 Chapter 5, Part B of the Wealth of Nations, Book 4. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. Recording by Stephen Escalera. The Wealth of Nations by Adam Smith, Book 4, Chapter 5, Part B of Bounties. Our country gentlemen, when they imposed the high duties upon the exportation of the foreign corn, which in times of moderate plenty amount to a prohibition, and when they established the bounty, seemed 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 endeavored to prevent that market from ever being overstocked with their commodity. By both, they endeavored to raise its real value in the same manner as our manufacturers had, by the like institutions, raise 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 labor 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 labor in those particular manufacturers. You really encourage those manufacturers and direct towards them a greater quantity of the industry of the country than what would probably go to them of its own accord. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value, you do not increase the real 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 laborers 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 labor which it can maintain, and in every particular place it is equal to the quantity of labor which it can maintain in the way, whether liberal, moderate, or scanty, in which labor is commonly maintained in that place. Woolen 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 occurs 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 favored accordingly as the more immediate means of bringing money into the country. Bounties upon production, it has been said to, 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. Nothing 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 defense by augmenting the number of 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 favorable allegations, however, the following considerations disposed me to believe that in granting at least one of these bounties, the legislature has been very grossly imposed upon. First, the herring bus 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 bus fishery has been at 30 shillings of the ton. During these 11 years, the whole number of barrels caught by the herring bus 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 11 years, will amount only, according to this account, to 252,231. During these 11 years, the tonnage bounties paid amounted to 155,463.11 shillings, or eight shillings two and a quarter pence upon every barrel of sea sticks, and to 12 shillings three and three quarter pence 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 one shilling six pence. That upon foreign salt is ten shillings 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 of April, 1771, to the 5th of April, 1782, the quantity of foreign salt imported amount to 936,974 bushels, at 84 pounds the bushel. The quantity of scotch salt delivered from the works to the fish curers to no more than 168,226 at 56 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 two shillings eightpence, and more than two thirds of the bus caught herrings are exported. Put all these things together and you will find that during these eleven years every barrel of bus caught herrings cured with scotch salt when exported has cost government 17 shillings 11 and 3 quarter pence, and when entered for home consumption 14 shillings 3 and 3 quarter pence, and that every barrel cured with foreign salt when exported has cost government one pound seven shillings five and three quarter pence, and when entered for home consumption one pound three shilling nine and three quarter pence. The price of a barrel of good merchantable herrings runs from seventeen and eighteen to four and five and twenty shillings about a guinea and average. 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 bus fishery of Scotland brought in only four barrels of sea sticks. In that year each barrel of sea sticks cost government and bounties alone one hundred and thirteen pound fifteen shillings each barrel of merchantable herrings one hundred and fifty nine pound seven shillings six pence. Thirdly, the mode of fishing for which this tonnage bounty in the white herring fishery has been given by buses 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 northwestern coast of Scotland the countries in whose neighborhood 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 locks. It is to these sea locks 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 30 shillings the ton gives to the bus 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 bus fishery. The boat fishery accordingly which before the establishment of the bus bounty was very considerable and is said to have employed a number of seamen not inferior to what the bus 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 two shillings eight pence the barrel upon exportation carries the greater part more than two thirds of the produce of the bus fishery abroad. Between 30 and 40 years ago before the establishment of the bus bounty 16 shillings the barrel I have been assured was the common price of white herrings. Between 10 and 15 years ago before the boat fishery was entirely ruined the price was said to have run from 17 to 20 shillings the barrel. For these last five years it has at an average been at 25 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 prices included in all the foregoing prices has since the commencement of the American war risen to about double its former price or from about three shillings to about six shillings. I must likewise observe that the accounts I have received of the prices of former times have been by no means quite uniform and consistent and an old man of great accuracy and experience has assured me that more than 50 years ago again he 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 bus 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 that 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 30 shillings the ton for the encouragement of the white herring fishery the 23rd of George II chapter 24 a joint stock company was erected with a capital of 500,000 pounds to which the subscribers over and above all other encouragements the tonnage bounty just now mentioned the exportation bounty of two shillings eight pence the barrel the delivery of both British and foreign salt duty free were during the space of 14 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 residents of whose governor and directors was to be in London it was declared lawful to erect different fishing chambers in all the different outports of the kingdom provided a some not less than 10,000 pounds was subscribed into the capital of each to be managed at its own risk and for its own profit and loss the same annuity and the same 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 outports of the kingdom in spite of all these encouragements almost all those different companies both great and small lost either the whole or the greater part of their capitals scarce a vestige now remains of any of them and the white herring fishery is now entirely or almost entirely carried on by private adventurers if any particular manufacturer was necessary indeed for the defense of the society it might not always be prudent to depend upon our neighbors for the supply and if such manufacturer 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 sailcloth 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 favorite manufacturers 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 and 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 rot 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 salt peter 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 manufacturer 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 employment but to render the work which is done in each as perfect and complete as possible the expensive premiums besides is very trifling that of bounties very great the bounty upon corn alone has sometimes cost the public in one year more than three hundred thousand pounds bounties are sometimes called premiums as drawbacks are sometimes called bounties but we must in all cases attend to the nature of the thing without paying any regard to the word end of book four chapter five part b chapter five part c of the wealth of nations book four this is a LibriVox recording all LibriVox recordings are in the public domain for more information or to volunteer please visit LibriVox.org recording by Stephen Escalera the wealth of nations by Adam Smith book four chapter five part c of bounties 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 principle British laws which relate to it will sufficiently demonstrate the truth of this assertion the great importance of the 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 for 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 one the interest of the inland dealer and that of the great body of the people how opposites so ever 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 everybody 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 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 on short allowance though from excess of caution he should sometimes do this without any real necessity yet all the inconveniences which his crew can thereby suffer are inconsiderable in comparison of the danger misery and ruin to which they might sometimes be exposed by a less provident conduct though from excess of avarice in the same manner the inland corn merchant should sometimes raise the price of his corn somewhat higher than the scarcity of the season requires yet all the inconveniences which the people can suffer from this conduct which effectively 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 in which if the next season happens to prove favorable 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 malookas 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 monopolized by the force of a few large capitals which buy up the greater part of it not only its value far exceeds with 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 to 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 neighborhood 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 occasion sometimes perhaps and in some particular places by the waste of war but in by far the greatest number of cases by the fault of the seasons and that a famine has never arisen from any other cause but the violence of government attempting by improper means to remedy the inconveniences of a dearth in an extensive corn country between all the different parts of which there is a free commerce and communication the scarcity occasion by the most unfavorable 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 season's most unfavorable 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 favorable 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 underwater 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 free trade the drought and bangle 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 inconveniences of a dearth orders all the dealers to sell their corn at what it supposes a reasonable price it either hinders them from bringing it to market which may sometimes produce a famine even in the beginning of the season or if they bring it to their it enables the people and thereby encourages them to consume it so fast as must necessarily produce a famine before the end of the season the unlimited unrestrained freedom of the corn trade as it is the only effectual preventative of the miseries of a famine so it is the best palliative of the inconveniences of a dearth for the inconveniences of a real scarcity cannot be remedied they can only be palliated no trade deserves more the full protection of the law and no trade requires it so much because no trade is so much exposed to popular odium in years of scarcity the inferior ranks of people impute their 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 28 shillings for the quarter of wheat and for that of other grain in proportion in years of scarcity therefore the corn merchant buys a great part of his corn for the ordinary price and sells it for a much higher that this 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 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 discounting this popular odium against a trade so beneficial to the public seems on the contrary to have authorized and encouraged it by the fifth and sixth of edward the sixth cap 14 it was enacted that whoever should buy any corn or grain with intent to sell it again should be reputed and unlawful and grosser 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 who 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 endeavored therefore to annihilate his trade altogether they even endeavored 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 kitters or carriers of corn a trade which nobody was allowed to exercise without a license 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 the sixth necessary in order to grant this license 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 endeavored in this manner to regulate agriculture the great trade of the country by maxims quite different from those which it established with regard to manufacturers the great trade of the towns by leaving a farmer no other customers but either the consumers or their immediate factors the kitters and carriers of corn it endeavored 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 it's 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 manufacturer 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 10 percent 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 20 percent when he carried them from his workhouse to his shop he must have valued them at the price for which he could have sold them to a dealer or shopkeeper who would have bought them by wholesale if he valued them lower he lost a part of the profit of his manufacturing capital when again he sold them from his shop unless he got the same price at which a shopkeeper would have sold them he lost a part of the profit of his shopkeeping capital though he might appear therefore to make a double profit upon the same piece of goods yet as these goods made successfully 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 neighbors what the manufacturer was prohibited to do the farmer was in some measure enjoying 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 has called a farmer or to the person who has 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 labor 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 then 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 endeavored 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 endeavored 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 in politic as they were unjust it is the interest of every society that things of this kind should never either be forced or obstructed the man who employs either his labor or his stock in a greater variety of ways than his situation renters necessary can never hurt his neighbor 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 and granaries and stackyard 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 otherwise would 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 their 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 genuinely 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 middleman from coming in between the grower and the consumer endeavored to annihilate a trade of which the free exercise is not only the best palliative of the inconveniences of a dearth but the best preventative of that calamity after the trade of the farmer no trade contributing so much to the growing of corn as that of the corn merchant the rigor of this law was afterwards softened by several subsequent statutes which successfully permitted the engrossing of corn when the price of wheat should not exceed 20 shillings and 24 shillings 32 shillings and 40 shillings the quarter at last by the 15th of Charles II C7 the engrossing or buying of corn in order to sell it again as long as the price of wheat did not exceed 48 shillings the quarter and that of other grain in proportion was declared lawful to all persons not being four stallers 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 12th of the present king which repeals almost all the other ancient laws against engrossers and four stallers does not repeal the restrictions of this particular statute which therefore still continue in force this statute however authorizes in some measure two very absurd popular prejudices first it supposes that when the price of wheat has risen so high as 48 shillings the quarter and that of other grain in proportion corn is likely to be so engrossed as to hurt the people but from what has already been said it seems evident enough that corn can at no price be so engrossed by the inland dealers as to hurt the people and 48 shillings the quarter besides though it may be considered as a very high price yet in years of scarcity it is a price which frequently takes place 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 inconveniences of a dearth somewhat earlier than they otherwise might do he prevents their feeling them afterwards so severely as they certainly would do if the cheapness of price encourage them to consume faster then 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 neighbor 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 fifteenth of Charles II c7 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 tracks upon the corn trade does not exceed that of 1 to 570 for supplying the home market therefore the importance of the inland trade must be to that of the importation trade as 570 to 1 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 30 to 1 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 then the home trade the great cheapness of corn in the years immediately proceeding the establishment of the bounty may perhaps with reason be ascribed in some measure to the operation of this statute of Charles II which had been enacted about five and twenty years before and which had therefore full time to produce its effect a very few words will sufficiently explain all that I have to say concerning the other three branches of the corn trade End of Book 4 Chapter 5 Part C Chapter 5 Part D of the Wealth of Nations Book 4 This is a LibriVox recording All LibriVox recordings are in the public domain For more information or to volunteer please visit LibriVox.org Recording by Stephen Escalera The Wealth of Nations by Adam Smith Book 4 Chapter 5 Part D of Bounties 2. 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 labor 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 labor 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 22nd of Charles II C-13 the importation of wheat whenever the price in the home market did not exceed 53 shillings 4 pence a quarter was subjected to a duty of 16 shillings a quarter and to a duty of 8 shillings whenever the price did not exceed 4 pound 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 Please refer to the text for the accompanying table These different duties were imposed partly by the 22nd of Charles II in place of the old subsidy partly by the new subsidy by the one-third and two-third 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 so ever in themselves these or some other restraints upon importation became necessary in consequence of that regulation If when wheat was either below 48 shillings the quarter or not much above it foreign corn could have been imported either duty-free or upon paying only a small duty it might have been exported again with the benefit of the bounty to the great loss of the public revenue and to the entire perversion of the institution of which the object was to extend the market for the home growth not that for the growth of foreign countries 3. 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 the supply may be usually drawn whether from home growth or from foreign importation unless more corn is either usually grown or usually imported into the country than what is usually consumed in it the supply of the home market can never be very plentiful But unless the surplus can in all ordinary cases be exported the growers will be careful never to grow more and the importers never to import more than what the bare 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 genuinely 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. IV the exportation of corn was permitted whenever the price of wheat did not exceed forty shillings the quarter and that of other grain in proportion By the 15th of the same prince this liberty was extended till the price of wheat exceeded forty-eight shillings the quarter and by the 22nd to all higher prices A poundage, indeed, was to be paid to the king upon such exportation But all grain was rated so low in the book of rates that this poundage amounted only upon wheat to one shilling upon oats to four pence and upon all other grain to six pence 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 forty-eight shillings the quarter and by the 11th and 12th of William III, C. XX 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 forty-eight shillings the quarter The interest of the inland dealer, however, it has already been shown can never be opposite to that of the great body of the people That of the merchant exporter may and, in fact, sometimes is If, while his own country labors under a dearth a neighboring country should be afflicted with a famine it might be his interest to carry corn to the latter country and 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 pretense 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 forty-eight shillings the quarter that market was not, even in times of considerable scarcity, allowed to enjoy the whole of that growth The temporary laws prohibiting, for a limited time, the exportation of corn and taking off, for a limited time, the duties upon importation, expedience 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 preventative of a famine So would the freedom of the exportation and importation trade be among the different states into which a great continent was divided The larger the continent, the easier the communication through all the different parts of it, both by land and by water, the less would any one particular part of it ever be exposed to either of these calamities The scarcity of any one country being more likely to be relieved by the plenty of some other But very few countries have entirely adopted this liberal system The freedom of the corn trade is almost everywhere more or less restrained and in many countries is confined by such absurd regulations as frequently aggravate the unavoidable misfortune of a dearth into the dreadful calamity of a famine The demand of such countries for corn may frequently become so great and so urgent that a small state in their neighborhood, which happened at the same time to be laboring 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 tranquility, 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 4. 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 labor, is alone sufficient to make any country flourish, notwithstanding these and twenty other absurd regulations of commerce And the 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 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 million 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 perpetrate their present state of poverty, even though their regulations of commerce were as wise as the greater part of them were absurd and foolish The 13th of the present king, C43, 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 48 shillings a quarter, that of middling rye, peas, or beans to 32 shillings, that of barley to 24 shillings, and that of oats to 16 shillings, and instead of them a small duty is imposed of only six pence 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 open to foreign supplies, at prices considerably lower than before By the same statute, the old bounty of five shillings upon the exportation of wheat ceases so soon as the price rises to 44 shillings a quarter, instead of 48 shillings, the price at which it ceased before, that of two shillings six pence upon the exportation of barley ceases so soon as the price rises to 22 shillings instead of 24 shillings, the price at which it ceased before, that of two shillings six pence upon the exportation of exportation of oatmeal, ceases so soon as the price rises to fourteen shillings instead of fifteen shillings, the price at which it ceased before. The bounty upon rye is reduced from three shillings six pence to three shillings, and it ceases so soon as the price rises to twenty-eight shillings instead of thirty-two shillings, the price at which it ceased before. If bounties are as improper as I have endeavored to prove them to be, the sooner they cease and the lower they are so much the better. The same statute permits at the lowest prices the importation of corn in order to be exported again duty-free, provided it is in the meantime lodged in a warehouse under the joint locks of the king and the importer. This liberty indeed extends to no more than twenty-five of the different ports of Great Britain. They are, however, the principal ones, and there may not, perhaps, be warehouses proper for this purpose in the greater part of the others. So far, this law seems evidently an improvement upon the ancient system. But by the same law, a bounty of two shillings the quarter is given for the exportation of oats whenever the price does not exceed fourteen shillings. No bounty had ever been given before for the exportation of this grain no more than for that of peas 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 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 6 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 favored, 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 favored 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 favored, are necessarily disadvantageous to those of the favoring 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 scare some out 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 favoring 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 the 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. Methwin, has been so much commended. The following is a literal translation of that treaty, which consists of three articles only. Article 1. His sacred royal majesty of Portugal promises, both in his own name, and that of his successors, to admit forever hereafter into Portugal the woollen cloths and the rest of the woollen manufacturers of the British, as was accustomed till they were prohibited by the law. Nevertheless, upon this condition, Article 2, that is to say that her sacred royal majesty of Great Britain shall, in her own name, and that of her successors, be obliged forever hereafter to admit the wines of the growth of Portugal into Britain, so that at no time, whether there shall be peace or war between the kingdoms of Britain and France, anything more shall be demanded for these wines by the name of custom or duty or by whatsoever other title, directly or indirectly, whether they shall be imported into Great Britain in pipes or hogsheads or other casks, then what shall be demanded for the light quantity or measure of French wine, deducting or abating a third part of the custom or duty? But if, at any time, this deduction or abatement of customs, which is to be made as aforesaid, shall in any manner be attempted or prejudiced, it shall be just and lawful for his sacred royal majesty of Portugal, again to prohibit the woollen cloths and the rest of the British woollen manufacturers. Article 3. 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 woollands 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. Beretti was informed that the weekly packet boat from Lisbon brings, one week with another, more than fifty thousand pounds in gold to England. The sum had probably been exaggerated. It would amount to more than two million six hundred thousand pounds a year, which is more than the Brazils are supposed to afford. Our merchants were, some years ago, out of humor 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 favors, defense 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. Beretti 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 roundabout one, and to bring the same value of foreign goods to the home market requires a much smaller capital in the one way than in the other. If a smaller share of its industry therefore had been employed in producing goods fit for the Portugal market, and a greater in producing those fit for the other markets, where those consumable goods for which there is a demand in Great Britain are to be had, it would have been more for the advantage of England. To procure both the gold which it wants for its own use, and the consumable goods, it 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 and additional quantity of industry, and in raising a greater annual produce. Though Britain was 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 has said, comes from Portugal. With other nations the balance of trade is either against us, or not much in our favor. 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 favor 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 offense 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 the Zignominius terms which his brother-in-law, the King of Spain, proposed to him, Britain would have been freed from a much greater inconvenience than the loss of the Portugal trade, the burden of supporting a very weak ally, so unprovided of everything for his own defense, 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 inconvenience 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 roundabout foreign trade of consumption can be carried on more advantageously by means of those metals than of almost any other goods. As they are the universal instruments of commerce, they are more readily received in return for all commodities than any other goods. And on account of their small bulk and great value, it costs less to transport them backward and forward from one place to another than almost any other sort of merchandise, and they lose less of 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 roundabout 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 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 goldsmith's 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 pounds a year in gold, was an annual addition to the money before current in the kingdom. In a country where the expense of the coinage is defrayed by the government, the value of the coin, even when it contains its full standard weight of gold and silver, can never be much greater than that of an equal quantity of those metals uncoined. Because it 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 and 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 percent and the silver more than eight percent 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 pounds, 14 shilling sixpence, was then about 47 pounds, 14 shillings, and sometimes about 48 pounds. When the greater part of the coin, however, was in this degenerate condition, 44 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 pounds, 14 shillings, sixpence. 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 pounds, 14 shillings, and 48 pounds, 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 coin 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 senorage, 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 labor and expense requisite for coinage, false corners, 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 senorage is 8%, no sensible inconvenience of this kind is found to arise from it. The dangers to which a false corner is everywhere exposed, if he lives in the country of which he counterfeits the coin, and to which his agents or correspondence are exposed, if he lives in a foreign country, are by far too great to be incurred for the sake of a profit of 6 or 7%. The senorage 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 24 carats was fixed at 740 lever, 9 sous and 1 denier, 111 the mark of 8 Paris ounces. The gold coin of France, making an allowance for the remedy of the mint, contains 21 carats and 3 fourths of fine gold, and 2 carats, 1 fourth of alloy. The mark of standard gold therefore is worth no more than about 671 lever, 10 denier. But in France, this mark of standard gold is coined into 30 Louis d'Or, of 24 lever each, or into 720 lever. The coinage therefore increases the value of a mark of standard gold bullion by the difference between 671 lever, 10 denier and 720 lever, or by 48 lever, 19 sous and 2 denier. A senorage 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 senorage, there will be loss instead of profit. If it is equal to the senorage, there will be neither profit nor loss. If it is greater than the senorage, there will indeed be some profit, but less than if there was no senorage. If, before the late reformation of the gold coin, for example, there had been a senorage of 5% upon the coinage, there would have been a loss of 3% upon the melting down of the gold coin. If the senorage had been 2%, there would have been neither profit nor loss. If the senorage had been 1%, there would have been a profit, but of 1% only, instead of 2%. Wherever money is received by tail, therefore, and not by weight, a senorage is the most effectual preventative 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 complacence 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 inconvenience, should the gold coin of England come to be received by tail, 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 percent below its standard weight, as there was no signurage, it was two percent 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 percent more than it was worth after the coinage. But if there had been a signurage of two percent upon the coinage, the common gold currency, though two percent 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 signurage to pay, which, being two percent, their loss upon the whole transaction would have been two percent, exactly the same, but no greater than it actually was. If the signurage had been five percent and the gold currency only two percent below its standard weight, the bank would, in this case, have gained three percent upon the price of the bullion, and as they would have had a signurage of five percent to pay upon the coinage, their loss upon the whole transaction would, in the same manner, have been exactly two percent. If the signurage had been only one percent and the gold currency two percent below its standard weight, the bank would, in this case, have lost only one percent upon the price of the bullion, but as they would likewise have had a signurage of one percent to pay, their loss upon the whole transaction would have been exactly two percent in the same manner as in all other cases. If there was a reasonable signurage, 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 signurage 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 signurage. 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 signurage. 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 everybody advances the tax, nobody finally pays it, because everybody gets it back in the advanced value of the coin. A moderate signurage, 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 signurage does not, in any case, diminish it. Whether there is, or is not a signurage, 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 defrains 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 signurage upon the authority of a speculation which promises them no gain, but only pretends to ensure 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 and consequence of the imposition of a signurage 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 eight hundred and fifty thousand pounds. But if there had been a signurage of four or five percent 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 percent upon the bullion, which was to be coined into more than eight hundred and fifty thousand pounds, or incurring an annual loss of more than twenty one thousand two hundred and fifty pounds, would not probably have incurred the tenth part of that loss. 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 cost the government, or the fees of the officers of the mint, do not, upon the 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 nominal price of commodities. But as the law for the encouragement of coinage derives its own 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 experience for enriching the country.