.
HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY.
The increase and riches of commercial and manufacturing towns contributed
to the improvement and cultivation of the countries to which they
belonged, in three different ways.
First, by affording a great and ready market for the rude produce of the
country, they gave encouragement to its cultivation and further
improvement. This benefit was not even confined to the countries in which
they were situated, but extended more or less to all those with which they
had any dealings. To all of them they afforded a market for some part
either of their rude or manufactured produce, and, consequently, gave some
encouragement to the industry and improvement of all. Their own country,
however, on account of its neighbourhood, necessarily derived the greatest
benefit from this market. Its rude produce being charged with less
carriage, the traders could pay the growers a better price for it, and yet
afford it as cheap to the consumers as that of more distant countries.
Secondly, the wealth acquired by the inhabitants of cities was frequently
employed in purchasing such lands as were to be sold, of which a great
part would frequently be uncultivated. Merchants are commonly ambitious of
becoming country gentlemen, and, when they do, they are generally the best
of all improvers. A merchant is accustomed to employ his money chiefly in
profitable projects; whereas a mere country gentleman is accustomed to
employ it chiefly in expense. The one often sees his money go from him,
and return to him again with a profit; the other, when once he parts with
it, very seldom expects to see any more of it. Those different habits
naturally affect their temper and disposition in every sort of business.
The merchant is commonly a bold, a country gentleman a timid undertaker.
The one is not afraid to lay out at once a large capital upon the
improvement of his land, when he has a probable prospect of raising the
value of it in proportion to the expense; the other, if he has any
capital, which is not always the case, seldom ventures to employ it in
this manner. If he improves at all, it is commonly not with a capital, but
with what he can save out or his annual revenue. Whoever has had the
fortune to live in a mercantile town, situated in an unimproved country,
must have frequently observed how much more spirited the operations of
merchants were in this way, than those of mere country gentlemen. The
habits, besides, of order, economy, and attention, to which mercantile
business naturally forms a merchant, render him much fitter to execute,
with profit and success, any project of improvement.
Thirdly, and lastly, commerce and manufactures gradually introduced order
and good government, and with them the liberty and security of
individuals, among the inhabitants of the country, who had before lived
almost in a continual state of war with their neighbours, and of servile
dependency upon their superiors. This, though it has been the least
observed, is by far the most important of all their effects. Mr Hume is
the only writer who, so far as I know, has hitherto taken notice of it.
In a country which has neither foreign commerce nor any of the finer
manufactures, a great proprietor, having nothing for which he can exchange
the greater part of the produce of his lands which is over and above the
maintenance of the cultivators, consumes the whole in rustic hospitality
at home. If this surplus produce is sufficient to maintain a hundred or a
thousand men, he can make use of it in no other way than by maintaining a
hundred or a thousand men. He is at all times, therefore, surrounded with
a multitude of retainers and dependants, who, having no equivalent to give
in return for their maintenance, but being fed entirely by his bounty,
must obey him, for the same reason that soldiers must obey the prince who
pays them. Before the extension of commerce and manufactures in Europe,
the hospitality of the rich and the great, from the sovereign down to the
smallest baron, exceeded every thing which, in the present times, we can
easily form a notion of Westminster-hall was the dining-room of William
Rufus, and might frequently, perhaps, not be too large for his company. It
was reckoned a piece of magnificence in Thomas Becket, that he strewed the
floor of his hall with clean hay or rushes in the season, in order that
the knights and squires, who could not get seats, might not spoil their
fine clothes when they sat down on the floor to eat their dinner. The
great Earl of Warwick is said to have entertained every day, at his
different manors, 30,000 people; and though the number here may have been
exaggerated, it must, however, have been very great to admit of such
exaggeration. A hospitality nearly of the same kind was exercised not many
years ago in many different parts of the Highlands of Scotland. It seems
to be common in all nations to whom commerce and manufactures are little
known. I have seen, says Doctor Pocock, an Arabian chief dine in the
streets of a town where he had come to sell his cattle, and invite all
passengers, even common beggars, to sit down with him and partake of his
banquet.
The occupiers of land were in every respect as dependent upon the great
proprietor as his retainers. Even such of them as were not in a state of
villanage, were tenants at will, who paid a rent in no respect equivalent
to the subsistence which the land afforded them. A crown, half a crown, a
sheep, a lamb, was some years ago, in the Highlands of Scotland, a common
rent for lands which maintained a family. In some places it is so at this
day; nor will money at present purchase a greater quantity of commodities
there than in other places. In a country where the surplus produce of a
large estate must be consumed upon the estate itself, it will frequently
be more convenient for the proprietor, that part of it be consumed at a
distance from his own house, provided they who consume it are as dependent
upon him as either his retainers or his menial servants. He is thereby
saved from the embarrassment of either too large a company, or too large a
family. A tenant at will, who possesses land sufficient to maintain his
family for little more than a quit-rent, is as dependent upon the
proprietor as any servant or retainer whatever, and must obey him with as
little reserve. Such a proprietor, as he feeds his servants and retainers
at his own house, so he feeds his tenants at their houses. The subsistence
of both is derived from his bounty, and its continuance depends upon his
good pleasure.
Upon the authority which the great proprietors necessarily had, in such a
state of things, over their tenants and retainers, was founded the power
of the ancient barons. They necessarily became the judges in peace, and
the leaders in war, of all who dwelt upon their estates. They could
maintain order, and execute the law, within their respective demesnes,
because each of them could there turn the whole force of all the
inhabitants against the injustice of anyone. No other person had
sufficient authority to do this. The king, in particular, had not. In
those ancient times, he was little more than the greatest proprietor in
his dominions, to whom, for the sake of common defence against their
common enemies, the other great proprietors paid certain respects. To have
enforced payment of a small debt within the lands of a great proprietor,
where all the inhabitants were armed, and accustomed to stand by one
another, would have cost the king, had he attempted it by his own
authority, almost the same effort as to extinguish a civil war. He was,
therefore, obliged to abandon the administration of justice, through the
greater part of the country, to those who were capable of administering
it; and, for the same reason, to leave the command of the country militia
to those whom that militia would obey.
It is a mistake to imagine that those territorial jurisdictions took their
origin from the feudal law. Not only the highest jurisdictions, both civil
and criminal, but the power of levying troops, of coining money, and even
that of making bye-laws for the government of their own people, were all
rights possessed allodially by the great proprietors of land, several
centuries before even the name of the feudal law was known in Europe. The
authority and jurisdiction of the Saxon lords in England appear to have
been as great before the Conquest as that of any of the Norman lords after
it. But the feudal law is not supposed to have become the common law of
England till after the Conquest. That the most extensive authority and
jurisdictions were possessed by the great lords in France allodially, long
before the feudal law was introduced into that country, is a matter of
fact that admits of no doubt. That authority, and those jurisdictions, all
necessarily flowed from the state of property and manners just now
described. Without remounting to the remote antiquities of either the
French or English monarchies, we may find, in much later times, many
proofs that such effects must always flow from such causes. It is not
thirty years ago since Mr Cameron of Lochiel, a gentleman of Lochaber in
Scotland, without any legal warrant whatever, not being what was then
called a lord of regality, nor even a tenant in chief, but a vassal of the
Duke of Argyll, and with out being so much as a justice of peace, used,
notwithstanding, to exercise the highest criminal jurisdictions over his
own people. He is said to have done so with great equity, though without
any of the formalities of justice; and it is not improbable that the state
of that part of the country at that time made it necessary for him to
assume this authority, in order to maintain the public peace. That
gentleman, whose rent never exceeded £500 a-year, carried, in 1745, 800 of
his own people into the rebellion with him.
The introduction of the feudal law, so far from extending, may be regarded
as an attempt to moderate, the authority of the great allodial lords. It
established a regular subordination, accompanied with a long train of
services and duties, from the king down to the smallest proprietor. During
the minority of the proprietor, the rent, together with the management of
his lands, fell into the hands of his immediate superior; and,
consequently, those of all great proprietors into the hands of the king,
who was charged with the maintenance and education of the pupil, and who,
from his authority as guardian, was supposed to have a right of disposing
of him in marriage, provided it was in a manner not unsuitable to his
rank. But though this institution necessarily tended to strengthen the
authority of the king, and to weaken that of the great proprietors, it
could not do either sufficiently for establishing order and good
government among the inhabitants of the country; because it could not
alter sufficiently that state of property and manners from which the
disorders arose. The authority of government still continued to be, as
before, too weak in the head, and too strong in the inferior members; and
the excessive strength of the inferior members was the cause of the
weakness of the head. After the institution of feudal subordination, the
king was as incapable of restraining the violence of the great lords as
before. They still continued to make war according to their own
discretion, almost continually upon one another, and very frequently upon
the king; and the open country still continued to be a scene of violence,
rapine, and disorder.
But what all the violence of the feudal institutions could never have
effected, the silent and insensible operation of foreign commerce and
manufactures gradually brought about. These gradually furnished the great
proprietors with something for which they could exchange the whole surplus
produce of their lands, and which they could consume themselves, without
sharing it either with tenants or retainers. All for ourselves, and
nothing for other people, seems, in every age of the world, to have been
the vile maxim of the masters of mankind. As soon, therefore, as they
could find a method of consuming the whole value of their rents
themselves, they had no disposition to share them with any other persons.
For a pair of diamond buckles, perhaps, or for something as frivolous and
useless, they exchanged the maintenance, or, what is the same thing, the
price of the maintenance of 1000 men for a year, and with it the whole
weight and authority which it could give them. The buckles, however, were
to be all their own, and no other human creature was to have any share of
them; whereas, in the more ancient method of expense, they must have
shared with at least 1000 people. With the judges that were to determine
the preference, this difference was perfectly decisive; and thus, for the
gratification of the most childish, the meanest, and the most sordid of
all vanities they gradually bartered their whole power and authority.
In a country where there is no foreign commerce, nor any of the finer
manufactures, a man of £10,000 a-year cannot well employ his revenue in
any other way than in maintaining, perhaps, 1000 families, who are all of
them necessarily at his command. In the present state of Europe, a man of
£10,000 a-year can spend his whole revenue, and he generally does so,
without directly maintaining twenty people, or being able to command more
than ten footmen, not worth the commanding. Indirectly, perhaps, he
maintains as great, or even a greater number of people, than he could have
done by the ancient method of expense. For though the quantity of precious
productions for which he exchanges his whole revenue be very small, the
number of workmen employed in collecting and preparing it must necessarily
have been very great. Its great price generally arises from the wages of
their labour, and the profits of all their immediate employers. By paying
that price, he indirectly pays all those wages and profits, and thus
indirectly contributes to the maintenance of all the workmen and their
employers. He generally contributes, however, but a very small proportion
to that of each; to a very few, perhaps, not a tenth, to many not a
hundredth, and to some not a thousandth, or even a ten thousandth part of
their whole annual maintenance. Though he contributes, therefore, to the
maintenance of them all, they are all more or less independent of him,
because generally they can all be maintained without him.
When the great proprietors of land spend their rents in maintaining their
tenants and retainers, each of them maintains entirely all his own tenants
and all his own retainers. But when they spend them in maintaining
tradesmen and artificers, they may, all of them taken together, perhaps
maintain as great, or, on account of the waste which attends rustic
hospitality, a greater number of people than before. Each of them,
however, taken singly, contributes often but a very small share to the
maintenance of any individual of this greater number. Each tradesman or
artificer derives his subsistence from the employment, not of one, but of
a hundred or a thousand different customers. Though in some measure
obliged to them all, therefore, he is not absolutely dependent upon any
one of them.
The personal expense of the great proprietors having in this manner
gradually increased, it was impossible that the number of their retainers
should not as gradually diminish, till they were at last dismissed
altogether. The same cause gradually led them to dismiss the unnecessary
part of their tenants. Farms were enlarged, and the occupiers of land,
notwithstanding the complaints of depopulation, reduced to the number
necessary for cultivating it, according to the imperfect state of
cultivation and improvement in those times. By the removal of the
unnecessary mouths, and by exacting from the farmer the full value of the
farm, a greater surplus, or, what is the same thing, the price of a
greater surplus, was obtained for the proprietor, which the merchants and
manufacturers soon furnished him with a method of spending upon his own
person, in the same manner as he had done the rest. The cause continuing
to operate, he was desirous to raise his rents above what his lands, in
the actual state of their improvement, could afford. His tenants could
agree to this upon one condition only, that they should be secured in
their possession for such a term of years as might give them time to
recover, with profit, whatever they should lay out in the further
improvement of the land. The expensive vanity of the landlord made him
willing to accept of this condition; and hence the origin of long leases.
Even a tenant at will, who pays the full value of the land, is not
altogether dependent upon the landlord. The pecuniary advantages which
they receive from one another are mutual and equal, and such a tenant will
expose neither his life nor his fortune in the service of the proprietor.
But if he has a lease for a long term of years he is altogether
independent; and his landlord must not expect from him even the most
trifling service, beyond what is either expressly stipulated in the lease,
or imposed upon him by the common and known law of the country.
The tenants having in this manner become independent, and the retainers
being dismissed, the great proprietors were no longer capable of
interrupting the regular execution of justice, or of disturbing the peace
of the country. Having sold their birth-right, not like Esau, for a mess
of pottage in time of hunger and necessity, but, in the wantonness of
plenty, for trinkets and baubles, fitter to be the playthings of children
than the serious pursuits of men, they became as insignificant as any
substantial burgher or tradesmen in a city. A regular government was
established in the country as well as in the city, nobody having
sufficient power to disturb its operations in the one, any more than in
the other.
It does not, perhaps, relate to the present subject, but I cannot help
remarking it, that very old families, such as have possessed some
considerable estate from father to son for many successive generations,
are very rare in commercial countries. In countries which have little
commerce, on the contrary, such as Wales, or the Highlands of Scotland,
they are very common. The Arabian histories seem to be all full of
genealogies; and there is a history written by a Tartar Khan, which has
been translated into several European languages, and which contains scarce
any thing else; a proof that ancient families are very common among those
nations. In countries where a rich man can spend his revenue in no other
way than by maintaining as many people as it can maintain, he is apt to
run out, and his benevolence, it seems, is seldom so violent as to attempt
to maintain more than he can afford. But where he can spend the greatest
revenue upon his own person, he frequently has no bounds to his expense,
because he frequently has no bounds to his vanity, or to his affection for
his own person. In commercial countries, therefore, riches, in spite of
the most violent regulations of law to prevent their dissipation, very
seldom remain long in the same family. Among simple nations, on the
contrary, they frequently do, without any regulations of law; for among
nations of shepherds, such as the Tartars and Arabs, the consumable nature
of their property necessarily renders all such regulations impossible.
A revolution of the greatest importance to the public happiness, was in
this manner brought about by two different orders of people, who had not
the least intention to serve the public. To gratify the most childish
vanity was the sole motive of the great proprietors. The merchants and
artificers, much less ridiculous, acted merely from a view to their own
interest, and in pursuit of their own pedlar principle of turning a penny
wherever a penny was to be got. Neither of them had either knowledge or
foresight of that great revolution which the folly of the one, and the
industry of the other, was gradually bringing about.
It was thus, that, through the greater part of Europe, the commerce and
manufactures of cities, instead of being the effect, have been the cause
and occasion of the improvement and cultivation of the country.
This order, however, being contrary to the natural course of things, is
necessarily both slow and uncertain. Compare the slow progress of those
European countries of which the wealth depends very much upon their
commerce and manufactures, with the rapid advances of our North American
colonies, of which the wealth is founded altogether in agriculture.
Through the greater part of Europe, the number of inhabitants is not
supposed to double in less than five hundred years. In several of our
North American colonies, it is found to double in twenty or
five-and-twenty years. In Europe, the law of primogeniture, and
perpetuities of different kinds, prevent the division of great estates,
and thereby hinder the multiplication of small proprietors. A small
proprietor, however, who knows every part of his little territory, views
it with all the affection which property, especially small property,
naturally inspires, and who upon that account takes pleasure, not only in
cultivating, but in adorning it, is generally of all improvers the most
industrious, the most intelligent, and the most successful. The same
regulations, besides, keep so much land out of the market, that there are
always more capitals to buy than there is land to sell, so that what is
sold always sells at a monopoly price. The rent never pays the interest of
the purchase-money, and is, besides, burdened with repairs and other
occasional charges, to which the interest of money is not liable. To
purchase land, is, everywhere in Europe, a most unprofitable employment of
a small capital. For the sake of the superior security, indeed, a man of
moderate circumstances, when he retires from business, will sometimes
choose to lay out his little capital in land. A man of profession, too
whose revenue is derived from another source often loves to secure his
savings in the same way. But a young man, who, instead of applying to
trade or to some profession, should employ a capital of two or three
thousand pounds in the purchase and cultivation of a small piece of land,
might indeed expect to live very happily and very independently, but must
bid adieu for ever to all hope of either great fortune or great
illustration, which, by a different employment of his stock, he might have
had the same chance of acquiring with other people. Such a person, too,
though he cannot aspire at being a proprietor, will often disdain to be a
farmer. The small quantity of land, therefore, which is brought to market,
and the high price of what is brought thither, prevents a great number of
capitals from being employed in its cultivation and improvement, which
would otherwise have taken that direction. In North America, on the
contrary, fifty or sixty pounds is often found a sufficient stock to begin
a plantation with. The purchase and improvement of uncultivated land is
there the most profitable employment of the smallest as well as of the
greatest capitals, and the most direct road to all the fortune and
illustration which can be required in that country. Such land, indeed, is
in North America to be had almost for nothing, or at a price much below
the value of the natural produce; a thing impossible in Europe, or indeed
in any country where all lands have long been private property. If landed
estates, however, were divided equally among all the children, upon the
death of any proprietor who left a numerous family, the estate would
generally be sold. So much land would come to market, that it could no
longer sell at a monopoly price. The free rent of the land would go no
nearer to pay the interest of the purchase-money, and a small capital
might be employed in purchasing land as profitable as in any other way.
England, on account of the natural fertility of the soil, of the great
extent of the sea-coast in proportion to that of the whole country, and of
the many navigable rivers which run through it, and afford the conveniency
of water carriage to some of the most inland parts of it, is perhaps as
well fitted by nature as any large country in Europe to be the seat of
foreign commerce, of manufactures for distant sale, and of all the
improvements which these can occasion. From the beginning of the reign of
Elizabeth, too, the English legislature has been peculiarly attentive to
the interest of commerce and manufactures, and in reality there is no
country in Europe, Holland itself not excepted, of which the law is, upon
the whole, more favourable to this sort of industry. Commerce and
manufactures have accordingly been continually advancing during all this
period. The cultivation and improvement of the country has, no doubt, been
gradually advancing too; but it seems to have followed slowly, and at a
distance, the more rapid progress of commerce and manufactures. The
greater part of the country must probably have been cultivated before the
reign of Elizabeth; and a very great part of it still remains
uncultivated, and the cultivation of the far greater part much inferior to
what it might be, The law of England, however, favours agriculture, not
only indirectly, by the protection of commerce, but by several direct
encouragements. Except in times of scarcity, the exportation of corn is
not only free, but encouraged by a bounty. In times of moderate plenty,
the importation of foreign corn is loaded with duties that amount to a
prohibition. The importation of live cattle, except from Ireland, is
prohibited at all times; and it is but of late that it was permitted from
thence. Those who cultivate the land, therefore, have a monopoly against
their countrymen for the two greatest and most important articles of land
produce, bread and butcher’s meat. These encouragements, although at
bottom, perhaps, as I shall endeavour to show hereafter, altogether
illusory, sufficiently demonstrate at least the good intention of the
legislature to favour agriculture. But what is of much more importance
than all of them, the yeomanry of England are rendered as secure, as
independent, and as respectable, as law can make them. No country,
therefore, which the right of primogeniture takes place, which pays
tithes, and where perpetuities, though contrary to the spirit of the law,
are admitted in some cases, can give more encouragement to agriculture
than England. Such, however, notwithstanding, is the state of its
cultivation. What would it have been, had the law given no direct
encouragement to agriculture besides what arises indirectly from the
progress of commerce, and had left the yeomanry in the same condition as
in most other countries of Europe? It is now more than two hundred years
since the beginning of the reign of Elizabeth, a period as long as the
course of human prosperity usually endures.
France seems to have had a considerable share of foreign commerce, near a
century before England was distinguished as a commercial country. The
marine of France was considerable, according to the notions of the times,
before the expedition of Charles VIII. to Naples. The cultivation and
improvement of France, however, is, upon the whole, inferior to that of
England. The law of the country has never given the same direct
encouragement to agriculture.
The foreign commerce of Spain and Portugal to the other parts of Europe,
though chiefly carried on in foreign ships, is very considerable. That to
their colonies is carried on in their own, and is much greater, on account
of the great riches and extent of those colonies. But it has never
introduced any considerable manufactures for distant sale into either of
those countries, and the greater part of both still remains uncultivated.
The foreign commerce of Portugal is of older standing than that of any
great country in Europe, except Italy.
Italy is the only great country of Europe which seems to have been
cultivated and improved in every part, by means of foreign commerce and
manufactures for distant sale. Before the invasion of Charles VIII.,
Italy, according to Guicciardini, was cultivated not less in the most
mountainous and barren parts of the country, than in the plainest and most
fertile. The advantageous situation of the country, and the great number
of independent states which at that time subsisted in it, probably
contributed not a little to this general cultivation. It is not
impossible, too, notwithstanding this general expression of one of the
most judicious and reserved of modern historians, that Italy was not at
that time better cultivated than England is at present.
The capital, however, that is acquired to any country by commerce and
manufactures, is always a very precarious and uncertain possession, till
some part of it has been secured and realized in the cultivation and
improvement of its lands. A merchant, it has been said very properly, is
not necessarily the citizen of any particular country. It is in a great
measure indifferent to him from what place he carries on his trade; and a
very trifling disgust will make him remove his capital, and, together with
it, all the industry which it supports, from one country to another. No
part of it can be said to belong to any particular country, till it has
been spread, as it were, over the face of that country, either in
buildings, or in the lasting improvement of lands. No vestige now remains
of the great wealth said to have been possessed by the greater part of the
Hanse Towns, except in the obscure histories of the thirteenth and
fourteenth centuries. It is even uncertain where some of them were
situated, or to what towns in Europe the Latin names given to some of them
belong. But though the misfortunes of Italy, in the end of the fifteenth
and beginning of the sixteenth centuries, greatly diminished the commerce
and manufactures of the cities of Lombardy and Tuscany, those countries
still continue to be among the most populous and best cultivated in
Europe. The civil wars of Flanders, and the Spanish government which
succeeded them, chased away the great commerce of Antwerp, Ghent, and
Bruges. But Flanders still continues to be one of the richest, best
cultivated, and most populous provinces of Europe. The ordinary
revolutions of war and government easily dry up the sources of that wealth
which arises from commerce only. That which arises from the more solid
improvements of agriculture is much more durable, and cannot be destroyed
but by those more violent convulsions occasioned by the depredations of
hostile and barbarous nations continued for a century or two together;
such as those that happened for some time before and after the fall of the
Roman empire in the western provinces of Europe.
BOOK IV.
OF SYSTEMS OF POLITICAL ECONOMY.
Political economy, considered as a branch of the science of a statesman or
legislator, proposes two distinct objects; first, to provide a plentiful
revenue or subsistence for the people, or, more properly, to enable them
to provide such a revenue or subsistence for themselves; and, secondly, to
supply the state or commonwealth with a revenue sufficient for the public
services. It proposes to enrich both the people and the sovereign.
The different progress of opulence in different ages and nations, has
given occasion to two different systems of political economy, with regard
to enriching the people. The one may be called the system of commerce, the
other that of agriculture. I shall endeavour to explain both as fully and
distinctly as I can, and shall begin with the system of commerce. It is
the modern system, and is best understood in our own country and in our
own times.
CHAPTER I.
OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM.
That wealth consists in money, or in gold and silver, is a popular notion
which naturally arises from the double function of money, as the
instrument of commerce, and as the measure of value. In consequence of its
being the instrument of commerce, when we have money we can more readily
obtain whatever else we have occasion for, than by means of any other
commodity. The great affair, we always find, is to get money. When that is
obtained, there is no difficulty in making any subsequent purchase. In
consequence of its being the measure of value, we estimate that of all
other commodities by the quantity of money which they will exchange for.
We say of a rich man, that he is worth a great deal, and of a poor man,
that he is worth very little money. A frugal man, or a man eager to be
rich, is said to love money; and a careless, a generous, or a profuse man,
is said to be indifferent about it. To grow rich is to get money; and
wealth and money, in short, are, in common language, considered as in
every respect synonymous.
A rich country, in the same manner as a rich man, is supposed to be a
country abounding in money; and to heap up gold and silver in any country
is supposed to be the readiest way to enrich it. For some time after the
discovery of America, the first inquiry of the Spaniards, when they
arrived upon any unknown coast, used to be, if there was any gold or
silver to be found in the neighbourhood? By the information which they
received, they judged whether it was worth while to make a settlement
there, or if the country was worth the conquering. Plano Carpino, a monk
sent ambassador from the king of France to one of the sons of the famous
Gengis Khan, says, that the Tartars used frequently to ask him, if there
was plenty of sheep and oxen in the kingdom of France? Their inquiry had
the same object with that of the Spaniards. They wanted to know if the
country was rich enough to be worth the conquering. Among the Tartars, as
among all other nations of shepherds, who are generally ignorant of the
use of money, cattle are the instruments of commerce and the measures of
value. Wealth, therefore, according to them, consisted in cattle, as,
according to the Spaniards, it consisted in gold and silver. Of the two,
the Tartar notion, perhaps, was the nearest to the truth.
Mr Locke remarks a distinction between money and other moveable goods. All
other moveable goods, he says, are of so consumable a nature, that the
wealth which consists in them cannot be much depended on; and a nation
which abounds in them one year may, without any exportation, but merely by
their own waste and extravagance, be in great want of them the next.
Money, on the contrary, is a steady friend, which, though it may travel
about from hand to hand, yet if it can be kept from going out of the
country, is not very liable to be wasted and consumed. Gold and silver,
therefore, are, according to him, the must solid and substantial part of
the moveable wealth of a nation; and to multiply those metals ought, he
thinks, upon that account, to be the great object of its political
economy.
Others admit, that if a nation could be separated from all the world, it
would be of no consequence how much or how little money circulated in it.
The consumable goods, which were circulated by means of this money, would
only be exchanged for a greater or a smaller number of pieces; but the
real wealth or poverty of the country, they allow, would depend altogether
upon the abundance or scarcity of those consumable goods. But it is
otherwise, they think, with countries which have connections with foreign
nations, and which are obliged to carry on foreign wars, and to maintain
fleets and armies in distant countries. This, they say, cannot be done,
but by sending abroad money to pay them with; and a nation cannot send
much money abroad, unless it has a good deal at home. Every such nation,
therefore, must endeavour, in time of peace, to accumulate gold and
silver, that when occasion requires, it may have wherewithal to carry on
foreign wars.
In consequence of those popular notions, all the different nations of
Europe have studied, though to little purpose, every possible means of
accumulating gold and silver in their respective countries. Spain and
Portugal, the proprietors of the principal mines which supply Europe with
those metals, have either prohibited their exportation under the severest
penalties, or subjected it to a considerable duty. The like prohibition
seems anciently to have made a part of the policy of most other European
nations. It is even to be found, where we should least of all expect to
find it, in some old Scotch acts of Parliament, which forbid, under heavy
penalties, the carrying gold or silver forth of the kingdom. The like
policy anciently took place both in France and England.
When those countries became commercial, the merchants found this
prohibition, upon many occasions, extremely inconvenient. They could
frequently buy more advantageously with gold and silver, than with any
other commodity, the foreign goods which they wanted, either to import
into their own, or to carry to some other foreign country. They
remonstrated, therefore, against this prohibition as hurtful to trade.
They represented, first, that the exportation of gold and silver, in order
to purchase foreign goods, did not always diminish the quantity of those
metals in the kingdom; that, on the contrary, it might frequently increase
the quantity; because, if the consumption of foreign goods was not thereby
increased in the country, those goods might be re-exported to foreign
countries, and being there sold for a large profit, might bring back much
more treasure than was originally sent out to purchase them. Mr Mun
compares this operation of foreign trade to the seed-time and harvest of
agriculture. “If we only behold,” says he, “the actions of the husbandman
in the seed time, when he casteth away much good corn into the ground, we
shall account him rather a madman than a husbandman. But when we consider
his labours in the harvest, which is the end of his endeavours, we shall
find the worth and plentiful increase of his actions.”
They represented, secondly, that this prohibition could not hinder the
exportation of gold and silver, which, on account of the smallness of
their bulk in proportion to their value, could easily be smuggled 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 necessarily paid to it in gold and silver, and thereby
increased the quantity of those 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 necessarily paid to them in the same
manner, and thereby diminished that quantity: that in this case, to
prohibit the exportation of those metals, could not prevent it, but only,
by making it more dangerous, render it more expensive: that the exchange
was thereby turned more against the country which owed the balance, than
it otherwise might have been; the merchant who purchased a bill upon the
foreign country being obliged to pay the banker who sold it, not only for
the natural risk, trouble, and expense of sending the money thither, but
for the extraordinary risk arising from the prohibition; but that the more
the exchange was against any country, the more the balance of trade became
necessarily against it; the money of that country becoming necessarily of
so much less value, in comparison with that of the country to which the
balance was due. That if the exchange between England and Holland, for
example, was five per cent. against England, it would require 105 ounces
of silver in England to purchase a bill for 100 ounces of silver in
Holland: that 105 ounces of silver in England, therefore, would be worth
only 100 ounces of silver in Holland, and would purchase only a
proportionable quantity of Dutch goods; but that 100 ounces of silver in
Holland, on the contrary, would be worth 105 ounces in England, and would
purchase a proportionable quantity of English goods; that the English
goods which were sold to Holland would be sold so much cheaper, and the
Dutch goods which were sold to England so much dearer, by the difference
of the exchange: that the one would draw so much less Dutch money to
England, and the other so much more English money to Holland, as this
difference amounted to: and that the balance of trade, therefore, would
necessarily be so much more against England, and would require a greater
balance of gold and silver to be exported to Holland.
Those arguments were partly solid and partly sophistical. They were solid,
so far as they asserted that the exportation of gold and silver in trade
might frequently be advantageous to the country. They were solid, too, in
asserting that no prohibition could prevent their exportation, when
private people found any advantage in exporting them. But they were
sophistical, in supposing, that either to preserve or to augment the
quantity of those metals required more the attention of government, than
to preserve or to augment the quantity of any other useful commodities,
which the freedom of trade, without any such attention, never fails to
supply in the proper quantity. They were sophistical, too, perhaps, in
asserting that the high price of exchange necessarily increased what they
called the unfavourable balance of trade, or occasioned the exportation of
a greater quantity of gold and silver. That high price, indeed, was
extremely disadvantageous to the merchants who had any money to pay in
foreign countries. They paid so much dearer for the bills which their
bankers granted them upon those countries. But though the risk arising
from the prohibition might occasion some extraordinary expense to the
bankers, it would not necessarily carry any more money out of the country.
This expense would generally be all laid out in the country, in smuggling
the money out of it, and could seldom occasion the exportation of a single
sixpence beyond the precise sum drawn for. The high price of exchange,
too, would naturally dispose the merchants to endeavour to make their
exports nearly balance their imports, in order that they might have this
high exchange to pay upon as small a sum as possible. The high price of
exchange, besides, must necessarily have operated as a tax, in raising the
price of foreign goods, and thereby diminishing their consumption. It
would tend, therefore, not to increase, but to diminish, what they called
the unfavourable balance of trade, and consequently the exportation of
gold and silver.
Such as they were, however, those arguments convinced the people to whom
they were addressed. They were addressed by merchants to parliaments and
to the councils of princes, to nobles, and to country gentlemen; by those
who were supposed to understand trade, to those who were conscious to them
selves that they knew nothing about the matter. That foreign trade
enriched the country, experience demonstrated to the nobles and country
gentlemen, as well as to the merchants; but how, or in what manner, none
of them well knew. The merchants knew perfectly in what manner it enriched
themselves, it was their business to know it. But to know in what manner
it enriched the country, was no part of their business. The subject never
came into their consideration, but when they had occasion to apply to
their country for some change in the laws relating to foreign trade. It
then became necessary to say something about the beneficial effects of
foreign trade, and the manner in which those effects were obstructed by
the laws as they then stood. To the judges who were to decide the
business, it appeared a most satisfactory account of the matter, when they
were told that foreign trade brought money into the country, but that the
laws in question hindered it from bringing so much as it otherwise would
do. Those arguments, therefore, produced the wished-for effect. The
prohibition of exporting gold and silver was, in France and England,
confined to the coin of those respective countries. The exportation of
foreign coin and of bullion was made free. In Holland, and in some other
places, this liberty was extended even to the coin of the country. The
attention of government was turned away from guarding against the
exportation of gold and silver, to watch over the balance of trade, as the
only cause which could occasion any augmentation or diminution of those
metals. From one fruitless care, it was turned away to another care much
more intricate, much more embarrassing, and just equally fruitless. The
title of Mun’s book, England’s Treasure in Foreign Trade, became a
fundamental maxim in the political economy, not of England only, but of
all other commercial countries. The inland or home trade, the most
important of all, the trade in which an equal capital affords the greatest
revenue, and creates the greatest employment to the people of the country,
was considered as subsidiary only to foreign trade. It neither brought
money into the country, it was said, nor carried any out of it. The
country, therefore, could never become either richer or poorer by means of
it, except so far as its prosperity or decay might indirectly influence
the state of foreign trade.
A country that has no mines of its own, must undoubtedly draw its gold and
silver from foreign countries, in the same manner as one that has no
vineyards of its own must draw its wines. It does not seem necessary,
however, that the attention of government should be more turned towards
the one than towards the other object. A country that has wherewithal to
buy wine, will always get the wine which it has occasion for; and a
country that has wherewithal to buy gold and silver, will never be in want
of those metals. They are to be bought for a certain price, like all other
commodities; and as they are the price of all other commodities, so all
other commodities are the price of those metals. We trust, with perfect
security, that the freedom of trade, without any attention of government,
will always supply us with the wine which we have occasion for; and we may
trust, with equal security, that it will always supply us with all the
gold and silver which we can afford to purchase or to employ, either in
circulating our commodities or in other uses.
The quantity of every commodity which human industry can either purchase
or produce, naturally regulates itself in every country according to the
effectual demand, or according to the demand of those who are willing to
pay the whole rent, labour, and profits, which must be paid in order to
prepare and bring it to market. But no commodities regulate themselves
more easily or more exactly, according to this effectual demand, than gold
and silver; because, on account of the small bulk and great value of those
metals, no commodities can be more easily transported from one place to
another; from the places where they are cheap, to those where they are
dear; from the places where they exceed, to those where they fall short of
this effectual demand. If there were in England, for example, an effectual
demand for an additional quantity of gold, a packet-boat could bring from
Lisbon, or from wherever else it was to be had, fifty tons of gold, which
could be coined into more than five millions of guineas. But if there were
an effectual demand for grain to the same value, to import it would
require, at five guineas a-ton, a million of tons of shipping, or a
thousand ships of a thousand tons each. The navy of England would not be
sufficient.
When the quantity of gold and silver imported into any country exceeds the
effectual demand, no vigilance of government can prevent their
exportation. All the sanguinary laws of Spain and Portugal are not able to
keep their gold and silver at home. The continual importations from Peru
and Brazil exceed the effectual demand of those countries, and sink the
price of those metals there below that in the neighbouring countries. If,
on the contrary, in any particular country, their quantity fell short of
the effectual demand, so as to raise their price above that of the
neighbouring countries, the government would have no occasion to take any
pains to import them. If it were even to take pains to prevent their
importation, it would not be able to effectuate it. Those metals, when the
Spartans had got wherewithal to purchase them, broke through all the
barriers which the laws of Lycurgus opposed to their entrance into
Lacedaemon. All the sanguinary laws of the customs are not able to prevent
the importation of the teas of the Dutch and Gottenburg East India
companies; because somewhat cheaper than those of the British company. A
pound of tea, however, is about a hundred times the bulk of one of the
highest prices, sixteen shillings, that is commonly paid for it in silver,
and more than two thousand times the bulk of the same price in gold, and,
consequently, just so many times more difficult to smuggle.
It is partly owing to the easy transportation of gold and silver, from the
places where they abound to those where they are wanted, that the price of
those metals does not fluctuate continually, like that of the greater part
of other commodities, which are hindered by their bulk from shifting their
situation, when the market happens to be either over or under-stocked with
them. The price of those metals, indeed, is not altogether exempted from
variation; but the changes to which it is liable are generally slow,
gradual, and uniform. In Europe, for example, it is supposed, without much
foundation, perhaps, that during the course of the present and preceding
century, they have been constantly, but gradually, sinking in their value,
on account of the continual importations from the Spanish West Indies. But
to make any sudden change in the price of gold and silver, so as to raise
or lower at once, sensibly and remarkably, the money price of all other
commodities, requires such a revolution in commerce as that occasioned by
the discovery of America.
If, not withstanding all this, gold and silver should at any time fall
short in a country which has wherewithal to purchase them, there are more
expedients for supplying their place, than that of almost any other
commodity. If the materials of manufacture are wanted, industry must stop.
If provisions are wanted, the people must starve. But if money is wanted,
barter will supply its place, though with a good deal of inconveniency.
Buying and selling upon credit, and the different dealers compensating
their credits with one another, once a-month, or once a-year, will supply
it with less inconveniency. A well-regulated paper-money will supply it
not only without any inconveniency, but, in some cases, with some
advantages. Upon every account, therefore, the attention of government
never was so unnecessarily employed, as when directed to watch over the
preservation or increase of the quantity of money in any country.
No complaint, however, is more common than that of a scarcity of money.
Money, like wine, must always be scarce with those who have neither
wherewithal to buy it, nor credit to borrow it. Those who have either,
will seldom be in want either of the money, or of the wine which they have
occasion for. This complaint, however, of the scarcity of money, is not
always confined to improvident spendthrifts. It is sometimes general
through a whole mercantile town and the country in its neighbourhood.
Over-trading is the common cause of it. Sober men, whose projects have
been disproportioned to their capitals, are as likely to have neither
wherewithal to buy money, nor credit to borrow it, as prodigals, whose
expense has been disproportioned to their revenue. Before their projects
can be brought to bear, their stock is gone, and their credit with it.
They run about everywhere to borrow money, and everybody tells them that
they have none to lend. Even such general complaints of the scarcity of
money do not always prove that the usual number of gold and silver pieces
are not circulating in the country, but that many people want those pieces
who have nothing to give for them. When the profits of trade happen to be
greater than ordinary over-trading becomes a general error, both among
great and small dealers. They do not always send more money abroad than
usual, but they buy upon credit, both at home and abroad, an unusual
quantity of goods, which they send to some distant market, in hopes that
the returns will come in before the demand for payment. The demand comes
before the returns, and they have nothing at hand with which they can
either purchase money or give solid security for borrowing. It is not any
scarcity of gold and silver, but the difficulty which such people find in
borrowing, and which their creditor find in getting payment, that
occasions the general complaint of the scarcity of money.
It would be too ridiculous to go about seriously to prove, that wealth
does not consist in money, or in gold and silver; but in what money
purchases, and is valuable only for purchasing. Money, no doubt, makes
always a part of the national capital; but it has already been shown that
it generally makes but a small part, and always the most unprofitable part
of it.
It is not because wealth consists more essentially in money than in goods,
that the merchant finds it generally more easy to buy goods with money,
than to buy money with goods; but because money is the known and
established instrument of commerce, for which every thing is readily given
in exchange, but which is not always with equal readiness to be got in
exchange for every thing. The greater part of goods, besides, are more
perishable than money, and he may frequently sustain a much greater loss
by keeping them. When his goods are upon hand, too, he is more liable to
such demands for money as he may not be able to answer, than when he has
got their price in his coffers. Over and above all this, his profit arises
more directly from selling than from buying; and he is, upon all these
accounts, generally much more anxious to exchange his goods for money than
his money for goods. But though a particular merchant, with abundance of
goods in his warehouse, may sometimes be ruined by not being able to sell
them in time, a nation or country is not liable to the same accident, The
whole capital of a merchant frequently consists in perishable goods
destined for purchasing money. But it is but a very small part of the
annual produce of the land and labour of a country, which can ever be
destined for purchasing gold and silver from their neighbours. The far
greater part is circulated and consumed among themselves; and even of the
surplus which is sent abroad, the greater part is generally destined for
the purchase of other foreign goods. Though gold and silver, therefore,
could not be had in exchange for the goods destined to purchase them, the
nation would not be ruined. It might, indeed, suffer some loss and
inconveniency, and be forced upon some of those expedients which are
necessary for supplying the place of money. The annual produce of its land
and labour, however, would be the same, or very nearly the same as usual;
because the same, or very nearly the same consumable capital would be
employed in maintaining it. And though goods do not always draw money so
readily as money draws goods, in the long-run they draw it more
necessarily than even it draws them. Goods can serve many other purposes
besides purchasing money, but money can serve no other purpose besides
purchasing goods. Money, therefore, necessarily runs after goods, but
goods do not always or necessarily run after money. The man who buys, does
not always mean to sell again, but frequently to use or to consume;
whereas he who sells always means to buy again. The one may frequently
have done the whole, but the other can never have done more than the one
half of his business. It is not for its own sake that men desire money,
but for the sake of what they can purchase with it.
Consumable commodities, it is said, are soon destroyed; whereas gold and
silver are of a more durable nature, and were it not for this continual
exportation, might be accumulated for ages together, to the incredible
augmentation of the real wealth of the country. Nothing, therefore, it is
pretended, can be more disadvantageous to any country, than the trade
which consists in the exchange of such lasting for such perishable
commodities. We do not, however, reckon that trade disadvantageous, which
consists in the exchange of the hardware of England for the wines of
France, and yet hardware is a very durable commodity, and were it not for
this continual exportation, might too be accumulated for ages together, to
the incredible augmentation of the pots and pans of the country. But it
readily occurs, that the number of such utensils is in every country
necessarily limited by the use which there is for them; that it would be
absurd to have more pots and pans than were necessary for cooking the
victuals usually consumed there; and that, if the quantity of victuals
were to increase, the number of pots and pans would readily increase along
with it; a part of the increased quantity of victuals being employed in
purchasing them, or in maintaining an additional number of workmen whose
business it was to make them. It should as readily occur, that the
quantity of gold and silver is, in every country, limited by the use which
there is for those metals; that their use consists in circulating
commodities, as coin, and in affording a species of household furniture,
as plate; that the quantity of coin in every country is regulated by the
value of the commodities which are to be circulated by it; increase that
value, and immediately a part of it will be sent abroad to purchase,
wherever it is to be had, the additional quantity of coin requisite for
circulating them: that the quantity of plate is regulated by the number
and wealth of those private families who choose to indulge themselves in
that sort of magnificence; increase the number and wealth of such
families, and a part of this increased wealth will most probably be
employed in purchasing, wherever it is to be found, an additional quantity
of plate; that to attempt to increase the wealth of any country, either by
introducing or by detaining in it an unnecessary quantity of gold and
silver, is as absurd as it would be to attempt to increase the good cheer
of private families, by obliging them to keep an unnecessary number of
kitchen utensils. As the expense of purchasing those unnecessary utensils
would diminish, instead of increasing, either the quantity or goodness of
the family provisions; so the expense of purchasing an unnecessary
quantity of gold and silver must, in every country, as necessarily
diminish the wealth which feeds, clothes, and lodges, which maintains and
employs the people. Gold and silver, whether in the shape of coin or of
plate, are utensils, it must be remembered, as much as the furniture of
the kitchen. Increase the use of them, increase the consumable commodities
which are to be circulated, managed, and prepared by means of them, and
you will infallibly increase the quantity; but if you attempt by
extraordinary means to increase the quantity, you will as infallibly
diminish the use, and even the quantity too, which in those metals can
never be greater than what the use requires. Were they ever to be
accumulated beyond this quantity, their transportation is so easy, and the
loss which attends their lying idle and unemployed so great, that no law
could prevent their being immediately sent out of the country.
It is not always necessary to accumulate gold and silver, in order to
enable a country to carry on foreign wars, and to maintain fleets and
armies in distant countries. Fleets and armies are maintained, not with
gold and silver, but with consumable goods. The nation which, from the
annual produce of its domestic industry, from the annual revenue arising
out of its lands, and labour, and consumable stock, has wherewithal to
purchase those consumable goods in distant countries, can maintain foreign
wars there.
A nation may purchase the pay and provisions of an army in a distant
country three different ways; by sending abroad either, first, some part
of its accumulated gold and silver; or, secondly, some part of the annual
produce of its manufactures; or, last of all, some part of its annual rude
produce.
The gold and silver which can properly be considered as accumulated, or
stored up in any country, may be distinguished into three parts; first,
the circulating money; secondly, the plate of private families; and, last
of all, the money which may have been collected by many years parsimony,
and laid up in the treasury of the prince.
It can seldom happen that much can be spared from the circulating money of
the country; because in that there can seldom be much redundancy. The
value of goods annually bought and sold in any country requires a certain
quantity of money to circulate and distribute them to their proper
consumers, and can give employment to no more. The channel of circulation
necessarily draws to itself a sum sufficient to fill it, and never admits
any more. Something, however, is generally withdrawn from this channel in
the case of foreign war. By the great number of people who are maintained
abroad, fewer are maintained at home. Fewer goods are circulated there,
and less money becomes necessary to circulate them. An extraordinary
quantity of paper money of some sort or other, too, such as exchequer
notes, navy bills, and bank bills, in England, is generally issued upon
such occasions, and, by supplying the place of circulating gold and
silver, gives an opportunity of sending a greater quantity of it abroad.
All this, however, could afford but a poor resource for maintaining a
foreign war, of great expense, and several years duration.
The melting down of the plate of private families has, upon every
occasion, been found a still more insignificant one. The French, in the
beginning of the last war, did not derive so much advantage from this
expedient as to compensate the loss of the fashion.
The accumulated treasures of the prince have in former times afforded a
much greater and more lasting resource. In the present times, if you
except the king of Prussia, to accumulate treasure seems to be no part of
the policy of European princes.
The funds which maintained the foreign wars of the present century, the
most expensive perhaps which history records, seem to have had little
dependency upon the exportation either of the circulating money, or of the
plate of private families, or of the treasure of the prince. The last
French war cost Great Britain upwards of £90,000,000, including not only
the £75,000,000 of new debt that was contracted, but the additional 2s. in
the pound land-tax, and what was annually borrowed of the sinking fund.
More than two-thirds of this expense were laid out in distant countries;
in Germany, Portugal, America, in the ports of the Mediterranean, in the
East and West Indies. The kings of England had no accumulated treasure. We
never heard of any extraordinary quantity of plate being melted down. The
circulating gold and silver of the country had not been supposed to exceed
£18,000,000. Since the late recoinage of the gold, however, it is believed
to have been a good deal under-rated. Let us suppose, therefore, according
to the most exaggerated computation which I remember to have either seen
or heard of, that, gold and silver together, it amounted to £30,000,000.
Had the war been carried on by means of our money, the whole of it must,
even according to this computation, have been sent out and returned again,
at least twice in a period of between six and seven years. Should this be
supposed, it would afford the most decisive argument, to demonstrate how
unnecessary it is for government to watch over the preservation of money,
since, upon this supposition, the whole money of the country must have
gone from it, and returned to it again, two different times in so short a
period, without any body’s knowing any thing of the matter. The channel of
circulation, however, never appeared more empty than usual during any part
of this period. Few people wanted money who had wherewithal to pay for it.
The profits of foreign trade, indeed, were greater than usual during the
whole war, but especially towards the end of it. This occasioned, what it
always occasions, a general over-trading in all the ports of Great
Britain; and this again occasioned the usual complaint of the scarcity of
money, which always follows over-trading. Many people wanted it, who had
neither wherewithal to buy it, nor credit to borrow it; and because the
debtors found it difficult to borrow, the creditors found it difficult to
get payment. Gold and silver, however, were generally to be had for their
value, by those who had that value to give for them.
The enormous expense of the late war, therefore, must have been chiefly
defrayed, not by the exportation of gold and silver, but by that of
British commodities of some kind or other. When the government, or those
who acted under them, contracted with a merchant for a remittance to some
foreign country, he would naturally endeavour to pay his foreign
correspondent, upon whom he granted a bill, by sending abroad rather
commodities than gold and silver. If the commodities of Great Britain were
not in demand in that country, he would endeavour to send them to some
other country in which he could purchase a bill upon that country. The
transportation of commodities, when properly suited to the market, is
always attended with a considerable profit; whereas that of gold and
silver is scarce ever attended with any. When those metals are sent abroad
in order to purchase foreign commodities, the merchant’s profit arises,
not from the purchase, but from the sale of the returns. But when they are
sent abroad merely to pay a debt, he gets no returns, and consequently no
profit. He naturally, therefore, exerts his invention to find out a way of
paying his foreign debts, rather by the exportation of commodities, than
by that of gold and silver. The great quantity of British goods, exported
during the course of the late war, without bringing back any returns, is
accordingly remarked by the author of the Present State of the Nation.
Besides the three sorts of gold and silver above mentioned, there is in
all great commercial countries a good deal of bullion alternately imported
and exported, for the purposes of foreign trade. This bullion, as it
circulates among different commercial countries, in the same manner as the
national coin circulates in every country, may be considered as the money
of the great mercantile republic. The national coin receives its movement
and direction from the commodities circulated within the precincts of each
particular country; the money in the mercantile republic, from those
circulated between different countries. Both are employed in facilitating
exchanges, the one between different individuals of the same, the other
between those of different nations. Part of this money of the great
mercantile republic may have been, and probably was, employed in carrying
on the late war. In time of a general war, it is natural to suppose that a
movement and direction should be impressed upon it, different from what it
usually follows in profound peace, that it should circulate more about the
seat of the war, and be more employed in purchasing there, and in the
neighbouring countries, the pay and provisions of the different armies.
But whatever part of this money of the mercantile republic Great Britain
may have annually employed in this manner, it must have been annually
purchased, either with British commodities, or with something else that
had been purchased with them; which still brings us back to commodities,
to the annual produce of the land and labour of the country, as the
ultimate resources which enabled us to carry on the war. It is natural,
indeed, to suppose, that so great an annual expense must have been
defrayed from a great annual produce. The expense of 1761, for example,
amounted to more than £19,000,000. No accumulation could have supported so
great an annual profusion. There is no annual produce, even of gold and
silver, which could have supported it. The whole gold and silver annually
imported into both Spain and Portugal, according to the best accounts,
does not commonly much exceed £6,000,000 sterling, which, in some years,
would scarce have paid four months expense of the late war.
The commodities most proper for being transported to distant countries, in
order to purchase there either the pay and provisions of an army, or some
part of the money of the mercantile republic to be employed in purchasing
them, seem to be the finer and more improved manufactures; such as contain
a great value in a small bulk, and can therefore be exported to a great
distance at little expense. A country whose industry produces a great
annual surplus of such manufactures, which are usually exported to foreign
countries, may carry on for many years a very expensive foreign war,
without either exporting any considerable quantity of gold and silver, or
even having any such quantity to export. A considerable part of the annual
surplus of its manufactures must, indeed, in this case, be exported
without bringing back any returns to the country, though it does to the
merchant; the government purchasing of the merchant his bills upon foreign
countries, in order to purchase there the pay and provisions of an army.
Some part of this surplus, however, may still continue to bring back a
return. The manufacturers during; the war will have a double demand upon
them, and be called upon first to work up goods to be sent abroad, for
paying the bills drawn upon foreign countries for the pay and provisions
of the army: and, secondly, to work up such as are necessary for
purchasing the common returns that had usually been consumed in the
country. In the midst of the most destructive foreign war, therefore, the
greater part of manufactures may frequently flourish greatly; and, on the
contrary, they may decline on the return of peace. They may flourish
amidst the ruin of their country, and begin to decay upon the return of
its prosperity. The different state of many different branches of the
British manufactures during the late war, and for some time after the
peace, may serve as an illustration of what has been just now said.
No foreign war, of great expense or duration, could conveniently be
carried on by the exportation of the rude produce of the soil. The expense
of sending such a quantity of it into a foreign country as might purchase
the pay and provisions of an army would be too great. Few countries, too,
produce much more rude produce than what is sufficient for the subsistence
of their own inhabitants. To send abroad any great quantity of it,
therefore, would be to send abroad a part of the necessary subsistence of
the people. It is otherwise with the exportation of manufactures. The
maintenance of the people employed in them is kept at home, and only the
surplus part of their work is exported. Mr Hume frequently takes notice of
the inability of the ancient kings of England to carry on, without
interruption, any foreign war of long duration. The English in those days
had nothing wherewithal to purchase the pay and provisions of their armies
in foreign countries, but either the rude produce of the soil, of which no
considerable part could be spared from the home consumption, or a few
manufactures of the coarsest kind, of which, as well as of the rude
produce, the transportation was too expensive. This inability did not
arise from the want of money, but of the finer and more improved
manufactures. Buying and selling was transacted by means of money in
England then as well as now. The quantity of circulating money must have
borne the same proportion, to the number and value of purchases and sales
usually transacted at that time, which it does to those transacted at
present; or, rather, it must have borne a greater proportion, because
there was then no paper, which now occupies a great part of the employment
of gold and silver. Among nations to whom commerce and manufactures are
little known, the sovereign, upon extraordinary occasions, can seldom draw
any considerable aid from his subjects, for reasons which shall be
explained hereafter. It is in such countries, therefore, that he generally
endeavours to accumulate a treasure, as the only resource against such
emergencies. Independent of this necessity, he is, in such a situation,
naturally disposed to the parsimony requisite for accumulation. In that
simple state, the expense even of a sovereign is not directed by the
vanity which delights in the gaudy finery of a court, but is employed in
bounty to his tenants, and hospitality to his retainers. But bounty and
hospitality very seldom lead to extravagance; though vanity almost always
does. Every Tartar chief, accordingly, has a treasure. The treasures of
Mazepa, chief of the Cossacks in the Ukraine, the famous ally of Charles
XII., are said to have been very great. The French kings of the
Merovingian race had all treasures. When they divided their kingdom among
their different children, they divided their treasures too. The Saxon
princes, and the first kings after the Conquest, seem likewise to have
accumulated treasures. The first exploit of every new reign was commonly
to seize the treasure of the preceding king, as the most essential measure
for securing the succession. The sovereigns of improved and commercial
countries are not under the same necessity of accumulating treasures,
because they can generally draw from their subjects extraordinary aids
upon extraordinary occasions. They are likewise less disposed to do so.
They naturally, perhaps necessarily, follow the mode of the times; and
their expense comes to be regulated by the same extravagant vanity which
directs that of all the other great proprietors in their dominions. The
insignificant pageantry of their court becomes every day more brilliant;
and the expense of it not only prevents accumulation, but frequently
encroaches upon the funds destined for more necessary expenses. What
Dercyllidas said of the court of Persia, may be applied to that of several
European princes, that he saw there much splendour, but little strength,
and many servants, but few soldiers.
The importation of gold and silver is not the principal, much less the
sole benefit, which a nation derives from its foreign trade. Between
whatever places foreign trade is carried on, they all of them derive two
distinct benefits from it. It carries out that surplus part of the produce
of their land and labour for which there is no demand among them, and
brings back in return for it something else for which there is a demand.
It gives a value to their superfluities, by exchanging them for something
else, which may satisfy a part of their wants and increase their
enjoyments. By means of it, the narrowness of the home market does not
hinder the division of labour in any particular branch of art or
manufacture from being carried to the highest perfection. By opening a
more extensive market for whatever part of the produce of their labour may
exceed the home consumption, it encourages them to improve its productive
power, and to augment its annual produce to the utmost, and thereby to
increase the real revenue and wealth of the society. These great and
important services foreign trade is 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 resides
generally derives the greatest, as he is generally more employed in
supplying the wants, and carrying out the superfluities of his own, than
of any other particular country. To import the gold and silver which may
be wanted into the countries which have no mines, is, no doubt a part of
the business of foreign commerce. It is, however, a most insignificant
part of it. A country which carried on foreign trade merely upon this
account, could scarce have occasion to freight a ship in a century.
It is not by the importation of gold and silver that the discovery of
America has enriched Europe. By the abundance of the American mines, those
metals have become cheaper. A service of plate can now be purchased for
about a third part of the corn, or a third part of the labour, which it
would have cost in the fifteenth century. With the same annual expense of
labour and commodities, Europe can annually purchase about three times the
quantity of plate which it could have purchased at that time. But when a
commodity comes to be sold for a third part of what bad been its usual
price, not only those who purchased it before can purchase three times
their former quantity, but it is brought down to the level of a much
greater number of purchasers, perhaps to more than ten, perhaps to more
than twenty times the former number. So that there may be in Europe at
present, not only more than three times, but more than twenty or thirty
times the quantity of plate which would have been in it, even in its
present state of improvement, had the discovery of the American mines
never been made. So far Europe has, no doubt, gained a real conveniency,
though surely a very trifling one. The cheapness of gold and silver
renders those metals rather less fit for the purposes of money than they
were before. In order to make the same purchases, we must load ourselves
with a greater quantity of them, and carry about a shilling in our pocket,
where a groat would have done before. It is difficult to say which is most
trifling, this inconveniency, or the opposite conveniency. Neither the one
nor the other could have made any very essential change in the state of
Europe. The discovery of America, however, certainly made a most essential
one. By opening a new and inexhaustible market to all the commodities of
Europe, it gave occasion to new divisions of labour and improvements of
art, which in the narrow circle of the ancient commerce could never have
taken place, for want of a market to take off the greater part of their
produce. The productive powers of labour were improved, and its produce
increased in all the different countries of Europe, and together with it
the real revenue and wealth of the inhabitants. The commodities of Europe
were almost all new to America, and many of those of America were new to
Europe. A new set of exchanges, therefore, began to take place, which had
never been thought of before, and which should naturally have proved as
advantageous to the new, as it certainly did to the old continent. The
savage injustice of the Europeans rendered an event, which ought to have
been beneficial to all, ruinous and destructive to several of those
unfortunate countries.
The discovery of a passage to the East Indies by the Cape of Good Hope,
which happened much about the same time, opened perhaps a still more
extensive range to foreign commerce, than even that of America,
notwithstanding the greater distance. There were but two nations in
America, in any respect, superior to the savages, and these were destroyed
almost as soon as discovered. The rest were mere savages. But the empires
of China, Indostan, Japan, as well as several others in the East Indies,
without having richer mines of gold or silver, were, in every other
respect, much richer, better cultivated, and more advanced in all arts and
manufactures, than either Mexico or Peru, even though we should credit,
what plainly deserves no credit, the exaggerated accounts of the Spanish
writers concerning the ancient state of those empires. But rich and
civilized nations can always exchange to a much greater value with one
another, than with savages and barbarians. Europe, however, has hitherto
derived much less advantage from its commerce with the East Indies, than
from that with America. The Portuguese monopolised the East India trade to
themselves for about a century; and it was only indirectly, and through
them, that the other nations of Europe could either send out or receive
any goods from that country. When the Dutch, in the beginning of the last
century, began to encroach upon them, they vested their whole East India
commerce in an exclusive company. The English, French, Swedes, and Danes,
have all followed their example; so that no great nation of Europe has
ever yet had the benefit of a free commerce to the East Indies. No other
reason need be assigned why it has never been so advantageous as the trade
to America, which, between almost every nation of Europe and its own
colonies, is free to all its subjects. The exclusive privileges of those
East India companies, their great riches, the great favour and protection
which these have procured them from their respective governments, have
excited much envy against them. This envy has frequently represented their
trade as altogether pernicious, on account of the great quantities of
silver which it every year exports from the countries from which it is
carried on. The parties concerned have replied, that their trade by this
continual exportation of silver, might indeed tend to impoverish Europe in
general, but not the particular country from which it was carried on;
because, by the exportation of a part of the returns to other European
countries, it annually brought home a much greater quantity of that metal
than it carried out. Both the objection and the reply are founded in the
popular notion which I have been just now examining. It is therefore
unnecessary to say any thing further about either. By the annual
exportation of silver to the East Indies, plate is probably somewhat
dearer in Europe than it otherwise might have been; and coined silver
probably purchases a larger quantity both of labour and commodities. The
former of these two effects is a very small loss, the latter a very small
advantage; both too insignificant to deserve any part of the public
attention. The trade to the East Indies, by opening a market to the
commodities of Europe, or, what comes nearly to the same thing, to the
gold and silver which is purchased with those commodities, must
necessarily tend to increase the annual production of European
commodities, and consequently the real wealth and revenue of Europe. That
it has hitherto increased them so little, is probably owing to the
restraints which it everywhere labours under.
I thought it necessary, though at the hazard of being tedious, to examine
at full length this popular notion, that wealth consists in money or in
gold and silver. Money, in common language, as I have already observed,
frequently signifies wealth; and this ambiguity of expression has rendered
this popular notion so familiar to us, that even they who are convinced of
its absurdity, are very apt to forget their own principles, and, in the
course of their reasonings, to take it for granted as a certain and
undeniable truth. Some of the best English writers upon commerce set out
with observing, that the wealth of a country consists, not in its gold and
silver only, but in its lands, houses, and consumable goods of all
different kinds. In the course of their reasonings, however, the lands,
houses, and consumable goods, seem to slip out of their memory; and the
strain of their argument frequently supposes that all wealth consists in
gold and silver, and that to multiply those metals is the great object of
national industry and commerce.
The two principles being established, however, that wealth consisted in
gold and silver, and that those metals could be brought into a country
which had no mines, only by the balance of trade, or by exporting to a
greater value than it imported; it necessarily became the great object of
political economy to diminish as much as possible the importation of
foreign goods for home consumption, and to increase as much as possible
the exportation of the produce of domestic industry. Its two great engines
for enriching the country, therefore, were restraints upon importation,
and encouragement to exportation.
The restraints upon importation were of two kinds.
First, restraints upon the importation of such foreign goods for home
consumption as could be produced at home, from whatever country they were
imported.
Secondly, restraints upon the importation of goods of almost all kinds,
from those particular countries with which the balance of trade was
supposed to be disadvantageous.
Those different restraints consisted sometimes in high duties, and
sometimes in absolute prohibitions.
Exportation was encouraged sometimes by drawbacks, sometimes by bounties,
sometimes by advantageous treaties of commerce with foreign states, and
sometimes by the establishment of colonies in distant countries.
Drawbacks were given upon two different occasions. When the home
manufactures were subject to any duty or excise, either the whole or a
part of it was frequently drawn back upon their exportation; and when
foreign goods liable to a duty were imported, in order to be exported
again, either the whole or a part of this duty was sometimes given back
upon such exportation.
Bounties were given for the encouragement, either of some beginning
manufactures, or of such sorts of industry of other kinds as were supposed
to deserve particular favour.
By advantageous treaties of commerce, particular privileges were procured
in some foreign state for the goods and merchants of the country, beyond
what were granted to those of other countries.
By the establishment of colonies in distant countries, not only particular
privileges, but a monopoly was frequently procured for the goods and
merchants of the country which established them.
The two sorts of restraints upon importation above mentioned, together
with these four encouragements to exportation, constitute the six
principal means by which the commercial system proposes to increase the
quantity of gold and silver in any country, by turning the balance of
trade in its favour. I shall consider each of them in a particular
chapter, and, without taking much farther notice of their supposed
tendency to bring money into the country, I shall examine chiefly what are
likely to be the effects of each of them upon the annual produce of its
industry. According as they tend either to increase or diminish the value
of this annual produce, they must evidently tend either to increase or
diminish the real wealth and revenue of the country.
CHAPTER II.
OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME.
By restraining, either by high duties, or by absolute prohibitions, the
importation of such goods from foreign countries as can be produced at
home, the monopoly of the home market is more or less secured to the
domestic industry employed in producing them. Thus the prohibition of
importing either live cattle or salt provisions from foreign countries,
secures to the graziers of Great Britain the monopoly of the home market
for butcher’s meat. The high duties upon the importation of corn, which,
in times of moderate plenty, amount to a prohibition, give a like
advantage to the growers of that commodity. The prohibition of the
importation of foreign woollen is equally favourable to the woollen
manufacturers. The silk manufacture, though altogether employed upon
foreign materials, has lately obtained the same advantage. The linen
manufacture has not yet obtained it, but is making great strides towards
it. Many other sorts of manufactures have, in the same manner obtained in
Great Britain, either altogether, or very nearly, a monopoly against their
countrymen. The variety of goods, of which the importation into Great
Britain is prohibited, either absolutely, or under certain circumstances,
greatly exceeds what can easily be suspected by those who are not well
acquainted with the laws of the customs.
That this monopoly of the home market frequently gives great encouragement
to that particular species of industry which enjoys it, and frequently
turns towards that employment a greater share of both the labour and stock
of the society than would otherwise have gone to it, cannot be doubted.
But whether it tends either to increase the general industry of the
society, or to give it the most advantageous direction, is not, perhaps,
altogether so evident.
The general industry of the society can never exceed what the capital of
the society can employ. As the number of workmen that can be kept in
employment by any particular person must bear a certain proportion to his
capital, so the number of those that can be continually employed by all
the members of a great society must bear a certain proportion to the whole
capital of the society, and never can exceed that proportion. No
regulation of commerce can increase the quantity of industry in any
society beyond what its capital can maintain. It can only divert a part of
it into a direction into which it might not otherwise have gone; and it is
by no means certain that this artificial direction is likely to be more
advantageous to the society, than that into which it would have gone of
its own accord.
Every individual is continually exerting himself to find out the most
advantageous employment for whatever capital he can command. It is his own
advantage, indeed, and not that of the society, which he has in view. But
the study of his own advantage naturally, or rather necessarily, leads him
to prefer that employment which is most advantageous to the society.
First, every individual endeavours to employ his capital as near home as
he can, and consequently as much as he can in the support of domestic
industry, provided always that he can thereby obtain the ordinary, or not
a great deal less than the ordinary profits of stock.
Thus, upon equal, or nearly equal profits, every wholesale merchant
naturally prefers the home trade to the foreign trade of consumption, and
the foreign trade of consumption to the carrying trade. In the home trade,
his capital is never so long out of his sight as it frequently is in the
foreign trade of consumption. He can know better the character and
situation of the persons whom he trusts; and if he should happen to be
deceived, he knows better the laws of the country from which he must seek
redress. In the carrying trade, the capital of the merchant is, as it
were, divided between two foreign countries, and no part of it is ever
necessarily brought home, or placed under his own immediate view and
command. The capital which an Amsterdam merchant employs in carrying corn
from Koningsberg to Lisbon, and fruit and wine from Lisbon to Koningsberg,
must generally be the one half of it at Koningsberg, and the other half at
Lisbon. No part of it need ever come to Amsterdam. The natural residence
of such a merchant should either be at Koningsberg or Lisbon; and it can
only be some very particular circumstances which can make him prefer the
residence of Amsterdam. The uneasiness, however, which he feels at being
separated so far from his capital, generally determines him to bring part
both of the Koningsberg goods which he destines for the market of Lisbon,
and of the Lisbon goods which he destines for that of Koningsberg, to
Amsterdam; and though this necessarily subjects him to a double charge of
loading and unloading as well as to the payment of some duties and
customs, yet, for the sake of having some part of his capital always under
his own view and command, he willingly submits to this extraordinary
charge; and it is in this manner that every country which has any
considerable share of the carrying trade, becomes always the emporium, or
general market, for the goods of all the different countries whose trade
it carries on. The merchant, in order to save a second loading and
unloading, endeavours always to sell in the home market, as much of the
goods of all those different countries as he can; and thus, so far as he
can, to convert his carrying trade into a foreign trade of consumption. A
merchant, in the same manner, who is engaged in the foreign trade of
consumption, when he collects goods for foreign markets, will always be
glad, upon equal or nearly equal profits, to sell as great a part of them
at home as he can. He saves himself the risk and trouble of exportation,
when, so far as he can, he thus converts his foreign trade of consumption
into a home trade. Home is in this manner the centre, if I may say so,
round which the capitals of the inhabitants of every country are
continually circulating, and towards which they are always tending,
though, by particular causes, they may sometimes be driven off and
repelled from it towards more distant employments. But a capital employed
in the home trade, it has already been shown, necessarily puts into motion
a greater quantity of domestic industry, and gives revenue and employment
to a greater number of the inhabitants of the country, than an equal
capital employed in the foreign trade of consumption; and one employed in
the foreign trade of consumption has the same 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 greatest support
to domestic industry, and to give revenue and employment to the greatest
number of people of his own country.
Secondly, every individual who employs his capital in the support of
domestic industry, necessarily endeavours so to direct that industry, that
its produce may be of the greatest possible value.
The produce of industry is what it adds to the subject or materials upon
which it is employed. In proportion as the value of this produce is great
or small, so will likewise be the profits of the employer. But it is only
for the sake of profit that any man employs a capital in the support of
industry; and he will always, therefore, endeavour to employ it in the
support of that industry of which the produce is likely to be of the
greatest value, or to exchange for the greatest quantity either of money
or of other goods.
But the annual revenue of every society is always precisely equal to the
exchangeable value of the whole annual produce of its industry, or rather
is precisely the same thing with that exchangeable value. As every
individual, therefore, endeavours as much as he can, both to employ his
capital in the support of domestic industry, and so to direct that
industry that its produce maybe of the greatest value; every individual
necessarily labours to render the annual revenue of the society as great
as he can. He generally, indeed, neither intends to promote the public
interest, nor knows how much he is promoting it. By preferring the support
of domestic to that of foreign industry, he intends only his own security;
and by directing that industry in such a manner as its produce may be of
the greatest value, he intends only his own gain; and he is in this, as in
many other cases, led by an invisible hand to promote an end which was no
part of his intention. Nor is it always the worse for the society that it
was no part of it. By pursuing his own interest, he frequently promotes
that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to
trade for the public good. It is an affectation, indeed, not very common
among merchants, and very few words need be employed in dissuading them
from it.
What is the species of domestic industry which his capital can employ, and
of which the produce is likely to be of the greatest value, every
individual, it is evident, can in his local situation judge much better
than any statesman or lawgiver can do for him. The statesman, who should
attempt to direct private people in what manner they ought to employ their
capitals, would not only load himself with a most unnecessary attention,
but assume an authority which could safely be trusted, not only to no
single person, but to no council or senate whatever, and which would
nowhere be so dangerous as in the hands of a man who had folly and
presumption enough to fancy himself fit to exercise it.
To give the monopoly of the home market to the produce of domestic
industry, in any particular art or manufacture, is in some measure to
direct private people in what manner they ought to employ their capitals,
and must in almost all cases be either a useless or a hurtful regulation.
If the produce of domestic can be brought there as cheap as that of
foreign industry, the regulation is evidently useless. If it cannot, it
must generally be hurtful. It is the maxim of every prudent master of a
family, never to attempt to make at home what it will cost him more to
make than to buy. The tailor does not attempt to make his own shoes, but
buys them of the shoemaker. The shoemaker does not attempt to make his own
clothes, but employs a tailor. The farmer attempts to make neither the one
nor the other, but employs those different artificers. All of them find it
for their interest to employ their whole industry in a way in which they
have some advantage over their neighbours, and to purchase with a part of
its produce, or, what is the same thing, with the price of a part of it,
whatever else they have occasion for.
What is prudence in the conduct of every private family, can scarce be
folly in that of a great kingdom. If a foreign country can supply us with
a commodity cheaper than we ourselves can make it, better buy it of them
with some part of the produce of our own industry, employed in a way in
which we have some advantage. The general industry of the country being
always in proportion to the capital which employs it, will not thereby be
diminished, no more than that of the abovementioned artificers; but only
left to find out the way in which it can be employed with the greatest
advantage. It is certainly not employed to the greatest advantage, when it
is thus directed towards an object which it can buy cheaper than it can
make. The value of its annual produce is certainly more or less
diminished, when it is thus turned away from producing commodities
evidently of more value than the commodity which it is directed to
produce. According to the supposition, that commodity could be purchased
from foreign countries cheaper than it can be made at home; it could
therefore have been purchased with a part only of the commodities, or,
what is the same thing, with a part only of the price of the commodities,
which the industry employed by an equal capital would have produced at
home, had it been left to follow its natural course. The industry of the
country, therefore, is thus turned away from a more to a less advantageous
employment; and the exchangeable value of its annual produce, instead of
being increased, according to the intention of the lawgiver, must
necessarily be diminished by every such regulation.
By means of such regulations, indeed, a particular manufacture may
sometimes be acquired sooner than it could have been otherwise, and after
a certain time may be made at home as cheap, or cheaper, than in the
foreign country. But though the industry of the society may be thus
carried with advantage into a particular channel sooner than it could have
been otherwise, it will by no means follow that the sum-total, either of
its industry, or of its revenue, can ever be augmented by any such
regulation. The industry of the society can augment only in proportion as
its capital augments, and its capital can augment only in proportion to
what can be gradually saved out of its revenue. But the immediate effect
of every such regulation is to diminish its revenue; and what diminishes
its revenue is certainly not very likely to augment its capital faster
than it would have augmented of its own accord, had both capital and
industry been left to find out their natural employments.
Though, for want of such regulations, the society should never acquire the
proposed manufacture, it would not upon that account necessarily be the
poorer in anyone period of its duration. In every period of its duration
its whole capital and industry might still have been employed, though upon
different objects, in the manner that was most advantageous at the time.
In every period its revenue might have been the greatest which its capital
could afford, and both capital and revenue might have been augmented with
the greatest possible rapidity.
The natural advantages which one country has over another, in producing
particular commodities, are sometimes so great, that it is acknowledged by
all the world to be in vain to struggle with them. By means of glasses,
hot-beds, and hot-walls, very good grapes can be raised in Scotland, and
very good wine, too, can be made of them, at about thirty times the
expense for which at least equally good can be brought from foreign
countries. Would it be a reasonable law to prohibit the importation of all
foreign wines, merely to encourage the making of claret and Burgundy in
Scotland? But if there would be a manifest absurdity in turning towards
any employment thirty times more of the capital and industry of the
country than would be necessary to purchase from foreign countries an
equal quantity of the commodities wanted, there must be an absurdity,
though not altogether so glaring, yet exactly of the same kind, in turning
towards any such employment a thirtieth, or even a three hundredth part
more of either. Whether the advantages which one country has over another
be natural or acquired, is in this respect of no consequence. As long as
the one country has those advantages, and the other wants them, it will
always be more advantageous for the latter rather to buy of the former
than to make. It is an acquired advantage only, which one artificer has
over his neighbour, who exercises another trade; and yet they both find it
more advantageous to buy of one another, than to make what does not belong
to their particular trades.
Merchants and manufacturers are the people who derive the greatest
advantage from this monopoly of the home market. The prohibition of the
importation of foreign cattle and of salt provisions, together with the
high duties upon foreign corn, which in times of moderate plenty amount to
a prohibition, are not near so advantageous to the graziers and farmers of
Great Britain, as other regulations of the same kind are to its merchants
and manufacturers. Manufactures, those of the finer kind especially, are
more easily transported from one country to another than corn or cattle.
It is in the fetching and carrying manufactures, accordingly, that foreign
trade is chiefly employed. In manufactures, a very small advantage will
enable foreigners to undersell our own workmen, even in the home market.
It will require a very great one to enable them to do so in the rude
produce of the soil. If the free importation of foreign manufactures were
permitted, several of the home manufactures would probably suffer, and
some of them perhaps go to ruin altogether, and a considerable part of the
stock and industry at present employed in them, would be forced to find
out some other employment. But the freest importation of the rude produce
of the soil could have no such effect upon the agriculture of the country.
If the importation of foreign cattle, for example, were made ever so free,
so few could be imported, that the grazing trade of Great Britain could be
little affected by it. Live cattle are, perhaps, the only commodity of
which the transportation is more expensive by sea than by land. By land
they carry themselves to market. By sea, not only the cattle, but their
food and their water too, must be carried at no small expense and
inconveniency. The short sea between Ireland and Great Britain, indeed,
renders the importation of Irish cattle more easy. But though the free
importation of them, which was lately permitted only for a limited time,
were rendered perpetual, it could have no considerable effect upon the
interest of the graziers of Great Britain. Those parts of Great Britain
which border upon the Irish sea are all grazing countries. Irish cattle
could never be imported for their use, but must be drove through those
very extensive countries, at no small expense and inconveniency, before
they could arrive at their proper market. Fat cattle could not be drove so
far. Lean cattle, therefore, could only be imported; and such importation
could interfere not with the interest of the feeding or fattening
countries, to which, by reducing the price of lean cattle it would rather
be advantageous, but with that of the breeding countries only. The small
number of Irish cattle imported since their importation was permitted,
together with the good price at which lean cattle still continue to sell,
seem to demonstrate, that even the breeding countries of Great Britain are
never likely to be much affected by the free importation of Irish cattle.
The common people of Ireland, indeed, are said to have sometimes opposed
with violence the exportation of their cattle. But if the exporters had
found any great advantage in continuing the trade, they could easily, when
the law was on their side, have conquered this mobbish opposition.
Feeding and fattening countries, besides, must always be highly improved,
whereas breeding countries are generally uncultivated. The high price of
lean cattle, by augmenting the value of uncultivated land, is like a
bounty against improvement. To any country which was highly improved
throughout, it would be more advantageous to import its lean cattle than
to breed them. The province of Holland, accordingly, is said to follow
this maxim at present. The mountains of Scotland, Wales, and
Northumberland, indeed, are countries not capable of much improvement, and
seem destined by nature to be the breeding countries of Great Britain. The
freest importation of foreign cattle could have no other effect than to
hinder those breeding countries from taking advantage of the increasing
population and improvement of the rest of the kingdom, from raising their
price to an exorbitant height, and from laying a real tax upon all the
more improved and cultivated parts of the country.
The freest importation of salt provisions, in the same manner, could have
as little effect upon the interest of the graziers of Great Britain as
that of live cattle. Salt provisions are not only a very bulky commodity,
but when compared with fresh meat they are a commodity both of worse
quality, and, as they cost more labour and expense, of higher price. They
could never, therefore, come into competition with the fresh meat, though
they might with the salt provisions of the country. They might be used for
victualling ships for distant voyages, and such like uses, but could never
make any considerable part of the food of the people. The small quantity
of salt provisions imported from Ireland since their importation was
rendered free, is an experimental proof that our graziers have nothing to
apprehend from it. It does not appear that the price of butcher’s meat has
ever been sensibly affected by it.
Even the free importation of foreign corn could very little affect the
interest of the farmers of Great Britain. Corn is a much more bulky
commodity than butcher’s meat. A pound of wheat at a penny is as dear as a
pound of butcher’s meat at fourpence. The small quantity of foreign corn
imported even in times of the greatest scarcity, may satisfy our farmers
that they can have nothing to fear from the freest importation. The
average quantity imported, one year with another, amounts only, according
to the very well informed author of the Tracts upon the Corn Trade, to
23,728 quarters of all sorts of grain, and does not exceed the five
hundredth and seventy-one part of the annual consumption. But as the
bounty upon corn occasions a greater exportation in years of plenty, so it
must, of consequence, occasion a greater importation in years of scarcity,
than in the actual state of tillage would otherwise take place. By means
of it, the plenty of one year does not compensate the scarcity of another;
and as the average quantity exported is necessarily augmented by it, so
must likewise, in the actual state of tillage, the average quantity
imported. If there were no bounty, as less corn would be exported, so it
is probable that, one year with another, less would be imported than at
present. The corn-merchants, the fetchers and carriers of corn between
Great Britain and foreign countries, would have much less employment, and
might suffer considerably; but the country gentlemen and farmers could
suffer very little. It is in the corn-merchants, accordingly, rather than
the country gentlemen and farmers, that I have observed the greatest
anxiety for the renewal and continuation of the bounty.
Country gentlemen and farmers are, to their great honour, of all people,
the least subject to the wretched spirit of monopoly. The undertaker of a
great manufactory is sometimes alarmed if another work of the same kind is
established within twenty miles of him; the Dutch undertaker of the
woollen manufacture at Abbeville, stipulated that no work of the same kind
should be established within thirty leagues of that city. Farmers and
country gentlemen, on the contrary, are generally disposed rather to
promote, than to obstruct, the cultivation and improvement of their
neighbours farms and estates. They have no secrets, such as those of the
greater part of manufacturers, but are generally rather fond of
communicating to their neighbours, and of extending as far as possible any
new practice which they may have found to be advantageous. “Pius
quaestus”, says old Cato, “stabilissimusque, minimeque invidiosus;
minimeque male cogitantes sunt, qui in eo studio occupati sunt.” Country
gentlemen and farmers, dispersed in different parts of the country, cannot
so easily combine as merchants and manufacturers, who being collected into
towns, and accustomed to that exclusive corporation spirit which prevails
in them, naturally endeavour to obtain, against all their countrymen, the
same exclusive privilege which they generally possess against the
inhabitants of their respective towns. They accordingly seem to have been
the original inventors of those restraints upon the importation of foreign
goods, which secure to them the monopoly of the home market. It was
probably in imitation of them, and to put themselves upon a level with
those who, they found, were disposed to oppress them, that the country
gentlemen and farmers of Great Britain so far forgot the generosity which
is natural to their station, as to demand the exclusive privilege of
supplying their countrymen with corn and butcher’s meat. They did not,
perhaps, take time to consider how much less their interest could be
affected by the freedom of trade, than that of the people whose example
they followed.
To prohibit, by a perpetual law, the importation of foreign corn and
cattle, is in reality to enact, that the population and industry of the
country shall, at no time, exceed what the rude produce of its own soil
can maintain.
There seem, however, to be two cases, in which it will generally be
advantageous to lay some burden upon foreign, for the encouragement of
domestic industry.
The first is, when some particular sort of industry is necessary for the
defence of the country. The defence of Great Britain, for example, depends
very much upon the number of its sailors and shipping. The act of
navigation, therefore, very properly endeavours to give the sailors and
shipping of Great Britain the monopoly of the trade of their own country,
in some cases, by absolute prohibitions, and in others, by heavy burdens
upon the shipping of foreign countries. The following are the principal
dispositions of this act.
First, All ships, of which the owners, masters, and three-fourths of the
mariners, are not British subjects, are prohibited, upon pain of
forfeiting ship and cargo, from trading to the British settlements and
plantations, or from being employed in the coasting trade of Great
Britain.
Secondly, A great variety of the most bulky articles of importation can be
brought into Great Britain only, either in such ships as are above
described, or in ships of the country where those goods are produced, and
of which the owners, masters, and three-fourths of the mariners, are of
that particular country; and when imported even in ships of this latter
kind, they are subject to double aliens duty. If imported in ships of any
other country, the penalty is forfeiture of ship and goods. When this act
was made, the Dutch were, what they still are, the great carriers of
Europe; and by this regulation they were entirely excluded from being the
carriers to Great Britain, or from importing to us the goods of any other
European country.
Thirdly, A great variety of the most bulky articles of importation are
prohibited from being imported, even in British ships, from any country
but that in which they are produced, under pain of forfeiting ship and
cargo. This regulation, too, was probably intended against the Dutch.
Holland was then, as now, the great emporium for all European goods; and
by this regulation, British ships were hindered from loading in Holland
the goods of any other European country.
Fourthly, Salt fish of all kinds, whale fins, whalebone, oil, and blubber,
not caught by and cured on board British vessels, when imported into Great
Britain, are subject to double aliens duty. The Dutch, as they are still
the principal, were then the only fishers in Europe that attempted to
supply foreign nations with fish. By this regulation, a very heavy burden
was laid upon their supplying Great Britain.
When the act of navigation was made, though England and Holland were not
actually at war, the most violent animosity subsisted between the two
nations. It had begun during the government of the long parliament, which
first framed this act, and it broke out soon after in the Dutch wars,
during that of the Protector and of Charles II. It is not impossible,
therefore, that some of the regulations of this famous act may have
proceeded from national animosity. They are as wise, however, as if they
had all been dictated by the most deliberate wisdom. National animosity,
at that particular time, aimed at the very same object which the most
deliberate wisdom would have recommended, the diminution of the naval
power of Holland, the only naval power which could endanger the security
of England.
The act of navigation is not favourable to foreign commerce, or to the
growth of that opulence which can arise from it. The interest of a nation,
in its commercial relations to foreign nations, is, like that of a
merchant with regard to the different people with whom he deals, to buy as
cheap, and to sell as dear as possible. But it will be most likely to buy
cheap, when, by the most perfect freedom of trade, it encourages all
nations to bring to it the goods which it has occasion to purchase; and,
for the same reason, it will be most likely to sell dear, when its markets
are thus filled with the greatest number of buyers. The act of navigation,
it is true, lays no burden upon foreign ships that come to export the
produce of British industry. Even the ancient aliens duty, which used to
be paid upon all goods, exported as well as imported, has, by several
subsequent acts, been taken off from the greater part of the articles of
exportation. But if foreigners, either by prohibitions or high duties, are
hindered from coming to sell, they cannot always afford to come to buy;
because, coming without a cargo, they must lose the freight from their own
country to Great Britain. By diminishing the number of sellers, therefore,
we necessarily diminish that of buyers, and are thus likely not only to
buy foreign goods dearer, but to sell our own cheaper, than if there was a
more perfect freedom of trade. As defence, however, is of much more
importance than opulence, the act of navigation is, perhaps, the wisest of
all the commercial regulations of England.
The second case, in which it will generally be advantageous to lay some
burden upon foreign for the encouragement of domestic industry, is when
some tax is imposed at home upon the produce of the latter. In this case,
it seems reasonable that an equal tax should be imposed upon the like
produce of the former. This would not give the monopoly of the home
market to domestic industry, nor turn towards a particular employment a
greater share of the stock and labour of the country, than what would
naturally go to it. It would only hinder any part of what would naturally
go to it from being turned away by the tax into a less natural direction,
and would leave the competition between foreign and domestic industry,
after the tax, as nearly as possible upon the same footing as before it.
In Great Britain, when any such tax is laid upon the produce of domestic
industry, it is usual, at the same time, in order to stop the clamorous
complaints of our merchants and manufacturers, that they will be undersold
at home, to lay a much heavier duty upon the importation of all foreign
goods of the same kind.
This second limitation of the freedom of trade, according to some people,
should, upon most occasions, be extended much farther than to the precise
foreign commodities which could come into competition with those which had
been taxed at home. When the necessaries of life have been taxed in any
country, it becomes proper, they pretend, to tax not only the like
necessaries of life imported from other countries, but all sorts of
foreign goods which can come into competition with any thing that is the
produce of domestic industry. Subsistence, they say, becomes necessarily
dearer in consequence of such taxes; and the price of labour must always
rise with the price of the labourer’s subsistence. Every commodity,
therefore, which is the produce of domestic industry, though not
immediately taxed itself, becomes dearer in consequence of such taxes,
because the labour which produces it becomes so. Such taxes, therefore,
are really equivalent, they say, to a tax upon every particular commodity
produced at home. In order to put domestic upon the same footing with
foreign industry, therefore, it becomes necessary, they think, to lay some
duty upon every foreign commodity, equal to this enhancement of the price
of the home commodities with which it can come into competition.
Whether taxes upon the necessaries of life, such as those in Great Britain
upon soap, salt, leather, candles, etc. necessarily raise the price of
labour, and consequently that of all other commodities, I shall consider
hereafter, when I come to treat of taxes. Supposing, 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 consequence of
that labour, is a case which differs in the two following respects from
that of a particular commodity, of which the price was enhanced by a
particular tax immediately imposed upon it.
First, It might always be known with great exactness, how far the price of
such a commodity could be enhanced by such a tax; but how far the general
enhancement of the price of labour might affect that of every different
commodity about which labour was employed, could never be known with any
tolerable exactness. It would be impossible, therefore, to proportion,
with any tolerable exactness, the tax of every foreign, to the enhancement
of the price of every home commodity.
Secondly, Taxes upon the necessaries of life have nearly the same effect
upon the circumstances of the people as a poor soil and a bad climate.
Provisions are thereby rendered dearer, in the same manner as if it
required extraordinary labour and expense to raise them. As, in the
natural scarcity arising from soil and climate, it would be absurd to
direct the people in what manner they ought to employ their capitals and
industry, so is it likewise in the artificial scarcity arising from such
taxes. To be left to accommodate, as well as they could, their industry to
their situation, and to find out those employments in which,
notwithstanding their unfavourable circumstances, they might have some
advantage either in the home or in the foreign market, is what, in both
cases, would evidently be most for their advantage. To lay a new-tax upon
them, because they are already overburdened with taxes, and because they
already pay too dear for the necessaries of life, to make them likewise
pay too dear for the greater part of other commodities, is certainly a
most absurd way of making amends.
Such taxes, when they have grown up to a certain height, are a curse equal
to the barrenness of the earth, and the inclemency of the heavens, and yet
it is in the richest and most industrious countries that they have been
most generally imposed. No other countries could support so great a
disorder. As the strongest bodies only can live and enjoy health under an
unwholesome regimen, so the nations only, that in every sort of industry
have the greatest natural and acquired advantages, can subsist and prosper
under such taxes. Holland is the country in Europe in which they abound
most, and which, from peculiar circumstances, continues to prosper, not by
means of them, as has been most absurdly supposed, but in spite of them.
As there are two cases in which it will generally be advantageous to lay
some burden upon foreign for the encouragement of domestic industry, so
there are two others in which it may sometimes be a matter of
deliberation, in the one, how far it is proper to continue the free
importation of certain foreign goods; and, in the other, how far, or in
what manner, it may be proper to restore that free importation, after it
has been for some time interrupted.
The case in which it may sometimes be a matter of deliberation how far it
is proper to continue the free importation of certain foreign goods, is
when some foreign nation restrains, by high duties or prohibitions, the
importation of some of our manufactures into their country. Revenge, in
this case, naturally dictates retaliation, and that we should impose the
like duties and prohibitions upon the importation of some or all of their
manufactures into ours. Nations, accordingly, seldom fail to retaliate in
this manner. The French have been particularly forward to favour their own
manufactures, by restraining the importation of such foreign goods as
could come into competition with them. In this consisted a great part of
the policy of Mr Colbert, who, notwithstanding his great abilities, seems
in this case to have been imposed upon by the sophistry of merchants and
manufacturers, who are always demanding a monopoly against their
countrymen. It is at present the opinion of the most intelligent men in
France, that his operations of this kind have not been beneficial to his
country. That minister, by the tariff of 1667, imposed very high duties
upon a great number of foreign manufactures. Upon his refusing to moderate
them in favour of the Dutch, they, in 1671, prohibited the importation of
the wines, brandies, and manufactures of France. The war of 1672 seems to
have been in part occasioned by this commercial dispute. The peace of
Nimeguen put an end to it in 1678, by moderating some of those duties in
favour of the Dutch, who in consequence took off their prohibition. It was
about the same time that the French and English began mutually to oppress
each other’s industry, by the like duties and prohibitions, of which the
French, however, seem to have set the first example, The spirit of
hostility which has subsisted between the two nations ever since, has
hitherto hindered them from being moderated on either side. In 1697, the
English prohibited the importation of bone lace, the manufacture of
Flanders. The government of that country, at that time under the dominion
of Spain, prohibited, in return, the importation of English woollens. In
1700, the prohibition of importing bone lace into England was taken off
upon condition that the importation of English woollens into Flanders
should be put on the same footing as before.
There may be good policy in retaliations of this kind, when there is a
probability that they will procure the repeal of the high duties or
prohibitions complained of. The recovery of a great foreign market will
generally more than compensate the transitory inconveniency of paying
dearer during a short time for some sorts of goods. To judge whether such
retaliations are likely to produce such an effect, does not, perhaps,
belong so much to the science of a legislator, whose deliberations ought
to be governed by general principles, which are always the same, as to the
skill of that insidious and crafty animal vulgarly called a statesman or
politician, whose councils are directed by the momentary fluctuations of
affairs. When there is no probability that any such repeal can be
procured, it seems a bad method of compensating the injury done to certain
classes of our people, to do another injury ourselves, not only to those
classes, but to almost all the other classes of them. When our neighbours
prohibit some manufacture of ours, we generally prohibit, not only the
same, for that alone would seldom affect them considerably, but some other
manufacture of theirs. This may, no doubt, give encouragement to some
particular class of workmen among ourselves, and, by excluding some of
their rivals, may enable them to raise their price in the home market.
Those workmen however, who suffered by our neighbours prohibition, will
not be benefited by ours. On the contrary, they, and almost all the other
classes of our citizens, will thereby be obliged to pay dearer than before
for certain goods. Every such law, therefore, imposes a real tax upon the
whole country, not in favour of that particular class of workmen who were
injured by our neighbours prohibitions, but of some other class.
The case in which it may sometimes be a matter of deliberation, how far,
or in what manner, it is proper to restore the free importation of foreign
goods, after it has been for some time interrupted, is when particular
manufactures, by means of high duties or prohibitions upon all foreign
goods which can come into competition with them, have been so far extended
as to employ a great multitude of hands. Humanity may in this case require
that the freedom of trade should be restored only by slow gradations, and
with a good deal of reserve and circumspection. Were those high duties and
prohibitions taken away all at once, cheaper foreign goods of the same
kind might be poured so fast into the home market, as to deprive all at
once many thousands of our people of their ordinary employment and means
of subsistence. The disorder which this would occasion might no doubt be
very considerable. It would in all probability, however, be much less than
is commonly imagined, for the two following reasons.
First, All those manufactures of which any part is commonly exported to
other European countries without a bounty, could be very little affected
by the freest importation of foreign goods. Such manufactures must be sold
as cheap abroad as any other foreign goods of the same quality and kind,
and consequently must be sold cheaper at home. They would still,
therefore, keep possession of the home market; and though a capricious man
of fashion might sometimes prefer foreign wares, merely because they were
foreign, to cheaper and better goods of the same kind that were made at
home, this folly could, from the nature of things, extend to so few, that
it could make no sensible impression upon the general employment of the
people. But a great part of all the different branches of our woollen
manufacture, of our tanned leather, and of our hardware, are annually
exported to other European countries without any bounty, and these are the
manufactures which employ the greatest number of hands. The silk, perhaps,
is the manufacture which would suffer the most by this freedom of trade,
and after it the linen, though the latter much less than the former.
Secondly, Though a great number of people should, by thus restoring the
freedom of trade, be thrown all at once out of their ordinary employment
and common method of subsistence, it would by no means follow that they
would thereby be deprived either of employment or subsistence. By the
reduction of the army and navy at the end of the late war, more than
100,000 soldiers and seamen, a number equal to what is employed in the
greatest manufactures, were all at once thrown out of their ordinary
employment: but though they no doubt suffered some inconveniency, they
were not thereby deprived of all employment and subsistence. The greater
part of the seamen, it is probable, gradually betook themselves to the
merchant service as they could find occasion, and in the mean time both
they and the soldiers were absorbed in the great mass of the people, and
employed in a great variety of occupations. Not only no great convulsion,
but no sensible disorder, arose from so great a change in the situation of
more than 100,000 men, all accustomed to the use of arms, and many of them
to rapine and plunder. The number of vagrants was scarce anywhere sensibly
increased by it; even the wages of labour were not reduced by it in any
occupation, so far as I have been able to learn, except in that of seamen
in the merchant service. But if we compare together the habits of a
soldier and of any sort of manufacturer, we shall find that those of the
latter do not tend so much to disqualify him from being employed in a new
trade, as those of the former from being employed in any. The manufacturer
has always been accustomed to look for his subsistence from his labour
only; the soldier to expect it from his pay. Application and industry have
been familiar to the one; idleness and dissipation to the other. But it is
surely much easier to change the direction of industry from one sort of
labour to another, than to turn idleness and dissipation to any. To the
greater part of manufactures, besides, it has already been observed, there
are other collateral manufactures of so similar a nature, that a workman
can easily transfer his industry from one of them to another. The greater
part of such workmen, too, are occasionally employed in country labour.
The stock which employed them in a particular manufacture before, will
still remain in the country, to employ an equal number of people in some
other way. The capital of the country remaining the same, the demand for
labour will likewise be the same, or very nearly the same, though it may
be exerted in different places, and for different occupations. Soldiers
and seamen, indeed, when discharged from the king’s service, are at
liberty to exercise any trade within any town or place of Great Britain or
Ireland. Let the same natural liberty of exercising what species of
industry they please, be restored to all his Majesty’s subjects, in the
same manner as to soldiers and seamen; that is, break down the exclusive
privileges of corporations, and repeal the statute of apprenticeship, both
which are really encroachments upon natural Liberty, and add to those the
repeal of the law of settlements, so that a poor workman, when thrown out
of employment, either in one trade or in one place, may seek for it in
another trade or in another place, without the fear either of a
prosecution or of a removal; and neither the public nor the individuals
will suffer much more from the occasional disbanding some particular
classes of manufacturers, than from that of the soldiers. Our
manufacturers have no doubt great merit with their country, but they
cannot have more than those who defend it with their blood, nor deserve to
be treated with more delicacy.
To expect, indeed, that the freedom of trade should ever be entirely
restored in Great Britain, is as absurd as to expect that an Oceana or
Utopia should ever be established in it. Not only the prejudices of the
public, but, what is much more unconquerable, the private interests of
many individuals, irresistibly oppose it. Were the officers of the army to
oppose, with the same zeal and unanimity, any reduction in the number of
forces, with which master manufacturers set themselves against every law
that is likely to increase the number of their rivals in the home market;
were the former to animate their soldiers, in the same manner as the
latter inflame their workmen, to attack with violence and outrage the
proposers of any such regulation; to attempt to reduce the army would be
as dangerous as it has now become to attempt to diminish, in any respect,
the monopoly which our manufacturers have obtained against us. This
monopoly has so much increased the number of some particular tribes of
them, that, like an overgrown standing army, they have become formidable
to the government, and, upon many occasions, intimidate the legislature.
The member of parliament who supports every proposal for strengthening
this monopoly, is sure to acquire not only the reputation of understanding
trade, but great popularity and influence with an order of men whose
numbers and wealth render them of great importance. If he opposes them, on
the contrary, and still more, if he has authority enough to be able to
thwart them, neither the most acknowledged probity, nor the highest rank,
nor the greatest public services, can protect him from the most infamous
abuse and detraction, from personal insults, nor sometimes from real
danger, arising from the insolent outrage of furious and disappointed
monopolists.
The undertaker of a great manufacture, who, by the home markets being
suddenly laid open to the competition of foreigners, should be obliged to
abandon his trade, would no doubt suffer very considerably. That part of
his capital which had usually been employed in purchasing materials, and
in paying his workmen, might, without much difficulty, perhaps, find
another employment; but that part of it which was fixed in workhouses, and
in the instruments of trade, could scarce be disposed of without
considerable loss. The equitable regard, therefore, to his interest,
requires that changes of this kind should never be introduced suddenly,
but slowly, gradually, and after a very long warning. The legislature,
were it possible that its deliberations could be always directed, not by
the clamorous importunity of partial interests, but by an extensive view
of the general good, ought, upon this very account, perhaps, to be
particularly careful, neither to establish any new monopolies of this
kind, nor to extend further those which are already established. Every
such regulation introduces some degree of real disorder into the
constitution of the state, which it will be difficult afterwards to cure
without occasioning another disorder.
How far it may be proper to impose taxes upon the importation of foreign
goods, in order not to prevent their importation, but to raise a revenue
for government, I shall consider hereafter when I come to treat of taxes.
Taxes imposed with a view to prevent, or even to diminish importation, are
evidently as destructive of the revenue of the customs as of the freedom
of trade.
CHAPTER III.
OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS.
Part I—Of the Unreasonableness of those Restraints, even upon the
Principles of the Commercial System.
To lay extraordinary restraints upon the importation of goods of almost
all kinds, from those particular countries with which the balance of trade
is supposed to be disadvantageous, is the second expedient by which the
commercial system proposes to increase the quantity of gold and silver.
Thus, in Great Britain, Silesia lawns may be imported for home
consumption, upon paying certain duties; but French cambrics and lawns are
prohibited to be imported, except into the port of London, there to be
warehoused for exportation. Higher duties are imposed upon the wines of
France than upon those of Portugal, or indeed of any other country. By
what is called the impost 1692, a duty of five and-twenty per cent. of the
rate or value, was laid upon all French goods; while the goods of other
nations were, the greater part of them, subjected to much lighter duties,
seldom exceeding five per cent. The wine, brandy, salt, and vinegar of
France, were indeed excepted; these commodities being subjected to other
heavy duties, either by other laws, or by particular clauses of the same
law. In 1696, a second duty of twenty-five per cent. the first not having
been thought a sufficient discouragement, was imposed upon all French
goods, except brandy; together with a new duty of five-and-twenty pounds
upon the ton of French wine, and another of fifteen pounds upon the ton of
French vinegar. French goods have never been omitted in any of those
general subsidies or duties of five per cent. which have been imposed upon
all, or the greater part, of the goods enumerated in the book of rates. If
we count the one-third and two-third subsidies as making a complete
subsidy between them, there have been five of these general subsidies; so
that, before the commencement of the present war, seventy-five per cent.
may be considered as the lowest duty to which the greater part of the
goods of the growth, produce, or manufacture of France, were liable. But
upon the greater part of goods, those duties are equivalent to a
prohibition. The French, in their turn, have, I believe, treated our goods
and manufactures just as hardly; though I am not so well acquainted with
the particular hardships which they have imposed upon them. Those mutual
restraints have put an end to almost all fair commerce between the two
nations; and smugglers are now the principal importers, either of British
goods into France, or of French goods into Great Britain. The principles
which I have been examining, in the foregoing chapter, took their origin
from private interest and the spirit of monopoly; those which I am going
te examine in this, from national prejudice and animosity. They are,
accordingly, as might well be expected, still more unreasonable. They are
so, even upon the principles of the commercial system.
First, Though it were certain that in the case of a free trade between
France and England, for example, the balance would be in favour of France,
it would by no means follow that such a trade would be disadvantageous to
England, or that the general balance of its whole trade would thereby be
turned more against it. If the wines of France are better and cheaper than
those of Portugal, or its linens than those of Germany, it would be more
advantageous for Great Britain to purchase both the wine and the foreign
linen which it had occasion for of France, than of Portugal and Germany.
Though the value of the annual importations from France would thereby be
greatly augmented, the value of the whole annual importations would be
diminished, in proportion as the French goods of the same quality were
cheaper than those of the other two countries. This would be the case,
even upon the supposition that the whole French goods imported were to be
consumed in Great Britain.
But, Secondly, A great part of them might be re-exported to other
countries, where, being sold with profit, they might bring back a return,
equal in value, perhaps, to the prime cost of the whole French goods
imported. What has frequently been said of the East India trade, might
possibly be true of the French; that though the greater part of East India
goods were bought with gold and silver, the re-exportation of a part of
them to other countries brought back more gold and silver to that which
carried on the trade, than the prime cost of the whole amounted to. One of
the most important branches of the Dutch trade at present, consists in the
carriage of French goods to other European countries. Some part even of
the French wine drank in Great Britain, is clandestinely imported from
Holland and Zealand. If there was either a free trade between France and
England, or if French goods could be imported upon paying only the same
duties as those of other European nations, to be drawn back upon
exportation, England might have some share of a trade which is found so
advantageous to Holland.
Thirdly, and lastly, There is no certain criterion by which we can
determine on which side what is called the balance between any two
countries lies, or which of them exports to the greatest value. National
prejudice and animosity, prompted always by the private interest of
particular traders, are the principles which generally direct our judgment
upon all questions concerning it. There are two criterions, however, which
have frequently been appealed to upon such occasions, the custom-house
books and the course of exchange. The custom-house books, I think, it is
now generally acknowledged, are a very uncertain criterion, on account of
the inaccuracy of the valuation at which the greater part of goods are
rated in them. The course of exchange is, perhaps, almost equally so.
When the exchange between two places, such as London and Paris, is at par,
it is said to be a sign that the debts due from London to Paris are
compensated by those due from Paris to London. On the contrary, when a
premium is paid at London for a bill upon Paris, it is said to be a sign
that the debts due from London to Paris are not compensated by those due
from Paris to London, but that a balance in money must be sent out from
the latter place; for the risk, trouble, and expense, of exporting which,
the premium is both demanded and given. But the ordinary state of debt and
credit between those two cities must necessarily be regulated, it is said,
by the ordinary course of their dealings with one another. When neither of
them imports from from other to a greater amount than it exports to that
other, the debts and credits of each may compensate one another. But when
one of them imports from the other to a greater value than it exports to
that other, the former necessarily becomes indebted to the latter in a
greater sum than the latter becomes indebted to it: the debts and credits
of each do not compensate one another, and money must be sent out from
that place of which the debts overbalance the credits. The ordinary course
of exchange, therefore, being an indication of the ordinary state of debt
and credit between two places, must likewise be an indication of the
ordinary course of their exports and imports, as these necessarily
regulate that state.
But though the ordinary course of exchange shall be allowed to be a
sufficient indication of the ordinary state of debt and credit between any
two places, it would not from thence follow, that the balance of trade was
in favour of that place which had the ordinary state of debt and credit in
its favour. The ordinary state of debt and credit between any two places
is not always entirely regulated by the ordinary course of their dealings
with one another, but is often influenced by that of the dealings of
either with many other places. If it is usual, for example, for the
merchants of England to pay for the goods which they buy of Hamburg,
Dantzic, Riga, etc. by bills upon Holland, the ordinary state of debt and
credit between England and Holland will not be regulated entirely by the
ordinary course of the dealings of those two countries with one another,
but will be influenced by that of the dealings in England with those other
places. England may be obliged to send out every year money to Holland,
though its annual exports to that country may exceed very much the annual
value of its imports from thence, and though what is called the balance of
trade may be very much in favour of England.
In the way, besides, in which the par of exchange has hitherto been
computed, the ordinary course of exchange can afford no sufficient
indication that the ordinary state of debt and credit is in favour of that
country which seems to have, or which is supposed to have, the ordinary
course of exchange in its favour; or, in other words, the real exchange
may be, and in fact often is, so very different from the computed one,
that, from the course of the latter, no certain conclusion can, upon many
occasions, be drawn concerning that of the former.
When for a sum or money paid in England, containing, according to the
standard of the English mint, a certain number of ounces of pure silver,
you receive a bill for a sum of money to be paid in France, containing,
according to the standard of the French mint, an equal number of ounces of
pure silver, exchange is said to be at par between England and France.
When you pay more, you are supposed to give a premium, and exchange is
said to be against England, and in favour of France. When you pay less,
you are supposed to get a premium, and exchange is said to be against
France, and in favour of England.
But, first, We cannot always judge of the value of the current money of
different countries by the standard of their respective mints. In some it
is more, in others it is less worn, clipt, and otherwise degenerated from
that standard. But the value of the current coin of every country,
compared with that of any other country, is in proportion, not to the
quantity of pure silver which it ought to contain, but to that which it
actually does contain. Before the reformation of the silver coin in King
William’s time, exchange between England and Holland, computed in the
usual manner, according to the standard of their respective mints, was
five-and twenty per cent. against England. But the value of the current
coin of England, as we learn from Mr Lowndes, was at that time rather more
than five-and-twenty per cent. below its standard value. The real
exchange, therefore, may even at that time have been in favour of England,
notwithstanding the computed exchange was so much against it; a smaller
number or ounces of pure silver, actually paid in England, may have
purchased a bill for a greater number of ounces of pure silver to be paid
in Holland, and the man who was supposed to give, may in reality have got
the premium. The French coin was, before the late reformation of the
English gold coin, much less wore than the English, and was perhaps two or
three per cent. nearer its standard. If the computed exchange with France,
therefore, was not more than two or three per cent. against England, the
real exchange might have been in its favour. Since the reformation of the
gold coin, the exchange has been constantly in favour of England, and
against France.
Secondly, In some countries the expense of coinage is defrayed by the
government; in others, it is defrayed by the private people, who carry
their bullion to the mint, and the government even derives some revenue
from the coinage. In England it is defrayed by the government; and if you
carry a pound weight of standard silver to the mint, you get back
sixty-two shillings, containing a pound weight of the like standard
silver. In France a duty of eight per cent. is deducted for the coinage,
which not only defrays the expense of it, but affords a small revenue to
the government. In England, as the coinage costs nothing, the current coin
can never be much more valuable than the quantity of bullion which it
actually contains. In France, the workmanship, as you pay for it, adds to
the value, in the same manner as to that of wrought plate. A sum of French
money, therefore, containing an equal weight of pure silver, is more
valuable than a sum of English money containing an equal weight of pure
silver, and must require more bullion, or other commodities, to purchase
it. Though the current coin of the two countries, therefore, were equally
near the standards of their respective mints, a sum of English money could
not well purchase a sum of French money containing an equal number of
ounces of pure silver, nor, consequently, a bill upon France for such a
sum. If, for such a bill, no more additional money was paid than what was
sufficient to compensate the expense of the French coinage, the real
exchange might be at par between the two countries; their debts and
credits might mutually compensate one another, while the computed exchange
was considerably in favour of France. If less than this was paid, the real
exchange might be in favour of England, while the computed was in favour
of France.
Thirdly, and lastly, In some places, as at Amsterdam, Hamburg, Venice,
etc. foreign bills of exchange are paid in what they call bank money;
while in others, as at London, Lisbon, Antwerp, Leghorn, etc. they are
paid in the common currency of the country. What is called bank money, is
always of more value than the same nominal sum of common currency. A
thousand guilders in the bank of Amsterdam, for example, are of more value
than a thousand guilders of Amsterdam currency. The difference between
them is called the agio of the bank, which at Amsterdam is generally about
five per cent. Supposing the current money of the two countries equally
near to the standard of their respective mints, and that the one pays
foreign bills in this common currency, while the other pays them in bank
money, it is evident that the computed exchange may be in favour of that
which pays in bank money, though the real exchange should be in favour of
that which pays in current money; for the same reason that the computed
exchange may be in favour of that which pays in better money, or in money
nearer to its own standard, though the real exchange should be in favour
of that which pays in worse. The computed exchange, before the late
reformation of the gold coin, was generally against London with Amsterdam,
Hamburg, Venice, and, I believe, with all other places which pay in what
is called bank money. It will by no means follow, however, that the real
exchange was against it. Since the reformation of the gold coin, it has
been in favour of London, even with those places. The computed exchange
has generally been in favour of London with Lisbon, Antwerp, Leghorn, and,
if you except France, I believe with most other parts of Europe that pay
in common currency; and it is not improbable that the real exchange was so
too.
Digression concerning Banks of Deposit, particularly concerning that of
Amsterdam.
The currency of a great state, such as France or England, generally
consists almost entirely of its own coin. Should this currency, therefore,
be at any time worn, clipt, or otherwise degraded below its standard
value, the state, by a reformation of its coin, can effectually
re-establish its currency. But the currency of a small state, such as
Genoa or Hamburg, can seldom consist altogether in its own coin, but must
be made up, in a great measure, of the coins of all the neighbouring
states with which its inhabitants have a continual intercourse. Such a
state, therefore, by reforming its coin, will not always be able to reform
its currency. If foreign bills of exchange are paid in this currency, the
uncertain value of any sum, of what is in its own nature so uncertain,
must render the exchange always very much against such a state, its
currency being in all foreign states necessarily valued even below what it
is worth.
In order to remedy the inconvenience to which this disadvantageous
exchange must have subjected their merchants, such small states, when they
began to attend to the interest of trade, have frequently enacted that
foreign bills of exchange of a certain value should be paid, not in common
currency, but by an order upon, or by a transfer in the books of a certain
bank, established upon the credit, and under the protection of the state,
this bank being always obliged to pay, in good and true money, exactly
according to the standard of the state. The banks of Venice, Genoa,
Amsterdam, Hamburg, and Nuremberg, seem to have been all originally
established with this view, though some of them may have afterwards been
made subservient to other purposes. The money of such banks, being better
than the common currency of the country, necessarily bore an agio, which
was greater or smaller, according as the currency was supposed to be more
or less degraded below the standard of the state. The agio of the bank of
Hamburg, for example, which is said to be commonly about fourteen per
cent. is the supposed difference between the good standard money of the
state, and the clipt, worn, and diminished currency, poured into it from
all the neighbouring states.
Before 1609, the great quantity of clipt and worn foreign coin which the
extensive trade of Amsterdam brought from all parts of Europe, reduced the
value of its currency about nine per cent. below that of good money fresh
from the mint. Such money no sooner appeared, than it was melted down or
carried away, as it always is in such circumstances. The merchants, with
plenty of currency, could not always find a sufficient quantity of good
money to pay their bills of exchange; and the value of those bills, in
spite of several regulations which were made to prevent it, became in a
great measure uncertain.
In order to remedy these inconveniencies, a bank was established in 1609,
under the guarantee of the city. This bank received both foreign coin, and
the light and worn coin of the country, at its real intrinsic value in the
good standard money of the country, deducting only so much as was
necessary for defraying the expense of coinage and the other necessary
expense of management. For the value which remained after this small
deduction was made, it gave a credit in its books. This credit was called
bank money, which, as it represented money exactly according to the
standard of the mint, was always of the same real value, and intrinsically
worth more than current money. It was at the same time enacted, that all
bills drawn upon or negotiated at Amsterdam, of the value of 600 guilders
and upwards, should be paid in bank money, which at once took away all
uncertainty in the value of those bills. Every merchant, in consequence of
this regulation, was obliged to keep an account with the bank, in order to
pay his foreign bills of exchange, which necessarily occasioned a certain
demand for bank money.
Bank money, over and above both its intrinsic superiority to currency, and
the additional value which this demand necessarily gives it, has likewise
some other advantages, It is secure from fire, robbery, and other
accidents; the city of Amsterdam is bound for it; it can be paid away by a
simple transfer, without the trouble of counting, or the risk of
transporting it from one place to another. In consequence of those
different advantages, it seems from the beginning to have borne an agio;
and it is generally believed that all the money originally deposited in
the bank, was allowed to remain there, nobody caring to demand payment of
a debt which he could sell for a premium in the market. By demanding
payment of the bank, the owner of a bank credit would lose this premium.
As a shilling fresh from the mint will buy no more goods in the market
than one of our common worn shillings, so the good and true money which
might be brought from the coffers of the bank into those of a private
person, being mixed and confounded with the common currency of the
country, would be of no more value than that currency, from which it could
no longer be readily distinguished. While it remained in the coffers of
the bank, its superiority was known and ascertained. When it had come into
those of a private person, its superiority could not well be ascertained
without more trouble than perhaps the difference was worth. By being
brought from the coffers of the bank, besides, it lost all the other
advantages of bank money; its security, its easy and safe transferability,
its use in paying foreign bills of exchange. Over and above all this, it
could not be brought from those coffers, as will appear by and by, without
previously paying for the keeping.
Those deposits of coin, or those deposits which the bank was bound to
restore in coin, constituted the original capital of the bank, or the
whole value of what was represented by what is called bank money. At
present they are supposed to constitute but a very small part of it. In
order to facilitate the trade in bullion, the bank has been for these many
years in the practice of giving credit in its books, upon deposits of gold
and silver bullion. This credit is generally about five per cent. below
the mint price of such bullion. The bank grants at the same time what is
called a recipice or receipt, entitling the person who makes the deposit,
or the bearer, to take out the bullion again at any time within six
months, upon transferring to the bank a quantity of bank money equal to
that for which credit had been given in its books when the deposit was
made, and upon paying one-fourth per cent. for the keeping, if the deposit
was in silver; and one-half per cent. if it was in gold; but at the same
time declaring, that in default of such payment, and upon the expiration
of this term, the deposit should belong to the bank, at the price at which
it had been received, or for which credit had been given in the transfer
books. What is thus paid for the keeping of the deposit may be considered
as a sort of warehouse rent; and why this warehouse rent should be so much
dearer for gold than for silver, several different reasons have been
assigned. The fineness of gold, it has been said, is more difficult to be
ascertained than that of silver. Frauds are more easily practised, and
occasion a greater loss in the most precious metal. Silver, besides, being
the standard metal, the state, it has been said, wishes to encourage more
the making of deposits of silver than those of gold.
Deposits of bullion are most commonly made when the price is somewhat
lower than ordinary, and they are taken out again when it happens to rise.
In Holland the market price of bullion is generally above the mint price,
for the same reason that it was so in England before the late reformation
of the gold coin. The difference is said to be commonly from about six to
sixteen stivers upon the mark, or eight ounces of silver, of eleven parts
of fine and one part alloy. The bank price, or the credit which the bank
gives for the deposits of such silver (when made in foreign coin, of which
the fineness is well known and ascertained, such as Mexico dollars), is
twenty-two guilders the mark: the mint price is about twenty-three
guilders, and the market price is from twenty-three guilders six, to
twenty-three guilders sixteen stivers, or from two to three per cent.
above the mint price.
The following are the prices at which the bank of Amsterdam at present
{September 1775} receives bullion and coin of different kinds:
SILVER
Mexico dollars ................. 22 Guilders / mark
French crowns .................. 22
English silver coin............. 22
Mexico dollars, new coin........ 21 10
Ducatoons....................... 3 0
Rix-dollars..................... 2 8
Bar silver, containing 11-12ths fine silver, 21 Guilders / mark, and in
this proportion down to 1-4th fine, on which 5 guilders are given. Fine
bars,................. 28 Guilders / mark.
GOLD
Portugal coin................. 310 Guilders / mark
Guineas....................... 310
Louis d’ors, new.............. 310
Ditto old.............. 300
New ducats.................... 4 19 8 per ducat
Bar or ingot gold is received in proportion to its fineness, compared with
the above foreign gold coin. Upon fine bars the bank gives 340 per mark.
In general, however, something more is given upon coin of a known
fineness, than upon gold and silver bars, of which the fineness cannot be
ascertained but by a process of melting and assaying.
The proportions between the bank price, the mint price, and the market
price of gold bullion, are nearly the same. A person can generally sell
his receipt for the difference between the mint price of bullion and the
market price. A receipt for bullion is almost always worth something, and
it very seldom happens, therefore, that anybody suffers his receipts to
expire, or allows his bullion to fall to the bank at the price at which it
had been received, either by not taking it out before the end of the six
months, or by neglecting to pay one fourth or one half per cent. in order
to obtain a new receipt for another six months. This, however, though it
happens seldom, is said to happen sometimes, and more frequently with
regard to gold than with regard to silver, on account of the higher
warehouse rent which is paid for the keeping of the more precious metal.
The person who, by making a deposit of bullion, obtains both a bank credit
and a receipt, pays his bills of exchange as they become due, with his
bank credit; and either sells or keeps his receipt, according as he judges
that the price of bullion is likely to rise or to fall. The receipt and
the bank credit seldom keep long together, and there is no occasion that
they should. The person who has a receipt, and who wants to take out
bullion, finds always plenty of bank credits, or bank money, to buy at the
ordinary price, and the person who has bank money, and wants to take out
bullion, finds receipts always in equal abundance.
The owners of bank credits, and the holders of receipts, constitute two
different sorts of creditors against the bank. The holder of a receipt
cannot draw out the bullion for which it is granted, without re-assigning
to the bank a sum of bank money equal to the price at which the bullion
had been received. If he has no bank money of his own, he must purchase it
of those who have it. The owner of bank money cannot draw out bullion,
without producing to the bank receipts for the quantity which he wants. If
he has none of his own, he must buy them of those who have them. The
holder of a receipt, when he purchases bank money, purchases the power of
taking out a quantity of bullion, of which the mint price is five per
cent. above the bank price. The agio of five per cent. therefore, which he
commonly pays for it, is paid, not for an imaginary, but for a real value.
The owner of bank money, when he purchases a receipt, purchases the power
of taking out a quantity of bullion, of which the market price is commonly
from two to three per cent. above the mint price. The price which he pays
for it, therefore, is paid likewise for a real value. The price of the
receipt, and the price of the bank money, compound or make up between them
the full value or price of the bullion.
Upon deposits of the coin current in the country, the bank grant receipts
likewise, as well as bank credits; but those receipts are frequently of no
value and will bring no price in the market. Upon ducatoons, for example,
which in the currency pass for three guilders three stivers each, the bank
gives a credit of three guilders only, or five per cent. below their
current value. It grants a receipt likewise, entitling the bearer to take
out the number of ducatoons deposited at any time within six months, upon
paying one fourth per cent. for the keeping. This receipt will frequently
bring no price in the market. Three guilders, bank money, generally sell
in the market for three guilders three stivers, the full value of the
ducatoons, if they were taken out of the bank; and before they can be
taken out, one-fourth per cent. must be paid for the keeping, which would
be mere loss to the holder of the receipt. If the agio of the bank,
however, should at any time fall to three per cent. such receipts might
bring some price in the market, and might sell for one and three-fourths
per cent. But the agio of the bank being now generally about five per
cent. such receipts are frequently allowed to expire, or, as they express
it, to fall to the bank. The receipts which are given for deposits of gold
ducats fall to it yet more frequently, because a higher warehouse rent, or
one half per cent. must be paid for the keeping of them, before they can
be taken out again. The five per cent. which the bank gains, when deposits
either of coin or bullion are allowed to fall to it, maybe considered as
the warehouse rent for the perpetual keeping of such deposits.
The sum of bank money, for which the receipts are expired, must be very
considerable. It must comprehend the whole original capital of the bank,
which, it is generally supposed, has been allowed to remain there from the
time it was first deposited, nobody caring either to renew his receipt, or
to take out his deposit, as, for the reasons already assigned, neither the
one nor the other could be done without loss. But whatever may be the
amount of this sum, the proportion which it bears to the whole mass of
bank money is supposed to be very small. The bank of Amsterdam has, for
these many years past, been the great warehouse of Europe for bullion, for
which the receipts are very seldom allowed to expire, or, as they express
it, to fall to the bank. The far greater part of the bank money, or of the
credits upon the books of the bank, is supposed to have been created, for
these many years past, by such deposits, which the dealers in bullion are
continually both making and withdrawing.
No demand can be made upon the bank, but by means of a recipice or
receipt. The smaller mass of bank money, for which the receipts are
expired, is mixed and confounded with the much greater mass for which they
are still in force; so that, though there may be a considerable sum of
bank money, for which there are no receipts, there is no specific sum or
portion of it which may not at any time be demanded by one. The bank
cannot be debtor to two persons for the same thing; and the owner of bank
money who has no receipt, cannot demand payment of the bank till he buys
one. In ordinary and quiet times, he can find no difficulty in getting one
to buy at the market price, which generally corresponds with the price at
which he can sell the coin or bullion it entitles him to take out of the
bank.
It might be otherwise during a public calamity; an invasion, for example,
such as that of the French in 1672. The owners of bank money being then
all eager to draw it out of the bank, in order to have it in their own
keeping, the demand for receipts might raise their price to an exorbitant
height. The holders of them might form extravagant expectations, and,
instead of two or three per cent. demand half the bank money for which
credit had been given upon the deposits that the receipts had respectively
been granted for. The enemy, informed of the constitution of the bank,
might even buy them up, in order to prevent the carrying away of the
treasure. In such emergencies, the bank, it is supposed, would break
through its ordinary rule of making payment only to the holders of
receipts. The holders of receipts, who had no bank money, must have
received within two or three per cent. of the value of the deposit for
which their respective receipts had been granted. The bank, therefore, it
is said, would in this case make no scruple of paying, either with money
or bullion, the full value of what the owners of bank money, who could get
no receipts, were credited for in its books; paying, at the same time, two
or three per cent. to such holders of receipts as had no bank money, that
being the whole value which, in this state of things, could justly be
supposed due to them.
Even in ordinary and quiet times, it is the interest of the holders of
receipts to depress the agio, in order either to buy bank money (and
consequently the bullion which their receipts would then enable them to
take out of the bank ) so much cheaper, or to sell their receipts to those
who have bank money, and who want to take out bullion, so much dearer; the
price of a receipt being generally equal to the difference between the
market price of bank money and that of the coin or bullion for which the
receipt had been granted. It is the interest of the owners of bank money,
on the contrary, to raise the agio, in order either to sell their bank
money so much dearer, or to buy a receipt so much cheaper. To prevent the
stock-jobbing tricks which those opposite interests might sometimes
occasion, the bank has of late years come to the resolution, to sell at
all times bank money for currency at five per cent. agio, and to buy it in
again at four per cent. agio. In consequence of this resolution, the agio
can never either rise above five, or sink below four per cent.; and the
proportion between the market price of bank and that of current money is
kept at all times very near the proportion between their intrinsic values.
Before this resolution was taken, the market price of bank money used
sometimes to rise so high as nine per cent. agio, and sometimes to sink so
low as par, according as opposite interests happened to influence the
market.
The bank of Amsterdam professes to lend out no part of what is deposited
with it, but for every guilder for which it gives credit in its books, to
keep in its repositories the value of a guilder either in money or
bullion. That it keeps in its repositories all the money or bullion for
which there are receipts in force for which it is at all times liable to
be called upon, and which in reality is continually going from it, and
returning to it again, cannot well be doubted. But whether it does so
likewise with regard to that part of its capital for which the receipts
are long ago expired, for which, in ordinary and quiet times, it cannot be
called upon, and which, in reality, is very likely to remain with it for
ever, or as long as the states of the United Provinces subsist, may
perhaps appear more uncertain. At Amsterdam, however, no point of faith is
better established than that, for every guilder circulated as bank money,
there is a correspondent guilder in gold or silver to be found in the
treasures of the bank. The city is guarantee that it should be so. The
bank is under the direction of the four reigning burgomasters who are
changed every year. Each new set of burgomasters visits the treasure,
compares it with the books, receives it upon oath, and delivers it over,
with the same awful solemnity to the set which succeeds; and in that sober
and religious country, oaths are not yet disregarded. A rotation of this
kind seems alone a sufficient security against any practices which cannot
be avowed. Amidst all the revolutions which faction has ever occasioned in
the government of Amsterdam, the prevailing party has at no time accused
their predecessors of infidelity in the administration of the bank. No
accusation could have affected more deeply the reputation and fortune of
the disgraced party; and if such an accusation could have been supported,
we may be assured that it would have been brought. In 1672, when the
French king was at Utrecht, the bank of Amsterdam paid so readily, as left
no doubt of the fidelity with which it had observed its engagements. Some
of the pieces which were then brought from its repositories, appeared to
have been scorched with the fire which happened in the town-house soon
after the bank was established. Those pieces, therefore, must have lain
there from that time.
What may be the amount of the treasure in the bank, is a question which
has long employed the speculations of the curious. Nothing but conjecture
can be offered concerning it. It is generally reckoned, that there are
about 2000 people who keep accounts with the bank; and allowing them to
have, one with another, the value of £1500 sterling lying upon their
respective accounts (a very large allowance), the whole quantity of bank
money, and consequently of treasure in the bank, will amount to about
£3,000,000 sterling, or, at eleven guilders the pound sterling, 33,000,000
of guilders; a great sum, and sufficient to carry on a very extensive
circulation, but vastly below the extravagant ideas which some people have
formed of this treasure.
The city of Amsterdam derives a considerable revenue from the bank.
Besides what may be called the warehouse rent above mentioned, each
person, upon first opening an account with the bank, pays a fee of ten
guilders; and for every new account, three guilders three stivers; for
every transfer, two stivers; and if the transfer is for less than 300
guilders, six stivers, in order to discourage the multiplicity of small
transactions. The person who neglects to balance his account twice in the
year, forfeits twenty-five guilders. The person who orders a transfer for
more than is upon his account, is obliged to pay three per cent. for the
sum overdrawn, and his order is set aside into the bargain. The bank is
supposed, too, to make a considerable profit by the sale of the foreign
coin or bullion which sometimes falls to it by the expiring of receipts,
and which is always kept till it can be sold with advantage. It makes a
profit, likewise, by selling bank money at five per cent. agio, and buying
it in at four. These different emoluments amount to a good deal more than
what is necessary for paying the salaries of officers, and defraying the
expense of management. What is paid for the keeping of bullion upon
receipts, is alone supposed to amount to a neat annual revenue of between
150,000 and 200,000 guilders. Public utility, however, and not revenue,
was the original object of this institution. Its object was to relieve the
merchants from the inconvenience of a disadvantageous exchange. The
revenue which has arisen from it was unforeseen, and may be considered as
accidental. But it is now time to return from this long digression, into
which I have been insensibly led, in endeavouring to explain the reasons
why the exchange between the countries which pay in what is called bank
money, and those which pay in common currency, should generally appear to
be in favour of the former, and against the latter. The former pay in a
species of money, of which the intrinsic value is always the same, and
exactly agreeable to the standard of their respective mints; the latter is
a species of money, of which the intrinsic value is continually varying,
and is almost always more or less below that standard.
PART II.—Of the Unreasonableness of those extraordinary Restraints,
upon other Principles.
In the foregoing part of this chapter, I have endeavoured to show, even
upon the principles of the commercial system, how unnecessary it is to lay
extraordinary restraints upon the importation of goods from those
countries with which the balance of trade is supposed to be
disadvantageous.
Nothing, however, can be more absurd than this whole doctrine of the
balance of trade, upon which, not only these restraints, but almost all
the other regulations of commerce, are founded. When two places trade with
one another, this doctrine supposes that, if the balance be even, neither
of them either loses or gains; but if it leans in any degree to one side,
that one of them loses, and the other gains, in proportion to its
declension from the exact equilibrium. Both suppositions are false. A
trade, which is forced by means of bounties and monopolies, may be, and
commonly is, disadvantageous to the country in whose favour it is meant to
be established, as I shall endeavour to show hereafter. But that trade
which, without force or constraint, is naturally and regularly carried on
between any two places, is always advantageous, though not always equally
so, to both.
By advantage or gain, I understand, not the increase of the quantity of
gold and silver, but that of the exchangeable value of the annual produce
of the land and labour of the country, or the increase of the annual
revenue of its inhabitants.
If the balance be even, and if the trade between the two places consist
altogether in the exchange of their native commodities, they will, upon
most occasions, not only both gain, but they will gain equally, or very
nearly equally; each will, in this case, afford a market for a part of the
surplus produce of the other; each will replace a capital which had been
employed in raising and preparing for the market this part of the surplus
produce of the other, and which had been distributed among, and given
revenue and maintenance to, a certain number of its inhabitants. Some part
of the inhabitants of each, therefore, will directly derive their revenue
and maintenance from the other. As the commodities exchanged, too, are
supposed to be of equal value, so the two capitals employed in the trade
will, upon most occasions, be equal, or very nearly equal; and both being
employed in raising the native commodities of the two countries, the
revenue and maintenance which their distribution will afford to the
inhabitants of each will be equal, or very nearly equal. This revenue and
maintenance, thus mutually afforded, will be greater or smaller, in
proportion to the extent of their dealings. If these should annually
amount to £100,000, for example, or to £1,000,000, on each side, each of
them will afford an annual revenue, in the one case, of £100,000, and, in
the other, of £1,000,000, to the inhabitants of the other.
If their trade should be of such a nature, that one of them exported to
the other nothing but native commodities, while the returns of that other
consisted altogether in foreign goods; the balance, in this case, would
still be supposed even, commodities being paid for with commodities. They
would, in this case too, both gain, but they would not gain equally; and
the inhabitants of the country which exported nothing but native
commodities, would derive the greatest revenue from the trade. If England,
for example, should import from France nothing but the native commodities
of that country, and not having such commodities of its own as were in
demand there, should annually repay them by sending thither a large
quantity of foreign goods, tobacco, we shall suppose, and East India
goods; this trade, though it would give some revenue to the inhabitants of
both countries, would give more to those of France than to those of
England. The whole French capital annually employed in it would annually
be distributed among the people of France; but that part of the English
capital only, which was employed in producing the English commodities with
which those foreign goods were purchased, would be annually distributed
among the people of England. The greater part of it would replace the
capitals which had been employed in Virginia, Indostan, and China, and
which had given revenue and maintenance to the inhabitants of those
distant countries. If the capitals were equal, or nearly equal, therefore,
this employment of the French capital would augment much more the revenue
of the people of France, than that of the English capital would the
revenue of the people of England. France would, in this case, carry on a
direct foreign trade of consumption with England; whereas England would
carry on a round-about trade of the same kind with France. The different
effects of a capital employed in the direct, and of one employed in the
round-about foreign trade of consumption, have already been fully
explained.
There is not, probably, between any two countries, a trade which consists
altogether in the exchange, either of native commodities on both sides, or
of native commodities on one side, and of foreign goods on the other.
Almost all countries exchange with one another, partly native and partly
foreign goods. That country, however, in whose cargoes there is the
greatest proportion of native, and the least of foreign goods, will always
be the principal gainer.
If it was not with tobacco and East India goods, but with gold and silver,
that England paid for the commodities annually imported from France, the
balance, in this case, would be supposed uneven, commodities not being
paid for with commodities, but with gold and silver. The trade, however,
would in this case, as in the foregoing, give some revenue to the
inhabitants of both countries, but more to those of France than to those
of England. It would give some revenue to those of England. The capital
which had been employed in producing the English goods that purchased this
gold and silver, the capital which had been distributed among, and given
revenue to, certain inhabitants of England, would thereby be replaced, and
enabled to continue that employment. The whole capital of England would no
more be diminished by this exportation of gold and silver, than by the
exportation of an equal value of any other goods. On the contrary, it
would, in most cases, be augmented. No goods are sent abroad but those for
which the demand is supposed to be greater abroad than at home, and of
which the returns, consequently, it is expected, will be of more value at
home than the commodities exported. If the tobacco which in England is
worth only £100,000, when sent to France, will purchase wine which is in
England worth £110,000, the exchange will augment the capital of England
by £10,000. If £100,000 of English gold, in the same manner, purchase
French wine, which in England is worth £110,000, this exchange will
equally augment the capital of England by £10,000. As a merchant, who has
£110,000 worth of wine in his cellar, is a richer man than he who has only
£100,000 worth of tobacco in his warehouse, so is he likewise a richer man
than he who has only £100,000 worth of gold in his coffers. He can put
into motion a greater quantity of industry, and give revenue, maintenance,
and employment, to a greater number of people, than either of the other
two. But the capital of the country is equal to the capital of all its
different inhabitants; and the quantity of industry which can be annually
maintained in it is equal to what all those different capitals can
maintain. Both the capital of the country, therefore, and the quantity of
industry which can be annually maintained in it, must generally be
augmented by this exchange. It would, indeed, be more advantageous for
England that it could purchase the wines of France with its own hardware
and broad cloth, than with either the tobacco of Virginia, or the gold and
silver of Brazil and Peru. A direct foreign trade of consumption is always
more advantageous than a round-about one. But a round-about foreign trade
of consumption, which is carried on with gold and silver, does not seem to
be less advantageous than any other equally round-about one. Neither is a
country which has no mines, more likely to be exhausted of gold and silver
by this annual exportation of those metals, than one which does not grow
tobacco by the like annual exportation of that plant. As a country which
has wherewithal to buy tobacco will never be long in want of it, so
neither will one be long in want of gold and silver which has wherewithal
to purchase those metals.
It is a losing trade, it is said, which a workman carries on with the
alehouse; and the trade which a manufacturing nation would naturally carry
on with a wine country, may be considered as a trade of the same nature. I
answer, that the trade with the alehouse is not necessarily a losing
trade. In its own nature it is just as advantageous as any other, though,
perhaps, somewhat more liable to be abused. The employment of a brewer,
and even that of a retailer of fermented liquors, are as necessary
divisions of labour as any other. It will generally be more advantageous
for a workman to buy of the brewer the quantity he has occasion for, than
to brew it himself; and if he is a poor workman, it will generally be more
advantageous for him to buy it by little and little of the retailer, than
a large quantity of the brewer. He may no doubt 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 advantageous to the great body of workmen,
notwithstanding, that all these trades should be free, though this freedom
may be abused in all of them, and is more likely to be so, perhaps, in
some than in others. Though individuals, besides, may sometimes ruin their
fortunes by an excessive consumption of fermented liquors, there seems to
be no risk that a nation should do so. Though in every country there are
many people who spend upon such liquors more than they can afford, there
are always many more who spend less. It deserves to be remarked, too, that
if we consult experience, the cheapness of wine seems to be a cause, not
of drunkenness, but of sobriety. The inhabitants of the wine countries are
in general the soberest people of Europe; witness the Spaniards, the
Italians, and the inhabitants of the southern provinces of France. People
are seldom guilty of excess in what is their daily fare. Nobody affects
the character of liberality and good fellowship, by being profuse of a
liquor which is as cheap as small beer. On the contrary, in the countries
which, either from excessive heat or cold, produce no grapes, and where
wine consequently is dear and a rarity, drunkenness is a common vice, as
among the northern nations, and all those who live between the tropics,
the negroes, for example on the coast of Guinea. When a French regiment
comes from some of the northern provinces of France, where wine is
somewhat dear, to be quartered in the southern, where it is very cheap,
the soldiers, I have frequently heard it observed, are at first debauched
by the cheapness and novelty of good wine; but after a few months
residence, the greater part of them become as sober as the rest of the
inhabitants. Were the duties upon foreign wines, and the excises upon
malt, beer, and ale, to be taken away all at once, it might, in the same
manner, occasion in Great Britain a pretty general and temporary
drunkenness among the middling and inferior ranks of people, which would
probably be soon followed by a permanent and almost universal sobriety. At
present, drunkenness is by no means the vice of people of fashion, or of
those who can easily afford the most expensive liquors. A gentleman drunk
with ale has scarce ever been seen among us. The restraints upon the wine
trade in Great Britain, besides, do not so much seem calculated to hinder
the people from going, if I may say so, to the alehouse, as from going
where they can buy the best and cheapest liquor. They favour the wine
trade of Portugal, and discourage that of France. The Portuguese, it is
said, indeed, are better customers for our manufactures than the French,
and should therefore be encouraged in preference to them. As they give us
their custom, it is pretended we should give them ours. The sneaking arts
of underling tradesmen are thus erected into political maxims for the
conduct of a great empire; for it is the most underling tradesmen only who
make it a rule to employ chiefly their own customers. A great trader
purchases his goods always where they are cheapest and best, without
regard to any little interest of this kind.
By such maxims as these, however, nations have been taught that their
interest consisted in beggaring all their neighbours. Each nation has been
made to look with an invidious eye upon the prosperity of all the nations
with which it trades, and to consider their gain as its own loss.
Commerce, which ought naturally to be, among nations as among individuals,
a bond of union and friendship, has become the most fertile source of
discord and animosity. The capricious ambition of kings and ministers has
not, during the present and the preceding century, been more fatal to the
repose of Europe, than the impertinent jealousy of merchants and
manufacturers. The violence and injustice of the rulers of mankind is an
ancient evil, for which, I am afraid, the nature of human affairs can
scarce admit of a remedy: but the mean rapacity, the monopolizing spirit,
of merchants and manufacturers, who neither are, nor ought to be, the
rulers of mankind, though it cannot, perhaps, be corrected, may very
easily be prevented from disturbing the tranquillity of anybody but
themselves.
That it was the spirit of monopoly which originally both invented and
propagated this doctrine, cannot be doubted and they who first taught it,
were by no means such fools as they who believed it. In every country it
always is, and must be, the interest of the great body of the people, to
buy whatever they want of those who sell it cheapest. The proposition is
so very manifest, that it seems ridiculous to take any pains to prove it;
nor could it ever have been called in question, had not the interested
sophistry of merchants and manufacturers confounded the common sense of
mankind. Their interest is, in this respect, directly opposite to that of
the great body of the people. As it is the interest of the freemen of a
corporation to hinder the rest of the inhabitants from employing any
workmen but themselves; so it is the interest of the merchants and
manufacturers of every country to secure to themselves the monopoly of the
home market. Hence, in Great Britain, and in most other European
countries, the extraordinary duties upon almost all goods imported by
alien merchants. Hence the high duties and prohibitions upon all those
foreign manufactures which can come into competition with our own. Hence,
too, the extraordinary restraints upon the importation of almost all sorts
of goods from those countries with which the balance of trade is supposed
to be disadvantageous; that is, from those against whom national animosity
happens ta be most violently inflamed.
The wealth of neighbouring nations, however, though dangerous in war and
politics, is certainly advantageous in trade. In a state of hostility, it
may enable our enemies to maintain fleets and armies superior to our own;
but in a state of peace and commerce it must likewise enable them to
exchange with us to a greater value, and to afford a better market, either
for the immediate produce of our own industry, or for whatever is
purchased with that produce. As a rich man is likely to be a better
customer to the industrious people in his neighbourhood, than a poor, so
is likewise a rich nation. A rich man, indeed, who is himself a
manufacturer, is a very dangerous neighbour to all those who deal in the
same way. All the rest of the neighbourhood, however, by far the greatest
number, profit by the good market which his expense affords them. They
even profit by his underselling the poorer workmen who deal in the same
way with him. The manufacturers of a rich nation, in the same manner, may
no doubt be very dangerous rivals to those of their neighbours. This very
competition, however, is advantageous to the great body of the people, who
profit greatly, besides, by the good market which the great expense of
such a nation affords them in every other way. Private people, who want to
make a fortune, never think of retiring to the remote and poor provinces
of the country, but resort either to the capital, or to some of the great
commercial towns. They know, that where little wealth circulates, there is
little to be got; but that where a great deal is in motion, some share of
it may fall to them. The same maxim which would in this manner direct the
common sense of one, or ten, or twenty individuals, should regulate the
judgment of one, or ten, or twenty millions, and should make a whole
nation regard the riches of its neighbours, as a probable cause and
occasion for itself to acquire riches. A nation that would enrich itself
by foreign trade, is certainly most likely to do so, when its neighbours
are all rich, industrious and commercial nations. A great nation,
surrounded on all sides by wandering savages and poor barbarians, might,
no doubt, acquire riches by the cultivation of its own lands, and by its
own interior commerce, but not by foreign trade. It seems to have been in
this manner that the ancient Egyptians and the modern Chinese acquired
their great wealth. The ancient Egyptians, it is said, neglected foreign
commerce, and the modern Chinese, it is known, hold it in the utmost
contempt, and scarce deign to afford it the decent protection of the laws.
The modern maxims of foreign commerce, by aiming at the impoverishment of
all our neighbours, so far as they are capable of producing their intended
effect, tend to render that very commerce insignificant and contemptible.
It is in consequence of these maxims, that the commerce between France and
England has, in both countries, been subjected to so many discouragements
and restraints. If those two countries, however, were to consider their
real interest, without either mercantile jealousy or national animosity,
the commerce of France might be more advantageous to Great Britain than
that of any other country, and, for the same reason, that of Great Britain
to France. France is the nearest neighbour to Great Britain. In the trade
between the southern coast of England and the northern and north-western
coast of France, the returns might be expected, in the same manner as in
the inland trade, four, five, or six times in the year. The capital,
therefore, employed in this trade could, in each of the two countries,
keep in motion four, five, or six times the quantity of industry, and
afford employment and subsistence to four, five, or six times the number
of people, which all equal capital could do in the greater part of the
other branches of foreign trade. Between the parts of France and Great
Britain most remote from one another, the returns might be expected, at
least, once in the year; and even this trade would so far be at least
equally advantageous, as the greater part of the other branches of our
foreign European trade. It would be, at least, three times more
advantageous than the boasted trade with our North American colonies, in
which the returns were seldom made in less than three years, frequently
not in less than four or five years. France, besides, is supposed to
contain 24,000,000 of inhabitants. Our North American colonies were never
supposed to contain more than 3,000,000; and France is a much richer
country than North America; though, on account of the more unequal
distribution of riches, there is much more poverty and beggary in the one
country than in the other. France, therefore, could afford a market at
least eight times more extensive, and, on account of the superior
frequency of the returns, four-and-twenty times more advantageous than
that which our North American colonies ever afforded. The trade of Great
Britain would be just as advantageous to France, and, in proportion to the
wealth, population, and proximity of the respective countries, would have
the same superiority over that which France carries on with her own
colonies. Such is the very great difference between that trade which the
wisdom of both nations has thought proper to discourage, and that which it
has favoured the most.
But the very same circumstances which would have rendered an open and free
commerce between the two countries so advantageous to both, have
occasioned the principal obstructions to that commerce. Being neighbours,
they are necessarily enemies, and the wealth and power of each becomes,
upon that account, more formidable to the other; and what would increase
the advantage of national friendship, serves only to inflame the violence
of national animosity. They are both rich and industrious nations; and the
merchants and manufacturers of each dread the competition of the skill and
activity of those of the other. Mercantile jealousy is excited, and both
inflames, and is itself inflamed, by the violence of national animosity,
and the traders of both countries have announced, with all the passionate
confidence of interested falsehood, the certain ruin of each, in
consequence of that unfavourable balance of trade, which, they pretend,
would be the infallible effect of an unrestrained commerce with the other.
There is no commercial country in Europe, of which the approaching ruin
has not frequently been foretold by the pretended doctors of this system,
from all unfavourably balance of trade. After all the anxiety, however,
which they have excited about this, after all the vain attempts of almost
all trading nations to turn that balance in their own favour, and against
their neighbours, it does not appear that any one nation in Europe has
been, in any respect, impoverished by this cause. Every town and country,
on the contrary, in proportion as they have opened their ports to all
nations, instead of being ruined by this free trade, as the principles of
the commercial system would lead us to expect, have been enriched by it.
Though there are in Europe indeed, a few towns which, in same respects,
deserve the name of free ports, there is no country which does so.
Holland, perhaps, approaches the nearest to this character of any, though
still very remote from it; and Holland, it is acknowledged, not only
derives its whole wealth, but a great part of its necessary subsistence,
from foreign trade.
There is another balance, indeed, which has already been explained, very
different from the balance of trade, and which, according as it happens to
be either favourable or unfavourable, necessarily occasions the prosperity
or decay of every nation. This is the balance of the annual produce and
consumption. If the exchangeable value of the annual produce, it has
already been observed, exceeds that of the annual consumption, the capital
of the society must annually increase in proportion to this excess. The
society in this case lives within its revenue; and what is annually saved
out of its revenue, is naturally added to its capital, and employed so as
to increase still further the annual produce. If the exchangeable value of
the annual produce, on the contrary, fall short of the annual consumption,
the capital of the society must annually decay in proportion to this
deficiency. The expense of the society, in this case, exceeds its revenue,
and necessarily encroaches upon its capital. Its capital, therefore, must
necessarily decay, and, together with it, the exchangeable value of the
annual produce of its industry.
This balance of produce and consumption is entirely different from what is
called the balance of trade. It might take place in a nation which had no
foreign trade, but which was entirely separated from all the world. It may
take place in the whole globe of the earth, of which the wealth,
population, and improvement, may be either gradually increasing or
gradually decaying.
The balance of produce and consumption may be constantly in favour of a
nation, though what is called the balance of trade be generally against
it. A nation may import to a greater value than it exports for half a
century, perhaps, together; the gold and silver which comes into it during
all this time, may be all immediately sent out of it; its circulating coin
may gradually decay, different sorts of paper money being substituted in
its place, and even the debts, too, which it contracts in the principal
nations with whom it deals, may be gradually increasing; and yet its real
wealth, the exchangeable value of the annual produce of its lands and
labour, may, during the same period, have been increasing in a much
greater proportion. The state of our North American colonies, and of the
trade which they carried on with Great Britain, before the commencement of
the present disturbances, {This paragraph was written in the year 1775.}
may serve as a proof that this is by no means an impossible supposition.
CHAPTER IV.
OF DRAWBACKS.
Merchants and manufacturers are not contented with the monopoly of the
home market, but desire likewise the most extensive foreign sale for their
goods. Their country has no jurisdiction in foreign nations, and therefore
can seldom procure them any monopoly there. They are generally obliged,
therefore, to content themselves with petitioning for certain
encouragements to exportation.
Of these encouragements, what are called drawbacks seem to be the most
reasonable. To allow the merchant to draw back upon exportation, either
the whole, or a part of whatever excise or inland duty is imposed upon
domestic industry, can never occasion the exportation of a greater
quantity of goods than what would have been exported had no duty been
imposed. Such encouragements do not tend to turn towards any particular
employment a greater share of the capital of the country, than what would
go to that employment of its own accord, but only to hinder the duty from
driving away any part of that share to other employments. They tend not to
overturn that balance which naturally establishes itself among all the
various employments of the society, but to hinder it from being overturned
by the duty. They tend not to destroy, but to preserve, what it is in most
cases advantageous to preserve, the natural division and distribution of
labour in the society.
The same thing may be said of the drawbacks upon the re-exportation of
foreign goods imported, which, in Great Britain, generally amount to by
much the largest part of the duty upon importation. By the second of the
rules, annexed to the act of parliament, which imposed what is now called
the old subsidy, every merchant, whether English or alien. was allowed to
draw back half that duty upon exportation; the English merchant, provided
the exportation took place within twelve months; the alien, provided it
took place within nine months. Wines, currants, and wrought silks, were
the only goods which did not fall within this rule, having other and more
advantageous allowances. The duties imposed by this act of parliament
were, at that time, the only duties upon the importation of foreign goods.
The term within which this, and all other drawbacks could be claimed, was
afterwards (by 7 Geo. I. chap. 21. sect. 10.) extended to three years.
The duties which have been imposed since the old subsidy, are, the greater
part of them, wholly drawn back upon exportation. This general rule,
however, is liable to a great number of exceptions; and the doctrine of
drawbacks has become a much less simple matter than it was at their first
institution.
Upon the exportation of some foreign goods, of which it was expected that
the importation would greatly exceed what was necessary for the home
consumption, the whole duties are drawn back, without retaining even half
the old subsidy. Before the revolt of our North American colonies, we had
the monopoly of the tobacco of Maryland and Virginia. We imported about
ninety-six thousand hogsheads, and the home consumption was not supposed
to exceed fourteen thousand. To facilitate the great exportation which was
necessary, in order to rid us of the rest, the whole duties were drawn
back, provided the exportation took place within three years.
We still have, though not altogether, yet very nearly, the monopoly of the
sugars of our West Indian islands. If sugars are exported within a year,
therefore, all the duties upon importation are drawn back; and if exported
within three years, all the duties, except half the old subsidy, which
still continues to be retained upon the exportation of the greater part of
goods. Though the importation of sugar exceeds a good deal what is
necessary for the home consumption, the excess is inconsiderable, in
comparison of what it used to be in tobacco.
Some goods, the particular objects of the jealousy of our own
manufacturers, are prohibited to be imported for home consumption. They
may, however, upon paying certain duties, be imported and warehoused for
exportation. But upon such exportation no part of these duties is drawn
back. Our manufacturers are unwilling, it seems, that even this restricted
importation should be encouraged, and are afraid lest some part of these
goods should be stolen out of the warehouse, and thus come into
competition with their own. It is under these regulations only that we can
import wrought silks, French cambrics and lawns, calicoes, painted,
printed, stained, or dyed, etc.
We are unwilling even to be the carriers of French goods, and choose
rather to forego a profit to ourselves than to suffer those whom we
consider as our enemies to make any profit by our means. Not only half the
old subsidy, but the second twenty-five per cent. is retained upon the
exportation of all French goods.
By the fourth of the rules annexed to the old subsidy, the drawback
allowed upon the exportation of all wines amounted to a great deal more
than half the duties which were at that time paid upon their importation;
and it seems at that time to have been the object of the legislature to
give somewhat more than ordinary encouragement to the carrying trade in
wine. Several of the other duties, too which were imposed either at the
same time or subsequent to the old subsidy, what is called the additional
duty, the new subsidy, the one-third and two-thirds subsidies, the impost
1692, the tonnage on wine, were allowed to be wholly drawn back upon
exportation. All those duties, however, except the additional duty and
impost 1692, being paid down in ready money upon importation, the interest
of so large a sum occasioned an expense, which made it unreasonable to
expect any profitable carrying trade in this article. Only a part,
therefore of the duty called the impost on wine, and no part of the
twenty-five pounds the ton upon French wines, or of the duties imposed in
1745, in 1763, and in 1778, were allowed to be drawn back upon
exportation. The two imposts of five per cent. imposed in 1779 and 1781,
upon all the former duties of customs, being allowed to be wholly drawn
back upon the exportation of all other goods, were likewise allowed to be
drawn back upon that of wine. The last duty that has been particularly
imposed upon wine, that of 1780, is allowed to be wholly drawn back; an
indulgence which, when so many heavy duties are retained, most probably
could never occasion the exportation of a single ton of wine. These rules
took place with regard to all places of lawful exportation, except the
British colonies in America.
The 15th Charles II, chap. 7, called an act for the encouragement of
trade, had given Great Britain the monopoly of supplying the colonies with
all the commodities of the growth or manufacture of Europe, and
consequently with wines. In a country of so extensive a coast as our North
American and West Indian colonies, where our authority was always so very
slender, and where the inhabitants were allowed to carry out in their own
ships their non-enumerated commodities, at first to all parts of Europe,
and afterwards to all parts of Europe south of Cape Finisterre, it is not
very probable that this monopoly could ever be much respected; and they
probably at all times found means of bringing back some cargo from the
countries to which they were allowed to carry out one. They seem, however,
to have found some difficulty in importing European wines from the places
of their growth; and they could not well import them from Great Britain,
where they were loaded with many heavy duties, of which a considerable
part was not drawn back upon exportation. Madeira wine, not being an
European commodity, could be imported directly into America and the West
Indies, countries which, in all their non-enumerated commodities, enjoyed
a free trade to the island of Madeira. These circumstances had probably
introduced that general taste for Madeira wine, which our officers found
established in all our colonies at the commencement of the war which began
in 1755, and which they brought back with them to the mother country,
where that wine had not been much in fashion before. Upon the conclusion
of that war, in 1763 (by the 4th Geo. III, chap. 15, sect. 12), all the
duties except £3, 10s. were allowed to be drawn back upon the exportation
to the colonies of all wines, except French wines, to the commerce and
consumption of which national prejudice would allow no sort of
encouragement. The period between the granting of this indulgence and the
revolt of our North American colonies, was probably too short to admit of
any considerable change in the customs of those countries.
The same act which, in the drawbacks upon all wines, except French wines,
thus favoured the colonies so much more than other countries, in those
upon the greater part of other commodities, favoured them much less. Upon
the exportation of the greater part of commodities to other countries,
half the old subsidy was drawn back. But this law enacted, that no part of
that duty should be drawn back upon the exportation to the colonies of any
commodities of the growth or manufacture either of Europe or the East
Indies, except wines, white calicoes, and muslins.
Drawbacks were, perhaps, originally granted for the encouragement of the
carrying trade, which, as the freight of the ship is frequently paid by
foreigners in money, was supposed to be peculiarly fitted for bringing
gold and silver into the country. But though the carrying trade certainly
deserves no peculiar encouragement, though the motive of the institution
was, perhaps, abundantly foolish, the institution itself seems reasonable
enough. Such drawbacks cannot force into this trade a greater share of the
capital of the country than what would have gone to it of its own accord,
had there been no duties upon importation; they only prevent its being
excluded altogether by those duties. The carrying trade, though it
deserves no preference, ought not to be precluded, but to be left free,
like all other trades. It is a necessary resource to those capitals which
cannot find employment, either in the agriculture or in the manufactures
of the country, either in its home trade, or in its foreign trade of
consumption.
The revenue of the customs, instead of suffering, profits from such
drawbacks, by that part of the duty which is retained. If the whole duties
had been retained, the foreign goods upon which they are paid could seldom
have been exported, nor consequently imported, for want of a market. The
duties, therefore, of which a part is retained, would never have been
paid.
These reasons seem sufficiently to justify drawbacks, and would justify
them, though the whole duties, whether upon the produce of domestic
industry or upon foreign goods, were always drawn back upon exportation.
The revenue of excise would, in this case indeed, suffer a little, and
that of the customs a good deal more; but the natural balance of industry,
the natural division and distribution of labour, which is always more or
less disturbed by such duties, would be more nearly re-established by such
a regulation.
These reasons, however, will justify drawbacks only upon exporting goods
to those countries which are altogether foreign and independent, not to
those in which our merchants and manufacturers enjoy a monopoly. A
drawback, for example, upon the exportation of European goods to our
American colonies, will not always occasion a greater exportation than
what would have taken place without it. By means of the monopoly which our
merchants and manufacturers enjoy there, the same quantity might
frequently, perhaps, be sent thither, though the whole duties were
retained. The drawback, therefore, may frequently be pure loss to the
revenue of excise and customs, without altering the state of the trade, or
rendering it in any respect more extensive. How far such drawbacks can be
justified as a proper encouragement to the industry of our colonies, or
how far it is advantageous to the mother country that they should be
exempted from taxes which are paid by all the rest of their
fellow-subjects, will appear hereafter, when I come to treat of colonies.
Drawbacks, however, it must always be understood, are useful only in those
cases in which the goods, for the exportation of which they are given, are
really exported to some foreign country, and not clandestinely re-imported
into our own. That some drawbacks, particularly those upon tobacco, have
frequently been abused in this manner, and have given occasion to many
frauds, equally hurtful both to the revenue and to the fair trader, is
well known.
CHAPTER V.
OF BOUNTIES.
Bounties upon exportation are, in Great Britain, frequently petitioned
for, and sometimes granted, to the produce of particular branches of
domestic industry. By means of them, our merchants and manufacturers, it
is pretended, will be enabled to sell their goods as cheap or cheaper than
their rivals in the foreign market. A greater quantity, it is said, will
thus be exported, and the balance of trade consequently turned more in
favour of our own country. We cannot give our workmen a monopoly in the
foreign, as we have done in the home market. We cannot force foreigners to
buy their goods, as we have done our own countrymen. The next best
expedient, it has been thought, therefore, is to pay them for buying. It
is in this manner that the mercantile system proposes to enrich the whole
country, and to put money into all our pockets, by means of the balance of
trade.
Bounties, it is allowed, ought to be given to those branches of trade only
which cannot be carried on without them. But every branch of trade in
which the merchant can sell his goods for a price which replaces to him,
with the ordinary profits of stock, the whole capital employed in
preparing and sending them to market, can be carried on without a bounty.
Every such branch is evidently upon a level with all the other branches of
trade which are carried on without bounties, and cannot, therefore,
require one more than they. Those trades only require bounties, in which
the merchant is obliged to sell his goods for a price which does not
replace to him his capital, together with the ordinary profit, or in which
he is obliged to sell them for less than it really cost him to send them
to market. The bounty is given in order to make up this loss, and to
encourage him to continue, or, perhaps, to begin a trade, of which the
expense is supposed to be greater than the returns, of which every
operation eats up a part of the capital employed in it, and which is of
such a nature, that if all other trades resembled it, there would soon be
no capital left in the country.
The trades, it is to be observed, which are carried on by means of
bounties, are the only ones which can be carried on between two nations
for any considerable time together, in such a manner as that one of them
shall always and regularly lose, or sell its goods for less than it
really cost to send them to market. But if the bounty did not repay to the
merchant what he would otherwise lose upon the price of his goods, his own
interest would soon oblige him to employ his stock in another way, or to
find out a trade in which the price of the goods would replace to him,
with the ordinary profit, the capital employed in sending them to market.
The effect of bounties, like that of all the other expedients of the
mercantile system, can only be to force the trade of a country into a
channel much less advantageous than that in which it would naturally run
of its own accord.
The ingenious and well-informed author of the Tracts upon the Corn Trade
has shown very clearly, that since the bounty upon the exportation of corn
was first established, the price of the corn exported, valued moderately
enough, has exceeded that of the corn imported, valued very high, by a
much greater sum than the amount of the whole bounties which have been
paid during that period. This, he imagines, upon the true principles of
the mercantile system, is a clear proof that this forced corn trade is
beneficial to the nation, the value of the exportation exceeding that of
the importation by a much greater sum than the whole extraordinary expense
which the public has been at in order to get it exported. He does not
consider that this extraordinary expense, or the bounty, is the smallest
part of the expense which the exportation of corn really costs the
society. The capital which the farmer employed in raising it must likewise
be taken into the account. Unless the price of the corn, when sold in the
foreign markets, replaces not only the bounty, but this capital, together
with the ordinary profits of stock, the society is a loser by the
difference, or the national stock is so much diminished. But the very
reason for which it has been thought necessary to grant a bounty, is the
supposed insufficiency of the price to do this.
The average price of corn, it has been said, has fallen considerably since
the establishment of the bounty. That the average price of corn began to
fall somewhat towards the end of the last century, and has continued to do
so during the course of the sixty-four first years of the present, I have
already endeavoured to show. But this event, supposing it to be real, as I
believe it to be, must have happened in spite of the bounty, and cannot
possibly have happened in consequence of it. It has happened in France, as
well as in England, though in France there was not only no bounty, but,
till 1764, the exportation of corn was subjected to a general prohibition.
This gradual fall in the average price of grain, it is probable,
therefore, is ultimately owing neither to the one regulation nor to the
other, but to that gradual and insensible rise in the real value of
silver, which, in the first book of this discourse, I have endeavoured to
show, has taken place in the general market of Europe during the course of
the present century. It seems to be altogether impossible that the bounty
could ever contribute to lower the price of grain.
In years of plenty, it has already been observed, the bounty, by
occasioning an extraordinary exportation, necessarily keeps up the price
of corn in the home market above what it would naturally fall to. To do so
was the avowed purpose of the institution. In years of scarcity, though
the bounty is frequently suspended, yet the great exportation which it
occasions in years of plenty, must frequently hinder, more or less, the
plenty of one year from relieving the scarcity of another. Both in years
of plenty and in years of scarcity, therefore, the bounty necessarily
tends to raise the money price of corn somewhat higher than it otherwise
would be in the home market.
That in the actual state of tillage the bounty must necessarily have this
tendency, will not, I apprehend, be disputed by any reasonable person. But
it has been thought by many people, that it tends to encourage tillage,
and that in two different ways; first, by opening a more extensive foreign
market to the corn of the farmer, it tends, they imagine, to increase the
demand for, and consequently the production of, that commodity; and,
secondly by securing to him a better price than he could otherwise expect
in the actual state of tillage, it tends, they suppose, to encourage
tillage. This double encouragement must they imagine, in a long period of
years, occasion such an increase in the production of corn, as may lower
its price in the home market, much more than the bounty can raise it in
the actual state which tillage may, at the end of that period, happen to
be in.
I answer, that whatever extension of the foreign market can be occasioned
by the bounty must, in every particular year, be altogether at the expense
of the home market; as every bushel of corn, which is exported by means of
the bounty, and which would not have been exported without the bounty,
would have remained in the home market to increase the consumption, and to
lower the price of that commodity. The corn bounty, it is to be observed,
as well as every other bounty upon exportation, imposes two different
taxes upon the people; first, the tax which they are obliged to
contribute, in order to pay the bounty; and, secondly, the tax which
arises from the advanced price of the commodity in the home market, and
which, as the whole body of the people are purchasers of corn, must, in
this particular commodity, be paid by the whole body of the people. In
this particular commodity, therefore, this second tax is by much the
heaviest of the two. Let us suppose that, taking one year with another,
the bounty of 5s. upon the exportation of the quarter of wheat raises the
price of that commodity in the home market only 6d. the bushel, or 4s. the
quarter higher than it otherwise would have been in the actual state of
the crop. Even upon this very moderate supposition, the great body of the
people, over and above contributing the tax which pays the bounty of 5s.
upon every quarter of wheat exported, must pay another of 4s. upon every
quarter which they themselves consume. But according to the very well
informed author of the Tracts upon the Corn Trade, the average proportion
of the corn exported to that consumed at home, is not more than that of
one to thirty-one. For every 5s. therefore, which they contribute to the
payment of the first tax, they must contribute £6:4s. to the payment of
the second. So very heavy a tax upon the first necessary of life-must
either reduce the subsistence of the labouring poor, or it must occasion
some augmentation in their pecuniary wages, proportionable to that in the
pecuniary price of their subsistence. So far as it operates in the one
way, it must reduce the ability of the labouring poor to educate and bring
up their children, and must, so far, tend to restrain the population of
the country. So far as it operates in the other, it must reduce the
ability of the employers of the poor, to employ so great a number as they
otherwise might do, and must so far tend to restrain the industry of the
country. The extraordinary exportation of corn, therefore occasioned by
the bounty, not only in every particular year diminishes the home, just as
much as it extends the foreign market and consumption, but, by restraining
the population and industry of the country, its final tendency is to stint
and restrain the gradual extension of the home market; and thereby, in the
long-run, rather to diminish than to augment the whole market and
consumption of corn.
This enhancement of the money price of corn, however, it has been thought,
by rendering that commodity more profitable to the farmer, must
necessarily encourage its production.
I answer, that this might be the case, if the effect of the bounty was to
raise the real price of corn, or to enable the farmer, with an equal
quantity of it, to maintain a greater number of labourers in the same
manner, whether liberal, moderate, or scanty, than other labourers are
commonly maintained in his neighbourhood. But neither the bounty, it is
evident, nor any other human institution, can have any such effect. It is
not the real, but the nominal price of corn, which can in any considerable
degree be affected by the bounty. And though the tax, which that
institution imposes upon the whole body of the people, may be very
burdensome to those who pay it, it is of very little advantage to those
who receive it.
The real effect of the bounty is not so much to raise the real value of
corn, as to degrade the real value of silver; or to make an equal quantity
of it exchange for a smaller quantity, not only of corn, but of all other
home made commodities; for the money price of corn regulates that of all
other home made commodities.
It regulates the money price of labour, which must always be such as to
enable the labourer to purchase a quantity of corn sufficient to maintain
him and his family, either in the liberal, moderate, or scanty manner, in
which the advancing, stationary, or declining, circumstances of the
society, oblige his employers to maintain him.
It regulates the money price of all the other parts of the rude produce of
land, which, in every period of improvement, must bear a certain
proportion to that of corn, though this proportion is different in
different periods. It regulates, for example, the money price of grass and
hay, of butcher’s meat, of horses, and the maintenance of horses, of land
carriage consequently, or of the greater part of the inland commerce of
the country.
By regulating the money price of all the other parts of the rude produce
of land, it regulates that of the materials of almost all manufactures; by
regulating the money price of labour, it regulates that of manufacturing
art and industry; and by regulating both, it regulates that of the
complete manufacture. The money price of labour, and of every thing that
is the produce, either of land or labour, must necessarily either rise or
fall in proportion to the money price of corn.
Though in consequence of the bounty, therefore, the farmer should be
enabled to sell his corn for 4s. the bushel, instead of 3s:6d. and to pay
his landlord a money rent proportionable to this rise in the money price
of his produce; yet if, in consequence of this rise in the price of corn,
4s. will purchase no more home made goods of any other kind than 3s. 6d.
would have done before, neither the circumstances of the farmer, nor those
of the landlord, will be much mended by this change. The farmer will not
be able to cultivate much better; the landlord will not be able to live
much better. In the purchase of foreign commodities, this enhancement in
the price of corn may give them some little advantage. In that of home
made commodities, it can give them none at all. And almost the whole
expense of the farmer, and the far greater part even of that of the
landlord, is in home made commodities.
That degradation in the value of silver, which is the effect of the
fertility of the mines, and which operates equally, or very nearly
equally, through the greater part of the commercial world, is a matter of
very little consequence to any particular country. The consequent rise of
all money prices, though it does not make those who receive them really
richer, does not make them really poorer. A service of plate becomes
really cheaper, and every thing else remains precisely of the same real
value as before.
But that degradation in the value of silver, which, being the effect
either of the peculiar situation or of the political institutions of a
particular country, takes place only in that country, is a matter of very
great consequence, which, far from tending to make anybody really richer,
tends to make every body really poorer. The rise in the money price of all
commodities, which is in this case peculiar to that country, tends to
discourage more or less every sort of industry which is carried on within
it, and to enable foreign nations, by furnishing almost all sorts of goods
for a smaller quantity of silver than its own workmen can afford to do, to
undersell them, not only in the foreign, but even in the home market.
It is the peculiar situation of Spain and Portugal, as proprietors of the
mines, to be the distributers of gold and silver to all the other
countries of Europe. Those metals ought naturally, therefore, to be
somewhat cheaper in Spain and Portugal than in any other part of Europe.
The difference, however, should be no more than the amount of the freight
and insurance; and, on account of the great value and small bulk of those
metals, their freight is no great matter, and their insurance is the same
as that of any other goods of equal value. Spain and Portugal, therefore,
could suffer very little from their peculiar situation, if they did not
aggravate its disadvantages by their political institutions.
Spain by taxing, and Portugal by prohibiting, the exportation of gold and
silver, load that exportation with the expense of smuggling, and raise the
value of those metals in other countries so much more above what it is in
their own, by the whole amount of this expense. When you dam up a stream
of water, as soon as the dam is full, as much water must run over the
dam-head as if there was no dam at all. The prohibition of exportation
cannot detain a greater quantity of gold and silver in Spain and Portugal,
than what they can afford to employ, than what the annual produce of their
land and labour will allow them to employ, in coin, plate, gilding, and
other ornaments of gold and silver. When they have got this quantity, the
dam is full, and the whole stream which flows in afterwards must run over.
The annual exportation of gold and silver from Spain and Portugal,
accordingly, is, by all accounts, notwithstanding these restraints, very
near equal to the whole annual importation. As the water, however, must
always be deeper behind the dam-head than before it, so the quantity of
gold and silver which these restraints detain in Spain and Portugal, must,
in proportion to the annual produce of their land and labour, be greater
than what is to be found in other countries. The higher and stronger the
dam-head, the greater must be the difference in the depth of water behind
and before it. The higher the tax, the higher the penalties with which the
prohibition is guarded, the more vigilant and severe the police which
looks after the execution of the law, the greater must be the difference
in the proportion of gold and silver to the annual produce of the land and
labour of Spain and Portugal, and to that of other countries. It is said,
accordingly, to be very considerable, and that you frequently find there a
profusion of plate in houses, where there is nothing else which would in
other countries be thought suitable or correspondent to this sort of
magnificence. The cheapness of gold and silver, or, what is the same
thing, the dearness of all commodities, which is the necessary effect of
this redundancy of the precious metals, discourages both the agriculture
and manufactures of Spain and Portugal, and enables foreign nations to
supply them with many sorts of rude, and with almost all sorts of
manufactured produce, for a smaller quantity of gold and silver than what
they themselves can either raise or make them for at home. The tax and
prohibition operate in two different ways. They not only lower very much
the value of the precious metals in Spain and Portugal, but by detaining
there a certain quantity of those metals which would otherwise flow over
other countries, they keep up their value in those other countries
somewhat above what it otherwise would be, and thereby give those
countries a double advantage in their commerce with Spain and Portugal.
Open the flood-gates, and there will presently be less water above, and
more below the dam-head, and it will soon come to a level in both places.
Remove the tax and the prohibition, and as the quantity of gold and silver
will diminish considerably in Spain and Portugal, so it will increase
somewhat in other countries; and the value of those metals, their
proportion to the annual produce of land and labour, will soon come to a
level, or very near to a level, in all. The loss which Spain and Portugal
could sustain by this exportation of their gold and silver, would be
altogether nominal and imaginary. The nominal value of their goods, and of
the annual produce of their land and labour, would fall, and would be
expressed or represented by a smaller quantity of silver than before; but
their real value would be the same as before, and would be sufficient to
maintain, command, and employ the same quantity of labour. As the nominal
value of their goods would fall, the real value of what remained of their
gold and silver would rise, and a smaller quantity of those metals would
answer all the same purposes of commerce and circulation which had
employed a greater quantity before. The gold and silver which would go
abroad would not go abroad for nothing, but would bring back an equal
value of goods of some kind or other. Those goods, too, would not be all
matters of mere luxury and expense, to be consumed by idle people, who
produce nothing in return for their consumption. As the real wealth and
revenue of idle people would not be augmented by this extraordinary
exportation of gold and silver, so neither would their consumption be much
augmented by it. Those goods would probably, the greater part of them, and
certainly some part of them, consist in materials, tools, and provisions,
for the employment and maintenance of industrious people, who would
reproduce, with a profit, the full value of their consumption. A part of
the dead stock of the society would thus be turned into active stock, and
would put into motion a greater quantity of industry than had been
employed before. The annual produce of their land and labour would
immediately be augmented a little, and in a few years would probably be
augmented a great deal; their industry being thus relieved from one of the
most oppressive burdens which it at present labours under.
The bounty upon the exportation of corn necessarily operates exactly in
the same way as this absurd policy of Spain and Portugal. Whatever be the
actual state of tillage, it renders our corn somewhat dearer in the home
market than it otherwise would be in that state, and somewhat cheaper in
the foreign; and as the average money price of corn regulates, more or
less, that of all other commodities, it lowers the value of silver
considerably in the one, and tends to raise it a little in the other. It
enables foreigners, the Dutch in particular, not only to eat our corn
cheaper than they otherwise could do, but sometimes to eat it cheaper than
even our own people can do upon the same occasions; as we are assured by
an excellent authority, that of Sir Matthew Decker. It hinders our own
workmen from furnishing their goods for so small a quantity of silver as
they otherwise might do, and enables the Dutch to furnish theirs for a
smaller. It tends to render our manufactures somewhat dearer in every
market, and theirs somewhat cheaper, than they otherwise would be, and
consequently to give their industry a double advantage over our own.
The bounty, as it raises in the home market, not so much the real, as the
nominal price of our corn; as it augments, not the quantity of labour
which a certain quantity of corn can maintain and employ, but only the
quantity of silver which it will exchange for; it discourages our
manufactures, without rendering any considerable service, either to our
farmers or country gentlemen. It puts, indeed, a little more money into
the pockets of both, and it will perhaps be somewhat difficult to persuade
the greater part of them that this is not rendering them a very
considerable service. But if this money sinks in its value, in the
quantity of labour, provisions, and home-made commodities of all different
kinds which it is capable of purchasing, as much as it rises in its
quantity, the service will be little more than nominal and imaginary.
There is, perhaps, but one set of men in the whole commonwealth to whom
the bounty either was or could be essentially serviceable. These were the
corn merchants, the exporters and importers of corn. In years of plenty,
the bounty necessarily occasioned a greater exportation than would
otherwise have taken place; and by hindering the plenty of the one year
from relieving the scarcity of another, it occasioned in years of scarcity
a greater importation than would otherwise have been necessary. It
increased the business of the corn merchant in both; and in the years of
scarcity, it not only enabled him to import a greater quantity, but to
sell it for a better price, and consequently with a greater profit, than
he could otherwise have made, if the plenty of one year had not been more
or less hindered from relieving the scarcity of another. It is in this set
of men, accordingly, that I have observed the greatest zeal for the
continuance or renewal of the bounty.
Our country gentlemen, when they imposed the high duties upon the
exportation of foreign corn, which in times of moderate plenty amount to a
prohibition, and when they established the bounty, seem to have imitated
the conduct of our manufacturers. By the one institution, they secured to
themselves the monopoly of the home market, and by the other they
endeavoured to prevent that market from ever being overstocked with their
commodity. By both they endeavoured to raise its real value, in the same
manner as our manufacturers had, by the like institutions, raised the real
value of many different sorts of manufactured goods. They did not,
perhaps, attend to the great and essential difference which nature has
established between corn and almost every other sort of goods. When,
either by the monopoly of the home market, or by a bounty upon
exportation, you enable our woollen or linen manufacturers to sell their
goods for somewhat a better price than they otherwise could get for them,
you raise, not only the nominal, but the real price of those goods; you
render them equivalent to a greater quantity of labour and subsistence;
you increase not only the nominal, but the real profit, the real wealth
and revenue of those manufacturers; and you enable them, either to live
better themselves, or to employ a greater quantity of labour in those
particular manufactures. You really encourage those manufactures, and
direct towards them a greater quantity of the industry of the country than
what would properly go to them of its own accord. But when, by the like
institutions, you raise the nominal or money price of corn, you do not
raise its real value; you do not increase the real wealth, the real
revenue, either of our farmers or country gentlemen; you do not encourage
the growth of corn, because you do not enable them to maintain and employ
more labourers in raising it. The nature of things has stamped upon corn a
real value, which cannot be altered by merely altering its money price. No
bounty upon exportation, no monopoly of the home market, can raise that
value. The freest competition cannot lower it, Through the world in
general, that value is equal to the quantity of labour which it can
maintain, and in every particular place it is equal to the quantity of
labour which it can maintain in the way, whether liberal, moderate, or
scanty, in which labour is commonly maintained in that place. Woollen or
linen cloth are not the regulating commodities by which the real value of
all other commodities must be finally measured and determined; corn is.
The real value of every other commodity is finally measured and determined
by the proportion which its average money price bears to the average money
price of corn. The real value of corn does not vary with those variations
in its average money price, which sometimes occur from one century to
another; it is the real value of silver which varies with them.
Bounties upon the exportation of any homemade commodity are liable, first,
to that general objection which may be made to all the different
expedients of the mercantile system; the objection of forcing some part of
the industry of the country into a channel less advantageous than that in
which it would run of its own accord; and, secondly, to the particular
objection of forcing it not only into a channel that is less advantageous,
but into one that is actually disadvantageous; the trade which cannot be
carried on but by means of a bounty being necessarily a losing trade. The
bounty upon the exportation of corn is liable to this further objection,
that it can in no respect promote the raising of that particular commodity
of which it was meant to encourage the production. When our country
gentlemen, therefore, demanded the establishment of the bounty, though
they acted in imitation of our merchants and manufacturers, they did not
act with that complete comprehension of their own interest, which commonly
directs the conduct of those two other orders of people. They loaded the
public revenue with a very considerable expense: they imposed a very heavy
tax upon the whole body of the people; but they did not, in any sensible
degree, increase the real value of their own commodity; and by lowering
somewhat the real value of silver, they discouraged, in some degree, the
general industry of the country, and, instead of advancing, retarded more
or less the improvement of their own lands, which necessarily depend upon
the general industry of the country.
To encourage the production of any commodity, a bounty upon production,
one should imagine, would have a more direct operation than one upon
exportation. It would, besides, impose only one tax upon the people, that
which they must contribute in order to pay the bounty. Instead of raising,
it would tend to lower the price of the commodity in the home market; and
thereby, instead of imposing a second tax upon the people, it might, at
least in part, repay them for what they had contributed to the first.
Bounties upon production, however, have been very rarely granted. The
prejudices established by the commercial system have taught us to believe,
that national wealth arises 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 said too, have been found by experience more liable to frauds than
those upon exportation. How far this is true, I know not. That bounties
upon exportation have been abused, to many fraudulent purposes, is very
well known. But it is not the interest of merchants and manufacturers, the
great inventors of all these expedients, that the home market should be
overstocked with their goods; an event which a bounty upon production
might sometimes occasion. A bounty upon exportation, by enabling them to
send abroad their surplus part, and to keep up the price of what remains
in the home market, effectually prevents this. Of all the expedients of
the mercantile system, accordingly, it is the one of which they are the
fondest. I have known the different undertakers of some particular works
agree privately among themselves to give a bounty out of their own pockets
upon the exportation of a certain proportion of the goods which they dealt
in. This expedient succeeded so well, that it more than doubled the price
of their goods in the home market, notwithstanding a very considerable
increase in the produce. The operation of the bounty upon corn must have
been wonderfully different, if it has lowered the money price of that
commodity.
Something like a bounty upon production, however, has been granted upon
some particular occasions. The tonnage bounties given to the white herring
and whale fisheries may, perhaps, be considered as somewhat of this
nature. They tend directly, it may be supposed, to render the goods
cheaper in the home market than they otherwise would be. In other
respects, their effects, it must be acknowledged, are the same as those of
bounties upon exportation. By means of them, a part of the capital of the
country is employed in bringing goods to market, of which the price does
not repay the cost, together with the ordinary profits of stock.
But though the tonnage bounties to those fisheries do not contribute to
the opulence of the nation, it may, perhaps, be thought that they
contribute to its defence, by augmenting the number of its sailors and
shipping. This, it may be alleged, may sometimes be done by means of such
bounties, at a much smaller expense than by keeping up a great standing
navy, if I may use such an expression, in the same way as a standing army.
Notwithstanding these favourable allegations, however, the following
considerations dispose me to believe, that in granting at least one of
these bounties, the legislature has been very grossly imposed upon:
First, The herring-buss bounty seems too large.
From the commencement of the winter fishing 1771, to the end of the winter
fishing 1781, the tonnage bounty upon the herring-buss fishery has been at
thirty shillings the ton. During these eleven years, the whole number of
barrels caught by the herring-buss fishery of Scotland amounted to
378,347. The herrings caught and cured at sea are called sea-sticks. In
order to render them what are called merchantable herrings, it is
necessary to repack them with an additional quantity of salt; and in this
case, it is reckoned, that three barrels of sea-sticks are usually
repacked into two barrels of merchantable herrings. The number of barrels
of merchantable herrings, therefore, caught during these eleven years,
will amount only, according to this account, to 252,231¼. During these
eleven years, the tonnage bounties paid amounted to £155,463:11s. or
8s:2¼d. upon every barrel of sea-sticks, and to 12s:3¾d. upon every barrel
of merchantable herrings.
The salt with which these herrings are cured is sometimes Scotch, and
sometimes foreign salt; both which are delivered, free of all excise duty,
to the fish-curers. The excise duty upon Scotch salt is at present 1s:6d.,
that upon foreign salt 10s. the bushel. A barrel of herrings is supposed
to require about one bushel and one-fourth of a bushel foreign salt. Two
bushels are the supposed average of Scotch salt. If the herrings are
entered for exportation, no part of this duty is paid up; if entered for
home consumption, whether the herrings were cured with foreign or with
Scotch salt, only one shilling the barrel is paid up. It was the old
Scotch duty upon a bushel of salt, the quantity which, at a low
estimation, had been supposed necessary for curing a barrel of herrings.
In Scotland, foreign salt is very little used for any other purpose but
the curing of fish. But from the 5th April 1771 to the 5th April 1782, the
quantity of foreign salt imported amounted to 936,974 bushels, at
eighty-four pounds the bushel; the quantity of Scotch salt delivered from
the works to the fish-curers, to no more than 168,226, at fifty-six pounds
the bushel only. It would appear, therefore, that it is principally
foreign salt that is used in the fisheries. Upon every barrel of herrings
exported, there is, besides, a bounty of 2s:8d. and more than two-thirds
of the buss-caught herrings are exported. Put all these things together,
and you will find that, during these eleven years, every barrel of
buss-caught herrings, cured with Scotch salt, when exported, has cost
government 17s:11¾d.; and, when entered for home consumption, 14s:3¾d.;
and that every barrel cured with foreign salt, when exported, has cost
government £1:7:5¾d.; and, when entered for home consumption, £1:3:9¾d.
The price of a barrel of good merchantable herrings runs from seventeen
and eighteen to four and five-and-twenty shillings; about a guinea at an
average. {See the accounts at the end of this Book.}
Secondly, The bounty to the white-herring fishery is a tonnage bounty, and
is proportioned to the burden of the ship, not to her diligence or success
in the fishery; and it has, I am afraid, been too common for the vessels
to fit out for the sole purpose of catching, not the fish but the bounty.
In the year 1759, when the bounty was at fifty shillings the ton, the
whole buss fishery of Scotland brought in only four barrels of sea-sticks.
In that year, each barrel of sea-sticks cost government, in bounties
alone, £113:15s.; each barrel of merchantable herrings £159:7:6.
Thirdly, The mode of fishing, for which this tonnage bounty in the white
herring fishery has been given (by busses or decked vessels from twenty to
eighty tons burden ), seems not so well adapted to the situation of
Scotland, as to that of Holland, from the practice of which country it
appears to have been borrowed. Holland lies at a great distance from the
seas to which herrings are known principally to resort, and can,
therefore, carry on that fishery only in decked vessels, which can carry
water and provisions sufficient for a voyage to a distant sea; but the
Hebrides, or Western Islands, the islands of Shetland, and the northern
and north-western coasts of Scotland, the countries in whose neighbourhood
the herring fishery is principally carried on, are everywhere intersected
by arms of the sea, which run up a considerable way into the land, and
which, in the language of the country, are called sea-lochs. It is to
these sea-lochs that the herrings principally resort during the seasons in
which they visit these seas; for the visits of this, and, I am assured, of
many other sorts of fish, are not quite regular and constant. A
boat-fishery, therefore, seems to be the mode of fishing best adapted to
the peculiar situation of Scotland, the fishers carrying the herrings on
shore as fast as they are taken, to be either cured or consumed fresh. But
the great encouragement which a bounty of 30s. the ton gives to the
buss-fishery, is necessarily a discouragement to the boat-fishery, which,
having no such bounty, cannot bring its cured fish to market upon the same
terms as the buss-fishery. The boat-fishery; accordingly, which, before
the establishment of the buss-bounty, was very considerable, and is said
to have employed a number of seamen, not inferior to what the buss-fishery
employs at present, is now gone almost entirely to decay. Of the former
extent, however, of this now ruined and abandoned fishery, I must
acknowledge that I cannot pretend to speak with much precision. As no
bounty was-paid upon the outfit of the boat-fishery, no account was taken
of it by the officers of the customs or salt duties.
Fourthly, In many parts of Scotland, during certain seasons of the year,
herrings make no inconsiderable part of the food of the common people. A
bounty which tended to lower their price in the home market, might
contribute a good deal to the relief of a great number of our
fellow-subjects, whose circumstances are by no means affluent. But the
herring-bus bounty contributes to no such good purpose. It has ruined the
boat fishery, which is by far the best adapted for the supply of the home
market; and the additional bounty of 2s:8d. the barrel upon exportation,
carries the greater part, more than two-thirds, of the produce of the
buss-fishery abroad. Between thirty and forty years ago, before the
establishment of the buss-bounty, 16s. the barrel, I have been assured,
was the common price of white herrings. Between ten and fifteen years ago,
before the boat-fishery was entirely ruined, the price was said to have
run from seventeen to twenty shillings the barrel. For these last five
years, it has, at an average, been at twenty-five shillings the barrel.
This high price, however, may have been owing to the real scarcity of the
herrings upon the coast of Scotland. I must observe, too, that the cask or
barrel, which is usually sold with the herrings, and of which the price is
included in all the foregoing prices, has, since the commencement of the
American war, risen to about double its former price, or from about 3s. to
about 6s. I must likewise observe, that the accounts I have received of
the prices of former times, have been by no means quite uniform and
consistent, and an old man of great accuracy and experience has assured
me, that, more than fifty years ago, a guinea was the usual price of a
barrel of good merchantable herrings; and this, I imagine, may still be
looked upon as the average price. All accounts, however, I think, agree
that the price has not been lowered in the home market in consequence of
the buss-bounty.
When the undertakers of fisheries, after such liberal bounties have been
bestowed upon them, continue to sell their commodity at the same, or even
at a higher price than they were accustomed to do before, it might be
expected that their profits should be very great; and it is not improbable
that those of some individuals may have been so. In general, however, I
have every reason to believe they have been quite otherwise. The usual
effect of such bounties is, to encourage rash undertakers to adventure in
a business which they do not understand; and what they lose by their own
negligence and ignorance, more than compensates all that they can gain by
the utmost liberality of government. In 1750, by the same act which first
gave the bounty of 30s. the ton for the encouragement of the white herring
fishery (the 23d Geo. II. chap. 24), a joint stock company was erected,
with a capital of £500,000, to which the subscribers (over and above all
other encouragements, the tonnage bounty just now mentioned, the
exportation bounty of 2s:8d. the barrel, the delivery of both British and
foreign salt duty free) were, during the space of fourteen years, for
every hundred pounds which they subscribed and paid into the stock of the
society, entitled to three pounds a-year, to be paid by the
receiver-general of the customs in equal half-yearly payments. Besides
this great company, the residence of whose governor and directors was to
be in London, it was declared lawful to erect different fishing chambers
in all the different out-ports of the kingdom, provided a sum not less
than £10,000 was subscribed into the capital of each, to be managed at its
own risk, and for its own profit and loss. The same annuity, and the same
encouragements of all kinds, were given to the trade of those inferior
chambers as to that of the great company. The subscription of the great
company was soon filled up, and several different fishing chambers were
erected in the different out-ports of the kingdom. In spite of all these
encouragements, almost all those different companies, both great and
small, lost either the whole or the greater part of their capitals; scarce
a vestige now remains of any of them, and the white-herring fishery is now
entirely, or almost entirely, carried on by private adventurers.
If any particular manufacture was necessary, indeed, for the defence of
the society, it might not always be prudent to depend upon our neighbours
for the supply; and if such manufacture could not otherwise be supported
at home, it might not be unreasonable that all the other branches of
industry should be taxed in order to support it. The bounties upon the
exportation of British made sail-cloth, and British made gunpowder, may,
perhaps, both be vindicated upon this principle.
But though it can very seldom be reasonable to tax the industry of the
great body of the people, in order to support that of some particular
class of manufacturers; yet, in the wantonness of great prosperity, when
the public enjoys a greater revenue than it knows well what to do with, to
give such bounties to favourite manufactures, may, perhaps, be as natural
as to incur any other idle expense. In public, as well as in private
expenses, great wealth, may, perhaps, frequently be admitted as an apology
for great folly. But there must surely be something more than ordinary
absurdity in continuing such profusion in times of general difficulty and
distress.
What is called a bounty, is sometimes no more than a drawback, and,
consequently, is not liable to the same objections as what is properly a
bounty. The bounty, for example, upon refined sugar exported, may be
considered as a drawback of the duties upon the brown and Muscovado
sugars, from which it is made; the bounty upon wrought silk exported, a
drawback of the duties upon raw and thrown silk imported; the bounty upon
gunpowder exported, a drawback of the duties upon brimstone and saltpetre
imported. In the language of the customs, those allowances only are called
drawbacks which are given upon goods exported in the same form in which
they are imported. When that form has been so altered by manufacture of
any kind as to come under a new denomination, they are called bounties.
Premiums given by the public to artists and manufacturers, who excel in
their particular occupations, are not liable to the same objections as
bounties. By encouraging extraordinary dexterity and ingenuity, they serve
to keep up the emulation of the workmen actually employed in those
respective occupations, and are not considerable enough to turn towards
any one of them a greater share of the capital of the country than what
would go to it of its own accord. Their tendency is not to overturn the
natural balance of employments, but to render the work which is done in
each as perfect and complete as possible. The expense of premiums,
besides, is very trifling, that of bounties very great. The bounty upon
corn alone has sometimes cost the public, in one year, more than £300,000.
Bounties are sometimes called premiums, as drawbacks are sometimes called
bounties. But we must, in all cases, attend to the nature of the thing,
without paying any regard to the word.
Digression concerning the Corn Trade and Corn Laws.
I cannot conclude this chapter concerning bounties, without observing,
that the praises which have been bestowed upon the law which establishes
the bounty upon the exportation of corn, and upon that system of
regulations which is connected with it, are altogether unmerited. A
particular examination of the nature of the corn trade, and of the
principal British laws which relate to it, will sufficiently demonstrate
the truth of this assertion. The great importance of this subject must
justify the length of the digression.
The trade of the corn merchant is composed of four different branches,
which, though they may sometimes be all carried on by the same person,
are, in their own nature, four separate and distinct trades. These are,
first, the trade of the inland dealer; secondly, that of the
merchant-importer for home consumption; thirdly, that of the
merchant-exporter of home produce for foreign consumption; and, fourthly,
that of the merchant-carrier, or of the importer of corn, in order to
export it again.
I. The interest of the inland dealer, and that of the great body of the
people, how opposite soever they may at first appear, are, even in years
of the greatest scarcity, exactly the same. It is his interest to raise
the price of his corn as high as the real scarcity of the season
requires, and it can never be his interest to raise it higher. By raising
the price, he discourages the consumption, and puts every body more or
less, but particularly the inferior ranks of people, upon thrift and good
management. If, by raising it too high, he discourages the consumption so
much that the supply of the season is likely to go beyond the consumption
of the season, and to last for some time after the next crop begins to
come in, he runs the hazard, not only of losing a considerable part of
his corn by natural causes, but of being obliged to sell what remains of
it for much less than what he might have had for it several months
before. If, by not raising the price high enough, he discourages the
consumption so little, that the supply of the season is likely to fall
short of the consumption of the season, he not only loses a part of the
profit which he might otherwise have made, but he exposes the people to
suffer before the end of the season, instead of the hardships of a
dearth, the dreadful horrors of a famine. It is the interest of the
people that their daily, weekly, and monthly consumption should be
proportioned as exactly as possible to the supply of the season. The
interest of the inland corn dealer is the same. By supplying them, as
nearly as he can judge, in this proportion, he is likely to sell all his
corn for the highest price, and with the greatest profit; and his
knowledge of the state of the crop, and of his daily, weekly, and monthly
sales, enables him to judge, with more or less accuracy, how far they
really are supplied in this manner. Without intending the interest of the
people, he is necessarily led, by a regard to his own interest, to treat
them, even in years of scarcity, pretty much in the same manner as the
prudent master of a vessel is sometimes obliged to treat his crew. When
he foresees that provisions are likely to run short, he puts them upon
short allowance. Though from excess of caution he should sometimes do
this without any real necessity, yet all the inconveniencies which his
crew can thereby suffer are inconsiderable, in comparison of the danger,
misery, and ruin, to which they might sometimes be exposed by a less
provident conduct. Though, from excess of avarice, in the same manner,
the inland corn merchant should sometimes raise the price of his corn
somewhat higher than the scarcity of the season requires, yet all the
inconveniencies which the people can suffer from this conduct, which
effectually secures them from a famine in the end of the season, are
inconsiderable, in comparison of what they might have been exposed to by
a more liberal way of dealing in the beginning of it the corn merchant
himself is likely to suffer the most by this excess of avarice; not only
from the indignation which it generally excites against him, but, though
he should escape the effects of this indignation, from the quantity of
corn which it necessarily leaves upon his hands in the end of the season,
and which, if the next season happens to prove favourable, he must always
sell for a much lower price than he might otherwise have had.
Were it possible, indeed, for one great company of merchants to possess
themselves of the whole crop of an extensive country, it might perhaps be
their interest to deal with it, as the Dutch are said to do with the
spiceries of the Moluccas, to destroy or throw away a considerable part of
it, in order to keep up the price of the rest. But it is scarce possible,
even by the violence of law, to establish such an extensive monopoly with
regard to corn; and wherever the law leaves the trade free, it is of all
commodities the least liable to be engrossed or monopolised by the force
a few large capitals, which buy up the greater part of it. Not only its
value far exceeds what the capitals of a few private men are capable of
purchasing; but, supposing they were capable of purchasing it, the manner
in which it is produced renders this purchase altogether impracticable.
As, in every civilized country, it is the commodity of which the annual
consumption is the greatest; so a greater quantity of industry is annually
employed in producing corn than in producing any other commodity. When it
first comes from the ground, too, it is necessarily divided among a
greater number of owners than any other commodity; and these owners can
never be collected into one place, like a number of independent
manufacturers, but are necessarily scattered through all the different
corners of the country. These first owners either immediately supply the
consumers in their own neighbourhood, or they supply other inland dealers,
who supply those consumers. The inland dealers in corn, therefore,
including both the farmer and the baker, are necessarily more numerous
than the dealers in any other commodity; and their dispersed situation
renders it altogether impossible for them to enter into any general
combination. If, in a year of scarcity, therefore, any of them should find
that he had a good deal more corn upon hand than, at the current price, he
could hope to dispose of before the end of the season, he would never
think of keeping up this price to his own loss, and to the sole benefit of
his rivals and competitors, but would immediately lower it, in order to
get rid of his corn before the new crop began to come in. The same
motives, the same interests, which would thus regulate the conduct of any
one dealer, would regulate that of every other, and oblige them all in
general to sell their corn at the price which, according to the best of
their judgment, was most suitable to the scarcity or plenty of the season.
Whoever examines, with attention, the history of the dearths and famines
which have afflicted any part of Europe during either the course of the
present or that of the two preceding centuries, of several of which we
have pretty exact accounts, will find, I believe, that a dearth never has
arisen from any combination among the inland dealers in corn, nor from any
other cause but a real scarcity, occasioned sometimes, perhaps, and in
some particular places, by the waste of war, but in by far the greatest
number of cases by the fault of the seasons; and that a famine has never
arisen from any other cause but the violence of government attempting, by
improper means, to remedy the inconveniencies of a dearth.
In an extensive corn country, between all the different parts of which
there is a free commerce and communication, the scarcity occasioned by the
most unfavourable seasons can never be so great as to produce a famine;
and the scantiest crop, if managed with frugality and economy, will
maintain, through the year, the same number of people that are commonly
fed in a more affluent manner by one of moderate plenty. The seasons most
unfavourable to the crop are those of excessive drought or excessive rain.
But as corn grows equally upon high and low lands, upon grounds that are
disposed to be too wet, and upon those that are disposed to be too dry,
either the drought or the rain, which is hurtful to one part of the
country, is favourable to another; and though, both in the wet and in the
dry season, the crop is a good deal less than in one more properly
tempered; yet, in both, what is lost in one part of the country is in some
measure compensated by what is gained in the other. In rice countries,
where the crop not only requires a very moist soil, but where, in a
certain period of its growing, it must be laid under water, the effects of
a drought are much more dismal. Even in such countries, however, the
drought is, perhaps, scarce ever so universal as necessarily to occasion a
famine, if the government would allow a free trade. The drought in Bengal,
a few years ago, might probably have occasioned a very great dearth. Some
improper regulations, some injudicious restraints, imposed by the servants
of the East India Company upon the rice trade, contributed, 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 sell their corn at what it supposes a reasonable
price, it either hinders them from bringing it to market, which may
sometimes produce a famine even in the beginning of the season; or, if
they bring it thither, it enables the people, and thereby encourages them
to consume it so fast as must necessarily produce a famine before the end
of the season. The unlimited, unrestrained freedom of the corn trade, as
it is the only effectual preventive of the miseries of a famine, so it is
the best palliative of the inconveniencies of a dearth; for the
inconveniencies of a real scarcity cannot be remedied; they can only be
palliated. No trade deserves more the full protection of the law, and no
trade requires it so much; because no trade is so much exposed to popular
odium.
In years of scarcity, the inferior ranks of people impute their distress
to the avarice of the corn merchant, who becomes the object of their
hatred and indignation. Instead of making profit upon such occasions,
therefore, he is often in danger of being utterly ruined, and of having
his magazines plundered and destroyed by their violence. It is in years of
scarcity, however, when prices are high, that the corn merchant expects to
make his principal profit. He is generally in contract with some farmers
to furnish him, for a certain number of years, with a certain quantity of
corn, at a certain price. This contract price is settled according to what
is supposed to be the moderate and reasonable, that is, the ordinary or
average price, which, before the late years of scarcity, was commonly
about 28s. for the quarter of wheat, and for that of other grain in
proportion. In years of scarcity, therefore, the corn merchant buys a
great part of his corn for the ordinary price, and sells it for a much
higher. That this extraordinary profit, however, is no more than
sufficient to put his trade upon a fair level with other trades, and to
compensate the many losses which he sustains upon other occasions, both
from the perishable nature of the commodity itself, and from the frequent
and unforeseen fluctuations of its price, seems evident enough, from this
single circumstance, that great fortunes are as seldom made in this as in
any other trade. The popular odium, however, which attends it in years of
scarcity, the only years in which it can be very profitable, renders
people of character and fortune averse to enter into it. It is abandoned
to an inferior set of dealers; and millers, bakers, meal-men, and
meal-factors, together with a number of wretched hucksters, are almost the
only middle people that, in the home market, come between the grower and
the consumer.
The ancient policy of Europe, instead of discountenancing this popular
odium against a trade so beneficial to the public, seems, on the contrary,
to have authorised and encouraged it.
By the 5th and 6th of Edward VI cap. 14, it was enacted, that whoever
should buy any corn or grain, with intent to sell it again, should be
reputed an unlawful engrosser, and should, for the first fault, suffer two
months imprisonment, and forfeit the value of the corn; for the second,
suffer six months imprisonment, and forfeit double the value; and, for the
third, be set in the pillory, suffer imprisonment during the king’s
pleasure, and forfeit all his goods and chattels. The ancient policy of
most other parts of Europe was no better than that of England.
Our ancestors seem to have imagined, that the people would buy their corn
cheaper of the farmer than of the corn merchant, who, they were afraid,
would require, over and above the price which he paid to the farmer, an
exorbitant profit to himself. They endeavoured, therefore, to annihilate
his trade altogether. They even endeavoured to hinder, as much as
possible, any middle man of any kind from coming in between the grower and
the consumer; and this was the meaning of the many restraints which they
imposed upon the trade of those whom they called kidders, or carriers of
corn; a trade which nobody was allowed to exercise without a licence,
ascertaining his qualifications as a man of probity and fair dealing. The
authority of three justices of the peace was, by the statute of Edward VI.
necessary in order to grant this licence. But even this restraint was
afterwards thought insufficient, and, by a statute of Elizabeth, the
privilege of granting it was confined to the quarter-sessions.
The ancient policy of Europe endeavoured, in this manner, to regulate
agriculture, the great trade of the country, by maxims quite different
from those which it established with regard to manufactures, the great
trade of the towns. By leaving a farmer no other customers but either the
consumers or their immediate factors, the kidders and carriers of corn, it
endeavoured to force him to exercise the trade, not only of a farmer, but
of a corn merchant, or corn retailer. On the contrary, it, in many cases,
prohibited the manufacturer from exercising the trade of a shopkeeper, or
from selling his own goods by retail. It meant, by the one law, to promote
the general interest of the country, or to render corn cheap, without,
perhaps, its being well understood how this was to be done. By the other,
it meant to promote that of a particular order of men, the shopkeepers,
who would be so much undersold by the manufacturer, it was supposed, that
their trade would be ruined, if he was allowed to retail at all.
The manufacturer, however, though he had been allowed to keep a shop, and
to sell his own goods by retail, could not have undersold the common
shopkeeper. Whatever part of his capital he might have placed in his shop,
he must have withdrawn it from his manufacture. In order to carry on his
business on a level with that of other people, as he must have had the
profit of a manufacturer on the one part, so he must have had that of a
shopkeeper upon the other. Let us suppose, for example, that in the
particular town where he lived, ten per cent. was the ordinary profit both
of manufacturing and shopkeeping stock; he must in this case have charged
upon every piece of his own goods, which he sold in his shop, a profit of
twenty per cent. When he carried them from his workhouse to his shop, he
must have valued them at the price for which he could have sold them to a
dealer or shopkeeper, who would have bought them by wholesale. If he
valued them lower, he lost a part of the profit of his manufacturing
capital. When, again, he sold them from his shop, unless he got the same
price at which a shopkeeper would have sold them, he lost a part of the
profit of his shop-keeping capital. Though he might appear, therefore, to
make a double profit upon the same piece of goods, yet, as these goods
made successively a part of two distinct capitals, he made but a single
profit upon the whole capital employed about them; and if he made less
than his profit, he was a loser, and did not employ his whole capital with
the same advantage as the greater part of his neighbours.
What the manufacturer was prohibited to do, the farmer was in some measure
enjoined to do; to divide his capital between two different employments;
to keep one part of it in his granaries and stack-yard, for supplying the
occasional demands of the market, and to employ the other in the
cultivation of his land. But as he could not afford to employ the latter
for less than the ordinary profits of farming stock, so he could as little
afford to employ the former for less than the ordinary profits of
mercantile stock. Whether the stock which really carried on the business
of a corn merchant belonged to the person who was called a farmer, or to
the person who was called a corn merchant, an equal profit was in both
cases requisite, in order to indemnify its owner for employing it in this
manner, in order to put his business on a level with other trades, and in
order to hinder him from having an interest to change it as soon as
possible for some other. The farmer, therefore, who was thus forced to
exercise the trade of a corn merchant, could not afford to sell his corn
cheaper than any other corn merchant would have been obliged to do in the
case of a free competition.
The dealer who can employ his whole stock in one single branch of
business, has an advantage of the same kind with the workman who can
employ his whole labour in one single operation. As the latter acquires a
dexterity which enables him, with the same two hands, to perform a much
greater quantity of work, so the former acquires so easy and ready a
method of transacting his business, of buying and disposing of his goods,
that with the same capital he can transact a much greater quantity of
business. As the one can commonly afford his work a good deal cheaper, so
the other can commonly afford his goods somewhat cheaper, than if his
stock and attention were both employed about a greater variety of objects.
The greater part of manufacturers could not afford to retail their own
goods so cheap as a vigilant and active shopkeeper, whose sole business it
was to buy them by wholesale and to retail them again. The greater part of
farmers could still less afford to retail their own corn, to supply the
inhabitants of a town, at perhaps four or five miles distance from the
greater part of them, so cheap as a vigilant and active corn merchant,
whose sole business it was to purchase corn by wholesale, to collect it
into a great magazine, and to retail it again.
The law which prohibited the manufacturer from exercising the trade of a
shopkeeper, endeavoured to force this division in the employment of stock
to go on faster than it might otherwise have done. The law which obliged
the farmer to exercise the trade of a corn merchant, endeavoured to hinder
it from going on so fast. Both laws were evident violations of natural
liberty, and therefore unjust; and they were both, too, as impolitic as
they were unjust. It is the interest of every society, that things of this
kind should never either he forced or obstructed. The man who employs
either his labour or his stock in a greater variety of ways than his
situation renders necessary, can never hurt his neighbour by underselling
him. He may hurt himself, and he generally does so. Jack-of-all-trades
will never be rich, says the proverb. But the law ought always to trust
people with the care of their own interest, as in their local situations
they must generally be able to judge better of it than the legislature can
do. The law, however, which obliged the farmer to exercise the trade of a
corn merchant was by far the most pernicious of the two.
It obstructed not only that division in the employment of stock which is
so advantageous to every society, but it obstructed likewise the
improvement and cultivation of the land. By obliging the farmer to carry
on two trades instead of one, it forced him to divide his capital into two
parts, of which one only could be employed in cultivation. But if he had
been at liberty to sell his whole crop to a corn merchant as fast as he
could thresh it out, his whole capital might have returned immediately to
the land, and have been employed in buying more cattle, and hiring more
servants, in order to improve and cultivate it better. But by being
obliged to sell his corn by retail, he was obliged to keep a great part of
his capital in his granaries and stack-yard through the year, and could
not therefore cultivate so well as with the same capital he might
otherwise have done. This law, therefore, necessarily obstructed the
improvement of the land, and, instead of tending to render corn cheaper,
must have tended to render it scarcer, and therefore dearer, than it would
otherwise have been.
After the business of the farmer, that of the corn merchant is in reality
the trade which, if properly protected and encouraged, would contribute
the most to the raising of corn. It would support the trade of the farmer,
in the same manner as the trade of the wholesale dealer supports that of
the manufacturer.
The wholesale dealer, by affording a ready market to the manufacturer, by
taking his goods off his hand as fast as he can make them, and by
sometimes even advancing their price to him before he has made them,
enables him to keep his whole capital, and sometimes even more than his
whole capital, constantly employed in manufacturing, and consequently to
manufacture a much greater quantity of goods than if he was obliged to
dispose of them himself to the immediate consumers, or even to the
retailers. As the capital of the wholesale merchant, too, is generally
sufficient to replace that of many manufacturers, this intercourse between
him and them interests the owner of a large capital to support the owners
of a great number of small ones, and to assist them in those losses and
misfortunes which might otherwise prove ruinous to them.
An intercourse of the same kind universally established between the
farmers and the corn merchants, would be attended with effects equally
beneficial to the farmers. They would be enabled to keep their whole
capitals, and even more than their whole capitals constantly employed in
cultivation. In case of any of those accidents to which no trade is more
liable than theirs, they would find in their ordinary customer, the
wealthy corn merchant, a person who had both an interest to support them,
and the ability to do it; and they would not, as at present, be entirely
dependent upon the forbearance of their landlord, or the mercy of his
steward. Were it possible, as perhaps it is not, to establish this
intercourse universally, and all at once; were it possible to turn all at
once the whole farming stock of the kingdom to its proper business, the
cultivation of land, withdrawing it from every other employment into which
any part of it may be at present diverted; and were it possible, in order
to support and assist, upon occasion, the operations of this great stock,
to provide all at once another stock almost equally great; it is not,
perhaps, very easy to imagine how great, how extensive, and how sudden,
would be the improvement which this change of circumstances would alone
produce upon the whole face of the country.
The statute of Edward VI. therefore, by prohibiting as much as possible
any middle man from coming in between the grower and the consumer,
endeavoured to annihilate a trade, of which the free exercise is not only
the best palliative of the inconveniencies of a dearth, but the best
preventive of that calamity; after the trade of the farmer, no trade
contributing so much to the growing of corn as that of the corn merchant.
The rigour of this law was afterwards softened by several subsequent
statutes, which successively permitted the engrossing of corn when the
price of wheat should not exceed 20s. and 24s. 32s. and 40s. the quarter.
At last, by the 15th of Charles II. c.7, the engrossing or buying of corn,
in order to sell it again, as long as the price of wheat did not exceed
48s. the quarter, and that of other grain in proportion, was declared
lawful to all persons not being forestallers, that is, not selling again
in the same market within three months. All the freedom which the trade of
the inland corn dealer has ever yet enjoyed was bestowed upon it by this
statute. The statute of the twelfth of the present king, which repeals
almost all the other ancient laws against engrossers and forestallers,
does not repeal the restrictions of this particular statute, which
therefore still continue in force.
This statute, however, authorises in some measure two very absurd popular
prejudices.
First, It supposes, that when the price of wheat has risen so high as 48s.
the quarter, and that of other grain in proportion, corn is likely to be
so engrossed as to hurt the people. But, from what has been already said,
it seems evident enough, that corn can at no price be so engrossed by the
inland dealers as to hurt the people; and 48s. the quarter, besides,
though it may be considered as a very high price, yet, in years of
scarcity, it is a price which frequently takes place immediately after
harvest, when scarce any part of the new crop can be sold off, and when it
is impossible even for ignorance to suppose that any part of it can be so
engrossed as to hurt the people.
Secondly, It supposes that there is a certain price at which corn is
likely to be forestalled, that is, bought up in order to be sold again
soon after in the same market, so as to hurt the people. But if a merchant
ever buys up corn, either going to a particular market, or in a particular
market, in order to sell it again soon after in the same market, it must
be because he judges that the market cannot be so liberally supplied
through the whole season as upon that particular occasion, and that the
price, therefore, must soon rise. If he judges wrong in this, and if the
price does not rise, he not only loses the whole profit of the stock which
he employs in this manner, but a part of the stock itself, by the expense
and loss which necessarily attend the storing and keeping of corn. He
hurts himself, therefore, much more essentially than he can hurt even the
particular people whom he may hinder from supplying themselves upon that
particular market day, because they may afterwards supply themselves just
as cheap upon any other market day. If he judges right, instead of hurting
the great body of the people, he renders them a most important service. By
making them feel the inconveniencies of a dearth somewhat earlier than
they otherwise might do, he prevents their feeling them afterwards so
severely as they certainly would do, if the cheapness of price encouraged
them to consume faster than suited the real scarcity of the season. When
the scarcity is real, the best thing that can be done for the people is,
to divide the inconvenience of it as equally as possible, through all the
different months and weeks and days of the year. The interest of the corn
merchant makes him study to do this as exactly as he can; and as no other
person can have either the same interest, or the same knowledge, or the
same abilities, to do it so exactly as he, this most important operation
of commerce ought to be trusted entirely to him; or, in other words, the
corn trade, so far at least as concerns the supply of the home market,
ought to be left perfectly free.
The popular fear of engrossing and forestalling may be compared to the
popular terrors and suspicions of witchcraft. The unfortunate wretches
accused of this latter crime were not more innocent of the misfortunes
imputed to them, than those who have been accused of the former. The law
which put an end to all prosecutions against witchcraft, which put it out
of any man’s power to gratify his own malice by accusing his neighbour of
that imaginary crime, seems effectually to have put an end to those fears
and suspicions, by taking away the great cause which encouraged and
supported them. The law which would restore entire freedom to the inland
trade of corn, would probably prove as effectual to put an end to the
popular fears of engrossing and forestalling.
The 15th of Charles II. c. 7, however, with all its imperfections, has,
perhaps, contributed more, both to the plentiful supply of the home
market, and to the increase of tillage, than any other law in the statute
book. It is from this law that the inland corn trade has derived all the
liberty and protection which it has ever yet enjoyed; and both the supply
of the home market and the interest of tillage are much more effectually
promoted by the inland, than either by the importation or exportation
trade.
The proportion of the average quantity of all sorts of grain imported into
Great Britain to that of all sorts of grain consumed, it has been computed
by the author of the Tracts upon the Corn Trade, does not exceed that of
one to five hundred and seventy. For supplying the home market, therefore,
the importance of the inland trade must be to that of the importation
trade as five hundred and seventy to one.
The average quantity of all sorts of grain exported from Great Britain
does not, according to the same author, exceed the one-and-thirtieth part
of the annual produce. For the encouragement of tillage, therefore, by
providing a market for the home produce, the importance of the inland
trade must be to that of the exportation trade as thirty to one.
I have no great faith in political arithmetic, and I mean not to warrant
the exactness of either of these computations. I mention them only in
order to show of how much less consequence, in the opinion of the most
judicious and experienced persons, the foreign trade of corn is than the
home trade. The great cheapness of corn in the years immediately preceding
the establishment of the bounty may, perhaps with reason, he ascribed in
some measure to the operation of this statute of Charles II. which had
been enacted about five-and-twenty years before, and which had, therefore,
full time to produce its effect.
A very few words will sufficiently explain all that I have to say
concerning the other three branches of the corn trade.
II. The trade of the merchant-importer of foreign corn for home
consumption, evidently contributes to the immediate supply of the home
market, and must so far be immediately beneficial to the great body of the
people. It tends, indeed, to lower somewhat the average money price of
corn, but not to diminish its real value, or the quantity of labour which
it is capable of maintaining. If importation was at all times free, our
farmers and country gentlemen would probably, one year with another, get
less money for their corn than they do at present, when importation is at
most times in effect prohibited; but the money which they got would be of
more value, would buy more goods of all other kinds, and would employ more
labour. Their real wealth, their real revenue, therefore, would be the
same as at present, though it might be expressed by a smaller quantity of
silver, and they would neither be disabled nor discouraged from
cultivating corn as much as they do at present. On the contrary, as the
rise in the real value of silver, in consequence of lowering the money
price of corn, lowers somewhat the money price of all other commodities,
it gives the industry of the country where it takes place some advantage
in all foreign markets and thereby tends to encourage and increase that
industry. But the extent of the home market for corn must be in proportion
to the general industry of the country where it grows, or to the number of
those who produce something else, and therefore, have something else, or,
what comes to the same thing, the price of something else, to give in
exchange for corn. But in every country, the home market, as it is the
nearest and most convenient, so is it likewise the greatest and most
important market for corn. That rise in the real value of silver,
therefore, which is the effect of lowering the average money price of
corn, tends to enlarge the greatest and most important market for corn,
and thereby to encourage, instead of discouraging its growth.
By the 22d of Charles II. c. 13, the importation of wheat, whenever the
price in the home market did not exceed 53s:4d. the quarter, was subjected
to a duty of 16s. the quarter; and to a duty of 8s. whenever the price did
not exceed £4. The former of these two prices has, for more than a century
past, taken place only in times of very great scarcity; and the latter
has, so far as I know, not taken place at all. Yet, till wheat has risen
above this latter price, it was, by this statute, subjected to a very high
duty; and, till it had risen above the former, to a duty which amounted to
a prohibition. The importation of other sorts of grain was restrained at
rates and by duties, in proportion to the value of the grain, almost
equally high. Before the 13th of the present king, the following were the
duties payable upon the importation of the different sorts of grain:
Grain. Duties. Duties Duties.
Beans to 28s. per qr. 19s:10d. after till 40s. 16s:8d. then 12d. Barley to 28s. - 19s:10d. - 32s. 16s. - 12d. Malt is prohibited by the annual malt-tax bill. Oats to 16s. - 5s:10d. after - 9½d. Pease to 40s. - 16s: 0d. after - 9¾d. Rye to 36s. - 19s:10d. till 40s. 16s:8d - 12d. Wheat to 44s. - 21s: 9d. till 53s:4d. 17s. - 8s. till £4, and after that about 1s:4d. Buck-wheat to 32s. per qr. to pay 16s.
These different duties were imposed, partly by the 22d of Charles II. in
place of the old subsidy, partly by the new subsidy, by the one-third and
two-thirds subsidy, and by the subsidy 1747. Subsequent laws still further
increased those duties.
The distress which, in years of scarcity, the strict execution of those
laws might have brought upon the people, would probably have been very
great; but, upon such occasions, its execution was generally suspended by
temporary statutes, which permitted, for a limited time, the importation
of foreign corn. The necessity of these temporary statutes sufficiently
demonstrates the impropriety of this general one.
These restraints upon importation, though prior to the establishment of
the bounty, were dictated by the same spirit, by the same principles,
which afterwards enacted that regulation. How hurtful soever in
themselves, these, or some other restraints upon importation, became
necessary in consequence of that regulation. If, when wheat was either
below 48s. the quarter, or not much above it, foreign corn could have been
imported, either duty free, or upon paying only a small duty, it might
have been exported again, with the benefit of the bounty, to the great
loss of the public revenue, and to the entire perversion of the
institution, of which the object was to extend the market for the home
growth, not that for the growth of foreign countries.
III. The trade of the merchant-exporter of corn for foreign consumption,
certainly does not contribute directly to the plentiful supply of the home
market. It does so, however, indirectly. From whatever source this supply
maybe usually drawn, whether from home growth, or from foreign
importation, unless more corn is either usually grown, or usually imported
into the country, than what is usually consumed in it, the supply of the
home market can never be very plentiful. But unless the surplus can, in
all ordinary cases, be exported, the growers will be careful never to grow
more, and the importers never to import more, than what the bare
consumption of the home market requires. That market will very seldom be
overstocked; but it will generally be understocked; the people, whose
business it is to supply it, being generally afraid lest their goods
should be left upon their hands. The prohibition of exportation limits the
improvement and cultivation of the country to what the supply of its own
inhabitants require. The freedom of exportation enables it to extend
cultivation for the supply of foreign nations.
By the 12th of Charles II. c.4, the exportation of corn was permitted
whenever the price of wheat did not exceed 40s. the quarter, and that of
other grain in proportion. By the 15th of the same prince, this liberty
was extended till the price of wheat exceeded 48s. the quarter; and by the
22d, to all higher prices. A poundage, indeed, was to be paid to the king
upon such exportation; but all grain was rated so low in the book of
rates, that this poundage amounted only, upon wheat to 1s., upon oats to
4d., and upon all other grain to 6d. the quarter. By the 1st of William
and Mary, the act which established this bounty, this small duty was
virtually taken off whenever the price of wheat did not exceed 48s. the
quarter; and by the 11th and 12th of William III. c. 20, it was expressly
taken off at all higher prices.
The trade of the merchant-exporter was, in this manner, not only
encouraged by a bounty, but rendered much more free than that of the
inland dealer. By the last of these statutes, corn could be engrossed at
any price for exportation; but it could not be engrossed for inland sale,
except when the price did not exceed 48s. the quarter. The interest of the
inland dealer, however, it has already been shown, can never be opposite
to that of the great body of the people. That of the merchant-exporter
may, and in fact sometimes is. If, while his own country labours under a
dearth, a neighbouring country should be afflicted with a famine, it might
be his interest to carry corn to the latter country, in such quantities as
might very much aggravate the calamities of the dearth. The plentiful
supply of the home market was not the direct object of those statutes;
but, under the pretence of encouraging agriculture, to raise the money
price of corn as high as possible, and thereby to occasion, as much as
possible, a constant dearth in the home market. By the discouragement of
importation, the supply of that market; even in times of great scarcity,
was confined to the home growth; and by the encouragement of exportation,
when the price was so high as 48s. the quarter, that market was not, even
in times of considerable scarcity, allowed to enjoy the whole of that
growth. The temporary laws, prohibiting, for a limited time, the
exportation of corn, and taking off, for a limited time, the duties upon
its importation, expedients to which Great Britain has been obliged so
frequently to have recourse, sufficiently demonstrate the impropriety of
her general system. Had that system been good, she would not so frequently
have been reduced to the necessity of departing from it.
Were all nations to follow the liberal system of free exportation and free
importation, the different states into which a great continent was
divided, would so far resemble 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 reason and experience, not only the best
palliative of a dearth, but the most effectual preventive of a famine; so
would the freedom of the exportation and importation trade be among the
different states into which a great continent was divided. The larger the
continent, the easier the communication through all the different parts of
it, both by land and by water, the less would any one particular part of
it ever be exposed to either of these calamities, the scarcity of any one
country being more likely to be relieved by the plenty of some other. But
very few countries have entirely adopted this liberal system. The freedom
of the corn trade is almost everywhere more or less restrained, and in
many countries is confined by such absurd regulations, as frequently
aggravate the unavoidable misfortune of a dearth into the dreadful
calamity of a famine. The demand of such countries for corn may frequently
become so great and so urgent, that a small state in their neighbourhood,
which happened at the same time to be labouring under some degree of
dearth, could not venture to supply them without exposing itself to the
like dreadful calamity. The very bad policy of one country may thus render
it, in some measure, dangerous and imprudent to establish what would
otherwise be the best policy in another. The unlimited freedom of
exportation, however, would be much less dangerous in great states, in
which the growth being much greater, the supply could seldom be much
affected by any quantity or corn that was likely to be exported. In a
Swiss canton, or in some of the little states in Italy, it may, perhaps,
sometimes be necessary to restrain the exportation of corn. In such great
countries as France or England, it scarce ever can. To hinder, besides,
the farmer from sending his goods at all times to the best market, is
evidently to sacrifice the ordinary laws of justice to an idea of public
utility, to a sort of reasons of state; an act or legislative authority
which ought to be exercised only, which can be pardoned only, in cases of
the most urgent necessity. The price at which exportation of corn is
prohibited, if it is ever to be prohibited, ought always to be a very high
price.
The laws concerning corn may everywhere be compared to the laws concerning
religion. The people feel themselves so much interested in what relates
either to their subsistence in this life, or to their happiness in a life
to come, that government must yield to their prejudices, and, in order to
preserve the public tranquillity, establish that system which they approve
of. It is upon this account, perhaps, that we so seldom find a reasonable
system established with regard to either of those two capital objects.
IV. The trade of the merchant-carrier, or of the importer of foreign corn,
in order to export it again, contributes to the plentiful supply of the
home market. It is not, indeed, the direct purpose of his trade to sell
his corn there; but he will generally be willing to do so, and even for a
good deal less money than he might expect in a foreign market; because he
saves in this manner the expense of loading and unloading, of freight and
insurance. The inhabitants of the country which, by means of the carrying
trade, becomes the magazine and storehouse for the supply of other
countries, can very seldom be in want themselves. Though the carrying
trade must thus contribute to reduce the average money price of corn in
the home market, it would not thereby lower its real value; it would only
raise somewhat the real value of silver.
The carrying trade was in effect prohibited in Great Britain, upon all
ordinary occasions, by the high duties upon the importation of foreign
corn, of the greater part of which there was no drawback; and upon
extraordinary occasions, when a scarcity made it necessary to suspend
those duties by temporary statutes, exportation was always prohibited. By
this system of laws, therefore, the carrying trade was in effect
prohibited.
That system of laws, therefore, which is connected with the establishment
of the bounty, seems to deserve no part of the praise which has been
bestowed upon it. The improvement and prosperity of Great Britain, which
has been so often ascribed to those laws, may very easily be accounted for
by other causes. That security which the laws in Great Britain give to
every man, that he shall enjoy the fruits of his own labour, is alone
sufficient to make any country flourish, notwithstanding these and twenty
other absurd regulations of commerce; and this security was perfected by
the Revolution, much about the same time that the bounty was established.
The natural effort of every individual to better his own condition, when
suffered to exert itself with freedom and security, is so powerful a
principle, that it is alone, and without any assistance, not only capable
of carrying on the society to wealth and prosperity, but of surmounting a
hundred impertinent obstructions, with which the folly of human laws too
often encumbers its operations: though the effect of those obstructions is
always, more or less, either to encroach upon its freedom, or to diminish
its security. In Great Britain industry is perfectly secure; and though it
is far from being perfectly free, it is as free or freer than in any other
part of Europe.
Though the period of the greatest prosperity and improvement of Great
Britain has been posterior to that system of laws which is connected with
the bounty, we must not upon that account, impute it to those laws. It has
been posterior likewise to the national debt; but the national debt has
most assuredly not been the cause of it.
Though the system of laws which is connected with the bounty, has exactly
the same tendency with the practice of Spain and Portugal, to lower
somewhat the value of the precious metals in the country where it takes
place; yet Great Britain is certainly one of the richest countries in
Europe, while Spain and Portugal are perhaps amongst the most beggarly.
This difference of situation, however, may easily be accounted for from
two different causes. First, the tax in Spain, the prohibition in Portugal
of exporting gold and silver, and the vigilant police which watches over
the execution of those laws, must, in two very poor countries, which
between them import annually upwards of six millions sterling, operate not
only more directly, but much more forcibly, in reducing the value of those
metals there, than the corn laws can do in Great Britain. And, secondly,
this bad policy is not in those countries counterbalanced by the general
liberty and security of the people. Industry is there neither free nor
secure; and the civil and ecclesiastical governments of both Spain and
Portugal are such as would alone be sufficient to perpetuate their present
state of poverty, even though their regulations of commerce were as wise
as the greatest part of them are absurd and foolish.
The 13th of the present king, c. 43, seems to have established a new
system with regard to the corn laws, in many respects better than the
ancient one, but in one or two respects perhaps not quite so good.
By this statute, the high duties upon importation for home consumption are
taken off, so soon as the price of middling wheat rises to 48s. the
quarter; that of middling rye, pease, or beans, to 32s.; that of barley to
24s.; and that of oats to 16s.; and instead of them, a small duty is
imposed of only 6d upon the quarter of wheat, and upon that or other grain
in proportion. With regard to all those different sorts of grain, but
particularly with regard to wheat, the home market is thus opened to
foreign supplies, at prices considerably lower than before.
By the same statute, the old bounty of 5s. upon the exportation of wheat,
ceases so soon as the price rises to 44s. the quarter, instead of 48s. the
price at which it ceased before; that of 2s:6d. upon the exportation of
barley, ceases so soon as the price rises to 22s. instead of 24s. the
price at which it ceased before; that of 2s:6d. upon the exportation of
oatmeal, ceases so soon as the price rises to 14s. instead of 15s. the
price at which it ceased before. The bounty upon rye is reduced from
3s:6d. to 3s. and it ceases so soon as the price rises to 28s. instead of
32s. the price at which it ceased before. If bounties are as improper as I
have endeavoured to prove them to be, the sooner they cease, and the lower
they are, so much the better.
The same statute permits, at the lowest prices, the importation of corn in
order to be exported again, duty free, provided it is in the mean time
lodged in a warehouse under the joint locks of the king and the importer.
This liberty, indeed, extends to no more than twenty-five of the different
ports of Great Britain. They are, however, the principal ones; and there
may not, perhaps, be warehouses proper for this purpose in the greater
part of the others.
So far this law seems evidently an improvement upon the ancient system.
But by the same law, a bounty of 2s. the quarter is given for the
exportation of oats, whenever the price does not exceed fourteen
shillings. No bounty had ever been given before for the exportation of
this grain, no more than for that of pease or beans.
By the same law, too, the exportation of wheat is prohibited so soon as
the price rises to forty-four shillings the quarter; that of rye so soon
as it rises to twenty-eight shillings; that of barley so soon as it rises
to twenty-two shillings; and that of oats so soon as they rise to fourteen
shillings. Those several prices seem all of them a good deal too low; and
there seems to be an impropriety, besides, in prohibiting exportation
altogether at those precise prices at which that bounty, which was given
in order to force it, is 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 seems to be inferior to the ancient system.
With all its imperfections, however, we may perhaps say of it what was
said of the laws of Solon, that though not the best in itself, it is the
best which the interest, prejudices, and temper of the times, would admit
of. It may perhaps in due time prepare the way for a better.
CHAPTER VI.
OF TREATIES OF COMMERCE.
When a nation binds itself by treaty, either to permit the entry of
certain goods from one foreign country which it prohibits from all others,
or to exempt the goods of one country from duties to which it subjects
those of all others, the country, or at least the merchants and
manufacturers of the country, whose commerce is so favoured, must
necessarily derive great advantage from the treaty. Those merchants and
manufacturers enjoy a sort of monopoly in the country which is so
indulgent to them. That country becomes a market, both more extensive and
more advantageous for their goods: more extensive, because the goods of
other nations being either excluded or subjected to heavier duties, it
takes off a greater quantity of theirs; more advantageous, because the
merchants of the favoured country, enjoying a sort of monopoly there, will
often sell their goods for a better price than if exposed to the free
competition of all other nations.
Such treaties, however, though they may be advantageous to the merchants
and manufacturers of the favoured, are necessarily disadvantageous to
those of the favouring country. A monopoly is thus granted against them to
a foreign nation; and they must frequently buy the foreign goods they have
occasion for, dearer than if the free competition of other nations was
admitted. That part of its own produce with which such a nation purchases
foreign goods, must consequently be sold cheaper; because, when two things
are exchanged for one another, the cheapness of the one is a necessary
consequence, or rather is the same thing, with the dearness of the other.
The exchangeable value of its annual produce, therefore, is likely to be
diminished by every such treaty. This diminution, however, can scarce
amount to any positive loss, but only to a lessening of the gain which it
might otherwise make. Though it sells its goods cheaper than it otherwise
might do, it will not probably sell them for less than they cost; nor, as
in the case of bounties, for a price which will not replace the capital
employed in bringing them to market, together with the ordinary profits of
stock. The trade could not go on long if it did. Even the favouring
country, therefore, may still gain by the trade, though less than if there
was a free competition.
Some treaties of commerce, however, have been supposed advantageous, upon
principles very different from these; and a commercial country has
sometimes granted a monopoly of this kind, against itself, to certain
goods of a foreign nation, because it expected, that in the whole commerce
between them, it would annually sell more than it would buy, and that a
balance in gold and silver would be annually returned to it. It is upon
this principle that the treaty of commerce between England and Portugal,
concluded in 1703 by Mr Methuen, has been so much commended. The following
is a literal translation of that treaty, which consists of three articles
only.
ART. I. His sacred royal majesty of Portugal promises, both in his own
name and that of his successors, to admit for ever hereafter, into
Portugal, the woollen cloths, and the rest of the woollen manufactures of
the British, as was accustomed, till they were prohibited by the law;
nevertheless upon this condition:
ART. II. That is to say, that her sacred royal majesty of Great Britain
shall, in her own name, and that of her successors, be obliged, for ever
hereafter, to admit the wines of the growth of Portugal into Britain; so
that at no time, whether there shall be peace or war between the kingdoms
of Britain and France, any thing more shall be demanded for these wines by
the name of custom or duty, or by whatsoever other title, directly or
indirectly, whether they shall be imported into Great Britain in pipes or
hogsheads, or other casks, than what shall be demanded for the like
quantity or measure of French wine, deducting or abating a third part of
the custom or duty. But if, at any time, this deduction or abatement of
customs, which is to be made as aforesaid, shall in any manner be
attempted and prejudiced, it shall be just and lawful for his sacred royal
majesty of Portugal, again to prohibit the woollen cloths, and the rest of
the British woollen manufactures.
ART. III. The most excellent lords the plenipotentiaries promise and take
upon themselves, that their above named masters shall ratify this treaty;
and within the space of two months the ratification shall be exchanged.
By this treaty, the crown of Portugal becomes bound to admit the English
woollens upon the same footing as before the prohibition; that is, not to
raise the duties which had been paid before that time. But it does not
become bound to admit them upon any better terms than those of any other
nation, of France or Holland, for example. The crown of Great Britain, on
the contrary, becomes bound to admit the wines of Portugal, upon paying
only two-thirds of the duty which is paid for those of France, the wines
most likely to come into competition with them. So far this treaty,
therefore, is evidently advantageous to Portugal, and disadvantageous to
Great Britain.
It has been celebrated, however, as a masterpiece of the commercial policy
of England. Portugal receives annually from the Brazils a greater quantity
of gold than can be employed in its domestic commerce, whether in the
shape of coin or of plate. The surplus is too valuable to be allowed to
lie idle and locked up in coffers; and as it can find no advantageous
market at home, it must, notwithstanding; any prohibition, be sent abroad,
and exchanged for something for which there is a more advantageous market
at home. A large share of it comes annually to England, in return either
for English goods, or for those of other European nations that receive
their returns through England. Mr Barretti was informed, that the weekly
packet-boat from Lisbon brings, one week with another, more than £50,000
in gold to England. The sum had probably been exaggerated. It would amount
to more than £2,600,000 a year, which is more than the Brazils are
supposed to afford.
Our merchants were, some years ago, out of humour with the crown of
Portugal. Some privileges which had been granted them, not by treaty, but
by the free grace of that crown, at the solicitation, indeed, it is
probable, and in return for much greater favours, defence and protection
from the crown of Great Britain, had been either infringed or revoked. The
people, therefore, usually most interested in celebrating the Portugal
trade, were then rather disposed to represent it as less advantageous than
it had commonly been imagined. The far greater part, almost the whole,
they pretended, of this annual importation of gold, was not on account of
Great Britain, but of other European nations; the fruits and wines of
Portugal annually imported into Great Britain nearly compensating the
value of the British goods sent thither.
Let us suppose, however, that the whole was on account of Great Britain,
and that it amounted to a still greater sum than Mr Barretti seems to
imagine; this trade would not, upon that account, be more advantageous
than any other, in which, for the same value sent out, we received an
equal value of consumable goods in return.
It is but a very small part of this importation which, it can be supposed,
is employed as an annual addition, either to the plate or to the coin of
the kingdom. The rest must all be sent abroad, and exchanged for
consumable goods of some kind or other. But if those consumable goods were
purchased directly with the produce of English industry, it would be more
for the advantage of England, than first to purchase with that produce the
gold of Portugal, and afterwards to purchase with that gold those
consumable goods. A direct foreign trade of consumption is always more
advantageous than a round-about one; and to bring the same value of
foreign goods to the home market requires a much smaller capital in the
one way than in the ether. If a smaller share of its industry, therefore,
had been employed in producing goods fit for the Portugal market, and a
greater in producing those lit for the other markets, where those
consumable goods for which there is a demand in Great Britain are to be
had, it would have been more for the advantage of England. To procure both
the gold which it wants for its own use, and the consumable goods, would,
in this way, employ a much smaller capital than at present. There would be
a spare capital, therefore, to be employed for other purposes, in exciting
an additional quantity of industry, and in raising a greater annual
produce.
Though Britain were entirely excluded from the Portugal trade, it could
find very little difficulty in procuring all the annual supplies of gold
which it wants, either for the purposes of plate, or of coin, or of
foreign trade. Gold, like every other commodity, is always somewhere or
another to be got for its value by those who have that value to give for
it. The annual surplus of gold in Portugal, besides, would still be sent
abroad, and though not carried away by Great Britain, would be carried
away by some other nation, which would be glad to sell it again for its
price, in the same manner as Great Britain does at present. In buying gold
of Portugal, indeed, we buy it at the first hand; whereas, in buying it of
any other nation, except Spain, we should buy it at the second, and might
pay somewhat dearer. This difference, however, would surely be too
insignificant to deserve the public attention.
Almost all our gold, it is said, comes from Portugal. With other nations,
the balance of trade is either against as, or not much in our favour. But
we should remember, that the more gold we import from one country, the
less we must necessarily import from all others. The effectual demand for
gold, like that for every other commodity, is in every country limited to
a certain quantity. If nine-tenths of this quantity are imported from one
country, there remains a tenth only to be imported from all others. The
more gold, besides, that is annually imported from some particular
countries, over and above what is requisite for plate and for coin, the
more must necessarily be exported to some others: and the more that most
insignificant object of modern policy, the balance of trade, appears to be
in our favour with some particular countries, the more it must necessarily
appear to be against us with many others.
It was upon this silly notion, however, that England could not subsist
without the Portugal trade, that, towards the end of the late war, France
and Spain, without pretending either offence or provocation, required the
king of Portugal to exclude all British ships from his ports, and, for the
security of this exclusion, to receive into them French or Spanish
garrisons. Had the king of Portugal submitted to those ignominious terms
which his brother-in-law the king of Spain proposed to him, Britain would
have been freed from a much greater inconveniency than the loss of the
Portugal trade, the burden of supporting a very weak ally, so unprovided
of every thing for his own defence, that the whole power of England, had
it been directed to that single purpose, could scarce, perhaps, have
defended him for another campaign. The loss of the Portugal trade would,
no doubt, have occasioned a considerable embarrassment to the merchants at
that time engaged in it, who might not, perhaps, have found out, for a
year or two, any other equally advantageous method of employing their
capitals; and in this would probably have consisted all the inconveniency
which England could have suffered from this notable piece of commercial
policy.
The great annual importation of gold and silver is neither for the purpose
of plate nor of coin, but of foreign trade. A round-about foreign trade of
consumption can be carried on more advantageously by means of these metals
than of almost any other goods. As they are the universal instruments of
commerce, they are more readily received in return for all commodities
than any other goods; and, on account of their small bulk and great value,
it costs less to transport them backward and forward from one place to
another than almost any other sort of merchandize, and they lose less of
their value by being so transported. Of all the commodities, therefore,
which are bought in one foreign country, for no other purpose but to be
sold or exchanged again for some other goods in another, there are none so
convenient as gold and silver. In facilitating all the different
round-about foreign trades of consumption which are carried on in Great
Britain, consists the principal advantage of the Portugal trade; and
though it is not a capital advantage, it is, no doubt, a considerable one.
That any annual addition which, it can reasonably be supposed, is made
either to the plate or to the coin of the kingdom, could require but a
very small annual importation of gold and silver, seems evident enough;
and though we had no direct trade with Portugal, this small quantity could
always, somewhere or another, be very easily got.
Though the goldsmiths trade be very considerable in Great Britain, the far
greater part of the new plate which they annually sell, is made from other
old plate melted down; so that the addition annually made to the whole
plate of the kingdom cannot be very great, and could require but a very
small annual importation.
It is the same case 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 upwards of £800,000
a-year in gold, was an annual addition to the money before current in the
kingdom. In a country where the expense of the coinage is defrayed by the
government, the value of the coin, even when it contains its full standard
weight of gold and silver, can never be much greater than that of an equal
quantity of those metals uncoined, because it 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 silver an equal quantity of those metals
in coin; but in every country the greater part of the current coin is
almost always more or less worn, or otherwise degenerated from its
standard. In Great Britain it was, before the late reformation, a good
deal so, the gold being more than two per cent., and the silver more than
eight per cent. below its standard weight. But if forty-four guineas and
a-half, containing their full standard weight, a pound weight of gold,
could purchase very little more than a pound weight of uncoined gold;
forty-four guineas and a-half, wanting a part of their weight, could not
purchase a pound weight, and something was to be added, in order to make
up the deficiency. The current price of gold bullion at market, therefore,
instead of being the same with the mint price, or £46:14:6, was then about
£47:14s., and sometimes about £48. When the greater part of the coin,
however, was in this degenerate condition, forty four guineas and a-half,
fresh from the mint, would purchase no more goods in the market than any
other ordinary guineas; because, when they came into the coffers of the
merchant, being confounded with other money, they could not afterwards be
distinguished without more trouble than the difference was worth. Like
other guineas, they were worth no more than £46:14:6. If thrown into the
melting pot, however, they produced, without any sensible loss, a pound
weight of standard gold, which could be sold at any time for between
£47:14s. and £48, either in gold or silver, as fit for all the purposes of
coin as that which had been melted down. There was an evident profit,
therefore, in melting down new-coined money; and it was done so
instantaneously, that no precaution of government could prevent it. The
operations of the mint were, upon this account, somewhat like the web of
Penelope; the work that was done in the day was undone in the night. The
mint was employed, not so much in making daily additions to the coin, as
in replacing the very best part of it, which was daily melted down.
Were the private people who carry their gold and silver to the mint to pay
themselves for the coinage, it would add to the value of those metals, in
the same manner as the fashion does to that of plate. Coined gold and
silver would be more valuable than uncoined. The seignorage, if it was not
exorbitant, would add to the bullion the whole value of the duty; because,
the government having everywhere the exclusive privilege of coining, no
coin can come to market cheaper than they think proper to afford it. If
the duty was exorbitant, indeed, that is, if it was very much above the
real value of the labour and expense requisite for coinage, false coiners,
both at home and abroad, might be encouraged, by the great difference
between the value of bullion and that of coin, to pour in so great a
quantity of counterfeit money as might reduce the value of the government
money. In France, however, though the seignorage is eight per cent., no
sensible inconveniency of this kind is found to arise from it. The dangers
to which a false coiner is everywhere exposed, if he lives in the country
of which he counterfeits the coin, and to which his agents or
correspondents are exposed, if he lives in a foreign country, are by far
too great to be incurred for the sake of a profit of six or seven per
cent.
The seignorage in France raises the value of the coin higher than in
proportion to the quantity of pure gold which it contains. Thus, by the
edict of January 1726, the mint price of fine gold of twenty-four carats
was fixed at seven hundred and forty livres nine sous and one denier
one-eleventh the mark of eight Paris ounces. {See Dictionnaire des
Monnoies, tom. ii. article Seigneurage, p. 439, par 81. Abbot de
Bazinghen, Conseiller-Commissaire en la Cour des Monnoies à Paris.} The
gold coin of France, making an allowance for the remedy of the mint,
contains twenty-one carats and three-fourths of fine gold, and two carats
one-fourth of alloy. The mark of standard gold, therefore, is worth no
more than about six hundred and seventy-one livres ten deniers. But in
France this mark of standard gold is coined into thirty louis d’ors of
twenty-four livres each, or into seven hundred and twenty livres. The
coinage, therefore, increases the value of a mark of standard gold
bullion, by the difference between six hundred and seventy-one livres ten
deniers and seven hundred and twenty livres, or by forty-eight livres
nineteen sous and two deniers.
A seignorage will, in many cases, take away altogether, and will in all
cases diminish, the profit of melting down the new coin. This profit
always arises from the difference between the quantity of bullion which
the common currency ought to contain and that which it actually does
contain. If this difference is less than the seignorage, there will be
loss instead of profit. If it is equal to the seignorage, there will be
neither profit nor loss. If it is greater than the seignorage, there will,
indeed, be some profit, but less than if there was no seignorage. If,
before the late reformation of the gold coin, for example, there had been
a seignorage of five per cent. upon the coinage, there would have been a
loss of three per cent. upon the melting down of the gold coin. If the
seignorage had been two per cent., there would have been neither profit
nor loss. If the seignorage had been one per cent., there would have been
a profit but of one per cent. only, instead of two per cent. Wherever
money is received by tale, therefore, and not by weight, a seignorage is
the most effectual preventive of the melting down of the coin, and, for
the same reason, of its exportation. It is the best and heaviest pieces
that are commonly either melted down or exported, because it is upon such
that the largest profits are made.
The law for the encouragement of the coinage, by rendering it duty-free,
was first enacted during the reign of Charles II. for a limited time, and
afterwards continued, by different prolongations, till 1769, when it was
rendered perpetual. The bank of England, in order to replenish their
coffers with money, are frequently obliged to carry bullion to the mint;
and it was more for their interest, they probably imagined, that the
coinage should be at the expense of the government than at their own. It
was probably out of complaisance to this great company, that the
government agreed to render this law perpetual. Should the custom of
weighing gold, however, come to be disused, as it is very likely to be on
account of its inconveniency; should the gold coin of England come to be
received by tale, as it was before the late recoinage this great company
may, perhaps, find that they have, upon this, as upon some other
occasions, mistaken their own interest not a little.
Before the late recoinage, when the gold currency of England was two per
cent. below its standard weight, as there was no seignorage, it was two
per cent. below the value of that quantity of standard gold bullion which
it ought to have contained. When this great company, therefore, bought
gold bullion in order to have it coined, they were obliged to pay for it
two per cent. more than it was worth after the coinage. But if there had
been a seignorage of two per cent. upon the coinage, the common gold
currency, though two per cent. below its standard weight, would,
notwithstanding, have been equal in value to the quantity of standard gold
which it ought to have contained; the value of the fashion compensating in
this case the diminution of the weight. They would, indeed, have had the
seignorage to pay, which being two per cent., their loss upon the whole
transaction would have been two per cent., exactly the same, but no
greater than it actually was.
If the seignorage had been five per cent. and the gold currency only two
per cent. below its standard weight, the bank would, in this case, have
gained three per cent. upon the price of the bullion; but as they would
have had a seignorage of five per cent. to pay upon the coinage, their
loss upon the whole transaction would, in the same manner, have been
exactly two per cent.
If the seignorage had been only one per cent., and the gold currency two
per cent. below its standard weight, the bank would, in this case, have
lost only one per cent. upon the price of the bullion; but as they would
likewise have had a seignorage of one per cent. to pay, their loss upon
the whole transaction would have been exactly two per cent., in the same
manner as in all other cases.
If there was a reasonable seignorage, while at the same time the coin
contained its full standard weight, as it has done very nearly since the
late recoinage, whatever the bank might lose by the seignorage, they would
gain upon the price of the bullion; and whatever they might gain upon the
price of the bullion, they would lose by the seignorage. They would
neither lose nor gain, therefore, upon the whole transaction, and they
would in this, as in all the foregoing cases, be exactly in the same
situation as if there was no seignorage.
When the tax upon a commodity is so moderate as not to encourage
smuggling, the merchant who deals in it, though he advances, does not
properly pay the tax, as he gets it back in the price of the commodity.
The tax is finally paid by the last purchaser or consumer. But money is a
commodity, with regard to which every man is a merchant. Nobody buys it
but in order to sell it again; and with regard to it there is, in ordinary
cases, no last purchaser or consumer. When the tax upon coinage,
therefore, is so moderate as not to encourage false coining, though every
body advances the tax, nobody finally pays it; because every body gets it
back in the advanced value of the coin.
A moderate seignorage, therefore, would not, in any case, augment the
expense of the bank, or of any other private persons who carry their
bullion to the mint in order to be coined; and the want of a moderate
seignorage does not in any case diminish it. Whether there is or is not a
seignorage, if the currency contains its full standard weight, the coinage
costs nothing to anybody; and if it is short of that weight, the coinage
must always cost the difference between the quantity of bullion which
ought to be contained in it, and that which actually is contained in it.
The government, therefore, when it defrays the expense of coinage, not
only incurs some small expense, but loses some small revenue which it
might get by a proper duty; and neither the bank, nor any other private
persons, are in the smallest degree benefited by this useless piece of
public generosity.
The directors of the bank, however, would probably be unwilling to agree
to the imposition of a seignorage upon the authority of a speculation
which promises them no gain, but only pretends to insure them from any
loss. In the present state of the gold coin, and as long as it continues
to be received by weight, they certainly would gain nothing by such a
change. But if the custom of weighing the gold coin should ever go into
disuse, as it is very likely to do, and if the gold coin should ever fall
into the same state of degradation in which it was before the late
recoinage, the gain, or more properly the savings, of the bank,
in consequence of the imposition of a seignorage, would probably be very
considerable. The bank of England is the only company which sends any
considerable quantity of bullion to the mint, and the burden of the annual
coinage falls entirely, or almost entirely, upon it. If this annual
coinage had nothing to do but to repair the unavoidable losses and
necessary wear and tear of the coin, it could seldom exceed fifty
thousand, or at most a hundred thousand pounds. But when the coin is
degraded below its standard weight, the annual coinage must, besides this,
fill up the large vacuities which exportation and the melting pot are
continually making in the current coin. It was upon this account, that
during the ten or twelve years immediately preceding the late reformation
of the gold coin, the annual coinage amounted, at an average, to more than
£850,000. But if there had been a seignorage of four or five per cent.
upon the gold coin, it would probably, even in the state in which things
then were, have put an effectual stop to the business both of exportation
and of the melting pot. The bank, instead of losing every year about two
and a half per cent. upon the bullion which was to be coined into more
than eight hundred and fifty thousand pounds, or incurring an annual loss
of more than £21,250 pounds, would not probably have incurred the tenth
part of that loss.
The revenue allotted by parliament for defraying the expense of the
coinage is but fourteen thousand pounds a-year; and the real expense which
it costs the government, or the fees of the officers of the mint, do not,
upon ordinary occasions, I am assured, exceed the half of that sum. The
saving of so very small a sum, or even the gaining of another, which could
not well be much larger, are objects too inconsiderable, it may be
thought, to deserve the serious attention of government. But the saving of
eighteen or twenty thousand pounds a-year, in case of an event which is
not improbable, which has frequently happened before, and which is very
likely to happen again, is surely an object which well deserves the
serious attention, even of so great a company as the bank of England.
Some of the foregoing reasonings and observations might, perhaps, have
been more properly placed in those chapters of the first book which treat
of the origin and use of money, and of the difference between the real and
the nominal price of commodities. But as the law for the encouragement of
coinage derives its origin from those vulgar prejudices which have been
introduced by the mercantile system, I judged it more proper to reserve
them for this chapter. Nothing could be more agreeable to the spirit of
that system than a sort of bounty upon the production of money, the very
thing which, it supposes, constitutes the wealth of every nation. It is
one of its many admirable expedients for enriching the country.
CHAPTER VII.
OF COLONIES.
PART I. Of the Motives for Establishing New Colonies.
The interest which occasioned the first settlement of the different
European colonies in America and the West Indies, was not altogether so
plain and distinct as that which directed the establishment of those of
ancient Greece and Rome.
All the different states of ancient Greece possessed, each of them, but a
very small territory; and when the people in anyone of them multiplied
beyond what that territory could easily maintain, a part of them were sent
in quest of a new habitation, in some remote and distant part of the
world; the warlike neighbours who surrounded them on all sides, rendering
it difficult for any of them to enlarge very much its territory at home.
The colonies of the Dorians resorted chiefly to Italy and Sicily, which,
in the times preceding the foundation of Rome, were inhabited by barbarous
and uncivilized nations; those of the Ionians and Aeolians, the two other
great tribes of the Greeks, to Asia Minor and the islands of the Aegean
sea, of which the inhabitants sewn at that time to have been pretty much
in the same state as those of Sicily and Italy. The mother city, though
she considered the colony as a child, at all times entitled to great
favour and assistance, and owing in return much gratitude and respect, yet
considered it as an emancipated child, over whom she pretended to claim no
direct authority or jurisdiction. The colony settled its own form of
government, enacted its own laws, elected its own magistrates, and made
peace or war with its neighbours, as an independent state, which had no
occasion to wait for the approbation or consent of the mother city.
Nothing can be more plain and distinct than the interest which directed
every such establishment.
Rome, like most of the other ancient republics, was originally founded
upon an agrarian law, which divided the public territory, in a certain
proportion, among the different citizens who composed the state. The
course of human affairs, by marriage, by succession, and by alienation,
necessarily deranged this original division, and frequently threw the
lands which had been allotted for the maintenance of many different
families, into the possession of a single person. To remedy this disorder,
for such it was supposed to be, a law was made, restricting the quantity
of land which any citizen could possess to five hundred jugera; about 350
English acres. This law, however, though we read of its having been
executed upon one or two occasions, was either neglected or evaded, and
the inequality of fortunes went on continually increasing. The greater
part of the citizens had no land; and without it the manners and customs
of those times rendered it difficult for a freeman to maintain his
independency. In the present times, though a poor man has no land of his
own, if he has a little stock, he may either farm the lands of another, or
he may carry on some little retail trade; and if he has no stock, he may
find employment either as a country labourer, or as an artificer. But
among the ancient Romans, the lands of the rich were all cultivated by
slaves, who wrought under an overseer, who was likewise a slave; so that a
poor freeman had little chance of being employed either as a farmer or as
a labourer. All trades and manufactures, too, even the retail trade, were
carried on by the slaves of the rich for the benefit of their masters,
whose wealth, authority, and protection, made it difficult for a poor
freeman to maintain the competition against them. The citizens, therefore,
who had no land, had scarce any other means of subsistence but the
bounties of the candidates at the annual elections. The tribunes, when
they had a mind to animate the people against the rich and the great, put
them in mind of the ancient divisions of lands, and represented that law
which restricted this sort of private property as the fundamental law of
the republic. The people became clamorous to get land, and the rich and
the great, we may believe, were perfectly determined not to give them any
part of theirs. To satisfy them in some measure, therefore, they
frequently proposed to send out a new colony. But conquering Rome was,
even upon such occasions, under no necessity of turning out her citizens
to seek their fortune, if one may so, through the wide world, without
knowing where they were to settle. She assigned them lands generally in
the conquered provinces of Italy, where, being within the dominions of the
republic, they could never form any independent state, but were at best
but a sort of corporation, which, though it had the power of enacting
bye-laws for its own government, was at all times subject to the
correction, jurisdiction, and legislative authority of the mother city.
The sending out a colony of this kind not only gave some satisfaction to
the people, but often established a sort of garrison, too, in a newly
conquered province, of which the obedience might otherwise have been
doubtful. A Roman colony, therefore, whether we consider the nature of the
establishment itself, or the motives for making it, was altogether
different from a Greek one. The words, accordingly, which in the original
languages denote those different establishments, have very different
meanings. The Latin word (colonia) signifies simply a plantation. The
Greek word (apoixia), on the contrary, signifies a separation of dwelling,
a departure from home, a going out of the house. But though the Roman
colonies were, in many respects, different from the Greek ones, the
interest which prompted to establish them was equally plain and distinct.
Both institutions derived their origin, either from irresistible
necessity, or from clear and evident utility.
The establishment of the European colonies in America and the West Indies
arose from no necessity; and though the utility which has resulted from
them has been very great, it is not altogether so clear and evident. It
was not understood at their first establishment, and was not the motive,
either of that establishment, or of the discoveries which gave occasion to
it; and the nature, extent, and limits of that utility, are not, perhaps,
well understood at this day.
The Venetians, during the fourteenth and fifteenth centuries, carried on a
very advantageous commerce in spiceries and other East India goods, which
they distributed among the other nations of Europe. They purchased them
chiefly in Egypt, at that time under the dominion of the Mamelukes, the
enemies of the Turks, of whom the Venetians were the enemies; and this
union of interest, assisted by the money of Venice, formed such a
connexion as gave the Venetians almost a monopoly of the trade.
The great profits of the Venetians tempted the avidity of the Portuguese.
They had been endeavouring, during the course of the fifteenth century, to
find out by sea a way to the countries from which the Moors brought them
ivory and gold dust across the desert. They discovered the Madeiras, the
Canaries, the Azores, the Cape de Verd islands, the coast of Guinea, that
of Loango, Congo, Angola, and Benguela, and, finally, the Cape of Good
Hope. They had long wished to share in the profitable traffic of the
Venetians, and this last discovery opened to them a probable prospect of
doing so. In 1497, Vasco de Gamo sailed from the port of Lisbon with a
fleet of four ships, and, after a navigation of eleven months, arrived
upon the coast of Indostan; and thus completed a course of discoveries
which had been pursued with great steadiness, and with very little
interruption, for near a century together.
Some years before this, while the expectations of Europe were in suspense
about the projects of the Portuguese, of which the success appeared yet to
be doubtful, a Genoese pilot formed the yet more daring project of sailing
to the East Indies by the west. The situation of those countries was at
that time very imperfectly known in Europe. The few European travellers
who had been there, had magnified the distance, perhaps through simplicity
and ignorance; what was really very great, appearing almost infinite to
those who could not measure it; or, perhaps, in order to increase somewhat
more the marvellous of their own adventures in visiting regions so
immensely remote from Europe. The longer the way was by the east, Columbus
very justly concluded, the shorter it would be by the west. He proposed,
therefore, to take that way, as both the shortest and the surest, and he
had the good fortune to convince Isabella of Castile of the probability of
his project. He sailed from the port of Palos in August 1492, near five
years before the expedition of Vasco de Gamo set out from Portugal; and,
after a voyage of between two and three months, discovered first some of
the small Bahama or Lucyan islands, and afterwards the great island of St.
Domingo.
But the countries which Columbus discovered, either in this or in any of
his subsequent voyages, had no resemblance to those which he had gone in
quest of. Instead of the wealth, cultivation, and populousness of China
and Indostan, he found, in St. Domingo, and in all the other parts of the
new world which he ever visited, nothing but a country quite covered with
wood, uncultivated, and inhabited only by some tribes of naked and
miserable savages. He was not very willing, however, to believe that they
were not the same with some of the countries described by Marco Polo, the
first European who had visited, or at least had left behind him any
description of China or the East Indies; and a very slight resemblance,
such as that which he found between the name of Cibao, a mountain in St.
Domingo, and that of Cipange, mentioned by Marco Polo, was frequently
sufficient to make him return to this favourite prepossession, though
contrary to the clearest evidence. In his letters to Ferdinand and
Isabella, he called the countries which he had discovered the Indies. He
entertained no doubt but that they were the extremity of those which had
been described by Marco Polo, and that they were not very distant from the
Ganges, or from the countries which had been conquered by Alexander. Even
when at last convinced that they were different, he still flattered
himself that those rich countries were at no great distance; and in a
subsequent voyage, accordingly, went in quest of them along the coast of
Terra Firma, and towards the Isthmus of Darien.
In consequence of this mistake of Columbus, the name of the Indies has
stuck to those unfortunate countries ever since; and when it was at last
clearly discovered that the new were altogether different from the old
Indies, the former were called the West, in contradistinction to the
latter, which were called the East Indies.
It was of importance to Columbus, however, that the countries which he had
discovered, whatever they were, should be represented to the court of
Spain as of very great consequence; and, in what constitutes the real
riches of every country, the animal and vegetable productions of the soil,
there was at that time nothing which could well justify such a
representation of them.
The cori, something between a rat and a rabbit, and supposed by Mr Buffon
to be the same with the aperea of Brazil, was the largest viviparous
quadruped in St. Domingo. This species seems never to have been very
numerous; and the dogs and cats of the Spaniards are said to have long ago
almost entirely extirpated it, as well as some other tribes of a still
smaller size. These, however, together with a pretty large lizard, called
the ivana or iguana, constituted the principal part of the animal food
which the land afforded.
The vegetable food of the inhabitants, though, from their want of
industry, not very abundant, was not altogether so scanty. It consisted in
Indian corn, yams, potatoes, bananas, etc., plants which were then
altogether unknown in Europe, and which have never since been very much
esteemed in it, or supposed to yield a sustenance equal to what is drawn
from the common sorts of grain and pulse, which have been cultivated in
this part of the world time out of mind.
The cotton plant, indeed, afforded the material of a very important
manufacture, and was at that time, to Europeans, undoubtedly the most
valuable of all the vegetable productions of those islands. But though, in
the end of the fifteenth century, the muslins and other cotton goods of
the East Indies were much esteemed in every part of Europe, the cotton
manufacture itself was not cultivated in any part of it. Even this
production, therefore, could not at that time appear in the eyes of
Europeans to be of very great consequence.
Finding nothing, either in the animals or vegetables of the newly
discovered countries which could justify a very advantageous
representation of them, Columbus turned his view towards their minerals;
and in the richness of their productions of this third kingdom, he
flattered himself he had found a full compensation for the insignificancy
of those of the other two. The little bits of gold with which the
inhabitants ornamented their dress, and which, he was informed, they
frequently found in the rivulets and torrents which fell from the
mountains, were sufficient to satisfy him that those mountains abounded
with the richest gold mines. St. Domingo, therefore, was represented as a
country abounding with gold, and upon that account (according to the
prejudices not only of the present times, but of those times), an
inexhaustible source of real wealth to the crown and kingdom of Spain.
When Columbus, upon his return from his first voyage, was introduced with
a sort of triumphal honours to the sovereigns of Castile and Arragon, the
principal productions of the countries which he had discovered were
carried in solemn procession before him. The only valuable part of them
consisted in some little fillets, bracelets, and other ornaments of gold,
and in some bales of cotton. The rest were mere objects of vulgar wonder
and curiosity; some reeds of an extraordinary size, some birds of a very
beautiful plumage, and some stuffed skins of the huge alligator and
manati; all of which were preceded by six or seven of the wretched
natives, whose singular colour and appearance added greatly to the novelty
of the show.
In consequence of the representations of Columbus, the council of Castile
determined to take possession of the countries of which the inhabitants
were plainly incapable of defending themselves. The pious purpose of
converting them to Christianity sanctified the injustice of the project.
But the hope of finding treasures of gold there was the sole motive which
prompted to undertake it; and to give this motive the greater weight, it
was proposed by Columbus, that the half of all the gold and silver that
should be found there, should belong to the crown. This proposal was
approved of by the council.
As long as the whole, or the greater part of the gold which the first
adventurers imported into Europe was got by so very easy a method as the
plundering of the defenceless natives, it was not perhaps very difficult
to pay even this heavy tax; but when the natives were once fairly stript
of all that they had, which, in St. Domingo, and in all the other
countries discovered by Columbus, was done completely in six or eight
years, and when, in order to find more, it had become necessary to dig for
it in the mines, there was no longer any possibility of paying this tax.
The rigorous exaction of it, accordingly, first occasioned, it is said,
the total abandoning of the mines of St. Domingo, which have never been
wrought since. It was soon reduced, therefore, to a third; then to a
fifth; afterwards to a tenth; and at last to a twentieth part of the gross
produce of the gold mines. The tax upon silver continued for a long time
to be a fifth of the gross produce. It was reduced to a tenth only in the
course of the present century. But the first adventurers do not appear to
have been much interested about silver. Nothing less precious than gold
seemed worthy of their attention.
All the other enterprizes of the Spaniards in the New World, subsequent to
those of Columbus, seem to have been prompted by the same motive. It was
the sacred thirst of gold that carried Ovieda, Nicuessa, and Vasco Nugnes
de Balboa, to the Isthmus of Darien; that carried Cortes to Mexico,
Almagro and Pizarro to Chili and Peru. When those adventurers arrived upon
any unknown coast, their first inquiry was always if there was any gold to
be found there; and according to the information which they received
concerning this particular, they determined either to quit the country or
to settle in it.
Of all those expensive and uncertain projects, however, which bring
bankruptcy upon the greater part of the people who engage in them, there
is none, perhaps, more perfectly ruinous than the search after new silver
and gold mines. It is, perhaps, the most disadvantageous lottery in the
world, or the one in which the gain of those who draw the prizes bears the
least proportion to the loss of those who draw the blanks; for though the
prizes are few, and the blanks many, the common price of a ticket is the
whole fortune of a very rich man. Projects of mining, instead of replacing
the capital employed in them, together with the ordinary profits of stock,
commonly absorb both capital and profit. They are the projects, therefore,
to which, of all others, a prudent lawgiver, who desired to increase the
capital of his nation, would least choose to give any extraordinary
encouragement, or to turn towards them a greater share of that capital
than what would go to them of its own accord. Such, in reality, is the
absurd confidence which almost all men have in their own good fortune,
that wherever there is the least probability of success, too great a share
of it is apt to go to them of its own accord.
But though the judgment of sober reason and experience concerning such
projects has always been extremely unfavourable, that of human avidity has
commonly been quite otherwise. The same passion which has suggested to so
many people the absurd idea of the philosopher’s stone, has suggested to
others the equally absurd one of immense rich mines of gold and silver.
They did not consider that the value of those metals has, in all ages and
nations, arisen chiefly from their scarcity, and that their scarcity has
arisen from the very small quantities of them which nature has anywhere
deposited in one place, from the hard and intractable substances with
which she has almost everywhere surrounded those small quantities, and
consequently from the labour and expense which are everywhere necessary in
order to penetrate, and get at them. They flattered themselves that veins
of those metals might in many places be found, as large and as abundant as
those which are commonly found of lead, or copper, or tin, or iron. The
dream of Sir Waiter Raleigh, concerning the golden city and country of El
Dorado, may satisfy us, that even wise men are not always exempt from such
strange delusions. More than a hundred years after the death of that great
man, the Jesuit Gumila was still convinced of the reality of that
wonderful country, and expressed, with great warmth, and, I dare say, with
great sincerity, how happy he should be to carry the light of the gospel
to a people who could so well reward the pious labours of their
missionary.
In the countries first discovered by the Spaniards, no gold and silver
mines are at present known which are supposed to be worth the working. The
quantities of those metals which the first adventurers are said to have
found there, had probably been very much magnified, as well as the
fertility of the mines which were wrought immediately after the first
discovery. What those adventurers were reported to have found, however,
was sufficient to inflame the avidity of all their countrymen. Every
Spaniard who sailed to America expected to find an El Dorado. Fortune,
too, did upon this what she has done upon very few other occasions. She
realized in some measure the extravagant hopes of her votaries; and in the
discovery and conquest of Mexico and Peru (of which the one happened about
thirty, and the other about forty, years after the first expedition of
Columbus), she presented them with something not very unlike that
profusion of the precious metals which they sought for.
A project of commerce to the East Indies, therefore, gave occasion to the
first discovery of the West. A project of conquest gave occasion to all
the establishments of the Spaniards in those newly discovered countries.
The motive which excited them to this conquest was a project of gold and
silver mines; and a course of accidents which no human wisdom could
foresee, rendered this project much more successful than the undertakers
had any reasonable grounds for expecting.
The first adventurers of all the other nations of Europe who attempted to
make settlements in America, were animated by the like chimerical views;
but they were not equally successful. It was more than a hundred years
after the first settlement of the Brazils, before any silver, gold, or
diamond mines, were discovered there. In the English, French, Dutch, and
Danish colonies, none have ever yet been discovered, at least none that
are at present supposed to be worth the working. The first English
settlers in North America, however, offered a fifth of all the gold and
silver which should be found there to the king, as a motive for granting
them their patents. In the patents of Sir Waiter Raleigh, to the London
and Plymouth companies, to the council of Plymouth, etc. this fifth was
accordingly reserved to the crown. To the expectation of finding gold and
silver mines, those first settlers, too, joined that of discovering a
north-west passage to the East Indies. They have hitherto been
disappointed in both.
PART II. Causes of the Prosperity of New Colonies.
The colony of a civilized nation which takes possession either of a waste
country, or of one so thinly inhabited that the natives easily give place
to the new settlers, advances more rapidly to wealth and greatness than
any other human society.
The colonies carry out with them a knowledge of agriculture and of other
useful arts, superior to what can grow up of its own accord, in the course
of many centuries, among savage and barbarous nations. They carry out with
them, too, the habit of subordination, some notion of the regular
government which takes place in their own country, of the system of laws
which support it, and of a regular administration of justice; and they
naturally establish something of the same kind in the new settlement. But
among savage and barbarous nations, the natural progress of law and
government is still slower than the natural progress of arts, after law
and government have been so far established as is necessary for their
protection. Every colonist gets more land than he can possibly cultivate.
He has no rent, and scarce any taxes, to pay. No landlord shares with him
in its produce, and, the share of the sovereign is commonly but a trifle.
He has every motive to render as great as possible a produce which is thus
to be almost entirely his own. But his land is commonly so extensive,
that, with all his own industry, and with all the industry of other people
whom he can get to employ, he can seldom make it produce the tenth part of
what it is capable of producing. He is eager, therefore, to collect
labourers from all quarters, and to reward them with the most liberal
wages. But those liberal wages, joined to the plenty and cheapness of
land, soon make those labourers leave him, in order to become landlords
themselves, and to reward with equal liberality other labourers, who soon
leave them for the same reason that they left their first master. The
liberal reward of labour encourages marriage. The children, during the
tender years of infancy, are well fed and properly taken care of; and when
they are grown up, the value of their labour greatly overpays their
maintenance. When arrived at maturity, the high price of labour, and the
low price of land, enable them to establish themselves in the same manner
as their fathers did before them.
In other countries, rent and profit eat up wages, and the two superior
orders of people oppress the inferior one; but in new colonies, the
interest of the two superior orders obliges them to treat the inferior one
with more generosity and humanity, at least where that inferior one is not
in a state of slavery. Waste lands, of the greatest natural fertility, are
to be had for a trifle. The increase of revenue which the proprietor, who
is always the undertaker, expects from their improvement, constitutes his
profit, which, in these circumstances, is commonly very great; but this
great profit cannot be made, without employing the labour of other people
in clearing and cultivating the land; and the disproportion between the
great extent of the land and the small number of the people, which
commonly takes place in new colonies, makes it difficult for him to get
this labour. He does not, therefore, dispute about wages, but is willing
to employ labour at any price. The high wages of labour encourage
population. The cheapness and plenty of good land encourage improvement,
and enable the proprietor to pay those high wages. In those wages consists
almost the whole price of the land; and though they are high, considered
as the wages of labour, they are low, considered as the price of what is
so very valuable. What encourages the progress of population and
improvement, encourages that of real wealth and greatness.
The progress of many of the ancient Greek colonies towards wealth and
greatness seems accordingly to have been very rapid. In the course of a
century or two, several of them appear to have rivalled, and even to have
surpassed, their mother cities. Syracuse and Agrigentum in Sicily,
Tarentum and Locri in Italy, Ephesus and Miletus in Lesser Asia, appear,
by all accounts, to have been at least equal to any of the cities of
ancient Greece. Though posterior in their establishment, yet all the arts
of refinement, philosophy, poetry, and eloquence, seem to have been
cultivated as early, and to have been improved as highly in them as in any
part of the mother country. The schools of the two oldest Greek
philosophers, those of Thales and Pythagoras, were established, it is
remarkable, not in ancient Greece, but the one in an Asiatic, the other in
an Italian colony. All those colonies had established themselves in
countries inhabited by savage and barbarous nations, who easily gave place
to the new settlers. They had plenty of good land; and as they were
altogether independent of the mother city, they were at liberty to manage
their own affairs in the way that they judged was most suitable to their
own interest.
The history of the Roman colonies is by no means so brilliant. Some of
them, indeed, such as Florence, have, in the course of many ages, and
after the fall of the mother city, grown up to be considerable states. But
the progress of no one of them seems ever to have been very rapid. They
were all established in conquered provinces, which in most cases had been
fully inhabited before. The quantity of land assigned to each colonist was
seldom very considerable, and, as the colony was not independent, they
were not always at liberty to manage their own affairs in the way that
they judged was most suitable to their own interest.
In the plenty of good land, the European colonies established in America
and the West Indies resemble, and even greatly surpass, those of ancient
Greece. In their dependency upon the mother state, they resemble those of
ancient Rome; but their great distance from Europe has in all of them
alleviated more or less the effects of this dependency. Their situation
has placed them less in the view, and less in the power of their mother
country. In pursuing their interest their own way, their conduct has upon
many occasions been overlooked, either because not known or not understood
in Europe; and upon some occasions it has been fairly suffered and
submitted to, because their distance rendered it difficult to restrain it.
Even the violent and arbitrary government of Spain has, upon many
occasions, been obliged to recall or soften the orders which had been
given for the government of her colonies, for fear of a general
insurrection. The progress of all the European colonies in wealth,
population, and improvement, has accordingly been very great.
The crown of Spain, by its share of the gold and silver, derived some
revenue from its colonies from the moment of their first establishment. It
was a revenue, too, of a nature to excite in human avidity the most
extravagant expectation of still greater riches. The Spanish colonies,
therefore, from the moment of their first establishment, attracted very
much the attention of their mother country; while those of the other
European nations were for a long time in a great measure neglected. The
former did not, perhaps, thrive the better in consequence of this
attention, nor the latter the worse in consequence of this neglect. In
proportion to the extent of the country which they in some measure
possess, the Spanish colonies are considered as less populous and thriving
than those of almost any other European nation. The progress even of the
Spanish colonies, however, in population and improvement, has certainly
been very rapid and very great. The city of Lima, founded since the
conquest, is represented by Ulloa as containing fifty thousand inhabitants
near thirty years ago. Quito, which had been but a miserable hamlet of
Indians, is represented by the same author as in his time equally
populous. Gemel i Carreri, a pretended traveller, it is said, indeed, but
who seems everywhere to have written upon extreme good information,
represents the city of Mexico as containing a hundred thousand
inhabitants; a number which, in spite of all the exaggerations of the
Spanish writers, is probably more than five times greater than what it
contained in the time of Montezuma. These numbers exceed greatly those of
Boston, New York, and Philadelphia, the three greatest cities of the
English colonies. Before the conquest of the Spaniards, there were no
cattle fit for draught, either in Mexico or Peru. The lama was their only
beast of burden, and its strength seems to have been a good deal inferior
to that of a common ass. The plough was unknown among them. They were
ignorant of the use of iron. They had no coined money, nor any established
instrument of commerce of any kind. Their commerce was carried on by
barter. A sort of wooden spade was their principal instrument of
agriculture. Sharp stones served them for knives and hatchets to cut with;
fish bones, and the hard sinews of certain animals, served them with
needles to sew with; and these seem to have been their principal
instruments of trade. In this state of things, it seems impossible that
either of those empires could have been so much improved or so well
cultivated as at present, when they are plentifully furnished with all
sorts of European cattle, and when the use of iron, of the plough, and of
many of the arts of Europe, have been introduced among them. But the
populousness of every country must be in proportion to the degree of its
improvement and cultivation. In spite of the cruel destruction of the
natives which followed the conquest, these two great empires are probably
more populous now than they ever were before; and the people are surely
very different; for we must acknowledge, I apprehend, that the Spanish
creoles are in many respects superior to the ancient Indians.
After the settlements of the Spaniards, that of the Portuguese in Brazil
is the oldest of any European nation in America. But as for a long time
after the first discovery neither gold nor silver mines were found in it,
and as it afforded upon that account little or no revenue to the crown, it
was for a long time in a great measure neglected; and during this state of
neglect, it grew up to be a great and powerful colony. While Portugal was
under the dominion of Spain, Brazil was attacked by the Dutch, who got
possession of seven of the fourteen provinces into which it is divided.
They expected soon to conquer the other seven, when Portugal recovered its
independency by the elevation of the family of Braganza to the throne. The
Dutch, then, as enemies to the Spaniards, became friends to the
Portuguese, who were likewise the enemies of the Spaniards. They agreed,
therefore, to leave that part of Brazil which they had not conquered to
the king of Portugal, who agreed to leave that part which they had
conquered to them, as a matter not worth disputing about, with such good
allies. But the Dutch government soon began to oppress the Portuguese
colonists, who, instead of amusing themselves with complaints, took arms
against their new masters, and by their own valour and resolution, with
the connivance, indeed, but without any avowed assistance from the mother
country, drove them out of Brazil. The Dutch, therefore, finding it
impossible to keep any part of the country to themselves, were contented
that it should be entirely restored to the crown of Portugal. In this
colony there are said to be more than six hundred thousand people, either
Portuguese or descended from Portuguese, creoles, mulattoes, and a mixed
race between Portuguese and Brazilians. No one colony in America is
supposed to contain so great a number of people of European extraction.
Towards the end of the fifteenth, and during the greater part of the
sixteenth century, Spain and Portugal were the two great naval powers upon
the ocean; for though the commerce of Venice extended to every part of
Europe, its fleet had scarce ever sailed beyond the Mediterranean. The
Spaniards, in virtue of the first discovery, claimed all America as their
own; and though they could not hinder so great a naval power as that of
Portugal from settling in Brazil, such was at that time the terror of
their name, that the greater part of the other nations of Europe were
afraid to establish themselves in any other part of that great continent.
The French, who attempted to settle in Florida, were all murdered by the
Spaniards. But the declension of the naval power of this latter nation, in
consequence of the defeat or miscarriage of what they called their
invincible armada, which happened towards the end of the sixteenth
century, put it out of their power to obstruct any longer the settlements
of the other European nations. In the course of the seventeenth century,
therefore, the English, French, Dutch, Danes, and Swedes, all the great
nations who had any ports upon the ocean, attempted to make some
settlements in the new world.
The Swedes established themselves in New Jersey; and the number of Swedish
families still to be found there sufficiently demonstrates, that this
colony was very likely to prosper, had it been protected by the mother
country. But being neglected by Sweden, it was soon swallowed up by the
Dutch colony of New York, which again, in 1674, fell under the dominion of
the English.
The small islands of St. Thomas and Santa Cruz, are the only countries in
the new world that have ever been possessed by the Danes. These little
settlements, too, were under the government of an exclusive company, which
had the sole right, both of purchasing the surplus produce of the
colonies, and of supplying them with such goods of other countries as they
wanted, and which, therefore, both in its purchases and sales, had not
only the power of oppressing them, but the greatest temptation to do so.
The government of an exclusive company of merchants is, perhaps, the worst
of all governments for any country whatever. It was not, however, able to
stop altogether the progress of these colonies, though it rendered it more
slow and languid. The late king of Denmark dissolved this company, and
since that time the prosperity of these colonies has been very great.
The Dutch settlements in the West, as well as those in the East Indies,
were originally put under the government of an exclusive company. The
progress of some of them, therefore, though it has been considerable in
comparison with that of almost any country that has been long peopled and
established, has been languid and slow in comparison with that of the
greater part of new colonies. The colony of Surinam, though very
considerable, is still inferior to the greater part of the sugar colonies
of the other European nations. The colony of Nova Belgia, now divided into
the two provinces of New York and New Jersey, would probably have soon
become considerable too, even though it had remained under the government
of the Dutch. The plenty and cheapness of good land are such powerful
causes of prosperity, that the very worst government is scarce capable of
checking altogether the efficacy of their operation. The great distance,
too, from the mother country, would enable the colonists to evade more or
less, by smuggling, the monopoly which the company enjoyed against them.
At present, the company allows all Dutch ships to trade to Surinam, upon
paying two and a-half per cent. upon the value of their cargo for a
license; and only reserves to itself exclusively, the direct trade from
Africa to America, which consists almost entirely in the slave trade. This
relaxation in the exclusive privileges of the company, is probably the
principal cause of that degree of prosperity which that colony at present
enjoys. Curacoa and Eustatia, the two principal islands belonging to the
Dutch, are free ports, open to the ships of all nations; and this freedom,
in the midst of better colonies, whose ports are open to those of one
nation only, has been the great cause of the prosperity of those two
barren islands.
The French colony of Canada was, during the greater part of the last
century, and some part of the present, under the government of an
exclusive company. Under so unfavourable an administration, its progress
was necessarily very slow, in comparison with that of other new colonies;
but it became much more rapid when this company was dissolved, after the
fall of what is called the Mississippi scheme. When the English got
possession of this country, they found in it near double the number of
inhabitants which father Charlevoix had assigned to it between twenty and
thirty years before. That jesuit had travelled over the whole country, and
had no inclination to represent it as less inconsiderable than it really
was.
The French colony of St. Domingo was established by pirates and
freebooters, who, for a long time, neither required the protection, nor
acknowledged the authority of France; and when that race of banditti
became so far citizens as to acknowledge this authority, it was for a long
time necessary to exercise it with very great gentleness. During this
period, the population and improvement of this colony increased very fast.
Even the oppression of the exclusive company, to which it was for some
time subjected with all the other colonies of France, though it no doubt
retarded, had not been able to stop its progress altogether. The course of
its prosperity returned as soon as it was relieved from that oppression.
It is now the most important of the sugar colonies of the West Indies, and
its produce is said to be greater than that of all the English sugar
colonies put together. The other sugar colonies of France are in general
all very thriving.
But there are no colonies of which the progress has been more rapid than
that of the English in North America.
Plenty of good land, and liberty to manage their own affairs their own
way, seem to be the two great causes of the prosperity of all new
colonies.
In the plenty of good land, the English colonies of North America, though
no doubt very abundantly provided, are, however, inferior to those of the
Spaniards and Portuguese, and not superior to some of those possessed by
the French before the late war. But the political institutions of the
English colonies have been more favourable to the improvement and
cultivation of this land, than those of the other three nations.
First, The engrossing of uncultivated land, though it has by no means been
prevented altogether, has been more restrained in the English colonies
than in any other. The colony law, which imposes upon every proprietor the
obligation of improving and cultivating, within a limited time, a certain
proportion of his lands, and which, in case of failure, declares those
neglected lands grantable to any other person; though it has not perhaps
been very strictly executed, has, however, had some effect.
Secondly, In Pennsylvania there is no right of primogeniture, and lands,
like moveables, are divided equally among all the children of the family.
In three of the provinces of New England, the oldest has only a double
share, as in the Mosaical law. Though in those provinces, therefore, too
great a quantity of land should sometimes be engrossed by a particular
individual, it is likely, in the course of a generation or two, to be
sufficiently divided again. In the other English colonies, indeed, the
right of primogeniture takes place, as in the law of England: But in all
the English colonies, the tenure of the lands, which are all held by free
soccage, facilitates alienation; and the grantee of an extensive tract of
land generally finds it for his interest to alienate, as fast as he can,
the greater part of it, reserving only a small quit-rent. In the Spanish
and Portuguese colonies, what is called the right of majorazzo takes place
in the succession of all those great estates to which any title of honour
is annexed. Such estates go all to one person, and are in effect entailed
and unalienable. The French colonies, indeed, are subject to the custom of
Paris, which, in the inheritance of land, is much more favourable to the
younger children than the law of England. But, in the French colonies, if
any part of an estate, held by the noble tenure of chivalry and homage, is
alienated, it is, for a limited time, subject to the right of redemption,
either by the heir of the superior, or by the heir of the family; and all
the largest estates of the country are held by such noble tenures, which
necessarily embarrass alienation. But, in a new colony, a great
uncultivated estate is likely to be much more speedily divided by
alienation than by succession. The plenty and cheapness of good land, it
has already been observed, are the principal causes of the rapid
prosperity of new colonies. The engrossing of land, in effect, destroys
this plenty and cheapness. The engrossing of uncultivated land, besides,
is the greatest obstruction to its improvement; but the labour that is
employed in the improvement and cultivation of land affords the greatest
and most valuable produce to the society. The produce of labour, in this
case, pays not only its own wages and the profit of the stock which
employs it, but the rent of the land too upon which it is employed. The
labour of the English colonies, therefore, being more employed in the
improvement and cultivation of land, is likely to afford a greater and
more valuable produce than that of any of the other three nations, which,
by the engrossing of land, is more or less diverted towards other
employments.
Thirdly, The labour of the English colonists is not only likely to afford
a greater and more valuable produce, but, in consequence of the moderation
of their taxes, a greater proportion of this produce belongs to
themselves, which they may store up and employ in putting into motion a
still greater quantity of labour. The English colonists have never yet
contributed any thing towards the defence of the mother country, or
towards the support of its civil government. They themselves, on the
contrary, have hitherto been defended almost entirely at the expense of
the mother country; but the expense of fleets and armies is out of all
proportion greater than the necessary expense of civil government. The
expense of their own civil government has always been very moderate. It
has generally been confined to what was necessary for paying competent
salaries to the governor, to the judges, and to some other officers of
police, and for maintaining a few of the most useful public works. The
expense of the civil establishment of Massachusetts Bay, before the
commencement of the present disturbances, used to be but about £18;000
a-year; that of New Hampshire and Rhode Island, £3500 each; that of
Connecticut, £4000; that of New York and Pennsylvania, £4500 each; that of
New Jersey, £1200; that of Virginia and South Carolina, £8000 each. The
civil establishments of Nova Scotia and Georgia are partly supported by an
annual grant of parliament; but Nova Scotia pays, besides, about £7000
a-year towards the public expenses of the colony, and Georgia about £2500
a-year. All the different civil establishments in North America, in short,
exclusive of those of Maryland and North Carolina, of which no exact
account has been got, did not, before the commencement of the present
disturbances, cost the inhabitants above £64,700 a-year; an ever memorable
example, at how small an expense three millions of people may not only be
governed but well governed. The most important part of the expense of
government, indeed, that of defence and protection, has constantly fallen
upon the mother country. The ceremonial, too, of the civil government in
the colonies, upon the reception of a new governor, upon the opening of a
new assembly, etc. though sufficiently decent, is not accompanied with any
expensive pomp or parade. Their ecclesiastical government is conducted
upon a plan equally frugal. Tithes are unknown among them; and their
clergy, who are far from being numerous, are maintained either by moderate
stipends, or by the voluntary contributions of the people. The power of
Spain and Portugal, on the contrary, derives some support from the taxes
levied upon their colonies. France, indeed, has never drawn any
considerable revenue from its colonies, the taxes which it levies upon
them being generally spent among them. But the colony government of all
these three nations is conducted upon a much more extensive plan, and is
accompanied with a much more expensive ceremonial. The sums spent upon the
reception of a new viceroy of Peru, for example, have frequently been
enormous. Such ceremonials are not only real taxes paid by the rich
colonists upon those particular occasions, but they serve to introduce
among them the habit of vanity and expense upon all other occasions. They
are not only very grievous occasional taxes, but they contribute to
establish perpetual taxes, of the same kind, still more grievous; the
ruinous taxes of private luxury and extravagance. In the colonies of all
those three nations, too, the ecclesiastical government is extremely
oppressive. Tithes take place in all of them, and are levied with the
utmost rigour in those of Spain and Portugal. All of them, besides, are
oppressed with a numerous race of mendicant friars, whose beggary being
not only licensed but consecrated by religion, is a most grievous tax upon
the poor people, who are most carefully taught that it is a duty to give,
and a very great sin to refuse them their charity. Over and above all
this, the clergy are, in all of them, the greatest engrossers of land.
Fourthly, In the disposal of their surplus produce, or of what is over and
above their own consumption, the English colonies have been more favoured,
and have been allowed a more extensive market, than those of any other
European nation. Every European nation has endeavoured, more or less, to
monopolize to itself the commerce of its colonies, and, upon that account,
has prohibited the ships of foreign nations from trading to them, and has
prohibited them from importing European goods from any foreign nation. But
the manner in which this monopoly has been exercised in different nations,
has been very different.
Some nations have given up the whole commerce of their colonies to an
exclusive company, of whom the colonists were obliged to buy all such
European goods as they wanted, and to whom they were obliged to sell the
whole of their surplus produce. It was the interest of the company,
therefore, not only to sell the former as dear, and to buy the latter as
cheap as possible, but to buy no more of the latter, even at this low
price, than what they could dispose of for a very high price in Europe. It
was their interest not only to degrade in all cases the value of the
surplus produce of the colony, but in many cases to discourage and keep
down the natural increase of its quantity. Of all the expedients that can
well be contrived to stunt the natural growth of a new colony, that of an
exclusive company is undoubtedly the most effectual. This, however, has
been the policy of Holland, though their company, in the course of the
present century, has given up in many respects the exertion of their
exclusive privilege. This, too, was the policy of Denmark, till the reign
of the late king. It has occasionally been the policy of France; and of
late, since 1755, after it had been abandoned by all other nations on
account of its absurdity, it has become the policy of Portugal, with
regard at least to two of the principal provinces of Brazil, Pernambucco,
and Marannon.
Other nations, without establishing an exclusive company, have confined
the whole commerce of their colonies to a particular port of the mother
country, from whence no ship was allowed to sail, but either in a fleet
and at a particular season, or, if single, in consequence of a particular
license, which in most cases was very well paid for. This policy opened,
indeed, the trade of the colonies to all the natives of the mother
country, provided they traded from the proper port, at the proper season,
and in the proper vessels. But as all the different merchants, who joined
their stocks in order to fit out those licensed vessels, would find it for
their interest to act in concert, the trade which was carried on in this
manner would necessarily be conducted very nearly upon the same principles
as that of an exclusive company. The profit of those merchants would be
almost equally exorbitant and oppressive. The colonies would be ill
supplied, and would be obliged both to buy very dear, and to sell very
cheap. This, however, till within these few years, had always been the
policy of Spain; and the price of all European goods, accordingly, is said
to have been enormous in the Spanish West Indies. At Quito, we are told by
Ulloa, a pound of iron sold for about 4s:6d., and a pound of steel for
about 6s:9d. sterling. But it is chiefly in order to purchase European
goods that the colonies part with their own produce. The more, therefore,
they pay for the one, the less they really get for the other, and the
dearness of the one is the same thing with the cheapness of the other. The
policy of Portugal is, in this respect, the same as the ancient policy of
Spain, with regard to all its colonies, except Pernambucco and Marannon;
and with regard to these it has lately adopted a still worse.
Other nations leave the trade of their colonies free to all their
subjects, who may carry it on from all the different ports of the mother
country, and who have occasion for no other license than the common
despatches of the custom-house. In this case the number and dispersed
situation of the different traders renders it impossible for them to enter
into any general combination, and their competition is sufficient to
hinder them from making very exorbitant profits. Under so liberal a
policy, the colonies are enabled both to sell their own produce, and to
buy the goods of Europe at a reasonable price; but since the dissolution
of the Plymouth company, when our colonies were but in their infancy, this
has always been the policy of England. It has generally, too, been that of
France, and has been uniformly so since the dissolution of what in England
is commonly called their Mississippi company. The profits of the trade,
therefore, which France and England carry on with their colonies, though
no doubt somewhat higher than if the competition were free to all other
nations, are, however, by no means exorbitant; and the price of European
goods, accordingly, is not extravagantly high in the greater past of the
colonies of either of those nations.
In the exportation of their own surplus produce, too, it is only with
regard to certain commodities that the colonies of Great Britain are
confined to the market of the mother country. These commodities having
been enumerated in the act of navigation, and in some other subsequent
acts, have upon that account been called enumerated commodities. The rest
are called non-enumerated, and may be exported directly to other
countries, provided it is in British or plantation ships, of which the
owners and three fourths of the mariners are British subjects.
Among the non-enumerated commodities are some of the most important
productions of America and the West Indies, grain of all sorts, lumber,
salt provisions, fish, sugar, and rum.
Grain is naturally the first and principal object of the culture of all
new colonies. By allowing them a very extensive market for it, the law
encourages them to extend this culture much beyond the consumption of a
thinly inhabited country, and thus to provide beforehand an ample
subsistence for a continually increasing population.
In a country quite covered with wood, where timber consequently is of
little or no value, the expense of clearing the ground is the principal
obstacle to improvement. By allowing the colonies a very extensive market
for their lumber, the law endeavours to facilitate improvement by raising
the price of a commodity which would otherwise be of little value, and
thereby enabling them to make some profit of what would otherwise be mere
expense.
In a country neither half peopled nor half cultivated, cattle naturally
multiply beyond the consumption of the inhabitants, and are often, upon
that account, of little or no value. But it is necessary, it has already
been shown, that the price of cattle should bear a certain proportion to
that of corn, before the greater part of the lands of any country can be
improved. By allowing to American cattle, in all shapes, dead and alive, a
very extensive market, the law endeavours to raise the value of a
commodity, of which the high price is so very essential to improvement.
The good effects of this liberty, however, must be somewhat diminished by
the 4th of Geo. III. c. 15, which puts hides and skins among the
enumerated commodities, and thereby tends to reduce the value of American
cattle.
To increase the shipping and naval power of Great Britain by the extension
of the fisheries of our colonies, is an object which the legislature seems
to have had almost constantly in view. Those fisheries, upon this account,
have had all the encouragement which freedom can give them, and they have
flourished accordingly. The New England fishery, in particular, was,
before the late disturbances, one of the most important, perhaps, in the
world. The whale fishery which, notwithstanding an extravagant bounty, is
in Great Britain carried on to so little purpose, that in the opinion of
many people ( which I do not, however, pretend to warrant), the whole
produce does not much exceed the value of the bounties which are annually
paid for it, is in New England carried on, without any bounty, to a very
great extent. Fish 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 only be exported
to Great Britain; but in 1751, upon a representation of the
sugar-planters, its exportation was permitted to all parts of the world.
The restrictions, however, with which this liberty was granted, joined to
the high price of sugar in Great Britain, have rendered it in a great
measure ineffectual. Great Britain and her colonies still continue to be
almost the sole market for all sugar produced in the British plantations.
Their consumption increases so fast, that, though in consequence of the
increasing improvement of Jamaica, as well as of the ceded islands, the
importation of sugar has increased very greatly within these twenty years,
the exportation to foreign countries is said to be not much greater than
before.
Rum is a very important article in the trade which the Americans carry on
to the coast of Africa, from which they bring back negro slaves in return.
If the whole surplus produce of America, in grain of all sorts, in salt
provisions, and in fish, had been put into the enumeration, and thereby
forced into the market of Great Britain, it would have interfered too much
with the produce of the industry of our own people. It was probably not so
much from any regard to the interest of America, as from a jealousy of
this interference, that those important commodities have not only been
kept out of the enumeration, but that the importation into Great Britain
of all grain, except rice, and of all salt provisions, has, in the
ordinary state of the law, been prohibited.
The non-enumerated commodities could originally be exported to all parts
of the world. Lumber and rice having been once put into the enumeration,
when they were afterwards taken out of it, were confined, as to the
European market, to the countries that lie south of Cape Finisterre. By
the 6th of George III. c. 52, all non-enumerated commodities were
subjected to the like restriction. The parts of Europe which lie south of
Cape Finisterre are not manufacturing countries, and we are less jealous
of the colony ships carrying home from them any manufactures which could
interfere with our own.
The enumerated commodities are of two sorts; first, such as are either the
peculiar produce of America, or as cannot be produced, or at least are not
produced in the mother country. Of this kind are molasses, coffee,
cocoa-nuts, tobacco, pimento, ginger, whalefins, raw silk, cotton, wool,
beaver, and other peltry of America, indigo, fustick, and other dyeing
woods; secondly, such as are not the peculiar produce of America, but
which are, and may be produced in the mother country, though not in such
quantities as to supply the greater part of her demand, which is
principally supplied from foreign countries. Of this kind are all naval
stores, masts, yards, and bowsprits, tar, pitch, and turpentine, pig and
bar iron, copper ore, hides and skins, pot and pearl ashes. The largest
importation of commodities of the first kind could not discourage the
growth, or interfere with the sale, of any part of the produce of the
mother country. By confining them to the home market, our merchants, it
was expected, would not only be enabled to buy them cheaper in the
plantations, and consequently to sell them with a better profit at home,
but to establish between the plantations and foreign countries an
advantageous carrying trade, of which Great Britain was necessarily to be
the centre or emporium, as the European country into which those
commodities were first to be imported. The importation of commodities of
the second kind might be so managed too, it was supposed, as to interfere,
not with the sale of those of the same kind which were produced at home,
but with that of those which were imported from foreign countries;
because, by means of proper duties, they might be rendered always somewhat
dearer than the former, and yet a good deal cheaper than the latter. By
confining such commodities to the home market, therefore, it was proposed
to discourage the produce, not of Great Britain, but of some foreign
countries with which the balance of trade was believed to be unfavourable
to Great Britain.
The prohibition of exporting from the colonies to any other country but
Great Britain, masts, yards, and bowsprits, tar, pitch, and turpentine,
naturally tended to lower the price of timber in the colonies, and
consequently to increase the expense of clearing their lands, the
principal obstacle to their improvement. But about the beginning of the
present century, in 1703, the pitch and tar company of Sweden endeavoured
to raise the price of their commodities to Great Britain, by prohibiting
their exportation, except in their own ships, at their own price, and in
such quantities as they thought proper. In order to counteract this
notable piece of mercantile policy, and to render herself as much as
possible independent, not only of Sweden, but of all the other northern
powers, Great Britain gave a bounty upon the importation of naval stores
from America; and the effect of this bounty was to raise the price of
timber in America much more than the confinement to the home market could
lower it; and as both regulations were enacted at the same time, their
joint effect was rather to encourage than to discourage the clearing of
land in America.
Though pig and bar iron, too, have been put among the enumerated
commodities, yet as, when imported from America, they are exempted from
considerable duties to which they are subject when imported front any
other country, the one part of the regulation contributes more to
encourage the erection of furnaces in America than the other to discourage
it. There is no manufacture which occasions so great a consumption of wood
as a furnace, or which can contribute so much to the clearing of a country
overgrown with it.
The tendency of some of these regulations to raise the value of timber in
America, and thereby to facilitate the clearing of the land, was neither,
perhaps, intended nor understood by the legislature. Though their
beneficial effects, however, have been in this respect accidental, they
have not upon that account been less real.
The most perfect freedom of trade is permitted between the British
colonies of America and the West Indies, both in the enumerated and in the
non-enumerated commodities Those colonies are now become so populous and
thriving, that each of them finds in some of the others a great and
extensive market for every part of its produce. All of them taken
together, they make a great internal market for the produce of one
another.
The liberality of England, however, towards the trade of her colonies, has
been confined chiefly to what concerns the market for their produce,
either in its rude state, or in what may be called the very first stage of
manufacture. The more advanced or more refined manufactures, even of the
colony produce, the merchants and manufacturers of Great Britain chuse to
reserve to themselves, and have prevailed upon the legislature to prevent
their establishment in the colonies, sometimes by high duties, and
sometimes by absolute prohibitions.
While, for example, Muscovado sugars from the British plantations pay,
upon importation, only 6s:4d. the hundred weight, white sugars pay £1:1:1;
and refined, either double or single, in loaves, £4:2:5 ⁸⁄₂₀ths. When
those high duties were imposed, Great Britain was the sole, and she still
continues to be, the principal market, to which the sugars of the British
colonies could be exported. They amounted, therefore, to a prohibition, at
first of claying or refining sugar for any foreign market, and at present
of claying or refining it for the market which takes off, perhaps, more
than nine-tenths of the whole produce. The manufacture of claying or
refining sugar, accordingly, though it has flourished in all the sugar
colonies of France, has been little cultivated in any of those of England,
except for the market of the colonies themselves. While Grenada was in the
hands of the French, there was a refinery of sugar, by claying, at least
upon almost every plantation. Since it fell into those of the English,
almost all works of this kind have been given up; and there are at present
(October 1773), I am assured, not above two or three remaining in the
island. At present, however, by an indulgence of the custom-house, clayed
or refined sugar, if reduced from loaves into powder, is commonly imported
as Muscovado.
While Great Britain encourages in America the manufacturing of pig and bar
iron, by exempting them from duties to which the like commodities are
subject when imported from any other country, she imposes an absolute
prohibition upon the erection of steel furnaces and slit-mills in any of
her American plantations. She will not suffer her colonies to work in
those more refined manufactures, even for their own consumption; but
insists upon their purchasing of her merchants and manufacturers all goods
of this kind which they have occasion for.
She prohibits the exportation from one province to another by water, and
even the carriage by land upon horseback, or in a cart, of hats, of wools,
and woollen goods, of the produce of America; a regulation which
effectually prevents the establishment of any manufacture of such
commodities for distant sale, and confines the industry of her colonists
in this way to such coarse and household manufactures as a private family
commonly makes for its own use, or for that of some of its neighbours in
the same province.
To prohibit a great people, however, from making all that they can of
every part of their own produce, or from employing their stock and
industry in the way that they judge most advantageous to themselves, is a
manifest violation of the most sacred rights of mankind. Unjust, however,
as such prohibitions may be, they have not hitherto been very hurtful to
the colonies. Land is still so cheap, and, consequently, labour so dear
among them, that they can import from the mother country almost all the
more refined or more advanced manufactures cheaper than they could make
them for themselves. Though they had not, therefore, been prohibited from
establishing such manufactures, yet, in their present state of
improvement, a regard to their own interest would probably have prevented
them from doing so. In their present state of improvement, those
prohibitions, perhaps, without cramping their industry, or restraining it
from any employment to which it would have gone of its own accord, are
only impertinent badges of slavery imposed upon them, without any
sufficient reason, by the groundless jealousy of the merchants and
manufacturers of the mother country. In a more advanced state, they might
be really oppressive and insupportable.
Great Britain, too, as she confines to her own market some of the most
important productions of the colonies, so, in compensation, she gives to
some of them an advantage in that market, sometimes by imposing higher
duties upon the like productions when imported from other countries, and
sometimes by giving bounties upon their importation from the colonies. In
the first way, she gives an advantage in the home market to the sugar,
tobacco, and iron of her own colonies; and, in the second, to their raw
silk, to their hemp and flax, to their indigo, to their naval stores, and
to their building timber. This second way of encouraging the colony
produce, by bounties upon importation, is, so far as I have been able to
learn, peculiar to Great Britain: the first is not. Portugal does not
content herself with imposing higher duties upon the importation of
tobacco from any other country, but prohibits it under the severest
penalties.
With regard to the importation of goods from Europe, England has likewise
dealt more liberally with her colonies than any other nation.
Great Britain allows a part, almost always the half, generally a larger
portion, and sometimes the whole, of the duty which is paid upon the
importation of foreign goods, to be drawn back upon their exportation to
any foreign country. No independent foreign country, it was easy to
foresee, would receive them, if they came to it loaded with the heavy
duties to which almost all foreign goods are subjected on their
importation into Great Britain. Unless, therefore, some part of those
duties was drawn back upon exportation, there was an end of the carrying
trade; a trade so much favoured by the mercantile system.
Our colonies, however, are by no means independent foreign countries; and
Great Britain having assumed to herself the exclusive right of supplying
them with all goods from Europe, might have forced them (in the same
manner as other countries have done their colonies) to receive such goods
loaded with all the same duties which they paid in the mother country.
But, on the contrary, till 1763, the same drawbacks were paid upon the
exportation of the greater part of foreign goods to our colonies, as to
any independent foreign country. In 1763, indeed, by the 4th of Geo. III.
c. 15, this indulgence was a good deal abated, and it was enacted, “That
no part of the duty called the old subsidy should be drawn back for any
goods of the growth, production, or manufacture of Europe or the East
Indies, which should be exported from this kingdom to any British colony
or plantation in America; wines, white calicoes, and muslins, excepted.”
Before this law, many different sorts of foreign goods might have been
bought cheaper in the plantations than in the mother country, and some may
still.
Of the greater part of the regulations concerning the colony trade, the
merchants who carry it on, it must be observed, have been the principal
advisers. We must not wonder, therefore, if, in a great part of them,
their interest has been more considered than either that of the colonies
or that of the mother country. In their exclusive privilege of supplying
the colonies with all the goods which they wanted from Europe, and of
purchasing all such parts of their surplus produce as could not interfere
with any of the trades which they themselves carried on at home, the
interest of the colonies was sacrificed to the interest of those
merchants. In allowing the same drawbacks upon the re-exportation of the
greater part of European and East India goods to the colonies, as upon
their re-exportation to any independent country, the interest of the
mother country was sacrificed to it, even according to the mercantile
ideas of that interest. It was for the interest of the merchants to pay as
little as possible for the foreign goods which they sent to the colonies,
and, consequently, to get back as much as possible of the duties which
they advanced upon their importation into Great Britain. They might
thereby be enabled to sell in the colonies, either the same quantity of
goods with a greater profit, or a greater quantity with the same profit,
and, consequently, to gain something either in the one way or the other.
It was likewise for the interest of the colonies to get all such goods as
cheap, and in as great abundance as possible. But this might not always be
for the interest of the mother country. She might frequently suffer, both
in her revenue, by giving back a great part of the duties which had been
paid upon the importation of such goods; and in her manufactures, by being
undersold in the colony market, in consequence of the easy terms upon
which foreign manufactures could be carried thither by means of those
drawbacks. The progress of the linen manufacture of Great Britain, it is
commonly said, has been a good deal retarded by the drawbacks upon the
re-exportation of German linen to the American colonies.
But though the policy of Great Britain, with regard to the trade of her
colonies, has been dictated by the same mercantile spirit as that of other
nations, it has, however, upon the whole, been less illiberal and
oppressive than that of any of them.
In every thing except their foreign trade, the liberty of the English
colonists to manage their own affairs their own way, is complete. It is in
every respect equal to that of their fellow-citizens at home, and is
secured in the same manner, by an assembly of the representatives of the
people, who claim the sole right of imposing taxes for the support of the
colony government. The authority of this assembly overawes the executive
power; and neither the meanest nor the most obnoxious colonist, as long as
he obeys the law, has any thing to fear from the resentment, either of the
governor, or of any other civil or military officer in the province. The
colony assemblies, though, like the house of commons in England, they are
not always a very equal representation of the people, yet they approach
more nearly to that character; and as the executive power either has not
the means to corrupt them, or, on account of the support which it receives
from the mother country, is not under the necessity of doing so, they are,
perhaps, in general more influenced by the inclinations of their
constituents. The councils, which, in the colony legislatures, correspond
to the house of lords in Great Britain, are not composed of a hereditary
nobility. In some of the colonies, as in three of the governments of New
England, those councils are not appointed by the king, but chosen by the
representatives of the people. In none of the English colonies is there
any hereditary nobility. In all of them, indeed, as in all other free
countries, the descendant of an old colony family is more respected than
an upstart of equal merit and fortune; but he is only more respected, and
he has no privileges by which he can be troublesome to his neighbours.
Before the commencement of the present disturbances, the colony assemblies
had not only the legislative, but a part of the executive power. In
Connecticut and Rhode Island, they elected the governor. In the other
colonies, they appointed the revenue officers, who collected the taxes
imposed by those respective assemblies, to whom those officers were
immediately responsible. There is more equality, therefore, among the
English colonists than among the inhabitants of the mother country. Their
manners are more re publican; and their governments, those of three of the
provinces of New England in particular, have hitherto been more republican
too.
The absolute governments of Spain, Portugal, and France, on the contrary,
take place in their colonies; and the discretionary powers which such
governments commonly delegate to all their inferior officers are, on
account of the great distance, naturally exercised there with more than
ordinary violence. Under all absolute governments, there is more liberty
in the capital than in any other part of the country. The sovereign
himself can never have either interest or inclination to pervert the order
of justice, or to oppress the great body of the people. In the capital,
his presence overawes, more or less, all his inferior officers, who, in
the remoter provinces, from whence the complaints of the people are less
likely to reach him, can exercise their tyranny with much more safety. But
the European colonies in America are more remote than the most distant
provinces of the greatest empires which had ever been known before. The
government of the English colonies is, perhaps, the only one which, since
the world began, could give perfect security to the inhabitants of so very
distant a province. The administration of the French colonies, however,
has always been conducted with much more gentleness and moderation than
that of the Spanish and Portuguese. This superiority of conduct is
suitable both to the character of the French nation, and to what forms the
character of every nation, the nature of their government, which, though
arbitrary and violent in comparison with that of Great Britain, is legal
and free in comparison with those of Spain and Portugal.
It is in the progress of the North American colonies, however, that the
superiority of the English policy chiefly appears. The progress of the
sugar colonies of France has been at least equal, perhaps superior, to
that of the greater part of those of England; and yet the sugar colonies
of England enjoy a free government, nearly of the same kind with that
which takes place in her colonies of North America. But the sugar colonies
of France are not discouraged, like those of England, from refining their
own sugar; and what is still of greater importance, the genius of their
government naturally introduces a better management of their negro slaves.
In all European colonies, the culture of the sugar-cane is carried on by
negro slaves. The constitution of those who have been born in the
temperate climate of Europe could not, it is supposed, support the labour
of digging the ground under the burning sun of the West Indies; and the
culture of the sugar-cane, as it is managed at present, is all hand
labour; though, in the opinion of many, the drill plough might be
introduced into it with great advantage. But, as the profit and success of
the cultivation which is carried on by means of cattle, depend very much
upon the good management of those cattle; so the profit and success of
that which is carried on by slaves must depend equally upon the good
management of those slaves; and in the good management of their slaves the
French planters, I think it is generally allowed, are superior to the
English. The law, so far as it gives some weak protection to the slave
against the violence of his master, is likely to be better executed in a
colony where the government is in a great measure arbitrary, than in one
where it is altogether free. In every country where the unfortunate law
of slavery is established, the magistrate, when he protects the slave,
intermeddles in some measure in the management of the private property of
the master; and, in a free country, where the master is, perhaps, either a
member of the colony assembly, or an elector of such a member, he dares
not do this but with the greatest caution and circumspection. The respect
which he is obliged to pay to the master, renders it more difficult for
him to protect the slave. But in a country where the government is in a
great measure arbitrary, where it is usual for the magistrate to
intermeddle even in the management of the private property of individuals,
and to send them, perhaps, a lettre de cachet, if they do not manage it
according to his liking, it is much easier for him to give some protection
to the slave; and common humanity naturally disposes him to do so. The
protection of the magistrate renders the slave less contemptible in the
eyes of his master, who is thereby induced to consider him with more
regard, and to treat him with more gentleness. Gentle usage renders the
slave not only more faithful, but more intelligent, and, therefore, upon a
double account, more useful. He approaches more to the condition of a free
servant, and may possess some degree of integrity and attachment to his
master’s interest; virtues which frequently belong to free servants, but
which never can belong to a slave, who is treated as slaves commonly are
in countries where the master is perfectly free and secure.
That the condition of a slave is better under an arbitrary than under a
free government, is, I believe, supported by the history of all ages and
nations. In the Roman history, the first time we read of the magistrate
interposing to protect the slave from the violence of his master, is under
the emperors. When Vidius Pollio, in the presence of Augustus, ordered one
of his slaves, who had committed a slight fault, to be cut into pieces and
thrown into his fish-pond, in order to feed his fishes, the emperor
commanded him, with indignation, to emancipate immediately, not only that
slave, but all the others that belonged to him. Under the republic no
magistrate could have had authority enough to protect the slave, much less
to punish the master.
The stock, it is to be observed, which has improved the sugar colonies of
France, particularly the great colony of St Domingo, has been raised
almost entirely from the gradual improvement and cultivation of those
colonies. It has been almost altogether the produce of the soil and of the
industry of the colonists, or, what comes to the same thing, the price of
that produce, gradually accumulated by good management, and employed in
raising a still greater produce. But the stock which has improved and
cultivated the sugar colonies of England, has, a great part of it, been
sent out from England, and has by no means been altogether the produce of
the soil and industry of the colonists. The prosperity of the English
sugar colonies has been in a great measure owing to the great riches of
England, of which a part has overflowed, if one may say so, upon these
colonies. But the prosperity of the sugar colonies of France has been
entirely owing to the good conduct of the colonists, which must therefore
have had some superiority over that of the English; and this superiority
has been remarked in nothing so much as in the good management of their
slaves.
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 boast of, either in
the original establishment, or, so far as concerns their internal
government, in the subsequent prosperity of the colonies of America.
Folly and injustice seem to have been the principles which presided over
and directed the first project of establishing those colonies; the folly
of hunting after gold and silver mines, and the injustice of coveting the
possession of a country whose harmless natives, far from having ever
injured the people of Europe, had received the first adventurers with
every mark of kindness and hospitality.
The adventurers, indeed, who formed some of the latter establishments,
joined to the chimerical project of finding gold and silver mines, other
motives more reasonable and more laudable; but even these motives do very
little honour to the policy of Europe.
The English puritans, restrained at home, fled for freedom to America, and
established there the four governments of New England. The English
catholics, treated with much greater injustice, established that of
Maryland; the quakers, that of Pennsylvania. The Portuguese Jews,
persecuted by the inquisition, stript of their fortunes, and banished to
Brazil, introduced, by their example, some sort of order and industry
among the transported felons and strumpets by whom that colony was
originally peopled, and taught them the culture of the sugar-cane. Upon
all these different occasions, it was not the wisdom and policy, but the
disorder and injustice of the European governments, which peopled and
cultivated America.
In effectuation some of the most important of these establishments, the
different governments of Europe had as little merit as in projecting them.
The conquest of Mexico was the project, not of the council of Spain, but
of a governor of Cuba; and it was effectuated by the spirit of the bold
adventurer to whom it was entrusted, in spite of every thing which that
governor, who soon repented of having trusted such a person, could do to
thwart it. The conquerors of Chili and Peru, and of almost all the other
Spanish settlements upon the continent of America, carried out with them
no other public encouragement, but a general permission to make
settlements and conquests in the name of the king of Spain. Those
adventures were all at the private risk and expense of the adventurers.
The government of Spain contributed scarce any thing to any of them. That
of England contributed as little towards effectuating the establishment of
some of its most important colonies in North America.
When those establishments were effectuated, and had become so considerable
as to attract the attention of the mother country, the first regulations
which she made with regard to them, had always in view to secure to
herself the monopoly of their commerce; to confine their market, and to
enlarge her own at their expense, and, consequently, rather to damp and
discourage, than to quicken and forward the course of their prosperity. In
the different ways in which this monopoly has been exercised, consists one
of the most essential differences in the policy of the different European
nations with regard to their colonies. The best of them all, that of
England, is only somewhat less illiberal and oppressive than that of any
of the rest.
In what way, therefore, has the policy of Europe contributed either to the
first establishment, or to the present grandeur of the colonies of
America? In one way, and in one way only, it has contributed a good deal.
Magna virum mater! It bred and formed the men who were capable of
achieving such great actions, and of laying the foundation of so great an
empire; and there is no other quarter of the world; of which the policy is
capable of forming, or has ever actually, and in fact, formed such men.
The colonies owe to the policy of Europe the education and great views of
their active and enterprizing founders; and some of the greatest and most
important of them, so far as concerns their internal government, owe to it
scarce anything else.
PART III. Of the Advantages which Europe has derived From the Discovery of
America, and from that of a Passage to the East Indies by the Cape of Good
Hope.
Such are the advantages which the colonies of America have derived from
the policy of Europe.
What are those which Europe has derived from the discovery and
colonization of America?
Those advantages may be divided, first, into the general advantages which
Europe, considered as one great country, has derived from those great
events; and, secondly, into the particular advantages which each
colonizing country has derived from the colonies which particularly belong
to it, in consequence of the authority or dominion which it exercises over
them.
The general advantages which Europe, considered as one great country, has
derived from the discovery and colonization of America, consist, first, in
the increase of its enjoyments; and, secondly, in the augmentation of its
industry.
The surplus produce of America imported into Europe, furnishes the
inhabitants of this great continent with a variety of commodities which
they could not otherwise have possessed; some for conveniency and use,
some for pleasure, and some for ornament; and thereby contributes to
increase their enjoyments.
The discovery and colonization of America, it will readily be allowed,
have contributed to augment the industry, first, of all the countries
which trade to it directly, such as Spain, Portugal, France, and England;
and, secondly, of all those which, without trading to it directly, send,
through the medium of other countries, goods to it of their own produce,
such as Austrian Flanders, and some provinces of Germany, which, through
the medium of the countries before mentioned, send to it a considerable
quantity of linen and other goods. All such countries have evidently
gained a more extensive market for their surplus produce, and must
consequently have been encouraged to increase its quantity.
But that those great events should likewise have contributed to encourage
the industry of countries such as Hungary and Poland, which may never,
perhaps, have sent a single commodity of their own produce to America, is
not, perhaps, altogether so evident. That those events have done so,
however, cannot be doubted. Some part of the produce of America is
consumed in Hungary and Poland, and there is some demand there for the
sugar, chocolate, and tobacco, of that new quarter of the world. But those
commodities must be purchased with something which is either the produce
of the industry of Hungary and Poland, or with something which had been
purchased with some part of that produce. Those commodities of America are
new values, new equivalents, introduced into Hungary and Poland, to be
exchanged there for the surplus produce of these countries. By being
carried thither, they create a new and more extensive market for that
surplus produce. They raise its value, and thereby contribute to encourage
its increase. Though no part of it may ever be carried to America, it may
be carried to other countries, which purchase it with a part of their
share of the surplus produce of America, and it may find a market by means
of the circulation of that trade which was originally put into motion by
the surplus produce of America.
Those great events may even have contributed to increase the enjoyments,
and to augment the industry, of countries which not only never sent any
commodities to America, but never received any from it. Even such
countries may have received a greater abundance of other commodities from
countries, of which the surplus produce had been augmented by means of the
American trade. This greater abundance, as it must necessarily have
increased their enjoyments, so it must likewise have augmented their
industry. A greater number of new equivalents, of some kind or other, must
have been presented to them to be exchanged for the surplus produce of
that industry. A more extensive market must have been created for that
surplus produce, so as to raise its value, and thereby encourage its
increase. The mass of commodities annually thrown into the great circle of
European commerce, and by its various revolutions annually distributed
among all the different nations comprehended within it, must have been
augmented by the whole surplus produce of America. A greater share of this
greater mass, therefore, is likely to have fallen to each of those
nations, to have increased their enjoyments, and augmented their industry.
The exclusive trade of the mother countries tends to diminish, or at least
to keep down below what they would otherwise rise to, both the enjoyments
and industry of all those nations in general, and of the American colonies
in particular. It is a dead weight upon the action of one of the great
springs which puts into motion a great part of the business of mankind. By
rendering the colony produce dearer in all other countries, it lessens its
consumption, and thereby cramps the industry of the colonies, and both the
enjoyments and the industry of all other countries, which both enjoy less
when they pay more for what they enjoy, and produce less when they get
less for what they produce. By rendering the produce of all other
countries dearer in the colonies, it cramps in the same manner the
industry of all other colonies, and both the enjoyments and the industry
of the colonies. It is a clog which, for the supposed benefit of some
particular countries, embarrasses the pleasures and encumbers the industry
of all other countries, but of the colonies more than of any other. It not
only excludes as much as possible all other countries from one particular
market, but it confines as much as possible the colonies to one particular
market; and the difference is very great between being excluded from one
particular market when all others are open, and being confined to one
particular market when all others are shut up. The surplus produce of the
colonies, however, is the original source of all that increase of
enjoyments and industry which Europe derives from the discovery and
colonization of America, and the exclusive trade of the mother countries
tends to render this source much less abundant than it otherwise would be.
The particular advantages which each colonizing country derives from the
colonies which particularly belong to it, are of two different kinds;
first, those common advantages which every empire derives from the
provinces subject to its dominion; and, secondly, those peculiar
advantages which are supposed to result from provinces of so very peculiar
a nature as the European colonies of America.
The common advantages which every empire derives from the provinces
subject to its dominion consist, first, in the military force which they
furnish for its defence; and, secondly, in the revenue which they furnish
for the support of its civil government. The Roman colonies furnished
occasionally both the one and the other. The Greek colonies sometimes
furnished a military force, but seldom any revenue. They seldom
acknowledged themselves subject to the dominion of the mother city. They
were generally her allies in war, but very seldom her subjects in peace.
The European colonies of America have never yet furnished any military
force for the defence of the mother country. The military force has never
yet been sufficient for their own defence; and in the different wars in
which the mother countries have been engaged, the defence of their
colonies has generally occasioned a very considerable distraction of the
military force of those countries. In this respect, therefore, all the
European colonies have, without exception, been a cause rather of weakness
than of strength to their respective mother countries.
The colonies of Spain and Portugal only have contributed any revenue
towards the defence of the mother country, or the support of her civil
government. The taxes which have been levied upon those of other European
nations, upon those of England in particular, have seldom been equal to
the expense laid out upon them in time of peace, and never sufficient to
defray that which they occasioned in time of war. Such colonies,
therefore, have been a source of expense, and not of revenue, to their
respective mother countries.
The advantages of such colonies to their respective mother countries,
consist altogether in those peculiar advantages which are supposed to
result from provinces of so very peculiar a nature as the European
colonies of America; and the exclusive trade, it is acknowledged, is the
sole source of all those peculiar advantages.
In consequence of this exclusive trade, all that part of the surplus
produce of the English colonies, for example, which consists in what are
called enumerated commodities, can be sent to no other country but
England. Other countries must afterwards buy it of her. It must be
cheaper, therefore, in England than it can be in any other country, and
must contribute more to increase the enjoyments of England than those of
any other country. It must likewise contribute more to encourage her
industry. For all those parts of her own surplus produce which England
exchanges for those enumerated commodities, she must get a better price
than any other countries can get for the like parts of theirs, when they
exchange them for the same commodities. The manufactures of England, for
example, will purchase a greater quantity of the sugar and tobacco of her
own colonies than the like manufactures of other countries can purchase of
that sugar and tobacco. So far, therefore, as the manufactures of England
and those of other countries are both to be exchanged for the sugar and
tobacco of the English colonies, this superiority of price gives an
encouragement to the former beyond what the latter can, in these
circumstances, enjoy. The exclusive trade of the colonies, therefore, as
it diminishes, or at least keeps down below what they would otherwise rise
to, both the enjoyments and the industry of the countries which do not
possess it, so it gives an evident advantage to the countries which do
possess it over those other countries.
This advantage, however, will, perhaps, be found to be rather what may be
called a relative than an absolute advantage, and to give a superiority to
the country which enjoys it, rather by depressing the industry and produce
of other countries, than by raising those of that particular country above
what they would naturally rise to in the case of 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 sells a considerable
part of it. But had France and all other European countries been at all
times allowed a free trade to Maryland and Virginia, the tobacco of those
colonies might by this time have come cheaper than it actually does, not
only to all those other countries, but likewise to England. The produce of
tobacco, in consequence of a market so much more extensive than any which
it has hitherto enjoyed, might, and probably would, by this time have been
so much increased as to reduce the profits of a tobacco plantation to
their natural level with those of a corn plantation, which it is supposed
they are still somewhat above. The price of tobacco might, and probably
would, by this time have fallen somewhat lower than it is at present. An
equal quantity of the commodities, either of England or of those other
countries, might have purchased in Maryland and Virginia a greater
quantity of tobacco than it can do at present, and consequently have been
sold there for so much a better price. So far as that weed, therefore,
can, by its cheapness and abundance, increase the enjoyments, or augment
the industry, either of England or of any other country, it would
probably, in the case of a free trade, have produced both these effects in
somewhat a greater degree than it can do at present. England, indeed,
would not, in this case, have had any advantage over other countries. She
might have bought the tobacco of her colonies somewhat cheaper, and
consequently have sold some of her own commodities somewhat dearer, than
she actually does; but she could neither have bought the one cheaper, nor
sold the other dearer, than any other country might have done. She might,
perhaps, have gained an absolute, but she would certainly have lost a
relative advantage.
In order, however, to obtain this relative advantage in the colony trade,
in order to execute the invidious and malignant project of excluding, as
much as possible, other nations from any share in it, England, there are
very probable reasons for believing, has not only sacrificed a part of the
absolute advantage which she, as well as every other nation, might have
derived from that trade, but has subjected herself both to an absolute and
to a relative disadvantage in almost every other branch of trade.
When, by the act of navigation, England assumed to herself the monopoly of
the colony trade, the foreign capitals which had before been employed in
it, were necessarily withdrawn from it. The English capital, which had
before carried on but a part of it, was now to carry on the whole. The
capital which had before supplied the colonies with but a part of the
goods which they wanted from Europe, was now all that was employed to
supply them with the whole. But it could not supply them with the whole;
and the goods with which it did supply them were necessarily sold very
dear. The capital which had before bought but a part of the surplus
produce of the colonies, was now all that was employed to buy the whole.
But it could not buy the whole at any thing near the old price; and
therefore, whatever it did buy, it necessarily bought very cheap. But in
an employment of capital, in which the merchant sold very dear, and bought
very cheap, the profit must have been very great, and much above the
ordinary level of profit in other branches of trade. This superiority of
profit in the colony trade could not fail to draw from other branches of
trade a part of the capital which had before been employed in them. But
this revulsion of capital, as it must have gradually increased the
competition of capitals in the colony trade, so it must have gradually
diminished that competition in all those other branches of trade; as it
must have gradually lowered the profits of the one, so it must have
gradually raised those of the other, till the profits of all came to a new
level, different from, and somewhat higher, than that at which they had
been before.
This double effect of drawing capital from all other trades, and of
raising the rate of profit somewhat higher than it otherwise would have
been in all trades, was not only produced by this monopoly upon its first
establishment, but has continued to be produced by it ever since.
First, This monopoly has been continually drawing capital from all other
trades, to be employed in that of the colonies.
Though the wealth of Great Britain has increased very much since the
establishment of the act of navigation, it certainly has not increased in
the same proportion as that or the colonies. But the foreign trade of
every country naturally increases in proportion to its wealth, its surplus
produce in proportion to its whole produce; and Great Britain having
engrossed to herself almost the whole of what may be called the foreign
trade of the colonies, and her capital not having increased in the same
proportion as the extent of that trade, she could not carry it on without
continually withdrawing from other branches of trade some part of the
capital which had before been employed in them, as well as withholding
from them a great deal more which would otherwise have gone to them. Since
the establishment of the act of navigation, accordingly, the colony trade
has been continually increasing, while many other branches of foreign
trade, particularly of that to other parts of Europe, have been
continually decaying. Our manufactures for foreign sale, instead of being
suited, as before the act of navigation, to the neighbouring market of
Europe, or to the more distant one of the countries which lie round the
Mediterranean sea, have the greater part of them, been accommodated to the
still more distant one of the colonies; to the market in which they have
the monopoly, rather than to that in which they have many competitors. The
causes of decay in other branches of foreign trade, which, by Sir Matthew
Decker and other writers, have been sought for in the excess and improper
mode of taxation, in the high price of labour, in the increase of luxury,
etc. may all be found in the overgrowth of the colony trade. The
mercantile capital of Great Britain, though very great, yet not being
infinite, and though greatly increased since the act of navigation, yet
not being increased in the same proportion as the colony trade, that trade
could not possibly be carried on without withdrawing some part of that
capital from other branches of trade, nor consequently without some decay
of those other branches.
England, it must be observed, was a great trading country, her mercantile
capital was very great, and likely to become still greater and greater
every day, not only before the act of navigation had established the
monopoly of the corn trade, but before that trade was very considerable.
In the Dutch war, during the government of Cromwell, her navy was superior
to that of Holland; and in that which broke out in the beginning of the
reign of Charles II., it was at least equal, perhaps superior to the
united navies of France and Holland. Its superiority, perhaps, would
scarce appear greater in the present times, at least if the Dutch navy
were to bear the same proportion to the Dutch commerce now which it did
then. But this great naval power could not, in either of those wars, be
owing to the act of navigation. During the first of them, the plan of that
act had been but just formed; and though, before the breaking out of the
second, it had been fully enacted by legal authority, yet no part of it
could have had time to produce any considerable effect, and least of all
that part which established the exclusive trade to the colonies. Both the
colonies and their trade were inconsiderable then, in comparison of what
they are how. The island of Jamaica was an unwholesome desert, little
inhabited, and less cultivated. New York and New Jersey were in the
possession of the Dutch, the half of St. Christopher’s in that of the
French. The island of Antigua, the two Carolinas, Pennsylvania, Georgia,
and Nova Scotia, were not planted. Virginia, Maryland, and New England
were planted; and though they were very thriving colonies, yet there was
not perhaps at that time, either in Europe or America, a single person who
foresaw, or even suspected, the rapid progress which they have since made
in wealth, population, and improvement. The island of Barbadoes, in short,
was the only British colony of any consequence, of which the condition at
that time bore any resemblance to what it is at present. The trade of the
colonies, of which England, even for some time after the act of
navigation, enjoyed but a part (for the act of navigation was not very
strictly executed till several years after it was enacted), could not at
that time be the cause of the great trade of England, nor of the great
naval power which was supported by that trade. The trade which at that
time supported that great naval power was the trade of Europe, and of the
countries which lie round the Mediterranean sea. But the share which Great
Britain at present enjoys of that trade could not support any such great
naval power. Had the growing trade of the colonies been left free to all
nations, whatever share of it might have fallen to Great Britain, and a
very considerable share would probably have fallen to her, must have been
all an addition to this great trade of which she was before in possession.
In consequence of the monopoly, the increase of the colony trade has not
so much occasioned an addition to the trade which Great Britain had
before, as a total change in its direction.
Secondly, This monopoly has necessarily contributed to keep up the rate of
profit, in all the different branches of British trade, higher than it
naturally would have been, had all nations been allowed a free trade to
the British colonies.
The monopoly of the colony trade, as it necessarily drew towards that
trade a greater proportion of the capital of Great Britain than what would
have gone to it of its own accord, so, by the expulsion of all foreign
capitals, it necessarily reduced the whole quantity of capital employed in
that trade below what it naturally would have been in the case of a free
trade. But, by lessening the competition of capitals in that branch of
trade, it necessarily raised the rate of profit in that branch. By
lessening, too, the competition of British capitals in all other branches
of trade, it necessarily raised the rate of British profit in all those
other branches. Whatever may have been, at any particular period since the
establishment of the act of navigation, the state or extent of the
mercantile capital of Great Britain, the monopoly of the colony trade
must, during the continuance of that state, have raised the ordinary rate
of British profit higher than it otherwise would have been, both in that
and in all the other branches of British trade. If, since the
establishment of the act of navigation, the ordinary rate of British
profit has fallen considerably, as it certainly has, it must have fallen
still lower, had not the monopoly established by that act contributed to
keep it up.
But whatever raises, in any country, the ordinary rate of profit higher
than it otherwise would be, necessarily subjects that country both to an
absolute, and to a relative disadvantage in every branch of trade of which
she has not the monopoly.
It subjects her to an absolute disadvantage; because, in such branches of
trade, her merchants cannot get this greater profit without selling dearer
than they otherwise would do, both the goods of foreign countries which
they import into their own, and the goods of their own country which they
export to foreign countries. Their own country must both buy dearer and
sell dearer; must both buy less, and sell less; must both enjoy less and
produce less, than she otherwise would do.
It subjects her to a relative disadvantage; because, in such branches of
trade, it sets other countries, which are not subject to the same absolute
disadvantage, either more above her or less below her, than they otherwise
would be. It enables them both to enjoy more and to produce more, in
proportion to what she enjoys and produces. It renders their superiority
greater, or their inferiority less, than it otherwise would be. By raising
the price of her produce above what it otherwise would be, it enables the
merchants of other countries to undersell her in foreign markets, and
thereby to justle her out of almost all those branches of trade, of which
she has not the monopoly.
Our merchants frequently complain of the high wages of British labour, as
the cause of their manufactures being undersold in foreign markets; but
they are silent about the high profits of stock. They complain of the
extravagant gain of other people; but they say nothing of their own. The
high profits of British stock, however, may contribute towards raising the
price of British manufactures, in many cases, as much, and in some perhaps
more, than the high wages of British labour.
It is in this manner that the capital of Great Britain, one may justly
say, has partly been drawn and partly been driven from the greater part of
the different branches of trade of which she has not the monopoly; from
the trade of Europe, in particular, and from that of the countries which
lie round the Mediterranean sea.
It has partly been drawn from those branches of trade, by the attraction
of superior profit in the colony trade, in consequence of the continual
increase of that trade, and of the continual insufficiency of the capital
which had carried it on one year to carry it on the next.
It has partly been driven from them, by the advantage which the high rate
of profit established in Great Britain gives to other countries, in all
the different branches of trade of which Great Britain has not the
monopoly.
As the monopoly of the colony trade has drawn from those other branches a
part of the British capital, which would otherwise have been employed in
them, so it has forced into them many foreign capitals which would never
have gone to them, had they not been expelled from the colony trade. In
those other branches of trade, it has diminished the competition of
British capitals, and thereby raised the rate of British profit higher
than it otherwise would have been. On the contrary, it has increased the
competition of foreign capitals, and thereby sunk the rate of foreign
profit lower than it otherwise would have been. Both in the one way and in
the other, it must evidently have subjected Great Britain to a relative
disadvantage in all those other branches of trade.
The colony trade, however, it may perhaps be said, is more advantageous to
Great Britain than any other; and the monopoly, by forcing into that trade
a greater proportion of the capital of Great Britain than what would
otherwise have gone to it, has turned that capital into an employment,
more advantageous to the country than any other which it could have found.
The most advantageous employment of any capital to the country to which it
belongs, is that which maintains there the greatest quantity of productive
labour, and increases the most the annual produce of the land and labour
of that country. But the quantity of productive labour which any capital
employed in the foreign trade of consumption can maintain, is exactly in
proportion, it has been shown in the second book, to the frequency of its
returns. A capital of a thousand pounds, for example, employed in a
foreign trade of consumption, of which the returns are made regularly once
in the year, can keep in constant employment, in the country to which it
belongs, a quantity of productive labour, equal to what a thousand pounds
can maintain there for a year. If the returns are made twice or thrice in
the year, it can keep in constant employment a quantity of productive
labour, equal to what two or three thousand pounds can maintain there for
a year. A foreign trade of consumption carried on with a neighbouring, is,
upon that account, in general, more advantageous than one carried on with
a distant country; and, for the same reason, a direct foreign trade of
consumption, as it has likewise been shown in the second book, is in
general more advantageous than a round-about one.
But the monopoly of the colony trade, so far as it has operated upon the
employment of the capital of Great Britain, has, in all cases, forced some
part of it from a foreign trade of consumption carried on with a
neighbouring, to one carried on with a more distant country, and in many
cases from a direct foreign trade of consumption to a round-about one.
First, The monopoly of the colony trade has, in all cases, forced some
part of the capital of Great Britain from a foreign trade of consumption
carried on with a neighbouring, to one carried on with a more distant
country.
It has, in all cases, forced some part of that capital from the trade with
Europe, and with the countries which lie round the Mediterranean sea, to
that with the more distant regions of America and the West Indies; from
which the returns are necessarily less frequent, not only on account of
the greater distance, but on account of the peculiar circumstances of
those countries. New colonies, it has already been observed, are always
understocked. Their capital is always much less than what they could
employ with great profit and advantage in the improvement and cultivation
of their land. They have a constant demand, therefore, for more capital
than they have of their own; and, in order to supply the deficiency of
their own, they endeavour to borrow as much as they can of the mother
country, to whom they are, therefore, always in debt. The most common way
in which the colonies contract this debt, is not by borrowing upon bond of
the rich people of the mother country, though they sometimes do this too,
but by running as much in arrear to their correspondents, who supply them
with goods from Europe, as those correspondents will allow them. Their
annual returns frequently do not amount to more than a third, and
sometimes not to so great a proportion of what they owe. The whole
capital, therefore, which their correspondents advance to them, is seldom
returned to Britain in less than three, and sometimes not in less than
four or five years. But a British capital of a thousand pounds, for
example, which is returned to Great Britain only once in five years, can
keep in constant employment only one-fifth part of the British industry
which it could maintain, if the whole was returned once in the year; and,
instead of the quantity of industry which a thousand pounds could maintain
for a year, can keep in constant employment the quantity only which two
hundred pounds can maintain for a year. The planter, no doubt, by the high
price which he pays for the goods from Europe, by the interest upon the
bills which he grants at distant dates, and by the commission upon the
renewal of those which he grants at near dates, makes up, and probably
more than makes up, all the loss which his correspondent can sustain by
this delay. But, though he make up the loss of his correspondent, he
cannot make up that of Great Britain. In a trade of which the returns are
very distant, the profit of the merchant may be as great or greater than
in one in which they are very frequent and near; but the advantage of the
country in which he resides, the quantity of productive labour constantly
maintained there, the annual produce of the land and labour, must always
be much less. That the returns of the trade to America, and still more
those of that to the West Indies, are, in general, not only more distant,
but more irregular and more uncertain, too, than those of the trade to any
part of Europe, or even of the countries which lie round the Mediterranean
sea, will readily be allowed, I imagine, by everybody who has any
experience of those different branches of trade.
Secondly, The monopoly of the colony trade, has, in many cases, forced
some part of the capital of Great Britain from a direct foreign trade of
consumption, into a round-about one.
Among the enumerated commodities which can be sent to no other market but
Great Britain, there are several of which the quantity exceeds very much
the consumption of Great Britain, and of which, a part, therefore, must be
exported to other countries. But this cannot be done without forcing some
part of the capital of Great Britain into a round-about foreign trade of
consumption. Maryland, and Virginia, for example, send annually to Great
Britain upwards of ninety-six thousand hogsheads of tobacco, and the
consumption of Great Britain is said not to exceed fourteen thousand.
Upwards of eighty-two thousand hogsheads, therefore, must be exported to
other countries, to France, to Holland, and, to the countries which lie
round the Baltic and Mediterranean seas. But that part of the capital of
Great Britain which brings those eighty-two thousand hogsheads to Great
Britain, which re-exports them from thence to those other countries, and
which brings back from those other countries to Great Britain either goods
or money in return, is employed in a round-about foreign trade of
consumption; and is necessarily forced into this employment, in order to
dispose of this great surplus. If we would compute in how many years the
whole of this capital is likely to come back to Great Britain, we must add
to the distance of the American returns that of the returns from those
other countries. If, in the direct foreign trade of consumption which we
carry on with America, the whole capital employed frequently does not come
back in less than three or four years, the whole capital employed in this
round-about one is not likely to come back in less than four or five. If
the one can keep in constant employment but a third or a fourth part of
the domestic industry which could be maintained by a capital returned once
in the year, the other can keep in constant employment but a fourth or a
fifth part of that industry. At some of the outports a credit is commonly
given to those foreign correspondents to whom they export them tobacco. At
the port of London, indeed, it is commonly sold for ready money: the rule
is Weigh and pay. At the port of London, therefore, the final returns of
the whole round-about trade are more distant than the returns from
America, by the time only which the goods may lie unsold in the warehouse;
where, however, they may sometimes lie long enough. But, had not the
colonies been confined to the market of Great Britain for the sale of
their tobacco, very little more of it would probably have come to us than
what was necessary for the home consumption. The goods which Great Britain
purchases at present for her own consumption with the great surplus of
tobacco which she exports to other countries, she would, in this case,
probably have purchased with the immediate produce of her own industry, or
with some part of her own manufactures. That produce, those manufactures,
instead of being almost entirely suited to one great market, as at
present, would probably have been fitted to a great number of smaller
markets. Instead of one great round-about foreign trade of consumption,
Great Britain would probably have carried on a great number of small
direct foreign trades of the same kind. On account of the frequency of the
returns, a part, and probably but a small part, perhaps not above a third
or a fourth of the capital which at present carries on this great
round-about trade, might have been sufficient to carry on all those small
direct ones; might have kept in constant employment an equal quantity of
British industry; and have equally supported the annual produce of the
land and labour of Great Britain. All the purposes of this trade being, in
this manner, answered by a much smaller capital, there would have been a
large spare capital to apply to other purposes; to improve the lands, to
increase the manufactures, and to extend the commerce of Great Britain; to
come into competition at least with the other British capitals employed in
all those different ways, to reduce the rate of profit in them all, and
thereby to give to Great Britain, in all of them, a superiority over other
countries, still greater than what she at present enjoys.
The monopoly of the colony trade, too, has forced some part of the capital
of Great Britain from all foreign trade of consumption to a carrying
trade; and, consequently from supporting more or less the industry of
Great Britain, to be employed altogether in supporting partly that of the
colonies, and partly that of some other countries.
The goods, for example, which are annually purchased with the great
surplus of eighty-two thousand hogsheads of tobacco annually re-exported
from Great Britain, are not all consumed in Great Britain. Part of them,
linen from Germany and Holland, for example, is returned to the colonies
for their particular consumption. But that part of the capital of Great
Britain which buys the tobacco with which this linen is afterwards bought,
is necessarily withdrawn from supporting the industry of Great Britain, to
be employed altogether in supporting, partly that of the colonies, and
partly that of the particular countries who pay for this tobacco with the
produce of their own industry.
The monopoly of the colony trade, besides, by forcing towards it a much
greater proportion of the capital of Great Britain than what would
naturally have gone to it, seems to have broken altogether that natural
balance which would otherwise have taken place among all the different
branches of British industry. The industry of Great Britain, instead of
being accommodated to a great number of small markets, has been
principally suited to one great market. Her commerce, instead of running
in a great number of small channels, has been taught to run principally in
one great channel. But the whole system of her industry and commerce has
thereby been rendered less secure; the whole state of her body politic
less healthful than it otherwise would have been. In her present
condition, Great Britain resembles one of those unwholesome bodies in
which some of the vital parts are overgrown, and which, upon that account,
are liable to many dangerous disorders, scarce incident to those in which
all the parts are more properly proportioned. A small stop in that great
blood-vessel, which has been artificially swelled beyond its natural
dimensions, and through which an unnatural proportion of the industry and
commerce of the country has been forced to circulate, is very likely to
bring on the most dangerous disorders upon the whole body politic. The
expectation of a rupture with the colonies, accordingly, has struck the
people of Great Britain with more terror than they ever felt for a Spanish
armada, or a French invasion. It was this terror, whether well or ill
grounded, which rendered the repeal of the stamp act, among the merchants
at least, a popular measure. In the total exclusion from the colony
market, was it to last only for a few years, the greater part of our
merchants used to fancy that they foresaw an entire stop to their trade;
the greater part of our master manufacturers, the entire ruin of their
business; and the greater part of our workmen, an end of their employment.
A rupture with any of our neighbours upon the continent, though likely,
too, to occasion some stop or interruption in the employments of some of
all these different orders of people, is foreseen, however, without any
such general emotion. The blood, of which the circulation is stopt in some
of the smaller vessels, easily disgorges itself into the greater, without
occasioning any dangerous disorder; but, when it is stopt in any of the
greater vessels, convulsions, apoplexy, or death, are the immediate and
unavoidable consequences. If but one of those overgrown manufactures,
which, by means either of bounties or of the monopoly of the home and
colony markets, have been artificially raised up to any unnatural height,
finds some small stop or interruption in its employment, it frequently
occasions a mutiny and disorder alarming to government, and embarrassing
even to the deliberations of the legislature. How great, therefore, would
be the disorder and confusion, it was thought, which must necessarily be
occasioned by a sudden and entire stop in the employment of so great a
proportion of our principal manufacturers?
Some moderate and gradual relaxation of the laws which give to Great
Britain the exclusive trade to the colonies, till it is rendered in a
great measure free, seems to be the only expedient which can, in all
future times, deliver her from this danger; which can enable her, or even
force her, to withdraw some part of her capital from this overgrown
employment, and to turn it, though with less profit, towards other
employments; and which, by gradually diminishing one branch of her
industry, and gradually increasing all the rest, can, by degrees, restore
all the different branches of it to that natural, healthful, and proper
proportion, which perfect liberty necessarily establishes, and which
perfect liberty can alone preserve. To open the colony trade all at once
to all nations, might not only occasion some transitory inconveniency, but
a great permanent loss, to the greater part of those whose industry or
capital is at present engaged in it. The sudden loss of the employment,
even of the ships which import the eighty-two thousand hogsheads of
tobacco, which are over and above the consumption of Great Britain, might
alone be felt very sensibly. Such are the unfortunate effects of all the
regulations of the mercantile system. They not only introduce very
dangerous disorders into the state of the body politic, but disorders
which it is often difficult to remedy, without occasioning, for a time at
least, still greater disorders. In what manner, therefore, the colony
trade ought gradually to be opened; what are the restraints which ought
first, and what are those which ought last, to be taken away; or in what
manner the natural system of perfect liberty and justice ought gradually
to be restored, we must leave to the wisdom of future statesmen and
legislators to determine.
Five different events, unforeseen and unthought of, have very fortunately
concurred to hinder Great Britain from feeling, so sensibly as it was
generally expected she would, the total exclusion which has now taken
place for more than a year (from the first of December 1774) from a very
important branch of the colony trade, that of the twelve associated
provinces of North America. First, those colonies, in preparing themselves
for their non-importation agreement, drained Great Britain completely of
all the commodities which were fit for their market; secondly, the extra
ordinary demand of the Spanish flota has, this year, drained Germany and
the north of many commodities, linen in particular, which used to come
into competition, even in the British market, with the manufactures of
Great Britain; thirdly, the peace between Russia and Turkey has occasioned
an extraordinary demand from the Turkey market, which, during the distress
of the country, and while a Russian fleet was cruizing in the Archipelago,
had been very poorly supplied; fourthly, the demand of the north of Europe
for the manufactures of Great Britain has been increasing from year to
year, for some time past; and, fifthly, the late partition, and
consequential pacification of Poland, by opening the market of that great
country, have, this year, added an extraordinary demand from thence to the
increasing demand of the north. These events are all, except the fourth,
in their nature transitory and accidental; and the exclusion from so
important a branch of the colony trade, if unfortunately it should
continue much longer, may still occasion some degree of distress. This
distress, however, as it will come on gradually, will be felt much less
severely than if it had come on all at once; and, in the mean time, the
industry and capital of the country may find a new employment and
direction, so as to prevent this distress from ever rising to any
considerable height.
The monopoly of the colony trade, therefore, so far as it has turned
towards that trade a greater proportion of the capital of Great Britain
than what would otherwise have gone to it, has in all cases turned it,
from a foreign trade of consumption with a neighbouring, into one with a
more distant country; in many cases from a direct foreign trade of
consumption into a round-about one; and, in some cases, from all foreign
trade of consumption into a carrying trade. It has, in all cases,
therefore, turned it from a direction in which it would have maintained a
greater quantity of productive labour, into one in which it can maintain a
much smaller quantity. By suiting, besides, to one particular market only,
so great a part of the industry and commerce of Great Britain, it has
rendered the whole state of that industry and commerce more precarious and
less secure, than if their produce had been accommodated to a greater
variety of markets.
We must carefully distinguish between the effects of the colony trade and
those of the monopoly of that trade. The former are always and necessarily
beneficial; the latter always and necessarily hurtful. But the former are
so beneficial, that the colony trade, though subject to a monopoly, and,
notwithstanding the hurtful effects of that monopoly, is still, upon the
whole, beneficial, and greatly beneficial, though a good deal less so than
it otherwise would be.
The effect of the colony trade, in its natural and free state, is to open
a great though distant market, for such parts of the produce of British
industry as may exceed the demand of the markets nearer home, of those of
Europe, and of the countries which lie round the Mediterranean sea. In its
natural and free state, the colony trade, without drawing from those
markets any part of the produce which had ever been sent to them,
encourages Great Britain to increase the surplus continually, by
continually presenting new equivalents to be exchanged for it. In its
natural and free state, the colony trade tends to increase the quantity of
productive labour in Great Britain, but without altering in any respect
the direction of that which had been employed there before. In the natural
and free state of the colony trade, the competition of all other nations
would hinder the rate of profit from rising above the common level, either
in the new market, or in the new employment. The new market, without
drawing any thing from the old one, would create, if one may say so, a new
produce for its own supply; and that new produce would constitute a new
capital for carrying on the new employment, which, in the same manner,
would draw nothing from the old one.
The monopoly of the colony trade, on the contrary, by excluding the
competition of other nations, and thereby raising the rate of profit, both
in the new market and in the new employment, draws produce from the old
market, and capital from the old employment. To augment our share of the
colony trade beyond what it otherwise would be, is the avowed purpose of
the monopoly. If our share of that trade were to be no greater with, than
it would have been without the monopoly, there could have been no reason
for establishing the monopoly. But whatever forces into a branch of trade,
of which the returns are slower and more distant than those of the greater
part of other trades, a greater proportion of the capital of any country,
than what of its own accord would go to that branch, necessarily renders
the whole quantity of productive labour annually maintained there, the
whole annual produce of the land and labour of that country, less than
they otherwise would be. It keeps down the revenue of the inhabitants of
that country below what it would naturally rise to, and thereby diminishes
their power of accumulation. It not only hinders, at all times, their
capital from maintaining so great a quantity of productive labour as it
would otherwise maintain, but it hinders it from increasing so fast as it
would otherwise increase, and, consequently, from maintaining a still
greater quantity of productive labour.
The natural good effects of the colony trade, however, more than
counterbalance to Great Britain the bad effects of the monopoly; so that,
monopoly and altogether, that trade, even as it is carried on at present,
is not only advantageous, but greatly advantageous. The new market and the
new employment which are opened by the colony trade, are of much greater
extent than that portion of the old market and of the old employment which
is lost by the monopoly. The new produce and the new capital which has
been created, if one may say so, by the colony trade, maintain in Great
Britain a greater quantity of productive labour than what can have been
thrown out of employment by the revulsion of capital from other trades of
which the returns are more frequent. If the colony trade, however, even as
it is carried on at present, is advantageous to Great Britain, it is not
by means of the monopoly, but in spite of the monopoly.
It is rather for the manufactured than for the rude produce of Europe,
that the colony trade opens a new market. Agriculture is the proper
business of all new colonies; a business which the cheapness of land
renders more advantageous than any other. They abound, therefore, in the
rude produce of land; and instead of importing it from other countries,
they have generally a large surplus to export. In new colonies,
agriculture either draws hands from all other employments, or keeps them
from going to any other employment. There are few hands to spare for the
necessary, and none for the ornamental manufactures. The greater part of
the manufactures of both kinds they find it cheaper to purchase of other
countries than to make for themselves. It is chiefly by encouraging the
manufactures of Europe, that the colony trade indirectly encourages its
agriculture. The manufacturers of Europe, to whom that trade gives
employment, constitute a new market for the produce of the land, and the
most advantageous of all markets; the home market for the corn and cattle,
for the bread and butcher’s meat of Europe, is thus greatly extended by
means of the trade to America.
But that the monopoly of the trade of populous and thriving colonies is
not alone sufficient to establish, or even to maintain, manufactures in
any country, the examples of Spain and Portugal sufficiently demonstrate.
Spain and Portugal were manufacturing countries before they had any
considerable colonies. Since they had the richest and most fertile in the
world, they have both ceased to be so.
In Spain and Portugal, the bad effects of the monopoly, aggravated by
other causes, have, perhaps, nearly overbalanced the natural good effects
of the colony trade. These causes seem to be other monopolies of different
kinds: the degradation of the value of gold and silver below what it is in
most other countries; the exclusion from foreign markets by improper taxes
upon exportation, and the narrowing of the home market, by still more
improper taxes upon the transportation of goods from one part of the
country to another; but above all, that irregular and partial
administration of justice which often protects the rich and powerful
debtor from the pursuit of his injured creditor, and which makes the
industrious part of the nation afraid to prepare goods for the consumption
of those haughty and great men, to whom they dare not refuse to sell upon
credit, and from whom they are altogether uncertain of repayment.
In England, on the contrary, the natural good effects of the colony trade,
assisted by other causes, have in a great measure conquered the bad
effects of the monopoly. These causes seem to be, the general liberty of
trade, which, notwithstanding some restraints, is at least equal, perhaps
superior, to what it is in any other country; the liberty of exporting,
duty free, almost all sorts of goods which are the produce of domestic
industry, to almost any foreign country; and what, perhaps, is of still
greater importance, the unbounded liberty of transporting them from one
part of our own country to any other, without being obliged to give any
account to any public office, without being liable to question or
examination of any kind; but, above all, that equal and impartial
administration of justice, which renders the rights of the meanest British
subject respectable to the greatest, and which, by securing to every man
the fruits of his own industry, gives the greatest and most effectual
encouragement to every sort of industry.
If the manufactures of Great Britain, however, have been advanced, as they
certainly have, by the colony trade, it has not been by means of the
monopoly of that trade, but in spite of the monopoly. The effect of the
monopoly has been, not to augment the quantity, but to alter the quality
and shape of a part of the manufactures of Great Britain, and to
accommodate to a market, from which the returns are slow and distant, what
would otherwise have been accommodated to one from which the returns are
frequent and near. Its effect has consequently been, to turn a part of the
capital of Great Britain from an employment in which it would have
maintained a greater quantity of manufacturing industry, to one in which
it maintains a much smaller, and thereby to diminish, instead of
increasing, the whole quantity of manufacturing industry maintained in
Great Britain.
The monopoly of the colony trade, therefore, like all the other mean and
malignant expedients of the mercantile system, depresses the industry of
all other countries, but chiefly that of the colonies, without in the
least increasing, but on the contrary diminishing, that of the country in
whose favour it is established.
The monopoly hinders the capital of that country, whatever may, at any
particular time, be the extent of that capital, from maintaining so great
a quantity of productive labour as it would otherwise maintain, and from
affording so great a revenue to the industrious inhabitants as it would
otherwise afford. But as capital can be increased only by savings from
revenue, the monopoly, by hindering it from affording so great a revenue
as it would otherwise afford, necessarily hinders it from increasing so
fast as it would otherwise increase, and consequently from maintaining a
still greater quantity of productive labour, and affording a still greater
revenue to the industrious inhabitants of that country. One great original
source of revenue, therefore, the wages of labour, the monopoly must
necessarily have rendered, at all times, less abundant than it otherwise
would have been.
By raising the rate of mercantile profit, the monopoly discourages the
improvement of land. The profit of improvement depends upon the difference
between what the land actually produces, and what, by the application of a
certain capital, it can be made to produce. If this difference affords a
greater profit than what can be drawn from an equal capital in any
mercantile employment, the improvement of land will draw capital from all
mercantile employments. If the profit is less, mercantile employments will
draw capital from the improvement of land. Whatever, therefore, raises the
rate of mercantile profit, either lessens the superiority, or increases
the inferiority of the profit of improvement: and, in the one case,
hinders capital from going to improvement, and in the other draws capital
from it; but by discouraging improvement, the monopoly necessarily retards
the natural increase of another great original source of revenue, the rent
of land. By raising the rate of profit, too, the monopoly necessarily
keeps up the market rate of interest higher than it otherwise would be.
But the price of land, in proportion to the rent which it affords, the
number of years purchase which is commonly paid for it, necessarily falls
as the rate of interest rises, and rises as the rate of interest falls.
The monopoly, therefore, hurts the interest of the landlord two different
ways, by retarding the natural increase, first, of his rent, and,
secondly, of the price which he would get for his land, in proportion to
the rent which it affords.
The monopoly, indeed, raises the rate of mercantile profit and thereby
augments somewhat the gain of our merchants. But as it obstructs the
natural increase of capital, it tends rather to diminish than to increase
the sum total of the revenue which the inhabitants of the country derive
from the profits of stock; a small profit upon a great capital generally
affording a greater revenue than a great profit upon a small one. The
monopoly raises the rate of profit, but it hinders the sum of profit from
rising so high as it otherwise would do.
All the original sources of revenue, the wages of labour, the rent of
land, and the profits of stock, the monopoly renders much less abundant
than they otherwise would be. To promote the little interest of one little
order of men in one country, it hurts the interest of all other orders of
men in that country, and of all the men in all other countries.
It is solely by raising the ordinary rate of profit, that the monopoly
either has proved, or could prove, advantageous to any one particular
order of men. But besides all the bad effects to the country in general,
which have already been mentioned as necessarily resulting from a higher
rate of profit, there is one more fatal, perhaps, than all these put
together, but which, if we may judge from experience, is inseparably
connected with it. The high rate of profit seems everywhere to destroy
that parsimony which, in other circumstances, is natural to the character
of the merchant. When profits are high, that sober virtue seems to be
superfluous, and expensive luxury to suit better the affluence of his
situation. But the owners of the great mercantile capitals are necessarily
the leaders and conductors of the whole industry of every nation; and
their example has a much greater influence upon the manners of the whole
industrious part of it than that of any other order of men. If his
employer is attentive and parsimonious, the workman is very likely to be
so too; but if the master is dissolute and disorderly, the servant, who
shapes his work according to the pattern which his master prescribes to
him, will shape his life, too, according to the example which he sets him.
Accumulation is thus prevented in the hands of all those who are naturally
the most disposed to accumulate; and the funds destined for the
maintenance of productive labour, receive no augmentation from the revenue
of those who ought naturally to augment them the most. The capital of the
country, instead of increasing, gradually dwindles away, and the quantity
of productive labour maintained in it grows every day less and less. Have
the exorbitant profits of the merchants of Cadiz and Lisbon augmented the
capital of Spain and Portugal? Have they alleviated the poverty, have they
promoted the industry, of those two beggarly countries? Such has been the
tone of mercantile expense in those two trading cities, that those
exorbitant profits, far from augmenting the general capital of the
country, seem scarce to have been sufficient to keep up the capitals upon
which they were made. Foreign capitals are every day intruding themselves,
if I may say so, more and more into the trade of Cadiz and Lisbon. It is
to expel those foreign capitals from a trade which their own grows every
day more and more insufficient for carrying on, that the Spaniards and
Portuguese endeavour every day to straiten more and more the galling bands
of their absurd monopoly. Compare the mercantile manners of Cadiz and
Lisbon with those of Amsterdam, and you will be sensible how differently
the conduct and character of merchants are affected by the high and by the
low profits of stock. The merchants of London, indeed, have not yet
generally become such magnificent lords as those of Cadiz and Lisbon; but
neither are they in general such attetitive and parsimonious burghers as
those of Amsterdam. They are supposed, however, many of them, to be a good
deal richer than the greater part of the former, and not quire so rich as
many of the latter: but the rate of their profit is commonly much lower
than that of the former, and a good deal higher than that of the latter.
Light come, light go, says the proverb; and the ordinary tone of expense
seems everywhere to be regulated, not so much according to the real
ability of spending, as to the supposed facility of getting money to
spend.
It is thus that the single advantage which the monopoly procures to a
single order of men, is in many different ways hurtful to the general
interest of the country.
To found a great empire for the sole purpose of raising up a people of
customers, may at first sight, appear a project fit only for a nation of
shopkeepers. It is, however, a project altogether unfit for a nation of
shopkeepers, but extremely fit for a nation whose government is influenced
by shopkeepers. Such statesmen, and such statesmen only, are capable of
fancying that they will find some advantage in employing the blood and
treasure of their fellow-citizens, to found and maintain such an empire.
Say to a shopkeeper, Buy me a good estate, and I shall always buy my
clothes at your shop, even though I should pay somewhat dearer than what I
can have them for at other shops; and you will not find him very forward
to embrace your proposal. But should any other person buy you such an
estate, the shopkeeper will be much obliged to your benefactor if he would
enjoin you to buy all your clothes at his shop. England purchased for some
of her subjects, who found themselves uneasy at home, a great estate in a
distant country. The price, indeed, was very small, and instead of thirty
years purchase, the ordinary price of land in the present times, it
amounted to little more than the expense of the different equipments which
made the first discovery, reconnoitered the coast, and took a fictitious
possession of the country. The land was good, and of great extent; and the
cultivators having plenty of good ground to work upon, and being for some
time at liberty to sell their produce where they pleased, became, in the
course of little more than thirty or forty years (between 1620 and 1660),
so numerous and thriving a people, that the shopkeepers and other traders
of England wished to secure to themselves the monopoly of their custom.
Without pretending, therefore, that they had paid any part, either of the
original purchase money, or of the subsequent expense of improvement, they
petitioned the parliament, that the cultivators of America might for the
future be confined to their shop; first, for buying all the goods which
they wanted from Europe; and, secondly, for selling all such parts of
their own produce as those traders might find it convenient to buy. For
they did not find it convenient to buy every part of it. Some parts of it
imported into England, might have interfered with some of the trades which
they themselves carried on at home. Those particular parts of it,
therefore, they were willing that the colonists should sell where they
could; the farther off the better; and upon that account proposed that
their market should be confined to the countries south of Cape Finisterre.
A clause in the famous act of navigation established this truly shopkeeper
proposal into a law.
The maintenance of this monopoly has hitherto been the principal, or more
properly, perhaps, the sole end and purpose of the dominion which Great
Britain assumes over her colonies. In the exclusive trade, it is supposed,
consists the great advantage of provinces, which have never yet afforded
either revenue or military force for the support of the civil government,
or the defence of the mother country. The monopoly is the principal badge
of their dependency, and it is the sole fruit which has hitherto been
gathered from that dependency. Whatever expense Great Britain has hitherto
laid out in maintaining this dependency, has really been laid out in order
to support this monopoly. The expense of the ordinary peace establishment
of the colonies amounted, before the commencement of the present
disturbances to the pay of twenty regiments of foot; to the expense of the
artillery, stores, and extraordinary provisions, with which it was
necessary to supply them; and to the expense of a very considerable naval
force, which was constantly kept up, in order to guard from the smuggling
vessels of other nations, the immense coast of North America, and that of
our West Indian islands. The whole expense of this peace establishment was
a charge upon the revenue of Great Britain, and was, at the same time, the
smallest part of what the dominion of the colonies has cost the mother
country. If we would know the amount of the whole, we must add to the
annual expense of this peace establishment, the interest of the sums
which, in consequence of their considering her colonies as provinces
subject to her dominion, Great Britain has, upon different occasions, laid
out upon their defence. We must add to it, in particular, the whole
expense of the late war, and a great part of that of the war which
preceded it. The late war was altogether a colony quarrel; and the whole
expense of it, in whatever part of the world it might have been laid out,
whether in Germany or the East Indies, ought justly to be stated to the
account of the colonies. It amounted to more than ninety millions
sterling, including not only the new debt which was contracted, but the
two shillings in the pound additional land tax, and the sums which were
every year borrowed from the sinking fund. The Spanish war which began in
1739 was principally a colony quarrel. Its principal object was to prevent
the search of the colony ships, which carried on a contraband trade with
the Spanish Main. This whole expense is, in reality, a bounty which has
been given in order to support a monopoly. The pretended purpose of it was
to encourage the manufactures, and to increase the commerce of Great
Britain. But its real effect has been to raise the rate of mercantile
profit, and to enable our merchants to turn into a branch of trade, of
which the returns are more slow and distant than those of the greater part
of other trades, a greater proportion of their capital than they otherwise
would have done; two events which, if a bounty could have prevented, it
might perhaps have been very well worth while to give such a bounty.
Under the present system of management, therefore, Great Britain derives
nothing but loss from the dominion which she assumes over her colonies.
To propose that Great Britain should voluntarily give up all authority
over her colonies, and leave them to elect their own magistrates, to enact
their own laws, and to make peace and war, as they might think proper,
would be to propose such a measure as never was, and never will be,
adopted by any nation in the world. No nation ever voluntarily gave up the
dominion of any province, how troublesome soever it might be to govern it,
and how small soever the revenue which it afforded might be in proportion
to the expense which it occasioned. Such sacrifices, though they might
frequently be agreeable to the interest, are always mortifying to the
pride of every nation; and, what is perhaps of still greater consequence,
they are always contrary to the private interest of the governing part of
it, who would thereby be deprived of the disposal of many places of trust
and profit, of many opportunities of acquiring wealth and distinction,
which the possession of the most turbulent, and, to the great body of the
people, the most unprofitable province, seldom fails to afford. The most
visionary enthusiasts would scarce be capable of proposing such a measure,
with any serious hopes at least of its ever being adopted. If it was
adopted, however, Great Britain would not only be immediately freed from
the whole annual expense of the peace establishment of the colonies, but
might settle with them such a treaty of commerce as would effectually
secure to her a free trade, more advantageous to the great body of the
people, though less so to the merchants, than the monopoly which she at
present enjoys. By thus parting good friends, the natural affection of the
colonies to the mother country, which, perhaps, our late dissensions have
well nigh extinguished, would quickly revive. It might dispose them not
only to respect, for whole centuries together, that treaty of commerce
which they had concluded with us at parting, but to favour us in war as
well as in trade, and instead of turbulent and factious subjects, to
become our most faithful, affectionate, and generous allies; and the same
sort of parental affection on the one side, and filial respect on the
other, might revive between Great Britain and her colonies, which used to
subsist between those of ancient Greece and the mother city from which
they descended.
In order to render any province advantageous to the empire to which it
belongs, it ought to afford, in time of peace, a revenue to the public,
sufficient not only for defraying the whole expense of its own peace
establishment, but for contributing its proportion to the support of the
general government of the empire. Every province necessarily contributes,
more or less, to increase the expense of that general government. If any
particular province, therefore, does not contribute its share towards
defraying this expense, an unequal burden must be thrown upon some other
part of the empire. The extraordinary revenue, too, which every province
affords to the public in time of war, ought, from parity of reason, to
bear the same proportion to the extraordinary revenue of the whole empire,
which its ordinary revenue does in time of peace. That neither the
ordinary nor extraordinary revenue which Great Britain derives from her
colonies, bears this proportion to the whole revenue of the British
empire, will readily be allowed. The monopoly, it has been supposed,
indeed, by increasing the private revenue of the people of Great Britain,
and thereby enabling them to pay greater taxes, compensates the deficiency
of the public revenue of the colonies. But this monopoly, I have
endeavoured to show, though a very grievous tax upon the colonies, and
though it may increase the revenue of a particular order of men in Great
Britain, diminishes, instead of increasing, that of the great body of the
people, and consequently diminishes, instead of increasing, the ability of
the great body of the people to pay taxes. The men, too, whose revenue the
monopoly increases, constitute a particular order, which it is both
absolutely impossible to tax beyond the proportion of other orders, and
extremely impolitic even to attempt to tax beyond that proportion, as I
shall endeavour to show in the following book. No particular resource,
therefore, can be drawn from this particular order.
The colonies may be taxed either by their own assemblies, or by the
parliament of Great Britain.
That the colony assemblies can never be so managed as to levy upon their
constituents a public revenue, sufficient, not only to maintain at all
times their own civil and military establishment, but to pay their proper
proportion of the expense of the general government of the British empire,
seems not very probable. It was a long time before even the parliament of
England, though placed immediately under the eye of the sovereign, could
be brought under such a system of management, or could be rendered
sufficiently liberal in their grants for supporting the civil and military
establishments even of their own country. It was only by distributing
among the particular members of parliament a great part either of the
offices, or of the disposal of the offices arising from this civil and
military establishment, that such a system of management could be
established, even with regard to the parliament of England. But the
distance of the colony assemblies from the eye of the sovereign, their
number, their dispersed situation, and their various constitutions, would
render it very difficult to manage them in the same manner, even though
the sovereign had the same means of doing it; and those means are wanting.
It would be absolutely impossible to distribute among all the leading
members of all the colony assemblies such a share, either of the offices,
or of the disposal of the offices, arising from the general government of
the British empire, as to dispose them to give up their popularity at
home, and to tax their constituents for the support of that general
government, of which almost the whole emoluments were to be divided among
people who were strangers to them. The unavoidable ignorance of
administration, besides, concerning the relative importance of the
different members of those different assemblies, the offences which must
frequently be given, the blunders which must constantly be committed, in
attempting to manage them in this manner, seems to render such a system of
management altogether impracticable with regard to them.
The colony assemblies, besides, cannot be supposed the proper judges of
what is necessary for the defence and support of the whole empire. The
care of that defence and support is not entrusted to them. It is not their
business, and they have no regular means of information concerning it. The
assembly of a province, like the vestry of a parish, may judge very
properly concerning the affairs of its own particular district, but can
have no proper means of judging concerning those of the whole empire. It
cannot even judge properly concerning the proportion which its own
province bears to the whole empire, or concerning the relative degree of
its wealth and importance, compared with the other provinces; because
those other provinces are not under the inspection and superintendency of
the assembly of a particular province. What is necessary for the defence
and support of the whole empire, and in what proportion each part ought to
contribute, can be judged of only by that assembly which inspects and
super-intends the affairs of the whole empire.
It has been proposed, accordingly, that the colonies should be taxed by
requisition, the parliament of Great Britain determining the sum which
each colony ought to pay, and the provincial assembly assessing and
levying it in the way that suited best the circumstances of the province.
What concerned the whole empire would in this way be determined by the
assembly which inspects and superintends the affairs of the whole empire;
and the provincial affairs of each colony might still be regulated by its
own assembly. Though the colonies should, in this case, have no
representatives in the British parliament, yet, if we may judge by
experience, there is no probability that the parliamentary requisition
would be unreasonable. The parliament of England has not, upon any
occasion, shewn the smallest disposition to overburden those parts of the
empire which are not represented in parliament. The islands of Guernsey
and Jersey, without any means of resisting the authority of parliament,
are more lightly taxed than any part of Great Britain. Parliament, in
attempting to exercise its supposed right, whether well or ill grounded,
of taxing the colonies, has never hitherto demanded of them anything which
even approached to a just proportion to what was paid by their fellow
subjects at home. If the contribution of the colonies, besides, was to
rise or fall in proportion to the rise or fall of the land-tax, parliament
could not tax them without taxing, at the same time, its own constituents,
and the colonies might, in this case, be considered as virtually
represented in parliament.
Examples are not wanting of empires in which all the different provinces
are not taxed, if I may be allowed the expression, in one mass; but in
which the sovereign regulates the sum which each province ought to pay,
and in some provinces assesses and levies it as he thinks proper; while in
others he leaves it to be assessed and levied as the respective states of
each province shall determine. In some provinces of France, the king not
only imposes what taxes he thinks proper, but assesses and levies them in
the way he thinks proper. From others he demands a certain sum, but leaves
it to the states of each province to assess and levy that sum as they
think proper. According to the scheme of taxing by requisition, the
parliament of Great Britain would stand nearly in the same situation
towards the colony assemblies, as the king of France does towards the
states of those provinces which still enjoy the privilege of having states
of their own, the provinces of France which are supposed to be the best
governed.
But though, according to this scheme, the colonies could have no just
reason to fear that their share of the public burdens should ever exceed
the proper proportion to that of their fellow-citizens at home, Great
Britain might have just reason to fear that it never would amount to that
proper proportion. The parliament of Great Britain has not, for some time
past, had the same established authority in the colonies, which the French
king has in those provinces of France which still enjoy the privilege of
having states of their own. The colony assemblies, if they were not very
favourably disposed (and unless more skilfully managed than they ever have
been hitherto, they are not very likely to be so), might still find many
pretences for evading or rejecting the most reasonable requisitions of
parliament. A French war breaks out, we shall suppose; ten millions must
immediately be raised, in order to defend the seat of the empire. This sum
must be borrowed upon the credit of some parliamentary fund mortgaged for
paying the interest. Part of this fund parliament proposes to raise by a
tax to be levied in Great Britain; and part of it by a requisition to all
the different colony assemblies of America and the West Indies. Would
people readily advance their money upon the credit of a fund which partly
depended upon the good humour of all those assemblies, far distant from
the seat of the war, and sometimes, perhaps, thinking themselves not much
concerned in the event of it? Upon such a fund, no more money would
probably be advanced than what the tax to be levied in Great Britain might
be supposed to answer for. The whole burden of the debt contracted on
account of the war would in this manner fall, as it always has done
hitherto, upon Great Britain; upon a part of the empire, and not upon the
whole empire. Great Britain is, perhaps, since the world began, the only
state which, as it has extended its empire, has only increased its
expense, without once augmenting its resources. Other states have
generally disburdened themselves, upon their subject and subordinate
provinces, of the most considerable part of the expense of defending the
empire. Great Britain has hitherto suffered her subject and subordinate
provinces to disburden themselves upon her of almost this whole expense.
In order to put Great Britain upon a footing of equality with her own
colonies, which the law has hitherto supposed to be subject and
subordinate, it seems necessary, upon the scheme of taxing them by
parliamentary requisition, that parliament should have some means of
rendering its requisitions immediately effectual, in case the colony
assemblies should attempt to evade or reject them; and what those means
are, it is not very easy to conceive, and it has not yet been explained.
Should the parliament of Great Britain, at the same time, be ever fully
established in the right of taxing the colonies, even independent of the
consent of their own assemblies, the importance of those assemblies would,
from that moment, be at an end, and with it, that of all the leading men
of British America. Men desire to have some share in the management of
public affairs, chiefly on account of the importance which it gives them.
Upon the power which the greater part of the leading men, the natural
aristocracy of every country, have of preserving or defending their
respective importance, depends the stability and duration of every system
of free government. In the attacks which those leading men are continually
making upon the importance of one another, and in the defence of their
own, consists the whole play of domestic faction and ambition. The leading
men of America, like those of all other countries, desire to preserve
their own importance. They feel, or imagine, that if their assemblies,
which they are fond of calling parliaments, and of considering as equal in
authority to the parliament of Great Britain, should be so far degraded as
to become the humble ministers and executive officers of that parliament,
the greater part of their own importance would be at an end. They have
rejected, therefore, the proposal of being taxed by parliamentary
requisition, and, like other ambitious and high-spirited men, have rather
chosen to draw the sword in defence of their own importance.
Towards the declension of the Roman republic, the allies of Rome, who had
borne the principal burden of defending the state and extending the
empire, demanded to be admitted to all the privileges of Roman citizens.
Upon being refused, the social war broke out. During the course of that
war, Rome granted those privileges to the greater part of them, one by
one, and in proportion as they detached themselves from the general
confederacy. The parliament of Great Britain insists upon taxing the
colonies; and they refuse to be taxed by a parliament in which they are
not represented. If to each colony which should detach itself from the
general confederacy, Great Britain should allow such a number of
representatives as suited the proportion of what it contributed to the
public revenue of the empire, in consequence of its being subjected to the
same taxes, and in compensation admitted to the same freedom of trade with
its fellow-subjects at home; the number of its representatives to be
augmented as the proportion of its contribution might afterwards augment;
a new method of acquiring importance, a new and more dazzling object of
ambition, would be presented to the leading men of each colony. Instead of
piddling for the little prizes which are to be found in what may be called
the paltry raffle of colony faction, they might then hope, from the
presumption which men naturally have in their own ability and good
fortune, to draw some of the great prizes which sometimes come from the
wheel of the great state lottery of British politics. Unless this or some
other method is fallen upon, and there seems to be none more obvious than
this, of preserving the importance and of gratifying the ambition of the
leading men of America, it is not very probable that they will ever
voluntarily submit to us; and we ought to consider, that the blood which
must be shed in forcing them to do so, is, every drop of it, the blood
either of those who are, or of those whom we wish to have for our fellow
citizens. They are very weak who flatter themselves that, in the state to
which things have come, our colonies will be easily conquered by force
alone. The persons who now govern the resolutions of what they call their
continental congress, feel in themselves at this moment a degree of
importance which, perhaps, the greatest subjects in Europe scarce feel.
From shopkeepers, trades men, and attorneys, they are become statesmen and
legislators, and are employed in contriving a new form of government for
an extensive empire, which, they flatter themselves, will become, and
which, indeed, seems very likely to become, one of the greatest and most
formidable that ever was in the world. Five hundred different people,
perhaps, who, in different ways, act immediately under the continental
congress, and five hundred thousand, perhaps, who act under those five
hundred, all feel, in the same manner, a proportionable rise in their own
importance. Almost every individual of the governing party in America
fills, at present, in his own fancy, a station superior, not only to what
he had ever filled before, but to what he had ever expected to fill; and
unless some new object of ambition is presented either to him or to his
leaders, if he has the ordinary spirit of a man, he will die in defence of
that station.
It is a remark of the President Heynaut, that we now read with pleasure
the account of many little transactions of the Ligue, which, when they
happened, were not, perhaps, considered as very important pieces of news.
But everyman then, says he, fancied himself of some importance; and the
innumerable memoirs which have come down to us from those times, were the
greater part of them written by people who took pleasure in recording and
magnifying events, in which they flattered themselves they had been
considerable actors. How obstinately the city of Paris, upon that
occasion, defended itself, what a dreadful famine it supported, rather
than submit to the best, and afterwards the most beloved of all the French
kings, is well known. The greater part of the citizens, or those who
governed the greater part of them, fought in defence of their own
importance, which, they foresaw, was to be at an end whenever the ancient
government should be re-established. Our colonies, unless they can be
induced to consent to a union, are very likely to defend themselves,
against the best of all mother countries, as obstinately as the city of
Paris did against one of the best of kings.
The idea of representation was unknown in ancient times. When the people
of one state were admitted to the right of citizenship in another, they
had no other means of exercising that right, but by coming in a body to
vote and deliberate with the people of that other state. The admission of
the greater part of the inhabitants of Italy to the privileges of Roman
citizens, completely ruined the Roman republic. It was no longer possible
to distinguish between who was, and who was not, a Roman citizen. No tribe
could know its own members. A rabble of any kind could be introduced into
the assemblies of the people, could drive out the real citizens, and
decide upon the affairs of the republic, as if they themselves had been
such. But though America were to send fifty or sixty new representatives
to parliament, the door-keeper of the house of commons could not find any
great difficulty in distinguishing between who was and who was not a
member. Though the Roman constitution, therefore, was necessarily ruined
by the union of Rome with the allied states of Italy, there is not the
least probability that the British constitution would be hurt by the union
of Great Britain with her colonies. That constitution, on the contrary,
would be completed by it, and seems to be imperfect without it. The
assembly which deliberates and decides concerning the affairs of every
part of the empire, in order to be properly informed, ought certainly to
have representatives from every part of it. That this union, however,
could be easily effectuated, or that difficulties, and great difficulties,
might not occur in the execution, I do not pretend. I have yet heard of
none, however, which appear insurmountable. The principal, perhaps, arise,
not from the nature of things, but from the prejudices and opinions of the
people, both on this and on the other side of the Atlantic.
We on this side the water are afraid lest the multitude of American
representatives should overturn the balance of the constitution, and
increase too much either the influence of the crown on the one hand, or
the force of the democracy on the other. But if the number of American
representatives were to be in proportion to the produce of American
taxation, the number of people to be managed would increase exactly in
proportion to the means of managing them, and the means of managing to the
number of people to be managed. The monarchical and democratical parts of
the constitution would, after the union, stand exactly in the same degree
of relative force with regard to one another as they had done before.
The people on the other side of the water are afraid lest their distance
from the seat of government might expose them to many oppressions; but
their representatives in parliament, of which the number ought from the
first to be considerable, would easily be able to protect them from all
oppression. The distance could not much weaken the dependency of the
representative upon the constituent, and the former would still feel that
he owed his seat in parliament, and all the consequence which he derived
from it, to the good-will of the latter. It would be the interest of the
former, therefore, to cultivate that good-will, by complaining, with all
the authority of a member of the legislature, of every outrage which any
civil or military officer might be guilty of in those remote parts of the
empire. The distance of America from the seat of government, besides, the
natives of that country might flatter themselves, with some appearance of
reason too, would not be of very long continuance. Such has hitherto been
the rapid progress of that country in wealth, population, and improvement,
that in the course of little more than a century, perhaps, the produce of
the American might exceed that of the British taxation. The seat of the
empire would then naturally remove itself to that part of the empire which
contributed most to the general defence and support of the whole.
The discovery of America, and that of a passage to the East Indies by the
Cape of Good Hope, are the two greatest and most important events recorded
in the history of mankind. Their consequences have already been great;
but, in the short period of between two and three centuries which has
elapsed since these discoveries were made, it is impossible that the whole
extent of their consequences can have been seen. What benefits or what
misfortunes to mankind may hereafter result from those great events, no
human wisdom can foresee. By uniting in some measure the most distant
parts of the world, by enabling them to relieve one another’s wants, to
increase one another’s enjoyments, and to encourage one another’s
industry, their general tendency would seem to be beneficial. To the
natives, however, both of the East and West Indies, all the commercial
benefits which can have resulted from those events have been sunk and lost
in the dreadful misfortunes which they have occasioned. These misfortunes,
however, seem to have arisen rather from accident than from any thing in
the nature of those events themselves. At the particular time when these
discoveries were made, the superiority of force happened to be so great on
the side of the Europeans, that they were enabled to commit with impunity
every sort of injustice in those remote countries. Hereafter, perhaps, the
natives of those countries may grow stronger, or those of Europe may grow
weaker; and the inhabitants of all the different quarters of the world may
arrive at that equality of courage and force which, by inspiring mutual
fear, can alone overawe the injustice of independent nations into some
sort of respect for the rights of one another. But nothing seems more
likely to establish this equality of force, than that mutual communication
of knowledge, and of all sorts of improvements, which an extensive
commerce from all countries to all countries naturally, or rather
necessarily, carries along with it.
In the mean time, one of the principal effects of those discoveries has
been, to raise the mercantile system to a degree of splendour and glory
which it could never otherwise have attained to. It is the object of that
system to enrich a great nation, rather by trade and manufactures than by
the improvement and cultivation of land, rather by the industry of the
towns than by that of the country. But in consequence of those
discoveries, the commercial towns of Europe, instead of being the
manufacturers and carriers for but a very small part of the world (that
part of Europe which is washed by the Atlantic ocean, and the countries
which lie round the Baltic and Mediterranean seas), have now become the
manufacturers for the numerous and thriving cultivators of America, and
the carriers, and in some respects the manufacturers too, for almost all
the different nations of Asia, Africa, and America. Two new worlds have
been opened to their industry, each of them much greater and more
extensive than the old one, and the market of one of them growing still
greater and greater every day.
The countries which possess the colonies of America, and which trade
directly to the East Indies, enjoy indeed the whole show and splendour of
this great commerce. Other countries, however, notwithstanding all the
invidious restraints by which it is meant to exclude them, frequently
enjoy a greater share of the real benefit of it. The colonies of Spain and
Portugal, for example, give more real encouragement to the industry of
other countries than to that of Spain and Portugal. In the single article
of linen alone, the consumption of those colonies amounts, it is said (but
I do not pretend to warrant the quantity ), to more than three millions
sterling a-year. But this great consumption is almost entirely supplied by
France, Flanders, Holland, and Germany. Spain and Portugal furnish but a
small part of it. The capital which supplies the colonies with this great
quantity of linen, is annually distributed among, and furnishes a revenue
to, the inhabitants of those other countries. The profits of it only are
spent in Spain and Portugal, where they help to support the sumptuous
profusion of the merchants of Cadiz and Lisbon.
Even the regulations by which each nation endeavours to secure to itself
the exclusive trade of its own colonies, are frequently more hurtful to
the countries in favour of which they are established, than to those
against which they are established. The unjust oppression of the industry
of other countries falls back, if I may say so, upon the heads of the
oppressors, and crushes their industry more than it does that of those
other countries. By those regulations, for example, the merchant of
Hamburg must send the linen which he destines for the American market to
London, and he must bring back from thence the tobacco which he destines
for the German market; because he can neither send the one directly to
America, nor bring the other directly from thence. By this restraint he is
probably obliged to sell the one somewhat cheaper, and to buy the other
somewhat dearer, than he otherwise might have done; and his profits are
probably somewhat abridged by means of it. In this trade, however, between
Hamburg and London, he certainly receives the returns of his capital much
more quickly than he could possibly have done in the direct trade to
America, even though we should suppose, what is by no means the case, that
the payments of America were as punctual as those of London. In the trade,
therefore, to which those regulations confine the merchant of Hamburg, his
capital can keep in constant employment a much greater quantity of German
industry than he possibly could have done in the trade from which he is
excluded. Though the one employment, therefore, may to him perhaps be less
profitable than the other, it cannot be less advantageous to his country.
It is quite otherwise with the employment into which the monopoly
naturally attracts, if I may say so, the capital of the London merchant.
That employment may, perhaps, be more profitable to him than the greater
part of other employments; but on account of the slowness of the returns,
it cannot be more advantageous to his country.
After all the unjust attempts, therefore, of every country in Europe to
engross to itself the whole advantage of the trade of its own colonies, no
country has yet been able to engross to itself any thing but the expense
of supporting in time of peace, and of defending in time of war, the
oppressive authority which it assumes over them. The inconveniencies
resulting from the possession of its colonies, every country has engrossed
to itself completely. The advantages resulting from their trade, it has
been obliged to share with many other countries.
At first sight, no doubt, the monopoly of the great commerce of America
naturally seems to be an acquisition of the highest value. To the
undiscerning eye of giddy ambition it naturally presents itself, amidst
the confused scramble of politics and war, as a very dazzling object to
fight for. The dazzling splendour of the object, however, the immense
greatness of the commerce, is the very quality which renders the monopoly
of it hurtful, or which makes one employment, in its own nature
necessarily less advantageous to the country than the greater part of
other employments, absorb a much greater proportion of the capital of the
country than what would otherwise have gone to it.
The mercantile stock of every country, it has been shown in the second
book, naturally seeks, if one may say so, the employment most advantageous
to that country. If it is employed in the carrying trade, the country to
which it belongs becomes the emporium of the goods of all the countries
whose trade that stock carries on. But the owner of that stock necessarily
wishes to dispose of as great a part of those goods as he can at home. He
thereby saves himself the trouble, risk, and expense of exportation; and
he will upon that account be glad to sell them at home, not only for a
much smaller price, but with somewhat a smaller profit, than he might
expect to make by sending them abroad. He naturally, therefore, endeavours
as much as he can to turn his carrying trade into a foreign trade of
consumption, If his stock, again, is employed in a foreign trade of
consumption, he will, for the same reason, be glad to dispose of, at home,
as great a part as he can of the home goods which he collects in order to
export to some foreign market, and he will thus endeavour, as much as he
can, to turn his foreign trade of consumption into a home trade. The
mercantile stock of every country naturally courts in this manner the
near, and shuns the distant employment: naturally courts the employment in
which the returns are frequent, and shuns that in which they are distant
and slow; naturally courts the employment in which it can maintain the
greatest quantity of productive labour in the country to which it belongs,
or in which its owner resides, and shuns that in which it can maintain
there the smallest quantity. It naturally courts the employment which in
ordinary cases is most advantageous, and shuns that which in ordinary
cases is least advantageous to that country.
But if, in any one of those distant employments, which in ordinary cases
are less advantageous to the country, the profit should happen to rise
somewhat higher than what is sufficient to balance the natural preference
which is given to nearer employments, this superiority of profit will draw
stock from those nearer employments, till the profits of all return to
their proper level. This superiority of profit, however, is a proof that,
in the actual circumstances of the society, those distant employments are
somewhat understocked in proportion to other employments, and that the
stock of the society is not distributed in the properest manner among all
the different employments carried on in it. It is a proof that something
is either bought cheaper or sold dearer than it ought to be, and that some
particular class of citizens is more or less oppressed, either by paying
more, or by getting less than what is suitable to that equality which
ought to take place, and which naturally does take place, among all the
different classes of them. Though the same capital never will maintain the
same quantity of productive labour in a distant as in a near employment,
yet a distant employment maybe as necessary for the welfare of the society
as a near one; the goods which the distant employment deals in being
necessary, perhaps, for carrying on many of the nearer employments. But if
the profits of those who deal in such goods are above their proper level,
those goods will be sold dearer than they ought to be, or somewhat above
their natural price, and all those engaged in the nearer employments will
be more or less oppressed by this high price. Their interest, therefore,
in this case, requires, that some stock should be withdrawn from those
nearer employments, and turned towards that distant one, in order to
reduce its profits to their proper level, and the price of the goods which
it deals in to their natural price. In this extraordinary case, the public
interest requires that some stock should be withdrawn from those
employments which, in ordinary cases, are more advantageous, and turned
towards one which, in ordinary cases, is less advantageous to the public;
and, in this extraordinary case, the natural interests and inclinations of
men coincide as exactly with the public interests as in all other ordinary
cases, and lead them to withdraw stock from the near, and to turn it
towards the distant employments.
It is thus that the private interests and passions of individuals
naturally dispose them to turn their stock towards the employments which
in ordinary cases, are most advantageous to the society. But if from this
natural preference they should turn too much of it towards those
employments, the fall of profit in them, and the rise of it in all others,
immediately dispose them to alter this faulty distribution. Without any
intervention of law, therefore, the private interests and passions of men
naturally lead them to divide and distribute the stock of every society
among all the different employments carried on in it; as nearly as
possible in the proportion which is most agreeable to the interest of the
whole society.
All the different regulations of the mercantile system necessarily derange
more or less this natural and most advantageous distribution of stock. But
those which concern the trade to America and the East Indies derange it,
perhaps, more than any other; because the trade to those two great
continents absorbs a greater quantity of stock than any two other branches
of trade. The regulations, however, by which this derangement is effected
in those two different branches of trade, are not altogether the same.
Monopoly is the great engine of both; but it is a different sort of
monopoly. Monopoly of one kind or another, indeed, seems to be the sole
engine of the mercantile system.
In the trade to America, every nation endeavours to engross as much as
possible the whole market of its own colonies, by fairly excluding all
other nations from any direct trade to them. During the greater part of
the sixteenth century, the Portuguese endeavoured to manage the trade to
the East Indies in the same manner, by claiming the sole right of sailing
in the Indian seas, on account of the merit of having first found out the
road to them. The Dutch still continue to exclude all other European
nations from any direct trade to their spice islands. Monopolies of this
kind are evidently established against all other European nations, who are
thereby not only excluded from a trade to which it might be convenient for
them to turn some part of their stock, but are obliged to buy the goods
which that trade deals in, somewhat dearer than if they could import them
themselves directly from the countries which produced them.
But since the fall of the power of Portugal, no European nation has
claimed the exclusive right of sailing in the Indian seas, of which the
principal ports are now open to the ships of all European nations. Except
in Portugal, however, and within these few years in France, the trade to
the East Indies has, in every European country, been subjected to an
exclusive company. Monopolies of this kind are properly established
against the very nation which erects them. The greater part of that nation
are thereby not only excluded from a trade to which it might be convenient
for them to turn some part of their stock, but are obliged to buy the
goods which that trade deals in somewhat dearer than if it was open and
free to all their countrymen. Since the establishment of the English East
India company, for example, the other inhabitants of England, over and
above being excluded from the trade, must have paid, in the price of the
East India goods which they have consumed, not only for all the
extraordinary profits which the company may have made upon those goods in
consequence of their monopoly, but for all the extraordinary waste which
the fraud and abuse inseparable from the management of the affairs of so
great a company must necessarily have occasioned. The absurdity of this
second kind of monopoly, therefore, is much more manifest than that of the
first.
Both these kinds of monopolies derange more or less the natural
distribution of the stock of the society; but they do not always derange
it in the same way.
Monopolies of the first kind always attract to the particular trade in
which they are established a greater proportion of the stock of the
society than what would go to that trade of its own accord.
Monopolies of the second kind may sometimes attract stock towards the
particular trade in which they are established, and sometimes repel it
from that trade, according to different circumstances. In poor countries,
they naturally attract towards that trade more stock than would otherwise
go to it. In rich countries, they naturally repel from it a good deal of
stock which would otherwise go to it.
Such poor countries as Sweden and Denmark, for example, would probably
have never sent a single ship to the East Indies, had not the trade been
subjected to an exclusive company. The establishment of such a company
necessarily encourages adventurers. Their monopoly secures them against
all competitors in the home market, and they have the same chance for
foreign markets with the traders of other nations. Their monopoly shows
them the certainty of a great profit upon a considerable quantity of
goods, and the chance of a considerable profit upon a great quantity.
Without such extraordinary encouragement, the poor traders of such poor
countries would probably never have thought of hazarding their small
capitals in so very distant and uncertain an adventure as the trade to the
East Indies must naturally have appeared to them.
Such a rich country as Holland, on the contrary, would probably, in the
case of a free trade, send many more ships to the East Indies than it
actually does. The limited stock of the Dutch East India company probably
repels from that trade many great mercantile capitals which would
otherwise go to it. The mercantile capital of Holland is so great, that it
is, as it were, continually overflowing, sometimes into the public funds
of foreign countries, sometimes into loans to private traders and
adventurers of foreign countries, sometimes into the most round-about
foreign trades of consumption, and sometimes into the carrying trade. All
near employments being completely filled up, all the capital which can be
placed in them with any tolerable profit being already placed in them, the
capital of Holland necessarily flows towards the most distant employments.
The trade to the East Indies, if it were altogether free, would probably
absorb the greater part of this redundant capital. The East Indies offer a
market both for the manufactures of Europe, and for the gold and silver,
as well as for the several other productions of America, greater and more
extensive than both Europe and America put together.
Every derangement of the natural distribution of stock is necessarily
hurtful to the society in which it takes place; whether it be by repelling
from a particular trade the stock which would otherwise go to it, or by
attracting towards a particular trade that which would not otherwise come
to it. If, without any exclusive company, the trade of Holland to the East
Indies would be greater than it actually is, that country must suffer a
considerable loss, by part of its capital being excluded from the
employment most convenient for that port. And, in the same manner, if,
without an exclusive company, the trade of Sweden and Denmark to the East
Indies would be less than it actually is, or, what perhaps is more
probable, would not exist at all, those two countries must likewise suffer
a considerable loss, by part of their capital being drawn into an
employment which must be more or less unsuitable to their present
circumstances. Better for them, perhaps, in the present circumstances, to
buy East India goods of other nations, even though they should pay
somewhat dearer, than to turn so great a part of their small capital to so
very distant a trade, in which the returns are so very slow, in which that
capital can maintain so small a quantity of productive labour at home,
where productive labour is so much wanted, where so little is done, and
where so much is to do.
Though without an exclusive company, therefore, a particular country
should not be able to carry on any direct trade to the East Indies, it
will not from thence follow, that such a company ought to be established
there, but only that such a country ought not, in these circumstances, to
trade directly to the East Indies. That such companies are not in general
necessary for carrying on the East India trade, is sufficiently
demonstrated by the experience of the Portuguese, who enjoyed almost the
whole of it for more than a century together, without any exclusive
company.
No private merchant, it has been said, could well have capital sufficient
to maintain factors and agents in the different ports of the East Indies,
in order to provide goods for the ships which he might occasionally send
thither; and yet, unless he was able to do this, the difficulty of finding
a cargo might frequently make his ships lose the season for returning; and
the expense of so long a delay would not only eat up the whole profit of
the adventure, but frequently occasion a very considerable loss. This
argument, however, if it proved any thing at all, would prove that no one
great branch of trade could be carried on without an exclusive company,
which is contrary to the experience of all nations. There is no great
branch of trade, in which the capital of any one private merchant is
sufficient for carrying on all the subordinate branches which must be
carried on, in order to carry on the principal one. But when a nation is
ripe for any great branch of trade, some merchants naturally turn their
capitals towards the principal, and some towards the subordinate branches
of it; and though all the different branches of it are in this manner
carried on, yet it very seldom happens that they are all carried on by the
capital of one private merchant. If a nation, therefore, is ripe for the
East India trade, a certain portion of its capital will naturally divide
itself among all the different branches of that trade. Some of its
merchants will find it for their interest to reside in the East Indies,
and to employ their capitals there in providing goods for the ships which
are to be sent out by other merchants who reside in Europe. The
settlements which different European nations have obtained in the East
Indies, if they were taken from the exclusive companies to which they at
present belong, and put under the immediate protection of the sovereign,
would render this residence both safe and easy, at least to the merchants
of the particular nations to whom those settlements belong. If, at any
particular time, that part of the capital of any country which of its own
accord tended and inclined, if I may say so, towards the East India trade,
was not sufficient for carrying on all those different branches of it, it
would be a proof that, at that particular time, that country was not ripe
for that trade, and that it would do better to buy for some time, even at
a higher price, from other European nations, the East India goods it had
occasion for, than to import them itself directly from the East Indies.
What it might lose by the high price of those goods, could seldom be equal
to the loss which it would sustain by the distraction of a large portion
of its capital from other employments more necessary, or more useful, or
more suitable to its circumstances and situation, than a direct trade to
the East Indies.
Though the Europeans possess many considerable settlements both upon the
coast of Africa and in the East Indies, they have not yet established, in
either of those countries, such numerous and thriving colonies as those in
the islands and continent of America. Africa, however, as well as several
of the countries comprehended under the general name of the East Indies,
is inhabited by barbarous nations. But those nations were by no means so
weak and defenceless as the miserable and helpless Americans; and in
proportion to the natural fertility of the countries which they inhabited,
they were, besides, much more populous. The most barbarous nations either
of Africa or of the East Indies, were shepherds; even the Hottentots were
so. But the natives of every part of America, except Mexico and Peru, were
only hunters and the difference is very great between the number of
shepherds and that of hunters whom the same extent of equally fertile
territory can maintain. In Africa and the East Indies, therefore, it was
more difficult to displace the natives, and to extend the European
plantations over the greater part of the lands of the original
inhabitants. The genius of exclusive companies, besides, is unfavourable,
it has already been observed, to the growth of new colonies, and has
probably been the principal cause of the little progress which they have
made in the East Indies. The Portuguese carried on the trade both to
Africa and the East Indies, without any exclusive companies; and their
settlements at Congo, Angola, and Benguela, on the coast of Africa, and at
Goa in the East Indies though much depressed by superstition and every
sort of bad government, yet bear some resemblance to the colonies of
America, and are partly inhabited by Portuguese who have been established
there for several generations. The Dutch settlements at the Cape of Good
Hope and at Batavia, are at present the most considerable colonies which
the Europeans have established, either in Africa or in the East Indies;
and both those settlements are peculiarly fortunate in their situation. The
Cape of Good Hope was inhabited by a race of people almost as barbarous,
and quite as incapable of defending themselves, as the natives of America.
It is, besides, the half-way house, if one may say so, between Europe and
the East Indies, at which almost every European ship makes some stay, both
in going and returning. The supplying of those ships with every sort of
fresh provisions, with fruit, and sometimes with wine, affords alone a
very extensive market for the surplus produce of the colonies. What the
Cape of Good Hope is between Europe and every part of the East Indies,
Batavia is between the principal countries of the East Indies. It lies
upon the most frequented road from Indostan to China and Japan, and is
nearly about mid-way upon that road. Almost all the ships too, that sail
between Europe and China, touch at Batavia; and it is, over and above all
this, the centre and principal mart of what is called the country trade of
the East Indies; not only of that part of it which is carried on by
Europeans, but of that which is carried on by the native Indians; and
vessels navigated by the inhabitants of China and Japan, of Tonquin,
Malacca, Cochin-China, and the island of Celebes, are frequently to be
seen in its port. Such advantageous situations have enabled those two
colonies to surmount all the obstacles which the oppressive genius of an
exclusive company may have occasionally opposed to their growth. They have
enabled Batavia to surmount the additional disadvantage of perhaps the
most unwholesome climate in the world.
The English and Dutch companies, though they have established no
considerable colonies, except the two above mentioned, have both made
considerable conquests in the East Indies. But in the manner in which they
both govern their new subjects, the natural genius of an exclusive company
has shewn itself most distinctly. In the spice islands, the Dutch are said
to burn all the spiceries which a fertile season produces, beyond what
they expect to dispose of in Europe with such a profit as they think
sufficient. In the islands where they have no settlements, they give a
premium to those who collect the young blossoms and green leaves of the
clove and nutmeg trees, which naturally grow there, but which this savage
policy has now, it is said, almost completely extirpated. Even in the
islands where they have settlements, they have very much reduced, it is
said, the number of those trees. If the produce even of their own islands
was much greater than what suited their market, the natives, they suspect,
might find means to convey some part of it to other nations; and the best
way, they imagine, to secure their own monopoly, is to take care that no
more shall grow than what they themselves carry to market. By different
arts of oppression, they have reduced the population of several of the
Moluccas nearly to the number which is sufficient to supply with fresh
provisions, and other necessaries of life, their own insignificant
garrisons, and such of their ships as occasionally come there for a cargo
of spices. Under the government even of the Portuguese, however, those
islands are said to have been tolerably well inhabited. The English
company have not yet had time to establish in Bengal so perfectly
destructive a system. The plan of their government, however, has had
exactly the same tendency. It has not been uncommon, I am well assured,
for the chief, that is, the first clerk or a factory, to order a peasant
to plough up a rich field of poppies, and sow it with rice, or some other
grain. The pretence was, to prevent a scarcity of provisions; but the real
reason, to give the chief an opportunity of selling at a better price a
large quantity of opium which he happened then to have upon hand. Upon
other occasions, the order has been reversed; and a rich field of rice or
other grain has been ploughed up, in order to make room for a plantation
of poppies, when the chief foresaw that extraordinary profit was likely to
be made by opium. The servants of the company have, upon several
occasions, attempted to establish in their own favour the monopoly of some
of the most important branches, not only of the foreign, but of the inland
trade of the country. Had they been allowed to go on, it is impossible
that they should not, at some time or another, have attempted to restrain
the production of the particular articles of which they had thus usurped
the monopoly, not only to the quantity which they themselves could
purchase, but to that which they could expect to sell with such a profit
as they might think sufficient. In the course of a century or two, the
policy of the English company would, in this manner, have probably proved
as completely destructive as that of the Dutch.
Nothing, however, can be more directly contrary to the real interest of
those companies, considered as the sovereigns of the countries which they
have conquered, than this destructive plan. In almost all countries, the
revenue of the sovereign is drawn from that of the people. The greater the
revenue of the people, therefore, the greater the annual produce of their
land and labour, the more they can afford to the sovereign. It is his
interest, therefore, to increase as much as possible that annual produce.
But if this is the interest of every sovereign, it is peculiarly so of one
whose revenue, like that of the sovereign of Bengal, arises chiefly from a
land-rent. That rent must necessarily be in proportion to the quantity and
value of the produce; and both the one and the other must depend upon the
extent of the market. The quantity will always be suited, with more or
less exactness, to the consumption of those who can afford to pay for it;
and the price which they will pay will always be in proportion to the
eagerness of their competition. It is the interest of such a sovereign,
therefore, to open the most extensive market for the produce of his
country, to allow the most perfect freedom of commerce, in order to
increase as much as possible the number and competition of buyers; and
upon this account to abolish, not only all monopolies, but all restraints
upon the transportation of the home produce from one part of the country
to another, upon its exportation to foreign countries, or upon the
importation of goods of any kind for which it can be exchanged. He is in
this manner most likely to increase both the quantity and value of that
produce, and consequently of his own share of it, or of his own revenue.
But a company of merchants, are, it seems, incapable of considering
themselves as sovereigns, even after they have become such. Trade, or
buying in order to sell again, they still consider as their principal
business, and by a strange absurdity, regard the character of the
sovereign as but an appendix to that of the merchant; as something which
ought to be made subservient to it, or by means of which they may be
enabled to buy cheaper in India, and thereby to sell with a better profit
in Europe. They endeavour, for this purpose, to keep out as much as
possible all competitors from the market of the countries which are
subject to their government, and consequently to reduce, at least, some
part of the surplus produce of those countries to what is barely
sufficient for supplying their own demand, or to what they can expect to
sell in Europe, with such a profit as they may think reasonable. Their
mercantile habits draw them in this manner, almost necessarily, though
perhaps insensibly, to prefer, upon all ordinary occasions, the little and
transitory profit of the monopolist to the great and permanent revenue of
the sovereign; and would gradually lead them to treat the countries
subject to their government nearly as the Dutch treat the Moluccas. It is
the interest of the East India company, considered as sovereigns, that the
European goods which are carried to their Indian dominions should be sold
there as cheap as possible; and that the Indian goods which are brought
from thence should bring there as good a price, or should be sold there as
dear as possible. But the reverse of this is their interest as merchants.
As sovereigns, their interest is exactly the same with that of the country
which they govern. As merchants, their interest is directly opposite to
that interest.
But if the genius of such a government, even as to what concerns its
direction in Europe, is in this manner essentially, and perhaps incurably
faulty, that of its administration in India is still more so. That
administration is necessarily composed of a council of merchants, a
profession no doubt extremely respectable, but which in no country in the
world carries along with it that sort of authority which naturally
overawes the people, and without force commands their willing obedience.
Such a council can command obedience only by the military force with which
they are accompanied; and their government is, therefore, necessarily
military and despotical. Their proper business, however, is that of
merchants. It is to sell, upon their master’s account, the European goods
consigned to them, and to buy, in return, Indian goods for the European
market. It is to sell the one as dear, and to buy the other as cheap as
possible, and consequently to exclude, as much as possible, all rivals
from the particular market where they keep their shop. The genius of the
administration, therefore, so far as concerns the trade of the company, is
the same as that of the direction. It tends to make government subservient
to the interest of monopoly, and consequently to stunt the natural growth
of some parts, at least, of the surplus produce of the country, to what is
barely sufficient for answering the demand of the company.
All the members of the administration besides, trade more or less upon
their own account; and it is in vain to prohibit them from doing so.
Nothing can be more completely foolish than to expect that the clerk of a
great counting-house, at ten thousand miles distance, and consequently
almost quite out of sight, should, upon a simple order from their master,
give up at once doing any sort of business upon their own account abandon
for ever all hopes of making a fortune, of which they have the means in
their hands; and content themselves with the moderate salaries which those
masters allow them, and which, moderate as they are, can seldom be
augmented, being commonly as large as the real profits of the company
trade can afford. In such circumstances, to prohibit the servants of the
company from trading upon their own account, can have scarce any other
effect than to enable its superior servants, under pretence of executing
their master’s order, to oppress such of the inferior ones as have had the
misfortune to fall under their displeasure. The servants naturally
endeavour to establish the same monopoly in favour of their own private
trade as of the public trade of the company. If they are suffered to act
as they could wish, they will establish this monopoly openly and directly,
by fairly prohibiting all other people from trading in the articles in
which they choose to deal; and this, perhaps, is the best and least
oppressive way of establishing it. But if, by an order from Europe, they
are prohibited from doing this, they will, notwithstanding, endeavour to
establish a monopoly of the same kind secretly and indirectly, in a way
that is much more destructive to the country. They will employ the whole
authority of government, and pervert the administration of Justice, in
order to harass and ruin those who interfere with them in any branch of
commerce, which by means of agents, either concealed, or at least not
publicly avowed, they may choose to carry on. But the private trade of the
servants will naturally extend to a much greater variety of articles than
the public trade of the company. The public trade of the company extends
no further than the trade with Europe, and comprehends a part only of the
foreign trade of the country. But the private trade of the servants may
extend to all the different branches both of its inland and foreign trade.
The monopoly of the company can tend only to stunt the natural growth of
that part of the surplus produce which, in the case of a free trade, would
be exported to Europe. That of the servants tends to stunt the natural
growth of every part of the produce in which they choose to deal; of what
is destined for home consumption, as well as of what is destined for
exportation; and consequently to degrade the cultivation of the whole
country, and to reduce the number of its inhabitants. It tends to reduce
the quantity of every sort of produce, even that of the necessaries of
life, whenever the servants of the country choose to deal in them, to what
those servants can both afford to buy and expect to sell with such a
profit as pleases them.
From the nature of their situation, too, the servants must be more
disposed to support with rigourous severity their own interest, against
that of the country which they govern, than their masters can be to
support theirs. The country belongs to their masters, who cannot avoid
having some regard for the interest of what belongs to them; but it does
not belong to the servants. The real interest of their masters, if they
were capable of understanding it, is the same with that of the country;
{The interest of every proprietor of India stock, however, is by no means
the same with that of the country in the government of which his vote
gives him some influence.—See book v, chap. 1, part ii.}and it is
from ignorance chiefly, and the meanness of mercantile prejudice, that
they ever oppress it. But the real interest of the servants is by no means
the same with that of the country, and the most perfect information would
not necessarily put an end to their oppressions. The regulations,
accordingly, which have been sent out from Europe, though they have been
frequently weak, have upon most occasions been well meaning. More
intelligence, and perhaps less good meaning, has sometimes appeared in
those established by the servants in India. It is a very singular
government in which every member of the administration wishes to get out
of the country, and consequently to have done with the government, as soon
as he can, and to whose interest, the day after he has left it, and
carried his whole fortune with him, it is perfectly indifferent though the
whole country was swallowed up by an earthquake.
I mean not, however, by any thing which I have here said, to throw any
odious imputation upon the general character of the servants of the East
India company, and touch less upon that of any particular persons. It is
the system of government, the situation in which they are placed, that I
mean to censure, not the character of those who have acted in it. They
acted as their situation naturally directed, and they who have clamoured
the loudest against them would probably not have acted better themselves.
In war and negotiation, the councils of Madras and Calcutta, have upon
several occasions, conducted themselves with a resolution and decisive
wisdom, which would have done honour to the senate of Rome in the best
days of that republic. The members of those councils, however, had been
bred to professions very different from war and politics. But their
situation alone, without education, experience, or even example, seems to
have formed in them all at once the great qualities which it required, and
to have inspired them both with abilities and virtues which they
themselves could not well know that they possessed. If upon some
occasions, therefore, it has animated them to actions of magnanimity which
could not well have been expected from them, we should not wonder if, upon
others, it has prompted them to exploits of somewhat a different nature.
Such exclusive companies, therefore, are nuisances in every respect;
always more or less inconvenient to the countries in which they are
established, and destructive to those which have the misfortune to fall
under their government.
CHAPTER VIII.
CONCLUSION OF THE MERCANTILE SYSTEM.
Though the encouragement of exportation, and the discouragement of
importation, are the two great engines by which the mercantile system
proposes to enrich every country, yet, with regard to some particular
commodities, it seems to follow an opposite plan: to discourage
exportation, and to encourage importation. Its ultimate object, however,
it pretends, is always the same, to enrich the country by an advantageous
balance of trade. It discourages the exportation of the materials of
manufacture, and of the instruments of trade, in order to give our own
workmen an advantage, and to enable them to undersell those of other
nations in all foreign markets; and by restraining, in this manner, the
exportation of a few commodities, of no great price, it proposes to
occasion a much greater and more valuable exportation of others. It
encourages the importation of the materials of manufacture, in order that
our own people may be enabled to work them up more cheaply, and thereby
prevent a greater and more valuable importation of the manufactured
commodities. I do not observe, at least in our statute book, any
encouragement given to the importation of the instruments of trade. When
manufactures have advanced to a certain pitch of greatness, the
fabrication of the instruments of trade becomes itself the object of a
great number of very important manufactures. To give any particular
encouragement to the importation of such instruments, would interfere too
much with the interest of those manufactures. Such importation, therefore,
instead of being encouraged, has frequently been prohibited. Thus the
importation of wool cards, except from Ireland, or when brought in as
wreck or prize goods, was prohibited by the 3rd of Edward IV.; which
prohibition was renewed by the 39th of Elizabeth, and has been continued
and rendered perpetual by subsequent laws.
The importation of the materials of manufacture has sometimes been
encouraged by an exemption from the duties to which other goods are
subject, and sometimes by bounties.
The importation of sheep’s wool from several different countries, of
cotton wool from all countries, of undressed flax, of the greater part of
dyeing drugs, of the greater part of undressed hides from Ireland, or the
British colonies, of seal skins from the British Greenland fishery, of pig
and bar iron from the British colonies, as well as of several other
materials of manufacture, has been encouraged by an exemption from all
duties, if properly entered at the custom-house. The private interest of
our merchants and manufacturers may, perhaps, have extorted from the
legislature these exemptions, as well as the greater part of our other
commercial regulations. They are, however, perfectly just and reasonable;
and if, consistently with the necessities of the state, they could be
extended to all the other materials of manufacture, the public would
certainly be a gainer.
The avidity of our great manufacturers, however, has in some cases
extended these exemptions a good deal beyond what can justly be considered
as the rude materials of their work. By the 24th Geo. II. chap. 46, a
small duty of only 1d. the pound was imposed upon the importation of
foreign brown linen yarn, instead of much higher duties, to which it had
been subjected before, viz. of 6d. the pound upon sail yarn, of 1s. the
pound upon all French and Dutch yarn, and of £2:13:4 upon the hundred
weight of all spruce or Muscovia yarn. But our manufacturers were not long
satisfied with this reduction: by the 29th of the same king, chap. 15, the
same law which gave a bounty upon the exportation of British and Irish
linen, of which the price did not exceed 18d. the yard, even this small
duty upon the importation of brown linen yarn was taken away. In the
different operations, however, which are necessary for the preparation of
linen yarn, a good deal more industry is employed, than in the subsequent
operation of preparing linen cloth from linen yarn. To say nothing of the
industry of the flax-growers and flaxdressers, three or four spinners at
least are necessary in order to keep one weaver in constant employment;
and more than four-fifths of the whole quantity of labour necessary for
the preparation of linen cloth, is employed in that of linen yarn; but our
spinners are poor people; women commonly scattered about in all different
parts of the country, without support or protection. It is not by the sale
of their work, but by that of the complete work of the weavers, that our
great master manufacturers make their profits. As it is their interest to
sell the complete manufacture as dear, so it is to buy the materials as
cheap as possible. By extorting from the legislature bounties upon the
exportation of their own linen, high duties upon the importation of all
foreign linen, and a total prohibition of the home consumption of some
sorts of French linen, they endeavour to sell their own goods as dear as
possible. By encouraging the importation of foreign linen yarn, and
thereby bringing it into competition with that which is made by our own
people, they endeavour to buy the work of the poor spinners as cheap as
possible. They are as intent to keep down the wages of their own weavers,
as the earnings of the poor spinners; and it is by no means for the
benefit of the workmen that they endeavour either to raise the price of
the complete work, or to lower that of the rude materials. It is the
industry which is carried on for the benefit of the rich and the powerful,
that is principally encouraged by our mercantile system. That which is
carried on for the benefit of the poor and the indigent is too often
either neglected or oppressed.
Both the bounty upon the exportation of linen, and the exemption from the
duty upon the importation of foreign yarn, which were granted only for
fifteen years, but continued by two different prolongations, expire with
the end of the session of parliament which shall immediately follow the
24th of June 1786.
The encouragement given to the importation of the materials of manufacture
by bounties, has been principally confined to such as were imported from
our American plantations.
The first bounties of this kind were those granted about the beginning of
the present century, upon the importation of naval stores from America.
Under this denomination were comprehended timber fit for masts, yards, and
bowsprits; hemp, tar, pitch, and turpentine. The bounty, however, of £1
the ton upon masting-timber, and that of £6 the ton upon hemp, were
extended to such as should be imported into England from Scotland. Both
these bounties continued, without any variation, at the same rate, till
they were severally allowed to expire; that upon hemp on the 1st of
January 1741, and that upon masting-timber at the end of the session of
parliament immediately following the 24th June 1781.
The bounties upon the importation of tar, pitch, and turpentine,
underwent, during their continuance, several alterations. Originally, that
upon tar was £4 the ton; that upon pitch the same; and that upon
turpentine £3 the ton. The bounty of £4 the ton upon tar was afterwards
confined to such as had been prepared in a particular manner; that upon
other good, clean, and merchantable tar was reduced to £2:4s. the ton. The
bounty upon pitch was likewise reduced to £1, and that upon turpentine to
£1:10s. the ton.
The second bounty upon the importation of any of the materials of
manufacture, according to the order of time, was that granted by the 21st
Geo. II. chap.30, upon the importation of indigo from the British
plantations. When the plantation indigo was worth three-fourths of the
price of the best French indigo, it was, by this act, entitled to a bounty
of 6d. the pound. This bounty, which, like most others, was granted only
for a limited time, was continued by several prolongations, but was
reduced to 4d. the pound. It was allowed to expire with the end of the
session of parliament which followed the 25th March 1781.
The third bounty of this kind was that granted (much about the time that
we were beginning sometimes to court, and sometimes to quarrel with our
American colonies), by the 4th. Geo. III. chap. 26, upon the importation
of hemp, or undressed flax, from the British plantations. This bounty was
granted for twenty-one years, from the 24th June 1764 to the 24th June
1785. For the first seven years, it was to be at the rate of £8 the ton;
for the second at £6; and for the third at £4. It was not extended to
Scotland, of which the climate (although hemp is sometimes raised there in
small quantities, and of an inferior quality) is not very fit for that
produce. Such a bounty upon the importation of Scotch flax in England
would have been too great a discouragement to the native produce of the
southern part of the united kingdom.
The fourth bounty of this kind was that granted by the 5th Geo. III. chap.
45, upon the importation of wood from America. It was granted for nine
years from the 1st January 1766 to the 1st January 1775. During the first
three years, it was to be for every hundred-and-twenty good deals, at the
rate of £1, and for every load containing fifty cubic feet of other square
timber, at the rate of 12s. For the second three years, it was for deals,
to be at the rate of 15s., and for other squared timber at the rate of
8s.; and for the third three years, it was for deals, to be at the rate of
10s.; and for every other squared timber at the rate of 5s.
The fifth bounty of this kind was that granted by the 9th Geo. III. chap.
38, upon the importation of raw silk from the British plantations. It was
granted for twenty-one years, from the 1st January 1770, to the 1st
January 1791. For the first seven years, it was to be at the rate of £25
for every hundred pounds value; for the second, at £20; and for the third,
at £15. The management of the silk-worm, and the preparation of silk,
requires so much hand-labour, and labour is so very dear in America, that
even this great bounty, I have been informed, was not likely to produce
any considerable effect.
The sixth Bounty of this kind was that granted by 11th Geo. III. chap. 50,
for the importation of pipe, hogshead, and barrelstaves and leading from
the British plantations. It was granted for nine years, from 1st January
1772 to the 1st January 1781. For the first three years, it was, for a
certain quantity of each, to be at the rate of £6; for the second three
years at £4; and for the third three years at £2.
The seventh and last bounty of this kind was that granted by the 19th Geo.
III chap. 37, upon the importation of hemp from Ireland. It was granted in
the same manner as that for the importation of hemp and undressed flax
from America, for twenty-one years, from the 24th June 1779 to the 24th
June 1800. The term is divided likewise into three periods, of seven years
each; and in each of those periods, the rate of the Irish bounty is the
same with that of the American. It does not, however, like the American
bounty, extend to the importation of undressed flax. It would have been
too great a discouragement to the cultivation of that plant in Great
Britain. When this last bounty was granted, the British and Irish
legislatures were not in much better humour with one another, than the
British and American had been before. But this boon to Ireland, it is to
be hoped, has been granted under more fortunate auspices than all those to
America. The same commodities, upon which we thus gave bounties, when
imported from America, were subjected to considerable duties when imported
from any other country. The interest of our American colonies was regarded
as the same with that of the mother country. Their wealth was considered
as our wealth. Whatever money was sent out to them, it was said, came all
back to us by the balance of trade, and we could never become a farthing
the poorer by any expense which we could lay out upon them. They were our
own in every respect, and it was an expense laid out upon the improvement
of our own property, and for the profitable employment of our own people.
It is unnecessary, I apprehend, at present to say anything further, in
order to expose the folly of a system which fatal experience has now
sufficiently exposed. Had our American colonies really been a part of
Great Britain, those bounties might have been considered as bounties upon
production, and would still have been liable to all the objections to
which such bounties are liable, but to no other.
The exportation of the materials of manufacture is sometimes discouraged
by absolute prohibitions, and sometimes by high duties.
Our woollen manufacturers have been more successful than any other class
of workmen, in persuading the legislature that the prosperity of the
nation depended upon the success and extension of their particular
business. They have not only obtained a monopoly against the consumers, by
an absolute prohibition of importing woollen cloths from any foreign
country; but they have likewise obtained another monopoly against the
sheep farmers and growers of wool, by a similar prohibition of the
exportation of live sheep and wool. The severity of many of the laws which
have been enacted for the security of the revenue is very justly
complained of, as imposing heavy penalties upon actions which, antecedent
to the statutes that declared them to be crimes, had always been
understood to be innocent. But the cruellest of our revenue laws, I will
venture to affirm, are mild and gentle, in comparison to some of those
which the clamour of our merchants and manufacturers has extorted from the
legislature, for the support of their own absurd and oppressive
monopolies. Like the laws of Draco, these laws may be said to be all
written in blood.
By the 8th of Elizabeth, chap. 3, the exporter of sheep, lambs, or rams,
was for the first offence, to forfeit all his goods for ever, to suffer a
year’s imprisonment, and then to have his left hand cut off in a market
town, upon a market day, to be there nailed up; and for the second
offence, to be adjudged a felon, and to suffer death accordingly. To
prevent the breed of our sheep from being propagated in foreign countries,
seems to have been the object of this law. By the 13th and 14th of Charles
II. chap. 18, the exportation of wool was made felony, and the exporter
subjected to the same penalties and forfeitures as a felon.
For the honour of the national humanity, it is to be hoped that neither of
these statutes was ever executed. The first of them, however, so far as I
know, has never been directly repealed, and serjeant Hawkins seems to
consider it as still in force. It may, however, perhaps be considered as
virtually repealed by the 12th of Charles II. chap. 32, sect. 3, which,
without expressly taking away the penalties imposed by former statutes,
imposes a new penalty, viz. that of 20s. for every sheep exported, or
attempted to be exported, together with the forfeiture of the sheep, and
of the owner’s share of the sheep. The second of them was expressly
repealed by the 7th and 8th of William III. chap. 28, sect. 4, by which it
is declared that “Whereas the statute of the 13th and 14th of king Charles
II. made against the exportation of wool, among other things in the said
act mentioned, doth enact the same to be deemed felony, by the severity of
which penalty the prosecution of offenders hath not been so effectually
put in execution; be it therefore enacted, by the authority aforesaid,
that so much of the said act, which relates to the making the said offence
felony, be repealed and made void.”
The penalties, however, which are either imposed by this milder statute,
or which, though imposed by former statutes, are not repealed by this one,
are still sufficiently severe. Besides the forfeiture of the goods, the
exporter incurs the penalty of 3s. for every pound weight of wool, either
exported or attempted to be exported, that is, about four or five times
the value. Any merchant, or other person convicted of this offence, is
disabled from requiring any debt or account belonging to him from any
factor or other person. Let his fortune be what it will, whether he is or
is not able to pay those heavy penalties, the law means to ruin him
completely. But, as the morals of the great body of the people are not yet
so corrupt as those of the contrivers of this statute, I have not heard
that any advantage has ever been taken of this clause. If the person
convicted of this offence is not able to pay the penalties within three
months after judgment, he is to be transported for seven years; and if he
returns before the expiration of that term, he is liable to the pains of
felony, without benefit of clergy. The owner of the ship, knowing this
offence, forfeits all his interest in the ship and furniture. The master
and mariners, knowing this offence, forfeit all their goods and chattels,
and suffer three months imprisonment. By a subsequent statute, the master
suffers six months imprisonment.
In order to prevent exportation, the whole inland commerce of wool is laid
under very burdensome and oppressive restrictions. It cannot be packed in
any box, barrel, cask, case, chest, or any other package, but only in
packs of leather or pack-cloth, on which must be marked on the outside the
words WOOL or YARN, in large letters, not less than three inches long, on
pain of forfeiting the same and the package, and 8s. for every pound
weight, to be paid by the owner or packer. It cannot be loaden on any
horse or cart, or carried by land within five miles of the coast, but
between sun-rising, and sun-setting, on pain of forfeiting the same, the
horses and carriages. The hundred next adjoining to the sea coast, out of,
or through which the wool is carried or exported, forfeits £20, if the
wool is under the value of £10; and if of greater value, then treble that
value, together with treble costs, to be sued for within the year. The
execution to be against any two of the inhabitants, whom the sessions must
reimburse, by an assessment on the other inhabitants, as in the cases of
robbery. And if any person compounds with the hundred for less than this
penalty, he is to be imprisoned for five years; and any other person may
prosecute. These regulations take place through the whole kingdom.
But in the particular counties of Kent and Sussex, the restrictions are
still more troublesome. Every owner of wool within ten miles of the sea
coast must give an account in writing, three days after shearing, to the
next officer of the customs, of the number of his fleeces, and of the
places where they are lodged. And before he removes any part of them, he
must give the like notice of the number and weight of the fleeces, and of
the name and abode of the person to whom they are sold, and of the place
to which it is intended they should be carried. No person within fifteen
miles of the sea, in the said counties, can buy any wool, before he enters
into bond to the king, that no part of the wool which he shall so buy
shall be sold by him to any other person within fifteen miles of the sea.
If any wool is found carrying towards the sea side in the said counties,
unless it has been entered and security given as aforesaid, it is
forfeited, and the offender also forfeits 3s. for every pound weight, if
any person lay any wool, not entered as aforesaid, within fifteen miles of
the sea, it must be seized and forfeited; and if, after such seizure, any
person shall claim the same, he must give security to the exchequer, that
if he is cast upon trial he shall pay treble costs, besides all other
penalties.
When such restrictions are imposed upon the inland trade, the coasting
trade, we may believe, cannot be left very free. Every owner of wool, who
carrieth, or causeth to be carried, any wool to any port or place on the
sea coast, in order to be from thence transported by sea to any other
place or port on the coast, must first cause an entry thereof to be made
at the port from whence it is intended to be conveyed, containing the
weight, marks, and number, of the packages, before he brings the same
within five miles of that port, on pain of forfeiting the same, and also
the horses, carts, and other carriages; and also of suffering and
forfeiting, as by the other laws in force against the exportation of wool.
This law, however (1st of William III. chap. 32), is so very indulgent as
to declare, that this shall not hinder any person from carrying his wool
home from the place of shearing, though it be within five miles of the
sea, provided that in ten days after shearing, and before he remove the
wool, he do under his hand certify to the next officer of the customs the
true number of fleeces, and where it is housed; and do not remove the
same, without certifying to such officer, under his hand, his intention so
to do, three days before. Bond must be given that the wool to be carried
coast-ways is to be landed at the particular port for which it is entered
outwards; and if my part of it is landed without the presence of an
officer, not only the forfeiture of the wool is incurred, as in other
goods, but the usual additional penalty of 3s. for every pound weight is
likewise incurred.
Our woollen manufacturers, in order to justify their demand of such
extraordinary restrictions and regulations, confidently asserted, that
English wool was of a peculiar quality, superior to that of any other
country; that the wool of other countries could not, without some mixture
of it, be wrought up into any tolerable manufacture; that fine cloth could
not be made without it; that England, therefore, if the exportation of it
could be totally prevented, could monopolize to herself almost the whole
woollen trade of the world; and thus, having no rivals, could sell at what
price she pleased, and in a short time acquire the most incredible degree
of wealth by the most advantageous balance of trade. This doctrine, like
most other doctrines which are confidently asserted by any considerable
number of people, was, and still continues to be, most implicitly believed
by a much greater number: by almost all those who are either unacquainted
with the woollen trade, or who have not made particular inquiries. It is,
however, so perfectly false, that English wool is in any respect necessary
for the making of fine cloth, that it is altogether unfit for it. Fine
cloth is made altogether of Spanish wool. English wool, cannot be even so
mixed with Spanish wool, as to enter into the composition without spoiling
and degrading, in some degree, the fabric of the cloth.
It has been shown in the foregoing part of this work, that the effect of
these regulations has been to depress the price of English wool, not only
below what it naturally would be in the present times, but very much below
what it actually was in the time of Edward III. The price of Scotch wool,
when, in consequence of the Union, it became subject to the same
regulations, is said to have fallen about one half. It is observed by the
very accurate and intelligent author of the Memoirs of Wool, the Reverend
Mr John Smith, that the price of the best English wool in England, is
generally below what wool of a very inferior quality commonly sells for in
the market of Amsterdam. To depress the price of this commodity below what
may be called its natural and proper price, was the avowed purpose of
those regulations; and there seems to be no doubt of their having produced
the effect that was expected from them.
This reduction of price, it may perhaps be thought, by discouraging the
growing of wool, must have reduced very much the annual produce of that
commodity, though not below what it formerly was, yet below what, in the
present state of things, it would probably have been, had it, in
consequence of an open and free market, been allowed to rise to the
natural and proper price. I am, however, disposed to believe, that the
quantity of the annual produce cannot have been much, though it may,
perhaps, have been a little affected by these regulations. The growing of
wool is not the chief purpose for which the sheep farmer employs his
industry and stock. He expects his profit, not so much from the price of
the fleece, as from that of the carcase; and the average or ordinary price
of the latter must even, in many cases, make up to him whatever deficiency
there may be in the average or ordinary price of the former. It has been
observed, in the foregoing part of this work, that ‘whatever regulations
tend to sink the price, either of wool or of raw hides, below what it
naturally would be, must, in an improved and cultivated country, have some
tendency to raise the price of butcher’s meat. The price, both of the
great and small cattle which are fed on improved and cultivated land, must
be sufficient to pay the rent which the landlord, and the profit which the
farmer, has reason to expect from improved and cultivated land. If it is
not, they will soon cease to feed them. Whatever part of this price,
therefore, is not paid by the wool and the hide, must be paid by the
carcase. The less there is paid for the one, the more must be paid for the
other. In what manner this price is to be divided upon the different parts
of the beast, is indifferent to the landlords and farmers, provided it is
all paid to them. In an improved and cultivated country, therefore, their
interest as landlords and farmers cannot be much affected by such
regulations, though their interest as consumers may, by the rise in the
price of provisions.’ According to this reasoning, therefore, this
degradation in the price of wool is not likely, in an improved and
cultivated country, to occasion any diminution in the annual produce of
that commodity; except so far as, by raising the price of mutton, it may
somewhat diminish the demand for, and consequently the production of, that
particular species of butcher’s meat, Its effect, however, even in this
way, it is probable, is not very considerable.
But though its effect upon the quantity of the annual produce may not have
been very considerable, its effect upon the quality, it may perhaps be
thought, must necessarily have been very great. The degradation in the
quality of English wool, if not below what it was in former times, yet
below what it naturally would have been in the present state of
improvement and cultivation, must have been, it may perhaps be supposed,
very nearly in proportion to the degradation of price. As the quality
depends upon the breed, upon the pasture, and upon the management and
cleanliness of the sheep, during the whole progress of the growth of the
fleece, the attention to these circumstances, it may naturally enough be
imagined, can never be greater than in proportion to the recompence which
the price of the fleece is likely to make for the labour and expense which
that attention requires. It happens, however, that the goodness of the
fleece depends, in a great measure, upon the health, growth, and bulk of
the animal: the same attention which is necessary for the improvement of
the carcase is, in some respect, sufficient for that of the fleece.
Notwithstanding the degradation of price, English wool is said to have
been improved considerably during the course even of the present century.
The improvement, might, perhaps, have been greater if the price had been
better; but the lowness of price, though it may have obstructed, yet
certainly it has not altogether prevented that improvement.
The violence of these regulations, therefore, seems to have affected
neither the quantity nor the quality of the annual produce of wool, so
much as it might have been expected to do (though I think it probable that
it may have affected the latter a good deal more than the former); and the
interest of the growers of wool, though it must have been hurt in some
degree, seems upon the whole, to have been much less hurt than could well
have been imagined.
These considerations, however, will not justify the absolute prohibition
of the exportation of wool; but they will fully justify the imposition of
a considerable tax upon that exportation.
To hurt, in any degree, the interest of any one order of citizens, for no
other purpose but to promote that of some other, is evidently contrary to
that justice and equality of treatment which the sovereign owes to all the
different orders of his subjects. But the prohibition certainly hurts, in
some degree, the interest of the growers of wool, for no other purpose but
to promote that of the manufacturers.
Every different order of citizens is bound to contribute to the support of
the sovereign or commonwealth. A tax of five, or even of ten shillings,
upon the exportation of every tod of wool, would produce a very
considerable revenue to the sovereign. It would hurt the interest of the
growers somewhat less than the prohibition, because it would not probably
lower the price of wool quite so much. It would afford a sufficient
advantage to the manufacturer, because, though he might not buy his wool
altogether so cheap as under the prohibition, he would still buy it at
least five or ten shillings cheaper than any foreign manufacturer could
buy it, besides saving the freight and insurance which the other would be
obliged to pay. It is scarce possible to devise a tax which could produce
any considerable revenue to the sovereign, and at the same time occasion
so little inconveniency to anybody.
The prohibition, notwithstanding all the penalties which guard it, does
not prevent the exportation of wool. It is exported, it is well known, in
great quantities. The great difference between the price in the home and
that in the foreign market, presents such a temptation to smuggling, that
all the rigour of the law cannot prevent it. This illegal exportation is
advantageous to nobody but the smuggler. A legal exportation, subject to a
tax, by affording a revenue to the sovereign, and thereby saving the
imposition of some other, perhaps more burdensome and inconvenient taxes,
might prove advantageous to all the different subjects of the state.
The exportation of fuller’s earth, or fuller’s clay, supposed to be
necessary for preparing and cleansing the woollen manufactures, has been
subjected to nearly the same penalties as the exportation of wool. Even
tobacco-pipe clay, though acknowledged to be different from fuller’s clay,
yet, on account of their resemblance, and because fuller’s clay might
sometimes be exported as tobacco-pipe clay, has been laid under the same
prohibitions and penalties.
By the 13th and 14th of Charles II. chap, 7, the exportation, not only of
raw hides, but of tanned leather, except in the shape of boots, shoes, or
slippers, was prohibited; and the law gave a monopoly to our boot-makers
and shoe-makers, not only against our graziers, but against our tanners.
By subsequent statutes, our tanners have got themselves exempted from this
monopoly, upon paying a small tax of only one shilling on the hundred
weight of tanned leather, weighing one hundred and twelve pounds. They
have obtained likewise the drawback of two-thirds of the excise duties
imposed upon their commodity, even when exported without further
manufacture. All manufactures of leather may be exported duty free; and
the exporter is besides entitled to the drawback of the whole duties of
excise. Our graziers still continue subject to the old monopoly. Graziers,
separated from one another, and dispersed through all the different
corners of the country, cannot, without great difficulty, combine together
for the purpose either of imposing monopolies upon their fellow-citizens,
or of exempting themselves from such as may have been imposed upon them by
other people. Manufacturers of all kinds, collected together in numerous
bodies in all great cities, easily can. Even the horns of cattle are
prohibited to be exported; and the two insignificant trades of the horner
and comb-maker enjoy, in this respect, a monopoly against the graziers.
Restraints, either by prohibitions, or by taxes, upon the exportation of
goods which are partially, but not completely manufactured, are not
peculiar to the manufacture of leather. As long as anything remains to be
done, in order to fit any commodity for immediate use and consumption, our
manufacturers think that they themselves ought to have the doing of it.
Woollen yarn and worsted are prohibited to be exported, under the same
penalties as wool even white cloths we subject to a duty upon exportation;
and our dyers have so far obtained a monopoly against our clothiers. Our
clothiers would probably have been able to defend themselves against it;
but it happens that the greater part of our principal clothiers are
themselves likewise dyers. Watch-cases, clock-cases, and dial-plates for
clocks and watches, have been prohibited to be exported. Our clock-makers
and watch-makers are, it seems, unwilling that the price of this sort of
workmanship should be raised upon them by the competition of foreigners.
By some old statutes of Edward III, Henry VIII. and Edward VI. the
exportation of all metals was prohibited. Lead and tin were alone
excepted, probably on account of the great abundance of those metals; in
the exportation of which a considerable part of the trade of the kingdom
in those days consisted. For the encouragement of the mining trade, the
5th of William and Mary, chap.17, exempted from this prohibition iron,
copper, and mundic metal made from British ore. The exportation of all
sorts of copper bars, foreign as well as British, was afterwards permitted
by the 9th and 10th of William III. chap 26. The exportation of
unmanufactured brass, of what is called gun-metal, bell-metal, and shroff
metal, still continues to be prohibited. Brass manufactures of all sorts
may be exported duty free.
The exportation of the materials of manufacture, where it is not
altogether prohibited, is, in many cases, subjected to considerable
duties.
By the 8th Geo. I. chap.15, the exportation of all goods, the produce of
manufacture of Great Britain, upon which any duties had been imposed by
former statutes, was rendered duty free. The following goods, however,
were excepted: alum, lead, lead-ore, tin, tanned leather, copperas, coals,
wool, cards, white woollen cloths, lapis calaminaris, skins of all sorts,
glue, coney hair or wool, hares wool, hair of all sorts, horses, and
litharge of lead. If you except horses, all these are either materials of
manufacture, or incomplete manufactures (which may be considered as
materials for still further manufacture), or instruments of trade. This
statute leaves them subject to all the old duties which had ever been
imposed upon them, the old subsidy, and one per cent. outwards.
By the same statute, a great number of foreign drugs for dyers use are
exempted from all duties upon importation. Each of them, however, is
afterwards subjected to a certain duty, not indeed a very heavy one, upon
exportation. Our dyers, it seems, while they thought it for their interest
to encourage the importation of those drugs, by an exemption from all
duties, thought it likewise for their own interest to throw some small
discouragement upon their exportation. The avidity, however, which
suggested this notable piece of mercantile ingenuity, most probably
disappointed itself of its object. It necessarily taught the importers to
be more careful than they might otherwise have been, that their
importation should not exceed what was necessary for the supply of the
home market. The home market was at all times likely to be more scantily
supplied; the commodities were at all times likely to be somewhat dearer
there than they would have been, had the exportation been rendered as free
as the importation.
By the above-mentioned statute, gum senega, or gum arabic, being among the
enumerated dyeing drugs, might be imported duty free. They were subjected,
indeed, to a small poundage duty, amounting only to threepence in the
hundred weight, upon their re-exportation. France enjoyed, at that time,
an exclusive trade to the country most productive of those drugs, that
which lies in the neighbourhood of the Senegal; and the British market
could not be easily supplied by the immediate importation of them from the
place of growth. By the 25th Geo. II. therefore, gum senega was allowed to
be imported (contrary to the general dispositions of the act of
navigation) from any part of Europe. As the law, however, did not mean to
encourage this species of trade, so contrary to the general principles of
the mercantile policy of England, it imposed a duty of ten shillings the
hundred weight upon such importation, and no part of this duty was to be
afterwards drawn back upon its exportation. The successful war which began
in 1755 gave Great Britain the same exclusive trade to those countries
which France had enjoyed before. Our manufactures, as soon as the peace
was made, endeavoured to avail themselves of this advantage, and to
establish a monopoly in their own favour both against the growers and
against the importers of this commodity. By the 5th of Geo. III.
therefore, chap. 37, the exportation of gum senega, from his majesty’s
dominions in Africa, was confined to Great Britain, and was subjected to
all the same restrictions, regulations, forfeitures, and penalties, as
that of the enumerated commodities of the British colonies in America and
the West Indies. Its importation, indeed, was subjected to a small duty of
sixpence the hundred weight; but its re-exportation was subjected to the
enormous duty of one pound ten shillings the hundred weight. It was the
intention of our manufacturers, that the whole produce of those countries
should be imported into Great Britain; and in order that they themselves
might be enabled to buy it at their own price, that no part of it should
be exported again, but at such an expense as would sufficiently discourage
that exportation. Their avidity, however, upon this, as well as upon many
other occasions, disappointed itself of its object. This enormous duty
presented such a temptation to smuggling, that great quantities of this
commodity were clandestinely exported, probably to all the manufacturing
countries of Europe, but particularly to Holland, not only from Great
Britain, but from Africa. Upon this account, by the 14th Geo. III.
chap.10, this duty upon exportation was reduced to five shillings the
hundred weight.
In the book of rates, according to which the old subsidy was levied,
beaver skins were estimated at six shillings and eight pence a piece; and
the different subsidies and imposts which, before the year 1722, had been
laid upon their importation, amounted to one-fifth part of the rate, or to
sixteen pence upon each skin; all of which, except half the old subsidy,
amounting only to twopence, was drawn back upon exportation. This duty,
upon the importation of so important a material of manufacture, had been
thought too high; and, in the year 1722, the rate was reduced to two
shillings and sixpence, which reduced the duty upon importation to
sixpence, and of this only one-half was to be drawn back upon exportation.
The same successful war put the country most productive of beaver under
the dominion of Great Britain; and beaver skins being among the enumerated
commodities, the exportation from America was consequently confined to the
market of Great Britain. Our manufacturers soon bethought themselves of
the advantage which they might make of this circumstance; and in the year
1764, the duty upon the importation of beaver skin was reduced to one
penny, but the duty upon exportation was raised to sevenpence each skin,
without any drawback of the duty upon importation. By the same law, a duty
of eighteen pence the pound was imposed upon the exportation of beaver
wool or woumbs, without making any alteration in the duty upon the
importation of that commodity, which, when imported by British, and in
British shipping, amounted at that time to between fourpence and fivepence
the piece.
Coals may be considered both as a material of manufacture, and as an
instrument of trade. Heavy duties, accordingly, have been imposed upon
their exportation, amounting at present (1783) to more than five shillings
the ton, or more than fifteen shillings the chaldron, Newcastle measure;
which is, in most cases, more than the original value of the commodity at
the coal-pit, or even at the shipping port for exportation.
The exportation, however, of the instruments of trade, properly so called,
is commonly restrained, not by high duties, but by absolute prohibitions.
Thus, by the 7th and 8th of William III chap.20, sect.8, the exportation
of frames or engines for knitting gloves or stockings, is prohibited,
under the penalty, not only of the forfeiture of such frames or engines,
so exported, or attempted to be exported, but of forty pounds, one half to
the king, the other to the person who shall inform or sue for the same. In
the same manner, by the 14th Geo. III. chap. 71, the exportation to
foreign parts, of any utensils made use of in the cotton, linen, woollen,
and silk manufactures, is prohibited under the penalty, not only of the
forfeiture of such utensils, but of two hundred pounds, to be paid by the
person who shall offend in this manner; and likewise of two hundred
pounds, to be paid by the master of the ship, who shall knowingly suffer
such utensils to be loaded on board his ship.
When such heavy penalties were imposed upon the exportation of the dead
instruments of trade, it could not well be expected that the living
instrument, the artificer, should be allowed to go free. Accordingly, by
the 5th Geo. I. chap. 27, the person who shall be convicted of enticing
any artificer, of or in any of the manufactures of Great Britain, to go
into any foreign parts, in order to practise or teach his trade, is
liable, for the first offence, to be fined in any sum not exceeding one
hundred pounds, and to three months imprisonment, and until the fine shall
be paid; and for the second offence, to be fined in any sum, at the
discretion of the court, and to imprisonment for twelve months, and until
the fine shall be paid. By the 23d Geo. II. chap. 13, this penalty is
increased, for the first offence, to five hundred pounds for every
artificer so enticed, and to twelve months imprisonment, and until the
fine shall be paid; and for the second offence, to one thousand pounds,
and to two years imprisonment, and until the fine shall be paid.
By the former of these two statutes, upon proof that any person has been
enticing any artificer, or that any artificer has promised or contracted
to go into foreign parts, for the purposes aforesaid, such artificer may
be obliged to give security, at the discretion of the court, that he shall
not go beyond the seas, and may be committed to prison until he give such
security.
If any artificer has gone beyond the seas, and is exercising or teaching
his trade in any foreign country, upon warning being given to him by any
of his majesty’s ministers or consuls abroad, or by one of his majesty’s
secretaries of state, for the time being, if he does not, within six
months after such warning, return into this realm, and from henceforth
abide and inhabit continually within the same, he is from thenceforth
declared incapable of taking any legacy devised to him within this
kingdom, or of being executor or administrator to any person, or of taking
any lands within this kingdom, by descent, devise, or purchase. He
likewise forfeits to the king all his lands, goods, and chattels; is
declared an alien in every respect; and is put out of the king’s
protection.
It is unnecessary, I imagine, to observe how contrary such regulations are
to the boasted liberty of the subject, of which we affect to be so very
jealous; but which, in this case, is so plainly sacrificed to the futile
interests of our merchants and manufacturers.
The laudable motive of all these regulations, is to extend our own
manufactures, not by their own improvement, but by the depression of those
of all our neighbours, and by putting an end, as much as possible, to the
troublesome competition of such odious and disagreeable rivals. Our master
manufacturers think it reasonable that they themselves should have the
monopoly of the ingenuity of all their countrymen. Though by restraining,
in some trades, the number of apprentices which can be employed at one
time, and by imposing the necessity of a long apprenticeship in all
trades, they endeavour, all of them, to confine the knowledge of their
respective employments to as small a number as possible; they are
unwilling, however, that any part of this small number should go abroad to
instruct foreigners.
Consumption is the sole end and purpose of all production; and the
interest of the producer ought to be attended to, only so far as it may be
necessary for promoting that of the consumer.
The maxim is so perfectly self-evident, that it would be absurd to attempt
to prove it. But in the mercantile system, the interest of the consumer is
almost constantly sacrificed to that of the producer; and it seems to
consider production, and not consumption, as the ultimate end and object
of all industry and commerce.
In the restraints upon the importation of all foreign commodities which
can come into competition with those of our own growth or manufacture, the
interest of the home consumer is evidently sacrificed to that of the
producer. It is altogether for the benefit of the latter, that the former
is obliged to pay that enhancement of price which this monopoly almost
always occasions.
It is altogether for the benefit of the producer, that bounties are
granted upon the exportation of some of his productions. The home consumer
is obliged to pay, first the tax which is necessary for paying the bounty;
and, secondly, the still greater tax which necessarily arises from the
enhancement of the price of the commodity in the home market.
By the famous treaty of commerce with Portugal, the consumer is prevented
by duties from purchasing of a neighbouring country, a commodity which our
own climate does not produce; but is obliged to purchase it of a distant
country, though it is acknowledged, that the commodity of the distant
country is of a worse quality than that of the near one. The home consumer
is obliged to submit to this inconvenience, in order that the producer may
import into the distant country some of his productions, upon more
advantageous terms than he otherwise would have been allowed to do. The
consumer, too, is obliged to pay whatever enhancement in the price of
those very productions this forced exportation may occasion in the home
market.
But in the system of laws which has been established for the management of
our American and West Indian colonies, the interest of the home consumer
has been sacrificed to that of the producer, with a more extravagant
profusion than in all our other commercial regulations. A great empire has
been established for the sole purpose of raising up a nation of customers,
who should be obliged to buy, from the shops of our different producers,
all the goods with which these could supply them. For the sake of that
little enhancement of price which this monopoly might afford our
producers, the home consumers have been burdened with the whole expense of
maintaining and defending that empire. For this purpose, and for this
purpose only, in the two last wars, more than two hundred millions have
been spent, and a new debt of more than a hundred and seventy millions has
been contracted, over and above all that had been expended for the same
purpose in former wars. The interest of this debt alone is not only
greater than the whole extraordinary profit which, it never could be
pretended, was made by the monopoly of the colony trade, but than the
whole value of that trade, or than the whole value of the goods which, at
an average, have been annually exported to the colonies.
It cannot be very difficult to determine who have been the contrivers of
this whole mercantile system; not the consumers, we may believe, whose
interest has been entirely neglected; but the producers, whose interest
has been so carefully attended to; and among this latter class, our
merchants and manufacturers have been by far the principal architects. In
the mercantile regulations which have been taken notice of in this
chapter, the interest of our manufacturers has been most peculiarly
attended to; and the interest, not so much of the consumers, as that of
some other sets of producers, has been sacrificed to it.
CHAPTER IX.
OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY.
The agricultural systems of political economy will not require so long an
explanation as that which I have thought it necessary to bestow upon the
mercantile or commercial system.
That system which represents the produce of land as the sole source of the
revenue and wealth of every country, has so far as I know, never been
adopted by any nation, and it at present exists only in the speculations
of a few men of great learning and ingenuity in France. It would not,
surely, be worth while to examine at great length the errors of a system
which never has done, and probably never will do, any harm in any part of
the world. I shall endeavour to explain, however, as distinctly as I can,
the great outlines of this very ingenious system.
Mr Colbert, the famous minister of Lewis XIV. was a man of probity, of
great industry, and knowledge of detail; of great experience and acuteness
in the examination of public accounts; and of abilities, in short, every
way fitted for introducing method and good order into the collection and
expenditure of the public revenue. That minister had unfortunately
embraced all the prejudices of the mercantile system, in its nature and
essence a system of restraint and regulation, and such as could scarce
fail to be agreeable to a laborious and plodding man of business, who had
been accustomed to regulate the different departments of public offices,
and to establish the necessary checks and controls for confining each to
its proper sphere. The industry and commerce of a great country, he
endeavoured to regulate upon the same model as the departments of a public
office; and instead of allowing every man to pursue his own interest his
own way, upon the liberal plan of equality, liberty, and justice, he
bestowed upon certain branches of industry extraordinary privileges, while
he laid others under as extraordinary restraints. He was not only
disposed, like other European ministers, to encourage more the industry of
the towns than that of the country; but, in order to support the industry
of the towns, he was willing even to depress and keep down that of the
country. In order to render provisions cheap to the inhabitants of the
towns, and thereby to encourage manufactures and foreign commerce, he
prohibited altogether the exportation of corn, and thus excluded the
inhabitants of the country from every foreign market, for by far the most
important part of the produce of their industry. This prohibition, joined
to the restraints imposed by the ancient provincial laws of France upon
the transportation of corn from one province to another, and to the
arbitrary and degrading taxes which are levied upon the cultivators in
almost all the provinces, discouraged and kept down the agriculture of
that country very much below the state to which it would naturally have
risen in so very fertile a soil, and so very happy a climate. This state
of discouragement and depression was felt more or less in every different
part of the country, and many different inquiries were set on foot
concerning the causes of it. One of those causes appeared to be the
preference given, by the institutions of Mr Colbert, to the industry of
the towns above that of the country.
If the rod be bent too much one way, says the proverb, in order to make it
straight, you must bend it as much the other. The French philosophers, who
have proposed the system which represents agriculture as the sole source
of the revenue and wealth of every country, seem to have adopted this
proverbial maxim; and, as in the plan of Mr Colbert, the industry of the
towns was certainly overvalued in comparison with that of the country, so
in their system it seems to be as certainly under-valued.
The different orders of people, who have ever been supposed to contribute
in any respect towards the annual produce of the land and labour of the
country, they divide into three classes. The first is the class of the
proprietors of land. The second is the class of the cultivators, of
farmers and country labourers, whom they honour with the peculiar
appellation of the productive class. The third is the class of artificers,
manufacturers, and merchants, whom they endeavour to degrade by the
humiliating appellation of the barren or unproductive class.
The class of proprietors contributes to the annual produce, by the expense
which they may occasionally lay out upon the improvement of the land, upon
the buildings, drains, inclosures, and other ameliorations, which they may
either make or maintain upon it, and by means of which the cultivators are
enabled, with the same capital, to raise a greater produce, and
consequently to pay a greater rent. This advanced rent may be considered
as the interest or profit due to the proprietor, upon the expense or
capital which he thus employs in the improvement of his land. Such
expenses are in this system called ground expenses (depenses foncieres).
The cultivators or farmers contribute to the annual produce, by what are
in this system called the original and annual expenses (depenses
primitives, et depenses annuelles), which they lay out upon the
cultivation of the land. The original expenses consist in the instruments
of husbandry, in the stock of cattle, in the seed, and in the maintenance
of the farmer’s family, servants, and cattle, during at least a great part
of the first year of his occupancy, or till he can receive some return
from the land. The annual expenses consist in the seed, in the wear and
tear of instruments of husbandry, and in the annual maintenance of the
farmer’s servants and cattle, and of his family too, so far as any part of
them can be considered as servants employed in cultivation. That part of
the produce of the land which remains to him after paying the rent, ought
to be sufficient, first, to replace to him, within a reasonable time, at
least during the term of his occupancy, the whole of his original
expenses, together with the ordinary profits of stock; and, secondly, to
replace to him annually the whole of his annual expenses, together
likewise with the ordinary profits of stock. Those two sorts of expenses
are two capitals which the farmer employs in cultivation; and unless they
are regularly restored to him, together with a reasonable profit, he
cannot carry on his employment upon a level with other employments; but,
from a regard to his own interest, must desert it as soon as possible, and
seek some other. That part of the produce of the land which is thus
necessary for enabling the farmer to continue his business, ought to be
considered as a fund sacred to cultivation, which, if the landlord
violates, he necessarily reduces the produce of his own land, and, in a
few years, not only disables the farmer from paying this racked rent, but
from paying the reasonable rent which he might otherwise have got for his
land. The rent which properly belongs to the landlord, is no more than the
neat produce which remains after paying, in the completest manner, all the
necessary expenses which must be previously laid out, in order to raise
the gross or the whole produce. It is because the labour of the
cultivators, over and above paying completely all those necessary
expenses, affords a neat produce of this kind, that this class of people
are in this system peculiarly distinguished by the honourable appellation
of the productive class. Their original and annual expenses are for the
same reason called, In this system, productive expenses, because, over and
above replacing their own value, they occasion the annual reproduction of
this neat produce.
The ground expenses, as they are called, or what the landlord lays out
upon the improvement of his land, are, in this system, too, honoured with
the appellation of productive expenses. Till the whole of those expenses,
together with the ordinary profits of stock, have been completely repaid
to him by the advanced rent which he gets from his land, that advanced
rent ought to be regarded as sacred and inviolable, both by the church and
by the king; ought to be subject neither to tithe nor to taxation. If it
is otherwise, by discouraging the improvement of land, the church
discourages the future increase of her own tithes, and the king the future
increase of his own taxes. As in a well ordered state of things,
therefore, those ground expenses, over and above reproducing in the
completest manner their own value, occasion likewise, after a certain
time, a reproduction of a neat produce, they are in this system considered
as productive expenses.
The ground expenses of the landlord, however, together with the original
and the annual expenses of the farmer, are the only three sorts of
expenses which in this system are considered as productive. All other
expenses, and all other orders of people, even those who, in the common
apprehensions of men, are regarded as the most productive, are, in this
account of things, represented as altogether barren and unproductive.
Artificers and manufacturers, in particular, whose industry, in the common
apprehensions of men, increases so much the value of the rude produce of
land, are in this system represented as a class of people altogether
barren and unproductive. Their labour, it is said, replaces only the stock
which employs them, together with its ordinary profits. That stock
consists in the materials, tools, and wages, advanced to them by their
employer; and is the fund destined for their employment and maintenance.
Its profits are the fund destined for the maintenance of their employer.
Their employer, as he advances to them the stock of materials, tools, and
wages, necessary for their employment, so he advances to himself what is
necessary for his own maintenance; and this maintenance he generally
proportions to the profit which he expects to make by the price of their
work. Unless its price repays to him the maintenance which he advances to
himself, as well as the materials, tools, and wages, which he advances to
his workmen, it evidently does not repay to him the whole expense which he
lays out upon it. The profits of manufacturing stock, therefore, are not,
like the rent of land, a neat produce which remains after completely
repaying the whole expense which must be laid out in order to obtain them.
The stock of the farmer yields him a profit, as well as that of the master
manufacturer; and it yields a rent likewise to another person, which that
of the master manufacturer does not. The expense, therefore, laid out in
employing and maintaining artificers and manufacturers, does no more than
continue, if one may say so, the existence of its own value, and does not
produce any new value. It is, therefore, altogether a barren and
unproductive expense. The expense, on the contrary, laid out in employing
farmers and country labourers, over and above continuing the existence of
its own value, produces a new value the rent of the landlord. It is,
therefore, a productive expense.
Mercantile stock is equally barren and unproductive with manufacturing
stock. It only continues the existence of its own value, without producing
any new value. Its profits are only the repayment of the maintenance which
its employer advances to himself during the time that he employs it, or
till he receives the returns of it. They are only the repayment of a part
of the expense which must be laid out in employing it.
The labour of artificers and manufacturers never adds any thing to the
value of the whole annual amount of the rude produce of the land. It adds,
indeed, greatly to the value of some particular parts of it. But the
consumption which, in the mean time, it occasions of other parts, is
precisely equal to the value which it adds to those parts; so that the
value of the whole amount is not, at any one moment of time, in the least
augmented by it. The person who works the lace of a pair of fine ruffles
for example, will sometimes raise the value of, perhaps, a pennyworth of
flax to £30 sterling. But though, at first sight, he appears thereby to
multiply the value of a part of the rude produce about seven thousand and
two hundred times, he in reality adds nothing to the value of the whole
annual amount of the rude produce. The working of that lace costs him,
perhaps, two years labour. The £30 which he gets for it when it is
finished, is no more than the repayment of the subsistence which he
advances to himself during the two years that he is employed about it. The
value which, by every day’s, month’s, or year’s labour, he adds to the
flax, does no more than replace the value of his own consumption during
that day, month, or year. At no moment of time, therefore, does he add any
thing to the value of the whole annual amount of the rude produce of the
land: the portion of that produce which he is continually consuming, being
always equal to the value which he is continually producing. The extreme
poverty of the greater part of the persons employed in this expensive,
though trifling manufacture, may satisfy us that the price of their work
does not, in ordinary cases, exceed the value of their subsistence. It is
otherwise with the work of farmers and country labourers. The rent of the
landlord is a value which, in ordinary cases, it is continually producing
over and above replacing, in the most complete manner, the whole
consumption, the whole expense laid out upon the employment and
maintenance both of the workmen and of their employer.
Artificers, manufacturers, and merchants, can augment the revenue and
wealth of their society by parsimony only; or, as it is expressed in this
system, by privation, that is, by depriving themselves of a part of the
funds destined for their own subsistence. They annually reproduce nothing
but those funds. Unless, therefore, they annually save some part of them,
unless they annually deprive themselves of the enjoyment of some part of
them, the revenue and wealth of their society can never be, in the
smallest degree, augmented by means of their industry. Farmers and country
labourers, on the contrary, may enjoy completely the whole funds destined
for their own subsistence, and yet augment, at the same time, the revenue
and wealth of their society. Over and above what is destined for their own
subsistence, their industry annually affords a neat produce, of which the
augmentation necessarily augments the revenue and wealth of their society.
Nations, therefore, which, like France or England, consist in a great
measure, of proprietors and cultivators, can be enriched by industry and
enjoyment. Nations, on the contrary, which, like Holland and Hamburgh, are
composed chiefly of merchants, artificers, and manufacturers, can grow
rich only through parsimony and privation. As the interest of nations so
differently circumstanced is very different, so is likewise the common
character of the people. In those of the former kind, liberality,
frankness, and good fellowship, naturally make a part of their common
character; in the latter, narrowness, meanness, and a selfish disposition,
averse to all social pleasure and enjoyment.
The unproductive class, that of merchants, artificers, and manufacturers,
is maintained and employed altogether at the expense of the two other
classes, of that of proprietors, and of that of cultivators. They furnish
it both with the materials of its work, and with the fund of its
subsistence, with the corn and cattle which it consumes while it is
employed about that work. The proprietors and cultivators finally pay both
the wages of all the workmen of the unproductive class, and the profits of
all their employers. Those workmen and their employers are properly the
servants of the proprietors and cultivators. They are only servants who
work without doors, as menial servants work within. Both the one and the
other, however, are equally maintained at the expense of the same masters.
The labour of both is equally unproductive. It adds nothing to the value
of the sum total of the rude produce of the land. Instead of increasing
the value of that sum total, it is a charge and expense which must be paid
out of it.
The unproductive class, however, is not only useful, but greatly useful,
to the other two classes. By means of the industry of merchants,
artificers, and manufacturers, the proprietors and cultivators can
purchase both the foreign goods and the manufactured produce of their own
country, which they have occasion for, with the produce of a much smaller
quantity of their own labour, than what they would be obliged to employ,
if they were to attempt, in an awkward and unskilful manner, either to
import the one, or to make the other, for their own use. By means of the
unproductive class, the cultivators are delivered from many cares, which
would otherwise distract their attention from the cultivation of land. The
superiority of produce, which in consequence of this undivided attention,
they are enabled to raise, is fully sufficient to pay the whole expense
which the maintenance and employment of the unproductive class costs
either the proprietors or themselves. The industry of merchants,
artificers, and manufacturers, though in its own nature altogether
unproductive, yet contributes in this manner indirectly to increase the
produce of the land. It increases the productive powers of productive
labour, by leaving it at liberty to confine itself to its proper
employment, the cultivation of land; and the plough goes frequently the
easier and the better, by means of the labour of the man whose business is
most remote from the plough.
It can never be the interest of the proprietors and cultivators, to
restrain or to discourage, in any respect, the industry of merchants,
artificers, and manufacturers. The greater the liberty which this
unproductive class enjoys, the greater will be the competition in all the
different trades which compose it, and the cheaper will the other two
classes be supplied, both with foreign goods and with the manufactured
produce of their own country.
It can never be the interest of the unproductive class to oppress the
other two classes. It is the surplus produce of the land, or what remains
after deducting the maintenance, first of the cultivators, and afterwards
of the proprietors, that maintains and employs the unproductive class. The
greater this surplus, the greater must likewise be the maintenance and
employment of that class. The establishment of perfect justice, of perfect
liberty, and of perfect equality, is the very simple secret which most
effectually secures the highest degree of prosperity to all the three
classes.
The merchants, artificers, and manufacturers of those mercantile states,
which, like Holland and Hamburgh, consist chiefly of this unproductive
class, are in the same manner maintained and employed altogether at the
expense of the proprietors and cultivators of land. The only difference
is, that those proprietors and cultivators are, the greater part of them,
placed at a most inconvenient distance from the merchants, artificers, and
manufacturers, whom they supply with the materials of their work and the
fund of their subsistence; are the inhabitants of other countries, and the
subjects of other governments.
Such mercantile states, however, are not only useful, but greatly useful,
to the inhabitants of those other countries. They fill up, in some
measure, a very important void; and supply the place of the merchants,
artificers, and manufacturers, whom the inhabitants of those countries
ought to find at home, but whom, from some defect in their policy, they do
not find at home.
It can never be the interest of those landed nations, if I may call them
so, to discourage or distress the industry of such mercantile states, by
imposing high duties upon their trade, or upon the commodities which they
furnish. Such duties, by rendering those commodities dearer, could serve
only to sink the real value of the surplus produce of their own land, with
which, or, what comes to the same thing, with the price of which those
commodities are purchased. Such duties could only serve to discourage the
increase of that surplus produce, and consequently the improvement and
cultivation of their own land. The most effectual expedient, on the
contrary, for raising the value of that surplus produce, for encouraging
its increase, and consequently the improvement and cultivation of their
own land, would be to allow the most perfect freedom to the trade of all
such mercantile nations.
This perfect freedom of trade would even be the most effectual expedient
for supplying them, in due time, with all the artificers, manufacturers,
and merchants, whom they wanted at home; and for filling up, in the
properest and most advantageous manner, that very important void which
they felt there.
The continual increase of the surplus produce of their land would, in due
time, create a greater capital than what would be employed with the
ordinary rate of profit in the improvement and cultivation of land; and
the surplus part of it would naturally turn itself to the employment of
artificers and manufacturers, at home. But these artificers and
manufacturers, finding at home both the materials of their work and the
fund of their subsistence, might immediately, even with much less art and
skill be able to work as cheap as the little artificers and manufacturers
of such mercantile states, who had both to bring from a greater distance.
Even though, from want of art and skill, they might not for some time be
able to work as cheap, yet, finding a market at home, they might be able
to sell their work there as cheap as that of the artificers and
manufacturers of such mercantile states, which could not be brought to
that market but from so great a distance; and as their art and skill
improved, they would soon be able to sell it cheaper. The artificers and
manufacturers of such mercantile states, therefore, would immediately be
rivalled in the market of those landed nations, and soon after undersold
and justled out of it altogether. The cheapness of the manufactures of
those landed nations, in consequence of the gradual improvements of art
and skill, would, in due time, extend their sale beyond the home market,
and carry them to many foreign markets, from which they would, in the same
manner, gradually justle out many of the manufacturers of such mercantile
nations.
This continual increase, both of the rude and manufactured produce of
those landed nations, would, in due time, create a greater capital than
could, with the ordinary rate of profit, be employed either in agriculture
or in manufactures. The surplus of this capital would naturally turn
itself to foreign trade and be employed in exporting, to foreign
countries, such parts of the rude and manufactured produce of its own
country, as exceeded the demand of the home market. In the exportation of
the produce of their own country, the merchants of a landed nation would
have an advantage of the same kind over those of mercantile nations, which
its artificers and manufacturers had over the artificers and manufacturers
of such nations; the advantage of finding at home that cargo, and those
stores and provisions, which the others were obliged to seek for at a
distance. With inferior art and skill in navigation, therefore, they would
be able to sell that cargo as cheap in foreign markets as the merchants of
such mercantile nations; and with equal art and skill they would be able
to sell it cheaper. They would soon, therefore, rival those mercantile
nations in this branch of foreign trade, and, in due time, would justle
them out of it altogether.
According to this liberal and generous system, therefore, the most
advantageous method in which a landed nation can raise up artificers,
manufacturers, and merchants of its own, is to grant the most perfect
freedom of trade to the artificers, manufacturers, and merchants of all
other nations. It thereby raises the value of the surplus produce of its
own land, of which the continual increase gradually establishes a fund,
which, in due time, necessarily raises up all the artificers,
manufacturers, and merchants, whom it has occasion for.
When a landed nation on the contrary, oppresses, either by high duties or
by prohibitions, the trade of foreign nations, it necessarily hurts its
own interest in two different ways. First, by raising the price of all
foreign goods, and of all sorts of manufactures, it necessarily sinks the
real value of the surplus produce of its own land, with which, or, what
comes to the same thing, with the price of which, it purchases those
foreign goods and manufactures. Secondly, by giving a sort of monopoly of
the home market to its own merchants, artificers, and manufacturers, it
raises the rate of mercantile and manufacturing profit, in proportion to
that of agricultural profit; and, consequently, either draws from
agriculture a part of the capital which had before been employed in it, or
hinders from going to it a part of what would otherwise have gone to it.
This policy, therefore, discourages agriculture in two different ways;
first, by sinking the real value of its produce, and thereby lowering the
rate of its profits; and, secondly, by raising the rate of profit in all
other employments. Agriculture is rendered less advantageous, and trade
and manufactures more advantageous, than they otherwise would be; and
every man is tempted by his own interest to turn, as much as he can, both
his capital and his industry from the former to the latter employments.
Though, by this oppressive policy, a landed nation should be able to raise
up artificers, manufacturers, and merchants of its own, somewhat sooner
than it could do by the freedom of trade; a matter, however, which is not
a little doubtful; yet it would raise them up, if one may say so,
prematurely, and before it was perfectly ripe for them. By raising up too
hastily one species of industry, it would depress another more valuable
species of industry. By raising up too hastily a species of industry which
duly replaces the stock which employs it, together with the ordinary
profit, it would depress a species of industry which, over and above
replacing that stock, with its profit, affords likewise a neat produce, a
free rent to the landlord. It would depress productive labour, by
encouraging too hastily that labour which is altogether barren and
unproductive.
In what manner, according to this system, the sum total of the annual
produce of the land is distributed among the three classes above
mentioned, and in what manner the labour of the unproductive class does no
more than replace the value of its own consumption, without increasing in
any respect the value of that sum total, is represented by Mr Quesnai, the
very ingenious and profound author of this system, in some arithmetical
formularies. The first of these formularies, which, by way of eminence, he
peculiarly distinguishes by the name of the Economical Table, represents
the manner in which he supposes this distribution takes place, in a state
of the most perfect liberty, and, therefore, of the highest prosperity; in
a state where the annual produce is such as to afford the greatest
possible neat produce, and where each class enjoys its proper share of the
whole annual produce. Some subsequent formularies represent the manner in
which he supposes this distribution is made in different states of
restraint and regulation; in which, either the class of proprietors, or
the barren and unproductive class, is more favoured than the class of
cultivators; and in which either the one or the other encroaches, more or
less, upon the share which ought properly to belong to this productive
class. Every such encroachment, every violation of that natural
distribution, which the most perfect liberty would establish, must,
according to this system, necessarily degrade, more or less, from one year
to another, the value and sum total of the annual produce, and must
necessarily occasion a gradual declension in the real wealth and revenue
of the society; a declension, of which the progress must be quicker or
slower, according to the degree of this encroachment, according as that
natural distribution, which the most perfect liberty would establish, is
more or less violated. Those subsequent formularies represent the
different degrees of declension which, according to this system,
correspond to the different degrees in which this natural distribution of
things is violated.
Some speculative physicians seem to have imagined that the health of the
human body could be preserved only by a certain precise regimen of diet
and exercise, of which every, the smallest violation, necessarily
occasioned some degree of disease or disorder proportionate to the degree
of the violation. Experience, however, would seem to shew, that the human
body frequently preserves, to all appearance at least, the most perfect
state of health under a vast variety of different regimens; even under
some which are generally believed to be very far from being perfectly
wholesome. But the healthful state of the human body, it would seem,
contains in itself some unknown principle of preservation, capable either
of preventing or of correcting, in many respects, the bad effects even of
a very faulty regimen. Mr Quesnai, who was himself a physician, and a very
speculative physician, seems to have entertained a notion of the same kind
concerning the political body, and to have imagined that it would thrive
and prosper only under a certain precise regimen, the exact regimen of
perfect liberty and perfect justice. He seems not to have considered, that
in the political body, the natural effort which every man is continually
making to better his own condition, is a principle of preservation capable
of preventing and correcting, in many respects, the bad effects of a
political economy, in some degree both partial and oppressive. Such a
political economy, though it no doubt retards more or less, is not always
capable of stopping altogether, the natural progress of a nation towards
wealth and prosperity, and still less of making it go backwards. If a
nation could not prosper without the enjoyment of perfect liberty and
perfect justice, there is not in the world a nation which could ever have
prospered. In the political body, however, the wisdom of nature has
fortunately made ample provision for remedying many of the bad effects of
the folly and injustice of man; it the same manner as it has done in the
natural body, for remedying those of his sloth and intemperance.
The capital error of this system, however, seems to lie in its
representing the class of artificers, manufacturers, and merchants, as
altogether barren and unproductive. The following observations may serve
to shew the impropriety of this representation:—
First, this class, it is acknowledged, reproduces annually the value of
its own annual consumption, and continues, at least, the existence of the
stock or capital which maintains and employs it. But, upon this account
alone, the denomination of barren or unproductive should seem to be very
improperly applied to it. We should not call a marriage barren or
unproductive, though it produced only a son and a daughter, to replace the
father and mother, and though it did not increase the number of the human
species, but only continued it as it was before. Farmers and country
labourers, indeed, over and above the stock which maintains and employs
them, reproduce annually a neat produce, a free rent to the landlord. As a
marriage which affords three children is certainly more productive than
one which affords only two, so the labour of farmers and country labourers
is certainly more productive than that of merchants, artificers, and
manufacturers. The superior produce of the one class, however, does not,
render the other barren or unproductive.
Secondly, it seems, on this account, altogether improper to consider
artificers, manufacturers, and merchants, in the same light as menial
servants. The labour of menial servants does not continue the existence of
the fund which maintains and employs them. Their maintenance and
employment is altogether at the expense of their masters, and the work
which they perform is not of a nature to repay that expense. That work
consists in services which perish generally in the very instant of their
performance, and does not fix or realize itself in any vendible commodity,
which can replace the value of their wages and maintenance. The labour, on
the contrary, of artificers, manufacturers, and merchants, naturally does
fix and realize itself in some such vendible commodity. It is upon this
account that, in the chapter in which I treat of productive and
unproductive labour, I have classed artificers, manufacturers, and
merchants among the productive labourers, and menial servants among the
barren or unproductive.
Thirdly, it seems, upon every supposition, improper to say, that the
labour of artificers, manufacturers, and merchants, does not increase the
real revenue of the society. Though we should suppose, for example, as it
seems to be supposed in this system, that the value of the daily, monthly,
and yearly consumption of this class was exactly equal to that of its
daily, monthly, and yearly production; yet it would not from thence
follow, that its labour added nothing to the real revenue, to the real
value of the annual produce of the land and labour of the society. An
artificer, for example, who, in the first six months after harvest,
executes ten pounds worth of work, though he should, in the same time,
consume ten pounds worth of corn and other necessaries, yet really adds
the value of ten pounds to the annual produce of the land and labour of
the society. While he has been consuming a half-yearly revenue of ten
pounds worth of corn and other necessaries, he has produced an equal value
of work, capable of purchasing, either to himself, or to some other
person, an equal half-yearly revenue. The value, therefore, of what has
been consumed and produced during these six months, is equal, not to ten,
but to twenty pounds. It is possible, indeed, that no more than ten pounds
worth of this value may ever have existed at any one moment of time. But
if the ten pounds worth of corn and other necessaries which were consumed
by the artificer, had been consumed by a soldier, or by a menial servant,
the value of that part of the annual produce which existed at the end of
the six months, would have been ten pounds less than it actually is in
consequence of the labour of the artificer. Though the value of what the
artificer produces, therefore, should not, at any one moment of time, be
supposed greater than the value he consumes, yet, at every moment of time,
the actually existing value of goods in the market is, in consequence of
what he produces, greater than it otherwise would be.
When the patrons of this system assert, that the consumption of
artificers, manufacturers, and merchants, is equal to the value of what
they produce, they probably mean no more than that their revenue, or the
fund destined for their consumption, is equal to it. But if they had
expressed themselves more accurately, and only asserted, that the revenue
of this class was equal to the value of what they produced, it might
readily have occurred to the reader, that what would naturally be saved
out of this revenue, must necessarily increase more or less the real
wealth of the society. In order, therefore, to make out something like an
argument, it was necessary that they should express themselves as they
have done; and this argument, even supposing things actually were as it
seems to presume them to be, turns out to be a very inconclusive one.
Fourthly, farmers and country labourers can no more augment, without
parsimony, the real revenue, the annual produce of the land and labour of
their society, than artificers, manufacturers, and merchants. The annual
produce of the land and labour of any society can be augmented only in two
ways; either, first, by some improvement in the productive powers of the
useful labour actually maintained within it; or, secondly, by some
increase in the quantity of that labour.
The improvement in the productive powers of useful labour depends, first,
upon the improvement in the ability of the workman; and, secondly, upon
that of the machinery with which he works. But the labour of artificers
and manufacturers, as it is capable of being more subdivided, and the
labour of each workman reduced to a greater simplicity of operation, than
that of farmers and country labourers; so it is likewise capable of both
these sorts of improvement in a much higher degree {See book i chap. 1.}
In this respect, therefore, the class of cultivators can have no sort of
advantage over that of artificers and manufacturers.
The increase in the quantity of useful labour actually employed within any
society must depend altogether upon the increase of the capital which
employs it; and the increase of that capital, again, must be exactly equal
to the amount of the savings from the revenue, either of the particular
persons who manage and direct the employment of that capital, or of some
other persons, who lend it to them. If merchants, artificers, and
manufacturers are, as this system seems to suppose, naturally more
inclined to parsimony and saving than proprietors and cultivators, they
are, so far, more likely to augment the quantity of useful labour employed
within their society, and consequently to increase its real revenue, the
annual produce of its land and labour.
Fifthly and lastly, though the revenue of the inhabitants of every country
was supposed to consist altogether, as this system seems to suppose, in
the quantity of subsistence which their industry could procure to them;
yet, even upon this supposition, the revenue of a trading and
manufacturing country must, other things being equal, always be much
greater than that of one without trade or manufactures. By means of trade
and manufactures, a greater quantity of subsistence can be annually
imported into a particular country, than what its own lands, in the actual
state of their cultivation, could afford. The inhabitants of a town,
though they frequently possess no lands of their own, yet draw to
themselves, by their industry, such a quantity of the rude produce of the
lands of other people, as supplies them, not only with the materials of
their work, but with the fund of their subsistence. What a town always is
with regard to the country in its neighbourhood, one independent state or
country may frequently be with regard to other independent states or
countries. It is thus that Holland draws a great part of its subsistence
from other countries; live cattle from Holstein and Jutland, and corn from
almost all the different countries of Europe. A small quantity of
manufactured produce, purchases a great quantity of rude produce. A
trading and manufacturing country, therefore, naturally purchases, with a
small part of its manufactured produce, a great part of the rude produce
of other countries; while, on the contrary, a country without trade and
manufactures is generally obliged to purchase, at the expense of a great
part of its rude produce, a very small part of the manufactured produce of
other countries. The one exports what can subsist and accommodate but a
very few, and imports the subsistence and accommodation of a great number.
The other exports the accommodation and subsistence of a great number, and
imports that of a very few only. The inhabitants of the one must always
enjoy a much greater quantity of subsistence than what their own lands, in
the actual state of their cultivation, could afford. The inhabitants of
the other must always enjoy a much smaller quantity.
This system, however, with all its imperfections, is perhaps the nearest
approximation to the truth that has yet been published upon the subject of
political economy; and is upon that account, well worth the consideration
of every man who wishes to examine with attention the principles of that
very important science. Though in representing the labour which is
employed upon land as the only productive labour, the notions which it
inculcates are, perhaps, too narrow and confined; yet in representing the
wealth of nations as consisting, not in the unconsumable riches of money,
but in the consumable goods annually reproduced by the labour of the
society, and in representing perfect liberty as the only effectual
expedient for rendering this annual reproduction the greatest possible,
its doctrine seems to be in every respect as just as it is generous and
liberal. Its followers are very numerous; and as men are fond of
paradoxes, and of appearing to understand what surpasses the
comprehensions of ordinary people, the paradox which it maintains,
concerning the unproductive nature of manufacturing labour, has not,
perhaps, contributed a little to increase the number of its admirers. They
have for some years past made a pretty considerable sect, distinguished in
the French republic of letters by the name of the Economists. Their works
have certainly been of some service to their country; not only by bringing
into general discussion, many subjects which had never been well examined
before, but by influencing, in some measure, the public administration in
favour of agriculture. It has been in consequence of their
representations, accordingly, that the agriculture of France has been
delivered from several of the oppressions which it before laboured under.
The term, during which such a lease can be granted, as will be valid
against every future purchaser or proprietor of the land, has been
prolonged from nine to twenty-seven years. The ancient provincial
restraints upon the transportation of corn from one province of the
kingdom to another, have been entirely taken away; and the liberty of
exporting it to all foreign countries, has been established as the common
law of the kingdom in all ordinary cases. This sect, in their works, which
are very numerous, and which treat not only of what is properly called
Political Economy, or of the nature and causes or the wealth of nations,
but of every other branch of the system of civil government, all follow
implicitly, and without any sensible variation, the doctrine of Mr
Qttesnai. There is, upon this account, little variety in the greater part
of their works. The most distinct and best connected account of this
doctrine is to be found in a little book written by Mr Mercier de la
Riviere, some time intendant of Martinico, entitled, The natural and
essential Order of Political Societies. The admiration of this whole sect
for their master, who was himself a man of the greatest modesty and
simplicity, is not inferior to that of any of the ancient philosophers for
the founders of their respective systems. ‘There have been since the world
began,’ says a very diligent and respectable author, the Marquis de
Mirabeau, ‘three great inventions which have principally given stability
to political societies, independent of many other inventions which have
enriched and adorned them. The first is the invention of writing, which
alone gives human nature the power of transmitting, without alteration,
its laws, its contracts, its annals, and its discoveries. The second is
the invention of money, which binds together all the relations between
civilized societies. The third is the economical table, the result of the
other two, which completes them both by perfecting their object; the great
discovery of our age, but of which our posterity will reap the benefit.’
As the political economy of the nations of modern Europe has been more
favourable to manufactures and foreign trade, the industry of the towns,
than to agriculture, the industry of the country; so that of other nations
has followed a different plan, and has been more favourable to agriculture
than to manufactures and foreign trade.
The policy of China favours agriculture more than all other employments.
In China, the condition of a labourer is said to be as much superior to
that of an artificer, as in most parts of Europe that of an artificer is
to that of a labourer. In China, the great ambition of every man is to get
possession of a little bit of land, either in property or in lease; and
leases are there said to be granted upon very moderate terms, and to be
sufficiently secured to the lessees. The Chinese have little respect for
foreign trade. Your beggarly commerce! was the language in which the
mandarins of Pekin used to talk to Mr De Lange, the Russian envoy,
concerning it {See the Journal of Mr De Lange, in Bell’s Travels, vol.
ii. p. 258, 276, 293.}. Except with Japan, the Chinese carry on,
themselves, and in their own bottoms, little or no foreign trade; and it
is only into one or two ports of their kingdom that they even admit the
ships of foreign nations. Foreign trade, therefore, is, in China, every
way confined within a much narrower circle than that to which it would
naturally extend itself, if more freedom was allowed to it, either in
their own ships, or in those of foreign nations.
Manufactures, as in a small bulk they frequently contain a great value,
and can upon that account be transported at less expense from one country
to another than most parts of rude produce, are, in almost all countries,
the principal support of foreign trade. In countries, besides, less
extensive, and less favourably circumstanced for inferior commerce than
China, they generally require the support of foreign trade. Without an
extensive foreign market, they could not well flourish, either in
countries so moderately extensive as to afford but a narrow home market,
or in countries where the communication between one province and another
was so difficult, as to render it impossible for the goods of any
particular place to enjoy the whole of that home market which the country
could afford. The perfection of manufacturing industry, it must be
remembered, depends altogether upon the division of labour; and the degree
to which the division of labour can be introduced into any manufacture, is
necessarily regulated, it has already been shewn, by the extent of the
market. But the great extent of the empire of China, the vast multitude of
its inhabitants, the variety of climate, and consequently of productions
in its different provinces, and the easy communication by means of
water-carriage between the greater part of them, render the home market of
that country of so great extent, as to be alone sufficient to support very
great manufactures, and to admit of very considerable subdivisions of
labour. The home market of China is, perhaps, in extent, not much inferior
to the market of all the different countries of Europe put together. A
more extensive foreign trade, however, which to this great home market
added the foreign market of all the rest of the world, especially if any
considerable part of this trade was carried on in Chinese ships, could
scarce fail to increase very much the manufactures of China, and to
improve very much the productive powers of its manufacturing industry. By
a more extensive navigation, the Chinese would naturally learn the art of
using and constructing, themselves, all the different machines made use of
in other countries, as well as the other improvements of art and industry
which are practised in all the different parts of the world. Upon their
present plan, they have little opportunity of improving themselves by the
example of any other nation, except that of the Japanese.
The policy of ancient Egypt, too, and that of the Gentoo government of
Indostan, seem to have favoured agriculture more than all other
employments.
Both in ancient Egypt and Indostan, the whole body of the people was
divided into different casts or tribes each of which was confined, from
father to son, to a particular employment, or class of employments. The
son of a priest was necessarily a priest; the son of a soldier, a soldier;
the son of a labourer, a labourer; the son of a weaver, a weaver; the son
of a tailor, a tailor, etc. In both countries, the cast of the priests
holds the highest rank, and that of the soldiers the next; and in both
countries the cast of the farmers and labourers was superior to the casts
of merchants and manufacturers.
The government of both countries was particularly attentive to the
interest of agriculture. The works constructed by the ancient sovereigns
of Egypt, for the proper distribution of the waters of the Nile, were
famous in antiquity, and the ruined remains of some of them are still the
admiration of travellers. Those of the same kind which were constructed by
the ancient sovereigns of Indostan, for the proper distribution of the
waters of the Ganges, as well as of many other rivers, though they have
been less celebrated, seem to have been equally great. Both countries,
accordingly, though subject occasionally to dearths, have been famous for
their great fertility. Though both were extremely populous, yet, in years
of moderate plenty, they were both able to export great quantities of
grain to their neighbours.
The ancient Egyptians had a superstitious aversion to the sea; and as the
Gentoo religion does not permit its followers to light a fire, nor
consequently to dress any victuals, upon the water, it, in effect,
prohibits them from all distant sea voyages. Both the Egyptians and
Indians must have depended almost altogether upon the navigation of other
nations for the exportation of their surplus produce; and this dependency,
as it must have confined the market, so it must have discouraged the
increase of this surplus produce. It must have discouraged, too, the
increase of the manufactured produce, more than that of the rude produce.
Manufactures require a much more extensive market than the most important
parts of the rude produce of the land. A single shoemaker will make more
than 300 pairs of shoes in the year; and his own family will not, perhaps,
wear out six pairs. Unless, therefore, he has the custom of, at least, 50
such families as his own, he cannot dispose of the whole product of his
own labour. The most numerous class of artificers will seldom, in a large
country, make more than one in 50, or one in a 100, of the whole number of
families contained in it. But in such large countries, as France and
England, the number of people employed in agriculture has, by some authors
been computed at a half, by others at a third and by no author that I know
of, at less that a fifth of the whole inhabitants of the country. But as
the produce of the agriculture of both France and England is, the far
greater part of it, consumed at home, each person employed in it must,
according to these computations, require little more than the custom of
one, two, or, at most, of four such families as his own, in order to
dispose of the whole produce of his own labour. Agriculture, therefore,
can support itself under the discouragement of a confined market much
better than manufactures. In both ancient Egypt and Indostan, indeed, the
confinement of the foreign market was in some measure compensated by the
conveniency of many inland navigations, which opened, in the most
advantageous manner, the whole extent of the home market to every part of
the produce of every different district of those countries. The great
extent of Indostan, too, rendered the home market of that country very
great, and sufficient to support a great variety of manufactures. But the
small extent of ancient Egypt, which was never equal to England, must at
all times, have rendered the home market of that country too narrow for
supporting any great variety of manufactures. Bengal accordingly, the
province of Indostan which commonly exports the greatest quantity of rice,
has always been more remarkable for the exportation of a great variety of
manufactures, than for that of its grain. Ancient Egypt, on the contrary,
though it exported some manufactures, fine linen in particular, as well as
some other goods, was always most distinguished for its great exportation
of grain. It was long the granary of the Roman empire.
The sovereigns of China, of ancient Egypt, and of the different kingdoms
into which Indostan has, at different times, been divided, have always
derived the whole, or by far the most considerable part, of their revenue,
from some sort of land tax or land rent. This land tax, or land rent, like
the tithe in Europe, consisted in a certain proportion, a fifth, it is
said, of the produce of the land, which was either delivered in kind, or
paid in money, according to a certain valuation, and which, therefore,
varied from year to year, according to all the variations of the produce.
It was natural, therefore, that the sovereigns of those countries should
be particularly attentive to the interests of agriculture, upon the
prosperity or declension of which immediately depended the yearly increase
or diminution of their own revenue.
The policy of the ancient republics of Greece, and that of Rome, though it
honoured agriculture more than manufactures or foreign trade, yet seems
rather to have discouraged the latter employments, than to have given any
direct or intentional encouragement to the former. In several of the
ancient states of Greece, foreign trade was prohibited altogether; and in
several others, the employments of artificers and manufacturers were
considered as hurtful to the strength and agility of the human body, as
rendering it incapable of those habits which their military and gymnastic
exercises endeavoured to form in it, and as thereby disqualifying it, more
or less, for undergoing the fatigues and encountering the dangers of war.
Such occupations were considered as fit only for slaves, and the free
citizens of the states were prohibited from exercising them. Even in those
states where no such prohibition took place, as in Rome and Athens, the
great body of the people were in effect excluded from all the trades which
are now commonly exercised by the lower sort of the inhabitants of towns.
Such trades were, at Athens and Rome, all occupied by the slaves of the
rich, who exercised them for the benefit of their masters, whose wealth,
power, and protection, made it almost impossible for a poor freeman to
find a market for his work, when it came into competition with that of the
slaves of the rich. Slaves, however, are very seldom inventive; and all
the most important improvements, either in machinery, or in the
arrangement and distribution of work, which facilitate and abridge labour
have been the discoveries of freemen. Should a slave propose any
improvement of this kind, his master would be very apt to consider the
proposal as the suggestion of laziness, and of a desire to save his own
labour at the master’s expense. The poor slave, instead of reward would
probably meet with much abuse, perhaps with some punishment. In the
manufactures carried on by slaves, therefore, more labour must generally
have been employed to execute the same quantity of work, than in those
carried on by freemen. The work of the farmer must, upon that account,
generally have been dearer than that of the latter. The Hungarian mines,
it is remarked by Mr Montesquieu, though not richer, have always been
wrought with less expense, and therefore with more profit, than the
Turkish mines in their neighbourhood. The Turkish mines are wrought by
slaves; and the arms of those slaves are the only machines which the Turks
have ever thought of employing. The Hungarian mines are wrought by
freemen, who employ a great deal of machinery, by which they facilitate
and abridge their own labour. From the very little that is known about the
price of manufactures in the times of the Greeks and Romans, it would
appear that those of the finer sort were excessively dear. Silk sold for
its weight in gold. It was not, indeed, in those times an European
manufacture; and as it was all brought from the East Indies, the distance
of the carriage may in some measure account for the greatness of the
price. The price, however, which a lady, it is said, would sometimes pay
for a piece of very fine linen, seems to have been equally extravagant;
and as linen was always either an European, or at farthest, an Egyptian
manufacture, this high price can be accounted for only by the great
expense of the labour which must have been employed about It, and the
expense of this labour again could arise from nothing but the awkwardness
of the machinery which is made use of. The price of fine woollens, too,
though not quite so extravagant, seems, however, to have been much above
that of the present times. Some cloths, we are told by Pliny {Plin. 1.
ix.c.39.}, dyed in a particular manner, cost a hundred denarii, or
£3:6s:8d. the pound weight. Others, dyed in another manner, cost a
thousand denarii the pound weight, or £33:6s:8d. The Roman pound, it must
be remembered, contained only twelve of our avoirdupois ounces. This high
price, indeed, seems to have been principally owing to the dye. But had
not the cloths themselves been much dearer than any which are made in the
present times, so very expensive a dye would not probably have been
bestowed upon them. The disproportion would have been too great between
the value of the accessory and that of the principal. The price mentioned
by the same author {Plin. 1. viii.c.48.}, of some triclinaria, a sort of
woollen pillows or cushions made use of to lean upon as they reclined upon
their couches at table, passes all credibility; some of them being said to
have cost more than £30,000, others more than £300,000. This high price,
too, is not said to have arisen from the dye. In the dress of the people
of fashion of both sexes, there seems to have been much less variety, it
is observed by Dr Arbuthnot, in ancient than in modern times; and the
very little variety which we find in that of the ancient statues, confirms
his observation. He infers from this, that their dress must, upon the
whole, have been cheaper than ours; but the conclusion does not seem to
follow. When the expense of fashionable dress is very great, the variety
must be very small. But when, by the improvements in the productive powers
of manufacturing art and industry, the expense of any one dress comes to
be very moderate, the variety will naturally be very great. The rich, not
being able to distinguish themselves by the expense of any one dress, will
naturally endeavour to do so by the multitude and variety of their
dresses.
The greatest and most important branch of the commerce of every nation, it
has already been observed, is that which is carried on between the
inhabitants of the town and those of the country. The inhabitants of the
town draw from the country the rude produce, which constitutes both the
materials of their work and the fund of their subsistence; and they pay
for this rude produce, by sending back to the country a certain portion of
it manufactured and prepared for immediate use. The trade which is carried
on between these two different sets of people, consists ultimately in a
certain quantity of rude produce exchanged for a certain quantity of
manufactured produce. The dearer the latter, therefore, the cheaper the
former; and whatever tends in any country to raise the price of
manufactured produce, tends to lower that of the rude produce of the land,
and thereby to discourage agriculture. The smaller the quantity of
manufactured produce, which any given quantity of rude produce, or, what
comes to the same thing, which the price of any given quantity of rude
produce, is capable of purchasing, the smaller the exchangeable value of
that given quantity of rude produce; the smaller the encouragement which
either the landlord has to increase its quantity by improving, or the
farmer by cultivating the land. Whatever, besides, tends to diminish in
any country the number of artificers and manufacturers, tends to diminish
the home market, the most important of all markets, for the rude produce
of the land, and thereby still further to discourage agriculture.
Those systems, therefore, which preferring agriculture to all other
employments, in order to promote it, impose restraints upon manufactures
and foreign trade, act contrary to the very end which they propose, and
indirectly discourage that very species of industry which they mean to
promote. They are so far, perhaps, more inconsistent than even the
mercantile system. That system, by encouraging manufactures and foreign
trade more than agriculture, turns a certain portion of the capital of the
society, from supporting a more advantageous, to support a less
advantageous species of industry. But still it really, and in the end,
encourages that species of industry which it means to promote. Those
agricultural systems, on the contrary, really, and in the end, discourage
their own favourite species of industry.
It is thus that every system which endeavours, either, by extraordinary
encouragements to draw towards a particular species of industry a greater
share of the capital of the society than what would naturally go to it,
or, by extraordinary restraints, to force from a particular species of
industry some share of the capital which would otherwise be employed in
it, is, in reality, subversive of the great purpose which it means to
promote. It retards, instead of accelerating the progress of the society
towards real wealth and greatness; and diminishes, instead of increasing,
the real value of the annual produce of its land and labour.
All systems, either of preference or of restraint, therefore, being thus
completely taken away, the obvious and simple system of natural liberty
establishes itself of its own accord. Every man, as long as he does not
violate the laws of justice, is left perfectly free to pursue his own
interest his own way, and to bring both his industry and capital into
competition with those of any other man, or order of men. The sovereign is
completely discharged from a duty, in the attempting to perform which he
must always be exposed to innumerable delusions, and for the proper
performance of which, no human wisdom or knowledge could ever be
sufficient; the duty of superintending the industry of private people, and
of directing it towards the employments most suitable to the interests of
the society. According to the system of natural liberty, the sovereign has
only three duties to attend to; three duties of great importance, indeed,
but plain and intelligible to common understandings: first, the duty of
protecting the society from the violence and invasion of other independent
societies; secondly, the duty of protecting, as far as possible, every
member of the society from the injustice or oppression of every other
member of it, or the duty of establishing an exact administration of
justice; and, thirdly, the duty of erecting and maintaining certain public
works, and certain public institutions, which it can never be for the
interest of any individual, or small number of individuals to erect and
maintain; because the profit could never repay the expense to any
individual, or small number of individuals, though it may frequently do
much more than repay it to a great society.
The proper performance of those several duties of the sovereign
necessarily supposes a certain expense; and this expense again necessarily
requires a certain revenue to support it. In the following book,
therefore, I shall endeavour to explain, first, what are the necessary
expenses of the sovereign or commonwealth; and which of those expenses
ought to be defrayed by the general contribution of the whole society; and
which of them, by that of some particular part only, or of some particular
members of the society: secondly, what are the different methods in which
the whole society may be made to contribute towards defraying the expenses
incumbent on the whole society; and what are the principal advantages and
inconveniencies of each of those methods: and thirdly, what are the
reasons and causes which have induced almost all modern governments to
mortgage some part of this revenue, or to contract debts; and what have
been the effects of those debts upon the real wealth, the annual produce
of the land and labour of the society. The following book, therefore, will
naturally be divided into three chapters.
APPENDIX TO BOOK IV
The two following accounts are subjoined, in order to illustrate and
confirm what is said in the fifth chapter of the fourth book, concerning
the Tonnage Bounty to the Whit-herring Fishery. The reader, I believe, may
depend upon the accuracy of both accounts.
An account of Busses fitted out in Scotland for eleven Years, with the
Number of empty Barrels carried out, and the Number of Barrels of Herrings
caught; also the Bounty, at a Medium, on each Barrel of Sea-sricks, and on
each Barrel when fully packed.
Years Number of Empty Barrels Barrels of Her- Bounty paid on Busses carried out rings caught the Busses £. s. d. 1771 29 5,948 2,832 2,885 0 0 1772 168 41,316 22,237 11,055 7 6 1773 190 42,333 42,055 12,510 8 6 1774 240 59,303 56,365 26,932 2 6 1775 275 69,144 52,879 19,315 15 0 1776 294 76,329 51,863 21,290 7 6 1777 240 62,679 43,313 17,592 2 6 1778 220 56,390 40,958 16,316 2 6 1779 206 55,194 29,367 15,287 0 0 1780 181 48,315 19,885 13,445 12 6 1781 135 33,992 16,593 9,613 15 6
Totals 2,186 550,943 378,347 £165,463 14 0
Sea-sticks 378,347 Bounty, at a medium, for each barrel of sea-sticks, £ 0 8 2¼ But a barrel of sea-sticks being only reckoned two thirds of a barrel fully packed, one third to be deducted, which ⅓ deducted 126,115 brings the bounty to £ 0 12 3¾ Barrels fully packed 252,231
And if the herrings are exported, there is besides a premium of £ 0 2 8 So the bounty paid by government in money for each barrel is £ 0 14 11¾
But if to this, the duty of the salt usually taken credit for as expended in curing each barrel, which at a medium, is, of foreign, one bushel and one- fourth of a bushel, at 10s. a-bushel, be added, viz 0 12 6 the bounty on each barrel would amount to £ 1 7 5¾
If the herrings are cured with British salt, it will stand thus, viz. Bounty as before £ 0 14 11¾ But if to this bounty, the duty on two bushels of Scotch salt, at 1s.6d. per bushel, supposed to be the quantity, at a medium, used in curing each barrel is added, viz. 0 3 0 The bounty on each barrel will amount to £ 0 17 11¾
And when buss herrings are entered for home consumption in Scotland, and pay the shilling a barrel of duty, the bounty stands thus, to wit, as before £ 0 12 3¾ From which the shilling a barrel is to be deducted 0 1 0 £ 0 11 3¾
But to that there is to be added again, the duty of the foreign salt used curing a barrel of herring viz 0 12 6 So that the premium allowed for each barrel of her- rings entered for home consumption is £ 1 3 9¾
If the herrings are cured in British salt, it will stand as follows viz. Bounty on each barrel brought in by the busses, as above £ 0 12 3¾ From which deduct 1s. a-barrel, paid at the time they are entered for home consumption 0 1 0 £ 0 11 3¾
But if to the bounty, the the duty on two bushel of Scotch salt, at 1s.6d. per bushel supposed to be the quantity, at a medium, used in curing each barrel, is added, viz 0 3 0 the premium for each barrel entered for home consumption will be £ 1 14 3¾
Though the loss of duties upon herrings exported cannot, perhaps, properly
be considered as bounty, that upon herrings entered for home consumption
certainly may.
An account of the Quantity of Foreign Salt imported into Scotland, and of
Scotch Salt delivered Duty-free from the Works there, for the Fishery,
from the 5th. of April 1771 to the 5th. of April 1782 with the Medium of
both for one Year.
Foreign Salt Scotch Salt delivered
PERIOD imported from the Works
Bushels Bushels
From 5th. April 1771 to 5th. April 1782 936,974 168,226 Medium for one year 85,159½ 15,293¼
It is to be observed, that the bushel of foreign salt weighs 48lbs., that
of British weighs 56lbs. only.
BOOK V.
OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH
CHAPTER I.
OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH.
PART I. Of the Expense of Defence.
The first duty of the sovereign, that of protecting the society from the
violence and invasion of other independent societies, can be performed
only by means of a military force. But the expense both of preparing this
military force in time of peace, and of employing it in time of war, is
very different in the different states of society, in the different
periods of improvement.
Among nations of hunters, the lowest and rudest state of society, such as
we find it among the native tribes of North America, every man is a
warrior, as well as a hunter. When he goes to war, either to defend his
society, or to revenge the injuries which have been done to it by other
societies, he maintains himself by his own labour, in the same manner as
when he lives at home. His society (for in this state of things there is
properly neither sovereign nor commonwealth) is at no sort of expense,
either to prepare him for the field, or to maintain him while he is in it.
Among nations of shepherds, a more advanced state of society, such as we
find it among the Tartars and Arabs, every man is, in the same manner, a
warrior. Such nations have commonly no fixed habitation, but live either
in tents, or in a sort of covered waggons, which are easily transported
from place to place. The whole tribe, or nation, changes its situation
according to the different seasons of the year, as well as according to
other accidents. When its herds and flocks have consumed the forage of one
part of the country, it removes to another, and from that to a third. In
the dry season, it comes down to the banks of the rivers; in the wet
season, it retires to the upper country. When such a nation goes to war,
the warriors will not trust their herds and flocks to the feeble defence
of their old men, their women and children; and their old men, their women
and children, will not be left behind without defence, and without
subsistence. The whole nation, besides, being accustomed to a wandering
life, even in time of peace, easily takes the field in time of war.
Whether it marches as an army, or moves about as a company of herdsmen,
the way of life is nearly the same, though the object proposed by it be
very different. They all go to war together, therefore, and everyone does
as well as he can. Among the Tartars, even the women have been frequently
known to engage in battle. If they conquer, whatever belongs to the
hostile tribe is the recompence of the victory; but if they are
vanquished, all is lost; and not only their herds and flocks, but their
women and children become the booty of the conqueror. Even the greater
part of those who survive the action are obliged to submit to him for the
sake of immediate subsistence. The rest are commonly dissipated and
dispersed in the desert.
The ordinary life, the ordinary exercise of a Tartar or Arab, prepares him
sufficiently for war. Running, wrestling, cudgel-playing, throwing the
javelin, drawing the bow, etc. are the common pastimes of those who live
in the open air, and are all of them the images of war. When a Tartar or
Arab actually goes to war, he is maintained by his own herds and flocks,
which he carries with him, in the same manner as in peace. His chief or
sovereign (for those nations have all chiefs or sovereigns) is at no sort
of expense in preparing him for the field; and when he is in it, the
chance of plunder is the only pay which he either expects or requires.
An army of hunters can seldom exceed two or three hundred men. The
precarious subsistence which the chace affords, could seldom allow a
greater number to keep together for any considerable time. An army of
shepherds, on the contrary, may sometimes amount to two or three hundred
thousand. As long as nothing stops their progress, as long as they can go
on from one district, of which they have consumed the forage, to another,
which is yet entire; there seems to be scarce any limit to the number who
can march on together. A nation of hunters can never be formidable to the
civilized nations in their neighbourhood; a nation of shepherds may.
Nothing can be more contemptible than an Indian war in North America;
nothing, on the contrary, can be more dreadful than a Tartar invasion has
frequently been in Asia. The judgment of Thucydides, that both Europe and
Asia could not resist the Scythians united, has been verified by the
experience of all ages. The inhabitants of the extensive, but defenceless
plains of Scythia or Tartary, have been frequently united under the
dominion of the chief of some conquering horde or clan; and the havock and
devastation of Asia have always signalized their union. The inhabitants of
the inhospitable deserts of Arabia, the other great nation of shepherds,
have never been united but once, under Mahomet and his immediate
successors. Their union, which was more the effect of religious enthusiasm
than of conquest, was signalized in the same manner. If the hunting
nations of America should ever become shepherds, their neighbourhood would
be much more dangerous to the European colonies than it is at present.
In a yet more advanced state of society, among those nations of husbandmen
who have little foreign commerce, and no other manufactures but those
coarse and household ones, which almost every private family prepares for
its own use, every man, in the same manner, either is a warrior, or easily
becomes such. Those who live by agriculture generally pass the whole day
in the open air, exposed to all the inclemencies of the seasons. The
hardiness of their ordinary life prepares them for the fatigues of war, to
some of which their necessary occupations bear a great analogy. The
necessary occupation of a ditcher prepares him to work in the trenches,
and to fortify a camp, as well as to inclose a field. The ordinary
pastimes of such husbandmen are the same as those of shepherds, and are in
the same manner the images of war. But as husbandmen have less leisure
than shepherds, they are not so frequently employed in those pastimes.
They are soldiers but soldiers not quite so much masters of their
exercise. Such as they are, however, it seldom costs the sovereign or
commonwealth any expense to prepare them for the field.
Agriculture, even in its rudest and lowest state, supposes a settlement,
some sort of fixed habitation, which cannot be abandoned without great
loss. When a nation of mere husbandmen, therefore, goes to war, the whole
people cannot take the field together. The old men, the women and
children, at least, must remain at home, to take care of the habitation.
All the men of the military age, however, may take the field, and in small
nations of this kind, have frequently done so. In every nation, the men of
the military age are supposed to amount to about a fourth or a fifth part
of the whole body of the people. If the campaign, too, should begin after
seedtime, and end before harvest, both the husbandman and his principal
labourers can be spared from the farm without much loss. He trusts that
the work which must be done in the mean time, can be well enough executed
by the old men, the women, and the children. He is not unwilling,
therefore, to serve without pay during a short campaign; and it frequently
costs the sovereign or commonwealth as little to maintain him in the field
as to prepare him for it. The citizens of all the different states of
ancient Greece seem to have served in this manner till after the second
Persian war; and the people of Peloponnesus till after the Peloponnesian
war. The Peloponnesians, Thucydides observes, generally left the field in
the summer, and returned home to reap the harvest. The Roman people, under
their kings, and during the first ages of the republic, served in the same
manner. It was not till the seige of Veii, that they who staid at home
began to contribute something towards maintaining those who went to war.
In the European monarchies, which were founded upon the ruins of the Roman
empire, both before, and for some time after, the establishment of what is
properly called the feudal law, the great lords, with all their immediate
dependents, used to serve the crown at their own expense. In the field, in
the same manner as at home, they maintained themselves by their own
revenue, and not by any stipend or pay which they received from the king
upon that particular occasion.
In a more advanced state of society, two different causes contribute to
render it altogether impossible that they who take the field should
maintain themselves at their own expense. Those two causes are, the
progress of manufactures, and the improvement in the art of war.
Though a husbandman should be employed in an expedition, provided it
begins after seedtime, and ends before harvest, the interruption of his
business will not always occasion any considerable diminution of his
revenue. Without the intervention of his labour, Nature does herself the
greater part of the work which remains to be done. But the moment that an
artificer, a smith, a carpenter, or a weaver, for example, quits his
workhouse, the sole source of his revenue is completely dried up. Nature
does nothing for him; he does all for himself. When he takes the field,
therefore, in defence of the public, as he has no revenue to maintain
himself, he must necessarily be maintained by the public. But in a
country, of which a great part of the inhabitants are artificers and
manufacturers, a great part of the people who go to war must be drawn from
those classes, and must, therefore, be maintained by the public as long as
they are employed in its service.
When the art of war, too, has gradually grown up to be a very intricate
and complicated science; when the event of war ceases to be determined, as
in the first ages of society, by a single irregular skirmish or battle;
but when the contest is generally spun out through several different
campaigns, each of which lasts during the greater part of the year; it
becomes universally necessary that the public should maintain those who
serve the public in war, at least while they are employed in that service.
Whatever, in time of peace, might be the ordinary occupation of those who
go to war, so very tedious and expensive a service would otherwise be by
far too heavy a burden upon them. After the second Persian war,
accordingly, the armies of Athens seem to have been generally composed of
mercenary troops, consisting, indeed, partly of citizens, but partly, too,
of foreigners; and all of them equally hired and paid at the expense of
the state. From the time of the siege of Veii, the armies of Rome received
pay for their service during the time which they remained in the field.
Under the feudal governments, the military service, both of the great
lords, and of their immediate dependents, was, after a certain period,
universally exchanged for a payment in money, which was employed to
maintain those who served in their stead.
The number of those who can go to war, in proportion to the whole number
of the people, is necessarily much smaller in a civilized than in a rude
state of society. In a civilized society, as the soldiers are maintained
altogether by the labour of those who are not soldiers, the number of the
former can never exceed what the latter can maintain, over and above
maintaining, in a manner suitable to their respective stations, both
themselves and the other officers of government and law, whom they are
obliged to maintain. In the little agrarian states of ancient Greece, a
fourth or a fifth part of the whole body of the people considered the
themselves as soldiers, and would sometimes, it is said, take the field.
Among the civilized nations of modern Europe, it is commonly computed,
that not more than the one hundredth part of the inhabitants of any
country can be employed as soldiers, without ruin to the country which
pays the expense of their service.
The expense of preparing the army for the field seems not to have become
considerable in any nation, till long after that of maintaining it in the
field had devolved entirely upon the sovereign or commonwealth. In all the
different republics of ancient Greece, to learn his military exercises,
was a necessary part of education imposed by the state upon every free
citizen. In every city there seems to have been a public field, in which,
under the protection of the public magistrate, the young people were
taught their different exercises by different masters. In this very simple
institution consisted the whole expense which any Grecian state seems ever
to have been at, in preparing its citizens for war. In ancient Rome, the
exercises of the Campus Martius answered the same purpose with those of
the Gymnasium in ancient Greece. Under the feudal governments, the many
public ordinances, that the citizens of every district should practise
archery, as well as several other military exercises, were intended for
promoting the same purpose, but do not seem to have promoted it so well.
Either from want of interest in the officers entrusted with the execution
of those ordinances, or from some other cause, they appear to have been
universally neglected; and in the progress of all those governments,
military exercises seem to have gone gradually into disuse among the great
body of the people.
In the republics of ancient Greece and Rome, during the whole period of
their existence, and under the feudal governments, for a considerable time
after their first establishment, the trade of a soldier was not a
separate, distinct trade, which constituted the sole or principal
occupation of a particular class of citizens; every subject of the state,
whatever might be the ordinary trade or occupation by which he gained his
livelihood, considered himself, upon all ordinary occasions, as fit
likewise to exercise the trade of a soldier, and, upon many extraordinary
occasions, as bound to exercise it.
The art of war, however, as it is certainly the noblest of all arts, so,
in the progress of improvement, it necessarily becomes one of the most
complicated among them. The state of the mechanical, as well as some other
arts, with which it is necessarily connected, determines the degree of
perfection to which it is capable of being carried at any particular time.
But in order to carry it to this degree of perfection, it is necessary
that it should become the sole or principal occupation of a particular
class of citizens; and the division of labour is as necessary for the
improvement of this, as of every other art. Into other arts, the division
of labour is naturally introduced by the prudence of individuals, who find
that they promote their private interest better by confining themselves to
a particular trade, than by exercising a great number. But it is the
wisdom of the state only, which can render the trade of a soldier a
particular trade, separate and distinct from all others. A private
citizen, who, in time of profound peace, and without any particular
encouragement from the public, should spend the greater part of his time
in military exercises, might, no doubt, both improve himself very much in
them, and amuse himself very well; but he certainly would not promote his
own interest. It is the wisdom of the state only, which can render it for
his interest to give up the greater part of his time to this peculiar
occupation; and states have not always had this wisdom, even when their
circumstances had become such, that the preservation of their existence
required that they should have it.
A shepherd has a great deal of leisure; a husbandman, in the rude state of
husbandry, has some; an artificer or manufacturer has none at all. The
first may, without any loss, employ a great deal of his time in martial
exercises; the second may employ some part of it; but the last cannot
employ a single hour in them without some loss, and his attention to his
own interest naturally leads him to neglect them altogether. Those
improvements in husbandry, too, which the progress of arts and
manufactures necessarily introduces, leave the husbandman as little
leisure as the artificer. Military exercises come to be as much neglected
by the inhabitants of the country as by those of the town, and the great
body of the people becomes altogether unwarlike. That wealth, at the same
time, which always follows the improvements of agriculture and
manufactures, and which, in reality, is no more than the accumulated
produce of those improvements, provokes the invasion of all their
neighbours. An industrious, and, upon that account, a wealthy nation, is
of all nations the most likely to be attacked; and unless the state takes
some new measure for the public defence, the natural habits of the people
render them altogether incapable of defending themselves.
In these circumstances, there seem to be but two methods by which the
state can make any tolerable provision for the public defence.
It may either, first, by means of a very rigorous police, and in spite of
the whole bent of the interest, genius, and inclinations of the people,
enforce the practice of military exercises, and oblige either all the
citizens of the military age, or a certain number of them, to join in some
measure the trade of a soldier to whatever other trade or profession they
may happen to carry on.
Or, secondly, by maintaining and employing a certain number of citizens in
the constant practice of military exercises, it may render the trade of a
soldier a particular trade, separate and distinct from all others.
If the state has recourse to the first of those two expedients, its
military force is said to consist in a militia; if to the second, it is
said to consist in a standing army. The practice of military exercises is
the sole or principal occupation of the soldiers of a standing army, and
the maintenance or pay which the state affords them is the principal and
ordinary fund of their subsistence. The practice of military exercises is
only the occasional occupation of the soldiers of a militia, and they
derive the principal and ordinary fund of their subsistence from some
other occupation. In a militia, the character of the labourer, artificer,
or tradesman, predominates over that of the soldier; in a standing army,
that of the soldier predominates over every other character; and in this
distinction seems to consist the essential difference between those two
different species of military force.
Militias have been of several different kinds. In some countries, the
citizens destined for defending the state seem to have been exercised
only, without being, if I may say so, regimented; that is, without being
divided into separate and distinct bodies of troops, each of which
performed its exercises under its own proper and permanent officers. In
the republics of ancient Greece and Rome, each citizen, as long as he
remained at home, seems to have practised his exercises, either separately
and independently, or with such of his equals as he liked best; and not to
have been attached to any particular body of troops, till he was actually
called upon to take the field. In other countries, the militia has not
only been exercised, but regimented. In England, in Switzerland, and, I
believe, in every other country of modern Europe, where any imperfect
military force of this kind has been established, every militiaman is,
even in time of peace, attached to a particular body of troops, which
performs its exercises under its own proper and permanent officers.
Before the invention of fire-arms, that army was superior in which the
soldiers had, each individually, the greatest skill and dexterity in the
use of their arms. Strength and agility of body were of the highest
consequence, and commonly determined the fate of battles. But this skill
and dexterity in the use of their arms could be acquired only, in the same
manner as fencing is at present, by practising, not in great bodies, but
each man separately, in a particular school, under a particular master, or
with his own particular equals and companions. Since the invention of
fire-arms, strength and agility of body, or even extraordinary dexterity
and skill in the use of arms, though they are far from being of no
consequence, are, however, of less consequence. The nature of the weapon,
though it by no means puts the awkward upon a level with the skilful, puts
him more nearly so than he ever was before. All the dexterity and skill,
it is supposed, which are necessary for using it, can be well enough
acquired by practising in great bodies.
Regularity, order, and prompt obedience to command, are qualities which,
in modern armies, are of more importance towards determining the fate of
battles, than the dexterity and skill of the soldiers in the use of their
arms. But the noise of fire-arms, the smoke, and the invisible death to
which every man feels himself every moment exposed, as soon as he comes
within cannon-shot, and frequently a long time before the battle can be
well said to be engaged, must render it very difficult to maintain any
considerable degree of this regularity, order, and prompt obedience, even
in the beginning of a modern battle. In an ancient battle, there was no
noise but what arose from the human voice; there was no smoke, there was
no invisible cause of wounds or death. Every man, till some mortal weapon
actually did approach him, saw clearly that no such weapon was near him.
In these circumstances, and among troops who had some confidence in their
own skill and dexterity in the use of their arms, it must have been a good
deal less difficult to preserve some degree of regularity and order, not
only in the beginning, but through the whole progress of an ancient
battle, and till one of the two armies was fairly defeated. But the habits
of regularity, order, and prompt obedience to command, can be acquired
only by troops which are exercised in great bodies.
A militia, however, in whatever manner it may be either disciplined or
exercised, must always be much inferior to a well disciplined and well
exercised standing army.
The soldiers who are exercised only once a week, or once a-month, can
never be so expert in the use of their arms, as those who are exercised
every day, or every other day; and though this circumstance may not be of
so much consequence in modern, as it was in ancient times, yet the
acknowledged superiority of the Prussian troops, owing, it is said, very
much to their superior expertness in their exercise, may satisfy us that
it is, even at this day, of very considerable consequence.
The soldiers, who are bound to obey their officer only once a-week, or
once a-month, and who are at all other times at liberty to manage their
own affairs their own way, without being, in any respect, accountable to
him, can never be under the same awe in his presence, can never have the
same disposition to ready obedience, with those whose whole life and
conduct are every day directed by him, and who every day even rise and go
to bed, or at least retire to their quarters, according to his orders. In
what is called discipline, or in the habit of ready obedience, a militia
must always be still more inferior to a standing army, than it may
sometimes be in what is called the manual exercise, or in the management
and use of its arms. But, in modern war, the habit of ready and instant
obedience is of much greater consequence than a considerable superiority
in the management of arms.
Those militias which, like the Tartar or Arab militia, go to war under the
same chieftains whom they are accustomed to obey in peace, are by far the
best. In respect for their officers, in the habit of ready obedience, they
approach nearest to standing armies. The Highland militia, when it served
under its own chieftains, had some advantage of the same kind. As the
Highlanders, however, were not wandering, but stationary shepherds, as
they had all a fixed habitation, and were not, in peaceable times,
accustomed to follow their chieftain from place to place; so, in time of
war, they were less willing to follow him to any considerable distance, or
to continue for any long time in the field. When they had acquired any
booty, they were eager to return home, and his authority was seldom
sufficient to detain them. In point of obedience, they were always much
inferior to what is reported of the Tartars and Arabs. As the Highlanders,
too, from their stationary life, spend less of their time in the open air,
they were always less accustomed to military exercises, and were less
expert in the use of their arms than the Tartars and Arabs are said to be.
A militia of any kind, it must be observed, however, which has served for
several successive campaigns in the field, becomes in every respect a
standing army. The soldiers are every day exercised in the use of their
arms, and, being constantly under the command of their officers, are
habituated to the same prompt obedience which takes place in standing
armies. What they were before they took the field, is of little
importance. They necessarily become in every respect a standing army,
after they have passed a few campaigns in it. Should the war in America
drag out through another campaign, the American militia may become, in
every respect, a match for that standing army, of which the valour
appeared, in the last war at least, not inferior to that of the hardiest
veterans of France and Spain.
This distinction being well understood, the history of all ages, it will
be found, hears testimony to the irresistible superiority which a well
regulated standing army has over a militia.
One of the first standing armies, of which we have any distinct account in
any well authenticated history, is that of Philip of Macedon. His frequent
wars with the Thracians, Illyrians, Thessalians, and some of the Greek
cities in the neighbourhood of Macedon, gradually formed his troops, which
in the beginning were probably militia, to the exact discipline of a
standing army. When he was at peace, which he was very seldom, and never
for any long time together, he was careful not to disband that army. It
vanquished and subdued, after a long and violent struggle, indeed, the
gallant and well exercised militias of the principal republics of ancient
Greece; and afterwards, with very little struggle, the effeminate and ill
exercised militia of the great Persian empire. The fall of the Greek
republics, and of the Persian empire was the effect of the irresistible
superiority which a standing arm has over every other sort of militia. It
is the first great revolution in the affairs of mankind of which history
has preserved any distinct and circumstantial account.
The fall of Carthage, and the consequent elevation of Rome, is the second.
All the varieties in the fortune of those two famous republics may very
well be accounted for from the same cause.
From the end of the first to the beginning of the second Carthaginian war,
the armies of Carthage were continually in the field, and employed under
three great generals, who succeeded one another in the command; Amilcar,
his son-in-law Asdrubal, and his son Annibal: first in chastising their
own rebellious slaves, afterwards in subduing the revolted nations of
Africa; and lastly, in conquering the great kingdom of Spain. The army
which Annibal led from Spain into Italy must necessarily, in those
different wars, have been gradually formed to the exact discipline of a
standing army. The Romans, in the meantime, though they had not been
altogether at peace, yet they had not, during this period, been engaged in
any war of very great consequence; and their military discipline, it is
generally said, was a good deal relaxed. The Roman armies which Annibal
encountered at Trebi, Thrasymenus, and Cannae, were militia opposed to a
standing army. This circumstance, it is probable, contributed more than
any other to determine the fate of those battles.
The standing army which Annibal left behind him in Spain had the like
superiority over the militia which the Romans sent to oppose it; and, in a
few years, under the command of his brother, the younger Asdrubal,
expelled them almost entirely from that country.
Annibal was ill supplied from home. The Roman militia, being continually
in the field, became, in the progress of the war, a well disciplined and
well exercised standing army; and the superiority of Annibal grew every
day less and less. Asdrubal judged it necessary to lead the whole, or
almost the whole, of the standing army which he commanded in Spain, to the
assistance of his brother in Italy. In this march, he is said to have been
misled by his guides; and in a country which he did not know, was
surprised and attacked, by another standing army, in every respect equal
or superior to his own, and was entirely defeated.
When Asdrubal had left Spain, the great Scipio found nothing to oppose him
but a militia inferior to his own. He conquered and subdued that militia,
and, in the course of the war, his own militia necessarily became a well
disciplined and well exercised standing army. That standing army was
afterwards carried to Africa, where it found nothing but a militia to
oppose it. In order to defend Carthage, it became necessary to recal the
standing army of Annibal. The disheartened and frequently defeated African
militia joined it, and, at the battle of Zama, composed the greater part
of the troops of Annibal. The event of that day determined the fate of the
two rival republics.
From the end of the second Carthaginian war till the fall of the Roman
republic, the armies of Rome were in every respect standing armies. The
standing army of Macedon made some resistance to their arms. In the height
of their grandeur, it cost them two great wars, and three great battles,
to subdue that little kingdom, of which the conquest would probably have
been still more difficult, had it not been for the cowardice of its last
king. The militias of all the civilized nations of the ancient world, of
Greece, of Syria, and of Egypt, made but a feeble resistance to the
standing armies of Rome. The militias of some barbarous nations defended
themselves much better. The Scythian or Tartar militia, which Mithridates
drew from the countries north of the Euxine and Caspian seas, were the
most formidable enemies whom the Romans had to encounter after the second
Carthaginian war. The Parthian and German militias, too, were always
respectable, and upon several occasions, gained very considerable
advantages over the Roman armies. In general, however, and when the Roman
armies were well commanded, they appear to have been very much superior;
and if the Romans did not pursue the final conquest either of Parthia or
Germany, it was probably because they judged that it was not worth while
to add those two barbarous countries to an empire which was already too
large. The ancient Parthians appear to have been a nation of Scythian or
Tartar extraction, and to have always retained a good deal of the manners
of their ancestors. The ancient Germans were, like the Scythians or
Tartars, a nation of wandering shepherds, who went to war under the same
chiefs whom they were accustomed to follow in peace. ‘Their militia was
exactly of the same kind with that of the Scythians or Tartars, from whom,
too, they were probably descended.’
Many different causes contributed to relax the discipline of the Roman
armies. Its extreme severity was, perhaps, one of those causes. In the
days of their grandeur, when no enemy appeared capable of opposing them,
their heavy armour was laid aside as unnecessarily burdensome, their
laborious exercises were neglected, as unnecessarily toilsome. Under the
Roman emperors, besides, the standing armies of Rome, those particularly
which guarded the German and Pannonian frontiers, became dangerous to
their masters, against whom they used frequently to set up their own
generals. In order to render them less formidable, according to some
authors, Dioclesian, according to others, Constantine, first withdrew them
from the frontier, where they had always before been encamped in great
bodies, generally of two or three legions each, and dispersed them in
small bodies through the different provincial towns, from whence they were
scarce ever removed, but when it became necessary to repel an invasion.
Small bodies of soldiers, quartered in trading and manufacturing towns,
and seldom removed from those quarters, became themselves trades men,
artificers, and manufacturers. The civil came to predominate over the
military character; and the standing armies of Rome gradually degenerated
into a corrupt, neglected, and undisciplined militia, incapable of
resisting the attack of the German and Scythian militias, which soon
afterwards invaded the western empire. It was only by hiring the militia
of some of those nations to oppose to that of others, that the emperors
were for some time able to defend themselves. The fall of the western
empire is the third great revolution in the affairs of mankind, of which
ancient history has preserved any distinct or circumstantial account. It
was brought about by the irresistible superiority which the militia of a
barbarous has over that of a civilized nation; which the militia of a
nation of shepherds has over that of a nation of husbandmen, artificers,
and manufacturers. The victories which have been gained by militias have
generally been, not over standing armies, but over other militias, in
exercise and discipline inferior to themselves. Such were the victories
which the Greek militia gained over that of the Persian empire; and such,
too, were those which, in later times, the Swiss militia gained over that
of the Austrians and Burgundians.
The military force of the German and Scythian nations, who established
themselves upon ruins of the western empire, continued for some time to be
of the same kind in their new settlements, as it had been in their
original country. It was a militia of shepherds and husbandmen, which, in
time of war, took the field under the command of the same chieftains whom
it was accustomed to obey in peace. It was, therefore, tolerably well
exercised, and tolerably well disciplined. As arts and industry advanced,
however, the authority of the chieftains gradually decayed, and the great
body of the people had less time to spare for military exercises. Both the
discipline and the exercise of the feudal militia, therefore, went
gradually to ruin, and standing armies were gradually introduced to supply
the place of it. When the expedient of a standing army, besides, had once
been adopted by one civilized nation, it became necessary that all its
neighbours should follow the example. They soon found that their safety
depended upon their doing so, and that their own militia was altogether
incapable of resisting the attack of such an army.
The soldiers of a standing army, though they may never have seen an enemy,
yet have frequently appeared to possess all the courage of veteran troops,
and, the very moment that they took the field, to have been fit to face
the hardiest and most experienced veterans. In 1756, when the Russian army
marched into Poland, the valour of the Russian soldiers did not appear
inferior to that of the Prussians, at that time supposed to be the
hardiest and most experienced veterans in Europe. The Russian empire,
however, had enjoyed a profound peace for near twenty years before, and
could at that time have very few soldiers who had ever seen an enemy. When
the Spanish war broke out in 1739, England had enjoyed a profound peace
for about eight-and-twenty years. The valour of her soldiers, however, far
from being corrupted by that long peace, was never more distinguished than
in the attempt upon Carthagena, the first unfortunate exploit of that
unfortunate war. In a long peace, the generals, perhaps, may sometimes
forget their skill; but where a well regulated standing army has been kept
up, the soldiers seem never to forget their valour.
When a civilized nation depends for its defence upon a militia, it is at
all times exposed to be conquered by any barbarous nation which happens to
be in its neighbourhood. The frequent conquests of all the civilized
countries in Asia by the Tartars, sufficiently demonstrates the natural
superiority which the militia of a barbarous has over that of a civilized
nation. A well regulated standing army is superior to every militia. Such
an army, as it can best be maintained by an opulent and civilized nation,
so it can alone defend such a nation against the invasion of a poor and
barbarous neighbour. It is only by means of a standing army, therefore,
that the civilization of any country can be perpetuated, or even
preserved, for any considerable time.
As it is only by means of a well regulated standing army, that a civilized
country can be defended, so it is only by means of it that a barbarous
country can be suddenly and tolerably civilized. A standing army
establishes, with an irresistible force, the law of the sovereign through
the remotest provinces of the empire, and maintains some degree of regular
government in countries which could not otherwise admit of any. Whoever
examines with attention, the improvements which Peter the Great introduced
into the Russian empire, will find that they almost all resolve themselves
into the establishment of a well regulated standing army. It is the
instrument which executes and maintains all his other regulations. That
degree of order and internal peace, which that empire has ever since
enjoyed, is altogether owing to the influence of that army.
Men of republican principles have been jealous of a standing army, as
dangerous to liberty. It certainly is so, wherever the interest of the
general, and that of the principal officers, are not necessarily connected
with the support of the constitution of the state. The standing army of
Caesar destroyed the Roman republic. The standing army of Cromwell turned
the long parliament out of doors. But where the sovereign is himself the
general, and the principal nobility and gentry of the country the chief
officers of the army; where the military force is placed under the command
of those who have the greatest interest in the support of the civil
authority, because they have themselves the greatest share of that
authority, a standing army can never be dangerous to liberty. On the
contrary, it may, in some cases, be favourable to liberty. The security
which it gives to the sovereign renders unnecessary that troublesome
jealousy, which, in some modern republics, seems to watch over the
minutest actions, and to be at all times ready to disturb the peace of
every citizen. Where the security of the magistrate, though supported by
the principal people of the country, is endangered by every popular
discontent; where a small tumult is capable of bringing about in a few
hours a great revolution, the whole authority of government must be
employed to suppress and punish every murmur and complaint against it. To
a sovereign, on the contrary, who feels himself supported, not only by the
natural aristocracy of the country, but by a well regulated standing army,
the rudest, the most groundless, and the most licentious remonstrances,
can give little disturbance. He can safely pardon or neglect them, and his
consciousness of his own superiority naturally disposes him to do so. That
degree of liberty which approaches to licentiousness, can be tolerated
only in countries where the sovereign is secured by a well regulated
standing army. It is in such countries only, that the public safety does
not require that the sovereign should be trusted with any discretionary
power, for suppressing even the impertinent wantonness of this licentious
liberty.
The first duty of the sovereign, therefore, that of defending the society
from the violence and injustice of other independent societies, grows
gradually more and more expensive, as the society advances in
civilization. The military force of the society, which originally cost the
sovereign no expense, either in time of peace, or in time of war, must, in
the progress of improvement, first be maintained by him in time of war,
and afterwards even in time of peace.
The great change introduced into the art of war by the invention of
fire-arms, has enhanced still further both the expense of exercising and
disciplining any particular number of soldiers in time of peace, and that
of employing them in time of war. Both their arms and their ammunition are
become more expensive. A musket is a more expensive machine than a javelin
or a bow and arrows; a cannon or a mortar, than a balista or a catapulta.
The powder which is spent in a modern review is lost irrecoverably, and
occasions a very considerable expense. The javelins and arrows which were
thrown or shot in an ancient one, could easily be picked up again, and
were, besides, of very little value. The cannon and the mortar are not
only much dearer, but much heavier machines than the balista or catapulta;
and require a greater expense, not only to prepare them for the field, but
to carry them to it. As the superiority of the modern artillery, too, over
that of the ancients, is very great; it has become much more difficult,
and consequently much more expensive, to fortify a town, so as to resist,
even for a few weeks, the attack of that superior artillery. In modern
times, many different causes contribute to render the defence of the
society more expensive. The unavoidable effects of the natural progress of
improvement have, in this respect, been a good deal enhanced by a great
revolution in the art of war, to which a mere accident, the invention of
gunpowder, seems to have given occasion.
In modern war, the great expense of firearms gives an evident advantage to
the nation which can best afford that expense; and, consequently, to an
opulent and civilized, over a poor and barbarous nation. In ancient times,
the opulent and civilized found it difficult to defend themselves against
the poor and barbarous nations. In modern times, the poor and barbarous
find it difficult to defend themselves against the opulent and civilized.
The invention of fire-arms, an invention which at first sight appears to
be so pernicious, is certainly favourable, both to the permanency and to
the extension of civilization.
PART II. Of the Expense of Justice
The second duty of the sovereign, that of protecting, as far as possible,
every member of the society from the injustice or oppression of every
other member of it, or the duty of establishing an exact administration of
justice, requires two very different degrees of expense in the different
periods of society.
Among nations of hunters, as there is scarce any property, or at least
none that exceeds the value of two or three days labour; so there is
seldom any established magistrate, or any regular administration of
justice. Men who have no property, can injure one another only in their
persons or reputations. But when one man kills, wounds, beats, or defames
another, though he to whom the injury is done suffers, he who does it
receives no benefit. It is otherwise with the injuries to property. The
benefit of the person who does the injury is often equal to the loss of
him who suffers it. Envy, malice, or resentment, are the only passions
which can prompt one man to injure another in his person or reputation.
But the greater part of men are not very frequently under the influence of
those passions; and the very worst men are so only occasionally. As their
gratification, too, how agreeable soever it may be to certain characters,
is not attended with any real or permanent advantage, it is, in the
greater part of men, commonly restrained by prudential considerations. Men
may live together in society with some tolerable degree of security,
though there is no civil magistrate to protect them from the injustice of
those passions. But avarice and ambition in the rich, in the poor the
hatred of labour and the love of present ease and enjoyment, are the
passions which prompt to invade property; passions much more steady in
their operation, and much more universal in their influence. Wherever
there is a great property, there is great inequality. For one very rich
man, there must be at least five hundred poor, and the affluence of the
few supposes the indigence of the many. The affluence of the rich excites
the indignation of the poor, who are often both driven by want, and
prompted by envy to invade his possessions. It is only under the shelter
of the civil magistrate, that the owner of that valuable property, which
is acquired by the labour of many years, or perhaps of many successive
generations, can sleep a single night in security. He is at all times
surrounded by unknown enemies, whom, though he never provoked, he can
never appease, and from whose injustice he can be protected only by the
powerful arm of the civil magistrate, continually held up to chastise it.
The acquisition of valuable and extensive property, therefore, necessarily
requires the establishment of civil government. Where there is no
property, or at least none that exceeds the value of two or three days
labour, civil government is not so necessary.
Civil government supposes a certain subordination. But as the necessity of
civil government gradually grows up with the acquisition of valuable
property; so the principal causes, which naturally introduce
subordination, gradually grow up with the growth of that valuable
property.
The causes or circumstances which naturally introduce subordination, or
which naturally and antecedent to any civil institution, give some men
some superiority over the greater part of their brethren, seem to be four
in number.
The first of those causes or circumstances, is the superiority of personal
qualifications, of strength, beauty, and agility of body; of wisdom and
virtue; of prudence, justice, fortitude, and moderation of mind. The
qualifications of the body, unless supported by those of the mind, can
give little authority in any period of society. He is a very strong man,
who, by mere strength of body, can force two weak ones to obey him. The
qualifications of the mind can alone give very great authority. They are
however, invisible qualities; always disputable, and generally disputed.
No society, whether barbarous or civilized, has ever found it convenient
to settle the rules of precedency of rank and subordination, according to
those invisible qualities; but according to something that is more plain
and palpable.
The second of those causes or circumstances, is the superiority of age. An
old man, provided his age is not so far advanced as to give suspicion of
dotage, is everywhere more respected than a young man of equal rank,
fortune, and abilities. Among nations of hunters, such as the native
tribes of North America, age is the sole foundation of rank and
precedency. Among them, father is the appellation of a superior; brother,
of an equal; and son, of an inferior. In the most opulent and civilized
nations, age regulates rank among those who are in every other respect
equal; and among whom, therefore, there is nothing else to regulate it.
Among brothers and among sisters, the eldest always takes place; and in
the succession of the paternal estate, every thing which cannot be
divided, but must go entire to one person, such as a title of honour, is
in most cases given to the eldest. Age is a plain and palpable quality,
which admits of no dispute.
The third of those causes or circumstances, is the superiority of fortune.
The authority of riches, however, though great in every age of society,
is, perhaps, greatest in the rudest ages of society, which admits of any
considerable inequality of fortune. A Tartar chief, the increase of whose
flocks and herds is sufficient to maintain a thousand men, cannot well
employ that increase in any other way than in maintaining a thousand men.
The rude state of his society does not afford him any manufactured produce
any trinkets or baubles of any kind, for which he can exchange that part
of his rude produce which is over and above his own consumption. The
thousand men whom he thus maintains, depending entirely upon him for their
subsistence, must both obey his orders in war, and submit to his
jurisdiction in peace. He is necessarily both their general and their
judge, and his chieftainship is the necessary effect of the superiority of
his fortune. In an opulent and civilized society, a man may possess a much
greater fortune, and yet not be able to command a dozen of people. Though
the produce of his estate may be sufficient to maintain, and may, perhaps,
actually maintain, more than a thousand people, yet, as those people pay
for every thing which they get from him, as he gives scarce any thing to
any body but in exchange for an equivalent, there is scarce anybody who
considers himself as entirely dependent upon him, and his authority
extends only over a few menial servants. The authority of fortune,
however, is very great, even in an opulent and civilized society. That it
is much greater than that either of age or of personal qualities, has been
the constant complaint of every period of society which admitted of any
considerable inequality of fortune. The first period of society, that of
hunters, admits of no such inequality. Universal poverty establishes their
universal equality; and the superiority, either of age or of personal
qualities, are the feeble, but the sole foundations of authority and
subordination. There is, therefore, little or no authority or
subordination in this period of society. The second period of society,
that of shepherds, admits of very great inequalities of fortune, and there
is no period in which the superiority of fortune gives so great authority
to those who possess it. There is no period, accordingly, in which
authority and subordination are more perfectly established. The authority
of an Arabian scherif is very great; that of a Tartar khan altogether
despotical.
The fourth of those causes or circumstances, is the superiority of birth.
Superiority of birth supposes an ancient superiority of fortune in the
family of the person who claims it. All families are equally ancient; and
the ancestors of the prince, though they may be better known, cannot well
be more numerous than those of the beggar. Antiquity of family means
everywhere the antiquity either of wealth, or of that greatness which is
commonly either founded upon wealth, or accompanied with it. Upstart
greatness is everywhere less respected than ancient greatness. The hatred
of usurpers, the love of the family of an ancient monarch, are in a great
measure founded upon the contempt which men naturally have for the former,
and upon their veneration for the latter. As a military officer submits,
without reluctance, to the authority of a superior by whom he has always
been commanded, but cannot bear that his inferior should be set over his
head; so men easily submit to a family to whom they and their ancestors
have always submitted; but are fired with indignation when another family,
in whom they had never acknowledged any such superiority, assumes a
dominion over them.
The distinction of birth, being subsequent to the inequality of fortune,
can have no place in nations of hunters, among whom all men, being equal
in fortune, must likewise be very nearly equal in birth. The son of a wise
and brave man may, indeed, even among them, be somewhat more respected
than a man of equal merit, who has the misfortune to be the son of a fool
or a coward. The difference, however will not be very great; and there
never was, I believe, a great family in the world, whose illustration was
entirely derived from the inheritance of wisdom and virtue.
The distinction of birth not only may, but always does, take place among
nations of shepherds. Such nations are always strangers to every sort of
luxury, and great wealth can scarce ever be dissipated among them by
improvident profusion. There are no nations, accordingly, who abound more
in families revered and honoured on account of their descent from a long
race of great and illustrious ancestors; because there are no nations
among whom wealth is likely to continue longer in the same families.
Birth and fortune are evidently the two circumstances which principally
set one man above another. They are the two great sources of personal
distinction, and are, therefore, the principal causes which naturally
establish authority and subordination among men. Among nations of
shepherds, both those causes operate with their full force. The great
shepherd or herdsman, respected on account of his great wealth, and of the
great number of those who depend upon him for subsistence, and revered on
account of the nobleness of his birth, and of the immemorial antiquity or
his illustrious family, has a natural authority over all the inferior
shepherds or herdsmen of his horde or clan. He can command the united
force of a greater number of people than any of them. His military power
is greater than that of any of them. In time of war, they are all of them
naturally disposed to muster themselves under his banner, rather than
under that of any other person; and his birth and fortune thus naturally
procure to him some sort of executive power. By commanding, too, the
united force of a greater number of people than any of them, he is best
able to compel any one of them, who may have injured another, to
compensate the wrong. He is the person, therefore, to whom all those who
are too weak to defend themselves naturally look up for protection. It is
to him that they naturally complain of the injuries which they imagine
have been done to them; and his interposition, in such cases, is more
easily submitted to, even by the person complained of, than that of any
other person would be. His birth and fortune thus naturally procure him
some sort of judicial authority.
It is in the age of shepherds, in the second period of society, that the
inequality of fortune first begins to take place, and introduces among men
a degree of authority and subordination, which could not possibly exist
before. It thereby introduces some degree of that civil government which
is indispensably necessary for its own preservation; and it seems to do
this naturally, and even independent of the consideration of that
necessity. The consideration of that necessity comes, no doubt,
afterwards, to contribute very much to maintain and secure that authority
and subordination. The rich, in particular, are necessarily interested to
support that order of things, which can alone secure them in the
possession of their own advantages. Men of inferior wealth combine to
defend those of superior wealth in the possession of their property, in
order that men of superior wealth may combine to defend them in the
possession of theirs. All the inferior shepherds and herdsmen feel, that
the security of their own herds and flocks depends upon the security of
those of the great shepherd or herdsman; that the maintenance of their
lesser authority depends upon that of his greater authority; and that upon
their subordination to him depends his power of keeping their inferiors in
subordination to them. They constitute a sort of little nobility, who feel
themselves interested to defend the property, and to support the
authority, of their own little sovereign, in order that he may be able to
defend their property, and to support their authority. Civil government,
so far as it is instituted for the security of property, is, in reality,
instituted for the defence of the rich against the poor, or of those who
have some property against those who have none at all.
The judicial authority of such a sovereign, however, far from being a
cause of expense, was, for a long time, a source of revenue to him. The
persons who applied to him for justice were always willing to pay for it,
and a present never failed to accompany a petition. After the authority of
the sovereign, too, was thoroughly established, the person found guilty,
over and above the satisfaction which he was obliged to make to the party,
was like-wise forced to pay an amercement to the sovereign. He had given
trouble, he had disturbed, he had broke the peace of his lord the king,
and for those offences an amercement was thought due. In the Tartar
governments of Asia, in the governments of Europe which were founded by
the German and Scythian nations who overturned the Roman empire, the
administration of justice was a considerable source of revenue, both to
the sovereign, and to all the lesser chiefs or lords who exercised under
him any particular jurisdiction, either over some particular tribe or
clan, or over some particular territory or district. Originally, both the
sovereign and the inferior chiefs used to exercise this jurisdiction in
their own persons. Afterwards, they universally found it convenient to
delegate it to some substitute, bailiff, or judge. This substitute,
however, was still obliged to account to his principal or constituent for
the profits of the jurisdiction. Whoever reads the instructions (They are
to be found in Tyrol’s History of England) which were given to the judges
of the circuit in the time of Henry II will see clearly that those judges
were a sort of itinerant factors, sent round the country for the purpose
of levying certain branches of the king’s revenue. In those days, the
administration of justice not only afforded a certain revenue to the
sovereign, but, to procure this revenue, seems to have been one of the
principal advantages which he proposed to obtain by the administration of
justice.
This scheme of making the administration of justice subservient to the
purposes of revenue, could scarce fail to be productive of several very
gross abuses. The person who applied for justice with a large present in
his hand, was likely to get something more than justice; while he who
applied for it with a small one was likely to get something less. Justice,
too, might frequently be delayed, in order that this present might be
repeated. The amercement, besides, of the person complained of, might
frequently suggest a very strong reason for finding him in the wrong, even
when he had not really been so. That such abuses were far from being
uncommon, the ancient history of every country in Europe bears witness.
When the sovereign or chief exercises his judicial authority in his own
person, how much soever he might abuse it, it must have been scarce
possible to get any redress; because there could seldom be any body
powerful enough to call him to account. When he exercised it by a bailiff,
indeed, redress might sometimes be had. If it was for his own benefit
only, that the bailiff had been guilty of an act of injustice, the
sovereign himself might not always be unwilling to punish him, or to
oblige him to repair the wrong. But if it was for the benefit of his
sovereign; if it was in order to make court to the person who appointed
him, and who might prefer him, that he had committed any act of
oppression; redress would, upon most occasions, be as impossible as if the
sovereign had committed it himself. In all barbarous governments,
accordingly, in all those ancient governments of Europe in particular,
which were founded upon the ruins of the Roman empire, the administration
of justice appears for a long time to have been extremely corrupt; far
from being quite equal and impartial, even under the best monarchs, and
altogether profligate under the worst.
Among nations of shepherds, where the sovereign or chief is only the
greatest shepherd or herdsman of the horde or clan, he is maintained in
the same manner as any of his vassals or subjects, by the increase of his
own herds or flocks. Among those nations of husbandmen, who are but just
come out of the shepherd state, and who are not much advanced beyond that
state, such as the Greek tribes appear to have been about the time of the
Trojan war, and our German and Scythian ancestors, when they first settled
upon the ruins of the western empire; the sovereign or chief is, in the
same manner, only the greatest landlord of the country, and is maintained
in the same manner as any other landlord, by a revenue derived from his
own private estate, or from what, in modern Europe, was called the demesne
of the crown. His subjects, upon ordinary occasions, contribute nothing to
his support, except when, in order to protect them from the oppression of
some of their fellow-subjects, they stand in need of his authority. The
presents which they make him upon such occasions constitute the whole
ordinary revenue, the whole of the emoluments which, except, perhaps, upon
some very extraordinary emergencies, he derives from his dominion over
them. When Agamemnon, in Homer, offers to Achilles, for his friendship,
the sovereignty of seven Greek cities, the sole advantage which he
mentions as likely to be derived from it was, that the people would honour
him with presents. As long as such presents, as long as the emoluments of
justice, or what may be called the fees of court, constituted, in this
manner, the whole ordinary revenue which the sovereign derived from his
sovereignty, it could not well be expected, it could not even decently be
proposed, that he should give them up altogether. It might, and it
frequently was proposed, that he should regulate and ascertain them. But
after they had been so regulated and ascertained, how to hinder a person
who was all-powerful from extending them beyond those regulations, was
still very difficult, not to say impossible. During the continuance of
this state of things, therefore, the corruption of justice, naturally
resulting from the arbitrary and uncertain nature of those presents,
scarce admitted of any effectual remedy.
But when, from different causes, chiefly from the continually increasing
expense of defending the nation against the invasion of other nations, the
private estate of the sovereign had become altogether insufficient for
defraying the expense of the sovereignty; and when it had become necessary
that the people should, for their own security, contribute towards this
expense by taxes of different kinds; it seems to have been very commonly
stipulated, that no present for the administration of justice should,
under any pretence, be accepted either by the sovereign, or by his
bailiffs and substitutes, the judges. Those presents, it seems to have
been supposed, could more easily be abolished altogether, than effectually
regulated and ascertained. Fixed salaries were appointed to the judges,
which were supposed to compensate to them the loss of whatever might have
been their share of the ancient emoluments of justice; as the taxes more
than compensated to the sovereign the loss of his. Justice was then said
to be administered gratis.
Justice, however, never was in reality administered gratis in any country.
Lawyers and attorneys, at least, must always be paid by the parties; and
if they were not, they would perform their duty still worse than they
actually perform it. The fees annually paid to lawyers and attorneys,
amount, in every court, to a much greater sum than the salaries of the
judges. The circumstance of those salaries being paid by the crown, can
nowhere much diminish the necessary expense of a law-suit. But it was not
so much to diminish the expense, as to prevent the corruption of justice,
that the judges were prohibited from receiving my present or fee from the
parties.
The office of judge is in itself so very honourable, that men are willing
to accept of it, though accompanied with very small emoluments. The
inferior office of justice of peace, though attended with a good deal of
trouble, and in most cases with no emoluments at all, is an object of
ambition to the greater part of our country gentlemen. The salaries of all
the different judges, high and low, together with the whole expense of the
administration and execution of justice, even where it is not managed with
very good economy, makes, in any civilized country, but a very
inconsiderable part of the whole expense of government.
The whole expense of justice, too, might easily be defrayed by the fees of
court; and, without exposing the administration of justice to any real
hazard of corruption, the public revenue might thus be entirely discharged
from a certain, though perhaps but a small incumbrance. It is difficult to
regulate the fees of court effectually, where a person so powerful as the
sovereign is to share in them and to derive any considerable part of his
revenue from them. It is very easy, where the judge is the principal
person who can reap any benefit from them. The law can very easily oblige
the judge to respect the regulation though it might not always be able to
make the sovereign respect it. Where the fees of court are precisely
regulated and ascertained where they are paid all at once, at a certain
period of every process, into the hands of a cashier or receiver, to be by
him distributed in certain known proportions among the different judges
after the process is decided and not till it is decided; there seems to be
no more danger of corruption than when such fees are prohibited
altogether. Those fees, without occasioning any considerable increase in
the expense of a law-suit, might be rendered fully sufficient for
defraying the whole expense of justice. But not being paid to the judges
till the process was determined, they might be some incitement to the
diligence of the court in examining and deciding it. In courts which
consisted of a considerable number of judges, by proportioning the share
of each judge to the number of hours and days which he had employed in
examining the process, either in the court, or in a committee, by order of
the court, those fees might give some encouragement to the diligence of
each particular judge. Public services are never better performed, than
when their reward comes only in consequence of their being performed, and
is proportioned to the diligence employed in performing them. In the
different parliaments of France, the fees of court (called epices and
vacations) constitute the far greater part of the emoluments of the
judges. After all deductions are made, the neat salary paid by the crown
to a counsellor or judge in the parliament of Thoulouse, in rank and
dignity the second parliament of the kingdom, amounts only to 150 livres,
about £6:11s. sterling a-year. About seven years ago, that sum was in the
same place the ordinary yearly wages of a common footman. The distribution
of these epices, too, is according to the diligence of the judges. A
diligent judge gains a comfortable, though moderate revenue, by his
office; an idle one gets little more than his salary. Those parliaments
are, perhaps, in many respects, not very convenient courts of justice; but
they have never been accused; they seem never even to have been suspected
of corruption.
The fees of court seem originally to have been the principal support of
the different courts of justice in England. Each court endeavoured to draw
to itself as much business as it could, and was, upon that account,
willing to take cognizance of many suits which were not originally
intended to fall under its jurisdiction. The court of king’s bench,
instituted for the trial of criminal causes only, took cognizance of civil
suits; the plaintiff pretending that the defendant, in not doing him
justice, had been guilty of some trespass or misdemeanour. The court of
exchequer, instituted for the levying of the king’s revenue, and for
enforcing the payment of such debts only as were due to the king, took
cognizance of all other contract debts; the planitiff alleging that he
could not pay the king, because the defendant would not pay him. In
consequence of such fictions, it came, in many cases, to depend altogether
upon the parties, before what court they would choose to have their cause
tried, and each court endeavoured, by superior dispatch and impartiality,
to draw to itself as many causes as it could. The present admirable
constitution of the courts of justice in England was, perhaps, originally,
in a great measure, formed by this emulation, which anciently took place
between their respective judges: each judge endeavouring to give, in his
own court, the speediest and most effectual remedy which the law would
admit, for every sort of injustice. Originally, the courts of law gave
damages only for breach of contract. The court of chancery, as a court of
conscience, first took upon it to enforce the specific performance of
agreements. When the breach of contract consisted in the non-payment of
money, the damage sustained could be compensated in no other way than by
ordering payment, which was equivalent to a specific performance of the
agreement. In such cases, therefore, the remedy of the courts of law was
sufficient. It was not so in others. When the tenant sued his lord for
having unjustly outed him of his lease, the damages which he recovered
were by no means equivalent to the possession of the land. Such causes,
therefore, for some time, went all to the court of chancery, to the no
small loss of the courts of law. It was to draw back such causes to
themselves, that the courts of law are said to have invented the
artificial and fictitious writ of ejectment, the most effectual remedy for
an unjust outer or dispossession of land.
A stamp-duty upon the law proceedings of each particular court, to be
levied by that court, and applied towards the maintenance of the judges,
and other officers belonging to it, might in the same manner, afford a
revenue sufficient for defraying the expense of the administration of
justice, without bringing any burden upon the general revenue of the
society. The judges, indeed, might in this case, be under the temptation
of multiplying unnecessarily the proceedings upon every cause, in order to
increase, as much as possible, the produce of such a stamp-duty. It has
been the custom in modern Europe to regulate, upon most occasions, the
payment of the attorneys and clerks of court according to the number of
pages which they had occasion to write; the court, however, requiring that
each page should contain so many lines, and each line so many words. In
order to increase their payment, the attorneys and clerks have contrived
to multiply words beyond all necessity, to the corruption of the law
language of, I believe, every court of justice in Europe. A like
temptation might, perhaps, occasion a like corruption in the form of law
proceedings.
But whether the administration of justice be so contrived as to defray its
own expense, or whether the judges be maintained by fixed salaries paid to
them from some other fund, it does not seen necessary that the person or
persons entrusted with the executive power should be charged with the
management of that fund, or with the payment of those salaries. That fund
might arise from the rent of landed estates, the management of each estate
being entrusted to the particular court which was to be maintained by it.
That fund might arise even from the interest of a sum of money, the
lending out of which might, in the same manner, be entrusted to the court
which was to be maintained by it. A part, though indeed but a small part
of the salary of the judges of the court of session in Scotland, arises
from the interest of a sum of money. The necessary instability of such a
fund seems, however, to render it an improper one for the maintenance of
an institution which ought to last for ever.
The separation of the judicial from the executive power, seems originally
to have arisen from the increasing business of the society, in consequence
of its increasing improvement. The administration of justice became so
laborious and so complicated a duty, as to require the undivided attention
of the person to whom it was entrusted. The person entrusted with the
executive power, not having leisure to attend to the decision of private
causes himself, a deputy was appointed to decide them in his stead. In the
progress of the Roman greatness, the consul was too much occupied with the
political affairs of the state, to attend to the administration of
justice. A praetor, therefore, was appointed to administer it in his
stead. In the progress of the European monarchies, which were founded upon
the ruins of the Roman empire, the sovereigns and the great lords came
universally to consider the administration of justice as an office both
too laborious and too ignoble for them to execute in their own persons.
They universally, therefore, discharged themselves of it, by appointing a
deputy, bailiff or judge.
When the judicial is united to the executive power, it is scarce possible
that justice should not frequently be sacrificed to what is vulgarly
called politics. The persons entrusted with the great interests of the
state may even without any corrupt views, sometimes imagine it necessary
to sacrifice to those interests the rights of a private man. But upon the
impartial administration of justice depends the liberty of every
individual, the sense which he has of his own security. In order to make
every individual feel himself perfectly secure in the possession of every
right which belongs to him, it is not only necessary that the judicial
should be separated from the executive power, but that it should be
rendered as much as possible independent of that power. The judge should
not be liable to be removed from his office according to the caprice of
that power. The regular payment of his salary should not depend upon the
good will, or even upon the good economy of that power.
PART III. Of the Expense of public Works and public Institutions.
The third and last duty of the sovereign or commonwealth, is that of
erecting and maintaining those public institutions and those public works,
which though they may be in the highest degree advantageous to a great
society, are, however, of such a nature, that the profit could never repay
the expense to any individual, or small number of individuals; and which
it, therefore, cannot be expected that any individual, or small number of
individuals, should erect or maintain. The performance of this duty
requires, too, very different degrees of expense in the different periods
of society.
After the public institutions and public works necessary for the defence
of the society, and for the administration of justice, both of which have
already been mentioned, the other works and institutions of this kind are
chiefly for facilitating the commerce of the society, and those for
promoting the instruction of the people. The institutions for instruction
are of two kinds: those for the education of the youth, and those for the
instruction of people of all ages. The consideration of the manner in
which the expense of those different sorts of public works and
institutions may be most properly defrayed will divide this third part of
the present chapter into three different articles.
ARTICLE I.—Of the public Works and Institutions for facilitating the
Commerce of the Society.
And, first, of those which are necessary for facilitating Commerce in
general.
That the erection and maintenance of the public works which facilitate the
commerce of any country, such as good roads, bridges, navigable canals,
harbours, etc. must require very different degrees of expense in the
different periods of society, is evident without any proof. The expense of
making and maintaining the public roads of any country must evidently
increase with the annual produce of the land and labour of that country,
or with the quantity and weight of the goods which it becomes necessary to
fetch and carry upon those roads. The strength of a bridge must be suited
to the number and weight of the carriages which are likely to pass over
it. The depth and the supply of water for a navigable canal must be
proportioned to the number and tonnage of the lighters which are likely to
carry goods upon it; the extent of a harbour, to the number of the
shipping which are likely to take shelter in it.
It does not seem necessary that the expense of those public works should
be defrayed from that public revenue, as it is commonly called, of which
the collection and application are in most countries, assigned to the
executive power. The greater part of such public works may easily be so
managed, as to afford a particular revenue, sufficient for defraying their
own expense without bringing any burden upon the general revenue of the
society.
A highway, a bridge, a navigable canal, for example, may, in most cases,
be both made add maintained by a small toll upon the carriages which make
use of them; a harbour, by a moderate port-duty upon the tonnage of the
shipping which load or unload in it. The coinage, another institution for
facilitating commerce, in many countries, not only defrays its own
expense, but affords a small revenue or a seignorage to the sovereign. The
post-office, another institution for the same purpose, over and above
defraying its own expense, affords, in almost all countries, a very
considerable revenue to the sovereign.
When the carriages which pass over a highway or a bridge, and the lighters
which sail upon a navigable canal, pay toll in proportion to their weight
or their tonnage, they pay for the maintenance of those public works
exactly in proportion to the wear and tear which they occasion of them. It
seems scarce possible to invent a more equitable way of maintaining such
works. This tax or toll, too, though it is advanced by the carrier, is
finally paid by the consumer, to whom it must always be charged in the
price of the goods. As the expense of carriage, however, is very much
reduced by means of such public works, the goods, notwithstanding the
toll, come cheaper to the consumer than they could otherwise have done,
their price not being so much raised by the toll, as it is lowered by the
cheapness of the carriage. The person who finally pays this tax,
therefore, gains by the application more than he loses by the payment of
it. His payment is exactly in proportion to his gain. It is, in reality,
no more than a part of that gain which he is obliged to give up, in order
to get the rest. It seems impossible to imagine a more equitable method of
raising a tax. When the toll upon carriages of luxury, upon coaches,
post-chaises, etc. is made somewhat higher in proportion to their weight,
than upon carriages of necessary use, such as carts, waggons, etc. the
indolence and vanity of the rich is made to contribute, in a very easy
manner, to the relief of the poor, by rendering cheaper the transportation
of heavy goods to all the different parts of the country.
When high-roads, bridges, canals, etc. are in this manner made and
supported by the commerce which is carried on by means of them, they can
be made only where that commerce requires them, and, consequently, where
it is proper to make them. Their expense, too, their grandeur and
magnificence, must be suited to what that commerce can afford to pay. They
must be made, consequently, as it is proper to make them. A magnificent
high-road cannot be made through a desert country, where there is little
or no commerce, or merely because it happens to lead to the country villa
of the intendant of the province, or to that of some great lord, to whom
the intendant finds it convenient to make his court. A great bridge cannot
be thrown over a river at a place where nobody passes, or merely to
embellish the view from the windows of a neighbouring palace; things which
sometimes happen in countries, where works of this kind are carried on by
any other revenue than that which they themselves are capable of
affording.
In several different parts of Europe, the toll or lock-duty upon a canal
is the property of private persons, whose private interest obliges them to
keep up the canal. If it is not kept in tolerable order, the navigation
necessarily ceases altogether, and, along with it, the whole profit which
they can make by the tolls. If those tolls were put under the management
of commissioners, who had themselves no interest in them, they might be
less attentive to the maintenance of the works which produced them. The
canal of Languedoc cost the king of France and the province upwards of
thirteen millions of livres, which (at twenty-eight livres the mark of
silver, the value of French money in the end of the last century) amounted
to upwards of nine hundred thousand pounds sterling. When that great work
was finished, the most likely method, it was found, of keeping it in
constant repair, was to make a present of the tolls to Riquet, the
engineer who planned and conducted the work. Those tolls constitute, at
present, a very large estate to the different branches of the family of
that gentleman, who have, therefore, a great interest to keep the work in
constant repair. But had those tolls been put under the management of
commissioners, who had no such interest, they might perhaps, have been
dissipated in ornamental and unnecessary expenses, while the most
essential parts of the works were allowed to go to ruin.
The tolls for the maintenance of a highroad cannot, with any safety, be
made the property of private persons. A high-road, though entirely
neglected, does not become altogether impassable, though a canal does. The
proprietors of the tolls upon a high-road, therefore, might neglect
altogether the repair of the road, and yet continue to levy very nearly
the same tolls. It is proper, therefore, that the tolls for the
maintenance of such a work should be put under the management of
commissioners or trustees.
In Great Britain, the abuses which the trustees have committed in the
management of those tolls, have, in many cases, been very justly
complained of. At many turnpikes, it has been said, the money levied is
more than double of what is necessary for executing, in the completest
manner, the work, which is often executed in a very slovenly manner, and
sometimes not executed at all. The system of repairing the high-roads by
tolls of this kind, it must be observed, is not of very long standing. We
should not wonder, therefore, if it has not yet been brought to that
degree of perfection of which it seems capable. If mean and improper
persons are frequently appointed trustees; and if proper courts of
inspection and account have not yet been established for controlling their
conduct, and for reducing the tolls to what is barely sufficient for
executing the work to be done by them; the recency of the institution both
accounts and apologizes for those defects, of which, by the wisdom of
parliament, the greater part may, in due time, be gradually remedied.
The money levied at the different turnpikes in Great Britain, is supposed
to exceed so much what is necessary for repairing the roads, that the
savings which, with proper economy, might be made from it, have been
considered, even by some ministers, as a very great resource, which might,
at some time or another, be applied to the exigencies of the state.
Government, it has been said, by taking the management of the turnpikes
into its own hands, and by employing the soldiers, who would work for a
very small addition to their pay, could keep the roads in good order, at a
much less expense than it can be done by trustees, who have no other
workmen to employ, but such as derive their whole subsistence from their
wages. A great revenue, half a million, perhaps {Since publishing the two
first editions of this book, I have got good reasons to believe that all
the turnpike tolls levied in Great Britain do not produce a neat revenue
that amounts to half a million; a sum which, under the management of
government, would not be sufficient to keep in repair five of the
principal roads in the kingdom}, it has been pretended, might in this
manner be gained, without laying any new burden upon the people; and the
turnpike roads might be made to contribute to the general expense of the
state, in the same manner as the post-office does at present.
That a considerable revenue might be gained in this manner, I have no
doubt, though probably not near so much as the projectors of this plan
have supposed. The plan itself, however, seems liable to several very
important objections.
First, If the tolls which are levied at the turnpikes should ever be
considered as one of the resources for supplying the exigencies of the
state, they would certainly be augmented as those exigencies were supposed
to require. According to the policy of Great Britain, therefore, they
would probably he augmented very fast. The facility with which a great
revenue could be drawn from them, would probably encourage administration
to recur very frequently te this resource. Though it may, perhaps, be more
than doubtful whether half a million could by any economy be saved out of
the present tolls, it can scarcely be doubted, but that a million might be
saved out of them, if they were doubled; and perhaps two millions, if they
were tripled {I have now good reason to believe that all these conjectural
sums are by much too large.}. This great revenue, too, might be levied
without the appointment of a single new officer to collect and receive it.
But the turnpike tolls, being continually augmented in this manner,
instead of facilitating the inland commerce of the country, as at present,
would soon become a very great incumbrance upon it. The expense of
transporting all heavy goods from one part of the country to another,
would soon be so much increased, the market for all such goods,
consequently, would soon be so much narrowed, that their production would
be in a great measure discouraged, and the most important branches of the
domestic industry of the country annihilated altogether.
Secondly, A tax upon carriages, in proportion to their weight, though a
very equal tax when applied to the sole purpose of repairing the roads, is
a very unequal one when applied to any other purpose, or to supply the
common exigencies of the state. When it is applied to the sole purpose
above mentioned, each carriage is supposed to pay exactly for the wear and
tear which that carriage occasions of the roads. But when it is applied to
any other purpose, each carriage is supposed to pay for more than that
wear and tear, and contributes to the supply of some other exigency of the
state. But as the turnpike toll raises the price of goods in proportion to
their weight and not to their value, it is chiefly paid by the consumers
of coarse and bulky, not by those of precious and light commodities.
Whatever exigency of the state, therefore, this tax might be intended to
supply, that exigency would be chiefly supplied at the expense of the
poor, not of the rich; at the expense of those who are least able to
supply it, not of those who are most able.
Thirdly, If government should at any time neglect the reparation of the
high-roads, it would be still more difficult, than it is at present, to
compel the proper application of any part of the turnpike tolls. A large
revenue might thus be levied upon the people, without any part of it being
applied to the only purpose to which a revenue levied in this manner ought
ever to be applied. If the meanness and poverty of the trustees of
turnpike roads render it sometimes difficult, at present, to oblige them
to repair their wrong; their wealth and greatness would render it ten
times more so in the case which is here supposed.
In France, the funds destined for the reparation of the high-roads are
under the immediate direction of the executive power. Those funds consist,
partly in a certain number of days labour, which the country people are in
most parts of Europe obliged to give to the reparation of the highways;
and partly in such a portion of the general revenue of the state as the
king chooses to spare from his other expenses.
By the ancient law of France, as well as by that of most other parts of
Europe, the labour of the country people was under the direction of a
local or provincial magistracy, which had no immediate dependency upon the
king’s council. But, by the present practice, both the labour of the
country people, and whatever other fund the king may choose to assign for
the reparation of the high-roads in any particular province or generality,
are entirely under the management of the intendant; an officer who is
appointed and removed by the king’s council who receives his orders from
it, and is in constant correspondence with it. In the progress of
despotism, the authority of the executive power gradually absorbs that of
every other power in the state, and assumes to itself the management of
every branch of revenue which is destined for any public purpose. In
France, however, the great post-roads, the roads which make the
communication between the principal towns of the kingdom, are in general
kept in good order; and, in some provinces, are even a good deal superior
to the greater part of the turnpike roads of England. But what we call the
cross roads, that is, the far greater part of the roads in the country,
are entirely neglected, and are in many places absolutely impassable for
any heavy carriage. In some places it is even dangerous to travel on
horseback, and mules are the only conveyance which can safely be trusted.
The proud minister of an ostentatious court, may frequently take pleasure
in executing a work of splendour and magnificence, such as a great
highway, which is frequently seen by the principal nobility, whose
applauses not only flatter his vanity, but even contribute to support his
interest at court. But to execute a great number of little works, in which
nothing that can be done can make any great appearance, or excite the
smallest degree of admiration in any traveller, and which, in short, have
nothing to recommend them but their extreme utility, is a business which
appears, in every respect, too mean and paltry to merit the attention of
so great a magistrate. Under such an administration therefore, such works
are almost always entirely neglected.
In China, and in several other governments of Asia, the executive power
charges itself both with the reparation of the high-roads, and with the
maintenance of the navigable canals. In the instructions which are given
to the governor of each province, those objects, it is said, are
constantly recommended to him, and the judgment which the court forms of
his conduct is very much regulated by the attention which he appears to
have paid to this part of his instructions. This branch of public police,
accordingly, is said to be very much attended to in all those countries,
but particularly in China, where the high-roads, and still more the
navigable canals, it is pretended, exceed very much every thing of the
same kind which is known in Europe. The accounts of those works, however,
which have been transmitted to Europe, have generally been drawn up by
weak and wondering travellers; frequently by stupid and lying
missionaries. If they had been examined by more intelligent eyes, and if
the accounts of them had been reported by more faithful witnesses, they
would not, perhaps, appear to be so wonderful. The account which Bernier
gives of some works of this kind in Indostan, falls very short of what had
been reported of them by other travellers, more disposed to the marvellous
than he was. It may too, perhaps, be in those countries, as it is in
France, where the great roads, the great communications, which are likely
to be the subjects of conversation at the court and in the capital, are
attended to, and all the rest neglected. In China, besides, in Indostan,
and in several other governments of Asia, the revenue of the sovereign
arises almost altogether from a land tax or land rent, which rises or
falls with the rise and fall of the annual produce of the land. The great
interest of the sovereign, therefore, his revenue, is in such countries
necessarily and immediately connected with the cultivation of the land,
with the greatness of its produce, and with the value of its produce. But
in order to render that produce both as great and as valuable as possible,
it is necessary to procure to it as extensive a market as possible, and
consequently to establish the freest, the easiest, and the least expensive
communication between all the different parts of the country; which can be
done only by means of the best roads and the best navigable canals. But
the revenue of the sovereign does not, in any part of Europe, arise
chiefly from a land tax or land rent. In all the great kingdoms of Europe,
perhaps, the greater part of it may ultimately depend upon the produce of
the land: but that dependency is neither so immediate nor so evident. In
Europe, therefore, the sovereign does not feel himself so directly called
upon to promote the increase, both in quantity and value of the produce of
the land, or, by maintaining good roads and canals, to provide the most
extensive market for that produce. Though it should be true, therefore,
what I apprehend is not a little doubtful, that in some parts of Asia this
department of the public police is very properly managed by the executive
power, there is not the least probability that, during the present state
of things, it could be tolerably managed by that power in any part of
Europe.
Even those public works, which are of such a nature that they cannot
afford any revenue for maintaining themselves, but of which the
conveniency is nearly confined to some particular place or district, are
always better maintained by a local or provincial revenue, under the
management of a local and provincial administration, than by the general
revenue of the state, of which the executive power must always have the
management. Were the streets of London to be lighted and paved at the
expense of the treasury, is there any probability that they would be so
well lighted and paved as they are at present, or even at so small an
expense? The expense, besides, instead of being raised by a local tax upon
the inhabitants of each particular street, parish, or district in London,
would, in this case, be defrayed out of the general revenue of the state,
and would consequently be raised by a tax upon all the inhabitants of the
kingdom, of whom the greater part derive no sort of benefit from the
lighting and paving of the streets of London.
The abuses which sometimes creep into the local and provincial
administration of a local and provincial revenue, how enormous soever they
may appear, are in reality, however, almost always very trifling in
comparison of those which commonly take place in the administration and
expenditure of the revenue of a great empire. They are, besides, much more
easily corrected. Under the local or provincial administration of the
justices of the peace in Great Britain, the six days labour which the
country people are obliged to give to the reparation of the highways, is
not always, perhaps, very judiciously applied, but it is scarce ever
exacted with any circumstance of cruelty or oppression. In France, under
the administration of the intendants, the application is not always more
judicious, and the exaction is frequently the most cruel and oppressive.
Such corvees, as they are called, make one of the principal instruments of
tyranny by which those officers chastise any parish or communeaute, which
has had the misfortune to fall under their displeasure.
Of the public Works and Institution which are necessary for facilitating
particular Branches of Commerce.
The object of the public works and institutions above mentioned, is to
facilitate commerce in general. But in order to facilitate some particular
branches of it, particular institutions are necessary, which again require
a particular and extraordinary expense.
Some particular branches of commerce which are carried on with barbarous
and uncivilized nations, require extraordinary protection. An ordinary
store or counting-house could give little security to the goods of the
merchants who trade to the western coast of Africa. To defend them from
the barbarous natives, it is necessary that the place where they are
deposited should be in some measure fortified. The disorders in the
government of Indostan have been supposed to render a like precaution
necessary, even among that mild and gentle people; and it was under
pretence of securing their persons and property from violence, that both
the English and French East India companies were allowed to erect the
first forts which they possessed in that country. Among other nations,
whose vigorous government will suffer no strangers to possess any
fortified place within their territory, it may be necessary to maintain
some ambassador, minister, or consul, who may both decide, according to
their own customs, the differences arising among his own countrymen, and,
in their disputes with the natives, may by means of his public character,
interfere with more authority and afford them a more powerful protection
than they could expect from any private man. The interests of commerce
have frequently made it necessary to maintain ministers in foreign
countries, where the purposes either of war or alliance would not have
required any. The commerce of the Turkey company first occasioned the
establishment of an ordinary ambassador at Constantinople. The first
English embassies to Russia arose altogether from commercial interests.
The constant interference with those interests, necessarily occasioned
between the subjects of the different states of Europe, has probably
introduced the custom of keeping, in all neighbouring countries,
ambassadors or ministers constantly resident, even in the time of peace.
This custom, unknown to ancient times, seems not to be older than the end
of the fifteenth, or beginning of the sixteenth century; that is, than the
time when commerce first began to extend itself to the greater part of the
nations of Europe, and when they first began to attend to its interests.
It seems not unreasonable, that the extraordinary expense which the
protection of any particular branch of commerce may occasion, should be
defrayed by a moderate tax upon that particular branch; by a moderate
fine, for example, to be paid by the traders when they first enter into
it; or, what is more equal, by a particular duty of so much per cent. upon
the goods which they either import into, or export out of, the particular
countries with which it is carried on. The protection of trade, in
general, from pirates and freebooters, is said to have given occasion to
the first institution of the duties of customs. But, if it was thought
reasonable to lay a general tax upon trade, in order to defray the expense
of protecting trade in general, it should seem equally reasonable to lay a
particular tax upon a particular branch of trade, in order to defray the
extraordinary expense of protecting that branch.
The protection of trade, in general, has always been considered as
essential to the defence of the commonwealth, and, upon that account, a
necessary part of the duty of the executive power. The collection and
application of the general duties of customs, therefore, have always been
left to that power. But the protection of any particular branch of trade
is a part of the general protection of trade; a part, therefore, of the
duty of that power; and if nations always acted consistently, the
particular duties levied for the purposes of such particular protection,
should always have been left equally to its disposal. But in this respect,
as well as in many others, nations have not always acted consistently; and
in the greater part of the commercial states of Europe, particular
companies of merchants have had the address to persuade the legislature to
entrust to them the performance of this part of the duty of the sovereign,
together with all the powers which are necessarily connected with it.
These companies, though they may, perhaps, have been useful for the first
introduction of some branches of commerce, by making, at their own
expense, an experiment which the state might not think it prudent to make,
have in the long-run proved, universally, either burdensome or useless,
and have either mismanaged or confined the trade.
When those companies do not trade upon a joint stock, but are obliged to
admit any person, properly qualified, upon paying a certain fine, and
agreeing to submit to the regulations of the company, each member trading
upon his own stock, and at his own risk, they are called regulated
companies. When they trade upon a joint stock, each member sharing in the
common profit or loss, in proportion to his share in this stock, they are
called joint-stock companies. Such companies, whether regulated or
joint-stock, sometimes have, and sometimes have not, exclusive privileges.
Regulated companies resemble, in every respect, the corporation of trades,
so common in the cities and towns of all the different countries of
Europe; and are a sort of enlarged monopolies of the same kind. As no
inhabitant of a town can exercise an incorporated trade, without first
obtaining his freedom in the incorporation, so, in most cases, no subject
of the state can lawfully carry on any branch of foreign trade, for which
a regulated company is established, without first becoming a member of
that company. The monopoly is more or less strict, according as the terms
of admission are more or less difficult, and according as the directors of
the company have more or less authority, or have it more or less in their
power to manage in such a manner as to confine the greater part of the
trade to themselves and their particular friends. In the most ancient
regulated companies, the privileges of apprenticeship were the same as in
other corporations, and entitled the person who had served his time to a
member of the company, to become himself a member, either without paying
any fine, or upon paying a much smaller one than what was exacted of other
people. The usual corporation spirit, wherever the law does not restrain
it, prevails in all regulated companies. When they have been allowed to
act according to their natural genius, they have always, in order to
confine the competition to as small a number of persons as possible,
endeavoured to subject the trade to many burdensome regulations. When the
law has restrained them from doing this, they have become altogether
useless and insignificant.
The regulated companies for foreign commerce which at present subsist in
Great Britain, are the ancient merchant-adventurers company, now commonly
called the Hamburgh company, the Russia company, the Eastland company, the
Turkey company, and the African company.
The terms of admission into the Hamburgh company are now said to be quite
easy; and the directors either have it not in their power to subject the
trade to any troublesome restraint or regulations, or, at least, have not
of late exercised that power. It has not always been so. About the middle
of the last century, the fine for admission was fifty, and at one time one
hundred pounds, and the conduct of the company was said to be extremely
oppressive. In 1643, in 1645, and in 1661, the clothiers and free traders
of the west of England complained of them to parliament, as of
monopolists, who confined the trade, and oppressed the manufactures of the
country. Though those complaints produced no act of parliament, they had
probably intimidated the company so far, as to oblige them to reform their
conduct. Since that time, at least, there have been no complaints against
them. By the 10th and 11th of William III. c.6, the fine for admission
into the Russia company was reduced to five pounds; and by the 25th of
Charles II. c.7, that for admission into the Eastland company to forty
shillings; while, at the same time, Sweden, Denmark, and Norway, all the
countries on the north side of the Baltic, were exempted from their
exclusive charter. The conduct of those companies had probably given
occasion to those two acts of parliament. Before that time, Sir Josiah
Child had represented both these and the Hamburgh company as extremely
oppressive, and imputed to their bad management the low state of the
trade, which we at that time carried on to the countries comprehended
within their respective charters. But though such companies may not, in
the present times, be very oppressive, they are certainly altogether
useless. To be merely useless, indeed, is perhaps, the highest eulogy
which can ever justly be bestowed upon a regulated company; and all the
three companies above mentioned seem, in their present state, to deserve
this eulogy.
The fine for admission into the Turkey company was formerly twenty-five
pounds for all persons under twenty-six years of age, and fifty pounds for
all persons above that age. Nobody but mere merchants could be admitted; a
restriction which excluded all shop-keepers and retailers. By a bye-law,
no British manufactures could be exported to Turkey but in the general
ships of the company; and as those ships sailed always from the port of
London, this restriction confined the trade to that expensive port, and
the traders to those who lived in London and in its neighbourhood. By
another bye-law, no person living within twenty miles of London, and not
free of the city, could be admitted a member; another restriction which,
joined to the foregoing, necessarily excluded all but the freemen of
London. As the time for the loading and sailing of those general ships
depended altogether upon the directors, they could easily fill them with
their own goods, and those of their particular friends, to the exclusion
of others, who, they might pretend, had made their proposals too late. In
this state of things, therefore, this company was, in every respect, a
strict and oppressive monopoly. Those abuses gave occasion to the act of
the 26th of George II. c. 18, reducing the fine for admission to twenty
pounds for all persons, without any distinction of ages, or any
restriction, either to mere merchants, or to the freemen of London; and
granting to all such persons the liberty of exporting, from all the ports
of Great Britain, to any port in Turkey, all British goods, of which the
exportation was not prohibited, upon paying both the general duties of
customs, and the particular duties assessed for defraying the necessary
expenses of the company; and submitting, at the same time, to the lawful
authority of the British ambassador and consuls resident in Turkey, and to
the bye-laws of the company duly enacted. To prevent any oppression by
those bye-laws, it was by the same act ordained, that if any seven members
of the company conceived themselves aggrieved by any bye-law which should
be enacted after the passing of this act, they might appeal to the board
of trade and plantations (to the authority of which a committee of the
privy council has now succeeded), provided such appeal was brought within
twelve months after the bye-law was enacted; and that, if any seven
members conceived themselves aggrieved by any bye-law which had been
enacted before the passing of this act, they might bring a like appeal,
provided it was within twelve months after the day on which this act was
to take place. The experience of one year, however, may not always be
sufficient to discover to all the members of a great company the
pernicious tendency of a particular bye-law; and if several of them should
afterwards discover it, neither the board of trade, nor the committee of
council, can afford them any redress. The object, besides, of the greater
part of the bye-laws of all regulated companies, as well as of all other
corporations, is not so much to oppress those who are already members, as
to discourage others from becoming so; which may be done, not only by a
high fine, but by many other contrivances. The constant view of such
companies is always to raise the rate of their own profit as high as they
can; to keep the market, both for the goods which they export, and for
those which they import, as much understocked as they can; which can be
done only by restraining the competition, or by discouraging new
adventurers from entering into the trade. A fine, even of twenty pounds,
besides, though it may not, perhaps, be sufficient to discourage any man
from entering into the Turkey trade, with an intention to continue in it,
may be enough to discourage a speculative merchant from hazarding a single
adventure in it. In all trades, the regular established traders, even
though not incorporated, naturally combine to raise profits, which are
noway so likely to be kept, at all times, down to their proper level, as
by the occasional competition of speculative adventurers. The Turkey
trade, though in some measure laid open by this act of parliament, is
still considered by many people as very far from being altogether free.
The Turkey company contribute to maintain an ambassador and two or three
consuls, who, like other public ministers, ought to be maintained
altogether by the state, and the trade laid open to all his majesty’s
subjects. The different taxes levied by the company, for this and other
corporation purposes, might afford a revenue much more than sufficient to
enable a state to maintain such ministers.
Regulated companies, it was observed by Sir Josiah Child, though they had
frequently supported public ministers, had never maintained any forts or
garrisons in the countries to which they traded; whereas joint-stock
companies frequently had. And, in reality, the former seem to be much more
unfit for this sort of service than the latter. First, the directors of a
regulated company have no particular interest in the prosperity of the
general trade of the company, for the sake of which such forts and
garrisons are maintained. The decay of that general trade may even
frequently contribute to the advantage of their own private trade; as, by
diminishing the number of their competitors, it may enable them both to
buy cheaper, and to sell dearer. The directors of a joint-stock company,
on the contrary, having only their share in the profits which are made
upon the common stock committed to their management, have no private trade
of their own, of which the interest can be separated from that of the
general trade of the company. Their private interest is connected with the
prosperity of the general trade of the company, and with the maintenance
of the forts and garrisons which are necessary for its defence. They are
more likely, therefore, to have that continual and careful attention which
that maintenance necessarily requires. Secondly, The directors of a
joint-stock company have always the management of a large capital, the
joint stock of the company, a part of which they may frequently employ,
with propriety, in building, repairing, and maintaining such necessary
forts and garrisons. But the directors of a regulated company, having the
management of no common capital, have no other fund to employ in this way,
but the casual revenue arising from the admission fines, and from the
corporation duties imposed upon the trade of the company. Though they had
the same interest, therefore, to attend to the maintenance of such forts
and garrisons, they can seldom have the same ability to render that
attention effectual. The maintenance of a public minister, requiring
scarce any attention, and but a moderate and limited expense, is a
business much more suitable both to the temper and abilities of a
regulated company.
Long after the time of Sir Josiah Child, however, in 1750, a regulated
company was established, the present company of merchants trading to
Africa; which was expressly charged at first with the maintenance of all
the British forts and garrisons that lie between Cape Blanc and the Cape
of Good Hope, and afterwards with that of those only which lie between
Cape Rouge and the Cape of Good Hope. The act which establishes this
company (the 23rd of George II. c.51 ), seems to have had two distinct
objects in view; first, to restrain effectually the oppressive and
monopolizing spirit which is natural to the directors of a regulated
company; and, secondly, to force them, as much as possible, to give an
attention, which is not natural to them, towards the maintenance of forts
and garrisons.
For the first of these purposes, the fine for admission is limited to
forty shillings. The company is prohibited from trading in their corporate
capacity, or upon a joint stock; from borrowing money upon common seal, or
from laying any restraints upon the trade, which may be carried on freely
from all places, and by all persons being British subjects, and paying the
fine. The government is in a committee of nine persons, who meet at
London, but who are chosen annually by the freemen of the company at
London, Bristol, and Liverpool; three from each place. No committeeman can
be continued in office for more than three years together. Any
committee-man might be removed by the board of trade and plantations, now
by a committee of council, after being heard in his own defence. The
committee are forbid to export negroes from Africa, or to import any
African goods into Great Britain. But as they are charged with the
maintenance of forts and garrisons, they may, for that purpose export from
Great Britain to Africa goods and stores of different kinds. Out of the
moneys which they shall receive from the company, they are allowed a sum,
not exceeding eight hundred pounds, for the salaries of their clerks and
agents at London, Bristol, and Liverpool, the house-rent of their offices
at London, and all other expenses of management, commission, and agency,
in England. What remains of this sum, after defraying these different
expenses, they may divide among themselves, as compensation for their
trouble, in what manner they think proper. By this constitution, it might
have been expected, that the spirit of monopoly would have been
effectually restrained, and the first of these purposes sufficiently
answered. It would seem, however, that it had not. Though by the 4th of
George III. c.20, the fort of Senegal, with all its dependencies, had been
invested in the company of merchants trading to Africa, yet, in the year
following (by the 5th of George III. c.44), not only Senegal and its
dependencies, but the whole coast, from the port of Sallee, in South
Barbary, to Cape Rouge, was exempted from the jurisdiction of that
company, was vested in the crown, and the trade to it declared free to all
his majesty’s subjects. The company had been suspected of restraining the
trade and of establishing some sort of improper monopoly. It is not,
however, very easy to conceive how, under the regulations of the 23d
George II. they could do so. In the printed debates of the house of
commons, not always the most authentic records of truth, I observe,
however, that they have been accused of this. The members of the committee
of nine being all merchants, and the governors and factors in their
different forts and settlements being all dependent upon them, it is not
unlikely that the latter might have given peculiar attention to the
consignments and commissions of the former, which would establish a real
monopoly.
For the second of these purposes, the maintenance of the forts and
garrisons, an annual sum has been allotted to them by parliament,
generally about £13,000. For the proper application of this sum, the
committee is obliged to account annually to the cursitor baron of
exchequer; which account is afterwards to be laid before parliament. But
parliament, which gives so little attention to the application of
millions, is not likely to give much to that of £13,000 a-year; and the
cursitor baron of exchequer, from his profession and education, is not
likely to be profoundly skilled in the proper expense of forts and
garrisons. The captains of his majesty’s navy, indeed, or any other
commissioned officers, appointed by the board of admiralty, may inquire
into the condition of the forts and garrisons, and report their
observations to that board. But that board seems to have no direct
jurisdiction over the committee, nor any authority to correct those whose
conduct it may thus inquire into; and the captains of his majesty’s navy,
besides, are not supposed to be always deeply learned in the science of
fortification. Removal from an office, which can be enjoyed only for the
term of three years, and of which the lawful emoluments, even during that
term, are so very small, seems to be the utmost punishment to which any
committee-man is liable, for any fault, except direct malversation, or
embezzlement, either of the public money, or of that of the company; and
the fear of the punishment can never be a motive of sufficient weight to
force a continual and careful attention to a business to which he has no
other interest to attend. The committee are accused of having sent out
bricks and stones from England for the reparation of Cape Coast Castle, on
the coast of Guinea; a business for which parliament had several times
granted an extraordinary sum of money. These bricks and stones, too, which
had thus been sent upon so long a voyage, were said to have been of so bad
a quality, that it was necessary to rebuild, from the foundation, the
walls which had been repaired with them. The forts and garrisons which lie
north of Cape Rouge, are not only maintained at the expense of the state,
but are under the immediate government of the executive power; and why
those which lie south of that cape, and which, too, are, in part at least,
maintained at the expense of the state, should be under a different
government, it seems not very easy even to imagine a good reason. The
protection of the Mediterranean trade was the original purpose or pretence
of the garrisons of Gibraltar and Minorca; and the maintenance and
government of those garrisons have always been, very properly, committed,
not to the Turkey company, but to the executive power. In the extent of
its dominion consists, in a great measure, the pride and dignity of that
power; and it is not very likely to fail in attention to what is necessary
for the defence of that dominion. The garrisons at Gibraltar and Minorca,
accordingly, have never been neglected. Though Minorca has been twice
taken, and is now probably lost for ever, that disaster has never been
imputed to any neglect in the executive power. I would not, however, be
understood to insinuate, that either of those expensive garrisons was
ever, even in the smallest degree, necessary for the purpose for which
they were originally dismembered from the Spanish monarchy. That
dismemberment, perhaps, never served any other real purpose than to
alienate from England her natural ally the king of Spain, and to unite the
two principal branches of the house of Bourbon in a much stricter and more
permanent alliance than the ties of blood could ever have united them.
Joint-stock companies, established either by royal charter, or by act of
parliament, are different in several respects, not only from regulated
companies, but from private copartneries.
First, In a private copartnery, no partner without the consent of the
company, can transfer his share to another person, or introduce a new
member into the company. Each member, however, may, upon proper warning,
withdraw from the copartnery, and demand payment from them of his share of
the common stock. In a joint-stock company, on the contrary, no member can
demand payment of his share from the company; but each member can, without
their consent, transfer his share to another person, and thereby introduce
a new member. The value of a share in a joint stock is always the price
which it will bring in the market; and this may be either greater or less
in any proportion, than the sum which its owner stands credited for in the
stock of the company.
Secondly, In a private copartnery, each partner is bound for the debts
contracted by the company, to the whole extent of his fortune. In a
joint-stock company, on the contrary, each partner is bound only to the
extent of his share.
The trade of a joint-stock company is always managed by a court of
directors. This court, indeed, is frequently subject, in many respects, to
the control of a general court of proprietors. But the greater part of
these proprietors seldom pretend to understand any thing of the business
of the company; and when the spirit of faction happens not to prevail
among them, give themselves no trouble about it, but receive contentedly
such halfyearly or yearly dividend as the directors think proper to make
to them. This total exemption front trouble and front risk, beyond a
limited sum, encourages many people to become adventurers in joint-stock
companies, who would, upon no account, hazard their fortunes in any
private copartnery. Such companies, therefore, commonly draw to themselves
much greater stocks, than any private copartnery can boast of. The trading
stock of the South Sea company at one time amounted to upwards of
thirty-three millions eight hundred thousand pounds. The divided capital
of the Bank of England amounts, at present, to ten millions seven hundred
and eighty thousand pounds. The directors of such companies, however,
being the managers rather of other people’s money than of their own, it
cannot well be expected that they should watch over it with the same
anxious vigilance with which the partners in a private copartnery
frequently watch over their own. Like the stewards of a rich man, they are
apt to consider attention to small matters as not for their master’s
honour, and very easily give themselves a dispensation from having it.
Negligence and profusion, therefore, must always prevail, more or less, in
the management of the affairs of such a company. It is upon this account,
that joint-stock companies for foreign trade have seldom been able to
maintain the competition against private adventurers. They have,
accordingly, very seldom succeeded without an exclusive privilege; and
frequently have not succeeded with one. Without an exclusive privilege,
they have commonly mismanaged the trade. With an exclusive privilege, they
have both mismanaged and confined it.
The Royal African company, the predecessors of the present African
company, had an exclusive privilege by charter; but as that charter had
not been confirmed by act of parliament, the trade, in consequence of the
declaration of rights, was, soon after the Revolution, laid open to all
his majesty’s subjects. The Hudson’s Bay company are, as to their legal
rights, in the same situation as the Royal African company. Their
exclusive charter has not been confirmed by act of parliament. The South
Sea company, as long as they continued to be a trading company, had an
exclusive privilege confirmed by act of parliament; as have likewise the
present united company of merchants trading to the East Indies.
The Royal African company soon found that they could not maintain the
competition against private adventurers, whom, notwithstanding the
declaration of rights, they continued for some time to call interlopers,
and to persecute as such. In 1698, however, the private adventurers were
subjected to a duty of ten per cent. upon almost all the different
branches of their trade, to be employed by the company in the maintenance
of their forts and garrisons. But, notwithstanding this heavy tax, the
company were still unable to maintain the competition. Their stock and
credit gradually declined. In 1712, their debts had become so great, that
a particular act of parliament was thought necessary, both for their
security and for that of their creditors. It was enacted, that the
resolution of two-thirds of these creditors in number and value should
bind the rust, both with regard to the time which should be allowed to the
company for the payment of their debts, and with regard to any other
agreement which it might be thought proper to make with them concerning
those debts. In 1730, their affairs were in so great disorder, that they
were altogether incapable of maintaining their forts and garrisons, the
sole purpose and pretext of their institution. From that year till their
final dissolution, the parliament judged it necessary to allow the annual
sum of £10,000 for that purpose. In 1732, after having been for many years
losers by the trade of carrying negroes to the West Indies, they at last
resolved to give it up altogether; to sell to the private traders to
America the negroes which they purchased upon the coast; and to employ
their servants in a trade to the inland parts of Africa for gold dust,
elephants teeth, dyeing drugs, etc. But their success in this more
confined trade was not greater than in their former extensive one. Their
affairs continued to go gradually to decline, till at last, being in every
respect a bankrupt company, they were dissolved by act of parliament, and
their forts and garrisons vested in the present regulated company of
merchants trading to Africa. Before the erection of the Royal African
company, there had been three other joint-stock companies successively
established, one after another, for the African trade. They were all
equally unsuccessful. They all, however, had exclusive charters, which,
though not confirmed by act of parliament, were in those days supposed to
convey a real exclusive privilege.
The Hudson’s Bay company, before their misfortunes in the late war, had
been much more fortunate than the Royal African company. Their necessary
expense is much smaller. The whole number of people whom they maintain in
their different settlements and habitations, which they have honoured with
the name of forts, is said not to exceed a hundred and twenty persons.
This number, however, is sufficient to prepare beforehand the cargo of
furs and other goods necessary for loading their ships, which, on account
of the ice, can seldom remain above six or eight weeks in those seas. This
advantage of having a cargo ready prepared, could not, for several years,
be acquired by private adventurers; and without it there seems to be no
possibility of trading to Hudson’s Bay. The moderate capital of the
company, which, it is said, does not exceed one hundred and ten thousand
pounds, may, besides, be sufficient to enable them to engross the whole,
or almost the whole trade and surplus produce, of the miserable though
extensive country comprehended within their charter. No private
adventurers, accordingly, have ever attempted to trade to that country in
competition with them. This company, therefore, have always enjoyed an
exclusive trade, in fact, though they may have no right to it in law. Over
and above all this, the moderate capital of this company is said to be
divided among a very small number of proprietors. But a joint-stock
company, consisting of a small number of proprietors, with a moderate
capital, approaches very nearly to the nature of a private copartnery, and
may be capable of nearly the same degree of vigilance and attention. It is
not to be wondered at, therefore, if, in consequence of these different
advantages, the Hudson’s Bay company had, before the late war, been able
to carry on their trade with a considerable degree of success. It does not
seem probable, however, that their profits ever approached to what the
late Mr Dobbs imagined them. A much more sober and judicious writer, Mr
Anderson, author of the Historical and Chronological Deduction of
Commerce, very justly observes, that upon examining the accounts which Mr
Dobbs himself has given for several years together, of their exports and
imports, and upon making proper allowances for their extraordinary risk
and expense, it does not appear that their profits deserve to be envied,
or that they can much, if at all, exceed the ordinary profits of trade.
The South Sea company never had any forts or garrisons to maintain, and
therefore were entirely exempted from one great expense, to which other
joint-stock companies for foreign trade are subject; but they had an
immense capital divided among an immense number of proprietors. It was
naturally to be expected, therefore, that folly, negligence, and
profusion, should prevail in the whole management of their affairs. The
knavery and extravagance of their stock-jobbing projects are sufficiently
known, and the explication of them would be foreign to the present
subject. Their mercantile projects were not much better conducted. The
first trade which they engaged in, was that of supplying the Spanish West
Indies with negroes, of which (in consequence of what was called the
Assiento Contract granted them by the treaty of Utrecht) they had the
exclusive privilege. But as it was not expected that much profit could be
made by this trade, both the Portuguese and French companies, who had
enjoyed it upon the same terms before them, having been ruined by it, they
were allowed, as compensation, to send annually a ship of a certain
burden, to trade directly to the Spanish West Indies. Of the ten voyages
which this annual ship was allowed to make, they are said to have gained
considerably by one, that of the Royal Caroline, in 1731; and to have been
losers, more or less, by almost all the rest. Their ill success was
imputed, by their factors and agents, to the extortion and oppression of
the Spanish government; but was, perhaps, principally owing to the
profusion and depredations of those very factors and agents; some of whom
are said to have acquired great fortunes, even in one year. In 1734, the
company petitioned the king, that they might be allowed to dispose of the
trade and tonnage of their annual ship, on account of the little profit
which they made by it, and to accept of such equivalent as they could
obtain from the king of Spain.
In 1724, this company had undertaken the whale fishery. Of this, indeed,
they had no monopoly; but as long as they carried it on, no other British
subjects appear to have engaged in it. Of the eight voyages which their
ships made to Greenland, they were gainers by one, and losers by all the
rest. After their eighth and last voyage, when they had sold their ships,
stores, and utensils, they found that their whole loss upon this branch,
capital and interest included, amounted to upwards of £237,000.
In 1722, this company petitioned the parliament to be allowed to divide
their immense capital of more than thirty-three millions eight hundred
thousand pounds, the whole of which had been lent to government, into two
equal parts; the one half, or upwards of £16,900,000, to be put upon the
same footing with other government annuities, and not to be subject to the
debts contracted, or losses incurred, by the directors of the company, in
the prosecution of their mercantile projects; the other half to remain as
before, a trading stock, and to be subject to those debts and losses. The
petition was too reasonable not to be granted. In 1733, they again
petitioned the parliament, that three-fourths of their trading stock might
be turned into annuity stock, and only one-fourth remain as trading stock,
or exposed to the hazards arising from the bad management of their
directors. Both their annuity and trading stocks had, by this time, been
reduced more than two millions each, by several different payments from
government; so that this fourth amounted only to £3,662,784:8:6. In 1748,
all the demands of the company upon the king of Spain, in consequence of
the assiento contract, were, by the treaty of Aix-la-Chapelle, given up
for what was supposed an equivalent. An end was put to their trade with
the Spanish West Indies; the remainder of their trading stock was turned
into an annuity stock; and the company ceased, in every respect, to be a
trading company.
It ought to be observed, that in the trade which the South Sea company
carried on by means of their annual ship, the only trade by which it ever
was expected that they could make any considerable profit, they were not
without competitors, either in the foreign or in the home market. At
Carthagena, Porto Bello, and La Vera Cruz, they had to encounter the
competition of the Spanish merchants, who brought from Cadiz to those
markets European goods, of the same kind with the outward cargo of their
ship; and in England they had to encounter that of the English merchants,
who imported from Cadiz goods of the Spanish West Indies, of the same kind
with the inward cargo. The goods, both of the Spanish and English
merchants, indeed, were, perhaps, subject to higher duties. But the loss
occasioned by the negligence, profusion, and malversation of the servants
of the company, had probably been a tax much heavier than all those
duties. That a joint-stock company should be able to carry on successfully
any branch of foreign trade, when private adventurers can come into any
sort of open and fair competition with them, seems contrary to all
experience.
The old English East India company was established in 1600, by a charter
from Queen Elizabeth. In the first twelve voyages which they fitted out
for India, they appear to have traded as a regulated company, with
separate stocks, though only in the general ships of the company. In 1612,
they united into a joint stock. Their charter was exclusive, and, though
not confirmed by act of parliament, was in those days supposed to convey a
real exclusive privilege. For many years, therefore, they were not much
disturbed by interlopers. Their capital, which never exceeded £744,000,
and of which £50 was a share, was not so exorbitant, nor their dealings so
extensive, as to afford either a pretext for gross negligence and
profusion, or a cover to gross malversation. Notwithstanding some
extraordinary losses, occasioned partly by the malice of the Dutch East
India company, and partly by other accidents, they carried on for many
years a successful trade. But in process of time, when the principles of
liberty were better understood, it became every day more and more
doubtful, how far a royal charter, not confirmed by act of parliament,
could convey an exclusive privilege. Upon this question the decisions of
the courts of justice were not uniform, but varied with the authority of
government, and the humours of the times. Interlopers multiplied upon
them; and towards the end of the reign of Charles II., through the whole
of that of James II., and during a part of that of William III., reduced
them to great distress. In 1698, a proposal was made to parliament, of
advancing two millions to government, at eight per cent. provided the
subscribers were erected into a new East India company, with exclusive
privileges. The old East India company offered seven hundred thousand
pounds, nearly the amount of their capital, at four per cent. upon the
same conditions. But such was at that time the state of public credit,
that it was more convenient for government to borrow two millions at eight
per cent. than seven hundred thousand pounds at four. The proposal of the
new subscribers was accepted, and a new East India company established in
consequence. The old East India company, however, had a right to continue
their trade till 1701. They had, at the same time, in the name of their
treasurer, subscribed very artfully three hundred and fifteen thousand
pounds into the stock of the new. By a negligence in the expression of the
act of parliament, which vested the East India trade in the subscribers to
this loan of two millions, it did not appear evident that they were all
obliged to unite into a joint stock. A few private traders, whose
subscriptions amounted only to seven thousand two hundred pounds, insisted
upon the privilege of trading separately upon their own stocks, and at
their own risks. The old East India company had a right to a separate
trade upon their own stock till 1701; and they had likewise, both before
and after that period, a right, like that or other private traders, to a
separate trade upon the £315,000, which they had subscribed into the stock
of the new company. The competition of the two companies with the private
traders, and with one another, is said to have well nigh ruined both. Upon
a subsequent occasion, in 1750, when a proposal was made to parliament for
putting the trade under the management of a regulated company, and thereby
laying it in some measure open, the East India company, in opposition to
this proposal, represented, in very strong terms, what had been, at this
time, the miserable effects, as they thought them, of this competition. In
India, they said, it raised the price of goods so high, that they were not
worth the buying; and in England, by overstocking the market, it sunk
their price so low, that no profit could be made by them. That by a more
plentiful supply, to the great advantage and conveniency of the public, it
must have reduced very much the price of India goods in the English
market, cannot well be doubted; but that it should have raised very much
their price in the Indian market, seems not very probable, as all the
extraordinary demand which that competition could occasion must have been
but as a drop of water in the immense ocean of Indian commerce. The
increase of demand, besides, though in the beginning it may sometimes
raise the price of goods, never fails to lower it in the long-run. It
encourages production, and thereby increases the competition of the
producers, who, in order to undersell one another, have recourse to new
divisions or labour and new improvements of art, which might never
otherwise have been thought of. The miserable effects of which the company
complained, were the cheapness of consumption, and the encouragement given
to production; precisely the two effects which it is the great business of
political economy to promote. The competition, however, of which they gave
this doleful account, had not been allowed to be of long continuance. In
1702, the two companies were, in some measure, united by an indenture
tripartite, to which the queen was the third party; and in 1708, they were
by act of parliament, perfectly consolidated into one company, by their
present name of the United Company of Merchants trading to the East
Indies. Into this act it was thought worth while to insert a clause,
allowing the separate traders to continue their trade till Michaelmas
1711; but at the same time empowering the directors, upon three years
notice, to redeem their little capital of seven thousand two hundred
pounds, and thereby to convert the whole stock of the company into a joint
stock. By the same act, the capital of the company, in consequence of a
new loan to government, was augmented from two millions to three millions
two hundred thousand pounds. In 1743, the company advanced another million
to government. But this million being raised, not by a call upon the
proprietors, but by selling annuities and contracting bond-debts, it did
not augment the stock upon which the proprietors could claim a dividend.
It augmented, however, their trading stock, it being equally liable with
the other three millions two hundred thousand pounds, to the losses
sustained, and debts contracted by the company in prosecution of their
mercantile projects. From 1708, or at least from 1711, this company, being
delivered from all competitors, and fully established in the monopoly of
the English commerce to the East Indies, carried on a successful trade,
and from their profits, made annually a moderate dividend to their
proprietors. During the French war, which began in 1741, the ambition of
Mr Dupleix, the French governor of Pondicherry, involved them in the wars
of the Carnatic, and in the politics of the Indian princes. After many
signal successes, and equally signal losses, they at last lost Madras, at
that time their principal settlement in India. It was restored to them by
the treaty of Aix-la-Chapelle; and, about this time the spirit of war and
conquest seems to have taken possession of their servants in India, and
never since to have left them. During the French war, which began in 1755,
their arms partook of the general good fortune of those of Great Britain.
They defended Madras, took Pondicherry, recovered Calcutta, and acquired
the revenues of a rich and extensive territory, amounting, it was then
said, to upwards of three millions a-year. They remained for several years
in quiet possession of this revenue; but in 1767, administration laid
claim to their territorial acquisitions, and the revenue arising from
them, as of right belonging to the crown; and the company, in compensation
for this claim, agreed to pay to government £400,000 a-year. They had,
before this, gradually augmented their dividend from about six to ten per
cent.; that is, upon their capital of three millions two hundred thousand
pounds, they had increased it by £128,000, or had raised it from one
hundred and ninety-two thousand to three hundred and twenty thousand
pounds a-year. They were attempting about this time to raise it still
further, to twelve and a-half per cent., which would have made their
annual payments to their proprietors equal to what they had agreed to pay
annually to government, or to £400,000 a-year. But during the two years in
which their agreement with government was to take place, they were
restrained from any further increase of dividend by two successive acts of
parliament, of which the object was to enable them to make a speedier
progress in the payment of their debts, which were at this time estimated
at upwards of six or seven millions sterling. In 1769, they renewed their
agreement with government for five years more, and stipulated, that during
the course of that period, they should be allowed gradually to increase
their dividend to twelve and a-half per cent; never increasing it,
however, more than one per cent. in one year. This increase of dividend,
therefore, when it had risen to its utmost height, could augment their
annual payments, to their proprietors and government together, but by
£680,000, beyond what they had been before their late territorial
acquisitions. What the gross revenue of those territorial acquisitions was
supposed to amount to, has already been mentioned; and by an account
brought by the Cruttenden East Indiaman in 1769, the neat revenue, clear
of all deductions and military charges, was stated at two millions
forty-eight thousand seven hundred and forty-seven pounds. They were said,
at the same time, to possess another revenue, arising partly from lands,
but chiefly from the customs established at their different settlements,
amounting to £439,000. The profits of their trade, too, according to the
evidence of their chairman before the house of commons, amounted, at this
time, to at least £400,000 a-year; according to that of their accountant,
to at least £500,000; according to the lowest account, at least equal to
the highest dividend that was to be paid to their proprietors. So great a
revenue might certainly have afforded an augmentation of £680,000 in their
annual payments; and, at the same time, have left a large sinking fund,
sufficient for the speedy reduction of their debt. In 1773, however, their
debts, instead of being reduced, were augmented by an arrear to the
treasury in the payment of the four hundred thousand pounds; by another to
the custom-house for duties unpaid; by a large debt to the bank, for money
borrowed; and by a fourth, for bills drawn upon them from India, and
wantonly accepted, to the amount of upwards of twelve hundred thousand
pounds. The distress which these accumulated claims brought upon them,
obliged them not only to reduce all at once their dividend to six per
cent. but to throw themselves upon the mercy of govermnent, and to
supplicate, first, a release from the further payment of the stipulated
£400,000 a-year; and, secondly, a loan of fourteen hundred thousand, to
save them from immediate bankruptcy. The great increase of their fortune
had, it seems, only served to furnish their servants with a pretext for
greater profusion, and a cover for greater malversation, than in
proportion even to that increase of fortune. The conduct of their servants
in India, and the general state of their affairs both in India and in
Europe, became the subject of a parliamentary inquiry: in consequence of
which, several very important alterations were made in the constitution of
their government, both at home and abroad. In India, their principal
settlements or Madras, Bombay, and Calcutta, which had before been
altogether independent of one another, were subjected to a
governor-general, assisted by a council of four assessors, parliament
assuming to itself the first nomination of this governor and council, who
were to reside at Calcutta; that city having now become, what Madras was
before, the most important of the English settlements in India. The court
of the Mayor of Calcutta, originally instituted for the trial of
mercantile causes, which arose in the city and neighbourhood, had
gradually extended its jurisdiction with the extension of the empire. It
was now reduced and confined to the original purpose of its institution.
Instead of it, a new supreme court of judicature was established,
consisting of a chief justice and three judges, to be appointed by the
crown. In Europe, the qualification necessary to entitle a proprietor to
vote at their general courts was raised, from five hundred pounds, the
original price of a share in the stock of the company, to a thousand
pounds. In order to vote upon this qualification, too, it was declared
necessary, that he should have possessed it, if acquired by his own
purchase, and not by inheritance, for at least one year, instead of six
months, the term requisite before. The court of twenty-four directors had
before been chosen annually; but it was now enacted, that each director
should, for the future, be chosen for four years; six of them, however, to
go out of office by rotation every year, and not be capable of being
re-chosen at the election of the six new directors for the ensuing year.
In consequence of these alterations, the courts, both of the proprietors
and directors, it was expected, would be likely to act with more dignity
and steadiness than they had usually done before. But it seems impossible,
by any alterations, to render those courts, in any respect, fit to govern,
or even to share in the government of a great empire; because the greater
part of their members must always have too little interest in the
prosperity of that empire, to give any serious attention to what may
promote it. Frequently a man of great, sometimes even a man of small
fortune, is willing to purchase a thousand pounds share in India stock,
merely for the influence which he expects to aquire by a vote in the court
of proprietors. It gives him a share, though not in the plunder, yet in
the appointment of the plunderers of India; the court of directors, though
they make that appointment, being necessarily more or less under the
influence of the proprietors, who not only elect those directors, but
sometimes over-rule the appointments of their servants in India. Provided
he can enjoy this influence for a few years, and thereby provide for a
certain number of his friends, he frequently cares little about the
dividend, or even about the value of the stock upon which his vote is
founded. About the prosperity of the great empire, in the government of
which that vote gives him a share, he seldom cares at all. No other
sovereigns ever were, or, from the nature of things, ever could be, so
perfectly indifferent about the happiness or misery of their subjects, the
improvement or waste of their dominions, the glory or disgrace of their
administration, as, from irresistible moral causes, the greater part of
the proprietors of such a mercantile company are, and necessarily must be.
This indifference, too, was more likely to be increased than diminished by
some of the new regulations which were made in consequence of the
parliamentary inquiry. By a resolution of the house of commons, for
example, it was declared, that when the £1,400,000 lent to the company by
government, should be paid, and their bond-debts be reduced to £1,500,000,
they might then, and not till then, divide eight per cent. upon their
capital; and that whatever remained of their revenues and neat profits at
home should be divided into four parts; three of them to be paid into the
exchequer for the use of the public, and the fourth to be reserved as a
fund, either for the further reduction of their bond-debts, or for the
discharge of other contingent exigencies which the company might labour
under. But if the company were bad stewards and bad sovereigns, when the
whole of their neat revenue and profits belonged to themselves, and were
at their own disposal, they were surely not likely to be better when
three-fourths of them were to belong to other people, and the other
fourth, though to be laid out for the benefit of the company, yet to be so
under the inspection and with the approbation of other people.
It might be more agreeable to the company, that their own servants and
dependants should have either the pleasure of wasting, or the profit of
embezzling, whatever surplus might remain, after paying the proposed
dividend of eight per cent. than that it should come into the hands of a
set of people with whom those resolutions could scarce fail to set them in
some measure at variance. The interest of those servants and dependants
might so far predominate in the court of proprietors, as sometimes to
dispose it to support the authors of depredations which had been committed
in direct violation of its own authority. With the majority of
proprietors, the support even of the authority of their own court might
sometimes be a matter of less consequence than the support of those who
had set that authority at defiance.
The regulations of 1773, accordingly, did not put an end to the disorder
of the company’s government in India. Notwithstanding that, during a
momentary fit of good conduct, they had at one time collected into the
treasury of Calcutta more than £3,000,000 sterling; notwithstanding that
they had afterwards extended either their dominion or their depredations
over a vast accession of some of the richest and most fertile countries in
India, all was wasted and destroyed. They found themselves altogether
unprepared to stop or resist the incursion of Hyder Ali; and in
consequence of those disorders, the company is now (1784) in greater
distress than ever; and, in order to prevent immediate bankruptcy, is once
more reduced to supplicate the assistance of government. Different plans
have been proposed by the different parties in parliament for the better
management of its affairs; and all those plans seem to agree in supposing,
what was indeed always abundantly evident, that it is altogether unfit to
govern its territorial possessions. Even the company itself seems to be
convinced of its own incapacity so far, and seems, upon that account
willing to give them up to government.
With the right of possessing forts and garrisons in distant and barbarous
countries is necessarily connected the right of making peace and war in
those countries. The joint-stock companies, which have had the one right,
have constantly exercised the other, and have frequently had it expressly
conferred upon them. How unjustly, how capriciously, how cruelly, they
have commonly exercised it, is too well known from recent experience.
When a company of merchants undertake, at their own risk and expense, to
establish a new trade with some remote and barbarous nation, it may not be
unreasonable to incorporate them into a joint-stock company, and to grant
them, in case of their success, a monopoly of the trade for a certain
number of years. It is the easiest and most natural way in which the state
can recompense them for hazarding a dangerous and expensive experiment, of
which the public is afterwards to reap the benefit. A temporary monopoly
of this kind may be vindicated, upon the same principles upon which a like
monopoly of a new machine is granted to its inventor, and that of a new
book to its author. But upon the expiration of the term, the monopoly
ought certainly to determine; the forts and garrisons, if it was found
necessary to establish any, to be taken into the hands of government,
their value to be paid to the company, and the trade to be laid open to
all the subjects of the state. By a perpetual monopoly, all the other
subjects of the state are taxed very absurdly in two different ways:
first, by the high price of goods, which, in the case of a free trade,
they could buy much cheaper; and, secondly, by their total exclusion from
a branch of business which it might be both convenient and profitable for
many of them to carry on. It is for the most worthless of all purposes,
too, that they are taxed in this manner. It is merely to enable the
company to support the negligence, profusion, and malversation of their
own servants, whose disorderly conduct seldom allows the dividend of the
company to exceed the ordinary rate of profit in trades which are
altogether free, and very frequently makes a fall even a good deal short
of that rate. Without a monopoly, however, a joint-stock company, it would
appear from experience, cannot long carry on any branch of foreign trade.
To buy in one market, in order to sell with profit in another, when there
are many competitors in both; to watch over, not only the occasional
variations in the demand, but the much greater and more frequent
variations in the competition, or in the supply which that demand is
likely to get from other people; and to suit with dexterity and judgment
both the quantity and quality of each assortment of goods to all these
circumstances, is a species of warfare, of which the operations are
continually changing, and which can scarce ever be conducted successfully,
without such an unremitting exertion of vigilance and attention as cannot
long be expected from the directors of a joint-stock company. The East
India company, upon the redemption of their funds, and the expiration of
their exclusive privilege, have a right, by act of parliament, to continue
a corporation with a joint stock, and to trade in their corporate capacity
to the East Indies, in common with the rest of their fellow subjects. But
in this situation, the superior vigilance and attention of a private
adventurer would, in all probability, soon make them weary of the trade.
An eminent French author, of great knowledge in matters of political
economy, the Abbe Morellet, gives a list of fifty-five joint-stock
companies for foreign trade, which have been established in different
parts of Europe since the year 1600, and which, according to him, have all
failed from mismanagement, notwithstanding they had exclusive privileges.
He has been misinformed with regard to the history of two or three of
them, which were not joint-stock companies and have not failed. But, in
compensation, there have been several joint-stock companies which have
failed, and which he has omitted.
The only trades which it seems possible for a joint-stock company to carry
on successfully, without an exclusive privilege, are those, of which all
the operations are capable of being reduced to what is called a routine,
or to such a uniformity of method as admits of little or no variation. Of
this kind is, first, the banking trade; secondly, the trade of insurance
from fire and from sea risk, and capture in time of war; thirdly, the
trade of making and maintaining a navigable cut or canal; and, fourthly,
the similar trade of bringing water for the supply of a great city.
Though the principles of the banking trade may appear somewhat abstruse,
the practice is capable of being reduced to strict rules. To depart upon
any occasion from those rules, in consequence of some flattering
speculation of extraordinary gain, is almost always extremely dangerous
and frequently fatal to the banking company which attempts it. But the
constitution of joint-stock companies renders them in general, more
tenacious of established rules than any private copartnery. Such
companies, therefore, seem extremely well fitted for this trade. The
principal banking companies in Europe, accordingly, are joint-stock
companies, many of which manage their trade very successfully without any
exclusive privilege. The bank of England has no other exclusive privilege,
except that no other banking company in England shall consist of more than
six persons. The two banks of Edinburgh are joint-stock companies, without
any exclusive privilege.
The value of the risk, either from fire, or from loss by sea, or by
capture, though it cannot, perhaps, be calculated very exactly, admits,
however, of such a gross estimation, as renders it, in some degree,
reducible to strict rule and method. The trade of insurance, therefore,
may be carried on successfully by a joint-stock company, without any
exclusive privilege. Neither the London Assurance, nor the Royal Exchange
Assurance companies have any such privilege.
When a navigable cut or canal has been once made, the management of it
becomes quite simple and easy, and it is reducible to strict rule and
method. Even the making of it is so, as it may be contracted for with
undertakers, at so much a mile, and so much a lock. The same thing may be
said of a canal, an aqueduct, or a great pipe for bringing water to supply
a great city. Such under-takings, therefore, may be, and accordingly
frequently are, very successfully managed by joint-stock companies,
without any exclusive privilege.
To establish a joint-stock company, however, for any undertaking, merely
because such a company might be capable of managing it successfully; or,
to exempt a particular set of dealers from some of the general laws which
take place with regard to all their neighbours, merely because they might
be capable of thriving, if they had such an exemption, would certainly not
be reasonable. To render such an establishment perfectly reasonable, with
the circumstance of being reducible to strict rule and method, two other
circumstances ought to concur. First, it ought to appear with the clearest
evidence, that the undertaking is of greater and more general utility than
the greater part of common trades; and, secondly, that it requires a
greater capital than can easily be collected into a private copartnery. If
a moderate capital were sufficient, the great utility of the undertaking
would not be a sufficient reason for establishing a joint-stock company;
because, in this case, the demand for what it was to produce, would
readily and easily be supplied by private adventurers. In the four trades
above mentioned, both those circumstances concur.
The great and general utility of the banking trade, when prudently
managed, has been fully explained in the second book of this Inquiry. But
a public bank, which is to support public credit, and, upon particular
emergencies, to advance to government the whole produce of a tax, to the
amount, perhaps, of several millions, a year or two before it comes in,
requires a greater capital than can easily be collected into any private
copartnery.
The trade of insurance gives great security to the fortunes of private
people, and, by dividing among a great many that loss which would ruin an
individual, makes it fall light and easy upon the whole society. In order
to give this security, however, it is necessary that the insurers should
have a very large capital. Before the establishment of the two joint-stock
companies for insurance in London, a list, it is said, was laid before the
attorney-general, of one hundred and fifty private usurers, who had failed
in the course of a few years.
That navigable cuts and canals, and the works which are sometimes
necessary for supplying a great city with water, are of great and general
utility, while, at the same time, they frequently require a greater
expense than suits the fortunes of private people, is sufficiently
obvious.
Except the four trades above mentioned, I have not been able to recollect
any other, in which all the three circumstances requisite for rendering
reasonable the establishment of a joint-stock company concur. The English
copper company of London, the lead-smelting company, the glass-grinding
company, have not even the pretext of any great or singular utility in the
object which they pursue; nor does the pursuit of that object seem to
require any expense unsuitable to the fortunes of many private men.
Whether the trade which those companies carry on, is reducible to such
strict rule and method as to render it fit for the management of a
joint-stock company, or whether they have any reason to boast of their
extraordinary profits, I do not pretend to know. The mine-adventurers
company has been long ago bankrupt. A share in the stock of the British
Linen company of Edinburgh sells, at present, very much below par, though
less so than it did some years ago. The joint-stock companies, which are
established for the public-spirited purpose of promoting some particular
manufacture, over and above managing their own affairs ill, to the
diminution of the general stock of the society, can, in other respects,
scarce ever fail to do more harm than good. Notwithstanding the most
upright intentions, the unavoidable partiality of their directors to
particular branches of the manufacture, of which the undertakers mislead
and impose upon them, is a real discouragement to the rest, and
necessarily breaks, more or less, that natural proportion which would
otherwise establish itself between judicious industry and profit, and
which, to the general industry of the country, is of all encouragements
the greatest and the most effectual.
ART. II.—Of the Expense of the Institution for the Education of
Youth.
The institutions for the education of the youth may, in the same manner,
furnish a revenue sufficient for defraying their own expense. The fee or
honorary, which the scholar pays to the master, naturally constitutes a
revenue of this kind.
Even where the reward of the master does not arise altogether from this
natural revenue, it still is not necessary that it should be derived from
that general revenue of the society, of which the collection and
application are, in most countries, assigned to the executive power.
Through the greater part of Europe, accordingly, the endowment of schools
and colleges makes either no charge upon that general revenue, or but a
very small one. It everywhere arises chiefly from some local or provincial
revenue, from the rent of some landed estate, or from the interest of some
sum of money, allotted and put under the management of trustees for this
particular purpose, sometimes by the sovereign himself, and sometimes by
some private donor.
Have those public endowments contributed in general, to promote the end of
their institution? Have they contributed to encourage the diligence, and
to improve the abilities, of the teachers? Have they directed the course
of education towards objects more useful, both to the individual and to
the public, than those to which it would naturally have gone of its own
accord? It should not seem very difficult to give at least a probable
answer to each of those questions.
In every profession, the exertion of the greater part of those who
exercise it, is always in proportion to the necessity they are under of
making that exertion. This necessity is greatest with those to whom the
emoluments of their profession are the only source from which they expect
their fortune, or even their ordinary revenue and subsistence. In order to
acquire this fortune, or even to get this subsistence, they must, in the
course of a year, execute a certain quantity of work of a known value;
and, where the competition is free, the rivalship of competitors, who are
all endeavouring to justle one another out of employment, obliges every
man to endeavour to execute his work with a certain degree of exactness.
The greatness of the objects which are to be acquired by success in some
particular professions may, no doubt, sometimes animate the exertions of a
few men of extraordinary spirit and ambition. Great objects, however, are
evidently not necessary, in order to occasion the greatest exertions.
Rivalship and emulation render excellency, even in mean professions, an
object of ambition, and frequently occasion the very greatest exertions.
Great objects, on the contrary, alone and unsupported by the necessity of
application, have seldom been sufficient to occasion any considerable
exertion. In England, success in the profession of the law leads to some
very great objects of ambition; and yet how few men, born to easy
fortunes, have ever in this country been eminent in that profession?
The endowments of schools and colleges have necessarily diminished, more
or less, the necessity of application in the teachers. Their subsistence,
so far as it arises from their salaries, is evidently derived from a fund,
altogether independent of their success and reputation in their particular
professions.
In some universities, the salary makes but a part, and frequently but a
small part, of the emoluments of the teacher, of which the greater part
arises from the honoraries or fees of his pupils. The necessity of
application, though always more or less diminished, is not, in this case,
entirely taken away. Reputation in his profession is still of some
importance to him, and he still has some dependency upon the affection,
gratitude, and favourable report of those who have attended upon his
instructions; and these favourable sentiments he is likely to gain in no
way so well as by deserving them, that is, by the abilities and diligence
with which he discharges every part of his duty.
In other universities, the teacher is prohibited from receiving any
honorary or fee from his pupils, and his salary constitutes the whole of
the revenue which he derives from his office. His interest is, in this
case, set as directly in opposition to his duty as it is possible to set
it. It is the interest of every man to live as much at his ease as he can;
and if his emoluments are to be precisely the same, whether he does or
does not perform some very laborious duty, it is certainly his interest,
at least as interest is vulgarly understood, either to neglect it
altogether, or, if he is subject to some authority which will not suffer
him to do this, to perform it in as careless and slovenly a manner as that
authority will permit. If he is naturally active and a lover of labour, it
is his interest to employ that activity in any way from which he can
derive some advantage, rather than in the performance of his duty, from
which he can derive none.
If the authority to which he is subject resides in the body corporate, the
college, or university, of which he himself is a member, and in which the
greater part of the other members are, like himself, persons who either
are, or ought to be teachers, they are likely to make a common cause, to
be all very indulgent to one another, and every man to consent that his
neighbour may neglect his duty, provided he himself is allowed to neglect
his own. In the university of Oxford, the greater part of the public
professors have, for these many years, given up altogether even the
pretence of teaching.
If the authority to which he is subject resides, not so much in the body
corporate, of which he is a member, as in some other extraneous persons,
in the bishop of the diocese, for example, in the governor of the
province, or, perhaps, in some minister of state, it is not, indeed, in
this case, very likely that he will be suffered to neglect his duty
altogether. All that such superiors, however, can force him to do, is to
attend upon his pupils a certain number of hours, that is, to give a
certain number of lectures in the week, or in the year. What those
lectures shall be, must still depend upon the diligence of the teacher;
and that diligence is likely to be proportioned to the motives which he
has for exerting it. An extraneous jurisdiction of this kind, besides, is
liable to be exercised both ignorantly and capriciously. In its nature, it
is arbitrary and discretionary; and the persons who exercise it, neither
attending upon the lectures of the teacher themselves, nor perhaps
understanding the sciences which it is his business to teach, are seldom
capable of exercising it with judgment. From the insolence of office, too,
they are frequently indifferent how they exercise it, and are very apt to
censure or deprive him of his office wantonly and without any just cause.
The person subject to such jurisdiction is necessarily degraded by it,
and, instead of being one of the most respectable, is rendered one of the
meanest and most contemptible persons in the society. It is by powerful
protection only, that he can effectually guard himself against the bad
usage to which he is at all times exposed; and this protection he is most
likely to gain, not by ability or diligence in his profession, but by
obsequiousness to the will of his superiors, and by being ready, at all
times, to sacrifice to that will the rights, the interest, and the honour
of the body corporate, of which he is a member. Whoever has attended for
any considerable time to the administration of a French university, must
have had occasion to remark the effects which naturally result from an
arbitrary and extraneous jurisdiction of this kind.
Whatever forces a certain number of students to any college or university,
independent of the merit or reputation of the teachers, tends more or less
to diminish the necessity of that merit or reputation.
The privileges of graduates in arts, in law, physic, and divinity, when
they can be obtained only by residing a certain number of years in certain
universities, necessarily force a certain number of students to such
universities, independent of the merit or reputation of the teachers. The
privileges of graduates are a sort of statutes of apprenticeship, which
have contributed to the improvement of education just as the other
statutes of apprenticeship have to that of arts and manufactures.
The charitable foundations of scholarships, exhibitions, bursaries, etc.
necessarily attach a certain number of students to certain colleges,
independent altogether of the merit of those particular colleges. Were the
students upon such charitable foundations left free to choose what college
they liked best, such liberty might perhaps contribute to excite some
emulation among different colleges. A regulation, on the contrary, which
prohibited even the independent members of every particular college from
leaving it, and going to any other, without leave first asked and obtained
of that which they meant to abandon, would tend very much to extinguish
that emulation.
If in each college, the tutor or teacher, who was to instruct each student
in all arts and sciences, should not be voluntarily chosen by the student,
but appointed by the head of the college; and if, in case of neglect,
inability, or bad usage, the student should not be allowed to change him
for another, without leave first asked and obtained; such a regulation
would not only tend very much to extinguish all emulation among the
different tutors of the same college, but to diminish very much, in all of
them, the necessity of diligence and of attention to their respective
pupils. Such teachers, though very well paid by their students, might be
as much disposed to neglect them, as those who are not paid by them at all
or who have no other recompense but their salary.
If the teacher happens to be a man of sense, it must be an unpleasant
thing to him to be conscious, while he is lecturing to his students, that
he is either speaking or reading nonsense, or what is very little better
than nonsense. It must, too, be unpleasant to him to observe, that the
greater part of his students desert his lectures; or perhaps, attend upon
them with plain enough marks of neglect, contempt, and derision. If he is
obliged, therefore, to give a certain number of lectures, these motives
alone, without any other interest, might dispose him to take some pains to
give tolerably good ones. Several different expedients, however, may be
fallen upon, which will effectually blunt the edge of all those
incitements to diligence. The teacher, instead of explaining to his pupils
himself the science in which he proposes to instruct them, may read some
book upon it; and if this book is written in a foreign and dead language,
by interpreting it to them into their own, or, what would give him still
less trouble, by making them interpret it to him, and by now and then
making an occasional remark upon it, he may flatter himself that he is
giving a lecture. The slightest degree of knowledge and application will
enable him to do this, without exposing himself to contempt or derision,
by saying any thing that is really foolish, absurd, or ridiculous. The
discipline of the college, at the same time, may enable him to force all
his pupils to the most regular attendance upon his sham lecture, and to
maintain the most decent and respectful behaviour during the whole time of
the performance.
The discipline of colleges and universities is in general contrived, not
for the benefit of the students, but for the interest, or, more properly
speaking, for the ease of the masters. Its object is, in all cases, to
maintain the authority of the master, and, whether he neglects or performs
his duty, to oblige the students in all cases to behave to him as if he
performed it with the greatest diligence and ability. It seems to presume
perfect wisdom and virtue in the one order, and the greatest weakness and
folly in the other. Where the masters, however, really perform their duty,
there are no examples, I believe, that the greater part of the students
ever neglect theirs. No discipline is ever requisite to force attendance
upon lectures which are really worth the attending, as is well known
wherever any such lectures are given. Force and restraint may, no doubt,
be in some degree requisite, in order to oblige children, or very young
boys, to attend to those parts of education, which it is thought necessary
for them to acquire during that early period of life; but after twelve or
thirteen years of age, provided the master does his duty, force or
restraint can scarce ever be necessary to carry on any part of education.
Such is the generosity of the greater part of young men, that so far from
being disposed to neglect or despise the instructions of their master,
provided he shews some serious intention of being of use to them, they are
generally inclined to pardon a great deal of incorrectness in the
performance of his duty, and sometimes even to conceal from the public a
good deal of gross negligence.
Those parts of education, it is to be observed, for the teaching of which
there are no public institutions, are generally the best taught. When a
young man goes to a fencing or a dancing school, he does not, indeed,
always learn to fence or to dance very well; but he seldom fails of
learning to fence or to dance. The good effects of the riding school are
not commonly so evident. The expense of a riding school is so great, that
in most places it is a public institution. The three most essential parts
of literary education, to read, write, and account, it still continues to
be more common to acquire in private than in public schools; and it very
seldom happens, that anybody fails of acquiring them to the degree in
which it is necessary to acquire them.
In England, the public schools are much less corrupted than the
universities. In the schools, the youth are taught, or at least may be
taught, Greek and Latin; that is, everything which the masters pretend to
teach, or which it is expected they should teach. In the universities, the
youth neither are taught, nor always can find any proper means of being
taught the sciences, which it is the business of those incorporated bodies
to teach. The reward of the schoolmaster, in most cases, depends
principally, in some cases almost entirely, upon the fees or honoraries of
his scholars. Schools have no exclusive privileges. In order to obtain the
honours of graduation, it is not necessary that a person should bring a
certificate of his having studied a certain number of years at a public
school. If, upon examination, he appears to understand what is taught
there, no questions are asked about the place where he learnt it.
The parts of education which are commonly taught in universities, it may
perhaps be said, are not very well taught. But had it not been for those
institutions, they would not have been commonly taught at all; and both
the individual and the public would have suffered a good deal from the
want of those important parts of education.
The present universities of Europe were originally, the greater part of
them, ecclesiastical corporations, instituted for the education of
churchmen. They were founded by the authority of the pope; and were so
entirely under his immediate protection, that their members, whether
masters or students, had all of them what was then called the benefit of
clergy, that is, were exempted from the civil jurisdiction of the
countries in which their respective universities were situated, and were
amenable only to the ecclesiastical tribunals. What was taught in the
greater part of those universities was suitable to the end of their
institution, either theology, or something that was merely preparatory to
theology.
When Christianity was first established by law, a corrupted Latin had
become the common language of all the western parts of Europe. The service
of the church, accordingly, and the translation of the Bible which were
read in churches, were both in that corrupted Latin; that is, in the
common language of the country, After the irruption of the barbarous
nations who overturned the Roman empire, Latin gradually ceased to be the
language of any part of Europe. But the reverence of the people naturally
preserves the established forms and ceremonies of religion long after the
circumstances which first introduced and rendered them reasonable, are no
more. Though Latin, therefore, was no longer understood anywhere by the
great body of the people, the whole service of the church still continued
to be performed in that language. Two different languages were thus
established in Europe, in the same manner as in ancient Egypt: a language
of the priests, and a language of the people; a sacred and a profane, a
learned and an unlearned language. But it was necessary that the priests
should understand something of that sacred and learned language in which
they were to officiate; and the study of the Latin language therefore
made, from the beginning, an essential part of university education.
It was not so with that either of the Greek or of the Hebrew language. The
infallible decrees of the church had pronounced the Latin translation of
the Bible, commonly called the Latin Vulgate, to have been equally
dictated by divine inspiration, and therefore of equal authority with the
Greek and Hebrew originals. The knowledge of those two languages,
therefore, not being indispensably requisite to a churchman, the study of
them did not for a long time make a necessary part of the common course of
university education. There are some Spanish universities, I am assured,
in which the study of the Greek language has never yet made any part of
that course. The first reformers found the Greek text of the New
Testament, and even the Hebrew text of the Old, more favourable to their
opinions than the vulgate translation, which, as might naturally be
supposed, had been gradually accommodated to support the doctrines of the
Catholic Church. They set themselves, therefore, to expose the many errors
of that translation, which the Roman catholic clergy were thus put under
the necessity of defending or explaining. But this could not well be done
without some knowledge of the original languages, of which the study was
therefore gradually introduced into the greater part of universities; both
of those which embraced, and of those which rejected, the doctrines of the
reformation. The Greek language was connected with every part of that
classical learning, which, though at first principally cultivated by
catholics and Italians, happened to come into fashion much about the same
time that the doctrines of the reformation were set on foot. In the
greater part of universities, therefore, that language was taught previous
to the study of philosophy, and as soon as the student had made some
progress in the Latin. The Hebrew language having no connection with
classical learning, and, except the Holy Scriptures, being the language of
not a single book in any esteem the study of it did not commonly commence
till after that of philosophy, and when the student had entered upon the
study of theology.
Originally, the first rudiments, both of the Greek and Latin languages,
were taught in universities; and in some universities they still continue
to be so. In others, it is expected that the student should have
previously acquired, at least, the rudiments of one or both of those
languages, of which the study continues to make everywhere a very
considerable part of university education.
The ancient Greek philosophy was divided into three great branches;
physics, or natural philosophy; ethics, or moral philosophy; and logic.
This general division seems perfectly agreeable to the nature of things.
The great phenomena of nature, the revolutions of the heavenly bodies,
eclipses, comets; thunder and lightning, and other extraordinary meteors;
the generation, the life, growth, and dissolution of plants and animals;
are objects which, as they necessarily excite the wonder, so they
naturally call forth the curiosity of mankind to inquire into their
causes. Superstition first attempted to satisfy this curiosity, by
referring all those wonderful appearances to the immediate agency of the
gods. Philosophy afterwards endeavoured to account for them from more
familiar causes, or from such as mankind were better acquainted with, than
the agency of the gods. As those great phenomena are the first objects of
human curiosity, so the science which pretends to explain them must
naturally have been the first branch of philosophy that was cultivated.
The first philosophers, accordingly, of whom history has preserved any
account, appear to have been natural philosophers.
In every age and country of the world, men must have attended to the
characters, designs, and actions of one another; and many reputable rules
and maxims for the conduct of human life must have been laid down and
approved of by common consent. As soon as writing came into fashion, wise
men, or those who fancied themselves such, would naturally endeavour to
increase the number of those established and respected maxims, and to
express their own sense of what was either proper or improper conduct,
sometimes in the more artificial form of apologues, like what are called
the fables of Aesop; and sometimes in the more simple one of apophthegms
or wise sayings, like the proverbs of Solomon, the verses of Theognis and
Phocyllides, and some part of the works of Hesiod. They might continue in
this manner, for a long time, merely to multiply the number of those
maxims of prudence and morality, without even attempting to arrange them
in any very distinct or methodical order, much less to connect them
together by one or more general principles, from which they were all
deducible, like effects from their natural causes. The beauty of a
systematical arrangement of different observations, connected by a few
common principles, was first seen in the rude essays of those ancient
times towards a system of natural philosophy. Something of the same kind
was afterwards attempted in morals. The maxims of common life were
arranged in some methodical order, and connected together by a few common
principles, in the same manner as they had attempted to arrange and
connect the phenomena of nature. The science which pretends to investigate
and explain those connecting principles, is what is properly called Moral
Philosophy.
Different authors gave different systems, both of natural and moral
philosophy. But the arguments by which they supported those different
systems, far from being always demonstrations, were frequently at best but
very slender probabilities, and sometimes mere sophisms, which had no
other foundation but the inaccuracy and ambiguity of common language.
Speculative systems, have, in all ages of the world, been adopted for
reasons too frivolous to have determined the judgment of any man of common
sense, in a matter of the smallest pecuniary interest. Gross sophistry has
scarce ever had any influence upon the opinions of mankind, except in
matters of philosophy and speculation; and in these it has frequently had
the greatest. The patrons of each system of natural and moral philosophy,
naturally endeavoured to expose the weakness of the arguments adduced to
support the systems which were opposite to their own. In examining those
arguments, they were necessarily led to consider the difference between a
probable and a demonstrative argument, between a fallacious and a
conclusive one; and logic, or the science of the general principles of
good and bad reasoning, necessarily arose out of the observations which a
scrutiny of this kind gave occasion to; though, in its origin, posterior
both to physics and to ethics, it was commonly taught, not indeed in all,
but in the greater part of the ancient schools of philosophy, previously
to either of those sciences. The student, it seems to have been thought,
ought to understand well the difference between good and bad reasoning,
before he was led to reason upon subjects of so great importance.
This ancient division of philosophy into three parts was, in the greater
part of the universities of Europe, changed for another into five.
In the ancient philosophy, whatever was taught concerning the nature
either of the human mind or of the Deity, made a part of the system of
physics. Those beings, in whatever their essence might be supposed to
consist, were parts of the great system of the universe, and parts, too,
productive of the most important effects. Whatever human reason could
either conclude or conjecture concerning them, made, as it were, two
chapters, though no doubt two very important ones, of the science which
pretended to give an account of the origin and revolutions of the great
system of the universe. But in the universities of Europe, where
philosophy was taught only as subservient to theology, it was natural to
dwell longer upon these two chapters than upon any other of the science.
They were gradually more and more extended, and were divided into many
inferior chapters; till at last the doctrine of spirits, of which so
little can be known, came to take up as much room in the system of
philosophy as the doctrine of bodies, of which so much can be known. The
doctrines concerning those two subjects were considered as making two
distinct sciences. What are called metaphysics, or pneumatics, were set in
opposition to physics, and were cultivated not only as the more sublime,
but, for the purposes of a particular profession, as the more useful
science of the two. The proper subject of experiment and observation, a
subject in which a careful attention is capable of making so many useful
discoveries, was almost entirely neglected. The subject in which, after a
very few simple and almost obvious truths, the most careful attention can
discover nothing but obscurity and uncertainty, and can consequently
produce nothing but subtleties and sophisms, was greatly cultivated.
When those two sciences had thus been set in opposition to one another,
the comparison between them naturally gave birth to a third, to what was
called ontology, or the science which treated of the qualities and
attributes which were common to both the subjects of the other two
sciences. But if subtleties and sophisms composed the greater part of the
metaphysics or pneumatics of the schools, they composed the whole of this
cobweb science of ontology, which was likewise sometimes called
metaphysics.
Wherein consisted the happiness and perfection of a man, considered not
only as an individual, but as the member of a family, of a state, and of
the great society of mankind, was the object which the ancient moral
philosophy proposed to investigate. In that philosophy, the duties of
human life were treated of as subservient to the happiness and perfection
of human life, But when moral, as well as natural philosophy, came to be
taught only as subservient to theology, the duties of human life were
treated of as chiefly subservient to the happiness of a life to come. In
the ancient philosophy, the perfection of virtue was represented as
necessarily productive, to the person who possessed it, of the most
perfect happiness in this life. In the modern philosophy, it was
frequently represented as generally, or rather as almost always,
inconsistent with any degree of happiness in this life; and heaven was to
be earned only by penance and mortification, by the austerities and
abasement of a monk, not by the liberal, generous, and spirited conduct of
a man. Casuistry, and an ascetic morality, made up, in most cases, the
greater part of the moral philosophy of the schools. By far the most
important of all the different branches of philosophy became in this
manner by far the most corrupted.
Such, therefore, was the common course of philosophical education in the
greater part of the universities in Europe. Logic was taught first;
ontology came in the second place; pneumatology, comprehending the
doctrine concerning the nature of the human soul and of the Deity, in the
third; in the fourth followed a debased system of moral philosophy, which
was considered as immediately connected with the doctrines of
pneumatology, with the immortality of the human soul, and with the rewards
and punishments which, from the justice of the Deity, were to be expected
in a life to come: a short and superficial system of physics usually
concluded the course.
The alterations which the universities of Europe thus introduced into the
ancient course of philosophy were all meant for the education of
ecclesiastics, and to render it a more proper introduction to the study of
theology. But the additional quantity of subtlety and sophistry, the
casuistry and ascetic morality which those alterations introduced into it,
certainly did not render it more for the education of gentlemen or men of
the world, or more likely either to improve the understanding or to mend
the heart.
This course of philosophy is what still continues to be taught in the
greater part of the universities of Europe, with more or less diligence,
according as the constitution of each particular university happens to
render diligence more or less necessary to the teachers. In some of the
richest and best endowed universities, the tutors content themselves with
teaching a few unconnected shreds and parcels of this corrupted course;
and even these they commonly teach very negligently and superficially.
The improvements which, in modern times have been made in several
different branches of philosophy, have not, the greater part of them, been
made in universities, though some, no doubt, have. The greater part of
universities have not even been very forward to adopt those improvements
after they were made; and several of those learned societies have chosen
to remain, for a long time, the sanctuaries in which exploded systems and
obsolete prejudices found shelter and protection, after they had been
hunted out of every other corner of the world. In general, the richest and
best endowed universities have been slowest in adopting those
improvements, and the most averse to permit any considerable change in the
established plan of education. Those improvements were more easily
introduced into some of the poorer universities, in which the teachers,
depending upon their reputation for the greater part of their subsistence,
were obliged to pay more attention to the current opinions of the world.
But though the public schools and universities of Europe were originally
intended only for the education of a particular profession, that of
churchmen; and though they were not always very diligent in instructing
their pupils, even in the sciences which were supposed necessary for that
profession; yet they gradually drew to themselves the education of almost
all other people, particularly of almost all gentlemen and men of fortune.
No better method, it seems, could be fallen upon, of spending, with any
advantage, the long interval between infancy and that period of life at
which men begin to apply in good earnest to the real business of the
world, the business which is to employ them during the remainder of their
days. The greater part of what is taught in schools and universities,
however, does not seem to be the most proper preparation for that
business.
In England, it becomes every day more and more the custom to send young
people to travel in foreign countries immediately upon their leaving
school, and without sending them to any university. Our young people, it
is said, generally return home much improved by their travels. A young
man, who goes abroad at seventeen or eighteen, and returns home at
one-and-twenty, returns three or four years older than he was when he went
abroad; and at that age it is very difficult not to improve a good deal in
three or four years. In the course of his travels, he generally acquires
some knowledge of one or two foreign languages; a knowledge, however,
which is seldom sufficient to enable him either to speak or write them
with propriety. In other respects, he commonly returns home more
conceited, more unprincipled, more dissipated, and more incapable of any
serious application, either to study or to business, than he could well
have become in so short a time had he lived at home. By travelling so very
young, by spending in the most frivolous dissipation the most precious
years of his life, at a distance from the inspection and control of his
parents and relations, every useful habit, which the earlier parts of his
education might have had some tendency to form in him, instead of being
riveted and confirmed, is almost necessarily either weakened or effaced.
Nothing but the discredit into which the universities are allowing
themselves to fall, could ever have brought into repute so very absurd a
practice as that of travelling at this early period of life. By sending
his son abroad, a father delivers himself, at least for some time, from so
disagreeable an object as that of a son unemployed, neglected, and going
to ruin before his eyes.
Such have been the effects of some of the modern institutions for
education.
Different plans and different institutions for education seem to have
taken place in other ages and nations.
In the republics of ancient Greece, every free citizen was instructed,
under the direction of the public magistrate, in gymnastic exercises and
in music. By gymnastic exercises, it was intended to harden his body, to
sharpen his courage, and to prepare him for the fatigues and dangers of
war; and as the Greek militia was, by all accounts, one of the best that
ever was in the world, this part of their public education must have
answered completely the purpose for which it was intended. By the other
part, music, it was proposed, at least by the philosophers and historians,
who have given us an account of those institutions, to humanize the mind,
to soften the temper, and to dispose it for performing all the social and
moral duties of public and private life.
In ancient Rome, the exercises of the Campus Martius answered the same
purpose as those of the Gymnasium in ancient Greece, and they seem to have
answered it equally well. But among the Romans there was nothing which
corresponded to the musical education of the Greeks. The morals of the
Romans, however, both in private and public life, seem to have been, not
only equal, but, upon the whole, a good deal superior to those of the
Greeks. That they were superior in private life, we have the express
testimony of Polybius, and of Dionysius of Halicarnassus, two authors well
acquainted with both nations; and the whole tenor of the Greek and Roman
history bears witness to the superiority of the public morals of the
Romans. The good temper and moderation of contending factions seem to be
the most essential circumstances in the public morals of a free people.
But the factions of the Greeks were almost always violent and sanguinary;
whereas, till the time of the Gracchi, no blood had ever been shed in any
Roman faction; and from the time of the Gracchi, the Roman republic may be
considered as in reality dissolved. Notwithstanding, therefore, the very
respectable authority of Plato, Aristotle, and Polybius, and
notwithstanding the very ingenious reasons by which Mr Montesquieu
endeavours to support that authority, it seems probable that the musical
education of the Greeks had no great effect in mending their morals,
since, without any such education, those of the Romans were, upon the
whole, superior. The respect of those ancient sages for the institutions
of their ancestors had probably disposed them to find much political
wisdom in what was, perhaps, merely an ancient custom, continued, without
interruption, from the earliest period of those societies, to the times in
which they had arrived at a considerable degree of refinement. Music and
dancing are the great amusements of almost all barbarous nations, and the
great accomplishments which are supposed to fit any man for entertaining
his society. It is so at this day among the negroes on the coast of
Africa. It was so among the ancient Celtes, among the ancient
Scandinavians, and, as we may learn from Homer, among the ancient Greeks,
in the times preceding the Trojan war. When the Greek tribes had formed
themselves into little republics, it was natural that the study of those
accomplishments should for a long time make a part of the public and
common education of the people.
The masters who instructed the young people, either in music or in
military exercises, do not seem to have been paid, or even appointed by
the state, either in Rome or even at Athens, the Greek republic of whose
laws and customs we are the best informed. The state required that every
free citizen should fit himself for defending it in war, and should upon
that account, learn his military exercises. But it left him to learn them
of such masters as he could find; and it seems to have advanced nothing
for this purpose, but a public field or place of exercise, in which he
should practise and perform them.
In the early ages, both of the Greek and Roman republics, the other parts
of education seem to have consisted in learning to read, write, and
account, according to the arithmetic of the times. These accomplishments
the richer citizens seem frequently to have acquired at home, by the
assistance of some domestic pedagogue, who was, generally, either a slave
or a freedman; and the poorer citizens in the schools of such masters as
made a trade of teaching for hire. Such parts of education, however, were
abandoned altogether to the care of the parents or guardians of each
individual. It does not appear that the state ever assumed any inspection
or direction of them. By a law of Solon, indeed, the children were
acquitted from maintaining those parents who had neglected to instruct
them in some profitable trade or business.
In the progress of refinement, when philosophy and rhetoric came into
fashion, the better sort of people used to send their children to the
schools of philosophers and rhetoricians, in order to be instructed in
these fashionable sciences. But those schools were not supported by the
public. They were, for a long time, barely tolerated by it. The demand for
philosophy and rhetoric was, for a long time, so small, that the first
professed teachers of either could not find constant employment in any one
city, but were obliged to travel about from place to place. In this manner
lived Zeno of Elea, Protagoras, Gorgias, Hippias, and many others. As the
demand increased, the school, both of philosophy and rhetoric, became
stationary, first in Athens, and afterwards in several other cities. The
state, however, seems never to have encouraged them further, than by
assigning to some of them a particular place to teach in, which was
sometimes done, too, by private donors. The state seems to have assigned
the Academy to Plato, the Lyceum to Aristotle, and the Portico to Zeno of
Citta, the founder of the Stoics. But Epicurus bequeathed his gardens to
his own school. Till about the time of Marcus Antoninus, however, no
teacher appears to have had any salary from the public, or to have had any
other emoluments, but what arose from the honoraries or fees of his
scholars. The bounty which that philosophical emperor, as we learn from
Lucian, bestowed upon one of the teachers of philosophy, probably lasted
no longer than his own life. There was nothing equivalent to the
privileges of graduation; and to have attended any of those schools was
not necessary, in order to be permitted to practise any particular trade
or profession. If the opinion of their own utility could not draw scholars
to them, the law neither forced anybody to go to them, nor rewarded
anybody for having gone to them. The teachers had no jurisdiction over
their pupils, nor any other authority besides that natural authority which
superior virtue and abilities never fail to procure from young people
towards those who are entrusted with any part of their education.
At Rome, the study of the civil law made a part of the education, not of
the greater part of the citizens, but of some particular families. The
young people, however, who wished to acquire knowledge in the law, had no
public school to go to, and had no other method of studying it, than by
frequenting the company of such of their relations and friends as were
supposed to understand it. It is, perhaps, worth while to remark, that
though the laws of the twelve tables were many of them copied from those
of some ancient Greek republics, yet law never seems to have grown up to
be a science in any republic of ancient Greece. In Rome it became a
science very early, and gave a considerable degree of illustration to
those citizens who had the reputation of understanding it. In the
republics of ancient Greece, particularly in Athens, the ordinary courts
of justice consisted of numerous, and therefore disorderly, bodies of
people, who frequently decided almost at random, or as clamour, faction,
and party-spirit, happened to determine. The ignominy of an unjust
decision, when it was to be divided among five hundred, a thousand, or
fifteen hundred people (for some of their courts were so very numerous),
could not fall very heavy upon any individual. At Rome, on the contrary,
the principal courts of justice consisted either of a single judge, or of
a small number of judges, whose characters, especially as they deliberated
always in public, could not fail to be very much affected by any rash or
unjust decision. In doubtful cases such courts, from their anxiety to
avoid blame, would naturally endeavour to shelter themselves under the
example or precedent of the judges who had sat before them, either in the
same or in some other court. This attention to practice and precedent,
necessarily formed the Roman law into that regular and orderly system in
which it has been delivered down to us; and the like attention has had the
like effects upon the laws of every other country where such attention has
taken place. The superiority of character in the Romans over that of the
Greeks, so much remarked by Polybius and Dionysius of Halicarnassus, was
probably more owing to the better constitution of their courts of justice,
than to any of the circumstances to which those authors ascribe it. The
Romans are said to have been particularly distinguished for their superior
respect to an oath. But the people who were accustomed to make oath only
before some diligent and well informed court of justice, would naturally
be much more attentive to what they swore, than they who were accustomed
to do the same thing before mobbish and disorderly assemblies.
The abilities, both civil and military, of the Greeks and Romans, will
readily be allowed to have been at least equal to those of any modern
nation. Our prejudice is perhaps rather to overrate them. But except in
what related to military exercises, the state seems to have been at no
pains to form those great abilities; for I cannot be induced to believe
that the musical education of the Greeks could be of much consequence in
forming them. Masters, however, had been found, it seems, for instructing
the better sort of people among those nations, in every art and science in
which the circumstances of their society rendered it necessary or
convenient for them to be instructed. The demand for such instruction
produced, what it always produces, the talent for giving it; and the
emulation which an unrestrained competition never fails to excite, appears
to have brought that talent to a very high degree of perfection. In the
attention which the ancient philosophers excited, in the empire which they
acquired over the opinions and principles of their auditors, in the
faculty which they possessed of giving a certain tone and character to the
conduct and conversation of those auditors, they appear to have been much
superior to any modern teachers. In modern times, the diligence of public
teachers is more or less corrupted by the circumstances which render them
more or less independent of their success and reputation in their
particular professions. Their salaries, too, put the private teacher, who
would pretend to come into competition with them, in the same state with a
merchant who attempts to trade without a bounty, in competition with those
who trade with a considerable one. If he sells his goods at nearly the
same price, he cannot have the same profit; and poverty and beggary at
least, if not bankruptcy and ruin, will infallibly be his lot. If he
attempts to sell them much dearer, he is likely to have so few customers,
that his circumstances will not be much mended. The privileges of
graduation, besides, are in many countries necessary, or at least
extremely convenient, to most men of learned professions, that is, to the
far greater part of those who have occasion for a learned education. But
those privileges can be obtained only by attending the lectures of the
public teachers. The most careful attendance upon the ablest instructions
of any private teacher cannot always give any title to demand them. It is
from these different causes that the private teacher of any of the
sciences, which are commonly taught in universities, is, in modern times,
generally considered as in the very lowest order of men of letters. A man
of real abilities can scarce find out a more humiliating or a more
unprofitable employment to turn them to. The endowments of schools and
colleges have in this manner not only corrupted the diligence of public
teachers, but have rendered it almost impossible to have any good private
ones.
Were there no public institutions for education, no system, no science,
would be taught, for which there was not some demand, or which the
circumstances of the times did not render it either necessary or
convenient, or at least fashionable to learn. A private teacher could
never find his account in teaching either an exploded and antiquated
system of a science acknowledged to be useful, or a science universally
believed to be a mere useless and pedantic heap of sophistry and nonsense.
Such systems, such sciences, can subsist nowhere but in those incorporated
societies for education, whose prosperity and revenue are in a great
measure independent of their industry. Were there no public institutions
for education, a gentleman, after going through, with application and
abilities, the most complete course of education which the circumstances
of the times were supposed to afford, could not come into the world
completely ignorant of everything which is the common subject of
conversation among gentlemen and men of the world.
There are no public institutions for the education of women, and there is
accordingly nothing useless, absurd, or fantastical, in the common course
of their education. They are taught what their parents or guardians judge
it necessary or useful for them to learn, and they are taught nothing
else. Every part of their education tends evidently to some useful
purpose; either to improve the natural attractions of their person, or to
form their mind to reserve, to modesty, to chastity, and to economy; to
render them both likely to became the mistresses of a family, and to
behave properly when they have become such. In every part of her life, a
woman feels some conveniency or advantage from every part of her
education. It seldom happens that a man, in any part of his life, derives
any conveniency or advantage from some of the most laborious and
troublesome parts of his education.
Ought the public, therefore, to give no attention, it may be asked, to the
education of the people? Or, if it ought to give any, what are the
different parts of education which it ought to attend to in the different
orders of the people? and in what manner ought it to attend to them?
In some cases, the state of society necessarily places the greater part of
individuals in such situations as naturally form in them, without any
attention of government, almost all the abilities and virtues which that
state requires, or perhaps can admit of. In other cases, the state of the
society does not place the greater part of individuals in such situations;
and some attention of government is necessary, in order to prevent the
almost entire corruption and degeneracy of the great body of the people.
In the progress of the division of labour, the employment of the far
greater part of those who live by labour, that is, of the great body of
the people, comes to be confined to a few very simple operations;
frequently to one or two. But the understandings of the greater part of
men are necessarily formed by their ordinary employments. The man whose
whole life is spent in performing a few simple operations, of which the
effects, too, are perhaps always the same, or very nearly the same, has no
occasion to exert his understanding, or to exercise his invention, in
finding out expedients for removing difficulties which never occur. He
naturally loses, therefore, the habit of such exertion, and generally
becomes as stupid and ignorant as it is possible for a human creature to
become. The torpor of his mind renders him not only incapable of relishing
or bearing a part in any rational conversation, but of conceiving any
generous, noble, or tender sentiment, and consequently of forming any just
judgment concerning many even of the ordinary duties of private life. Of
the great and extensive interests of his country he is altogether
incapable of judging; and unless very particular pains have been taken to
render him otherwise, he is equally incapable of defending his country in
war. The uniformity of his stationary life naturally corrupts the courage
of his mind, and makes him regard, with abhorrence, the irregular,
uncertain, and adventurous life of a soldier. It corrupts even the
activity of his body, and renders him incapable of exerting his strength
with vigour and perseverance in any other employment, than that to which
he has been bred. His dexterity at his own particular trade seems, in this
manner, to be acquired at the expense of his intellectual, social, and
martial virtues. But in every improved and civilized society, this is the
state into which the labouring poor, that is, the great body of the
people, must necessarily fall, unless government takes some pains to
prevent it.
It is otherwise in the barbarous societies, as they are commonly called,
of hunters, of shepherds, and even of husbandmen in that rude state of
husbandry which precedes the improvement of manufactures, and the
extension of foreign commerce. In such societies, the varied occupations
of every man oblige every man to exert his capacity, and to invent
expedients for removing difficulties which are continually occurring.
Invention is kept alive, and the mind is not suffered to fall into that
drowsy stupidity, which, in a civilized society, seems to benumb the
understanding of almost all the inferior ranks of people. In those
barbarous societies, as they are called, every man, it has already been
observed, is a warrior. Every man, too, is in some measure a statesman,
and can form a tolerable judgment concerning the interest of the society,
and the conduct of those who govern it. How far their chiefs are good
judges in peace, or good leaders in war, is obvious to the observation of
almost every single man among them. In such a society, indeed, no man can
well acquire that improved and refined understanding which a few men
sometimes possess in a more civilized state. Though in a rude society
there is a good deal of variety in the occupations of every individual,
there is not a great deal in those of the whole society. Every man does,
or is capable of doing, almost every thing which any other man does, or is
capable of being. Every man has a considerable degree of knowledge,
ingenuity, and invention but scarce any man has a great degree. The
degree, however, which is commonly possessed, is generally sufficient for
conducting the whole simple business of the society. In a civilized state,
on the contrary, though there is little variety in the occupations of the
greater part of individuals, there is an almost infinite variety in those
of the whole society. These varied occupations present an almost infinite
variety of objects to the contemplation of those few, who, being attached
to no particular occupation themselves, have leisure and inclination to
examine the occupations of other people. The contemplation of so great a
variety of objects necessarily exercises their minds in endless
comparisons and combinations, and renders their understandings, in an
extraordinary degree, both acute and comprehensive. Unless those few,
however, happen to be placed in some very particular situations, their
great abilities, though honourable to themselves, may contribute very
little to the good government or happiness of their society.
Notwithstanding the great abilities of those few, all the nobler parts of
the human character may be, in a great measure, obliterated and
extinguished in the great body of the people.
The education of the common people requires, perhaps, in a civilized and
commercial society, the attention of the public, more than that of people
of some rank and fortune. People of some rank and fortune are generally
eighteen or nineteen years of age before they enter upon that particular
business, profession, or trade, by which they propose to distinguish
themselves in the world. They have, before that, full time to acquire, or
at least to fit themselves for afterwards acquiring, every accomplishment
which can recommend them to the public esteem, or render them worthy of
it. Their parents or guardians are generally sufficiently anxious that
they should be so accomplished, and are in most cases, willing enough to
lay out the expense which is necessary for that purpose. If they are not
always properly educated, it is seldom from the want of expense laid out
upon their education, but from the improper application of that expense.
It is seldom from the want of masters, but from the negligence and
incapacity of the masters who are to be had, and from the difficulty, or
rather from the impossibility, which there is, in the present state of
things, of finding any better. The employments, too, in which people of
some rank or fortune spend the greater part of their lives, are not, like
those of the common people, simple and uniform. They are almost all of
them extremely complicated, and such as exercise the head more than the
hands. The understandings of those who are engaged in such employments,
can seldom grow torpid for want of exercise. The employments of people of
some rank and fortune, besides, are seldom such as harass them from
morning to night. They generally have a good deal of leisure, during which
they may perfect themselves in every branch, either of useful or
ornamental knowledge, of which they may have laid the foundation, or for
which they may have acquired some taste in the earlier part of life.
It is otherwise with the common people. They have little time to spare for
education. Their parents can scarce afford to maintain them, even in
infancy. As soon as they are able to work, they must apply to some trade,
by which they can earn their subsistence. That trade, too, is generally so
simple and uniform, as to give little exercise to the understanding;
while, at the same time, their labour is both so constant and so severe,
that it leaves them little leisure and less inclination to apply to, or
even to think of any thing else.
But though the common people cannot, in any civilized society, be so well
instructed as people of some rank and fortune; the most essential parts of
education, however, to read, write, and account, can be acquired at so
early a period of life, that the greater part, even of those who are to be
bred to the lowest occupations, have time to acquire them before they can
be employed in those occupations. For a very small expense, the public can
facilitate, can encourage and can even impose upon almost the whole body
of the people, the necessity of acquiring those most essential parts of
education.
The public can facilitate this acquisition, by establishing in every
parish or district a little school, where children maybe taught for a
reward so moderate, that even a common labourer may afford it; the master
being partly, but not wholly, paid by the public; because, if he was
wholly, or even principally, paid by it, he would soon learn to neglect
his business. In Scotland, the establishment of such parish schools has
taught almost the whole common people to read, and a very great proportion
of them to write and account. In England, the establishment of charity
schools has had an effect of the same kind, though not so universally,
because the establishment is not so universal. If, in those little
schools, the books by which the children are taught to read, were a little
more instructive than they commonly are; and if, instead of a little
smattering in Latin, which the children of the common people are sometimes
taught there, and which can scarce ever be of any use to them, they were
instructed in the elementary parts of geometry and mechanics; the literary
education of this rank of people would, perhaps, be as complete as can be.
There is scarce a common trade, which does not afford some opportunities
of applying to it the principles of geometry and mechanics, and which
would not, therefore, gradually exercise and improve the common people in
those principles, the necessary introduction to the most sublime, as well
as to the most useful sciences.
The public can encourage the acquisition of those most essential parts of
education, by giving small premiums, and little badges of distinction, to
the children of the common people who excel in them.
The public can impose upon almost the whole body of the people the
necessity of acquiring the most essential parts of education, by obliging
every man to undergo an examination or probation in them, before he can
obtain the freedom in any corporation, or be allowed to set up any trade,
either in a village or town corporate.
It was in this manner, by facilitating the acquisition of their military
and gymnastic exercises, by encouraging it, and even by imposing upon the
whole body of the people the necessity of learning those exercises, that
the Greek and Roman republics maintained the martial spirit of their
respective citizens. They facilitated the acquisition of those exercises,
by appointing a certain place for learning and practising them, and by
granting to certain masters the privilege of teaching in that place. Those
masters do not appear to have had either salaries or exclusive privileges
of any kind. Their reward consisted altogether in what they got from their
scholars; and a citizen, who had learnt his exercises in the public
gymnasia, had no sort of legal advantage over one who had learnt them
privately, provided the latter had learned them equally well. Those
republics encouraged the acquisition of those exercises, by bestowing
little premiums and badges of distinction upon those who excelled in them.
To have gained a prize in the Olympic, Isthmian, or Nemaean games, gave
illustration, not only to the person who gained it, but to his whole
family and kindred. The obligation which every citizen was under, to serve
a certain number of years, if called upon, in the armies of the republic,
sufficiently imposed the necessity of learning those exercises, without
which he could not be fit for that service.
That in the progress of improvement, the practice of military exercises,
unless government takes proper pains to support it, goes gradually to
decay, and, together with it, the martial spirit of the great body of the
people, the example of modern Europe sufficiently demonstrates. But the
security of every society must always depend, more or less, upon the
martial spirit of the great body of the people. In the present times,
indeed, that martial spirit alone, and unsupported by a well-disciplined
standing army, would not, perhaps, be sufficient for the defence and
security of any society. But where every citizen had the spirit of a
soldier, a smaller standing army would surely be requisite. That spirit,
besides, would necessarily diminish very much the dangers to liberty,
whether real or imaginary, which are commonly apprehended from a standing
army. As it would very much facilitate the operations of that army against
a foreign invader; so it would obstruct them as much, if unfortunately
they should ever be directed against the constitution of the state.
The ancient institutions of Greece and Rome seem to have been much more
effectual for maintaining the martial spirit of the great body of the
people, than the establishment of what are called the militias of modern
times. They were much more simple. When they were once established, they
executed themselves, and it required little or no attention from
government to maintain them in the most perfect vigour. Whereas to
maintain, even in tolerable execution, the complex regulations of any
modern militia, requires the continual and painful attention of
government, without which they are constantly falling into total neglect
and disuse. The influence, besides, of the ancient institutions, was much
more universal. By means of them, the whole body of the people was
completely instructed in the use of arms; whereas it is but a very small
part of them who can ever be so instructed by the regulations of any
modern militia, except, perhaps, that of Switzerland. But a coward, a man
incapable either of defending or of revenging himself, evidently wants one
of the most essential parts of the character of a man. He is as much
mutilated and deformed in his mind as another is in his body, who is
either deprived of some of its most essential members, or has lost the use
of them. He is evidently the more wretched and miserable of the two;
because happiness and misery, which reside altogether in the mind, must
necessarily depend more upon the healthful or unhealthful, the mutilated
or entire state of the mind, than upon that of the body. Even though the
martial spirit of the people were of no use towards the defence of the
society, yet, to prevent that sort of mental mutilation, deformity, and
wretchedness, which cowardice necessarily involves in it, from spreading
themselves through the great body of the people, would still deserve the
most serious attention of government; in the same manner as it would
deserve its most serious attention to prevent a leprosy, or any other
loathsome and offensive disease, though neither mortal nor dangerous, from
spreading itself among them; though, perhaps, no other public good might
result from such attention, besides the prevention of so great a public
evil.
The same thing may be said of the gross ignorance and stupidity which, in
a civilized society, seem so frequently to benumb the understandings of
all the inferior ranks of people. A man without the proper use of the
intellectual faculties of a man, is, if possible, more contemptible than
even a coward, and seems to be mutilated and deformed in a still more
essential part of the character of human nature. Though the state was to
derive no advantage from the instruction of the inferior ranks of people,
it would still deserve its attention that they should not be altogether
uninstructed. The state, however, derives no inconsiderable advantage from
their instruction. The more they are instructed, the less liable they are
to the delusions of enthusiasm and superstition, which, among ignorant
nations frequently occasion the most dreadful disorders. An instructed and
intelligent people, besides, are always more decent and orderly than an
ignorant and stupid one. They feel themselves, each individually, more
respectable, and more likely to obtain the respect of their lawful
superiors, and they are, therefore, more disposed to respect those
superiors. They are more disposed to examine, and more capable of seeing
through, the interested complaints of faction and sedition; and they are,
upon that account, less apt to be misled into any wanton or unnecessary
opposition to the measures of government. In free countries, where the
safety of government depends very much upon the favourable judgment which
the people may form of its conduct, it must surely be of the highest
importance, that they should not be disposed to judge rashly or
capriciously concerning it.
Art. III.—Of the Expense of the Institutions for the Instruction of
People of all Ages.
The institutions for the instruction of people of all ages, are chiefly
those for religious instruction. This is a species of instruction, of
which the object is not so much to render the people good citizens in this
world, as to prepare them for another and a better world in the life to
come. The teachers of the doctrine which contains this instruction, in the
same manner as other teachers, may either depend altogether for their
subsistence upon the voluntary contributions of their hearers; or they may
derive it from some other fund, to which the law of their country may
entitle them; such as a landed estate, a tythe or land tax, an established
salary or stipend. Their exertion, their zeal and industry, are likely to
be much greater in the former situation than in the latter. In this
respect, the teachers of a new religion have always had a considerable
advantage in attacking those ancient and established systems, of which the
clergy, reposing themselves upon their benefices, had neglected to keep up
the fervour of faith and devotion in the great body of the people; and
having given themselves up to indolence, were become altogether incapable
of making any vigorous exertion in defence even of their own
establishment. The clergy of an established and well endowed religion
frequently become men of learning and elegance, who possess all the
virtues of gentlemen, or which can recommend them to the esteem of
gentlemen; but they are apt gradually to lose the qualities, both good and
bad, which gave them authority and influence with the inferior ranks of
people, and which had perhaps been the original causes of the success and
establishment of their religion. Such a clergy, when attacked by a set of
popular and bold, though perhaps stupid and ignorant enthusiasts, feel
themselves as perfectly defenceless as the indolent, effeminate, and full
fed nations of the southern parts of Asia, when they were invaded by the
active, hardy, and hungry Tartars of the north. Such a clergy, upon such
an emergency, have commonly no other resource than to call upon the civil
magistrate to persecute, destroy, or drive out their adversaries, as
disturbers of the public peace. It was thus that the Roman catholic clergy
called upon the civil magistrate to persecute the protestants, and the
church of England to persecute the dissenters; and that in general every
religious sect, when it has once enjoyed, for a century or two, the
security of a legal establishment, has found itself incapable of making
any vigorous defence against any new sect which chose to attack its
doctrine or discipline. Upon such occasions, the advantage, in point of
learning and good writing, may sometimes be on the side of the established
church. But the arts of popularity, all the arts of gaining proselytes,
are constantly on the side of its adversaries. In England, those arts have
been long neglected by the well endowed clergy of the established church,
and are at present chiefly cultivated by the dissenters and by the
methodists. The independent provisions, however, which in many places have
been made for dissenting teachers, by means of voluntary subscriptions, of
trust rights, and other evasions of the law, seem very much to have abated
the zeal and activity of those teachers. They have many of them become
very learned, ingenious, and respectable men; but they have in general
ceased to be very popular preachers. The methodists, without half the
learning of the dissenters, are much more in vogue.
In the church of Rome the industry and zeal of the inferior clergy are
kept more alive by the powerful motive of self-interest, than perhaps in
any established protestant church. The parochial clergy derive many of
them, a very considerable part of their subsistence from the voluntary
oblations of the people; a source of revenue, which confession gives them
many opportunities of improving. The mendicant orders derive their whole
subsistence from such oblations. It is with them as with the hussars and
light infantry of some armies; no plunder, no pay. The parochial clergy
are like those teachers whose reward depends partly upon their salary, and
partly upon the fees or honoraries which they get from their pupils; and
these must always depend, more or less, upon their industry and
reputation. The mendicant orders are like those teachers whose subsistence
depends altogether upon their industry. They are obliged, therefore, to
use every art which can animate the devotion of the common people. The
establishment of the two great mendicant orders of St Dominic and St.
Francis, it is observed by Machiavel, revived, in the thirteenth and
fourteenth centuries, the languishing faith and devotion of the catholic
church. In Roman catholic countries, the spirit of devotion is supported
altogether by the monks, and by the poorer parochial clergy. The great
dignitaries of the church, with all the accomplishments of gentlemen and
men of the world, and sometimes with those of men of learning, are careful
to maintain the necessary discipline over their inferiors, but seldom give
themselves any trouble about the instruction of the people.
“Most of the arts and professions in a state,” says by far the most
illustrious philosopher and historian of the present age, “are of such a
nature, that, while they promote the interests of the society, they are
also useful or agreeable to some individuals; and, in that case, the
constant rule of the magistrate, except, perhaps, on the first
introduction of any art, is, to leave the profession to itself, and trust
its encouragement to the individuals who reap the benefit of it. The
artizans, finding their profits to rise by the favour of their customers,
increase, as much as possible, their skill and industry; and as matters
are not disturbed by any injudicious tampering, the commodity is always
sure to be at all times nearly proportioned to the demand.
“But there are also some callings which, though useful and even necessary
in a state, bring no advantage or pleasure to any individual; and the
supreme power is obliged to alter its conduct with regard to the retainers
of those professions. It must give them public encouragement in order to
their subsistence; and it must provide against that negligence to which
they will naturally be subject, either by annexing particular honours to
profession, by establishing a long subordination of ranks, and a strict
dependence, or by some other expedient. The persons employed in the
finances, fleets, and magistracy, are instances of this order of men.
“It may naturally be thought, at first sight, that the ecclesiastics
belong to the first class, and that their encouragement, as well as that
of lawyers and physicians, may safely be entrusted to the liberality of
individuals, who are attached to their doctrines, and who find benefit or
consolation from their spiritual ministry and assistance. Their industry
and vigilance will, no doubt, be whetted by such an additional motive; and
their skill in the profession, as well as their address in governing the
minds of the people, must receive daily increase, from their increasing
practice, study, and attention.
“But if we consider the matter more closely, we shall find that this
interested diligence of the clergy is what every wise legislator will
study to prevent; because, in every religion except the true, it is highly
pernicious, and it has even a natural tendency to pervert the truth, by
infusing into it a strong mixture of superstition, folly, and delusion.
Each ghostly practitioner, in order to render himself more precious and
sacred in the eyes of his retainers, will inspire them with the most
violent abhorrence of all other sects, and continually endeavour, by some
novelty, to excite the languid devotion of his audience. No regard will be
paid to truth, morals, or decency, in the doctrines inculcated. Every
tenet will be adopted that best suits the disorderly affections of the
human frame. Customers will be drawn to each conventicle by new industry
and address, in practising on the passions and credulity of the populace.
And, in the end, the civil magistrate will find that he has dearly paid
for his intended frugality, in saving a fixed establishment for the
priests; and that, in reality, the most decent and advantageous
composition, which he can make with the spiritual guides, is to bribe
their indolence, by assigning stated salaries to their profession, and
rendering it superfluous for them to be farther active, than merely to
prevent their flock from straying in quest of new pastors. And in this
manner ecclesiastical establishments, though commonly they arose at first
from religious views, prove in the end advantageous to the political
interests of society.”
But whatever may have been the good or bad effects of the independent
provision of the clergy, it has, perhaps, been very seldom bestowed upon
them from any view to those effects. Times of violent religious
controversy have generally been times of equally violent political
faction. Upon such occasions, each political party has either found it, or
imagined it, for his interest, to league itself with some one or other of
the contending religious sects. But this could be done only by adopting,
or, at least, by favouring the tenets of that particular sect. The sect
which had the good fortune to be leagued with the conquering party
necessarily shared in the victory of its ally, by whose favour and
protection it was soon enabled, in some degree, to silence and subdue all
its adversaries. Those adversaries had generally leagued themselves with
the enemies of the conquering party, and were, therefore the enemies of
that party. The clergy of this particular sect having thus become complete
masters of the field, and their influence and authority with the great
body of the people being in its highest vigour, they were powerful enough
to overawe the chiefs and leaders of their own party, and to oblige the
civil magistrate to respect their opinions and inclinations. Their first
demand was generally that he should silence and subdue all their
adversaries; and their second, that he should bestow an independent
provision on themselves. As they had generally contributed a good deal to
the victory, it seemed not unreasonable that they should have some share
in the spoil. They were weary, besides, of humouring the people, and of
depending upon their caprice for a subsistence. In making this demand,
therefore, they consulted their own ease and comfort, without troubling
themselves about the effect which it might have, in future times, upon the
influence and authority of their order. The civil magistrate, who could
comply with their demand only by giving them something which he would have
chosen much rather to take, or to keep to himself, was seldom very forward
to grant it. Necessity, however, always forced him to submit at last,
though frequently not till after many delays, evasions, and affected
excuses.
But if politics had never called in the aid of religion, had the
conquering party never adopted the tenets of one sect more than those of
another, when it had gained the victory, it would probably have dealt
equally and impartially with all the different sects, and have allowed
every man to choose his own priest, and his own religion, as he thought
proper. There would, and, in this case, no doubt, have been, a great
multitude of religious sects. Almost every different congregation might
probably have had a little sect by itself, or have entertained some
peculiar tenets of its own. Each teacher, would, no doubt, have felt
himself under the necessity of making the utmost exertion, and of using
every art, both to preserve and to increase the number of his disciples.
But as every other teacher would have felt himself under the same
necessity, the success of no one teacher, or sect of teachers, could have
been very great. The interested and active zeal of religious teachers can
be dangerous and troublesome only where there is either but one sect
tolerated in the society, or where the whole of a large society is divided
into two or three great sects; the teachers of each acting by concert, and
under a regular discipline and subordination. But that zeal must be
altogether innocent, where the society is divided into two or three
hundred, or, perhaps, into as many thousand small sects, of which no one
could be considerable enough to disturb the public tranquillity. The
teachers of each sect, seeing themselves surrounded on all sides with more
adversaries than friends, would be obliged to learn that candour and
moderation which are so seldom to be found among the teachers of those
great sects, whose tenets, being supported by the civil magistrate, are
held in veneration by almost all the inhabitants of extensive kingdoms and
empires, and who, therefore, see nothing round them but followers,
disciples, and humble admirers. The teachers of each little sect, finding
themselves almost alone, would be obliged to respect those of almost every
other sect; and the concessions which they would mutually find it both
convenient and agreeable to make one to another, might in time, probably
reduce the doctrine of the greater part of them to that pure and rational
religion, free from every mixture of absurdity, imposture, or fanaticism,
such as wise men have, in all ages of the world, wished to see
established; but such as positive law has, perhaps, never yet established,
and probably never will establish in any country; because, with regard to
religion, positive law always has been, and probably always will be, more
or less influenced by popular superstition and enthusiasm. This plan of
ecclesiastical government, or, more properly, of no ecclesiastical
government, was what the sect called Independents (a sect, no doubt, of
very wild enthusiasts), proposed to establish in England towards the end
of the civil war. If it had been established, though of a very
unphilosophical origin, it would probably, by this time, have been
productive of the most philosophical good temper and moderation with
regard to every sort of religious principle. It has been established in
Pennsylvania, where, though the quakers happen to be the most numerous,
the law, in reality, favours no one sect more than another; and it is
there said to have been productive of this philosophical good temper and
moderation.
But though this equality of treatment should not be productive of this
good temper and moderation in all, or even in the greater part of the
religious sects of a particular country; yet, provided those sects were
sufficiently numerous, and each of them consequently too small to disturb
the public tranquillity, the excessive zeal of each for its particular
tenets could not well be productive of any very hurtful effects, but, on
the contrary, of several good ones; and if the government was perfectly
decided, both to let them all alone, and to oblige them all to let alone
one another, there is little danger that they would not of their own
accord, subdivide themselves fast enough, so as soon to become
sufficiently numerous.
In every civilized society, in every society where the distinction of
ranks has once been completely established, there have been always two
different schemes or systems of morality current at the same time; of
which the one may be called the strict or austere; the other the liberal,
or, if you will, the loose system. The former is generally admired and
revered by the common people; the latter is commonly more esteemed and
adopted by what are called the people of fashion. The degree of
disapprobation with which we ought to mark the vices of levity, the vices
which are apt to arise from great prosperity, and from the excess of
gaiety and good humour, seems to constitute the principal distinction
between those two opposite schemes or systems. In the liberal or loose
system, luxury, wanton, and even disorderly mirth, the pursuit of pleasure
to some degree of intemperance, the breach of chastity, at least in one of
the two sexes, etc. provided they are not accompanied with gross
indecency, and do not lead to falsehood and injustice, are generally
treated with a good deal of indulgence, and are easily either excused or
pardoned altogether. In the austere system, on the contrary, those
excesses are regarded with the utmost abhorrence and detestation. The
vices of levity are always ruinous to the common people, and a single
week’s thoughtlessness and dissipation is often sufficient to undo a poor
workman for ever, and to drive him, through despair, upon committing the
most enormous crimes. The wiser and better sort of the common people,
therefore, have always the utmost abhorrence and detestation of such
excesses, which their experience tells them are so immediately fatal to
people of their condition. The disorder and extravagance of several years,
on the contrary, will not always ruin a man of fashion; and people of that
rank are very apt to consider the power of indulging in some degree of
excess, as one of the advantages of their fortune; and the liberty of
doing so without censure or reproach, as one of the privileges which
belong to their station. In people of their own station, therefore, they
regard such excesses with but a small degree of disapprobation, and
censure them either very slightly or not at all.
Almost all religious sects have begun among the common people, from whom
they have generally drawn their earliest, as well as their most numerous
proselytes. The austere system of morality has, accordingly, been adopted
by those sects almost constantly, or with very few exceptions; for there
have been some. It was the system by which they could best recommend
themselves to that order of people, to whom they first proposed their plan
of reformation upon what had been before established. Many of them,
perhaps the greater part of them, have even endeavoured to gain credit by
refining upon this austere system, and by carrying it to some degree of
folly and extravagance; and this excessive rigour has frequently
recommended them, more than any thing else, to the respect and veneration
of the common people.
A man of rank and fortune is, by his station, the distinguished member of
a great society, who attend to every part of his conduct, and who thereby
oblige him to attend to every part of it himself. His authority and
consideration depend very much upon the respect which this society bears
to him. He dares not do anything which would disgrace or discredit him in
it; and he is obliged to a very strict observation of that species of
morals, whether liberal or austere, which the general consent of this
society prescribes to persons of his rank and fortune. A man of low
condition, on the contrary, is far from being a distinguished member of
any great society. While he remains in a country village, his conduct may
be attended to, and he may be obliged to attend to it himself. In this
situation, and in this situation only, he may have what is called a
character to lose. But as soon as he comes into a great city, he is sunk
in obscurity and darkness. His conduct is observed and attended to by
nobody; and he is, therefore, very likely to neglect it himself, and to
abandon himself to every sort of low profligacy and vice. He never emerges
so effectually from this obscurity, his conduct never excites so much the
attention of any respectable society, as by his becoming the member of a
small religious sect. He from that moment acquires a degree of
consideration which he never had before. All his brother sectaries are,
for the credit of the sect, interested to observe his conduct; and, if he
gives occasion to any scandal, if he deviates very much from those austere
morals which they almost always require of one another, to punish him by
what is always a very severe punishment, even where no evil effects attend
it, expulsion or excommunication from the sect. In little religious sects,
accordingly, the morals of the common people have been almost always
remarkably regular and orderly; generally much more so than in the
established church. The morals of those little sects, indeed, have
frequently been rather disagreeably rigorous and unsocial.
There are two very easy and effectual remedies, however, by whose joint
operation the state might, without violence, correct whatever was unsocial
or disagreeably rigorous in the morals of all the little sects into which
the country was divided.
The first of those remedies is the study of science and philosophy, which
the state might render almost universal among all people of middling or
more than middling rank and fortune; not by giving salaries to teachers in
order to make them negligent and idle, but by instituting some sort of
probation, even in the higher and more difficult sciences, to be undergone
by every person before he was permitted to exercise any liberal
profession, or before he could be received as a candidate for any
honourable office, of trust or profit. If the state imposed upon this
order of men the necessity of learning, it would have no occasion to give
itself any trouble about providing them with proper teachers. They would
soon find better teachers for themselves, than any whom the state could
provide for them. Science is the great antidote to the poison of
enthusiasm and superstition; and where all the superior ranks of people
were secured from it, the inferior ranks could not be much exposed to it.
The second of those remedies is the frequency and gaiety of public
diversions. The state, by encouraging, that is, by giving entire liberty
to all those who, from their own interest, would attempt, without scandal
or indecency, to amuse and divert the people by painting, poetry, music,
dancing; by all sorts of dramatic representations and exhibitions; would
easily dissipate, in the greater part of them, that melancholy and gloomy
humour which is almost always the nurse of popular superstition and
enthusiasm. Public diversions have always been the objects of dread and
hatred to all the fanatical promoters of those popular frenzies. The
gaiety and good humour which those diversions inspire, were altogether
inconsistent with that temper of mind which was fittest for their purpose,
or which they could best work upon. Dramatic representations, besides,
frequently exposing their artifices to public ridicule, and sometimes even
to public execration, were, upon that account, more than all other
diversions, the objects of their peculiar abhorrence.
In a country where the law favoured the teachers of no one religion more
than those of another, it would not be necessary that any of them should
have any particular or immediate dependency upon the sovereign or
executive power; or that he should have anything to do either in
appointing or in dismissing them from their offices. In such a situation,
he would have no occasion to give himself any concern about them, further
than to keep the peace among them, in the same manner as among the rest of
his subjects, that is, to hinder them from persecuting, abusing, or
oppressing one another. But it is quite otherwise in countries where there
is an established or governing religion. The sovereign can in this case
never be secure, unless he has the means of influencing in a considerable
degree the greater part of the teachers of that religion.
The clergy of every established church constitute a great incorporation.
They can act in concert, and pursue their interest upon one plan, and with
one spirit as much as if they were under the direction of one man; and
they are frequently, too, under such direction. Their interest as an
incorporated body is never the same with that of the sovereign, and is
sometimes directly opposite to it. Their great interest is to maintain
their authority with the people, and this authority depends upon the
supposed certainty and importance of the whole doctrine which they
inculcate, and upon the supposed necessity of adopting every part of it
with the most implicit faith, in order to avoid eternal misery. Should the
sovereign have the imprudence to appear either to deride, or doubt himself
of the most trifling part of their doctrine, or from humanity, attempt to
protect those who did either the one or the other, the punctilious honour
of a clergy, who have no sort of dependency upon him, is immediately
provoked to proscribe him as a profane person, and to employ all the
terrors of religion, in order to oblige the people to transfer their
allegiance to some more orthodox and obedient prince. Should he oppose any
of their pretensions or usurpations, the danger is equally great. The
princes who have dared in this manner to rebel against the church, over
and above this crime of rebellion, have generally been charged, too, with
the additional crime of heresy, notwithstanding their solemn protestations
of their faith, and humble submission to every tenet which she thought
proper to prescribe to them. But the authority of religion is superior to
every other authority. The fears which it suggests conquer all other
fears. When the authorized teachers of religion propagate through the
great body of the people, doctrines subversive of the authority of the
sovereign, it is by violence only, or by the force of a standing army,
that he can maintain his authority. Even a standing army cannot in this
case give him any lasting security; because if the soldiers are not
foreigners, which can seldom be the case, but drawn from the great body of
the people, which must almost always be the case, they are likely to be
soon corrupted by those very doctrines. The revolutions which the
turbulence of the Greek clergy was continually occasioning at
Constantinople, as long as the eastern empire subsisted; the convulsions
which, during the course of several centuries, the turbulence of the Roman
clergy was continually occasioning in every part of Europe, sufficiently
demonstrate how precarious and insecure must always be the situation of
the sovereign, who has no proper means of influencing the clergy of the
established and governing religion of his country.
Articles of faith, as well as all other spiritual matters, it is evident
enough, are not within the proper department of a temporal sovereign, who,
though he may be very well qualified for protecting, is seldom supposed to
be so for instructing the people. With regard to such matters, therefore,
his authority can seldom be sufficient to counterbalance the united
authority of the clergy of the established church. The public
tranquillity, however, and his own security, may frequently depend upon
the doctrines which they may think proper to propagate concerning such
matters. As he can seldom directly oppose their decision, therefore, with
proper weight and authority, it is necessary that he should be able to
influence it; and he can influence it only by the fears and expectations
which he may excite in the greater part of the individuals of the order.
Those fears and expectations may consist in the fear of deprivation or
other punishment, and in the expectation of further preferment.
In all Christian churches, the benefices of the clergy are a sort of
freeholds, which they enjoy, not during pleasure, but during life or good
behaviour. If they held them by a more precarious tenure, and were liable
to be turned out upon every slight disobligation either of the sovereign
or of his ministers, it would perhaps be impossible for them to maintain
their authority with the people, who would then consider them as mercenary
dependents upon the court, in the sincerity of whose instructions they
could no longer have any confidence. But should the sovereign attempt
irregularly, and by violence, to deprive any number of clergymen of their
freeholds, on account, perhaps, of their having propagated, with more than
ordinary zeal, some factious or seditious doctrine, he would only render,
by such persecution, both them and their doctrine ten times more popular,
and therefore ten times more troublesome and dangerous, than they had been
before. Fear is in almost all cases a wretched instrument of govermnent,
and ought in particular never to be employed against any order of men who
have the smallest pretensions to independency. To attempt to terrify them,
serves only to irritate their bad humour, and to confirm them in an
opposition, which more gentle usage, perhaps, might easily induce them
either to soften, or to lay aside altogether. The violence which the
French government usually employed in order to oblige all their
parliaments, or sovereign courts of justice, to enregister any unpopular
edict, very seldom succeeded. The means commonly employed, however, the
imprisonment of all the refractory members, one would think, were forcible
enough. The princes of the house of Stuart sometimes employed the like
means in order to influence some of the members of the parliament of
England, and they generally found them equally intractable. The parliament
of England is now managed in another manner; and a very small experiment,
which the duke of Choiseul made, about twelve years ago, upon the
parliament of Paris, demonstrated sufficiently that all the parliaments of
France might have been managed still more easily in the same manner. That
experiment was not pursued. For though management and persuasion are
always the easiest and safest instruments of government as force and
violence are the worst and the most dangerous; yet such, it seems, is the
natural insolence of man, that he almost always disdains to use the good
instrument, except when he cannot or dare not use the bad one. The French
government could and durst use force, and therefore disdained to use
management and persuasion. But there is no order of men, it appears I
believe, from the experience of all ages, upon whom it is so dangerous or
rather so perfectly ruinous, to employ force and violence, as upon the
respected clergy of an established church. The rights, the privileges, the
personal liberty of every individual ecclesiastic, who is upon good terms
with his own order, are, even in the most despotic governments, more
respected than those of any other person of nearly equal rank and fortune.
It is so in every gradation of despotism, from that of the gentle and mild
government of Paris, to that of the violent and furious government of
Constantinople. But though this order of men can scarce ever be forced,
they may be managed as easily as any other; and the security of the
sovereign, as well as the public tranquillity, seems to depend very much
upon the means which he has of managing them; and those means seem to
consist altogether in the preferment which he has to bestow upon them.
In the ancient constitution of the Christian church, the bishop of each
diocese was elected by the joint votes of the clergy and of the people of
the episcopal city. The people did not long retain their right of
election; and while they did retain it, they almost always acted under the
influence of the clergy, who, in such spiritual matters, appeared to be
their natural guides. The clergy, however, soon grew weary of the trouble
of managing them, and found it easier to elect their own bishops
themselves. The abbot, in the same manner, was elected by the monks of the
monastery, at least in the greater part of abbacies. All the inferior
ecclesiastical benefices comprehended within the diocese were collated by
the bishop, who bestowed them upon such ecclesiastics as he thought
proper. All church preferments were in this manner in the disposal of the
church. The sovereign, though he might have some indirect influence in
those elections, and though it was sometimes usual to ask both his consent
to elect, and his approbation of the election, yet had no direct or
sufficient means of managing the clergy. The ambition of every clergyman
naturally led him to pay court, not so much to his sovereign as to his own
order, from which only he could expect preferment.
Through the greater part of Europe, the pope gradually drew to himself,
first the collation of almost all bishoprics and abbacies, or of what were
called consistorial benefices, and afterwards, by various machinations and
pretences, of the greater part of inferior benefices comprehended within
each diocese, little more being left to the bishop than what was barely
necessary to give him a decent authority with his own clergy. By this
arrangement the condition of the sovereign was still worse than it had
been before. The clergy of all the different countries of Europe were thus
formed into a sort of spiritual army, dispersed in different quarters
indeed, but of which all the movements and operations could now be
directed by one head, and conducted upon one uniform plan. The clergy of
each particular country might be considered as a particular detachment of
that army, of which the operations could easily be supported and seconded
by all the other detachments quartered in the different countries round
about. Each detachment was not only independent of the sovereign of the
country in which it was quartered, and by which it was maintained, but
dependent upon a foreign sovereign, who could at any time turn its arms
against the sovereign of that particular country, and support them by the
arms of all the other detachments.
Those arms were the most formidable that can well be imagined. In the
ancient state of Europe, before the establishment of arts and
manufactures, the wealth of the clergy gave them the same sort of
influence over the common people which that of the great barons gave them
over their respective vassals, tenants, and retainers. In the great landed
estates, which the mistaken piety both of princes and private persons had
bestowed upon the church, jurisdictions were established, of the same kind
with those of the great barons, and for the same reason. In those great
landed estates, the clergy, or their bailiffs, could easily keep the
peace, without the support or assistance either of the king or of any
other person; and neither the king nor any other person could keep the
peace there without the support and assistance of the clergy. The
jurisdictions of the clergy, therefore, in their particular baronies or
manors, were equally independent, and equally exclusive of the authority
of the king’s courts, as those of the great temporal lords. The tenants of
the clergy were, like those of the great barons, almost all tenants at
will, entirely dependent upon their immediate lords, and, therefore,
liable to be called out at pleasure, in order to fight in any quarrel in
which the clergy might think proper to engage them. Over and above the
rents of those estates, the clergy possessed in the tithes a very large
portion of the rents of all the other estates in every kingdom of Europe.
The revenues arising from both those species of rents were, the greater
part of them, paid in kind, in corn, wine, cattle, poultry, etc. The
quantity exceeded greatly what the clergy could themselves consume; and
there were neither arts nor manufactures, for the produce of which they
could exchange the surplus. The clergy could derive advantage from this
immense surplus in no other way than by employing it, as the great barons
employed the like surplus of their revenues, in the most profuse
hospitality, and in the most extensive charity. Both the hospitality and
the charity of the ancient clergy, accordingly, are said to have been very
great. They not only maintained almost the whole poor of every kingdom,
but many knights and gentlemen had frequently no other means of
subsistence than by travelling about from monastery to monastery, under
pretence of devotion, but in reality to enjoy the hospitality of the
clergy. The retainers of some particular prelates were often as numerous
as those of the greatest lay-lords; and the retainers of all the clergy
taken together were, perhaps, more numerous than those of all the
lay-lords. There was always much more union among the clergy than among
the lay-lords. The former were under a regular discipline and
subordination to the papal authority. The latter were under no regular
discipline or subordination, but almost always equally jealous of one
another, and of the king. Though the tenants and retainers of the clergy,
therefore, had both together been less numerous than those of the great
lay-lords, and their tenants were probably much less numerous, yet their
union would have rendered them more formidable. The hospitality and
charity of the clergy, too, not only gave them the command of a great
temporal force, but increased very much the weight of their spiritual
weapons. Those virtues procured them the highest respect and veneration
among all the inferior ranks of people, of whom many were constantly, and
almost all occasionally, fed by them. Everything belonging or related to
so popular an order, its possessions, its privileges, its doctrines,
necessarily appeared sacred in the eyes of the common people; and every
violation of them, whether real or pretended, the highest act of
sacrilegious wickedness and profaneness. In this state of things, if the
sovereign frequently found it difficult to resist the confederacy of a few
of the great nobility, we cannot wonder that he should find it still more
so to resist the united force of the clergy of his own dominions,
supported by that of the clergy of all the neighbouring dominions. In such
circumstances, the wonder is, not that he was sometimes obliged to yield,
but that he ever was able to resist.
The privileges of the clergy in those ancient times (which to us, who live
in the present times, appear the most absurd), their total exemption from
the secular jurisdiction, for example, or what in England was called the
benefit of clergy, were the natural, or rather the necessary, consequences
of this state of things. How dangerous must it have been for the sovereign
to attempt to punish a clergyman for any crime whatever, if his order were
disposed to protect him, and to represent either the proof as insufficient
for convicting so holy a man, or the punishment as too severe to be
inflicted upon one whose person had been rendered sacred by religion? The
sovereign could, in such circumstances, do no better than leave him to be
tried by the ecclesiastical courts, who, for the honour of their own
order, were interested to restrain, as much as possible, every member of
it from committing enormous crimes, or even from giving occasion to such
gross scandal as might disgust the minds of the people.
In the state in which things were, through the greater part of Europe,
during the tenth, eleventh, twelfth, and thirteenth centuries, and for
some time both before and after that period, the constitution of the
church of Rome may be considered as the most formidable combination that
ever was formed against the authority and security of civil government, as
well as against the liberty, reason, and happiness of mankind, which can
flourish only where civil government is able to protect them. In that
constitution, the grossest delusions of superstition were supported in
such a manner by the private interests of so great a number of people, as
put them out of all danger from any assault of human reason; because,
though human reason might, perhaps, have been able to unveil, even to the
eyes of the common people, some of the delusions of superstition, it could
never have dissolved the ties of private interest. Had this constitution
been attacked by no other enemies but the feeble efforts of human reason,
it must have endured for ever. But that immense and well-built fabric,
which all the wisdom and virtue of man could never have shaken, much less
have overturned, was, by the natural course of things, first weakened, and
afterwards in part destroyed; and is now likely, in the course of a few
centuries more, perhaps, to crumble into ruins altogether.
The gradual improvements of arts, manufactures, and commerce, the
same causes which destroyed the power of the great barons, destroyed,
in the same manner, through the greater part of Europe, the whole
temporal power of the clergy. In the produce of arts, manufactures, and
commerce, the clergy, like the great barons, found something for which
they could exchange their rude produce, and thereby discovered the
means of spending their whole revenues upon their own persons, without
giving any considerable share of them to other people. Their charity
became gradually less extensive, their hospitality less liberal, or
less profuse. Their retainers became consequently less numerous, and,
by degrees, dwindled away altogether. The clergy, too, like the great
barons, wished to get a better rent from their landed estates, in order
to spend it, in the same manner, upon the gratification of their own
private vanity and folly. But this increase of rent could be got only
by granting leases to their tenants, who thereby became, in a great
measure, independent of them. The ties of interest, which bound the
inferior ranks of people to the clergy, were in this manner gradually
broken and dissolved. They were even broken and dissolved sooner than
those which bound the same ranks of people to the great barons; because
the benefices of the church being, the greater part of them, much smaller
than the estates of the great barons, the possessor of each benefice was
much sooner able to spend the whole of its revenue upon his own person.
During the greater part of the fourteenth and fifteenth centuries, the
power of the great barons was, through the greater part of Europe, in
full vigour. But the temporal power of the clergy, the absolute command
which they had once had over the great body of the people was very much
decayed. The power of the church was, by that time, very nearly reduced,
through the greater part of Europe, to what arose from their spiritual
authority; and even that spiritual authority was much weakened, when it
ceased to be supported by the charity and hospitality of the clergy. The
inferior ranks of people no longer looked upon that order as they had
done before; as the comforters of their distress, and the relievers of
their indigence. On the contrary, they were provoked and disgusted by the
vanity, luxury, and expense of the richer clergy, who appeared to spend
upon their own pleasures what had always before been regarded as the
patrimony of the poor.
In this situation of things, the sovereigns in the different states of
Europe endeavoured to recover the influence which they had once had in the
disposal of the great benefices of the church; by procuring to the deans
and chapters of each diocese the restoration of their ancient right of
electing the bishop; and to the monks of each abbacy that of electing the
abbot. The re-establishing this ancient order was the object of several
statutes enacted in England during the course of the fourteenth century,
particularly of what is called the statute of provisors; and of the
pragmatic sanction, established in France in the fifteenth century. In
order to render the election valid, it was necessary that the sovereign
should both consent to it before hand, and afterwards approve of the
person elected; and though the election was still supposed to be free, he
had, however all the indirect means which his situation necessarily
afforded him, of influencing the clergy in his own dominions. Other
regulations, of a similar tendency, were established in other parts of
Europe. But the power of the pope, in the collation of the great benefices
of the church, seems, before the reformation, to have been nowhere so
effectually and so universally restrained as in France and England. The
concordat afterwards, in the sixteenth century, gave to the kings of
France the absolute right of presenting to all the great, or what are
called the consistorial, benefices of the Gallican church.
Since the establishment of the pragmatic sanction and of the concordat,
the clergy of France have in general shewn less respect to the decrees of
the papal court, than the clergy of any other catholic country. In all the
disputes which their sovereign has had with the pope, they have almost
constantly taken part with the former. This independency of the clergy of
France upon the court of Rome seems to be principally founded upon the
pragmatic sanction and the concordat. In the earlier periods of the
monarchy, the clergy of France appear to have been as much devoted to the
pope as those of any other country. When Robert, the second prince of the
Capetian race, was most unjustly excommunicated by the court of Rome, his
own servants, it is said, threw the victuals which came from his table to
the dogs, and refused to taste any thing themselves which had been
polluted by the contact of a person in his situation. They were taught to
do so, it may very safely be presumed, by the clergy of his own dominions.
The claim of collating to the great benefices of the church, a claim in
defence of which the court of Rome had frequently shaken, and sometimes
overturned, the thrones of some of the greatest sovereigns in Christendom,
was in this manner either restrained or modified, or given up altogether,
in many different parts of Europe, even before the time of the
reformation. As the clergy had now less influence over the people, so the
state had more influence over the clergy. The clergy, therefore, had both
less power, and less inclination, to disturb the state.
The authority of the church of Rome was in this state of declension, when
the disputes which gave birth to the reformation began in Germany, and
soon spread themselves through every part of Europe. The new doctrines
were everywhere received with a high degree of popular favour. They were
propagated with all that enthusiastic zeal which commonly animates the
spirit of party, when it attacks established authority. The teachers of
those doctrines, though perhaps, in other respects, not more learned than
many of the divines who defended the established church, seem in general
to have been better acquainted with ecclesiastical history, and with the
origin and progress of that system of opinions upon which the authority of
the church was established; and they had thereby the advantage in almost
every dispute. The austerity of their manners gave them authority with the
common people, who contrasted the strict regularity of their conduct with
the disorderly lives of the greater part of their own clergy. They
possessed, too, in a much higher degree than their adversaries, all the
arts of popularity and of gaining proselytes; arts which the lofty and
dignified sons of the church had long neglected, as being to them in a
great measure useless. The reason of the new doctrines recommended them to
some, their novelty to many; the hatred and contempt of the established
clergy to a still greater number: but the zealous, passionate, and
fanatical, though frequently coarse and rustic eloquence, with which they
were almost everywhere inculcated, recommended them to by far the greatest
number.
The success of the new doctrines was almost everywhere so great, that the
princes, who at that time happened to be on bad terms with the court of
Rome, were, by means of them, easily enabled, in their own dominions, to
overturn the church, which having lost the respect and veneration of the
inferior ranks of people, could make scarce any resistance. The court of
Rome had disobliged some of the smaller princes in the northern parts of
Germany, whom it had probably considered as too insignificant to be worth
the managing. They universally, therefore, established the reformation in
their own dominions. The tyranny of Christiern II., and of Troll
archbishop of Upsal, enabled Gustavus Vasa to expel them both from Sweden.
The pope favoured the tyrant and the archbishop, and Gustavus Vasa found
no difficulty in establishing the reformation in Sweden. Christiern II.
was afterwards deposed from the throne of Denmark, where his conduct had
rendered him as odious as in Sweden. The pope, however, was still disposed
to favour him; and Frederic of Holstein, who had mounted the throne in his
stead, revenged himself, by following the example of Gustavus Vasa. The
magistrates of Berne and Zurich, who had no particular quarrel with the
pope, established with great ease the reformation in their respective
cantons, where just before some of the clergy had, by an imposture
somewhat grosser than ordinary, rendered the whole order both odious and
contemptible.
In this critical situation of its affairs the papal court was at
sufficient pains to cultivate the friendship of the powerful sovereigns of
France and Spain, of whom the latter was at that time emperor of Germany.
With their assistance, it was enabled, though not without great
difficulty, and much bloodshed, either to suppress altogether, or to
obstruct very much, the progress of the reformation in their dominions. It
was well enough inclined, too, to be complaisant to the king of England.
But from the circumstances of the times, it could not be so without giving
offence to a still greater sovereign, Charles V., king of Spain and
emperor of Germany. Henry VIII., accordingly, though he did not embrace
himself the greater part of the doctrines of the reformation, was yet
enabled, by their general prevalence, to suppress all the monasteries, and
to abolish the authority of the church of Rome in his dominions. That he
should go so far, though he went no further, gave some satisfaction to the
patrons of the reformation, who, having got possession of the government
in the reign of his son and successor completed, without any difficulty,
the work which Henry VIII. had begun.
In some countries, as in Scotland, where the government was weak,
unpopular, and not very firmly established, the reformation was strong
enough to overturn, not only the church, but the state likewise, for
attempting to support the church.
Among the followers of the reformation, dispersed in all the different
countries of Europe, there was no general tribunal, which, like that of
the court of Rome, or an oecumenical council, could settle all disputes
among them, and, with irresistible authority, prescribe to all of them the
precise limits of orthodoxy. When the followers of the reformation in one
country, therefore, happened to differ from their brethren in another, as
they had no common judge to appeal to, the dispute could never be decided;
and many such disputes arose among them. Those concerning the government
of the church, and the right of conferring ecclesiastical benefices, were
perhaps the most interesting to the peace and welfare of civil society.
They gave birth, accordingly, to the two principal parties or sects among
the followers of the reformation, the Lutheran and Calvinistic sects, the
only sects among them, of which the doctrine and discipline have ever yet
been established by law in any part of Europe.
The followers of Luther, together with what is called the church of
England, preserved more or less of the episcopal government, established
subordination among the clergy, gave the sovereign the disposal of all the
bishoprics, and other consistorial benefices within his dominions, and
thereby rendered him the real head of the church; and without depriving
the bishop of the right of collating to the smaller benefices within his
diocese, they, even to those benefices, not only admitted, but favoured
the right of presentation, both in the sovereign and in all other lay
patrons. This system of church government was, from the beginning,
favourable to peace and good order, and to submission to the civil
sovereign. It has never, accordingly, been the occasion of any tumult or
civil commotion in any country in which it has once been established. The
church of England, in particular, has always valued herself, with great
reason, upon the unexceptionable loyalty of her principles. Under such a
government, the clergy naturally endeavour to recommend themselves to the
sovereign, to the court, and to the nobility and gentry of the country, by
whose influence they chiefly expect to obtain preferment. They pay court
to those patrons, sometimes, no doubt, by the vilest flattery and
assentation; but frequently, too, by cultivating all those arts which best
deserve, and which are therefore most likely to gain them, the esteem of
people of rank and fortune; by their knowledge in all the different
branches of useful and ornamental learning, by the decent liberality of
their manners, by the social good humour of their conversation, and by
their avowed contempt of those absurd and hypocritical austerities which
fanatics inculcate and pretend to practise, in order to draw upon
themselves the veneration, and upon the greater part of men of rank and
fortune, who avow that they do not practise them, the abhorrence of the
common people. Such a clergy, however, while they pay their court in this
manner to the higher ranks of life, are very apt to neglect altogether the
means of maintaining their influence and authority with the lower. They
are listened to, esteemed, and respected by their superiors; but before
their inferiors they are frequently incapable of defending, effectually,
and to the conviction of such hearers, their own sober and moderate
doctrines, against the most ignorant enthusiast who chooses to attack
them.
The followers of Zuinglius, or more properly those of Calvin, on the
contrary, bestowed upon the people of each parish, whenever the church
became vacant, the right of electing their own pastor; and established, at
the same time, the most perfect equality among the clergy. The former part
of this institution, as long as it remained in vigour, seems to have been
productive of nothing but disorder and confusion, and to have tended
equally to corrupt the morals both of the clergy and of the people. The
latter part seems never to have had any effects but what were perfectly
agreeable.
As long as the people of each parish preserved the right of electing their
own pastors, they acted almost always under the influence of the clergy,
and generally of the most factious and fanatical of the order. The clergy,
in order to preserve their influence in those popular elections, became,
or affected to become, many of them, fanatics themselves, encouraged
fanaticism among the people, and gave the preference almost always to the
most fanatical candidate. So small a matter as the appointment of a parish
priest, occasioned almost always a violent contest, not only in one
parish, but in all the neighbouring parishes who seldom failed to take
part in the quarrel. When the parish happened to be situated in a great
city, it divided all the inhabitants into two parties; and when that city
happened, either to constitute itself a little republic, or to be the head
and capital of a little republic, as in the case with many of the
considerable cities in Switzerland and Holland, every paltry dispute of
this kind, over and above exasperating the animosity of all their other
factions, threatened to leave behind it, both a new schism in the church,
and a new faction in the state. In those small republics, therefore, the
magistrate very soon found it necessary, for the sake of preserving the
public peace, to assume to himself the right of presenting to all vacant
benefices. In Scotland, the most extensive country in which this
presbyterian form of church government has ever been established, the
rights of patronage were in effect abolished by the act which established
presbytery in the beginning of the reign of William III. That act, at
least, put in the power of certain classes of people in each parish to
purchase, for a very small price, the right of electing their own pastor.
The constitution which this act established, was allowed to subsist for
about two-and-twenty years, but was abolished by the 10th of queen Anne,
ch.12, on account of the confusions and disorders which this more popular
mode of election had almost everywhere occasioned. In so extensive a
country as Scotland, however, a tumult in a remote parish was not so
likely to give disturbance to government as in a smaller state. The 10th
of queen Anne restored the rights of patronage. But though, in Scotland,
the law gives the benefice, without any exception to the person presented
by the patron; yet the church requires sometimes (for she has not in this
respect been very uniform in her decisions) a certain concurrence of the
people, before she will confer upon the presentee what is called the cure
of souls, or the ecclesiastical jurisdiction in the parish. She sometimes,
at least, from an affected concern for the peace of the parish, delays the
settlement till this concurrence can be procured. The private tampering of
some of the neighbouring clergy, sometimes to procure, but more frequently
to prevent this concurrence, and the popular arts which they cultivate, in
order to enable them upon such occasions to tamper more effectually, are
perhaps the causes which principally keep up whatever remains of the old
fanatical spirit, either in the clergy or in the people of Scotland.
The equality which the presbyterian form of church government establishes
among the clergy, consists, first, in the equality of authority or
ecclesiastical jurisdiction; and, secondly, in the equality of benefice.
In all presbyterian churches, the equality of authority is perfect; that
of benefice is not so. The difference, however, between one benefice and
another, is seldom so considerable, as commonly to tempt the possessor
even of the small one to pay court to his patron, by the vile arts of
flattery and assentation, in order to get a better. In all the
presbyterian churches, where the rights of patronage are thoroughly
established, it is by nobler and better arts, that the established clergy
in general endeavour to gain the favour of their superiors; by their
learning, by the irreproachable regularity of their life, and by the
faithful and diligent discharge of their duty. Their patrons even
frequently complain of the independency of their spirit, which they are
apt to construe into ingratitude for past favours, but which, at worse,
perhaps, is seldom anymore than that indifference which naturally arises
from the consciousness that no further favours of the kind are ever to be
expected. There is scarce, perhaps, to be found anywhere in Europe, a more
learned, decent, independent, and respectable set of men, than the greater
part of the presbyterian clergy of Holland, Geneva, Switzerland, and
Scotland.
Where the church benefices are all nearly equal, none of them can be very
great; and this mediocrity of benefice, though it may be, no doubt,
carried too far, has, however, some very agreeable effects. Nothing but
exemplary morals can give dignity to a man of small fortune. The vices of
levity and vanity necessarily render him ridiculous, and are, besides,
almost as ruinous to him as they are to the common people. In his own
conduct, therefore, he is obliged to follow that system of morals which
the common people respect the most. He gains their esteem and affection,
by that plan of life which his own interest and situation would lead him
to follow. The common people look upon him with that kindness with which
we naturally regard one who approaches somewhat to our own condition, but
who, we think, ought to be in a higher. Their kindness naturally provokes
his kindness. He becomes careful to instruct them, and attentive to assist
and relieve them. He does not even despise the prejudices of people who
are disposed to be so favourable to him, and never treats them with those
contemptuous and arrogant airs, which we so often meet with in the proud
dignitaries of opulent and well endowed churches. The presbyterian clergy,
accordingly, have more influence over the minds of the common people, than
perhaps the clergy of any other established church. It is, accordingly, in
presbyterian countries only, that we ever find the common people
converted, without persecution completely, and almost to a man, to the
established church.
In countries where church benefices are, the greater part of them, very
moderate, a chair in a university is generally a better establishment than
a church benefice. The universities have, in this case, the picking and
chusing of their members from all the churchmen of the country, who, in
every country, constitute by far the most numerous class of men of
letters. Where church benefices, on the contrary, are many of them very
considerable, the church naturally draws from the universities the greater
part of their eminent men of letters; who generally find some patron, who
does himself honour by procuring them church preferment. In the former
situation, we are likely to find the universities filled with the most
eminent men of letters that are to be found in the country. In the latter,
we are likely to find few eminent men among them, and those few among the
youngest members of the society, who are likely, too, to be drained away
from it, before they can have acquired experience and knowledge enough to
be of much use to it. It is observed by Mr de Voltaire, that father
Porée, a jesuit of no great eminence in the republic of letters, was the
only professor they had ever had in France, whose works were worth the
reading. In a country which has produced so many eminent men of letters,
it must appear somewhat singular, that scarce one of them should have been
a professor in a university. The famous Cassendi was, in the beginning of
his life, a professor in the university of Aix. Upon the first dawning of
his genius, it was represented to him, that by going into the church he
could easily find a much more quiet and comfortable subsistence, as well
as a better situation for pursuing his studies; and he immediately
followed the advice. The observation of Mr de Voltaire may be applied, I
believe, not only to France, but to all other Roman Catholic countries. We
very rarely find in any of them an eminent man of letters, who is a
professor in a university, except, perhaps, in the professions of law and
physic; professions from which the church is not so likely to draw them.
After the church of Rome, that of England is by far the richest and best
endowed church in Christendom. In England, accordingly, the church is
continually draining the universities of all their best and ablest
members; and an old college tutor who is known and distinguished in Europe
as an eminent man of letters, is as rarely to be found there as in any
Roman catholic country. In Geneva, on the contrary, in the protestant
cantons of Switzerland, in the protestant countries of Germany, in
Holland, in Scotland, in Sweden, and Denmark, the most eminent men of
letters whom those countries have produced, have, not all indeed, but the
far greater part of them, been professors in universities. In those
countries, the universities are continually draining the church of all its
most eminent men of letters.
It may, perhaps, be worth while to remark, that, if we except the poets, a
few orators, and a few historians, the far greater part of the other
eminent men of letters, both of Greece and Rome, appear to have been
either public or private teachers; generally either of philosophy or of
rhetoric. This remark will be found to hold true, from the days of Lysias
and Isocrates, of Plato and Aristotle, down to those of Plutarch and
Epictetus, Suetonius, and Quintilian. To impose upon any man the necessity
of teaching, year after year, in any particular branch of science seems in
reality to be the most effectual method for rendering him completely
master of it himself. By being obliged to go every year over the same
ground, if he is good for any thing, he necessarily becomes, in a few
years, well acquainted with every part of it, and if, upon any particular
point, he should form too hasty an opinion one year, when he comes, in the
course of his lectures to reconsider the same subject the year thereafter,
he is very likely to correct it. As to be a teacher of science is
certainly the natural employment of a mere man of letters; so is it
likewise, perhaps, the education which is most likely to render him a man
of solid learning and knowledge. The mediocrity of church benefices
naturally tends to draw the greater part of men of letters in the country
where it takes place, to the employment in which they can be the most
useful to the public, and at the same time to give them the best
education, perhaps, they are capable of receiving. It tends to render
their learning both as solid as possible, and as useful as possible.
The revenue of every established church, such parts of it excepted as may
arise from particular lands or manors, is a branch, it ought to be
observed, of the general revenue of the state, which is thus diverted to a
purpose very different from the defence of the state. The tithe, for
example, is a real land tax, which puts it out of the power of the
proprietors of land to contribute so largely towards the defence of the
state as they otherwise might be able to do. The rent of land, however,
is, according to some, the sole fund; and, according to others, the
principal fund, from which, in all great monarchies, the exigencies of the
state must be ultimately supplied. The more of this fund that is given to
the church, the less, it is evident, can be spared to the state. It may be
laid down as a certain maxim, that all other things being supposed equal,
the richer the church, the poorer must necessarily be, either the
sovereign on the one hand, or the people on the other; and, in all cases,
the less able must the state be to defend itself. In several protestant
countries, particularly in all the protestant cantons of Switzerland, the
revenue which anciently belonged to the Roman catholic church, the tithes
and church lands, has been found a fund sufficient, not only to afford
competent salaries to the established clergy, but to defray, with little
or no addition, all the other expenses of the state. The magistrates of
the powerful canton of Berne, in particular, have accumulated, out of the
savings from this fund, a very large sum, supposed to amount to several
millions; part of which is deposited in a public treasure, and part is
placed at interest in what are called the public funds of the different
indebted nations of Europe; chiefly in those of France and Great Britain.
What may be the amount of the whole expense which the church, either of
Berne, or of any other protestant canton, costs the state, I do not
pretend to know. By a very exact account it appears, that, in 1755, the
whole revenue of the clergy of the church of Scotland, including their
glebe or church lands, and the rent of their manses or dwelling-houses,
estimated according to a reasonable valuation, amounted only to
£68,514:1:5 ¹⁄₁₂d. This very moderate revenue affords a decent subsistence
to nine hundred and forty-four ministers. The whole expense of the church,
including what is occasionally laid out for the building and reparation of
churches, and of the manses of ministers, cannot well be supposed to
exceed eighty or eighty-five thousand pounds a-year. The most opulent
church in Christendom does not maintain better the uniformity of faith,
the fervour of devotion, the spirit of order, regularity, and austere
morals, in the great body of the people, than this very poorly endowed
church of Scotland. All the good effects, both civil and religious, which
an established church can be supposed to produce, are produced by it as
completely as by any other. The greater part of the protestant churches of
Switzerland, which, in general, are not better endowed than the church of
Scotland, produce those effects in a still higher degree. In the greater
part of the protestant cantons, there is not a single person to be found,
who does not profess himself to be of the established church. If he
professes himself to be of any other, indeed, the law obliges him to leave
the canton. But so severe, or, rather, indeed, so oppressive a law, could
never have been executed in such free countries, had not the diligence of
the clergy beforehand converted to the established church the whole body
of the people, with the exception of, perhaps, a few individuals only. In
some parts of Switzerland, accordingly, where, from the accidental union
of a protestant and Roman catholic country, the conversion has not been so
complete, both religions are not only tolerated, but established by law.
The proper performance of every service seems to require, that its pay or
recompence should be, as exactly as possible, proportioned to the nature
of the service. If any service is very much underpaid, it is very apt to
suffer by the meanness and incapacity of the greater part of those who are
employed in it. If it is very much overpaid, it is apt to suffer, perhaps
still more, by their negligence and idleness. A man of a large revenue,
whatever may be his profession, thinks he ought to live like other men of
large revenues; and to spend a great part of his time in festivity, in
vanity, and in dissipation. But in a clergyman, this train of life not
only consumes the time which ought to be employed in the duties of his
function, but in the eyes of the common people, destroys almost entirely
that sanctity of character, which can alone enable him to perform those
duties with proper weight and authority.
PART IV. Of the Expense of supporting the Dignity of the Sovereign.
Over and above the expenses necessary for enabling the sovereign to
perform his several duties, a certain expense is requisite for the support
of his dignity. This expense varies, both with the different periods of
improvement, and with the different forms of government.
In an opulent and improved society, where all the different orders of
people are growing every day more expensive in their houses, in their
furniture, in their tables, in their dress, and in their equipage; it
cannot well be expected that the sovereign should alone hold out against
the fashion. He naturally, therefore, or rather necessarily, becomes more
expensive in all those different articles too. His dignity even seems to
require that he should become so.
As, in point of dignity, a monarch is more raised above his subjects than
the chief magistrate of any republic is ever supposed to be above his
fellow-citizens; so a greater expense is necessary for supporting that
higher dignity. We naturally expect more splendour in the court of a king,
than in the mansion-house of a doge or burgo-master.
CONCLUSION.
The expense of defending the society, and that of supporting the dignity
of the chief magistrate, are both laid out for the general benefit of the
whole society. It is reasonable, therefore, that they should be defrayed
by the general contribution of the whole society; all the different
members contributing, as nearly as possible, in proportion to their
respective abilities.
The expense of the administration of justice, too, may no doubt be
considered as laid out for the benefit of the whole society. There is no
impropriety, therefore, in its being defrayed by the general contribution
of the whole society. The persons, however, who give occasion to this
expense, are those who, by their injustice in one way or another, make it
necessary to seek redress or protection from the courts of justice. The
persons, again, most immediately benefited by this expense, are those whom
the courts of justice either restore to their rights, or maintain in their
rights. The expense of the administration of justice, therefore, may very
properly be defrayed by the particular contribution of one or other, or
both, of those two different sets of persons, according as different
occasions may require, that is, by the fees of court. It cannot be
necessary to have recourse to the general contribution of the whole
society, except for the conviction of those criminals who have not
themselves any estate or fund sufficient for paying those fees.
Those local or provincial expenses, of which the benefit is local or
provincial (what is laid out, for example, upon the police of a particular
town or district), ought to be defrayed by a local or provincial revenue,
and ought to be no burden upon the general revenue of the society. It is
unjust that the whole society should contribute towards an expense, of
which the benefit is confined to a part of the society.
The expense of maintaining good roads and communications is, no doubt,
beneficial to the whole society, and may, therefore, without any
injustice, be defrayed by the general contributions of the whole society.
This expense, however, is most immediately and directly beneficial to
those who travel or carry goods from one place to another, and to those
who consume such goods. The turnpike tolls in England, and the duties
called peages in other countries, lay it altogether upon those two
different sets of people, and thereby discharge the general revenue of the
society from a very considerable burden.
The expense of the institutions for education and religious instruction,
is likewise, no doubt, beneficial to the whole society, and may,
therefore, without injustice, be defrayed by the general contribution of
the whole society. This expense, however, might, perhaps, with equal
propriety, and even with some advantage, be defrayed altogether by those
who receive the immediate benefit of such education and instruction, or by
the voluntary contribution of those who think they have occasion for
either the one or the other.
When the institutions, or public works, which are beneficial to the whole
society, either cannot be maintained altogether, or are not maintained
altogether, by the contribution of such particular members of the society
as are most immediately benefited by them; the deficiency must, in most
cases, be made up by the general contribution of the whole society. The
general revenue of the society, over and above defraying the expense of
defending the society, and of supporting the dignity of the chief
magistrate, must make up for the deficiency of many particular branches of
revenue. The sources of this general or public revenue, I shall endeavour
to explain in the following chapter.
CHAPTER II.
OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY.
The revenue which must defray, not only the expense of defending the
society and of supporting the dignity of the chief magistrate, but all the
other necessary expenses of government, for which the constitution of the
state has not provided any particular revenue may be drawn, either, first,
from some fund which peculiarly belongs to the sovereign or commonwealth,
and which is independent of the revenue of the people; or, secondly, from
the revenue of the people.
PART I. Of the Funds, or Sources, of Revenue, which may peculiarly belong
to the Sovereign or Commonwealth.
The funds, or sources, of revenue, which may peculiarly belong to the
sovereign or commonwealth, must consist, either in stock, or in land.
The sovereign, like, any other owner of stock, may derive a revenue from
it, either by employing it himself, or by lending it. His revenue is, in
the one case, profit, in the other interest.
The revenue of a Tartar or Arabian chief consists in profit. It arises
principally from the milk and increase of his own herds and flocks, of
which he himself superintends the management, and is the principal
shepherd or herdsman of his own horde or tribe. It is, however, in this
earliest and rudest state of civil government only, that profit has ever
made the principal part of the public revenue of a monarchical state.
Small republics have sometimes derived a considerable revenue from the
profit of mercantile projects. The republic of Hamburgh is said to do so
from the profits of a public wine-cellar and apothecary’s shop. {See
Memoires concernant les Droits et Impositions en Europe, tome i. page 73.
This work was compiled by the order of the court, for the use of a
commission employed for some years past in considering the proper means
for reforming the finances of France. The account of the French taxes,
which takes up three volumes in quarto, may be regarded as perfectly
authentic. That of those of other European nations was compiled from such
information as the French ministers at the different courts could procure.
It is much shorter, and probably not quite so exact as that of the French
taxes.} That state cannot be very great, of which the sovereign has
leisure to carry on the trade of a wine-merchant or an apothecary. The
profit of a public bank has been a source of revenue to more considerable
states. It has been so, not only to Hamburgh, but to Venice and Amsterdam.
A revenue of this kind has even by some people been thought not below the
attention of so great an empire as that of Great Britain. Reckoning the
ordinary dividend of the bank of England at five and a-half per cent., and
its capital at ten millions seven hundred and eighty thousand pounds, the
neat annual profit, after paying the expense of management, must amount,
it is said, to five hundred and ninety-two thousand nine hundred pounds.
Government, it is pretended, could borrow this capital at three per cent.
interest, and, by taking the management of the bank into its own hands,
might make a clear profit of two hundred and sixty-nine thousand five
hundred pounds a-year. The orderly, vigilant, and parsimonious
administration of such aristocracies as those of Venice and Amsterdam, is
extremely proper, it appears from experience, for the management of a
mercantile project of this kind. But whether such a government as that of
England, which, whatever may be its virtues, has never been famous for
good economy; which, in time of peace, has generally conducted itself with
the slothful and negligent profusion that is, perhaps, natural to
monarchies; and, in time of war, has constantly acted with all the
thoughtless extravagance that democracies are apt to fall into, could be
safely trusted with the management of such a project, must at least be a
good deal more doubtful.
The post-office is properly a mercantile project. The government advances
the expense of establishing the different offices, and of buying or hiring
the necessary horses or carriages, and is repaid, with a large profit, by
the duties upon what is carried. It is, perhaps, the only mercantile
project which has been successfully managed by, I believe, every sort of
government. The capital to be advanced is not very considerable. There is
no mystery in the business. The returns are not only certain but
immediate.
Princes, however, have frequently engaged in many other mercantile
projects, and have been willing, like private persons, to mend their
fortunes, by becoming adventurers in the common branches of trade. They
have scarce ever succeeded. The profusion with which the affairs of
princes are always managed, renders it almost impossible that they should.
The agents of a prince regard the wealth of their master as inexhaustible;
are careless at what price they buy, are careless at what price they sell,
are careless at what expense they transport his goods from one place to
another. Those agents frequently live with the profusion of princes; and
sometimes, too, in spite of that profusion, and by a proper method of
making up their accounts, acquire the fortunes of princes. It was thus, as
we are told by Machiavel, that the agents of Lorenzo of Medicis, not a
prince of mean abilities, carried on his trade. The republic of Florence
was several times obliged to pay the debt into which their extravagance
had involved him. He found it convenient, accordingly to give up the
business of merchant, the business to which his family had originally owed
their fortune, and, in the latter part of his life, to employ both what
remained of that fortune, and the revenue of the state, of which he had
the disposal, in projects and expenses more suitable to his station.
No two characters seem more inconsistent than those of trader and
sovereign. If the trading spirit of the English East India company renders
them very bad sovereigns, the spirit of sovereignty seems to have rendered
them equally bad traders. While they were traders only, they managed their
trade successfully, and were able to pay from their profits a moderate
dividend to the proprietors of their stock. Since they became sovereigns,
with a revenue which, it is said, was originally more than three millions
sterling, they have been obliged to beg the ordinary assistance of
government, in order to avoid immediate bankruptcy. In their former
situation, their servants in India considered themselves as the clerks of
merchants; in their present situation, those servants consider themselves
as the ministers of sovereigns.
A state may sometimes derive some part of its public revenue from the
interest of money, as well as from the profits of stock. If it has amassed
a treasure, it may lend a part of that treasure, either to foreign states,
or to its own subjects.
The canton of Berne derives a considerable revenue by lending a part of
its treasure to foreign states, that is, by placing it in the public funds
of the different indebted nations of Europe, chiefly in those of France
and England. The security of this revenue must depend, first, upon the
security of the funds in which it is placed, or upon the good faith of the
government which has the management of them; and, secondly, upon the
certainty or probability of the continuance of peace with the debtor
nation. In the case of a war, the very first act of hostility on the part
of the debtor nation might be the forfeiture of the funds of its credit.
This policy of lending money to foreign states is, so far as I know
peculiar to the canton of Berne.
The city of Hamburgh {See Memoire concernant les Droites et Impositions en
Europe tome i p. 73.}has established a sort of public pawn-shop, which
lends money to the subjects of the state, upon pledges, at six per cent.
interest. This pawn-shop, or lombard, as it is called, affords a revenue,
it is pretended, to the state, of a hundred and fifty thousand crowns,
which, at four and sixpence the crown, amounts to £33,750 sterling.
The government of Pennsylvania, without amassing any treasure, invented a
method of lending, not money, indeed, but what is equivalent to money, to
its subjects. By advancing to private people, at interest, and upon land
security to double the value, paper bills of credit, to be redeemed
fifteen years after their date; and, in the mean time, made transferable
from hand to hand, like banknotes, and declared by act of assembly to be a
legal tender in all payments from one inhabitant of the province to
another, it raised a moderate revenue, which went a considerable way
towards defraying an annual expense of about £4,500, the whole ordinary
expense of that frugal and orderly government. The success of an expedient
of this kind must have depended upon three different circumstances: first,
upon the demand for some other instrument of commerce, besides gold and
silver money, or upon the demand for such a quantity of consumable stock
as could not be had without sending abroad the greater part of their gold
and silver money, in order to purchase it; secondly, upon the good credit
of the government which made use of this expedient; and, thirdly, upon the
moderation with which it was used, the whole value of the paper bills of
credit never exceeding that of the gold and silver money which would have
been necessary for carrying on their circulation, had there been no paper
bills of credit. The same expedient was, upon different occasions, adopted
by several other American colonies; but, from want of this moderation, it
produced, in the greater part of them, much more disorder than
conveniency.
The unstable and perishable nature of stock and credit, however, renders
them unfit to be trusted to as the principal funds of that sure, steady,
and permanent revenue, which can alone give security and dignity to
government. The government of no great nation, that was advanced beyond
the shepherd state, seems ever to have derived the greater part of its
public revenue from such sources.
Land is a fund of more stable and permanent nature; and the rent of public
lands, accordingly, has been the principal source of the public revenue of
many a great nation that was much advanced beyond the shepherd state. From
the produce or rent of the public lands, the ancient republics of Greece
and Italy derived for a long time the greater part of that revenue which
defrayed the necessary expenses of the commonwealth. The rent of the crown
lands constituted for a long time the greater part of the revenue of the
ancient sovereigns of Europe.
War, and the preparation for war, are the two circumstances which, in
modern times, occasion the greater part of the necessary expense or all
great states. But in the ancient republics of Greece and Italy, every
citizen was a soldier, and both served, and prepared himself for service,
at his own expense. Neither of those two circumstances, therefore, could
occasion any very considerable expense to the state. The rent of a very
moderate landed estate might be fully sufficient for defraying all the
other necessary expenses of government.
In the ancient monarchies of Europe, the manners and customs of the time
sufficiently prepared the great body of the people for war; and when they
took the field, they were, by the condition of their feudal tenures, to be
maintained either at their own expense, or at that of their immediate
lords, without bringing any new charge upon the sovereign. The other
expenses of government were, the greater part of them, very moderate. The
administration of justice, it has been shewn, instead of being a cause of
expense was a source of revenue. The labour of the country people, for
three days before, and for three days after, harvest, was thought a fund
sufficient for making and maintaining all the bridges, highways, and other
public works, which the commerce of the country was supposed to require.
In those days the principal expense of the sovereign seems to have
consisted in the maintenance of his own family and household. The officers
of his household, accordingly, were then the great officers of state. The
lord treasurer received his rents. The lord steward and lord chamberlain
looked after the expense of his family. The care of his stables was
committed to the lord constable and the lord marshal. His houses were all
built in the form of castles, and seem to have been the principal
fortresses which he possessed. The keepers of those houses or castles
might be considered as a sort of military governors. They seem to have
been the only military officers whom it was necessary to maintain in time
of peace. In these circumstances, the rent of a great landed estate might,
upon ordinary occasions, very well defray all the necessary expenses of
government.
In the present state of the greater part of the civilized monarchies of
Europe, the rent of all the lands in the country, managed as they probably
would be, if they all belonged to one proprietor, would scarce, perhaps,
amount to the ordinary revenue which they levy upon the people even in
peaceable times. The ordinary revenue of Great Britain, for example,
including not only what is necessary for defraying the current expense of
the year, but for paying the interest of the public debts, and for sinking
a part of the capital of those debts, amounts to upwards of ten millions
a-year. But the land tax, at four shillings in the pound, falls short of
two millions a-year. This land tax, as it is called however, is supposed
to be one-fifth, not only of the rent of all the land, but of that of all
the houses, and of the interest of all the capital stock of Great Britain,
that part of it only excepted which is either lent to the public, or
employed as farming stock in the cultivation of land. A very considerable
part of the produce of this tax arises from the rent of houses and the
interest of capital stock. The land tax of the city of London, for
example, at four shillings in the pound, amounts to £123,399: 6: 7; that
of the city of Westminster to £63,092: 1: 5; that of the palaces of
Whitehall and St. James’s, to £30,754: 6: 3. A certain proportion of the
land tax is, in the same manner, assessed upon all the other cities and
towns corporate in the kingdom; and arises almost altogether, either from
the rent of houses, or from what is supposed to be the interest of trading
and capital stock. According to the estimation, therefore, by which Great
Britain is rated to the land tax, the whole mass of revenue arising from
the rent of all the lands, from that of all the houses, and from the
interest of all the capital stock, that part of it only excepted which is
either lent to the public, or employed in the cultivation of land, does
not exceed ten millions sterling a-year, the ordinary revenue which
government levies upon the people, even in peaceable times. The estimation
by which Great Britain is rated to the land tax is, no doubt, taking the
whole kingdom at an average, very much below the real value; though in
several particular counties and districts it is said to be nearly equal to
that value. The rent of the lands alone, exclusive of that of houses and
of the interest of stock, has by many people been estimated at twenty
millions; an estimation made in a great measure at random, and which, I
apprehend, is as likely to be above as below the truth. But if the lands
of Great Britain, in the present state of their cultivation, do not afford
a rent of more than twenty millions a-year, they could not well afford the
half, most probably not the fourth part of that rent, if they all belonged
to a single proprietor, and were put under the negligent, expensive, and
oppressive management of his factors and agents. The crown lands of Great
Britain do not at present afford the fourth part of the rent which could
probably be drawn from them if they were the property of private persons.
If the crown lands were more extensive, it is probable, they would be
still worse managed.
The revenue which the great body of the people derives from land is, in
proportion, not to the rent, but to the produce of the land. The whole
annual produce of the land of every country, if we except what is reserved
for seed, is either annually consumed by the great body of the people, or
exchanged for something else that is consumed by them. Whatever keeps down
the produce of the land below what it would otherwise rise to, keeps down
the revenue of the great body of the people, still more than it does that
of the proprietors of land. The rent of land, that portion of the produce
which belongs to the proprietors, is scarce anywhere in Great Britain
supposed to be more than a third part of the whole produce. If the land
which, in one state of cultivation, affords a revenue of ten millions
sterling a-year, would in another afford a rent of twenty millions; the
rent being, in both cases, supposed a third part of the produce, the
revenue of the proprietors would be less than it otherwise might be, by
ten millions a-year only; but the revenue of the great body of the people
would be less than it otherwise might be, by thirty millions a-year,
deducting only what would be necessary for seed. The population of the
country would be less by the number of people which thirty millions
a-year, deducting always the seed, could maintain, according to the
particular mode of living, and expense which might take place in the
different ranks of men, among whom the remainder was distributed.
Though there is not at present in Europe, any civilized state of any kind
which derives the greater part of its public revenue from the rent of
lands which are the property of the state; yet, in all the great
monarchies of Europe, there are still many large tracts of land which
belong to the crown. They are generally forest, and sometimes forests
where, after travelling several miles, you will scarce find a single tree;
a mere waste and loss of country, in respect both of produce and
population. In every great monarchy of Europe, the sale of the crown lands
would produce a very large sum of money, which, if applied to the payment
of the public debts, would deliver from mortgage a much greater revenue
than any which those lands have ever afforded to the crown. In countries
where lands, improved and cultivated very highly, and yielding, at the
time of sale, as great a rent as can easily be got from them, commonly
sell at thirty years purchase; the unimproved, uncultivated, and
low-rented crown lands, might well be expected to sell at forty, fifty, or
sixty years purchase. The crown might immediately enjoy the revenue which
this great price would redeem from mortgage. In the course of a few years,
it would probably enjoy another revenue. When the crown lands had become
private property, they would, in the course of a few years, become well
improved and well cultivated. The increase of their produce would increase
the population of the country, by augmenting the revenue and consumption
of the people. But the revenue which the crown derives from the duties or
custom and excise, would necessarily increase with the revenue and
consumption of the people.
The revenue which, in any civilized monarchy, the crown derives from the
crown lands, though it appears to cost nothing to individuals, in reality
costs more to the society than perhaps any other equal revenue which the
crown enjoys. It would, in all cases, be for the interest of the society,
to replace this revenue to the crown by some other equal revenue, and to
divide the lands among the people, which could not well be done better,
perhaps, than by exposing them to public sale.
Lands, for the purposes of pleasure and magnificence, parks, gardens,
public walks, etc. possessions which are everywhere considered as causes
of expense, not as sources of revenue, seem to be the only lands which, in
a great and civilized monarchy, ought to belong to the crown.
Public stock and public lands, therefore, the two sources of revenue which
may peculiarly belong to the sovereign or commonwealth, being both
improper and insufficient funds for defraying the necessary expense of any
great and civilized state; it remains that this expense must, the greater
part of it, be defrayed by taxes of one kind or another; the people
contributing a part of their own private revenue, in order to make up a
public revenue to the sovereign or commonwealth.
PART II. Of Taxes.
The private revenue of individuals, it has been shown in the first book of
this Inquiry, arises, ultimately from three different sources; rent,
profit, and wages. Every tax must finally be paid from some one or other
of those three different sources of revenue, or from all of them
indifferently. I shall endeavour to give the best account I can, first, of
those taxes which, it is intended should fall upon rent; secondly, of
those which, it is intended should fall upon profit; thirdly, of those
which, it is intended should fall upon wages; and fourthly, of those
which, it is intended should fall indifferently upon all those three
different sources of private revenue. The particular consideration of each
of these four different sorts of taxes will divide the second part of the
present chapter into four articles, three of which will require several
other subdivisions. Many of these taxes, it will appear from the following
review, are not finally paid from the fund, or source of revenue, upon
which it is intended they should fall.
Before I enter upon the examination of particular taxes, it is necessary
to premise the four following maxims with regard to taxes in general.
1. The subjects of every state ought to contribute towards the support of
the government, as nearly as possible, in proportion to their respective
abilities; that is, in proportion to the revenue which they respectively
enjoy under the protection of the state. The expense of government to the
individuals of a great nation, is like the expense of management to the
joint tenants of a great estate, who are all obliged to contribute in
proportion to their respective interests in the estate. In the observation
or neglect of this maxim, consists what is called the equality or
inequality of taxation. Every tax, it must be observed once for all, which
falls finally upon one only of the three sorts of revenue above mentioned,
is necessarily unequal, in so far as it does not affect the other two. In
the following examination of different taxes, I shall seldom take much
farther notice of this sort of inequality; but shall, in most cases,
confine my observations to that inequality which is occasioned by a
particular tax falling unequally upon that particular sort of private
revenue which is affected by it.
2. The tax which each individual is bound to pay, ought to be certain and
not arbitrary. The time of payment, the manner of payment, the quantity to
be paid, ought all to be clear and plain to the contributor, and to every
other person. Where it is otherwise, every person subject to the tax is
put more or less in the power of the tax-gatherer, who can either
aggravate the tax upon any obnoxious contributor, or extort, by the terror
of such aggravation, some present or perquisite to himself. The
uncertainty of taxation encourages the insolence, and favours the
corruption, of an order of men who are naturally unpopular, even where
they are neither insolent nor corrupt. The certainty of what each
individual ought to pay is, in taxation, a matter of so great importance,
that a very considerable degree of inequality, it appears, I believe, from
the experience of all nations, is not near so great an evil as a very
small degree of uncertainty.
3. Every tax ought to be levied at the time, or in the manner, in which it
is most likely to be convenient for the contributor to pay it. A tax upon
the rent of land or of houses, payable at the same term at which such
rents are usually paid, is levied at the time when it is most likely to be
convenient for the contributor to pay; or when he is most likely to have
wherewithall to pay. Taxes upon such consumable goods as are articles of
luxury, are all finally paid by the consumer, and generally in a manner
that is very convenient for him. He pays them by little and little, as he
has occasion to buy the goods. As he is at liberty too, either to buy or
not to buy, as he pleases, it must be his own fault if he ever suffers any
considerable inconveniency from such taxes.
4. Every tax ought to be so contrived, as both to take out and to keep out
of the pockets of the people as little as possible, over and above what it
brings into the public treasury of the state. A tax may either take out or
keep out of the pockets of the people a great deal more than it brings
into the public treasury, in the four following ways. First, the levying
of it may require a great number of officers, whose salaries may eat up
the greater part of the produce of the tax, and whose perquisites may
impose another additional tax upon the people. Secondly, it may obstruct
the industry of the people, and discourage them from applying to certain
branches of business which might give maintenance and employment to great
multitudes. While it obliges the people to pay, it may thus diminish, or
perhaps destroy, some of the funds which might enable them more easily to
do so. Thirdly, by the forfeitures and other penalties which those
unfortunate individuals incur, who attempt unsuccessfully to evade the
tax, it may frequently ruin them, and thereby put an end to the benefit
which the community might have received from the employment of their
capitals. An injudicious tax offers a great temptation to smuggling. But
the penalties of smuggling must arise in proportion to the temptation. The
law, contrary to all the ordinary principles of justice, first creates the
temptation, and then punishes those who yield to it; and it commonly
enhances the punishment, too, in proportion to the very circumstance which
ought certainly to alleviate it, the temptation to commit the crime. {See
Sketches of the History of Man page 474, and Seq.} Fourthly, by subjecting
the people to the frequent visits and the odious examination of the
tax-gatherers, it may expose them to much unnecessary trouble, vexation,
and oppression; and though vexation is not, strictly speaking, expense, it
is certainly equivalent to the expense at which every man would be willing
to redeem himself from it. It is in some one or other of these four
different ways, that taxes are frequently so much more burdensome to the
people than they are beneficial to the sovereign.
The evident justice and utility of the foregoing maxims have recommended
them, more or less, to the attention of all nations. All nations have
endeavoured, to the best of their judgment, to render their taxes as equal
as they could contrive; as certain, as convenient to the contributor, both
the time and the mode of payment, and in proportion to the revenue which
they brought to the prince, as little burdensome to the people. The
following short review of some of the principal taxes which have taken
place in different ages and countries, will show, that the endeavours of
all nations have not in this respect been equally successful.
ARTICLE I.—Taxes upon Rent—Taxes upon the Rent of Land.
A tax upon the rent of land may either be imposed according to a certain
canon, every district being valued at a curtain rent, which valuation is
not afterwards to be altered; or it may be imposed in such a manner, as to
vary with every variation in the real rent of the land, and to rise or
fall with the improvement or declension of its cultivation.
A land tax which, like that of Great Britain, is assessed upon each
district according to a certain invariable canon, though it should be
equal at the time of its first establishment, necessarily becomes unequal
in process of time, according to the unequal degrees of improvement or
neglect in the cultivation of the different parts of the country. In
England, the valuation, according to which the different counties and
parishes were assessed to the land tax by the 4th of William and Mary, was
very unequal even at its first establishment. This tax, therefore, so far
offends against the first of the four maxims above mentioned. It is
perfectly agreeable to the other three. It is perfectly certain. The time
of payment for the tax, being the same as that for the rent, is as
convenient as it can be to the contributor. Though the landlord is, in all
cases, the real contributor, the tax is commonly advanced by the tenant,
to whom the landlord is obliged to allow it in the payment of the rent.
This tax is levied by a much smaller number of officers than any other
which affords nearly the same revenue. As the tax upon each district does
not rise with the rise of the rent, the sovereign does not share in the
profits of the landlord’s improvements. Those improvements sometimes
contribute, indeed, to the discharge of the other landlords of the
district. But the aggravation of the tax, which this may sometimes
occasion upon a particular estate, is always so very small, that it never
can discourage those improvements, nor keep down the produce of the land
below what it would otherwise rise to. As it has no tendency to diminish
the quantity, it can have none to raise the price of that produce. It does
not obstruct the industry of the people; it subjects the landlord to no
other inconveniency besides the unavoidable one of paying the tax. The
advantage, however, which the land-lord has derived from the invariable
constancy of the valuation, by which all the lands of Great Britain are
rated to the land-tax, has been principally owing to some circumstances
altogether extraneous to the nature of the tax.
It has been owing in part, to the great prosperity of almost every part of
the country, the rents of almost all the estates of Great Britain having,
since the time when this valuation was first established, been continually
rising, and scarce any of them having fallen. The landlords, therefore,
have almost all gained the difference between the tax which they would
have paid, according to the present rent of their estates, and that which
they actually pay according to the ancient valuation. Had the state of the
country been different, had rents been gradually falling in consequence of
the declension of cultivation, the landlords would almost all have lost
this difference. In the state of things which has happened to take place
since the revolution, the constancy of the valuation has been advantageous
to the landlord and hurtful to the sovereign. In a different state of
things it might have been advantageous to the sovereign and hurtful to the
landlord.
As the tax is made payable in money, so the valuation of the land is
expressed in money. Since the establishment of this valuation, the value
of silver has been pretty uniform, and there has been no alteration in the
standard of the coin, either as to weight or fineness. Had silver risen
considerably in its value, as it seems to have done in the course of the
two centuries which preceded the discovery of the mines of America, the
constancy of the valuation might have proved very oppressive to the
landlord. Had silver fallen considerably in its value, as it certainly did
for about a century at least after the discovery of those mines, the same
constancy of valuation would have reduced very much this branch of the
revenue of the sovereign. Had any considerable alteration been made in the
standard of the money, either by sinking the same quantity of silver to a
lower denomination, or by raising it to a higher; had an ounce of silver,
for example, instead of being coined into five shillings and two pence,
been coined either into pieces which bore so low a denomination as two
shillings and seven pence, or into pieces which bore so high a one as ten
shillings and four pence, it would, in the one case, have hurt the revenue
of the proprietor, in the other that of the sovereign.
In circumstances, therefore, somewhat different from those which have
actually taken place, this constancy of valuation might have been a very
great inconveniency, either to the contributors or to the commonwealth. In
the course of ages, such circumstances, however, must at some time or
other happen. But though empires, like all the other works of men, have
all hitherto proved mortal, yet every empire aims at immortality. Every
constitution, therefore, which it is meant should be as permanent as the
empire itself, ought to be convenient, not in certain circumstances only,
but in all circumstances; or ought to be suited, not to those
circumstances which are transitory, occasional, or accidental, but to
those which are necessary, and therefore always the same.
A tax upon the rent of land, which varies with every variation of the
rent, or which rises and falls according to the improvement or neglect of
cultivation, is recommended by that sect of men of letters in France, who
call themselves the economists, as the most equitable of all taxes. All
taxes, they pretend, fall ultimately upon the rent of land, and ought,
therefore, to be imposed equally upon the fund which must finally pay
them. That all taxes ought to fall as equally as possible upon the fund
which must finally pay them, is certainly true. But without entering into
the disagreeable discussion of the metaphysical arguments by which they
support their very ingenious theory, it will sufficiently appear, from the
following review, what are the taxes which fall finally upon the rent of
the land, and what are those which fall finally upon some other fund.
In the Venetian territory, all the arable lands which are given in lease
to farmers are taxed at a tenth of the rent. {Memoires concernant les
Droits, p. 240, 241.} The leases are recorded in a public register, which
is kept by the officers of revenue in each province or district. When the
proprietor cultivates his own lands, they are valued according to an
equitable estimation, and he is allowed a deduction of one-fifth of the
tax; so that for such land he pays only eight instead of ten per cent. of
the supposed rent.
A land-tax of this kind is certainly more equal than the land-tax of
England. It might not, perhaps, be altogether so certain, and the
assessment of the tax might frequently occasion a good deal more trouble
to the landlord. It might, too, be a good deal more expensive in the
levying.
Such a system of administration, however, might, perhaps, be contrived, as
would in a great measure both prevent this uncertainty, and moderate this
expense.
The landlord and tenant, for example, might jointly be obliged to record
their lease in a public register. Proper penalties might be enacted
against concealing or misrepresenting any of the conditions; and if part
of those penalties were to be paid to either of the two parties who
informed against and convicted the other of such concealment or
misrepresentation, it would effectually deter them from combining together
in order to defraud the public revenue. All the conditions of the lease
might be sufficiently known from such a record.
Some landlords, instead of raising the rent, take a fine for the renewal
of the lease. This practice is, in most cases, the expedient of a
spendthrift, who, for a sum of ready money sells a future revenue of much
greater value. It is, in most cases, therefore, hurtful to the landlord;
it is frequently hurtful to the tenant; and it is always hurtful to the
community. It frequently takes from the tenant so great a part of his
capital, and thereby diminishes so much his ability to cultivate the land,
that he finds it more difficult to pay a small rent than it would
otherwise have been to pay a great one. Whatever diminishes his ability to
cultivate, necessarily keeps down, below what it would otherwise have
been, the most important part of the revenue of the community. By
rendering the tax upon such fines a good deal heavier than upon the
ordinary rent, this hurtful practice might be discouraged, to the no small
advantage of all the different parties concerned, of the landlord, of the
tenant, of the sovereign, and of the whole community.
Some leases prescribe to the tenant a certain mode of cultivation, and a
certain succession of crops, during the whole continuance of the lease.
This condition, which is generally the effect of the landlord’s conceit of
his own superior knowledge (a conceit in most cases very ill-founded),
ought always to be considered as an additional rent, as a rent in service,
instead of a rent in money. In order to discourage the practice, which is
generally a foolish one, this species of rent might be valued rather high,
and consequently taxed somewhat higher than common money-rents.
Some landlords, instead of a rent in money, require a rent in kind, in
corn, cattle, poultry, wine, oil, etc.; others, again, require a rent in
service. Such rents are always more hurtful to the tenant than beneficial
to the landlord. They either take more, or keep more out of the pocket of
the former, than they put into that of the latter. In every country where
they take place, the tenants are poor and beggarly, pretty much according
to the degree in which they take place. By valuing, in the same manner,
such rents rather high, and consequently taxing them somewhat higher than
common money-rents, a practice which is hurtful to the whole community,
might, perhaps, be sufficiently discouraged.
When the landlord chose to occupy himself a part of his own lands, the
rent might be valued according to an equitable arbitration of the farmers
and landlords in the neighbourhood, and a moderate abatement of the tax
might be granted to him, in the same manner as in the Venetian territory,
provided the rent of the lands which he occupied did not exceed a certain
sum. It is of importance that the landlord should be encouraged to
cultivate a part of his own land. His capital is generally greater than
that of the tenant, and, with less skill, he can frequently raise a
greater produce. The landlord can afford to try experiments, and is
generally disposed to do so. His unsuccessful experiments occasion only a
moderate loss to himself. His successful ones contribute to the
improvement and better cultivation of the whole country. It might be of
importance, however, that the abatement of the tax should encourage him to
cultivate to a certain extent only. If the landlords should, the greater
part of them, be tempted to farm the whole of their own lands, the country
(instead of sober and industrious tenants, who are bound by their own
interest to cultivate as well as their capital and skill will allow them)
would be filled with idle and profligate bailiffs, whose abusive
management would soon degrade the cultivation, and reduce the annual
produce of the land, to the diminution, not only of the revenue of their
masters, but of the most important part of that of the whole society.
Such a system of administration might, perhaps, free a tax of this kind
from any degree of uncertainty, which could occasion either oppression or
inconveniency to the contributor; and might, at the same time, serve to
introduce into the common management of land such a plan of policy as
might contribute a good deal to the general improvement and good
cultivation of the country.
The expense of levying a land-tax, which varied with every variation of
the rent, would, no doubt, be somewhat greater than that of levying one
which was always rated according to a fixed valuation. Some additional
expense would necessarily be incurred, both by the different
register-offices which it would be proper to establish in the different
districts of the country, and by the different valuations which might
occasionally be made of the lands which the proprietor chose to occupy
himself. The expense of all this, however, might be very moderate, and
much below what is incurred in the levying of many other taxes, which
afford a very inconsiderable revenue in comparison of what might easily be
drawn from a tax of this kind.
The discouragement which a variable land-tax of this kind might give to
the improvement of land, seems to be the most important objection which
can be made to it. The landlord would certainly be less disposed to
improve, when the sovereign, who contributed nothing to the expense, was
to share in the profit of the improvement. Even this objection might,
perhaps, be obviated, by allowing the landlord, before he began his
improvement, to ascertain, in conjunction with the officers of revenue,
the actual value of his lands, according to the equitable arbitration of a
certain number of landlords and farmers in the neighbourhood, equally
chosen by both parties: and by rating him, according to this valuation,
for such a number of years as might be fully sufficient for his complete
indemnification. To draw the attention of the sovereign towards the
improvement of the land, from a regard to the increase of his own revenue,
is one or the principal advantages proposed by this species of land-tax.
The term, therefore, allowed, for the indemnification of the landlord,
ought not to be a great deal longer than what was necessary for that
purpose, lest the remoteness of the interest should discourage too much
this attention. It had better, however, be somewhat too long, than in any
respect too short. No incitement to the attention of the sovereign can
ever counterbalance the smallest discouragement to that of the landlord.
The attention of the sovereign can be, at best, but a very general and
vague consideration of what is likely to contribute to the better
cultivation of the greater part of his dominions. The attention of the
landlord is a particular and minute consideration of what is likely to be
the most advantageous application of every inch of ground upon his estate.
The principal attention of the sovereign ought to be, to encourage, by
every means in his power, the attention both of the landlord and of the
farmer, by allowing both to pursue their own interest in their own way,
and according to their own judgment; by giving to both the most perfect
security that they shall enjoy the full recompence of their own industry;
and by procuring to both the most extensive market for every part of their
produce, in consequence of establishing the easiest and safest
communications, both by land and by water, through every part of his own
dominions, as well as the most unbounded freedom of exportation to the
dominions of all other princes.
If, by such a system of administration, a tax of this kind could be so
managed as to give, not only no discouragement, but, on the contrary, some
encouragement to the improvement or land, it does not appear likely to
occasion any other inconveniency to the landlord, except always the
unavoidable one of being obliged to pay the tax. In all the variations of
the state of the society, in the improvement and in the declension of
agriculture; in all the variations in the value of silver, and in all
those in the standard of the coin, a tax of this kind would, of its own
accord, and without any attention of government, readily suit itself to
the actual situation of things, and would be equally just and equitable in
all those different changes. It would, therefore, be much more proper to
be established as a perpetual and unalterable regulation, or as what is
called a fundamental law of the commonwealth, than any tax which was
always to be levied according to a certain valuation.
Some states, instead of the simple and obvious expedient of a register of
leases, have had recourse to the laborious and expensive one of an actual
survey and valuation of all the lands in the country. They have suspected,
probably, that the lessor and lessee, in order to defraud the public
revenue, might combine to conceal the real terms of the lease.
Doomsday-book seems to have been the result of a very accurate survey of
this kind.
In the ancient dominions of the king of Prussia, the land-tax is assessed
according to an actual survey and valuation, which is reviewed and altered
from time to time. {Memoires concernant les Droits, etc. tom, i. p. 114,
115, 116, etc.} According to that valuation, the lay proprietors pay from
twenty to twenty-five per cent. of their revenue; ecclesiastics from forty
to forty-five per cent. The survey and valuation of Silesia was made by
order of the present king, it is said, with great accuracy. According to
that valuation, the lands belonging to the bishop of Breslaw are taxed at
twenty-five per cent. of their rent. The other revenues of the
ecclesiastics of both religions at fifty per cent. The commanderies of the
Teutonic order, and of that of Malta, at forty per cent. Lands held by a
noble tenure, at thirty-eight and one-third per cent. Lands held by a base
tenure, at thirty-five and one-third per cent.
The survey and valuation of Bohemia is said to have been the work of more
than a hundred years. It was not perfected till after the peace of 1748,
by the orders of the present empress queen. {Id. tom i. p.85, 84.} The
survey of the duchy of Milan, which was begun in the time of Charles VI.,
was not perfected till after 1760. It is esteemed one of the most
accurate that has ever been made. The survey of Savoy and Piedmont was
executed under the orders of the late king of Sardinia. {Id. p. 280,
etc.; also p, 287. etc. to 316.}
In the dominions of the king of Prussia, the revenue of the church is
taxed much higher than that of lay proprietors. The revenue of the church
is, the greater part of it, a burden upon the rent of land. It seldom
happens that any part of it is applied towards the improvement of land; or
is so employed as to contribute, in any respect, towards increasing the
revenue of the great body of the people. His Prussian majesty had
probably, upon that account, thought it reasonable that it should
contribute a good deal more towards relieving the exigencies of the state.
In some countries, the lands of the church are exempted from all taxes. In
others, they are taxed more lightly than other lands. In the duchy of
Milan, the lands which the church possessed before 1575, are rated to the
tax at a third only or their value.
In Silesia, lands held by a noble tenure are taxed three per cent. higher
than those held by a base tenure. The honours and privileges of different
kinds annexed to the former, his Prussian majesty had probably imagined,
would sufficiently compensate to the proprietor a small aggravation of the
tax; while, at the same time, the humiliating inferiority of the latter
would be in some measure alleviated, by being taxed somewhat more lightly.
In other countries, the system of taxation, instead of alleviating,
aggravates this inequality. In the dominions of the king of Sardinia, and
in those provinces of France which are subject to what is called the real
or predial taille, the tax falls altogether upon the lands held by a base
tenure. Those held by a noble one are exempted.
A land tax assessed according to a general survey and valuation, how equal
soever it may be at first, must, in the course of a very moderate period
of time, become unequal. To prevent its becoming so would require the
continual and painful attention of government to all the variations in the
state and produce of every different farm in the country. The governments
of Prussia, of Bohemia, of Sardinia, and of the duchy of Milan, actually
exert an attention of this kind; an attention so unsuitable to the nature
of government, that it is not likely to be of long continuance, and which,
if it is continued, will probably, in the long-run, occasion much more
trouble and vexation than it can possibly bring relief to the
contributors.
In 1666, the generality of Montauban was assessed to the real or predial
taille, according, it is said, to a very exact survey and valuation.
{Memoires concernant les Droits, etc. tom. ii p. 139, etc.} By 1727, this
assessment had become altogether unequal. In order to remedy this
inconveniency, government has found no better expedient, than to impose
upon the whole generality an additional tax of a hundred and twenty
thousand livres. This additional tax is rated upon all the different
districts subject to the taille according to the old assessment. But it is
levied only upon those which, in the actual state of things, are by that
assessment under-taxed; and it is applied to the relief of those which, by
the same assessment, are over-taxed. Two districts, for example, one of
which ought, in the actual state of things, to be taxed at nine hundred,
the other at eleven hundred livres, are, by the old assessment, both taxed
at a thousand livres. Both these districts are, by the additional tax,
rated at eleven hundred livres each. But this additional tax is levied
only upon the district under-charged, and it is applied altogether to the
relief of that overcharged, which consequently pays only nine hundred
livres. The government neither gains nor loses by the additional tax,
which is applied altogether to remedy the inequalities arising from the
old assessment. The application is pretty much regulated according to the
discretion of the intendant of the generality, and must, therefore, be in
a great measure arbitrary.
Taxes which are proportioned, not in the Rent, but to the Produce of Land.
Taxes upon the produce of land are, in reality, taxes upon the rent; and
though they may be originally advanced by the farmer, are finally paid by
the landlord. When a certain portion of the produce is to be paid away for
a tax, the farmer computes as well as he can, what the value of this
portion is, one year with another, likely to amount to, and he makes a
proportionable abatement in the rent which he agrees to pay to the
landlord. There is no farmer who does not compute beforehand what the
church tythe, which is a land tax of this kind, is, one year with another,
likely to amount to.
The tythe, and every other land tax of this kind, under the appearance of
perfect equality, are very unequal taxes; a certain portion of the produce
being in different situations, equivalent to a very different portion of
the rent. In some very rich lands, the produce is so great, that the one
half of it is fully sufficient to replace to the farmer his capital
employed in cultivation, together with the ordinary profits of farming
stock in the neighbourhood. The other half, or, what comes to the same
thing, the value of the other half, he could afford to pay as rent to the
landlord, if there was no tythe. But if a tenth of the produce is taken
from him in the way of tythe, he must require an abatement of the fifth
part of his rent, otherwise he cannot get back his capital with the
ordinary profit. In this case, the rent of the landlord, instead of
amounting to a half, or five-tenths of the whole produce, will amount only
to four-tenths of it. In poorer lands, on the contrary, the produce is
sometimes so small, and the expense of cultivation so great, that it
requires four-fifths of the whole produce, to replace to the farmer his
capital with the ordinary profit. In this case, though there was no tythe,
the rent of the landlord could amount to no more than one-fifth or
two-tenths of the whole produce. But if the farmer pays one-tenth of the
produce in the way of tythe, he must require an equal abatement of the
rent of the landlord, which will thus be reduced to one-tenth only of the
whole produce. Upon the rent of rich lands the tythe may sometimes be a
tax of no more than one-fifth part, or four shillings in the pound;
whereas upon that of poorer lands, it may sometimes be a tax of one half,
or of ten shillings in the pound.
The tythe, as it is frequently a very unequal tax upon the rent, so it is
always a great discouragement, both to the improvements of the landlord,
and to the cultivation of the farmer. The one cannot venture to make the
most important, which are generally the most expensive improvements; nor
the other to raise the most valuable, which are generally, too, the most
expensive crops; when the church, which lays out no part of the expense,
is to share so very largely in the profit. The cultivation of madder was,
for a long time, confined by the tythe to the United Provinces, which,
being presbyterian countries, and upon that account exempted from this
destructive tax, enjoyed a sort of monopoly of that useful dyeing drug
against the rest of Europe. The late attempts to introduce the culture of
this plant into England, have been made only in consequence of the
statute, which enacted that five shillings an acre should be received in
lieu of all manner of tythe upon madder.
As through the greater part of Europe, the church, so in many different
countries of Asia, the state, is principally supported by a land tax,
proportioned not to the rent, but to the produce of the land. In China,
the principal revenue of the sovereign consists in a tenth part of the
produce of all the lands of the empire. This tenth part, however, is
estimated so very moderately, that, in many provinces, it is said not to
exceed a thirtieth part of the ordinary produce. The land tax or land rent
which used to be paid to the Mahometan government of Bengal, before that
country fell into the hands of the English East India company, is said to
have amounted to about a fifth part of the produce. The land tax of
ancient Egypt is said likewise to have amounted to a fifth part.
In Asia, this sort of land tax is said to interest the sovereign in the
improvement and cultivation of land. The sovereigns of China, those of
Bengal while under the Mahometan govermnent, and those of ancient Egypt,
are said, accordingly, to have been extremely attentive to the making and
maintaining of good roads and navigable canals, in order to increase, as
much as possible, both the quantity and value of every part of the produce
of the land, by procuring to every part of it the most extensive market
which their own dominions could afford. The tythe of the church is divided
into such small portions that no one of its proprietors can have any
interest of this kind. The parson of a parish could never find his
account, in making a road or canal to a distant part of the country, in
order to extend the market for the produce of his own particular parish.
Such taxes, when destined for the maintenance of the state, have some
advantages, which may serve in some measure to balance their
inconveniency. When destined for the maintenance of the church, they are
attended with nothing but inconveniency.
Taxes upon the produce of land may be levied, either in kind, or,
according to a certain valuation in money.
The parson of a parish, or a gentleman of small fortune who lives upon his
estate, may sometimes, perhaps find some advantage in receiving, the one
his tythe, and the other his rent, in kind. The quantity to be collected,
and the district within which it is to be collected, are so small, that
they both can oversee, with their own eyes, the collection and disposal of
every part of what is due to them. A gentleman of great fortune, who lived
in the capital, would be in danger of suffering much by the neglect, and
more by the fraud, of his factors and agents, if the rents of an estate in
a distant province were to be paid to him in this manner. The loss of the
sovereign, from the abuse and depredation of his tax-gatherers, would
necessarily be much greater. The servants of the most careless private
person are, perhaps, more under the eye of their master than those of the
most careful prince; and a public revenue, which was paid in kind, would
suffer so much from the mismanagement of the collectors, that a very small
part of what was levied upon the people would ever arrive at the treasury
of the prince. Some part of the public revenue of China, however, is said
to be paid in this manner. The mandarins and other tax-gatherers will, no
doubt, find their advantage in continuing the practice of a payment, which
is so much more liable to abuse than any payment in money.
A tax upon the produce of land, which is levied in money, may be levied,
either according to a valuation, which varies with all the variations of
the market price; or according to a fixed valuation, a bushel of wheat,
for example, being always valued at one and the same money price, whatever
may be the state of the market. The produce of a tax levied in the former
way will vary only according to the variations in the real produce of the
land, according to the improvement or neglect of cultivation. The produce
of a tax levied in the latter way will vary, not only according to the
variations in the produce of the land, but according both to those in the
value of the precious metals, and those in the quantity of those metals
which is at different times contained in coin of the same denomination.
The produce of the former will always bear the same proportion to the
value of the real produce of the land. The produce of the latter may, at
different times, bear very different proportions to that value.
When, instead either of a certain portion of the produce of land, or of
the price of a certain portion, a certain sum of money is to be paid in
full compensation for all tax or tythe; the tax becomes, in this case,
exactly of the same nature with the land tax of England. It neither rises
nor falls with the rent of the land. It neither encourages nor discourages
improvement. The tythe in the greater part of those parishes which pay
what is called a modus, in lieu of all other tythe is a tax of this kind.
During the Mahometan government of Bengal, instead of the payment in kind
of the fifth part of the produce, a modus, and, it is said, a very
moderate one, was established in the greater part of the districts or
zemindaries of the country. Some of the servants of the East India
company, under pretence of restoring the public revenue to its proper
value, have, in some provinces, exchanged this modus for a payment in
kind. Under their management, this change is likely both to discourage
cultivation, and to give new opportunities for abuse in the collection of
the public revenue, which has fallen very much below what it was said to
have been when it first fell under the management of the company. The
servants of the company may, perhaps, have profited by the change, but at
the expense, it is probable, both of their masters and of the country.
Taxes upon the Rent of Houses.
The rent of a house may be distinguished into two parts, of which the one
may very properly be called the building-rent; the other is commonly
called the ground-rent.
The building-rent is the interest or profit of the capital expended in
building the house. In order to put the trade of a builder upon a level
with other trades, it is necessary that this rent should be sufficient,
first, to pay him the same interest which he would have got for his
capital, if he had lent it upon good security; and, secondly, to keep the
house in constant repair, or, what comes to the same thing, to replace,
within a certain term of years, the capital which had been employed in
building it. The building-rent, or the ordinary profit of building, is,
therefore, everywhere regulated by the ordinary interest of money. Where
the market rate of interest is four per cent. the rent of a house, which,
over and above paying the ground-rent, affords six or six and a-half per
cent. upon the whole expense of building, may, perhaps, afford a
sufficient profit to the builder. Where the market rate of interest is
five per cent. it may perhaps require seven or seven and a half per cent.
If, in proportion to the interest of money, the trade of the builders
affords at any time much greater profit than this, it will soon draw so
much capital from other trades as will reduce the profit to its proper
level. If it affords at any time much less than this, other trades will
soon draw so much capital from it as will again raise that profit.
Whatever part of the whole rent of a house is over and above what is
sufficient for affording this reasonable profit, naturally goes to the
ground-rent; and, where the owner of the ground and the owner of the
building are two different persons, is, in most cases, completely paid to
the former. This surplus rent is the price which the inhabitant of the
house pays for some real or supposed advantage of the situation. In
country houses, at a distance from any great town, where there is plenty
of ground to chuse upon, the ground-rent is scarce anything, or no more
than what the ground which the house stands upon would pay, if employed in
agriculture. In country villas, in the neighbourhood of some great town,
it is sometimes a good deal higher; and the peculiar conveniency or beauty
of situation is there frequently very well paid for. Ground-rents are
generally highest in the capital, and in those particular parts of it
where there happens to be the greatest demand for houses, whatever be the
reason of that demand, whether for trade and business, for pleasure and
society, or for mere vanity and fashion.
A tax upon house-rent, payable by the tenant, and proportioned to the
whole rent of each house, could not, for any considerable time at least,
affect the building-rent. If the builder did not get his reasonable
profit, he would be obliged to quit the trade; which, by raising the
demand for building, would, in a short time, bring back his profit to its
proper level with that of other trades. Neither would such a tax fall
altogether upon the ground-rent; but it would divide itself in such a
manner, as to fall partly upon the inhabitant of the house, and partly
upon the owner of the ground.
Let us suppose, for example, that a particular person judges that he can
afford for house-rent all expense of sixty pounds a-year; and let us
suppose, too, that a tax of four shillings in the pound, or of one-fifth,
payable by the inhabitant, is laid upon house-rent. A house of sixty
pounds rent will, in that case, cost him seventy-two pounds a-year, which
is twelve pounds more than he thinks he can afford. He will, therefore,
content himself with a worse house, or a house of fifty pounds rent,
which, with the additional ten pounds that he must pay for the tax, will
make up the sum of sixty pounds a-year, the expense which he judges he can
afford, and, in order to pay the tax, he will give up a part of the
additional conveniency which he might have had from a house of ten pounds
a-year more rent. He will give up, I say, a part of this additional
conveniency; for he will seldom be obliged to give up the whole, but will,
in consequence of the tax, get a better house for fifty pounds a-year,
than he could have got if there had been no tax for as a tax of this kind,
by taking away this particular competitor, must diminish the competition
for houses of sixty pounds rent, so it must likewise diminish it for those
of fifty pounds rent, and in the same manner for those of all other rents,
except the lowest rent, for which it would for some time increase the
competition. But the rents of every class of houses for which the
competition was diminished, would necessarily be more or less reduced. As
no part of this reduction, however, could for any considerable time at
least, affect the building-rent, the whole of it must, in the long-run,
necessarily fall upon the ground-rent. The final payment of this tax,
therefore, would fall partly upon the inhabitant of the house, who, in
order to pay his share, would be obliged to give up a part of his
conveniency; and partly upon the owner of the ground, who, in order to pay
his share, would be obliged to give up a part of his revenue. In what
proportion this final payment would be divided between them, it is not,
perhaps, very easy to ascertain. The division would probably be very
different in different circumstances, and a tax of this kind might,
according to those different circumstances, affect very unequally, both
the inhabitant of the house and the owner of the ground.
The inequality with which a tax of this kind might fall upon the owners of
different ground-rents, would arise altogether from the accidental
inequality of this division. But the inequality with which it might fall
upon the inhabitants of different houses, would arise, not only from this,
but from another cause. The proportion of the expense of house-rent to the
whole expense of living, is different in the different degrees of fortune.
It is, perhaps, highest in the highest degree, and it diminishes gradually
through the inferior degrees, so as in general to be lowest in the lowest
degree. The necessaries of life occasion the great expense of the poor.
They find it difficult to get food, and the greater part of their little
revenue is spent in getting it. The luxuries and vanities of life occasion
the principal expense of the rich; and a magnificent house embellishes and
sets off to the best advantage all the other luxuries and vanities which
they possess. A tax upon house-rents, therefore, would in general fall
heaviest upon the rich; and in this sort of inequality there would not,
perhaps, be any thing very unreasonable. It is not very unreasonable that
the rich should contribute to the public expense, not only in proportion
to their revenue, but something more than in that proportion.
The rent of houses, though it in some respects resembles the rent of land,
is in one respect essentially different from it. The rent of land is paid
for the use of a productive subject. The land which pays it produces it.
The rent of houses is paid for the use of an unproductive subject. Neither
the house, nor the ground which it stands upon, produce anything. The
person who pays the rent, therefore, must draw it from some other source
of revenue, distinct from and independent of this subject. A tax upon the
rent of houses, so far as it falls upon the inhabitants, must be drawn
from the same source as the rent itself, and must be paid from their
revenue, whether derived from the wages of labour, the profits of stock,
or the rent of land. So far as it falls upon the inhabitants, it is one of
those taxes which fall, not upon one only, but indifferently upon all the
three different sources of revenue; and is, in every respect, of the same
nature as a tax upon any other sort of consumable commodities. In general,
there is not perhaps, any one article of expense or consumption by which
the liberality or narrowness of a man’s whole expense can be better judged
of than by his house-rent. A proportional tax upon this particular article
of expense might, perhaps, produce a more considerable revenue than any
which has hitherto been drawn from it in any part of Europe. If the tax,
indeed, was very high, the greater part of people would endeavour to evade
it as much as they could, by contenting themselves with smaller houses,
and by turning the greater part of their expense into some other channel.
The rent of houses might easily be ascertained with sufficient accuracy,
by a policy of the same kind with that which would be necessary for
ascertaining the ordinary rent of land. Houses not inhabited ought to pay
no tax. A tax upon them would fall altogether upon the proprietor, who
would thus be taxed for a subject which afforded him neither conveniency
nor revenue. Houses inhabited by the proprietor ought to be rated, not
according to the expense which they might have cost in building, but
according to the rent which an equitable arbitration might judge them
likely to bring if leased to a tenant. If rated according to the expense
which they might have cost in building, a tax of three or four shillings
in the pound, joined with other taxes, would ruin almost all the rich and
great families of this, and, I believe, of every other civilized country.
Whoever will examine with attention the different town and country houses
of some of the richest and greatest families in this country, will find
that, at the rate of only six and a-half, or seven per cent. upon the
original expense of building, their house-rent is nearly equal to the
whole neat rent of their estates. It is the accumulated expense of several
successive generations, laid out upon objects of great beauty and
magnificence, indeed, but, in proportion to what they cost, of very small
exchangeable value. {Since the first publication of this book, a tax
nearly upon the above-mentioned principles has been imposed.}
Ground-rents are a still more proper subject of taxation than the rent of
houses. A tax upon ground-rents would not raise the rent of houses; it
would fall altogether upon the owner of the ground-rent, who acts always
as a monopolist, and exacts the greatest rent which can be got for the use
of his ground. More or less can be got for it, according as the
competitors happen to be richer or poorer, or can afford to gratify their
fancy for a particular spot of ground at a greater or smaller expense. In
every country, the greatest number of rich competitors is in the capital,
and it is there accordingly that the highest ground-rents are always to be
found. As the wealth of those competitors would in no respect be increased
by a tax upon ground-rents, they would not probably be disposed to pay
more for the use of the ground. Whether the tax was to be advanced by the
inhabitant or by the owner of the ground, would be of little importance.
The more the inhabitant was obliged to pay for the tax, the less he would
incline to pay for the ground; so that the final payment of the tax would
fall altogether upon the owner of the ground-rent. The ground-rents of
uninhabited houses ought to pay no tax. Both ground-rents, and the
ordinary rent of land, are a species of revenue which the owner, in many
cases, enjoys without any care or attention of his own. Though a part of
this revenue should be taken from him in order to defray the expenses of
the state, no discouragement will thereby be given to any sort of
industry. The annual produce of the land and labour of the society, the
real wealth and revenue of the great body of the people, might be the same
after such a tax as before. Ground-rents, and the ordinary rent of land,
are therefore, perhaps, the species of revenue which can best bear to have
a peculiar tax imposed upon them.
Ground-rents seem, in this respect, a more proper subject of peculiar
taxation, than even the ordinary rent of land. The ordinary rent of land
is, in many cases, owing partly, at least, to the attention and good
management of the landlord. A very heavy tax might discourage, too much,
this attention and good management. Ground-rents, so far as they exceed
the ordinary rent of land, are altogether owing to the good government of
the sovereign, which, by protecting the industry either of the whole
people or of the inhabitants of some particular place, enables them to pay
so much more than its real value for the ground which they build their
houses upon; or to make to its owner so much more than compensation for
the loss which he might sustain by this use of it. Nothing can be more
reasonable, than that a fund, which owes its existence to the good
government of the state, should be taxed peculiarly, or should contribute
something more than the greater part of other funds, towards the support
of that government.
Though, in many different countries of Europe, taxes have been imposed
upon the rent of houses, I do not know of any in which ground-rents have
been considered as a separate subject of taxation. The contrivers of taxes
have, probably, found some difficulty in ascertaining what part of the
rent ought to be considered as ground-rent, and what part ought to be
considered as building-rent. It should not, however, seem very difficult
to distinguish those two parts of the rent from one another.
In Great Britain the rent of houses is supposed to be taxed in the same
proportion as the rent of land, by what is called the annual land tax. The
valuation, according to which each different parish and district is
assessed to this tax, is always the same. It was originally extremely
unequal, and it still continues to be so. Through the greater part of the
kingdom this tax falls still more lightly upon the rent of houses than
upon that of land. In some few districts only, which were originally rated
high, and in which the rents of houses have fallen considerably, the land
tax of three or four shillings in the pound is said to amount to an equal
proportion of the real rent of houses. Untenanted houses, though by law
subject to the tax, are, in most districts, exempted from it by the favour
of the assessors; and this exemption sometimes occasions some little
variation in the rate of particular houses, though that of the district is
always the same. Improvements of rent, by new buildings, repairs, etc. go
to the discharge of the district, which occasions still further variations
in the rate of particular houses.
In the province of Holland, {Memoires concernant les Droits, etc. p. 223.}
every house is taxed at two and a-half per cent. of its value, without any
regard, either to the rent which it actually pays, or to the circumstance
of its being tenanted or untenanted. There seems to be a hardship in
obliging the proprietor to pay a tax for an untenanted house, from which
he can derive no revenue, especially so very heavy a tax. In Holland,
where the market rate of interest does not exceed three per cent., two and
a-half per cent. upon the whole value of the house must, in most cases,
amount to more than a third of the building-rent, perhaps of the whole
rent. The valuation, indeed, according to which the houses are rated,
though very unequal, is said to be always below the real value. When a
house is rebuilt, improved, or enlarged, there is a new valuation, and the
tax is rated accordingly.
The contrivers of the several taxes which in England have, at different
times, been imposed upon houses, seem to have imagined that there was some
great difficulty in ascertaining, with tolerable exactness, what was the
real rent of every house. They have regulated their taxes, therefore,
according to some more obvious circumstance, such as they had probably
imagined would, in most cases, bear some proportion to the rent.
The first tax of this kind was hearth-money; or a tax of two shillings
upon every hearth. In order to ascertain how many hearths were in the
house, it was necessary that the tax-gatherer should enter every room in
it. This odious visit rendered the tax odious. Soon after the Revolution,
therefore, it was abolished as a badge of slavery.
The next tax of this kind was a tax of two shillings upon every
dwelling-house inhabited. A house with ten windows to pay four shillings
more. A house with twenty windows and upwards to pay eight shillings. This
tax was afterwards so far altered, that houses with twenty windows, and
with less than thirty, were ordered to pay ten shillings, and those with
thirty windows and upwards to pay twenty shillings. The number of windows
can, in most cases, be counted from the outside, and, in all cases,
without entering every room in the house. The visit of the tax-gatherer,
therefore, was less offensive in this tax than in the hearth-money.
This tax was afterwards repealed, and in the room of it was established
the window-tax, which has undergone two several alterations and
augmentations. The window tax, as it stands at present (January 1775),
over and above the duty of three shillings upon every house in England,
and of one shilling upon every house in Scotland, lays a duty upon every
window, which in England augments gradually from twopence, the lowest rate
upon houses with not more than seven windows, to two shillings, the
highest rate upon houses with twenty-five windows and upwards.
The principal objection to all such taxes is their inequality; an
inequality of the worst kind, as they must frequently fall much heavier
upon the poor than upon the rich. A house of ten pounds rent in a country
town, may sometimes have more windows than a house of five hundred pounds
rent in London; and though the inhabitant of the former is likely to be a
much poorer man than that of the latter, yet, so far as his contribution
is regulated by the window tax, he must contribute more to the support of
the state. Such taxes are, therefore, directly contrary to the first of
the four maxims above mentioned. They do not seem to offend much against
any of the other three.
The natural tendency of the window tax, and of all other taxes upon
houses, is to lower rents. The more a man pays for the tax, the less, it
is evident, he can afford to pay for the rent. Since the imposition of the
window tax, however, the rents of houses have, upon the whole, risen more
or less, in almost every town and village of Great Britain, with which I
am acquainted. Such has been, almost everywhere, the increase of the
demand for houses, that it has raised the rents more than the window tax
could sink them; one of the many proofs of the great prosperity of the
country, and of the increasing revenue of its inhabitants. Had it not been
for the tax, rents would probably have risen still higher.
ARTICLE II.—Taxes upon Profit, or upon the Revenue arising from
Stock.
The revenue or profit arising from stock naturally divides itself into two
parts; that which pays the interest, and which belongs to the owner of the
stock; and that surplus part which is over and above what is necessary for
paying the interest.
This latter part of profit is evidently a subject not taxable directly. It
is the compensation, and, in most cases, it is no more than a very
moderate compensation for the risk and trouble of employing the stock. The
employer must have this compensation, otherwise he cannot, consistently
with his own interest, continue the employment. If he was taxed directly,
therefore, in proportion to the whole profit, he would be obliged either
to raise the rate of his profit, or to charge the tax upon the interest of
money; that is, to pay less interest. If he raised the rate of his profit
in proportion to the tax, the whole tax, though it might be advanced by
him, would be finally paid by one or other of two different sets of
people, according to the different ways in which he might employ the stock
of which he had the management. If he employed it as a farming stock, in
the cultivation of land, he could raise the rate of his profit only by
retaining a greater portion, or, what comes to the same thing, the price
of a greater portion, of the produce of the land; and as this could be
done only by a reduction of rent, the final payment of the tax would fall
upon the landlord. If he employed it as a mercantile or manufacturing
stock, he could raise the rate of his profit only by raising the price of
his goods; in which case, the final payment of the tax would fall
altogether upon the consumers of those goods. If he did not raise the rate
of his profit, he would be obliged to charge the whole tax upon that part
of it which was allotted for the interest of money. He could afford less
interest for whatever stock he borrowed, and the whole weight of the tax
would, in this case, fall ultimately upon the interest of money. So far as
he could not relieve himself from the tax in the one way, he would be
obliged to relieve himself in the other.
The interest of money seems, at first sight, a subject equally capable of
being taxed directly as the rent of land. Like the rent of land, it is a
neat produce, which remains, after completely compensating the whole risk
and trouble of employing the stock. As a tax upon the rent of land cannot
raise rents, because the neat produce which remains, after replacing the
stock of the farmer, together with his reasonable profit, cannot be
greater after the tax than before it, so, for the same reason, a tax upon
the interest of money could not raise the rate of interest; the quantity
of stock or money in the country, like the quantity of land, being
supposed to remain the same after the tax as before it. The ordinary rate
of profit, it has been shewn, in the first book, is everywhere regulated
by the quantity of stock to be employed, in proportion to the quantity of
the employment, or of the business which must be done by it. But the
quantity of the employment, or of the business to be done by stock, could
neither be increased nor diminished by any tax upon the interest of money.
If the quantity of the stock to be employed, therefore, was neither
increased nor diminished by it, the ordinary rate of profit would
necessarily remain the same. But the portion of this profit, necessary for
compensating the risk and trouble of the employer, would likewise remain
the same; that risk and trouble being in no respect altered. The residue,
therefore, that portion which belongs to the owner of the stock, and which
pays the interest of money, would necessarily remain the same too. At
first sight, therefore, the interest of money seems to be a subject as fit
to be taxed directly as the rent of land.
There are, however, two different circumstances, which render the interest
of money a much less proper subject of direct taxation than the rent of
land.
First, the quantity and value of the land which any man possesses, can
never be a secret, and can always be ascertained with great exactness. But
the whole amount of the capital stock which he possesses is almost always
a secret, and can scarce ever be ascertained with tolerable exactness. It
is liable, besides, to almost continual variations. A year seldom passes
away, frequently not a month, sometimes scarce a single day, in which it
does not rise or fall more or less. An inquisition into every man’s
private circumstances, and an inquisition which, in order to accommodate
the tax to them, watched over all the fluctuations of his fortune, would
be a source of such continual and endless vexation as no person could
support.
Secondly, land is a subject which cannot be removed; whereas stock easily
may. The proprietor of land is necessarily a citizen of the particular
country in which his estate lies. The proprietor of stock is properly a
citizen of the world, and is not necessarily attached to any particular
country. He would be apt to abandon the country in which he was exposed to
a vexatious inquisition, in order to be assessed to a burdensome tax; and
would remove his stock to some other country, where he could either carry
on his business, or enjoy his fortune more at his ease. By removing his
stock, he would put an end to all the industry which it had maintained in
the country which he left. Stock cultivates land; stock employs labour. A
tax which tended to drive away stock from any particular country, would so
far tend to dry up every source of revenue, both to the sovereign and to
the society. Not only the profits of stock, but the rent of land, and the
wages of labour, would necessarily be more or less diminished by its
removal.
The nations, accordingly, who have attempted to tax the revenue arising
from stock, instead of any severe inquisition of this kind, have been
obliged to content themselves with some very loose, and, therefore, more
or less arbitrary estimation. The extreme inequality and uncertainty of a
tax assessed in this manner, can be compensated only by its extreme
moderation; in consequence of which, every man finds himself rated so very
much below his real revenue, that he gives himself little disturbance
though his neighbour should be rated somewhat lower.
By what is called the land tax in England, it was intended that the stock
should be taxed in the same proportion as land. When the tax upon land was
at four shillings in the pound, or at one-fifth of the supposed rent, it
was intended that stock should be taxed at one-fifth of the supposed
interest. When the present annual land tax was first imposed, the legal
rate of interest was six per cent. Every hundred pounds stock,
accordingly, was supposed to be taxed at twenty-four shillings, the fifth
part of six pounds. Since the legal rate of interest has been reduced to
five per cent. every hundred pounds stock is supposed to be taxed at
twenty shillings only. The sum to be raised, by what is called the land
tax, was divided between the country and the principal towns. The greater
part of it was laid upon the country; and of what was laid upon the towns,
the greater part was assessed upon the houses. What remained to be
assessed upon the stock or trade of the towns (for the stock upon the land
was not meant to be taxed) was very much below the real value of that
stock or trade. Whatever inequalities, therefore, there might be in the
original assessment, gave little disturbance. Every parish and district
still continues to be rated for its land, its houses, and its stock,
according to the original assessment; and the almost universal prosperity
of the country, which, in most places, has raised very much the value of
all these, has rendered those inequalities of still less importance now.
The rate, too, upon each district, continuing always the same, the
uncertainty of this tax, so far as it might he assessed upon the stock of
any individual, has been very much diminished, as well as rendered of much
less consequence. If the greater part of the lands of England are not
rated to the land tax at half their actual value, the greater part of the
stock of England is, perhaps, scarce rated at the fiftieth part of its
actual value. In some towns, the whole land tax is assessed upon houses;
as in Westminster, where stock and trade are free. It is otherwise in
London.
In all countries, a severe inquisition into the circumstances of private
persons has been carefully avoided.
At Hamburg, {Memoires concernant les Droits, tom. i, p.74} every
inhabitant is obliged to pay to the state one fourth per cent. of all that
he possesses; and as the wealth of the people of Hamburg consists
principally in stock, this tax maybe considered as a tax upon stock. Every
man assesses himself, and, in the presence of the magistrate, puts
annually into the public coffer a certain sum of money, which he declares
upon oath, to be one fourth per cent. of all that he possesses, but
without declaring what it amounts to, or being liable to any examination
upon that subject. This tax is generally supposed to be paid with great
fidelity. In a small republic, where the people have entire confidence in
their magistrates, are convinced of the necessity of the tax for the
support of the state, and believe that it will be faithfully applied to
that purpose, such conscientious and voluntary payment may sometimes be
expected. It is not peculiar to the people of Hamburg.
The canton of Underwald, in Switzerland, is frequently ravaged by storms
and inundations, and it is thereby exposed to extraordinary expenses. Upon
such occasions the people assemble, and every one is said to declare with
the greatest frankness what he is worth, in order to be taxed accordingly.
At Zurich, the law orders, that in cases of necessity, every one should be
taxed in proportion to his revenue; the amount of which he is obliged to
declare upon oath. They have no suspicion, it is said, that any of their
fellow citizens will deceive them. At Basil, the principal revenue of the
state arises from a small custom upon goods exported. All the citizens
make oath, that they will pay every three months all the taxes imposed by
law. All merchants, and even all inn-keepers, are trusted with keeping
themselves the account of the goods which they sell, either within or
without the territory. At the end of every three months, they send this
account to the treasurer, with the amount of the tax computed at the
bottom of it. It is not suspected that the revenue suffers by this
confidence. {Memoires concernant les Droits, tom. i p. 163, 167,171.}
To oblige every citizen to declare publicly upon oath, the amount of his
fortune, must not, it seems, in those Swiss cantons, be reckoned a
hardship. At Hamburg it would be reckoned the greatest. Merchants engaged
in the hazardous projects of trade, all tremble at the thoughts of being
obliged, at all times, to expose the real state of their circumstances.
The ruin of their credit, and the miscarriage of their projects, they
foresee, would too often be the consequence. A sober and parsimonious
people, who are strangers to all such projects, do not feel that they have
occasion for any such concealment.
In Holland, soon after the exaltation of the late prince of Orange to the
stadtholdership, a tax of two per cent. or the fiftieth penny, as it was
called, was imposed upon the whole substance of every citizen. Every
citizen assesed himself, and paid his tax, in the same manner as at
Hamburg, and it was in general supposed to have been paid with great
fidelity. The people had at that time the greatest affection for their new
government, which they had just established by a general insurrection. The
tax was to be paid but once, in order to relieve the state in a particular
exigency. It was, indeed, too heavy to be permanent. In a country where
the market rate of interest seldom exceeds three per cent., a tax of two
per cent. amounts to thirteen shillings and four pence in the pound, upon
the highest neat revenue which is commonly drawn from stock. It is a tax
which very few people could pay, without encroaching more or less upon
their capitals. In a particular exigency, the people may, from great
public zeal, make a great effort, and give up even a part of their
capital, in order to relieve the state. But it is impossible that they
should continue to do so for any considerable time; and if they did, the
tax would soon ruin them so completely, as to render them altogether
incapable of supporting the state.
The tax upon stock, imposed by the land tax bill in England, though it is
proportioned to the capital, is not intended to diminish or, take away any
part of that capital. It is meant only to be a tax upon the interest of
money, proportioned to that upon the rent of land; so that when the latter
is at four shillings in the pound, the former may be at four shillings in
the pound too. The tax at Hamburg, and the still more moderate taxes of
Underwald and Zurich, are meant, in the same manner, to be taxes, not upon
the capital, but upon the interest or neat revenue of stock. That of
Holland was meant to be a tax upon the capital.
Taxes upon the Profit of particular Employments.
In some countries, extraordinary taxes are imposed upon the profits of
stock; sometimes when employed in particular branches of trade, and
sometimes when employed in agriculture.
Of the former kind, are in England, the tax upon hawkers and pedlars, that
upon hackney-coaches and chairs, and that which the keepers of ale-houses
pay for a licence to retail ale and spiritous liquors. During the late
war, another tax of the same kind was proposed upon shops. The war having
been undertaken, it was said, in defence of the trade of the country, the
merchants, who were to profit by it, ought to contribute towards the
support of it.
A tax, however, upon the profits of stock employed in any particular
branch of trade, can never fall finally upon the dealers (who must in all
ordinary cases have their reasonable profit, and, where the competition is
free, can seldom have more than that profit), but always upon the
consumers, who must be obliged to pay in the price of the goods the tax
which the dealer advances; and generally with some overcharge.
A tax of this kind, when it is proportioned to the trade of the dealer, is
finally paid by the consumer, and occasions no oppression to the dealer.
When it is not so proportioned, but is the same upon all dealers, though
in this case, too, it is finally paid by the consumer, yet it favours the
great, and occasions some oppression to the small dealer. The tax of five
shillings a-week upon every hackney coach, and that of ten shillings
a-year upon every hackney chair, so far as it is advanced by the different
keepers of such coaches and chairs, is exactly enough proportioned to the
extent of their respective dealings. It neither favours the great, nor
oppresses the smaller dealer. The tax of twenty shillings a-year for a
licence to sell ale; of forty shillings for a licence to sell spiritous
liquors; and of forty shillings more for a licence to sell wine, being the
same upon all retailers, must necessarily give some advantage to the
great, and occasion some oppression to the small dealers. The former must
find it more easy to get back the tax in the price of their goods than the
latter. The moderation of the tax, however, renders this inequality of
less importance; and it may to many people appear not improper to give
some discouragement to the multiplication of little ale-houses. The tax
upon shops, it was intended, should be the same upon all shops. It could
not well have been otherwise. It would have been impossible to proportion,
with tolerable exactness, the tax upon a shop to the extent of the trade
carried on in it, without such an inquisition as would have been
altogether insupportable in a free country. If the tax had been
considerable, it would have oppressed the small, and forced almost the
whole retail trade into the hands of the great dealers. The competition of
the former being taken away, the latter would have enjoyed a monopoly of
the trade; and, like all other monopolists, would soon have combined to
raise their profits much beyond what was necessary for the payment of the
tax. The final payment, instead of falling upon the shop-keeper, would
have fallen upon the consumer, with a considerable overcharge to the
profit of the shop-keeper. For these reasons, the project of a tax upon
shops was laid aside, and in the room of it was substituted the subsidy,
1759.
What in France is called the personal taille, is perhaps, the most
important tax upon the profits of stock employed in agriculture, that is
levied in any part of Europe.
In the disorderly state of Europe, during the prevalence of the feudal
government, the sovereign was obliged to content himself with taxing those
who were too weak to refuse to pay taxes. The great lords, though willing
to assist him upon particular emergencies, refused to subject themselves
to any constant tax, and he was not strong enough to force them. The
occupiers of land all over Europe were, the greater part of them,
originally bond-men. Through the greater part of Europe, they were
gradually emancipated. Some of them acquired the property of landed
estates, which they held by some base or ignoble tenure, sometimes under
the king, and sometimes under some other great lord, like the ancient
copy-holders of England. Others, without acquiring the property, obtained
leases for terms of years, of the lands which they occupied under their
lord, and thus became less dependent upon him. The great lords seem to
have beheld the degree of prosperity and independency, which this inferior
order of men had thus come to enjoy, with a malignant and contemptuous
indignation, and willingly consented that the sovereign should tax them.
In some countries, this tax was confined to the lands which were held in
property by an ignoble tenure; and, in this case, the taille was said to
be real. The land tax established by the late king of Sardinia, and the
taille in the provinces of Languedoc, Provence, Dauphine, and Britanny; in
the generality of Montauban, and in the elections of Agen and Condom, as
well as in some other districts of France; are taxes upon lands held in
property by an ignoble tenure. In other countries, the tax was laid upon
the supposed profits of all those who held, in farm or lease, lands
belonging to other people, whatever might be the tenure by which the
proprietor held them; and in this case, the taille was said to be
personal. In the greater part of those provinces of France, which are
called the countries of elections, the taille is of this kind. The real
taille, as it is imposed only upon a part of the lands of the country, is
necessarily an unequal, but it is not always an arbitrary tax, though it
is so upon some occasions. The personal taille, as it is intended to be
proportioned to the profits of a certain class of people, which can only
be guessed at, is necessarily both arbitrary and unequal.
In France, the personal taille at present (1775) annually imposed upon the
twenty generalities, called the countries of elections, amounts to
40,107,239 livres, 16 sous. {Memoires concernant les Droits, etc tom. ii,
p.17.} the proportion in which this sum is assessed upon those different
provinces, varies from year to year, according to the reports which are
made to the king’s council concerning the goodness or badness of the
crops, as well as other circumstances, which may either increase or
diminish their respective abilities to pay. Each generality is divided
into a certain number of elections; and the proportion in which the sum
imposed upon the whole generality is divided among those different
elections, varies likewise from year to year, according to the reports
made to the council concerning their respective abilities. It seems
impossible, that the council, with the best intentions, can ever
proportion, with tolerable exactness, either of these two assessments to
the real abilities of the province or district upon which they are
respectively laid. Ignorance and misinformation must always, more or less,
mislead the most upright council. The proportion which each parish ought
to support of what is assessed upon the whole election, and that which
each individual ought to support of what is assessed upon his particular
parish, are both in the same manner varied from year to year, according as
circumstances are supposed to require. These circumstances are judged of,
in the one case, by the officers of the election, in the other, by those
of the parish; and both the one and the other are, more or less, under the
direction and influence of the intendant. Not only ignorance and
misinformation, but friendship, party animosity, and private resentment,
are said frequently to mislead such assessors. No man subject to such a
tax, it is evident, can ever be certain, before he is assessed, of what he
is to pay. He cannot even be certain after he is assessed. If any person
has been taxed who ought to have been exempted, or if any person has been
taxed beyond his proportion, though both must pay in the mean time, yet if
they complain, and make good their complaints, the whole parish is
reimposed next year, in order to reimburse them. If any of the
contributors become bankrupt or insolvent, the collector is obliged to
advance his tax; and the whole parish is reimposed next year, in order to
reimburse the collector. If the collector himself should become bankrupt,
the parish which elects him must answer for his conduct to the
receiver-general of the election. But, as it might be troublesome for the
receiver to prosecute the whole parish, he takes at his choice five or six
of the richest contributors, and obliges them to make good what had been
lost by the insolvency of the collector. The parish is afterwards
reimposed, in order to reimburse those five or six. Such reimpositions are
always over and above the taille of the particular year in which they are
laid on.
When a tax is imposed upon the profits of stock in a particular branch of
trade, the traders are all careful to bring no more goods to market than
what they can sell at a price sufficient to reimburse them from advancing
the tax. Some of them withdraw a part of their stocks from the trade, and
the market is more sparingly supplied than before. The price of the goods
rises, and the final payment of the tax falls upon the consumer. But when
a tax is imposed upon the profits of stock employed in agriculture, it is
not the interest of the farmers to withdraw any part of their stock from
that employment. Each farmer occupies a certain quantity of land, for
which he pays rent. For the proper cultivation of this land, a certain
quantity of stock is necessary; and by withdrawing any part of this
necessary quantity, the farmer is not likely to be more able to pay either
the rent or the tax. In order to pay the tax, it can never be his interest
to diminish the quantity of his produce, nor consequently to supply the
market more sparingly than before. The tax, therefore, will never enable
him to raise the price of his produce, so as to reimburse himself, by
throwing the final payment upon the consumer. The farmer, however, must
have his reasonable profit as well as every other dealer, otherwise he
must give up the trade. After the imposition of a tax of this kind, he can
get this reasonable profit only by paying less rent to the landlord. The
more he is obliged to pay in the way of tax, the less he can afford to pay
in the way of rent. A tax of this kind, imposed during the currency of a
lease, may, no doubt, distress or ruin the farmer. Upon the renewal of the
lease, it must always fall upon the landlord.
In the countries where the personal taille takes place, the farmer is
commonly assessed in proportion to the stock which he appears to employ in
cultivation. He is, upon this account, frequently afraid to have a good
team of horses or oxen, but endeavours to cultivate with the meanest and
most wretched instruments of husbandry that he can. Such is his distrust
in the justice of his assessors, that he counterfeits poverty, and wishes
to appear scarce able to pay anything, for fear of being obliged to pay
too much. By this miserable policy, he does not, perhaps, always consult
his own interest in the most effectual manner; and he probably loses more
by the diminution of his produce, than he saves by that of his tax.
Though, in consequence of this wretched cultivation, the market is, no
doubt, somewhat worse supplied; yet the small rise of price which this may
occasion, as it is not likely even to indemnify the farmer for the
diminution of his produce, it is still less likely to enable him to pay
more rent to the landlord. The public, the farmer, the landlord, all
suffer more or less by this degraded cultivation. That the personal taille
tends, in many different ways, to discourage cultivation, and consequently
to dry up the principal source of the wealth of every great country, I
have already had occasion to observe in the third book of this Inquiry.
What are called poll-taxes in the southern provinces of North America, and
the West India islands, annual taxes of so much a-head upon every negro,
are properly taxes upon the profits of a certain species of stock employed
in agriculture. As the planters, are the greater part of them, both
farmers and landlords, the final payment of the tax falls upon them in
their quality of landlords, without any retribution.
Taxes of so much a head upon the bondmen employed in cultivation, seem
anciently to have been common all over Europe. There subsists at present a
tax of this kind in the empire of Russia. It is probably upon this account
that poll-taxes of all kinds have often been represented as badges of
slavery. Every tax, however, is, to the person who pays it, a badge, not
of slavery, but of liberty. It denotes that he is subject to government,
indeed; but that, as he has some property, he cannot himself be the
property of a master. A poll tax upon slaves is altogether different from
a poll-tax upon freemen. The latter is paid by the persons upon whom it is
imposed; the former, by a different set of persons. The latter is either
altogether arbitrary, or altogether unequal, and, in most cases, is both
the one and the other; the former, though in some respects unequal,
different slaves being of different values, is in no respect arbitrary.
Every master, who knows the number of his own slaves, knows exactly what
he has to pay. Those different taxes, however, being called by the same
name, have been considered as of the same nature.
The taxes which in Holland are imposed upon men and maid servants, are
taxes, not upon stock, but upon expense; and so far resemble the taxes
upon consumable commodities. The tax of a guinea a-head for every
man-servant, which has lately been imposed in Great Britain, is of the
same kind. It falls heaviest upon the middling rank. A man of two hundred
a-year may keep a single man-servant. A man of ten thousand a-year will
not keep fifty. It does not affect the poor.
Taxes upon the profits of stock, in particular employments, can never
affect the interest of money. Nobody will lend his money for less interest
to those who exercise the taxed, than to those who exercise the untaxed
employments. Taxes upon the revenue arising from stock in all employments,
where the government attempts to levy them with any degree of exactness,
will, in many cases, fall upon the interest of money. The vingtieme, or
twentieth penny, in France, is a tax of the same kind with what is called
the land tax in England, and is assessed, in the same manner, upon the
revenue arising upon land, houses, and stock. So far as it affects stock,
it is assessed, though not with great rigour, yet with much more exactness
than that part of the land tax in England which is imposed upon the same
fund. It, in many cases, falls altogether upon the interest of money.
Money is frequently sunk in France, upon what are called contracts for the
constitution of a rent; that is, perpetual annuities, redeemable at any
time by the debtor, upon payment of the sum originally advanced, but of
which this redemption is not exigible by the creditor except in particular
cases. The vingtieme seems not to have raised the rate of those annuities,
though it is exactly levied upon them all.
APPENDIX TO ARTICLES I. AND II.—Taxes upon the Capital Value of
Lands, Houses, and Stock.
While property remains in the possession of the same person, whatever
permanent taxes may have been imposed upon it, they have never been
intended to diminish or take away any part of its capital value, but only
some part of the revenue arising from it. But when property changes hands,
when it is transmitted either from the dead to the living, or from the
living to the living, such taxes have frequently been imposed upon it as
necessarily take away some part of its capital value.
The transference of all sorts of property from the dead to the living, and
that of immoveable property of land and houses from the living to the
living, are transactions which are in their nature either public and
notorious, or such as cannot be long concealed. Such transactions,
therefore, may be taxed directly. The transference of stock or moveable
property, from the living to the living, by the lending of money, is
frequently a secret transaction, and may always be made so. It cannot
easily, therefore, be taxed directly. It has been taxed indirectly in two
different ways; first, by requiring that the deed, containing the
obligation to repay, should be written upon paper or parchment which had
paid a certain stamp duty, otherwise not to be valid; secondly, by
requiring, under the like penalty of invalidity, that it should be
recorded either in a public or secret register, and by imposing certain
duties upon such registration. Stamp duties, and duties of registration,
have frequently been imposed likewise upon the deeds transferring property
of all kinds from the dead to the living, and upon those transferring
immoveable property from the living to the living; transactions which
might easily have been taxed directly.
The vicesima hereditatum, or the twentieth penny of inheritances, imposed
by Augustus upon the ancient Romans, was a tax upon the transference of
property from the dead to the living. Dion Cassius, { Lib. 55. See also
Burman. de Vectigalibus Pop. Rom. cap. xi. and Bouchaud de l’impot du
vingtieme sur les successions.} the author who writes concerning it the
least indistinctly, says, that it was imposed upon all successions,
legacies and donations, in case of death, except upon those to the nearest
relations, and to the poor.
Of the same kind is the Dutch tax upon successions. {See Memoires
concernant les Droits, etc. tom i, p. 225.} Collateral successions are
taxed according to the degree of relation, from five to thirty per cent.
upon the whole value of the succession. Testamentary donations, or
legacies to collaterals, are subject to the like duties. Those from
husband to wife, or from wife to husband, to the fiftieth penny. The
luctuosa hereditas, the mournful succession of ascendants to descendants,
to the twentieth penny only. Direct successions, or those of descendants
to ascendants, pay no tax. The death of a father, to such of his children
as live in the same house with him, is seldom attended with any increase,
and frequently with a considerable diminution of revenue; by the loss of
his industry, of his office, or of some life-rent estate, of which he may
have been in possession. That tax would be cruel and oppressive, which
aggravated their loss, by taking from them any part of his succession. It
may, however, sometimes be otherwise with those children, who, in the
language of the Roman law, are said to be emancipated; in that of the
Scotch law, to be foris-familiated; that is, who have received their
portion, have got families of their own, and are supported by funds
separate and independent of those of their father. Whatever part of his
succession might come to such children, would be a real addition to their
fortune, and might, therefore, perhaps, without more inconveniency than
what attends all duties of this kind, be liable to some tax. The
casualties of the feudal law were taxes upon the transference of land,
both from the dead to the living, and from the living to the living. In
ancient times, they constituted, in every part of Europe, one of the
principal branches of the revenue of the crown.
The heir of every immediate vassal of the crown paid a certain duty,
generally a year’s rent, upon receiving the investiture of the estate. If
the heir was a minor, the whole rents of the estate, during the
continuance of the minority, devolved to the superior, without any other
charge besides the maintenance of the minor, and the payment of the
widow’s dower, when there happened to be a dowager upon the land. When the
minor came to be of age, another tax, called relief, was still due to the
superior, which generally amounted likewise to a year’s rent. A long
minority, which, in the present times, so frequently disburdens a great
estate of all its incumbrances, and restores the family to their ancient
splendour, could in those times have no such effect. The waste, and not
the disincumbrance of the estate, was the common effect of a long
minority.
By a feudal law, the vassal could not alienate without the consent of his
superior, who generally extorted a fine or composition on granting it.
This fine, which was at first arbitrary, came, in many countries, to be
regulated at a certain portion of the price of the land. In some
countries, where the greater part of the other feudal customs have gone
into disuse, this tax upon the alienation of land still continues to make
a very considerable branch of the revenue of the sovereign. In the canton
of Berne it is so high as a sixth part of the price of all noble fiefs,
and a tenth part of that of all ignoble ones. {Memoires concernant les
Droits, etc, tom.i p.154} In the canton of Lucern, the tax upon the sale
of land is not universal, and takes place only in certain districts. But
if any person sells his land in order to remove out of the territory, he
pays ten per cent. upon the whole price of the sale. {id. p.157.} Taxes of
the same kind, upon the sale either of all lands, or of lands held by
certain tenures, take place in many other countries, and make a more or
less considerable branch of the revenue of the sovereign.
Such transactions may be taxed indirectly, by means either of stamp
duties, or of duties upon registration; and those duties either may, or
may not, be proportioned to the value of the subject which is transferred.
In Great Britain, the stamp duties are higher or lower, not so much
according to the value of the property transferred (an eighteen-penny or
half-crown stamp being sufficient upon a bond for the largest sum of
money), as according to the nature of the deed. The highest do not exceed
six pounds upon every sheet of paper, or skin of parchment; and these high
duties fall chiefly upon grants from the crown, and upon certain law
proceedings, without any regard to the value of the subject. There are, in
Great Britain, no duties on the registration of deeds or writings, except
the fees of the officers who keep the register; and these are seldom more
than a reasonable recompence for their labour. The crown derives no
revenue from them.
In Holland {Memoires concernant les Droits, etc. tom. i. p 223, 224, 225.}
there are both stamp duties and duties upon registration; which in some
cases are, and in some are not, proportioned to the value of the property
transferred. All testaments must be written upon stamped paper, of which
the price is proportioned to the property disposed of; so that there are
stamps which cost from three pence or three stivers a-sheet, to three
hundred florins, equal to about twenty-seven pounds ten shillings of our
money. If the stamp is of an inferior price to what the testator ought to
have made use of, his succession is confiscated. This is over and above
all their other taxes on succession. Except bills of exchange, and some
other mercantile bills, all other deeds, bonds, and contracts, are subject
to a stamp duty. This duty, however, does not rise in proportion to the
value of the subject. All sales of land and of houses, and all mortgages
upon either, must be registered, and, upon registration, pay a duty to the
state of two and a-half per cent. upon the amount of the price or of the
mortgage. This duty is extended to the sale of all ships and vessels of
more than two tons burden, whether decked or undecked. These, it seems,
are considered as a sort of houses upon the water. The sale of moveables,
when it is ordered by a court of justice, is subject to the like duty of
two and a-half per cent.
In France, there are both stamp duties and duties upon registration. The
former are considered as a branch of the aids of excise, and, in the
provinces where those duties take place, are levied by the excise
officers. The latter are considered as a branch of the domain of the crown
and are levied by a different set of officers.
Those modes of taxation by stamp duties and by duties upon registration,
are of very modern invention. In the course of little more than a century,
however, stamp duties have, in Europe, become almost universal, and duties
upon registration extremely common. There is no art which one government
sooner learns of another, than that of draining money from the pockets of
the people.
Taxes upon the transference of property from the dead to the living, fall
finally, as well as immediately, upon the persons to whom the property is
transferred. Taxes upon the sale of land fall altogether upon the seller.
The seller is almost always under the necessity of selling, and must,
therefore, take such a price as he can get. The buyer is scarce ever under
the necessity of buying, and will, therefore, only give such a price as he
likes. He considers what the land will cost him, in tax and price
together. The more he is obliged to pay in the way of tax, the less he
will be disposed to give in the way of price. Such taxes, therefore, fall
almost always upon a necessitous person, and must, therefore, be
frequently very cruel and oppressive. Taxes upon the sale of new-built
houses, where the building is sold without the ground, fall generally upon
the buyer, because the builder must generally have his profit; otherwise
he must give up the trade. If he advances the tax, therefore, the buyer
must generally repay it to him. Taxes upon the sale of old houses, for the
same reason as those upon the sale of land, fall generally upon the
seller; whom, in most cases, either conveniency or necessity obliges to
sell. The number of new-built houses that are annually brought to market,
is more or less regulated by the demand. Unless the demand is such as to
afford the builder his profit, after paying all expenses, he will build no
more houses. The number of old houses which happen at any time to come to
market, is regulated by accidents, of which the greater part have no
relation to the demand. Two or three great bankruptcies in a mercantile
town, will bring many houses to sale, which must be sold for what can be
got for them. Taxes upon the sale of ground-rents fall altogether upon the
seller, for the same reason as those upon the sale of lands. Stamp duties,
and duties upon the registration of bonds and contracts for borrowed
money, fall altogether upon the borrower, and, in fact, are always paid by
him. Duties of the same kind upon law proceedings fall upon the suitors.
They reduce to both the capital value of the subject in dispute. The more
it costs to acquire any property, the less must be the neat value of it
when acquired.
All taxes upon the transference of property of every kind, so far as they
diminish the capital value of that property, tend to diminish the funds
destined for the maintenance of productive labour. They are all more or
less unthrifty taxes that increase the revenue of the sovereign, which
seldom maintains any but unproductive labourers, at the expense of the
capital of the people, which maintains none but productive.
Such taxes, even when they are proportioned to the value of the property
transferred, are still unequal; the frequency of transference not being
always equal in property of equal value. When they are not proportioned to
this value, which is the case with the greater part of the stamp duties
and duties of registration, they are still more so. They are in no respect
arbitrary, but are, or may be, in all cases, perfectly clear and certain.
Though they sometimes fall upon the person who is not very able to pay,
the time of payment is, in most cases, sufficiently convenient for him.
When the payment becomes due, he must, in most cases, have the more to
pay. They are levied at very little expense, and in general subject the
contributors to no other inconveniency, besides always the unavoidable one
of paying the tax. In France, the stamp duties are not much complained of.
Those of registration, which they call the Controle, are. They give
occasion, it is pretended, to much extortion in the officers of the
farmers-general who collect the tax, which is in a great measure arbitrary
and uncertain. In the greater part of the libels which have been written
against the present system of finances in France, the abuses of the
controle make a principal article. Uncertainty, however, does not seem to
be necessarily inherent in the nature of such taxes. If the popular
complaints are well founded, the abuse must arise, not so much from the
nature of the tax as from the want of precision and distinctness in the
words of the edicts or laws which impose it.
The registration of mortgages, and in general of all rights upon
immoveable property, as it gives great security both to creditors and
purchasers, is extremely advantageous to the public. That of the greater
part of deeds of other kinds, is frequently inconvenient and even
dangerous to individuals, without any advantage to the public. All
registers which, it is acknowledged, ought to be kept secret, ought
certainly never to exist. The credit of individuals ought certainly never
to depend upon so very slender a security, as the probity and religion of
the inferior officers of revenue. But where the fees of registration have
been made a source of revenue to the sovereign, register-offices have
commonly been multiplied without end, both for the deeds which ought to be
registered, and for those which ought not. In France there are several
different sorts of secret registers. This abuse, though not perhaps a
necessary, it must be acknowledged, is a very natural effect of such
taxes.
Such stamp duties as those in England upon cards and dice, upon newspapers
and periodical pamphlets, etc. are properly taxes upon consumption; the
final payment falls upon the persons who use or consume such commodities.
Such stamp duties as those upon licences to retail ale, wine, and
spiritous liquors, though intended, perhaps, to fall upon the profits of
the retailers, are likewise finally paid by the consumers of those
liquors. Such taxes, though called by the same name, and levied by the
same officers, and in the same manner with the stamp duties above
mentioned upon the transference of property, are, however, of a quite
different nature, and fall upon quite different funds.
ARTICLE III.—Taxes upon the Wages of Labour.
The wages of the inferior classes of work men, I have endeavoured to show
in the first book are everywhere necessarily regulated by two different
circumstances; the demand for labour, and the ordinary or average price of
provisions. The demand for labour, according as it happens to be either
increasing, stationary, or declining; or to require an increasing,
stationary, or declining population, regulates the subsistence of the
labourer, and determines in what degree it shall be either liberal,
moderate, or scanty. The ordinary average price of provisions determines
the quantity of money which must be paid to the workman, in order to
enable him, one year with another, to purchase this liberal, moderate, or
scanty subsistence. While the demand for the labour and the price of
provisions, therefore, remain the same, a direct tax upon the wages of
labour can have no other effect, than to raise them somewhat higher than
the tax. Let us suppose, for example, that, in a particular place, the
demand for labour and the price of provisions were such as to render ten
shillings a-week the ordinary wages of labour; and that a tax of
one-fifth, or four shillings in the pound, was imposed upon wages. If the
demand for labour and the price of provisions remained the same, it would
still be necessary that the labourer should, in that place, earn such a
subsistence as could be bought only for ten shillings a-week; so that,
after paying the tax, he should have ten shillings a-week free wages. But,
in order to leave him such free wages, after paying such a tax, the price
of labour must, in that place, soon rise, not to twelve shillings a week
only, but to twelve and sixpence; that is, in order to enable him to pay a
tax of one-fifth, his wages must necessarily soon rise, not one-fifth part
only, but one-fourth. Whatever was the proportion of the tax, the wages of
labour must, in all cases rise, not only in that proportion, but in a
higher proportion. If the tax for example, was one-tenth, the wages of
labour must necessarily soon rise, not one-tenth part only, but
one-eighth.
A direct tax upon the wages of labour, therefore, though the labourer
might, perhaps, pay it out of his hand, could not properly be said to be
even advanced by him; at least if the demand for labour and the average
price of provisions remained the same after the tax as before it. In all
such cases, not only the tax, but something more than the tax, would in
reality be advanced by the person who immediately employed him. The final
payment would, in different cases, fall upon different persons. The rise
which such a tax might occasion in the wages of manufacturing labour would
be advanced by the master manufacturer, who would both be entitled and
obliged to charge it, with a profit, upon the price of his goods. The
final payment of this rise of wages, therefore, together with the
additional profit of the master manufacturer would fall upon the consumer.
The rise which such a tax might occasion in the wages of country labour
would be advanced by the farmer, who, in order to maintain the same number
of labourers as before, would be obliged to employ a greater capital. In
order to get back this greater capital, together with the ordinary profits
of stock, it would be necessary that he should retain a larger portion,
or, what comes to the same thing, the price of a larger portion, of the
produce of the land, and, consequently, that he should pay less rent to
the landlord. The final payment of this rise of wages, therefore, would,
in this case, fall upon the landlord, together with the additional profit
of the farmer who had advanced it. In all cases, a direct tax upon the
wages of labour must, in the long-run, occasion both a greater reduction
in the rent of land, and a greater rise in the price of manufactured goods
than would have followed from the proper assessment of a sum equal to the
produce of the tax, partly upon the rent of land, and partly upon
consumable commodities.
If direct taxes upon the wages of labour have not always occasioned a
proportionable rise in those wages, it is because they have generally
occasioned a considerable fall in the demand of labour. The declension of
industry, the decrease of employment for the poor, the diminution of the
annual produce of the land and labour of the country, have generally been
the effects of such taxes. In consequence of them, however, the price of
labour must always be higher than it otherwise would have been in the
actual state of the demand; and this enhancement of price, together with
the profit of those who advance it, must always be finally paid by the
landlords and consumers.
A tax upon the wages of country labour does not raise the price of the
rude produce of land in proportion to the tax; for the same reason that a
tax upon the farmer’s profit does not raise that price in that proportion.
Absurd and destructive as such taxes are, however, they take place in many
countries. In France, that part of the taille which is charged upon the
industry of workmen and day-labourers in country villages, is properly a
tax of this kind. Their wages are computed according to the common rate of
the district in which they reside; and, that they may be as little liable
as possible to any overcharge, their yearly gains are estimated at no more
than two hundred working days in the year. {Memoires concernant les
Droits, etc. tom. ii. p. 108.} The tax of each individual is varied from
year to year, according to different circumstances, of which the collector
or the commissary, whom intendant appoints to assist him, are the judges.
In Bohemia, in consequence of the alteration in the system of finances
which was begun in 1748, a very heavy tax is imposed upon the industry of
artificers. They are divided into four classes. The highest class pay a
hundred florins a year, which, at two-and-twenty pence half penny
a-florin, amounts to £9:7:6. The second class are taxed at seventy; the
third at fifty; and the fourth, comprehending artificers in villages, and
the lowest class of those in towns, at twenty-five florins. {Memoires
concernant les Droits, etc. tom. iii. p. 87.}
The recompence of ingenious artists, and of men of liberal professions, I
have endeavoured to show in the first book, necessarily keeps a certain
proportion to the emoluments of inferior trades. A tax upon this
recompence, therefore, could have no other effect than to raise it
somewhat higher than in proportion to the tax. If it did not rise in this
manner, the ingenious arts and the liberal professions, being no longer
upon a level with other trades, would be so much deserted, that they would
soon return to that level.
The emoluments of offices are not, like those of trades and professions,
regulated by the free competition of the market, and do not, therefore,
always bear a just proportion to what the nature of the employment
requires. They are, perhaps, in most countries, higher than it requires;
the persons who have the administration of government being generally
disposed to regard both themselves and their immediate dependents, rather
more than enough. The emoluments of offices, therefore, can, in most
cases, very well bear to be taxed. The persons, besides, who enjoy public
offices, especially the more lucrative, are, in all countries, the objects
of general envy; and a tax upon their emoluments, even though it should be
somewhat higher than upon any other sort of revenue, is always a very
popular tax. In England, for example, when, by the land-tax, every other
sort of revenue was supposed to be assessed at four shillings in the
pound, it was very popular to lay a real tax of five shillings and
sixpence in the pound upon the salaries of offices which exceeded a
hundred pounds a-year; the pensions of the younger branches of the royal
family, the pay of the officers of the army and navy, and a few others
less obnoxious to envy, excepted. There are in England no other direct
taxes upon the wages of labour.
ARTICLE IV.—Taxes which it is intended should fall indifferently
upon every different Species of Revenue.
The taxes which it is intended should fall indifferently upon every
different species of revenue, are capitation taxes, and taxes upon
consumable commodities. Those must be paid indifferently, from whatever
revenue the contributors may possess; from the rent of their land, from
the profits of their stock, or from the wages of their labour.
Capitation Taxes.
Capitation taxes, if it is attempted to proportion them to the fortune or
revenue of each contributor, become altogether arbitrary. The state of a
man’s fortune varies from day to day; and, without an inquisition, more
intolerable than any tax, and renewed at least once every year, can only
be guessed at. His assessment, therefore, must, in most cases, depend upon
the good or bad humour of his assessors, and must, therefore, be
altogether arbitrary and uncertain.
Capitation taxes, if they are proportioned, not to the supposed fortune,
but to the rank of each contributor, become altogether unequal; the
degrees of fortune being frequently unequal in the same degree of rank.
Such taxes, therefore, if it is attempted to render them equal, become
altogether arbitrary and uncertain; and if it is attempted to render them
certain and not arbitrary, become altogether unequal. Let the tax be light
or heavy, uncertainty is always a great grievance. In a light tax, a
considerable degree of inequality may be supported; in a heavy one, it is
altogether intolerable.
In the different poll-taxes which took place in England during the reign
of William III. the contributors were, the greater part of them, assessed
according to the degree of their rank; as dukes, marquises, earls,
viscounts, barons, esquires, gentlemen, the eldest and youngest sons of
peers, etc. All shop-keepers and tradesmen worth more than three hundred
pounds, that is, the better sort of them, were subject to the same
assessment, how great soever might be the difference in their fortunes.
Their rank was more considered than their fortune. Several of those who,
in the first poll-tax, were rated according to their supposed fortune were
afterwards rated according to their rank. Serjeants, attorneys, and
proctors at law, who, in the first poll-tax, were assessed at three
shillings in the pound of their supposed income, were afterwards assessed
as gentlemen. In the assessment of a tax which was not very heavy, a
considerable degree of inequality had been found less insupportable than
any degree of uncertainty.
In the capitation which has been levied in France, without-any
interruption, since the beginning of the present century, the highest
orders of people are rated according to their rank, by an invariable
tariff; the lower orders of people, according to what is supposed to be
their fortune, by an assessment which varies from year to year. The
officers of the king’s court, the judges, and other officers in the
superior courts of justice, the officers of the troops, etc are assessed
in the first manner. The inferior ranks of people in the provinces are
assessed in the second. In France, the great easily submit to a
considerable degree of inequality in a tax which, so far as it affects
them, is not a very heavy one; but could not brook the arbitrary
assessment of an intendant.
The inferior ranks of people must, in that country, suffer patiently the
usage which their superiors think proper to give them.
In England, the different poll-taxes never produced the sum which had been
expected from them, or which it was supposed they might have produced, had
they been exactly levied. In France, the capitation always produces the
sum expected from it. The mild government of England, when it assessed the
different ranks of people to the poll-tax, contented itself with what that
assessment happened to produce, and required no compensation for the loss
which the state might sustain, either by those who could not pay, or by
those who would not pay (for there were many such), and who, by the
indulgent execution of the law, were not forced to pay. The more severe
government of France assesses upon each generality a certain sum, which
the intendant must find as he can. If any province complains of being
assessed too high, it may, in the assessment of next year, obtain an
abatement proportioned to the overcharge of the year before; but it must
pay in the mean time. The intendant, in order to be sure of finding the
sum assessed upon his generality, was empowered to assess it in a larger
sum, that the failure or inability of some of the contributors might be
compensated by the overcharge of the rest; and till 1765, the fixation of
this surplus assessment was left altogether to his discretion. In that
year, indeed, the council assumed this power to itself. In the capitation
of the provinces, it is observed by the perfectly well informed author of
the Memoirs upon the Impositions in France, the proportion which falls
upon the nobility, and upon those whose privileges exempt them from the
taille, is the least considerable. The largest falls upon those subject to
the taille, who are assessed to the capitation at so much a-pound of what
they pay to that other tax. Capitation taxes, so far as they are levied
upon the lower ranks of people, are direct taxes upon the wages of labour,
and are attended with all the inconveniencies of such taxes.
Capitation taxes are levied at little expense; and, where they are
rigorously exacted, afford a very sure revenue to the state. It is upon
this account that, in countries where the case, comfort, and security of
the inferior ranks of people are little attended to, capitation taxes are
very common. It is in general, however, but a small part of the public
revenue, which, in a great empire, has ever been drawn from such taxes;
and the greatest sum which they have ever afforded, might always have been
found in some other way much more convenient to the people.
Taxes upon Consumable Commodities.
The impossibility of taxing the people, in proportion to their revenue, by
any capitation, seems to have given occasion to the invention of taxes
upon consumable commodities. The state not knowing how to tax, directly
and proportionably, the revenue of its subjects, endeavours to tax it
indirectly by taxing their expense, which, it is supposed, will, in most
cases, be nearly in proportion to their revenue. Their expense is taxed,
by taxing the consumable commodities upon which it is laid out.
Consumable commodities are either necessaries or luxuries.
By necessaries I understand, not only the commodities which are
indispensibly necessary for the support of life, but whatever the custom
of the country renders it indecent for creditable people, even of the
lowest order, to be without. A linen shirt, for example, is, strictly
speaking, not a necessary of life. The Greeks and Romans lived, I suppose,
very comfortably, though they had no linen. But in the present times,
through the greater part of Europe, a creditable day-labourer would be
ashamed to appear in public without a linen shirt, the want of which would
be supposed to denote that disgraceful degree of poverty, which, it is
presumed, nobody can well fall into without extreme bad conduct. Custom,
in the same manner, has rendered leather shoes a necessary of life in
England. The poorest creditable person, of either sex, would be ashamed to
appear in public without them. In Scotland, custom has rendered them a
necessary of life to the lowest order of men; but not to the same order of
women, who may, without any discredit, walk about barefooted. In France,
they are necessaries neither to men nor to women; the lowest rank of both
sexes appearing there publicly, without any discredit, sometimes in wooden
shoes, and sometimes barefooted. Under necessaries, therefore, I
comprehend, not only those things which nature, but those things which the
established rules of decency have rendered necessary to the lowest rank of
people. All other things I call luxuries, without meaning, by this
appellation, to throw the smallest degree of reproach upon the temperate
use of them. Beer and ale, for example, in Great Britain, and wine, even
in the wine countries, I call luxuries. A man of any rank may, without any
reproach, abstain totally from tasting such liquors. Nature does not
render them necessary for the support of life; and custom nowhere renders
it indecent to live without them.
As the wages of labour are everywhere regulated, partly by the demand for
it, and partly by the average price of the necessary articles of
subsistence; whatever raises this average price must necessarily raise
those wages; so that the labourer may still be able to purchase that
quantity of those necessary articles which the state of the demand for
labour, whether increasing, stationary, or declining, requires that he
should have. {See book i.chap. 8} A tax upon those articles necessarily
raises their price somewhat higher than the amount of the tax, because the
dealer, who advances the tax, must generally get it back, with a profit.
Such a tax must, therefore, occasion a rise in the wages of labour,
proportionable to this rise of price.
It is thus that a tax upon the necessaries of life operates exactly in the
same manner as a direct tax upon the wages of labour. The labourer, though
he may pay it out of his hand, cannot, for any considerable time at least,
be properly said even to advance it. It must always, in the long-run, be
advanced to him by his immediate employer, in the advanced state of wages.
His employer, if he is a manufacturer, will charge upon the price of his
goods the rise of wages, together with a profit, so that the final payment
of the tax, together with this overcharge, will fall upon the consumer. If
his employer is a farmer, the final payment, together with a like
overcharge, will fall upon the rent of the landlord.
It is otherwise with taxes upon what I call luxuries, even upon those of
the poor. The rise in the price of the taxed commodities, will not
necessarily occasion any rise in the wages of labour. A tax upon tobacco,
for example, though a luxury of the poor, as well as of the rich, will not
raise wages. Though it is taxed in England at three times, and in France
at fifteen times its original price, those high duties seem to have no
effect upon the wages of labour. The same thing maybe said of the taxes
upon tea and sugar, which, in England and Holland, have become luxuries of
the lowest ranks of people; and of those upon chocolate, which, in Spain,
is said to have become so.
The different taxes which, in Great Britain, have, in the course of the
present century, been imposed upon spiritous liquors, are not supposed to
have had any effect upon the wages of labour. The rise in the price of
porter, occasioned by an additional tax of three shillings upon the barrel
of strong beer, has not raised the wages of common labour in London. These
were about eighteen pence or twenty pence a-day before the tax, and they
are not more now.
The high price of such commodities does not necessarily diminish the
ability of the inferior ranks of people to bring up families. Upon the
sober and industrious poor, taxes upon such commodities act as sumptuary
laws, and dispose them either to moderate, or to refrain altogether from
the use of superfluities which they can no longer easily afford. Their
ability to bring up families, in consequence of this forced frugality,
instead of being diminished, is frequently, perhaps, increased by the tax.
It is the sober and industrious poor who generally bring up the most
numerous families, and who principally supply the demand for useful
labour. All the poor, indeed, are not sober and industrious; and the
dissolute and disorderly might continue to indulge themselves in the use
of such commodities, after this rise of price, in the same manner as
before, without regarding the distress which this indulgence might bring
upon their families. Such disorderly persons, however, seldom rear up
numerous families, their children generally perishing from neglect,
mismanagement, and the scantiness or unwholesomeness of their food. If by
the strength of their constitution, they survive the hardships to which
the bad conduct of their parents exposes them, yet the example of that bad
conduct commonly corrupts their morals; so that, instead of being useful
to society by their industry, they become public nuisances by their vices
and disorders. Through the advanced price of the luxuries of the poor,
therefore, might increase somewhat the distress of such disorderly
families, and thereby diminish somewhat their ability to bring up
children, it would not probably diminish much the useful population of the
country.
Any rise in the average price of necessaries, unless it be compensated by
a proportionable rise in the wages of labour, must necessarily diminish,
more or less, the ability of the poor to bring up numerous families, and,
consequently, to supply the demand for useful labour; whatever may be the
state of that demand, whether increasing, stationary, or declining; or
such as requires an increasing, stationary, or declining population.
Taxes upon luxuries have no tendency to raise the price of any other
commodities, except that of the commodities taxed. Taxes upon necessaries,
by raising the wages of labour, necessarily tend to raise the price of all
manufactures, and consequently to diminish the extent of their sale and
consumption. Taxes upon luxuries are finally paid by the consumers of the
commodities taxed, without any retribution. They fall indifferently upon
every species of revenue, the wages of labour, the profits of stock, and
the rent of land. Taxes upon necessaries, so far as they affect the
labouring poor, are finally paid, partly by landlords, in the diminished
rent of their lands, and partly by rich consumers, whether landlords or
others, in the advanced price of manufactured goods; and always with a
considerable overcharge. The advanced price of such manufactures as are
real necessaries of life, and are destined for the consumption of the
poor, of coarse woollens, for example, must be compensated to the poor by
a farther advancement of their wages. The middling and superior ranks of
people, if they understood their own interest, ought always to oppose all
taxes upon the necessaries of life, as well as all taxes upon the wages of
labour. The final payment of both the one and the other falls altogether
upon themselves, and always with a considerable overcharge. They fall
heaviest upon the landlords, who always pay in a double capacity; in that
of landlords, by the reduction, of their rent; and in that of rich
consumers, by the increase of their expense. The observation of Sir
Matthew Decker, that certain taxes are, in the price of certain goods,
sometimes repeated and accumulated four or five times, is perfectly just
with regard to taxes upon the necessaries of life. In the price of
leather, for example, you must pay not only for the tax upon the leather
of your own shoes, but for a part of that upon those of the shoemaker and
the tanner. You must pay, too, for the tax upon the salt, upon the soap,
and upon the candles which those workmen consume while employed in your
service; and for the tax upon the leather, which the saltmaker, the
soap-maker, and the candle-maker consume, while employed in their service.
In Great Britain, the principal taxes upon the necessaries of life, are
those upon the four commodities just now mentioned, salt, leather, soap,
and candles.
Salt is a very ancient and a very universal subject of taxation. It was
taxed among the Romans, and it is so at present in, I believe, every part
of Europe. The quantity annually consumed by any individual is so small,
and may be purchased so gradually, that nobody, it seems to have been
thought, could feel very sensibly even a pretty heavy tax upon it. It is
in England taxed at three shillings and fourpence a bushel; about three
times the original price of the commodity. In some other countries, the
tax is still higher. Leather is a real necessary of life. The use of linen
renders soap such. In countries where the winter nights are long, candles
are a necessary instrument of trade. Leather and soap are in Great Britain
taxed at three halfpence a-pound; candles at a penny; taxes which, upon
the original price of leather, may amount to about eight or ten per cent.;
upon that of soap, to about twenty or five-and-twenty per cent.; and upon
that of candles to about fourteen or fifteen per cent.; taxes which,
though lighter than that upon salt, are still very heavy. As all those
four commodities are real necessaries of life, such heavy taxes upon them
must increase somewhat the expense of the sober and industrious poor, and
must consequently raise more or less the wages of their labour.
In a country where the winters are so cold as in Great Britain, fuel is,
during that season, in the strictest sense of the word, a necessary of
life, not only for the purpose of dressing victuals, but for the
comfortable subsistence of many different sorts of workmen who work within
doors; and coals are the cheapest of all fuel. The price of fuel has so
important an influence upon that of labour, that all over Great Britain,
manufactures have confined themselves principally to the coal counties;
other parts of the country, on account of the high price of this necessary
article, not being able to work so cheap. In some manufactures, besides,
coal is a necessary instrument of trade; as in those of glass, iron, and
all other metals. If a bounty could in any case be reasonable, it might
perhaps be so upon the transportation of coals from those parts of the
country in which they abound, to those in which they are wanted. But the
legislature, instead of a bounty, has imposed a tax of three shillings and
threepence a-ton upon coals carried coastways; which, upon most sorts of
coal, is more than sixty per cent. of the original price at the coal pit.
Coals carried, either by land or by inland navigation, pay no duty. Where
they are naturally cheap, they are consumed duty free; where they are
naturally dear, they are loaded with a heavy duty.
Such taxes, though they raise the price of subsistence, and consequently
the wages of labour, yet they afford a considerable revenue to government,
which it might not be easy to find in any other way. There may, therefore,
be good reasons for continuing them. The bounty upon the exportation of
corn, so far as it tends, in the actual state of tillage, to raise the
price of that necessary article, produces all the like bad effects; and
instead of affording any revenue, frequently occasions a very great
expense to government. The high duties upon the importation of foreign
corn, which, in years of moderate plenty, amount to a prohibition; and the
absolute prohibition of the importation, either of live cattle, or of salt
provisions, which takes place in the ordinary state of the law, and which,
on account of the scarcity, is at present suspended for a limited time
with regard to Ireland and the British plantations, have all had the bad
effects of taxes upon the necessaries of life, and produce no revenue to
government. Nothing seems necessary for the repeal of such regulations,
but to convince the public of the futility of that system in consequence
of which they have been established.
Taxes upon the necessaries of life are much higher in many other countries
than in Great Britain. Duties upon flour and meal when ground at the mill,
and upon bread when baked at the oven, take place in many countries. In
Holland the money-price of the bread consumed in towns is supposed to be
doubled by means of such taxes. In lieu of a part of them, the people who
live in the country, pay every year so much a-head, according to the sort
of bread they are supposed to consume. Those who consume wheaten bread pay
three guilders fifteen stivers; about six shillings and ninepence
halfpenny. Those, and some other taxes of the same kind, by raising the
price of labour, are said to have ruined the greater part of the
manufactures of Holland {Memoires concernant les Droits, etc. p. 210,
211.}. Similar taxes, though not quite so heavy, take place in the
Milanese, in the states of Genoa, in the duchy of Modena, in the duchies
of Parma, Placentia, and Guastalla, and the Ecclesiastical state. A French
author {Le Reformateur} of some note, has proposed to reform the finances
of his country, by substituting in the room of the greater part of other
taxes, this most ruinous of all taxes. There is nothing so absurd, says
Cicero, which has not sometimes been asserted by some philosophers.
Taxes upon butcher’s meat are still more common than those upon bread. It
may indeed be doubted, whether butcher’s meat is any where a necessary of
life. Grain and other vegetables, with the help of milk, cheese, and
butter, or oil, where butter is not to be had, it is known from
experience, can, without any butcher’s meat, afford the most plentiful,
the most wholesome, the most nourishing, and the most invigorating diet.
Decency nowhere requires that any man should eat butcher’s meat, as it in
most places requires that he should wear a linen shirt or a pair of
leather shoes.
Consumable commodities, whether necessaries or luxuries, may be taxed in
two different ways. The consumer may either pay an annual sum on account
of his using or consuming goods of a certain kind; or the goods may be
taxed while they remain in the hands of the dealer, and before they are
delivered to the consumer. The consumable goods which last a considerable
time before they are consumed altogether, are most properly taxed in the
one way; those of which the consumption is either immediate or more
speedy, in the other. The coach-tax and plate tax are examples of the
former method of imposing; the greater part of the other duties of excise
and customs, of the latter.
A coach may, with good management, last ten or twelve years. It might be
taxed, once for all, before it comes out of the hands of the coach-maker.
But it is certainly more convenient for the buyer to pay four pounds
a-year for the privilege of keeping a coach, than to pay all at once forty
or forty-eight pounds additional price to the coach-maker; or a sum
equivalent to what the tax is likely to cost him during the time he uses
the same coach. A service of plate in the same manner, may last more than
a century. It is certainly-easier for the consumer to pay five shillings
a-year for every hundred ounces of plate, near one per cent. of the value,
than to redeem this long annuity at five-and-twenty or thirty years
purchase, which would enhance the price at least five-and-twenty or thirty
per cent. The different taxes which affect houses, are certainly more
conveniently paid by moderate annual payments, than by a heavy tax of
equal value upon the first building or sale of the house.
It was the well-known proposal of Sir Matthew Decker, that all
commodities, even those of which the consumption is either immediate or
speedy, should be taxed in this manner; the dealer advancing nothing, but
the consumer paying a certain annual sum for the licence to consume
certain goods. The object of his scheme was to promote all the different
branches of foreign trade, particularly the carrying trade, by taking away
all duties upon importation and exportation, and thereby enabling the
merchant to employ his whole capital and credit in the purchase of goods
and the freight of ships, no part of either being diverted towards the
advancing of taxes, The project, however, of taxing, in this manner, goods
of immediate or speedy consumption, seems liable to the four following
very important objections. First, the tax would be more unequal, or not so
well proportioned to the expense and consumption of the different
contributors, as in the way in which it is commonly imposed. The taxes
upon ale, wine, and spiritous liquors, which are advanced by the dealers,
are finally paid by the different consumers, exactly in proportion to
their respective consumption. But if the tax were to be paid by purchasing
a licence to drink those liquors, the sober would, in proportion to his
consumption, be taxed much more heavily than the drunken consumer. A
family which exercised great hospitality, would be taxed much more lightly
than one who entertained fewer guests. Secondly, this mode of taxation, by
paying for an annual, half-yearly, or quarterly licence to consume certain
goods, would diminish very much one of the principal conveniences of taxes
upon goods of speedy consumption; the piece-meal payment. In the price of
threepence halfpenny, which is at present paid for a pot of porter, the
different taxes upon malt, hops, and beer, together with the extraordinary
profit which the brewer charges for having advanced than, may perhaps
amount to about three halfpence. If a workman can conveniently spare those
three halfpence, he buys a pot of porter. If he cannot, he contents
himself with a pint; and, as a penny saved is a penny got, he thus gains a
farthing by his temperance. He pays the tax piece-meal, as he can afford
to pay it, and when he can afford to pay it, and every act of payment is
perfectly voluntary, and what he can avoid if he chuses to do so. Thirdly,
such taxes would operate less as sumptuary laws. When the licence was once
purchased, whether the purchaser drunk much or drunk little, his tax would
be the same. Fourthly, if a workman were to pay all at once, by yearly,
half-yearly, or quarterly payments, a tax equal to what he at present
pays, with little or no inconveniency, upon all the different pots and
pints of porter which he drinks in any such period of time, the sum might
frequently distress him very much. This mode of taxation, therefore, it
seems evident, could never, without the most grievous oppression, produce
a revenue nearly equal to what is derived from the present mode without
any oppression. In several countries, however, commodities of an immediate
or very speedy consumption are taxed in this manner. In Holland, people
pay so much a-head for a licence to drink tea. I have already mentioned a
tax upon bread, which, so far as it is consumed in farm houses and country
villages, is there levied in the same manner.
The duties of excise are imposed chiefly upon goods of home produce,
destined for home consumption. They are imposed only upon a few sorts of
goods of the most general use. There can never be any doubt, either
concerning the goods which are subject to those duties, or concerning the
particular duty which each species of goods is subject to. They fall
almost altogether upon what I call luxuries, excepting always the four
duties above mentioned, upon salt, soap, leather, candles, and perhaps
that upon green glass.
The duties of customs are much more ancient than those of excise. They
seem to have been called customs, as denoting customary payments, which
had been in use for time immemorial. They appear to have been originally
considered as taxes upon the profits of merchants. During the barbarous
times of feudal anarchy, merchants, like all the other inhabitants of
burghs, were considered as little better than emancipated bondmen, whose
persons were despised, and whose gains were envied. The great nobility,
who had consented that the king should tallage the profits of their own
tenants, were not unwilling that he should tallage likewise those of an
order of men whom it was much less their interest to protect. In those
ignorant times, it was not understood, that the profits of merchants are a
subject not taxable directly; or that the final payment of all such taxes
must fall, with a considerable overcharge, upon the consumers.
The gains of alien merchants were looked upon more unfavourably than those
of English merchants. It was natural, therefore, that those of the former
should be taxed more heavily than those of the latter. This distinction
between the duties upon aliens and those upon English merchants, which was
begun from ignorance, has been continued front the spirit of monopoly, or
in order to give our own merchants an advantage, both in the home and in
the foreign market.
With this distinction, the ancient duties of customs were imposed equally
upon all sorts of goods, necessaries as well its luxuries, goods exported
as well as goods imported. Why should the dealers in one sort of goods, it
seems to have been thought, be more favoured than those in another? or why
should the merchant exporter be more favoured than the merchant importer?
The ancient customs were divided into three branches. The first, and,
perhaps, the most ancient of all those duties, was that upon wool and
leather. It seems to have been chiefly or altogether an exportation duty.
When the woollen manufacture came to be established in England, lest the
king should lose any part of his customs upon wool by the exportation of
woollen cloths, a like duty was imposed upon them. The other two branches
were, first, a duty upon wine, which being imposed at so much a-ton, was
called a tonnage; and, secondly, a duty upon all other goods, which being
imposed at so much a-pound of their supposed value, was called a poundage.
In the forty-seventh year of Edward III., a duty of sixpence in the pound
was imposed upon all goods exported and imported, except wools,
wool-felts, leather, and wines which were subject to particular duties. In
the fourteenth of Richard II., this duty was raised to one shilling in the
pound; but, three years afterwards, it was again reduced to sixpence. It
was raised to eightpence in the second year of Henry IV.; and, in the
fourth of the same prince, to one shilling. From this time to the ninth
year of William III., this duty continued at one shilling in the pound.
The duties of tonnage and poundage were generally granted to the king by
one and the same act of parliament, and were called the subsidy of tonnage
and poundage. The subsidy of poundage having continued for so long a time
at one shilling in the pound, or at five per cent., a subsidy came, in the
language of the customs, to denote a general duty of this kind of five per
cent. This subsidy, which is now called the old subsidy, still continues
to be levied, according to the book of rates established by the twelfth of
Charles II. The method of ascertaining, by a book of rates, the value of
goods subject to this duty, is said to be older than the time of James I.
The new subsidy, imposed by the ninth and tenth of William III., was an
additional five per cent. upon the greater part of goods. The one-third
and the two-third subsidy made up between them another five per cent. of
which they were proportionable parts. The subsidy of 1747 made a fourth
five per cent. upon the greater part of goods; and that of 1759, a fifth
upon some particular sorts of goods. Besides those five subsidies, a great
variety of other duties have occasionally been imposed upon particular
sorts of goods, in order sometimes to relieve the exigencies of the
state, and sometimes to regulate the trade of the country, according to
the principles of the mercantile system.
That system has come gradually more and more into fashion. The old subsidy
was imposed indifferently upon exportation, as well as importation. The
four subsequent subsidies, as well as the other duties which have since
been occasionally imposed upon particular sorts of goods, have, with a few
exceptions, been laid altogether upon importation. The greater part of the
ancient duties which had been imposed upon the exportation of the goods of
home produce and manufacture, have either been lightened or taken away
altogether. In most cases, they have been taken away. Bounties have even
been given upon the exportation of some of them. Drawbacks, too, sometimes
of the whole, and, in most cases, of a part of the duties which are paid
upon the importation of foreign goods, have been granted upon their
exportation. Only half the duties imposed by the old subsidy upon
importation, are drawn back upon exportation; but the whole of those
imposed by the latter subsidies and other imposts are, upon the greater
parts of the goods, drawn back in the same manner. This growing favour of
exportation, and discouragement of importation, have suffered only a few
exceptions, which chiefly concern the materials of some manufactures.
These our merchants and manufacturers are willing should come as cheap as
possible to themselves, and as dear as possible to their rivals and
competitors in other countries. Foreign materials are, upon this account,
sometimes allowed to be imported duty-free; spanish wool, for example,
flax, and raw linen yarn. The exportation of the materials of home
produce, and of those which are the particular produce of our colonies,
has sometimes been prohibited, and sometimes subjected to higher duties.
The exportation of English wool has been prohibited. That of beaver skins,
of beaver wool, and of gum-senega, has been subjected to higher duties;
Great Britain, by the conquests of Canada and Senegal, having got almost
the monopoly of those commodities.
That the mercantile system has not been very favourable to the revenue of
the great body of the people, to the annual produce of the land and labour
of the country, I have endeavoured to show in the fourth book of this
Inquiry. It seems not to have been more favourable to the revenue of the
sovereign; so far, at least, as that revenue depends upon the duties of
customs.
In consequence of that system, the importation of several sorts of goods
has been prohibited altogether. This prohibition has, in some cases,
entirely prevented, and in others has very much diminished, the
importation of those commodities, by reducing the importers to the
necessity of smuggling. It has entirely prevented the importation of
foreign wollens; and it has very much diminished that of foreign silks and
velvets, In both cases, it has entirely annihilated the revenue of customs
which might have been levied upon such importation.
The high duties which have been imposed upon the importation of many
different sorts of foreign goods in order to discourage their consumption
in Great Britain, have, in many cases, served only to encourage smuggling,
and, in all cases, have reduced the revenues of the customs below what
more moderate duties would have afforded. The saying of Dr Swift, that in
the arithmetic of the customs, two and two, instead of making four, make
sometimes only one, holds perfectly true with regard to such heavy duties,
which never could have been imposed, had not the mercantile system taught
us, in many cases, to employ taxation as an instrument, not of revenue,
but of monopoly.
The bounties which are sometimes given upon the exportation of home
produce and manufactures, and the drawbacks which are paid upon the
re-exportation of the greater part of foreign goods, have given occasion
to many frauds, and to a species of smuggling, more destructive of the
public revenue than any other. In order to obtain the bounty or drawback,
the goods, it is well known, are sometimes shipped, and sent to sea, but
soon afterwards clandestinely re-landed in some other part of the country.
The defalcation of the revenue of customs occasioned by bounties and
drawbacks, of which a great part are obtained fraudulently, is very great.
The gross produce of the customs, in the year which ended on the 5th of
January 1755, amounted to £5,068,000. The bounties which were paid out of
this revenue, though in that year there was no bounty upon corn, amounted
to £167,806. The drawbacks which were paid upon debentures and
certificates, to £2,156,800. Bounties and drawbacks together amounted to
£2,324,600. In consequence of these deductions, the revenue of the customs
amounted only to £2,743,400; from which deducting £287,900 for the expense
of management, in salaries and other incidents, the neat revenue of the
customs for that year comes out to be £2,455,500. The expense of
management, amounts, in this manner, to between five and six per cent.
upon the gross revenue of the customs; and to something more than ten per
cent. upon what remains of that revenue, after deducting what is paid away
in bounties and drawbacks.
Heavy duties being imposed upon almost all goods imported, our merchant
importers smuggle as much, and make entry of as little as they can. Our
merchant exporters, on the contrary, make entry of more than they export;
sometimes out of vanity, and to pass for great dealers in goods which pay
no duty gain a bounty back. Our exports, in consequence of these different
frauds, appear upon the custom-house books greatly to overbalance our
imports, to the unspeakable comfort of those politicians, who measure the
national prosperity by what they call the balance of trade.
All goods imported, unless particularly exempted, and such exemptions are
not very numerous, are liable to some duties of customs. If any goods are
imported, not mentioned in the book of rates, they are taxed at 4s:9¾d.
for every twenty shillings value, according to the oath of the importer,
that is, nearly at five subsidies, or five poundage duties. The book of
rates is extremely comprehensive, and enumerates a great variety of
articles, many of them little used, and, therefore, not well known. It is,
upon this account, frequently uncertain under what article a particular
sort of goods ought to be classed, and, consequently what duty they ought
to pay. Mistakes with regard to this sometimes ruin the custom-house
officer, and frequently occasion much trouble, expense, and vexation to
the importer. In point of perspicuity, precision, and distinctness,
therefore, the duties of customs are much inferior to those of excise.
In order that the greater part of the members of any society should
contribute to the public revenue, in proportion to their respective
expense, it does not seem necessary that every single article of that
expense should be taxed. The revenue which is levied by the duties of
excise is supposed to fall as equally upon the contributors as that which
is levied by the duties of customs; and the duties of excise are imposed
upon a few articles only of the most general used and consumption. It has
been the opinion of many people, that, by proper management, the duties of
customs might likewise, without any loss to the public revenue, and with
great advantage to foreign trade, be confined to a few articles only.
The foreign articles, of the most general use and consumption in Great
Britain, seem at present to consist chiefly in foreign wines and brandies;
in some of the productions of America and the West Indies, sugar, rum,
tobacco, cocoa-nuts, etc. and in some of those of the East Indies, tea,
coffee, china-ware, spiceries of all kinds, several sorts of piece-goods,
etc. These different articles afford, the greater part of the perhaps, at
present, revenue which is drawn from the duties of customs. The taxes
which at present subsist upon foreign manufactures, if you except those
upon the few contained in the foregoing enumeration, have, the greater
part of them, been imposed for the purpose, not of revenue, but of
monopoly, or to give our own merchants an advantage in the home market. By
removing all prohibitions, and by subjecting all foreign manufactures to
such moderate taxes, as it was found from experience, afforded upon each
article the greatest revenue to the public, our own workmen might still
have a considerable advantage in the home market; and many articles, some
of which at present afford no revenue to government, and others a very
inconsiderable one, might afford a very great one.
High taxes, sometimes by diminishing the consumption of the taxed
commodities, and sometimes by encouraging smuggling frequently afford a
smaller revenue to government than what might be drawn from more moderate
taxes.
When the diminution of revenue is the effect of the diminution of
consumption, there can be but one remedy, and that is the lowering of the
tax. When the diminution of revenue is the effect of the encouragement
given to smuggling, it may, perhaps, be remedied in two ways; either by
diminishing the temptation to smuggle, or by increasing the difficulty of
smuggling. The temptation to smuggle can be diminished only by the
lowering of the tax; and the difficulty of smuggling can be increased only
by establishing that system of administration which is most proper for
preventing it.
The excise laws, it appears, I believe, from experience, obstruct and
embarrass the operations of the smuggler much more effectually than those
of the customs. By introducing into the customs a system of administration
as similar to that of the excise as the nature of the different duties
will admit, the difficulty of smuggling might be very much increased. This
alteration, it has been supposed by many people, might very easily be
brought about.
The importer of commodities liable to any duties of customs, it has been
said, might, at his option, be allowed either to carry them to his own
private warehouse; or to lodge them in a warehouse, provided either at his
own expense or at that of the public, but under the key of the
custom-house officer, and never to be opened but in his presence. If the
merchant carried them to his own private warehouse, the duties to be
immediately paid, and never afterwards to be drawn back; and that
warehouse to be at all times subject to the visit and examination of the
custom-house officer, in order to ascertain how far the quantity contained
in it corresponded with that for which the duty had been paid. If he
carried them to the public warehouse, no duty to be paid till they were
taken out for home consumption. If taken out for exportation, to be
duty-free; proper security being always given that they should be so
exported. The dealers in those particular commodities, either by wholesale
or retail, to be at all times subject to the visit and examination of the
custom-house officer; and to be obliged to justify, by proper
certificates, the payment of the duty upon the whole quantity contained in
their shops or warehouses. What are called the excise duties upon rum
imported, are at present levied in this manner; and the same system of
administration might, perhaps, be extended to all duties upon goods
imported; provided always that those duties were, like the duties of
excise, confined to a few sorts of goods of the most general use and
consumption. If they were extended to almost all sorts of goods, as at
present, public warehouses of sufficient extent could not easily be
provided; and goods of a very delicate nature, or of which the
preservation required much care and attention, could not safely be trusted
by the merchant in any warehouse but his own.
If, by such a system of administration, smuggling to any considerable
extent could be prevented, even under pretty high duties; and if every
duty was occasionally either heightened or lowered according as it was
most likely, either the one way or the other, to afford the greatest
revenue to the state; taxation being always employed as an instrument of
revenue, and never of monopoly; it seems not improbable that a revenue, at
least equal to the present neat revenue of the customs, might be drawn
from duties upon the importation of only a few sorts of goods of the most
general use and consumption; and that the duties of customs might thus be
brought to the same degree of simplicity, certainty, and precision, as
those of excise. What the revenue at present loses by drawbacks upon the
re-exportation of foreign goods, which are afterwards re-landed and
consumed at home, would, under this system, be saved altogether. If to
this saving, which would alone be very considerable, were added the
abolition of all bounties upon the exportation of home produce; in all
cases in which those bounties were not in reality drawbacks of some duties
of excise which had before been advanced; it cannot well be doubted, but
that the neat revenue of customs might, after an alteration of this kind,
be fully equal to what it had ever been before.
If, by such a change of system, the public revenue suffered no loss, the
trade and manufactures of the country would certainly gain a very
considerable advantage. The trade in the commodities not taxed, by far the
greatest number would be perfectly free, and might be carried on to and
from all parts of the world with every possible advantage. Among those
commodities would be comprehended all the necessaries of life, and all the
materials of manufacture. So far as the free importation of the
necessaries of life reduced their average money price in the home market,
it would reduce the money price of labour, but without reducing in any
respect its real recompence. The value of money is in proportion to the
quantity of the necessaries of life which it will purchase. That of the
necessaries of life is altogether independent of the quantity of money
which can be had for them. The reduction in the money price of labour
would necessarily be attended with a proportionable one in that of all
home manufactures, which would thereby gain some advantage in all foreign
markets. The price of some manufactures would be reduced, in a still
greater proportion, by the free importation of the raw materials. If raw
silk could be imported from China and Indostan, duty-free, the silk
manufacturers in England could greatly undersell those of both France and
Italy. There would be no occasion to prohibit the importation of foreign
silks and velvets. The cheapness of their goods would secure to our own
workmen, not only the possession of a home, but a very great command of
the foreign market. Even the trade in the commodities taxed, would be
carried on with much more advantage than at present. If those commodities
were delivered out of the public warehouse for foreign exportation, being
in this case exempted from all taxes, the trade in them would be perfectly
free. The carrying trade, in all sorts of goods, would, under this system,
enjoy every possible advantage. If these commodities were delivered out
for home consumption, the importer not being obliged to advance the tax
till he had an opportunity of selling his goods, either to some dealer, or
to some consumer, he could always afford to sell them cheaper than if he
had been obliged to advance it at the moment of importation. Under the
same taxes, the foreign trade of consumption, even in the taxed
commodities, might in this manner be carried on with much more advantage
than it is at present.
It was the object of the famous excise scheme of Sir Robert Walpole, to
establish, with regard to wine and tobacco, a system not very unlike that
which is here proposed. But though the bill which was then brought into
Parliament, comprehended those two commodities only, it was generally
supposed to be meant as an introduction to a more extensive scheme of the
same kind. Faction, combined with the interest of smuggling merchants,
raised so violent, though so unjust a clamour, against that bill, that the
minister thought proper to drop it; and, from a dread of exciting a
clamour of the same kind, none of his successors have dared to resume the
project.
The duties upon foreign luxuries, imported for home consumption, though
they sometimes fall upon the poor, fall principally upon people of
middling or more than middling fortune. Such are, for example, the duties
upon foreign wines, upon coffee, chocolate, tea, sugar, etc.
The duties upon the cheaper luxuries of home produce, destined for home
consumption, fall pretty equally upon people of all ranks, in proportion
to their respective expense. The poor pay the duties upon malt, hops,
beer, and ale, upon their own consumption; the rich, upon both their own
consumption and that of their servants.
The whole consumption of the inferior ranks of people, or of those below
the middling rank, it must be observed, is, in every country, much
greater, not only in quantity, but in value, than that of the middling,
and of those above the middling rank. The whole expense of the inferior is
much greater titan that of the superior ranks. In the first place, almost
the whole capital of every country is annually distributed among the
inferior ranks of people, as the wages of productive labour. Secondly, a
great part of the revenue, arising from both the rent of land and the
profits of stock, is annually distributed among the same rank, in the
wages and maintenance of menial servants, and other unproductive
labourers. Thirdly, some part of the profits of stock belongs to the same
rank, as a revenue arising from the employment of their small capitals.
The amount of the profits annually made by small shopkeepers, tradesmen,
and retailers of all kinds, is everywhere very considerable, and makes a
very considerable portion of the annual produce. Fourthly and lastly, some
part even of the rent of land belongs to the same rank; a considerable
part to those who are somewhat below the middling rank, and a small part
even to the lowest rank; common labourers sometimes possessing in property
an acre or two of land. Though the expense of those inferior ranks of
people, therefore, taking them individually, is very small, yet the whole
mass of it, taking them collectively, amounts always to by much the
largest portion of the whole expense of the society; what remains of the
annual produce of the land and labour of the country, for the consumption
of the superior ranks, being always much less, not only in quantity, but
in value. The taxes upon expense, therefore, which fall chiefly upon that
of the superior ranks of people, upon the smaller portion of the annual
produce, are likely to be much less productive than either those which
fall indifferently upon the expense of all ranks, or even those which fall
chiefly upon that of the inferior ranks, than either those which fall
indifferently upon the whole annual produce, or those which fall chiefly
upon the larger portion of it. The excise upon the materials and
manufacture of home-made fermented and spirituous liquors, is,
accordingly, of all the different taxes upon expense, by far the most
productive; and this branch of the excise falls very much, perhaps
principally, upon the expense of the common people. In the year which
ended on the 5th of July 1775, the gross produce of this branch of the
excise amounted to £3,341,837:9:9.
It must always be remembered, however, that it is the luxuries, and not
the necessary expense of the inferior ranks of people, that ought ever to
be taxed. The final payment of any tax upon their necessary expense, would
fall altogether upon the superior ranks of people; upon the smaller
portion of the annual produce, and not upon the greater. Such a tax must,
in all cases, either raise the wages of labour, or lessen the demand for
it. It could not raise the wages of labour, without throwing the final
payment of the tax upon the superior ranks of people. It could not lessen
the demand for labour, without lessening the annual produce of the land
and labour of the country, the fund upon which all taxes must be finally
paid. Whatever might be the state to which a tax of this kind reduced the
demand for labour, it must always raise wages higher than they otherwise
would be in that state; and the final payment of this enhancement of wages
must, in all cases, fall upon the superior ranks of people.
Fermented liquors brewed, and spiritous liquors distilled, not for sale,
but for private use, are not in Great Britain liable to any duties of
excise. This exemption, of which the object is to save private families
from the odious visit and examination of the tax-gatherer, occasions the
burden of those duties to fall frequently much lighter upon the rich than
upon the poor. It is not, indeed, very common to distil for private use,
though it is done sometimes. But in the country, many middling and almost
all rich and great families, brew their own beer. Their strong beer,
therefore, costs them eight shillings a-barrel less than it costs the
common brewer, who must have his profit upon the tax, as well as upon all
the other expense which he advances. Such families, therefore, must drink
their beer at least nine or ten shillings a-barrel cheaper than any liquor
of the same quality can be drank by the common people, to whom it is
everywhere more convenient to buy their beer, by little and little, from
the brewery or the ale-house. Malt, in the same manner, that is made for
the use of a private family, is not liable to the visit or examination of
the tax-gatherer but, in this case the family must compound at seven
shillings and sixpence a-head for the tax. Seven shillings and sixpence
are equal to the excise upon ten bushels of malt; a quantity fully equal
to what all the different members of any sober family, men, women, and
children, are, at an average, likely to consume. But in rich and great
families, where country hospitality is much practised, the malt liquors
consumed by the members of the family make but a small part of the
consumption of the house. Either on account of this composition, however,
or for other reasons, it is not near so common to malt as to brew for
private use. It is difficult to imagine any equitable reason, why those
who either brew or distil for private use should not be subject to a
composition of the same kind.
A greater revenue than what is at present drawn from all the heavy taxes
upon malt, beer, and ale, might be raised, it has frequently been said, by
a much lighter tax upon malt; the opportunities of defrauding the revenue
being much greater in a brewery than in a malt-house; and those who brew
for private use being exempted from all duties or composition for duties,
which is not the case with those who malt for private use.
In the porter brewery of London, a quarter of malt is commonly brewed into
more than two barrels and a-half, sometimes into three barrels of porter.
The different taxes upon malt amount to six shillings a-quarter; those
upon strong ale and beer to eight shillings a-barrel. In the porter
brewery, therefore, the different taxes upon malt, beer, and ale, amount
to between twenty-six and thirty shillings upon the produce of a quarter
of malt. In the country brewery for common country sale, a quarter of malt
is seldom brewed into less than two barrels of strong, and one barrel of
small beer; frequently into two barrels and a-half of strong beer. The
different taxes upon small beer amount to one shilling and fourpence
a-barrel. In the country brewery, therefore, the different taxes upon
malt, beer, and ale, seldom amount to less than twenty-three shillings and
fourpence, frequently to twenty-six shillings, upon the produce of a
quarter of malt. Taking the whole kingdom at an average, therefore, the
whole amount of the duties upon malt, beer, and ale, cannot be estimated
at less than twenty-four or twenty-five shillings upon the produce of a
quarter of malt. But by taking off all the different duties upon beer and
ale, and by trebling the malt tax, or by raising it from six to eighteen
shillings upon the quarter of malt, a greater revenue, it is said, might
be raised by this single tax, than what is at present drawn from all those
heavier taxes.
In 1772, the old malt tax produced......... £722,023: 11: 11 The additional... £356,776: 7: 9¾ In 1773, the old tax produced............... £561,627: 3: 7½ The additional... £278,650: 15: 3¾ In 1774, the old tax produced ............. £624,614: 17: 5¾ The additional....£310,745: 2: 8½ In 1775, the old tax produced ..............£657,357: 0: 8¼ The additional....£323,785: 12: 6¼ 4)£3,835,580: 12: 0¾ Average of these four years ............... £958,895: 3: 0
In 1772, the country excise produced.......£1,243,120: 5: 3 The London brewery 408,260: 7: 2¾ In 1773, the country excise................£1,245,808: 3: 3 The London brewery 405,406: 17: 10½ In 1774, the country excise................£1,246,373: 14: 5½ The London brewery 320,601: 18: 0¼ In 1775, the country excise................£1,214,583: 6: 1¼ The London brewery 463,670: 7: 0¼ 4)£6,547,832 19: 2¼ Average of these four years ...............£1,636,958: 4: 9½ To which adding the average malt tax........ 958,895: 3: 0¼
The whole amount of those different taxes comes out to be........£2,595,835: 7: 10
But, by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, that single tax would produce.....£2,876,685: 9: 0 A sum which exceeds the foregoing by.... 280,832: 1: 3
Under the old malt tax, indeed, is comprehended a tax of four shillings
upon the hogshead of cyder, and another of ten shillings upon the barrel
of mum. In 1774, the tax upon cyder produced only £3,083:6:8. It probably
fell somewhat short of its usual amount; all the different taxes upon
cyder, having, that year, produced less than ordinary. The tax upon mum,
though much heavier, is still less productive, on account of the smaller
consumption of that liquor. But to balance whatever may be the ordinary
amount of those two taxes, there is comprehended under what is called the
country excise, first, the old excise of six shillings and eightpence upon
the hogshead of cyder; secondly, a like tax of six shillings and
eightpence upon the hogshead of verjuice; thirdly, another of eight
shillings and ninepence upon the hogshead of vinegar; and, lastly, a
fourth tax of elevenpence upon the gallon of mead or metheglin. The
produce of those different taxes will probably much more than
counterbalance that of the duties imposed, by what is called the annual
malt tax, upon cyder and mum.
Malt is consumed, not only in the brewery of beer and ale, but in the
manufacture of low wines and spirits. If the malt tax were to be raised to
eighteen shillings upon the quarter, it might be necessary to make some
abatement in the different excises which are imposed upon those particular
sorts of low wines and spirits, of which malt makes any part of the
materials. In what are called malt spirits, it makes commonly but a third
part of the materials; the other two-thirds being either raw barley, or
one-third barley and one-third wheat. In the distillery of malt spirits,
both the opportunity and the temptation to smuggle are much greater than
either in a brewery or in a malt-house; the opportunity, on account of the
smaller bulk and greater value of the commodity, and the temptation, on
account of the superior height of the duties, which amounted to 3s. 10
⅔d. upon the gallon of spirits. {Though the duties directly imposed upon
proof spirits amount only to 2s. 6d per gallon, these, added to the duties
upon the low wines, from which they are distilled, amount to 3s 10 ⅔d.
Both low wines and proof spirits are, to prevent frauds, now rated
according to what they gauge in the wash.}
By increasing the duties upon malt, and reducing those upon the
distillery, both the opportunities and the temptation to smuggle would be
diminished, which might occasion a still further augmentation of revenue.
It has for some time past been the policy of Great Britain to discourage
the consumption of spiritous liquors, on account of their supposed
tendency to ruin the health and to corrupt the morals of the common
people. According to this policy, the abatement of the taxes upon the
distillery ought not to be so great as to reduce, in any respect, the
price of those liquors. Spiritous liquors might remain as dear as ever;
while, at the same time, the wholesome and invigorating liquors of beer
and ale might be considerably reduced in their price. The people might
thus be in part relieved from one of the burdens of which they at present
complain the most; while, at the same time, the revenue might be
considerably augmented.
The objections of Dr Davenant to this alteration in the present system of
excise duties, seem to be without foundation. Those objections are, that
the tax, instead of dividing itself, as at present, pretty equally upon
the profit of the maltster, upon that of the brewer and upon that of the
retailer, would so far as it affected profit, fall altogether upon that of
the maltster; that the maltster could not so easily get back the amount of
the tax in the advanced price of his malt, as the brewer and retailer in
the advanced price of their liquor; and that so heavy a tax upon malt
might reduce the rent and profit of barley land.
No tax can ever reduce, for any considerable time, the rate of profit in
any particular trade, which must always keep its level with other trades
in the neighbourhood. The present duties upon malt, beer, and ale, do not
affect the profits of the dealers in those commodities, who all get back
the tax with an additional profit, in the enhanced price of their goods. A
tax, indeed, may render the goods upon which it is imposed so dear, as to
diminish the consumption of them. But the consumption of malt is in malt
liquors; and a tax of eighteen shillings upon the quarter of malt could
not well render those liquors dearer than the different taxes, amounting
to twenty-four or twenty-five shillings, do at present. Those liquors, on
the contrary, would probably become cheaper, and the consumption of them
would be more likely to increase than to diminish.
It is not very easy to understand why it should be more difficult for the
maltster to get back eighteen shillings in the advanced price of his malt,
than it is at present for the brewer to get back twenty-four or
twenty-five, sometimes thirty shillings, in that of his liquor. The
maltster, indeed, instead of a tax of six shillings, would be obliged to
advance one of eighteen shilling upon every quarter of malt. But the
brewer is at present obliged to advance a tax of twenty-four or
twenty-five, sometimes thirty shillings, upon every quarter of malt which
he brews. It could not be more inconvenient for the maltster to advance a
lighter tax, than it is at present for the brewer to advance a heavier
one. The maltster does not always keep in his granaries a stock of malt,
which it will require a longer time to dispose of than the stock of beer
and ale which the brewer frequently keeps in his cellars. The former,
therefore, may frequently get the returns of his money as soon as the
latter. But whatever inconveniency might arise to the maltster from being
obliged to advance a heavier tax, it could easily be remedied, by granting
him a few months longer credit than is at present commonly given to the
brewer.
Nothing could reduce the rent and profit of barley land, which did not
reduce the demand for barley. But a change of system, which reduced the
duties upon a quarter of malt brewed into beer and ale, from twenty-four
and twenty-five shillings to eighteen shillings, would be more likely to
increase than diminish that demand. The rent and profit of barley land,
besides, must always be nearly equal to those of other equally fertile and
equally well cultivated land. If they were less, some part of the barley
land would soon be turned to some other purpose; and if they were greater,
more land would soon be turned to the raising of barley. When the ordinary
price of any particular produce of land is at what may be called a
monopoly price, a tax upon it necessarily reduces the rent and profit of
the land which grows it. A tax upon the produce of those precious
vineyards, of which the wine falls so much short of the effectual demand,
that its price is always above the natural proportion to that of the
produce of other equally fertile and equally well cultivated land, would
necessarily reduce the rent and profit of those vineyards. The price of
the wines being already the highest that could be got for the quantity
commonly sent to market, it could not be raised higher without diminishing
that quantity; and the quantity could not be diminished without still
greater loss, because the lands could not be turned to any other equally
valuable produce. The whole weight of the tax, therefore, would fall upon
the rent and profit; properly upon the rent of the vineyard. When it has
been proposed to lay any new tax upon sugar, our sugar planters have
frequently complained that the whole weight of such taxes fell not upon
the consumer, but upon the producer; they never having been able to raise
the price of their sugar after the tax higher than it was before. The
price had, it seems, before the tax, been a monopoly price; and the
arguments adduced to show that sugar was an improper subject of taxation,
demonstrated perhaps that it was a proper one; the gains of monopolists,
whenever they can be come at, being certainly of all subjects the most
proper. But the ordinary price of barley has never been a monopoly price;
and the rent and profit of barley land have never been above their natural
proportion to those of other equally fertile and equally well cultivated
land. The different taxes which have been imposed upon malt, beer, and
ale, have never lowered the price of barley; have never reduced the rent
and profit of barley land. The price of malt to the brewer has constantly
risen in proportion to the taxes imposed upon it; and those taxes,
together with the different duties upon beer and ale, have constantly
either raised the price, or, what comes to the same thing, reduced the
quality of those commodities to the consumer. The final payment of those
taxes has fallen constantly upon the consumer, and not upon the producer.
The only people likely to suffer by the change of system here proposed,
are those who brew for their own private use. But the exemption, which
this superior rank of people at present enjoy, from very heavy taxes which
are paid by the poor labourer and artificer, is surely most unjust and
unequal, and ought to be taken away, even though this change was never to
take place. It has probably been the interest of this superior order of
people, however, which has hitherto prevented a change of system that
could not well fail both to increase the revenue and to relieve the
people.
Besides such duties as those of custom and excise above mentioned, there
are several others which affect the price of goods more unequally and more
indirectly. Of this kind are the duties, which, in French, are called
peages, which in old Saxon times were called the duties of passage, and
which seem to have been originally established for the same purpose as our
turnpike tolls, or the tolls upon our canals and navigable rivers, for the
maintenance of the road or of the navigation. Those duties, when applied
to such purposes, are most properly imposed according to the bulk or
weight of the goods. As they were originally local and provincial duties,
applicable to local and provincial purposes, the administration of them
was, in most cases, entrusted to the particular town, parish, or lordship,
in which they were levied; such communities being, in some way or other,
supposed to be accountable for the application. The sovereign, who is
altogether unaccountable, has in many countries assumed to himself the
administration of those duties; and though he has in most cases enhanced
very much the duty, he has in many entirely neglected the application. If
the turnpike tolls of Great Britain should ever become one of the
resources of government, we may learn, by the example of many other
nations, what would probably be the consequence. Such tolls, no doubt, are
finally paid by the consumer; but the consumer is not taxed in proportion
to his expense, when he pays, not according to the value, but according to
the bulk or weight of what he consumes. When such duties are imposed, not
according to the bulk or weight, but according to the supposed value of
the goods, they become properly a sort of inland customs or excise, which
obstruct very much the most important of all branches of commerce, the
interior commerce of the country.
In some small states, duties similar to those passage duties are imposed
upon goods carried across the territory, either by land or by water, from
one foreign country to another. These are in some countries called
transit-duties. Some of the little Italian states which are situated upon
the Po, and the rivers which run into it, derive some revenue from duties
of this kind, which are paid altogether by foreigners, and which, perhaps,
are the only duties that one state can impose upon the subjects of
another, without obstruction in any respect, the industry or commerce of
its own. The most important transit-duty in the world, is that levied by
the king of Denmark upon all merchant ships which pass through the Sound.
Such taxes upon luxuries, as the greater part of the duties of customs and
excise, though they all fall indifferently upon every different species of
revenue, and are paid finally, or without any retribution, by whoever
consumes the commodities upon which they are imposed; yet they do not
always fall equally or proportionally upon the revenue of every
individual. As every man’s humour regulates the degree of his consumption,
every man contributes rather according to his humour, than proportion to
his revenue: the profuse contribute more, the parsimonious less, than
their proper proportion. During the minority of a man of great fortune, he
contributes commonly very little, by his consumption, towards the support
of that state from whose protection he derives a great revenue. Those who
live in another country, contribute nothing by their consumption towards
the support of the government of that country, in which is situated the
source of their revenue. If in this latter country there should be no land
tax, nor any considerable duty upon the transference either of moveable or
immoveable property, as is the case in Ireland, such absentees may derive
a great revenue from the protection of a government, to the support of
which they do not contribute a single shilling. This inequality is likely
to be greatest in a country of which the government is, in some respects,
subordinate and dependant upon that of some other. The people who possess
the most extensive property in the dependant, will, in this case,
generally chuse to live in the governing country. Ireland is precisely in
this situation; and we cannot therefore wonder, that the proposal of a tax
upon absentees should be so very popular in that country. It might,
perhaps, be a little difficult to ascertain either what sort, or what
degree of absence, would subject a man to be taxed as an absentee, or at
what precise time the tax should either begin or end. If you except,
however, this very peculiar situation, any inequality in the contribution
of individuals which can arise from such taxes, is much more than
compensated by the very circumstance which occasions that inequality; the
circumstance that every man’s contribution is altogether voluntary; it
being altogether in his power, either to consume, or not to consume, the
commodity taxed. Where such taxes, therefore, are properly assessed, and
upon proper commodities, they are paid with less grumbling than any other.
When they are advanced by the merchant or manufacturer, the consumer, who
finally pays them, soon comes to confound them with the price of the
commodities, and almost forgets that he pays any tax. Such taxes are, or
may be, perfectly certain; or may be assessed, so as to leave no doubt
concerning either what ought to be paid, or when it ought to be paid;
concerning either the quantity or the time of payment. What ever
uncertainty there may sometimes be, either in the duties of customs in
Great Britain, or in other duties of the same kind in other countries, it
cannot arise from the nature of those duties, but from the inaccurate or
unskilful manner in which the law that imposes them is expressed.
Taxes upon luxuries generally are, and always may be, paid piece-meal, or
in proportion as the contributors have occasion to purchase the goods upon
which they are imposed. In the time and mode of payment, they are, or may
be, of all taxes the most convenient. Upon the whole, such taxes,
therefore, are perhaps as agreeable to the three first of the four general
maxims concerning taxation, as any other. They offend in every respect
against the fourth.
Such taxes, in proportion to what they bring into the public treasury of
the state, always take out, or keep out, of the pockets of the people,
more than almost any other taxes. They seem to do this in all the four
different ways in which it is possible to do it.
First, the levying of such taxes, even when imposed in the most judicious
manner, requires a great number of custom-house and excise officers, whose
salaries and perquisites are a real tax upon the people, which brings
nothing into the treasury of the state. This expense, however, it must be
acknowledged, is more moderate in Great Britain than in most other
countries. In the year which ended on the 5th of July, 1775, the gross
produce of the different duties, under the management of the commissioners
of excise in England, amounted to £5,507,308:18:8¼, which was levied at an
expense of little more than five and a-half per cent. From this gross
produce, however, there must be deducted what was paid away in bounties
and drawbacks upon the exportation of exciseable goods, which will reduce
the neat produce below five millions. {The neat produce of that year,
after deducting all expenses and allowances, amounted to £4,975,652:19:6.}
The levying of the salt duty, and excise duty, but under a different
management, is much more expensive. The neat revenue of the customs does
not amount to two millions and a-half, which is levied at an expense of
more than ten per cent., in the salaries of officers and other incidents.
But the perquisites of custom-house officers are everywhere much greater
than their salaries; at some ports more than double or triple those
salaries. If the salaries of officers, and other incidents, therefore,
amount to more than ten per cent. upon the neat revenue of the customs,
the whole expense of levying that revenue may amount, in salaries and
perquisites together, to more than twenty or thirty per cent. The officers
of excise receive few or no perquisites; and the administration of that
branch of the revenue being of more recent establishment, is in general
less corrupted than that of the customs, into which length of time has
introduced and authorised many abuses. By charging upon malt the whole
revenue which is at present levied by the different duties upon malt and
malt liquors, a saving, it is supposed, of more than £50,000, might be
made in the annual expense of the excise. By confining the duties of
customs to a few sorts of goods, and by levying those duties according to
the excise laws, a much greater saving might probably be made in the
annual expense of the customs.
Secondly, such taxes necessarily occasion some obstruction or
discouragement to certain branches of industry. As they always raise the
price of the commodity taxed, they so far discourage its consumption, and
consequently its production. If it is a commodity of home growth or
manufacture, less labour comes to be employed in raising and producing it.
If it is a foreign commodity of which the tax increases in this manner the
price, the commodities of the same kind which are made at home may
thereby, indeed, gain some advantage in the home market, and a greater
quantity of domestic industry may thereby be turned toward preparing them.
But though this rise of price in a foreign commodity, may encourage
domestic industry in one particular branch, it necessarily discourages
that industry in almost every other. The dearer the Birmingham
manufacturer buys his foreign wine, the cheaper he necessarily sells that
part of his hardware with which, or, what comes to the same thing, with
the price of which, he buys it. That part of his hardware, therefore,
becomes of less value to him, and he has less encouragement to work at it.
The dearer the consumers in one country pay for the surplus produce of
another, the cheaper they necessarily sell that part of their own surplus
produce with which, or, what comes to the same thing, with the price of
which, they buy it. That part of their own surplus produce becomes of less
value to them, and they have less encouragement to increase its quantity.
All taxes upon consumable commodities, therefore, tend to reduce the
quantity of productive labour below what it otherwise would be, either in
preparing the commodities taxed, if they are home commodities, or in
preparing those with which they are purchased, if they are foreign
commodities. Such taxes, too, always alter, more or less, the natural
direction of national industry, and turn it into a channel always
different from, and generally less advantageous, than that in which it
would have run of its own accord.
Thirdly, the hope of evading such taxes by smuggling, gives frequent
occasion to forfeitures and other penalties, which entirely ruin the
smuggler; a person who, though no doubt highly blameable for violating the
laws of his country, is frequently incapable of violating those of natural
justice, and would have been, in every respect, an excellent citizen, had
not the laws of his country made that a crime which nature never meant to
be so. In those corrupted governments, where there is at least a general
suspicion of much unnecessary expense, and great misapplication of the
public revenue, the laws which guard it are little respected. Not many
people are scrupulous about smuggling, when, without perjury, they can
find an easy and safe opportunity of doing so. To pretend to have any
scruple about buying smuggled goods, though a manifest encouragement to
the violation of the revenue laws, and to the perjury which almost always
attends it, would, in most countries, be regarded as one of those pedantic
pieces of hypocrisy which, instead of gaining credit with anybody, serve
only to expose the person who affects to practise them to the suspicion of
being a greater knave than most of his neighbours. By this indulgence of
the public, the smuggler is often encouraged to continue a trade, which he
is thus taught to consider as in some measure innocent; and when the
severity of the revenue laws is ready to fall upon him, he is frequently
disposed to defend with violence, what he has been accustomed to regard as
his just property. From being at first, perhaps, rather imprudent than
criminal, he at last too often becomes one of the hardiest and most
determined violators of the laws of society. By the ruin of the smuggler,
his capital, which had before been employed in maintaining productive
labour, is absorbed either in the revenue of the state, or in that of the
revenue officer; and is employed in maintaining unproductive, to the
diminution of the general capital of the society, and of the useful
industry which it might otherwise have maintained.
Fourthly, such taxes, by subjecting at least the dealers in the taxed
commodities, to the frequent visits and odious examination of the
tax-gatherers, expose them sometimes, no doubt, to some degree of
oppression, and always to much trouble and vexation; and though vexation,
as has already been said, is not strictly speaking expense, it is
certainly equivalent to the expense at which every man would be willing to
redeem himself from it. The laws of excise, though more effectual for the
purpose for which they were instituted, are, in this respect, more
vexatious than those of the customs. When a merchant has imported goods
subject to certain duties of customs; when he has paid those duties, and
lodged the goods in his warehouse; he is not, in most cases, liable to any
further trouble or vexation from the custom-house officer. It is otherwise
with goods subject to duties of excise. The dealers have no respite from
the continual visits and examination of the excise officers. The duties of
excise are, upon this account, more unpopular than those of the customs;
and so are the officers who levy them. Those officers, it is pretended,
though in general, perhaps, they do their duty fully as well as those of
the customs; yet, as that duty obliges them to be frequently very
troublesome to some of their neighbours, commonly contract a certain
hardness of character, which the others frequently have not. This
observation, however, may very probably be the mere suggestion of
fraudulent dealers, whose smuggling is either prevented or detected by
their diligence.
The inconveniencies, however, which are, perhaps, in some degree
inseparable from taxes upon consumable communities, fall as light upon the
people of Great Britain as upon those of any other country of which the
government is nearly as expensive. Our state is not perfect, and might be
mended; but it is as good, or better, than that of most of our neighbours.
In consequence of the notion, that duties upon consumable goods were taxes
upon the profits of merchants, those duties have, in some countries, been
repeated upon every successive sale of the goods. If the profits of the
merchant-importer or merchant-manufacturer were taxed, equality seemed to
require that those of all the middle buyers, who intervened between either
of them and the consumer, should likewise be taxed. The famous alcavala of
Spain seems to have been established upon this principle. It was at first
a tax of ten per cent. afterwards of fourteen per cent. and it is at
present only six per cent. upon the sale of every sort of property whether
moveable or immoveable; and it is repeated every time the property is
sold. {Memoires concernant les Droits, etc. tom. i, p. 15} The levying of
this tax requires a multitude of revenue officers, sufficient to guard the
transportation of goods, not only from one province to another, but from
one shop to another. It subjects, not only the dealers in some sorts of
goods, but those in all sorts, every farmer, every manufacturer, every
merchant and shopkeeper, to the continual visit and examination of the
tax-gatherers. Through the greater part of the country in which a tax of
this kind is established, nothing can be produced for distant sale. The
produce of every part of the country must be proportioned to the
consumption of the neighbourhood. It is to the alcavala, accordingly, that
Ustaritz imputes the ruin of the manufactures of Spain. He might have
imputed to it, likewise, the declension of agriculture, it being imposed
not only upon manufactures, but upon the rude produce of the land.
In the kingdom of Naples, there is a similar tax of three per cent. upon
the value of all contracts, and consequently upon that of all contracts of
sale. It is both lighter than the Spanish tax, and the greater part of
towns and parishes are allowed to pay a composition in lieu of it. They
levy this composition in what manner they please, generally in a way that
gives no interruption to the interior commerce of the place. The
Neapolitan tax, therefore, is not near so ruinous as the Spanish one.
The uniform system of taxation, which, with a few exception of no great
consequence, takes place in all the different parts of the united kingdom
of Great Britain, leaves the interior commerce of the country, the inland
and coasting trade, almost entirely free. The inland trade is almost
perfectly free; and the greater part of goods may be carried from one end
of the kingdom to the other, without requiring any permit or let-pass,
without being subject to question, visit or examination, from the revenue
officers. There are a few exceptions, but they are such as can give no
interruption to any important branch of inland commerce of the country.
Goods carried coastwise, indeed, require certificates or coast-cockets. If
you except coals, however, the rest are almost all duty-free. This freedom
of interior commerce, the effect of the uniformity of the system of
taxation, is perhaps one of the principal causes of the prosperity of
Great Britain; every great country being necessarily the best and most
extensive market for the greater part of the productions of its own
industry. If the same freedom in consequence of the same uniformity, could
be extended to Ireland and the plantations, both the grandeur of the
state, and the prosperity of every part of the empire, would probably be
still greater than at present.
In France, the different revenue laws which take place in the different
provinces, require a multitude of revenue officers to surround, not only
the frontiers of the kingdom, but those of almost each particular
province, in order either to prevent the importation of certain goods, or
to subject it to the payment of certain duties, to the no small
interruption of the interior commerce of the country. Some provinces are
allowed to compound for the gabelle, or salt tax; others are exempted from
it altogether. Some provinces are exempted from the exclusive sale of
tobacco, which the farmers-general enjoy through the greater part of the
kingdom. The aides, which correspond to the excise in England, are very
different in different provinces. Some provinces are exempted from them,
and pay a composition or equivalent. In those in which they take place,
and are in farm, there are many local duties which do not extend beyond a
particular town or district. The traites, which correspond to our customs,
divide the kingdom into three great parts; first, the provinces subject to
the tariff of 1664, which are called the provinces of the five great
farms, and under which are comprehended Picardy, Normandy, and the greater
part of the interior provinces of the kingdom; secondly, the provinces
subject to the tariff of 1667, which are called the provinces reckoned
foreign, and under which are comprehended the greater part of the frontier
provinces; and, thirdly, those provinces which are said to be treated as
foreign, or which, because they are allowed a free commerce with foreign
countries, are, in their commerce with the other provinces of France,
subjected to the same duties as other foreign countries. These are Alsace,
the three bishoprics of Mentz, Toul, and Verdun, and the three cities of
Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great
farms (called so on account of an ancient division of the duties of
customs into five great branches, each of which was originally the subject
of a particular farm, though they are now all united into one), and in
those which are said to be reckoned foreign, there are many local duties
which do not extend beyond a particular town or district. There are some
such even in the provinces which are said to be treated as foreign,
particularly in the city of Marseilles. It is unnecessary to observe how
much both the restraints upon the interior commerce of the country, and
the number of the revenue officers, must be multiplied, in order to guard
the frontiers of those different provinces and districts which are subject
to such different systems of taxation.
Over and above the general restraints arising from this complicated system
of revenue laws, the commerce of wine (after corn, perhaps, the most
important production of France) is, in the greater part of the provinces,
subject to particular restraints arising from the favour which has been
shown to the vineyards of particular provinces and districts above those
of others. The provinces most famous for their wines, it will be found, I
believe, are those in which the trade in that article is subject to the
fewest restraints of this kind. The extensive market which such provinces
enjoy, encourages good management both in the cultivation of their
vineyards, and in the subsequent preparation of their wines.
Such various and complicated revenue laws are not peculiar to France. The
little duchy of Milan is divided into six provinces, in each of which
there is a different system of taxation, with regard to several different
sorts of consumable goods. The still smaller territories of the duke of
Parma are divided into three or four, each of which has, in the same
manner, a system of its own. Under such absurd management, nothing but the
great fertility of the soil, and happiness of the climate, could preserve
such countries from soon relapsing into the lowest state of poverty and
barbarism.
Taxes upon consumable commodities may either be levied by an
administration, of which the officers are appointed by govermnent, and are
immediately accountable to government, of which the revenue must, in this
case, vary from year to year, according to the occasional variations in
the produce of the tax; or they may be let in farm for a rent certain, the
farmer being allowed to appoint his own officers, who, though obliged to
levy the tax in the manner directed by the law, are under his immediate
inspection, and are immediately accountable to him. The best and most
frugal way of levying a tax can never be by farm. Over and above what is
necessary for paying the stipulated rent, the salaries of the officers,
and the whole expense of administration, the farmer must always draw from
the produce of the tax a certain profit, proportioned at least to the
advance which he makes, to the risk which he runs, to the trouble which he
is at, and to the knowledge and skill which it requires to manage so very
complicated a concern. Government, by establishing an administration under
their own immediate inspection, of the same kind with that which the
farmer establishes, might at least save this profit, which is almost
always exorbitant. To farm any considerable branch of the public revenue
requires either a great capital, or a great credit; circumstances which
would alone restrain the competition for such an undertaking to a very
small number of people. Of the few who have this capital or credit, a
still smaller number have the necessary knowledge or experience; another
circumstance which restrains the competition still further. The very few
who are in condition to become competitors, find it more for their
interest to combine together; to become copartners, instead of
competitors; and, when the farm is set up to auction, to offer no rent but
what is much below the real value. In countries where the public revenues
are in farm, the farmers are generally the most opulent people. Their
wealth would alone excite the public indignation; and the vanity which
almost always accompanies such upstart fortunes, the foolish ostentation
with which they commonly display that wealth, excite that indignation
still more.
The farmers of the public revenue never find the laws too severe, which
punish any attempt to evade the payment of a tax. They have no bowels for
the contributors, who are not their subjects, and whose universal
bankruptcy, if it should happen the day after the farm is expired, would
not much affect their interest. In the greatest exigencies of the state,
when the anxiety of the sovereign for the exact payment of his revenue is
necessarily the greatest, they seldom fail to complain, that without laws
more rigorous than those which actually took place, it will be impossible
for them to pay even the usual rent. In those moments of public distress,
their commands cannot be disputed. The revenue laws, therefore, become
gradually more and more severe. The most sanguinary are always to be found
in countries where the greater part of the public revenue is in farm; the
mildest, in countries where it is levied under the immediate inspection of
the sovereign. Even a bad sovereign feels more compassion for his people
than can ever be expected from the farmers of his revenue. He knows that
the permanent grandeur of his family depends upon the prosperity of his
people, and he will never knowingly ruin that prosperity for the sake of
any momentary interest of his own. It is otherwise with the farmers of his
revenue, whose grandeur may frequently be the effect of the ruin, and not
of the prosperity, of his people.
A tax is sometimes not only farmed for a certain rent, but the farmer has,
besides, the monopoly of the commodity taxed. In France, the duties upon
tobacco and salt are levied in this manner. In such cases, the farmer,
instead of one, levies two exorbitant profits upon the people; the profit
of the farmer, and the still more exorbitant one of the monopolist.
Tobacco being a luxury, every man is allowed to buy or not to buy as he
chuses; but salt being a necessary, every man is obliged to buy of the
farmer a certain quantity of it; because, if he did not buy this quantity
of the farmer, he would, it is presumed, buy it of some smuggler. The
taxes upon both commodities are exorbitant. The temptation to smuggle,
consequently, is to many people irresistible; while, at the same time, the
rigour of the law, and the vigilance of the farmer’s officers, render the
yielding to the temptation almost certainly ruinous. The smuggling of salt
and tobacco sends every year several hundred people to the galleys,
besides a very considerable number whom it sends to the gibbet. Those
taxes, levied in this manner, yield a very considerable revenue to
government. In 1767, the farm of tobacco was let for twenty-two millions
five hundred and forty-one thousand two hundred and seventy-eight livres
a-year; that of salt for thirty-six millions four hundred and ninety-two
thousand four hundred and four livres. The farm, in both cases, was to
commence in 1768, and to last for six years. Those who consider the blood
of the people as nothing, in comparison with the revenue of the prince,
may, perhaps, approve of this method of levying taxes. Similar taxes and
monopolies of salt and tobacco have been established in many other
countries, particularly in the Austrian and Prussian dominions, and in the
greater part of the states of Italy.
In France, the greater part of the actual revenue of the crown is derived
from eight different sources; the taille, the capitation, the two
vingtiemes, the gabelles, the aides, the traites, the domaine, and the
farm of tobacco. The five last are, in the greater part of the provinces,
under farm. The three first are everywhere levied by an administration,
under the immediate inspection and direction of government; and it is
universally acknowledged, that in proportion to what they take out of the
pockets of the people, they bring more into the treasury of the prince
than the other five, of which the administration is much more wasteful and
expensive.
The finances of France seem, in their present state, to admit of three
very obvious reformations. First, by abolishing the taille and the
capitation, and by increasing the number of the vingtiemes, so as to
produce an additional revenue equal to the amount of those other taxes,
the revenue of the crown might be preserved; the expense of collection
might be much diminished; the vexation of the inferior ranks of people,
which the taille and capitation occasion, might be entirely prevented; and
the superior ranks might not be more burdened than the greater part of
them are at present. The vingtieme, I have already observed, is a tax very
nearly of the same kind with what is called the land tax of England. The
burden of the taille, it is acknowledged, falls finally upon the
proprietors of land; and as the greater part of the capitation is assessed
upon those who are subject to the taille, at so much a-pound of that other
tax, the final payment of the greater part of it must likewise fall upon
the same order of people. Though the number of the vingtiemes, therefore,
was increased, so as to produce an additional revenue equal to the amount
of both those taxes, the superior ranks of people might not be more
burdened than they are at present; many individuals, no doubt, would, on
account of the great inequalities with which the taille is commonly
assessed upon the estates and tenants of different individuals. The
interest and opposition of such favoured subjects, are the obstacles most
likely to prevent this, or any other reformation of the same kind.
Secondly, by rendering the gabelle, the aides, the traites, the taxes upon
tobacco, all the different customs and excises, uniform in all the
different parts of the kingdom, those taxes might be levied at much less
expense, and the interior commerce of the kingdom might be rendered as
free as that of England. Thirdly, and lastly, by subjecting all those
taxes to an administration under the immediate inspection and direction or
government, the exorbitant profits of the farmers-general might be added
to the revenue of the state. The opposition arising from the private
interest of individuals, is likely to be as effectual for preventing the
two last as the first-mentioned scheme of reformation.
The French system of taxation seems, in every respect, inferior to the
British. In Great Britain, ten millions sterling are annually levied upon
less than eight millions of people, without its being possible to say that
any particular order is oppressed. From the Collections of the Abbé
Expilly, and the observations of the author of the Essay upon the
Legislation and Commerce of Corn, it appears probable that France,
including the provinces of Lorraine and Bar, contains about twenty-three
or twenty-four millions of people; three times the number, perhaps,
contained in Great Britain. The soil and climate of France are better than
those of Great Britain. The country has been much longer in a state of
improvement and cultivation, and is, upon that account, better stocked
with all those things which it requires a long time to raise up and
accumulate; such as great towns, and convenient and well-built houses,
both in town and country. With these advantages, it might be expected,
that in France a revenue of thirty millions might be levied for the
support of the state, with as little inconvenience as a revenue of ten
millions is in Great Britain. In 1765 and 1766, the whole revenue paid
into the treasury of France, according to the best, though, I acknowledge,
very imperfect accounts which I could get of it, usually run between 308
and 325 millions of livres; that is, it did not amount to fifteen millions
sterling; not the half of what might have been expected, had the people
contributed in the same proportion to their numbers as the people of Great
Britain. The people of France, however, it is generally acknowledged, are
much more oppressed by taxes than the people of Great Britain. France,
however, is certainly the great empire in Europe, which, after that of
Great Britain, enjoys the mildest and most indulgent government.
In Holland, the heavy taxes upon the necessaries of life have ruined, it
is said, their principal manufacturers, and are likely to discourage,
gradually, even their fisheries and their trade in ship-building. The
taxes upon the necessaries of life are inconsiderable in Great Britain,
and no manufacture has hitherto been ruined by them. The British taxes
which bear hardest on manufactures, are some duties upon the importation
of raw materials, particularly upon that of raw silk. The revenue of the
States-General and of the different cities, however, is said to amount to
more than five millions two hundred and fifty thousand pounds sterling;
and as the inhabitants of the United Provinces cannot well be supposed to
amount to more than a third part of those of Great Britain, they must, in
proportion to their number, be much more heavily taxed.
After all the proper subjects of taxation have been exhausted, if the
exigencies of the state still continue to require new taxes, they must be
imposed upon improper ones. The taxes upon the necessaries of life,
therefore, may be no impeachment of the wisdom of that republic, which, in
order to acquire and to maintain its independency, has, in spite of its
great frugality, been involved in such expensive wars as have obliged it to
contract great debts. The singular countries of Holland and Zealand,
besides, require a considerable expense even to preserve their existence,
or to prevent their being swallowed up by the sea, which must have
contributed to increase considerably the load of taxes in those two
provinces. The republican form of government seems to be the principal
support of the present grandeur of Holland. The owners of great capitals,
the great mercantile families, have generally either some direct share, or
some indirect influence, in the administration of that government. For the
sake of the respect and authority which they derive from this situation,
they are willing to live in a country where their capital, if they employ
it themselves, will bring them less profit, and if they lend it to
another, less interest; and where the very moderate revenue which they can
draw from it will purchase less of the necessaries and conveniencies of
life than in any other part of Europe. The residence of such wealthy
people necessarily keeps alive, in spite of all disadvantages, a certain
degree of industry in the country. Any public calamity which should
destroy the republican form of government, which should throw the whole
administration into the hands of nobles and of soldiers, which should
annihilate altogether the importance of those wealthy merchants, would
soon render it disagreeable to them to live in a country where they were
no longer likely to be much respected. They would remove both their
residence and their capital to some other country, and the industry and
commerce of Holland would soon follow the capitals which supported them.
CHAPTER III.
OF PUBLIC DEBTS.
In that rude state of society which precedes the extension of commerce and
the improvement of manufactures; when those expensive luxuries, which
commerce and manufactures can alone introduce, are altogether unknown; the
person who possesses a large revenue, I have endeavoured to show in the
third book of this Inquiry, can spend or enjoy that revenue in no other
way than by maintaining nearly as many people as it can maintain. A large
revenue may at all times be said to consist in the command of a large
quantity of the necessaries of life. In that rude state of things, it is
commonly paid in a large quantity of those necessaries, in the materials
of plain food and coarse clothing, in corn and cattle, in wool and raw
hides. When neither commerce nor manufactures furnish any thing for which
the owner can exchange the greater part of those materials which are over
and above his own consumption, he can do nothing with the surplus, but
feed and clothe nearly as many people as it will feed and clothe. A
hospitality in which there is no luxury, and a liberality in which there
is no ostentation, occasion, in this situation of things, the principal
expenses of the rich and the great. But these I have likewise endeavoured
to show, in the same book, are expenses by which people are not very apt
to ruin themselves. There is not, perhaps, any selfish pleasure so
frivolous, of which the pursuit has not sometimes ruined even sensible
men. A passion for cock-fighting has ruined many. But the instances, I
believe, are not very numerous, of people who have been ruined by a
hospitality or liberality of this kind; though the hospitality of luxury,
and the liberality of ostentation have ruined many. Among our feudal
ancestors, the long time during which estates used to continue in the same
family, sufficiently demonstrates the general disposition of people to
live within their income. Though the rustic hospitality, constantly
exercised by the great landholders, may not, to us in the present times,
seem consistent with that order which we are apt to consider as
inseparably connected with good economy; yet we must certainly allow them
to have been at least so far frugal, as not commonly to have spent their
whole income. A part of their wool and raw hides, they had generally an
opportunity of selling for money. Some part of this money, perhaps, they
spent in purchasing the few objects of vanity and luxury, with which the
circumstances of the times could furnish them; but some part of it they
seem commonly to have hoarded. They could not well, indeed, do any thing
else but hoard whatever money they saved. To trade, was disgraceful to a
gentleman; and to lend money at interest, which at that time was
considered as usury, and prohibited by law, would have been still more so.
In those times of violence and disorder, besides, it was convenient to
have a hoard of money at hand, that in case they should be driven from
their own home, they might have something of known value to carry with
them to some place of safety. The same violence which made it convenient
to hoard, made it equally convenient to conceal the hoard. The frequency
of treasure-trove, or of treasure found, of which no owner was known,
sufficiently demonstrates the frequency, in those times, both of hoarding
and of concealing the hoard. Treasure-trove was then considered as an
important branch of the revenue of the sovereign. All the treasure-trove
of the kingdom would scarce, perhaps, in the present times, make an
important branch of the revenue of a private gentleman of a good estate.
The same disposition, to save and to hoard, prevailed in the sovereign, as
well as in the subjects. Among nations, to whom commerce and manufacture
are little known, the sovereign, it has already been observed in the
Fourth book, is in a situation which naturally disposes him to the
parsimony requisite for accumulation. In that situation, the expense, even
of a sovereign, cannot be directed by that vanity which delights in the
gaudy finery of a court. The ignorance of the times affords but few of the
trinkets in which that finery consists. Standing armies are not then
necessary; so that the expense, even of a sovereign, like that of any
other great lord can be employed in scarce any thing but bounty to his
tenants, and hospitality to his retainers. But bounty and hospitality very
seldom lead to extravagance; though vanity almost always does. All the
ancient sovereigns of Europe, accordingly, it has already been observed,
had treasures. Every Tartar chief, in the present times, is said to have
one.
In a commercial country, abounding with every sort of expensive luxury,
the sovereign, in the same manner as almost all the great proprietors in
his dominions, naturally spends a great part of his revenue in purchasing
those luxuries. His own and the neighbouring countries supply him
abundantly with all the costly trinkets which compose the splendid, but
insignificant, pageantry of a court. For the sake of an inferior pageantry
of the same kind, his nobles dismiss their retainers, make their tenants
independent, and become gradually themselves as insignificant as the
greater part of the wealthy burghers in his dominions. The same frivolous
passions, which influence their conduct, influence his. How can it be
supposed that he should be the only rich man in his dominions who is
insensible to pleasures of this kind? If he does not, what he is very
likely to do, spend upon those pleasures so great a part of his revenue as
to debilitate very much the defensive power of the state, it cannot well
be expected that he should not spend upon them all that part of it which
is over and above what is necessary for supporting that defensive power.
His ordinary expense becomes equal to his ordinary revenue, and it is well
if it does not frequently exceed it. The amassing of treasure can no
longer be expected; and when extraordinary exigencies require
extraordinary expenses, he must necessarily call upon his subjects for an
extraordinary aid. The present and the late king of Prussia are the only
great princes of Europe, who, since the death of Henry IV. of France, in
1610, are supposed to have amassed any considerable treasure. The
parsimony which leads to accumulation has become almost as rare in
republican as in monarchical governments. The Italian republics, the
United Provinces of the Netherlands, are all in debt. The canton of Berne
is the single republic in Europe which has amassed any considerable
treasure. The other Swiss republics have not. The taste for some sort of
pageantry, for splendid buildings, at least, and other public ornaments,
frequently prevails as much in the apparently sober senate-house of a
little republic, as in the dissipated court of the greatest king.
The want of parsimony, in time of peace, imposes the necessity of
contracting debt in time of war. When war comes, there is no money in the
treasury, but what is necessary for carrying on the ordinary expense of
the peace establishment. In war, an establishment of three or four times
that expense becomes necessary for the defence of the state; and
consequently, a revenue three or four times greater than the peace
revenue. Supposing that the sovereign should have, what he scarce ever
has, the immediate means of augmenting his revenue in proportion to the
augmentation of his expense; yet still the produce of the taxes, from
which this increase of revenue must be drawn, will not begin to come into
the treasury, till perhaps ten or twelve months after they are imposed.
But the moment in which war begins, or rather the moment in which it
appears likely to begin, the army must be augmented, the fleet must be
fitted out, the garrisoned towns must be put into a posture of defence;
that army, that fleet, those garrisoned towns, must be furnished with
arms, ammunition, and provisions. An immediate and great expense must be
incurred in that moment of immediate danger, which will not wait for the
gradual and slow returns of the new taxes. In this exigency, government
can have no other resource but in borrowing.
The same commercial state of society which, by the operation of moral
causes, brings government in this manner into the necessity of borrowing,
produces in the subjects both an ability and an inclination to lend. If it
commonly brings along with it the necessity of borrowing, it likewise
brings with it the facility of doing so.
A country abounding with merchants and manufacturers, necessarily abounds
with a set of people through whose hands, not only their own capitals, but
the capitals of all those who either lend them money, or trust them with
goods, pass as frequently, or more frequently, than the revenue of a
private man, who, without trade or business, lives upon his income, passes
through his hands. The revenue of such a man can regularly pass through
his hands only once in a year. But the whole amount of the capital and
credit of a merchant, who deals in a trade of which the returns are very
quick, may sometimes pass through his hands two, three, or four times in a
year. A country abounding with merchants and manufacturers, therefore,
necessarily abounds with a set of people, who have it at all times in
their power to advance, if they chuse to do so, a very large sum of money
to government. Hence the ability in the subjects of a commercial state to
lend.
Commerce and manufactures can seldom flourish long in any state which does
not enjoy a regular administration of justice; in which the people do not
feel themselves secure in the possession of their property; in which the
faith of contracts is not supported by law; and in which the authority of
the state is not supposed to be regularly employed in enforcing the
payment of debts from all those who are able to pay. Commerce and
manufactures, in short, can seldom flourish in any state, in which there
is not a certain degree of confidence in the justice of government. The
same confidence which disposes great merchants and manufacturers upon
ordinary occasions, to trust their property to the protection of a
particular government, disposes them, upon extraordinary occasions, to
trust that government with the use of their property. By lending money to
government, they do not even for a moment diminish their ability to carry
on their trade and manufactures; on the contrary, they commonly augment
it. The necessities of the state render government, upon most occasions
willing to borrow upon terms extremely advantageous to the lender. The
security which it grants to the original creditor, is made transferable to
any other creditor; and from the universal confidence in the justice of
the state, generally sells in the market for more than was originally paid
for it. The merchant or monied man makes money by lending money to
government, and instead of diminishing, increases his trading capital. He
generally considers it as a favour, therefore, when the administration
admits him to a share in the first subscription for a new loan. Hence the
inclination or willingness in the subjects of a commercial state to lend.
The government of such a state is very apt to repose itself upon this
ability and willingness of its subjects to lend it their money on
extraordinary occasions. It foresees the facility of borrowing, and
therefore dispenses itself from the duty of saving.
In a rude state of society, there are no great mercantile or manufacturing
capitals. The individuals, who hoard whatever money they can save, and who
conceal their hoard, do so from a distrust of the justice of government;
from a fear, that if it was known that they had a hoard, and where that
hoard was to be found, they would quickly be plundered. In such a state of
things, few people would be able, and nobody would be willing to lend
their money to government on extraordinary exigencies. The sovereign feels
that he must provide for such exigencies by saving, because he foresees
the absolute impossibility of borrowing. This foresight increases still
further his natural disposition to save.
The progress of the enormous debts which at present oppress, and will in
the long-run probably ruin, all the great nations of Europe, has been
pretty uniform. Nations, like private men, have generally begun to borrow
upon what may be called personal credit, without assigning or mortgaging
any particular fund for the payment of the debt; and when this resource
has failed them, they have gone on to borrow upon assignments or mortgages
of particular funds.
What is called the unfunded debt of Great Britain, is contracted in the
former of those two ways. It consists partly in a debt which bears, or is
supposed to bear, no interest, and which resembles the debts that a
private man contracts upon account; and partly in a debt which bears
interest, and which resembles what a private man contracts upon his bill
or promissory-note. The debts which are due, either for extraordinary
services, or for services either not provided for, or not paid at the time
when they are performed; part of the extraordinaries of the army, navy,
and ordnance, the arrears of subsidies to foreign princes, those of
seamen’s wages, etc. usually constitute a debt of the first kind. Navy and
exchequer bills, which are issued sometimes in payment of a part of such
debts, and sometimes for other purposes, constitute a debt of the second
kind; exchequer bills bearing interest from the day on which they are
issued, and navy bills six months after they are issued. The bank of
England, either by voluntarily discounting those bills at their current
value, or by agreeing with government for certain considerations to
circulate exchequer bills, that is, to receive them at par, paying the
interest which happens to be due upon them, keeps up their value, and
facilitates their circulation, and thereby frequently enables government
to contract a very large debt of this kind. In France, where there is no
bank, the state bills (billets d’etat {See Examen des Reflections
Politiques sur les Finances.}) have sometimes sold at sixty and seventy
per cent. discount. During the great recoinage in king William’s time,
when the bank of England thought proper to put a stop to its usual
transactions, exchequer bills and tallies are said to have sold from
twenty-five to sixty per cent. discount; owing partly, no doubt, to the
supposed instability of the new government established by the Revolution,
but partly, too, to the want of the support of the bank of England.
When this resource is exhausted, and it becomes necessary, in order to
raise money, to assign or mortgage some particular branch of the public
revenue for the payment of the debt, government has, upon different
occasions, done this in two different ways. Sometimes it has made this
assignment or mortgage for a short period of time only, a year, or a few
years, for example; and sometimes for perpetuity. In the one case, the
fund was supposed sufficient to pay, within the limited time, both
principal and interest of the money borrowed. In the other, it was
supposed sufficient to pay the interest only, or a perpetual annuity
equivalent to the interest, government being at liberty to redeem, at any
time, this annuity, upon paying back the principal sum borrowed. When
money was raised in the one way, it was said to be raised by anticipation;
when in the other, by perpetual funding, or, more shortly, by funding.
In Great Britain, the annual land and malt taxes are regularly anticipated
every year, by virtue of a borrowing clause constantly inserted into the
acts which impose them. The bank of England generally advances at an
interest, which, since the Revolution, has varied from eight to three per
cent., the sums of which those taxes are granted, and receives payment as
their produce gradually comes in. If there is a deficiency, which there
always is, it is provided for in the supplies of the ensuing year. The
only considerable branch of the public revenue which yet remains
unmortgaged, is thus regularly spent before it comes in. Like an
improvident spendthrift, whose pressing occasions will not allow him to
wait for the regular payment of his revenue, the state is in the constant
practice of borrowing of its own factors and agents, and of paying
interest for the use of its own money.
In the reign of king William, and during a great part of that of queen
Anne, before we had become so familiar as we are now with the practice of
perpetual funding, the greater part of the new taxes were imposed but for
a short period of time (for four, five, six, or seven years only), and a
great part of the grants of every year consisted in loans upon
anticipations of the produce of those taxes. The produce being frequently
insufficient for paying, within the limited term, the principal and
interest of the money borrowed, deficiencies arose; to make good which, it
became necessary to prolong the term.
In 1697, by the 8th of William III., c. 20, the deficiencies of several
taxes were charged upon what was then called the first general mortgage or
fund, consisting of a prolongation to the first of August 1706, of several
different taxes, which would have expired within a shorter term, and of
which the produce was accumulated into one general fund. The deficiencies
charged upon this prolonged term amounted to £5,160,459: 14: 9½.
In 1701, those duties, with some others, were still further prolonged, for
the like purposes, till the first of August 1710, and were called the
second general mortgage or fund. The deficiencies charged upon it amounted
to £2,055,999: 7: 11½.
In 1707, those duties were still further prolonged, as a fund for new
loans, to the first of August 1712, and were called the third general
mortgage or fund. The sum borrowed upon it was £983,254:11:9¼.
In 1708, those duties were all (except the old subsidy of tonnage and
poundage, of which one moiety only was made a part of this fund, and a
duty upon the importation of Scotch linen, which had been taken off by the
articles of union) still further continued, as a fund for new loans, to
the first of August 1714, and were called the fourth general mortgage or
fund. The sum borrowed upon it was £925,176:9:2¼.
In 1709, those duties were all (except the old subsidy of tonnage and
poundage, which was now left out of this fund altogether) still further
continued, for the same purpose, to the first of August 1716, and were
called the fifth general mortgage or fund. The sum borrowed upon it was
£922,029:6s.
In 1710, those duties were again prolonged to the first of August 1720,
and were called the sixth general mortgage or fund. The sum borrowed upon
it was £1,296,552:9:11¾.
In 1711, the same duties (which at this time were thus subject to four
different anticipations), together with several others, were continued for
ever, and made a fund for paying the interest of the capital of the
South-sea company, which had that year advanced to government, for paying
debts, and making good deficiencies, the sum of £9,177,967:15:4d, the
greatest loan which at that time had ever been made.
Before this period, the principal, so far as I have been able to observe,
the only taxes, which, in order to pay the interest of a debt, had been
imposed for perpetuity, were those for paying the interest of the money
which had been advanced to government by the bank and East-India company,
and of what it was expected would be advanced, but which was never
advanced, by a projected land bank. The bank fund at this time amounted to
£3,375,027:17:10½, for which was paid an annuity or interest of
£206,501:15:5d. The East-India fund amounted to £3,200,000, for which was
paid an annuity or interest of £160,000; the bank fund being at six per
cent., the East-India fund at five per cent. interest.
In 1715, by the first of George I., c. 12, the different taxes which had
been mortgaged for paying the bank annuity, together with several others,
which, by this act, were likewise rendered perpetual, were accumulated
into one common fund, called the aggregate fund, which was charged not
only with the payment of the bank annuity, but with several other
annuities and burdens of different kinds. This fund was afterwards
augmented by the third of George I., c.8., and by the fifth of George I.,
c. 3, and the different duties which were then added to it were likewise
rendered perpetual.
In 1717, by the third of George I., c. 7, several other taxes were
rendered perpetual, and accumulated into another common fund, called the
general fund, for the payment of certain annuities, amounting in the whole
to £724,849:6:10½.
In consequence of those different acts, the greater part of the taxes,
which before had been anticipated only for a short term of years were
rendered perpetual, as a fund for paying, not the capital, but the
interest only, of the money which had been borrowed upon them by different
successive anticipations.
Had money never been raised but by anticipation, the course of a few years
would have liberated the public revenue, without any other attention of
government besides that of not overloading the fund, by charging it with
more debt than it could pay within the limited term, and not of
anticipating a second time before the expiration of the first
anticipation. But the greater part of European governments have been
incapable of those attentions. They have frequently overloaded the fund,
even upon the first anticipation; and when this happened not to be the
case, they have generally taken care to overload it, by anticipating a
second and a third time, before the expiration of the first anticipation.
The fund becoming in this manner altogether insufficient for paying both
principal and interest of the money borrowed upon it, it became necessary
to charge it with the interest only, or a perpetual annuity equal to the
interest; and such improvident anticipations necessarily gave birth to the
more ruinous practice of perpetual funding. But though this practice
necessarily puts off the liberation of the public revenue from a fixed
period, to one so indefinite that it is not very likely ever to arrive;
yet, as a greater sum can, in all cases, be raised by this new practice
than by the old one of anticipation, the former, when men have once become
familiar with it, has, in the great exigencies of the state, been
universally preferred to the latter. To relieve the present exigency, is
always the object which principally interests those immediately concerned
in the administration of public affairs. The future liberation of the
public revenue they leave to the care of posterity.
During the reign of queen Anne, the market rate of interest had fallen
from six to five per cent.; and, in the twelfth year of her reign, five
per cent. was declared to be the highest rate which could lawfully be
taken for money borrowed upon private security. Soon after the greater
part of the temporary taxes of Great Britain had been rendered perpetual,
and distributed into the aggregate, South-sea, and general funds, the
creditors of the public, like those of private persons, were induced to
accept of five per cent. for the interest of their money, which occasioned
a saving of one per cent. upon the capital of the greater part or the
debts which had been thus funded for perpetuity, or of one-sixth of the
greater part of the annuities which were paid out of the three great funds
above mentioned. This saving left a considerable surplus in the produce of
the different taxes which had been accumulated into those funds, over and
above what was necessary for paying the annuities which were now charged
upon them, and laid the foundation of what has since been called the
sinking fund. In 1717, it amounted to £523,454:7:7½. In 1727, the interest
of the greater part of the public debts was still further reduced to four
per cent.; and, in 1753 and 1757, to three and a-half, and three per
cent., which reductions still further augmented the sinking fund.
A sinking fund, though instituted for the payment of old, facilitates very
much the contracting of new debts. It is a subsidiary fund, always at
hand, to be mortgaged in aid of any other doubtful fund, upon which money
is proposed to be raised in any exigency of the state. Whether the sinking
fund of Great Britain has been more frequently applied to the one or to the
other of those two purposes, will sufficiently appear by and by.
Besides those two methods of borrowing, by anticipations and by a
perpetual funding, there are two other methods, which hold a sort of
middle place between them; these are, that of borrowing upon annuities for
terms of years, and that of borrowing upon annuities for lives.
During the reigns of king William and queen Anne, large sums were
frequently borrowed upon annuities for terms of years, which were
sometimes longer and sometimes shorter. In 1695, an act was passed for
borrowing one million upon an annuity of fourteen per cent., or £140,000
a-year, for sixteen years. In 1691, an act was passed for borrowing a
million upon annuities for lives, upon terms which, in the present times,
would appear very advantageous; but the subscription was not filled up. In
the following year, the deficiency was made good, by borrowing upon
annuities for lives, at fourteen per cent. or a little more than seven
years purchase. In 1695, the persons who had purchased those annuities
were allowed to exchange them for others of ninety-six years, upon paying
into the exchequer sixty-three pounds in the hundred; that is, the
difference between fourteen per cent. for life, and fourteen per cent. for
ninety-six years, was sold for sixty-three pounds, or for four and a-half
years purchase. Such was the supposed instability of government, that even
these terms procured few purchasers. In the reign of queen Anne, money
was, upon different occasions, borrowed both upon annuities for lives, and
upon annuities for terms of thirty-two, of eighty-nine, of ninety-eight,
and of ninety-nine years. In 1719, the proprietors of the annuities for
thirty-two years were induced to accept, in lieu of them, South-sea stock
to the amount of eleven and a-half years purchase of the annuities,
together with an additional quantity of stock, equal to the arrears which
happened then to be due upon them. In 1720, the greater part of the other
annuities for terms of years, both long and short, were subscribed into
the same fund. The long annuities, at that time, amounted to £666,821:
8:3½ a-year. On the 5th of January 1775, the remainder of them, or what
was not subscribed at that time, amounted only to £136,453:12:8d.
During the two wars which began in 1739 and in 1755, little money was
borrowed, either upon annuities for terms of years, or upon those for
lives. An annuity for ninety-eight or ninety-nine years, however, is worth
nearly as much as a perpetuity, and should therefore, one might think, be
a fund for borrowing nearly as much. But those who, in order to make
family settlements, and to provide for remote futurity, buy into the
public stocks, would not care to purchase into one of which the value was
continually diminishing; and such people make a very considerable
proportion, both of the proprietors and purchasers of stock. An annuity
for a long term of years, therefore, though its intrinsic value may be
very nearly the same with that of a perpetual annuity, will not find
nearly the same number of purchasers. The subscribers to a new loan, who
mean generally to sell their subscription as soon as possible, prefer
greatly a perpetual annuity, redeemable by parliament, to an irredeemable
annuity, for a long term of years, of only equal amount. The value of the
former may be supposed always the same, or very nearly the same; and it
makes, therefore, a more convenient transferable stock than the latter.
During the two last-mentioned wars, annuities, either for terms of years
or for lives, were seldom granted, but as premiums to the subscribers of a
new loan, over and above the redeemable annuity or interest, upon the
credit of which the loan was supposed to be made. They were granted, not
as the proper fund upon which the money was borrowed, but as an additional
encouragement to the lender.
Annuities for lives have occasionally been granted in two different ways;
either upon separate lives, or upon lots of lives, which, in French, are
called tontines, from the name of their inventor. When annuities are
granted upon separate lives, the death of every individual annuitant
disburdens the public revenue, so far as it was affected by his annuity.
When annuities are granted upon tontines, the liberation of the public
revenue does not commence till the death of all the annuitants
comprehended in one lot, which may sometimes consist of twenty or thirty
persons, of whom the survivors succeed to the annuities of all those who
die before them; the last survivor succeeding to the annuities of the
whole lot. Upon the same revenue, more money can always be raised by
tontines than by annuities for separate lives. An annuity, with a right of
survivorship, is really worth more than an equal annuity for a separate
life; and, from the confidence which every man naturally has in his own
good fortune, the principle upon which is founded the success of all
lotteries, such an annuity generally sells for something more than it is
worth. In countries where it is usual for government to raise money by
granting annuities, tontines are, upon this account, generally preferred
to annuities for separate lives. The expedient which will raise most
money, is almost always preferred to that which is likely to bring about,
in the speediest manner, the liberation of the public revenue.
In France, a much greater proportion of the public debts consists in
annuities for lives than in England. According to a memoir presented by
the parliament of Bourdeaux to the king, in 1764, the whole public debt of
France is estimated at twenty-four hundred millions of livres; of which
the capital, for which annuities for lives had been granted, is supposed
to amount to three hundred millions, the eighth part of the whole public
debt. The annuities themselves are computed to amount to thirty millions
a-year, the fourth part of one hundred and twenty millions, the supposed
interest of that whole debt. These estimations, I know very well, are not
exact; but having been presented by so very respectable a body as
approximations to the truth, they may, I apprehend, be considered as such.
It is not the different degrees of anxiety in the two governments of
France and England for the liberation of the public revenue, which
occasions this difference in their respective modes of borrowing; it
arises altogether from the different views and interests of the lenders.
In England, the seat of government being in the greatest mercantile city
in the world, the merchants are generally the people who advance money to
government. By advancing it, they do not mean to diminish, but, on the
contrary, to increase their mercantile capitals; and unless they expected
to sell, with some profit, their share in the subscription for a new loan,
they never would subscribe. But if, by advancing their money, they were to
purchase, instead of perpetual annuities, annuities for lives only,
whether their own or those of other people, they would not always be so
likely to sell them with a profit. Annuities upon their own lives they
would always sell with loss; because no man will give for an annuity upon
the life of another, whose age and state of health are nearly the same
with his own, the same price which he would give for one upon his own. An
annuity upon the life of a third person, indeed, is, no doubt, of equal
value to the buyer and the seller; but its real value begins to diminish
from the moment it is granted, and continues to do so, more and more, as
long as it subsists. It can never, therefore, make so convenient a
transferable stock as a perpetual annuity, of which the real value may be
supposed always the same, or very nearly the same.
In France, the seat of government not being in a great mercantile city,
merchants do not make so great a proportion of the people who advance
money to government. The people concerned in the finances, the
farmers-general, the receivers of the taxes which are not in farm, the
court-bankers, etc. make the greater part of those who advance their money
in all public exigencies. Such people are commonly men of mean birth, but
of great wealth, and frequently of great pride. They are too proud to
marry their equals, and women of quality disdain to marry them. They
frequently resolve, therefore, to live bachelors; and having neither any
families of their own, nor much regard for those of their relations, whom
they are not always very fond of acknowledging, they desire only to live
in splendour during their own time, and are not unwilling that their
fortune should end with themselves. The number of rich people, besides,
who are either averse to marry, or whose condition of life renders it
either improper or inconvenient for them to do so, is much greater in
France than in England. To such people, who have little or no care for
posterity, nothing can be more convenient than to exchange their capital
for a revenue, which is to last just as long, and no longer, than they
wish it to do.
The ordinary expense of the greater part of modern governments, in time of
peace, being equal, or nearly equal, to their ordinary revenue, when war
comes, they are both unwilling and unable to increase their revenue in
proportion to the increase of their expense. They are unwilling, for fear
of offending the people, who, by so great and so sudden an increase of
taxes, would soon be disgusted with the war; and they are unable, from not
well knowing what taxes would be sufficient to produce the revenue wanted.
The facility of borrowing delivers them from the embarrassment which this
fear and inability would otherwise occasion. By means of borrowing, they
are enabled, with a very moderate increase of taxes, to raise, from year
to year, money sufficient for carrying on the war; and by the practice of
perpetual funding, they are enabled, with the smallest possible increase
of taxes, to raise annually the largest possible sum of money. In great
empires, the people who live in the capital, and in the provinces remote
from the scene of action, feel, many of them, scarce any inconveniency
from the war, but enjoy, at their ease, the amusement of reading in the
newspapers the exploits of their own fleets and armies. To them this
amusement compensates the small difference between the taxes which they
pay on account of the war, and those which they had been accustomed to pay
in time of peace. They are commonly dissatisfied with the return of peace,
which puts an end to their amusement, and to a thousand visionary hopes of
conquest and national glory, from a longer continuance of the war.
The return of peace, indeed, seldom relieves them from the greater part of
the taxes imposed during the war. These are mortgaged for the interest of
the debt contracted, in order to carry it on. If, over and above paying
the interest of this debt, and defraying the ordinary expense of
government, the old revenue, together with the new taxes, produce some
surplus revenue, it may, perhaps, be converted into a sinking fund for
paying off the debt. But, in the first place, this sinking fund, even
supposing it should be applied to no other purpose, is generally
altogether inadequate for paying, in the course of any period during which
it can reasonably be expected that peace should continue, the whole debt
contracted during the war; and, in the second place, this fund is almost
always applied to other purposes.
The new taxes were imposed for the sole purpose of paying the interest of
the money borrowed upon them. If they produce more, it is generally
something which was neither intended nor expected, and is, therefore,
seldom very considerable. Sinking funds have generally arisen, not so much
from any surplus of the taxes which was over and above what was necessary
for paying the interest or annuity originally charged upon them, as from a
subsequent reduction of that interest; that of Holland in 1655, and that
of the ecclesiastical state in 1685, were both formed in this manner.
Hence the usual insufficiency of such funds.
During the most profound peace, various events occur, which require an
extraordinary expense; and government finds it always more convenient to
defray this expense by misapplying the sinking fund, than by imposing a
new tax. Every new tax is immediately felt more or less by the people. It
occasions always some murmur, and meets with some opposition. The more
taxes may have been multiplied, the higher they may have been raised upon
every different subject of taxation; the more loudly the people complain
of every new tax, the more difficult it becomes, too, either to find out
new subjects of taxation, or to raise much higher the taxes already
imposed upon the old. A momentary suspension of the payment of debt is not
immediately felt by the people, and occasions neither murmur nor
complaint. To borrow of the sinking fund is always an obvious and easy
expedient for getting out of the present difficulty. The more the public
debts may have been accumulated, the more necessary it may have become to
study to reduce them; the more dangerous, the more ruinous it may be to
misapply any part of the sinking fund; the less likely is the public debt
to be reduced to any considerable degree, the more likely, the more
certainly, is the sinking fund to be misapplied towards defraying all the
extraordinary expenses which occur in time of peace. When a nation is
already overburdened with taxes, nothing but the necessities of a new war,
nothing but either the animosity of national vengeance, or the anxiety for
national security, can induce the people to submit, with tolerable
patience, to a new tax. Hence the usual misapplication of the sinking
fund.
In Great Britain, from the time that we had first recourse to the ruinous
expedient of perpetual funding, the reduction of the public debt, in time
of peace, has never borne any proportion to its accumulation in time of
war. It was in the war which began in 1668, and was concluded by the
treaty of Ryswick, in 1697, that the foundation of the present enormous
debt of Great Britain was first laid.
On the 31st of December 1697, the public debts of Great Britain, funded
and unfunded, amounted to £21,515,742:13:8½. A great part of those debts
had been contracted upon short anticipations, and some part upon annuities
for lives; so that, before the 31st of December 1701, in less than four
years, there had partly been paid off; and partly reverted to the public,
the sum of £5,121,041:12:0¾d; a greater reduction of the public debt than
has ever since been brought about in so short a period of time. The
remaining debt, therefore, amounted only to £16,394,701:1:7¼d.
In the war which began in 1702, and which was concluded by the treaty of
Utrecht, the public debts were still more accumulated. On the 31st of
December 1714, they amounted to £53,681,076:5:6½. The subscription into
the South-sea fund, of the short and long annuities, increased the capital
of the public debt; so that, on the 31st of December 1722, it amounted to
£55,282,978:1:3 ⅚. The reduction of the debt began in 1723, and went on
so slowly, that, on the 31st of December 1739, during seventeen years-of
profound peace, the whole sum paid off was no more than £8,328,554:17:11
³⁄₁₂, the capital of the public debt, at that time, amounting to
£46,954,623:3:4 ⁷⁄₁₂.
The Spanish war, which began in 1739, and the French war which soon
followed it, occasioned a further increase of the debt, which, on the 31st
of December 1748, after the war had been concluded by the treaty of
Aix-la-Chapelle, amounted to £78,293,313:1:10¾. The most profound peace,
of 17 years continuance, had taken no more than £8,328,354, 17:11¼ from
it. A war, of less than nine years continuance, added £31,338,689:18: 6
⅙ to it. {See James Postlethwaite’s History of the Public Revenue.}
During the administration of Mr Pelham, the interest of the public debt
was reduced, or at least measures were taken for reducing it, from four to
three per cent.; the sinking fund was increased, and some part of the
public debt was paid off. In 1755, before the breaking out of the late
war, the funded debt of Great Britain amounted to £72,289,675. On the 5th
of January 1763, at the conclusion of the peace, the funded debt amounted
debt to £122,603,336:8:2¼. The unfunded debt has been stated at
£13,927,589:2:2. But the expense occasioned by the war did not end with
the conclusion of the peace; so that, though on the 5th of January 1764,
the funded debt was increased (partly by a new loan, and partly by funding
a part of the unfunded debt) to £129,586,789:10:1¾, there still remained
(according to the very well informed author of Considerations on the Trade
and Finances of Great Britain) an unfunded debt, which was brought to
account in that and the following year, of £9,975,017: 12:2 ¹⁵⁄₄₄d. In
1764, therefore, the public debt of Great Britain, funded and unfunded
together, amounted, according to this author, to £139,561,807:2:4. The
annuities for lives, too, which had been granted as premiums to the
subscribers to the new loans in 1757, estimated at fourteen years
purchase, were valued at £472,500; and the annuities for long terms of
years, granted as premiums likewise, in 1761 and 1762, estimated at
twenty-seven and a-half years purchase, were valued at £6,826,875. During
a peace of about seven years continuance, the prudent and truly patriotic
administration of Mr Pelham was not able to pay off an old debt of six
millions. During a war of nearly the same continuance, a new debt of more
than seventy-five millions was contracted.
On the 5th of January 1775, the funded debt of Great Britain amounted to
£124,996,086, 1:6¼d. The unfunded, exclusive of a large civil-list debt,
to £4,150,236:3:11 ⅞. Both together, to £129,146,322:5:6. According to
this account, the whole debt paid off, during eleven years of profound
peace, amounted only to £10,415,476:16:9 ⅞. Even this small reduction of
debt, however, has not been all made from the savings out of the ordinary
revenue of the state. Several extraneous sums, altogether independent of
that ordinary revenue, have contributed towards it. Amongst these we may
reckon an additional shilling in the pound land tax, for three years; the
two millions received from the East-India company, as indemnification for
their territorial acquisitions; and the one hundred and ten thousand
pounds received from the bank for the renewal of their charter. To these
must be added several other sums, which, as they arose out of the late
war, ought perhaps to be considered as deductions from the expenses of it.
The principal are,
The produce of French prizes.............. £690,449: 18: 9 Composition for French prisoners......... 670,000: 0: 0
What has been received from the sale of the ceded islands......................... 95,500: 0: 0
Total, .....................................£1,455,949: 18: 9
If we add to this sum the balance of the earl of Chatham’s and Mr
Calcraft’s accounts, and other army savings of the same kind, together
with what has been received from the bank, the East-India company, and the
additional shilling in the pound land tax, the whole must be a good deal
more than five millions. The debt, therefore, which, since the peace, has
been paid out of the savings from the ordinary revenue of the state, has
not, one year with another, amounted to half a million a-year. The sinking
fund has, no doubt, been considerably augmented since the peace, by the
debt which had been paid off, by the reduction of the redeemable four per
cents to three per cents, and by the annuities for lives which have fallen
in; and, if peace were to continue, a million, perhaps, might now be
annually spared out of it towards the discharge of the debt. Another
million, accordingly, was paid in the course of last year; but at the same
time, a large civil-list debt was left unpaid, and we are now involved in
a new war, which, in its progress, may prove as expensive as any of our
former wars. {It has proved more expensive than any one of our former
wars, and has involved us in an additional debt of more than one hundred
millions. During a profound peace of eleven years, little more than ten
millions of debt was paid; during a war of seven years, more than one
hundred millions was contracted.} The new debt which will probably be
contracted before the end of the next campaign, may, perhaps, be nearly
equal to all the old debt which has been paid off from the savings out of
the ordinary revenue of the state. It would be altogether chimerical,
therefore, to expect that the public debt should ever be completely
discharged, by any savings which are likely to be made from that ordinary
revenue as it stands at present.
The public funds of the different indebted nations of Europe, particularly
those of England, have, by one author, been represented as the
accumulation of a great capital, superadded to the other capital of the
country, by means of which its trade is extended, its manufactures are
multiplied, and its lands cultivated and improved, much beyond what they
could have been by means of that other capital only. He does not consider
that the capital which the first creditors of the public advanced to
government, was, from the moment in which he advanced it, a certain
portion of the annual produce, turned away from serving in the function of
a capital, to serve in that of a revenue; from maintaining productive
labourers, to maintain unproductive ones, and to be spent and wasted,
generally in the course of the year, without even the hope of any future
reproduction. In return for the capital which they advanced, they
obtained, indeed, an annuity of the public funds, in most cases, of more
than equal value. This annuity, no doubt, replaced to them their capital,
and enabled them to carry on their trade and business to the same, or,
perhaps, to a greater extent than before; that is, they were enabled,
either to borrow of other people a new capital, upon the credit of this
annuity or, by selling it, to get from other people a new capital of their
own, equal, or superior, to that which they had advanced to government.
This new capital, however, which they in this manner either bought or
borrowed of other people, must have existed in the country before, and
must have been employed, as all capitals are, in maintaining productive
labour. When it came into the hands of those who had advanced their money
to government, though it was, in some respects, a new capital to them, it
was not so to the country, but was only a capital withdrawn from certain
employments, in order to be turned towards others. Though it replaced to
them what they had advanced to government, it did not replace it to the
country. Had they not advanced this capital to government, there would
have been in the country two capitals, two portions of the annual produce,
instead of one, employed in maintaining productive labour.
When, for defraying the expense of government, a revenue is raised within
the year, from the produce of free or unmortgaged taxes, a certain portion
of the revenue of private people is only turned away from maintaining one
species of unproductive labour, towards maintaining another. Some part of
what they pay in those taxes, might, no doubt, have been accumulated into
capital, and consequently employed in maintaining productive labour; but
the greater part would probably have been spent, and consequently employed
in maintaining unproductive labour. The public expense, however, when
defrayed in this manner, no doubt hinders, more or less, the further
accumulation of new capital; but it does not necessarily occasion the
destruction of any actually-existing capital.
When the public expense is defrayed by funding, it is defrayed by the
annual destruction of some capital which had before existed in the
country; by the perversion of some portion of the annual produce which had
before been destined for the maintenance of productive labour, towards
that of unproductive labour. As in this case, however, the taxes are
lighter than they would have been, had a revenue sufficient for defraying
the same expense been raised within the year; the private revenue of
individuals is necessarily less burdened, and consequently their ability
to save and accumulate some part of that revenue into capital, is a good
deal less impaired. If the method of funding destroys more old capital,
it, at the same time, hinders less the accumulation or acquisition of new
capital, than that of defraying the public expense by a revenue raised
within the year. Under the system of funding, the frugality and industry
of private people can more easily repair the breaches which the waste and
extravagance of government may occasionally make in the general capital of
the society.
It is only during the continuance of war, however, that the system of
funding has this advantage over the other system. Were the expense of war
to be defrayed always by a revenue raised within the year, the taxes from
which that extraordinary revenue was drawn would last no longer than the
war. The ability of private people to accumulate, though less during the
war, would have been greater during the peace, than under the system of
funding. War would not necessarily have occasioned the destruction of any
old capitals, and peace would have occasioned the accumulation of many
more new. Wars would, in general, be more speedily concluded, and less
wantonly undertaken. The people feeling, during continuance of war, the
complete burden of it, would soon grow weary of it; and government, in
order to humour them, would not be under the necessity of carrying it on
longer than it was necessary to do so. The foresight of the heavy and
unavoidable burdens of war would hinder the people from wantonly calling
for it when there was no real or solid interest to fight for. The seasons
during which the ability of private people to accumulate was somewhat
impaired, would occur more rarely, and be of shorter continuance. Those,
on the contrary, during which that ability was in the highest vigour would
be of much longer duration than they can well be under the system of
funding.
When funding, besides, has made a certain progress, the multiplication of
taxes which it brings along with it, sometimes impairs as much the ability
of private people to accumulate, even in time of peace, as the other
system would in time of war. The peace revenue of Great Britain amounts at
present to more than ten millions a-year. If free and unmortgaged, it
might be sufficient, with proper management, and without contracting a
shilling of new debt, to carry on the most vigorous war. The private
revenue of the inhabitants of Great Britain is at present as much
incumbered in time of peace, their ability to accumulate is as much
impaired, as it would have been in the time of the most expensive war, had
the pernicious system of funding never been adopted.
In the payment of the interest of the public debt, it has been said, it is
the right hand which pays the left. The money does not go out of the
country. It is only a part of the revenue of one set of the inhabitants
which is transferred to another; and the nation is not a farthing the
poorer. This apology is founded altogether in the sophistry of the
mercantile system; and, after the long examination which I have already
bestowed upon that system, it may, perhaps, be unnecessary to say anything
further about it. It supposes, besides, that the whole public debt is
owing to the inhabitants of the country, which happens not to be true; the
Dutch, as well as several other foreign nations, having a very
considerable share in our public funds. But though the whole debt were
owing to the inhabitants of the country, it would not, upon that account,
be less pernicious.
Land and capital stock are the two original sources of all revenue, both
private and public. Capital stock pays the wages of productive labour,
whether employed in agriculture, manufactures, or commerce. The management
of those two original sources of revenue belongs to two different sets of
people; the proprietors of land, and the owners or employers of capital
stock.
The proprietor of land is interested, for the sake of his own revenue, to
keep his estate in as good condition as he can, by building and repairing
his tenants houses, by making and maintaining the necessary drains and
inclosures, and all those other expensive improvements which it properly
belongs to the landlord to make and maintain. But, by different land
taxes, the revenue of the landlord may be so much diminished, and, by
different duties upon the necessaries and conveniencies of life, that
diminished revenue may be rendered of so little real value, that he may
find himself altogether unable to make or maintain those expensive
improvements. When the landlord, however, ceases to do his part, it is
altogether impossible that the tenant should continue to do his. As the
distress of the landlord increases, the agriculture of the country must
necessarily decline.
When, by different taxes upon the necessaries and conveniencies of life,
the owners and employers of capital stock find, that whatever revenue they
derive from it, will not, in a particular country, purchase the same
quantity of those necessaries and conveniencies which an equal revenue
would in almost any other, they will be disposed to remove to some other.
And when, in order to raise those taxes, all or the greater part of
merchants and manufacturers, that is, all or the greater part of the
employers of great capitals, come to be continually exposed to the
mortifying and vexatious visits of the tax-gatherers, this disposition to
remove will soon be changed into an actual removing. The industry of the
country will necessarily fall with the removal of the capital which
supported it, and the ruin of trade and manufactures will follow the
declension of agriculture.
To transfer from the owners of those two great sources of revenue, land,
and capital stock, from the persons immediately interested in the good
condition of every particular portion of land, and in the good management
of every particular portion of capital stock, to another set of persons
(the creditors of the public, who have no such particular interest), the
greater part of the revenue arising from either, must, in the long-run,
occasion both the neglect of land, and the waste or removal of capital
stock. A creditor of the public has, no doubt, a general interest in the
prosperity of the agriculture, manufactures, and commerce of the country;
and consequently in the good condition of its land, and in the good
management of its capital stock. Should there be any general failure or
declension in any of these things, the produce of the different taxes
might no longer be sufficient to pay him the annuity or interest which is
due to him. But a creditor of the public, considered merely as such, has
no interest in the good condition of any particular portion of land, or in
the good management of any particular portion of capital stock. As a
creditor of the public, he has no knowledge of any such particular
portion. He has no inspection of it. He can have no care about it. Its
ruin may in some cases be unknown to him, and cannot directly affect him.
The practice of funding has gradually enfeebled every state which has
adopted it. The Italian republics seem to have begun it. Genoa and Venice,
the only two remaining which can pretend to an independent existence, have
both been enfeebled by it. Spain seems to have learned the practice from
the Italian republics, and (its taxes being probably less judicious than
theirs) it has, in proportion to its natural strength, been-still more
enfeebled. The debts of Spain are of very old standing. It was deeply in
debt before the end of the sixteenth century, about a hundred years before
England owed a shilling. France, notwithstanding all its natural
resources, languishes under an oppressive load of the same kind. The
republic of the United Provinces is as much enfeebled by its debts as
either Genoa or Venice. Is it likely that, in Great Britain alone, a
practice, which has brought either weakness or dissolution into every
other country, should prove altogether innocent?
The system of taxation established in those different countries, it may be
said, is inferior to that of England. I believe it is so. But it ought to
be remembered, that when the wisest government has exhausted all the
proper subjects of taxation, it must, in cases of urgent necessity, have
recourse to improper ones. The wise republic of Holland has, upon some
occasions, been obliged to have recourse to taxes as inconvenient as the
greater part of those of Spain. Another war, begun before any considerable
liberation of the public revenue had been brought about, and growing in
its progress as expensive as the last war, may, from irresistible
necessity, render the British system of taxation as oppressive as that of
Holland, or even as that of Spain. To the honour of our present system of
taxation, indeed, it has hitherto given so little embarrassment to
industry, that, during the course even of the most expensive wars, the
frugality and good conduct of individuals seem to have been able, by
saving and accumulation, to repair all the breaches which the waste and
extravagance of government had made in the general capital of the society.
At the conclusion of the late war, the most expensive that Great Britain
ever waged, her agriculture was as flourishing, her manufacturers as
numerous and as fully employed, and her commerce as extensive, as they had
ever been before. The capital, therefore, which supported all those
different branches of industry, must have been equal to what it had ever
been before. Since the peace, agriculture has been still further improved;
the rents of houses have risen in every town and village of the country, a
proof of the increasing wealth and revenue of the people; and the annual
amount of the greater part of the old taxes, of the principal branches of
the excise and customs, in particular, has been continually increasing, an
equally clear proof of an increasing consumption, and consequently of an
increasing produce, which could alone support that consumption. Great
Britain seems to support with ease, a burden which, half a century ago,
nobody believed her capable of supporting, Let us not, however, upon this
account, rashly conclude that she is capable of supporting any burden; nor
even be too confident that she could support, without great distress, a
burden a little greater than what has already been laid upon her.
When national debts have once been accumulated to a certain degree, there
is scarce, I believe, a single instance of their having been fairly and
completely paid. The liberation of the public revenue, if it has ever been
brought about at all, has always been brought about by a bankruptcy;
sometimes by an avowed one, though frequently by a pretended payment.
The raising of the denomination of the coin has been the most usual
expedient by which a real public bankruptcy has been disguised under the
appearance of a pretended payment. If a sixpence, for example, should,
either by act of parliament or royal proclamation, be raised to the
denomination of a shilling, and twenty sixpences to that of a pound
sterling; the person who, under the old denomination, had borrowed twenty
shillings, or near four ounces of silver, would, under the new, pay with
twenty sixpences, or with something less than two ounces. A national debt
of about a hundred and twenty-eight millions, near the capital of the
funded and unfunded debt of Great Britain, might, in this manner, be paid
with about sixty-four millions of our present money. It would, indeed, be
a pretended payment only, and the creditors of the public would really be
defrauded of ten shillings in the pound of what was due to them. The
calamity, too, would extend much further than to the creditors of the
public, and those of every private person would suffer a proportionable
loss; and this without any advantage, but in most cases with a great
additional loss, to the creditors of the public. If the creditors of the
public, indeed, were generally much in debt to other people, they might in
some measure compensate their loss by paying their creditors in the same
coin in which the public had paid them. But in most countries, the
creditors of the public are, the greater part of them, wealthy people, who
stand more in the relation of creditors than in that of debtors, towards
the rest of their fellow citizens. A pretended payment of this kind,
therefore, instead of alleviating, aggravates, in most cases, the loss of
the creditors of the public; and, without any advantage to the public,
extends the calamity to a great number of other innocent people. It
occasions a general and most pernicious subversion of the fortunes of
private people; enriching, in most cases, the idle and profuse debtor, at
the expense of the industrious and frugal creditor; and transporting a
great part of the national capital from the hands which were likely to
increase and improve it, to those who are likely to dissipate and destroy
it. When it becomes necessary for a state to declare itself bankrupt, in
the same manner as when it becomes necessary for an individual to do so, a
fair, open, and avowed bankruptcy, is always the measure which is both
least dishonourable to the debtor, and least hurtful to the creditor. The
honour of a state is surely very poorly provided for, when, in order to
cover the disgrace of a real bankruptcy, it has recourse to a juggling
trick of this kind, so easily seen through, and at the same time so
extremely pernicious.
Almost all states, however, ancient as well as modern, when reduced to
this necessity, have, upon some occasions, played this very juggling
trick. The Romans, at the end of the first Punic war, reduced the As, the
coin or denomination by which they computed the value of all their other
coins, from containing twelve ounces of copper, to contain only two
ounces; that is, they raised two ounces of copper to a denomination which
had always before expressed the value of twelve ounces. The republic was,
in this manner, enabled to pay the great debts which it had contracted
with the sixth part of what it really owed. So sudden and so great a
bankruptcy, we should in the present times be apt to imagine, must have
occasioned a very violent popular clamour. It does not appear to have
occasioned any. The law which enacted it was, like all other laws relating
to the coin, introduced and carried through the assembly of the people by
a tribune, and was probably a very popular law. In Rome, as in all other
ancient republics, the poor people were constantly in debt to the rich and
the great, who, in order to secure their votes at the annual elections,
used to lend them money at exorbitant interest, which, being never paid,
soon accumulated into a sum too great either for the debtor to pay, or for
any body else to pay for him. The debtor, for fear of a very severe
execution, was obliged, without any further gratuity, to vote for the
candidate whom the creditor recommended. In spite of all the laws against
bribery and corruption, the bounty of the candidates, together with the
occasional distributions of coin which were ordered by the senate, were
the principal funds from which, during the latter times of the Roman
republic, the poorer citizens derived their subsistence. To deliver
themselves from this subjection to their creditors, the poorer citizens
were continually calling out, either for an entire abolition of debts, or
for what they called new tables; that is, for a law which should entitle
them to a complete acquittance, upon paying only a certain proportion of
their accumulated debts. The law which reduced the coin of all
denominations to a sixth part of its former value, as it enabled them to
pay their debts with a sixth part of what they really owed, was equivalent
to the most advantageous new tables. In order to satisfy the people, the
rich and the great were, upon several different occasions, obliged to
consent to laws, both for abolishing debts, and for introducing new
tables; and they probably were induced to consent to this law, partly for
the same reason, and partly that, by liberating the public revenue, they
might restore vigour to that government, of which they themselves had the
principal direction. An operation of this kind would at once reduce a debt
of £128,000,000 to £21,333,333:6:8. In the course of the second Punic war,
the As was still further reduced, first, from two ounces of copper to one
ounce, and afterwards from one ounce to half an ounce; that is, to the
twenty-fourth part of its original value. By combining the three Roman
operations into one, a debt of a hundred and twenty-eight millions of our
present money, might in this manner be reduced all at once to a debt of
£5,333,333:6:8. Even the enormous debt of Great Britain might in this
manner soon be paid.
By means of such expedients, the coin of, I believe, all nations, has been
gradually reduced more and more below its original value, and the same
nominal sum has been gradually brought to contain a smaller and a smaller
quantity of silver.
Nations have sometimes, for the same purpose, adulterated the standard of
their coin; that is, have mixed a greater quantity of alloy in it. If in
the pound weight of our silver coin, for example, instead of eighteen
penny-weight, according to the present standard, there were mixed eight
ounces of alloy; a pound sterling, or twenty shillings of such coin, would
be worth little more than six shillings and eightpence of our present
money. The quantity of silver contained in six shillings and eightpence of
our present money, would thus be raised very nearly to the denomination of
a pound sterling. The adulteration of the standard has exactly the same
effect with what the French call an augmentation, or a direct raising of
the denomination of the coin.
An augmentation, or a direct raising of the denomination of the coin,
always is, and from its nature must be, an open and avowed operation. By
means of it, pieces of a smaller weight and bulk are called by the same
name, which had before been given to pieces of a greater weight and bulk.
The adulteration of the standard, on the contrary, has generally been a
concealed operation. By means of it, pieces are issued from the mint, of
the same denomination, and, as nearly as could be contrived, of the same
weight, bulk, and appearance, with pieces which had been current before of
much greater value. When king John of France, {See Du Cange Glossary, voce
Moneta; the Benedictine Edition.} in order to pay his debts, adulterated
his coin, all the officers of his mint were sworn to secrecy. Both
operations are unjust. But a simple augmentation is an injustice of open
violence; whereas an adulteration is an injustice of treacherous fraud.
This latter operation, therefore, as soon as it has been discovered, and
it could never be concealed very long, has always excited much greater
indignation than the former. The coin, after any considerable
augmentation, has very seldom been brought back to its former weight; but
after the greatest adulterations, it has almost always been brought back
to its former fineness. It has scarce ever happened, that the fury and
indignation of the people could otherwise be appeased.
In the end of the reign of Henry VIII., and in the beginning of that of
Edward VI., the English coin was not only raised in its denomination, but
adulterated in its standard. The like frauds were practised in Scotland
during the minority of James VI. They have occasionally been practised in
most other countries.
That the public revenue of Great Britain can never be completely
liberated, or even that any considerable progress can ever be made towards
that liberation, while the surplus of that revenue, or what is over and
above defraying the annual expense of the peace establishment, is so very
small, it seems altogether in vain to expect. That liberation, it is
evident, can never be brought about, without either some very considerable
augmentation of the public revenue, or some equally considerable reduction
of the public expense.
A more equal land tax, a more equal tax upon the rent of houses, and such
alterations in the present system of customs and excise as those which
have been mentioned in the foregoing chapter, might, perhaps, without
increasing the burden of the greater part of the people, but only
distributing the weight of it more equally upon the whole, produce a
considerable augmentation of revenue. The most sanguine projector,
however, could scarce flatter himself, that any augmentation of this kind
would be such as could give any reasonable hopes, either of liberating the
public revenue altogether, or even of making such progress towards that
liberation in time of peace, as either to prevent or to compensate the
further accumulation of the public debt in the next war.
By extending the British system of taxation to all the different provinces
of the empire, inhabited by people either of British or European
extraction, a much greater augmentation of revenue might be expected.
This, however, could scarce, perhaps, be done, consistently with the
principles of the British constitution, without admitting into the British
parliament, or, if you will, into the states-general of the British
empire, a fair and equal representation of all those different provinces;
that of each province bearing the same proportion to the produce of its
taxes, as the representation of Great Britain might bear to the produce of
the taxes levied upon Great Britain. The private interest of many powerful
individuals, the confirmed prejudices of great bodies of people, seem,
indeed, at present, to oppose to so great a change, such obstacles as it
may be very difficult, perhaps altogether impossible, to surmount.
Without, however, pretending to determine whether such a union be
practicable or impracticable, it may not, perhaps, be improper, in a
speculative work of this kind, to consider how far the British system of
taxation might be applicable to all the different provinces of the empire;
what revenue might be expected from it, if so applied; and in what manner
a general union of this kind might be likely to affect the happiness and
prosperity of the different provinces comprehended within it. Such a
speculation, can, at worst, be regarded but as a new Utopia, less amusing,
certainly, but no more useless and chimerical than the old one.
The land-tax, the stamp duties, and the different duties of customs and
excise, constitute the four principal branches of the British taxes.
Ireland is certainly as able, and our American and West India plantations
more able, to pay a land tax, than Great Britain. Where the landlord is
subject neither to tythe nor poor’s rate, he must certainly be more able
to pay such a tax, than where he is subject to both those other burdens.
The tythe, where there is no modus, and where it is levied in kind,
diminishes more what would otherwise be the rent of the landlord, than a
land tax which really amounted to five shillings in the pound. Such a
tythe will be found, in most cases, to amount to more than a fourth part
of the real rent of the land, or of what remains after replacing
completely the capital of the farmer, together with his reasonable profit.
If all moduses and all impropriations were taken away, the complete church
tythe of Great Britain and Ireland could not well be estimated at less
than six or seven millions. If there was no tythe either in Great Britain
or Ireland, the landlords could afford to pay six or seven millions
additional land tax, without being more burdened than a very great part of
them are at present. America pays no tythe, and could, therefore, very
well afford to pay a land tax. The lands in America and the West Indies,
indeed, are, in general, not tenanted nor leased out to farmers. They
could not, therefore, be assessed according to any rent roll. But neither
were the lands of Great Britain, in the 4th of William and Mary, assessed
according to any rent roll, but according to a very loose and inaccurate
estimation. The lands in America might be assessed either in the same
manner, or according to an equitable valuation, in consequence of an
accurate survey, like that which was lately made in the Milanese, and in
the dominions of Austria, Prussia, and Sardinia.
Stamp duties, it is evident, might be levied without any variation, in all
countries where the forms of law process, and the deeds by which property,
both real and personal, is transferred, are the same, or nearly the same.
The extension of the custom-house laws of Great Britain to Ireland and the
plantations, provided it was accompanied, as in justice it ought to be,
with an extension of the freedom of trade, would be in the highest degree
advantageous to both. All the invidious restraints which at present
oppress the trade of Ireland, the distinction between the enumerated and
non-enumerated commodities of America, would be entirely at an end. The
countries north of Cape Finisterre would be as open to every part of the
produce of America, as those south of that cape are to some parts of that
produce at present. The trade between all the different parts of the
British empire would, in consequence of this uniformity in the
custom-house laws, be as free as the coasting trade of Great Britain is at
present. The British empire would thus afford, within itself, an immense
internal market for every part of the produce of all its different
provinces. So great an extension of market would soon compensate, both to
Ireland and the plantations, all that they could suffer from the increase
of the duties of customs.
The excise is the only part of the British system of taxation, which would
require to be varied in any respect, according as it was applied to the
different provinces of the empire. It might be applied to Ireland without
any variation; the produce and consumption of that kingdom being exactly
of the same nature with those of Great Britain. In its application to
America and the West Indies, of which the produce and consumption are so
very different from those of Great Britain, some modification might be
necessary, in the same manner as in its application to the cyder and beer
counties of England.
A fermented liquor, for example, which is called beer, but which, as it is
made of molasses, bears very little resemblance to our beer, makes a
considerable part of the common drink of the people in America. This
liquor, as it can be kept only for a few days, cannot, like our beer, be
prepared and stored up for sale in great breweries; but every private
family must brew it for their own use, in the same manner as they cook
their victuals. But to subject every private family to the odious visits
and examination of the tax-gatherers, in the same manner as we subject the
keepers of ale-houses and the brewers for public sale, would be altogether
inconsistent with liberty. If, for the sake of equality, it was thought
necessary to lay a tax upon this liquor, it might be taxed by taxing the
material of which it is made, either at the place of manufacture, or, if
the circumstances of the trade rendered such an excise improper, by laying
a duty upon its importation into the colony in which it was to be
consumed. Besides the duty of one penny a-gallon imposed by the British
parliament upon the importation of molasses into America, there is a
provincial tax of this kind upon their importation into Massachusetts Bay,
in ships belonging to any other colony, of eight-pence the hogshead; and
another upon their importation from the northern colonies into South
Carolina, of five-pence the gallon. Or, if neither of these methods was
found convenient, each family might compound for its consumption of this
liquor, either according to the number of persons of which it consisted,
in the same manner as private families compound for the malt tax in
England; or according to the different ages and sexes of those persons, in
the same manner as several different taxes are levied in Holland; or,
nearly as Sir Matthew Decker proposes, that all taxes upon consumable
commodities should be levied in England. This mode of taxation, it has
already been observed, when applied to objects of a speedy consumption, is
not a very convenient one. It might be adopted, however, in cases where no
better could be done.
Sugar, rum, and tobacco, are commodities which are nowhere necessaries of
life, which are become objects of almost universal consumption, and which
are, therefore, extremely proper subjects of taxation. If a union with the
colonies were to take place, those commodities might be taxed, either
before they go out of the hands of the manufacturer or grower; or, if this
mode of taxation did not suit the circumstances of those persons, they
might be deposited in public warehouses, both at the place of manufacture,
and at all the different ports of the empire, to which they might
afterwards be transported, to remain there, under the joint custody of the
owner and the revenue officer, till such time as they should be delivered
out, either to the consumer, to the merchant-retailer for home
consumption, or to the merchant-exporter; the tax not to be advanced till
such delivery. When delivered out for exportation, to go duty-free, upon
proper security being given, that they should really be exported out of
the empire. These are, perhaps, the principal commodities, with regard to
which the union with the colonies might require some considerable change
in the present system of British taxation.
What might be the amount of the revenue which this system of taxation,
extended to all the different provinces of the empire, might produce, it
must, no doubt, be altogether impossible to ascertain with tolerable
exactness. By means of this system, there is annually levied in Great
Britain, upon less than eight millions of people, more than ten millions
of revenue. Ireland contains more than two millions of people, and,
according to the accounts laid before the congress, the twelve associated
provinces of America contain more than three. Those accounts, however, may
have been exaggerated, in order, perhaps, either to encourage their own
people, or to intimidate those of this country; and we shall suppose,
therefore, that our North American and West Indian colonies, taken
together, contain no more than three millions; or that the whole British
empire, in Europe and America, contains no more than thirteen millions of
inhabitants. If, upon less than eight millions of inhabitants, this system
of taxation raises a revenue of more than ten millions sterling; it ought,
upon thirteen millions of inhabitants, to raise a revenue of more than
sixteen millions two hundred and fifty thousand pounds sterling. From this
revenue, supposing that this system could produce it, must be deducted the
revenue usually raised in Ireland and the plantations, for defraying the
expense of the respective civil governments. The expense of the civil and
military establishment of Ireland, together with the interest of the
public debt, amounts, at a medium of the two years which ended March 1775,
to something less than seven hundred and fifty thousand pounds a year. By
a very exact account of the revenue of the principal colonies of America
and the West Indies, it amounted, before the commencement of the present
disturbances, to a hundred and forty-one thousand eight hundred pounds. In
this account, however, the revenue of Maryland, of North Carolina, and of
all our late acquisitions, both upon the continent, and in the islands, is
omitted; which may, perhaps, make a difference of thirty or forty thousand
pounds. For the sake of even numbers, therefore, let us suppose that the
revenue necessary for supporting the civil government of Ireland and the
plantations may amount to a million. There would remain, consequently, a
revenue of fifteen millions two hundred and fifty thousand pounds, to be
applied towards defraying the general expense of the empire, and towards
paying the public debt. But if, from the present revenue of Great Britain,
a million could, in peaceable times, be spared towards the payment of that
debt, six millions two hundred and fifty thousand pounds could very well
be spared from this improved revenue. This great sinking fund, too, might
be augmented every year by the interest of the debt which had been
discharged the year before; and might, in this manner, increase so very
rapidly, as to be sufficient in a few years to discharge the whole debt,
and thus to restore completely the at-present debilitated and languishing
vigour of the empire. In the meantime, the people might be relieved from
some of the most burdensome taxes; from those which are imposed either
upon the necessaries of life, or upon the materials of manufacture. The
labouring poor would thus be enabled to live better, to work cheaper, and
to send their goods cheaper to market. The cheapness of their goods would
increase the demand for them, and consequently for the labour of those who
produced them. This increase in the demand for labour would both increase
the numbers, and improve the circumstances of the labouring poor. Their
consumption would increase, and, together with it, the revenue arising
from all those articles of their consumption upon which the taxes might be
allowed to remain.
The revenue arising from this system of taxation, however, might not
immediately increase in proportion to the number of people who were
subjected to it. Great indulgence would for some time be due to those
provinces of the empire which were thus subjected to burdens to which they
had not before been accustomed; and even when the same taxes came to be
levied everywhere as exactly as possible, they would not everywhere
produce a revenue proportioned to the numbers of the people. In a poor
country, the consumption of the principal commodities subject to the
duties of customs and excise, is very small; and in a thinly inhabited
country, the opportunities of smuggling are very great. The consumption of
malt liquors among the inferior ranks of people in Scotland is very small;
and the excise upon malt, beer, and ale, produces less there than in
England, in proportion to the numbers of the people and the rate of the
duties, which upon malt is different, on account of a supposed difference
of quality. In these particular branches of the excise, there is not, I
apprehend, much more smuggling in the one country than in the other. The
duties upon the distillery, and the greater part of the duties of customs,
in proportion to the numbers of people in the respective countries,
produce less in Scotland than in England, not only on account of the
smaller consumption of the taxed commodities, but of the much greater
facility of smuggling. In Ireland, the inferior ranks of people are still
poorer than in Scotland, and many parts of the country are almost as
thinly inhabited. In Ireland, therefore, the consumption of the taxed
commodities might, in proportion to the number of the people, be still
less than in Scotland, and the facility of smuggling nearly the same. In
America and the West Indies, the white people, even of the lowest rank,
are in much better circumstances than those of the same rank in England;
and their consumption of all the luxuries in which they usually indulge
themselves, is probably much greater. The blacks, indeed, who make the
greater part of the inhabitants, both of the southern colonies upon the
continent and of the West India islands, as they are in a state of
slavery, are, no doubt, in a worse condition than the poorest people
either in Scotland or Ireland. We must not, however, upon that account,
imagine that they are worse fed, or that their consumption of articles
which might be subjected to moderate duties, is less than that even of the
lower ranks of people in England. In order that they may work well, it is
the interest of their master that they should be fed well, and kept in
good heart, in the same manner as it is his interest that his working
cattle should be so. The blacks, accordingly, have almost everywhere their
allowance of rum, and of molasses or spruce-beer, in the same manner as
the white servants; and this allowance would not probably be withdrawn,
though those articles should be subjected to moderate duties. The
consumption of the taxed commodities, therefore, in proportion to the
number of inhabitants, would probably be as great in America and the West
Indies as in any part of the British empire. The opportunities of
smuggling, indeed, would be much greater; America, in proportion to the
extent of the country, being much more thinly inhabited than either
Scotland or Ireland. If the revenue, however, which is at present raised
by the different duties upon malt and malt liquors, were to be levied by a
single duty upon malt, the opportunity of smuggling in the most important
branch of the excise would be almost entirely taken away; and if the
duties of customs, instead of being imposed upon almost all the different
articles of importation, were confined to a few of the most general use
and consumption, and if the levying of those duties were subjected to the
excise laws, the opportunity of smuggling, though not so entirely taken
away, would be very much diminished. In consequence of those two
apparently very simple and easy alterations, the duties of customs and
excise might probably produce a revenue as great, in proportion to the
consumption of the most thinly inhabited province, as they do at present,
in proportion to that of the most populous.
The Americans, it has been said, indeed, have no gold or silver money, the
interior commerce of the country being carried on by a paper currency; and
the gold and silver, which occasionally come among them, being all sent to
Great Britain, in return for the commodities which they receive from us.
But without gold and silver, it is added, there is no possibility of
paying taxes. We already get all the gold and silver which they have. How
is it possible to draw from them what they have not?
The present scarcity of gold and silver money in America, is not the
effect of the poverty of that country, or of the inability of the people
there to purchase those metals. In a country where the wages of labour are
so much higher, and the price of provisions so much lower than in England,
the greater part of the people must surely have wherewithal to purchase a
greater quantity, if it were either necessary or convenient for them to do
so. The scarcity of those metals, therefore, must be the effect of choice,
and not of necessity.
It is for transacting either domestic or foreign business, that gold or
silver money is either necessary or convenient.
The domestic business of every country, it has been shewn in the second
book of this Inquiry, may, at least in peaceable times, be transacted by
means of a paper currency, with nearly the same degree of conveniency as
by gold and silver money. It is convenient for the Americans, who could
always employ with profit, in the improvement of their lands, a greater
stock than they can easily get, to save as much as possible the expense of
so costly an instrument of commerce as gold and silver; and rather to
employ that part of their surplus produce which would be necessary for
purchasing those metals, in purchasing the instruments of trade, the
materials of clothing, several parts of household furniture, and the iron
work necessary for building and extending their settlements and
plantations; in purchasing not dead stock, but active and productive
stock. The colony governments find it for their interest to supply the
people with such a quantity of paper money as is fully sufficient, and
generally more than sufficient, for transacting their domestic business.
Some of those governments, that of Pennsylvania, particularly, derive a
revenue from lending this paper money to their subjects, at an interest of
so much per cent. Others, like that of Massachusetts Bay, advance, upon
extraordinary emergencies, a paper money of this kind for defraying the
public expense; and afterwards, when it suits the conveniency of the
colony, redeem it at the depreciated value to which it gradually falls. In
1747, {See Hutchinson’s History of Massachusetts Bay vol. ii. page 436 et
seq.} that colony paid in this manner the greater part of its public
debts, with the tenth part of the money for which its bills had been
granted. It suits the conveniency of the planters, to save the expense of
employing gold and silver money in their domestic transactions; and it
suits the conveniency of the colony governments, to supply them with a
medium, which, though attended with some very considerable disadvantages,
enables them to save that expense. The redundancy of paper money
necessarily banishes gold and silver from the domestic transactions of the
colonies, for the same reason that it has banished those metals from the
greater part of the domestic transactions in Scotland; and in both
countries, it is not the poverty, but the enterprizing and projecting
spirit of the people, their desire of employing all the stock which they
can get, as active and productive stock, which has occasioned this
redundancy of paper money.
In the exterior commerce which the different colonies carry on with Great
Britain, gold and silver are more or less employed, exactly in proportion
as they are more or less necessary. Where those metals are not necessary,
they seldom appear. Where they are necessary, they are generally found.
In the commerce between Great Britain and the tobacco colonies, the
British goods are generally advanced to the colonists at a pretty long
credit, and are afterwards paid for in tobacco, rated at a certain price.
It is more convenient for the colonists to pay in tobacco than in gold and
silver. It would be more convenient for any merchant to pay for the goods
which his correspondents had sold to him, in some other sort of goods
which he might happen to deal in, than in money. Such a merchant would
have no occasion to keep any part of his stock by him unemployed, and in
ready money, for answering occasional demands. He could have, at all
times, a larger quantity of goods in his shop or warehouse, and he could
deal to a greater extent. But it seldom happens to be convenient for all
the correspondents of a merchant to receive payment for the goods which
they sell to him, in goods of some other kind which he happens to deal in.
The British merchants who trade to Virginia and Maryland, happen to be a
particular set of correspondents, to whom it is more convenient to receive
payment for the goods which they sell to those colonies in tobacco, than
in gold and silver. They expect to make a profit by the sale of the
tobacco; they could make none by that of the gold and silver. Gold and
silver, therefore, very seldom appear in the commerce between Great
Britain and the tobacco colonies. Maryland and Virginia have as little
occasion for those metals in their foreign, as in their domestic commerce.
They are said, accordingly, to have less gold and silver money than any
other colonies in America. They are reckoned, however, as thriving, and
consequently as rich, as any of their neighbours.
In the northern colonies, Pennsylvania, New York, New Jersey, the four
governments of New England, etc. the value of their own produce which they
export to Great Britain is not equal to that of the manufactures which
they import for their own use, and for that of some of the other colonies,
to which they are the carriers. A balance, therefore, must be paid to the
mother-country in gold and silver and this balance they generally find.
In the sugar colonies, the value of the produce annually exported to Great
Britain is much greater than that of all the goods imported from thence.
If the sugar and rum annually sent to the mother-country were paid for in
those colonies, Great Britain would be obliged to send out, every year, a
very large balance in money; and the trade to the West Indies would, by a
certain species of politicians, be considered as extremely
disadvantageous. But it so happens, that many of the principal proprietors
of the sugar plantations reside in Great Britain. Their rents are remitted
to them in sugar and rum, the produce of their estates. The sugar and rum
which the West India merchants purchase in those colonies upon their own
account, are not equal in value to the goods which they annually sell
there. A balance, therefore, must necessarily be paid to them in gold and
silver, and this balance, too, is generally found.
The difficulty and irregularity of payment from the different colonies to
Great Britain, have not been at all in proportion to the greatness or
smallness of the balances which were respectively due from them. Payments
have, in general, been more regular from the northern than from the
tobacco colonies, though the former have generally paid a pretty large
balance in money, while the latter have either paid no balance, or a much
smaller one. The difficulty of getting payment from our different sugar
colonies has been greater or less in proportion, not so much to the extent
of the balances respectively due from them, as to the quantity of
uncultivated land which they contained; that is, to the greater or smaller
temptation which the planters have been under of over-trading, or of
undertaking the settlement and plantation of greater quantities of waste
land than suited the extent of their capitals. The returns from the great
island of Jamaica, where there is still much uncultivated land, have, upon
this account, been, in general, more irregular and uncertain than those
from the smaller islands of Barbadoes, Antigua, and St. Christopher’s,
which have, for these many years, been completely cultivated, and have,
upon that account, afforded less field for the speculations of the
planter. The new acquisitions of Grenada, Tobago, St. Vincent’s, and
Dominica, have opened a new field for speculations of this kind; and the
returns from those islands have of late been as irregular and uncertain
as those from the great island of Jamaica.
It is not, therefore, the poverty of the colonies which occasions, in the
greater part of them, the present scarcity of gold and silver money. Their
great demand for active and productive stock makes it convenient for them
to have as little dead stock as possible, and disposes them, upon that
account, to content themselves with a cheaper, though less commodious
instrument of commerce, than gold and silver. They are thereby enabled to
convert the value of that gold and silver into the instruments of trade,
into the materials of clothing, into household furniture, and into the
iron work necessary for building and extending their settlements and
plantations. In those branches of business which cannot be transacted
without gold and silver money, it appears, that they can always find the
necessary quantity of those metals; and if they frequently do not find it,
their failure is generally the effect, not of their necessary poverty, but
of their unnecessary and excessive enterprise. It is not because they are
poor that their payments are irregular and uncertain, but because they are
too eager to become excessively rich. Though all that part of the produce
of the colony taxes, which was over and above what was necessary for
defraying the expense of their own civil and military establishments, were
to be remitted to Great Britain in gold and silver, the colonies have
abundantly wherewithal to purchase the requisite quantity of those metals.
They would in this case be obliged, indeed, to exchange a part of their
surplus produce, with which they now purchase active and productive stock,
for dead stock. In transacting their domestic business, they would be
obliged to employ a costly, instead of a cheap instrument of commerce; and
the expense of purchasing this costly instrument might damp somewhat the
vivacity and ardour of their excessive enterprise in the improvement of
land. It might not, however, be necessary to remit any part of the
American revenue in gold and silver. It might be remitted in bills drawn
upon, and accepted by, particular merchants or companies in Great Britain,
to whom a part of the surplus produce of America had been consigned, who
would pay into the treasury the American revenue in money, after having
themselves received the value of it in goods; and the whole business might
frequently be transacted without exporting a single ounce of gold or
silver from America.
It is not contrary to justice, that both Ireland and America should
contribute towards the discharge of the public debt of Great Britain. That
debt has been contracted in support of the government established by the
Revolution; a government to which the protestants of Ireland owe, not only
the whole authority which they at present enjoy in their own country, but
every security which they possess for their liberty, their property, and
their religion; a government to which several of the colonies of America
owe their present charters, and consequently their present constitution;
and to which all the colonies of America owe the liberty, security, and
property, which they have ever since enjoyed. That public debt has been
contracted in the defence, not of Great Britain alone, but of all the
different provinces of the empire. The immense debt contracted in the late
war in particular, and a great part of that contracted in the war before,
were both properly contracted in defence of America.
By a union with Great Britain, Ireland would gain, besides the freedom of
trade, other advantages much more important, and which would much more
than compensate any increase of taxes that might accompany that union. By
the union with England, the middling and inferior ranks of people in
Scotland gained a complete deliverance from the power of an aristocracy,
which had always before oppressed them. By a union with Great Britain, the
greater part of people of all ranks in Ireland would gain an equally
complete deliverance from a much more oppressive aristocracy; an
aristocracy not founded, like that of Scotland, in the natural and
respectable distinctions of birth and fortune, but in the most odious of
all distinctions, those of religious and political prejudices;
distinctions which, more than any other, animate both the insolence of the
oppressors, and the hatred and indignation of the oppressed, and which
commonly render the inhabitants of the same country more hostile to one
another than those of different countries ever are. Without a union with
Great Britain, the inhabitants of Ireland are not likely, for many ages,
to consider themselves as one people.
No oppressive aristocracy has ever prevailed in the colonies. Even they,
however, would, in point of happiness and tranquillity, gain considerably
by a union with Great Britain. It would, at least, deliver them from those
rancourous and virulent factions which are inseparable from small
democracies, and which have so frequently divided the affections of their
people, and disturbed the tranquillity of their governments, in their form
so nearly democratical. In the case of a total separation from Great
Britain, which, unless prevented by a union of this kind, seems very
likely to take place, those factions would be ten times more virulent than
ever. Before the commencement of the present disturbances, the coercive
power of the mother-country had always been able to restrain those
factions from breaking out into any thing worse than gross brutality and
insult. If that coercive power were entirely taken away, they would
probably soon break out into open violence and bloodshed. In all great
countries which are united under one uniform government, the spirit of
party commonly prevails less in the remote provinces than in the centre of
the empire. The distance of those provinces from the capital, from the
principal seat of the great scramble of faction and ambition, makes them
enter less into the views of any of the contending parties, and renders
them more indifferent and impartial spectators of the conduct of all. The
spirit of party prevails less in Scotland than in England. In the case of
a union, it would probably prevail less in Ireland than in Scotland; and
the colonies would probably soon enjoy a degree of concord and unanimity,
at present unknown in any part of the British empire. Both Ireland and the
colonies, indeed, would be subjected to heavier taxes than any which they
at present pay. In consequence, however, of a diligent and faithful
application of the public revenue towards the discharge of the national
debt, the greater part of those taxes might not be of long continuance,
and the public revenue of Great Britain might soon be reduced to what was
necessary for maintaining a moderate peace-establishment.
The territorial acquisitions of the East India Company, the undoubted
right of the Crown, that is, of the state and people of Great Britain,
might be rendered another source of revenue, more abundant, perhaps, than
all those already mentioned. Those countries are represented as more
fertile, more extensive, and, in proportion to their extent, much richer
and more populous than Great Britain. In order to draw a great revenue
from them, it would not probably be necessary to introduce any new system
of taxation into countries which are already sufficiently, and more than
sufficiently, taxed. It might, perhaps, be more proper to lighten than to
aggravate the burden of those unfortunate countries, and to endeavour to
draw a revenue from them, not by imposing new taxes, but by preventing the
embezzlement and misapplication of the greater part of those which they
already pay.
If it should be found impracticable for Great Britain to draw any
considerable augmentation of revenue from any of the resources above
mentioned, the only resource which can remain to her, is a diminution of
her expense. In the mode of collecting and in that of expending the public
revenue, though in both there may be still room for improvement, Great
Britain seems to be at least as economical as any of her neighbours. The
military establishment which she maintains for her own defence in time of
peace, is more moderate than that of any European state, which can pretend
to rival her either in wealth or in power. None of these articles,
therefore, seem to admit of any considerable reduction of expense. The
expense of the peace-establishment of the colonies was, before the
commencement of the present disturbances, very considerable, and is an
expense which may, and, if no revenue can be drawn from them, ought
certainly to be saved altogether. This constant expense in time of peace,
though very great, is insignificant in comparison with what the defence of
the colonies has cost us in time of war. The last war, which was
undertaken altogether on account of the colonies, cost Great Britain, it
has already been observed, upwards of ninety millions. The Spanish war of
1739 was principally undertaken on their account; in which, and in the
French war that was the consequence of it, Great Britain, spent upwards of
forty millions; a great part of which ought justly to be charged to the
colonies. In those two wars, the colonies cost Great Britain much more
than double the sum which the national debt amounted to before the
commencement of the first of them. Had it not been for those wars, that
debt might, and probably would by this time, have been completely paid;
and had it not been for the colonies, the former of those wars might not,
and the latter certainly would not, have been undertaken. It was because
the colonies were supposed to be provinces of the British Empire, that
this expense was laid out upon them. But countries which contribute
neither revenue nor military force towards the support of the empire,
cannot be considered as provinces. They may, perhaps, be considered as
appendages, as a sort of splendid and shewy equipage of the empire. But if
the empire can no longer support the expense of keeping up this equipage,
it ought certainly to lay it down; and if it cannot raise its revenue in
proportion to its expense, it ought at least to accommodate its expense to
its revenue. If the colonies, notwithstanding their refusal to submit to
British taxes, are still to be considered as provinces of the British
empire, their defence, in some future war, may cost Great Britain as great
an expense as it ever has done in any former war. The rulers of Great
Britain have, for more than a century past, amused the people with the
imagination that they possessed a great empire on the west side of the
Atlantic. This empire, however, has hitherto existed in imagination only.
It has hitherto been, not an empire, but the project of an empire; not a
gold mine, but the project of a gold mine; a project which has cost, which
continues to cost, and which, if pursued in the same way as it has been
hitherto, is likely to cost, immense expense, without being likely to
bring any profit; for the effects of the monopoly of the colony trade, it
has been shewn, are to the great body of the people, mere loss instead of
profit. It is surely now time that our rulers should either realize this
golden dream, in which they have been indulging themselves, perhaps, as
well as the people; or that they should awake from it themselves, and
endeavour to awaken the people. If the project cannot be completed, it
ought to be given up. If any of the provinces of the British empire cannot
be made to contribute towards the support of the whole empire, it is
surely time that Great Britain should free herself from the expense of
defending those provinces in time of war, and of supporting any part of
their civil or military establishment in time of peace; and endeavour to
accommodate her future views and designs to the real mediocrity of her
circumstances.
