#1 in our series by Adam Smith
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Title: An Inquiry into the Nature and Causes of the Wealth of Nations
Author: Adam Smith
Release Date: April, 2002 [Etext #3300]
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AN INQUIRY INTO THE NATURE AND CAUSES OF
THE WEALTH OF NATIONS.
by Adam Smith
INTRODUCTION AND PLAN OF THE WORK.
The annual labour of every nation is the fund which originally supplies it
with all the necessaries and conveniencies of life which it annually
consumes, and which consist always either in the immediate produce of that
labour, or in what is purchased with that produce from other nations.
According, therefore, as this produce, or what is purchased with it, bears a
greater or smaller proportion to the number of those who are to consume it,
the nation will be better or worse supplied with all the necessaries and
conveniencies for which it has occasion.
But this proportion must in every nation be regulated by two different
circumstances: first, by the skill, dexterity, and judgment with which its
labour is generally applied; and, secondly, by the proportion between the
number of those who are employed in useful labour, and that of those who are
not so employed. Whatever be the soil, climate, or extent of territory of
any particular nation, the abundance or scantiness of its annual supply
must, in that particular situation, depend upon those two circumstances.
The abundance or scantiness of this supply, too, seems to depend more upon
the former of those two circumstances than upon the latter. Among the savage
nations of hunters and fishers, every individual who is able to work is more
or less employed in useful labour, and endeavours to provide, as well as he
can, the necessaries and conveniencies of life, for himself, and such of his
family or tribe as are either too old, or too young, or too infirm, to go
a-hunting and fishing. Such nations, however, are so miserably poor, that,
from mere want, they are frequently reduced, or at least think themselves
reduced, to the necessity sometimes of directly destroying, and sometimes of
abandoning their infants, their old people, and those afflicted with
lingering diseases, to perish with hunger, or to be devoured by wild beasts.
Among civilized and thriving nations, on the. contrary, though a great
number of people do not labour at all, many of whom consume the produce of
ten times, frequently of a hundred times, more labour than the greater part
of those who work ; yet the produce of the whole labour of the society is so
great, that all are often abundantly supplied ; and a workman, even of the
lowest and poorest order, if he is frugal and industrious, may enjoy a
greater share of the necessaries and conveniencies of life than it is
possible for any savage to acquire.
The causes of this improvement in the productive powers of labour, and the
order according to which its produce is naturally distributed among the
different ranks and conditions of men in the society, make the subject of
the first book of this Inquiry.
Whatever be the actual state of the skill, dexterity, and judgment, with
which labour is applied in any nation, the abundance or scantiness of its
annual supply must depend, during the continuance of that state, upon the
proportion between the number of those who are annually employed in useful
labour, and that of those who are not so employed. The number of useful and
productive labourers, it will hereafter appear, is everywhere in proportion
to the quantity of capital stock which is employed in setting them to work,
and to the particular way in which it is so employed. The second book,
therefore, treats of the nature of capital stock, of the manner in which it
is gradually accumulated, and of the different quantities of labour which it
puts into motion, according to the different ways in which it is employed.
Nations tolerably well advanced as to skill, dexterity, and judgment, in the
application of labour, have followed very different plans in the general
conduct or direction of it; and those plans have not all been equally
favourable to the greatness of its produce. The policy of some nations has
given extraordinary encouragement to the industry of the country ; that of
others to the industry of towns. Scarce any nation has dealt equally and
impartially with every sort of industry. Since the down-fall of the Roman
empire, the policy of Europe has been more favourable to arts, manufactures,
and commerce, the industry of towns, than to agriculture, the Industry of
the country. The circumstances which seem to have introduced and
established this policy are explained in the third book.
Though those different plans were, perhaps, first introduced by the private
interests and prejudices of particular orders of men, without any regard to,
or foresight of, their consequences upon the general welfare of the society;
yet they have given occasion to very different theories of political
economy; of which some magnify the importance of that industry which is
carried on in towns, others of that which is carried on in the country.
Those theories have had a considerable influence, not only upon the opinions
of men of learning, but upon the public conduct of princes and sovereign
states. I have endeavoured, in the fourth book, to explain as fully and
distinctly as I can those different theories, and the principal effects
which they have produced in different ages and nations.
To explain in what has consisted the revenue of the great body of the
people, or what has been the nature of those funds, which, in different ages
and nations, have supplied their annual consumption, is the object of these
four first books. The fifth and last book treats of the revenue of the
sovereign, or commonwealth. In this book I have endeavoured to shew, first,
what are the necessary expenses of the sovereign, or commonwealth ; which of
those expenses ought to be defrayed by the general contribution of the whole
society, and which of them, by that of some particular part only, or of some
particular members of it: secondly, what are the different methods in which
the whole society may be made to contribute towards defraying the expenses
incumbent on the whole society, and what are the principal advantages and
inconveniencies of each of those methods ; and, thirdly and lastly, what are
the reasons and causes which have induced almost all modern governments to
mortgage some part of this revenue, or to contract debts; and what have been
the effects of those debts upon the real wealth, the annual produce of the
land and labour of the society.
BOOK I.
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRlBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.
CHAPTER I.
OF THE DIVISlON OF LABOUR.
The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is
anywhere directed, or applied, seem to have been the effects of the division
of labour. The effects of the division of labour, in the general business of
society, will be more easily understood, by considering in what manner it
operates in some particular manufactures. It is commonly supposed to be
carried furthest in some very trifling ones ; not perhaps that it really is
carried further in them than in others of more importance: but in those
trifling manufactures which are destined to supply the small wants of but a
small number of people, the whole number of workmen must necessarily be
small ; and those employed in every different branch of the work can often
be collected into the same workhouse, and placed at once under the view of
the spectator.
In those great manufactures, on the contrary. which are destined to supply
the great wants of the great body of the people, every different branch
of the work employs so great a number of workmen, that it is impossible to
collect them all into the same workhouse. We can seldom see more, at one
time, than those employed in one single branch. Though in such
manufactures, therefore, the work may really be divided into a much greater
number of parts, than in those of a more trifling nature, the division is
not near so obvious, and has accordingly been much less observed.
To take an example, therefore, from a very trifling manufacture, but one in
which the division of labour has been very often taken notice of, the
trade of a pin-maker: a workman not educated to this business (which the
division of labour has rendered a distinct trade, nor acquainted with the
use of the machinery employed in it (to the invention of which the same
division of labour has probably given occasion), could scarce, perhaps, with
his utmost industry, make one pin in a day, and certainly could not make
twenty. But in the way in which this business is now carried on, not only
the whole work is a peculiar trade, but it is divided into a number of
branches, of which the greater part are likewise peculiar trades. One man
draws out the wire; another straights it; a third cuts it; a fourth points
it; a fifth grinds it at the top for receiving the head; to make the head
requires two or three distinct operations ; to put it on is a peculiar
business; to whiten the pins is another ; it is even a trade by itself to
put them into the paper ; and the important business of making a pin is, in
this manner, divided into about eighteen distinct operations, which, in some
manufactories, are all performed by distinct hands, though in others the
same man will sometimes perform two or three of them. I have seen a small
manufactory of this kind, where ten men only were employed, and where some
of them consequently performed two or three distinct operations. But though
they were very poor, and therefore but indifferently accommodated with the
necessary machinery, they could, when they exerted themselves, make among
them about twelve pounds of pins in a day. There are in a pound upwards of
four thousand pins of a middling size. Those ten persons, therefore, could
make among them upwards of forty-eight thousand pins in a day. Each
person, therefore, making a tenth part of forty-eight thousand pins, might
be considered as making four thousand eight hundred pins in a day. But if
they had all wrought separately and independently, and without any of them
having been educated to this peculiar business, they certainly could not
each of them have made twenty, perhaps not one pin in a day; that is,
certainly, not the two hundred and fortieth, perhaps not the four thousand
eight hundredth, part of what they are at present capable of performing, in
consequence of a proper division and combination of their different
operations.
In every other art and manufacture, the effects of the division of labour
are similar to what they are in this very trifling one, though, in many of
them, the labour can neither be so much subdivided, nor reduced to so great
a simplicity of operation. The division of labour, however, so far as it
can be introduced, occasions, in every art, a proportionable increase of
the productive powers of labour. The separation of different trades and
employments from one another, seems to have taken place in consequence of
this advantage. This separation, too, is generally carried furthest in those
countries which enjoy the highest degree of industry and improvement; what
is the work of one man, in a rude state of society, being generally that of
several in an improved one. In every improved society, the farmer is
generally nothing but a farmer ; the manufacturer, nothing but a
manufacturer. The labour, too, which is necessary to produce any one
complete manufacture, is almost always divided among a great number of
hands. How many different trades are employed in each branch of the linen
and woollen manufactures, from the growers of the flax and the wool, to the
bleachers and smoothers of the linen, or to the dyers and dressers of the
cloth ! The nature of agriculture, indeed, does not admit of so many
subdivisions of labour, nor of so complete a separation of one business
from another, as manufactures. It is impossible to separate so entirely
the business of the grazier from that of the corn-farmer, as the trade of
the carpenter is commonly separated from that of the smith. The spinner is
almost always a distinct person from the, weaver; but the ploughman, the
harrower, the sower of the seed, and the reaper of the corn, are often the
same. The occasions for those different sorts of labour returning with the
different seasons of the year, it is impossible that one man should be
constantly employed in any one of them. This impossibility of making so
complete and entire a separation of all the different branches of labour
employed in agriculture, is perhaps the reason why the improvement of the
productive powers of labour, in this art, does not always keep pace with
their improvement in manufactures. The most opulent nations, indeed,
generally excel all their neighbours in agriculture as well as in
manufactures ; but they are commonly more distinguished by their superiority
in the latter than in the former. Their lands are in general better
cultivated, and having more labour and expense bestowed upon them, produce
more in proportion to the extent and natural fertility of the ground. But
this superiority of produce is seldom much more than in proportion to the
superiority of labour and expense. In agriculture, the labour of the rich
country is not always much more productive than that of the poor ; or, at
least, it is never so much more productive, as it commonly is in
manufactures. The corn of the rich country, therefore, will not always, in
the same degree of goodness, come cheaper to market than that of the poor.
The corn of Poland, in the same degree of goodness, is as cheap as that of
France, notwithstanding the superior opulence and improvement of the latter
country. The corn of France is, in the corn-provinces, fully as good, and in
most years nearly about the same price with the corn of England, though, in
opulence and improvement, France is perhaps inferior to England. The
corn-lands of England, however, are better cultivated than those of France,
and the corn-lands of France are said to be much better cultivated than
those of Poland. But though the poor country, notwithstanding the
inferiority of its cultivation, can, in some measure. rival the rich in the
cheapness and goodness of its corn, it can pretend to no such competition in
its manufactures, at least if those manufactures suit the soil, climate, and
situation, of the rich country. The silks of France are better and cheaper
than those of England, because the silk manufacture, at least under the
present high duties upon the importation of raw silk, does not so well suit
the climate of England as that of France. But the hardware and the coarse
woollens of England are beyond all comparison superior to those of France,
and much cheaper, too, in the same degree of goodness. In Poland there are
said to be scarce any manufactures of any kind, a few of those coarser
household manufactures excepted, without which no country can well subsist.
This great increase in the quantity of work, which, in consequence of the
division of labour, the same number of people are capable of performing, is
owing to three different circumstances ; first, to the increase of dexterity
in every particular workman ; secondly, to the saving of the time which is
commonly lost in passing from one species of work to another ; and, lastly,
to the invention of a great number of machines which facilitate and abridge
labour, and enable one man to do the work of many.
First, the improvement of the dexterity of the workmen, necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man's business to some one simple operation, and
by making this operation the sole employment of his life, necessarily
increases very much the dexterity of the workman. A common smith, who,
though accustomed to handle the hammer, has never been used to make nails,
if, upon some particular occasion, he is obliged to attempt it, will scarce,
I am assured, be able to make above two or three hundred nails in a day, and
those, too, very bad ones. A smith who has been accustomed to make nails,
but whose sole or principal business has not been that of a nailer, can
seldom, with his utmost diligence, make more than eight hundred or a
thousand nails in a day. I have seen several boys, under twenty years of
age, who had never exercised any other trade but that of making nails, and
who, when they exerted themselves, could make, each of them, upwards of two
thousand three hundred nails in a day. The making of a nail, however, is by
no means one of the simplest operations. The same person blows the bellows,
stirs or mends the fire as there is occasion, heats the iron, and forges
every part of the nail: in forging the head, too, he is obliged to change
his tools. The different operations into which the making of a pin, or of a
metal button, is subdivided, are all of them much more simple, and the
dexterity of the person, of whose life it has been the sole business to
perform them, is usually much greater. The rapidity with which some of the
operations of those manufactures are performed, exceeds what the human hand
could, by those who had never seen them, he supposed capable of acquiring.
Secondly, The advantage which is gained by saving the time commonly lost in
passing from one sort of work to another, is much greater than we should at
first view be apt to imagine it. It is impossible to pass very quickly from
one kind of work to another, that is carried on in a different place, and
with quite different tools. A country weaver, who cultivates a small farm,
must loose a good deal of time in passing from his loom to the field, and
from the field to his loom. When the two trades can be carried on in the same
workhouse, the loss of time is, no doubt, much less. It is, even in this
case, however, very considerable. A man commonly saunters a little in
turning his hand from one sort of employment to another. When he first
begins the new work, he is seldom very keen and hearty; his mind, as they
say, does not go to it, and for some time he rather trifles than applies to
good purpose. The habit of sauntering, and of indolent careless application,
which is naturally, or rather necessarily, acquired by every country workman
who is obliged to change his work and his tools every half hour, and to
apply his hand in twenty different ways almost every day of his life,
renders him almost always slothful and lazy, and incapable of any vigorous
application, even on the most pressing occasions. Independent, therefore, of
his deficiency in point of dexterity, this cause alone must always reduce
considerably the quantity of work which he is capable of performing.
Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that the
invention of all those machines by which labour is to much facilitated and
abridged, seems to have been originally owing to the division of labour. Men
are much more likely to discover easier and readier methods of attaining any
object. when the whole attention of their minds is directed towards that
single object, than when it is dissipated among a great variety of things.
But, in consequence of the division of labour, the whole of every man's
attention comes naturally to be directed towards some one very simple
object. It is naturally to be expected, therefore, that some one or other of
those who are employed in each particular branch of labour should soon find
out easier and readier methods of performing their own particular work,
whenever the nature of it admits of such improvement. A great part of the
machines made use of in those manufactures in which labour is most
subdivided, were originally the invention of common workmen, who, being each
of them employed in some very simple operation, naturally turned their
thoughts towards finding out easier and readier methods of performing it.
Whoever has been much accustomed to visit such manufactures, must frequently
have been shewn very pretty machines, which were the inventions of such
workmen, in order to facilitate and quicken their own particular part of the
work. In the first fire engines {this was the current designation for steam
engines}, a boy was constantly employed to open and shut alternately the
communication between the boiler and the cylinder, according as the piston
either ascended or descended. One of those boys, who loved to play with his
companions, observed that, by tying a string from the handle of the valve
which opened this communication to another part of the machine, the valve
would open and shut without his assistance, and leave him at liberty to
divert himself with his play-fellows. One of the greatest improvements that
has been made upon this machine, since it was first invented, was in this
manner the discovery of a boy who wanted to save his own labour.
All the improvements in machinery, however, have by no means been the
inventions of those who had occasion to use the machines. Many improvements
have been made by the ingenuity of the makers of the machines, when to make
them became the business of a peculiar trade; and some by that of those who
are called philosophers, or men of speculation, whose trade it is not to do
any thing, but to observe every thing, and who, upon that account, are often
capable of combining together the powers of the most distant and dissimilar
objects. in the progress of society, philosophy or speculation becomes, like
every other employment, the principal or sole trade and occupation of a
particular class of citizens. Like every other employment, too, it is
subdivided into a great number of different branches, each of which affords
occupation to a peculiar tribe or class of philosophers ; and this
subdivision of employment in philosophy, as well as in every other business,
improve dexterity, and saves time. Each individual becomes more expert in
his own peculiar branch, more work is done upon the whole, and the quantity
of science is considerably increased by it.
It is the great multiplication of the productions of all the different arts,
in consequence of the division of labour, which occasions, in a
well-governed society, that universal opulence which extends itself to the
lowest ranks of the people. Every workman has a great quantity of his own
work to dispose of beyond what he himself has occasion for; and every other
workman being exactly in the same situation, he is enabled to exchange a
great quantity of his own goods for a great quantity or, what comes to the
same thing, for the price of a great quantity of theirs. He supplies them
abundantly with what they have occasion for, and they accommodate him as
amply with what he has occasion for, and a general plenty diffuses itself
through all the different ranks of the society.
Observe the accommodation of the most common artificer or daylabourer in a
civilized and thriving country, and you will perceive that the number of
people, of whose industry a part, though but a small part, has been employed
in procuring him this accommodation, exceeds all computation. The woollen
coat, for example, which covers the day-labourer, as coarse and rough as it
may appear, is the produce of the joint labour of a great multitude of
workmen. The shepherd, the sorter of the wool, the wool-comber or carder,
the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser,
with many others, must all join their different arts in order to complete
even this homely production. How many merchants and carriers, besides, must
have been employed in transporting the materials from some of those workmen
to others who often live in a very distant part of the country ? How much
commerce and navigation in particular, how many ship-builders, sailors,
sail-makers, rope-makers, must have been employed in order to bring together
the different drugs made use of by the dyer, which often come from the
remotest corners of the world ? What a variety of labour, too, is necessary
in order to produce the tools of the meanest of those workmen ! To say
nothing of such complicated machines as the ship of the sailor, the mill of
the fuller, or even the loom of the weaver, let us consider only what a
variety of labour is requisite in order to form that very simple machine,
the shears with which the shepherd clips the wool. The miner, the builder of
the furnace for smelting the ore the feller of the timber, the burner of
the charcoal to be made use of in the smelting-house, the brickmaker, the
bricklayer, the workmen who attend the furnace, the millwright, the forger,
the smith, must all of them join their different arts in order to produce
them. Were we to examine, in the same manner, all the different parts of his
dress and household furniture, the coarse linen shirt which he wears next
his skin, the shoes which cover his feet, the bed which he lies on, and all
the different parts which compose it, the kitchen-grate at which he prepares
his victuals, the coals which he makes use of for that purpose, dug from the
bowels of the earth, and brought to him, perhaps, by a long sea and a long
land-carriage, all the other utensils of his kitchen, all the furniture of
his table, the knives and forks, the earthen or pewter plates upon which he
serves up and divides his victuals, the different hands employed in
preparing his bread and his beer, the glass window which lets in the heat
and the light, and keeps out the wind and the rain, with all the knowledge
and art requisite for preparing that beautiful and happy invention, without
which these northern parts of the world could scarce have afforded a very
comfortable habitation, together with the tools of all the different workmen
employed in producing those different conveniencies ; if we examine, I say,
all these things, and consider what a variety of labour is employed about
each of them, we shall be sensible that, without the assistance and
co-operation of many thousands, the very meanest person in a civilized
country could not be provided, even according to, what we very falsely
imagine, the easy and simple manner in which he is commonly accommodated.
Compared, indeed, with the more extravagant luxury of the great, his
accommodation must no doubt appear extremely simple and easy ; and yet it
may be true, perhaps, that the accommodation of an European prince does not
always so much exceed that of an industrious and frugal peasant, as the
accommodation of the latter exceeds that of many an African king, the
absolute masters of the lives and liberties of ten thousand naked savages.
CHAPTER II.
OF THE PRINCIPLE WHICH GIVES OCCASION TO
THE DIVISION OF LABOUR.
This division of labour, from which so many advantages are derived, is not
originally the effect of any human wisdom, which foresees and intends that
general opulence to which it gives occasion. It is the necessary, though
very slow and gradual, consequence of a certain propensity in human nature,
which has in view no such extensive utility ; the propensity to truck,
barter, and exchange one thing for another.
Whether this propensity be one of those original principles in human nature,
of which no further account can be given, or whether, as seems more
probable, it be the necessary consequence of the faculties of reason and
speech, it belongs not to our present subject to inquire. It is common to
all men, and to be found in no other race of animals, which seem to know
neither this nor any other species of contracts. Two greyhounds, in running
down the same hare, have sometimes the appearance of acting in some sort of
concert. Each turns her towards his companion, or endeavours to intercept
her when his companion turns her towards himself. This, however, is not the
effect of any contract, but of the accidental concurrence of their passions
in the same object at that particular time. Nobody ever saw a dog make a
fair and deliberate exchange of one bone for another with another dog.
Nobody ever saw one animal, by its gestures and natural cries signify to
another, this is mine, that yours ; I am willing to give this for that. When
an animal wants to obtain something either of a man, or of another animal,
it has no other means of persuasion, but to gain the favour of those whose
service it requires. A puppy fawns upon its dam, and a spaniel endeavours,
by a thousand attractions, to engage the attention of its master who is at
dinner, when it wants to be fed by him. Man sometimes uses the same arts
with his brethren, and when he has no other means of engaging them to act
according to his inclinations, endeavours by every servile and fawning
attention to obtain their good will. He has not time, however, to do this
upon every occasion. In civilized society he stands at all times in need of
the co-operation and assistance of great multitudes, while his whole life is
scarce sufficient to gain the friendship of a few persons. In almost every
other race of animals, each individual, when it is grown up to maturity, is
entirely independent, and in its natural state has occasion for the
assistance of no other living creature. But man has almost constant
occasion for the help of his brethren, and it is in vain for him to expect
it from their benevolence only. He will be more likely to prevail if he can
interest their self-love in his favour, and shew them that it is for their
own advantage to do for him what he requires of them. Whoever offers to
another a bargain of any kind, proposes to do this. Give me that which I
want, and you shall have this which you want, is the meaning of every such
offer; and it is in this manner that we obtain from one another the far
greater part of those good offices which we stand in need of. It is not from
the benevolence of the butcher the brewer, or the baker that we expect our
dinner, but from their regard to their own interest. We address ourselves,
not to their humanity, but to their self-love, and never talk to them of our
own necessities, but of their advantages. Nobody but a beggar chooses to
depend chiefly upon the benevolence of his fellow-citizens. Even a beggar
does not depend upon it entirely. The charity of well-disposed people,
indeed, supplies him with the whole fund of his subsistence. But though
this principle ultimately provides him with all the necessaries of life
which he has occasion for, it neither does nor can provide him with them as
he has occasion for them. The greater part of his occasional wants are
supplied in the same manner as those of other people, by treaty, by barter,
and by purchase. With the money which one man gives him he purchases food.
The old clothes which another bestows upon him he exchanges for other
clothes which suit him better, or for lodging, or for food, or for money,
with which he can buy either food, clothes, or lodging, as he has occasion.
As it is by treaty, by barter, and by purchase, that we obtain from one
another the greater part of those mutual good offices which we stand in need
of, so it is this same trucking disposition which originally gives occasion
to the division of labour. In a tribe of hunters or shepherds, a particular
person makes bows and arrows, for example, with more readiness and dexterity
than any other. He frequently exchanges them for cattle or for venison, with
his companions; and he finds at last that he can, in this manner, get more
cattle and venison, than if he himself went to the field to catch them. From
a regard to his own interest, therefore, the making of bows and arrows grows
to be his chief business, and he becomes a sort of armourer. Another excels
in making the frames and covers of their little huts or moveable houses. He
is accustomed to be of use in this way to his neighbours, who reward him in
the same manner with cattle and with venison, till at last he finds it his
interest to dedicate himself entirely to this employment, and to become a
sort of house-carpenter. In the same manner a third becomes a smith or a
brazier; a fourth, a tanner or dresser of hides or skins, the principal part
of the clothing of savages. And thus the certainty of being able to exchange
all that surplus part of the produce of his own labour, which is over and
above his own consumption, for such parts of the produce of other men's
labour as he may have occasion for, encourages every man to apply himself to
a particular occupation, and to cultivate and bring to perfection whatever
talent of genius he may possess for that particular species of business.
The difference of natural talents in different men, is, in reality, much less
than we are aware of ; and the very different genius which appears to
distinguish men of different professions, when grown up to maturity, is not
upon many occasions so much the cause, as the effect of the division of
labour. The difference between the most dissimilar characters, between a
philosopher and a common street porter, for example, seems to arise not so
much from nature, as from habit, custom, and education. When they came in to
the world, and for the first six or eight years of their existence, they
were, perhaps, very much alike, and neither their parents nor play-fellows
could perceive any remarkable difference. About that age, or soon after,
they come to be employed in very different occupations. The difference of
talents comes then to be taken notice of, and widens by degrees, till at
last the vanity of the philosopher is willing to acknowledge scarce any
resemblance. But without the disposition to truck, barter, and exchange,
every man must have procured to himself every necessary and conveniency of
life which he wanted. All must have had the same duties to perform, and the
same work to do, and there could have been no such difference of employment
as could alone give occasion to any great difference of talents.
As it is this disposition which forms that difference of talents, so
remarkable among men of different professions, so it is this same
disposition which renders that difference useful. Many tribes of animals,
acknowledged to be all of the same species, derive from nature a much more
remarkable distinction of genius, than what, antecedent to custom and
education, appears to take place among men. By nature a philosopher is not
in genius and disposition half so different from a street porter, as a
mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last
from a shepherd's dog. Those different tribes of animals, however, though
all of the same species are of scarce any use to one another. The strength
of the mastiff is not in the least supported either by the swiftness of the
greyhound, or by the sagacity of the spaniel, or by the docility of the
shepherd's dog. The effects of those different geniuses and talents, for
want of the power or disposition to barter and exchange, cannot be brought
into a common stock, and do not in the least contribute to the better
accommodation and conveniency of the species. Each animal is still obliged
to support and defend itself, separately and independently, and derives no
sort of advantage from that variety of talents with which nature has
distinguished its fellows. Among men, on the contrary, the most dissimilar
geniuses are of use to one another ; the different produces of their
respective talents, by the general disposition to truck, barter, and
exchange, being brought, as it were, into a common stock, where every man
may purchase whatever part of the produce of other men's talents he has
occasion for,
CHAPTER III.
THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.
As it is the power of exchanging that gives occasion to the division of labour, so the extent of
this division must always be limited by the extent of that power, or, in other words, by the
extent of the market. When the market is very small, no person can have any encouragement
to dedicate himself entirely to one employment, for want of the power to exchange all that
surplus part of the produce of his own labour, which is over and above his own consumption,
for such parts of the produce of other men's labour as he has occasion for.
There are some sorts of industry, even of the lowest kind, which can be carried on nowhere
but in a great town. A porter, for example, can find employment and subsistence in no other
place. A village is by much too narrow a sphere for him; even an ordinary market-town is
scarce large enough to afford him constant occupation. In the lone houses and very small
villages which are scattered about in so desert a country as the highlands of Scotland, every
farmer must be butcher, baker, and brewer, for his own family. In such situations we can
scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of
another of the same trade. The scattered families that live at eight or ten miles distance from
the nearest of them, must learn to perform themselves a great number of little pieces of work,
for which, in more populous countries, they would call in the assistance of those workmen.
Country workmen are almost everywhere obliged to apply themselves to all the different
branches of industry that have so much affinity to one another as to be employed about the
same sort of materials. A country carpenter deals in every sort of work that is made of wood ;
a country smith in every sort of work that is made of iron. The former is not only a carpenter,
but a joiner, a cabinet-maker, and even a carver in wood, as well as a wheel-wright, a
plough-wright, a cart and waggon-maker. The employments of the latter are still more
various. It is impossible there should be such a trade as even that of a nailer in the remote and
inland parts of the highlands of Scotland. Such a workman at the rate of a thousand nails
a-day, and three hundred working days in the year, will make three hundred thousand nails in
the year. But in such a situation it would be impossible to dispose of one thousand, that is, of
one day's work in the year. As by means of water-carriage, a more extensive market is opened
to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast,
and along the banks of navigable rivers, that industry of every kind naturally begins to
subdivide and improve itself, and it is frequently not till a long time after that those
improvements extend themselves to the inland parts of the country. A broad-wheeled waggon,
attended by two men, and drawn by eight horses, in about six weeks time, carries and brings
back between London and Edinburgh near four ton weight of goods. In about the same time a
ship navigated by six or eight men, and sailing between the ports of London and Leith,
frequently carries and brings back two hundred ton weight of goods. Six or eight men,
therefore, by the help of water-carriage, can carry and bring back, in the same time, the same
quantity of goods between London and Edinburgh as fifty broad-wheeled waggons, attended
by a hundred men, and drawn by four hundred horses. Upon two hundred tons of goods,
therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be
charged the maintenance of a hundred men for three weeks, and both the maintenance and
what is nearly equal to maintenance the wear and tear of four hundred horses, as well as of
fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be
charged only the maintenance of six or eight men, and the wear and tear of a ship of two
hundred tons burthen, together with the value of the superior risk, or the difference of the
insurance between land and water-carriage. Were there no other communication between
those two places, therefore, but by land-carriage, as no goods could be transported from the
one to the other, except such whose price was very considerable in proportion to their weight,
they could carry on but a small part of that commerce which at present subsists between them,
and consequently could give but a small part of that encouragement which they at present
mutually afford to each other's industry. There could be little or no commerce of any kind
between the distant parts of the world. What goods could bear the expense of land-carriage
between London and Calcutta ? Or if there were any so precious as to be able to support this
expense, with what safety could they be transported through the territories of so many
barbarous nations? Those two cities, however, at present carry on a very considerable
commerce with each other, and by mutually affording a market, give a good deal of
encouragement to each other's industry.
Since such, therefore, are the advantages of water-carriage, it is natural that the first
improvements of art and industry should be made where this conveniency opens the whole
world for a market to the produce of every sort of labour, and that they should always be
much later in extending themselves into the inland parts of the country. The inland parts of the
country can for a long time have no other market for the greater part of their goods, but the
country which lies round about them, and separates them from the sea-coast, and the great
navigable rivers. The extent of the market, therefore, must for a long time be in proportion to
the riches and populousness of that country, and consequently their improvement must always
be posterior to the improvement of that country. In our North American colonies, the
plantations have constantly followed either the sea-coast or the banks of the navigable rivers,
and have scarce anywhere extended themselves to any considerable distance from both.
The nations that, according to the best authenticated history, appear to have been first
civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the
greatest inlet that is known in the world, having no tides, nor consequently any waves, except
such as are caused by the wind only, was, by the smoothness of its surface, as well as by the
multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to
the infant navigation of the world; when, from their ignorance of the compass, men were
afraid to quit the view of the coast, and from the imperfection of the art of ship-building, to
abandon themselves to the boisterous waves of the ocean. To pass beyond the pillars of
Hercules, that is, to sail out of the straits of Gibraltar, was, in the ancient world, long
considered as a most wonderful and dangerous exploit of navigation. It was late before even
the Phoenicians and Carthaginians, the most skilful navigators and ship-builders of those old
times, attempted it; and they were, for a long time, the only nations that did attempt it.
Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first
in which either agriculture or manufactures were cultivated and improved to any considerable
degree. Upper Egypt extends itself nowhere above a few miles from the Nile; and in Lower
Egypt, that great river breaks itself into many different canals, which, with the assistance of a
little art, seem to have afforded a communication by water-carriage, not only between all the
great towns, but between all the considerable villages, and even to many farm-houses in the
country, nearly in the same manner as the Rhine and the Maese do in Holland at present. The
extent and easiness of this inland navigation was probably one of the principal causes of the
early improvement of Egypt.
The improvements in agriculture and manufactures seem likewise to have been of very great
antiquity in the provinces of Bengal, in the East Indies, and in some of the eastern provinces
of China, though the great extent of this antiquity is not authenticated by any histories of
whose authority we, in this part of the world, are well assured. In Bengal, the Ganges, and
several other great rivers, form a great number of navigable canals, in the same manner as the
Nile does in Egypt. In the eastern provinces of China, too, several great rivers form, by their
different branches, a multitude of canals, and, by communicating with one another, afford an
inland navigation much more extensive than that either of the Nile or the Ganges, or, perhaps,
than both of them put together. It is remarkable, that neither the ancient Egyptians, nor the
Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.
All the inland parts of Africa, and all that part of Asia which lies any considerable way north
of the Euxine and Caspian seas, the ancient Scythia, the modern Tartary and Siberia, seem, in
all ages of the world, to have been in the same barbarous and uncivilized state in which we
find them at present. The sea of Tartary is the frozen ocean, which admits of no navigation ;
and though some of the greatest rivers in the world run through that country, they are at too
great a distance from one another to carry commerce and communication through the greater
part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in
Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulfs of Arabia,
Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of
that great continent; and the great rivers of Africa are at too great a distance from one another
to give occasion to any considerable inland navigation. The commerce, besides, which any
nation can carry on by means of a river which does not break itself into any great number of
branches or canals, and which runs into another territory before it reaches the sea, can never
be very considerable, because it is always in the power of the nations who possess that other
territory to obstruct the communication between the upper country and the sea. The navigation
of the Danube is of very little use to the different states of Bavaria, Austria. and Hungary, in
comparison of what it would be, if any of them possessed the whole of its course, till it falls
into the Black sea.
CHAPTER IV.
OF THE ORIGIN AND USE OF MONEY.
When the division of labour has been once thoroughly established, it is but
a very small part of a man's wants which the produce of his own labour can
supply. He supplies the far greater part of them by exchanging that surplus
part of the produce of his own labour, which is over and above his own
consumption, for such parts of the produce of other men's labour as he has
occasion for. Every man thus lives by exchanging, or becomes, in some
measure, a merchant, and the society itself grows to be what is properly a
commercial society.
But when the division of labour first began to take place, this power of
exchanging must frequently have been very much clogged and embarrassed in
its operations. One man, we shall suppose, has more of a certain commodity
than he himself has occasion for, while another has less. The former,
consequently, would be glad to dispose of; and the latter to purchase, a
part of this superfluity. But if this latter should chance to have nothing
that the former stands in need of, no exchange can be made between them. The
butcher has more meat in his shop than he himself can consume, and the
brewer and the baker would each of them be willing to purchase a part of it.
But they have nothing to offer in exchange, except the different productions
of their respective trades, and the butcher is already provided with all the
bread and beer which he has immediate occasion for. No exchange can, in this
case, be made between them. He cannot be their merchant, nor they his
customers ; and they are all of them thus mutually less serviceable to one
another. In order to avoid the inconveniency of such situations, every
prudent man in every period of society, after the first establishment of the
division of labour, must naturally have endeavoured to manage his affairs in
such a manner, as to have at all times by him, besides the peculiar produce
of his own industry, a certain quantity of some one commodity or other, such
as he imagined few people would be likely to refuse in exchange for the
produce of their industry. Many different commodities, it is probable, were
successively both thought of and employed for this purpose. In the rude ages
of society, cattle are said to have been the common instrument of commerce ;
and, though they must have been a most inconvenient one, yet, in old times,
we find things were frequently valued according to the number of cattle
which had been given in exchange for them. The armour of Diomede, says
Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is
said to be the common instrument of commerce and exchanges in Abyssinia ; a
species of shells in some parts of the coast of India ; dried cod at
Newfoundland; tobacco in Virginia; sugar in some of our West India colonies;
hides or dressed leather in some other countries; and there is at this day a
village In Scotland, where it is not uncommon, I am told, for a workman to
carry nails instead of money to the baker's shop or the ale-house.
In all countries, however, men seem at last to have been determined by
irresistible reasons to give the preference, for this employment, to metals
above every other commodity. Metals can not only be kept with as little loss
as any other commodity, scarce any thing being less perishable than they
are, but they can likewise, without any loss, be divided into any number of
parts, as by fusion those parts can easily be re-united again; a quality
which no other equally durable commodities possess, and which, more than any
other quality, renders them fit to be the instruments of commerce and
circulation. The man who wanted to buy salt, for example, and had nothing
but cattle to give in exchange for it, must have been obliged to buy salt to
the value of a whole ox, or a whole sheep, at a time. He could seldom buy
less than this, because what he was to give for it could seldom be divided
without loss; and if he had a mind to buy more, he must, for the same
reasons, have been obliged to buy double or triple the quantity, the value,
to wit, of two or three oxen, or of two or three sheep. If, on the contrary,
instead of sheep or oxen, he had metals to give in exchange for it, he could
easily proportion the quantity of the metal to the precise quantity of the
commodity which he had immediate occasion for.
Different metals have been made use of by different nations for this
purpose. Iron was the common instrument of commerce among the ancient
Spartans, copper among the ancient Romans, and gold and silver among all
rich and commercial nations.
Those metals seem originally to have been made use of for this purpose in
rude bars, without any stamp or coinage. Thus we are told by Pliny (Plin.
Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an ancient
historian, that, till the time of Servius Tullius, the Romans had no coined
money, but made use of unstamped bars of copper, to purchase whatever they
had occasion for. These rude bars, therefore, performed at this time the
function of rnoney.
The use of metals in this rude state was attended with two very considerable
inconveniences ; first, with the trouble of weighing, and secondly, with
that of assaying them. In the precious metals, where a small difference in
the quantity makes a great difference in the value, even the business of
weighing, with proper exactness, requires at least very accurate weights and
scales. The weighing of gold, in particular, is an operation of some nicety
In the coarser metals, indeed, where a small error would be of little
consequence, less accuracy would, no doubt, be necessary. Yet we should find
it excessively troublesome if every time a poor man had occasion either to
buy or sell a farthing's worth of goods, he was obliged to weigh the
farthing. The operation of assaying is still more difficult, still more
tedious ; and, unless a part of the metal is fairly melted in the crucible,
with proper dissolvents, any conclusion that can be drawn from it is
extremely uncertain. Before the institution of coined money, however, unless
they went through this tedious and difficult operation, people must always
have been liable to the grossest frauds and impositions; and instead of a
pound weight of pure silver, or pure copper, might receive, in exchange for
their goods, an adulterated composition of the coarsest and cheapest
materials, which had, however, in their outward appearance, been made to
resemble those metals. To prevent such abuses, to facilitate exchanges, and
thereby to encourage all sorts of industry and commerce, it has been found
necessary, in all countries that have made any considerable advances towards
improvement, to affix a public stamp upon certain quantities of such
particular metals, as were in those countries commonly made use of to
purchase goods. Hence the origin of coined money, and of those public
offices called mints; institutions exactly of the same nature with those of
the aulnagers and stamp-masters of woollen and linen cloth. All of them are
equally meant to ascertain, by means of a public stamp, the quantity and
uniform goodness of those different commodities when brought to market.
The first public stamps of this kind that were affixed to the current
metals, seem in many cases to have been intended to ascertain, what it was
both most difficult and most important to ascertain, the goodness or
fineness of the metal, and to have resembled the sterling mark which is at
present affixed to plate and bars of silver, or the Spanish mark which is
sometimes affixed to ingots of gold, and which, being struck only upon one
side of the piece, and not covering the whole surface, ascertains the
fineness, but not the weight of the metal. Abraham weighs to Ephron the four
hundred shekels of silver which he had agreed to pay for the field of
Machpelah. They are said, however, to be the current money of the merchant,
and yet are received by weight, and not by tale, in the same manner as
ingots of gold and bars of silver are at present. The revenues of the
ancient Saxon kings of England are said to have been paid, not in money, but
in kind, that is, in victuals and provisions of all sorts. William the
Conqueror introduced the custom of paying them in money. This money,
however, was for a long time, received at the exchequer, by weight, and not
by tale,
The inconveniency and difficulty of weighing those metals with exactness,
gave occasion to the institution of coins, of which the stamp, covering
entirely both sides of the piece, and sometimes the edges too, was supposed
to ascertain not only the fineness, but the weight of the metal. Such
coins, therefore, were received by tale, as at present, without the trouble
of weighing.
The denominations of those coins seem originally to have expressed the
weight or quantity of metal contained in them. In the time of Servius
Tullius, who first coined money at Rome, the Roman as or pondo contained a
Roman pound of good copper. It was divided, in the same manner as our Troyes
pound, into twelve ounces, each of which contained a real ounce of good
copper. The English pound sterling, in the time of Edward I. contained a
pound, Tower weight, of silver of a known fineness. The Tower pound seems to
have been something more than the Roman pound, and something less than the
Troyes pound. This last was not introduced into the mint of England till the
18th of Henry the VIII. The French livre contained, in the time of
Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair
of Troyes in Champaign was at that time frequented by all the nations of
Europe, and the weights and measures of so famous a market were generally
known and esteemed. The Scots money pound contained, from the time of
Alexander the First to that of Robert Bruce, a pound of silver of the same
weight and fineness with the English pound sterling. English, French, and
Scots pennies, too, contained all of them originally a real penny-weight of
silver, the twentieth part of an ounce, and the two hundred-and-fortieth
part of a pound. The shilling, too, seems originally to have been
the denomination of a weight. "When wheat is at twelve shillings the quarter,"
says an ancient statute of Henry III." then wastel bread of a farthing shall
weigh eleven shillings and fourpence". The proportion, however, between the
shilling, and either the penny on the one hand, or the pound on the other,
seems not to have been so constant and uniform as that between the penny and
the pound. During the first race of the kings of France, the French sou or
shilling appears upon different occasions to have contained five, twelve,
twenty, and forty pennies. Among the ancient Saxons, a shilling appears at
one time to have contained only five pennies, and it is not improbable that
it may have been as variable among them as among their neighbours, the
ancient Franks. From the time of Charlemagne among the French, and from that
of William the Conqueror among the English, the proportion between the
pound, the shilling, and the penny, seems to have been uniformly the same as
at present, though the value of each has been very different ; for in every
country of the world, I believe, the avarice and injustice of princes and
sovereign states, abusing the confidence of their subjects, have by degrees
diminished the real quantity of metal, which had been originally contained
in their coins. The Roman as, in the latter ages of the republic, was
reduced to the twenty-fourth part of its original value, and, instead of
weighing a pound, came to weigh only half an ounce. The English pound and
penny contain at present about a third only ; the Scots pound and penny
about a thirty-sixth ; and the French pound and penny about a sixty-sixth
part of their original value. By means of those operations, the princes and
sovereign states which performed them were enabled, in appearance, to pay
their debts and fulfil their engagements with a smaller quantity of silver
than would otherwise have been requisite. It was indeed in appearance only ;
for their creditors were really defrauded of a part of what was due to them.
All other debtors in the state were allowed the same privilege, and might
pay with the same nominal sum of the new and debased coin whatever they had
borrowed in the old. Such operations, therefore, have always proved
favourable to the debtor, and ruinous to the creditor, and have sometimes
produced a greater and more universal revolution in the fortunes of private
persons, than could have been occasioned by a very great public calamity.
It is in this manner that money has become, in all civilized nations, the
universal instrument of commerce, by the intervention of which goods of all
kinds are bought and sold, or exchanged for one another.
What are the rules which men naturally observe, in exchanging them either
for money, or for one another, I shall now proceed to examine. These rules
determine what may be called the relative or exchangeable value of goods.
The word VALUE, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and sometimes the
power of purchasing other goods which the possession of that object conveys.
The one may be called ' value in use ;' the other, 'value in exchange.' The
things which have the greatest value in use have frequently little or no
value in exchange ; and, on the contrary, those which have the greatest
value in exchange have frequently little or no value in use. Nothing is more
useful than water ; but it will purchase scarce any thing; scarce any thing
can be had in exchange for it. A diamond, on the contrary, has scarce any
value in use; but a very great quantity of other goods may frequently be had
in exchange for it.
In order to investigate the principles which regulate the exchangeable value
of commodities, I shall endeavour to shew,
First, what is the real measure of this exchangeable value; or wherein
consists the real price of all commodities.
Secondly, what are the different parts of which this real price is composed
or made up.
And, lastly, what are the different circumstances which sometimes raise some
or all of these different parts of price above, and sometimes sink them
below, their natural or ordinary rate; or, what are the causes which
sometimes hinder the market price, that is, the actual price of commodities,
from coinciding exactly with what may be called their natural price.
I shall endeavour to explain, as fully and distinctly as I can, those three
subjects in the three following chapters, for which I must very earnestly
entreat both the patience and attention of the reader : his patience, in
order to examine a detail which may, perhaps, in some places, appear
unnecessarily tedious; and his attention, in order to understand what may
perhaps, after the fullest explication which I am capable of giving it,
appear still in some degree obscure. I am always willing to run some hazard
of being tedious, in order to be sure that I am perspicuous; and, after
taking the utmost pains that I can to be perspicuous, some obscurity may
still appear to remain upon a subject, in its own nature extremely
abstracted.
CHAPTER V.
OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN
LABOUR, AND THEIR PRICE IN MONEY.
Every man is rich or poor according to the degree in which he can afford to
enjoy the necessaries, conveniencies, and amusements of human life. But
after the division of labour has once thoroughly taken place, it is but a
very small part of these with which a man's own labour can supply him. The
far greater part of them he must derive from the labour of other people, and
he must be rich or poor according to the quantity of that labour which he
can command, or which he can afford to purchase. The value of any commodity,
therefore, to the person who possesses it, and who means not to use or
consume it himself, but to exchange it for other commodities, is equal to
the quantity of labour which it enables him to purchase or command. Labour
therefore, is the real measure of the exchangeable value of all commodities.
The real price of every thing, what every thing really costs to the man who
wants to acquire it, is the toil and trouble of acquiring it. What every
thing is really worth to the man who has acquired it and who wants to
dispose of it, or exchange it for something else, is the toil and trouble
which it can save to himself, and which it can impose upon other people.
What is bought with money, or with goods, is purchased by labour, as much as
what we acquire by the toil of our own body. That money, or those goods,
indeed, save us this toil. They contain the value of a certain quantity of
labour, which we exchange for what is supposed at the time to contain the
value of an equal quantity. Labour was the first price, the original
purchase money that was paid for all things. It was not by gold or by silver,
but by labour, that all the wealth of the world was originally purchased;
and its value, to those who possess it, and who want to exchange it for some
new productions, is precisely equal to the quantity of' labour which it can
enable them to purchase or command.
Wealth, as Mr Hobbes says, is power. But the person who either acquires, or
succeeds to a great fortune, does not necessarily acquire or succeed to any
political power, either civil or military. His fortune may, perhaps, afford
him the means of acquiring both; but the mere possession of that fortune
does not necessarily convey to him either. The power which that possession
immediately and directly conveys to him, is the power of purchasing a
certain command over all the labour, or over all the produce of labour which
is then in the market. His fortune is greater or less, precisely in
proportion to the extent of this power, or to the quantity either of other
men's labour, or, what is the same thing, of the produce of other men's
labour, which it enables him to purchase or command. The exchangeable value
of every thing must always be precisely equal to the extent of this power
which it conveys to its owner.
But though labour be the real measure of the exchangeable value of all
commodities, it is not that by which their value is commonly estimated. It
is often difficult to ascertain the proportion between two different
quantities of labour. The time spent in two different sorts of work will not
always alone determine this proportion. The different degrees of hardship
endured, and of ingenuity exercised, must likewise be taken into account.
There may be more labour in an hour's hard work, than in two hours easy
business ; or in an hour's application to a trade which it cost ten years
labour to learn, than in a month's industry, at an ordinary and obvious
employment. But it is not easy to find any accurate measure either of
hardship or ingenuity. In exchanging, indeed, the different productions of
different sorts of labour for one another, some allowance is commonly made
for both. It is adjusted, however, not by any accurate measure, but by the
higgling and bargaining of the market, according to that sort of rough
equality which, though not exact, is sufficient for carrying on the business
of common life.
Every commodity, besides, Is more frequently exchanged for, and thereby
compared with, other commodities, than with labour. It is more natural,
therefore, to estimate its exchangeable value by the quantity of some other
commodity, than by that of the labour which it can produce. The greater part
of people, too, understand better what is meant by a quantity of a
particular commodity, than by a quantity of labour. The one is a plain
palpable object ; the other an abstract notion, which though it can be made
sufficiently intelligible, is not altogether so natural and obvious.
But when barter ceases, and money has become the common instrument of
commerce, every particular commodity is more frequently exchanged for money
than for any other commodity. The butcher seldom carries his beef or his
mutton to the baker or the brewer, in order to exchange them for bread or
for beer ; but he carries them to the market, where he exchanges them for
money, and afterwards exchanges that money for bread and for beer. The
quantity of money which he gets for them regulates, too, the quantity of
bread and beer which he can afterwards purchase. It is more natural and
obvious to him, therefore, to estimate their value by the quantity of money,
the commodity for which he immediately exchanges them, than by that of
bread and beer, the commodities for which he can exchange them only by the
intervention of another commodity ; and rather to say that his butcher's
meat is worth three-pence or fourpence a-pound, than that it is worth three
or four pounds of bread, or three or four quarts of small beer. Hence it
comes to pass, that the exchangeable value of every commodity is more
frequently estimated by the quantity of money, than by the quantity either
of labour or of any other commodity which can be had in exchange for it.
Gold and silver, however, like every other commodity, vary in their value;
are sometimes cheaper and sometimes dearer, sometimes of easier and
sometimes of more difficult purchase. The quantity of labour which any
particular quantity of them can purchase or command, or the quantity of
other goods which it will exchange for, depends always upon the fertility or
barrenness of the mines which happen to be known about the time when such
exchanges are made. The discovery of the abundant mines of America, reduced,
in the sixteenth century, the value of gold and silver in Europe to about a
third of what it had been before. As it cost less labour to bring those
metals from the mine to the market, so, when they were brought thither, they
could purchase or command less labour; and this revolution in their value,
though perhaps the greatest, is by no means the only one of which history
gives some account. But as a measure of quantity, such as the natural foot,
fathom, or handful, which is continually varying in its own quantity, can
never be an accurate measure of the quantity of other things ; so a
commodity which is itself continually varying in its own value, can never be
an accurate measure of the value of other commodities. Equal quantities of
labour, at all times and places, may be said to be of equal value to the
labourer. In his ordinary state of health, strength, and spirits ; in the
ordinary degree of his skill and dexterity, he must always lay down the same
portion of his ease, his liberty, and his happiness. The price which he pays
must always be the same, whatever may be the quantity of goods which he
receives in return for it. Of these, indeed, it may sometimes purchase a
greater and sometimes a smaller quantity ; but it is their value which
varies, not that of the labour which purchases them. At all times and
places, that is dear which it is difficult to come at, or which it costs
much labour to acquire; and that cheap which is to be had easily, or with
very little labour. Labour alone, therefore, never varying in its own value,
is alone the ultimate and real standard by which the value of all
commodities can at all times and places be estimated and compared. It is
their real price; money is their nominal price only.
But though equal quantities of labour are always of equal value to the
labourer, yet to the person who employs him they appear sometimes to be of
greater, and sometimes of smaller value. He purchases them sometimes with a
greater, and sometimes with a smaller quantity of goods, and to him the
price of labour seems to vary like that of all other things. It appears to
him dear in the one case, and cheap in the other. In reality, however, it is
the goods which are cheap in the one case, and dear in the other.
In this popular sense, therefore, labour, like commodities, may be said to
have a real and a nominal price. Its real price may be said to consist in
the quantity of the necessaries and conveniencies of life which are given
for it ; its nominal price, in the quantity of money. The labourer is rich
or poor, is well or ill rewarded, in proportion to the real, not to the
nominal price of his labour.
The distinction between the real and the nominal price of commodities and
labour is not a matter of mere speculation, but may sometimes be of
considerable use in practice. The same real price is always of the same
value; but on account of the variations in the value of gold and silver, the
same nominal price is sometimes of very different values. When a landed
estate, therefore, is sold with a reservation of a perpetual rent, if it is
intended that this rent should always be of the same value, it is of
importance to the family in whose favour it is reserved, that it should not
consist in a particular sum of money. Its value would in this case be liable
to variations of two different kinds: first, to those which arise from the
different quantities of gold and silver which are contained at different
times in coin of the same denomination; and, secondly, to those which arise
from the different values of equal quantities of gold and silver at
different times.
Princes and sovereign states have frequently fancied that they had a
temporary interest to diminish the quantity of pure metal contained in their
coins; but they seldom have fancied that they had any to augment it. The
quantity of metal contained in the coins, I believe of all nations, has
accordingly been almost continually diminishing, and hardly ever augmenting.
Such variations, therefore, tend almost always to diminish the value of a
money rent.
The discovery of the mines of America diminished the value of gold and
silver in Europe. This diminution, it is commonly supposed, though I
apprehend without any certain proof, is still going on gradually, and is
likely to continue to do so for a long time. Upon this supposition,
therefore, such variations are more likely to diminish than to augment the
value of a money rent, even though it should be stipulated to be paid, not
in such a quantity of coined money of such a denomination (in so many pounds
sterling, for example), but in so many ounces, either of pure silver, or of
silver of a certain standard.
The rents which have been reserved in corn, have preserved their value much
better than those which have been reserved in money, even where the
denomination of the coin has not been altered. By the 18th of Elizabeth, it
was enacted, that a third of the rent of all college leases should be
reserved in corn, to be paid either in kind, or according to the current
prices at the nearest public market. The money arising from this corn rent,
though originally but a third of the whole, is, in the present times,
according to Dr. Blackstone, commonly near double of what arises from the
other two-thirds. The old money rents of colleges must, according to this
account, have sunk almost to a fourth part of their ancient value, or are
worth little more than a fourth part of the corn which they were formerly
worth. But since the reign of Philip and Mary, the denomination of the
English coin has undergone little or no alteration, and the same number of
pounds, shillings, and pence, have contained very nearly the same quantity
of pure silver. This degradation, therefore, in the value of the money rents
of colleges, has arisen altogether from the degradation in the price of
silver.
When the degradation in the value of silver is combined with the diminution
of the quantity of it contained in the coin of the same denomination, the
loss is frequently still greater. In Scotland, where the denomination of the
coin has undergone much greater alterations than it ever did in England, and
in France, where it has undergone still greater than it ever did in
Scotland, some ancient rents, originally of considerable value, have, in
this manner, been reduced almost to nothing.
Equal quantities of labour will, at distant times, be purchased more nearly
with equal quantities of corn, the subsistence of the labourer, than with
equal quantities of gold and silver, or, perhaps, of any other commodity.
Equal quantities of corn, therefore, will, at distant times, be more nearly
of the same real value, or enable the possessor to purchase or command more
nearly the same quantity of the labour of other people. They will do this, I
say, more nearly than equal quantities of almost any other commodity; for
even equal quantities of corn will not do it exactly. The subsistence of the
labourer, or the real price of labour, as I shall endeavour to shew
hereafter, is very different upon different occasions ; more liberal in a
society advancing to opulence, than in one that is standing still, and in
one that is standing still, than in one that is going backwards. Every
other commodity, however, will, at any particular time, purchase a greater
or smaller quantity of labour, in proportion to the quantity of subsistence
which it can purchase at that time. A rent, therefore, reserved in corn, is
liable only to the variations in the quantity of labour which a certain
quantity of corn can purchase. But a rent reserved in any other commodity is
liable, not only to the variations in the quantity of labour which any
particular quantity of corn can purchase, but to the variations in the
quantity of corn which can be purchased by any particular quantity of that
commodity.
Though the real value of a corn rent, it is to be observed, however, varies
much less from century to century than that of a money rent, it varies much
more from year to year. The money price of labour, as I shall endeavour to
shew hereafter, does not fluctuate from year to year with the money price of
corn, but seems to be everywhere accommodated, not to the temporary or
occasional, but to the average or ordinary price of that necessary of life.
The average or ordinary price of corn, again is regulated, as I shall
likewise endeavour to shew hereafter, by the value of silver, by the
richness or barrenness of the mines which supply the market with that metal,
or by the quantity of labour which must be employed, and consequently of
corn which must be consumed, in order to bring any particular quantity of
silver from the mine to the market. But the value of silver, though it
sometimes varies greatly from century to century, seldom varies much from
year to year, but frequently continues the same, or very nearly the same,
for half a century or a century together. The ordinary or average money
price of corn, therefore, may, during so long a period, continue the same,
or very nearly the same, too, and along with it the money price of labour,
provided, at least, the society continues, in other respects, in the same,
or nearly in the same, condition. In the mean time, the temporary and
occasional price of corn may frequently be double one year of what it had
been the year before, or fluctuate, for example, from five-and-twenty to
fifty shillings the quarter. But when corn is at the latter price, not only
the nominal, but the real value of a corn rent, will be double of what it is
when at the former, or will command double the quantity either of labour, or
of the greater part of other commodities; the money price of labour, and
along with it that of most other things, continuing the same during all
these fluctuations.
Labour, therefore, it appears evidently, is the only universal, as well as
the only accurate, measure of value, or the only standard by which we can
compare the values of different commodities, at all times, and at all
places. We cannot estimate, it is allowed, the real value of different
commodities from century to century by the quantities of silver which were
given for them. We cannot estimate it from year to year by the quantities of
corn. By the quantities of labour, we can, with the greatest accuracy,
estimate it, both from century to century, and from year to year. From
century to century, corn is a better measure than silver, because, from
century to century, equal quantities of corn will command the same quantity
of labour more nearly than equal quantities of silver. From year to year, on
the contrary, silver is a better measure than corn, because equal quantities
of it will more nearly command the same quantity of labour.
But though, in establishing perpetual rents, or even in letting very long
leases, it may be of use to distinguish between real and nominal price; it
is of none in buying and selling, the more common and ordinary transactions.
of human life.
At the same time and place, the real and the nominal price of all
commodities are exactly in proportion to one another. The more or less money
you get for any commodity, in the London market, for example, the more or
less labour it will at that time and place enable you to purchase or
command. At the same time and place, therefore, money is the exact measure
of the real exchangeable value of all commodities. It is so, however, at the
same time and place only.
Though at distant places there is no regular proportion between the real and
the money price of commodities, yet the merchant who carries goods from the
one to the other, has nothing to consider but the money price, or the
difference between the quantity of silver for which he buys them, and that
for which he is likely to sell them. Half an ounce of silver at Canton in
China may command a greater quantity both of labour and of the necessaries
and conveniencies of life, than an ounce at London. A commodity, therefore,
which sells for half an ounce of silver at Canton, may there be really
dearer, of more real importance to the man who possesses it there, than a
commodity which sells for an ounce at London is to the man who possesses it
at London. If a London merchant, however, can buy at Canton, for half an
ounce of silver, a commodity which he can afterwards sell at London for an
ounce, he gains a hundred per cent. by the bargain, just as much as if an
ounce of silver was at London exactly of the same value as at Canton. It is
of no importance to him that half an ounce of silver at Canton would have
given him the command of more labour, and of a greater quantity of the
necessaries and conveniencies of life than an ounce can do at London. An
ounce at London will always give him the command of double the quantity of
all these, which half an ounce could have done there, and this is precisely
what he wants.
As it is the nominal or money price of goods, therefore, which finally
determines the prudence or imprudence of all purchases and sales, and
thereby regulates almost the whole business of common life in which price is
concerned, we cannot wonder that it should have been so much more attended
to than the real price.
In such a work as this, however, it may sometimes be of use to compare the
different real values of a particular commodity at different times and
places, or the different degrees of power over the labour of other people
which it may, upon different occasions, have given to those who possessed
it. We must in this case compare, not so much the different quantities of
silver for which it was commonly sold, as the different quantities or labour
which those different quantities of silver could have purchased. But the
current prices of labour, at distant times and places, can scarce ever be
known with any degree of exactness. Those of corn, though they have in few
places been regularly recorded, are in general better known, and have been
more frequently taken notice of by historians and other writers. We must
generally, therefore, content ourselves with them, not as being always
exactly in the same proportion as the current prices of labour, but as being
the nearest approximation which can commonly be had to that proportion. I
shall hereafter have occasion to make several comparisons of this kind.
In the progress of industry, commercial nations have found it convenient to
coin several different metals into money; gold for larger payments, silver
for purchases of moderate value, and copper, or some other coarse metal, for
those of still smaller consideration, They have always, however, considered
one of those metals as more peculiarly the measure of value than any of the
other two; and this preference seems generally to have been given to the
metal which they happen first to make use of as the instrument of commerce.
Having once begun to use it as their standard, which they must have done
when they had no other money, they have generally continued to do so even
when the necessity was not the same.
The Romans are said to have had nothing but copper money till within five
years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
first began to coin silver. Copper, therefore, appears to have continued
always the measure of value in that republic. At Rome all accounts appear to
have been kept, and the value of all estates to have been computed, either
in asses or in sestertii. The as was always the denomination of a copper
coin. The word sestertius signifies two asses and a half. Though the
sestertius, therefore, was originally a silver coin, its value was estimated
in copper. At Rome, one who owed a great deal of money was said to have a
great deal of other people's copper.
The northern nations who established themselves upon the ruins of the
Roman empire, seem to have had silver money from the first beginning of
their settlements, and not to have known either gold or copper coins for
several ages thereafter. There were silver coins in England in the time of
the Saxons ; but there was little gold coined till the time of Edward III
nor any copper till that of James I. of Great Britain. In England,
therefore, and for the same reason, I believe, in all other modern nations
of Europe, all accounts are kept, and the value of all goods and of all
estates is generally computed, in silver: and when we mean to express the
amount of a person's fortune, we seldom mention the number of guineas, but
the number of pounds sterling which we suppose would be given for it.
Originally, in all countries, I believe, a legal tender of payment could be
made only in the coin of that metal which was peculiarly considered as the
standard or measure of value. In England, gold was not considered as a legal
tender for a long time after it was coined into money. The proportion
between the values of gold and silver money was not fixed by any public law
or proclamation, but was left to be settled by the market. If a debtor
offered payment in gold, the creditor might either reject such payment
altogether, or accept of it at such a valuation of the gold as he and his
debtor could agree upon. Copper is not at present a legal tender, except in
the change of the smaller silver coins.
In this state of things, the distinction between the metal which was the
standard, and that which was not the standard, was something more than a
nominal distinction.
In process of time, and as people became gradually more familiar with the
use of the different metals in coin, and consequently better acquainted with
the proportion between their respective values, it has, in most countries, I
believe, been found convenient to ascertain this proportion, and to declare
by a public law, that a guinea, for example, of such a weight and fineness,
should exchange for one-and-twenty shillings, or be a legal tender for a debt
of that amount. In this state of things, and during the continuance of any
one regulated proportion of this kind, the distinction between the metal,
which is the standard, and that which is not the standard, becomes little
more than a nominal distinction.
In consequence of any change, however, in this regulated proportion, this
distinction becomes, or at least seems to become, something more than
nominal again. If the regulated value of a guinea, for example, was either
reduced to twenty, or raised to two-and-twenty shillings, all accounts being
kept, and almost all obligations for debt being expressed, in silver money,
the greater part of payments could in either case be made with the same
quantity of silver money as before; but would require very different
quantities of gold money ; a greater in the one case, and a smaller in the
other. Silver would appear to be more invariable in its value than gold.
Silver would appear to measure the value of gold, and gold would not appear
to measure the value of silver. The value of gold would seem to depend upon
the quantity of silver which it would exchange for, and the value of silver
would not seem to depend upon the quantity of gold which it would exchange
for. This difference, however, would be altogether owing to the custom of
keeping accounts, and of expressing the amount of all great and small sums
rather in silver than in gold money. One of Mr Drummond's notes for
five-and-twenty or fifty guineas would, after an alteration of this kind, be
still payable with five-and-twenty or fifty guineas, in the same manner as
before. It would, after such an alteration, be payable with the same
quantity of gold as before, but with very different quantities of silver. In
the payment of such a note, gold would appear to be more invariable in its
value than silver. Gold would appear to measure the value of silver, and
silver would not appear to measure the value of gold. If the custom of
keeping accounts, and of expressing promissory-notes and other obligations
for money, in this manner should ever become general, gold, and not silver,
would be considered as the metal which was peculiarly the standard or
measure of value.
In reality, during the continuance of any one regulated proportion between the respective
values of the different metals in coin, the value of the most precious metal regulates the value
of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the
best quality, which, before it is coined, is seldom worth seven-pence in silver. But as, by the
regulation, twelve such pence are ordered to exchange for a shilling, they are in the market
considered as worth a shilling, and a shilling can at any time be had for them. Even before the
late reformation of the gold coin of Great Britain, the gold, that part of it at least which
circulated in London and its neighbourhood, was in general less degraded below its standard
weight than the greater part of the silver. One-and-twenty worn and defaced shillings,
however, were considered as equivalent to a guinea, which, perhaps, indeed, was worn and
defaced too, but seldom so much so. The late regulations have brought the gold coin as near,
perhaps, to its standard weight as it is possible to bring the current coin of any nation; and the
order to receive no gold at the public offices but by weight, is likely to preserve it so, as long
as that order is enforced. The silver coin still continues in the same worn and degraded state as
before the reformation of the cold coin. In the market, however, one-and-twenty shillings of
this degraded silver coin are still considered as worth a guinea of this excellent gold coin.
The reformation of the gold coin has evidently raised the value of the silver coin which can be
exchanged for it.
In the English mint, a pound weight of gold is coined into forty-four guineas and a half, which
at one-and-twenty shillings the guinea, is equal to forty-six pounds fourteen shillings and
sixpence. An ounce of such gold coin, therefore, is worth £ 3:17:10½ in silver. In England, no
duty or seignorage is paid upon the coinage, and he who carries a pound weight or an ounce
weight of standard gold bullion to the mint, gets back a pound weight or an ounce weight of
gold in coin, without any deduction. Three pounds seventeen shillings and tenpence halfpenny
an ounce, therefore, is said to be the mint price of gold in England, or the quantity of gold
coin which the mint gives in return for standard gold bullion.
Before the reformation of the gold coin, the price of standard gold bullion in the market had,
for many years, been upwards of £3:18s. sometimes £ 3:19s. and very frequently £4 an ounce;
that sum, it is probable, in the worn and degraded gold coin, seldom containing more than an
ounce of standard gold. Since the reformation of the gold coin, the market price of standard
gold bullion seldom exceeds £ 3:17:7 an ounce. Before the reformation of the gold coin, the
market price was always more or less above the mint price. Since that reformation, the market
price has been constantly below the mint price. But that market price is the same whether it is
paid in gold or in silver coin. The late reformation of the gold coin, therefore, has raised not
only the value of the gold coin, but likewise that of the silver coin in proportion to gold
bullion, and probably, too, in proportion to all other commodities ; though the price of the
greater part of other commodities being influenced by so many other causes, the rise in the
value of either gold or silver coin in proportion to them may not be so distinct and sensible.
In the English mint, a pound weight of standard silver bullion is coined into sixty-two
shillings, containing, in the same manner, a pound weight of standard silver. Five shillings
and twopence an ounce, therefore, is said to be the mint price of silver in England, or the
quantity of silver coin which the mint gives in return for standard silver bullion. Before the
reformation of the gold coin, the market price of standard silver bullion was, upon different
occasions, five shillings and fourpence, five shillings and fivepence, five shillings and
sixpence, five shillings and sevenpence, and very often five shillings and eightpence an ounce.
Five shillings and sevenpence, however, seems to have been the most common price. Since
the reformation of the gold coin, the market price of standard silver bullion has fallen
occasionally to five shillings and threepence, five shillings and fourpence, and five shillings
and fivepence an ounce, which last price it has scarce ever exceeded. Though the market price
of silver bullion has fallen considerably since the reformation of the gold coin, it has not fallen
so low as the mint price.
In the proportion between the different metals in the English coin, as copper is rated very
much above its real value, so silver is rated somewhat below it. In the market of Europe, in the
French coin and in the Dutch coin, an ounce of fine gold exchanges for about fourteen ounces
of fine silver. In the English coin, it exchanges for about fifteen ounces, that is, for more silver
than it is worth, according to the common estimation of Europe. But as the price of copper in
bars is not, even in England, raised by the high price of copper in English coin, so the price of
silver in bullion is not sunk by the low rate of silver in English coin. Silver in bullion still
preserves its proper proportion to gold, for the same reason that copper in bars preserves its
proper proportion to silver.
Upon the reformation of the silver coin, in the reign of William III., the price of silver bullion
still continued to be somewhat above the mint price. Mr Locke imputed this high price to the
permission of exporting silver bullion, and to the prohibition of exporting silver coin. This
permission of exporting, he said, rendered the demand for silver bullion greater than the
demand for silver coin. But the number of people who want silver coin for the common
uses of buying and selling at home, is surely much greater than that of those who want silver
bullion either for the use of exportation or for any other use. There subsists at present a like
permission of exporting gold bullion, and a like prohibition of exporting gold coin; and yet the
price of gold bullion has fallen below the mint price. But in the English coin, silver was then,
in the same manner as now, under-rated in proportion to gold; and the gold coin (which at that
time, too, was not supposed to require any reformation) regulated then, as well as now, the
real value of the whole coin. As the reformation of the silver coin did not then reduce the price
of silver bullion to the mint price, it is not very probable that a like reformation will do so
now.
Were the silver coin brought back as near to its standard weight as the gold, a guinea, it is
probable, would, according to the present proportion, exchange for more silver in coin than it
would purchase in bullion. The silver coin containing its full standard weight, there would in
this case, be a profit in melting it down, in order, first to sell the bullion for gold coin, and
afterwards to exchange this gold coin for silver coin, to be melted down in the same manner.
Some alteration in the present proportion seems to be the only method of preventing this
inconveniency.
The inconveniency, perhaps, would be less, if silver was rated in the coin as much above its
proper proportion to gold as it is at present rated below it, provided it was at the same time
enacted, that silver should not be a legal tender for more than the change of a guinea, in the
same manner as copper is not a legal tender for more than the change of a shilling. No creditor
could, in this case, be cheated in consequence of the high valuation of silver in coin ; as no
creditor can at present be cheated in consequence of the high valuation of copper. The bankers
only would suffer by this regulation. When a run comes upon them, they sometimes
endeavour to gain time, by paying in sixpences, and they would be precluded by this
regulation from this discreditable method of evading immediate payment.They would be
obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at
present ; and though this might, no doubt, be a considerable inconveniency to them, it would,
at the same time, be a considerable security to their creditors.
Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly
does not contain, even in our present excellent gold coin, more than an ounce of standard
gold, and it may be thought, therefore, should not purchase more standard bullion. But gold in
coin is more convenient than gold in bullion ; and though, in England, the coinage is free, yet
the gold which is carried in bullion to the mint, can seldom be returned in coin to the owner
till after a delay of several weeks. In the present hurry of the mint, it could not be returned till
after a delay of several months. This delay is equivalent to a small duty, and renders gold in
coin somewhat more valuable than an equal quantity of gold in bullion. If, in the English coin,
silver was rated according to its proper proportion to gold, the price of silver bullion would
probably fall below the mint price, even without any reformation of the silver coin ; the value
even of the present worn and defaced silver coin being regulated by the value of the excellent
gold coin for which it can be changed.
A small seignorage or duty upon the coinage of both gold and silver, would probably increase
still more the superiority of those metals in coin above an equal quantity of either of them in
bullion. The coinage would, in this case, increase the value of the metal coined in
proportion to the extent of this small duty, for the same reason that the fashion increases the
value of plate in proportion to the price of that fashion. The superiority of coin above bullion
would prevent the melting down of the coin, and would discourage its exportation. If, upon
any public exigency, it should become necessary to export the coin, the greater part of it
would soon return again, of its own accord. Abroad, it could sell only for its weight in bullion.
At home, it would buy more than that weight. There would be a profit, therefore, in bringing it
home again. In France, a seignorage of about eight per cent. is imposed upon the coinage, and
the French coin, when exported, is said to return home again, of its own accord.
The occasional fluctuations in the market price of gold and silver bullion arise from the same
causes as the like fluctuations in that of all other commodities. The frequent loss of those
metals from various accidents by sea and by land, the continual waste of them in gilding and
plating, in lace and embroidery, in the wear and tear of coin, and in that of plate, require, in all
countries which possess no mines of their own, a continual importation, in order to repair this
loss and this waste. The merchant importers, like all other merchants, we may believe,
endeavour, as well as they can, to suit their occasional importations to what they judge is
likely to be the immediate demand. With all their attention, however, they sometimes overdo
the business, and sometimes underdo it. When they import more bullion than is wanted, rather
than incur the risk and trouble of exporting it again, they are sometimes willing to sell a part
of it for something less than the ordinary or average price. When, on the other hand, they
import less than is wanted, they get something more than this price. But when, under all those
occasional fluctuations, the market price either of gold or silver bullion continues for several
years together steadily and constantly, either more or less above, or more or less below the
mint price, we may be assured that this steady and constant, either superiority or inferiority of
price, is the effect of something in the state of the coin, which, at that time, renders a certain
quantity of coin either of more value or of less value than the precise quantity of bullion
which it ought to contain. The constancy and steadiness of the effect supposes a
proportionable constancy and steadiness in the cause.
The money of any particular country is, at any particular time and place, more or less an
accurate measure or value, according as the current coin is more or less exactly agreeable to
its standard, or contains more or less exactly the precise quantity of pure gold or pure silver
which it ought to contain. If in England, for example, forty-four guineas and a half contained
exactly a pound weight of standard gold, or eleven ounces of fine gold, and one ounce of
alloy, the gold coin of England would be as accurate a measure of the actual value of goods at
any particular time and place as the nature of the thing would admit. But if, by rubbing and
wearing, forty-four guineas and a half generally contain less than a pound weight of standard
gold, the diminution, however, being greater in some pieces than in others, the measure of
value comes to be liable to the same sort of uncertainty to which all other weights and
measures are commonly exposed. As it rarely happens that these are exactly agreeable to their
standard, the merchant adjusts the price of his goods as well as he can, not to what those
weights and measures ought to be, but to what, upon an average, he finds, by experience, they
actually are. In consequence of a like disorder in the coin, the price of goods comes, in the
same manner, to be adjusted, not to the quantity of pure gold or silver which the coin ought to
contain, but to that which, upon an average, it is found, by experience, it actually does
contain.
By the money price of goods, it is to be observed, I understand always the quantity of pure
gold or silver for which they are sold, without any regard to the denomination of the coin. Six
shillings and eight pence, for example, in the time of Edward I., I consider as the same money
price with a pound sterling in the present times, because it contained, as nearly as we can
judge, the same quantity of pure silver.
CHAPTER VI.
OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
In that early and rude state of society which precedes both the accumulation
of stock and the appropriation of land, the proportion between the
quantities of labour necessary for acquiring different objects, seems to be
the only circumstance which can afford any rule for exchanging them for one
another. If among a nation of hunters, for example, it usually costs twice
the labour to kill a beaver which it does to kill a deer, one beaver should
naturally exchange for or be worth two deer. It is natural that what is
usually the produce of two days or two hours labour, should be worth double
of what is usually the produce of one day's or one hour's labour.
If the one species of labour should be more severe than the other, some
allowance will naturally be made for this superior hardship; and the produce
of one hour's labour in the one way may frequently exchange for that of two
hour's labour in the other.
Or if the one species of labour requires an uncommon degree of dexterity
and ingenuity, the esteem which men have for such talents, will naturally
give a value to their produce, superior to what would be due to the time
employed about it. Such talents can seldom be acquired but in consequence of
long application, and the superior value of their produce may frequently be
no more than a reasonable compensation for the time and labour which must be
spent in acquiring them. In the advanced state of society, allowances of
this kind, for superior hardship and superior skill, are commonly made in
the wages of labour ; and something of the same kind must probably have
taken place in its earliest and rudest period.
In this state of things, the whole produce of labour belongs to the
labourer; and the quantity of labour commonly employed in acquiring or
producing any commodity, is the only circumstance which can regulate the
quantity of labour which it ought commonly to purchase, command, or exchange
for.
As soon as stock has accumulated in the hands of particular persons, some of
them will naturally employ it in setting to work industrious people, whom
they will supply with materials and subsistence, in order to make a profit
by the sale of their work, or by what their labour adds to the value of the
materials. In exchanging the complete manufacture either for money, for
labour, or for other goods, over and above what may be sufficient to pay the
price of the materials, and the wages of the workmen, something must be given
for the profits of the undertaker of the work, who hazards his stock in this
adventure. The value which the workmen add to the materials, therefore,
resolves itself in this case into two parts, of which the one pays their
wages, the other the profits of their employer upon the whole stock of
materials and wages which he advanced. He could have no interest to employ
them, unless he expected from the sale of their work something more than
what was sufficient to replace his stock to him ; and he could have no
interest to employ a great stock rather than a small one, unless his profits
were to bear some proportion to the extent of his stock.
The profits of stock, it may perhaps be thought, are only a different name
for the wages of a particular sort of labour, the labour of inspection and
direction. They are, however, altogether different, are regulated by quite
different principles, and bear no proportion to the quantity, the hardship,
or the ingenuity of this supposed labour of inspection and direction. They
are regulated altogether by the value of the stock employed, and are greater
or smaller in proportion to the extent of this stock. Let us suppose, for
example, that in some particular place, where the common annual profits of
manufacturing stock are ten per cent. there are two different manufactures,
in each of which twenty workmen are employed, at the rate of fifteen pounds
a year each, or at the expense of three hundred a-year in each manufactory.
Let us suppose, too, that the coarse materials annually wrought up in the
one cost only seven hundred pounds, while the finer materials in the other
cost seven thousand. The capital annually employed in the one will, in this
case, amount only to one thousand pounds; whereas that employed in the other
will amount to seven thousand three hundred pounds. At the rate of ten per
cent. therefore, the undertaker of the one will expect a yearly profit of
about one hundred pounds only; while that of the other will expect about
seven hundred and thirty pounds. But though their profits are so very
different, their labour of inspection and direction may be either altogether
or very nearly the same. In many great works, almost the whole labour of
this kind is committed to some principal clerk. His wages properly express
the value of this labour of inspection and direction. Though in settling
them some regard is had commonly, not only to his labour and skill, but to
the trust which is reposed in him, yet they never bear any regular
proportion to the capital of which he oversees the management ; and the
owner of this capital, though he is thus discharged of almost all labour,
still expects that his profit should bear a regular proportion to his
capital. In the price of commodities, therefore, the profits of stock
constitute a component part altogether different from the wages of labour, and
regulated by quite different principles.
In this state of things, the whole produce of labour does not always belong
to the labourer. He must in most cases share it with the owner of the stock
which employs him. Neither is the quantity of labour commonly employed in
acquiring or producing any commodity, the only circumstance which can
regulate the quantity which it ought commonly to purchase, command or
exchange for. An additional quantity, it is evident, must be due for the
profits of the stock which advanced the wages and furnished the materials of
that labour.
As soon as the land of any country has all become private property, the
landlords, like all other men, love to reap where they never sowed, and
demand a rent even for its natural produce. The wood of the forest, the
grass of the field, and all the natural fruits of the earth, which, when
land was in common, cost the labourer only the trouble of gathering them,
come, even to him, to have an additional price fixed upon them. He must then
pay for the licence to gather them, and must give up to the landlord a
portion of what his labour either collects or produces. This portion, or,
what comes to the same thing, the price of this portion, constitutes the
rent of land, and in the price of the greater part of commodities, makes a
third component part.
The real value of all the different component parts of price, it must be
observed, is measured by the quantity of labour which they can, each of
them, purchase or command. Labour measures the value, not only of that part
of price which resolves itself into labour, but of that which resolves
itself into rent, and of that which resolves itself into profit.
In every society, the price of every commodity finally resolves itself into
some one or other, or all of those three parts ; and in every improved
society, all the three enter, more or less, as component parts, into the
price of the far greater part of commodities.
In the price of corn, for example, one part pays the rent of the landlord,
another pays the wages or maintenance of the labourers and labouring cattle
employed in producing it, and the third pays the profit of the farmer. These
three parts seem either immediately or ultimately to make up the whole price
of corn. A fourth part, it may perhaps be thought is necessary for replacing
the stock of the farmer, or for compensating the wear and tear of his
labouring cattle, and other instruments of husbandry. But it must be
considered, that the price of any instrument of husbandry, such as a
labouring horse, is itself made up of the same time parts ; the rent of the
land upon which he is reared, the labour of tending and rearing him, and the
profits of the farmer, who advances both the rent of this land, and the
wages of this labour. Though the price of the corn, therefore, may pay the
price as well as the maintenance of the horse, the whole price still
resolves itself, either immediately or ultimately, into the same three parts
of rent, labour, and profit.
In the price of flour or meal, we must add to the price of the corn, the
profits of the miller, and the wages of his servants ; in the price of
bread, the profits of the baker, and the wages of his servants; and in the
price of both, the labour of transporting the corn from the house of the
farmer to that of the miller, and from that of the miller to that of the
baker, together with the profits of those who advance the wages of that
labour.
The price of flax resolves itself into the same three parts as that of corn.
In the price of linen we must add to this price the wages of the
flax-dresser, of the spinner, of the weaver, of the bleacher, etc. together
with the profits of their respective employers.
As any particular commodity comes to be more manufactured, that part of the
price which resolves itself into wages and profit, comes to be greater in
proportion to that which resolves itself into rent. In the progress of the
manufacture, not only the number of profits increase, but every subsequent
profit is greater than the foregoing ; because the capital from which it is
derived must always be greater. The capital which employs the weavers, for
example, must be greater than that which employs the spinners; because it
not only replaces that capital with its profits, but pays, besides, the
wages of the weavers : and the profits must always bear some proportion to
the capital.
In the most improved societies, however, there are always a few commodities
of which the price resolves itself into two parts only the wages of labour,
and the profits of stock ; and a still smaller number, in which it consists
altogether in the wages of labour. In the price of sea-fish, for example,
one part pays the labour of the fisherman, and the other the profits of the
capital employed in the fishery. Rent very seldom makes any part of it,
though it does sometimes, as I shall shew hereafter. It is otherwise, at
least through the greater part of Europe, in river fisheries. A salmon
fishery pays a rent ; and rent, though it cannot well be called the rent of
land, makes a part of the price of a salmon, as well as wares and profit. In
some parts of Scotland, a few poor people make a trade of gathering, along
the sea-shore, those little variegated stones commonly known by the name of
Scotch pebbles. The price which is paid to them by the stone-cutter, is
altogether the wages of their labour ; neither rent nor profit makes an part
of it.
But the whole price of any commodity must still finally resolve itself into some one or other
or all of those three parts; as whatever part of it remains after paying the rent of the land, and
the price of the whole labour employed in raising, manufacturing, and bringing it to market,
must necessarily be profit to somebody.
As the price or exchangeable value of every particular commodity, taken
separately, resolves itself into some one or other, or all of those three
parts ; so that of all the commodities which compose the whole annual
produce of the labour of every country, taken complexly, must resolve itself
into the same three parts, and be parcelled out among different inhabitants
of the country, either as the wages of their labour, the profits of their
stock, or the rent of their land. The whole of what is annually either
collected or produced by the labour of every society, or, what comes to the
same thing, the whole price of it, is in this manner originally distributed
among some of its different members. Wages, profit, and rent, are the three
original sources of all revenue, as well as of all exchangeable value. All
other revenue is ultimately derived from some one or other of these.
Whoever derives his revenue from a fund which is his own, must draw it
either from his labour, from his stock, or from his land. The revenue
derived from labour is called wages; that derived from stock, by the person
who manages or employs it, is called profit; that derived from it by the
person who does not employ it himself, but lends it to another, is called
the interest or the use of money. It is the compensation which the borrower
pays to the lender, for the profit which he has an opportunity of making by
the use of the money. Part of that profit naturally belongs to the borrower,
who runs the risk and takes the trouble of employing it, and part to the
lender, who affords him the opportunity of making this profit. The interest
of money is always a derivative revenue, which, if it is not paid from the
profit which is made by the use of the money, must be paid from some other
source of revenue, unless perhaps the borrower is a spendthrift, who
contracts a second debt in order to pay the interest of the first. The
revenue which proceeds altogether from land, is called rent, and belongs to
the landlord. The revenue of the farmer is derived partly from his labour,
and partly from his stock. To him, land is only the instrument which enables
him to earn the wages of this labour, and to make the profits of this stock.
All taxes, and all the revenue which is founded upon them, all salaries,
pensions, and annuities of every kind, are ultimately derived from some one
or other of those three original sources of revenue, and are paid either
immediately or mediately from the wages of labour, the profits of stock, or
the rent of land.
When those three different sorts of revenue belong to different persons,
they are readily distinguished; but when they belong to the same, they are
sometimes confounded with one another, at least in common language.
A gentleman who farms a part of his own estate, after paying the expense of
cultivation, should gain both the rent of the landlord and the profit of the
farmer. He is apt to denominate, however, his whole gain, profit, and thus
confounds rent with profit, at least in common language. The greater part of
our North American and West Indian planters are in this situation. They
farm, the greater part of them, their own estates : and accordingly we
seldom hear of the rent of a plantation, but frequently of its profit.
Common farmers seldom employ any overseer to direct the general operations
of the farm. They generally, too, work a good deal with their own hands, as
ploughmen, harrowers, etc. What remains of the crop, after paying the rent,
therefore, should not only replace to them their stock employed in
cultivation, together with its ordinary profits, but pay them the wages
which are due to them, both as labourers and overseers. Whatever remains,
however, after paying the rent and keeping up the stock, is called profit.
But wages evidently make a part of it. The farmer, by saving these wages,
must necessarily gain them. Wages, therefore, are in this case confounded
with profit.
An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to market,
should gain both the wages of a journeyman who works under a master, and the
profit which that master makes by the sale of that journeyman's work. His
whole gains, however, are commonly called profit, and wages are, in this
case, too, confounded with profit.
A gardener who cultivates his own garden with his own hands, unites in his
own person the three different characters, of landlord, farmer, and
labourer. His produce, therefore, should pay him the rent of the first, the
profit of the second, and the wages of the third. The whole, however, is
commonly considered as the earnings of his labour. Both rent and profit are,
in this case, confounded with wages.
As in a civilized country there are but few commodities of which the
exchangeable value arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so the annual produce of
its labour will always be sufficient to purchase or command a much greater
quantity of labour than what was employed in raising, preparing, and
bringing that produce to market. If the society were annually to employ all
the labour which it can annually purchase, as the quantity of labour would
increase greatly every year, so the produce of every succeeding year would
be of vastly greater value than that of the foregoing. But there is no
country in which the whole annual produce is employed in maintaining the
industrious. The idle everywhere consume a great part of it; and, according
to the different proportions in which it is annually divided between those
two different orders of people, its ordinary or average value must either
annually increase or diminish, or continue the same from one year to
another.
CHAPTER VII.
OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
There is in every society or neighbourhood an ordinary or average rate, both
of wages and profit, in every different employment of labour and stock. This
rate is naturally regulated, as I shall shew hereafter, partly by the
general circumstances of the society, their riches or poverty, their
advancing, stationary, or declining condition, and partly by the particular
nature of each employment.
There is likewise in every society or neighbourhood an ordinary or average
rate of rent, which is regulated, too, as I shall shew hereafter, partly by
the general circumstances of the society or neighbourhood in which the land
is situated, and partly by the natural or improved fertility of the land.
These ordinary or average rates may be called the natural rates of wages,
profit and rent, at the time and place in which they commonly prevail.
When the price of any commodity is neither more nor less than what is
sufficient to pay the rent of the land, the wages of the labour, and the
profits of the stock employed in raising, preparing, and bringing it to
market, according to their natural rates, the commodity is then sold for
what may be called its natural price.
The commodity is then sold precisely for what it is worth, or for what it
really costs the person who brings it to market; for though, in common
language, what is called the prime cost of any commodity does not comprehend
the profit of the person who is to sell it again, yet, if he sells it at a
price which does not allow him the ordinary rate of profit in his
neighbourhood, he is evidently a loser by the trade; since, by employing his
stock in some other way, he might have made that profit. His profit,
besides, is his revenue, the proper fund of his subsistence. As, while he is
preparing and bringing the goods to market, he advances to his workmen their
wages, or their subsistence ; so he advances to himself, in the same manner,
his own subsistence, which is generally suitable to the profit which he may
reasonably expect from the sale of his goods. Unless they yield him this
profit, therefore, they do not repay him what they may very properly be said
to have really cost him.
Though the price, therefore, which leaves him this profit, is not always the
lowest at which a dealer may sometimes sell his goods, it is the lowest at
which he is likely to sell them for any considerable time; at least where
there is perfect liberty, or where he may change his trade as often as he
pleases.
The actual price at which any commodity is commonly sold, is called its
market price. It may either be above, or below, or exactly the same with its
natural price.
The market price of every particular commodity is regulated by the
proportion between the quantity which is actually brought to market, and the
demand of those who are willing to pay the natural price of the commodity,
or the whole value of the rent, labour, and profit, which must be paid in
order to bring it thither. Such people may be called the effectual
demanders, and their demand the effectual demand; since it maybe sufficient
to effectuate the bringing of the commodity to market. It is different from
the absolute demand. A very poor man may be said, in some sense, to have a
demand for a coach and six; he might like to have it; but his demand is not
an effectual demand, as the commodity can never be brought to market in
order to satisfy it.
When the quantity of any commodity which is brought to market falls short of
the effectual demand, all those who are willing to pay the whole value of
the rent, wages, and profit, which must be paid in order to bring it
thither, cannot be supplied with the quantity which they want. Rather than
want it altogether, some of them will be willing to give more. A competition
will immediately begin among them, and the market price will rise more or
less above the natural price, according as either the greatness of the
deficiency, or the wealth and wanton luxury of the competitors, happen to
animate more or less the eagerness of the competition. Among competitors of
equal wealth and luxury, the same deficiency will generally occasion a more
or less eager competition, according as the acquisition of the commodity
happens to be of more or less importance to them. Hence the exorbitant price
of the necessaries of life during the blockade of a town, or in a famine.
When the quantity brought to market exceeds the effectual demand, it cannot
be all sold to those who are willing to pay the whole value of the rent,
wages, and profit, which must be paid in order to bring it thither. Some
part must be sold to those who are willing to pay less, and the low price
which they give for it must reduce the price of the whole. The market price
will sink more or less below the natural price, according as the greatness
of the excess increases more or less the competition of the sellers, or
according as it happens to be more or less important to them to get
immediately rid of the commodity. The same excess in the importation of
perishable, will occasion a much greater competition than in that of durable
commodities; in the importation of oranges, for example, than in that of old
iron.
When the quantity brought to market is just sufficient to supply the
effectual demand, and no more, the market price naturally comes to be either
exactly, or as nearly as can be judged of, the same with the natural price.
The whole quantity upon hand can be disposed of for this price, and can not
be disposed of for more. The competition of the different dealers obliges
them all to accept of this price, but does not oblige them to accept of
less.
The quantity of every commodity brought to market naturally suits itself to
the effectual demand. It is the interest of all those who employ their land,
labour, or stock, in bringing any commodity to market, that the quantity
never should exceed the effectual demand ; and it is the interest of all
other people that it never should fall short of that demand.
If at any time it exceeds the effectual demand, some of the component parts
of its price must be paid below their natural rate. If it is rent, the
interest of the landlords will immediately prompt them to withdraw a part of
their land; and if it is wages or profit, the interest of the labourers in
the one case, and of their employers in the other, will prompt them to
withdraw a part of their labour or stock, from this employment. The quantity
brought to market will soon be no more than sufficient to supply the
effectual demand. All the different parts of its price will rise to their
natural rate, and the whole price to its natural price.
If, on the contrary, the quantity brought to market should at any time fall
short of the effectual demand, some of the component parts of its price must
rise above their natural rate. If it is rent, the interest of all other
landlords will naturally prompt them to prepare more land for the raising of
this commodity ; if it is wages or profit, the interest of all other
labourers and dealers will soon prompt them to employ more labour and stock
in preparing and bringing it to market. The quantity brought thither will
soon be sufficient to supply the effectual demand. All the different parts
of its price will soon sink to their natural rate, and the whole price to
its natural price.
The natural price, therefore, is, as it were, the central price, to which
the prices of all commodities are continually gravitating. Different
accidents may sometimes keep them suspended a good deal above it, and
sometimes force them down even somewhat below it. But whatever may be the
obstacles which hinder them from settling in this centre of repose and
continuance, they are constantly tending towards it.
The whole quantity of industry annually employed in order to bring any
commodity to market, naturally suits itself in this manner to the effectual
demand. It naturally aims at bringing always that precise quantity thither
which may be sufficient to supply, and no more than supply, that demand.
But, in some employments, the same quantity of industry will, in different
years, produce very different quantities of commodities ; while, in others,
it will produce always the same, or very nearly the same. The same number of
labourers in husbandry will, in different years, produce very different
quantities of corn, wine, oil, hops, etc. But the same number of spinners or
weavers will every year produce the same, or very nearly the same, quantity
of linen and woollen cloth. It is only the average produce of the one
species of industry which can be suited, in any respect, to the effectual
demand ; and as its actual produce is frequently much greater, and
frequently much less, than its average produce, the quantity of the
commodities brought to market will sometimes exceed a good deal, and
sometimes fall short a good deal, of the effectual demand. Even though that
demand, therefore, should continue always the same, their market price will
be liable to great fluctuations, will sometimes fall a good deal below, and
sometimes rise a good deal above, their natural price. In the other species
of industry, the produce of equal quantities of labour being always the
same, or very nearly the same, it can be more exactly suited to the
effectual demand. While that demand continues the same, therefore, the
market price of the commodities is likely to do so too, and to be either
altogether, or as nearly as can be judged of, the same with the natural
price. That the price of linen and woollen cloth is liable neither to such
frequent, nor to such great variations, as the price of corn, every man's
experience will inform him. The price of the one species of commodities
varies only with the variations in the demand; that of the other varies not
only with the variations in the demand, but with the much greater, and more
frequent, variations in the quantity of what is brought to market, in order
to supply that demand.
The occasional and temporary fluctuations in the market price of any
commodity fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which resolves itself into rent
is less affected by them. A rent certain in money is not in the least
affected by them, either in its rate or in its value. A rent which consists
either in a certain proportion, or in a certain quantity, of the rude
produce, is no doubt affected in its yearly value by all the occasional and
temporary fluctuations in the market price of that rude produce; but it is
seldom affected by them in its yearly rate. In settling the terms of the
lease, the landlord and farmer endeavour, according to their best judgment,
to adjust that rate, not to the temporary and occasional, but to the average
and ordinary price of the produce.
Such fluctuations affect both the value and the rate, either of wages or of
profit, according as the market happens to be either overstocked or
understocked with commodities or with labour, with work done, or with work
to be done. A public mourning raises the price of black cloth ( with which
the market is almost always understocked upon such occasions), and augments
the profits of the merchants who possess any considerable quantity of it. It
has no effect upon the wages of the weavers. The market is understocked with
commodities, not with labour, with work done, not with work to be done. It
raises the wages of journeymen tailors. The market is here understocked with
labour. There is an effectual demand for more labour, for more work to be
done, than can be had. It sinks the price of coloured silks and cloths, and
thereby reduces the profits of the merchants who have any considerable
quantity of them upon hand. It sinks, too, the wages of the workmen employed
in preparing such commodities, for which all demand is stopped for six
months, perhaps for a twelvemonth. The market is here overstocked both with
commodities and with labour.
But though the market price of every particular commodity is in this manner
continually gravitating, if one may say so, towards the natural price; yet
sometimes particular accidents, sometimes natural causes, and sometimes
particular regulations of policy, may, in many commodities, keep up the
market price, for a long time together, a good deal above the natural price.
When, by an increase in the effectual demand, the market price of some
particular commodity happens to rise a good deal above the natural price,
those who employ their stocks in supplying that market, are generally
careful to conceal this change. If it was commonly known, their great profit
would tempt so many new rivals to employ their stocks in the same way, that,
the effectual demand being fully supplied, the market price would soon be
reduced to the natural price, and, perhaps, for some time even below it. If
the market is at a great distance from the residence of those who supply it,
they may sometimes be able to keep the secret for several years together,
and may so long enjoy their extraordinary profits without any new rivals.
Secrets of this kind, however, it must be acknowledged, can seldom be long
kept; and the extraordinary profit can last very little longer than they are
kept.
Secrets in manufactures are capable of being longer kept than secrets in
trade. A dyer who has found the means of producing a particular colour with
materials which cost only half the price of those commonly made use of, may,
with good management, enjoy the advantage of his discovery as long as he
lives, and even leave it as a legacy to his posterity. His extraordinary
gains arise from the high price which is paid for his private labour. They
properly consist in the high wages of that labour. But as they are repeated
upon every part of his stock, and as their whole amount bears, upon that
account, a regular proportion to it, they are commonly considered as
extraordinary profits of stock.
Such enhancements of the market price are evidently the effects of
particular accidents, of which, however, the operation may sometimes last
for many years together.
Some natural productions require such a singularity of soil and situation,
that all the land in a great country, which is fit for producing them, may
not be sufficient to supply the effectual demand. The whole quantity brought
to market, therefore, may be disposed of to those who are willing to give
more than what is sufficient to pay the rent of the land which produced
them, together with the wages of the labour and the profits of the stock
which were employed in preparing and bringing them to market, according to
their natural rates. Such commodities may continue for whole centuries
together to be sold at this high price ; and that part of it which resolves
itself into the rent of land, is in this case the part which is generally
paid above its natural rate. The rent of the land which affords such
singular and esteemed productions, like the rent of some vineyards in France
of a peculiarly happy soil and situation, bears no regular proportion to the
rent of other equally fertile and equally well cultivated land in its
neighbourhood. The wages of the labour, and the profits of the stock
employed in bringing such commodities to market, on the contrary, are seldom
out of their natural proportion to those of the other employments of labour
and stock in their neighbourhood.
Such enhancements of the market price are evidently the effect of natural
causes, which may hinder the effectual demand from ever being fully
supplied, and which may continue, therefore, to operate for ever.
A monopoly granted either to an individual or to a trading company, has the
same effect as a secret in trade or manufactures. The monopolists, by
keeping the market constantly understocked by never fully supplying the
effectual demand, sell their commodities much above the natural price, and
raise their emoluments. whether they consist in wages or profit, greatly
above their natural rate.
The price of monopoly is upon every occasion the highest which can be got.
The natural price, or the price of free competition, on the contrary, is the
lowest which can be taken, not upon every occasion indeed, but for any
considerable time together. The one is upon every occasion the highest which
can be squeezed out of the buyers, or which it is supposed they will
consent to give; the other is the lowest which the sellers can commonly
afford to take, and at the same time continue their business.
The exclusive privileges of corporations, statutes of apprenticeship, and
all those laws which restrain in particular employments, the competition to
a smaller number than might otherwise go into them, have the same tendency,
though in a less degree. They are a sort of enlarged monopolies, and may
frequently, for ages together, and in whole classes of employments, keep up
the market price of particular commodities above the natural price, and
maintain both the wages of the labour and the profits of the stock employed
about them somewhat above their natural rate.
Such enhancements of the market price may last as long as the regulations of
policy which give occasion to them.
The market price of any particular commodity, though it may continue long
above, can seldom continue long below, its natural price. Whatever part of
it was paid below the natural rate, the persons whose interest it affected
would immediately feel the loss, and would immediately withdraw either so
much land or no much labour, or so much stock, from being employed about it,
that the quantity brought to market would soon be no more than sufficient to
supply the effectual demand. Its market price, therefore, would soon rise to
the natural price; this at least would be the case where there was perfect
liberty.
The same statutes of apprenticeship and other corporation laws, indeed,
which, when a manufacture is in prosperity, enable the workman to raise his
wages a good deal above their natural rate, sometimes oblige him, when it
decays, to let them down a good deal below it. As in the one case they
exclude many people from his employment, so in the other they exclude him
from many employments. The effect of such regulations, however, is not near
so durable in sinking the workman's wages below, as in raising them above
their natural rate. Their operation in the one way may endure for many
centuries, but in the other it can last no longer than the lives of some of
the workmen who were bred to the business in the time of its prosperity.
When they are gone, the number of those who are afterwards educated to the
trade will naturally suit itself to the effectual demand. The policy must be
as violent as that of Indostan or ancient Egypt (where every man was bound
by a principle of religion to follow the occupation of his father, and was
supposed to commit the most horrid sacrilege if he changed it for another),
which can in any particular employment, and for several generations
together, sink either the wages of labour or the profits of stock below
their natural rate.
This is all that I think necessary to be observed at present concerning the
deviations, whether occasional or permanent, of the market price of
commodities from the natural price.
The natural price itself varies with the natural rate of each of its
component parts, of wages, profit, and rent; and in every society this rate
varies according to their circumstances, according to their riches or
poverty, their advancing, stationary, or declining condition. I shall, in
the four following chapters, endeavour to explain, as fully and distinctly
as I can, the causes of those different variations.
First, I shall endeavour to explain what are the circumstances which
naturally determine the rate of wages, and in what manner those
circumstances are affected by the riches or poverty, by the advancing,
stationary, or declining state of the society.
Secondly, I shall endeavour to shew what are the circumstances which
naturally determine the rate of profit ; and in what manner, too, those
circumstances are affected by the like variations in the state of the
society.
Though pecuniary wages and profit are very different in the different
employments of labour and stock ; yet a certain proportion seems commonly to
take place between both the pecuniary wages in all the different employments
of labour, and the pecuniary profits in all the different employments of
stock. This proportion, it will appear hereafter, depends partly upon the
nature of the different employments, and partly upon the different laws and
policy of the society in which they are carried on. But though in many
respects dependent upon the laws and policy, this proportion seems to be
little affected by the riches or poverty of that society, by its advancing,
stationary, or declining condition, but to remain the same, or very nearly
the same, in all those different states. I shall, in the third place,
endeavour to explain all the different circumstances which regulate this
proportion.
In the fourth and last place, I shall endeavour to shew what are the
circumstances which regulate the rent of land, and which either raise or
lower the real price of all the different substances which it produces.
CHAPTER VIII.
OF THE WAGES OF LABOUR.
The produce of labour constitutes the natural recompence or wages of labour.
In that original state of things which precedes both the appropriation of
land and the accumulation of stock, the whole produce of labour belongs to
the labourer. He has neither landlord nor master to share with him.
Had this state continued, the wages of labour would have augmented with all
those improvements in its productive powers, to which the division of labour
gives occasion. All things would gradually have become cheaper. They would
have been produced by a smaller quantity of labour ; and as the commodities
produced by equal quantities of labour would naturally in this state of
things be exchanged for one another, they would have been purchased likewise
with the produce of a smaller quantity.
But though all things would have become cheaper in reality, in appearance
many things might have become dearer, than before, or have been exchanged
for a greater quantity of other goods. Let us suppose, for example, that in
the greater part of employments the productive powers of labour had been
improved to tenfold, or that a day's labour could produce ten times the
quantity of work which it had done originally ; but that in a particular
employment they had been improved only to double, or that a day's labour
could produce only twice the quantity of work which it had done before. In
exchanging the produce of a day's labour in the greater part of employments
for that of a day's labour in this particular one, ten times the original
quantity of work in them would purchase only twice the original quantity in
it. Any particular quantity in it, therefore, a pound weight, for example,
would appear to be five times dearer than before. In reality, however, it
would be twice as cheap. Though it required five times the quantity of other
goods to purchase it, it would require only half the quantity of labour
either to purchase or to produce it. The acquisition, therefore, would be
twice as easy as before.
But this original state of things, in which the labourer enjoyed the whole
produce of his own labour, could not last beyond the first introduction of
the appropriation of land and the accumulation of stock. It was at an end,
therefore, long before the most considerable improvements were made in the
productive powers of labour ; and it would be to no purpose to trace further
what might have been its effects upon the recompence or wages of labour.
As soon as land becomes private property, the landlord demands a share of
almost all the produce which the labourer can either raise or collect from
it. His rent makes the first deduction from the produce of the labour which
is employed upon land.
It seldom happens that the person who tills the ground has wherewithal to
maintain himself till he reaps the harvest. His maintenance is generally
advanced to him from the stock of a master, the farmer who employs him, and
who would have no interest to employ him, unless he was to share in the
produce of his labour, or unless his stock was to be replaced to him with a
profit. This profit makes a second deduction from the produce of the labour
which is employed upon land.
The produce of almost all other labour is liable to the like deduction of
profit. In all arts and manufactures, the greater part of the workmen stand
in need of a master, to advance them the materials of their work, and their
wages and maintenance, till it be completed. He shares in the produce of
their labour, or in the value which it adds to the materials upon which it
is bestowed; and in this share consists his profit.
It sometimes happens, indeed, that a single independent workman has stock
sufficient both to purchase the materials of his work, and to maintain
himself till it be completed. He is both master and workman, and enjoys the
whole produce of his own labour, or the whole value which it adds to the
materials upon which it is bestowed. It includes what are usually two
distinct revenues, belonging to two distinct persons, the profits of stock,
and the wages of labour.
Such cases, however, are not very frequent; and in every part of Europe
twenty workmen serve under a master for one that is independent, and the
wages of labour are everywhere understood to be, what they usually are, when
the labourer is one person, and the owner of the stock which employs him
another.
What are the common wages of labour, depends everywhere upon the contract
usually made between those two parties, whose interests are by no means the
same. The workmen desire to get as much, the masters to give as little, as
possible. The former are disposed to combine in order to raise, the latter
in order to lower, the wages of labour.
It is not, however, difficult to foresee which of the two parties must, upon
all ordinary occasions, have the advantage in the dispute, and force the
other into a compliance with their terms. The masters, being fewer in
number, can combine much more easily: and the law, besides, authorises, or
at least does not prohibit, their combinations, while it prohibits those of
the workmen. We have no acts of parliament against combining to lower the
price of work, but many against combining to raise it. In all such disputes,
the masters can hold out much longer. A landlord, a farmer, a master
manufacturer, or merchant, though they did not employ a single workman,
could generally live a year or two upon the stocks, which they have already
acquired. Many workmen could not subsist a week, few could subsist a month,
and scarce any a year, without employment. In the long run, the workman may
be as necessary to his master as his master is to him ; but the necessity is
not so immediate.
We rarely hear, it has been said, of the combinations of masters, though
frequently of those of workmen. But whoever imagines, upon this account,
that masters rarely combine, is as ignorant of the world as of the subject.
Masters are always and everywhere in a sort of tacit, but constant and
uniform, combination, not to raise the wages of labour above their actual
rate. To violate this combination is everywhere a most unpopular action, and
a sort of reproach to a master among his neighbours and equals. We seldom,
indeed, hear of this combination, because it is the usual, and, one may say,
the natural state of things, which nobody ever hears of. Masters, too,
sometimes enter into particular combinations to sink the wages of labour
even below this rate. These are always conducted with the utmost silence and
secrecy till the moment of execution; and when the workmen yield, as they
sometimes do without resistance, though severely felt by them, they are
never heard of by other people. Such combinations, however, are frequently
resisted by a contrary defensive combination of the workmen, who sometimes,
too, without any provocation of this kind, combine, of their own accord, to
raise tile price of their labour. Their usual pretences are, sometimes the
high price of provisions, sometimes the great profit which their masters
make by their work. But whether their combinations be offensive or
defensive, they are always abundantly heard of. In order to bring the point
to a speedy decision, they have always recourse to the loudest clamour, and
sometimes to the most shocking violence and outrage. They are desperate, and
act with the folly and extravagance of desperate men, who must either
starve, or frighten their masters into an immediate compliance with their
demands. The masters, upon these occasions, are just as clamorous upon the
other side, and never cease to call aloud for the assistance of the civil
magistrate, and the rigorous execution of those laws which have been enacted
with so much severity against the combination of servants, labourers, and
journeymen. The workmen, accordingly, very seldom derive any advantage from
the violence of those tumultuous combinations, which, partly from the
interposition of the civil magistrate, partly from the superior steadiness
of the masters, partly from the necessity which the greater part of the
workmen are under of submitting for the sake of present subsistence,
generally end in nothing but the punishment or ruin of the ringleaders.
But though, in disputes with their workmen, masters must generally have
the advantage, there is, however, a certain rate, below which it seems
impossible to reduce, for any considerable time, the ordinary wages even of
the lowest species of labour.
A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be somewhat
more, otherwise it would be impossible for him to bring up a family. and the
race of such workmen could not last beyond the first generation. Mr
Cantillon seems, upon this account, to suppose that the lowest species of
common labourers must everywhere earn at least double their own maintenance,
in order that, one with another, they may be enabled to bring up two
children; the labour of the wife, on account of her necessary attendance on
the children, being supposed no more than sufficient to provide for herself:
But one half the children born, it is computed, die before the age of
manhood. The poorest labourers, therefore, according to this account, must,
one with another, attempt to rear at least four children, in order; that two
may have an equal chance of living to that age. But the necessary
maintenance of four children, it is supposed, may be nearly equal to that of
one man. The labour of an able-bodied slave, the same author adds, is
computed to be worth double his maintenance ; and that of the meanest
labourer, he thinks, cannot be worth less than that of an able-bodied slave.
Thus far at least seems certain, that, in order to bring up a family, the
labour of the husband and wife together must, even in the lowest species of
common labour, be able to earn something more than what is precisely
necessary for their own maintenance; but in what proportion, whether in that
above-mentioned, or many other, I shall not take upon me to determine.
There are certain circumstances, however, which sometimes give the labourers
an advantage, and enable them to raise their wages considerably above this
rate, evidently the lowest which is consistent with common humanity.
When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when every
year furnishes employment for a greater number than had been employed the
year before, the workmen have no occasion to combine in order to raise their
wages. The scarcity of hands occasions a competition among masters, who bid
against one another in order to get workmen, and thus voluntarily break
through the natural combination of masters not to raise wages. The demand
for those who live by wages, it is evident, cannot increase but in proportion
to the increase of the funds which are destined to the payment of
wages. These funds are of two kinds, first, the revenue which is over and
above what is necessary for the maintenance; and, secondly, the stock which
is over and above what is necessary for the employment of their masters.
When the landlord, annuitant, or monied man, has a greater revenue than what
he judges sufficient to maintain his own family, he employs either the whole
or a part of the surplus in maintaining one or more menial servants.
Increase this surplus, and he will naturally increase the number of those
servants.
When an independent workman, such as a weaver or shoemaker, has got more
stock than what is sufficient to purchase the materials of his own work, and
to maintain himself till he can dispose of it, he naturally employs one or
more journeymen with the surplus, in order to make a profit by their work.
Increase this surplus, and he will naturally increase the number of his
journeymen.
The demand for those who live by wages, therefore, necessarily increases
with the increase of the revenue and stock of every country, and cannot
possibly increase without it. The increase of revenue and stock is the
increase of national wealth. The demand for those who live by wages,
therefore, naturally increases with the increase of national wealth, and
cannot possibly increase without it.
It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or in those
which are growing rich the fastest, that the wages of labour are highest.
England is certainly, in the present times, a much richer country than any
part of North America. The wages of labour, however, are much higher in
North America than in any part of England. In the province of New York,
common labourers earned in 1773, before the commencement
of the late disturbances, three shillings and sixpence currency, equal to
two shillings sterling, a-day ; ship-carpenters, ten shillings and sixpence
currency, with a pint of rum, worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house-carpenters and bricklayers, eight
shillings currency, equal to four shillings and sixpence sterling ;
journeymen tailors, five shillings currency, equal to about two shillings
and tenpence sterling. These prices are all above the London price ; and
wages are said to be as high in the other colonies as in New York. The price
of provisions is everywhere in North America much lower than in England. A
dearth has never been known there. In the worst seasons they have always had
a sufficiency for themselves, though less for exportation. If the money
price of labour, therefore, be higher than it is anywhere in the
mother-country, its real price, the real command of the necessaries and
conveniencies of life which it conveys to the labourer, must be higher in a
still greater proportion.
But though North America is not yet so rich as England, it is much more
thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to double
in less than five hundred years. In the British colonies in North
America, it has been found that they double in twenty or five-and-twenty
years. Nor in the present times is this increase principally owing to the
continual importation of new inhabitants, but to the great multiplication of
the species. Those who live to old age, it is said, frequently see there
from fifty to a hundred, and sometimes many more, descendants from their own
body. Labour is there so well rewarded, that a numerous family of children,
instead of being a burden, is a source of opulence and prosperity to the
parents. The labour of each child, before it can leave their house, is
computed to be worth a hundred pounds clear gain to them. A young widow with
four or five young children, who, among the middling or inferior ranks of
people in Europe, would have so little chance for a second husband, is there
frequently courted as a sort of fortune. The value of children is the
greatest of all encouragements to marriage. We cannot, therefore, wonder
that the people in North America should generally marry very young.
Notwithstanding the great increase occasioned by such early marriages, there
is a continual complaint of the scarcity of hands in North America. The
demand for labourers, the funds destined for maintaining them increase, it
seems, still faster than they can find labourers to employ.
Though the wealth of a country should be very great, yet if it has been long
stationary, we must not expect to find the wages of labour very high in it.
The funds destined for the payment of wages, the revenue and stock of its
inhabitants, may be of the greatest extent; but if they have continued for
several centuries of the same, or very nearly of the same extent, the number
of labourers employed every year could easily supply, and even more than
supply, the number wanted the following year. There could seldom be any
scarcity of hands, nor could the masters be obliged to bid against one
another in order to get them. The hands, on the contrary, would, in this
case, naturally multiply beyond their employment. There would be a constant
scarcity of employment, and the labourers would be obliged to bid against
one another in order to get it. If in such a country the wages off labour had
ever been more than sufficient to maintain the labourer, and to enable him
to bring up a family, the competition of the labourers and the interest of
the masters would soon reduce them to the lowest rate which is consistent
with common humanity. China has been long one of the richest, that is, one
of the most fertile, best cultivated, most industrious, and most populous,
countries in the world. It seems, however, to have been long stationary.
Marco Polo, who visited it more than five hundred years ago, describes its
cultivation, industry, and populousness, almost in the same terms in which
they are described by travellers in the present times. It had, perhaps, even
long before his time, acquired that full complement of riches which the
nature of its laws and institutions permits it to acquire. The accounts of
all travellers, inconsistent in many other respects, agree in the low wages
of labour, and in the difficulty which a labourer finds in bringing up a
family in China. If by digging the ground a whole day he can get what will
purchase a small quantity of rice in the evening, he is contented. The
condition of artificers is, if possible, still worse. Instead of waiting
indolently in their work-houses for the calls of their customers, as in
Europe, they are continually running about the streets with the tools of
their respective trades, offering their services, and, as it were, begging
employment. The poverty of the lower ranks of people in China far surpasses
that of the most beggarly nations in Europe. In the neighbourhood of Canton,
many hundred, it is commonly said, many thousand families have no habitation
on the land, but live constantly in little fishing-boats upon the rivers and
canals. The subsistence which they find there is so scanty, that they are
eager to fish up the nastiest garbage thrown overboard from any European
ship. Any carrion, the carcase of a dead dog or cat, for example, though
half putrid and stinking, is as welcome to them as the most wholesome food
to the people of other countries. Marriage is encouraged in China, not by
the profitableness of children, but by the liberty of destroying them. In
all great towns, several are every night exposed in the street, or drowned
like puppies in the water. The performance of this horrid office is even
said to be the avowed business by which some people earn their subsistence.
China, however, though it may, perhaps, stand still, does not seem to go
backwards. Its towns are nowhere deserted by their inhabitants. The lands
which had once been cultivated, are nowhere neglected. The same, or very
nearly the same, annual labour, must, therefore, continue to be performed,
and the funds destined for maintaining it must not, consequently, be
sensibly diminished. The lowest class of labourers, therefore,
notwithstanding their scanty subsistence, must some way or another make
shift to continue their race so far as to keep up their usual numbers.
But it would be otherwise in a country where the funds destined for the
maintenance of labour were sensibly decaying. Every year the demand for
servants and labourers would, in all the different classes of employments,
be less than it had been the year before. Many who had been bred in the
superior classes, not being able to find employment in their own business,
would be glad to seek it in the lowest. The lowest class being not only
overstocked with its own workmen, but with the overflowings of all the other
classes, the competition for employment would be so great in it, as to
reduce the wages of labour to the most miserable and scanty subsistence of
the labourer. Many would not he able to find employment even upon these hard
terms, but would either starve, or be driven to seek a subsistence, either
by begging, or by the perpetration perhaps, of the greatest enormities.
Want, famine, and mortality, would immediately prevail in that class, and
from thence extend themselves to all the superior classes, till the number
of inhabitants in the country was reduced to what could easily be maintained
by the revenue and stock which remained in it, and which had escaped either
the tyranny or calamity which had destroyed the rest. This, perhaps, is
nearly the present state of Bengal, and of some other of the English
settlements in the East Indies. In a fertile country, which had before been
much depopulated, where subsistence, consequently, should not be very
difficult, and where, notwithstanding, three or four hundred thousand people
die of hunger in one year, we maybe assured that the funds destined for the
maintenance of the labouring poor are fast decaying. The difference between
the genius of the British constitution, which protects and governs North
America, and that of the mercantile company which oppresses and domineers in
the East Indies, cannot, perhaps, be better illustrated than by the
different state of those countries.
The liberal reward of labour, therefore, as it is the necessary effect, so
it is the natural symptom of increasing national wealth. The scanty
maintenance of the labouring poor, on the other hand, is the natural symptom
that things are at a stand, and their starving condition, that they are
going fast backwards.
In Great Britain, the wages of labour seem, in the present times, to be
evidently more than what is precisely necessary to enable the labourer to
bring up a family. In order to satisfy ourselves upon this point, it will
not be necessary to enter into any tedious or doubtful calculation of what
may be the lowest sum upon winch it is possible to do this. There are many
plain symptoms, that the wages of labour are nowhere in this country
regulated by this lowest rate, which is consistent with common humanity.
First, in almost every part of Great Britain there is a distinction, even in
the lowest species of labour, between summer and winter wages. Summer wages
are always highest. But, on account of the extraordinary expense of fuel,
the maintenance of a family is most expensive in winter. Wages, therefore,
being highest when this expense is lowest, it seems evident that they are
not regulated by what is necessary for this expense, but by the quantity and
supposed value of the work. A labourer, it may be said, indeed, ought to
save part of his summer wages, in order to defray his winter expense; and
that, through the whole year, they do not exceed what is necessary to
maintain his family through the whole year. A slave, however, or one
absolutely dependent on us for immediate subsistence, would not be treated
in this manner. His daily subsistence would be proportioned to his daily
necessities.
Secondly, the wages of labour do not, in Great Britain, fluctuate with
the price of provisions. These vary everywhere from year to year, frequently
from month to month. But in many places, the money price of labour remains
uniformly the same, sometimes for half a century together. If, in these
places, therefore, the labouring poor can maintain their families in dear
years, they must be at their ease in times of moderate plenty, and in
affluence in those of extraordinary cheapness. The high price of provisions
during these ten years past, has not, in many parts of the kingdom, been
accompanied with any sensible rise in the money price of labour. It has,
indeed, in some ; owing, probably, more to the increase of the demand for
labour, than to that of the price of provisions.
Thirdly, as the price of provisions varies more from year to year than the
wages of labour, so, on the other hand, the wages of labour vary more from
place to place than the price of provisions. The prices of bread and
butchers' meat are generally the same, or very nearly the same, through the
greater part of the united kingdom. These, and most other things which are
sold by retail, the way in which the labouring poor buy all things, are
generally fully as cheap, or cheaper, in great towns than in the remoter
parts of the country, for reasons which I shall have occasion to explain
hereafter. But the wages of labour in a great town and its neighbourhood,
are frequently a fourth or a fifth part, twenty or five-and--twenty per
cent. higher than at a few miles distance. Eighteen pence a day may be
reckoned the common price of labour in London and its neighbourhood. At a
few miles distance. it falls to fourteen and fifteen pence. Tenpence may be
reckoned its price in Edinburgh and its neighbourhood. At a few miles
distance, it falls to eightpence, the usual price of common labour through
the greater part of the low country of Scotland, where it varies a good deal
less than in England. Such a difference of prices, which, it seems, is not
always sufficient to transport a man from one parish to another, would
necessarily occasion so great a transportation of the most bulky
commodities, not only from one parish to another, but from one end of the
kingdom, almost from one end of the world to the other, as would soon reduce
them more nearly to a level. After all that has been said of the levity and
inconstancy of human nature, it appears evidently from experience, that man
is, of all sorts of luggage, the most difficult to be transported. If the
labouring poor, therefore, can maintain their families in those parts of the
kingdom where the price of labour is lowest, they must be in affluence where
it is highest.
Fourthly, the variations in the price of labour not only do not correspond,
either in place or time, with those in the price of provisions, but they are
frequently quite opposite.
Grain, the food of the common people, is dearer in Scotland than in England,
whence Scotland receives almost every year very large supplies. But English
corn must be sold dearer in Scotland, the country to which it is brought,
than in England, the country from which it comes; and in proportion to its
quality it cannot be sold dearer in Scotland than the Scotch corn that comes
to the same market in competition with it. The quality of grain depends
chiefly upon the quantity of flour or meal which it yields at the mill ;
and, in this respect, English grain is so much superior to the Scotch, that
though often dearer in appearance, or in proportion to the measure of its
bulk, it is generally cheaper in reality, or in proportion to its quality,
or even to the measure of its weight. The price of labour, on the contrary,
is dearer in England than in Scotland. If the labouring poor, therefore, can
maintain their families in the one part of the united kingdom, they must be
in affluence in the other. Oatmeal, indeed, supplies the common people in
Scotland with the greatest and the best part of their food, which is, in
general, much inferior to that of their neighbours of the same rank in
England. This difference, however, in the mode of their subsistence, is not
the cause, but the effect, of the difference in their wages; though, by a
strange misapprehension, I have frequently heard it represented as the
cause. It is not because one man keeps a coach, while his neighbour walks
a-foot, that the one is rich, and the other poor; but because the one is
rich, he keeps a coach, and because the other is poor, he walks a-foot.
During the course of the last century, taking one year with another, grain
was dearer in both parts of the united kingdom than during that of the
present. This is a matter of fact which cannot now admit of any reasonable
doubt ; and the proof of it is, if possible, still more decisive with regard
to Scotland than with regard to England. It is in Scotland supported by the
evidence of the public fiars, annual valuations made upon oath, according to
the actual state of the markets, of all the different sorts of grain in
every different county of Scotland. If such direct proof could require any
collateral evidence to confirm it, I would observe, that this has likewise
been the case in France, and probably in most other parts of Europe. With
regard to France, there is the clearest proof. But though it is certain,
that in both parts of the united kingdom grain was somewhat dearer in the
last century than in the present, it is equally certain that labour was much
cheaper. If the labouring poor, therefore, could bring up their families
then, they must be much more at their ease now. In the last century, the
most usual day-wages of common labour through the greater part of Scotland
were sixpence in summer, and fivepence in winter. Three shillings a-week,
the same price, very nearly still continues to be paid in some parts of the
Highlands and Western islands. Through the greater part of the Low country,
the most usual wages of common labour are now eight pence a-day ; tenpence,
sometimes a shilling, about Edinburgh, in the counties which border upon
England, probably on account of that neighbourhood, and in a few other
places where there has lately been a considerable rise in the demand for
labour, about Glasgow, Carron, Ayrshire, etc. In England, the improvements
of agriculture, manufactures, and commerce, began much earlier than in
Scotland. The demand for labour, and consequently its price, must
necessarily have increased with those improvements. In the last century,
accordingly, as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since that
time, though, on account of the greater variety of wages paid there in
different places, it is more difficult to ascertain how much. In 1614, the
pay of a foot soldier was the same as in the present times, eightpence
a-day. When it was first established, it would naturally be regulated by the
usual wages of common labourers, the rank of people from which foot soldiers
are commonly drawn. Lord-chief-justice Hales, who wrote in the time of
Charles II. computes the necessary expense of a labourer's family,
consisting of six persons, the father and mother, two children able to do
something, and two not able, at ten shillings a-week, or twenty-six pounds
a-year. If they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have enquired very
carefully into this subject {See his scheme for the maintenance of the
poor, in Burn's History of the Poor Laws.}. In 1688, Mr Gregory King, whose
skill in political arithmetic is so much extolled by Dr Davenant, computed
the ordinary income of labourers and out-servants to be fifteen pounds
a-year to a family, which he supposed to consist, one with another, of three
and a half persons. His calculation, therefore, though different in
appearance, corresponds very nearly at bottom with that of Judge Hales. Both
suppose the weekly expense of such families to be about twenty-pence a-head.
Both the pecuniary income and expense of such families have increased
considerably since that time through the greater part of the kingdom, in
some places more, and in some less, though perhaps scarce anywhere so much
as some exaggerated accounts of the present wages of labour have lately
represented them to the public. The price of labour, it must be observed,
cannot be ascertained very accurately anywhere, different prices being often
paid at the same place and for the same sort of labour, not only according
to the different abilities of the workman, but according to the easiness or
hardness of the masters. Where wages are not regulated by law, all that we
can pretend to determine is, what are the most usual; and experience seems
to shew that law can never regulate them properly, though it has often
pretended to do so.
The real recompence of labour, the real quantity of the necessaries and
conveniencies of life which it can procure to the labourer, has, during the
course of the present century, increased perhaps in a still greater
proportion than its money price. Not only grain has become somewhat cheaper,
but many other things, from which the industrious poor derive an agreeable
and wholesome variety of food, have become a great deal cheaper. Potatoes,
for example, do not at present, through the greater part of the kingdom,
cost half the price which they used to do thirty or forty years ago. The
same thing may be said of turnips, carrots, cabbages ; things which were
formerly never raised but by the spade, but which are now commonly raised by
the plough. All sort of garden stuff, too, has become cheaper. The greater
part of the apples, and even of the onions, consumed in Great Britain, were,
in the last century, imported from Flanders. The great improvements in the
coarser manufactories of both linen and woollen cloth furnish the labourers
with cheaper and better clothing; and those in the manufactories of the
coarser metals, with cheaper and better instruments of trade, as well as
with many agreeable and convenient pieces of household furniture. Soap,
salt, candles, leather, and fermented liquors, have, indeed, become a good
deal dearer, chiefly from the taxes which have been laid upon them. The
quantity of these, however, which the labouring poor an under any necessity
of consuming, is so very small, that the increase in their price does not
compensate the diminution in that of so many other things. The common
complaint, that luxury extends itself even to the lowest ranks of the
people, and that the labouring poor will not now be contented with the same
food, clothing, and lodging, which satisfied them in former times, may
convince us that it is not the money price of labour only, but its real
recompence, which has augmented.
Is this improvement in the circumstances of the lower ranks of the people to
be regarded as an advantage, or as an inconveniency, to the society ? The
answer seems at first abundantly plain. Servants, labourers, and workmen of
different kinds, make up the far greater part of every great political
society. But what improves the circumstances of the greater part, can never
be regarded as any inconveniency to the whole. No society can surely be
flourishing and happy, of which the far greater part of the members are poor
and miserable. It is but equity, besides, that they who feed, clothe, and
lodge the whole body of the people, should have such a share of the produce
of their own labour as to be themselves tolerably well fed, clothed, and
lodged.
Poverty, though it no doubt discourages, does not always prevent, marriage.
It seems even to be favourable to generation. A half-starved Highland woman
frequently bears more than twenty children, while a pampered fine lady is
often incapable of bearing any, and is generally exhausted by two or three.
Barrenness, so frequent among women of fashion, is very rare among those of
inferior station. Luxury, in the fair sex, while it inflames, perhaps, the
passion for enjoyment, seems always to weaken, and frequently to destroy
altogether, the powers of generation.
But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced ; but
in so cold a soil, and so severe a climate, soon withers and dies. It is not
uncommon, I have been frequently told, in the Highlands of Scotland, for a
mother who has born twenty children not to have two alive. Several officers
of great experience have assured me, that, so far from recruiting their
regiment, they have never been able to supply it with drums and fifes, from
all the soldiers' children that were born in it. A greater number of fine
children, however, is seldom seen anywhere than about a barrack of soldiers.
Very few of them, it seems, arrive at the age of thirteen or fourteen. In
some places, one half the children die before they are four years of age, in
many places before they are seven, and in almost all places before they are
nine or ten. This great mortality, however will everywhere be found chiefly
among the children of the common people, who cannot afford to tend them with
the same care as those of better station. Though their marriages are
generally more fruitful than those of people of fashion, a smaller
proportion of their children arrive at maturity. In foundling hospitals, and
among the children brought up by parish charities, the mortality is still
greater than among those of the common people.
Every species of animals naturally multiplies in proportion to the
means of their subsistence, and no species can ever multiply be yond it. But
in civilized society, it is only among the inferior ranks of people that the
scantiness of subsistence can set limits to the further multiplication of
the human species ; and it can do so in no other way than by destroying a
great part of the children which their fruitful marriages produce.
The liberal reward of labour, by enabling them to provide better for their
children, and consequently to bring up a greater number, naturally tends to
widen and extend those limits. It deserves to be remarked, too, that it
necessarily does this as nearly as possible in the proportion which the
demand for labour requires. If this demand is continually increasing, the
reward of labour must necessarily encourage in such a manner the marriage
and multiplication of labourers, as may enable them to supply that
continually increasing demand by a continually increasing population. If the
reward should at any time be less than what was requisite for this purpose,
the deficiency of hands would soon raise it ; and if it should at any time
be more, their excessive multiplication would soon lower it to this
necessary rate. The market would be so much understocked with labour in the
one case, and so much overstocked in the other, as would soon force back its
price to that proper rate which the circumstances of the society required.
It is in this manner that the demand for men, like that for any other
commodity, necessarily regulates the production of men, quickens it when it
goes on too slowly, and stops it when it advances too fast. It is this
demand which regulates and determines the state of propagation in all the
different countries of the world ; in North America, in Europe, and in China
; which renders it rapidly progressive in the first, slow and gradual in the
second, and altogether stationary in the last.
The wear and tear of a slave, it has been said, is at the expense of his
master ; but that of a free servant is at his own expense. The wear and tear
of the latter, however, is, in reality, as much at the expense of his master
as that of the former. The wages paid to journeymen and servants of every
kind must be such as may enable them, one with another to continue the race
of journeymen and servants, according as the increasing, diminishing, or
stationary demand of the society, may happen to require. But though the wear
and tear of a free servant be equally at the expense of his master, it
generally costs him much less than that of a slave. The fund destined for
replacing or repairing, if I may say so, the wear and tear of the slave, is
commonly managed by a negligent master or careless overseer. That destined
for performing the same office with regard to the freeman is managed by the
freeman himself. The disorders which generally prevail in the economy of the
rich, naturally introduce themselves into the management of the former; the
strict frugality and parsimonious attention of the poor as naturally
establish themselves in that of the latter. Under such different management,
the same purpose must require very different degrees of expense to execute
it. It appears, accordingly, from the experience of all ages and nations, I
believe, that the work done by freemen comes cheaper in the end than that
performed by slaves. It is found to do so even at Boston, New-York, and
Philadelphia, where the wages of common labour are so very high.
The liberal reward of labour, therefore, as it is the effect of increasing
wealth, so it is the cause of increasing population. To complain of it, is
to lament over the necessary cause and effect of the greatest public
prosperity.
It deserves to be remarked, perhaps, that it is in the progressive state,
while the society is advancing to the further acquisition, rather than when
it has acquired its full complement of riches, that the condition of the
labouring poor, of the great body of the people, seems to be the happiest
and the most comfortable. It is hard in the stationary, and miserable in the
declining state. The progressive state is, in reality, the cheerful and the
hearty state to all the different orders of the society; the stationary is
dull ; the declining melancholy.
The liberal reward of labour, as it encourages the propagation, so it
increases the industry of the common people. The wages of labour are the
encouragement of industry, which, like every other human quality, improves
in proportion to the encouragement it receives. A plentiful subsistence
increases the bodily strength of the labourer, and the comfortable hope of
bettering his condition, and of ending his days, perhaps, in ease and
plenty, animates him to exert that strength to the utmost. Where wages are
high, accordingly, we shall always find the workmen more active, diligent,
and expeditious, than where they are low ; in England, for example, than in
Scotland; in the neighbourhood of great towns, than in remote country
places. Some workmen, indeed, when they can earn in four days what will
maintain them through the week, will be idle the other three. This, however,
is by no means the case with the greater part. Workmen, on the contrary,
when they are liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a few years. A
carpenter in London, and in some other places, is not supposed to last in
his utmost vigour above eight years. Something of the same kind happens in
many other trades, in which the workmen are paid by the piece; as they
generally are in manufactures, and even in country labour, wherever wages
are higher than ordinary. Almost every class of artificers is subject to
some peculiar infirmity occasioned by excessive application to their
peculiar species of work. Ramuzzini, an eminent Italian physician, has
written a particular book concerning such diseases. We do not reckon our
soldiers the most industrious set of people among us; yet when soldiers have
been employed in some particular sorts of work, and liberally paid by the
piece, their officers have frequently been obliged to stipulate with the
undertaker, that they should not be allowed to earn above a certain sum
every day, according to the rate at which they were paid. Till this
stipulation was made, mutual emulation, and the desire of greater gain,
frequently prompted them to overwork themselves, and to hurt their health by
excessive labour. Excessive application, during four days of the week, is
frequently the real cause of the idleness of the other three, so much and so
loudly complained of. Great labour, either of mind or body, continued for
several days together is, in most men, naturally followed by a great desire
of relaxation, which, if not restrained by force, or by some strong
necessity, is almost irresistible. It is the call of nature, which requires
to be relieved by some indulgence, sometimes of ease only, but sometimes too
of dissipation and diversion. If it is not complied with, the consequences
are often dangerous and sometimes fatal, and such as almost always, sooner
or later, bring on the peculiar infirmity of the trade. If masters would
always listen to the dictates of reason and humanity, they have frequently
occasion rather to moderate, than to animate the application of many of
their workmen. It will be found, I believe, in every sort of trade, that the
man who works so moderately, as to be able to work constantly, not only
preserves his health the longest, but, in the course of the year, executes
the greatest quantity of work.
In cheap years it is pretended, workmen are generally more idle, and in dear
times more industrious than ordinary. A plentiful subsistence, therefore, it
has been concluded, relaxes, and a scanty one quickens their industry. That
a little more plenty than ordinary may render some workmen idle, cannot be
well doubted; but that it should have this effect upon the greater part, or
that men in general should work better when they are ill fed, than when they
are well fed, when they are disheartened than when they are in good spirits,
when they are frequently sick than when they are generally in good health,
seems not very probable. Years of dearth, it is to be observed, are
generally among the common people years of sickness and mortality, which
cannot fail to diminish the produce of their industry.
In years of plenty, servants frequently leave their masters, and trust their
subsistence to what they can make by their own industry. But the same
cheapness of provisions, by increasing the fund which is destined for the
maintenance of servants, encourages masters, farmers especially, to employ a
greater number. Farmers, upon such occasions, expect more profit from their
corn by maintaining a few more labouring servants, than by selling it at a
low price in the market. The demand for servants increases, while the number
of those who offer to supply that demand diminishes. The price of labour,
therefore, frequently rises in cheap years.
In years of scarcity, the difficulty and uncertainty of subsistence make all
such people eager to return to service. But the high price of provisions, by
diminishing the funds destined for the maintenance of servants, disposes
masters rather to diminish than to increase the number of those they have.
In dear years, too, poor independent workmen frequently consume the little
stock with which they had used to supply themselves with the materials of
their work, and are obliged to become journeymen for subsistence. More
people want employment than easily get it ; many are willing to take it upon
lower terms than ordinary ; and the wages of both servants and journeymen
frequently sink in dear years.
Masters of all sorts, therefore, frequently make better bargains with their
servants in dear than in cheap years, and find them more humble and
dependent in the former than in the latter. They naturally, therefore,
commend the former as more favourable to industry. Landlords and farmers,
besides, two of the largest classes of masters, have another reason for
being pleased with dear years. The rents of the one, and the profits of the
other, depend very much upon the price of provisions. Nothing can be more
absurd, however, than to imagine that men in general should work less when
they work for themselves, than when they work for other people. A poor
independent workman will generally be more industrious than even a
journeyman who works by the piece. The one enjoys the whole produce of his
own industry, the other shares it with his master. The one, in his separate
independent state, is less liable to the temptations of bad company, which,
in large manufactories, so frequently ruin the morals of the other. The
superiority of the independent workman over those servants who are hired by
the month or by the year, and whose wages and maintenance are the same,
whether they do much or do little, is likely to be still greater. Cheap
years tend to increase the proportion of independent workmen to journeymen
and servants of all kinds, and dear years to diminish it.
A French author of great knowledge and ingenuity, Mr Messance, receiver of
the taillies in the election of St Etienne, endeavours to shew that the poor
do more work in cheap than in dear years, by comparing the quantity and
value of the goods made upon those different occasions in three different
manufactures; one of coarse woollens, carried on at Elbeuf; one of linen,
and another of silk, both which extend through the whole generality of
Rouen. It appears from his account, which is copied from the registers of
the public offices, that the quantity and value of the goods made in all
those three manufactories has generally been greater in cheap than in dear
years, and that it has always been; greatest in the cheapest, and least in
the dearest years. All the three seem to be stationary manufactures, or
which, though their produce may vary somewhat from year to year, are, upon
the whole, neither going backwards nor forwards.
The manufacture of linen in Scotland, and that of coarse woollens in the
West Riding of Yorkshire, are growing manufactures, of which the produce is
generally, though with some variations, increasing both in quantity and
value. Upon examining, however, the accounts which have been published of
their annual produce, I have not been able to observe that its variations
have had any sensible connection with the dearness or cheapness of the
seasons. In 1740, a year of great scarcity, both manufactures, indeed,
appear to have declined very considerably. But in 1756, another year or
great scarcity, the Scotch manufactures made more than ordinary advances.
The Yorkshire manufacture, indeed, declined, and its produce did not rise to
what it had been in 1755, till 1766, after the repeal of the American stamp
act. In that and the following year, it greatly exceeded what it had ever
been before, and it has continued to advance ever since.
The produce of all great manufactures for distant sale must necessarily
depend, not so much upon the dearness or cheapness of the seasons in the
countries where they are carried on, as upon the circumstances which affect
the demand in the countries where they are consumed; upon peace or war, upon
the prosperity or declension of other rival manufactures and upon the good
or bad humour of their principal customers. A great part of the
extraordinary work, besides, which is probably done in cheap years, never
enters the public registers of manufactures. The men-servants, who leave
their masters, become independent labourers. The women return to their
parents, and commonly spin, in order to make clothes for themselves and
their families. Even the independent workmen do not always, work for public
sale, but are employed by some of their neighbours in manufactures for
family use. The produce of their labour, therefore, frequently makes no
figure in those public registers, of which the records are sometimes
published with so much parade, and from which our merchants and
manufacturers would often vainly pretend to announce the prosperity or
declension of the greatest empires.
Through the variations in the price of labour not only do not always
correspond with those in the price of provisions, but are frequently quite
opposite, we must not, upon this account, imagine that the price of
provisions has no influence upon that of labour. The money price of labour
is necessarily regulated by two circumstances; the demand for labour, and
the price of the necessaries and conveniencies of life. The demand for
labour, according as it happens to be increasing, stationary, or declining,
or to require an increasing, stationary, or declining population, determines
the quantities of the necessaries and conveniencies of life which must be
given to the labourer; and the money price of labour is determined by what
is requisite for purchasing this quantity. Though the money price of labour,
therefore, is sometimes high where the price of provisions is low, it would
be still higher, the demand continuing the same, if the price of provisions
was high.
It is because the demand for labour increases in years of sudden and
extraordinary plenty, and diminishes in those of sudden and extraordinary
scarcity, that the money price of labour sometimes rises in the one, and
sinks in the other.
In a year of sudden and extraordinary plenty, there are funds in the hands
of many of the employers of industry, sufficient to maintain and employ a
greater number of industrious people than had been employed the year before
; and this extraordinary number cannot always be had. Those masters,
therefore, who want more workmen, bid against one another, in order to get
them, which sometimes raises both the real and the money price of their
labour.
The contrary of this happens in a year of sudden and extraordinary scarcity.
The funds destined for employing industry are less than they had been the
year before. A considerable number of people are thrown out of employment,
who bid one against another, in order to get it, which sometimes lowers both
the real and the money price of labour. In 1740, a year of extraordinary
scarcity, many people were willing to work for bare subsistence. In the
succeeding years of plenty, it was more difficult to get labourers and
servants. The scarcity of a dear year, by diminishing the demand for labour,
tends to lower its price, as the high price of provisions tends to raise it.
The plenty of a cheap year, on the contrary, by increasing the demand, tends
to raise the price of labour, as the cheapness of provisions tends to lower
it. In the ordinary variations of the prices of provisions, those two
opposite causes seem to counterbalance one another, which is probably, in
part, the reason why the wages of labour are everywhere so much more steady
and permanent than the price of provisions.
The increase in the wages of labour necessarily increases the price of many
commodities, by increasing that part of it which resolves itself into wages,
and so far tends to diminish their consumption, both at home and abroad. The
same cause, however, which raises the wages of labour, the increase of
stock, tends to increase its productive powers, and to make a smaller
quantity of labour produce a greater quantity of work. The owner of the
stock which employs a great number of labourers necessarily endeavours, for
his own advantage, to make such a proper division and distribution of
employment, that they may be enabled to produce the greatest quantity of
work possible. For the same reason, he endeavours to supply them with the
best machinery which either he or they can think of. What takes place among
the labourers in a particular workhouse, takes place, for the same reason,
among those of a great society. The greater their number, the more they
naturally divide themselves into different classes and subdivisions of
employments. More heads are occupied in inventing the most proper machinery
for executing the work of each, and it is, therefore, more likely to be
invented. There me many commodities, therefore, which, in consequence of
these improvements, come to be produced by so much less labour than be.
fore, that the increase of its price is more than compensated by the
diminution of its quantity.
CHAPTER IX.
OF THE PROFITS OF STOCK.
The rise and fall in the profits of stock depend upon the same causes with
the rise and fall in the wages of labour, the increasing or declining state
of the wealth of the society ; but those causes affect the one and the other
very differently.
The increase of stock, which raises wages, tends to lower profit. When the
stocks of many rich merchants are turned into the same trade, their mutual
competition naturally tends to lower its profit; and when there is a like
increase of stock in all the different trades carried on in the same
society, the same competition must produce the same effect in them all.
It is not easy, it has already been observed, to ascertain what are the
average wages of labour, even in a particular place, and at a particular
time. We can, even in this case, seldom determine more than what are the
most usual wages. But even this can seldom be done with regard to the
profits of stock. Profit is so very fluctuating, that the person who carries
on a particular trade, cannot always tell you himself what is the average of
his annual profit. It is affected, not only by every variation of price in
the commodities which he deals in, but by the good or bad fortune both of
his rivals and of his customers, and by a thousand other accidents, to which
goods, when carried either by sea or by land, or even when stored in a
warehouse, are liable. It varies, therefore, not only from year to year, but
from day to day, and almost from hour to hour. To ascertain what is the
average profit of all the different trades carried on in a great kingdom,
must be much more difficult; and to judge of what it may have been formerly,
or in remote periods of time, with any degree of precision, must be
altogether impossible.
But though it may be impossible to determine, with any degree of precision,
what are or were the average profits of stock, either in the present or in
ancient times, some notion may be formed of them from the interest of money.
It may be laid down as a maxim, that wherever a great deal can be made by
the use of money, a great deal will commonly be given for the use of it; and
that, wherever little can be made by it, less will commonly he given for it.
Accordingly, therefore, as the usual market rate of interest varies in any
country, we may be assured that the ordinary profits of stock must vary with
it, must sink as it sinks, and rise as it rises. The progress of interest,
therefore, may lead us to form some notion of the progress of profit.
By the 37th of Henry VIII. all interest above ten per cent. was declared
unlawful. More, it seems, had sometimes been taken before that. In the reign
of Edward VI. religious zeal prohibited all interest. This prohibition,
however, like all others of the same kind, is said to have produced no
effect, and probably rather increased than diminished the evil of usury. The
statute of Henry VIII. was revived by the 13th of Elizabeth, cap. 8. and ten
per cent. continued to be the legal rate of interest till the 21st of James
I. when it was restricted to eight per cent. It was reduced to six per cent.
soon after the Restoration, and by the 12th of Queen Anne, to five per cent.
All these different statutory regulations seem to have been made with great
propriety. They seem to have followed, and not to have gone before, the
market rate of interest, or the rate at which people of good credit usually
borrowed. Since the time of Queen Anne, five per cent. seems to have been
rather above than below the market rate. Before the late war, the government
borrowed at three per cent. ; and people of good credit in the capital, and
in many other parts of the kingdom, at three and a-half, four, and four and
a-half per cent.
Since the time of Henry VIII. the wealth and revenue of the country have
been continually advancing, and in the course of their progress, their pace
seems rather to have been gradually accelerated than retarded. They seem not
only to have been going on, but to have been going on faster and faster. The
wages of labour have been continually increasing during the same period,
and, in the greater part of the different branches of trade and
manufactures, the profits of stock have been diminishing.
It generally requires a greater stock to carry on any sort of trade in a
great town than in a country village. The great stocks employed in every
branch of trade, and the number of rich competitors, generally reduce the
rate of profit in the former below what it is in the latter. But the wages
of labour are generally higher in a great town than in a country village. In
a thriving town, the people who have great stocks to employ, frequently
cannot get the number of workmen they want, and therefore bid against one
another, in order to get as many as they can, which raises the wages of
labour, and lowers the profits of stock. In the remote parts of the
country, there is frequently not stock sufficient to employ all the people,
who therefore bid against one another, in order to get employment, which
lowers the wages of labour, and raises the profits of stock.
In Scotland, though the legal rate of interest is the same as in England,
the market rate is rather higher. People of the best credit there seldom
borrow under five per cent. Even private bankers in Edinburgh give four per
cent. upon their promissory-notes, of which payment, either in whole or in
part may be demanded at pleasure. Private bankers in London give no interest
for the money which is deposited with them. There are few trades which
cannot be carried on with a smaller stock in Scotland than in England. The
common rate of profit, therefore, must be somewhat greater. The wages of
labour, it has already been observed, are lower in Scotland than in England.
The country, too, is not only much poorer, but the steps by which it
advances to a better condition, for it is evidently advancing, seem to be
much slower and more tardy.
The legal rate of interest in France has not during the course of the present century, been
always regulated by the market rate { See Denisart, Article Taux des Interests, tom. iii, p.13}.
In 1720, interest was reduced from the twentieth to the fiftieth penny, or from five to two per
cent. In 1724, it was raised to the thirtieth penny, or to three and a third per cent. In 1725, it
was again raised to the twentieth penny, or to five per cent. In 1766, during the administration
of Mr Laverdy, it was reduced to the twenty-fifth penny, or to four per cent. The Abbé Terray
raised it afterwards to the old rate of five per cent. The supposed purpose of many of those
violent reductions of interest was to prepare the way for reducing that of the public debts ; a
purpose which has sometimes been executed. France is, perhaps, in the present times, not so
rich a country as England; and though the legal rate of interest has in France frequently been
lower than in England, the market rate has generally been higher; for there, as in other
countries, they have several very safe and easy methods of evading the law. The profits of
trade, I have been assured by British merchants who had traded in both countries, are higher
in France than in England ; and it is no doubt upon this account, that many British subjects
chuse rather to employ their capitals in a country where trade is in disgrace, than in one where
it is highly respected. The wages of labour are lower in France than in England. When you go
from Scotland to England, the difference which you may remark between the dress and
countenance of the common people in the one country and in the other, sufficiently indicates
the difference in their condition. The contrast is still greater when you return from France.
France, though no doubt a richer country than Scotland, seems not to be going forward so fast.
It is a common and even a popular opinion in the country, that it is going backwards ; an
opinion which I apprehend, is ill-founded, even with regard to France, but which nobody can
possibly entertain with regard to Scotland, who sees the country now, and who saw it twenty
or thirty years ago.
The province of Holland, on the other hand, in proportion to the extent of
its territory and the number of its people, is a richer country than
England. The government there borrow at two per cent. and private people of
good credit at three. The wages of labour are said to be higher in Holland
than in England, and the Dutch, it is well known, trade upon lower profits
than any people in Europe. The trade of Holland, it has been pretended by
some people, is decaying, and it may perhaps be true that some particular
branches of it are so; but these symptoms seem to indicate sufficiently that
there is no general decay. When profit diminishes, merchants are very apt to
complain that trade decays, though the diminution of profit is the natural
effect of its prosperity, or of a greater stock being employed in it than
before. During the late war, the Dutch gained the whole carrying trade of
France, of which they still retain a very large share. The great property
which they possess both in French and English funds, about forty millions,
it is said in the latter (in which, I suspect, however, there is a
considerable exaggeration ), the great sums which they lend to private
people, in countries where the rate of interest is higher than in their own,
are circumstances which no doubt demonstrate the redundancy of their stock,
or that it has increased beyond what they can employ with tolerable profit
in the proper business of their own country; but they do not demonstrate
that that business has decreased. As the capital of a private man, though
acquired by a particular trade, may increase beyond what he can employ in
it, and yet that trade continue to increase too, so may likewise the capital
of a great nation.
In our North American and West Indian colonies, not only the wages of
labour, but the interest of money, and consequently the profits of stock,
are higher than in England. In the different colonies, both the legal and
the market rate of interest run from six to eight percent. High wages of
labour and high profits of stock, however, are things, perhaps, which scarce
ever go together, except in the peculiar circumstances of new colonies. A
new colony must always, for some time, be more understocked in proportion to
the extent of its territory, and more underpeopled in proportion to the
extent of its stock, than the greater part of other countries. They have
more land than they have stock to cultivate. What they have, therefore, is
applied to the cultivation only of what is most fertile and most favourably
situated, the land near the sea-shore, and along the banks of navigable
rivers. Such land, too, is frequently purchased at a price below the value
even of its natural produce. Stock employed in the purchase and improvement
of such lands, must yield a very large profit, and, consequently, afford to
pay a very large interest. Its rapid accumulation in so profitable an
employment enables the planter to increase the number of his hands faster
than he can find them in a new settlement. Those whom he can find,
therefore, are very liberally rewarded. As the colony increases, the profits
of stock gradually diminish. When the most fertile and best situated lands
have been all occupied, less profit can be made by the cultivation of what
is inferior both in soil and situation, and less interest can be afforded
for the stock which is so employed. In the greater part of our colonies,
accordingly, both the legal and the market rate of interest have been
considerably reduced during the course of the present century. As riches,
improvement, and population, have increased, interest has declined. The
wages of labour do not sink with the profits of stock. The demand for labour
increases with the increase of stock, whatever be its profits; and after
these are diminished, stock may not only continue to increase, but to
increase much faster than before. It is with industrious nations, who are
advancing in the acquisition of riches, as with industrious individuals. A
great stock, though with small profits, generally increases faster than a
small stock with great profits. Money, says the proverb, makes money. When
you have got a little, it is often easy to get more. The great difficulty is
to get that little. The connection between the increase of stock and that of
industry, or of the demand for useful labour, has partly been explained
already, but will be explained more fully hereafter, in treating of the
accumulation of stock.
The acquisition of new territory, or of new branches of trade, may sometimes
raise the profits of stock, and with them the interest of money, even in a
country which is fast advancing in the acquisition of riches. The stock of
the country, not being sufficient for the whole accession of business which
such acquisitions present to the different people among whom it is divided,
is applied to those particular branches only which afford the greatest
profit. Part of what had before been employed in other trades, is
necessarily withdrawn from them, and turned into some of the new and more
profitable ones. In all those old trades, therefore, the competition comes
to be Jess than before. The market comes to be less fully supplied with many
different sorts of goods. Their price necessarily rises more or less, and
yields a greater profit to those who deal in them, who can, therefore,
afford to borrow at a higher interest. For some time after the conclusion of
the late war, not only private people of the best credit, but some of the
greatest companies in London, commonly borrowed at five per cent. who,
before that, had not been used to pay more than four, and four and a half
per cent. The great accession both of territory and trade by our
acquisitions in North America and the West Indies, will sufficiently account
for this, without supposing any diminution in the capital stock of the
society. So great an accession of new business to be carried on by the old
stock, must necessarily have diminished the quantity employed in a great
number of particular branches, in which the competition being less, the
profits must have been greater. I shall hereafter have occasion to mention
the reasons which dispose me to believe that the capital stock of Great
Britain was not diminished, even by the enormous expense of the late war.
The diminution of the capital stock of the society, or of the funds destined
for the maintenance of industry, however, as it lowers the wages of labour,
so it raises the profits of stock, and consequently the interest of money.
By the wages of labour being lowered, the owners of what stock remains in
the society can bring their goods at less expense to market than before ;
and less stock being employed in supplying the market than before, they can
sell them dearer. Their goods cost them less, and they get more for them.
Their profits, therefore, being augmented at both ends, can well afford a
large interest. The great fortunes so suddenly and so easily acquired in
Bengal and the other British settlements in the East Indies, may satisfy us,
that as the wages of labour are very low, so the profits of stock are very
high in those ruined countries. The interest of money is proportionably so.
In Bengal, money is frequently lent to the farmers at forty, fifty, and
sixty per cent. and the succeeding crop is mortgaged for the payment. As the
profits which can afford such an interest must eat up almost the whole rent
of the landlord, so such enormous usury must in its turn eat up the greater
part of those profits. Before the fall of the Roman republic, a usury of the
same kind seems to have been common in the provinces, under the ruinous
administration of their proconsuls. The virtuous Brutus lent money in Cyprus
at eight-and-forty per cent. as we learn from the letters of Cicero.
In a country which had acquired that full complement of riches which the
nature of its soil and climate, and its situation with respect to other
countries, allowed it to acquire, which could, therefore, advance no
further, and which was not going backwards, both the wages of labour and the
profits of stock would probably be very low. In a country fully peopled in
proportion to what either its territory could maintain, or its stock employ,
the competition for employment would necessarily be so great as to reduce
the wages of labour to what was barely sufficient to keep up the number of
labourers, and the country being already fully peopled, that number could
never be augmented. In a country fully stocked in proportion to all the
business it had to transact, as great a quantity of stock would be employed
in every particular branch as the nature and extent of the trade would
admit. The competition, therefore, would everywhere be as great, and,
consequently, the ordinary profit as low as possible.
But, perhaps, no country has ever yet arrived at this degree of opulence.
China seems to have been long stationary, and had, probably, long ago
acquired that full complement of riches which is consistent with the nature
of its laws and institutions. But this complement may be much inferior to
what, with other laws and institutions, the nature of its soil, climate, and
situation, might admit of. A country which neglects or despises foreign
commerce, and which admits the vessel of foreign nations into one or two of
its ports only, cannot transact the same quantity of business which it might
do with different laws and institutions. In a country, too, where, though
the rich, or the owners of large capitals, enjoy a good deal of security,
the poor, or the owners of small capitals, enjoy scarce any, but are liable,
under the pretence of justice, to be pillaged and plundered at any time by
the inferior mandarins, the quantity of stock employed in all the different
branches of business transacted within it, can never be equal to what the
nature and extent of that business might admit. In every different branch,
the oppression of the poor must establish the monopoly of the rich, who, by
engrossing the whole trade to themselves, will be able to make very large
profits. Twelve per cent. accordingly, is said to be the common interest of
money in China, and the ordinary profits of stock must be sufficient to
afford this large interest.
A defect in the law may sometimes raise the rate of interest considerably
above what the condition of the country, as to wealth or poverty, would
require. When the law does not enforce the performance of contracts, it puts
all borrowers nearly upon the same footing with bankrupts, or people of
doubtful credit, in better regulated countries. The uncertainty of
recovering his money makes the lender exact the same usurious interest which
is usually required from bankrupts. Among the barbarous nations who overran
the western provinces of the Roman empire, the performance of contracts was
left for many ages to the faith of the contracting parties. The courts of
justice of their kings seldom intermeddled in it. The high rate of interest
which took place in those ancient times, may, perhaps, be partly accounted
for from this cause.
When the law prohibits interest altogether, it does not prevent it. Many
people must borrow, and nobody will lend without such a consideration for
the use of their money as is suitable, not only to what can be made by the
use of it, but to the difficulty and danger of evading the law. The high
rate of interest among all Mahometan nations is accounted for by M.
Montesquieu, not from their poverty, but partly from this, and partly from
the difficulty of recovering the money.
The lowest ordinary rate of profit must always be something more than what
is sufficient to compensate the occasional losses to which every employment
of stock is exposed. It is this surplus only which is neat or clear profit.
What is called gross profit, comprehends frequently not only this surplus,
but what is retained for compensating such extraordinary losses. The
interest which the borrower can afford to pay is in proportion to the clear
profit only. The lowest ordinary rate of interest must, in the same manner,
be something more than sufficient to compensate the occasional losses to
which lending, even with tolerable prudence, is exposed. Were it not, mere
charity or friendship could be the only motives for lending.
In a country which had acquired its full complement of riches, where, in
every particular branch of business, there was the greatest quantity of
stock that could be employed in it, as the ordinary rate of clear profit
would be very small, so the usual market rate of interest which could be
afforded out of it would be so low as to render it impossible for any but
the very wealthiest people to live upon the interest of their money. All
people of small or middling fortunes would be obliged to superintend
themselves the employment of their own stocks. It would be necessary that
almost every man should be a man of business, or engage in some sort of
trade. The province of Holland seems to be approaching near to this state.
It is there unfashionable not to be a man of business. Necessity makes it
usual for almost every man to be so, and custom everywhere regulates
fashion. As it is ridiculous not to dress, so is it, in some measure, not to
be employed like other people. As a man of a civil profession seems awkward
in a camp or a garrison, and is even in some danger of being despised there,
so does an idle man among men of business.
The highest ordinary rate of profit may be such as, in the price of the
greater part of commodities, eats up the whole of what should go to the rent
of the land, and leaves only what is sufficient to pay the labour of
preparing and bringing them to market, according to the lowest rate at which
labour can anywhere be paid, the bare subsistence of the labourer. The
workman must always have been fed in some way or other while he was about
the work, but the landlord may not always have been paid. The profits of the
trade which the servants of the East India Company carry on in Bengal may
not, perhaps, be very far from this rate.
The proportion which the usual market rate of interest ought to bear to the
ordinary rate of clear profit, necessarily varies as profit rises or falls.
Double interest is in Great Britain reckoned what the merchants call a good,
moderate, reasonable profit; terms which, I apprehend, mean no more than a
common and usual profit. In a country where the ordinary rate of clear profit
is eight or ten per cent. it may be reasonable that one half of it should go
to interest, wherever business is carried on with borrowed money. The stock
is at the risk of the borrower, who, as it were, insures it to the lender ;
and four or five per cent. may, in the greater part of trades, be both a
sufficient profit upon the risk of this insurance, and a sufficient
recompence for the trouble of employing the stock. But the proportion
between interest and clear profit might not be the same in countries where
the ordinary rate of profit was either a good deal lower, or a good deal
higher. If it were a good deal lower, one half of it, perhaps, could not be
afforded for interest ; and more might be afforded if it were a good deal
higher.
In countries which are fast advancing to riches, the low rate of profit may,
in the price of many commodities, compensate the high wages of labour, and
enable those countries to sell as cheap as their less thriving neighbours,
among whom the wages of labour may be lower.
In reality, high profits tend much more to raise the price of work than high
wages. If, in the linen manufacture, for example, the wages of the different
working people, the flax-dressers, the spinners, the weavers, etc. should all
of them be advanced twopence a-day, it would be necessary to heighten the
price of a piece of linen only by a number of twopences equal to the number
of people that had been employed about it, multiplied by the number of days
during which they had been so employed. That part of the price of the
commodity which resolved itself into the wages, would, through all the
different stages of the manufacture, rise only in arithmetical proportion to
this rise of wages. But if the profits of all the different employers of
those working people should be raised five per cent. that part of the price
of the commodity which resolved itself into profit would, through all the
different stages of the manufacture, rise in geometrical proportion to this
rise of profit. The employer of the flax dressers would, in selling his
flax, require an additional five per cent. upon the whole value of the
materials and wages which he advanced to his workmen. The employer of the
spinners would require an additional five per cent. both upon the advanced
price of the flax, and upon the wages of the spinners. And the employer of
the weavers would require alike five per cent. both upon the advanced price
of the linen-yarn, and upon the wages of the weavers. In raising the price of
commodities, the rise of wages operates in the same manner as simple
interest does in the accumulation of debt. The rise of profit operates like
compound interest. Our merchants and master manufacturers complain much of
the bad effects of high wages in raising the price, and thereby lessening
the sale of their goods, both at home and abroad. They say nothing
concerning the bad effects of high profits ; they are silent with regard to
the pernicious effects of their own gains; they complain only of those of
other people.
CHAPTER X.
OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND
STOCK.
The whole of the advantages and disadvantages of the different employments of labour and
stock, must, in the same neighbourhood, be either perfectly equal, or continually tending to
equality. If, in the same neighbourhood, there was any employment evidently either more or
less advantageous than the rest, so many people would crowd into it in the one case, and so
many would desert it in the other, that its advantages would soon return to the level of other
employments. This, at least, would be the case in a society where things were left to follow
their natural course, where there was perfect liberty, and where every man was perfectly free
both to choose what occupation he thought proper, and to change it as often as he thought
proper. Every man's interest would prompt him to seek the advantageous, and to shun the
disadvantageous employment.
Pecuniary wages and profit, indeed, are everywhere in Europe extremely different, according
to the different employments of labour and stock. But this difference arises, partly from
certain circumstances in the employments themselves, which, either really, or at least in the
imagination of men, make up for a small pecuniary gain in some, and counterbalance a great
one in others, and partly from the policy of Europe, which nowhere leaves things at perfect
liberty.
The particular consideration of those circumstances, and of that policy, will divide this
Chapter into two parts.
PART I. Inequalities arising from the nature of the employments themselves.
The five following are the principal circumstances which, so far as I have been able to
observe, make up for a small pecuniary gain in some employments, and counterbalance a
great one in others. First, the agreeableness or disagreeableness of the employments
themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning
them ; thirdly, the constancy or inconstancy of employment in them ; fourthly, the small or
great trust which must be reposed in those who exercise them; and, fifthly, the probability or
improbability of success in them.
First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the
honourableness or dishonourableness, of the employment. Thus in most places, take the year
round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A
journeyman weaver earns less than a journeyman smith. His work is not always easier, but it
is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in
twelve hours, as a collier, who is only a labourer, does in eight. His work is not quite so dirty,
is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part
of the reward of all honourable professions. In point of pecuniary gain, all things considered,
they are generally under-recompensed, as I shall endeavour to shew by and by. Disgrace has
the contrary effect. The trade of a butcher is a brutal and an odious business ; but it is in most
places more profitable than the greater part of common trades. The most detestable of all
employments, that of public executioner, is, in proportion to the quantity of work done, better
paid than any common trade whatever.
Hunting and fishing, the most important employments of mankind in the rude state of society,
become, in its advanced state, their most agreeable amusements, and they pursue for pleasure
what they once followed from necessity. In the advanced state of society, therefore, they are
all very poor people who follow as a trade, what other people pursue as a pastime. Fishermen
have been so since the time of Theocritus. {See Idyllium xxi.}. A poacher is everywhere a
very poor man in Great Britain. In countries where the rigour of the law suffers no poachers,
the licensed hunter is not in a much better condition. The natural taste for those employments
makes more people follow them, than can live comfortably by them; and the produce of their
labour, in proportion to its quantity, comes always too cheap to market, to afford any thing but
the most scanty subsistence to the labourers.
Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of
labour. The keeper of an inn or tavern, who is never master of his own house, and who is
exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very
creditable business. But there is scarce any common trade in which a small stock yields so
great a profit.
Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and
expense, of learning the business.
When any expensive machine is erected, the extraordinary work to be performed by it before
it is worn out, it must be expected, will replace the capital laid out upon it, with at least the
ordinary profits. A man educated at the expense of much labour and time to any of those
employments which require extraordinary dexterity and skill, may be compared to one of
those expensive machines. The work which he learns to perform, it must be expected, over
and above the usual wages of common labour, will replace to him the whole expense of his
education, with at least the ordinary profits of an equally valuable capital. It must do this too
in a reasonable time, regard being had to the very uncertain duration of human life, in the
same manner as to the more certain duration of the machine.
The difference between the wages of skilled labour and those of common labour, is founded
upon this principle.
The policy of Europe considers the labour of all mechanics, artificers, and manufacturers, as
skilled labour ; and that of all country labourers us common labour. It seems to suppose that
of the former to be of a more nice and delicate nature than that of the latter. It is so perhaps in
some cases ; but in the greater part it is quite otherwise, as I shall endeavour to shew by and
by. The laws and customs of Europe, therefore, in order to qualify any person for exercising
the one species of labour, impose the necessity of an apprenticeship, though with different
degrees of rigour in different places. They leave the other free and open to every body. During
the continuance of the apprenticeship, the whole labour of the apprentice belongs to his
master. In the meantime he must, in many cases, be maintained by his parents or relations,
and, in almost all cases, must be clothed by them. Some money, too, is commonly given to the
master for teaching him his trade. They who cannot give money, give time, or become bound
for more than the usual number of years ; a consideration which, though it is not always
advantageous to the master, on account of the usual idleness of apprentices, is always
disadvantageous to the apprentice. In country labour, on the contrary, the labourer, while he is
employed about the easier, learns the more difficult parts of his business, and his own labour
maintains him through all the different stages of his employment. It is reasonable, therefore,
that in Europe the wages of mechanics, artificers, and manufacturers, should be somewhat
higher than those of common labourers. They are so accordingly, and their superior gains
make them, in most places, be considered as a superior rank of people. This superiority,
however, is generally very small: the daily or weekly earnings of journeymen in the more
common sorts of manufactures, such as those of plain linen and woollen cloth, computed at an
average, are, in most places, very little more than the day-wages of common labourers. Their
employment, indeed, is more steady and uniform, and the superiority of their earnings, taking
the whole year together, may be somewhat greater. It seems evidently, however, to be no
greater than what is sufficient to compensate the superior expense of their education.
Education in the ingenious arts, and in the liberal professions, is still more tedious and
expensive. The pecuniary recompence, therefore, of painters and sculptors, of lawyers and
physicians, ought to be much more liberal; and it is so accordingly.
The profits of stock seem to be very little affected by the easiness or difficulty of learning the
trade in which it is employed. All the different ways in which stock is commonly employed in
great towns seem, in reality, to be almost equally easy and equally difficult to learn. One
branch, either of foreign or domestic trade, cannot well be a much more intricate business than
another.
Thirdly, the wages of labour in different occupations vary with the constancy or inconstancy
of employment.
Employment is much more constant in some trades than in others. In the greater part of
manufactures, a journeyman maybe pretty sure of employment almost every day in the year
that he is able to work. A mason or bricklayer, on the contrary, can work neither in hard frost
nor in foul weather, and his employment at all other times depends upon the occasional calls
of his customers. He is liable, in consequence, to be frequently without any. What he earns,
therefore, while he is employed, must not only maintain him while he is idle, but make him
some compensation for those anxious and desponding moments which the thought of so
precarious a situation must sometimes occasion. Where the computed earnings of the greater
part of manufacturers, accordingly, are nearly upon a level with the day-wages of common
labourers, those of masons and bricklayers are generally from one-half more to double those
wages. Where common labourers earn four or five shillings a-week, masons and bricklayers
frequently earn seven and eight; where the former earn six, the latter often earn nine and ten ;
and where the former earn nine and ten, as in London, the latter commonly earn fifteen and
eighteen. No species of skilled labour, however, seems more easy to learn than that of masons
and bricklayers. Chairmen in London, during the summer season, are said sometimes to be
employed as bricklayers. The high wages of those workmen, therefore, are not so much the
recompence of their skill, as the compensation for the inconstancy of their employment.
A house-carpenter seems to exercise rather a nicer and a more ingenious trade than a mason.
In most places, however, for it is not universally so, his day-wages are somewhat lower. His
employment, though it depends much, does not depend so entirely upon the occasional calls
of his customers; and it is not liable to be interrupted by the weather.
When the trades which generally afford constant employment, happen in a particular place not
to do so, the wages of the workmen always rise a good deal above their ordinary proportion to
those of common labour. In London, almost all journeymen artificers are liable to be called
upon and dismissed by their masters from day to day, and from week to week, in the same
manner as day-labourers in other places. The lowest order of artificers, journeymen tailors,
accordingly, earn their half-a-crown a-day, though eighteen pence may be reckoned the wages
of common labour. In small towns and country villages, the wages of journeymen tailors
frequently scarce equal those of common labour ; but in London they are often many weeks
without employment, particularly during the summer.
When the inconstancy of employment is combined with the hardship, disagreeableness, and
dirtiness of the work, it sometimes raises the wages of the most common labour above those
of the most skilful artificers. A collier working by the piece is supposed, at Newcastle, to earn
commonly about double, and, in many parts of Scotland, about three times, the wages of
common labour. His high wages arise altogether from the hardship, disagreeableness, and
dirtiness of his work. His employment may, upon most occasions, be as constant as he
pleases. The coal-heavers in London exercise a trade which, in hardship, dirtiness, and
disagreeableness, almost equals that of colliers ; and, from the unavoidable irregularity in the
arrivals of coal-ships, the employment of the greater part of them is necessarily very
inconstant. If colliers, therefore, commonly earn double and triple the wages of common
labour, it ought not to seem unreasonable that coal-heavers should sometimes earn four and
five times those wages. In the inquiry made into their condition a few years ago, it was found
that, at the rate at which they were then paid, they could earn from six to ten shillings a-day.
Six shillings are about four times the wages of common labour in London; and, in every
particular trade, the lowest common earnings may always be considered as those of the far
greater number. How extravagant soever those earnings may appear, if they were more than
sufficient to compensate all the disagreeable circumstances of the business, there would soon
be so great a number of competitors, as, in a trade which has no exclusive privilege, would
quickly reduce them to a lower rate.
The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any
particular trade. Whether the stock is or is not constantly employed, depends, not upon the
trade, but the trader.
Fourthly, the wages of labour vary according to the small or great trust which must be reposed
in the workmen.
The wages of goldsmiths and jewellers are everywhere superior to those of many other
workmen, not only of equal, but of much superior ingenuity, on account of the precious
materials with which they are entrusted. We trust our health to the physician, our fortune, and
sometimes our life and reputation, to the lawyer and attorney. Such confidence could not
safely be reposed in people of a very mean or low condition. Their reward must be such,
therefore, as may give them that rank in the society which so important a trust requires. The
long time and the great expense which must be laid out in their education, when combined
with this circumstance, necessarily enhance still further the price of their labour.
When a person employs only his own stock in trade, there is no trust; and the credit which he
may get from other people, depends, not upon the nature of the trade, but upon their opinion
of his fortune, probity and prudence. The different rates of profit, therefore, in the different
branches of trade, cannot arise from the different degrees of trust reposed in the traders.
Fifthly, the wages of labour in different employments vary according to the probability or
improbability of success in them.
The probability that any particular person shall ever be qualified for the employments to
which he is educated, is very different in different occupations. In the greatest part of
mechanic trades success is almost certain; but very uncertain in the liberal professions. Put
your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of
shoes; but send him to study the law, it as at least twenty to one if he ever makes such
proficiency as will enable him to live by the business. In a perfectly fair lottery, those who
draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession,
where twenty fail for one that succeeds, that one ought to gain all that should have been
gained by the unsuccessful twenty. The counsellor at law, who, perhaps, at near forty years of
age, begins to make something by his profession, ought to receive the retribution, not only of
his own so tedious and expensive education, but of that of more than twenty others, who are
never likely to make any thing by it. How extravagant soever the fees of counsellors at law
may sometimes appear, their real retribution is never equal to this. Compute, in any particular
place, what is likely to be annually gained, and what is likely to be annually spent, by all the
different workmen in any common trade, such as that of shoemakers or weavers, and you will
find that the former sum will generally exceed the latter. But make the same computation with
regard to all the counsellors and students of law, in all the different Inns of Court, and you
will find that their annual gains bear but a very small proportion to their annual expense, even
though you rate the former as high, and the latter as low, as can well be done. The lottery of
the law, therefore, is very far from being a perfectly fair lottery ; and that as well as many
other liberal and honourable professions, is, in point of pecuniary gain, evidently
under-recompensed.
Those professions keep their level, however, with other occupations ; and,
notwithstanding these discouragements, all the most generous and liberal spirits are eager to
crowd into them. Two different causes contribute to recommend them. First, the desire of the
reputation which attends upon superior excellence in any of them ; and, secondly, the natural
confidence which every man has, more or less, not only in his own abilities, but in his own
good fortune.
To excel in any profession, in which but few arrive at mediocrity, it is the most decisive mark
of what is called genius, or superior talents. The public admiration which attends upon such
distinguished abilities makes always a part of their reward; a greater or smaller, in proportion
as it is higher or lower in degree. It makes a considerable part of that reward in the profession
of physic ; a still greater, perhaps, in that of law; in poetry and philosophy it makes almost the
whole.
There are some very agreeable and beautiful talents, of which the possession commands a
certain sort of admiration, but of which the exercise, for the sake of gain, is considered,
whether from reason or prejudice, as a sort of public prostitution. The pecuniary recompence,
therefore, of those who exercise them in this manner, must be sufficient, not only to pay for
the time, labour, and expense of acquiring the talents, but for the discredit which attends the
employment of them as the means of subsistence. The exorbitant rewards of players,
opera-singers, opera-dancers, etc. are founded upon those two principles ; the rarity and
beauty of the talents, and the discredit of employing them in this manner. It seems absurd at
first sight, that we should despise their persons, and yet reward their talents with the most
profuse liberality. While we do the one, however, we must of necessity do the other, Should
the public opinion or prejudice ever alter with regard to such occupations, their pecuniary
recompence would quickly diminish. More people would apply to them, and the competition
would quickly reduce the price of their labour. Such talents, though far from being common,
are by no means so rare as imagined. Many people possess them in great perfection, who
disdain to make this use of them; and many more are capable of acquiring them, if any thing
could be made honourably by them.
The over-weening conceit which the greater part of men have of their own abilities, is an
ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption
in their own good fortune has been less taken notice of. It is, however, if possible, still more
universal. There is no man living, who, when in tolerable health and spirits, has not some
share of it. The chance of gain is by every man more or less over-valued, and the chance of
loss is by most men under-valued, and by scarce any man, who is in tolerable health and
spirits, valued more than it is worth.
That the chance of gain is naturally overvalued, we may learn from the universal success of
lotteries. The world neither ever saw, nor ever will see, a perfectly fair lottery, or one in which
the whole gain compensated the whole loss; because the undertaker could make nothing by it.
In the state lotteries, the tickets are really not worth the price which is paid by the original
subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per
cent. advance. The vain hopes of gaining some of the great prizes is the sole cause of this
demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance
of gaining ten or twenty thousand pounds, though they know that even that small sum is
perhaps twenty or thirty per cent. more than the chance is worth. In a lottery in which no prize
exceeded twenty pounds, though in other respects it approached much nearer to a perfectly
fair one than the common state lotteries, there would not be the same demand for tickets. In
order to have a better chance for some of the great prizes, some people purchase several
tickets ; and others, small shares in a still greater number. There is not, however, a more
certain proposition in mathematics, than that the more tickets you adventure upon, the more
likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for
certain ; and the greater the number of your tickets, the nearer you approach to this certainty.
That the chance of loss is frequently undervalued, and scarce ever valued more than it is
worth, we may learn from the very moderate profit of insurers. In order to make insurance,
either from fire or sea-risk, a trade at all, the common premium must be sufficient to
compensate the common losses, to pay the expense of management, and to afford such a profit
as might have been drawn from an equal capital employed in any common trade. The person
who pays no more than this, evidently pays no more than the real value of the risk, or the
lowest price at which he can reasonably expect to insure it. But though many people have
made a little money by insurance, very few have made a great fortune; and, from this
consideration alone, it seems evident enough that the ordinary balance of profit and loss is not
more advantageous in this than in other common trades, by which so many people make
fortunes. Moderate, however, as the premium of insurance commonly is, many people despise
the risk too much to care to pay it. Taking the whole kingdom at an average, nineteen houses
in twenty, or rather, perhaps, ninety-nine in a hundred, are not insured from fire. Sea-risk is
more alarming to the greater part of people ; and the proportion of ships insured to those not
insured is much greater. Many sail, however, at all seasons, and even in time of war,
without any insurance. This may sometimes, perhaps, be done without any imprudence. When
a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it
were, insure one another. The premium saved up on them all may more than compensate such
losses as they are likely to meet with in the common course of chances. The neglect of
insurance upon shipping, however, in the same manner as upon houses, is, in most cases, the
effect of no such nice calculation, but of mere thoughtless rashness, and presumptuous
contempt of the risk.
The contempt of risk, and the presumptuous hope of success, are in no period of life more
active than at the age at which young people choose their professions. How little the fear of
misfortune is then capable of balancing the hope of good luck, appears still more evidently in
the readiness of the common people to enlist as soldiers, or to go to sea, than in the eagerness
of those of better fashion to enter into what are called the liberal professions.
What a common soldier may lose is obvious enough. Without regarding the danger, however,
young volunteers never enlist so readily as at the beginning of a new war ; and though they
have scarce any chance of preferment, they figure to themselves, in their youthful fancies, a
thousand occasions of acquiring honour and distinction which never occur. These romantic
hopes make the whole price of their blood. Their pay is less than that of common labourers,
and, in actual service, their fatigues are much greater.
The lottery of the sea is not altogether so disadvantageous as that of the army. The son of a
creditable labourer or artificer may frequently go to sea with his father's consent ; but if he
enlists as a soldier, it is always without it. Other people see some chance of his making
something by the one trade; nobody but himself sees any of his making any thing by the other.
The great admiral is less the object of public admiration than the great general ; and the
highest success in the sea service promises a less brilliant fortune and reputation than equal
success in the land. The same difference runs through all the inferior degrees of preferment in
both. By the rules of precedency, a captain in the navy ranks with a colonel in the army ; but
he does not rank with him in the common estimation. As the great prizes in the lottery are
less, the smaller ones must be more numerous. Common sailors, therefore, more frequently
get some fortune and preferment than common soldiers ; and the hope of those prizes is what
principally recommends the trade. Though their skill and dexterity are much superior to that
of almost any artificers; and though their whole life is one continual scene of hardship and
danger ; yet for all this dexterity and skill, for all those hardships and dangers, while they
remain in the condition of common sailors, they receive scarce any other recompence but the
pleasure of exercising the one and of surmounting the other. Their wages are not greater
than those of common labourers at the port which regulates the rate of seamen's wages. As
they are continually going from port to port, the monthly pay of those who sail from all the
different ports of Great Britain, is more nearly upon a level than that of any other workmen in
those different places ; and the rate of the port to and from which the greatest number sail, that
is, the port of London, regulates that of all the rest. At London, the wages of the greater part of
the different classes of workmen are about double those of the same classes at Edinburgh. But
the sailors who sail from the port of London, seldom earn above three or four shillings a
month more than those who sail from the port of Leith, and the difference is frequently not so
great. In time of peace, and in the merchant-service, the London price is from a guinea to
about seven-and-twenty shillings the calendar month. A common labourer in London, at the
rate of nine or ten shillings a week, may earn in the calendar month from forty to
five-and-forty shillings. The sailor, indeed, over and above his pay, is supplied with
provisions. Their value, however, may not perhaps always exceed the difference between his
pay and that of the common labourer ; and though it sometimes should, the excess will not be
clear gain to the sailor, because he cannot share it with his wife and family, whom he must
maintain out of his wages at home.
The dangers and hair-breadth escapes of a life of adventures, instead of disheartening young
people, seem frequently to recommend a trade to them. A tender mother, among the inferior
ranks of people, is often afraid to send her son to school at a sea-port town, lest the sight of
the ships, and the conversation and adventures of the sailors, should entice him to go to sea.
The distant prospect of hazards, from which we can hope to extricate ourselves by courage
and address, is not disagreeable to us, and does not raise the wages of labour in any
employment. It is otherwise with those in which courage and address can be of no avail. In
trades which are known to be very unwholesome, the wages of labour are always remarkably
high. Unwholesomeness is a species of disagreeableness, and its effects upon the wages of
labour are to be ranked under that general head.
In all the different employments of stock, the ordinary rate of profit varies more or less with
the certainty or uncertainty of the returns. These are, in general, less uncertain in the inland
than in the foreign trade, and in some branches of foreign trade than in others ; in the trade to
North America, for example, than in that to Jamaica. The ordinary rate of profit always rises
more or less with the risk. it does not, however, seem to rise in proportion to it, or so as to
compensate it completely. Bankruptcies are most frequent in the most hazardous trades. The
most hazardous of all trades, that of a smuggler, though, when the adventure succeeds, it is
likewise the most profitable, is the infallible road to bankruptcy. The presumptuous hope of
success seems to act here as upon all other occasions, and to entice so many adventurers into
those hazardous trades, that their competition reduces the profit below what is sufficient to
compensate the risk. To compensate it completely, the common returns ought, over and above
the ordinary profits of stock, not only to make up for all occasional losses, but to afford a
surplus profit to the adventurers, of the same nature with the profit of insurers. But if the
common returns were sufficient for all this, bankruptcies would not be more frequent in these
than in other trades.
Of the five circumstances, therefore, which vary the wages of labour, two only affect the
profits of stock ; the agreeableness or disagreeableness of the business, and the risk or security
with which it is attended. In point of agreeableness or disagreeableness, there is little or no
difference in the far greater part of the different employments of stock, but a great deal in
those of labour ; and the ordinary profit of stock, though it rises with the risk, does not always
seem to rise in proportion to it. It should follow from all this, that, in the same society or
neighbourhood, the average and ordinary rates of profit in the different employments of stock
should he more nearly upon a level than the pecuniary wages of the different sorts of labour.
They are so accordingly. The difference between the earnings of a common labourer and those
of a well employed lawyer or physician, is evidently much greater than that between the
ordinary profits in any two different branches of trade. The apparent difference, besides, in the
profits of different trades, is generally a deception arising from our not always distinguishing
what ought to be considered as wages, from what ought to be considered as profit.
Apothecaries' profit is become a bye-word, denoting something uncommonly extravagant.
This great apparent profit, however, is frequently no more than the reasonable wages of
labour. The skill of an apothecary is a much nicer and more delicate matter than that of any
artificer whatever ; and the trust which is reposed in him is of much greater importance. He is
the physician of the poor in all cases, and of the rich when the distress or danger is not very
great. His reward, therefore, ought to be suitable to his skill and his trust ; and it arises
generally from the price at which he sells his drugs. But the whole drugs which the best
employed apothecary in a large market-town, will sell in a year, may not perhaps cost him
above thirty or forty pounds. Though he should sell them, therefore, for three or four hundred,
or at a thousand per cent. profit, this may frequently be no more than the reasonable wages of
his labour, charged, in the only way in which he can charge them, upon the price of his drugs.
The greater part of the apparent profit is real wages disguised in the garb of profit.
In a small sea-port town, a little grocer will make forty or fifty per cent. upon a stock of a
single hundred pounds, while a considerable wholesale merchant in the same place will scarce
make eight or ten per cent. upon a stock of ten thousand. The trade of the grocer may be
necessary for the conveniency of the inhabitants, and the narrowness of the market may not
admit the employment of a larger capital in the business. The man, however, must not only
live by his trade, but live by it suitably to the qualifications which it requires. Besides
possessing a little capital, he must be able to read, write, and account and must be a tolerable
judge, too, of perhaps fifty or sixty different sorts of goods, their prices, qualities, and the
markets where they are to be had cheapest. He must have all the knowledge, in short, that is
necessary for a great merchant, which nothing hinders him from becoming but the want of a
sufficient capital. Thirty or forty pounds a year cannot be considered as too great a
recompence for the labour of a person so accomplished. Deduct this from the seemingly great
profits of his capital, and little more will remain, perhaps, than the ordinary profits of stock.
The greater part of the apparent profit is, in this case too, real wages.
The difference between the apparent profit of the retail and that of the wholesale trade, is
much less in the capital than in small towns and country villages. Where ten thousand pounds
can be employed in the grocery trade, the wages of the grocer's labour must be a very trifling
addition to the real profits of so great a stock. The apparent profits of the wealthy retailer,
therefore, are there more nearly upon a level with those of the wholesale merchant. It is upon
this account that goods sold by retail are generally as cheap, and frequently much cheaper, in
the capital than in small towns and country villages. Grocery goods, for example, are
generally much cheaper ; bread and butchers' meat frequently as cheap. It costs no more to
bring grocery goods to the great town than to the country village ; but it costs a great deal
more to bring corn and cattle, as the greater part of them must be brought from a much greater
distance. The prime cost of grocery goods, therefore, being the same in both places, they are
cheapest where the least profit is charged upon them. The prime cost of bread and butchers'
meat is greater in the great town than in the country village; and though the profit is less,
therefore they are not always cheaper there, but often equally cheap. In such articles as bread
and butchers' meat, the same cause which diminishes apparent profit, increases prime cost.
The extent of the market, by giving employment to greater stocks, diminishes apparent profit;
but by requiring supplies from a greater distance, it increases prime cost. This diminution of
the one and increase of the other, seem, in most cases, nearly to counterbalance one another ;
which is probably the reason that, though the prices of corn and cattle are commonly very
different in different parts of the kingdom, those of bread and butchers' meat are generally
very nearly the same through the greater part of it.
Though the profits of stock, both in the wholesale and retail trade, are generally less in the
capital than in small towns and country villages, yet great fortunes are frequently acquired
from small beginnings in the former, and scarce ever in the latter. In small towns and country
villages, on account of the narrowness of the market, trade cannot always be extended as stock
extends. In such places, therefore, though the rate of a particular person's profits may be very
high, the sum or amount of them can never be very great, nor consequently that of his annual
accumulation. In great towns, on the contrary, trade can be extended as stock increases, and
the credit of a frugal and thriving man increases much faster than his stock. His trade is
extended in proportion to the amount of both ; and the sum or amount of his profits is in
proportion to the extent of his trade, and his annual accumulation in proportion to the amount
of his profits. It seldom happens, however, that great fortunes are made, even in great towns,
by any one regular, established, and well-known branch of business, but in consequence of a
long life of industry, frugality, and attention. Sudden fortunes, indeed, are sometimes made in
such places, by what is called the trade of speculation. The speculative merchant exercises no
one regular, established, or well-known branch of business. He is a corn merchant this year,
and a wine merchant the next, and a sugar, tobacco, or tea merchant the year after. He enters
into every trade, when he foresees that it is likely to lie more than commonly profitable, and
he quits it when he foresees that its profits are likely to return to the level of other trades. His
profits and losses, therefore, can bear no regular proportion to those of any one established
and well-known branch of business. A bold adventurer may sometimes acquire a considerable
fortune by two or three successful speculations, but is just as likely to lose one by two or three
unsuccessful ones. This trade can be carried on nowhere but in great towns. It is only in places
of the most extensive commerce and correspondence that the intelligence requisite for it can
be had.
The five circumstances above mentioned, though they occasion considerable inequalities in
the wages of labour and profits of stock, occasion none in the whole of the advantages and
disadvantages, real or imaginary, of the different employments of either. The nature of those
circumstances is such, that they make up for a small pecuniary gain in some, and
counterbalance a great one in others.
In order, however, that this equality may take place in the whole of their advantages or
disadvantages, three things are requisite, even where there is the most perfect freedom. First
the employments must be well known and long established in the neighbourhood; secondly,
they must be in their ordinary, or what may be called their natural state ; and, thirdly, they
must be the sole or principal employments of those who occupy them.
First, This equality can take place only in those employments which are well known, and have
been long established in the neighbourhood.
Where all other circumstances are equal, wages are generally higher in new than in old trades.
When a projector attempts to establish a new manufacture, he must at first entice his workmen
from other employments, by higher wages than they can either earn in their own trades, or
than the nature of his work would otherwise require ; and a considerable time must pass away
before he can venture to reduce them to the common level. Manufactures for which the
demand arises altogether from fashion and fancy, are continually changing, and seldom last
long enough to be considered as old established manufactures. Those, on the contrary, for
which the demand arises chiefly from use or necessity, are less liable to change, and the same
form or fabric may continue in demand for whole centuries together. The wages of labour,
therefore, are likely to be higher in manufactures of the former, than in those of the latter kind.
Birmingham deals chiefly in manufactures of the former kind ; Sheffield in those of the latter ;
and the wages of labour in those two different places are said to be suitable to this difference
in the nature of their manufactures.
The establishment of any new manufacture, of any new branch of commerce, or of any new
practice in agriculture, is always a speculation from which the projector promises himself
extraordinary profits. These profits sometimes are very great, and sometimes, more
frequently, perhaps, they are quite otherwise ; but, in general, they bear no regular proportion
to those of other old trades in the neighbourhood. If the project succeeds, they are commonly
at first very high. When the trade or practice becomes thoroughly established and well known,
the competition reduces them to the level of other trades.
Secondly, this equality in the whole of the advantages and disadvantages of the different
employments of labour and stock, can take place only in the ordinary, or what may be called
the natural state of those employments.
The demand for almost every different species of labour is sometimes greater, and sometimes
less than usual. In the one case, the advantages of the employment rise above, in the other
they fall below the common level. The demand for country labour is greater at hay-time and
harvest than during the greater part of the year ; and wages rise with the demand. In time of
war, when forty or fifty thousand sailors are forced from the merchant service into that of the
king, the demand for sailors to merchant ships necessarily rises with their scarcity ; and their
wages, upon such occasions, commonly rise from a guinea and seven-and-twenty shillings to
forty shilling's and three pounds a-month. In a decaying manufacture, on the contrary, many
workmen, rather than quit their own trade, are contented with smaller wages than would
otherwise be suitable to the nature of their employment.
The profits of stock vary with the price of the commodities in which it is employed. As the
price of any commodity rises above the ordinary or average rate, the profits of at least some
part of the stock that is employed in bringing it to market, rise above their proper level, and as
it falls they sink below it. All commodities are more or less liable to variations of price, but
some are much more so than others. In all commodities which are produced by human
industry, the quantity of industry annually employed is necessarily regulated by the annual
demand, in such a manner that the average annual produce may, as nearly as possible, be
equal to the average annual consumption. In some employments, it has already been observed,
the same quantity of industry will always produce the same, or very nearly the same quantity
of commodities. In the linen or woollen manufactures, for example, the same number of hands
will annually work up very nearly the same quantity of linen and woollen cloth. The
variations in the market price of such commodities, therefore, can arise only from some
accidental variation in the demand. A public mourning raises the price of black cloth. But as
the demand for most sorts of plain linen and woollen cloth is pretty uniform. so is likewise the
price. But there are other employments in which the same quantity of industry will not always
produce the same quantity of commodities. The same quantity of industry, for example, will,
in different years, produce very different quantities of corn, wine, hops, sugar tobacco, etc.
The price of such commodities, therefore, varies not only with the variations of demand, but
with the much greater and more frequent variations of quantity, and is consequently extremely
fluctuating; but the profit of some of the dealers must necessarily fluctuate with the price of
the commodities. The operations of the speculative merchant are principally employed about
such commodities. He endeavours to buy them up when he foresees that their price is likely to
rise, and to sell them when it is likely to fall.
Thirdly, this equality in the whole of the advantages and disadvantages of the different
employments of labour and stock, can take place only in such as are the sole or principal
employments of those who occupy them.
When a person derives his subsistence from one employment, which does not occupy the
greater part of his time, in the intervals of his leisure he is often willing to work at another for
less wages than would otherwise suit the nature of the employment.
There still subsists, in many parts of Scotland, a set of people called cottars or cottagers,
though they were more frequent some years ago than they are now. They are a sort of
out-servants of the landlords and farmers. The usual reward which they receive from their
master is a house, a small garden for pot-herbs, as much grass as will feed a cow, and,
perhaps, an acre or two of bad arable land. When their master has occasion for their labour, he
gives them, besides, two pecks of oatmeal a-week, worth about sixteen pence sterling. During
a great part of the year, he has little or no occasion for their labour, and the cultivation of their
own little possession is not sufficient to occupy the time which is left at their own disposal.
When such occupiers were more numerous than they are at present, they are said to have been
willing to give their spare time for a very small recompence to any body, and to have wrought
for less wages than other labourers. In ancient times, they seem to have been common all
over Europe. In countries ill cultivated, and worse inhabited, the greater part of landlords and
farmers could not otherwise provide themselves with the extraordinary number of hands
which country labour requires at certain seasons. The daily or weekly recompence which such
labourers occasionally received from their masters, was evidently not the whole price of their
labour. Their small tenement made a considerable part of it. This daily or weekly recompence,
however, seems to have been considered as the whole of it, by many writers who have
collected the prices of labour and provisions in ancient times, and who have taken pleasure in
representing both as wonderfully low.
The produce of such labour comes frequently cheaper to market than would otherwise be
suitable to its nature. Stockings, in many parts of Scotland, are knit much cheaper than they
can anywhere be wrought upon the loom. They are the work of servants and labourers who
derive the principal part of their subsistence from some other employment. More than a
thousand pair of Shetland stockings are annually imported into Leith, of which the price is
from fivepence to seven-pence a pair. At Lerwick, the small capital of the Shetland islands,
tenpence a-day, I have been assured, is a common price of common labour. In the same
islands, they knit worsted stockings to the value of a guinea a pair and upwards.
The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of
stockings, by servants, who are chiefly hired for other purposes. They earn but a very scanty
subsistence, who endeavour to get their livelihood by either of those trades. In most parts of
Scotland, she is a good spinner who can earn twentypence a-week.
In opulent countries, the market is generally so extensive, that any one trade is sufficient to
employ the whole labour and stock of those who occupy it. Instances of people living by one
employment, and, at the same time, deriving some little advantage from another, occur
chiefly in pour countries. The following instance, however, of something of the same kind, is
to be found in the capital of a very rich one. There is no city in Europe, I believe, in which
house-rent is dearer than in London, and yet I know no capital in which a furnished apartment
can be hired so cheap. Lodging is not only much cheaper in London than in Paris; it is much
cheaper than in Edinburgh, of the same degree of goodness ; and, what may seem
extraordinary, the dearness of house-rent is the cause of the cheapness of lodging. The
dearness of house-rent in London arises, not only from those causes which render it dear in all
great capitals, the dearness of labour, the dearness of all the materials of building, which must
generally be brought from a great distance, and, above all, the dearness of ground-rent, every
landlord acting the part of a monopolist, and frequently exacting a higher rent for a single acre
of bad land in a town, than can be had for a hundred of the best in the country; but it arises in
part from the peculiar manners and customs of the people, which oblige every master of a
family to hire a whole house from top to bottom. A dwelling-house in England means every
thing that is contained under the same roof. In France, Scotland, and many other parts of
Europe, it frequently means no more than a single storey. A tradesman in London is obliged to
hire a whole house in that part of the town where his customers live. His shop is upon the
ground floor, and he and his family sleep in the garret ; and he endeavours to pay a part of his
house-rent by letting the two middle storeys to lodgers. He expects to maintain his family by
his trade, and not by his lodgers. Whereas at Paris and Edinburgh, people who let lodgings
have commonly no other means of subsistence ; and the price of the lodging must pay, not
only the rent of the house, but the whole expense of the family.
PART II. ˜ Inequalities occasioned by the Policy of Europe.
Such are the inequalities in the whole of the advantages and disadvantages of the different
employments of labour and stock, which the defect of any of the three requisites above
mentioned must occasion, even where there is the most perfect liberty. But the policy of
Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater
importance.
It does this chiefly in the three following ways. First, by restraining the competition in some
employments to a smaller number than would otherwise be disposed to enter into them ;
secondly, by increasing it in others beyond what it naturally would be; and, thirdly, by
obstructing the free circulation of labour and stock, both from employment to employment,
and from place to place.
First, The policy of Europe occasions a very important inequality in the whole of the
advantages and disadvantages of the different employments of labour and stock, by restraining
the competition in some employments to a smaller number than might otherwise be disposed
to enter into them.
The exclusive privileges of corporations are the principal means it makes use of for this
purpose.
The exclusive privilege of an incorporated trade necessarily restrains the competition, in the
town where it is established, to those who are free of the trade. To have served an
apprenticeship in the town, under a master properly qualified, is commonly the necessary
requisite for obtaining this freedom. The bye-laws of the corporation regulate sometimes the
number of apprentices which any master is allowed to have, and almost always the number of
years which each apprentice is obliged to serve. The intention of both regulations is to restrain
the competition to a much smaller number than might otherwise be disposed to enter into the
trade. The limitation of the number of apprentices restrains it directly. A long term of
apprenticeship restrains it more indirectly, but as effectually, by increasing the expense of
education.
In Sheffield, no master cutler can have more than one apprentice at a time, by a bye-law of the
corporation. In Norfolk and Norwich, no master weaver can have more than two apprentices,
under pain of forfeiting five pounds a-month to the king. No master hatter can have more than
two apprentices anywhere in England, or in the English plantations, under pain of forfeiting;
five pounds a-month, half to the king, and half to him who shall sue in any court of record.
Both these regulations, though they have been confirmed by a public law of the kingdom, are
evidently dictated by the same corporation-spirit which enacted the bye-law of Sheffield. The
silk-weavers in London had scarce been incorporated a year, when they enacted a bye-law,
restraining any master from having more than two apprentices at a time. It required a
particular act of parliament to rescind this bye-law.
Seven years seem anciently to have been, all over Europe, the usual term established for the
duration of apprenticeships in the greater part of incorporated trades. All such incorporations
were anciently called universities, which, indeed, is the proper Latin name for any
incorporation whatever. The university of smiths, the university of tailors, etc. are expressions
which we commonly meet with in the old charters of ancient towns. When those particular
incorporations, which are now peculiarly called universities, were first established, the term of
years which it was necessary to study, in order to obtain the degree of master of arts, appears
evidently to have been copied from the term of apprenticeship in common trades, of which the
incorporations were much more ancient. As to have wrought seven years under a master
properly qualified, was necessary, in order to entitle my person to become a master, and to
have himself apprentices in a common trade ; so to have studied seven years under a master
properly qualified. was necessary to entitle him to become a master, teacher, or doctor (words
anciently synonymous), in the liberal arts, and to have scholars or apprentices (words likewise
originally synonymous) to study under him.
By the 5th of Elizabeth, commonly called the Statute of Apprenticeship, it was enacted, that
no person should, for the future, exercise any trade, craft, or mystery, at that time exercised in
England, unless he had previously served to it an apprenticeship of seven years at least ; and
what before had been the bye-law of many particular corporations, became in England the
general and public law of all trades carried on in market towns. For though the words of the
statute are very general, and seem plainly to include the whole kingdom, by interpretation its
operation has been limited to market towns; it having been held that, in country villages, a
person may exercise several different trades, though he has not served a seven years
apprenticeship to each, they being necessary for the conveniency of the inhabitants, and the
number of people frequently not being sufficient to supply each with a particular set of hands.
By a strict interpretation of the words, too, the operation of this statute has been limited to
those trades which were established in England before the 5th of Elizabeth, and has never
been extended to such as have been introduced since that time. This limitation has given
occasion to several distinctions, which, considered as rules of police, appear as foolish as can
well be imagined. It has been adjudged, for example, that a coach-maker can neither himself
make nor employ journeymen to make his coach-wheels, but must buy them of a master
wheel-wright; this latter trade having been exercised in England before the 5th of Elizabeth.
But a wheel-wright, though he has never served an apprenticeship to a coachmaker, may
either himself make or employ journeymen to make coaches; the trade of a coachmaker not
being within the statute, because not exercised in England at the time when it was made. The
manufactures of Manchester, Birmingham, and Wolverhampton, are many of them, upon this
account, not within the statute, not having been exercised in England before the 5th of
Elizabeth.
In France, the duration of apprenticeships is different in different towns and in different
trades. In Paris, five years is the term required in a great number; but, before any person can
be qualified to exercise the trade as a master, he must, in many of them, serve five years more
as a journeyman. During this latter term, he is called the companion of his master, and the
term itself is called his companionship.
In Scotland, there is no general law which regulates universally the duration of
apprenticeships. The term is different in different corporations. Where it is long, a part of it
may generally be redeemed by paying a small fine. In most towns, too, a very small fine is
sufficient to purchase the freedom of any corporation. The weavers of linen and hempen cloth,
the principal manufactures of the country, as well as all other artificers subservient to them,
wheel-makers, reel-makers, etc. may exercise their trades in any town-corporate without
paying any fine. In all towns-corporate, all persons are free to sell butchers' meat upon any
lawful day of the week. Three years is, in Scotland, a common term of apprenticeship, even in
some very nice trades; and, in general, I know of no country in Europe, in which corporation
laws are so little oppressive.
The property which every man has in his own labour, as it is the original foundation of all
other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the
strength and dexterity of his hands ; and to hinder him from employing this strength and
dexterity in what manner he thinks proper, without injury to his neighbour. is a plain violation
of this most sacred property. It is a manifest encroachment upon the just liberty, both of the
workman, and of those who might be disposed to employ him. As it hinders the one from
working at what he thinks proper, so it hinders the others from employing whom they think
proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of
the employers, whose interest it so much concerns. The affected anxiety of the lawgiver, lest
they should employ an improper person, is evidently as impertinent as it is oppressive.
The institution of long apprenticeships can give no security that insufficient workmanship
shall not frequently be exposed to public sale. When this is done, it is generally the effect of
fraud, and not of inability ; and the longest apprenticeship can give no security against fraud.
Quite different regulations are necessary to prevent this abuse. The sterling mark upon plate,
and the stamps upon linen and woollen cloth, give the purchaser much greater security than
any statute of apprenticeship. He generally looks at these, but never thinks it worth while to
enquire whether the workman had served a seven years apprenticeship.
The institution of long apprenticeships has no tendency to form young people to industry. A
journeyman who works by the piece is likely to be industrious, because he derives a benefit
from every exertion of his industry. An apprentice is likely to be idle, and almost always is so,
because he has no immediate interest to be otherwise. In the inferior employments, the sweets
of labour consist altogether in the recompence of labour. They who are soonest in a condition
to enjoy the sweets of it, are likely soonest to conceive a relish for it, and to acquire the early
habit of industry. A young man naturally conceives an aversion to labour, when for a long
time he receives no benefit from it. The boys who are put out apprentices from public charities
are generally bound for more than the usual number of years, and they generally turn out very
idle and worthless.
Apprenticeships were altogether unknown to the ancients. The reciprocal duties of master and
apprentice make a considerable article in every modern code. The Roman law is perfectly
silent with regard to them. I know no Greek or Latin word (I might venture, I believe, to assert
that there is none) which expresses the idea we now annex to the word apprentice, a servant
bound to work at a particular trade for the benefit of a master, during a term of years, upon
condition that the master shall teach him that trade.
Long apprenticeships are altogether unnecessary. The arts, which are much superior to
common trades, such as those of making clocks and watches, contain no such mystery as to
require a long course of instruction. The first invention of such beautiful machines, indeed,
and even that of some of the instruments employed in making them, must no doubt have been
the work of deep thought and long time, and may justly be considered as among the happiest
efforts of human ingenuity. But when both have been fairly invented, and are well understood,
to explain to any young man, in the completest manner, how to apply the instruments, and
how to construct the machines, cannot well require more than the lessons of a few weeks;
perhaps those of a few days might be sufficient. In the common mechanic trades, those of a
few days might certainly be sufficient. The dexterity of hand, indeed, even in common trades,
cannot be acquired without much practice and experience. But a young man would practice
with much more diligence and attention, if from the beginning he wrought as a journeyman,
being paid in proportion to the little work which he could execute, and paying in his turn for
the materials which he might sometimes spoil through awkwardness and inexperience. His
education would generally in this way be more effectual, and always less tedious and
expensive. The master, indeed, would be a loser. He would lose all the wages of the
apprentice, which he now saves, for seven years together. In the end, perhaps, the apprentice
himself would he a loser. In a trade so easily learnt he would have more competitors, and his
wages, when he came to be a complete workman, would be much less than at present. The
same increase of competition would reduce the profits of the masters, as well as the wages of
workmen. The trades, the crafts, the mysteries, would all be losers. But the public would be a
gainer, the work of all artificers coming in this way much cheaper to market.
It is to prevent his reduction of price, and consequently of wages and profit, by restraining that
free competition which would most certainly occasion it, that all corporations, and the greater
part of corporation laws have been established. In order to erect a corporation, no other
authority in ancient times was requisite, in many parts of Europe, but that of the
town-corporate in which it was established. In England, indeed, a charter from the king was
likewise necessary. But this prerogative of the crown seems to have been reserved rather for
extorting money from the subject, than for the defence of the common liberty against such
oppressive monopolies. Upon paying a fine to the king, the charter seems generally to have
been readily granted ; and when any particular class of artificers or traders thought proper to
act as a corporation, without a charter, such adulterine guilds, as they were called, were not
always disfranchised upon that account, but obliged to fine annually to the king, for
permission to exercise their usurped privileges {See Madox Firma Burgi p. 26 etc.}. The
immediate inspection of all corporations, and of the bye-laws which they might think proper
to enact for their own government, belonged to the town-corporate in which they were
established; and whatever discipline was exercised over them, proceeded commonly, not from
the king, but from that greater incorporation of which those subordinate ones were only parts
or members.
The government of towns-corporate was altogether in the hands of traders and artificers, and it
was the manifest interest of every particular class of them, to prevent the market from being
overstocked, as they commonly express it, with their own particular species of industry; which
is in reality to keep it always understocked. Each class was eager to establish regulations
proper for this purpose, and, provided it was allowed to do so, was willing to consent that
every other class should do the same. In consequence of such regulations, indeed, each class
was obliged to buy the goods they had occasion for from every other within the town,
somewhat dearer than they otherwise might have done. But, in recompence, they were
enabled to sell their own just as much dearer ; so that, so far it was as broad as long, as they
say ; and in the dealings of the different classes within the town with one another, none of
them were losers by these regulations. But in their dealings with the country they were all
great gainers; and in these latter dealings consist the whole trade which supports and enriches
every town.
Every town draws its whole subsistence, and all the materials of its industry, from the:
country. It pays for these chiefly in two ways. First, by sending back to the country a part of
those materials wrought up and manufactured ; in which case, their price is augmented by the
wages of the workmen, and the profits of their masters or immediate employers ; secondly, by
sending to it a part both of the rude and manufactured produce, either of other countries, or of
distant parts of the same country, imported into the town; in which case, too, the original price
of those goods is augmented by the wages of the carriers or sailors, and by the profits of the
merchants who employ them. In what is gained upon the first of those branches of commerce,
consists the advantage which the town makes by its manufactures; in what is gained upon the
second, the advantage of its inland and foreign trade. The wages of the workmen, and the
profits of their different employers, make up the whole of what is gained upon both. Whatever
regulations, therefore, tend to increase those wages and profits beyond what they otherwise:
would be, tend to enable the town to purchase, with a smaller quantity of its labour, the
produce of a greater quantity of the labour of the country. They give the traders and artificers
in the town an advantage over the landlords, farmers, and labourers, in the country, and break
down that natural equality which would otherwise take place in the commerce which is
carried on between them. The whole annual produce of the labour of the society is annually
divided between those two different sets of people. By means of those regulations, a greater
share of it is given to the inhabitants of the town than would otherwise fall to them, and a less
to those of' the country.
The price which the town really pays for the provisions and materials annually imported into
it, is the quantity of manufactures and other goods annually exported from it. The dearer the
latter are sold, the cheaper the former are bought. The industry of the town becomes more, and
that of the country less advantageous.
That the industry which is carried on in towns is, everywhere in Europe, more advantageous
than that which is carried on in the country, without entering into any very nice computations,
we may satisfy ourselves by one very simple and obvious observation. In every country of
Europe, we find at least a hundred people who have acquired great fortunes, from small
beginnings, by trade and manufactures, the industry which properly belongs to towns, for one
who has done so by that which properly belongs to the country, the raising of rude produce by
the improvement and cultivation of land. Industry, therefore, must be better rewarded, the
wages of labour and the profits of stock must evidently be greater, in the one situation than in
the other. But stock and labour naturally seek the most advantageous employment. They
naturally, therefore, resort as much as they can to the town, and desert the country.
The inhabitants of a town being collected into one place, can easily combine together. The
most insignificant trades carried on in towns have, accordingly, in some place or other, been
incorporated ; and even where they have never been incorporated, yet the corporation-spirit,
the jealousy of strangers, the aversion to take apprentices, or to communicate the secret of
their trade, generally prevail in them, and often teach them, by voluntary associations and
agreements, to prevent that free competition which they cannot prohibit by bye-laws. The
trades which employ but a small number of hands, run most easily into such combinations.
Half-a-dozen wool-combers, perhaps, are necessary to keep a thousand spinners and weavers
at work. By combining not to take apprentices, they can not only engross the employment, but
reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their
labour much above what is due to the nature of their work.
The inhabitants of the country, dispersed in distant places, cannot easily combine together.
They have not only never been incorporated, but the incorporation spirit never has prevailed
among them. No apprenticeship has ever been thought necessary to qualify for husbandry, the
great trade of the country. After what are called the fine arts, and the liberal professions,
however, there is perhaps no trade which requires so great a variety of knowledge and
experience. The innumerable volumes which have been written upon it in all languages, may
satisfy us, that among the wisest and most learned nations, it has never been regarded as a
matter very easily understood. And from all those volumes we shall in vain attempt to collect
that knowledge of its various and complicated operations which is commonly possessed even
by the common farmer ; how contemptuously soever the very contemptible authors of some of
them may sometimes affect to speak of him. There is scarce any common mechanic trade, on
the contrary, of which all the operations may not be as completely and distinctly explained in
a pamphlet of a very few pages, as it is possible for words illustrated by figures to explain
them. In the history of the arts, now publishing by the French Academy of Sciences, several of
them are actually explained in this manner. The direction of operations, besides, which must
be varied with every change of the weather, as well as with many other accidents, requires
much more judgment and discretion, than that of those which are always the same, or very
nearly the same.
Not only the art of the farmer, the general direction of the operations of husbandry, but many
inferior branches of country labour require much more skill and experience than the greater
part of mechanic trades. The man who works upon brass and iron, works with instruments,
and upon materials of which the temper is always the same, or very nearly the same. But the
man who ploughs the ground with a team of horses or oxen, works with instruments of which
the health, strength, and temper, are very different upon different occasions. The condition of
the materials which he works upon, too, is as variable as that of the instruments which he
works with, and both require to be managed with much judgment and discretion. The common
ploughman, though generally regarded as the pattern of stupidity and ignorance, is seldom
defective in this judgment and discretion. He is less accustomed, indeed, to social intercourse,
than the mechanic who lives in a town. His voice and language are more uncouth, and more
difficult to be understood by those who are not used to them. His understanding, however,
being accustomed to consider a greater variety of objects, is generally much superior to that of
the other, whose whole attention, from morning till night, is commonly occupied in
performing one or two very simple operations. How much the lower ranks of people in the
country are really superior to those of the town, is well known to every man whom either
business or curiosity has led to converse much with both. In China and Indostan, accordingly,
both the rank and the wages of country labourers are said to be superior to those of the greater
part of artificers and manufacturers. They would probably be so everywhere, if corporation
laws and the corporation spirit did not prevent it.
The superiority which the industry of the towns has everywhere in Europe over that of the
country, is not altogether owing to corporations and corporation laws. It is supported by many
other regulations. The high duties upon foreign manufactures, and upon all goods imported by
alien merchants, all tend to the same purpose. Corporation laws enable the inhabitants of
towns to raise their prices, without fearing to be undersold by the free competition of their
own countrymen. Those other regulations secure them equally against that of foreigners. The
enhancement of price occasioned by both is everywhere finally paid by the landlords, farmers,
and labourers, of the country, who have seldom opposed the establishment of such
monopolies. They have commonly neither inclination nor fitness to enter into combinations;
and the clamour and sophistry of merchants and manufacturers easily persuade them, that the
private interest of a part, and of a subordinate part, of the society, is the general interest of the
whole.
In Great Britain, the superiority of the industry of the towns over that of the country seems to
have been greater formerly than in the present times. The wages of country labour approach
nearer to those of manufacturing labour, and the profits of stock employed in agriculture to
those of trading and manufacturing stock, than they are said to have none in the last century,
or in the beginning of the present. This change may be regarded as the necessary, though very
late consequence of the extraordinary encouragement given to the industry of the towns. The
stocks accumulated in them come in time to be so great, that it can no longer be employed
with the ancient profit in that species of industry which is peculiar to them. That industry has
its limits like every other ; and the increase of stock, by increasing the competition,
necessarily reduces the profit. The lowering of profit in the town forces out stock to the
country, where, by creating a new demand for country labour, it necessarily raises its wages. It
then spreads itself, if I my say so, over the face of the land, and, by being employed in
agriculture, is in part restored to the country, at the expense of which, in a great measure, it
had originally been accumulated in the town. That everywhere in Europe the greatest
improvements of the country have been owing to such over flowings of the stock originally
accumulated in the towns, I shall endeavour to shew hereafter, and at the same time to
demonstrate, that though some countries have, by this course, attained to a considerable
degree of opulence, it is in itself necessarily slow, uncertain, liable to be disturbed and
interrupted by innumerable accidents, and, in every respect, contrary to the order of nature and
of reason The interests, prejudices, laws, and customs, which have given occasion to it, I shall
endeavour to explain as fully and distinctly as I can in the third and fourth books of this
Inquiry.
People of the same trade seldom meet together, even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It
is impossible, indeed, to prevent such meetings, by any law which either could be executed, or
would be consistent with liberty and justice. But though the law cannot hinder people of the
same trade from sometimes assembling together, it ought to do nothing to facilitate such
assemblies, much less to render them necessary.
A regulation which obliges all those of the same trade in a particular town to enter their names
and places of abode in a public register, facilitates such assemblies. It connects individuals
who might never otherwise be known to one another, and gives every man of the trade a
direction where to find every other man of it.
A regulation which enables those of the same trade to tax themselves, in order to provide for
their poor, their sick, their widows and orphans, by giving them a common interest to manage,
renders such assemblies necessary.
An incorporation not only renders them necessary, but makes the act of the majority binding
upon the whole. In a free trade, an effectual combination cannot be established but by the
unanimous consent of every single trader, and it cannot last longer than every single trader
continues of the same mind. The majority of a corporation can enact a bye-law, with proper
penalties, which will limit the competition more effectually and more durably than any
voluntary combination what. ever.
The pretence that corporations are necessary for the better government of the trade, is without
any foundation. The real and effectual discipline which is exercised over a workman, is not
that of his corporation, but that of his customers. It is the fear of losing their employment
which restrains his frauds and corrects his negligence. An exclusive corporation necessarily
weakens the force of this discipline. A particular set of workmen must then be employed, let
them behave well or ill. It is upon this account that, in many large incorporated towns, no
tolerable workmen are to be found, even in some of the most necessary trades. If you would
have your work tolerably executed, it must be done in the suburbs, where the workmen,
having no exclusive privilege, have nothing but their character to depend upon, and you must
then smuggle it into the town as well as you can.
It is in this manner that the policy of Europe, by restraining the competition in some
employments to a smaller number than would otherwise be disposed to enter into them,
occasions a very important inequality in the whole of the advantages and disadvantages of the
different employments of labour and stock.
Secondly, The policy of Europe, by increasing the competition in some employments beyond
what it naturally would be, occasions another inequality, of an opposite kind, in the whole of
the advantages and disadvantages of the different employments of labour and stock.
It has been considered as of so much importance that a proper number of young people should
be educated for certain professions, that sometimes the public, and sometimes the piety of
private founders, have established many pensions, scholarships, exhibitions, bursaries, etc. for
this purpose, which draw many more people into those trades than could otherwise pretend to
follow them. In all Christian countries, I believe, the education of the greater part of
churchmen is paid for in this manner. Very few of them are educated altogether at their own
expense. The long, tedious, and expensive education, therefore, of those who are, will not
always procure them a suitable reward, the church being crowded with people, who, in order
to get employment, are willing to accept of a much smaller recompence than what such an
education would otherwise have entitled them to ; and in this manner the competition of the
poor takes away the reward of the rich. It would be indecent, no doubt, to compare either a
curate or a chaplain with a journeyman in any common trade. The pay of a curate or chaplain,
however, may very properly be considered as of the same nature with the wages of a
journeyman. They are all three paid for their work according to the contract which they may
happen to make with their respective superiors. Till after the middle of the fourteenth century,
five merks, containing about as much silver as ten pounds of our present money, was in
England the usual pay of a curate or a stipendiary parish priest, as we find it regulated by the
decrees of several different national councils. At the same period, fourpence a-day, containing
the same quantity of silver as a shilling of our present money, was declared to be the pay of a
master mason; and threepence a-day, equal to ninepence of our present money, that of a
journeyman mason. {See the Statute of Labourers, 25, Ed. III.} The wages of both these
labourer's, therefore, supposing them to have been constantly employed, were much superior
to those of the curate. The wages of the master mason, supposing him to have been without
employment one-third of the year, would have fully equalled them. By the 12th of Queen
Anne, c. 12. it is declared, "That whereas, for want of sufficient maintenance and
encouragement to curates, the cures have, in several places, been meanly supplied, the bishop
is, therefore, empowered to appoint, by writing under his hand and seal, a sufficient certain
stipend or allowance, not exceeding fifty, and not less than twenty pounds a-year". Forty
pounds a-year is reckoned at present very good pay for a curate; and, notwithstanding this act
of parliament, there are many curacies under twenty pounds a-year. There are journeymen
shoemakers in London who earn forty pounds a-year, and there is scarce an industrious
workman of any kind in that metropolis who does not earn more than twenty. This last sum,
indeed, does not exceed what frequently earned by common labourers in many country
parishes. Whenever the law has attempted to regulate the wages of workmen, it has always
been rather to lower them than to raise them. But the law has, upon many occasions,
attempted to raise the wages of curates, and, for the dignity of the church, to oblige the rectors
of parishes to give them more than the wretched maintenance which they themselves might be
willing to accept of. And, in both cases, the law seems to have been equally ineffectual, and
has never either been able to raise the wages of curates, or to sink those of labourers to the
degree that was intended; because it has never been able to hinder either the one from being
willing to accept of less than the legal allowance, on account of the indigence of their situation
and the multitude of their competitors, or the other from receiving more, on account of the
contrary competition of those who expected to derive either profit or pleasure from employing
them.
The great benefices and other ecclesiastical dignities support the honour of the church.
notwithstanding the mean circumstances of some of its inferior members. The respect paid to
the profession, too, makes some compensation even to them for the meanness of their
pecuniary recompence. In England, and in all Roman catholic countries, the lottery of the
church is in reality much more advantageous than is necessary. The example of the churches
of Scotland, of Geneva, and of several other protestant churches, may satisfy us, that in so
creditable a profession, in which education is so easily procured, the hopes of much more
moderate benefices will draw a sufficient number of learned, decent, and respectable men into
holy orders.
In professions in which there are no benefices, such as law and physic, if an equal proportion
of people were educated at the public expense, the competition would soon be so great as to
sink very much their pecuniary reward. It might then not be worth any man's while to educate
his son to either of those professions at his own expense. They would be entirely abandoned to
such as had been educated by those public charities, whose numbers and necessities would
oblige them in general to content themselves with a very miserable recompence, to the entire
degradation of the now respectable professions of law and physic.
That unprosperous race of men, commonly called men of letters, are pretty much in the
situation which lawyers and physicians probably would be in, upon the foregoing supposition.
In every part of Europe, the greater part of them have been educated for the church, but have
been hindered by different reasons from entering into holy orders. They have generally,
therefore, been educated at the public expense; and their numbers are everywhere so great, as
commonly to reduce the price of their labour to a very paltry recompence.
Before the invention of the art of printing, the only employment by which a man of letters
could make any thing by his talents, was that of a public or private teacher, or by
communicating to other people the curious and useful knowledge which he had acquired
himself ; and this is still surely a more honourable, a more useful, and, in general, even a more
profitable employment than that other of writing for a bookseller, to which the art of printing
has given occasion. The time and study, the genius, knowledge, and application requisite to
qualify an eminent teacher of the sciences, are at least equal to what is necessary for the
greatest practitioners in law and physic. But the usual reward of the eminent teacher bears no
proportion to that of the lawyer or physician, because the trade of the one is crowded with
indigent people, who have been brought up to it at the public expense ; whereas those of the
other two are encumbered with very few who have not been educated at their own. The usual
recompence, however, of public and private teachers, small as it may appear, would
undoubtedly be less than it is, if the competition of those yet more indigent men of letters,
who write for bread, was not taken out of the market. Before the invention of the art of
printing, a scholar and a beggar seem to have been terms very nearly synonymous. The
different governors of the universities, before that time, appear to have often granted licences
to their scholars to beg.
In ancient times, before any charities of this kind had been established for the education of
indigent people to the learned professions, the rewards of eminent teachers appear to have
been much more considerable. Isocrates, in what is called his discourse against the sophists.
reproaches the teachers of his own times with inconsistency. 'They make the most magnificent
promises to their scholars," says he, " and undertake to teach them to be wise, to be happy,
and to be just; and, in return for so important a service, they stipulate the paltry reward of four
or five minae." "They who teach wisdom," continues he, "ought certainly to be wise
themselves ; but if any man were to sell such a bargain for such a price, he would be
convicted of the most evident folly." He certainly does not mean here to exaggerate the
reward, and we may be assured that it was not less than he represents it. Four minae were
equal to thirteen pounds six shillings and eightpence ; five minae to sixteen pounds thirteen
shillings and fourpence.Something not less than the largest of those two sums, therefore, must
at that time have been usually paid to the most eminent teachers at Athens. Isocrates himself
demanded ten minae, or £ 33:6:8 from each scholar. When he taught at Athens, he is said to
have had a hundred scholars. I understand this to be the number whom he taught at one time,
or who attended what we would call one course of lectures ; a number which will not appear
extraordinary from so great a city to so famous a teacher, who taught, too, what was at that
time the most fashionable of all sciences, rhetoric. He must have made, therefore, by each
course of lectures, a thousand minae, or £ 3335:6:8. A thousand minae, accordingly, is said by
Plutarch, in another place, to have been his didactron, or usual price of teaching. Many other
eminent teachers in those times appear to have acquired great fortunes. Georgias made a
present to the temple of Delphi of his own statue in solid gold. We must not, I presume,
suppose that it was as large as the life. His way of living, as well as that of Hippias and
Protagoras, two other eminent teachers of those times, is represented by Plato as splendid,
even to ostentation. Plato himself is said to have lived with a good deal of magnificence.
Aristotle, after having been tutor to Alexander, and most munificently rewarded, as it is
universally agreed, both by him and his father, Philip, thought it worth while,
notwithstanding, to return to Athens, in order to resume the teaching of his school. Teachers
of the sciences were probably in those times less common than they came to be in an age or
two afterwards, when the competition had probably somewhat reduced both the price of their
labour and the admiration for their persons. The most eminent of them, however, appear
always to have enjoyed a degree of consideration much superior to any of the like profession
in the present times. The Athenians sent Carneades the academic, and Diogenes the stoic,
upon a solemn embassy to Rome; and though their city had then declined from its former
grandeur, it was still an independent and considerable republic.
Carneades, too, was a Babylonian by birth; and as there never was a people more jealous of
admitting foreigners to public offices than the Athenians, their consideration for him must
have been very great.
This inequality is, upon the whole, perhaps rather advantageous than hurtful to the public. It
may somewhat degrade the profession of a public teacher ; but the cheapness of literary
education is surely an advantage which greatly overbalances this trifling inconveniency. The
public, too, might derive still greater benefit from it, if the constitution of those schools and
colleges, in which education is carried on, was more reasonable than it is at present through
the greater part of Europe.
Thirdly, the policy of Europe, by obstructing the free circulation of labour and stock, both
from employment to employment, and from place to place, occasions, in some cases, a very
inconvenient inequality in the whole of the advantages and disadvantages of their different
employments.
The statute of apprenticeship obstructs the free circulation of labour from one employment to
another, even in the same place. The exclusive privileges of corporations obstruct it from one
place to another, even in the same employment.
It frequently happens, that while high wages are given to the workmen in one manufacture,
those in another are obliged to content themselves with bare subsistence. The one is in an
advancing state, and has therefore a continual demand for new hands ; the other is in a
declining state, and the superabundance of hands is continually increasing. Those two
manufactures may sometimes be in the same town, and sometimes in the same
neighbourhood, without being able to lend the least assistance to one another. The statute of
apprenticeship may oppose it in the one case, and both that and an exclusive corporation in the
other. In many different manufactures, however, the operations are so much alike, that the
workmen could easily change trades with one another, if those absurd laws did not hinder
them. The arts of weaving plain linen and plain silk, for example, are almost entirely the
same. That of weaving plain woollen is somewhat different ; but the difference is so
insignificant, that either a linen or a silk weaver might become a tolerable workman in a very
few days. If any of those three capital manufactures, therefore, were decaying, the workmen
might find a resource in one of the other two which was in a more prosperous condition; and
their wages would neither rise too high in the thriving, nor sink too low in the decaying
manufacture. The linen manufacture, indeed, is in England, by a particular statute, open to
every body ; but as it is not much cultivated through the greater part of the country, it can
afford no general resource to the work men of other decaying manufactures, who, wherever
the statute of apprenticeship takes place, have no other choice, but dither to come upon the
parish, or to work as common labourers ; for which, by their habits, they are much worse
qualified than for any sort of manufacture that bears any resemblance to their own. They
generally, therefore, chuse to come upon the parish.
Whatever obstructs the free circulation of labour from one employment to another, obstructs
that of stock likewise; the quantity of stock which can be employed in any branch of business
depending very much upon that of the labour which can be employed in it. Corporation laws,
however, give less obstruction to the free circulation of stock from one place to another, than
to that of labour. It is everywhere much easier for a wealthy merchant to obtain the privilege
of trading in a town-corporate, than for a poor artificer to obtain that of working in it.
The obstruction which corporation laws give to the free circulation of labour is common, I
believe, to every part of Europe. That which is given to it by the poor laws is, so far as I know,
peculiar to England. It consists in the difficulty which a poor man finds in obtaining a
settlement, or even in being allowed to exercise his industry in any parish but that to which he
belongs. It is the labour of artificers and manufacturers only of which the free circulation is
obstructed by corporation laws. The difficulty of obtaining settlements obstructs even that of
common labour. It may be worth while to give some account of the rise, progress, and present
state of this disorder, the greatest, perhaps, of any in the police of England.
When, by the destruction of monasteries, the poor had been deprived of the charity of those
religious houses, after some other ineffectual attempts for their relief, it was enacted, by the
43d of Elizabeth, c. 2. that every parish should be bound to provide for its own poor, and that
overseers of the poor should be annually appointed, who, with the church-wardens, should
raise, by a parish rate, competent sums for this purpose.
By this statute, the necessity of providing for their own poor was indispensably imposed upon
every parish. Who were to be considered as the poor of each parish became, therefore, a
question of some importance. This question, after some variation, was at last determined by
the 13th and 14th of Charles II. when it was enacted, that forty days undisturbed residence
should gain any person a settlement in any parish; but that within that time it should be lawful
for two justices of the peace, upon complaint made by the church-wardens or overseers of the
poor, to remove any new inhabitant to the parish where he was last legally settled ; unless he
either rented a tenement of ten pounds a-year, or could give such security for the discharge of
the parish where he was then living, as those justices should judge sufficient.
Some frauds, it is said, were committed in consequence of this statute; parish officers
sometime's bribing their own poor to go clandestinely to another parish, and, by keeping
themselves concealed for forty days, to gain a settlement there, to the discharge of that to
which they properly belonged. It was enacted, therefore, by the 1st of James II. that the forty
days undisturbed residence of any person necessary to gain a settlement, should be accounted
only from the time of his delivering notice, in writing, of the place of his abode and the
number of his family, to one of the church-wardens or overseers of the parish where he came
to dwell.
But parish officers, it seems, were not always more honest with regard to their own than they
had been with regard to other parishes, and sometimes connived at such intrusions, receiving
the notice, and taking no proper steps in consequence of it. As every person in a parish,
therefore, was supposed to have an interest to prevent as much as possible their being
burdened by such intruders, it was further enacted by the 3rd of William III. that the forty
days residence should be accounted only from the publication of such notice in writing on
Sunday in the church, immediately after divine service.
" After all," says Doctor Burn, "this kind of settlement, by continuing forty days after
publication of notice in writing, is very seldom obtained ; and the design of the acts is not so
much for gaining of settlements, as for the avoiding of them by persons coming into a parish
clandestinely, for the giving of notice is only putting a force upon the parish to remove. But if
a person's situation is such, that it is doubtful whether he is actually removable or not, he
shall, by giving of notice, compel the parish either to allow him a settlement uncontested, by
suffering him to continue forty days, or by removing him to try the right."
This statute, therefore, rendered it almost impracticable for a poor man to gain a new
settlement in the old way, by forty days inhabitancy. But that it might not appear to preclude
altogether the common people of one' parish from ever establishing themselves with security
in another, it appointed four other ways by which a settlement might be gained without any
notice delivered or published. The first was, by being taxed to parish rates and paying them;
the second, by being elected into an annual parish office, and serving in it a year ; the third, by
serving an apprenticeship in the parish ; the fourth, by being hired into service there for a year,
and continuing in the same service during the whole of it. Nobody can gain a settlement by
either of the two first ways, but by the public deed of the whole parish, who are too well
aware of the consequences to adopt any new-comer, who has nothing but his labour to support
him, either by taxing him to parish rates, or by electing him into a parish office.
No married man can well gain any settlement in either of the two last ways. An apprentice is
scarce ever married ; and it is expressly enacted, that no married servant shall gain any
settlement by being hired for a year. The principal effect of introducing settlement by service,
has been to put out in a great measure the old fashion of hiring for a year; which before had
been so customary in England, that even at this day, if no particular term is agreed upon, the
law intends that every servant is hired for a year. But masters are not always willing to give
their servants a settlement by hiring them in this manner ; and servants are not always willing
to be so hired, because, as every last settlement discharges all the foregoing, they might
thereby lose their original settlement in the places of their nativity, the habitation of their
parents and relations.
No independent workman, it is evident, whether labourer or artificer, is likely to gain any new
settlement, either by apprenticeship or by service. When such a person, therefore, carried his
industry to a new parish, he was liable to be removed, how healthy and industrious soever, at
the caprice of any churchwarden or overseer, unless he either rented a tenement of ten pounds
a-year, a thing impossible for one who has nothing but his labour to live by, or could give
such security for the discharge of the parish as two justices of the peace should judge
sufficient.
What security they shall require, indeed, is left altogether to their discretion; but they cannot
well require less than thirty pounds, it having been enacted, that the purchase even of a
freehold estate of less than thirty pounds value, shall not gain any person a settlement, as not
being sufficient for the discharge of the parish. But this is a security which scarce any man
who lives by labour can give; and much greater security is frequently demanded.
In order to restore, in some measure, that free circulation of labour which those different
statutes had almost entirely taken away, the invention of certificates was fallen upon. By the
8th and 9th of William III. it was enacted that if any person should bring a certificate from the
parish where he was last legally settled, subscribed by the church-wardens and overseers of
the poor, and allowed by two justices of the peace, that every other parish should be obliged to
receive him; that he should not be removable merely upon account of his being likely to
become chargeable, but only upon his becoming actually chargeable ; and that then the parish
which granted the certificate should be obliged to pay the expense both of his maintenance
and of his removal. And in order to give the most perfect security to the parish where such
certificated man should come to reside, it was further enacted by the same statute, that he
should gain no settlement there by any means whatever, except either by renting a tenement of
ten pounds a-year, or by serving upon his own account in an annual parish office for one
whole year ; and consequently neither by notice nor by service, nor by apprenticeship, nor by
paying parish rates. By the 12th of Queen Anne, too, stat. 1, c.18, it was further enacted, that
neither the servants nor apprentices of such certificated man should gain any settlement in the
parish where he resided under such certificate.
How far this invention has restored that free circulation of labour, which the preceding
statutes had almost entirely taken away, we may learn from the following very judicious
observation of Doctor Burn. "It is obvious," says he, " that there are divers good reasons for
requiring certificates with persons coming to settle in any place; namely, that persons residing
under them can gain no settlement, neither by apprenticeship, nor by service, nor by giving
notice, nor by paying parish rates; that they can settle neither apprentices nor servants ; that if
they become chargeable, it is certainly known whither to remove them, and the parish shall be
paid for the removal, and for their maintenance in the mean time ; and that, if they fall sick,
and cannot be removed, the parish which gave the certificate must maintain them ; none of all
which can be without a certificate. Which reasons will hold proportionably for parishes not
granting certificates in ordinary cases; for it is far more than an equal chance, but that they
will have the certificated persons again, and in a worse condition." The moral of this
observation seems to be, that certificates ought always to be required by the parish where any
poor man comes to reside, and that they ought very seldom to be granted by that which he
purposes to leave. " There is somewhat of hardship in this matter of certificates," says the
same very intelligent author, in his History of the Poor Laws, "by putting it in the power of a
parish officer to imprison a man as it were for life, however inconvenient it may be for him to
continue at that place where he has had the misfortune to acquire what is called a settlement,
or whatever advantage he may propose himself by living elsewhere."
Though a certificate carries along with it no testimonial of good behaviour, and certifies
nothing but that the person belongs to the parish to which he really does belong, it is
altogether discretionary in the parish officers either to grant or to refuse it. A mandamus was
once moved for, says Doctor Burn, to compel the church-wardens and overseers to sign a
certificate; but the Court of King's Bench rejected the motion as a very strange attempt.
The very unequal price of labour which we frequently find in England, in places at no great
distance from one another, is probably owing to the obstruction which the law of settlements
gives to a poor man who would carry his industry from one parish to another without a
certificate. A single man, indeed who is healthy and industrious, may sometimes reside by
sufferance without one ; but a man with a wife and family who should attempt to do so,
would, in most parishes, be sure of being removed ; and, if the single man should afterwards
marry, he would generally be removed likewise. The scarcity of hands in one parish,
therefore, cannot always be relieved by their superabundance in another, as it is constantly in
Scotland, and. I believe, in all other countries where there is no difficulty of settlement. In
such countries, though wages may sometimes rise a little in the neighbourhood of a great
town, or wherever else there is an extraordinary demand for labour, and sink gradually as the
distance from such places increases, till they fall back to the common rate of the country ; yet
we never meet with those sudden and unaccountable differences in the wages of neighbouring
places which we sometimes find in England, where it is often more difficult for a poor man to
pass the artificial boundary of a parish, than an arm of the sea, or a ridge of high mountains,
natural boundaries which sometimes separate very distinctly different rates of wages in other
countries.
To remove a man who has committed no misdemeanour, from the parish where he chooses to
reside, is an evident violation of natural liberty and justice. The common people of England,
however, so jealous of their liberty, but like the common people of most other countries, never
rightly understanding wherein it consists, have now, for more than a century together, suffered
themselves to be exposed to this oppression without a remedy. Though men of reflection, too,
have some. times complained of the law of settlements as a public grievance ; yet it has never
been the object of any general popular clamour, such as that against general warrants, an
abusive practice undoubtedly, but such a one as was not likely to occasion any general
oppression. There is scarce a poor man in England, of forty years of age, 1 will venture to say,
who has not, in some part of his life, felt himself most cruelly oppressed by this ill-contrived
law of settlements.
I shall conclude this long chapter with observing, that though anciently it was usual to rate
wages, first by general laws extending over the whole kingdom, and afterwards by particular
orders of the justices of peace in every particular county, both these practices have now gone
entirely into disuse " By the experience of above four hundred years," says Doctor Burn, " it
seems time to lay aside all endeavours to bring under strict regulations, what in its own nature
seems incapable of minute limitation ; for if all persons in the same kind of work were to
receive equal wages, there would be no emulation, and no room left for industry or ingenuity."
Particular acts of parliament, however, still attempt sometimes to regulate wages in particular
trades, and in particular places. Thus the 8th of George III. prohibits, under heavy penalties,
all master tailors in London, and five miles round it, from giving, and their workmen from
accepting, more than two shillings and sevenpence halfpenny a-day, except in the case of a
general mourning. Whenever the legislature attempts to regulate the differences between
masters and their workmen, its counsellors are always the masters. When the regulation,
therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes
otherwise when in favour of the masters. Thus the law which obliges the masters in several
different trades to pay their workmen in money, and not in goods, is quite just and equitable.
It imposes no real hardship upon the masters. It only obliges them to pay that value in money,
which they pretended to pay, but did not always really pay, in goods. This law is in favour of
the workmen; but the 8th of George III. is in favour of the masters. When masters combine
together, in order to reduce the wages of their workmen, they commonly enter into a private
bond or agreement, not to give more than a certain wage, under a certain penalty. Were the
workmen to enter into a contrary combination of the same kind, not to accept of a certain
wage, under a certain penalty, the law would punish them very severely; and, if it dealt
impartially, it would treat the masters in the same manner. But the 8th of George III. enforces
by law that very regulation which masters sometimes attempt to establish by such
combinations. The complaint of the workmen, that it puts the ablest and most industrious
upon the same footing with an ordinary workman, seems perfectly well founded.
In ancient times, too, it was usual to attempt to regulate the profits of merchants and other
dealers, by regulating the price of provisions and ether goods. The assize of bread is, so far as
I know, the only remnant of this ancient usage. Where there is an exclusive corporation, it
may, perhaps, be proper to regulate the price of the first necessary of life ; but, where there is
none, the competition will regulate it much better than any assize. The method of fixing the
assize of bread, established by the 31st of George II. could not be put in practice in Scotland,
on account of a defect in the law, its execution depending upon the office of clerk of the
market, which does not exist there. This defect was not remedied till the third of George III.
The want of an assize occasioned no sensible inconveniency; and the establishment of one in
the few places where it has yet taken place has produced no sensible advantage. In the greater
part of the towns in Scotland, however, there is an incorporation of bakers, who claim
exclusive privileges, though they are not very strictly guarded. The proportion between the
different rates, both of wages and profit, in the different employments of labour and stock,
seems not to be much affected, as has already been observed, by the riches or poverty, the
advancing, stationary, or declining state of the society. Such revolutions in the public welfare,
though they affect the general rates both of wages and profit, must, in the end, affect them
equally in all different employments. The proportion between them, therefore, must remain
the same, and cannot well be altered, at least for any considerable time, by any such
revolutions.
CHAPTER XI.
OF THE RENT OF LAND.
Rent, considered as the price paid for the use of land, is naturally the
highest which the tenant can afford to pay in the actual circumstances of
the land. In adjusting the terms of the lease, the landlord endeavours to
leave him no greater share of the produce than what is sufficient to keep up
the stock from which he furnishes the seed, pays the labour, and purchases
and maintains the cattle and other instruments of husbandry, together with
the ordinary profits of farming stock in the neighbourhood. This is
evidently the smallest share with which the tenant can content himself,
without being a loser, and the landlord seldom means to leave him any more.
Whatever part of the produce, or, what is the same thing, whatever part of
its price, is over and above this share, he naturally endeavours to reserve
to himself as the rent of his land, which is evidently the highest the
tenant can afford to pay in the actual circumstances of the land. Sometimes,
indeed, the liberality, more frequently the ignorance, of the landlord,
makes him accept of somewhat less than this portion ; and sometimes, too,
though more rarely, the ignorance of the tenant makes him undertake to pay
somewhat more, or to content himself with somewhat less, than the ordinary
profits of farming stock in the neighbourhood. This portion, however, may
still be considered as the natural rent of land, or the rent at which it is
naturally meant that land should, for the most part, be let.
The rent of land, it may be thought, is frequently no more than a reasonable
profit or interest for the stock laid out by the landlord upon its
improvement. This, no doubt, may be partly the case upon some occasions ;
for it can scarce ever be more than partly the case. The landlord demands a
rent even for unimproved land, and the supposed interest or profit upon the
expense of improvement is generally an addition to this original rent. Those
improvements, besides, are not always made by the stock of the landlord, but
sometimes by that of the tenant. When the lease comes to be renewed,
however, the landlord commonly demands the same augmentation of rent as if
they had been all made by his own.
He sometimes demands rent for what is altogether incapable of human
improvements. Kelp is a species of sea-weed, which, when burnt, yields an
alkaline salt, useful for making glass, soap, and for several other
purposes. It grows in several parts of Great Britain, particularly in
Scotland, upon such rocks only as lie within the high-water mark, which are
twice every day covered with the sea, and of which the produce, therefore,
was never augmented by human industry. The landlord, however, whose estate
is bounded by a kelp shore of this kind, demands a rent for it as much as
for his corn-fields.
The sea in the neighbourhood of the islands of Shetland is more than
commonly abundant in fish, which makes a great part of the subsistence of
their inhabitants. But, in order to profit by the produce of the water, they
must have a habitation upon the neighbouring land. The rent of the landlord
is in proportion, not to what the farmer can make by the land, but to what
he can make both by the land and the water. It is partly paid in sea-fish;
and one of the very few instances in which rent makes a part of the price of
that commodity, is to be found in that country.
The rent of land, therefore, considered as the price paid for the use of the
land, is naturally a monopoly price. It is not at all proportioned to what
the landlord may have laid out upon the improvement of the land, or to what
he can afford to take, but to what the farmer can afford to give.
Such parts only of the produce of land can commonly be brought to market, of
which the ordinary price is sufficient to replace the stock which must be
employed in bringing them thither, together with its ordinary profits. If
the ordinary price is more than this, the surplus part of it will naturally
go to the rent of the land. If it is not more, though the commodity may be
brought to market, it can afford no rent to the landlord. Whether the price
is, or is not more, depends upon the demand.
There are some parts of the produce of land, for which the demand must
always be such as to afford a greater price than what is sufficient to bring
them to market; and there are others for which it either may or may not be
such as to afford this greater price. The former must always afford a rent
to the landlord. The latter sometimes may and sometimes may not, according
to different circumstances.
Rent, it is to be observed, therefore, enters into the composition of the
price of commodities in a different way from wages and profit. High or low
wages and profit are the causes of high or low price ; high or low rent is
the effect of it. It is because high or low wages and profit must be paid,
in order to bring a particular commodity to market, that its price is high
or low. But it is because its price is high or low, a great deal more, or
very little more, or no more, than what is sufficient to pay those wages and
profit, that it affords a high rent, or a low rent, or no rent at all.
The particular consideration, first, of those parts of the produce of land
which always afford some rent ; secondly, of those which sometimes may and
sometimes may not afford rent ; and, thirdly, of the variations which, in
the different periods of improvement, naturally take place in the relative
value of those two different sorts of rude produce, when compared both with
one another and with manufactured commodities, will divide this chapter into
three parts.
PART I. - Of the Produce of Land which always affords Rent.
As men, like all other animals, naturally multiply in proportion to the
means of their subsistence, food is always more or less in demand. It can
always purchase or command a greater or smaller quantity of labour, and
somebody can always be found who is willing to do something in order to
obtain it. The quantity of labour, indeed, which it can purchase, is not
always equal to what it could maintain, if managed in the most economical
manner, on account of the high wages which are sometimes given to labour ;
but it can always purchase such a quantity of labour as it can maintain,
according to the rate at which that sort of labour is commonly maintained in
the neighbourhood.
But land, in almost any situation, produces a greater quantity of food than
what is sufficient to maintain all the labour necessary for bringing it to
market, in the most liberal way in which that labour is ever maintained. The
surplus, too, is always more than sufficient to replace the stock which
employed that labour, together with its profits. Something, therefore,
always remains for a rent to the landlord.
The most desert moors in Norway and Scotland produce some sort of pasture
for cattle, of which the milk and the increase are always more than
sufficient, not only to maintain all the labour necessary for tending them,
and to pay the ordinary profit to the farmer or the owner of the herd or
flock, but to afford some small rent to the landlord. The rent increases in
proportion to the goodness of the pasture. The same extent of ground not
only maintains a greater number of cattle, but as they we brought within a
smaller compass, less labour becomes requisite to tend them, and to collect
their produce. The landlord gains both ways; by the increase of the produce,
and by the diminution of the labour which must be maintained out of it.
The rent of land not only varies with its fertility, whatever be its
produce, but with its situation, whatever be its fertility. Land in the
neighbourhood of a town gives a greater rent than land equally fertile in a
distant part of the country. Though it may cost no more labour to cultivate
the one than the other, it must always cost more to bring the produce of the
distant land to market. A greater quantity of labour, therefore, must be
maintained out of it; and the surplus, from which are drawn both the profit
of the farmer and the rent of the landlord, must be diminished. But in
remote parts of the country, the rate of profit, as has already been shewn,
is generally higher than in the neighbourhood of a large town. A smaller
proportion of this diminished surplus, therefore, must belong to the
landlord.
Good roads, canals, and navigable rivers, by diminishing the expense of
carriage, put the remote parts of the country more nearly upon a level with
those in the neighbourhood of the town. They are upon that account the
greatest of all improvements. They encourage the cultivation of the remote,
which must always be the most extensive circle of the country. They are
advantageous to the town by breaking down the monopoly of the country in its
neighbourhood. They are advantageous even to that part of the country.
Though they introduce some rival commodities into the old market, they open
many new markets to its produce. Monopoly, besides, is a great enemy to good
management, which can never be universally established, but in consequence
of that free and universal competition which forces every body to have
recourse to it for the sake of self defence. It is not more than fifty years
ago, that some of the counties in the neighbourhood of London petitioned the
parliament against the extension of the turnpike roads into the remoter
counties. Those remoter counties, they pretended, from the cheapness of
labour, would be able to sell their grass and corn cheaper in the London
market than themselves, and would thereby reduce their rents, and ruin their
cultivation. Their rents, however, have risen, and their cultivation has
been improved since that time.
A corn field of moderate fertility produces a much greater quantity of food
for man, than the best pasture of equal extent. Though its cultivation
requires much more labour, yet the surplus which remains after replacing the
seed and maintaining all that labour, is likewise much greater. If a pound
of butcher's meat, therefore, was never supposed to be worth more than a
pound of bread, this greater surplus would everywhere be of greater value
and constitute a greater fund, both for the profit of the farmer and the
rent of the landlord. It seems to have done so universally in the rude
beginnings of agriculture.
But the relative values of those two different species of food, bread and
butcher's meat, are very different in the different periods of agriculture.
In its rude beginnings, the unimproved wilds, which then occupy the far
greater part of the country, are all abandoned to cattle. There is more
butcher's meat than bread; and bread, therefore, is the food for which there
is the greatest competition, and which consequently brings the greatest
price. At Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty
pence halfpenny sterling, was, forty or fifty years ago, the ordinary price
of an ox, chosen from a herd of two or three hundred. He says nothing of the
price of bread, probably because he found nothing remarkable about it. An ox
there, he says, costs little more than the labour of catching him. But corn
can nowhere be raised without a great deal of labour ; and in a country
which lies upon the river Plate, at that time the direct road from Europe to
the silver mines of Potosi, the money-price of labour could be very cheap.
It is otherwise when cultivation is extended over the greater part of the
country. There is then more bread than butcher's meat. The competition
changes its direction, and the price of butcher's meat becomes greater
than the price of bread.
By the extension, besides, of cultivation, the unimproved wilds become
insufficient to supply the demand for butcher's meat. A great part of the
cultivated lands must be employed in rearing and fattening cattle ; of which
the price, therefore, must be sufficient to pay, not only the labour
necessary for tending them, but the rent which the landlord, and the profit
which the farmer, could have drawn from such land employed in tillage. The
cattle bred upon the most uncultivated moors, when brought to the same
market, are, in proportion to their weight or goodness, sold at the same
price as those which are reared upon the most improved land. The proprietors
of those moors profit by it, and raise the rent of their land in proportion
to the price of their cattle. It is not more than a century ago, that in
many parts of the Highlands of Scotland, butcher's meat was as cheap or
cheaper than even bread made of oatmeal The Union opened the market of
England to the Highland cattle. Their ordinary price, at present, is about
three times greater than at the beginning of the century, and the rents of
many Highland estates have been tripled and quadrupled in the same time. In
almost every part of Great Britain, a pound of the best butcher's meat is,
in the present times, generally worth more than two pounds of the best white
bread ; and in plentiful years it is sometimes worth three or four pounds.
It is thus that, in the progress of improvement, the rent and profit of
unimproved pasture come to be regulated in some measure by the rent and
profit of what is improved, and these again by the rent and profit of corn.
Corn is an annual crop ; butcher's meat, a crop which requires four or five
years to grow. As an acre of land, therefore, will produce a much smaller
quantity of the one species of food than of the other, the inferiority of
the quantity must be compensated by the superiority of the price. If it was
more than compensated, more corn-land would be turned into pasture ; and if
it was not compensated, part of what was in pasture would be brought back
into corn.
This equality, however, between the rent and profit of grass and those of
corn ; of the land of which the immediate produce is food for cattle, and of
that of which the immediate produce is food for men, must be understood to
take place only through the greater part of the improved lands of a great
country. In some particular local situations it is quite otherwise, and the
rent and profit of grass are much superior to what can be made by corn.
Thus, in the neighbourhood of a great town, the demand for milk, and for
forage to horses, frequently contribute, together with the high price of
butcher's meat, to raise the value of grass above what may be called its
natural proportion to that of corn. This local advantage, it is evident,
cannot be communicated to the lands at a distance.
Particular circumstances have sometimes rendered some countries so populous,
that the whole territory, like the lands in the neighbourhood of a great
town, has not been sufficient to produce both the grass and the corn
necessary for the subsistence of their inhabitants. Their lands, therefore,
have been principally employed in the production of grass, the more bulky
commodity, and which cannot be so easily brought from a great distance; and
corn, the food of the great body of the people, has been chiefly imported
from foreign countries. Holland is at present in this situation; and a
considerable part of ancient Italy seems to have been so during the
prosperity of the Romans. To feed well, old Cato said, as we are told by
Cicero, was the first and most profitable thing in the management of a
private estate ; to feed tolerably well, the second ; and to feed ill, the
third. To plough, he ranked only in the fourth place of profit and
advantage. Tillage, indeed, in that part of ancient Italy which lay in the
neighbour hood of Rome, must have been very much discouraged by the
distributions of corn which were frequently made to the people, either
gratuitously, or at a very low price. This corn was brought from the
conquered provinces, of which several, instead of taxes, were obliged to
furnish a tenth part of their produce at a stated price, about sixpence
a-peck, to the republic. The low price at which this corn was distributed to
the people, must necessarily have sunk the price of what could be brought to
the Roman market from Latium, or the ancient territory of Rome, and must
have discouraged its cultivation in that country.
In an open country, too, of which the principal produce is corn, a
well-inclosed piece of grass will frequently rent higher than any corn field
in its neighbourhood. It is convenient for the maintenance of the cattle
employed in the cultivation of the corn; and its high rent is, in this case,
not so properly paid from the value of its own produce, as from that of the
corn lands which are cultivated by means of it. It is likely to fall, if
ever the neighbouring lands are completely inclosed. The present high rent
of inclosed land in Scotland seems owing to the scarcity of inclosure, and
will probably last no longer than that scarcity. The advantage of inclosure
is greater for pasture than for corn. It saves the labour of guarding the
cattle, which feed better, too, when they are not liable to be disturbed by
their keeper or his dog.
But where there is no local advantage of this kind, the rent and profit of
corn, or whatever else is the common vegetable food of the people, must
naturally regulate upon the land which is fit for producing it, the rent and
profit of pasture.
The use of the artificial grasses, of turnips, carrots, cabbages, and the
other expedients which have been fallen upon to make an equal quantity of
land feed a greater number of cattle than when in natural grass, should
somewhat reduce, it might be expected, the superiority which, in an
improved country, the price of butcher's meat naturally has over that of
bread. It seems accordingly to have done so ; and there is some reason for
believing that, at least in the London market, the price of butcher's meat,
in proportion to the price of bread, is a good deal lower in the present
times than it was in the beginning of the last century.
In the Appendix to the life of Prince Henry, Doctor Birch has given us an
account of the prices of butcher's meat as commonly paid by that prince. It
is there said, that the four quarters of an ox, weighing six hundred pounds,
usually cost him nine pounds ten shillings, or thereabouts; that is
thirty-one shillings and eight-pence per hundred pounds weight. Prince Henry
died on the 6th of November 1612, in the nineteenth year of his age.
In March 1764, there was a parliamentary inquiry into the causes of the high
price of provisions at that time. It was then, among other proof to the same
purpose, given in evidence by a Virginia merchant, that in March 1763, he
had victualled his ships for twentyfour or twenty-five shillings the hundred
weight of beef, which he considered as the ordinary price; whereas, in that
dear year, he had paid twenty-seven shillings for the same weight and sort.
This high price in 1764 is, however, four shillings and eight-pence cheaper
than the ordinary price paid by Prince Henry ; and it is the best beef only,
it must be observed, which is fit to be salted for those distant voyages.
The price paid by Prince Henry amounts to 3d. 4/5ths per pound weight of the
whole carcase, coarse and choice pieces taken together ; and at that rate
the choice pieces could not have been sold by retail for less than 4½d. or
5d. the pound.
In the parliamentary inquiry in 1764, the witnesses stated the price of the
choice pieces of the best beef to be to the consumer 4d. and 4½d. the
pound; and the coarse pieces in general to be from seven farthings to 2½d.
and 2¾d.; and this, they said, was in general one halfpenny dearer than the
same sort of pieces had usually been sold in the month of March. But even
this high price is still a good deal cheaper than what we can well suppose
the ordinary retail price to have been in the time of Prince Henry.
During the first twelve years of the last century, the average price of the
best wheat at the Windsor market was £ 1:18:3½d. the quarter of nine
Winchester bushels.
But in the twelve years preceding 1764 including that year, the average
price of the same measure of the best wheat at the same market was £
2:1:9½d.
In the first twelve years of the last century, therefore, wheat appears to
have been a good deal cheaper, and butcher's meat a good deal dearer, than
in the twelve years preceding 1764, including that year.
In all great countries, the greater part of the cultivated lands are
employed in producing either food for men or food for cattle. The rent and
profit of these regulate the rent and profit of all other cultivated land.
If any particular produce afforded less, the land would soon be turned into
corn or pasture; and if any afforded more, some part of the lands in corn or
pasture would soon be turned to that produce.
Those productions, indeed, which require either a greater original expense
of improvement, or a greater annual expense of cultivation in order to fit
the land for them, appear commonly to afford, the one a greater rent, the
other a greater profit, than corn or pasture. This superiority, however,
will seldom be found to amount to more than a reasonable interest or
compensation for this superior expense.
In a hop garden, a fruit garden, a kitchen garden, both the rent of the
landlord, and the profit of the farmer, are generally greater than in acorn
or grass field. But to bring the ground into this condition requires more
expense. Hence a greater rent becomes due to the landlord. It requires, too,
a more attentive and skilful management. Hence a greater profit becomes due
to the farmer. The crop, too, at least in the hop and fruit garden, is more
precarious. Its price, therefore, besides compensating all occasional
losses, must afford something like the profit of insurance. The
circumstances of gardeners, generally mean, and always moderate, may satisfy
us that their great ingenuity is not commonly over-recompensed. Their
delightful art is practised by so many rich people for amusement, that
little advantage is to be made by those who practise it for profit; because
the persons who should naturally be their best customers, supply themselves
with all their most precious productions.
The advantage which the landlord derives from such improvements, seems at no
time to have been greater than what was sufficient to compensate the
original expense of making them. In the ancient husbandry, after the
vineyard, a well-watered kitchen garden seems to have been the part of the
farm which was supposed to yield the most valuable produce. But Democritus,
who wrote upon husbandry about two thousand years ago, and who was regarded
by the ancients as one of the fathers of the art, thought they did not act
wisely who inclosed a kitchen garden. The profit, he said, would not
compensate the expense of a stone-wall: and bricks (he meant, I suppose,
bricks baked in the sun) mouldered with the rain and the winter-storm, and
required continual repairs. Columella, who reports this judgment of
Democritus, does not controvert it, but proposes a very frugal method of
inclosing with a hedge of brambles and briars, which he says he had found by
experience to be both a lasting and an impenetrable fence ; but which, it
seems, was not commonly known in the time of Democritus. Palladius adopts
the opinion of Columella, which had before been recommended by Varro. In the
judgment of those ancient improvers. the produce of a kitchen garden had, it
seems, been little more than sufficient to pay the extraordinary culture and
the expense of watering ; for in countries so near the sun, it was thought
proper, in those times as in the present, to have the command of a stream of
water, which could be conducted to every bed in the garden. Through the
greater part of Europe, a kitchen garden is not at present supposed to
deserve a better inclosure than mat recommended by Columella. In Great
Britain, and some other northern countries, the finer fruits cannot Be
brought to perfection but by the assistance of a wall. Their price,
therefore, in such countries, must be sufficient to pay the expense of
building and maintaining what they cannot be had without. The fruit-wall
frequently surrounds the kitchen garden, which thus enjoys the benefit of an
inclosure which its own produce could seldom pay for.
That the vineyard, when properly planted and brought to perfection, was the
most valuable part of the farm, seems to have been an undoubted maxim in the
ancient agriculture, as it is in the modern, through all the wine countries.
But whether it was advantageous to plant a new vineyard, was a matter of
dispute among the ancient Italian husbandmen, as we learn from Columella. He
decides, like a true lover of all curious cultivation, in favour of the
vineyard; and endeavours to shew, by a comparison of the profit and expense,
that it was a most advantageous improvement. Such comparisons, however,
between the profit and expense of new projects are commonly very fallacious
; and in nothing more so than in agriculture. Had the gain actually made by
such plantations been commonly as great as he imagined it might have been,
there could have been no dispute about it. The same point is frequently at
this day a matter of controversy in the wine countries. Their writers on
agriculture, indeed, the lovers and promoters of high cultivation, seem
generally disposed to decide with Columella in favour of the vineyard. In
France, the anxiety of the proprietors of the old vineyards to prevent the
planting of any new ones, seems to favour their opinion, and to indicate a
consciousness in those who must have the experience, that this species of
cultivation is at present in that country more profitable than any other. It
seems, at the same time, however, to indicate another opinion, that this
superior profit can last no longer than the laws which at present restrain
the free cultivation of the vine. In 1731, they obtained an order of
council, prohibiting both the planting of new vineyards, and the renewal of
these old ones, of which the cultivation had been interrupted for two years,
without a particular permission from the king, to be granted only in
consequence of an information from the intendant of the province, certifying
that he had examined the land, and that it was incapable of any other
culture. The pretence of this order was the scarcity of corn and pasture,
and the superabundance of wine. But had this superabundance been real, it
would, without any order of council, have effectually prevented the
plantation of new vineyards, by reducing the profits of this species of
cultivation below their natural proportion to those of corn and pasture.
With regard to the supposed scarcity of corn occasioned by the
multiplication of vineyards, corn is nowhere in France more carefully
cultivated than in the wine provinces, where the land is fit for producing
it: as in Burgundy, Guienne, and the Upper Languedoc. The numerous hands
employed in the one species of cultivation necessarily encourage the other,
by affording a ready market for its produce. To diminish the number of those
who are capable of paying it, is surely a most unpromising expedient for
encouraging the cultivation of corn. It is like the policy which would
promote agriculture, by discouraging manufactures.
The rent and profit of those productions, therefore, which require either a
greater original expense of improvement in order to fit the land for them,
or a greater annual expense of cultivation, though often much superior to
those of corn and pasture, yet when they do no more than compensate such
extraordinary expense, are in reality regulated by the rent and profit of
those common crops.
It sometimes happens, indeed, that the quantity of land which can be fitted
for some particular produce, is too small to supply the effectual demand.
The whole produce can be disposed of to those who are willing to give
somewhat more than what is sufficient to pay the whole rent, wages, and
profit, necessary for raising and bringing it to market, according to their
natural rates, or according to the rates at which they are paid in the
greater part of other cultivated land. The surplus part of the price which
remains after defraying the whole expense of improvement and cultivation,
may commonly, in this case, and in this case only, bear no regular
proportion to the like surplus in corn or pasture, but may exceed it in
almost any degree; and the greater part of this excess naturally goes to the
rent of the landlord.
The usual and natural proportion, for example, between the rent and profit
of wine, and those of corn and pasture, must be understood to take place
only with regard to those vineyards which produce nothing but good common
wine, such as can be raised almost anywhere, upon any light, gravelly, or
sandy soil, and which has nothing to recommend it but its strength and
wholesomeness. It is with such vineyards only, that the common land of the
country can be brought into competition ; for with those of a peculiar
quality it is evident that it cannot.
The vine is more affected by the difference of soils than any other
fruit-tree. From some it derives a flavour which no culture or management
can equal, it is supposed, upon any other. This flavour, real or imaginary,
is sometimes peculiar to the produce of a few vineyards; sometimes it
extends through the greater part of a small district, and sometimes through
a considerable part of a large province. The whole quantity of such wines
that is brought to market falls short of the effectual demand, or the demand
of those who would be willing to pay the whole rent, profit, and wages,
necessary for preparing and bringing them thither, according to the ordinary
rate, or according to the rate at which they are paid in common vineyards.
The whole quantity, therefore, can be disposed of to those who are willing
to pay more, which necessarily raises their price above that of common wine.
The difference is greater or less, according as the fashionableness and
scarcity of the wine render the competition of the buyers more or less
eager. Whatever it be, the greater part of it goes to the rent of the
landlord. For though such vineyards are in general more carefully cultivated
than most others, the high price of the wine seems to be, not so much the
effect, as the cause of this careful cultivation. In so valuable a produce,
the loss occasioned by negligence is so great, as to force even the most
careless to attention. A small part of this high price, therefore, is
sufficient to pay the wages of the extraordinary labour bestowed upon their
cultivation, and the profits of the extraordinary stock which puts that
labour into motion.
The sugar colonies possessed by the European nations in the West Indies may
be compared to those precious vineyards. Their whole produce falls short of
the effectual demand of Europe, and can be disposed of to those who are
willing to give more than what is sufficient to pay the whole rent, profit,
and wages, necessary for preparing and bringing it to market, according to
the rate at which they are commonly paid by any other produce. In Cochin
China, the finest white sugar generally sells for three piastres the
quintal, about thirteen shillings and sixpence of our money, as we are told
by Mr Poivre {Voyages d'un Philosophe.}, a very careful observer of the
agriculture of that country. What is there called the quintal, weighs from a
hundred and fifty to two hundred Paris pounds, or a hundred and seventy-five
Paris pounds at a medium, which reduces the price of the hundred weight
English to about eight shillings sterling; not a fourth part of what is
commonly paid for the brown or muscovada sugars imported from our colonies,
and not a sixth part of what is paid for the finest white sugar. The greater
part of the cultivated lands in Cochin China are employed in producing corn
and rice, the food of the great body of the people. The respective prices of
corn, rice, and sugar, are there probably in the natural proportion, or in
that which naturally takes place in the different crops of the greater part
of cultivated land, and which recompenses the landlord and farmer, as nearly
as can be computed, according to what is usually the original expense of
improvement, and the annual expense of cultivation. But in our sugar
colonies, the price of sugar bears no such proportion to that of the produce
of a rice or corn field either in Europe or America. It is commonly said
that a sugar planter expects that the rum and the molasses should defray the
whole expense of his cultivation, and that his sugar should be all clear
profit. If this be true, for I pretend not to affirm it, it is as if a corn
farmer expected to defray the expense of his cultivation with the chaff and
the straw, and that the grain should be all clear profit. We see frequently
societies of merchants in London, and other trading towns, purchase waste
lands in our sugar colonies, which they expect to improve and cultivate with
profit, by means of factors and agents, notwithstanding the great
distance and the uncertain returns, from the defective administration of
justice in those countries. Nobody will attempt to improve and cultivate in
the same manner the most fertile lands of Scotland, Ireland, or the corn
provinces of North America, though, from the more exact administration of
justice in these countries, more regular returns might be expected.
In Virginia and Maryland, the cultivation of tobacco is preferred, as most
profitable, to that of corn. Tobacco might be cultivated with advantage
through the greater part of Europe ; but, in almost every part of Europe, it
has become a principal subject of taxation ; and to collect a tax from every
different farm in the country where this plant might happen to be
cultivated, would be more difficult, it has been supposed, than to levy one
upon its importation at the custom-house. The cultivation of tobacco has,
upon this account, been most absurdly prohibited through the greater part of
Europe, which necessarily gives a sort of monopoly to the countries where it
is allowed ; and as Virginia and Maryland produce the greatest quantity of
it, they share largely, though with some competitors, in the advantage of
this monopoly. The cultivation of tobacco, however, seems not to be so
advantageous as that of sugar. I have never even heard of any tobacco
plantation that was improved and cultivated by the capital of merchants who
resided in Great Britain; and our tobacco colonies send us home no such
wealthy planters as we see frequently arrive from our sugar islands. Though,
from the preference given in those colonies to the cultivation of tobacco
above that of corn, it would appear that the effectual demand of Europe for
tobacco is not completely supplied, it probably is more nearly so than that
for sugar; and though the present price of tobacco is probably more than
sufficient to pay the whole rent, wages, and profit, necessary for preparing
and bringing it to market, according to the rate at which they are commonly
paid in corn land, it must not be so much more as the present price of
sugar. Our tobacco planters, accordingly, have shewn the same fear of the
superabundance of tobacco, which the proprietors of the old vineyards in
France have of the superabundance of wine. By act of assembly, they have
restrained its cultivation to six thousand plants, supposed to yield a
thousand weight of tobacco, for every negro between sixteen and sixty years
of age. Such a negro, over and above this quantity of tobacco, can manage,
they reckon, four acres of Indian corn. To prevent the market from being
overstocked, too, they have sometimes, in plentiful years, we are told by Dr
Douglas {Douglas's Summary,vol. ii. p. 379, 373.} (I suspect he has been ill
informed), burnt a certain quantity of tobacco for every negro, in the same
manner as the Dutch are said to do of spices. If such violent methods are
necessary to keep up the present price of tobacco, the superior advantage of
its culture over that of corn, if it still has any, will not probably be of
long continuance.
It is in this manner that the rent of the cultivated land, of which the
produce is human food, regulates the rent of the greater part of other
cultivated land. No particular produce can long afford less, because the
land would immediately be turned to another use; and if any particular
produce commonly affords more, it is because the quantity of land which can
be fitted for it is too small to supply the effectual demand.
In Europe, corn is the principal produce of land, which serves immediately
for human food. Except in particular situations, therefore, the rent of corn
land regulates in Europe that of all other cultivated land. Britain need
envy neither the vineyards of France, nor the olive plantations of Italy.
Except in particular situations, the value of these is regulated by that of
corn, in which the fertility of Britain is not much inferior to that of
either of those two countries.
If, in any country, the common and favourite vegetable food of the people
should be drawn from a plant of which the most common land, with the same,
or nearly the same culture, produced a much greater quantity than the most
fertile does of corn ; the rent of the landlord, or the surplus quantity of
food which would remain to him, after paying the labour, and replacing the
stock of the farmer, together with its ordinary profits, would necessarily
be much greater. Whatever was the rate at which labour was commonly
maintained in that country, this greater surplus could always maintain a
greater quantity of it, and, consequently, enable the landlord to purchase
or command a greater quantity of it. The real value of his rent, his real
power and authority, his command of the necessaries and conveniencies of
life with which the labour of other people could supply him, would
necessarily be much greater.
A rice field produces a much greater quantity of food than the most fertile
corn field. Two crops in the year, from thirty to sixty bushels each, are
said to be the ordinary produce of an acre. Though its cultivation,
therefore, requires more labour, a much greater surplus remains after
maintaining all that labour. In those rice countries, therefore, where
rice is the common and favourite vegetable food of the people, and where the
cultivators are chiefly maintained with it, a greater share of this greater
surplus should belong to the landlord than in corn countries. In Carolina,
where the planters, as in other British colonies, are generally both farmers
and landlords, and where rent, consequently, is confounded with profit,
the cultivation of rice is found to be more profitable than that of corn,
though their fields produce only one crop in the year, and though, from the
prevalence of the customs of Europe, rice is not there the common and
favourite vegetable food of the people.
A good rice field is a bog at all seasons, and at one season a bog covered
with water. It is unfit either for corn, or pasture, or vineyard, or,
indeed, for any other vegetable produce that is very useful to men ; and the
lands which are fit for those purposes are not fit for rice. Even in the
rice countries, therefore, the rent of rice lands cannot regulate the rent
of the other cuitivated land which can never be turned to that produce.
The food produced by a field of potatoes is not inferior in quantity to that
produced by a field of rice, and much superior to what is produced by a
field of wheat. Twelve thousand weight of potatoes from an acre of land is
not a greater produce than two thousand weight of wheat. The food or solid
nourishment, indeed, which can be drawn from each of those two plants, is
not altogether in proportion to their weight, on account of the watery
nature of potatoes. Allowing, however, half the weight of this root to go to
water, a very large allowance, such an acre of potatoes will still produce
six thousand weight of solid nourishment, three times the quantity produced
by the acre of wheat. An acre of potatoes is cultivated with less expense
than an acre of wheat; the fallow, which generally precedes the sowing of
wheat, more than compensating the hoeing and other extraordinary culture
which is always given to potatoes. Should this root ever become in any part
of Europe, like rice in some rice countries, the common and favourite
vegetable food of the people, so as to occupy the same proportion of the
lands in tillage, which wheat and other sorts of grain for human food do at
present, the same quantity of cultivated land would maintain a much greater
number of people ; and the labourers being generally fed with potatoes, a
greater surplus would remain after replacing all the stock, and maintaining
all the labour employed in cultivation. A greater share of this surplus,
too, would belong to the landlord. Population would increase, and rents
would rise much beyond what they are at present.
The land which is fit for potatoes, is fit for almost every other useful
vegetable. If they occupied the same proportion of cultivated land which
corn does at present, they would regulate, in the same manner, the rent of
the greater part of other cultivated land.
In some parts of Lancashire, it is pretended, I have been told, that bread
of oatmeal is a heartier food for labouring people than wheaten bread, and 1
have frequently heard the same doctrine held in Scotland. I am, however,
somewhat doubtful of the truth of if. The common people in Scotland, who are
fed with oatmeal, are in general neither so strong nor so handsome as the
same rank of people in England, who are fed with wheaten bread. They neither
work so well, nor look so well; and as there is not the same difference
between the people of fashion in the two countries, experience would seem to
shew, that the food of the common people in Scotland is not so suitable to
the human constitution as that of their neighbours of the same rank in
England. But it seems to be otherwise with potatoes. The chairmen, porters,
and coal-heavers in London, and those unfortunate women who live by
prostitution, the strongest men and the most beautiful women perhaps in the
British dominions, are said to be, the greater part of them, from the lowest
rank of people in Ireland. who are generally fed with this root. No food can
afford a more decisive proof of its nourishing quality, or of its being
peculiarly suitable to the health of the human constitution.
It is difficult to preserve potatoes through the year, and impossible to
store them like corn, for two or three years together. The fear of not being
able to sell them before they rot, discourages their cultivation, and is,
perhaps, the chief obstacle to their ever becoming in any great country,
like bread, the principal vegetable food of all the different ranks of the
people.
PART II. - Of the Produce of Land, which sometimes does, and sometimes
does not, afford Rent.
Human food seems to be the only produce of land, which always and
necessarily affords some rent to the landlord. Other sorts of produce
sometimes may, and sometimes may not, according to different circumstances.
After food, clothing and lodging are the two great wants of mankind.
Land, in its original rude state, can afford the materials of clothing and
lodging to a much greater number of people than it can feed. In its improved
state, it can sometimes feed a greater number of people than it can supply
with those materials; at least in the way in which they require them, and
are willing to pay for them. In the one state, therefore, there is always a
superabundance of these materials, which are frequently, upon that account,
of little or no value. In the other, there is often a scarcity, which
necessarily augments their value. In the one state, a great part of them is
thrown away as useless and the price of what is used is considered as equal
only to the labour and expense of fitting it for use, and can, therefore,
afford no rent to the landlord. In the other, they are all made use of, and
there is frequently a demand for more than can be had. Somebody is always
willing to give more for every part of them, than what is sufficient to pay
the expense of bringing them to market. Their price, therefore, can
always afford some rent to the landlord.
The skins of the larger animals were the original materials of clothing.
Among nations of hunters and shepherds, therefore, whose food consists
chiefly in the flesh of those animals, everyman, by providing himself with
food, provides himself with the materials of more clothing than he can wear.
If there was no foreign commerce, the greater part of them would be thrown
away as things of no value. This was probably the case among the hunting
nations of North America, before their country was discovered by the
Europeans, with whom they now exchange their surplus peltry, for blankets,
fire-arms, and brandy, which gives it some value. In the present commercial
state of the known world, the most barbarous nations, I believe, among whom
land property is established, have some foreign commerce of this kind, and
find among their wealthier neighbours such a demand for all the materials of
clothing, which their land produces, and which can neither be wrought up nor
consumed at home, as raises their price above what it costs to send them to
those wealthier neighbours. It affords, therefore, some rent to the
landlord. When the greater part of the Highland cattle were consumed on
their own hills, the exportation of their hides made the most considerable
article of the commerce of that country, and what they were exchanged for
afforded some addition to the rent of the Highland estates. The wool of
England, which in old times, could neither be consumed nor wrought up at
home, found a market in the then wealthier and more industrious country of
Flanders, and its price afforded something to the rent of the land which
produced it. In countries not better cultivated than England was then, or
than the Highlands of Scotland are now, and which had no foreign commerce,
the materials of clothing would evidently be so superabundant, that a great
part of them would be thrown away as useless, and no part could afford any
rent to the landlord.
The materials of lodging cannot always be transported to so great a distance
as those of clothing, and do not so readily become an object of foreign
commerce. When they are superabundant in the country which produces them, it
frequently happens, even in the present commercial state of the world, that
they are of no value to the landlord. A good stone quarry in the
neighbourhood of London would afford a considerable rent. In many parts of
Scotland and Wales it affords none. Barren timber for building is of great
value in a populous and well-cultivated country, and the land which produces
it affords a considerable rent. But in many parts of North America, the
landlord would be much obliged to any body who would carry away the greater
part of his large trees. In some parts of the Highlands of Scotland, the
bark is the only part of the wood which, for want of roads and
water-carriage, can be sent to market ; the timber is left to rot upon the
ground. When the materials of lodging are so superabundant, the part made
use of is worth only the labour and expense of fitting it for that use. It
affords no rent to the landlord, who generally grants the use of it to
whoever takes the trouble of asking it. The demand of wealthier nations,
however, sometimes enables him to get a rent for it. The paving of the
streets of London has enabled the owners of some barren rocks on the coast
of Scotland to draw a rent from what never afforded any before. The woods of
Norway, and of the coasts of the Baltic, find a market in many parts of
Great Britain, which they could not find at home, and thereby afford some
rent to their proprietors.
Countries are populous, not in proportion to the number of people whom their
produce can clothe and lodge, but in proportion to that of those whom it can
feed. When food is provided, it is easy to find the necessary clothing and
lodging. But though these are at hand, it may often be difficult to find
food. In some parts of the British dominions, what is called a house may be
built by one day's labour of one man. The simplest species of clothing, the
skins of animals, require somewhat more labour to dress and prepare them for
use. They do not, however, require a great deal. Among savage or barbarous
nations, a hundredth, or little more than a hundredth part of the labour of
the whole year, will be sufficient to provide them with such clothing and
lodging as satisfy the greater part of the people. All the other ninety-nine
parts are frequently no more than enough to provide them with food.
But when, by the improvement and cultivation of land, the labour of one
family can provide food for two, the labour of half the society becomes
sufficient to provide food for the whole. The other half, therefore, or at
least the greater part of them, can be employed in providing other things,
or in satisfying the other wants and fancies of mankind. Clothing and
lodging, household furniture, and what is called equipage, are the principal
objects of the greater part of those wants and fancies. The rich man
consumes no more food than his poor neighbour. In quality it may be very
different, and to select and prepare it may require more labour and art;
but in quantity it is very nearly the same. But compare the spacious palace
and great wardrobe of the one, with the hovel and the few rags of the other,
and you will be sensible that the difference between their clothing,
lodging, and household furniture, is almost as great in quantity as it is in
quality. The desire of food is limited in every man by the narrow capacity
of the human stomach; but the desire of the conveniencies and ornaments
of building, dress, equipage, and household furniture, seems to have no limit
or certain boundary. Those, therefore, who have the command of more food
than they themselves can consume, are always willing to exchange the
surplus, or, what is the same thing, the price of it, for gratifications of
this other kind. What is over and above satisfying the limited desire, is
given for the amusement of those desires which cannot be satisfied, but seem
to be altogether endless. The poor, in order to obtain food, exert
themselves to gratify those fancies of the rich ; and to obtain it more
certainly, they vie with one another in the cheapness and perfection of
their work. The number of workmen increases with the increasing quantity of
food, or with the growing improvement and cultivation of the lands ; and as
the nature of their business admits of the utmost subdivisions of labour,
the quantity of materials which they can work up, increases in a much
greater proportion than their numbers. Hence arises a demand for every sort
of material which human invention can employ, either usefully or
ornamentally, in building, dress, equipage, or household furniture ; for the
fossils and minerals contained in the bowels of the earth, the precious
metals, and the precious stones.
Food is, in this manner, not only the original source of rent, but every
other part of the produce of land which afterwards affords rent, derives
that part of its value from the improvement of the powers of labour in
producing food, by means of the improvement and cultivation of land.
Those other parts of the produce of land, however, which afterwards afford
rent, do not afford it always. Even in improved and cultivated countries,
the demand for them is not always such as to afford a greater price than
what is sufficient to pay the labour, and replace, together with its
ordinary profits, the stock which must be employed in bringing them to
market. Whether it is or is not such, depends upon different circumstances.
Whether a coal mine, for example, can afford any rent, depends partly upon
its fertility, and partly upon its situation.
A mine of any kind may be said to be either fertile or barren, according as
the quantity of mineral which can be brought from it by a certain quantity
of labour, is greater or less than what can be brought by an equal quantity
from the greater part of other mines of the same kind.
Some coal mines, advantageously situated, cannot be wrought on account of
their barrenness. The produce does not pay the expense. They can afford
neither profit nor rent.
There are some, of which the produce is barely sufficient to pay the labour,
and replace, together with its ordinary profits, the stock employed in
working them. They afford some profit to the undertaker of the work, but no
rent to the landlord. They can be wrought advantageously by nobody but the
landlord, who, being himself the undertaker of the work, gets the ordinary
profit of the capital which he employs in it. Many coal mines in Scotland
are wrought in this manner, and can be wrought in no other. The landlord
will allow nobody else to work them without paying some rent, and nobody can
afford to pay any.
Other coal mines in the same country, sufficiently fertile, cannot be
wrought on account of their situation. A quantity of mineral, sufficient
to defray the expense of working, could be brought from the mine by the
ordinary, or even less than the ordinary quantity of labour: but in an
inland country, thinly inhabited, and without either good roads or
water-carriage, this quantity could not be sold.
Coals are a less agreeable fuel than wood : they are said too to be less
wholesome. The expense of coals, therefore, at the place where they are
consumed, must generally be somewhat less than that of wood.
The price of wood, again, varies with the state of agriculture, nearly in
the same manner, and exactly for the same reason, as the price of cattle. In
its rude beginnings, the greater part of every country is covered with wood,
which is then a mere incumbrance, of no value to the landlord, who would
gladly give it to any body for the cutting. As agriculture advances, the
woods are partly cleared by the progress of tillage, and partly go to decay
in consequence of the increased number of cattle. These, though they do not
increase in the same proportion as corn, which is altogether the acquisition
of human industry, yet multiply under the care and protection of men, who
store up in the season of plenty what may maintain them in that of scarcity
; who, through the whole year, furnish them with a greater quantity of food
than uncultivated nature provides for them; and who, by destroying and
extirpating their enemies, secure them in the free enjoyment of all that she
provides.Numerous herds of cattle, when allowed to wander through the woods,
though they do not destroy the old trees, hinder any young ones from coming
up ; so that, in the course of a century or two, the whole forest goes to
ruin. The scarcity of wood then raises its price. It affords a good rent ;
and the landlord sometimes finds that he can scarce employ his best lands
more advantageously than in growing barren timber, of which the greatness of
the profit often compensates the lateness of the returns. This seems, in the
present times, to be nearly the state of things in several parts of Great
Britain, where the profit of planting is found to be equal to that of either
corn or pasture. The advantage which the landlord derives from planting can
nowhere exceed, at least for any considerable time, the rent which these
could afford him ; and in an inland country, which is highly cuitivated, it
will frequently not fall much short of this rent. Upon the sea-coast of a
well-improved country, indeed, if coals can conveniently be had for fuel, it
may sometimes be cheaper to bring barren timber for building from less
cultivated foreign countries than to raise it at home. In the new town of
Edinburgh, built within these few years, there is not, perhaps, a single
stick of Scotch timber.
Whatever may be the price of wood, if that of coals is such that the expense
of a coal fire is nearly equal to that of a wood one we may be assured, that
at that place, and in these circumstances, the price of coals is as high as
it can be. It seems to be so in some of the inland parts of England,
particularly in Oxfordshire, where it is usual, even in the fires of the
common people, to mix coals and wood together, and where the difference in
the expense of those two sorts of fuel cannot, therefore, be very great.
Coals, in the coal countries, are everywhere much below this highest price.
If they were not, they could not bear the expense of a distant carriage,
either by land or by water. A small quantity only could be sold; and the
coal masters and the coal proprietors find it more for their interest to
sell a great quantity at a price somewhat above the lowest, than a small
quantity at the highest. The most fertile coal mine, too, regulates the
price of coals at all the other mines in its neighbourhood. Both the
proprietor and the undertaker of the work find, the one that he can get a
greater rent, the other that he can get a greater profit, by somewhat
underselling all their neighbours. Their neighbours are soon obliged to sell
at the same price, though they cannot so well afford it, and though it
always diminishes, and sometimes takes away altogether, both their rent and
their profit. Some works are abandoned altogether ; others can afford no
rent, and can be wrought only by the proprietor.
The lowest price at which coals can be sold for any considerable time, is.
like that of all other commodities, the price which is barely sufficient to
replace, together with its ordinary profits, the stock which must be
employed in bringing them to market. At a coal mine for which the landlord
can get no rent, but, which he must either work himself or let it alone
altogether, the price of coals must generally be nearly about this price.
Rent, even where coals afford one, has generally a smaller share in their
price than in that of most other parts of the rude produce of land. The rent
of an estate above ground, commonly amounts to what is supposed to be a
third of the gross produce; and it is generally a rent certain and
independent of the occasional variations in the crop. In coal mines, a fifth
of the gross produce is a very great rent, a tenth the common rent ; and it
is seldom a rent certain, but depends upon the occasional variations in the
produce. These are so great, that in a country where thirty years purchase
is considered as a moderate price for the property of a landed estate, ten
years purchase is regarded as a good price for that of a coal mine.
The value of a coal mine to the proprietor, frequently depends as much upon
its situation as upon its fertility. That of a metallic mine depends more
upon its fertility, and less upon its situation. The coarse, and still more
the precious metals, when separated from the ore, are so valuable, that they
can generally bear the expense of a very long land, and of the most distant
sea carriage. Their market is not confined to the countries in the
neighbourhood of the mine, but extends to the whole world. The copper of
Japan makes an article of commerce in Europe; the iron of Spain in that of
Chili and Peru. The silver of Peru finds its way, not only to Europe, but
from Europe to China.
The price of coals in Westmoreland or Shropshire can have little effect on
their price at Newcastle ; and their price in the Lionnois can have none at
all. The productions of such distant coal mines can never be brought into
competition with one another. But the productions of the most distant
metallic mines frequently may, and in fact commonly are.
The price, therefore, of the coarse, and still more that of the precious
metals, at the most fertile mines in the world, must necessarily more or
less affect their price at every other in it. The price of copper in Japan
must have some influence upon its price at the copper mines in Europe. The
price of silver in Peru, or the quantity either of labour or of other goods
which it will purchase there, must have some influence on its price, not
only at the silver mines of Europe, but at those of China. After the
discovery of the mines of Peru, the silver mines of Europe were, the greater
part of them, abandoned. The value of silver was so much reduced, that their
produce could no longer pay the expense of working them, or replace, with a
profit, the food, clothes, lodging, and other necessaries which were
consumed in that operation. This was the case, too, with the mines of Cuba
and St. Domingo, and even with the ancient mines of Peru, after the
discovery of those of Potosi.
The price of every metal, at every mine, therefore, being regulated in some
measure by its price at the most fertile mine in the world that is actually
wrought, it can, at the greater part of mines, do very little more than pay
the expense of working, and can seldom afford a very high rent to the
landlord. Rent accordingly, seems at the greater part of mines to have but a
small share in the price of the coarse, and a still smaller in that of the
precious metals. Labour and profit make up the greater part of both.
A sixth part of the gross produce may be reckoned the average rent of the
tin mines of Cornwall, the most fertile that are known in the world, as we
are told by the Rev. Mr. Borlace, vice-warden of the stannaries. Some, he
says, afford more, and some do not afford so much. A sixth part of the gross
produce is the rent, too, of several very fertile lead mines in Scotland.
In the silver mines of Peru, we are told by Frezier and Ulloa, the
proprietor frequently exacts no other acknowledgment from the undertaker of
the mine, but that he will grind the ore at his mill, paying him the
ordinary multure or price of grinding. Till 1736, indeed, the tax of the
king of Spain amounted to one fifth of the standard silver, which till then
might be considered as the real rent of the greater part of the silver mines
of Peru, the richest which have been known in the world. If there had been
no tax, this fifth would naturally have belonged to the landlord, and many
mines might have been wrought which could not then be wrought, because they
could not afford this tax. The tax of the duke of Cornwall upon tin is
supposed to amount to more than five per cent. or one twentieth part of the
value ; and whatever may be his proportion, it would naturally, too, belong
to the proprietor of the mine, if tin was duty free. But if you add one
twentieth to one sixth, you will find that the whole average rent of the tin
mines of Cornwall, was to the whole average rent of the silver mines of
Peru, as thirteen to twelve. But the silver mines of Peru are not now able
to pay even this low rent; and the tax upon silver was, in 1736, reduced
from one fifth to one tenth. Even this tax upon silver, too, gives more
temptation to smuggling than the tax of one twentieth upon tin; and
smuggling must be much easier in the precious than in the bulky commodity.
The tax of the king of Spain, accordingly, is said to be very ill paid, and
that of the duke of Cornwall very well. Rent, therefore, it is probable,
makes a greater part of the price of tin at the most fertile tin mines than
it does of silver at the most fertile silver mines in the world. After
replacing the stock employed in working those different mines, together with
its ordinary profits, the residue which remains to the proprietor is
greater, it seems, in the coarse, than in the precious metal.
Neither are the profits of the undertakers of silver mines commonly very
great in Peru.The same most respectable and well-informed authors acquaint
us, that when any person undertakes to work a new mine in Peru, he is
universally looked upon as a man destined to bankruptcy and ruin, and is
upon that account shunned and avoided by every body.Mining, it seems, is
considered there in the same light as here, as a lottery, in which the
prizes do not compensate the blanks, though the greatness of some tempts
many adventurers to throw away their fortunes in such unprosperous projects.
As the sovereign, however, derives a considerable part of his revenue from the produce
of silver mines, the law in Peru gives every possible encouragement to the
discovery and working of new ones. Whoever discovers a new mine, is entitled
to measure off two hundred and forty-six feet in length, according to what
he supposes to be the direction of the vein, and half as much in breadth. He
becomes proprietor of this portion of the mine, and can work it without
paving any acknowledgment to the landlord. The interest of the duke of
Cornwall has given occasion to a regulation nearly of the same kind in that
ancient dutchy. In waste and uninclosed lands, any person who discovers a
tin mine may mark out its limits to a certain extent, which is called
bounding a mine. The bounder becomes the real proprietor of the mine, and
may either work it himself, or give it in lease to another, without the
consent of the owner of the land, to whom, however, a very small
acknowdedgment must be paid upon working it. In both regulations, the sacred
rights of private property are sacrificed to the supposed interests of
public revenue.
The same encouragement is given in Peru to the discovery and working of new
gold mines; and in gold the king's tax amounts only to a twentieth part of
the standard rental. It was once a fifth, and afterwards a tenth, as in
silver; but it was found that the work could not bear even the lowest of
these two taxes. If it is rare, however, say the same authors, Frezier and
Ulloa, to find a person who has made his fortune by a silver, it is still
much rarer to find one who has done so by a gold mine. This twentieth part
seems to be the whole rent which is paid by the greater part of the gold
mines of Chili and Peru. Gold, too, is much more liable to be smuggled than
even silver; not only on account of the superior value of the metal in
proportion to its bulk, but on account of the peculiar way in which nature
produces it. Silver is very seldom found virgin, but, like most other
metals, is generally mineralized with some other body, from which it is
impossible to separate it in such quantities as will pay for the expense,
but by a very laborious and tedious operation, which cannot well be carried
on but in work-houses erected for the purpose, and, therefore, exposed to
the inspection of the king's officers. Gold, on the contrary, is almost
always found virgin. It is sometimes found in pieces of some bulk ; and,
even when mixed, in small and almost insensible particles, with sand, earth,
and other extraneous bodies, it can be separated from them by a very short
and simple operation, which can be carried on in any private house by any
body who is possessed of a small quantity of mercury. If the king's tax,
therefore, is but ill paid upon silver, it is likely to be much worse paid
upon gold; and rent must make a much smaller part of the price of gold than
that of silver.
The lowest price at which the precious metals can be sold, or the smallest
quantity of other goods for which they can be exchanged, during any
considerable time, is regulated by the same principles which fix the lowest
ordinary price of all other goods. The stock which must commonly be
employed, the food, clothes, and lodging, which must commonly be consumed in
bringing them from the mine to the market, determine it. It must at least be
sufficient to replace that stock, with the ordinary profits.
Their highest price, however, seems not to be necessarily determined by any
thing but the actual scarcity or plenty of these metals themselves. It is
not determined by that of any other commodity, in the same manner as the
price of coals is by that of wood, beyond which no scarcity can ever raise
it. Increase the scarcity of gold to a certain degree, and the smallest bit
of it may become more precious than a diamond, and exchange for a greater
quantity of other goods.
The demand for those metals arises partly from their utility, and partly
from their beauty. If you except iron, they are more useful than, perhaps,
any other metal. As they are less liable to rust and impurity, they can more
easily be kept clean; and the utensils, either of the table or the kitchen,
are often, upon that account, more agreeable when made of them. A silver
boiler is more cleanly than a lead, copper, or tin one; and the same quality
would render a gold boiler still better than a silver one. Their principal
merit, however, arises from their beauty, which renders them peculiarly fit
for the ornaments of dress and furniture. No paint or dye can give so
splendid a colour as gilding. The merit of their beauty is greatly enhanced
by their scarcity. With the greater part of rich people, the chief enjoyment
of riches consists in the parade of riches ; which, in their eye, is never
so complete as when they appear to possess those decisive marks of opulence
which nobody can possess but themselves. In their eyes, the merit of an
object, which is in any degree either useful or beautiful, is greatly
enhanced by its scarcity, or by the great labour which it requires to
collect any considerable quantity of it; a labour which nobody can afford to
pay but themselves. Such objects they are willing to purchase at a higher
price than things much more beautiful and useful, but more common. These
qualities of utility, beauty, and scarcity, are the original foundation of
the high price of those metals, or of the great quantity of other goods for
which they can everywhere be exchanged. This value was antecedent to,
and independent of their being employed as coin, and was the quality which
fitted them for that employment. That employment, however, by occasioning a
new demand, and by diminishing the quantity which could be employed in any
other way, may have afterwards contributed to keep up or increase their
value.
The demand for the precious stones arises altogether from their beauty. They
are of no use but as ornaments ; and the merit of their beauty is greatly
enhanced by their scarcity, or by the difficulty and expense of getting them
from the mine. Wages and profit accordingly make up, upon most occasions,
almost the whole of the high price. Rent comes in but for a very small
share, frequently for no share ; and the most fertile mines only afford any
considerable rent. When Tavernier, a jeweller, visited the diamond mines of
Golconda and Visiapour, he was informed that the sovereign of the country,
for whose benefit they were wrought, had ordered all of them to be shut up
except those which yielded the largest and finest stones. The other, it
seems, were to the proprietor not worth the working.
As the prices, both of the precious metals and of the precious stones, is
regulated all over the world by their price at the most fertile mine in it,
the rent which a mine of either can afford to its proprietor is in
proportion, not to its absolute, but to what may be called its relative
fertility, or to its superiority over other mines of the same kind. If new
mines were discovered, as much superior to those of Potosi, as they were
superior to those of Europe, the value of silver might be so much degraded
as to render even the mines of Potosi not worth the working. Before the
discovery of the Spanish West Indies, the most fertile mines in Europe may
have afforded as great a rent to their proprietors as the richest mines in
Peru do at present. Though the quantity of silver was much less, it might
have exchanged for an equal quantity of other goods, and the proprietor's
share might have enabled him to purchase or command an equal quantity either
of labour or of commodities.
The value, both of the produce and of the rent, the real revenue which they
afforded, both to the public and to the proprietor, might have been the
same.
The most abundant mines, either of the precious metals, or of the precious
stones, could add little to the wealth of the world. A produce, of which the
value is principally derived from its scarcity, is necessarily degraded by
its abundance. A service of plate, and the other frivolous ornaments of
dress and furniture, could be purchased for a smaller quantity of
commodities ; and in this would consist the sole advantage which the world
could derive from that abundance.
It is otherwise in estates above ground. The value, both of their produce
and of their rent, is in proportion to their absolute, and not to their
relative fertility. The land which produces a certain quantity of food,
clothes, and lodging, can always feed, clothe, and lodge, a certain number
of people ; and whatever may be the proportion of the landlord, it will
always give him a proportionable command of the labour of those people, and
of the commodities with which that labour can supply him. The value of the
most barren land is not diminished by the neighbourhood of the most fertile.
On the contrary, it is generally increased by it. The great number of people
maintained by the fertile lands afford a market to many parts of the produce
of the barren, which they could never have found among those whom their own
produce could maintain.
Whatever increases the fertility of land in producing food, increases not
only the value of the lands upon which the improvement is bestowed, but
contributes likewise to increase that of many other lands, by creating a new
demand for their produce. That abundance of food, of which, in consequence
of the improvement of land, many people have the disposal beyond what they
themselves can consume, is the great cause of the demand, both for the
precious metals and the precious stones, as well as for every other
conveniency and ornament of dress, lodging, household furniture, and
equipage. Food not only constitutes the principal part of the riches of the
world, but it is the abundance of food which gives the principal part of
their value to many other sorts of riches. The poor inhabitants of Cuba and
St. Domingo, when they were first discovered by the Spaniards, used to wear
little bits of gold as ornaments in their hair and other parts of their
dress. They seemed to value them as we would do any little pebbles of
somewhat more than ordinary beauty, and to consider them as just worth the
picking up, but not worth the refusing to any body who asked them, They gave
them to their new guests at the first request, without seeming to think that
they had made them any very valuable present. They were astonished to
observe the rage of the Spaniards to obtain them; and had no notion that
there could anywhere be a country in which many people had the disposal of
so great a superfluity of food; so scanty always among themselves, that, for
a very small quantity of those glittering baubles, they would willingly give
as much as might maintain a whole family for many years. Could they have
been made to understand this, the passion of the Spaniards would not have
surprised them.
PART III. ˜ Of the variations in the Proportion between the respective
Values of that sort of Produce which always affords Rent, and of that which
sometimes does, and sometimes does not, afford Rent.
The increasing abundance of food, in consequence of the increasing
improvement and cultivation, must necessarily increase the demand for every
part of the produce of land which is not food, and which can be applied
either to use or to ornament. In the whole progress of improvement, it
might, therefore, be expected there should be only one variation in the
comparative values of those two different sorts of produce. The value of
that sort which sometimes does, and sometimes does not afford rent, should
constantly rise in proportion to that which always affords some rent. As art
and industry advance, the materials of clothing and lodging, the useful
fossils and materials of the earth, the precious metals and the precious
stones, should gradually come to be more and more in demand, should
gradually exchange for a greater and a greater quantity of food ; or, in
other words, should gradually become dearer and dearer. This, accordingly,
has been the case with most of these things upon most occasions, and would
have been the case with all of them upon all occasions, if particular
accidents had not, upon some occasions, increased the supply of some of them
in a still greater proportion than the demand.
The value of a free-stone quarry, for example, will necessarily increase
with the increasing improvement and population of the country round about
it, especially if it should be the only one in the neighbourhood. But the
value of a silver mine, even though there should not be another within a
thousand miles of it, will not necessarily increase with the improvement of
the country in which it is situated. The market for the produce of a
free-stone quarry can seldom extend more than a few miles round about it,
and the demand must generally be in proportion to the improvement and
population of that small district ; but the market for the produce of a silver
mine may extend over the whole known world. Unless the world in general.
therefore, be advancing in improvement and population, the demand for silver
might not be at all increased by the improvement even of a large country in
the neighbourhood of the mine. Even though the world in general were
improving, yet if, in the course of its improvements, new mines should be
discovered, much more fertile than any which had been known before, though
the demand for silver would necessarily increase, yet the supply might
increase in so much a greater proportion, that the real price of that metal
might gradually fall; that is, any given quantity, a pound weight of it, for
example, might gradually purchase or command a smaller and a smaller
quantity of labour, or exchange for a smaller and a smaller quantity of
corn, the principal part of the subsistence of the labourer.
The great market for silver is the commercial and civilized part of the
world.
If, by the general progress of improvement, the demand of this market should
increase, while, at the same time, the supply did not increase in the same
proportion, the value of silver would gradually rise in proportion to that
of corn. Any given quantity of silver would exchange for a greater and a
greater quantity of corn ; or, in other words, the average money price of
corn would gradually become cheaper and cheaper.
If, on the contrary, the supply, by some accident, should increase, for many
years together, in a greater proportion than the demand, that metal would
gradually become cheaper and cheaper; or, in other words, the average money
price of corn would, in spite of all improvements, gradually become dearer
and dearer.
But if, on the other hand, the supply of that metal should increase nearly
in the same proportion as the demand, it would continue to purchase or
exchange for nearly the same quantity of corn ; and the average money price
of corn would, in spite of all improvements. continue very nearly the same.
These three seem to exhaust all the possible combinations of events which
can happen in the progress of improvement; and during the course of the four
centuries preceding the present, if we may judge by what has happened both
in France and Great Britain, each of those three different combinations
seems to have taken place in the European market, and nearly in the same
order, too, in which I have here set them down.
Digression concerning the Variations in the value of Silver during the
Course of the Four last Centuries.
First Period. ˜ In 1350, and for some time before, the average price of the
quarter of wheat in England seems not to have been estimated lower than four
ounces of silver, Tower weight, equal to about twenty shillings of our
present money. From this price it seems to have fallen gradually to two
ounces of silver, equal to about ten shillings of our present money, the
price at which we find it estimated in the beginning of the sixteenth
century, and at which it seems to have continued to be estimated till about
1570.
In 1350, being the 25th of Edward III. was enacted what is called the
Statute of Labourers. In the preamble, it complains much of the insolence of
servants, who endeavoured to raise their wages upon their masters. It
therefore ordains, that all servants and labourers should, for the future,
be contented with the same wages and liveries (liveries in those times
signified not only clothes, but provisions) which they had been accustomed
to receive in the 20th year of the king, and the four preceding years; that,
upon this account, their livery-wheat should nowhere be estimated higher
than tenpence a-bushel, and that it should always be in the option of the
master to deliver them either the wheat or the money. Tenpence: a-bushel,
therefore, had, in the 25th of Edward III. been reckoned a very moderate
price of wheat, since it required a particular statute to oblige servants to
accept of it in exchange for their usual livery of provisions ; and it had
been reckoned a reasonable price ten years before that, or in the 16th year
of the king, the term to which the statute refers. But in the 16th year of
Edward III. tenpence contained about half an ounce of silver, Tower weight,
and was nearly equal to half-a-crown of our present money. Four ounces of
silver, Tower weight, therefore, equal to six shillings and eightpence of
the money of those times, and to near twenty shillings of that of the
present, must have been reckoned a moderate price for the quarter of eight
bushels.
This statute is surely a better evidence of what was reckoned, in those
times, a moderate price of grain, than the prices of some particular years,
which have generally been recorded by historians and other writers, on
account of their extraordinary dearness or cheapness, and from which,
therefore, it is difficult to form any judgment concerning what may have
been the ordinary price. There are, besides, other reasons for believing
that, in the beginning of the fourteenth century, and for some time before,
the common price of wheat was not less than four ounces of silver the
quarter, and that of other grain in proportion.
In 1309, Ralph de Born, prior of St Augustine's, Canterbury, gave a feast
upon his installation-day, of which William Thorn has preserved, not only
the bill of fare, but the prices of many particulars. In that feast were
consumed, 1st, fifty-three quarters of wheat, which cost nineteen pounds,
or seven shillings, and twopence a-quarter, equal to about one-and-twenty
shillings and sixpence of our present money ; 2dly, fifty-eight quarters of
malt, which cost seventeen pounds ten shillings, or six shillings a-quarter,
equal to about eighteen shillings of our present money; 3dly, twenty
quarters of oats, which cost four pounds, or four shillings a-quarter, equal
to about twelve shillings of our present money. The prices of malt and oats
seem here to lie higher than their ordinary proportion to the price of
wheat.
These prices are not recorded, on account of their extraordinary dearness or
cheapness, but are mentioned accidentally, as the prices actually paid for
large quantities of grain consumed at a feast, which was famous for its
magnificence.
In 1262, being the 51st of Henry III. was revived an ancient statute, called
the assize of bread and ale, which, the king says in the preamble, had been
made in the times of his progenitors, some time kings of England. It is
probably, therefore, as old at least as the time of his grandfather, Henry
II. and may have been as old as the Conquest. It regulates the price of
bread according as the prices of wheat may happen to be, from one shilling
to twenty shillings the quarter of the money of those times. But statutes of
this kind are generally presumed to provide with equal care for all
deviations from the middle price, for those below it, as well as for those
above it. Ten shillings, therefore, containing six ounces of silver, Tower
weight, and equal to about thirty shillings of our present money, must, upon
this supposition, have been reckoned the middle price of the quarter of
wheat when this statute was first enacted, and must have continued to be so
in the 51st of Henry III. We cannot, therefore, be very wrong in supposing
that the middle price was not less than one-third of the highest price at
which this statute regulates the price of bread, or than six shillings and
eightpence of the money of those times, containing four ounces of silver,
Tower weight.
From these different facts, therefore, we seem to have some reason to
conclude that, about the middle of the fourteenth century, and for a
considerable time before, the average or ordinary price of the quarter of
wheat was not supposed to be less than four ounces of silver, Tower weight.
From about the middle of the fourteenth to the beginning of the sixteenth
century, what was reckoned the reasonable and moderate, that is, the
ordinary or average price of wheat, seems to have sunk gradually to about
one half of this price; so as at last to have fallen to about two ounces of
silver, Tower weight, equal to about ten shillings of our present money. It
continued to be estimated at this price till about 1570.
In the household book of Henry, the fifth earl of Northumberland, drawn up
in 1512 there are two different estimations of wheat. In one of them it is
computed at six shilling and eightpence the quarter, in the other at five
shillings and eightpence only. In 1512, six shillings and eightpence
contained only two ounces of silver, Tower weight, and were equal to about
ten shillings of our present money.
From the 25th of Edward III. to the beginning of the reign of Elizabeth,
during the space of more than two hundred years, six shillings and
eightpence, it appears from several different statutes, had continued to be
considered as what is called the moderate and reasonable, that is, the
ordinary or average price of wheat. The quantity of silver, however,
contained in that nominal sum was, during the course of this period,
continually diminishing in consequence of some alterations which were made
in the coin. But the increase of the value of silver had, it seems, so far
compensated the diminution of the quantity of it contained in the same
nominal sum, that the legislature did not think it worth while to attend to
this circumstance.
Thus, in 1436, it was enacted, that wheat might be exported without a
licence when the price was so low as six shillings and eightpence: and in
1463, it was enacted, that no wheat should be imported if the price was not
above six shillings and eightpence the quarter: The legislature had
imagined, that when the price was so low, there could be no inconveniency in
exportation, but that when it rose higher, it became prudent to allow of
importation. Six shillings and eightpence, therefore, containing about the
same quantity of silver as thirteen shillings and fourpence of our present
money (one-third part less than the same nominal sum contained in the time
of Edward III), had, in those times, been considered as what is called the
moderate and reasonable price of wheat.
In 1554, by the 1st and 2nd of Philip and Mary, and in 1558, by the 1st of
Elizabeth, the exportation of wheat was in the same manner prohibited,
whenever the price of the quarter should exceed six shillings and
eightpence, which did not then contain two penny worth more silver than the
same nominal sum does at present. But it had soon been found, that to
restrain the exportation of wheat till the price was so very low, was, in
reality, to prohibit it altogether. In 1562, therefore, by the 5th of
Elizabeth, the exportation of wheat was allowed from certain ports, whenever
the price of the quarter should not exceed ten shillings, containing nearly
the same quantity of silver as the like nominal sum does at present. This
price had at this time, therefore, been considered as what is called the
moderate and reasonable price of wheat. It agrees nearly with the estimation
of the Northumberland book in 1512.
That in France the average price of grain was, in the same manner, much
lower in the end of the fifteenth and beginning of the sixteenth century,
than in the two centuries preceding, has been observed both by Mr Dupré de
St Maur, and by the elegant author of the Essay on the Policy of Grain. Its
price, during the same period, had probably sunk in the same manner through
the greater part of Europe.
This rise in the value of silver, in proportion to that of corn, may either
have been owing altogether to the increase of the demand for that metal, in
consequence of increasing improvement and cultivation, the supply, in
the mean time, continuing the same as before; or, the demand continuing the
same as before, it may have been owing altogether to the gradual diminution
of the supply: the greater part of the mines which were then known in the
world being much exhausted, and, consequently, the expense of working them
much increased; or it may have been owing partly to the one, and partly to
the other of those two circumstances. In the end of the fifteenth and
beginning of the sixteenth centuries, the greater part of Europe was
approaching towards a more settled from of government than it had enjoyed
for several ages before. The increase of security would naturally increase
industry and improvement; and the demand for the precious metals, as well as
for every other luxury and ornament, would naturally increase with the
increase of riches. A greater annual produce would require a greater
quantity of coin to circulate it ; and a greater number of rich people would
require a greater quantity of plate and other ornaments of silver. It is
natural to suppose, too, that the greater part of the mines which then
supplied the European market with silver might be a good deal exhausted, and
have become more expensive in the working. They had been wrought, many of
them, from the time of the Romans.
It has been the opinion, however, of the greater part of those who have
written upon the prices of commodities in ancient times, that, from the
Conquest, perhaps from the invasion of Julius Caesar, till the discovery of
the mines of America, the value of silver was continually diminishing. This
opinion they seem to have been led into, partly by the observations which
they had occasion to make upon the prices both of corn and of some other
parts of the rude produce of land, and partly by the popular notion, that as
the quantity of silver naturally increases in every country with the
increase of wealth, so its value diminishes as it quantity increases.
In their observations upon the prices of corn, three different circumstances
seem frequently to have misled them.
First. in ancient times, almost all rents were paid in kind; in a certain
quantity of corn, cattle, poultry, etc. It sometimes happened, however, that
the landlord would stipulate, that he should be at liberty to demand of the
tenant, either the annual payment in kind or a certain sum of money instead
of it. The price at which the payment in kind was in this manner exchanged
for a certain sum of money, is in Scotland called the conversion price. As
the option is always in the landlord to take either the substance or the
price, it is necessary, for the safety of the tenant, that the conversion
price should rather be below than above the average market price. In many
places, accordingly, it is not much above one half of this price. Through
the greater part of Scotland this custom still continues with regard to
poultry, and in some places with regard to cattle. It might probably have
continued to take place, too, with regard to corn, had not the institution
of the public fiars put an end to it. These are annual valuations, according
to the judgment of an assize, of the average price of all the different
sorts of grain, and of all the different qualities of each, according to the
actual market price in every different county. This institution rendered it
sufficiently safe for the tenant, and much more convenient for the landlord,
to convert, as they call it, the corn rent, rather at what should happen to
be the price of the fiars of each year, than at any certain fixed price. But
the writers who have collected the prices of corn in ancient times seem
frequently to have mistaken what is called in Scotland the conversion price
for the actual market price. Fleetwood acknowledges, upon one occasion, that
he had made this mistake. As he wrote his book, however, for a particular
purpose, he does not think proper to make this acknowledgment till after
transcribing this conversion price fifteen times. The price is eight
shillings the quarter of wheat. This sum in 1423, the year at which he
begins with it, contained the same quantity of silver as sixteen shillings
of our present money. But in 1562, the year at which he ends with it, it
contained no more than the same nominal sum does at present.
Secondly, they have been misled by the slovenly manner in which some ancient
statutes of assize had been sometimes transcribed by lazy copiers, and
sometimes, perhaps, actually composed by the legislature.
The ancient statutes of assize seem to have begun always with determining
what ought to be the price of bread and ale when the price of wheat and
barley were at the lowest ; and to have proceeded gradually to determine
what it ought to be, according as the prices of those two sorts of grain
should gradually rise above this lowest price. But the transcribers of those
statutes seem frequently to have thought it sufficient to copy the
regulation as far as the three or four first and lowest prices ; saving in
this manner their own labour, and judging, I suppose, that this was enough
to show what proportion ought to be observed in all higher prices.
Thus, in the assize of bread and ale, of the 51st of Henry III. the price of
bread was regulated according to the different prices of wheat, from one
shilling to twenty shillings the quarter of the money of those times. But in
the manuscripts from which all the different editions of the statutes,
preceding that of Mr Ruffhead, were printed, the copiers had never
transcribed this regulation beyond the price of twelve shillings. Several
writers, therefore, being misled by this faulty transcription, very
naturally conclude that the middle price, or six shillings the quarter,
equal to about eighteen shillings of our present money, was the ordinary or
average price of wheat at that time.
In the statute of Tumbrel and Pillory, enacted nearly about the same time,
the price of ale is regulated according to every sixpence rise in the price
of barley, from two shillings, to four shillings the quarter. That four
shillings, however, was not considered as the highest price to which barley
might frequently rise in those times, and that these prices were only given
as an example of the proportion which ought to be observed in all other
prices, whether higher or lower, we may infer from the last words of the
statute: " Et sic deinceps crescetur vel diminuetur per sex denarios." The
expression is very slovenly, but the meaning is plain enough, " that the
price of ale is in this manner to be increased or diminished according to
every sixpence rise or fall in the price of barley." In the composition of
this statute, the legislature itself seems to have been as negligent as the
copiers were in the transcription of the other.
In an ancient manuscript of the Regiam Majestatem, an old Scotch law book,
there is a statute of assize, in which the price of bread is regulated
according to all the different prices of wheat, from tenpence to three
shillings the Scotch boll, equal to about half an English quarter. Three
shillings Scotch, at the time when this assize is supposed to have been
enacted, were equal to about nine shillings sterling of our present money Mr
Ruddiman seems {See his Preface to Anderson's Diplomata Scotiae.} to
conclude from this, that three shillings was the highest price to which
wheat ever rose in those times, and that tenpence, a shilling, or at most
two shillings, were the ordinary prices. Upon consulting the manuscript,
however, it appears evidently, that all these prices are only set down as
examples of the proportion which ought to be observed between the respective
prices of wheat and bread. The last words of the statute are " reliqua
judicabis secundum praescripta, habendo respectum ad pretium bladi." ˜ " You
shall judge of the remaining cases, according to what is above written,
having respect to the price of corn."
Thirdly, they seem to have been misled too, by the very low price at which
wheat was sometimes sold in very ancient times ; and to have imagined, that
as its lowest price was then much lower than in later times its ordinary
price must likewise have been much lower. They might have found, however,
that in those ancient times its highest price was fully as much above, as
its lowest price was below any thing that had ever been known in later
times. Thus, in 1270, Fleetwood gives us two prices of the quarter of wheat.
The one is four pounds sixteen shillings of the money of those times, equal
to fourteen pounds eight shillings of that of the present; the other is six
pounds eight shillings, equal to nineteen pounds four shillings of our
present money. No price can be found in the end of the fifteenth, or
beginning of the sixteenth century, which approaches to the extravagance of
these. The price of corn, though at all times liable to variation varies
most in those turbulent and disorderly societies, in which the interruption
of all commerce and communication hinders the plenty of one part of the
country from relieving the scarcity of another. In the disorderly state of
England under the Plantagenets, who governed it from about the middle of the
twelfth till towards the end of the fifteenth century, one district might be
in plenty, while another, at no great distance, by having its crop
destroyed, either by some accident of the seasons, or by the incursion of
some neighbouring baron, might be suffering all the horrors of a famine; and
yet if the lands of some hostile lord were interposed between them, the one
might not be able to give the least assistance to the other. Under the
vigorous administration of the Tudors, who governed England during the
latter part of the fifteenth, and through the whole of the sixteenth
century, no baron was powerful enough to dare to disturb the public
security.
The reader will find at the end of this chapter all the prices of wheat
which have been collected by Fleetwood, from l202 to 1597, both inclusive,
reduced to the money of the present times, and digested, according to the
order of time, into seven divisions of twelve years each. At the end of each
division, too, he will find the average price of the twelve years of which
it consists. In that long period of time, Fleetwood has been able to collect
the prices of no more than eighty years ; so that four years are wanting to
make out the last twelve years. I have added, therefore, from the accounts
of Eton college, the prices of 1598, 1599, 1600, and 1601. It is the only
addition which I have made. The reader will see, that from the beginning of
the thirteenth till after the middle of the sixteenth century, the average
price of each twelve years grows gradually lower and lower; and that towards
the end of the sixteenth century it begins to rise again. The prices,
indeed, which Fleetwood has been able to collect, seem to have been those
chiefly which were remarkable for extraordinary dearness or cheapness ; and
I do not pretend that any very certain conclusion can be drawn from them. So
far, however, as they prove any thing at all, they confirm the account which
I have been endeavouring to give. Fleetwood himself, however, seems, with
most other writers, to have believed, that, during all this period, the
value of silver, in consequence of its increasing abundance, was continually
diminishing. The prices of corn, which he himself has collected, certainly
do not agree with this opinion. They agree perfectly with that of Mr Dupré
de St Maur, and with that which I have been endeavouring to explain. Bishop
Fleetwood and Mr Dupré de St Maur are the two authors who seem to have
collected, with the greatest diligence and fidelity, the prices of things in
ancient times. It is some what curious that, though their opinions are so
very different, their facts, so far as they relate to the price of corn at
least, should coincide so very exactly.
It is not, however, so much from the low price of corn, as from that of some
other parts of the rude produce of land, that the most judicious writers
have inferred the great value of silver in those very ancient times. Corn,
it has been said, being a sort of manufacture, was, in those rude ages, much
dearer in proportion than the greater part of other commodities; it is
meant, I suppose, than the greater part of unmanufactured commodities, such
as cattle, poultry, game of all kinds, etc. That in those times of poverty
and barbarism these were proportionably much cheaper than corn, is
undoubtedly true. But this cheapness was not the effect of the high value of
silver, but of the low value of those commodities. It was not because silver
would in such times purchase or represent a greater quantity of labour, but
because such commodities would purchase or represent a much smaller quantity
than in times of more opulence and improvement. Silver must certainly be
cheaper in Spanish America than in Europe ; in the country where it is
produced, than in the country to which it is brought, at the expense of a
long carriage both by land and by sea, of a freight, and an insurance.
One-and-twenty pence halfpenny sterling, however, we are told by Ulloa, was,
not many years ago, at Buenos Ayres, the price of an ox chosen from a herd
of three or four hundred. Sixteen shillings sterling, we are told by Mr
Byron, was the price of a good horse in the capital of Chili. In a country
naturally fertile, but of which the far greater part is altogether
uncultivated, cattle, poultry, game of all kinds, etc. as they can be
acquired with a very small quantity of labour, so they will purchase or
command but a very small quantity. The low money price for which they may be
sold, is no proof that the real value of silver is there very high, but that
the real value of those commodities is very low.
Labour, it must always be remembered, and not any particular commodity, or
set of commodities, is the real measure of the value both of silver and of
all other commodities.
But in countries almost waste, or but thinly inhabited, cattle, poultry,
game of all kinds, etc. as they are the spontaneous productions of Nature,
so she frequently produces them in much greater quantities than the
consumption of the inhabitants requires. In such a state of things, the
supply commonly exceeds the demand. In different states of society, in
different states of improvement, therefore, such commodities will represent,
or be equivalent, to very different quantities of labour.
In every state of society, in every stage of improvement, corn is the
production of human industry. But the average produce of every sort of
industry is always suited, more or less exactly, to the average consumption;
the average supply to the average demand. In every different stage of
improvement, besides, the raising of equal quantities of corn in the same
soil and climate, will, at an average, require nearly equal quantities of
labour; or, what comes to the same thing, the price of nearly equal
quantities; the continual increase of the productive powers of labour, in an
improved state of cultivation, being more or less counterbalanced by the
continual increasing price of cattle, the principal instruments of
agriculture. Upon all these accounts, therefore, we may rest assured, that
equal quantities of corn will, in every state of society, in every stage of
improvement, more nearly represent, or be equivalent to, equal quantities of
labour, than equal quantities of any other part of the rude produce of land.
Corn, accordingly, it has already been observed, is, in all the different
stages of wealth and improvement, a more accurate measure of value than any
other commodity or set of commodities. In all those different stages,
therefore, we can judge better of the real value of silver, by comparing it
with corn, than by comparing it with any other commodity or set of
commodities.
Corn, besides, or whatever else is the common and favourite vegetable food
of the people, constitutes, in every civilized country, the principal part
of the subsistence of the labourer. In consequence of the extension of
agriculture, the land of every country produces a much greater quantity of
vegetable than of animal food, and the labourer everywhere lives chiefly
upon the wholesome food that is cheapest and most abundant. Butcher's meat,
except in the most thriving countries, or where labour is most highly
rewarded, makes but an insignificant part of his subsistence; poultry makes
a still smaller part of it, and game no part of it. In France, and even in
Scotland, where labour is somewhat better rewarded than in France, the
labouring poor seldom eat butcher's meat, except upon holidays, and other
extraordinary occasions. The money price of labour, therefore, depends much
more upon the average money price of corn, the subsistence of the labourer,
than upon that of butcher's meat, or of any other part of the rude produce
of land. The real value of gold and silver, therefore, the real quantity of
labour which they can purchase or command, depends much more upon the
quantity of corn which they can purchase or command, than upon that of
butcher's meat, or any other part of the rude produce of land.
Such slight observations, however, upon the prices either of corn or of
other commodities, would not probably have misled so many intelligent
authors, had they not been influenced at the same time by the popular
notion, that as the quantity of silver naturally increases in every country
with the increase of wealth, so its value diminishes as its quantity
increases. This notion, however, seems to be altogether groundless.
The quantity of the precious metals may increase in any country from two
different causes ; either, first, from the increased abundance of the mines
which supply it; or, secondly, from the increased wealth of the people, from
the increased produce of their annual labour. The first of these causes is
no doubt necessarily connected with the diminution of the value of the
precious metals; but the second is not.
When more abundant mines are discovered, a greater quantity of the precious
metals is brought to market; and the quantity of the necessaries and
conveniencies of life for which they must he exchanged being the same as
before, equal quantities of the metals must be exchanged for smaller
quantities of commodities. So far, therefore, as the increase of the
quantity of the precious metals in any country arises from the increased
abundance of the mines, it is necessarily connected with some diminution of
their value.
When, on the contrary, the wealth of any country increases, when the annual
produce of its labour becomes gradually greater and greater, a greater
quantity of coin becomes necessary in order to circulate a greater quantity
of commodities: and the people, as they can afford it, as they have more
commodities to give for it, will naturally purchase a greater and a greater
quantity of plate. The quantity of their coin will increase from necessity;
the quantity of their plate from vanity and ostentation, or from the same
reason that the quantity of fine statues, pictures, and of every other
luxury and curiosity, is likely to increase among them. But as statuaries
and painters are not likely to be worse rewarded in times of wealth and
prosperity, than in times of poverty and depression, so gold and silver are
not likely to be worse paid for.
The price of gold and silver, when the accidental discovery of more abundant
mines does not keep it down, as it naturally rises with the wealth of every
country; so, whatever be the state of the mines, it is at all times
naturally higher in a rich than in a poor country. Gold and silver, like all
other commodities, naturally seek the market where the best price is given
for them, and the best price is commonly given for every thing in the
country which can best afford it. Labour, it must be remembered, is the
ultimate price which is paid for every thing; and in countries where labour
is equally well rewarded, the money price of labour will be in proportion to
that of the subsistence of the labourer. But gold and silver will naturally
exchange for a greater quantity of subsistence in a rich than in a poor
country ; in a country which abounds with subsistence, than in one which is
but indifferently supplied with it. If the two countries are at a great
distance, the difference may be very great; because, though the metals
naturally fly from the worse to the better market, yet it may be difficult
to transport them in such quantities as to bring their price nearly to a
level in both. If the countries are near, the difference will be smaller,
and may sometimes be scarce perceptible ; because in this case the
transportation will be easy. China is a much richer country than any part of
Europe, and the difference between the price of subsistence in China and in
Europe is very great. Rice in China is much cheaper than wheat is any where
in Europe. England is a much richer country than Scotland, but the
difference between the money price of corn in those two countries is much
smaller, and is but just perceptible. In proportion to the quantity or
measure, Scotch corn generally appears to be a good deal cheaper than
English; but, in proportion to its quality, it is certainly somewhat dearer.
Scotland receives almost every year very large supplies from England, and
every commodity must commonly be somewhat dearer in the country to which it
is brought than in that from which it comes. English corn, therefore, must
be dearer in Scotland than in England ; and yet in proportion to its
quality, or to the quantity and goodness of the flour or meal which can be
made from it, it cannot commonly be sold higher there than the Scotch corn
which comes to market in competition with it.
The difference between the money price of labour in China and in Europe, is
still greater than that between the money price of subsistence; because the
real recompence of labour is higher in Europe than in China, the greater
part of Europe being in an improving state, while China seems to be standing
still. The money price of labour is lower in Scotland than in England,
because the real recompence of labour is much lower: Scotland, though
advancing to greater wealth, advances much more slowly than England. The
frequency of emigration from Scotland, and the rarity of it from England,
sufficiently prove that the demand for labour is very different in the two
countries. The proportion between the real recompence of labour in different
countries, it must be remembered, is naturally regulated, not by their
actual wealth or poverty, but by their advancing, stationary, or declining
condition.
Gold and silver, as they are naturally of the greatest value among the
richest, so they are naturally of the least value among the poorest nations.
Among savages, the poorest of all nations, they are scarce of any value.
In great towns, corn is always dearer than in remote parts of the country.
This, however, is the effect, not of the real cheapness of silver, but of
the real dearness of corn. It does not cost less labour to bring silver to
the great town than to the remote parts of the country; but it costs a great
deal more to bring corn.
In some very rich and commercial countries, such as Holland and the
territory of Genoa, corn is dear for the same reason that it is dear in
great towns. They do not produce enough to maintain their inhabitants. They
are rich in the industry and skill of their artificers and manufacturers, in
every sort of machinery which can facilitate and abridge labour; in
shipping, and in all the other instruments and means of carriage and
commerce: but they are poor in corn, which, as it must be brought to them
from distant countries, must, by an addition to its price, pay for the
carriage from those countries. It does not cost less labour to bring silver
to Amsterdam than to Dantzic ; but it costs a great deal more to bring corn.
The real cost of silver must be nearly the same in both places ; but that of
corn must be very different. Diminish the real opulence either of Holland or
of the territory of Genoa, while the number of their inhabitants remains the
same ; diminish their power of supplying themselves from distant countries;
and the price of corn, instead of sinking with that diminution in the
quantity of their silver, which must necessarily accompany this declension,
either as its cause or as its effect, will rise to the price of a famine.
When we are in want of necessaries, we must part with all superfluities, of
which the value, as it rises in times of opulence and prosperity, so it
sinks in times of poverty and distress. It is otherwise with necessaries.
Their real price, the quantity of labour which they can purchase or command,
rises in times of poverty and distress, and sinks in times of opulence and
prosperity, which are always times of great abundance ; for they could not
otherwise be times of opulence and prosperity.Corn is a necessary, silver is
only a superfluity.
Whatever, therefore, may have been the increase in the quantity of the
precious metals, which, during the period between the middle of the
fourteenth and that of the sixteenth century, arose from the increase of
wealth and improvement, it could have no tendency to diminish their value,
either in Great Britain, or in my other part of Europe. If those who have
collected the prices of things in ancient times, therefore, had, during this
period, no reason to infer the diminution of the value of silver from any
observations which they had made upon the prices either of corn, or of
other commodities, they had still less reason to infer it from any supposed
increase of wealth and improvement.
Second Period. ˜ But how various soever may have been the opinions of the
learned concerning the progress of the value of silver during the first
period, they are unanimous concerning it during the second.
From about 1570 to about 1640, during a period of about seventy years, the
variation in the proportion between the value of silver and that of corn
held a quite opposite course. Silver sunk in its real value, or would
exchange for a smaller quantity of labour than before; and corn rose in its
nominal price, and, instead of being commonly sold for about two ounces of
silver the quarter, or about ten shillings of our present money, came to be
sold for six and eight ounces of silver the quarter, or about thirty and
forty shillings of our present money.
The discovery of the abundant mines of America seems to have been the sole
cause of this diminution in the value of silver, in proportion to that of
corn. It is accounted for, accordingly, in the same manner by every body ;
and there never has been any dispute, either about the fact, or about the
cause of it. The greater part of Europe was, during this period, advancing
in industry and improvement, and the demand for silver must consequently
have been increasing; but the increase of the supply had, it seems, so far
exceeded that of the demand, that the value of that metal sunk considerably.
The discovery of the mines of America, it is to be observed, does not seem
to have had any very sensible effect upon the prices of things in England
till after 1570; though even the mines of Potosi had been discovered more
than twenty years before.
From 1595 to 1620, both inclusive, the average price of the quarter of nine
bushels of the best wheat, at Windsor market, appears, from the accounts of
Eton college, to have been £ 2:1:6 9/13. From which sum, neglecting the
fraction, and deducting a ninth, or 4s. 7 1/3d., the price of the quarter of
eight bushels comes out to have been £ 1:16:10 2/3. And from this sum,
neglecting likewise the fraction, and deducting a ninth, or 4s. 1 1/9d., for
the difference between the price of the best wheat and that of the middle
wheat, the price of the middle wheat comes out to have been about £ 1:12:8
8/9, or about six ounces and one-third of an ounce of silver.
From 1621 to 1636, both inclusive, the average price of the same measure of
the best wheat, at the same market, appears, from the same accounts, to have
been £ 2:10s.; from which, making the like deductions as in the foregoing
case, the average price of the quarter of eight bushels of middle wheat comes
out to have been £ 1:19:6, or about seven ounces and two-thirds of an ounce
of silver.
Third Period. - Between 1630 and 1640, or about 1636, the effect of the
discovery of the mines of America, in reducing the value of silver, appears
to have been completed, and the value of that metal seems never to have sunk
lower in proportion to that of corn than it was about that time. It seems to
have risen somewhat in the course of the present century, and it had
probably begun to do so, even some time before the end of the last.
From 1637 to 1700, both inclusive, being the sixty-four last years of the
last century the average price of the quarter of nine bushels of the best
wheat, at Windsor market, appears, from the same accounts, to have been £
2:11:0 1/3, which is only 1s. 0 1/3d. dearer than it had been during the
sixteen years before. But, in the course of these sixty-four years, there
happened two events, which must have produced a much greater scarcity of
corn than what the course of the season is would otherwise have occasioned,
and which, therefore, without supposing any further reduction in the value
of silver, will much more than account for this very small enhancement of
price.
The first of these events was the civil war, which, by discouraging tillage
and interrupting commerce, must have raised the price of corn much above
what the course of the seasons would otherwise have occasioned. It must have
had this effect, more or less, at all the different markets in the kingdom,
but particularly at those in the neighbourhood of London, which require to
be supplied from the greatest distance. In 1648, accordingly, the price of
the best wheat, at Windsor market, appears, from the same accounts, to have
been £ 4:5s., and, in 1649, to have been £ 4, the quarter of nine bushels.
The excess of those two years above £ 2:10s. (the average price of the
sixteen years preceding 1637 is £ 3:5s., which, divided among the sixty four
last years of the last century, will alone very nearly account for that
small enhancement of price which seems to have taken place in them. These,
however, though the highest, are by no means the only high prices which seem
to have been occasioned by the civil wars.
The second event was the bounty upon the exportation of corn, granted in
1688. The bounty, it has been thought by many people, by encouraging
tillage, may, in a long course of years, have occasioned a greater
abundance, and, consequently, a greater cheapness of corn in the home
market, than what would otherwise have taken place there. How far the bounty
could produce this effect at any time I shall examine hereafter: I shall
only observe at present, that between 1688 and 1700, it had not time to
produce any such effect. During this short period, its only effect must have
been, by encouraging the exportation of the surplus produce of every year,
and thereby hindering the abundance of one year from compensating the
scarcity of another, to raise the price in the home market. The scarcity
which prevailed in England, from 1693 to 1699, both inclusive, though no
doubt principally owing to the badness of the seasons, and, therefore,
extending through a considerable part of Europe, must have been somewhat
enhanced by the bounty. In 1699, accordingly, the further exportation of
corn was prohibited for nine months.
There was a third event which occurred in the course of the same period, and
which, though it could not occasion any scarcity of corn, nor, perhaps, any
augmentation in the real quantity of silver which was usually paid for it,
must necessarily have occasioned some augmetation in the nominal sum. This
event was the great debasement of the silver coin, by clipping and wearing.
This evil had begun in the reign of Charles II. and had gone on continually
increasing till 1695; at which time, as we may learn from Mr Lowndes, the
current silver coin was, at an average, near five-and-twenty per cent. below
its standard value. But the nominal sum which constitutes the market price
of every commodity is necessarily regulated, not so much by the quantity of
silver, which, according to the standard, ought to be contained in it, as by
that which, it is found by experience, actually is contained in it. This
nominal sum, therefore, is necessarily higher when the coin is much debased
by clipping and wearing, than when near to its standard value.
In the course of the present century, the silver coin has not at any time
been more below its standard weight than it is at present. But though very
much defaced, its value has been kept up by that of the gold coin, for which
it is exchanged. For though, before the late recoinage, the gold coin was a
good deal defaced too, it was less so than the silver. In 1695, on the
contrary, the value of the silver coin was not kept up by the gold coin; a
guinea then commonly exchanging for thirty shillings of the worn and clipt
silver. Before the late recoinage of the gold, the price of silver bullion
was seldom higher than five shillings and sevenpence an ounce, which is but
fivepence above the mint price. But in 1695, the common price of silver
bullion was six shillings and fivepence an ounce, {Lowndes's Essay on the
Silver Coin, 68.} which is fifteen pence above the mint price. Even before
the late recoinage of the gold, therefore, the coin, gold and silver
together, when compared with silver bullion, was not supposed to be more
than eight per cent. below its standard value, In 1695, on the contrary, it
had been supposed to be near five-and-twenty per cent. below that value. But
in the beginning of the present century, that is, immediately after the
great recoinage in King William's time, the greater part of the current
silver coin must have been still nearer to its standard weight than it is at
present. In the course of the present century, too, there has been no great
public calamity, such as a civil war, which could either discourage tillage,
or interrupt the interior commerce of the country. And though the bounty
which has taken place through the greater part of this century, must always
raise the price of corn somewhat higher than it otherwise would be in the
actual state of tillage ; yet, as in the course of this century, the bounty
has had full time to produce all the good effects commonly imputed to it to
encourage tillage, and thereby to increase the quantity of corn in the home
market, it may, upon the principles of a system which I shall explain and
examine hereafter, be supposed to have done something to lower the price of
that commodity the one way, as well as to raise it the other. It is by many
people supposed to have done more. In the sixty-four years of the present
century, accordingly, the average price of the quarter of nine bushels of
the best wheat, at Windsor market, appears, by the accounts of Eton college,
to have been £ 2:0:6 10/32, which is about ten shillings and sixpence, or
more than five-and-twenty percent. cheaper than it had been during the
sixty-four last years of the last century; and about nine shillings and
sixpence cheaper than it had been during the sixteen years preceding 1636,
when the discovery of the abundant mines of America may be supposed to have
produced its full effect ; and about one shilling cheaper than it had been
in the twenty-six years preceding 1620, before that discovery can well be
supposed to have produced its full effect. According to this account, the
average price of middle wheat, during these sixty-four first years of the
present century, comes out to have been about thirty-two shillings the
quarter of eight bushels.
The value of silver, therefore, seems to have risen somewhat in proportion
to that of corn during the course of the present century, and it had
probably begun to do so even some time before the end of the last.
In 1687, the price of the quarter of nine bushels of the best wheat, at
Windsor market, was £ 1:5:2, the lowest price at which it had ever been from
1595.
In 1688, Mr Gregory King, a man famous for his knowledge in matters of this
kind, estimated the average price of wheat, in years of moderate plenty, to
be to the grower 3s. 6d. the bushel, or eight-and-twenty shillings the
quarter. The grower's price I understand to be the same with what is
sometimes called the contract price, or the price at which a farmer
contracts for a certain number of years to deliver a certain quantity of
corn to a dealer. As a contract of this kind saves the farmer the expense
and trouble of marketing, the contract price is generally lower than what is
supposed to be the average market price. Mr King had judged eight-and-twenty
shillings the quarter to be at that time the ordinary contract price in
years of moderate plenty. Before the scarcity occasioned by the late
extraordinary course of bad seasons, it was, I have been assured, the
ordinary contract price in all common years.
In 1688 was granted the parliamentary bounty upon the exportation of corn.
The country gentlemen, who then composed a still greater proportion of the
legislature than they do at present, had felt that the money price of corn
was falling. The bounty was an expedient to raise it artificially to the
high price at which it had frequently been sold in the times of Charles I.
and II. It was to take place, therefore, till wheat was so high as
fortyeight shillings the quarter; that is, twenty shillings, or 5-7ths
dearer than Mr King had, in that very year, estimated the grower's price to
be in times of moderate plenty. If his calculations deserve any part of the
reputation which they have obtained very universally, eight-and-forty
shillings the quarter was a price which, without some such expedient as the
bounty, could not at that time be expected, except in years of extraordinary
scarcity. But the government of King William was not then fully settled. It
was in no condition to refuse anything to the country gentlemen, from whom
it was, at that very time, soliciting the first establishment of the annual
land-tax,
The value of silver, therefore, in proportion to that of corn, had probably
risen somewhat before the end of the last century; and it seems to have
continued to do so during the course of the greater part of the present,
though the necessary operation of the bounty must have hindered that rise
from being so sensible as it otherwise would have been in the actual state
of tillage.
In plentiful years, the bounty, by occasioning an extraordinary exportation,
necessarily raises the price of corn above what it otherwise would be in
those years. To encourage tillage, by keeping up the price of corn, even in
the most plentiful years, was the avowed end of the institution.
In years of great scarcity, indeed, the bounty has generally been suspended.
It must, however, have had some effect upon the prices of many of those
years. By the extraordinary exportation which it occasions in years of
plenty, it must frequently hinder the plenty of one year from compensating
the scarcity of another.
Both in years of plenty and in years of scarcity, therefore, the bounty
raises the price of corn above what it naturally would be in the actual
state of tillage. If during the sixty-four first years of the present
century, therefore, the average price has been lower than during the
sixty-four last years of the last century, it must, in the same state of
tillage, have been much more so, had it not been for this operation of the
bounty.
But, without the bounty, it may be said the state of tillage would not have
been the same. What may have been the effects of this institution upon the
agriculture of the country, I shall endeavour to explain hereafter, when I
come to treat particularly of bounties. I shall only observe at present,
that this rise in the value of silver, in proportion to that of corn, has
not been peculiar to England. It has been observed to have taken place in
France during the same period, and nearly in the same proportion, too, by
three very faithful, diligent, and laborious collectors of the prices of
corn, Mr Dupré de St Maur, Mr Messance, and the author of the Essay on the
Police of Grain. But in France, till 1764, the exportation of grain was by
law prohibited ; and it is somewhat difficult to suppose, that nearly the
same diminution of price which took place in one country, notwithstanding
this prohibition. should, in another, be owing to the extraordinary
encouragement given to exportation.
It would be more proper, perhaps, to consider this variation in the average
money price of corn as the effect rather of some gradual rise in the real
value of silver in the European market, than of any fall in the real average
value of corn. Corn, it has already been observed, is, at distant periods of
time, a more accurate measure of value than either silver or, perhaps, any
other commodity. When, after the discovery of the abundant mines of America,
corn rose to three and four times its former money price, this change was
universally ascribed, not to any rise in the real value of corn, but to a
fall in the real value of silver. If, during the sixty-four first years of
the present century, therefore, the average money price of corn has fallen
somewhat below what it had been during the greater part of the last century,
we should, in the same manner, impute this change, not to any fall in the
real value of corn, but to some rise in the real value of silver in the
European market.
The high price of corn during these ten or twelve years past, indeed, has
occasioned a suspicion that the real value of silver still continues to fall
in the European market. This high price of corn, however. seems evidently to
have been the effect of the extraordinary unfavourableness of the seasons,
and ought, therefore, to be regarded, not as a permanent, but as a
transitory and occasional event. The seasons, for these ten or twelve years
past, have been unfavourable through the greater part of Europe; and the
disorders of Poland have very much increased the scarcity in all those
countries, which, in dear years, used to be supplied from that market. So
long a course of bad seasons, though not a very common event, is by no means
a singular one; and whoever has inquired much into the history of the prices
of corn in former times, will be at no loss to recollect several other
examples of the same kind. Ten years of extraordinary scarcity, besides, are
not more wonderful than ten years of extraordinary plenty. The low price of
corn, from 1741 to 1750, both inclusive, may very well be set in opposition
to its high price during these last eight or ten years. From 1741 to 1750,
the average price of the quarter of nine bushels of the best wheat, at
Windsor market, it appears from the accounts of Eton college, was only £
1:13:9 4/5, which is nearly 6s.3d. below the average price of the sixty-four
first years of the present century. The average price of the quarter of
eight bushels of middle wheat comes out, according to this account, to have
been, during these ten years, only £ 1:6:8.
Between 1741 and 1750, however, the bounty must have hindered the price of
corn from falling so low in the home market as it naturally would have done.
During these ten years, the quantity of all sorts of grain exported, it
appears from the custom-house books, amounted to no less than 8,029,156
quarters, one bushel. The bounty paid for this amounted to £ 1,514,962:17:4
1/2. In 1749, accordingly, Mr Pelham, at that time prime minister, observed
to the house of commons, that, for the three years preceding, a very
extraordinary sum had been paid as bounty for the exportation of corn. He
had good reason to make this observation, and in the following year he might
have had still better. In that single year, the bounty paid amounted to no
less than £ 324,176:10:6. {See Tracts on the Corn Trade, Tract 3,} It is
unnecessary to observe how much this forced exportation must have raised the
price of corn above what it otherwise would have been in the home market.
At the end of the accounts annexed to this chapter the reader will find the
particular account of those ten years separated from the rest. He will find
there, too, the particular account of the preceding ten years, of which the
average is likewise below, though not so much below, the general average of
the sixty-four first years of the century. The year 1740, however, was a
year of extraordinary scarcity. These twenty years preceding 1750 may very
well be set in opposition to the twenty preceding 1770. As the former were a
good deal below the general average of the century, notwithstanding the
intervention of one or two dear years; so the latter have been a good deal
above it, notwithstanding the intervention of one or two cheap ones, of
1759, for example. If the former have not been as much below the general
average as the latter have been above it, we ought probably to impute it to
the bounty. The change has evidently been too sudden to he ascribed to any
change in the value of silver, which is always slow and gradual. The
suddenness of the effect can be accounted for only by a cause which can
operate suddenly, the accidental variations of the seasons.
The money price of labour in Great Britain has, indeed, risen during the
course of the present century. This, however, seems to be the effect, not so
much of any diminution in the value of silver in the European market, as of
an increase in the demand for labour in Great Britain, arising from the
great, and almost universal prosperity of the country. In France, a country
not altogether so prosperous, the money price of labour has, since the
middle of the last century, been observed to sink gradually with the average
money price of corn. Both in the last century and in the present, the day
wages of common labour are there said to have been pretty uniformly about
the twentieth part of the average price of the septier of wheat ; a measure
which contains a little more than four Winchester bushels. In Great Britain,
the real recompence of labour, it has already been shewn, the real
quantities of the necessaries and conveniencies of life which are given to
the labourer, has increased considerably during the course of the present
century. The rise in its money price seems to have been the effect, not of
any diminution of the value of silver in the general market of Europe, but
of a rise in the real price of labour, in the particular market of Great
Britain, owing to the peculiarly happy circumstances of the country.
For some time after the first discovery of America, silver would continue to
sell at its former, or not much below its former price. The profits of
mining would for some time be very great, and much above their natural rate.
Those who imported that metal into Europe, however, would soon find that the
whole annual importation could not be disposed of at this high price. Silver
would gradually exchange for a smaller and a smaller quantity of goods. Its
price would sink gradually lower and lower, till it fell to its natural
price ; or to what was just sufficient to pay, according to their natural
rates, the wages of the labour, the profits of the stock, and the rent of
the land, which must be paid in order to bring it from the mine to the
market. In the greater part of the silver mines of Peru, the tax of the king
of Spain, amounting to a tenth of the gross produce, eats up, it has already
been observed, the whole rent of the land. This tax was originally a half;
it soon afterwards fell to a third, then to a fifth, and at last to a tenth,
at which late it still continues. In the greater part of the silver mines of
Peru, this, it seems, is all that remains, after replacing the stock of the
undertaker of the work, together with its ordinary profits ; and it seems to
be universally acknowledged that these profits, which were once very high,
are now as low as they can well be, consistently with carrying on the works.
The tax of the king of Spain was reduced to a fifth of the registered silver
in 1504 {Solorzano, vol, ii.}, one-and-forty years before 1545, the date of
the discovery of the mines of Potosi. In the course of ninety years, or
before 1636, these mines, the most fertile in all America, had time
sufficient to produce their full effect, or to reduce the value of silver in
the European market as low as it could well fall, while it continued to pay
this tax to the king of Spain. Ninety years is time sufficient to reduce any
commodity, of which there is no monopoly, to its natural price, or to the
lowest price at which, while it pays a particular tax, it can continue to be
sold for any considerable time together.
The price of silver in the European market might, perhaps, have fallen still
lower, and it might have become necessary either to reduce the tax upon it,
not only to one-tenth, as in 1736, but to one twentieth, in the same manner
as that upon gold, or to give up working the greater part of the American
mines which are now wrought. The gradual increase of the demand for silver,
or the gradual enlargement of the market for the produce of the silver mines
of America, is probably the cause which has prevented this from happening,
and which has not only kept up the value of silver in the European market,
but has perhaps even raised it somewhat higher than it was about the middle
of the last century.
Since the first discovery of America, the market for the produce of its
silver mines has been growing gradually more and more extensive.
First, the market of Europe has become gradually more and more extensive.
Since the discovery of America, the greater part of Europe has been much
improved. England, Holland, France, and Germany; even Sweden, Denmark, and
Russia, have all advanced considerably, both in agriculture and in
manufactures. Italy seems not to have gone backwards. The fall of Italy
preceded the conquest of Peru. Since that time it seems rather to have
recovered a little. Spain and Portugal, indeed, are supposed to have gone
backwards. Portugal, however, is but a very small part of Europe, and the
declension of Spain is not, perhaps, so great as is commonly imagined. In the
beginning of the sixteenth century, Spain was a very poor country, even in
comparison with France, which has been so much improved since that time. It
was the well known remark of the emperor Charles V. who had travelled so
frequently through both countries, that every thing abounded in France, but
that every thing was wanting in Spain. The increasing produce of the
agriculture and manufactures of Europe must necessarily have required a
gradual increase in the quantity of silver coin to circulate it ; and the
increasing number of wealthy individuals must have required the like
increase in the quantity of their plate and other ornaments of silver.
Secondly, America is itself a new market, for the produce of its own silver
mines; and as its advances in agriculture, industry, and population, are
much more rapid than those of the most thriving countries in Europe, its
demand must increase much more rapidly. The English colonies are altogether
a new market, which, partly for coin, and partly for plate, requires a
continual augmenting supply of silver through a great continent where there
never was any demand before. The greater part, too, of the Spanish and
Portuguese colonies, are altogether new markets. New Granada, the Yucatan,
Paraguay, and the Brazils, were, before discovered by the Europeans,
inhabited by savage nations, who had neither arts nor agriculture. A
considerable degree of both has now been introduced into all of them. Even
Mexico and Peru, though they cannot be considered as altogether new markets,
are certainly much more extensive ones than they ever were before. After all
the wonderful tales which have been published concerning the splendid state
of those countries in ancient times, whoever reads, with any degree of sober
judgment, the history of their first discovery and conquest, will evidently
discern that, in arts, agriculture, and commerce, their inhabitants were
much more ignorant than the Tartars of the Ukraine are at present. Even the
Peruvians, the more civilized nation of the two, though they made use of
gold and silver as ornaments, had no coined money of any kind. Their whole
commerce was carried on by barter, and there was accordingly scarce any
division of labour among them. Those who cultivated the ground, were obliged
to build their own houses, to make their own household furniture, their own
clothes, shoes, and instruments of agriculture. The few artificers among
them are said to have been all maintained by the sovereign, the nobles, and
the priests, and were probably their servants or slaves. All the ancient
arts of Mexico and Peru have never furnished one single manufacture to
Europe. The Spanish armies, though they scarce ever exceeded five hundred
men, and frequently did not amount to half that number, found almost
everywhere great difficulty in procuring subsistence. The famines which they
are said to have occasioned almost wherever they went, in countries, too,
which at the same time are represented as very populous and well cultivated,
sufficiently demonstrate that the story of this populousness and high
cultivation is in a great measure fabulous. The Spanish colonies are under a
government in many respects less favourable to agriculture, improvement, and
population, than that of the English colonies. They seem, however, to be
advancing in all those much more rapidly than any country in Europe. In a
fertile soil and happy climate, the great abundance and cheapness of land, a
circumstance common to all new colonies, is, it seems, so great an
advantage, as to compensate many defects in civil government. Frezier, who
visited Peru in 1713, represents Lima as containing between twenty-five and
twenty-eight thousand inhabitants. Ulloa, who resided in the same country
between 1740 and 1746, represents it as containing more than fifty thousand.
The difference in their accounts of the populousness of several other
principal towns of Chili and Peru is nearly the same ; and as there seems to
be no reason to doubt of the good information of either, it marks an
increase which is scarce inferior to that of the English colonies. America,
therefore, is a new market for the produce of its own silver mines, of which
the demand must increase much more rapidly than that of the most thriving
country in Europe.
Thirdly, the East Indies is another market for the produce of the silver
mines of America, and a market which, from the time of the first discovery
of those mines, has been continually taking off a greater and a greater
quantity of silver. Since that time, the direct trade between America and
the East Indies, which is carried on by means of the Acapulco ships, has
been continually augmenting, and the indirect intercourse by the way of
Europe has been augmenting in a still greater proportion. During the
sixteenth century, the Portuguese were the only European nation who carried
on any regular trade to the East Indies. In the last years of that century,
the Dutch began to encroach upon this monopoly, and in a few years expelled
them from their principal settlements in India. During the greater part of
the last century, those two nations divided the most considerable part of
the East India trade between them; the trade of the Dutch continually
augmenting in a still greater proportion than that of the Portuguese
declined. The English and French carried on some trade with India in the
last century, but it has been greatly augmented in the course of the
present. The East India trade of the Swedes and Danes began in the course of
the present century. Even the Muscovites now trade regularly with China, by
a sort of caravans which go over land through Siberia and Tartary to Pekin.
The East India trade of all these nations, if we except that of the French,
which the last war had well nigh annihilated, has been almost continually
augmenting. The increasing consumptions of East India goods in Europe is, it
seems, so great, as to afford a gradual increase of employment to them all.
Tea, for example, was a drug very little used in Europe, before the middle
of the last century. At present, the value of the tea annually imported by
the English East India company, for the use of their own countrymen, amounts
to more than a million and a half a year; and even this is not enough; a
great deal more being constantly smuggled into the country from the ports of
Holland, from Gottenburgh in Sweden, and from the coast of France, too, as
long as the French East India company was in prosperity. The consumption of
the porcelain of China, of the spiceries of the Moluccas, of the piece goods
of Bengal, and of innumerable other articles, has increased very nearly in a
like proportion. The tonnage, accordingly, of all the European shipping
employed in the East India trade, at any one time during the last century,
was not, perhaps, much greater than that of the English East India company
before the late reduction of their shipping.
But in the East Indies, particularly in China and Indostan, the value of the
precious metals, when the Europeans first began to trade to those countries,
was much higher than in Europe; and it still continues to be so. In rice
countries, which generally yield two, sometimes three crops in the year,
each of them more plentiful than any common crop of corn, the abundance of
food must be much greater than in any corn country of equal extent. Such
countries are accordingly much more populous. In them, too, the rich, having
a greater superabundance of food to dispose of beyond what they themselves
can consume, have the means of purchasing a much greater quantity of the
labour of other people. The retinue of a grandee in China or Indostan
accordingly is, by all accounts, much more numerous and splendid than that
of the richest subjects in Europe. The same superabundance of food, of which
they have the disposal, enables them to give a greater quantity of it for
all those singular and rare productions which nature furnishes but in very
small quantities; such as the precious metals and the precious stones, the
great objects of the competition of the rich. Though the mines, therefore,
which supplied the Indian market, had been as abundant as those which
supplied the European, such commodities would naturally exchange for a
greater quantity of food in India than in Europe. But the mines which
supplied the Indian market with the precious metals seem to have been a good
deal less abundant, and those which supplied it with the precious stones a
good deal more so, than the mines which supplied the European. The precious
metals, therefore, would naturally exchange in India for a somewhat greater
quantity of the precious stones, and for a much greater quantity of food
than in Europe. The money price of diamonds, the greatest of all
superfluities, would be somewhat lower, and that of food, the first of all
necessaries, a great deal lower in the one country than in the other. But
the real price of labour, the real quantity of the necessaries of life which
is given to the labourer, it has already been observed, is lower both in
China and Indostan, the two great markets of India, than it is through the
greater part of Europe. The wages of the labourer will there purchase a
smaller quantity of food: and as the money price of food is much lower in
India than in Europe, the money price of labour is there lower upon a double
account; upon account both of the small quantity of food which it will
purchase, and of the low price of that food. But in countries of equal art
and industry, the money price of the greater part of manufactures will be in
proportion to the money price of labour; and in manufacturing art and
industry, China and Indostan, though inferior, seem not to be much inferior
to any part of Europe. The money price of the greater part of manufactures,
therefore, will naturally be much lower in those great empires than it is
anywhere in Europe. Through the greater part of Europe, too, the expense of
land-carriage increases very much both the real and nominal price of most
manufactures. It costs more labour, and therefore more money, to bring first
the materials, and afterwards the complete manufacture to market. In China
and Indostan, the extent and variety of inland navigations save the greater
part of this labour, and consequently of this money, and thereby reduce
still lower both the real and the nominal price of the greater part of their
manufactures. Upon all these accounts, the precious metals are a commodity
which it always has been, and still continues to be, extremely advantageous
to carry from Europe to India. There is scarce any commodity which
brings a better price there; or which, in proportion to the quantity of
labour and commodities which it costs in Europe. will purchase or command a
greater quantity of labour and commodities in India. It is more
advantageous, too, to carry silver thither than gold; because in China, and
the greater part of the other markets of India, the proportion between fine
silver and fine gold is but as ten, or at most as twelve to one; whereas in
Europe it is as fourteen or fifteen to one. In China, and the greater part
of the other markets of India, ten, or at most twelve ounces of silver, will
purchase an ounce of gold ; in Europe, it requires from fourteen to fifteen
ounces. In the cargoes, therefore, of the greater part of European ships
which sail to India, silver has generally been one of the most valuable
articles. It is the most valuable article in the Acapulco ships which sail
to Manilla. The silver of the new continent seems, in this manner, to be one
of the principal commodities by which the commerce between the two
extremities of the old one is carried on ; and it is by means of it, in a
great measure, that those distant parts of the world are connected with one
another.
In order to supply so very widely extended a market, the quantity of silver
annually brought from the mines must not only be sufficient to support that
continued increase, both of coin and of plate, which is required in all
thriving countries; but to repair that continual waste and consumption of
silver which takes place in all countries where that metal is used.
The continual consumption of the precious metals in coin by wearing, and in
plate both by wearing and cleaning, is very sensible ; and in commodities of
which the use is so very widely extended, would alone require a very great
annual supply. The consumption of those metals in some particular
manufactures, though it may not perhaps be greater upon the whole than this
gradual consumption, is, however, much more sensible, as it is much more
rapid. In the manufactures of Birmingham alone, the quantity of gold and
silver annually employed in gilding and plating, and thereby disqualified
from ever afterwards appearing in the shape of those metals, is said to
amount to more than fifty thousand pounds sterling. We may from thence form
some notion how great must be the annual consumption in all the different
parts of the world, either in manufactures of the same kind with those of
Birmingham, or in laces, embroideries, gold and silver stuffs, the gilding
of books, furniture, etc. A considerable quantity, too, must be annually
lost in transporting those metals from one place to another both by sea and
by land. In the greater part of the governments of Asia, besides, the almost
universal custom of concealing treasures in the bowels of the earth, of
which the knowledge frequently dies with the person who makes the
concealment, must occasion the loss of a still greater quantity.
The quantity of gold and silver imported at both Cadiz and Lisbon (including
not only what comes under register, but what may be supposed to be smuggled)
amounts, according to the best accounts, to about six millions sterling
a-year.
According to Mr Meggens {Postscript to the Universal Merchant p. 15 and 16.
This postscript was not printed till 1756, three years after the publication
of the book, which has never had a second edition. The postscript is,
therefore, to be found in few copies ; it corrects several errors in the
book.}, the annual importation of the precious metals into Spain, at an
average of six years, viz. from 1748 to 1753, both inclusive, and into
Portugal, at an average of seven years, viz. from 1747 to 1753, both
inclusive, amounted in silver to 1,101,107 pounds weight, and in gold to
49,940 pounds weight. The silver, at sixty two shillings the pound troy,
amounts to £ 3,4l3,43l:10s. sterling. The gold, at forty-four guineas and a
half the pound troy, amounts to £ 2,333,446:14s. sterling. Both together
amount to £ 5,746,878:4s. sterling. The account of what was imported under
register, he assures us, is exact. He gives us the detail of the particular
places from which the gold and silver were brought, and of the particular
quantity of each metal, which, according to the register, each of them
afforded. He makes an allowance, too, for the quantity of each metal which,
he supposes, may have been smuggled. The great experience of this judicious
merchant renders his opinion of considerable weight.
According to the eloquent, and sometimes well-informed, author of the
Philosophical and Political History of the Establishment of the Europeans in
the two Indies, the annual importation of registered gold and silver into
Spain, at an average of eleven years, viz. from 1754 to 1764, both
inclusive, amounted to 13,984,185 3/5 piastres of ten reals. On account of
what may have been smuggled, however, the whole annual importation, he
supposes, may have amounted to seventeen millions of piastres, which, at 4s.
6d. the piastre, is equal to £ 3,825,000 sterling. He gives the detail, too,
of the particular places from which the gold and silver were brought, and of
the particular quantities of each metal, which according to the register,
each of them afforded. He informs us, too, that if we were to judge of the
quantity of gold annually imported from the Brazils to Lisbon, by the amount
of the tax paid to the king of Portugal, which it seems, is one-fifth of the
standard metal, we might value it at eighteen millions of cruzadoes, or
forty-five millions of French livres, equal to about twenty millions
sterling. On account of what may have been smuggled, however, we may safely,
he says, add to this sum an eighth more, or £ 250,000 sterling, so that the
whole will amount to £ 2,250,000 sterling. According to this account,
therefore, the whole annual importation of the precious metals into both
Spain and Portugal, mounts to about £ 6,075,000 sterling.
Several other very well authenticated, though manuscript accounts, I have
been assured, agree in making this whole annual importation amount, at an
average, to about six millions sterling; sometimes a little more, sometimes
a little less.
The annual importation of the precious metals into Cadiz and Lisbon, indeed,
is not equal to the whole annual produce of the mines of America. Some part
is sent annually by the Acapulco ships to Manilla; some part is employed in
a contraband trade, which the Spanish colonies carry on with those of other
European nations; and some part, no doubt, remains in the country. The mines
of America, besides, are by no means the only gold and silver mines in the
world. They, are, however, by far the most abundant. The produce of all the
other mines which are known is insignificant, it is acknowledged, in
comparison with their's ; and the far greater part of their produce, it is
likewise acknowledged, is annually imported into Cadiz and Lisbon. But the
consumption of Birmingham alone, at the rate of fifty thousand pounds
a-year, is equal to the hundred-and-twentieth part of this annual
importation, at the rate of six millions a-year. The whole annual
consumption of gold and silver, therefore, in all the different countries of
the world where those metals are used, may, perhaps, be nearly equal to the
whole annual produce. The remainder may be no more than sufficient to supply
the increasing demand of all thriving countries. It may even have fallen so
far short of this demand, as somewhat to raise the price of those metals in
the European market.
The quantity of brass and iron annually brought from the mine to the market,
is out of all proportion greater than that of gold and silver. We do not,
however, upon this account, imagine that those coarse metals are likely to
multiply beyond the demand, or to become gradually cheaper and cheaper. Why
should we imagine that the precious metals are likely to do so? The coarse
metals, indeed, though harder, are put to much harder uses, and, as they are
of less value, less care is employed in their preservation. The precious
metals, however, are not necessarily immortal any more than they, but are
liable, too, to be lost, wasted, and consumed, in a great variety of ways.
The price of all metals, though liable to slow and gradual variations,
varies less from year to year than that of almost any other part of the rude
produce of land: and the price of the precious metals is even less liable to
sudden variations than that of the coarse ones. The durableness of metals is
the foundation of this extraordinary steadiness of price. The corn which was
brought to market last year will be all, or almost all, consumed, long
before the end of this year. But some part of the iron which was brought
from: the mine two or three hundred years ago, may be still in use, and,
perhaps, some part of the gold which was brought from it two or three
thousand years ago. The different masses of corn, which, in different years,
must supply the consumption of the world, will always be nearly in
proportion to the respective produce of those different years. But the
proportion between the different masses of iron which may be in use in two
different years, will be very little affected by any accidental difference
in the produce of the iron mines of those two years ; and the proportion
between the masses of gold will be still less affected by any such
difference in the produce of the gold mines. Though the produce of the
greater part of metallic mines, therefore, varies, perhaps, still more from
year to year than that of the greater part of corn fields, those variations
have not the same effect upon the price of the one species of commodities as
upon that of the other.
Variations in the Proportion between the respective Values of Gold and
Silver.
Before the discovery of the mines of America, the value of fine gold to fine
silver was regulated in the different mines of Europe, between the
proportions of one to ten and one to twelve ; that is, an ounce of fine gold
was supposed to be worth from ten to twelve ounces of fine silver. About the
middle of the last century, it came to be regulated, between the proportions
of one to fourteen and one to fifteen; that is, an ounce of fine gold came
to be supposed worth between fourteen and fifteen ounces of fine silver.
Gold rose in its nominal value, or in the quantity of silver which was given
for it. Both metals sunk in their real value, or in the quantity of labour
which they could purchase; but silver sunk more than gold. Though both the
gold and silver mines of America exceeded in fertility all those which had
ever been known before, the fertility of the silver mines had, it seems,
been proportionally still greater than that of the gold ones.
The great quantities of silver carried annually from Europe to India, have,
in some of the English settlements, gradually reduced the value of that
metal in proportion to gold. In the mint of Calcutta, an ounce of fine gold
is supposed to be worth fifteen ounces of fine silver, in the same manner as
in Europe. It is in the mint, perhaps, rated too high for the value which it
bears in the market of Bengal. In China, the proportion of gold to silver
still continues as one to ten, or one to twelve. In Japan, it is said to be
as one to eight.
The proportion between the quantities of gold and silver annually imported
into Europe, according to Mr Meggens' account, is as one to twenty-two
nearly ; that is, for one ounce of gold there are imported a little more
than twenty-two ounces of silver. The great quantity of silver sent annually
to the East Indies reduces, he supposes, the quantities of those metals
which remain in Europe to the proportion of one to fourteen or fifteen, the
proportion of their values. The proportion between their values, he seems to
think, must necessarily be the same as that between their quantities, and
would therefore be as one to twenty-two, were it not for this greater
exportation of silver.
But the ordinary proportion between the respective values of two commodities
is not necessarily the same as that between the quantities of them which are
commonly in the market. The price of an ox, reckoned at ten guineas, is
about three score times the price of a lamb, reckoned at 3s. 6d. It would be
absurd, however, to infer from thence, that there are commonly in the market
three score lambs for one ox ; and it would be just as absurd to infer,
because an ounce of gold will commonly purchase from fourteen or fifteen
ounces of silver, that there are commonly in the market only fourteen or
fifteen ounces of silver for one ounce of gold.
The quantity of silver commonly in the market, it is probable, is much
greater in proportion to that of gold, than the value of a certain quantity
of gold is to that of an equal quantity of silver. The whole quantity of a
cheap commodity brought to market is commonly not only greater, but of
greater value, than the whole quantity of a dear one. The whole quantity of
bread annually brought to market, is not only greater, but of greater value,
than the whole quantity of butcher's meat; the whole quantity of butcher's
meat, than the whole quantity of poultry ; and the whole quantity of
poultry, than the whole quantity of wild fowl. There are so many more
purchasers for the cheap than for the dear commodity, that, not only a
greater quantity of it, but a greater value can commonly be disposed of. The
whole quantity, therefore, of the cheap commodity, must commonly be greater
in proportion to the whole quantity of the dear one, than the value of a
certain quantity of the dear one, is to the value of an equal quantity of
the cheap one. When we compare the precious metals with one another, silver
is a cheap, and gold a dear commodity. We ought naturally to expect,
therefore, that there should always be in the market, not only a greater
quantity, but a greater value of silver than of gold. Let any man, who has a
little of both, compare his own silver with his gold plate, and he will
probably find, that not only the quantity, but the value of the former,
greatly exceeds that of the latter. Many people, besides, have a good deal
of silver who have no gold plate, which, even with those who have it, is
generally confined to watch-cases, snuff-boxes, and such like trinkets, of
which the whole amount is seldom of great value. In the British coin,
indeed, the value of the gold preponderates greatly, but it is not so in
that of all countries. In the coin of some countries, the value of the two
metals is nearly equal. In the Scotch coin, before the union with England,
the gold preponderated very little, though it did somewhat {See Ruddiman's
Preface to Anderson's Diplomata, etc. Scotiae.}, as it appears by the
accounts of the mint. In the coin of many countries the silver
preponderates. In France, the largest sums are commonly paid in that metal,
and it is there difficult to get more gold than what is necessary to carry
about in your pocket. The superior value, however, of the silver plate above
that of the gold, which takes place in all countries, will much more than
compensate the preponderancy of the gold coin above the silver, which takes
place only in some countries.
Though, in one sense of the word, silver always has been, and probably
always will be, much cheaper than gold ; yet, in another sense, gold may
perhaps, in the present state of the Spanish market, be said te be somewhat
cheaper than silver. A commodity may be said to be dear or cheap not only
according to the absolute greatness or smallness of its usual price, but
according as that price is more or less above the lowest for which it is
possible to bring it to market for any considerable time together. This
lowest price is that which barely replaces, with a moderate profit, the
stock which must be employed in bringing the commodity thither. It is the
price which affords nothing to the landlord, of which rent makes not any
component part, but which resolves itself altogether into wages and profit.
But, in the present state of the Spanish market, gold is certainly somewhat
nearer to this lowest price than silver. The tax of the king of Spain upon
gold is only one-twentieth part of the standard metal, or five per cent.;
whereas his tax upon silver amounts to one-tenth part of it, or to ten per
cent. In these taxes, too, it has already been observed, consists the whole
rent of the greater part of the gold and silver mines of Spanish America;
and that upon gold is still worse paid than that upon silver. The profits of
the undertakers of gold mines, too, as they more rarely make a fortune,
must, in general, be still more moderate than those of the undertakers of
silver mines. The price of Spanish gold, therefore, as it affords both less
rent and less profit, must, in the Spanish market, be somewhat nearer to the
lowest price for which it is possible to bring it thither, than the price of
Spanish silver. When all expenses are computed, the whole quantity of the
one metal, it would seem, cannot, in the Spanish market, be disposed of so
advantageously as the whole quantity of the other. The tax, indeed, of the
king of Portugal upon the gold of the Brazils, is the same with the ancient
tax of the king of Spain upon the silver of Mexico and Peru; or one-fifth
part of the standard metal. It may therefore be uncertain, whether, to the
general market of Europe, the whole mass of American gold comes at a price
nearer to the lowest for which it is possible to bring it thither, than the
whole mass of American silver.
The price of diamonds and other precious stones may, perhaps, be still
nearer to the lowest price at which it is possible to bring them to market,
than even the price of gold.
Though it is not very probable that any part of a tax, which is not only
imposed upon one of the most proper subjects of taxation, a mere luxury and
superfluity, but which affords so very important a revenue as the tax upon
silver, will ever be given up as long as it is possible to pay it; yet the
same impossibility of paying it, which, in 1736. made it necessary to reduce
it from one-fifth to one-tenth, may in time make it necessary to reduce it
still further ; in the same manner as it made it necessary to reduce the tax
upon gold to one-twentieth. That the silver mines of Spanish America, like
all other mines, become gradually more expensive in the working, on account
of the greater depths at which it is necessary to carry on the works, and of
the greater expense of drawing out the water, and of supplying them with
fresh air at those depths, is acknowledged by everybody who has inquired
into the state of those mines.
These causes, which are equivalent to a growing scarcity of silver (for a
commodity may be said to grow scarcer when it becomes more difficult and
expensive to collect a certain quantity of it), must, in time, produce one
or other of the three following events: The increase of the expense must
either, first, be compensated altogether by a proportionable increase in the
price of the metal ; or, secondly, it must be compensated altogether by a
proportionable diminution of the tax upon silver ; or, thirdly, it must be
compensated partly by the one and partly by the other of those two
expedients. This third event is very possible. As gold rose in its price in
proportion to silver, notwithstanding a great diminution of the tax upon
gold, so silver might rise in its price in proportion to labour and
commodities, notwithstanding an equal diminution of the tax upon silver.
Such successive reductions of the tax, however, though they may not
prevent altogether, must certainly retard, more or less, the rise of the
value of silver in the European market. In consequence of such reductions,
many mines may be wrought which could not be wrought before, because they
could not afford to pay the old tax ; and the quantity of silver annually
brought to market, must always be somewhat greater, and, therefore, the
value of any given quantity somewhat less, than it otherwise would have
been. In consequence of the reduction in 1736, the value of silver in the
European market, though it may not at this day be lower than before that
reduction, is, probably, at least ten per cent. lower than it would have
been, had the court of Spain continued to exact the old tax.
That, notwithstanding this reduction, the value of silver has, during the
course of the present century, begun to rise somewhat in the European
market, the facts and arguments which have been alleged above, dispose me to
believe, or more properly to suspect and conjecture; for the best opinion
which I can form upon this subject, scarce, perhaps, deserves the name of
belief. The rise, indeed, supposing there has been any, has hitherto been so
very small, that after all that has been said, it may, perhaps, appear to
many people uncertain, not only whether this event has actually taken place,
but whether the contrary may not have taken place, or whether the value of
silver may not still continue to fall in the European market.
It must be observed, however, that whatever may be the supposed annual
importation of gold and silver, there must be a certain period at which the
annual consumption of those metals will be equal to that annual importation.
Their consumption must increase as their mass increases, or rather in a much
greater proportion. As their mass increases, their value diminishes. They
are more used, and less cared for, and their consumption consequently
increases in a greater proportion than their mass. After a certain period,
therefore, the annual consumption of those metals must, in this manner,
become equal to their annual importation, provided that importation is not
continually increasing; which, in the present times, is not supposed to be
the case.
If, when the annual consumption has become equal to the annual importation,
the annual importation should gradually diminish, the annual consumption
may, for some time, exceed the annual importation. The mass of those metals
may gradually and insensibly diminish, and their value gradually and
insensibly rise, till the annual importation becoming again stationary, the
annual consumption will gradually and insensibly accommodate itself to what
that annual importation can maintain.
Grounds of the suspicion that the Value of Silver still continues to
decrease.
The increase of the wealth of Europe, and the popular notion, that as the
quantity of the precious metals naturally increases with the increase of
wealth, so their value diminishes as their quantity increases, may, perhaps,
dispose many people to believe that their value still continues to fall in
the European market; and the still gradually increasing price of many parts
of the rude produce of land may confirm them still farther in this opinion.
That that increase in the quantity of the precious metals, which arises in
any country from the increase of wealth, has no tendency to diminish their
value, I have endeavoured to shew already. Gold and silver naturally resort
to a rich country, for the same reason that all sorts of luxuries and
curiosities resort to it ; not because they are cheaper there than in poorer
countries, but because they are dearer, or because a better price is given
for them. It is the superiority of price which attracts them; and as soon as
that superiority ceases, they necessarily cease to go thither.
If you except corn, and such other vegetables as are raised altogether by
human industry, that all other sorts of rude produce, cattle, poultry, game
of all kinds, the useful fossils and minerals of the earth, etc. naturally
grow dearer, as the society advances in wealth and improvement, I have
endeavoured to shew already. Though such commodities, therefore, come to
exchange for a greater quantity of silver than before, it will not from
thence follow that silver has become really cheaper, or will purchase less
labour than before ; but that such commodities have become really dearer, or
will purchase more labour than before. It is not their nominal price only,
but their real price, which rises in the progress of improvement. The rise
of their nominal price is the effect, not of any degradation of the value of
silver, but of the rise in their real price.
Different Effects of the Progress of Improvement upon three different sorts
of rude Produce.
These different sorts of rude produce may be divided into three classes. The
first comprehends those which it is scarce in the power of human industry to
multiply at all. The second, those which it can multiply in proportion to
the demand. The third, those in which the efficacy of industry is either
limited or uncertain. In the progress of wealth and improvement, the real
price of the first may rise to any degree of extravagance, and seems not to
be limited by any certain boundary. That of the second, though it may rise
greatly, has, however, a certain boundary, beyond which it cannot well pass
for any considerable time together. That of the third, though its natural
tendency is to rise in the progress of improvement, yet in the same degree
of improvement it may sometimes happen even to fall, sometimes to continue
the same, and sometimes to rise more or less, according as different
accidents render the efforts of human industry, in multiplying this sort of
rude produce, more or less successful.
First Sort. - The first sort of rude produce, of which the price rises in the
progress of improvement, is that which it is scarce in the power of human
industry to multiply at all. It consists in those things which nature
produces only in certain quantities, and which being of a very perishable
nature, it is impossible to accumulate together the produce of many
different seasons. Such are the greater part of rare and singular birds and
fishes, many different sorts of game, almost all wild-fowl, all birds of
passage in particular, as well as many other things. When wealth, and the
luxury which accompanies it, increase, the demand for these is likely to
increase with them, and no effort of human industry may be able to increase
the supply much beyond what it was before this increase of the demand. The
quantity of such commodities, therefore, remaining the same, or nearly the
same, while the competition to purchase them is continually increasing,
their price may rise to any degree of extravagance, and seems not to be
limited by any certain boundary. If woodcocks should
become so fashionable as to sell for twenty guineas a-piece, no
effort of human industry could increase the number of those brought to
market, much beyond what it is at present. The high price paid by the
Romans, in the time of their greatest grandeur, for rare birds and fishes,
may in this manner easily be accounted for. These prices were not the
effects of the low value of silver in those times, but of the high value of
such rarities and curiosities as human industry could not multiply at
pleasure. The real value of silver was higher at Rome, for sometime before,
and after the fall of the republic, than it is through the greater part of
Europe at present. Three sestertii equal to about sixpence sterling, was the
price which the republic paid for the modius or peck of the tithe wheat of
Sicily. This price, however, was probably below the average market price,
the obligation to deliver their wheat at this rate being considered as a tax
upon the Sicilian farmers. When the Romans, therefore, had occasion to order
more corn than the tithe of wheat amounted to, they were bound by
capitulation to pay for the surplus at the rate of four sestertii, or
eightpence sterling the peck; and this had probably been reckoned the
moderate and reasonable, that is, the ordinary or average contract price of
those times; it is equal to about one-and-twenty shillings the quarter.
Eight-and-twenty shillings the quarter was, before the late years of
scarcity, the ordinary contract price of English wheat, which in quality is
inferior to the Sicilian, and generally sells for a lower price in the
European market. The value of silver, therefore, in those ancient times,
must have been to its value in the present, as three to four inversely ;
that is, three ounces of silver would then have purchased the same quantity
of labour and commodities which four ounces will do at present. When we
read in Pliny, therefore, that Seius {Lib.X,c.29.} bought a white
nightingale, as a present for the empress Agrippina, at the price of six
thousand sestertii, equal to about fifty pounds of our present money ; and
that Asinius Celer {Lib. IX,c. 17.} purchased a surmullet at the price of
eight thousand sestertii, equal to about sixty-six pounds thirteen shillings
and fourpence of our present money ; the extravagance of those prices, how
much soever it may surprise us, is apt, notwithstanding, to appear to us
about one third less than it really was. Their real price, the quantity of
labour and subsistence which was given away for them, was about one-third
more than their nominal price is apt to express to us in the present times.
Seius gave for the nightingale the command of a quantity of labour and
subsistence, equal to what £ 66:13: 4d. would purchase in the present times
; and Asinius Celer gave for a surmullet the command of a quantity equal to
what £ 88:17: 9d. would purchase. What occasioned the extravagance of those
high prices was, not so much the abundance of silver, as the abundance of
labour and subsistence, of which those Romans had the disposal, beyond what
was necessary for their own use. The quantity of silver, of which they had
the disposal, was a good deal less than what the command of the same
quantity of labour and subsistence would have procured to them in the
present times.
Second sort. - The second sort of rude produce, of which the price rises in
the progress of improvement, is that which human industry can multiply in
proportion to the demand. It consists in those useful plants and animals,
which, in uncultivated countries, nature produces with such profuse
abundance, that they are of little or no value, and which, as cultivation
advances, are therefore forced to give place to some more profitable
produce. During a long period in the progress of improvement, the quantity
of these is continually diminishing, while, at the same time, the demand for
them is continually increasing. Their real value, therefore, the real
quantity of labour which they will purchase or command, gradually rises,
till at last it gets so high as to render them as profitable a produce as
any thing else which human industry can raise upon the most fertile and best
cultivated land. When it has got so high, it cannot well go higher. If it
did, more land and more industry would soon be employed to increase their
quantity.
When the price of cattle, for example, rises so high, that it is as
profitable to cultivate land in order to raise food for them as in order to
raise food for man, it cannot well go higher. If it did, more corn land
would soon be turned into pasture. The extension of tillage, by diminishing
the quantity of wild pasture, diminishes the quantity of butcher's meat,
which the country naturally produces without labour or cultivation; and, by
increasing the number of those who have either corn, or, what comes to the
same thing, the price of corn, to give in exchange for it, increases the
demand. The price of butcher's meat, therefore, and, consequently, of
cattle, must gradually rise, till it gets so high, that it becomes as
profitable to employ the most fertile and best cultivated lands in raising
food for them as in raising corn. But it must always be late in the progress
of improvement before tillage can be so far extended as to raise the price
of cattle to this height ; and, till it has got to this height, if the
country is advancing at all, their price must be continually rising. There
are, perhaps, some parts of Europe in which the price of cattle has not yet
got to this height. It had not got to this height in any part of Scotland
before the Union. Had the Scotch cattle been always confined to the market
of Scotland, in a country in which the quantity of land, which can be
applied to no other purpose but the feeding of cattle, is so great in
proportion to what can be applied to other purposes, it is scarce possible,
perhaps, that their price could ever have risen so high as to render it
profitable to cultivate land for the sake of feeding them. In England, the
price of cattle, it has already been observed, seems, in the neighbourhood
of London, to have got to this height about the beginning of the last
century; but it was much later, probably, before it got through the greater
part of the remoter counties, in some of which, perhaps, it may scarce yet
have got to it. Of all the different substances, however, which compose this
second sort of rude produce, cattle is, perhaps, that of which the price, in
the progress of improvement, rises first to this height.
Till the price of cattle, indeed, has got to this height, it seems scarce
possible that the greater part, even of those lands which are capable of the
highest cultivation, can be completely cultivated. In all farms too distant
from any town to carry manure from it, that is, in the far greater part of
those of every extensive country, the quantity of well cultivated land must
be in proportion to the quantity of manure which the farm itself produces ;
and this, again, must be in proportion to the stock of cattle which are
maintained upon it. The land is manured, either by pasturing the cattle upon
it, or by feeding them in the stable, and from thence carrying out their
dung to it. But unless the price of the cattle be sufficient to pay both the
rent and profit of cultivated land, the farmer cannot afford to pasture them
upon it ; and he can still less afford to feed them in the stable. It is
with the produce of improved and cultivated land only that cattle can be fed
in the stable; because, to collect the scanty and scattered produce of waste
and unimproved lands, would require too much labour, and be too expensive.
It the price of the cattle, therefore, is not sufficient to pay for the
produce of improved and cuitivated land, when they are allowed to pasture
it, that price will be still less sufficient to pay for that produce, when
it must be collected with a good deal of additional labour, and brought into
the stable to them. In these circumstances, therefore, no more cattle can
with profit be fed in the stable than what are necessary for tillage. But
these can never afford manure enough for keeping constantly in good
condition all the lands which they are capable of cultivating. What they
afford, being insufficient for the whole farm, will naturally be reserved
for the lands to which it can be most advantageously or conveniently
applied; the most fertile, or those, perhaps, in the neighbourhood of the
farm-yard. These, therefore, will be kept constantly in good condition, and
fit for tillage. The rest will, the greater part of them, be allowed to lie
waste, producing scarce any thing but some miserable pasture, just
sufficient to keep alive a few straggling, half-starved cattle; the farm,
though much overstocked in proportion to what would be necessary for its
complete cultivation, being very frequently overstocked in proportion to its
actual produce. A portion of this waste land, however, after having been
pastured in this wretched manner for six or seven years together, may be
ploughed up, when it will yield, perhaps, a poor crop or two of bad oats, or
of some other coarse grain ; and then, being entirely exhausted, it must be
rested and pastured again as before, and another portion ploughed up, to be
in the same manner exhausted and rested again in its turn. Such,
accordingly, was the general system of management all over the low country
of Scotland before the Union. The lands which were kept constantly well
manured and in good condition seldom exceeded a third or fourth part of the
whole farm, and sometimes did not amount to a fifth or a sixth part of it.
The rest were never manured, but a certain portion of them was in its turn,
notwithstanding, regularly cultivated and exhausted. Under this system of
management, it is evident, even that part of the lands of Scotland which is
capable of good cultivation, could produce but little in comparison of what
it may be capable of producing. But how disadvantageous soever this system
may appear, yet, before the Union, the low price of cattle seems to have
rendered it almost unavoidable. If, notwithstanding a great rise in the
price, it still continues to prevail through a considerable part of the
country, it is owing in many places, no doubt, to ignorance and attachment
to old customs, but, in most places, to the unavoidable obstructions which
the natural course of things opposes to the immediate or speedy
establishment of a better system : first, to the poverty of the tenants, to
their not having yet had time to acquire a stock of cattle sufficient to
cultivate their lands more completely, the same rise of price, which would
render it advantageous for them to maintain a greater stock, rendering it
more difficult for them to acquire it; and, secondly, to their not having
yet had time to put their lands in condition to maintain this greater stock
properly, supposing they were capable of acquiring it. The increase of stock
and the improvement of land are two events which must go hand in hand, and
of which the one can nowhere much outrun the other. Without some increase of
stock, there can be scarce any improvement of land, but there can be no
considerable increase of stock, but in consequence of a considerable
improvement of land ; because otherwise the land could not maintain it.
These natural obstructions to the establishment of a better system, cannot
be removed but by a long course of frugality and industry ; and half a
century or a century more, perhaps, must pass away before the old system,
which is wearing out gradually, can be completely abolished through all the
different parts of the country. Of all the commercial advantages, however,
which Scotland has derived from the Union with England, this rise in the
price of cattle is, perhaps, the greatest. It has not only raised the value
of all highland estates, but it has, perhaps, been the principal cause of
the improvement of the low country.
In all new colonies, the great quantity of waste land, which can for many
years be applied to no other purpose but the feeding of cattle, soon renders
them extremely abundant ; and in every thing great cheapness is the
necessary consequence of great abundance. Though all the cattle of the
European colonies in America were originally carried from Europe, they soon
multiplied so much there, and became of so little value, that even horses
were allowed to run wild in the woods, without any owner thinking it worth
while to claim them. It must be a long time after the first establishment of
such colonies, before it can become profitable to feed cattle upon the
produce of cultivated land. The same causes, therefore, the want of manure,
and the disproportion between the stock employed in cultivation and the land
which it is destined to cultivate, are likely to introduce there a system of
husbandry, not unlike that which still continues to take place in so many
parts of Scotland. Mr Kalm, the Swedish traveller, when he gives an account
of the husbandry of some of the English colonies in North America, as he
found it in 1749, observes, accordingly, that he can with difficulty
discover there the character of the English nation, so well skilled in all
the different branches of agriculture. They make scarce any manure for their
corn fields, he says ; but when one piece of ground has been exhausted by
continual cropping, they clear and cultivate another piece of fresh land;
and when that is exhausted, proceed to a third. Their cattle are allowed to
wander through the woods and other uncultivated grounds, where they are
half-starved; having long ago extirpated almost all the annual grasses, by
cropping them too early in the spring, before they had time to form their
flowers, or to shed their seeds. {Kalm's Travels, vol 1, pp. 343, 344.} The
annual grasses were, it seems, the best natural grasses in that part of
North America; and when the Europeans first settled there, they used to grow
very thick, and to rise three or four feet high. A piece of ground which,
when he wrote, could not maintain one cow, would in former times, he was
assured, have maintained four, each of which would have given four times
the quantity of milk which that one was capable of giving. The poorness of
the pasture had, in his opinion, occasioned the degradation of their cattle,
which degenerated sensibly from me generation to another. They were probably
not unlike that stunted breed which was common all over Scotland thirty or
forty years ago, and which is now so much mended through the greater part of
the low country, not so much by a change of the breed, though that expedient
has been employed in some places, as by a more plentiful method of feeding
them.
Though it is late, therefore, in the progress of improvement, before cattle
can bring such a price as to render it profitable to cultivate land for the
sake of feeding them; yet of all the different parts which compose this
second sort of rude produce, they are perhaps the first which bring this
price ; because, till they bring it, it seems impossible that improvement
can be brought near even to that degree of perfection to which it has
arrived in many parts of Europe.
As cattle are among the first, so perhaps venison is among the last parts of
this sort of rude produce which bring this price. The price of venison in
Great Britain, how extravagant soever it may appear, is not near sufficient
to compensate the expense of a deer park, as is well known to all those who
have had any experience in the feeding of deer. If it was otherwise, the
feeding of deer would soon become an article of common farming, in the same
manner as the feeding of those small birds, called turdi, was among the
ancient Romans. Varro and Columella assure us, that it was a most profitable
article. The fattening of ortolans, birds of passage which arrive lean in
the country, is said to be so in some parts of France. If venison continues
in fashion, and the wealth and luxury of Great Britain increase as they have
done for some time past, its price may very probably rise still higher than
it is at present.
Between that period in the progress of improvement, which brings to its
height the price of so necessary an article as cattle, and that which brings
to it the price of such a superfluity as venison, there is a very long
interval, in the course of which many other sorts of rude produce gradually
arrive at their highest price, some sooner and some later, according to
different circumstances.
Thus, in every farm, the offals of the barn and stable will maintain a
certain number of poultry. These, as they are fed with what would otherwise
be lost, are a mere save-all ; and as they cost the farmer scarce any thing,
so he can afford to sell them for very little. Almost all that he gets is
pure gain, and their price can scarce be so low as to discourage him from
feeding this number. But in countries ill cultivated, and therefore but
thinly inhabited, the poultry, which are thus raised without expense, are
often fully sufficient to supply the whole demand. In this state of things,
therefore, they are often as cheap as butcher's meat, or any other sort of
animal food. But the whole quantity of poultry which the farm in this manner
produces without expense, must always be much smaller than the whole
quantity of butcher's meat which is reared upon it; and in times of wealth
and luxury, what is rare, with only nearly equal merit, is always preferred
to what is common. As wealth and luxury increase, therefore, in consequence
of improvement and cultivation, the price of poultry gradually rises above
that of butcher's meat, till at last it gets so high, that it becomes
profitable to cultivate land for the sake of feeding them. When it has got
to this height, it cannot well go higher. If it did, more land would soon be
turned to this purpose. In several provinces of France, the feeding of
poultry is considered as a very important article in rural economy, and
sufficiently profitable to encourage the farmer to raise a considerable
quantity of Indian corn and buckwheat for this purpose. A middling farmer
will there sometimes have four hundred fowls in his yard. The feeding of
poultry seems scarce yet to be generally considered as a matter of so much
importance in England. They are certainly, however, dearer in England than
in France, as England receives considerable supplies from France. In the
progress of improvements, the period at which every particular sort of
animal food is dearest, must naturally be that which immediately precedes
the general practice of cultivating land for the sake of raising it. For
some time before this practice becomes general, the scarcity must
necessarily raise the price. After it has become general, new methods of
feeding are commonly fallen upon, which enable the farmer to raise upon the
same quantity of ground a much greater quantity of that particular sort of
animal food. The plenty not only obliges him to sell cheaper, but, in
consequence of these improvements, he can afford to sell cheaper; for if he
could not afford it, the plenty would not be of long continuance. It has
been probably in this manner that the introduction of clover, turnips,
carrots, cabbages, etc. has contributed to sink the common price of
butcher's meat in the London market, somewhat below what it was about the
beginning of the last century.
The hog, that finds his food among ordure, and greedily devours many things
rejected by every other useful animal, is, like poultry, originally kept as
a save-all. As long as the number of such animals, which can thus be reared
at little or no expense, is fully sufficient to supply the demand, this sort
of butcher's meat comes to market at a much lower price than any other. But
when the demand rises beyond what this quantity can supply, when it becomes
necessary to raise food on purpose for feeding and fattening hogs, in the
same manner as for feeding and fattening other cattle, the price necessarily
rises, and becomes proportionably either higher or lower than that of other
butcher's meat, according as the nature of the country, and the state of its
agriculture, happen to render the feeding of hogs more or less expensive
than that of other cattle. In France, according to Mr Buffon, the price of
pork is nearly equal to that of beef. In most parts of Great Britain it is
at present somewhat higher.
The great rise in the price both of hogs and poultry, has, in Great Britain,
been frequently imputed to the diminution of the number of cottagers and
other small occupiers of land ; an event which has in every part of Europe
been the immediate forerunner of improvement and better cultivation, but
which at the same time may have contributed to raise the price of those
articles, both somewhat sooner and somewhat faster than it would otherwise
have risen. As the poorest family can often maintain a cat or a dog without
any expense, so the poorest occupiers of land can commonly maintain a few
poultry, or a sow and a few pigs, at very little. The little offals of their
own table, their whey, skimmed milk, and butter milk, supply those animals
with a part of their food, and they find the rest in the neighbouring
fields, without doing any sensible damage to any body. By diminishing the
number of those small occupiers, therefore, the quantity of this sort of
provisions, which is thus produced at little or no expense, must certainly
have been a good deal diminished, and their price must consequently have
been raised both sooner and faster than it would otherwise have risen.
Sooner or later, however, in the progress of improvement, it must at any
rate have risen to the utmost height to which it is capable of rising ; or
to the price which pays the labour and expense of cultivating the land which
furnishes them with food, as well as these are paid upon the greater part of
other cultivated land.
The business of the dairy, like the feeding of hogs and poultry, is
originally carried on as a save-all. The cattle necessarily kept upon the
farm produce more milk than either the rearing of their own young, or the
consumption of the farmer's family requires ; and they produce most at one
particular season. But of all the productions of land, milk is perhaps the
most perishable. In the warm season, when it is most abundant, it will
scarce keep four-and-twenty hours. The farmer, by making it into fresh
butter, stores a small part of it for a week ; by making it into salt butter,
for a year ; and by making it into cheese, he stores a much greater part of
it for several years. Part of all these is reserved for the use of his own
family; the rest goes to market, in order to find the best price which is to
be had, and which can scarce be so low is to discourage him from sending
thither whatever is over and above the use of his own family. If it is very
low indeed, he will be likely to manage his dairy in a very slovenly and
dirty manner, and will scarce, perhaps, think it worth while to have a
particular room or building on purpose for it, but will suffer the business
to be carried on amidst the smoke, filth, and nastiness of his own kitchen,
as was the case of almost all the farmers' dairies in Scotland thirty or
forty years ago, and as is the case of many of them still. The same causes
which gradually raise the price of butcher's meat, the increase of the
demand, and, in consequence of the improvement of the country, the
diminution of the quantity which can be fed at little or no expense, raise,
in the same manner, that of the produce of the dairy, of which the price
naturally connects with that of butcher's meat, or with the expense of
feeding cattle. The increase of price pays for more labour, care, and
cleanliness. The dairy becomes more worthy of the farmer's attention, and
the quality of its produce gradually improves. The price at last gets so
high, that it becomes worth while to employ some of the most fertile and
best cultivated lands in feeding cattle merely for the purpose of the dairy
; and when it has got to this height, it cannot well go higher. If it did,
more land would soon be turned to this purpose. It seems to have got to this
height through the greater part of England, where much good land is commonly
employed in this manner. If you except the neighbourhood of a few
considerable towns, it seems not yet to have got to this height anywhere in
Scotland, where common farmers seldom employ much good land in raising food
for cattle, merely for the purpose of the dairy. The price of the produce,
though it has risen very considerably within these few years, is probably
still too low to admit of it. The inferiority of the quality, indeed,
compared with that of the produce of English dairies, is fully equal to that
of the price. But this inferiority of quality is, perhaps, rather the effect
of this lowness of price, than the cause of it. Though the quality was much
better, the greater part of what is brought to market could not, I
apprehend, in the present circumstances of the country, be disposed of at a
much better price; and the present price, it is probable, would not pay the
expense of the land and labour necessary for producing a much better
quality. Through the greater part of England, notwithstanding the
superiority of price, the dairy is not reckoned a more profitable employment
of land than the raising of corn, or the fattening of cattle, the two great
objects of agriculture. Through the greater part of Scotland, therefore, it
cannot yet be even so profitable.
The lands of no country, it is evident, can ever be completely cultivated
and improved, till once the price of every produce, which human industry is
obliged to raise upon them, has got so high as to pay for the expense of
complete improvement and cultivation. In order to do this, the price of each
particular produce must be sufficient, first, to pay the rent of good corn
land, as it is that which regulates the rent of the greater part of other
cultivated land; and, secondly, to pay the labour and expense of the farmer,
as well as they are commonly paid upon good corn land ; or, in other words,
to replace with the ordinary profits the stock which he employs about it.
This rise in the price of each particular produce; must evidently be
previous to the improvement and cultivation of the land which is destined
for raising it. Gain is the end of all improvement; and nothing could
deserve that name, of which loss was to be the necessary consequence. But
loss must be the necessary consequence of improving land for the sake of a
produce of which the price could never bring back the expense. If the
complete improvement and cultivation of the country be, as it most certainly
is, the greatest of all public advantages, this rise in the price of all
those different sorts of rude produce, instead of being considered as a
public calamity, ought to be regarded as the necessary forerunner and
attendant of the greatest of all public advantages.
This rise, too, in the nominal or money price of all those different sorts
of rude produce, has been the effect, not of any degradation in the value of
silver, but of a rise in their real price. They have become worth, not only
a greater quantity of silver, but a greater quantity of labour and
subsistence than before. As it costs a greater quantity of labour and
subsistence to bring them to market, so, when they are brought thither they
represent, or are equivalent to a greater quantity.
Third Sort. ˜ The third and last sort of rude produce, of which the price
naturally rises in the progress of improvement, is that in which the
efficacy of human industry, in augmenting the quantity, is either limited or
uncertain. Though the real price of this sort of rude produce, therefore,
naturally tends to rise in the progress of improvement, yet, according as
different accidents happen to render the efforts of human industry more or
less successful in augmenting the quantity, it may happen sometimes even to
fall, sometimes to continue the same, in very different periods of
improvement, and sometimes to rise more or less in the same period.
There are some sorts of rude produce which nature has rendered a kind of
appendages to other sorts; so that the quantity of the one which any country
can afford, is necessarily limited by that of the other. The quantity of
wool or of raw hides, for example, which any country can afford, is
necessarily limited by the number of great and small cattle that are kept in
it. The state of its improvement, and the nature of its agriculture, again
necessarily determine this number.
The same causes which, in the progress of improvement, gradually raise the
price of butcher's meat, should have the same effect, it may be thought,
upon the prices of wool and raw hides, and raise them, too, nearly in the
same proportion. It probably would be so, if, in the rude beginnings of
improvement, the market for the latter commodities was confined within as
narrow bounds as that for the former. But the extent of their respective
markets is commonly extremely different.
The market for butcher's meat is almost everywhere confined to the country
which produces it. Ireland, and some part of British America, indeed, carry
on a considerable trade in salt provisions; but they are, I believe, the
only countries in the commercial world which do so, or which export to other
countries any considerable part of their butcher's meat.
The market for wool and raw hides, on the contrary, is, in the rude
beginnings of improvement, very seldom confined to the country which
produces them. They can easily be transported to distant countries ; wool
without any preparation, and raw hides with very little ; and as they are
the materials of many manufactures, the industry of other countries may
occasion a demand for them, though that of the country which produces them
might not occasion any.
In countries ill cultivated, and therefore but thinly inhabited, the price
of the wool and the hide bears always a much greater proportion to that of
the whole beast, than in countries where, improvement and population being
further advanced, there is more demand for butcher's meat. Mr Hume observes,
that in the Saxon times, the fleece was estimated at two-fifths of the value
of the whole sheep and that this was much above the proportion of its
present estimation. In some provinces of Spain, I have been assured, the
sheep is frequently killed merely for the sake of the fleece and the tallow.
The carcase is often left to rot upon the ground, or to be devoured by
beasts and birds of prey. If this sometimes happens even in Spain, it
happens almost constantly in Chili, at Buenos Ayres, and in many other parts
of Spanish America, where the horned cattle are almost constantly killed
merely for the sake of the hide and the tallow. This, too, used to happen
almost constantly in Hispaniola, while it was infested by the buccaneers,
and before the settlement, improvement, and populousness of the French
plantations ( which now extend round the coast of almost the whole western
half of the island) had given some value to the cattle of the Spaniards, who
still continue to possess, not only the eastern part of the coast, but the
whole inland mountainous part of the country.
Though, in the progress of improvement and population, the price of the
whole beast necessarily rises, yet the price of the carcase is likely to be
much more affected by this rise than that of the wool and the hide. The
market for the carcase being in the rude state of society confined always to
the country which produces it, must necessarily be extended in proportion to
the improvement and population of that country. But the market for the wool
and the hides, even of a barbarous country, often extending to the whole
commercial world, it can very seldom be enlarged in the same proportion. The
state of the whole commercial world can seldom be much affected by the
improvement of any particular country; and the market for such commodities
may remain the same, or very nearly the same, after such improvements, as
before. It should, however, in the natural course of things, rather, upon
the whole, be somewhat extended in consequence of them. If the manufactures,
especially, of which those commodities are the materials, should ever come
to flourish in the country, the market, though it might not be much
enlarged, would at least be brought much nearer to the place of growth than
before ; and the price of those materials might at least be increased by
what had usually been the expense of transporting them to distant countries.
Though it might not rise, therefore, in the same proportion as that of
butcher's meat, it ought naturally to rise somewhat, and it ought certainly
not to fall.
In England, however, notwithstanding the flourishing state of its woollen
manufacture, the price of English wool has fallen very considerably since
the time of Edward III. There are many authentic records which demonstrate
that, during the reign of that prince (towards the middle of the fourteenth
century, or about 1339), what was reckoned the moderate and reasonable price
of the tod, or twenty-eight pounds of English wool, was not less than ten
shillings of the money of those times {See Smith 's Memoirs of Wool, vol. i
c. 5, 6, 7. also vol. ii.}, containing, at the rate of twenty-pence the
ounce, six ounces of silver, Tower weight, equal to about thirty shillings
of our present money. In the present times, one-and-twenty shillings the tod
may be reckoned a good price for very good English wool. The money price of
wool, therefore, in the time of Edward III. was to its money price in the
present times as ten to seven. The superiority of its real price was still
greater. At the rate of six shillings and eightpence the quarter, ten
shillings was in those ancient times the price of twelve bushels of wheat.
At the rate of twenty-eight shillings the quarter, one-and-twenty shillings
is in the present times the price of six bushels only. The proportion
between the real price of ancient and modern times, therefore, is as twelve
to six, or as two to one. In those ancient times, a tod of wool would have
purchased twice the quantity of subsistence which it will purchase at
present, and consequently twice the quantity of labour, if the real
recompence of labour had been the same in both periods.
This degradation, both in the real and nominal value of wool, could never
have happened in consequence of the natural course of things. It has
accordingly been the effect of violence and artifice. First, of the absolute
prohibition of exporting wool from England: secondly, of the permission of
importing it from Spain, duty free: thirdly, of the prohibition of exporting
it from Ireland to another country but England. In consequence of these
regulations, the market for English wool, instead of being somewhat
extended, in consequence of the improvement of England, has been confined to
the home market, where the wool of several other countries is allowed to
come into competition with it, and where that of Ireland is forced into
competition with it. As the woollen manufactures, too, of Ireland, are fully
as much discouraged as is consistent with justice and fair dealing, the
Irish can work up but a smaller part of their own wool at home, and are
therefore obliged to send a greater proportion of it to Great Britain, the
only market they are allowed.
I have not been able to find any such authentic records concerning the price
of raw hides in ancient times. Wool was commonly paid as a subsidy to the
king, and its valuation in that subsidy ascertains, at least in some degree,
what was its ordinary price. But this seems not to have been the case with
raw hides. Fleetwood, however, from an account in 1425, between the prior of
Burcester Oxford and one of his canons, gives us their price, at least as it
was stated upon that particular occasion, viz. five ox hides at twelve
shillings ; five cow hides at seven shillings and threepence ; thirtysix
sheep skins of two years old at nine shillings; sixteen calf skins at two
shillings. In 1425, twelve shillings contained about the same quantity of
silver as four-and-twenty shillings of our present money. An ox hide,
therefore, was in this account valued at the same quantity of silver as 4s.
4/5ths of our present money. Its nominal price was a good deal lower than at
present. But at the rate of six shillings and eightpence the quarter, twelve
shillings would in those times have purchased fourteen bushels and
four-fifths of a bushel of wheat, which, at three and sixpence the bushel,
would in the present times cost 51s. 4d. An ox hide, therefore, would in
those times have purchased as much corn as ten shillings and threepence
would purchase at present. Its real value was equal to ten shillings and
threepence of our present money. In those ancient times, when the cattle
were half starved during the greater part of the winter, we cannot suppose
that they were of a very large size. An ox hide which weighs four stone of
sixteen pounds of avoirdupois, is not in the present times reckoned a bad
one; and in those ancient times would probably have been reckoned a very
good one. But at half-a-crown the stone, which at this moment (February
1773) I understand to be the common price, such a hide would at present cost
only ten shillings.Through its nominal price, therefore, is higher in the
present than it was in those ancient times, its real price, the real
quantity of subsistence which it will purchase or command, is rather
somewhat lower. The price of cow hides, as stated in the above account, is
nearly in the common proportion to that of ox hides. That of sheep skins is
a good deal above it. They had probably been sold with the wool. That of
calves skins, on the contrary, is greatly below it. In countries where the
price of cattle is very low, the calves, which are not intended to be reared
in order to keep up the stock, are generally killed very young, as was the
case in Scotland twenty or thirty years ago. It saves the milk, which their
price would not pay for. Their skins, therefore, are commonly good for
little.
The price of raw hides is a good deal lower at present than it was a few
years ago; owing probably to the taking off the duty upon seal skins, and to
the allowing, for a limited time, the importation of raw hides from Ireland,
and from the plantations, duty free, which was done in 1769. Take the whole
of the present century at an average, their real price has probably been
somewhat higher than it was in those ancient times. The nature of the
commodity renders it not quite so proper for being transported to distant
markets as wool. It suffers more by keeping. A salted hide is reckoned
inferior to a fresh one, and sells for a lower price. This circumstance must
necessarily have some tendency to sink the price of raw hides produced in a
country which does not manufacture them, but is obliged to export them, and
comparatively to raise that of those produced in a country which does
manufacture them. It must have some tendency to sink their price in a
barbarous, and to raise it in an improved and manufacturing country. It must
have had some tendency, therefore, to sink it in ancient, and to raise it in
modern times. Our tanners, besides, have not been quite so successful as our
clothiers, in convincing the wisdom of the nation, that the safety of the
commonwealth depends upon the prosperity of their particular manufacture.
They have accordingly been much less favoured. The exportation of raw hides
has, indeed, been prohibited, and declared a nuisance; but their importation
from foreign countries has been subjected to a duty ; and though this duty
has been taken off from those of Ireland and the plantations (for the
limited time of five years only), yet Ireland has not been confined to the
market of Great Britain for the sale of its surplus hides, or of those which
are not manufactured at home. The hides of common cattle have, but within
these few years, been put among the enumerated commodities which the
plantations can send nowhere but to the mother country ; neither has the
commerce of Ireland been in this case oppressed hitherto, in order to
support the manufactures of Great Britain.
Whatever regulations tend to sink the price, either of wool or of raw hides,
below what it naturally would he, must, in an improved and cultivated
country, have some tendency to raise the price of butcher's meat. The price
both of the great and small cattle, which are fed on improved and cultivated
land, must be sufficient to pay the rent which the landlord, and the profit
which the farmer, has reason to expect from improved and cultivated land. If
it is not, they will soon cease to feed them. Whatever part of this price,
therefore, is not paid by the wool and the hide, must be paid by the
carcase. The less there is paid for the one, the more must be paid for the
other. In what manner this price is to be divided upon the different parts
of the beast, is indifferent to the landlords and farmers, provided it is
all paid to them. In an improved and cultivated country, therefore, their
interest as landlords and farmers cannot be much affected by such
regulations, though their interest as consumers may, by the rise in the
price of provisions. It would be quite otherwise, however, in an unimproved
and uncultivated country, where the greater part of the lands could be
applied to no other purpose but the feeding of cattle, and where the wool
and the hide made the principal part of the value of those cattle. Their
interest as landlords and farmers would in this case be very deeply affected
by such regulations, and their interest as consumers very little. The fall
in the price of the wool and the hide would not in this case raise the price
of the carcase; because the greater part of the lands of the country being
applicable to no other purpose but the feeding of cattle, the same number
would still continue to be fed. The same quantity of butcher's meat would
still come to market. The demand for it would be no greater than before. Its
price, therefore, would be the same as before. The whole price of cattle
would fall, and along with it both the rent and the prožt of all those
lands of which cattle was the principal produce, that is, of the greater
part of the lands of the country. The perpetual prohibition of the
exportation of wool, which is commonly, but very falsely, ascribed to Edward
III., would, in the then circumstances of the country, have been the most
destructive regulation which could well have been thought of. It would not
only have reduced the actual value of the greater part of the lands in the
kingdom, but by reducing the price of the most important species of small
cattle, it would have retarded very much its subsequent improvement.
The wool of Scotland fell very considerably in its price in consequence of
the union with England, by which it was excluded from the great market of
Europe, and confined to the narrow one of Great Britain. The value of the
greater part of the lands in the southern counties of Scotland, which are
chiefly a sheep country, would have been very deeply affected by this event,
had not the rise in the price of butcher's meat fully compensated the fall
in the price of wool.
As the efficacy of human industry, in increasing the quantity either of wool
or of raw hides, is limited, so far as it depends upon the produce of the
country where it is exerted ; so it is uncertain so far as it depends upon
the produce of other countries. It so far depends not so much upon the
quantity which they produce, as upon that which they do not manufacture; and
upon the restraints which they may or may not think proper to impose upon
the exportation of this sort of rude produce. These circumstances, as they
are altogether independent of domestic industry, so they necessarily render
the efficacy of its efforts more or less uncertain. In multiplying this sort
of rude produce, therefore, the efficacy of human industry is not only
limited, but uncertain.
In multiplying another very important sort of rude produce, the quantity of
fish that is brought to market, it is likewise both limited and uncertain.
It is limited by the local situation of the country, by the proximity or
distance of its different provinces from the sea, by the number of its lakes
and rivers, and by what may be called the fertility or barrenness of those
seas, lakes, and rivers, as to this sort of rude produce. As population
increases, as the annual produce of the land and labour of the country grows
greater and greater, there come to be more buyers of fish ; and those
buyers, too, have a greater quantity and variety of other goods, or, what is
the same thing, the price of a greater quantity and variety of other goods,
to buy with. But it will generally be impossible to supply the great and
extended market, without employing a quantity of labour greater than in
proportion to what had been requisite for supplying the narrow and confined
one. A market which, from requiring only one thousand, comes to require
annually ten thousand ton of fish, can seldom be supplied, without employing
more than ten times the quantity of labour which had before been sufficient
to supply it. The fish must generally be sought for at a greater distance,
larger vessels must be employed, and more expensive machinery of every kind
made use of. The real price of this commodity, therefore, naturally rises in
the progress of improvement. It has accordingly done so, I believe, more or
less in every country.
Though the success of a particular day's fishing maybe a very uncertain
matter, yet the local situation of the country being supposed, the general
efficacy of industry in bringing a certain quantity of fish to market,
taking the course of a year, or of several years together, it may, perhaps,
be thought is certain enough; and it, no doubt, is so. As it depends more,
however, upon the local situation of the country, than upon the state of its
wealth and industry ; as upon this account it may in different countries be
the same in very different periods of improvement, and very different in the
same period; its connection with the state of improvement is uncertain; and
it is of this sort of uncertainty that I am here speaking.
In increasing the quantity of the different minerals and metals which are
drawn from the bowels of the earth, that of the more precious ones
particularly, the efficacy of human industry seems not to be limited, but to
be altogether uncertain.
The quantity of the precious metals which is to be found in any country, is
not limited by any thing in its local situation, such as the fertility or
barrenness of its own mines. Those metals frequently abound in countries
which possess no mines. Their quantity, in every particular country, seems
to depend upon two different circumstances ; first, upon its power of
purchasing, upon the state of its industry, upon the annual produce of its
land and labour, in consequence of which it can afford to employ a greater
or a smaller quantity of labour and subsistence, in bringing or purchasing
such superfluities as gold and silver, either from its own mines, or from
those of other countries; and, secondly, upon the fertility or barrenness of
the mines which may happen at any particular time to supply the commercial
world with those metals. The quantity of those metals in the countries most
remote from the mines, must be more or less affected by this fertility or
barrenness, on account of the easy and cheap transportation of those metals,
of their small bulk and great value. Their quantity in China and Indostan
must have been more or less affected by the abundance of the mines of
America.
So far as their quantity in any particular country depends upon the former
of those two circumstances (the power of purchasing), their real price, like
that of all other luxuries and superfluities, is likely to rise with the
wealth and improvement of the country, and to fall with its poverty and
depression. Countries which have a great quantity of labour and subsistence
to spare, can afford to purchase any particular quantity of those metals at
the expense of a greater quantity of labour and subsistence, than countries
which have less to spare.
So far as their quantity in any particular country depends upon the latter
of those two circumstances (the fertility or barrenness of the mines which
happen to supply the commercial world), their real price, the real quantity
of labour and subsistence which they will purchase or exchange for, will, no
doubt, sink more or less in proportion to the fertility, and rise in
proportion to the barrenness of those mines.
The fertility or barrenness of the mines, however, which may happen at any
particular time to supply the commercial world, is a circumstance which, it
is evident, may have no sort of connection with the state of industry in a
particular country. It seems even to have no very necessary connection with
that of the world in general. As arts and commerce, indeed, gradually spread
themselves over a greater and a greater part of the earth, the search for
new mines, being extended over a wider surface, may have somewhat a better
chance for being successful than when confined within narrower bounds. The
discovery of new mines, however, as the old ones come to be gradually
exhausted, is a matter of the greatest uncertainty, and such as no human
skill or industry can insure. All indications, it is acknowledged, are
doubtful; and the actual discovery and successful working of a new mine can
alone ascertain the reality of its value, or even of its existence. In this
search there seem to be no certain limits, either to the possible success,
or to the possible disappointment of human industry. In the course of a
century or two, it is possible that new mines may be discovered, more
fertile than any that have ever yet been known ; and it is just equally
possible, that the most fertile mine then known may be more barren than any
that was wrought before the discovery of the mines of America. Whether the
one or the other of those two events may happen to take place, is of very
little importance to the real wealth and prosperity of the world, to the
real value of the annual produce of the land and labour of mankind. Its
nominal value, the quantity of gold and silver by which this annual produce
could be expressed or represented, would, no doubt, be very different ; but
its real value, the real quantity of labour which it could purchase or
command, would be precisely the same. A shilling might, in the one case,
represent no more labour than a penny does at present ; and a penny, in the
other, might represent as much as a shilling does now. But in the one case,
he who had a shilling in his pocket would be no richer than he who has a
penny at present; and in the other, he who had a penny would be just as rich
as he who has a shilling now. The cheapness and abundance of gold and silver
plate would be the sole advantage which the world could derive from the one
event; and the dearness and scarcity of those trifling superfluities, the
only inconveniency it could suffer from the other.
Conclusion of the Digression concerning the Variations in the Value of
Silver.
The greater part of the writers who have collected the money price of things
in ancient times, seem to have considered the low money price of corn, and
of goods in general, or, in other words, the high value of gold and silver,
as a proof, not only of the scarcity of those metals, but of the poverty and
barbarism of the country at the time when it took place. This notion is
connected with the system of political economy, which represents national
wealth as consisting in the abundance and national poverty in the scarcity,
of gold and silver ; a system which I shall endeavour to explain and examine
at great length in the fourth book of this Inquiry. I shall only observe at
present, that the high value of the precious metals can be no proof of the
poverty or barbarism of any particular country at the time when it took
place. It is a proof only of the barrenness of the mines which happened at
that time to supply the commercial world. A poor country, as it cannot
afford to buy more, so it can as little afford to pay dearer for gold and
silver than a rich one ; and the value of those metals, therefore, is not
likely to be higher in the former than in the latter. In China, a country
much richer than any part of Europe, the value of the precious metals is
much higher than in any part of Europe. As the wealth of Europe, indeed, has
increased greatly since the discovery of the mines of America, so the value
of gold and silver has gradually diminished. This diminution of their
value, however, has not been owing to the increase of the real wealth of
Europe, of the annual produce of its land and labour, but to the accidental
discovery of more abundant mines than any that were known before. The
increase of the quantity of gold and silver in Europe, and the increase of
its manufactures and agriculture, are two events which, though they have
happened nearly about the same time, yet have arisen from very different
causes, and have scarce any natural connection with one another. The one has
arisen from a mere accident, in which neither prudence nor policy either had
or could have any share; the other, from the fall of the feudal system, and
from the establishment of a government which afforded to industry the only
encouragement which it requires, some tolerable security that it shall enjoy
the fruits of its own labour. Poland, where the feudal system still
continues to take place, is at this day as beggarly a country as it was
before the discovery of America. The money price of corn, however, has risen
; the real value of the precious metals has fallen in Poland, in the same
manner as in other parts of Europe. Their quantity, therefore, must have
increased there as in other places, and nearly in the same proportion to the
annual produce of its land and labour. This increase of the quantity of
those metals, however, has not, it seems, increased that annual produce, has
neither improved the manufactures and agriculture of the country, nor mended
the circumstances of its inhabitants. Spain and Portugal, the countries
which possess the mines, are, after Poland, perhaps the two most beggarly
countries in Europe. The value of the precious metals, however, must be
lower in Spain and Portugal than in any other part of Europe, as they come
from those countries to all other parts of Europe, loaded, not only with a
freight and an insurance, but with the expense of smuggling, their
exportation being either prohibited or subjected to a duty. In proportion to
the annual produce of the land and labour, therefore, their quantity must be
greater in those countries than in any other part of Europe; those
countries, however, are poorer than the greater part of Europe. Though the
feudal system has been abolished in Spain and Portugal, it has not been
succeeded by a much better.
As the low value of gold and silver, therefore, is no proof of the wealth
and flourishing state of the country where it takes place ; so neither is
their high value, or the low money price either of goods in general, or of
corn in particular, any proof of its poverty and barbarism.
But though the low money price, either of goods in general, or of corn in
particular, be no proof of the poverty or barbarism of the times, the low
money price of some particular sorts of goods, such as cattle, poultry, game
of all kinds, etc. in proportion to that of corn, is a most decisive one. It
clearly demonstrates, first, their great abundance in proportion to that of
corn, and, consequently, the great extent of the land which they occupied in
proportion to what was occupied by corn ; and, secondly, the low value of
this land in proportion to that of corn land, and, consequently, the
uncultivated and unimproved state of the far greater part of the lands of
the country. It clearly demonstrates, that the stock and population of the
country did not bear the same proportion to the extent of its territory,
which they commonly do in civilized countries ; and that society was at that
time, and in that country, but in its infancy. From the high or low money
price, either of goods in general, or of corn in particular, we can infer
only, that the mines, which at that time happened to supply the commercial
world with gold and silver, were fertile or barren, not that the country was
rich or poor. But from the high or low money price of some sorts of goods in
proportion to that of others, we can infer, with a degree of probability
that approaches almost to certainty, that it was rich or poor, that the
greater part of its lands were improved or unimproved, and that it was
either in a more or less barbarous state, or in a more or less civilized
one.
Any rise in the money price of goods which proceeded altogether from the
degradation of the value of silver, would affect all sorts of goods equally,
and raise their price universally, a third, or a fourth, or a fifth part
higher, according as silver happened to lose a third, or a fourth, or a
fifth part of its former value. But the rise in the price of provisions,
which has been the subject of so much reasoning and conversation, does not
affect all sorts of provisions equally. Taking the course of the present
century at an average, the price of corn, it is acknowledged, even by those
who account for this rise by the degradation of the value of silver, has
risen much less than that of some other sorts of provisions. The rise in the
price of those other sorts of provisions, therefore, cannot be owing
altogether to the degradation of the value of silver. Some other causes must
be taken into the account ; and those which have been above assigned, will,
perhaps, without having recourse to the supposed degradation of the value of
silver, sufficiently explain this rise in those particular sorts of
provisions, of which the price has actually risen in proportion to that of
corn.
As to the price of corn itself, it has, during the sixty-four first years of
the present century, and before the late extraordinary course of bad
seasons, been somewhat lower than it was during the sixty-four last years of
the preceding century. This fact is attested, not only by the accounts of
Windsor market, but by the public fiars of all the different counties of
Scotland, and by the accounts of several different markets in France, which
have been collected with great diligence and fidelity by Mr Messance, and by
Mr Dupré de St Maur. The evidence is more complete than could well have been
expected in a matter which is naturally so very difficult to be ascertained.
As to the high price of corn during these last ten or twelve years, it can
be sufficiently accounted for from the badness of the seasons, without
supposing any degradation in the value of silver.
The opinion, therefore, that silver is continually sinking in its value,
seems not to be founded upon any good observations, either upon the prices
of corn, or upon those of other provisions.
The same quantity of silver, it may perhaps be said, will, in the present
times, even according to the account which has been here given, purchase a
much smaller quantity of several sorts of provisions than it would have done
during some part of the last century ; and to ascertain whether this change
be owing to a rise in the value of those goods, or to a fall in the value of
silver, is only to establish a vain and useless distinction, which can be of
no sort of service to the man who has only a certain quantity of silver to
go to market with, or a certain fixed revenue in money. I certainly do not
pretend that the knowledge of this distinction will enable him to buy
cheaper. It may not, however, upon that account be altogether useless.
It may be of some use to the public, by affording an easy proof of the
prosperous condition of the country. If the rise in the price of some sorts
of provisions be owing altogether to a fall in the value of silver, it is
owing to a circumstance, from which nothing can be inferred but the
fertility of the American mines. The real wealth of the country, the annual
produce of its land and labour, may, notwithstanding this circumstance, be
either gradually declining, as in Portugal and Poland ; or gradually
advancing, as in most other parts of Europe. But if this rise in the price
of some sorts of provisions be owing to a rise in the real value of the land
which produces them, to its increased fertility, or, in consequence of more
extended improvement and good cultivation, to its having been rendered fit
for producing corn; it is owing to a circumstance which indicates, in the
clearest manner, the prosperous and advancing state of the country. The land
constitutes by far the greatest, the most important, and the most durable
part of the wealth of every extensive country. It may surely be of some use,
or, at least, it may give some satisfaction to the public, to have so
decisive a proof of the increasing value of by far the greatest, the most
important, and the most durable part of its wealth.
It may, too, be of some use to the public, in regulating the pecuniary
reward of some of its inferior servants. If this rise in the price of some
sorts of provisions be owing to a fall in the value of silver, their
pecuniary reward, provided it was not too large before, ought certainly to
be augmented in proportion to the extent of this fall. If it is not
augmented, their real recompence will evidently be so much diminished. But
if this rise of price is owing to the increased value, in consequence of the
improved fertility of the land which produces such provisions, it becomes a
much nicer matter to judge, either in what proportion any pecuniary reward
ought to be augmented, or whether it ought to be augmented at all. The
extension of improvement and cultivation, as it necessarily raises more or
less, in proportion to the price of corn, that of every sort of animal food,
so it as necessarily lowers that of, I believe, every sort of vegetable
food. It raises the price of animal food ; because a great part of the land
which produces it, being rendered fit for producing corn, must afford to the
landlord anti farmer the rent and profit of corn land. It lowers the price
of vegetable food; because, by increasing the fertility of the land, it
increases its abundance. The improvements of agriculture, too, introduce
many sorts of vegetable food, which requiring less land, and not more labour
than corn, come much cheaper to market. Such are potatoes and maize, or what
is called Indian corn, the two most important improvements which the
agriculture of Europe, perhaps, which Europe itself, has received from the
great extension of its commerce and navigation. Many sorts of vegetable
food, besides, which in the rude state of agriculture are confined to the
kitchen-garden, and raised only by the spade, come, in its improved state,
to be introduced into common fields, and to be raised by the plough ; such
as turnips, carrots, cabbages, etc. If, in the progress of improvement,
therefore, the real price of one species of food necessarily rises, that of
another as necessarily falls ; and it becomes a matter of more nicety to
judge how far the rise in the one may be compensated by the fall in the
other. When the real price of butcher's meat has once got to its height
(which, with regard to every sort, except perhaps that of hogs flesh, it
seems to have done through a great part of England more than a century ago),
any rise which can afterwards happen in that of any other sort of animal
food, cannot much affect the circumstances of the inferior ranks of people.
The circumstances of the poor, through a great part of England, cannot
surely be so much distressed by any rise in the price of poultry, fish,
wild-fowl, or venison, as they must be relieved by the fall in that of
potatoes.
In the present season of scarcity, the high price of corn no doubt
distresses the poor. But in times of moderate plenty, when corn is at its
ordinary or average price, the natural rise in the price of any other sort
of rude produce cannot much affect them. They suffer more, perhaps, by the
artificial rise which has been occasioned by taxes in the price of some
manufactured commodities, as of salt, soap, leather, candles, malt, beer,
ale, etc.
Effects of the Progress of Improvement upon the real Price of Manufactures.
It is the natural effect of improvement, however, to diminish gradually the
real price of almost all manufactures. That of the manufacturing workmanship
diminishes, perhaps, in all of them without exception. In consequence of
better machinery, of greater dexterity, and of a more proper division and
distribution of work, all of which are the natural effects of improvement, a
much smaller quantity of labour becomes requisite for executing any
particular piece of work ; and though, in consequence of the flourishing
circumstances of the society, the real price of labour should rise very
considerably, yet the great diminution of the quantity will generally much
more than compensate the greatest rise which can happen in the price.
There are, indeed, a few manufactures, in which the necessary rise in the
real price of the rude materials will more than compensate all the
advantages which improvement can introduce into the execution of the work In
carpenters' and joiners' work, and in the coarser sort of cabinet work, the
necessary rise in the real price of barren timber, in consequence of the
improvement of land, will more than compensate all the advantages which can
be derived from the best machinery, the greatest dexterity, and the most
proper division and distribution of work.
But in all cases in which the real price of the rude material either does
not rise at all, or does not rise very much, that of the manufactured
commodity sinks very considerably.
This diminution of price has, in the course of the present and preceding
century, been most remarkable in those manufactures of which the materials
are the coarser metals. A better movement of a watch, than about the middle
of the last century could have been bought for twenty pounds, may now
perhaps be had for twenty shillings. In the work of cutlers and locksmiths,
in all the toys which are made of the coarser metals, and in all those goods
which are commonly known by the name of Birmingham and Sheffield ware, there
has been, during the same period, a very great reduction of price, though
not altogether so great as in watch-work. It has, however, been sufficient
to astonish the workmen of every other part of Europe, who in many cases
acknowledge that they can produce no work of equal goodness for double
or even for triple the price. There are perhaps no manufactures, in which
the division of labour can be carried further, or in which the machinery
employed admits of' a greater variety of improvements, than those of which
the materials are the coarser metals.
In the clothing manufacture there has, during the same period, been no such
sensible reduction of price. The price of superfine cloth, I have been
assured, on the contrary, has, within these five-and-twenty or thirty years,
risen somewhat in proportion to its quality, owing, it was said, to a
considerable rise in the price of the material, which consists altogether of
Spanish wool. That of the Yorkshire cloth, which is made altogether of
English wool, is said, indeed, during the course of the present century, to
have fallen a good deal in proportion to its quality. Quality, however, is
so very disputable a matter, that I look upon all information of this kind
as somewhat uncertain. In the clothing manufacture, the division of labour
is nearly the same now as it was a century ago, and the machinery employed
is not very different. There may, however, have been some small improvements
in both, which may have occasioned some reduction of price.
But the reduction will appear much more sensible and undeniable, if we
compare the price of this manufacture in the present times with what it was
in a much remoter period, towards the end of the fifteenth century, when the
labour was probably much less subdivided, and the machinery employed much
more imperfect, than it is at present.
In 1487, being the 4th of Henry VII., it was enacted, that " whosoever shall
sell by retail a broad yard of the finest scarlet grained, or of other
grained cloth of the finest making, above sixteen shillings, shall forfeit
forty shillings for every yard so sold." Sixteen shillings, therefore,
containing about the same quantity of silver as four-and-twenty shillings of
our present money, was, at that time, reckoned not an unreasonable price for
a yard of the finest cloth; and as this is a sumptuary law, such cloth, it
is probable, had usually been sold somewhat dearer. A guinea may be reckoned
the highest price in the present times. Even though the quality of the
cloths, therefore, should be supposed equal, and that of the present times
is most probably much superior, yet, even upon this supposition, the money
price of the finest cloth appears to have been considerably reduced since
the end of the fifteenth century. But its real price has been much more
reduced. Six shillings and eightpence was then, and long afterwards,
reckoned the average price of a quarter of wheat. Sixteen shillings,
therefore, was the price of two quarters and more than three bushels of
wheat. Valuing a quarter of wheat in the present times at eight-and-twenty
shillings, the real price of a yard of fine cloth must, in those times, have
been equal to at least three pounds six shillings and sixpence of our
present money. The man who bought it must have parted with the command of a
quantity of labour and subsistence equal to what that sum would purchase in
the present times.
The reduction in the real price of the coarse manufacture, though
considerable, has not been so great as in that of the fine.
In 1463, being the 3rd of Edward IV. it was enacted, that "no servant in
husbandry nor common labourer, nor servant to any artificer inhabiting out
of a city or burgh, shall use or wear in their clothing any cloth above two
shillings the broad yard." In the 3rd of Edward IV., two shillings contained
very nearly the same quantity of silver as four of our present money. But
the Yorkshire cloth which is now sold at four shillings the yard, is
probably much superior to any that was then made for the wearing of the very
poorest order of common servants. Even the money price of their clothing,
therefore, may, in proportion to the quality, be somewhat cheaper in the
present than it was in those ancient times. The real price is certainly a
good deal cheaper. Tenpence was then reckoned what is called the moderate
and reasonable price of a bushel of wheat. Two shillings, therefore, was the
price of two bushels and near two pecks of wheat, which in the present
times, at three shillings and sixpence the bushel, would be worth eight
shillings and ninepence. For a yard of this cloth the poor servant must have
parted with the power of purchasing a quantity of subsistence equal to what
eight shillings and ninepence would purchase in the present times. This is a
sumptuary law, too, restraining the luxury and extravagance of the poor.
Their clothing, therefore, had commonly been much more expensive.
The same order of people are, by the same law, prohibited from wearing hose,
of which the price should exceed fourteen-pence the pair, equal to about
eight-and-twenty pence of our present money. But fourteen-pence was in those
times the price of a bushel and near two pecks of wheat; which in the
present times, at three and sixpence the bushel, would cost five shillings
and threepence. We should in the present times consider this as a very high
price for a pair of stockings to a servant of the poorest and lowest order.
He must however, in those times, have paid what was really equivalent to
this price for them.
In the time of Edward IV. the art of knitting stockings was probably not
known in any part of Europe. Their hose were made of common cloth, which may
have been one of the causes of their dearness. The first person that wore
stockings in England is said to have been Queen Elizabeth. She received them
as a present from the Spanish ambassador.
Both in the coarse and in the fine woollen manufacture, the machinery
employed was much more imperfect in those ancient, than it is in the present
times. It has since received three very capital improvements, besides,
probably, many smaller ones, of which it may be difficult to ascertain
either the number or the importance. The three capital improvements are,
first, the exchange of the rock and spindle for the spinning-wheel, which,
with the same quantity of labour, will perform more than double the quantity
of work. Secondly, the use of several very ingenious machines, which
facilitate and abridge, in a still greater proportion, the winding of the
worsted and woollen yarn, or the proper arrangement of the warp and woof
before they are put into the loom ; an operation which, previous to the
invention of those machines, must have been extremely tedious and
troublesome.Thirdly, the employment of the fulling-mill for thickening the
cloth, instead of treading it in water. Neither wind nor water mills of any
kind were known in England so early as the beginning of the sixteenth
century, nor, so far as I know, in any other part of Europe north of the
Alps. They had been introduced into Italy some time before.
The consideration of these circumstances may, perhaps, in some measure,
explain to us why the real price both of the coarse and of the fine
manufacture was so much higher in those ancient than it is in the present
times. It cost a greater quantity of labour to bring the goods to market.
When they were brought thither, therefore, they must have purchased, or
exchanged for the price of, a greater quantity.
The coarse manufacture probably was, in those ancient times, carried on in
England in the same manner as it always has been in countries where arts and
manufactures are in their infancy. It was probably a household manufacture,
in which every different part of the work was occasionally performed by all
the different members of almost every private family, but so as to be their
work only when they had nothing else to do, and not to be the principal
business from which any of them derived the greater part of their
subsistence. The work which is performed in this manner, it has already been
observed, comes always much cheaper to market than that which is the
principal or sole fund of the workman's subsistence. The fine manufacture,
on the other hand, was not, in those times, carried on in England, but in
the rich and commercial country of Flanders; and it was probably conducted
then, in the same manner as now, by people who derived the whole, or the
principal part of their subsistence from it. It was, besides, a foreign
manufacture, and must have paid some duty, the ancient custom of tonnage and
poundage at least, to the king. This duty, indeed, would not probably be
very great. It was not then the policy of Europe to restrain, by high
duties, the importation of foreign manufactures, but rather to encourage it,
in order that merchants might be enabled to supply, at as easy a rate as
possible, the great men with the conveniencies and luxuries which they
wanted, and which the industry of their own country could not afford them.
The consideration of these circumstances may, perhaps, in some measure
explain to us why, in those ancient times, the real price of the coarse
manufacture was, in proportion to that of the fine, so much lower than in
the present times.
Conclusion of the Chapter.
I shall conclude this very long chapter with observing, that every
improvement in the circumstances of the society tends, either directly or
indirectly, to raise the real rent of land to increase the real wealth of
the landlord, his power of purchasing the labour, or the produce of the
labour of other people.
The extension of improvement and cultivation tends to raise it directly. The
landlord's share of the produce necessarily increases with the increase of
the produce.
That rise in the real price of those parts of the rude produce of land,
which is first the effect of the extended improvement and cultivation, and
afterwards the cause of their being still further extended, the rise in the
price of cattle, for example, tends, too, to raise the rent of land
directly, and in a still greater proportion. The real value of the
landlord's share, his real command of the labour of other people, not only
rises with the real value of the produce, but the proportion of his share to
the whole produce rises with it.
That produce, after the rise in its real price, requires no more labour to
collect it than before. A smaller proportion of it will, therefore, be
sufficient to replace, with the ordinary profit, the stock which employs
that labour. A greater proportion of it must consequently belong to the
landlord.
All those improvements in the productive powers of labour, which tend
directly to reduce the rent price of manufactures, tend indirectly to raise
the real rent of land. The landlord exchanges that part of his rude produce,
which is over and above his own consumption, or, what comes to the same
thing, the price of that part of it, for manufactured produce. Whatever
reduces the real price of the latter, raises that of the former. An equal
quantity of the former becomes thereby equivalent to a greater quantity of
the latter ; and the landlord is enabled to purchase a greater quantity of
the conveniencies, ornaments, or luxuries which he has occasion for.
Every increase in the real wealth of the society, every increase in the
quantity of useful labour employed within it, tends indirectly to raise the
real rent of land. A certain proportion of this labour naturally goes to
the land. A greater number of men and cattle are employed in its
cultivation, the produce increases with the increase of the stock which is
thus employed in raising it, and the rent increases with the produce.
The contrary circumstances, the neglect of cultivation and improvement, the
fall in the real price of any part of the rude produce of land, the rise in
the real price of manufactures from the decay of manufacturing art and
industry, the declension of the real wealth of the society, all tend, on
the other hand, to lower the real rent of land, to reduce the real wealth of
the landlord, to diminish his power of purchasing either the labour, or the
produce of the labour, of other people.
The whole annual produce of the land and labour of every country, or, what
comes to the same thing, the whole price of that annual produce, naturally
divides itself, it has already been observed, into three parts; the rent of
land, the wages of labour, and the profits of stock ; and constitutes a
revenue to three different orders of people; to those who live by rent, to
those who live by wages, and to those who live by profit. These are the
three great, original, and constituent, orders of every civilized society,
from whose revenue that of every other order is ultimately derived.
The interest of the first of those three great orders, it appears from what
has been just now said, is strictly and inseparably connected with the
general interest of the society. Whatever either promotes or obstructs the
one, necessarily promotes or obstructs the other. When the public
deliberates concerning any regulation of commerce or police, the proprietors
of land never can mislead it, with a view to promote the interest of their
own particular order ; at least, if they have any tolerable knowledge of
that interest. They are, indeed, too often defective in this tolerable
knowledge. They are the only one of the three orders whose revenue costs
them neither labour nor care, but comes to them, as it were, of its own
accord, and independent of any plan or project of their own. That indolence
which is the natural effect of the ease and security of their situation,
renders them too often, not only ignorant, but incapable of that application
of mind, which is necessary in order to foresee and understand the
consequence of any public regulation.
The interest of the second order, that of those who live by wages, is as
strictly connected with the interest of the society as that of the first.
The wages of the labourer, it has already been shewn, are never so high as
when the demand for labour is continually rising, or when the quantity
employed is every year increasing considerably. When this real wealth of the
society becomes stationary, his wages are soon reduced to what is barely
enough to enable him to bring up a family, or to continue the race of
labourers. When the society declines, they fall even below this. The order
of proprietors may perhaps gain more by the prosperity of the society than
that of labourers; but there is no order that suffers so cruelly from its
decline. But though the interest of the labourer is strictly connected with
that of the society, he is incapable either of comprehending that interest,
or of understanding its connexion with his own. His condition leaves him no
time to receive the necessary information, and his education and habits are
commonly such as to render him unfit to judge, even though he was fully
informed. In the public deliberations, therefore, his voice is little heard,
and less regarded; except upon particular occasions, when his clamour is
animated, set on, and supported by his employers, not for his, but their own
particular purposes.
His employers constitute the third order, that of those who live by profit.
It is the stock that is employed for the sake of profit, which puts into
motion the greater part of the useful labour of every society. The plans and
projects of the employers of stock regulate and direct all the most
important operation of labour, and profit is the end proposed by all those
plans and projects. But the rate of profit does not, like rent and wages,
rise with the prosperity, and fall with the declension of the society. On
the contrary, it is naturally low in rich, and high in poor countries, and
it is always highest in the countries which are going fastest to ruin. The
interest of this third order, therefore, has not the same connexion with the
general interest of the society, as that of the other two. Merchants and
master manufacturers are, in this order, the two classes of people who
commonly employ the largest capitals, and who by their wealth draw to
themselves the greatest share of the public consideration. As during their
whole lives they are engaged in plans and projects, they have frequently
more acuteness of understanding than the greater part of country gentlemen.
As their thoughts, however, are commonly exercised rather about the interest
of their own particular branch of business. than about that of the society,
their judgment, even when given with the greatest candour (which it has not
been upon every occasion), is much more to be depended upon with regard to
the former of those two objects, than with regard to the latter. Their
superiority over the country gentleman is, not so much in their knowledge of
the public interest, as in their having a better knowledge of their own
interest than he has of his. It is by this superior knowledge of their own
interest that they have frequently imposed upon his generosity, and
persuaded him to give up both his own interest and that of the public, from
a very simple but honest conviction, that their interest, and not his, was
the interest of the public. The interest of the dealers, however, in any
particular branch of trade or manufactures, is always in some respects
different from, and even opposite to, that of the public. To widen the
market, and to narrow the competition, is always the interest of the
dealers. To widen the market may frequently be agreeable enough to the
interest of the public ; but to narrow the competition must always be
against it, and can only serve to enable the dealers, by raising their
profits above what they naturally would be, to levy, for their own benefit,
an absurd tax upon the rest of their fellow-citizens. The proposal of any
new law or regulation of commerce which comes from this order, ought always
to be listened to with great precaution, and ought never to be adopted till
after having been long and carefully examined, not only with the most
scrupulous, but with the most suspicious attention. It comes from an order
of men, whose interest is never exactly the same with that of the public,
who have generally an interest to deceive and even to oppress the public,
and who accordingly have, upon many occasions, both deceived and oppressed
it.
#
PRICES OF WHEAT
Year Prices/Quarter Average of different Average prices of
in each year prices in one year each year in money
of 1776
£ s d £ s d £ s d
1202 0 12 0 1 16 0
1205 0 12 0
0 13 4 0 13 5 2 0 3
0 15 0
1223 0 12 0 1 16 0
1237 0 3 4 0 10 0
1243 0 2 0 0 6 0
1244 0 2 0 0 6 0
1246 0 16 0 2 8 0
1247 0 13 5 2 0 0
1257 1 4 0 3 12 0
1258 1 0 0
0 15 0 0 17 0 2 11 0
0 16 0
1270 4 16 0
6 8 0 5 12 0 16 16 0
1286 0 2 8
0 16 0 0 9 4 1 8 0
Total 35 9 3
Average 2 19 1¼
1287 0 3 4 0 10 0
1288 0 0 8
0 1 0
0 1 4
0 1 6
0 1 8 0 3 0¼ 0 9 1¾
0 2 0
0 3 4
0 9 4
1289 0 12 0
0 6 0
0 2 0 0 10 1½ 1 10 4½
0 10 8
1 0 0
1290 0 16 0 2 8 0
1294 0 16 0 2 8 0
1302 0 4 0 0 12 0
1309 0 7 2 1 1 6
1315 1 0 0 3 0 0
1316 1 0 0
1 10 0 1 10 6 4 11 6
1 12 0
2 0 0
1317 2 4 0
0 14 0
2 13 0 1 19 6 5 18 6
4 0 0
0 6 8
1336 0 2 0 0 6 0
1338 0 3 4 0 10 0
Total 23 4 11¼
Average 1 18 8
1339 0 9 0 1 7 0
1349 0 2 0 0 5 2
1359 1 6 8 3 2 2
1361 0 2 0 0 4 8
1363 0 15 0 1 15 0
1369 1 0 0
1 4 0 1 2 0 2 9 4
1379 0 4 0 0 9 4
1387 0 2 0 0 4 8
1390 0 13 4
0 14 0 0 14 5 1 13 7
0 16 0
1401 0 16 0 1 17 6
1407 0 4 4¾
0 3 4 0 3 10 0 8 10
1416 0 16 0 1 12 0
Total 15 9 4
Average 1 5 9½
1423 0 8 0 0
1425 0 4 0 0
1434 1 6 8 4
1435 0 5 4 8
1439 1 0 0
1 6 8 1 3 4 2 6 8
1440 1 4 0 2 8 0
1444 0 4 4 0 4 2 0 4 8
0 4 0
1445 0 4 6 0 9 0
1447 0 8 0 0 16 0
1448 0 6 8 0 13 4
1449 0 5 0 0 10 0
1451 0 8 0 0 16 0
Total 12 15 4
Average 1 1 3¹/³
1453 0 5 4 0 10 8
1455 0 1 2 0 2 4
1457 0 7 8 1 15 4
1459 0 5 0 0 10 0
1460 0 8 0 0 16 0
1463 0 2 0 0 1 10 0 3 8
0 1 8
1464 0 6 8 0 10 0
1486 1 4 0 1 17 0
1491 0 14 8 1 2 0
1494 0 4 0 0 6 0
1495 0 3 4 0 5 0
1497 1 0 0 1 11 0
Total 8 9 0
Average 0 14 1
1499 0 4 0 0 6 0
1504 0 5 8 0 8 6
1521 1 0 0 1 10 0
1551 0 8 0 0 8 0
1553 0 8 0 0 8 0
1554 0 8 0 0 8 0
1555 0 8 0 0 8 0
1556 0 8 0 0 8 0
1557 0 8 0
0 4 0 0 17 8½ 0 17 8½
0 5 0
2 13 4
1558 0 8 0 0 8 0
1559 0 8 0 0 8 0
1560 0 8 0 0 8 0
Total 6 0 2½
Average 0 10 0½
1561 0 8 0 0 8 0
1562 0 8 0 0 8 0
1574 2 16 0
1 4 0 2 0 0 2 0 0
1587 3 4 0 3 4 0
1594 2 16 0 2 16 0
1595 2 13 0 2 13 0
1596 4 0 0 4 0 0
1597 5 4 0
4 0 0 4 12 0 4 12 0
1598 2 16 8 2 16 8
1599 1 19 2 1 19 8
1600 1 17 8 1 17 8
1601 1 14 10 1 14 10
Total 28 9 4
Average 2 7 5½
PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST
PRICED WHEAT AT WINDSOR MARKET, ON LADY DAY AND MICHAELMAS,
FROM 1595 TO 1764 BOTH INCLUSIVE; THE PRICE OF EACH YEAR
BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THESE TWO
MARKET DAYS.
£ s d
1595 2 0 0
1596 2 8 0
1597 3 9 6
1598 2 16 8
1599 1 19 2
1600 1 17 8
1601 1 14 10
1602 1 9 4
1603 1 15 4
1604 1 10 8
1605 1 15 10
1606 1 13 0
1607 1 16 8
1608 2 16 8
1609 2 10 0
1610 1 15 10
1611 1 18 8
1612 2 2 4
1613 2 8 8
1614 2 1 8½
1615 1 18 8
1616 2 0 4
1617 2 8 8
1618 2 6 8
1619 1 15 4
1620 1 10 4
26)54 0 6½
Average 2 1 6¾
1621 1 10 4
1622 2 18 8
1623 2 12 0
1624 2 8 0
1625 2 12 0
1626 2 9 4
1627 1 16 0
1628 1 8 0
1629 2 2 0
1630 2 15 8
1631 3 8 0
1632 2 13 4
1633 2 18 0
1634 2 16 0
1635 2 16 0
1636 2 16 8
16)40 0 0
Average 2 10 0
1637 2 13 0
1638 2 17 4
1639 2 4 10
1640 2 4 8
1641 2 8 0
1646 2 8 0
1647 3 13 0
1648 4 5 0
1649 4 0 0
1650 3 16 8
1651 3 13 4
1652 2 9 6
1653 1 15 6
1654 1 6 0
1655 1 13 4
1656 2 3 0
1657 2 6 8
1658 3 5 0
1659 3 6 0
1660 2 16 6
1661 3 10 0
1662 3 14 0
1663 2 17 0
1664 2 0 6
1665 2 9 4
1666 1 16 0
1667 1 16 0
1668 2 0 0
1669 2 4 4
1670 2 1 8
1671 2 2 0
1672 2 1 0
1673 2 6 8
1674 3 8 8
1675 3 4 8
1676 1 18 0
1677 2 2 0
1678 2 19 0
1679 3 0 0
1680 2 5 0
1681 2 6 8
1682 2 4 0
1683 2 0 0
1684 2 4 0
1685 2 6 8
1686 1 14 0
1687 1 5 2
1688 2 6 0
1689 1 10 0
1690 1 14 8
1691 1 14 0
1692 2 6 8
1693 3 7 8
1694 3 4 0
1695 2 13 0
1696 3 11 0
1697 3 0 0
1698 3 8 4
1699 3 4 0
1700 2 0 0
60) 153 1 8
Average 2 11 0¹/³
1701 1 17 8
1702 1 9 6
1703 1 16 0
1704 2 6 6
1705 1 10 0
1706 1 6 0
1707 1 8 6
1708 2 1 6
1709 3 18 6
1710 3 18 0
1711 2 14 0
1712 2 6 4
1713 2 11 0
1714 2 10 4
1715 2 3 0
1716 2 8 0
1717 2 5 8
1718 1 18 10
1719 1 15 0
1720 1 17 0
1721 1 17 6
1722 1 16 0
1723 1 14 8
1724 1 17 0
1725 2 8 6
1726 2 6 0
1727 2 2 0
1728 2 14 6
1729 2 6 10
1730 1 16 6
1731 1 12 10 1 12 10
1732 1 6 8 1 6 8
1733 1 8 4 1 8 4
1734 1 18 10 1 18 10
1735 2 3 0 2 3 0
1736 2 0 4 2 0 4
1737 1 18 0 1 18 0
1738 1 15 6 1 15 6
1739 1 18 6 1 18 6
1740 2 10 8 2 10 8
10) 18 12 8
1 17 3½
1741 2 6 8 2 6 8
1742 1 14 0 1 14 0
1743 1 4 10 1 4 10
1744 1 4 10 1 4 10
1745 1 7 6 1 7 6
1746 1 19 0 1 19 0
1747 1 14 10 1 14 10
1748 1 17 0 1 17 0
1749 1 17 0 1 17 0
1750 1 12 6 1 12 6
10) 16 18 2
1 13 9¾
1751 1 18 6
1752 2 1 10
1753 2 4 8
1754 1 13 8
1755 1 14 10
1756 2 5 3
1757 3 0 0
1758 2 10 0
1759 1 19 10
1760 1 16 6
1761 1 10 3
1762 1 19 0
1763 2 0 9
1764 2 6 9
64) 129 13 6
Average 2 0 6¾
BOOK II.
OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.
INTRODUCTION.
In that rude state of society, in which there is no division of labour, in
which exchanges are seldom made, and in which every man provides every thing
for himself, it is not necessary that any stock should be accumulated, or
stored up before-hand, in order to carry on the business of the society.
Every man endeavours to supply, by his own industry, his own occasional
wants, as they occur. When he is hungry, he goes to the forest to hunt ;
when his coat is worn out, he clothes himself with the skin of the first
large animal he kills : and when his hut begins to go to ruin, he repairs
it, as well as he can, with the trees and the turf that are nearest it.
But when the division of labour has once been thoroughly introduced, the
produce of a man's own labour can supply but a very small part of his
occasional wants. The far greater part of them are supplied by the produce
of other men's labour, which he purchases with the produce, or, what is the
same thing, with the price of the produce, of his own. But this purchase
cannot be made till such time as the produce of his own labour has not only
been completed, but sold. A stock of goods of different kinds, therefore,
must be stored up somewhere, sufficient to maintain him, and to supply him
with the materials and tools of his work, till such time at least as both
these events can be brought about. A weaver cannot apply himself entirely to
his peculiar business, unless there is before-hand stored up somewhere,
either in his own possession, or in that of some other person, a stock
sufficient te maintain him, and to supply him with the materials and tools
of his work, till he has not only completed, but sold his web. This
accumulation must evidently be previous to his applying his industry for so
long a time to such a peculiar business.
As the accumulation of stock must, in the nature of things, be previous to
the division of labour, so labour can be more and more subdivided in
proportion only as stock is previously more and more accumulated. The
quantity of materials which the same number of people can work up, increases
in a great proportion as labour comes to be more and more subdivided; and as
the operations of each workman are gradually reduced to a greater degree of
simplicity, a variety of new machines come to be invented for facilitating
and abridging those operations. As the division of labour advances,
therefore, in order to give constant employment to an equal number of
workmen, an equal stock of provisions, and a greater stock of materials and
tools than what would have been necessary in a ruder state of things, must
be accumulated before-hand. But the number of workmen in every branch of
business generally increases with the division of labour in that branch; or
rather it is the increase of their number which enables them to class and
subdivide themselves in this manner.
As the accumulation of stock is previously necessary for carrying on this
great improvement in the productive powers of labour, so that accumulation
naturally leads to this improvement. The person who employs his stock in
maintaining labour, necessarily wishes to employ it in such a manner as to
produce as great a quantity of work as possible. He endeavours, therefore,
both to make among his workmen the most proper distribution of employment,
and to furnish them with the best machines which he can either invent or
afford to purchase. His abilities, in both these respects, are generally in
proportion to the extent of his stock, or to the number of people whom it
can employ. The quantity of industry, therefore, not only increases in every
country with the increase of the stock which employs it, but, in consequence
of that increase, the same quantity of industry produces a much greater
quantity of work.
Such are in general the effects of the increase of stock upon industry and
its productive powers.
In the following book, I have endeavoured to explain the nature of stock,
the effects of its accumulation into capital of different kinds, and the
effects of the different employments of those capitals. This book is divided
into five chapters. In the first chapter, I have endeavoured to shew what
are the different parts or branches into which the stock, either of an
individual, or of a great society, naturally divides itself. In the second,
I have endeavoured to explain the nature and operation of money, considered
as a particular branch of the general stock of the society. The stock which
is accumulated into a capital, may either be employed by the person to whom
it belongs, or it may be lent to some other person. In the third and fourth
chapters, I have endeavoured to examine the manner in which it operates in
both these situations. The fifth and last chapter treats of the different
effects which the different employments of capital immediately produce upon
the quantity, both of national industry, and of the annual produce of land
and labour.
CHAPTER I.
OF THE DIVISION OF STOCK.
When the stock which a man possesses is no more than sufficient to maintain
him for a few days or a few weeks, he seldom thinks of deriving any revenue
from it. He consumes it as sparingly as he can, and endeavours, by his
labour, to acquire something which may supply its place before it be
consumed altogether. His revenue is, in this case, derived from his labour
only. This is the state of the greater part of the labouring poor in all
countries.
But when he possesses stock sufficient to maintain him for months or years,
he naturally endeavours to derive a revenue from the greater part of it,
reserving only so much for his immediate consumption as may maintain him
till this revenue begins to come in. His whole stock, therefore, is
distinguished into two parts. That part which he expects is to afford him
this revenue is called his capital. The other is that which supplies his
immediate consumption, and which consists either, first, in that portion of
his whole stock which was originally reserved for this purpose; or,
secondly, in his revenue, from whatever source derived, as it gradually
comes in ; or, thirdly, in such things as had been purchased by either of
these in former years, and which are not yet entirely consumed, such as a
stock of clothes, household furniture, and the like. In one or other, or all
of these three articles, consists the stock which men commonly reserve for
their own immediate consumption.
There are two different ways in which a capital may be employed so as to
yield a revenue or profit to its employer.
First, it maybe employed in raising, manufacturing, or purchasing goods, and
selling them again with a profit. The capital employed in this manner yields
no revenue or profit to its employer, while it either remains in his
possession, or continues in the same shape. The goods of the merchant yield
him no revenue or profit till he sells them for money, and the money yields
him as little till it is again exchanged for goods. His capital is
continually going from him in one shape, and returning to him in another ;
and it is only by means of such circulation, or successive changes, that it
can yield him any profit. Such capitals, therefore, may very properly be
called circulating capitals.
Secondly, it may be employed in the improvement of land, in the purchase of
useful machines and instruments of trade, or in such like things as yield a
revenue or profit without changing masters, or circulating any further. Such
capitals, therefore, may very properly be called fixed capitals.
Different occupations require very different proportions between the fixed
and circulating capitals employed in them.
The capital of a merchant, for example, is altogether a circulating capital.
He has occasion for no machines or instruments of trade, unless his shop or
warehouse be considered as such.
Some part of the capital of every master artificer or manufacturer must be
fixed in the instruments of his trade. This part, however, is very small in
some, and very great in others, A master tailor requires no other
instruments of trade but a parcel of needles. Those of the master shoemaker
are a little, though but a very little, more expensive. Those of the weaver
rise a good deal above those of the shoemaker. The far greater part of the
capital of all such master artificers, however, is circulated either in the
wages of their workmen, or in the price of their materials, and repaid, with
a profit, by the price of the work.
In other works a much greater fixed capital is required. In a great
iron-work, for example, the furnace for melting the ore, the forge, the
slit-mill, are instruments of trade which cannot be erected without a very
great expense. In coal works, and mines of every kind, the machinery
necessary, both for drawing out the water, and for other purposes, is
frequently still more expensive.
That part of the capital of the farmer which is employed in the instruments
of agriculture is a fixed, that which is employed in the wages and
maintenance of his labouring servants is a circulating capital. He makes a
profit of the one by keeping it in his own possession, and of the other by
parting with it. The price or value of his labouring cattle is a fixed
capital, in the same manner as that of the instruments of husbandry; their
maintenance is a circulating capital, in the same manner as that of the
labouring servants. The farmer makes his profit by keeping the labouring
cattle, and by parting with their maintenance. Both the price and the
maintenance of the cattle which are bought in and fattened, not for labour,
but for sale, are a circulating capital. The farmer makes his profit by
parting with them. A flock of sheep or a herd of cattle, that, in a breeding
country, is brought in neither for labour nor for sale, but in order to make
a profit by their wool, by their milk, and by their increase, is a fixed
capital. The profit is made by keeping them. Their maintenance is a
circulating capital. The profit is made by parting with it; and it comes
back with both its own profit and the profit upon the whole price of the
cattle, in the price of the wool, the milk, and the increase. The whole
value of the seed, too, is properly a fixed capital. Though it goes
backwards and forwards between the ground and the granary, it never changes
masters, and therefore does not properly circulate. The farmer makes his
profit, not by its sale, but by its increase.
The general stock of any country or society is the same with that of all its
inhabitants or members ; and, therefore, naturally divides itself into the
same three portions, each of which has a distinct function or office.
The first is that portion which is reserved for immediate consumption, and
of which the characteristic is, that it affords no revenue or profit. It
consists in the stock of food, clothes, household furniture, etc. which have
been purchased by their proper consumers, but which are not yet entirely
consumed. The whole stock of mere dwelling-houses, too, subsisting at anyone
time in the country, make a part of this first portion. The stock that is
laid out in a house, if it is to be the dwelling-house of the proprietor,
ceases from that moment to serve in the function of a capital, or to afford
any revenue to its owner. A dwelling-house, as such, contributes nothing to
the revenue of its inhabitant ; and though it is, no doubt, extremely useful
to him, it is as his clothes and household furniture are useful to him,
which, however, make a part of his expense, and not of his revenue. If it is
to be let to a tenant for rent, as the house itself can produce nothing, the
tenant must always pay the rent out of some other revenue, which he derives,
either from labour, or stock, or land. Though a house, therefore, may yield
a revenue to its proprietor, and thereby serve in the function of a capital
to him, it cannot yield any to the public, nor serve in the function of a
capital to it, and the revenue of the whole body of the people can never be
in the smallest degree increased by it. Clothes and household furniture, in
the same manner, sometimes yield a revenue, and thereby serve in the
function of a capital to particular persons. In countries where masquerades
are common, it is a trade to let out masquerade dresses for a night.
Upholsterers frequently let furniture by the month or by the year.
Undertakers let the furniture of funerals by the day and by the week. Many
people let furnished houses, and get a rent, not only for the use of the
house, but for that of the furniture. The revenue, however, which is derived
from such things, must always be ultimately drawn from some other source of
revenue. Of all parts of the stock, either of an individual or of a society,
reserved for immediate consumption, what is laid out in houses is most
slowly consumed. A stock of clothes may last several years; a stock of
furniture half a century or a century; but a stock of houses, well built and
properly taken care of, may last many centuries. Though the period of their
total consumption, however, is more distant, they are still as really a
stock reserved for immediate consumption as either clothes or household
furniture.
The second of the three portions into which the general stock of the society
divides itself, is the fixed capital ; of which the characteristic is, that
it affords a revenue or profit without circulating or changing masters. It
consists chiefly of the four following articles.
First, of all useful machines and instruments of trade, which facilitate and
abridge labour.
Secondly, of all those profitable buildings which are the means of procuring
a revenue, not only to the proprietor who lets them for a rent, but to the
person who possesses them, and pays that rent for them; such as shops,
warehouses, work-houses, farm-houses, with all their necessary buildings,
stables, granaries, etc. These are very different from mere dwelling-houses.
They are a sort of instruments of trade, and may be considered in the same
light.
Thirdly, of the improvements of land, of what has been profitably laid out
in clearing, draining, inclosing, manuring, and reducing it into the
condition most proper for tillage and culture. An improved farm may very
justly be regarded in the same light as those useful machines which
facilitate and abridge labour, and by means of which an equal circulating
capital can afford a much greater revenue to its employer. An improved farm
is equally advantageous and more durable than any of those machines,
frequently requiring no other repairs than the most profitable application
of the farmer's capital employed in cultivating it.
Fourthly, of the acquired and useful abilities of all the inhabitants and
members of the society. The acquisition of such talents, by the maintenance
of the acquirer during his education, study, or apprenticeship, always costs
a real expense, which is a capital fixed and realized, as it were, in his
person. Those talents, as they make a part of his fortune, so do they
likewise that of the society to which he belongs. The improved dexterity of
a workman may be considered in the same light as a machine or instrument of
trade which facilitates and abridges labour, and which, though it costs a
certain expense, repays that expense with a profit.
The third and last of the three portions into which the general stock of the
society naturally divides itself, is the circulating capital, of which the
characteristic is, that it affords a revenue only by circulating or changing
masters. It is composed likewise of four parts.
First, of the money, by means of which all the other three are circulated
and distributed to their proper consumers.
Secondly, of the stock of provisions which are in the possession of the
butcher, the grazier, the farmer, the corn-merchant, the brewer, etc. and
from the sale of which they expect to derive a profit.
Thirdly, of the materials, whether altogether rude, or more or less
manufactured, of clothes, furniture, and building which are not yet made up
into any of those three shapes, but which remain in the hands of the
growers, the manufacturers, the mercers, and drapers, the timber-merchants,
the carpenters and joiners, the brick-makers, etc.
Fourthly, and lastly, of the work which is made up and completed, but which
is still in the hands of the merchant and manufacturer, and not yet disposed
of or distributed to the proper consumers; such as the finished work which
we frequently find ready made in the shops of the smith, the cabinet-maker,
the goldsmith, the jeweller, the china-merchant, etc. The circulating
capital consists, in this manner, of the provisions, materials, and finished
work of all kinds that are in the hands of their respective dealers, and of
the money that is necessary for circulating and distributing them to those
who are finally to use or to consume them.
Of these four parts, three - provisions, materials, and finished work, are
either annually or in a longer or shorter period, regularly withdrawn from
it, and placed either in the fixed capital, or in the stock reserved for
immediate consumption.
Every fixed capital is both originally derived from, and requires to be
continually supported by, a circulating capital. All useful machines and
instruments of trade are originally derived from a circulating capital,
which furnishes the materials of which they are made, and the maintenance of
the workmen who make them. They require, too, a capital of the same kind to
keep them in constant repair.
No fixed capital can yield any revenue but by means of a circulating capital
The most useful machines and instruments of trade will produce nothing,
without the circulating capital, which affords the materials they are
employed upon, and the maintenance of the workmen who employ them. Land,
however improved, will yield no revenue without a circulating capital, which
maintains the labourers who cultivate and collect its produce.
To maintain and augment the stock which maybe reserved for immediate
consumption, is the sole end and purpose both of the fixed and circulating
capitals. It is this stock which feeds, clothes, and lodges the people.
Their riches or poverty depend upon the abundant or sparing supplies which
those two capitals can afford to the stock reserved for immediate
consumption.
So great a part of the circulating capital being continually withdrawn from
it, in order to be placed in the other two branches of the general stock of
the society, it must in its turn require continual supplies without which it
would soon cease to exist. These supplies are principally drawn from three
sources; the produce of land, of mines, and of fisheries. These afford
continual supplies of provisions and materials, of which part is afterwards
wrought up into finished work and by which are replaced the provisions,
materials, and finished work, continually withdrawn from the circulating
capital. From mines, too, is drawn what is necessary for maintaining and
augmenting that part of it which consists in money. For though, in the
ordinary course of business, this part is not, like the other three,
necessarily withdrawn from it, in order to be placed in the other two
branches of the general stock of the society, it must, however, like all
other things, be wasted and worn out at last, and sometimes, too, be either
lost or sent abroad, and must, therefore, require continual, though no doubt
much smaller supplies.
Lands, mines, and fisheries, require all both a fixed and circulating
capital to cultivate them; and their produce replaces, with a profit not
only those capitals, but all the others in the society. Thus the farmer
annually replaces to the manufacturer the provisions which he had consumed,
and the materials which he had wrought up the year before; and the
manufacturer replaces to the farmer the finished work which he had wasted
and worn out in the same time. This is the real exchange that is annually
made between those two orders of people, though it seldom happens that the
rude produce of the one, and the manufactured produce of the other, are
directly bartered for one another ; because it seldom happens that the
farmer sells his corn and his cattle, his flax and his wool, to the very
same person of whom he chuses to purchase the clothes, furniture, and
instruments of trade, which he wants. He sells, therefore, his rude produce
for money, with which he can purchase, wherever it is to be had, the
manufactured produce he has occasion for. Land even replaces, in part at
least, the capitals with which fisheries and mines are cultivated. It is the
produce of land which draws the fish from the waters ; and it is the produce
of the surface of the earth which extracts the minerals from its bowels.
The produce of land, mines, and fisheries, when their natural fertility is
equal, is in proportion to the extent and proper application of the capitals
employed about them. When the capitals are equal, and equally well applied,
it is in proportion to their natural fertility.
In all countries where there is a tolerable security, every man of common
understanding will endeavour to employ whatever stock he can command, in
procuring either present enjoyment or future profit. If it is employed in
procuring present enjoyment, it is a stock reserved for immediate
consumption. If it is employed in procuring future profit, it must procure
this profit either by staying with him, or by going from him. In the one
case it is a fixed, in the other it is a circulating capital. A man must be
perfectly crazy, who, where there is a tolerable security, does not employ
all the stock which he commands, whether it be his own, or borrowed of other
people, in some one or other of those three ways.
In those unfortunate countries, indeed, where men are continually afraid of
the violence of their superiors, they frequently bury or conceal a great
part of their stock, in order to have it always at hand to carry with them
to some place of safety, in case of their being threatened with any of those
disasters to which they consider themselves at all times exposed. This is
said to be a common practice in Turkey, in Indostan, and, I believe, in most
other governments of Asia. It seems to have been a common practice among our
ancestors during the violence of the feudal government. Treasure-trove was,
in these times, considered as no contemptible part of the revenue of the
greatest sovereigns in Europe. It consisted in such treasure as was found
concealed in the earth, and to which no particular person could prove any
right. This was regarded, in those times, as so important an object, that it
was always considered as belonging to the sovereign, and neither to the
finder nor to the proprietor of the land, unless the right to it had been
conveyed to the latter by an express clause in his charter. It was put upon
the same footing with gold and silver mines, which, without a special clause
in the charter, were never supposed to be comprehended in the general grant
of the lands, though mines of lead, copper, tin, and coal were, as things of
smaller consequence.
CHAPTER II.
OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE
SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL.
It has been shown in the First Book, that the price of the greater part of
commodities resolves itself into three parts, of which one pays the wages of
the labour, another the profits of the stock, and a third the rent of the
land which had been employed in producing and bringing them to market: that
there are, indeed, some commodities of which the price is made up of two of
those parts only, the wages of labour, and the profits of stock ; and a very
few in which it consists altogether in one, the wages of labour; but that
the price of every commodity necessarily resolves itself into some one or
other, or all, of those three parts; every part of it which goes neither to
rent nor to wages, being necessarily profit to some body.
Since this is the case, it has been observed, with regard to every
particular commodity, taken separately, it must be so with regard to all the
commodities which compose the whole annual produce of the land and labour of
every country, taken complexly. The whole price or exchangeable value of
that annual produce must resolve itself into the same three parts, and be
parcelled out among the different inhabitants of the country, either as the
wages of their labour, the profits of their stock, or the rent of their
land.
But though the whole value of the annual produce of the land and labour of
every country, is thus divided among, and constitutes a revenue to, its
different inhabitants ; yet, as in the rent of a private estate, we
distinguish between the gross rent and the neat rent, so may we likewise in
the revenue of all the inhabitants of a great country.
The gross rent of a private estate comprehends whatever is paid by the
farmer; the neat rent, what remains free to the landlord, after deducting
the expense of management, of repairs, and all other necessary charges; or
what, without hurting his estate, he can afford to place in his stock
reserved for immediate consumption, or to spend upon his table, equipage,
the ornaments of his house and furniture, his private enjoyments and
amusements. His real wealth is in proportion, not to his gross, but to his
neat rent.
The gross revenue of all the inhabitants of a great country comprehends the
whole annual produce of their land and labour; the neat revenue, what
remains free to them, after deducting the expense of maintaining first,
their fixed, and, secondly, their circulating capital, or what, without
encroaching upon their capital, they can place in their stock reserved for
immediate consumption, or spend upon their subsistence. conveniencies, and
amusements. Their real wealth, too, is in proportion, not to their gross,
but to their neat revenue.
The whole expense of maintaining the fixed capital must evidently be
excluded from the neat revenue of the society. Neither the materials
necessary for supporting their useful machines and instruments of trade,
their profitable buildings, etc. nor the produce of the labour necessary for
fashioning those materials into the proper form, can ever make any part of
it. The price of that labour may indeed make a part of it; as the workmen so
employed may place the whole value of their wages in their stock reserved
for immediate consumption. But in other sorts of labour, both the price and
the produce go to this stock ; the price to that of the workmen, the produce
to that of other people, whose subsistence, conveniencies, and amusements,
are augmented by the labour of those workmen.
The intention of the fixed capital is to increase the productive powers of
labour, or to enable the same number of labourers to perform a much greater
quantity of work. In a farm where all the necessary buildings, fences,
drains, communications, etc. are in the most perfect good order, the same
number of labourers and labouring cattle will raise a much greater produce,
than in one of equal extent and equally good ground, but not furnished with
equal conveniencies. In manufactures, the same number of hands, assisted
with the best machinery, will work up a much greater quantity of goods than
with more imperfect instruments of trade. The expense which is properly laid
out upon a fixed capital of any kind, is always repaid with great profit,
and increases the annual produce by a much greater value than that of the
support which such improvements require. This support, however, still
requires a certain portion of that produce. A certain quantity of materials,
and the labour of a certain number of workmen, both of which might have been
immediately employed to augment the food, clothing, and lodging, the
subsistence and conveniencies of the society, are thus diverted to another
employment, highly advantageous indeed, but still different from this one.
It is upon this account that all such improvements in mechanics, as enable
the same number of workmen to perform an equal quantity of work with cheaper
and simpler machinery than had been usual before, are always regarded as
advantageous to every society. A certain quantity of materials, and the
labour of a certain number of workmen, which had before been employed in
supporting a more complex and expensive machinery, can afterwards be applied
to augment the quantity of work which that or any other machinery is useful
only for performing. The undertaker of some great manufactory, who employs a
thousand a-year in the maintenance of his machinery, if he can reduce this
expense to five hundred, will naturally employ the other five hundred in
purchasing an additional quantity of materials, to he wrought up by an
additional number of workmen. The quantity of that work, therefore, which
his machinery was useful only for performing, will naturally be augmented,
and with it all the advantage and conveniency which the society can derive
from that work.
The expense of maintaining the fixed capital in a great country, may very
properly be compared to that of repairs in a private estate. The expense of
repairs may frequently be necessary for supporting the produce of the
estate, and consequently both the gross and the neat rent of the landlord.
When by a more proper direction, however, it can be diminished without
occasioning any diminution of produce, the gross rent remains at least the
same as before, and the neat rent is necessarily augmented.
But though the whole expense of maintaining the fixed capital is thus
necessarily excluded from the neat revenue of the society, it is not the
same case with that of maintaining the circulating capital. Of the four
parts of which this latter capital is composed, money, provisions,
materials, and finished work, the three last, it has already been observed,
are regularly withdrawn from it, and placed either in the fixed capital of
the society, or in their stock reserved for immediate consumption. Whatever
portion of those consumable goods is not employed in maintaining the former,
goes all to the latter, and makes a part of the neat revenue of the society.
The maintenance of those three parts of the circulating capital, therefore,
withdraws no portion of the annual produce from the neat revenue of the
society, besides what is necessary for maintaining the fixed capital.
The circulating capital of a society is in this respect different from that
of an individual. That of an individual is totally excluded from making any
part of his neat revenue, which must consist altogether in his profits. But
though the circulating capital of every individual makes a part of that of
the society to which he belongs, it is not upon that account totally
excluded from making a part likewise of their neat revenue. Though the whole
goods in a merchant's shop must by no means be placed in his own stock
reserved for immediate consumption, they may in that of other people, who,
from a revenue derived from other funds, may regularly replace their value
to him, together with its profits, without occasioning any diminution either
of his capital or of theirs.
Money, therefore, is the only part of the circulating capital of a society,
of which the maintenance can occasion any diminution in their neat revenue.
The fixed capital, and that part of the circulating capital which consists
in money, so far as they affect the revenue of the society, bear a very
great resemblance to one another.
First, as those machines and instruments of trade, etc. require a certain
expense, first to erect them, and afterwards to support them, both which
expenses, though they make a part of the gross, are deductions from the neat
revenue of the society ; so the stock of money which circulates in any
country must require a certain expense, first to collect it, and afterwards
to support it; both which expenses, though they make a part of the gross,
are, in the same manner, deductions from the neat revenue of the society. A
certain quantity of very valuable materials, gold and silver, and of very
curious labour, instead of augmenting the stock reserved for immediate
consumption, the subsistence, conveniencies, and amusements of individuals,
is employed in supporting that great but expensive instrument of commerce,
by means of which every individual in the society has his subsistence,
conveniencies, and amusements, regularly distributed to him in their proper
proportions.
Secondly, as the machines and instruments of trade, etc. which compose the
fixed capital either of an individual or of a society, make no part either
of the gross or of the neat revenue of either ; so money, by means of which
the whole revenue of the society is regularly distributed among all its
different members, makes itself no part of that revenue. The great wheel of
circulation is altogether different from the goods which are circulated by
means of it. The revenue of the society consists altogether in those goods,
and not in the wheel which circulates them. In computing either the gross or
the neat revenue of any society, we must always, from the whole annual
circulation of money and goods, deduct the whole value of the money, of
which not a single farthing can ever make any part of either.
It is the ambiguity of language only which can make this proposition appear
either doubtful or paradoxical. When properly explained and understood, it
is almost self-evident.
When we talk of any particular sum of money, we sometimes mean nothing but
the metal pieces of which it is composed, and sometimes we include in our
meaning some obscure reference to the goods which can be had in exchange for
it, or to the power of purchasing which the possession of it conveys. Thus,
when we say that the circulating money of England has been computed at
eighteen millions, we mean only to express the amount of the metal pieces,
which some writers have computed, or rather have supposed, to circulate in
that country. But when we say that a man is worth fifty or a hundred pounds
a-year, we mean commonly to express, not only the amount of the metal pieces
which are annually paid to him, but the value of the goods which he can
annually purchase or consume; we mean commonly to assertain what is or ought
to be his way of living, or the quantity and quality of the necessaries and
conveniencies of life in which he can with propriety indulge himself.
When, by any particular sum of money, we mean not only to express the amount
of the metal pieces of which it is composed, but to include in its
signification some obscure reference to the goods which can be had in
exchange for them, the wealth or revenue which it in this case denotes, is
equal only to one of the two values which are thus intimated somewhat
ambiguously by the same word, and to the latter more properly than to the
former, to the money's worth more properly than to the money.
Thus, if a guinea be the weekly pension of a particular person, he can in
the course of the week purchase with it a certain quantity of subsistence,
conveniencies, and amusements. In proportion as this quantity is great or
small, so are his real riches, his real weekly revenue. His weekly revenue
is certainly not equal both to the guinea and to what can be purchased with
it, but only to one or other of those two equal values, and to the latter
more properly than to the former, to the guinea's worth rather than to the
guinea.
If the pension of such a person was paid to him, not in gold, but in a
weekly bill for a guinea, his revenue surely would not so properly consist
in the piece of paper, as in what he could get for it. A guinea may be
considered as a bill for a certain quantity of necessaries and conveniencies
upon all the tradesmen in the neighbourhood The revenue of the person to
whom it is paid, does not so properly consist in the piece of gold, as in
what he can get for it, or in what he can exchange it for. If it could be
exchanged for nothing, it would, like a bill upon a bankrupt, be of no more
value than the most useless piece of paper.
Though the weekly or yearly revenue of all the different inhabitants of any
country, in the same manner, may be, and in reality frequently is, paid to
them in money, their real riches, however, the real weekly or yearly revenue
of all of them taken together, must always be great or small, in proportion
to the quantity of consumable goods which they can all of them purchase with
this money. The whole revenue of all of them taken together is evidently not
equal to both the money and the consumable goods, but only to one or other of
those two values, and to the latter more properly than to the former.
Though we frequently, therefore, express a person's revenue by the metal
pieces which are annually paid to him, it is because the amount of those
pieces regulates the extent of his power of purchasing, or the value of the
goods which he can annually afford to consume. We still consider his revenue
as consisting in this power of purchasing or consuming, and not in the
pieces which convey it.
But if this is sufficiently evident, even with regard to an individual, it
is still more so with regard to a society. The amount of the metal pieces
which are annually paid to an individual, is often precisely equal to his
revenue, and is upon that account the shortest and best expression of its
value. But the amount of the metal pieces which circulate in a society, can
never be equal to the revenue of all its members. As the same guinea which
pays the weekly pension of one man to-day, may pay that of another
to-morrow, and that of a third the day thereafter, the amount of the metal
pieces which annually circulate in any country, must always be of much less
value than the whole money pensions annually paid with them. But the power
of purchasing, or the goods which can successively be bought with the whole
of those money pensions, as they are successively paid, must always be
precisely of the same value with those pensions ; as must likewise be the
revenue of the different persons to whom they are paid. That revenue,
therefore, cannot consist in those metal pieces, of which the amount is so
much inferior to its value, but in the power of purchasing, in the goods
which can successively be bought with them as they circulate from hand to
hand.
Money, therefore, the great wheel of circulation, the great instrument of
commerce, like all other instruments of trade, though it makes a part, and a
very valuable part, of the capital, makes no part of the revenue of the
society to which it belongs; and though the metal pieces of which it is
composed, in the course of their annual circulation, distribute to every man
the revenue which properly belongs to him, they make themselves no part of
that revenue.
Thirdly, and lastly, the machines and instruments of trade, etc. which
compose the fixed capital, bear this further resemblance to that part of the
circulating capital which consists in money; that as every saving in the
expense of erecting and supporting those machines, which does not diminish
the introductive powers of labour, is an improvement of the neat revenue of
the society ; so every saving in the expense of collecting and supporting
that part of the circulating capital which consists in money is an
improvement of exactly the same kind.
It is sufficiently obvious, and it has partly, too, been explained already,
in what manner every saving in the expense of supporting the fixed capital
is an improvement of the neat revenue of the society. The whole capital of
the undertaker of every work is necessarily divided between his fixed and his
circulating capital. While his whole capital remains the same, the smaller
the one part, the greater must necessarily be the other. It is the
circulating capital which furnishes the materials and wages of labour, and
puts industry into motion. Every saving, therefore, in the expense of
maintaining the fixed capital, which does not diminish the productive powers
of labour, must increase the fund which puts industry into motion, and
consequently the annual produce of land and labour, the real revenue of
every society.
The substitution of paper in the room of gold and silver money, replaces a
very expensive instrument of commerce with one much less costly, and
sometimes equally convenient. Circulation comes to be carried on by a new
wheel, which it costs less both to erect and to maintain than the old one.
But in what manner this operation is performed, and in what manner it tends
to increase either the gross or the neat revenue of the society, is not
altogether so obvious, and may therefore require some further explication.
There are several different sorts of paper money; but the circulating notes
of banks and bankers are the species which is best known, and which seems
best adapted for this purpose.
When the people of any particular country have such confidence in the
fortune, probity and prudence of a particular banker, as to believe that
he is always ready to pay upon demand such of his promissory notes as are
likely to be at any time presented to him, those notes come to have the same
currency as gold and silver money, from the confidence that such money can
at any time be had for them.
A particular banker lends among his customers his own promissory notes, to
the extent, we shall suppose, of a hundred thousand pounds. As those notes
serve all the purposes of money, his debtors pay him the same interest as if
he had lent them so much money. This interest is the source of his gain.
Though some of those notes are continually coming back upon him for payment,
part of them continue to circulate for months and years together. Though he
has generally in circulation, therefore, notes to the extent of a hundred
thousand pounds, twenty thousand pounds in gold and silver may, frequently,
be a sufficient provision for answering occasional demands. By this
operation, therefore, twenty thousand pounds in gold and silver perform all
the functions which a hundred thousand could otherwise have performed. The
same exchanges may be made, the same quantity of consumable goods may be
circulated and distributed to their proper consumers, by means of his
promissory notes, to the value of a hundred thousand pounds, as by an equal
value of gold and silver money. Eighty thousand pounds of gold and silver,
therefore, can in this manner be spared from the circulation of the country
; and if different operations of the the same kind should, at the same time,
be carried on by many different banks and bankers, the whole circulation
may thus be conducted with a fifth part only of the gold and silver which
would otherwise have been requisite.
Let us suppose, for example, that the whole circulating money of some
particular country amounted, at a particular time, to one million sterling,
that sum being then sufficient for circulating the whole annual produce of
their land and labour; let us suppose, too, that some time thereafter,
different banks and bankers issued promissory notes payable to the bearer,
to the extent of one million, reserving in their different coffers two
hundred thousand pounds for answering occasional demands ; there would
remain, therefore, in circulation, eight hundred thousand pounds in gold and
silver, and a million of bank notes, or eighteen hundred thousand pounds of
paper and money together. But the annual produce of the land and labour of
the country had before required only one million to circulate and distribute
it to its proper consumers, and that annual produce cannot be immediately
augmented by those operations of banking. One million, therefore, will be
sufficient to circulate it after them. The goods to be bought and sold being
precisely the same as before, the same quantity of money will be sufficient
for buying and selling them. The channel of circulation, if I may be allowed
such an expression, will remain precisely the same as before. One million we
have supposed sufficient to fill that channel. Whatever, therefore, is
poured into it beyond this sum, cannot run into it, but must overflow. One
million eight hundred thousand pounds are poured into it. Eight hundred
thousand pounds, therefore, must overflow, that sum being over and above
what can be employed in the circulation of the country. But though this sum
cannot be employed at home, it is too valuable to be allowed to lie idle. It
will, therefore, be sent abroad, in order to seek that profitable employment
which it cannot find at home. But the paper cannot go abroad; because at a
distance from the banks which issue it, and from the country in which
payment of it can be exacted by law, it will not be received in common
payments. Gold and silver, therefore, to the amount of eight hundred
thousand pounds, will be sent abroad, and the channel of home circulation
will remain filled with a million of paper instead of a million of those
metals which filled it before.
But though so great a quantity of gold and silver is thus sent abroad, we
must not imagine that it is sent abroad for nothing, or that its proprietors
make a present of it to foreign nations. They will exchange it for foreign
goods of some kind or another, in order to supply the consumption either of
some other foreign country, or of their own.
If they employ it in purchasing goods in one foreign country, in order to
supply the consumption of another, or in what is called the carrying trade,
whatever profit they make will be in addition to the neat revenue of their
own country. It is like a new fund, created for carrying on a new trade;
domestic business being now transacted by paper, and the gold and silver
being converted into a fund for this new trade.
If they employ it in purchasing foreign goods for home consumption, they may
either, first, purchase such goods as are likely to be consumed by idle
people, who produce nothing, such as foreign wines, foreign silks, etc. ;
or, secondly, they may purchase an additional stock of materials, tools, and
provisions, in order to maintain and employ an additional number of
industrious people, who reproduce, with a profit, the value of their annual
consumption.
So far as it is employed in the first way, it promotes prodigality,
increases expense and consumption, without increasing production, or
establishing any permanent fund for supporting that expense, and is in every
respect hurtful to the society.
So far as it is employed in the second way, it promotes industry ; and
though it increases the consumption of the society, it provides a permanent
fund for supporting that consumption; the people who consume reproducing,
with a profit, the whole value of their annual consumption. The gross
revenue of the society, the annual produce of their land and labour, is
increased by the whole value which the labour of those workmen adds to the
materials upon which they are employed, and their neat revenue by what
remains of this value, after deducting what is necessary for supporting the
tools and instruments of their trade.
That the greater part of the gold and silver which being forced abroad by
those operations of banking, is employed in purchasing foreign goods for
home consumption, is, and must be, employed in purchasing those of this
second kind, seems not only probable, but almost unavoidable. Though some
particular men may sometimes increase their expense very considerably,
though their revenue does not increase at all, we maybe assured that no
class or order of men ever does so; because, though the principles of
common prudence do not always govern the conduct of every individual, they
always influence that of the majority of every class or order. But the
revenue of idle people, considered as a class or order, cannot, in the
smallest degree, be increased by those operations of banking. Their expense
in general, therefore, cannot be much increased by them, though that of a
few individuals among them may, and in reality sometimes is. The demand of
idle people, therefore, for foreign goods, being the same, or very nearly
the same as before, a very small part of the money which, being forced
abroad by those operations of banking, is employed in purchasing foreign
goods for home consumption, is likely to be employed in purchasing those for
their use. The greater part of it will naturally be destined for the
employment of industry, and not for the maintenance of idleness.
When we compute the quantity of industry which the circulating capital of
any society can employ, we must always have regard to those parts of it only
which consist in provisions, materials, and finished work ; the other, which
consists in money, and which serves only to circulate those three, must
always be deducted. In order to put industry into motion, three things are
requisite ; materials to work upon, tools to work with, and the wages or
recompence for the sake of which the work is done. Money is neither a
material to work upon, nor a tool to work with ; and though the wages of the
workman are commonly paid to him in money, his real revenue, like that of
all other men, consists, not in the money, but in the money's worth; not in
the metal pieces, but in what can be got for them.
The quantity of industry which any capital can employ, must evidently be
equal to the number of workmen whom it can supply with materials, tools, and
a maintenance suitable to the nature of the work. Money may be requisite for
purchasing the materials and tools of the work, as well as the maintenance
of the workmen ; but the quantity of industry which the whole capital can
employ, is certainly not equal both to the money which purchases, and to the
materials, tools, and maintenance, which are purchased with it, but only to
one or other of those two values, and to the latter more properly than to
the former.
When paper is substituted in the room of gold and silver money, the quantity
of the materials, tools, and maintenance, which the whole circulating
capital can supply, may be increased by the whole value of gold and silver
which used to be employed in purchasing them. The whole value of the great
wheel of circulation and distribution is added to the goods which are
circulated and distributed by means of it. The operation, in some measure,
resembles that of the undertaker of some great work, who, in consequence of
some improvement in mechanics, takes down his old machinery, and adds the
difference between its price and that of the new to his circulating capital,
to the fund from which he furnishes materials and wages to his workmen.
What is the proportion which the circulating money of any country bears to
the whole value of the annual produce circulated by means of it, it is
perhaps impossible to determine. It has been computed by different authors
at a fifth, at a tenth, at a twentieth, and at a thirtieth, part of that
value. But how small soever the proportion which the circulating money may
bear to the whole value of the annual produce, as but a part, and frequently
but a small part, of that produce, is ever destined for the maintenance of
industry, it must always bear a very considerable proportion to that part.
When, therefore, by the substitution of paper, the gold and silver
necessary for circulation is reduced to, perhaps, a fifth part of the former
quantity, if the value of only the greater part of the other four-fifths be
added to the funds which are destined for the maintenance of industry, it
must make a very considerable addition to the quantity of that industry,
and, consequently, to the value of the annual produce of land and labour.
An operation of this kind has, within these five-and-twenty or thirty years,
been performed in Scotland, by the erection of new banking companies in
almost every considerable town, and even in some country villages. The
effects of it have been precisely those above described. The business of the
country is almost entirely carried on by means of the paper of those
different banking companies, with which purchases and payments of all kinds
are commonly made. Silver very seldom appears, except in the change of a
twenty shilling bank note, and gold still seldomer. But though the conduct
of all those different companies has not been unexceptionable, and has
accordingly required an act of parliament to regulate it, the country,
notwithstanding, has evidently derived great benefit from their trade. I
have heard it asserted, that the trade of the city of Glasgow doubled in
about fifteen years after the first erection of the banks there; and that
the trade of Scotland has more than quadrupled since the first erection of
the two public banks at Edinburgh; of which the one, called the Bank of
Scotland, was established by act of parliament in 1695, and the other,
called the Royal Bank, by royal charter in 1727. Whether the trade, either
of Scotland in general, or of the city of Glasgow in particular, has really
increased in so great a proportion, during so short a period, I do not
pretend to know. If either of them has increased in this proportion, it
seems to be an effect too great to be accounted for by the sole operation of
this cause. That the trade and industry of Scotland, however, have increased
very considerably during this period, and that the banks have contributed a
good deal to this increase, cannot be doubted.
The value of the silver money which circulated in Scotland before the Union
in 1707, and which, immediately after it, was brought into the Bank of
Scotland, in order to be recoined, amounted to £411,117: 10: 9 sterling. No
account has been got of the gold coin ; but it appears from the ancient
accounts of the mint of Scotland, that the value of the gold annually coined
somewhat exceeded that of the silver. There were a good many people, too,
upon this occasion, who, from a diffidence of repayment, did not bring their
silver into the Bank of Scotland; and there was, besides, some English coin,
which was not called in. The whole value of the gold and silver, therefore,
which circulated in Scotland before the Union, cannot be estimated at less
than a million sterling. It seems to have constituted almost the whole
circulation of that country; for though the circulation of the Bank of
Scotland, which had then no rival, was considerable, it seems to have made
but a very small part of the whole. In the present times, the whole
circulation of Scotland cannot be estimated at less than two millions, of
which that part which consists in gold and silver, most probably, does not
amount to half a million. But though the circulating gold and silver of
Scotland have suffered so great a diminution during this period, its real
riches and prosperity do not appear to have suffered any. Its agriculture,
manufactures, and trade, on the contrary, the annual produce of its land and
labour, have evidently been augmented.
It is chiefly by discounting bills of exchange, that is, by advancing money
upon them before they are due, that the greater part of banks and bankers
issue their promissory notes. They deduct always, upon whatever sum they
advance, the legal interest till the bill shall become due. The payment of
the bill, when it becomes due, replaces to the bank the value of what had
been advanced, together with a clear profit of the interest. The banker, who
advances to the merchant whose bill he discounts, not gold and silver, but
his own promissory notes, has the advantage of being able to discount to a
greater amount by the whole value of his promissory notes, which he finds,
by experience, are commonly in circulation. He is thereby enabled to make
his clear gain of interest on so much a larger sum.
The commerce of Scotland, which at present is not very great, was still more
inconsiderable when the two first banking companies were established ; and
those companies would have had but little trade, had they confined their
business to the discounting of bills of exchange. They invented, therefore,
another method of issuing their promissory notes; by granting what they call
cash accounts, that is, by giving credit, to the extent of a certain sum
(two or three thousand pounds for example), to any individual who could
procure two persons of undoubted credit and good landed estate to become
surety for him, that whatever money should be advanced to him, within the
sum for which the credit had been given, should be repaid upon demand,
together with the legal interest. Credits of this kind are, I believe,
commonly granted by banks and bankers in all different parts of the world.
But the easy terms upon which the Scotch banking companies accept of
repayment are, so far as I know, peculiar to them, and have perhaps been the
principal cause, both of the great trade of those companies,and of the
benefit which the country has received from it.
Whoever has a credit of this kind with one of those companies, and borrows a
thousand pounds upon it, for example, may repay this sum piece-meal, by
twenty and thirty pounds at a time, the company discounting a proportionable
part of the interest of the great sum, from the day on which each of those
small sums is paid in, till the whole be in this manner repaid. All
merchants, therefore, and almost all men of business, find it convenient to
keep such cash accounts with them, and are thereby interested to promote the
trade of those companies, by readily receiving their notes in all payments,
and by encouraging all those with whom they have any influence to do the
same. The banks, when their customers apply to them for money, generally
advance it to them in their own promissory notes. These the merchants pay
away to the manufacturers for goods, the manufacturers to the farmers for
materials and provisions, the farmers to their landlords for rent; the
landlords repay them to the merchants for the conveniencies and luxuries
with which they supply them, and the merchants again return them to the
banks, in order to balance their cash accounts, or to replace what they my
have borrowed of them ; and thus almost the whole money business of the
country is transacted by means of them. Hence the great trade of those
companies.
By means of those cash accounts, every merchant can, without imprudence,
carry on a greater trade than he otherwise could do. If there are two
merchants, one in London and the other in Edinburgh, who employ equal stocks
in the same branch of trade, the Edinburgh merchant can, without imprudence,
carry on a greater trade, and give employment to a greater number of people,
than the London merchant. The London merchant must always keep by him a
considerable sum of money, either in his own coffers, or in those of his
banker, who gives him no interest for it, in order to answer the demands
continually coming upon him for payment of the goods which he purchases upon
credit. Let the ordinary amount of this sum be supposed five hundred pounds
; the value of the goods in his warehouse must always be less, by five
hundred pounds, than it would have been, had he not been obliged to keep
such a sum unemployed. Let us suppose that he generally disposes of his
whole stock upon hand, or of goods to the value of his whole stock upon
hand, once in the year. By being obliged to keep so great a sum unemployed,
he must sell in a year five hundred pounds worth less goods than he might
otherwise have done. His annual profits must be less by all that he could
have made by the sale of five hundred pounds worth more goods ; and the
number of people employed in preparing his goods for the market must be less
by all those that five hundred pounds more stock could have employed. The
merchant in Edinburgh, on the other hand, keeps no money unemployed for
answering such occasional demands. When they actually come upon him, he
satisfies them from his cash account with the bank, and gradually replaces
the sum borrowed with the money or paper which comes in from the occasional
sales of his goods. With the same stock, therefore, he can, without
imprudence, have at all times in his warehouse a larger quantity of goods
than the London merchant ; and can thereby both make a greater profit
himself, and give constant employment to a greater number of industrious
people who prepare those goods for the market. Hence the great benefit which
the country has derived from this trade.
The facility of discounting bills of exchange, it may be thought, indeed,
gives the English merchants a conveniency equivalent to the cash accounts of
the Scotch merchants. But the Scotch merchants, it must be remembered, can
discount their bills of exchange as easily as the English merchants; and
have, besides, the additional conveniency of their cash accounts.
The whole paper money of every kind which can easily circulate in any
country, never can exceed the value of the gold and silver, of which it
supplies the place, or which (the commerce being supposed the same) would
circulate there, if there was no paper money. If twenty shilling notes, for
example, are the lowest paper money current in Scotland, the whole of that
currency which can easily circulate there, cannot exceed the sum of gold and
silver which would be necessary for transacting the annual exchanges of
twenty shillings value and upwards usually transacted within that country.
Should the circulating paper at any time exceed that sum, as the excess
could neither be sent abroad nor be employed in the circulation of the
country, it must immediately return upon the banks, to be exchanged for gold
and silver. Many people would immediately perceive that they had more of
this paper than was necessary for transacting their business at home; and as
they could not send it abroad, they would immediately demand payment for it
from the banks. When this superfluous paper was converted into gold and
silver, they could easily find a use for it, by sending it abroad; but they
could find none while it remained in the shape of paper. There would
immediately, therefore, be a run upon the banks to the whole extent of this
superfluous paper, and if they showed any difficulty or backwardness in
payment, to a much greater extent ; the alarm which this would occasion
necessarily increasing the run.
Over and above the expenses which are common to every branch of trade, such
as the expense of house-rent, the wages of servants, clerks, accountants,
etc. the expenses peculiar to a bank consist chiefly in two articles: first,
in the expense of keeping at all times in its coffers, for answering the
occasional demands of the holders of its notes, a large sum of money, of
which it loses the interest; and, secondly, in the expense of replenishing
those coffers as fast as they are emptied by answering such occasional
demands.
A banking company which issues more paper than can be employed in the
circulation of the country, and of which the excess is continually returning
upon them for payment, ought to increase the quantity of gold and silver
which they keep at all times in their coffers, not only in proportion to
this excessive increase of their circulation, but in a much greater
proportion; their notes returning upon them much faster than in proportion
to the excess of their quantity. Such a company, therefore, ought to
increase the first article of their expense, not only in proportion to this
forced increase of their business, but in a much greater proportion.
The coffers of such a company, too, though they ought to be filled much
fuller, yet must empty themselves much faster than if their business was
confined within more reasonable bounds, and must require not only a more
violent, but a more constant and uninterrupted exertion of expense, in order
to replenish them, The coin, too, which is thus continually drawn in such
large quantities from their coffers, cannot be employed in the circulation
of the country. It comes in place of a paper which is over and above what can
be employed in that circulation, and is, therefore, over and above what can
be employed in it too. But as that coin will not be allowed to lie idle, it
must, in one shape or another, be sent abroad, in order to find that
profitable employment which it cannot find at home; and this continual
exportation of gold and silver, by enhancing the difficulty, must
necessarily enhance still farther the expense of the bank, in finding new
gold and silver in order to replenish those coffers, which empty themselves
so very rapidly. Such a company, therefore, must in proportion to this
forced increase of their business, increase the second article of their
expense still more than the first.
Let us suppose that all the paper of a particular bank, which the
circulation of the country can easily absorb and employ, amounts exactly to
forty thousand pounds, and that, for answering occasional demands, this bank
is obliged to keep at all times in its coffers ten thousand pounds in gold
and silver. Should this bank attempt to circulate forty-four thousand
pounds, the four thousand pounds which are over and above what the
circulation can easily absorb and employ, will return upon it almost as fast
as they are issued. For answering occasional demands, therefore, this bank
ought to keep at all times in its coffers, not eleven thousand pounds only,
but fourteen thousand pounds. It will thus gain nothing by the interest of
the four thousand pounds excessive circulation ; and it will lose the whole
expense of continually collecting four thousand pounds in gold and silver,
which will be continually going out of its coffers as fast as they are
brought into them.
Had every particular banking company always understood and attended to its
own particular interest, the circulation never could have been overstocked
with paper money. But every particular banking company has not always
understood or attended to its own particular interest, and the circulation
has frequently been overstocked with paper money.
By issuing too great a quantity of paper, of which the excess was
continually returning, in order to be exchanged for gold and silver, the
Bank of England was for many years together obliged to coin gold to the
extent of between eight hundred thousand pounds and a million a-year; or, at
an average, about eight hundred and fifty thousand pounds. For this great
coinage, the bank (inconsequence of the worn and degraded state into which
the gold coin had fallen a few years ago) was frequently obliged to purchase
gold bullion at the high price of four pounds an ounce, which it soon after
issued in coin at £3:17:10 1/2 an ounce, losing in this manner between two
and a half and three per cent. upon the coinage of so very large a sum.
Though the bank, therefore, paid no seignorage, though the government was
properly at the expense of this coinage, this liberality of government did
not prevent altogether the expense of the bank.
The Scotch banks, in consequence of an excess of the same kind, were all
obliged to employ constantly agents at London to collect money for them, at
an expense which was seldom below one and a half or two per cent. This money
was sent down by the waggon, and insured by the carriers at an additional
expense of three quarters per cent. or fifteen shillings on the hundred
pounds. Those agents were not always able to replenish the coffers of their
employers so fast as they were emptied. In this case, the resource of the
banks was, to draw upon their correspondents in London bills of exchange, to
the extent of the sum which they wanted. When those correspondents
afterwards drew upon them for the payment of this sum, together with the
interest and commission, some of those banks, from the distress into which
their excessive circulation had thrown them, had sometimes no other means of
satisfying this draught, but by drawing a second set of bills, either upon
the same, or upon some other correspondents in London; and the same sum, or
rather bills for the same sum, would in this manner make sometimes more than
two or three journeys ; the debtor bank paying always the interest and
commission upon the whole accumulated sum. Even those Scotch banks which
never distinguished themselves by their extreme imprudence, were sometimes
obliged to employ this ruinous resource.
The gold coin which was paid out, either by the Bank of England or by the
Scotch banks, in exchange for that part of their paper which was over and
above what could be employed in the circulation of the country, being
likewise over and above what could be employed in that circulation, was
sometimes sent abroad in the shape of coin, sometimes melted down and sent
abroad in the shape of bullion, and sometimes melted down and sold to the
Bank of England at the high price of four pounds an ounce. It was the
newest, the heaviest, and the best pieces only, which were carefully picked
out of the whole coin, and either sent abroad or melted down. At home, and
while they remained in the shape of coin, those heavy pieces were of no more
value than the light ; but they were of more value abroad, or when melted
down into bullion at home. The Bank of England, notwithstanding their great
annual coinage, found, to their astonishment, that there was every year the
same scarcity of coin as there had been the year before ; and that,
notwithstanding the great quantity of good and new coin which was every year
issued from the bank, the state of the coin, instead of growing better and
better, became every year worse and worse. Every year they found themselves
under the necessity of coining nearly the same quantity of gold as they had
coined the year before ; and from the continual rise in the price of gold
bullion, in consequence of the continual wearing and clipping of the coin,
the expense of this great annual coinage became, every year, greater and
greater. The Bank of England, it is to be observed, by supplying its own
coffers with coin, is indirectly obliged to supply the whole kingdom, into
which coin is continually flowing from those coffers in a great variety of
ways. Whatever coin, therefore, was wanted to support this excessive
circulation both of Scotch and English paper money, whatever vacuities this
excessive circulation occasioned in the necessary coin of the kingdom, the
Bank of England was obliged to supply them. The Scotch banks, no doubt, paid
all of them very dearly for their own imprudence and inattention : but the
Bank of England paid very dearly, not only for its own imprudence, but for
the much greater imprudence of almost all the Scotch banks.
The over-trading of some bold projectors in both parts of the united
kingdom, was the original cause of this excessive circulation of paper
money.
What a bank can with propriety advance to a merchant or undertaker of any
kind, is not either the whole capital with which he trades, or even any
considerable part of that capital; but that part of it only which he would
otherwise be obliged to keep by him unemployed and in ready money, for
answering occasional demands. If the paper money which the bank advances
never exceeds this value, it can never exceed the value of the gold and
silver which would necessarily circulate in the country if there was no
paper money; it can never exceed the quantity which the circulation of the
country can easily absorb and employ.
When a bank discounts to a merchant a real bill of exchange, drawn by a real
creditor upon a real debtor, and which, as soon as it becomes due, is really
paid by that debtor ; it only advances to him a part of the value which he
would otherwise be obliged to keep by him unemployed and in ready money, for
answering occasional demands. The payment of the bill, when it becomes due,
replaces to the bank the value of what it had advanced, together with the
interest. The coffers of the bank, so far as its dealings are confined to
such customers, resemble a water-pond, from which, though a stream is
continually running out, yet another is continually running in, fully equal
to that which runs out; so that, without any further care or attention, the
pond keeps always equally, or very near equally full. Little or no expense
can ever be necessary for replenishing the coffers of such a bank.
A merchant, without over-trading, may frequently have occasion for a sum of
ready money, even when he has no bills to discount. When a bank, besides
discounting his bills, advances him likewise, upon such occasions, such sums
upon his cash account, and accepts of a piece-meal repayment, as the money
comes in from the occasional sale of his goods, upon the easy terms of the
banking companies of Scotland; it dispenses him entirely from the necessity
of keeping any part of his stock by him unemployed and in ready money for
answering occasional demands. When such demands actually come upon him, he
can answer them sufficiently from his cash account. The bank, however, in
dealing with such customers, ought to observe with great attention, whether,
in the course of some short period (of four, five, six, or eight months, for
example), the sum of the repayments which it commonly receives from them,
is, or is not, fully equal to that of the advances which it commonly makes
to them. If, within the course of such short periods, the sum of the
repayments from certain customers is, upon most occasions, fully equal to
that of the advances, it may safely continue to deal with such customers.
Though the stream which is in this case continually running out from its
coffers may be very large, that which is continually running into them must
be at least equally large. so that, without any further care or attention,
those coffers are likely to be always equally or very near equally full, and
scarce ever to require any extraordinary expense to replenish them. If, on
the contrary, the sum of the repayments from certain other customers, falls
commonly very much short of the advances which it makes to them, it cannot
with any safety continue to deal with such customers, at least if they
continue to deal with it in this manner. The stream which is in this case
continually running out from its coffers, is necessarily much larger than
that which is continually running in ; so that, unless they are replenished
by some great and continual effort of expense, those coffers must soon be
exhausted altogether.
The banking companies of Scotland, accordingly, were for a long time very
careful to require frequent and regular repayments from all their customers,
and did not care to deal with any person, whatever might be his fortune or
credit, who did not make, what they called, frequent and regular operations
with them. By this attention, besides saving almost entirely the
extraordinary expense of replenishing their coffers, they gained two other
very considerable advantages.
First, by this attention they were enabled to make some tolerable judgment
concerning the thriving or declining circumstances of their debtors, without
being obliged to look out for any other evidence besides what their own
books afforded them ; men being, for the most part, either regular or
irregular in their repayments, according as their circumstances are either
thriving or declining. A private man who lends out his money to perhaps half
a dozen or a dozen of debtors, may, either by himself or his agents, observe
and inquire both constantly and carefully into the conduct and situation of
each of them. But a banking company, which lends money to perhaps five
hundred different people, and of which the attention is continually occupied
by objects of a very different kind, can have no regular information
concerning the conduct and circumstances of the greater part of its debtors,
beyond what its own books afford it. In requiring frequent and regular
repayments from all their customers, the banking companies of Scotland had
probably this advantage in view.
Secondly, by this attention they secured themselves from the possibility of
issuing more paper money than what the circulation of the country could
easily absorb and employ. When they observed, that within moderate periods
of time, the repayments of a particular customer were, upon most occasions,
fully equal to the advances which they had made to him, they might be
assured that the paper money which they had advanced to him had not, at any
time, exceeded the quantity of gold and silver which he would otherwise have
been obliged to keep by him for answering occasional demands; and that,
consequently, the paper money, which they had circulated by his means, had
not at any time exceeded the quantity of gold and silver which would have
circulated in the country, had there been no paper money. The frequency,
regularity, and amount of his repayments, would sufficiently demonstrate
that the amount of their advances had at no time exceeded that part of his
capital which he would otherwise have been obliged to keep by him
unemployed, and in ready money, for answering occasional demands; that is,
for the purpose of keeping the rest of his capital in constant employment.
It is this part of his capital only which, within moderate periods of time,
is continually returning to every dealer in the shape of money, whether
paper or coin, and continually going from him in the same shape. If the
advances of the bank had commonly exceeded this part of his capital, the
ordinary amount of his repayments could not, within moderate periods of
time, have equalled the ordinary amount of its advances. The stream which,
by means of his dealings, was continually running into the coffers of the
bank, could not have been equal to the stream which, by means of the same
dealings was continually running out. The advances of the bank paper, by
exceeding the quantity of gold and silver which, had there been no such
advances, he would have been obliged to keep by him for answering occasional
demands, might soon come to exceed the whole quantity of gold and silver
which ( the commerce being supposed the same ) would have circulated in the
country, had there been no paper money; and, consequently, to exceed the
quantity which the circulation of the country could easily absorb and employ
; and the excess of this paper money would immediately have returned upon
the bank, in order to be exchanged for gold and silver. This second
advantage, though equally real, was not, perhaps, so well understood by all
the different banking companies in Scotland as the first.
When, partly by the conveniency of discounting bills, and partly by that of
cash accounts, the creditable traders of any country can be dispensed from
the necessity of keeping any part of their stock by them unemployed, and in
ready money, for answering occasional demands, they can reasonably expect no
farther assistance from hanks and bankers, who, when they have gone thus
far, cannot, consistently with their own interest and safety, go farther. A
bank cannot, consistently with its own interest, advance to a trader the
whole, or even the greater part of the circulating capital with which he
trades ; because, though that capital is continually returning to him in the
shape of money, and going from him in the same shape, yet the whole of the
returns is too distant from the whole of the outgoings, and the sum of his
repayments could not equal the sum of his advances within such moderate
periods of time as suit the conveniency of a bank. Still less could a bank
afford to advance him any considerable part of his fixed capital ; of the
capital which the undertaker of an iron forge, for example, employs in
erecting his forge and smelting-houses, his work-houses, and warehouses, the
dwelling-houses of his workmen, etc. ; of the capital which the undertaker
of a mine employs in sinking his shafts, in erecting engines for drawing out
the water, in making roads and waggon-ways, etc. ; of the capital which the
person who undertakes to improve land employs in clearing, draining,
inclosing, manuring, and ploughing waste and uncultivated fields; in
building farmhouses, with all their necessary appendages of stables,
granaries, etc. The returns of the fixed capital are, in almost all
cases, much slower than those of the circulating capital : and such
expenses, even when laid out with the greatest prudence and judgment, very
seldom return to the undertaker till after a period of many years, a period
by far too distant to suit the conveniency of a bank. Traders and other
undertakers may, no doubt with great propriety, carry on a very considerable
part of their projects with borrowed money. In justice to their creditors,
however, their own capital ought in this case to be sufficient to insure, if
I may say so, the capital of those creditors; or to render it extremely
improbable that those creditors should incur any loss, even though the
success of the project should fall very much short of the expectation of the
projectors. Even with this precaution, too, the money which is borrowed, and
which it is meant should not be repaid till after a period of several years,
ought not to be borrowed of a bank, but ought to be borrowed upon bond or
mortgage, of such private people as propose to live upon the interest of
their money, without taking the trouble themselves to employ the capital,
and who are, upon that account, willing to lend that capital to such people
of good credit as are likely to keep it for several years. A bank, indeed,
which lends its money without the expense of stamped paper, or of attorneys'
fees for drawing bonds and mortgages, and which accepts of repayment upon
the easy terms of the banking companies of Scotland, would, no doubt, be a
very convenient creditor to such traders and undertakers. But such traders
and undertakers would surely be most inconvenient debtors to such a bank.
It is now more than five and twenty years since the paper money issued by
the different banking companies of Scotland was fully equal, or rather was
somewhat more than fully equal, to what the circulation of the country could
easily absorb and employ. Those companies, therefore, had so long ago given
all the assistance to the traders and other undertakers of Scotland which it
is possible for banks and bankers, consistently with their own interest, to
give. They had even done somewhat more. They had over-traded a little, and
had brought upon themselves that loss, or at least that diminution of
profit, which, in this particular business, never fails to attend the
smallest degree of over-trading. Those traders and other undertakers, having
got so much assistance from banks and bankers, wished to get still more. The
banks, they seem to have thought, could extend their credits to whatever sum
might be wanted, without incurring any other expense besides that of a few
reams of paper. They complained of the contracted views and dastardly spirit
of the directors of those banks, which did not, they said, extend their
credits in proportion to the extension of the trade of the country ;
meaning, no doubt, by the extension of that trade, the extension of their
own projects beyond what they could carry on either with their own capital,
or with what they had credit to borrow of private people in the usual way of
bond or mortgage. The banks, they seem to have thought, were in honour bound
to supply the deficiency, and to provide them with all the capital which
they wanted to trade with. The banks, however, were of a different opinion ;
and upon their refusing to extend their credits, some of those traders had
recourse to an expedient which, for a time, served their purpose, though at
a much greater expense, yet as effectually as the utmost extension of bank
credits could have done. This expedient was no other than the well known
shift of drawing and redrawing; the shift to which unfortunate traders have
sometimes recourse, when they are upon the brink of bankruptcy. The practice
of raising money in this manner had been long known in England ; and, during
the course of the late war, when the high profits of trade afforded a great
temptation to over-trading, is said to have been carried on to a very great
extent. From England it was brought into Scotland, where, in proportion to
the very limited commerce, and to the very moderate capital of the country,
it was soon carried on to a much greater extent than it ever had been in
England.
The practice of drawing and redrawing is so well known to all men of
business, that it may, perhaps, be thought unnecessary to give any account
of it. But as this book may come into the hands of many people who are not
men of business, and as the effects of this practice upon the banking trade
are not, perhaps, generally understood, even by men of business themselves, I
shall endeavour to explain it as distinctly as I can.
The customs of merchants, which were established when the barbarous laws
of Europe did not enforce the performance of their contracts, and which,
during the course of the two last centuries, have been adopted into the laws
of all European nations, have given such extraordinary privileges to bills
of exchange, that money is more readily advanced upon them than upon any
other species of obligation; especially when they are made payable within so
short a period as two or three months after their date. If, when the bill
becomes due, the acceptor does not pay it as soon as it is presented, he
becomes from that moment a bankrupt. The bill is protested, and returns upon
the drawer, who, if he does not immediately pay it, becomes likewise a
bankrupt. If, before it came to the person who presents it to the acceptor
for payment, it had passed through the hands of several other persons, who
had successively advanced to one another the contents of it, either in money
or goods, and who, to express that each of them had in his turn received
those contents, had all of them in their order indorsed, that is, written
their names upon the back of the bill; each indorser becomes in his turn
liable to the owner of the bill for those contents, and, if he fails to pay,
he becomes too, from that moment, a bankrupt. Though the drawer, acceptor,
and indorsers of the bill, should all of them be persons of doubtful credit;
yet, still the shortness of the date gives some security to the owner of the
bill. Though all of them may be very likely to become bankrupts, it is a
chance if they all become so in so short a time. The house is crazy, says a
weary traveller to himself, and will not stand very long; but it is a chance
if it falls to-night, and I will venture, therefore, to sleep in it
to-night.
The trader A in Edinburgh, we shall suppose, draws a bill upon B in London,
payable two months after date. In reality B in London owes nothing to A in
Edinburgh; but he agrees to accept of A 's bill, upon condition, that before
the term of payment he shall redraw upon A in Edinburgh for the same sum,
together with the interest and a commission, another bill, payable likewise
two months after date. B accordingly, before the expiration of the first two
months, redraws this bill upon A in Edinburgh ; who, again before the
expiration of the second two months, draws a second bill upon B in London,
payable likewise two months after date; and before the expiration of the
third two months, B in London redraws upon A in Edinburgh another bill
payable also two months after date. This practice has sometimes gone on, not
only for several months, but for several years together, the bill always
returning upon A in Edinburgh with the accumulated interest and commission
of all the former bills. The interest was five per cent. in the year, and
the commission was never less than one half per cent. on each draught. This
commission being repeated more than six times in the year, whatever money A
might raise by this expedient might necessarily have cost him something more
than eight per cent. in the year and sometimes a great deal more, when
either the price of the commission happened to rise, or when he was obliged
to pay compound interest upon the interest and commission of former bills.
This practice was called raising money by circulation.
In a country where the ordinary profits of stock, in the greater part of
mercantile projects, are supposed to run between six and ten per cent. it
must have been a very fortunate speculation, of which the returns could not
only repay the enormous expense at which the money was thus borrowed for
carrying it on, but afford, besides, a good surplus profit to the projector.
Many vast and extensive projects, however, were undertaken, and for several
years carried on, without any other fund to support them besides what was
raised at this enormous expense. The projectors, no doubt, had in their
golden dreams the most distinct vision of this great profit. Upon their
awakening, however, either at the end of their projects, or when they were
no longer able to carry them on, they very seldom, I believe, had the good
fortune to find it .
{The method described in the text was by no means either the most common or
the most expensive one in which those adventurers sometimes raised money by
circulation. It frequently happened, that A in Edinburgh would enable B in
London to pay the first bill of exchange, by drawing, a few days before it
became due, a second bill at three months date upon the same B in London.
This bill, being payable to his own order, A sold in Edinburgh at par ; and
with its contents purchased bills upon London, payable at sight to the order
of B, to whom he sent them by the post. Towards the end of the late war, the
exchange between Edinburgh and London was frequently three per cent. against
Edinburgh, and those bills at sight must frequently have cost A that
premium. This transaction, therefore, being repeated at least four times in
the year, and being loaded with a commission of at least one half per cent.
upon each repetition, must at that period have cost A, at least, fourteen
per cent. in the year. At other times A would enable to discharge the first
bill of exchange, by drawing, a few days before it became due, a second bill
at two months date, not upon B, but upon some third person, C, for example,
in London. This other bill was made payable to the order of B, who, upon its
being accepted by C, discounted it with some banker in London ; and A
enabled C to discharge it, by drawing, a few day's before it became due, a
third bill likewise at two months date, sometimes upon his first
correspondent B, and sometimes upon some fourth or fifth person, D or E, for
example. This third bill was made payable to the order of C, who, as soon as
it was accepted, discounted it in the same manner with some banker in
London. Such operations being repeated at least six times in the year, and
being loaded with a commission of at least one half per cent. upon each
repetition, together with the legal interest of five per cent. this method
of raising money, in the same manner as that described in the text, must
have cost A something more than eight per cent. By saving, however, the
exchange between Edinburgh and London, it was less expensive than that
mentioned in the foregoing part of this note ; but then it required an
established credit with more houses than one in London, an advantage which
many of these adventurers could not always find it easy to procure.}
The bills which A in Edinburgh drew upon B in London, he regularly
discounted two months before they were due, with some bank or banker in
Edinburgh ; and the bills which B in London redrew upon A in Edinburgh, he
as regularly discounted, either with the Bank of England, or with some other
banker in London. Whatever was advanced upon such circulating bills was in
Edinburgh advanced in the paper of the Scotch banks ; and in London, when
they were discounted at the Bank of England in the paper of that bank.
Though the bills upon which this paper had been advanced were all of them
repaid in their turn as soon as they became due, yet the value which had
been really advanced upon the first bill was never really returned to the
banks which advanced it ; because, before each bill became due, another bill
was always drawn to somewhat a greater amount than the bill which was soon
to be paid: and the discounting of this other bill was essentially necessary
towards the payment of that which was soon to be due. This payment,
therefore, was altogether fictitious. The stream which, by means of those
circulating bills of exchange, had once been made to run out from the
coffers of the banks, was never replaced by any stream which really ran into
them.
The paper which was issued upon those circulating bills of exchange
amounted, upon many occasions, to the whole fund destined for carrying on
some vast and extensive project of agriculture, commerce, or manufactures ;
and not merely to that part of it which, had there been no paper money, the
projector would have been obliged to keep by him unemployed, and in ready
money, for answering occasional demands. The greater part of this paper was,
consequently, over and above the value of the gold and silver which would
have circulated in the country, had there been no paper money. It was over
and above, therefore, what the circulation of the country could easily
absorb and employ, and upon that account, immediately returned upon the
banks, in order to be exchanged for gold and silver, which they were to find
as they could. It was a capital which those projectors had very artfully
contrived to draw from those banks, not only without their knowledge or
deliberate consent, but for some time, perhaps, without their having the
most distant suspicion that they had really advanced it.
When two people, who are continually drawing and redrawing upon one another,
discount their bills always with the same banker, he must immediately
discover what they are about, and see clearly that they are trading, not
with any capital of their own, but with the capital which he advances to
them. But this discovery is not altogether so easy when they discount their
bills sometimes with one banker, and sometimes with another, and when the
two same persons do not constantly draw and redraw upon one another, but
occasionally run the round of a great circle of projectors, who find it for
their interest to assist one another in this method of raising money and to
render it, upon that account, as difficult as possible to distinguish
between a real and a fictitious bill of exchange, between a bill drawn by a
real creditor upon a real debtor, and a bill for which there was properly no
real creditor but the bank which discounted it, nor any real debtor but the
projector who made use of the money. When a banker had even made this
discovery, he might sometimes make it too late, and might find that he had
already discounted the bills of those projectors to so great an extent,
that, by refusing to discount any more, he would necessarily make them all
bankrupts ; and thus by ruining them, might perhaps ruin himself. For his
own interest and safety, therefore, he might find it necessary, in this very
perilous situation, to go on for some time, endeavouring, however, to
withdraw gradually, and, upon that account, making every day greater and
greater difficulties about discounting, in order to force these projectors
by degrees to have recourse, either to other bankers, or to other methods of
raising money : so as that he himself might, as soon as possible, get out of
the circle. The difficulties, accordingly, which the Bank of England, which
the principal bankers in London, and which even the more prudent Scotch
banks began, after a certain time, and when all of them had already gone too
far, to make about discounting, not only alarmed, but enraged, in the
highest degree, those projectors. Their own distress, of which this prudent
and necessary reserve of the banks was, no doubt, the immediate occasion,
they called the distress of the country ; and this distress of the country,
they said, was altogether owing to the ignorance, pusillanimity, and bad
conduct of the banks, which did not give a sufficiently liberal aid to the
spirited undertakings of those who exerted themselves in order to beautify,
improve, and enrich the country. It was the duty of the banks, they seemed
to think, to lend for as long a time, and to as great an extent, as they
might wish to borrow. The banks, however, by refusing in this manner to
give more credit to those to whom they had already given a great deal too
much, took the only method by which it was now possible to save either their
own credit, or the public credit of the country.
In the midst of this clamour and distress, a new bank was established in
Scotland, for the express purpose of relieving the distress of the country.
The design was generous ; but the execution was imprudent, and the nature
and causes of the distress which it meant to relieve, were not, perhaps,
well understood. This bank was more liberal than any other had ever been,
both in granting cash-accounts, and in discounting bills of exchange. With
regard to the latter, it seems to have made scarce any distinction between
real and circulating bills, but to have discounted all equally. It was the
avowed principle of this bank to advance upon any reasonable security, the
whole capital which was to be employed in those improvements of which the
returns are the most slow and distant, such as the improvements of land. To
promote such improvements was even said to be the chief of the
public-spirited purposes for which it was instituted. By its liberality in
granting cash-accounts, and in discounting bills of exchange, it, no doubt,
issued great quantities of its bank notes. But those bank notes being, the
greater part of them, over and above what the circulation of the country
could easily absorb and employ, returned upon it, in order to be exchanged
for gold and silver, as fast as they were issued. Its coffers were never
well filled. The capital which had been subscribed to this bank, at two
different subscriptions, amounted to one hundred and sixty thousand pounds,
of which eighty per cent. only was paid up. This sum ought to have been paid
in at several different instalments. A great part of the proprietors, when
they paid in their first instalment, opened a cash-account with the bank;
and the directors, thinking themselves obliged to treat their own
proprietors with the same liberality with which they treated all other men,
allowed many of them to borrow upon this cash-account what they paid in upon
all their subsequent instalments. Such payments, therefore, only put into
one coffer what had the moment before been taken out of another. But had the
coffers of this bank been filled ever so well, its excessive circulation
must have emptied them faster than they could have been replenished by any
other expedient but the ruinous one of drawing upon London; and when the
bill became due, paying it, together with interest and commission, by
another draught upon the same place. Its coffers having been filled so very
ill, it is said to have been driven to this resource within a very few
months after it began to do business. The estates of the proprietors of this
bank were worth several millions, and, by their subscription to the original
bond or contract of the bank, were really pledged for answering all its
engagements. By means of the great credit which so great a pledge
necessarily gave it, it was, notwithstanding its too liberal conduct,
enabled to carry on business for more than two years. When it was obliged to
stop, it had in the circulation about two hundred thousand pounds in bank
notes. In order to support the circulation of those notes, which were
continually returning upon it as fast as they were issued, it had been
constantly in the practice of drawing bills of exchange upon London, of
which the number and value were continually increasing, and. when it stopt,
amounted to upwards of six hundred thousand pounds. This bank, therefore,
had, in little more than the course of two years, advanced to different
people upwards of eight hundred thousand pounds at five per cent. Upon the
two hundred thousand pounds which it circulated in bank notes, this five per
cent. might perhaps be considered as a clear gain, without any other
deduction besides the expense of management. But upon upwards of six hundred
thousand pounds, for which it was continually drawing bills of exchange upon
London, it was paying, in the way of interest and commission, upwards of
eight per cent. and was consequently losing more than three per cent. upon
more than three fourths of all its dealings.
The operations of this bank seem to have produced effects quite opposite to
those which were intended by the particular persons who planned and directed
it. They seem to have intended to support the spirited undertakings, for as
such they considered them, which were at that time carrying on in different
parts of the country ; and, at the same time, by drawing the whole banking
business to themselves, to supplant all the other Scotch banks, particularly
those established at Edinburgh, whose backwardness in discounting bills of
exchange had given some offence. This bank, no doubt, gave some temporary
relief to those projectors, and enabled them to carry on their projects for
about two years longer than they could otherwise have done. But it thereby
only enabled them to get so much deeper into debt ; so that, when ruin came,
it fell so much the heavier both upon them and upon their creditors. The
operations of this bank, therefore, instead of relieving, in reality
aggravated in the long-run the distress which those projectors had brought
both upon themselves and upon their country. It would have been much better
for themselves, their creditors, and their country, had the greater part of
them been obliged to stop two years sooner than they actually did. The
temporary relief, however, which this bank afforded to those projectors,
proved a real and permanent relief to the other Scotch banks. All the
dealers in circulating bills of exchange, which those other banks had become
so backward in discounting, had recourse to this new bank, where they were
received with open arms. Those other banks, therefore, were enabled to get
very easily out of that fatal circle, from which they could not otherwise
have disengaged themselves without incurring a considerable loss, and
perhaps, too, even some degree of discredit.
In the long-run, therefore, the operations of this bank increased the real
distress of the country, which it meant to relieve ; and effectually
relieved, from a very great distress, those rivals whom it meant to
supplant.
At the first setting out of this bank, it was the opinion of some people,
that how fast soever its coffers might be emptied, it might easily replenish
them, by raising money upon the securities of those to whom it had advanced
its paper. Experience, I believe, soon convinced them that this method of
raising money was by much too slow to answer their purpose; and that coffers
which originally were so ill filled, and which emptied themselves so very
fast, could be replenished by no other expedient but the ruinous one of
drawing bills upon London, and when they became due, paying them by other
draughts on the same place, with accumulated interest and commission. But
though they had been able by this method to raise money as fast as they
wanted it, yet, instead of making a profit, they must have suffered a loss
of every such operation ; so that in the long-run they must have ruined
themselves as a mercantile company, though perhaps not so soon as by the
more expensive practice of drawing and redrawing. They could still have made
nothing by the interest of the paper, which, being over and above what the
circulation of the country could absorb and employ, returned upon them in
order to be exchanged for gold and silver, as fast as they issued it ; and
for the payment of which they were themselves continually obliged to borrow
money. On the contrary, the whole expense of this borrowing, of employing
agents to look out for people who had money to lend, of negotiating with
those people, and of drawing the proper bond or assignment, must have fallen
upon them, and have been so much clear loss upon the balance of their
accounts. The project of replenishing their coffers in this manner may be
compared to that of a man who had a water-pond from which a stream was
continually running out, and into which no stream was continually running,
but who proposed to keep it always equally full, by employing a number of
people to go continually with buckets to a well at some miles distance, in
order to bring water to replenish it.
But though this operation had proved not only practicable, but profitable to
the bank, as a mercantile company; yet the country could have derived no
benefit front it, but, on the contrary, must have suffered a very
considerable loss by it. This operation could not augment, in the smallest
degree, the quantity of money to be lent. It could only have erected this
bank into a sort of general loan office for the whole country. Those who
wanted to borrow must have applied to this bank, instead of applying to the
private persons who had lent it their money. But a bank which lends money,
perhaps to five hundred different people, the greater part of whom its
directors can know very little about, is not likely to be more judicious in
the choice of its debtors than a private person who lends out his money
among a few people whom he knows, and in whose sober and frugal conduct he
thinks he has good reason to confide. The debtors of such a bank as that
whose conduct I have been giving some account of were likely, the greater
part of them, to be chimerical projectors, the drawers and redrawers of
circulating bills of exchange, who would employ the money in extravagant
undertakings, which, with all the assistance that could be given them, they
would probably never be able to complete, and which, if they should be
completed, would never repay the expense which they had really cost, would
never afford a fund capable of maintaining a quantity of labour equal to
that which had been employed about them. The sober and frugal debtors of
private persons, on the contrary, would be more likely to employ the money
borrowed in sober undertakings which were proportioned to their capitals,
and which, though they might have less of the grand and the marvellous,
would have more of the solid and the profitable ; which would repay with a
large profit whatever had been laid out upon them, and which would thus
afford a fund capable of maintaining a much greater quantity of labour than
that which had been employed about them. The success of this operation,
therefore, without increasing in the smallest degree the capital of the
country, would only have transferred a great part of it from prudent and
profitable to imprudent and unprofitable undertakings.
That the industry of Scotland languished for want of money to employ it, was
the opinion of the famous Mr Law. By establishing a bank of a particular
kind, which he seems to have imagined might issue paper to the amount of the
whole value of all the lands in the country, he proposed to remedy this want
of money. The parliament of Scotland, when he first proposed his project,
did not think proper to adopt it. It was afterwards adopted, with some
variations, by the Duke of Orleans, at that time regent of France. The idea
of the possibility of multiplying paper money to almost any extent was the
real foundation of what is called the Mississippi scheme, the most
extravagant project, both of banking and stock-jobbing, that perhaps the
world ever saw. The different operations of this scheme are explained so
fully, so clearly, and with so much order and distinctness, by Mr Du Verney,
in his Examination of the Political Reflections upon commerce and finances
of Mr Du Tot, that I shall not give any account of them. The principles upon
which it was founded are explained by Mr Law himself, in a discourse
concerning money and trade, which he published in Scotland when he first
proposed his project. The splendid but visionary ideas which are set forth
in that and some other works upon the same principles, still continue to
make an impression upon many people, and have, perhaps, in part, contributed
to that excess of banking, which has of late been complained of, both in
Scotland and in other places.
The Bank of England is the greatest bank of circulation in Europe. It was
incorporated, in pursuance of an act of parliament, by a charter under the
great seal, dated the 27th of July 1694. It at that time advanced to
government the sum of £1,200,000 for an annuity of £100,000, or for £
96,000 a-year, interest at the rate of eight per cent. and £4,000 year for
the expense of management. The credit of the new government, established by
the Revolution, we may believe, must have been very low, when it was obliged
to borrow at so high an interest.
In 1697, the bank was allowed to enlarge its capital stock, by an
ingraftment of £1,001,171:10s. Its whole capital stock, therefore, amounted
at this time to £2,201,171: 10s. This ingraftment is said to have been for
the support of public credit. In 1696, tallies had been at forty, and fifty,
and sixty. per cent. discount, and bank notes at twenty per cent. {James
Postlethwaite's History of the Public Revenue, p.301.} During the great
re-coinage of the silver, which was going on at this time, the bank had
thought proper to discontinue the payment of its notes, which necessarily
occasioned their discredit.
In pursuance of the 7th Anne, c. 7, the bank advanced and paid into the
exchequer the sum of £400,000; making in all the sum of £1,600,000, which
it had advanced upon its original annuity of £96,000 interest, and £4,000
for expense of management. In 1708, therefore, the credit of government was
as good as that of private persons, since it could borrow at six per cent.
interest, the common legal and market rate of those times. In pursuance of
the same act, the bank cancelled exchequer bills to the amount of £
1,775,027: 17s: 10½d. at six per cent. interest, and was at the same time
allowed to take in subscriptions for doubling its capital. In 1703,
therefore, the capital of the bank amounted to £4,402,343 ; and it had
advanced to government the sum of £3,375,027:17:10½d.
By a call of fifteen per cent. in 1709, there was paid in, and made stock, £
656,204:1:9d.; and by another of ten per cent. in 1710, £501,448:12:11d. In
consequence of those two calls, therefore, the bank capital amounted to £
5,559,995:14:8d.
In pursuance of the 3rd George I. c.8, the bank delivered up two millions of
exchequer Bills to be cancelled. It had at this time, therefore, advanced to
government £5,375,027:17 10d. In pursuance of the 8th George I. c.21, the
bank purchased of the South-sea company, stock to the amount of £4,000,000:
and in 1722, in consequence of the subscriptions which it had taken in for
enabling it to make this purchase, its capital stock was increased by £
3,400,000. At this time, therefore, the bank had advanced to the public £
9,375,027 17s. 10½d.; and its capital stock amounted only to £
8,959,995:14:8d. It was upon this occasion that the sum which the bank had
advanced to the public, and for which it received interest, began first to
exceed its capital stock, or the sum for which it paid a dividend to the
proprietors of bank stock ; or, in other words, that the bank began to have
an undivided capital, over and above its divided one. It has continued to
have an undivided capital of the same kind ever since. In 1746, the bank
had, upon different occasions, advanced to the public £11,686,800, and its
divided capital had been raised by different calls and subscriptions to £
10,780,000. The state of those two sums has continued to be the same ever
since. In pursuance of the 4th of George III. c.25, the bank agreed to pay
to government for the renewal of its charter £110,000, without interest or
re-payment. This sum, therefore did not increase either of those two other
sums.
The dividend of the bank has varied according to the variations in the rate
of the interest which it has, at different times, received for the money it
had advanced to the public, as well as according to other circumstances.
This rate of interest has gradually been reduced from eight to three per
cent. For some years past, the bank dividend has been at five and a half per
cent.
The stability of the bank of England is equal to that of the British
government. All that it has advanced to the public must be lost before its
creditors can sustain any loss. No other banking company in England can be
established by act of parliament, or can consist of more than six members.
It acts, not only as an ordinary bank, but as a great engine of state. It
receives and pays the greater part of the annuities which are due to the
creditors of the public ; it circulates exchequer bills ; and it advances to
government the annual amount of the land and malt taxes, which are
frequently not paid up till some years thereafter. In these different
operations, its duty to the public may sometimes have obliged it, without
any fault of its directors, to overstock the circulation with paper money.
It likewise discounts merchants' bills, and has, upon several different
occasions, supported the credit of the principal houses, not only of
England, but of Hamburgh and Holland. Upon one occasion, in 1763, it is said
to have advanced for this purpose, in one week, about £1,600,000, a great
part of it in bullion. I do not, however, pretend to warrant either the
greatness of the sum, or the shortness of the time. Upon other occasions,
this great company has been reduced to the necessity of paying in sixpences.
It is not by augmenting the capital of the country, but by rendering a
greater part of that capital active and productive than would otherwise be
so, that the most judicious operations of banking can increase the industry
of the country. That part of his capital which a dealer is obliged to keep
by him unemployed and in ready money, for answering occasional demands, is
so much dead stock, which, so long as it remains in this situation, produces
nothing, either to him or to his country. The judicious operations of
banking enable him to convert this dead stock into active and productive
stock ; into materials to work upon ; into tools to work with ; and into
provisions and subsistence to work for ; into stock which produces something
both to himself and to his country. The gold and silver money which
circulates in any country, and by means of which, the produce of its land
and labour is annually circulated and distributed to the proper consumers,
is, in the same manner as the ready money of the dealer, all dead stock. It
is a very valuable part of the capital of the country, which produces
nothing to the country. The judicious operations of banking, by substituting
paper in the room of a great part of this gold and silver, enable the
country to convert a great part of this dead stock into active and
productive stock; into stock which produces something to the country. The
gold and silver money which circulates in any country may very properly be
compared to a highway, which, while it circulates and carries to market all
the grass and corn of the country, produces itself not a single pile of
either. The judicious operations of banking, by providing, if I may be
allowed so violent a metaphor, a sort of waggon-way through the air, enable
the country to convert, as it were, a great part of its highways into good
pastures, and corn fields, and thereby to increase, very considerably, the
annual produce of its land and labour. The commerce and industry of the
country, however, it must be acknowledged, though they may be somewhat
augmented, cannot be altogether so secure, when they are thus, as it were,
suspended upon the Daedalian wings of paper money, as when they travel about
upon the solid ground of gold and silver. Over and above the accidents to
which they are exposed from the unskilfulness of the conductors of this
paper money, they are liable to several others, from which no prudence or
skill of those conductors can guard them.
An unsuccessful war, for example, in which the enemy got possession of the
capital, and consequently of that treasure which supported the credit of the
paper money, would occasion a much greater confusion in a country where the
whole circulation was carried on by paper, than in one where the greater
part of it was carried on by gold and silver. The usual instrument of
commerce having lost its value, no exchanges could be made but either by
barter or upon credit. All taxes having been usually paid in paper money,
the prince would not have wherewithal either to pay his troops, or to
furnish his magazines; and the state of the country would be much more
irretrievable than if the greater part of its circulation had consisted in
gold and silver. A prince, anxious to maintain his dominions at all times in
the state in which he can most easily defend them, ought upon this account
to guard not only against that excessive multiplication of paper money which
ruins the very banks which issue it, but even against that multiplication of
it which enables them to fill the greater part of the circulation of the
country with it.
The circulation of every country may be considered as divided into two
different branches; the circulation of the dealers with one another, and the
circulation between the dealers and the consumers. Though the same pieces of
money, whether paper or metal, may be employed sometimes in the one
circulation and sometimes in the other; yet as both are constantly going on
at the same time, each requires a certain stock of money, of one kind or
another, to carry it on. The value of the goods circulated between the
different dealers never can exceed the value of those circulated between the
dealers and the consumers ; whatever is bought by the dealers being
ultimately destined to be sold to the consumers. The circulation between the
dealers, as it is carried on by wholesale, requires generally a pretty large
sum for every particular transaction. That between the dealers and the
consumers, on the contrary, as it is generally carried on by retail,
frequently requires but very small ones, a shilling, or even a halfpenny,
being often sufficient. But small sums circulate much faster than large
ones. A shilling changes masters more frequently than a guinea, and a
halfpenny more frequently than a shilling. Though the annual purchases of
all the consumers, therefore, are at least equal in value to those of all
the dealers, they can generally be transacted with a much smaller quantity
of money ; the same pieces, by a more rapid circulation, serving as the
instrument of many more purchases of the one kind than of the other.
Paper money may be so regulated as either to confine itself very much to the
circulation between the different dealers, or to extend itself likewise to a
great part of that between the dealers and the consumers. Where no bank
notes are circulated under £10 value, as in London, paper money confines
itself very much to the circulation between the dealers. When a ten pound
bank note comes into the hands of a consumer, he is generally obliged to
change it at the first shop where he has occasion to purchase five shillings
worth of goods; so that it often returns into the hands of a dealer before
the consumer has spent the fortieth part of the money. Where bank notes are
issued for so small sums as 20s. as in Scotland, paper money extends itself
to a considerable part of the circulation between dealers and consumers.
Before the Act of parliament which put a stop to the circulation of ten and
five shilling notes, it filled a still greater part of that circulation. In
the currencies of North America, paper was commonly issued for so small a
sum as a shilling, and filled almost the whole of that circulation. In some
paper currencies of Yorkshire, it was issued even for so small a sum as a
sixpence.
Where the issuing of bank notes for such very small sums is allowed, and
commonly practised, many mean people are both enabled and encouraged to
become bankers. A person whose promissory note for £5, or even for 20s.
would be rejected by every body, will get it to be received without scruple
when it is issued for so small a sum as a sixpence. But the frequent
bankruptcies to which such beggarly bankers must be liable, may occasion a
very considerable inconveniency, and sometimes even a very great calamity,
to many poor people who had received their notes in payment.
It were better, perhaps, that no bank notes were issued in any part of the
kingdom for a smaller sum than £5. Paper money would then, probably, confine
itself, in every part of the kingdom, to the circulation between the
different dealers, as much as it does at present in London, where no bank
notes are issued under £10 value ; £5 being, in most part of the kingdom,
a sum which, though it will purchase, perhaps, little more than half the
quantity of goods, is as much considered, and is as seldom spent all at
once, as £10 are amidst the profuse expense of London.
Where paper money, it is to be observed, is pretty much confined to the
circulation between dealers and dealers, as at London, there is always
plenty of gold and silver. Where it extends itself to a considerable part of
the circulation between dealers and consumers, as in Scotland, and still
more in North America, it banishes gold and silver almost entirely from the
country ; almost all the ordinary transactions of its interior commerce
being thus carried on by paper. The suppression of ten and five shilling
bank notes, somewhat relieved the scarcity of gold and. silver in Scotland;
and the suppression of twenty shilling notes will probably relieve it still
more. Those metals are said to have become more abundant in America, since
the suppression of some of their paper currencies. They are said, likewise,
to have been more abundant before the institution of those currencies.
Though paper money should be pretty much confined to the circulation between
dealers and dealers, yet banks and bankers might still be able to give
nearly the same assistance to the industry and commerce of the country, as
they had done when paper money filled almost the whole circulation. The
ready money which a dealer is obliged to keep by him, for answering
occasional demands, is destined altogether for the circulation between
himself and other dealers of whom he buys goods. He has no occasion to keep
any by him for the circulation between himself and the consumers, who are
his customers, and who bring ready money to him, instead of taking any from
him. Though no paper money, therefore, was allowed to be issued, but for
such sums as would confine it pretty much to the circulation between dealers
and dealers; yet partly by discounting real bills of exchange, and partly by
lending upon cash-accounts, banks and bankers might still be able to relieve
the greater part of those dealers from the necessity of keeping any
considerable part of their stock by them unemployed, and in ready money, for
answering occasional demands. They might still be able to give the utmost
assistance which banks and bankers can with propriety give to traders of
every kind.
To restrain private people, it may be said, from receiving in payment the
promissory notes of a banker for any sum, whether great or small, when they
themselves are willing to receive them; or, to restrain a banker from
issuing such notes, when all his neighbours are willing to accept of them,
is a manifest violation of that natural liberty, which it is the proper
business of law not to infringe, but to support. Such regulations may, no
doubt, be considered as in some respect a violation of natural liberty. But
those exertions of the natural liberty of a few individuals, which might
endanger the security of the whole society, are, and ought to be, restrained
by the laws of all governments ; of the most free, as well as or the most
despotical. The obligation of building party walls, in order to prevent the
communication of fire, is a violation of natural liberty, exactly of the
same kind with the regulations of the banking trade which are here proposed.
A paper money, consisting in bank notes, issued by people of undoubted
credit, payable upon demand, without any condition, and, in fact, always
readily paid as soon as presented, is, in every respect, equal in value to
gold and silver money, since gold and silver money can at anytime be had for
it. Whatever is either bought or sold for such paper, must necessarily be
bought or sold as cheap as it could have been for gold and silver.
The increase of paper money, it has been said, by augmenting the quantity,
and consequently diminishing the value, of the whole currency, necessarily
augments the money price of commodities. But as the quantity of gold and
silver, which is taken from the currency, is always equal to the quantity of
paper which is added to it, paper money does not necessarily increase the
quantity of the whole currency. From the beginning of the last century to
the present time, provisions never were cheaper in Scotland than in 1759,
though, from the circulation of ten and five shilling bank notes, there was
then more paper money in the country than at present. The proportion
between the price of provisions in Scotland and that in England is the same
now as before the great multiplication of banking companies in Scotland.
Corn is, upon most occasions, fully as cheap in England as in France, though
there is a great deal of paper money in England, and scarce any in France.
In 1751 and 1752, when Mr Hume published his Political Discourses, and soon
after the great multiplication of paper money in Scotland, there was a very
sensible rise in the price of provisions, owing, probably, to the badness of
the seasons, and not to the multiplication of paper money.
It would be otherwise, indeed, with a paper money, consisting in promissory
notes, of which the immediate payment depended, in any respect, either upon
the good will of those who issued them, or upon a condition which the holder
of the notes might not always have it in his power to fulfil, or of which
the payment was not exigible till after a certain number of years, and
which, in the mean time, bore no interest. Such a paper money would, no
doubt, fall more or less below the value of gold and silver, according as
the difficulty or uncertainty of obtaining immediate payment was supposed to
be greater or less, or according to the greater or less distance of time at
which payment was exigible.
Some years ago the different banking companies of Scotland were in the
practice of inserting into their bank notes, what they called an optional
clause; by which they promised payment to the bearer, either as soon as the
note should be presented, or, in the option of the directors, six months
after such presentment, together with the legal interest for the said six
months. The directors of some of those banks sometimes took advantage of
this optional clause, and sometimes threatened those who demanded gold and
silver in exchange for a considerable number of their notes, that they would
take advantage of it, unless such demanders would content themselves with a
part of what they demanded. The promissory notes of those banking companies
constituted, at that time, the far greater part of the currency of Scotland,
which this uncertainty of payment necessarily degraded below value of gold
and silver money. During the continuance of this abuse (which prevailed
chiefly in 1762, 1763, and 1764), while the exchange between London and
Carlisle was at par, that between London and Dumfries would sometimes be
four per cent. against Dumfries, though this town is not thirty miles
distant from Carlisle. But at Carlisle, bills were paid in gold and
silver ; whereas at Dumfries they were paid in Scotch bank notes ; and the
uncertainty of getting these bank notes exchanged for gold and silver coin,
had thus degraded them four per cent. below the value of that coin. The same
act of parliament which suppressed ten and five shilling bank notes,
suppressed likewise this optional clause, and thereby restored the exchange
between England and Scotland to its natural rate, or to what the course of
trade and remittances might happen to make it.
In the paper currencies of Yorkshire, the payment of so small a sum as 6d.
sometimes depended upon the condition, that the holder of the note should
bring the change of a guinea to the person who issued it; a condition which
the holders of such notes might frequently find it very difficult to fulfil,
and which must have degraded this currency below the value of gold and
silver money. An act of parliament, accordingly, declared all such clauses
unlawful, and suppressed, in the same manner as in Scotland, all promissory
notes, payable to the bearer, under 20s. value.
The paper currencies of North America consisted, not in bank notes payable
to the bearer on demand, but in a government paper, of which the payment was
not exigible till several years after it was issued ; and though the colony
governments paid no interest to the holders of this paper, they declared it
to be, and in fact rendered it, a legal tender of payment for the full value
for which it was issued. But allowing the colony security to be perfectly
good, £100, payable fifteen years hence, for example, in a country where
interest is at six per cent., is worth little more than £40 ready money. ,
To oblige a creditor, therefore, to accept of this as full payment for a
debt of £100, actually paid down in ready money, was an act of such violent
injustice, as has scarce, perhaps, been attempted by the government of any
other country which pretended to be free. It bears the evident marks of
having originally been, what the honest and downright Doctor Douglas assures
us it was, a scheme of fraudulent debtors to cheat their creditors. The
government of Pennsylvania, indeed, pretended, upon their first emission of
paper money, in 1722, to render their paper of equal value with gold and
silver, by enacting penalties against all those who made any difference in
the price of their goods when they sold them for a colony paper, and when
they sold them for gold and silver, a regulation equally tyrannical, but
much less, effectual, than that which it was meant to support. A positive
law may render a shilling a legal tender for a guinea, because it may direct
the courts of justice to discharge the debtor who has made that tender ; but
no positive law can oblige a person who sells goods, and who is at liberty
to sell or not to sell as he pleases, to accept of a shilling as equivalent
to a guinea in the price of them. Notwithstanding any regulation of this
kind, it appeared, by the course of exchange with Great Britain, that £100
sterling was occasionally considered as equivalent, in some of the colonies,
to £130, and in others to so great a sum as £1100 currency ; this difference
in the value arising from the difference in the quantity of paper emitted in
the different colonies, and in the distance and probability of the term of
its final discharge and redemption.
No law, therefore, could be more equitable than the act of parliament, so
unjustly complained of in the colonies, which declared, that no paper
currency to be emitted there in time coming, should be a legal tender of
payment.
Pennsylvania was always more moderate in its emissions of paper money than
any other of our colonies. Its paper currency, accordingly, is said never to
have sunk below the value of the gold and silver which was current in the
colony before the first emission of its paper money. Before that emission,
the colony had raised the denomination of its coin, and had, by act of
assembly, ordered 5s. sterling to pass in the colonies for 6s:3d., and
afterwards for 6s:8d. A pound, colony currency, therefore, even when that
currency was gold and silver, was more than thirty per cent. below the value
of £1 sterling; and when that currency was turned into paper, it was seldom
much more than thirty per cent. below that value. The pretence for raising
the denomination of the coin was to prevent the exportation of gold and
silver, by making equal quantities of those metals pass for greater sums in
the colony than they did in the mother country. It was found, however, that
the price of all goods from the mother country rose exactly in proportion as
they raised the denomination of their coin, so that their gold and silver
were exported as fast as ever.
The paper of each colony being received in the payment of the provincial
taxes, for the full value for which it had been issued, it necessarily
derived from this use some additional value, over and above what it would
have had, from the real or supposed distance of the term of its final
discharge and redemption. This additional value was greater or less,
according as the quantity of paper issued was more or less above what could
be employed in the payment of the taxes of the particular colony which
issued it. It was in all the colonies very much above what could be employed
in this manner.
A prince, who should enact that a certain proportion of his taxes should be
paid in a paper money of a certain kind, might thereby . give a certain
value to this paper money, even though the term of its final discharge and
redemption should depend altogether upon the will of the prince. If the bank
which issued this paper was careful to keep the quantity of it always
somewhat below what could easily be employed in this manner, the demand for
it might be such as to make it even bear a premium, or sell for somewhat more
in the market than the quantity of gold or silver currency for which it
was issued. Some people account in this manner for what is called the agio
of the bank of Amsterdam, or for the superiority of bank money over
current money, though this bank money, as they pretend, cannot be taken
out of the bank at the will of the owner. The greater part of foreign bills
of exchange must be paid in bank money, that is, by a transfer in the
books of the bank ; and the directors of the bank, they allege, are
careful to keep the whole quantity of bank money always below what this
use occasions a demand for. It is upon this account, they say, the bank
money sells for a premium, or bears an agio of four or five per cent. above
the same nominal sum of the gold and silver currency of the country. This
account of the bank of Amsterdam, however, it will appear hereafter, is in a
great measure chimerical.
A paper currency which falls below the value of gold and silver coin, does
not thereby sink the value of those metals, or occasion equal quantities of
them to exchange for a smaller quantity of goods of any other kind. The
proportion between the value of gold and silver and that of goods of any
other kind, depends in all cases, not upon the nature and quantity of any
particular paper money, which may be current in any particular country, but
upon the richness or poverty of the mines, which happen at any particular
time to supply the great market of the commercial world with those metals.
It depends upon the proportion between the quantity of labour which is
necessary in order to bring a certain quantity of gold and silver to market,
and that which is necessary in order to bring thither a certain quantity of
any other sort of goods.
If bankers are restrained from issuing any circulating bank notes, or notes
payable to the bearer, for less than a certain sum; and if they are
subjected to the obligation of an immediate and unconditional payment of
such bank notes as soon as presented, their trade may, with safety to the
public, be rendered in all other respects perfectly free. The late
multiplication of banking companies in both parts of the united kingdom, an
event by which many people have been much alarmed, instead of diminishing,
increases the security of the public. It obliges all of them to be more
circumspect in their conduct, and, by not extending their currency beyond
its due proportion to their cash, to guard themselves against those
malicious runs, which the rivalship of so many competitors is always ready
to bring upon them. It restrains the circulation of each particular company
within a narrower circle, and reduces their circulating notes to a smaller
number. By dividing the whole circulation into a greater number of parts,
the failure of any one company, an accident which, in the course of things,
must sometimes happen, becomes of less consequence to the public. This free
competition, too, obliges all bankers to be more liberal in their dealings
with their customers, lest their rivals should carry them away. In general,
if any branch of trade, or any division of labour, be advantageous to the
public, the freer and more general the competition, it will always be the
more so.
CHAPTER III.
OF THE ACCUMULATION OF CAPITAL, OR OF
PRODUCTIVE AND UNPRODUCTIVE LABOUR.
There is one sort of labour which adds to the value of the subject upon
which it is bestowed ; there is another which has no such effect. The former
as it produces a value, may be called productive, the latter, unproductive
labour. { Some French authors of great learning and ingenuity have used
those words in a different sense. In the last chapter of the fourth book, I
shall endeavour to shew that their sense is an improper one.} Thus the labour
of a manufacturer adds generally to the value of the materials which he
works upon, that of his own maintenance, and of his master's profit. The
labour of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master, he in
reality costs him no expense, the value of those wages being generally
restored, together with a profit, in the improved value of the subject upon
which his labour is bestowed. But the maintenance of a menial servant never
is restored. A man grows rich by employing a multitude of manufacturers ;
he grows poor by maintaining a multitude or menial servants. The labour of
the latter, however, has its value, and deserves its reward as well as that
of the former. But the labour of the manufacturer fixes and realizes itself
in some particular subject or vendible commodity, which lasts for some time
at least after that labour is past. It is, as it were, a certain quantity of
labour stocked and stored up, to be employed, if necessary, upon some other
occasion. That subject, or, what is the same thing, the price of that
subject, can afterwards, if necessary, put into motion a quantity of labour
equal to that which had originally produced it. The labour of the menial
servant, on the contrary, does not fix or realize itself in any particular
subject or vendible commodity. His services generally perish in the very
instant of their performance, and seldom leave any trace of value behind
them, for which an equal quantity of service could afterwards be procured.
The labour of some of the most respectable orders in the society is, like
that of menial servants, unproductive of any value, and does not fix or
realize itself in any permanent subject, or vendible commodity, which
endures after that labour is past, and for which an equal quantity of labour
could afterwards be procured. The sovereign, for example, with all the
officers both of justice and war who serve under him, the whole army and
navy, are unproductive labourers. They are the servants of the public, and
are maintained by a part of the annual produce of the industry of other
people. Their service, how honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of service can afterwards be
procured. The protection, security, and defence, of the commonwealth, the
effect of their labour this year, will not purchase its protection,
security, and defence, for the year to come. In the same class must be
ranked, some both of the gravest and most important, and some of the most
frivolous professions; churchmen, lawyers, physicians, men of letters of all
kinds ; players, buffoons, musicians, opera-singers, opera-dancers, etc.
The labour of the meanest of these has a certain value, regulated by the
very same principles which regulate that of every other sort of labour; and
that of the noblest and most useful, produces nothing which could afterwards
purchase or procure an equal quantity of labour. Like the declamation of the
actor, the harangue of the orator, or the tune of the musician, the work of
all of them perishes in the very instant of its production.
Both productive and unproductive labourers, and those who do not labour at
all, are all equally maintained by the annual produce of the land and labour
of the country. This produce, how great soever, can never be infinite, but
must have certain limits. According, therefore, as a smaller or greater
proportion of it is in any one year employed in maintaining unproductive
hands, the more in the one case, and the less in the other, will remain for
the productive, and the next year's produce will be greater or smaller
accordingly ; the whole annual produce, if we except the spontaneous
productions of the earth, being the effect of productive labour.
Though the whole annual produce of the land and labour of every country is
no doubt ultimately destined for supplying the consumption of its
inhabitants, and for procuring a revenue to them; yet when it first comes
either from the ground, or from the hands of the productive labourers, it
naturally divides itself into two parts. One of them, and frequently the
largest, is, in the first place, destined for replacing a capital, or for
renewing the provisions, materials, and finished work, which had been
withdrawn from a capital ; the other for constituting a revenue either to
the owner of this capital, as the profit of his stock, or to some other
person, as the rent of his land. Thus, of the produce of land, one part
replaces the capital of the farmer ; the other pays his profit and the rent
of the landlord ; and thus constitutes a revenue both to the owner of this
capital, as the profits of his stock, and to some other person as the rent
of his land. Of the produce of a great manufactory, in the same manner, one
part, and that always the largest, replaces the capital of the undertaker of
the work ; the other pays his profit, and thus constitutes a revenue to the
owner of this capital.
That part of the annual produce of the land and labour of any country which
replaces a capital, never is immediately employed to maintain any but
productive hands. It pays the wages of productive labour only. That which is
immediately destined for constituting a revenue, either as profit or as
rent, may maintain indifferently either productive or unproductive hands.
Whatever part of his stock a man employs as a capital, he always expects it
to be replaced to him with a profit. He employs it, therefore, in
maintaining productive hands only ; and after having served in the function
of a capital to him, it constitutes a revenue to them. Whenever he employs
any part of it in maintaining unproductive hands of any kind, that part is
from that moment withdrawn from his capital, and placed in his stock
reserved for immediate consumption.
Unproductive labourers, and those who do not labour at all, are all
maintained by revenue; either, first, by that part of the annual produce
which is originally destined for constituting a revenue to some particular
persons, either as the rent of land, or as the profits of stock ; or,
secondly, by that part which, though originally destined for replacing a
capital, and for maintaining productive labourers only, yet when it comes
into their hands, whatever part of it is over and above their necessary
subsistence, may be employed in maintaining indifferently either productive
or unproductive hands. Thus, not only the great landlord or the rich
merchant, but even the common workman, if his wages are considerable, may
maintain a menial servant; or he may sometimes go to a play or a
puppet-show, and so contribute his share towards maintaining one set of
unproductive labourers; or he may pay some taxes, and thus help to maintain
another set, more honourable and useful, indeed, but equally unproductive.
No part of the annual produce, however, which had been originally destined
to replace a capital, is ever directed towards maintaining unproductive
hands, till after it has put into motion its full complement of productive
labour, or all that it could put into motion in the way in which it was
employed. The workman must have earned his wages by work done, before he can
employ any part of them in this manner. That part, too, is generally but a
small one. It is his spare revenue only, of which productive labourers have
seldom a great deal. They generally have some, however ; and in the payment
of taxes, the greatness of their number may compensate, in some measure, the
smallness of their contribution. The rent of land and the profits of stock
are everywhere, therefore, the principal sources from which unproductive
hands derive their subsistence. These are the two sorts of revenue of which
the owners have generally most to spare. They might both maintain
indifferently, either productive or unproductive hands. They seem, however,
to have some predilection for the latter. The expense of a great lord feeds
generally more idle than industrious people The rich merchant, though with
his capital he maintains industrious people only, yet by his expense, that
is, by the employment of his revenue, he feeds commonly the very same sort
as the great lord.
The proportion, therefore, between the productive and unproductive hands,
depends very much in every country upon the proportion between that part of
the annual produce, which, as soon as it comes either from the ground, or
from the hands of the productive labourers, is destined for replacing a
capital, and that which is destined for constituting a revenue, either as
rent or as profit. This proportion is very different in rich from what it is
in poor countries.
Thus, at present, in the opulent countries of Europe, a very large,
frequently the largest, portion of the produce of the land, is destined for
replacing the capital of the rich and independent farmer ; the other for
paying his profits, and the rent of the landlord. But anciently, during the
prevalency of the feudal government, a very small portion of the produce was
sufficient to replace the capital employed in cultivation. It consisted
commonly in a few wretched cattle, maintained altogether by the spontaneous
produce of uncultivated land, and which might, therefore, be considered as a
part of that spontaneous produce. It generally, too, belonged to the
landlord, and was by him advanced to the occupiers of the land. All the rest
of the produce properly belonged to him too, either as rent for his land, or
as profit upon this paltry capital. The occupiers of land were generally
bond-men, whose persons and effects were equally his property. Those who were
not bond-men were tenants at will; and though the rent which they paid was
often nominally little more than a quit-rent, it really amounted to the
whole produce of the land. Their lord could at all times command their
labour in peace and their service in war. Though they lived at a distance
from his house, they were equally dependent upon him as his retainers who
lived in it. But the whole produce of the land undoubtedly belongs to him,
who can dispose of the labour and service of all those whom it maintains. In
the present state of Europe, the share of the landlord seldom exceeds a
third, sometimes not a fourth part of the whole produce of the land. The
rent of land, however, in all the improved parts of the country, has been
tripled and quadrupled since those ancient times; and this third or fourth
part of the annual produce is, it seems, three or four times greater than
the whole had been before. In the progress of improvement, rent, though it
increases in proportion to the extent, diminishes in proportion to the
produce of the land.
In the opulent countries of Europe, great capitals are at present employed
in trade and manufactures. In the ancient state, the little trade that was
stirring, and the few homely and coarse manufactures that were carried on,
required but very small capitals. These, however, must have yielded very
large profits. The rate of interest was nowhere less than ten per cent. and
their profits must have been sufficient to afford this great interest. At
present, the rate of interest, in the improved parts of Europe, is nowhere
higher than six per cent.; and in some of the most improved, it is so low as
four, three, and two per cent. Though that part of the revenue of the
inhabitants which is derived from the profits of stock, is always much
greater in rich than in poor countries, it is because the stock is much
greater ; in proportion to the stock, the profits are generally much less.
That part of the annual produce, therefore, which, as soon as it comes
either from the ground, or from the hands of the productive labourers, is
destined for replacing a capital, is not only much greater in rich than in
poor countries, but bears a much greater proportion to that which is
immediately destined for constituting a revenue either as rent or as profit.
The funds destined for the maintenance of productive labour are not only
much greater in the former than in the latter, but bear a much greater
proportion to those which, though they may be employed to maintain either
productive or unproductive hands, have generally a predilection for the
latter.
The proportion between those different funds necessarily determines in every
country the general character of the inhabitants as to industry or idleness.
We are more industrious than our forefathers, because, in the present times,
the funds destined for the maintenance of industry are much greater in
proportion to those which are likely to be employed in the maintenance of
idleness, than they were two or three centuries ago. Our ancestors were idle
for want of a sufficient encouragement to industry. It is better, says the
proverb, to play for nothing, than to work for nothing. In mercantile
and manufacturing towns, where the inferior ranks of people are chiefly
maintained by the employment of capital, they are in general industrious,
sober, and thriving; as in many English, and in most Dutch towns. In those
towns which are principally supported by the constant or occasional
residence of a court, and in which the inferior ranks of people are chiefly
maintained by the spending of revenue, they are in general idle, dissolute,
and poor; as at Rome, Versailles, Compeigne, and Fontainbleau. If you except
Rouen and Bourdeaux, there is little trade or industry in any of the
parliament towns of France; and the inferior ranks of people, being chiefly
maintained by the expense of the members of the courts of justice, and of
those who come to plead before them, are in general idle and poor. The great
trade of Rouen and Bourdeaux seems to be altogether the effect of their
situation. Rouen is necessarily the entrepot of almost all the goods which
are brought either from foreign countries, or from the maritime provinces of
France, for the consumption of the great city of Paris. Bourdeaux is, in the
same manner, the entrepot of the wines which grow upon the banks of the
Garronne, and of the rivers which run into it, one of the richest wine
countries in the world, and which seems to produce the wine fittest for
exportation, or best suited to the taste of foreign nations. Such
advantageous situations necessarily attract a great capital by the great
employment which they afford it ; and the employment of this capital is the
cause of the industry of those two cities. In the other parliament towns
of France, very little more capital seems to be employed than what is
necessary for supplying their own consumption; that is, little more than the
smallest capital which can be employed in them. The same thing may be said
of Paris, Madrid, and Vienna. Of those three cities, Paris is by far the
most industrious, but Paris itself is the principal market of all the
manufactures established at Paris, and its own consumption is the principal
object of all the trade which it carries on. London, Lisbon, and Copenhagen,
are, perhaps, the only three cities in Europe, which are both the constant
residence of a court, and can at the same time be considered as trading
cities, or as cities which trade not only for their own consumption, but for
that of other cities and countries. The situation of all the three is
extremely advantageous, and naturally fits them to be the entrepots of a
great part of the goods destined for the consumption of distant places. In a
city where a great revenue is spent, to employ with advantage a capital for
any other purpose than for supplying the consumption of that city, is
probably more difficult than in one in which the inferior ranks of people
have no other maintenance but what they derive from the employment of such a
capital. The idleness of the greater part of the people who are maintained
by the expense of revenue, corrupts, it is probable, the industry of those
who ought to be maintained by the employment of capital, and renders it less
advantageous to employ a capital there than in other places. There was
little trade or industry in Edinburgh before the Union. When the Scotch
parliament was no longer to be assembled in it, when it ceased to be the
necessary residence of the principal nobility and gentry of Scotland, it
became a city of some trade and industry. It still continues, however, to
be the residence of the principal courts of justice in Scotland, of the
boards of customs and excise, etc. A considerable revenue, therefore, still
continues to be spent in it. In trade and industry, it is much inferior to
Glasgow, of which the inhabitants are chiefly maintained by the employment
of capital. The inhabitants of a large village, it has sometimes been
observed, after having made considerable progress in manufactures, have
become idle and poor, in consequence of a great lord's having taken up his
residence in their neighbourhood.
The proportion between capital and revenue, therefore, seems everywhere to
regulate the proportion between industry and idleness Wherever capital
predominates, industry prevails ; wherever revenue, idleness. Every increase
or diminution of capital, therefore, naturally tends to increase or diminish
the real quantity of industry, the number of productive hands, and
consequently the exchangeable value of the annual produce of the land and
labour of the country, the real wealth and revenue of all its inhabitants.
Capitals are increased by parsimony, and diminished by prodigality and
misconduct.
Whatever a person saves from his revenue he adds to his capital, and either
employs it himself in maintaining an additional number of productive hands,
or enables some other person to do so, by lending it to him for an interest,
that is, for a share of the profits. As the capital of an individual can be
increased only by what he saves from his annual revenue or his annual gains,
so the capital of a society, which is the same with that of all the
individuals who compose it, can be increased only in the same manner.
Parsimony, and not industry, is the immediate cause of the increase of
capital. Industry, indeed, provides the subject which parsimony accumulates;
but whatever industry might acquire, if parsimony did not save and store up,
the capital would never be the greater.
Parsimony, by increasing the fund which is destined for the maintenance of
productive hands, tends to increase the number of those hands whose labour
adds to the value of the subject upon winch it is bestowed. It tends,
therefore, to increase the exchangeable value of the annual produce of the
land and labour of the country. It puts into motion an additional quantity
of industry, which gives an additional value to the annual produce.
What is annually saved, is as regularly consumed as what is annually spent,
and nearly in the same time too : but it is consumed by a different set of
people. That portion of his revenue which a rich man annually spends, is, in
most cases, consumed by idle guests and menial servants, who leave nothing
behind them in return for their consumption. That portion which he annually
saves, as, for the sake of the profit, it is immediately employed as a
capital, is consumed in the same manner, and nearly in the same time too,
but by a different set of people: by labourers, manufacturers, and
artificers, who reproduce, with a profit, the value of their annual
consumption. His revenue, we shall suppose, is paid him in money. Had he
spent the whole, the food, clothing, and lodging, which the whole could have
purchased, would have been distributed among the former set of people. By
saving a part of it, as that part is, for the sake of the profit,
immediately employed as a capital, either by himself or by some other
person, the food, clothing, and lodging, which may be purchased with it, are
necessarily reserved for the latter. The consumption is the same, but the
consumers are different.
By what a frugal man annually saves, he not only affords maintenance to an
additional number of productive hands, for that of the ensuing year, but
like the founder of a public work-house he establishes, as it were, a
perpetual fund for the maintenance of an equal number in all times to come.
The perpetual allotment and destination of this fund, indeed, is not always
guarded by any positive law, by any trust-right or deed of mortmain. It is
always guarded, however, by a very powerful principle, the plain and evident
interest of every individual to whom any share of it shall ever belong. No
part of it can ever afterwards be employed to maintain any but productive
hands, without an evident loss to the person who thus perverts it from its
proper destination.
The prodigal perverts it in this manner: By not confining his expense within
his income, he encroaches upon his capital. Like him who perverts the
revenues of some pious foundation to profane purposes, he pays the wages of
idleness with those funds which the frugality of his forefathers had, as it
were, consecrated to the maintenance of industry. By diminishing the funds
destined for the employment of productive labour, he necessarily diminishes,
so far as it depends upon him, the quantity of that labour which adds a
value to the subject upon which it is bestowed, and, consequently, the value
of the annual produce of the land and labour of the whole country, the real
wealth and revenue of its inhabitants. If the prodigality of some were not
compensated by the frugality of others, the conduct of every prodigal, by
feeding the idle with the bread of the industrious, would tend not only to
beggar himself, but to impoverish his country.
Though the expense of the prodigal should be altogether in home made, and no
part of it in foreign commodities, its effect upon the productive funds of
the society would still be the same. Every year there would still be a
certain quantity of food and clothing, which ought to have maintained
productive, employed in maintaining unproductive hands. Every year,
therefore, there would still be some diminution in what would otherwise have
been the value of the annual produce of the land and labour of the country.
This expense, it may be said, indeed, not being in foreign goods, and not
occasioning any exportation of gold and silver, the same quantity of money
would remain in the country as before. But if the quantity of food and
clothing which were thus consumed by unproductive, had been distributed
among productive hands, they would have reproduced, together with a profit,
the full value of their consumption. The same quantity of money would, in
this case, equally have remained in the country, and there would, besides,
have been a reproduction of an equal value of consumable goods. There would
have been two values instead of one.
The same quantity of money, besides, can. not long remain in any country in
which the value of the annual produce diminishes. The sole use of money is
to circulate consumable goods. By means of it, provisions, materials, and
finished work, are bought and sold, and distributed to their proper
consumers. The quantity of money, therefore, which can be annually employed
in any country, must be determined by the value of the consumable goods
annually circulated within it. These must consist, either in the immediate
produce of the land and labour of the country itself, or in something which
had been purchased with some part of that produce. Their value, therefore,
must diminish as the value of that produce diminishes, and along with it the
quantity of money which can be employed in circulating them. But the money
which, by this annual diminution of produce, is annually thrown out of
domestic circulation, will not be allowed to lie idle. The interest of
whoever possesses it requires that it should be employed; but having no
employment at home, it will, in spite of all laws and prohibitions, be sent
abroad, and employed in purchasing consumable goods, which may be of some
use at home. Its annual exportation will, in this manner, continue for some
time to add something to the annual consumption of the country beyond the
value of its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and silver.
will contribute, for some little time, to support its consumption in
adversity. The exportation of gold and silver is, in this case, not the
cause, but the effect of its declension, and may even, for some little time,
alleviate the misery of that declension.
The quantity of money, on the contrary, must in every country naturally
increase as the value of the annual produce increases. The value of the
consumable goods annually circulated within the society being greater, will
require a greater quantity of money to circulate them. A part of the
increased produce, therefore, will naturally be employed in purchasing,
wherever it is to be had, the additional quantity of gold and silver
necessary for circulating the rest. The increase of those metals will, in
this case, be the effect, not the cause, of the public prosperity. Gold and
silver are purchased everywhere in the same manner. The food, clothing, and
lodging, the revenue and maintenance, of all those whose labour or stock is
employed in bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this price to pay,
will never belong without the quantity of those metals which it has occasion
for; and no country will ever long retain a quantity which it has no
occasion for.
Whatever, therefore, we may imagine the real wealth and revenue of a country
to consist in, whether in the value of the annual produce of its land and
labour, as plain reason seems to dictate, or in the quantity of the precious
metals which circulate within it, as vulgar prejudices suppose ; in either
view of the matter, every prodigal appears to be a public enemy, and every
frugal man a public benefactor.
The effects of misconduct are often the same as those of prodigality. Every
injudicious and unsuccessful project in agriculture, mines, fisheries,
trade, or manufactures, tends in the same manner to diminish the funds
destined for the maintenance of productive labour. In every such project,
though the capital is consumed by productive hands only, yet as, by the
injudicious manner in which they are employed, they do not reproduce the
full value of their consumption, there must always be some diminution in
what would otherwise have been the productive funds of the society.
It can seldom happen, indeed, that the circumstances of a great nation can
be much affected either by the prodigality or misconduct of individuals; the
profusion or imprudence of some being always more than compensated by the
frugality and good conduct of others.
With regard to profusion, the principle which prompts to expense is the
passion for present enjoyment; which, though sometimes violent and very
difficult to be restrained, is in general only momentary and occasional. But
the principle which prompts to save, is the desire of bettering our condition; a desire
which, though generally calm and dispassionate, comes with us from the womb,
and never leaves us till we go into the grave. In the whole interval which
separates those two moments, there is scarce, perhaps, a single instance, in
which any man is so perfectly and completely satisfied with his situation,
as to be without any wish of alteration or improvement of any kind. An
augmentation of fortune is the means by which the greater part of men
propose and wish to better their condition. It is the means the most vulgar
and the most obvious; and the most likely way of augmenting their fortune,
is to save and accumulate some part of what they acquire, either regularly
and annually, or upon some extraordinary occasion. Though the principle
of expense, therefore, prevails in almost all men upon some occasions, and in
some men upon almost all occasions ; yet in the greater part of men, taking
the whole course of their life at an average, the principle of frugality
seems not only to predominate, but to predominate very greatly.
With regard to misconduct, the number of prudent and successful undertakings
is everywhere much greater than that of injudicious and unsuccessful ones.
After all our complaints of the frequency of bankruptcies, the unhappy men
who fall into this misfortune, make but a very small part of the whole
number engaged in trade, and all other sorts of business; not much more,
perhaps, than one in a thousand. Bankruptcy is, perhaps, the greatest and
most humiliating calamity which can befal an innocent man. The greater part
of men, therefore, are sufficiently careful to avoid it. Some, indeed, do
not avoid it; as some do not avoid the gallows.
Great nations are never impoverished by private, though they sometimes are
by public prodigality and misconduct. The whole, or almost the whole public
revenue is, in most countries, employed in maintaining unproductive hands.
Such are the people who compose a numerous and splendid court, a great
ecclesiastical establishment, great fleets and armies, who in time of peace
produce nothing, and in time of war acquire nothing which can compensate the
expense of maintaining them, even while the war lasts. Such people, as they
themselves produce nothing, are all maintained by the produce of other men's
labour. When multiplied, therefore, to an unnecessary number, they may in a
particular year consume so great a share of this produce, as not to leave a
sufficiency for maintaining the productive labourers, who should reproduce
it next year. The next year's produce, therefore, will be less than that of
the foregoing ; and if the same disorder should continue, that of the third
year will be still less than that of the second. Those unproductive hands
who should be maintained by a part only of the spare revenue of the people,
may consume so great a share of their whole revenue, and thereby oblige so
great a number to encroach upon their capitals, upon the funds destined for
the maintenance of productive labour, that all the frugality and good
conduct of individuals may not be able to compensate the waste and
degradation of produce occasioned by this violent and forced encroachment.
This frugality and good conduct, however, is, upon most occasions, it
appears from experience, sufficient to compensate, not only the private
prodigality and misconduct of individuals, but the public extravagance of
government. The uniform, constant, and uninterrupted effort of every man to
better his condition, the principle from which public and national, as well
as private opulence is originally derived,is frequently powerful enough to
maintain the natural progress of things towards improvement, in spite both
of the extravagance of government, and of the greatest errors of
administration. Like the unknown principle of animal life, it frequently
restores health and vigour to the constitution, in spite not only of the
disease, but of the absurd prescriptions of the doctor.
The annual produce of the land and labour of any nation can be increased in
its value by no other means, but by increasing either the number of its
productive labourers, or the productive powers of those labourers who had
before been employed. The number of its productive labourers, it is evident,
can never be much increased, but in consequence of an increase of capital,
or of the funds destined for maintaining them. The productive powers of the
same number of labourers cannot be increased, but in consequence either of
some addition and improvement to those machines and instruments which
facilitate and abridge labour, or of more proper division and distribution
of employment. In either case, an additional capital is almost always
required. It is by means of an additional capital only, that the undertaker
of any work can either provide his workmen with better machinery, or make a
more proper distribution of employment among them. When the work to be done
consists of a number of parts, to keep every man constantly employed in one
way, requires a much greater capital than where every man is occasionally
employed in every different part of the work. When we compare, therefore,
the state of a nation at two different periods, and find that the annual
produce of its land and labour is evidently greater at the latter than at
the former, that its lands are better cultivated, its manufactures more
numerous and more flourishing, and its trade more extensive; we may be
assured that its capital must have increased during the interval between
those two periods, and that more must have been added to it by the good
conduct of some, than had been taken from it either by the private
misconduct of others, or by the public extravagance of government. But we
shall find this to have been the case of almost all nations, in all
tolerably quiet and peaceable times, even of those who have not enjoyed the
most prudent and parsimonious governments. To form a right judgment of it,
indeed, we must compare the state of the country at periods somewhat distant
from one another. The progress is frequently so gradual, that, at near
periods, the improvement is not only not sensible, but, from the declension
either of certain branches of industry, or of certain districts of the
country, things which sometimes happen, though the country in general is in
great prosperity, there frequently arises a suspicion, that the riches and
industry of the whole are decaying.
The annual produce of the land and labour of England, for example, is
certainly much greater than it was a little more than a century ago, at the
restoration of Charles II. Though at present few people, I believe, doubt of
this, yet during this period five years have seldom passed away, in which
some book or pamphlet has not been published, written, too, with such
abilities as to gain some authority with the public, and pretending to
demonstrate that the wealth of the nation was fast declining; that the
country was depopulated, agriculture neglected, manufactures decaying, and
trade undone. Nor have these publications been all party pamphlets, the
wretched offspring of falsehood and venality. Many of them have been written
by very candid and very intelligent people, who wrote nothing but what they
believed, and for no other reason but because they believed it.
The annual produce of the land and labour of England, again, was certainly
much greater at the Restoration than we can suppose it to have been about a
hundred years before, at the accession of Elizabeth. At this period, too, we
have all reason to believe, the country was much more advanced in
improvement, than it had been about a century before, towards the close of
the dissensions between the houses of York and Lancaster. Even then it was,
probably, in a better condition than it had been at the Norman conquest: and
at the Norman conquest, than during the confusion of the Saxon heptarchy.
Even at this early period, it was certainly a more improved country than at
the invasion of Julius Caesar, when its inhabitants were nearly in the same
state with the savages in North America.
In each of those periods, however, there was not only much private and
public profusion, many expensive and unnecessary wars, great perversion of
the annual produce from maintaining productive to maintain unproductive
hands; but sometimes, in the confusion of civil discord, such absolute waste
and destruction of stock, as might be supposed, not only to retard, as it
certainly did, the natural accumulation of riches, but to have left the
country, at the end of the period, poorer than at the beginning. Thus, in
the happiest and most fortunate period of them all, that which has passed
since the Restoration, how many disorders and misfortunes have occurred,
which, could they have been foreseen, not only the impoverishment, but the
total ruin of the country would have been expected from them ? The fire and
the plague of London, the two Dutch wars, the disorders of the revolution,
the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and
1756, together with the two rebellions of 1715 and 1745. In the course of
the four French wars, the nation has contracted more than £145,000,000 of
debt, over and above all the other extraordinary annual expense which they
occasioned ; so that the whole cannot be computed at less than £200,000,000.
So great a share of the annual produce of the land and labour of the
country, has, since the Revolution, been employed upon different occasions,
in maintaining an extraordinary number of unproductive hands. But had not
those wars given this particular direction to so large a capital, the
greater part of it would naturally have been employed in maintaining
productive hands, whose labour would have replaced, with a profit, the whole
value of their consumption. The value of the annual produce of the land and
labour of the country would have been considerably increased by it every
year, and every years increase would have augmented still more that of the
following year. More houses would have been built, more lands would have
been improved, and those which had been improved before would have been
better cultivated; more manufactures would have been established, and those
which had been established before would have been more extended ; and to
what height the real wealth and revenue of the country might by this time
have been raised, it is not perhaps very easy even to imagine.
But though the profusion of government must undoubtedly have retarded the
natural progress of England towards wealth and improvement, it has not been
able to stop it. The annual produce of its land and labour is undoubtedly
much greater at present than it was either at the Restoration or at the
Revolution. The capital, therefore, annually employed in cultivating this
land, and in maintaining this labour, must likewise be much greater. In the
midst of all the exactions of government, this capital has been silently and
gradually accumulated by the private frugality and good conduct of
individuals, by their universal, continual, and uninterrupted effort to
better their own condition. It is this effort, protected by law, and allowed
by liberty to exert itself in the manner that is most advantageous, which
has maintained the progress of England towards opulence and improvement in
almost all former times, and which, it is to be hoped, will do so in all
future times. England, however, as it has never been blessed with a very
parsimonious government, so parsimony has at no time been the characteristic
virtue of its inhabitants. It is the highest impertinence and presumption,
therefore, in kings and ministers to pretend to watch over the economy of
private people, and to restrain their expense, either by sumptuary laws, or
by prohibiting the importation of foreign luxuries. They are themselves
always, and without any exception, the greatest spendthrifts in the society.
Let them look well after their own expense, and they may safely trust
private people with theirs. If their own extravagance does not ruin the
state. that of the subject never will.
As frugality increases, and prodigality diminishes, the public capital, so
the conduct of those whose expense just equals their revenue, without either
accumulating or encroaching, neither increases nor diminishes it. Some modes
of expense, however, seem to contribute more to the growth of public
opulence than others.
The revenue of an individual may be spent, either in things which are
consumed immediately, and in which one day's expense can neither alleviate
nor support that of another ; or it may be spent in things mere durable,
which can therefore be accumulated, and in which every day's expense may, as
he chooses, either alleviate, or support and heighten, the effect of that of
the following day. A man of fortune, for example, may either spend his
revenue in a profuse and sumptuous table, and in maintaining a great number
of menial servants, and a multitude of dogs and horses; or, contenting
himself with a frugal table, and few attendants, he may lay out the greater
part of it in adorning his house or his country villa, in useful or
ornamental buildings, in useful or ornamental furniture, in collecting
books, statues, pictures ; or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds; or, what is most trifling of all, in
amassing a great wardrobe of fine clothes, like the favourite and minister
of a great prince who died a few years ago. Were two men of equal fortune to
spend their revenue, the one chiefly in the one way, the other in the other,
the magnificence of the person whose expense had been chiefly in durable
commodities, would be continually increasing, every day's expense
contributing something to support and heighten the effect of that of the
following day ; that of the other, on the contrary, would be no greater at
the end of the period than at the beginning. The former too would, at the
end of the period, be the richer man of the two. He would have a stock of
goods of some kind or other, which, though it might not be worth all that it
cost, would always be worth something. No trace or vestige of the expense of
the latter would remain, and the effects of ten or twenty years' profusion
would be as completely annihilated as if they had never existed.
As the one mode of expense is more favourable than the other to the opulence
of an individual, so is it likewise to that of a nation. The houses, the
furniture, the clothing of the rich, in a little time, become useful to the
inferior and middling ranks of people. They are able to purchase them when
their superiors grow weary of them ; and the general accommodation of the
whole people is thus gradually improved, when this mode of expense becomes
universal among men of fortune. In countries which have long been rich, you
will frequently find the inferior ranks of people in possession both of
houses and furniture perfectly good and entire, but of which neither the one
could have been built, nor the other have been made for their use. What was
formerly a seat of the family of Seymour, is now an inn upon the Bath road.
The marriage-bed of James I. of Great Britain, which his queen brought with
her from Denmark, as a present fit for a sovereign to make to a sovereign,
was, a few years ago, the ornament of an alehouse at Dunfermline. In some
ancient cities, which either have been long stationary, or have gone
somewhat to decay, you will sometimes scarce find a single house which could
have been built for its present inhabitants. If you go into those houses,
too, you will frequently find many excellent, though antiquated pieces of
furniture, which are still very fit for use, and which could as little have
been made for them. Noble palaces, magnificent villas, great collections of
books, statues, pictures, and other curiosities, are frequently both an
ornament and an honour, not only to the neighbourhood, but to the whole
country to which they belong. Versailles is an ornament and an honour to
France, Stowe and Wilton to England. Italy still continues to command some
sort of veneration, by the number of monuments of this kind which it
possesses, though the wealth which produced them has decayed, and though the
genius which planned them seems to be extinguished, perhaps from not having
the same employment.
The expense, too, which is laid out in durable commodities, is favourable
not only to accumulation, but to frugality. If a person should at any time
exceed in it, he can easily reform without exposing himself to the censure
of the public. To reduce very much the number of his servants, to reform his
table from great profusion to great frugality, to lay down his equipage
after he has once set it up, are changes which cannot escape the observation
of his neighbours, and which are supposed to imply some acknowledgment of
preceding bad conduct. Few, therefore, of those who have once been so
unfortunate as to launch out too far into this sort of expense, have
afterwards the courage to reform, till ruin and bankruptcy oblige them. But
if a person has, at any time, been at too great an expense in building, in
furniture, in books, or pictures, no imprudence can be inferred from his
changing his conduct. These are things in which further expense is
frequently rendered unnecessary by former expense; and when a person stops
short, he appears to do so, not because he has exceeded his fortune, but
because he has satisfied his fancy.
The expense, besides, that is laid out in durable commodities, gives
maintenance, commonly, to a greater number of people than that which is
employed in the most profuse hospitality. Of two or three hundred weight of
provisions, which may sometimes be served up at a great festival, one half,
perhaps, is thrown to the dunghill, and there is always a great deal wasted
and abused. But if the expense of this entertainment had been employed in
setting to work masons, carpenters, upholsterers, mechanics, etc. a quantity
of provisions of equal value would have been distributed among a still
greater number of people, who would have bought them in pennyworths and
pound weights, and not have lost or thrown away a single ounce of them. In
the one way, besides, this expense maintains productive, in the other
unproductive hands. In the one way, therefore, it increases, in the other it
does not increase the exchangeable value of the annual produce of the land
and labour of the country.
I would not, however, by all this, be understood to mean, that the one
species of expense always betokens a more liberal or generous spirit than
the other. When a man of fortune spends his revenue chiefly in hospitality,
he shares the greater part of it with his friends and companions; but when
he employs it in purchasing such durable commodities, he often spends the
whole upon his own person, and gives nothing to any body without an
equivalent. The latter species of expense, therefore, especially when
directed towards frivolous objects, the little ornaments of dress and
furniture, jewels, trinkets, gew-gaws, frequently indicates, not only a
trifling, but a base and selfish disposition. All that I mean is, that the
one sort of expense, as it always occasions some accumulation of valuable
commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it maintains
productive rather than unproductive hands, conduces more than the other to
the growth of public opulence.
CHAPTER IV.
OF STOCK LENT AT INTEREST.
The stock which is lent at interest is always considered as a capital by the
lender. He expects that in due time it is to be restored to him, and that,
in the mean time, the borrower is to pay him a certain annual rent for the
use of it. The borrower may use it either as a capital, or as a stock
reserved for immediate consumption. If he uses it as a capital, he employs
it in the maintenance of productive labourers, who reproduce the value, with
a profit. He can, in this case, both restore the capital, and pay the
interest, without alienating or encroaching upon any other source of
revenue. If he uses it as a stock reserved for immediate consumption, he
acts the part of a prodigal, and dissipates, in the maintenance of the idle,
what was destined for the support of the industrious. He can, in this case,
neither restore the capital nor pay the interest, without either alienating
or encroaching upon some other source of revenue, such as the property or
the rent of land.
The stock which is lent at interest is, no doubt, occasionally employed in
both these ways, but in the former much more frequently than in the latter.
The man who borrows in order to spend will soon be ruined, and he who lends
to him will generally have occasion to repent of his folly. To borrow or to
lend for such a purpose, therefore, is, in all cases, where gross usury is
out of the question, contrary to the interest of both parties; and though it
no doubt happens sometimes, that people do both the one and the other, yet,
from the regard that all men have for their own interest, we may be assured,
that it cannot happen so very frequently as we are sometimes apt to imagine.
Ask any rich man of common prudence, to which of the two sorts of people he
has lent the greater part of his stock, to those who he thinks will employ
it profitably, or to those who will spend it idly, and he will laugh at you
for proposing the question. Even among borrowers, therefore, not the people
in the world most famous for frugality, the number of the frugal and
industrious surpasses considerably that of the prodigal and idle.
The only people to whom stock is commonly lent, without their being expected
to make any very profitable use of it, are country gentlemen, who borrow
upon mortgage. Even they scarce ever borrow merely to spend. What they
borrow, one may say, is commonly spent before they borrow it. They have
generally consumed so great a quantity of goods, advanced to them upon
credit by shop-keepers and tradesmen, that they find it necessary to borrow
at interest, in order to pay the debt. The capital borrowed replaces the
capitals of those shop-keepers and tradesmen which the country gentlemen
could not have replaced from the rents of their estates. It is not properly
borrowed in order to be spent, but in order to replace a capital which had
been spent before.
Almost all loans at interest are made in money, either of paper, or of gold
and silver ; but what the borrower really wants, and what the lender readily
supplies him with, is not the money, but the money's worth, or the goods
which it can purchase. If he wants it as a stock for immediate consumption,
it is those goods only which he can place in that stock. If he wants it as a
capital for employing industry, it is from those goods only that the
industrious can be furnished with the tools, materials, and maintenance
necessary for carrying on their work. By means of the loan, the lender, as
it were, assigns to the borrower his right to a certain portion of the
annual produce of the land and labour of the country, to be employed as the
borrower pleases.
The quantity of stock, therefore, or, as it is commonly expressed, of money,
which can be lent at interest in any country, is not regulated by the value
of the money, whether paper or coin, which serves as the instrument of the
different loans made in that country, but by the value of that part of the
annual produce, which, as soon as it comes either from the ground, or from
the hands of the productive labourers, is destined, not only for replacing a
capital, but such a capital as the owner does not care to be at the trouble
of employing himself. As such capitals are commonly lent out and paid back
in money, they constitute what is called the monied interest. It is
distinct, not only from the landed, but from the trading and manufacturing
interests, as in these last the owners themselves employ their own capitals.
Even in the monied interest, however, the money is, as it were, but the deed
of assignment, which conveys from one hand to another those capitals which
the owners do not care to employ themselves. Those capitals may be greater,
in almost any proportion, than the amount of the money which serves as the
instrument of their conveyance; the same pieces of money successively
serving for many different loans, as well as for many different purchases.
A, for example, lends to W £1000, with which W immediately purchases of B
£1000 worth of goods. B having no occasion for the money himself, lends the
identical pieces to X, with which X immediately purchases of C another £1000
worth of goods. C, in the same manner, and for the same reason, lends them
to Y, who again purchases goods with them of D. In this manner, the same
pieces, either of coin or of paper, may, in the course of a few days, serve
as the Instrument of three different loans, and of three different
purchases, each of which is, in value, equal to the whole amount of those
pieces. What the three monied men, A, B, and C, assigned to the three
borrowers, W, X, and Y, is the power of making those purchases. In this
power consist both the value and the use of the loans. The stock lent by the
three monied men is equal to the value of the goods which can be purchased
with it, and is three times greater than that of the money with which the
purchases are made. Those loans, however, may be all perfectly well secured,
the goods purchased by the different debtors being so employed as, in due
time, to bring back, with a profit, an equal value either of coin or of
paper. And as the same pieces of money can thus serve as the instrument of
different loans to three, or, for the same reason, to thirty times their
value, so they may likewise successively serve as the instrument of
repayment.
A capital lent at interest may, in this manner, be considered as an
assignment, from the lender to the borrower, of a certain considerable
portion of the annual produce, upon condition that the burrower in return
shall, during the continuance of the loan, annually assign to the lender a
small portion, called the interest ; and, at the end of it, a portion
equally considerable with that which had originally been assigned to him,
called the repayment. Though money, either coin or paper, serves generally
as the deed of assignment, both to the smaller and to the more considerable
portion, it is itself altogether different from what is assigned by it.
In proportion as that share of the annual produce which, as soon as it comes
either from the ground, or from the hands of the productive labourers, is
destined for replacing a capital, increases in any country, what is called
the monied interest naturally increases with it. The increase of those
particular capitals from which the owners wish to derive a revenue, without
being at the trouble of employing them themselves, naturally accompanies the
general increase of capitals ; or, in other words, as stock increases, the
quantity of stock to be lent at interest grows gradually greater and
greater.
As the quantity of stock to be lent at interest increases, the interest, or
the price which must be paid for the use of that stock, necessarily
diminishes, not only from those general causes which make the market price
of things commonly diminish as their quantity increases, but from other
causes which are peculiar to this particular case. As capitals increase in
any country, the profits which can be made by employing them necessarily
diminish. It becomes gradually more and more difficult to find within the
country a profitable method of employing any new capital. There arises, in
consequence, a competition between different capitals, the owner of one
endeavouring to get possession of that employment which is occupied by
another; but, upon most occasions, he can hope to justle that other out of
this employment by no other means but by dealing upon more reasonable terms.
He must not only sell what he deals in somewhat cheaper, but, in order to
get it to sell, he must sometimes, too, buy it dearer. The demand for
productive labour, by the increase of the funds which are destined for
maintaining it, grows every day greater and greater. Labourers easily find
employment; but the owners of capitals find it difficult to get labourers to
employ. Their competition raises the wages of labour, and sinks the profits
of stock. But when the profits which can be made by the use of a capital
are in this manner diminished, as it were, at both ends, the price which can
be paid for the use of it, that is, the rate of interest, must necessarily
be diminished with them.
Mr Locke, Mr Lawe, and Mr Montesquieu, as well as many other writers, seem
to have imagined that the increase of the quantity of gold and silver, in
consequence of the discovery of the Spanish West Indies, was the real cause
of the lowering of the rate of interest through the greater part of Europe.
Those metals, they say, having become of less value themselves, the use of
any particular portion of them necessarily became of less value too, and,
consequently, the price which could be paid for it. This notion, which at
first sight seems so plausible, has been so fully exposed by Mr Hume, that
it is, perhaps, unnecessary to say any thing more about it. The following
very short and plain argument, however, may serve to explain more distinctly
the fallacy which seems to have misled those gentlemen.
Before the discovery of the Spanish West Indies, ten per cent. seems to have
been the common rate of interest through the greater part of Europe. It has
since that time, in different countries, sunk to six, five, four, and three
per cent. Let us suppose, that in every particular country the value of
silver has sunk precisely in the same proportion as the rate of interest;
and that in those countries, for example, where interest has been reduced
from ten to five per cent. the same quantity of silver can now purchase just
half the quantity of goods which it could have purchased before. This
supposition will not, I believe, be found anywhere agreeable to the truth ;
but it is the most favourable to the opinion which we are going to examine;
and, even upon this supposition, it is utterly impossible that the lowering
of the value of silver could have the smallest tendency to lower the rate of
interest. If £100 are in those countries now of no more value than £50 were
then, £10 must now be of no more value than £5 were then. Whatever were the
causes which lowered the value of the capital, the same must necessarily
have lowered that of the interest, and exactly in the same proportion. The
proportion between the value of the capital and that of the interest must
have remained the same, though the rate had never been altered. By altering
the rate, on the contrary, the proportion between those two values is
necessarily altered. If £100 now are worth no more than £50 were then, £5
now can be worth no more than £2:10s. were then. By reducing the rate of
interest, therefore, from ten to five per cent. we give for the use of a
capital, which is supposed to be equal to one half of its former value, an
interest which is equal to one fourth only of the value of the former
interest.
An increase in the quantity of silver, while that of the commodities
circulated by means of it remained the same, could have no other effect than
to diminish the value of that metal. The nominal value of all sorts of goods
would be greater, but their real value would be precisely the same as
before. They would be exchanged for a greater number of pieces of silver;
but the quantity of labour which they could command, the number of people
whom they could maintain and employ, would be precisely the same. The
capital of the country would be the same, though a greater number of pieces
might be requisite for conveying any equal portion of it from one hand to
another. The deeds of assignment, like the conveyances of a verbose
attorney, would be more cumbersome; but the thing assigned would be
precisely the same as before, and could produce only the same effects. The
funds for maintaining productive labour being the same, the demand for it
would be the same. Its price or wages, therefore, though nominally greater,
would really be the same. They would be paid in a greater number of pieces
of silver, but they would purchase only the same quantity of goods. The
profits of stock would be the same, both nominally and really. The wages of
labour are commonly computed by the quantity of silver which is paid to the
labourer. When that is increased, therefore, his wages appear to be
increased, though they may sometimes be no greater than before. But the
profits of stock are not computed by the number of pieces of silver with
which they are paid, but by the proportion which those pieces bear to the
whole capital employed. Thus, in a particular country, 5s. a-week are said
to be the common wages of labour, and ten per cent. the common profits of
stock ; but the whole capital of the country being the same as before, the
competition between the different capitals of individuals into which it was
divided would likewise be the same. They would all trade with the same
advantages and disadvantages. The common proportion between capital and
profit, therefore, would be the same, and consequently the common interest
of money; what can commonly be given for the use of money being necessarily
regulated by what can commonly be made by the use of it.
Any increase in the quantity of commodities annually circulated within the
country, while that of the money which circulated them remained the same,
would, on the contrary, produce many other important effects, besides that
of raising the value of the money. The capital of the country, though it
might nominally be the same, would really be augmented. It might continue to
be expressed by the same quantity of money, but it would command a greater
quantity of labour. The quantity of productive labour which it could
maintain and employ would be increased, and consequently the demand for that
labour. Its wages would naturally rise with the demand, and yet might appear
to sink. They might be paid with a smaller quantity of money, but that
smaller quantity might purchase a greater quantity of goods than a greater
had done before. The profits of stock would be diminished, both really and
in appearance. The whole capital of the country being augmented, the
competition between the different capitals of which it was composed would
naturally be augmented along with it. The owners of those particular
capitals would be obliged to content themselves with a smaller proportion of
the produce of that labour which their respective capitals employed. The
interest of money, keeping pace always with the profits of stock, might, in
this manner, be greatly diminished, though the value of money, or the
quantity of goods which any particular sum could purchase, was greatly
augmented.
In some countries the interest of money has been prohibited by law. But as
something can everywhere be made by the use of money, something ought
everywhere to be paid for the use of it. This regulation, instead of
preventing, has been found from experience to increase the evil of usury.
The debtor being obliged to pay, not only for the use of the money, but for
the risk which his creditor runs by accepting a compensation for that use,
he is obliged, if one may say so, to insure his creditor from the penalties
of usury.
In countries where interest is permitted, the law in order to prevent the
extortion of usury, generally fixes the highest rate which can be taken
without incurring a penalty. This rate ought always to be somewhat above the
lowest market price, or the price which is commonly paid for the use of
money by those who can give the most undoubted security. If this legal rate
should be fixed below the lowest market rate, the effects of this fixation
must be nearly the same as those of a total prohibition of interest. The
creditor will not lend his money for less than the use of it is worth, and
the debtor must pay him for the risk which he runs by accepting the full
value of that use. If it is fixed precisely at the lowest market price, it
ruins, with honest people who respect the laws of their country, the credit
of all those who cannot give the very best security, and obliges them to
have recourse to exorbitant usurers. In a country such as Great Britain,
where money is lent to government at three per cent. and to private people,
upon good security, at four and four and a-half, the present legal rate,
five per cent. is perhaps as proper as any.
The legal rate, it is to be observed, though it ought to be somewhat above,
ought not to be much above the lowest market rate. If the legal rate of
interest in Great Britain, for example, was fixed so high as eight or ten
per cent. the greater part of the money which was to be lent, would be lent
to prodigals and projectors, who alone would be willing to give this high
interest. Sober people, who will give for the use of money no more than a
part of what they are likely to make by the use of it, would not venture
into the competition. A great part of the capital of the country would thus
be kept out of the hands which were most likely to make a profitable and
advantageous use of it, and thrown into those which were most likely to
waste and destroy it. Where the legal rate of interest, on the contrary, is
fixed but a very little above the lowest market rate, sober people are
universally preferred, as borrowers, to prodigals and projectors. The person
who lends money gets nearly as much interest from the former as he dares to
take from the latter, and his money is much safer in the hands of the one
set of people than in those of the other. A great part of the capital of the
country is thus thrown into the hands in which it is most likely to be
employed with advantage.
No law can reduce the common rate of interest below the lowest ordinary
market rate at the time when that law is made. Notwithstanding the edict of
1766, by which the French king attempted to reduce the rate of interest from
five to four per cent. money continued to be lent in France at five per
cent. the law being evaded in several different ways.
The ordinary market price of land, it is to be observed, depends everywhere
upon the ordinary market rate of interest. The person who has a capital from
which he wishes to derive a revenue, without taking the trouble to employ it
himself, deliberates whether he should buy land with it, or lend it out at
interest. The superior security of land, together with some other advantages
which almost everywhere attend upon this species of property, will generally
dispose him to content himself with a smaller revenue from land, than what
he might have by lending out his money at interest. These advantages are
sufficient to compensate a certain difference of revenue; but they will
compensate a certain difference only ; and if the rent of land should fall
short of the interest of money by a greater difference, nobody would buy
land, which would soon reduce its ordinary price. On the contrary, if the
advantages should much more than compensate the difference, everybody would
buy land, which again would soon raise its ordinary price. When interest was
at ten per cent. land was commonly sold for ten or twelve years purchase. As
interest sunk to six, five, and four per cent. the price of land rose to
twenty, five-and-twenty, and thirty years purchase. The market rate of
interest is higher in France than in England, and the common price of land
is lower. In England it commonly sells at thirty, in France at twenty years
purchase.
CHAPTER V.
OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.
Though all capitals are destined for the maintenance of productive labour
only, yet the quantity of that labour which equal capitals are capable of
putting into motion, varies extremely according to the diversity of their
employment; as does likewise the value which that employment adds to the
annual produce of the land and labour of the country.
A capital may be employed in four different ways; either, first, in
procuring the rude produce annually required for the use and consumption of
the society ; or, secondly, in manufacturing and preparing that rude produce
for immediate use and consumption; or, thirdly in transporting either the
rude or manufactured produce from the places where they abound to those
where they are wanted ; or, lastly, in dividing particular portions of
either into such small parcels as suit the occasional demands of those who
want them. In the first way are employed the capitals of all those who
undertake improvement or cultivation of lands, mines, or fisheries; in the
second, those of all master manufacturers ; in the third, those of all
wholesale merchants; and in the fourth, those of all retailers. It is
difficult to conceive that a capital should be employed in any way which may
not be classed under some one or other of those four.
Each of those four methods of employing a capital is essentially necessary,
either to the existence or extension of the other three, or to the general
conveniency of the society.
Unless a capital was employed in furnishing rude produce to a certain degree
of abundance, neither manufactures nor trade of any kind could exist.
Unless a capital was employed in manufacturing that part of the rude
produce which requires a good deal of preparation before it can be fit for
use and consumption, it either would never be produced, because there could
be no demand for it; or if it was produced spontaneously, it would be of no
value in exchange, and could add nothing to the wealth of the society.
Unless a capital was employed in transporting either the rude or
manufactured produce from the places where it abounds to those where it is
wanted, no more of either could be produced than was necessary for the
consumption of the neighbourhood. The capital of the merchant exchanges the
surplus produce of one place for that of another, and thus encourages the
industry, and increases the enjoyments of both.
Unless a capital was employed in breaking and dividing certain portions
either of the rude or manufactured produce into such small parcels as suit
the occasional demands of those who want them, every man would be obliged to
purchase a greater quantity of the goods he wanted than his immediate
occasions required. If there was no such trade as a butcher, for example,
every man would be obliged to purchase a whole ox or a whole sheep at a
time. This would generally be inconvenient to the rich, and much more so to
the poor. If a poor workman was obliged to purchase a month's or six months'
provisions at a time, a great part of the stock which he employs as a
capital in the instruments of his trade, or in the furniture of his shop,
and which yields him a revenue, he would be forced to place in that part of
his stock which is reserved for immediate consumption, and which yields him
no revenue. Nothing can be more convenient for such a person than to be able
to purchase his subsistence from day to day, or even from hour to hour, as
he wants it. He is thereby enabled to employ almost his whole stock as a
capital. He is thus enabled to furnish work to a greater value; and the
profit which he makes by it in this way much more than compensates the
additional price which the profit of the retailer imposes upon the goods.
The prejudices of some political writers against shopkeepers and tradesmen
are altogether without foundation. So far is it from being necessary either
to tax them, or to restrict their numbers, that they can never be multiplied
so as to hurt the public, though they may so as to hurt one another. The
quantity of grocery goods, for example, which can be sold in a particular
town, is limited by the demand of that town and its neighbourhood. The
capital, therefore, which can be employed in the grocery trade, cannot
exceed what is sufficient to purchase that quantity. If this capital is
divided between two different grocers, their competition will tend to make
both of them sell cheaper than if it were in the hands of one only ; and if
it were divided among twenty, their competition would be just so much the
greater, and the chance of their combining together, in order to raise the
price, just so much the less. Their competition might, perhaps, ruin some of
themselves; but to take care of this, is the business of the parties
concerned, and it may safely be trusted to their discretion. It can never
hurt either the consumer or the producer ; on the contrary, it must tend to
make the retailers both sell cheaper and buy dearer, than if the whole trade
was monopolized by one or two persons. Some of them, perhaps, may sometimes
decoy a weak customer to buy what he has no occasion for. This evil,
however, is of too little importance to deserve the public attention, nor
would it necessarily be prevented by restricting their numbers. It is not
the multitude of alehouses, to give the must suspicious example, that
occasions a general disposition to drunkenness among the common people; but
that disposition, arising from other causes, necessarily gives employment to
a multitude of alehouses.
The persons whose capitals are employed in any of those four ways, are
themselves productive labourers. Their labour, when properly directed, fixes
and realizes itself in the subject or vendible commodity upon which it is
bestowed, and generally adds to its price the value at least of their own
maintenance and consumption. The profits of the farmer, of the manufacturer,
of the merchant, and retailer, are all drawn from the price of the goods
which the two first produce, and the two last buy and sell. Equal capitals.
however, employed in each of those four different ways, will immediately put
into motion very different quantities of productive labour ; and augment,
too, in very different proportions, the value of the annual produce of the
land and labour of the society to which they belong.
The capital of the retailer replaces, together with its profits, that of the
merchant of whom he purchases goods, and thereby enables him to continue his
business. The retailer himself is the only productive labourer whom it
immediately employs. In his profit consists the whole value which its
employment adds to the annual produce of the land and labour of the society.
The capital of the wholesale merchant replaces, together with their
profits, the capital's of the farmers and manufacturers of whom he purchases
the rude and manufactured produce which he deals in, and thereby enables
them to continue their respective trades. It is by this service chiefly that
he contributes indirectly to support the productive labour of the society,
and to increase the value of its annual produce. His capital employs, too,
the sailors and carriers who transport his goods from one place to another ;
and it augments the price of those goods by the value, not only of his
profits, but of their wages. This is all the productive labour which it
immediately puts into motion, and all the value which it immediately adds to
the annual produce. Its operation in both these respects is a good deal
superior to that of the capital of the retailer.
Part of the capital of the master manufacturer is employed as a fixed
capital in the instruments of his trade, and replaces, together with its
profits, that of some other artificer of whom he purchases them. Part of his
circulating capital is employed in purchasing materials, and replaces, with
their profits, the capitals of the farmers and miners of whom he purchases
them. But a great part of it is always, either annually, or in a much
shorter period, distributed among the different workmen whom he employs. It
augments the value of those materials by their wages, and by their masters'
profits upon the whole stock of wages, materials, and instruments of trade
employed in the business. It puts immediately into motion, therefore, a much
greater quantity of productive labour, and adds a much greater value to the
annual produce of the land and labour of the society, than an equal capital
in the hands of any wholesale merchant.
No equal capital puts into motion a greater quantity of productive labour
than that of the farmer. Not only his labouring servants, but his labouring
cattle, are productive labourers. In agriculture, too, Nature labours along
with man ; and though her labour costs no expense, its produce has its
value, as well as that of the most expensive workmen. The most important
operations of agriculture seem intended, not so much to increase, though
they do that too, as to direct the fertility of Nature towards the
production of the plants most profitable to man. A field overgrown with
briars and brambles, may frequently produce as great a quantity of
vegetables as the best cultivated vineyard or corn field. Planting and
tillage frequently regulate more than they animate the active fertility of
Nature; and after all their labour, a great part of the work always remains
to be done by her. The labourers and labouring cattle, therefore, employed
in agriculture, not only occasion, like the workmen in manufactures, the
reproduction of a value equal to their own consumption, or to the capital
which employs them, together with its owner's profits, but of a much greater
value. Over and above the capital of the farmer, and all its profits, they
regularly occasion the reproduction of the rent of the landlord. This rent
may be considered as the produce of those powers of Nature, the use of which
the landlord lends to the farmer. It is greater or smaller, according to the
supposed extent of those powers, or, in other words, according to the
supposed natural or improved fertility of the land. It is the work of Nature
which remains, after deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a fourth, and
frequently more than a third, of the whole produce. No equal quantity of
productive labour employed in manufactures, can ever occasion so great
reproduction. In them Nature does nothing ; man does all ; and the
reproduction must always be in proportion to the strength of the agents that
occasion it. The capital employed in agriculture, therefore, not only puts
into motion a greater quantity of productive labour than any equal capital
employed in manufactures; but in proportion, too, to the quantity of
productive labour which it employs, it adds a much greater value to the
annual produce of the land and labour of the country, to the real wealth and
revenue of its inhabitants. Of all the ways in which a capital can be
employed, it is by far the most advantageous to society.
The capitals employed in the agriculture and in the retail trade of any
society, must always reside within that society. Their employment is
confined almost to a precise spot, to the farm, and to the shop of the
retailer. They must generally, too, though there are some exceptions to
this, belong to resident members of the society.
The capital of a wholesale merchant, on the contrary, seems to have no fixed
or necessary residence anywhere, but may wander about from place to place,
according as it can either buy cheap or sell dear.
The capital of the manufacturer must, no doubt, reside where the manufacture
is carried on ; but where this shall be, is not always necessarily
determined. It may frequently be at a great distance, both from the place
where the materials grow, and from that where the complete manufacture is
consumed. Lyons is very distant, both from the places which afford the
materials of its manufactures, and from those which consume them. The people
of fashion in Sicily are clothed in silks made in other countries, from the
materials which their own produces. Part of the wool of Spain is
manufactured in Great Britain, and some part of that cloth is afterwards
sent back to Spain.
Whether the merchant whose capital exports the surplus produce of any
society, be a native or a foreigner, is of very little importance. If he is
a foreigner, the number of their productive labourers is necessarily less
than if he had been a native, by one man only ; and the value of their
annual produce, by the profits of that one man. The sailors or carriers whom
he employs, may still belong indifferently either to his country, or to
their country, or to some third country, in the same manner as if he had
been a native. The capital of a foreigner gives a value to their surplus
produce equally with that of a native, by exchanging it for something for
which there is a demand at home. It as effectually replaces the capital of
the person who produces that surplus, and as effectually enables him to
continue his business, the service by which the capital of a wholesale
merchant chiefly contributes to support the productive labour, and to
augment the value of the annual produce of the society to which he belongs.
It is of more consequence that the capital of the manufacturer should reside
within the country. It necessarily puts into motion a greater quantity of
productive labour, and adds a greater value to the annual produce of the
land and labour of the society. It may, however, be very useful to the
country, though it should not reside within it. The capitals of the British
manufacturers who work up the flax and hemp annually imported from the
coasts of the Baltic, are surely very useful to the countries which produce
them. Those materials are a part of the surplus produce of those countries,
which, unless it was annually exchanged for something which is in demand
here, would be of no value, and would soon cease to be produced. The
merchants who export it, replace the capitals of the people who produce it,
and thereby encourage them to continue the production ; and the British
manufacturers replace the capitals of those merchants.
A particular country, in the same manner as a particular person, may
frequently not have capital sufficient both to improve and cultivate all its
lands, to manufacture and prepare their whole rude produce for immediate use
and consumption, and to transport the surplus part either of the rude or
manufactured produce to those distant markets, where it can be exchanged for
something for which there is a demand at home. The inhabitants of many
different parts of Great Britain have not capital sufficient to improve and
cultivate all their lands. The wool of the southern counties of Scotland is,
a great part of it, after a long land carriage through very bad roads,
manufactured in Yorkshire, for want of a capital to manufacture it at home.
There are many little manufacturing towns in Great Britain, of which the
inhabitants have not capital sufficient to transport the produce of their
own industry to those distant markets where there is demand and consumption
for it. If there are any merchants among them, they are, properly, only the
agents of wealthier merchants who reside in some of the great commercial
cities.
When the capital of any country is not sufficient for all those three
purposes, in proportion as a greater share of it is employed in agriculture,
the greater will be the quantity of productive labour which it puts into
motion within the country ; as will likewise be the value which its
employment adds to the annual produce of the land and labour of the society.
After agriculture, the capital employed in manufactures puts into motion
the greatest quantity of productive labour, and adds the greatest value to
the annual produce. That which is employed in the trade of exportation has
the least effect of any of the three.
The country, indeed, which has not capital sufficient for all those three
purposes, has not arrived at that degree of opulence for which it seems
naturally destined. To attempt, however, prematurely, and with an
insufficient capital, to do all the three, is certainly not the shortest way
for a society, no more than it would be for an individual, to acquire a
sufficient one. The capital of all the individuals of a nation has its
limits, in the same manner as that of a single individual, and is capable
of executing only certain purposes. The capital of all the individuals of a
nation is increased in the same manner as that of a single individual, by
their continually accumulating and adding to it whatever they save out of
their revenue. It is likely to increase the fastest, therefore, when it is
employed in the way that affords the greatest revenue to all the inhabitants
or the country, as they will thus be enabled to make the greatest savings.
But the revenue of all the inhabitants of the country is necessarily in
proportion to the value of the annual produce of their land and labour.
It has been the principal cause of the rapid progress of our American
colonies towards wealth and greatness, that almost their whole capitals have
hitherto been employed in agriculture. They have no manufactures, those
household and coarser manufactures excepted, which necessarily accompany the
progress of agriculture, and which are the work of the women and children in
every private family. The greater part, both of the exportation and coasting
trade of America, is carried on by the capitals of merchants who reside in
Great Britain. Even the stores and warehouses from which goods are retailed
in some provinces, particularly in Virginia and Maryland, belong many of
them to merchants who reside in the mother country, and afford one of the
few instances of the retail trade of a society being carried on by the
capitals of those who are not resident members of it. Were the Americans,
either by combination, or by any other sort of violence, to stop the
importation of European manufactures, and, by thus giving a monopoly to such
of their own countrymen as could manufacture the like goods, divert any
considerable part of their capital into this employment, they would retard,
instead of accelerating, the further increase in the value of their annual
produce, and would obstruct, instead of promoting, the progress of their
country towards real wealth and greatness. This would be still more the
case, were they to attempt, in the same manner, to monopolize to themselves
their whole exportation trade.
The course of human prosperity, indeed, seems scarce ever to have been of so
long continuance as to unable any great country to acquire capital
sufficient for all those three purposes; unless, perhaps, we give credit to
the wonderful accounts of the wealth and cultivation of China, of those of
ancient Egypt, and of the ancient state of Indostan. Even those three
countries, the wealthiest, according to all accounts, that ever were in the
world, are chiefly renowned for their superiority in agriculture and
manufactures. They do not appear to have been eminent for foreign trade. The
ancient Egyptians had a superstitious antipathy to the sea ; a superstition
nearly of the same kind prevails among the Indians; and the Chinese have
never excelled in foreign commerce. The greater part of the surplus produce
of all those three countries seems to have been always exported by
foreigners, who gave in exchange for it something else, for which they found
a demand there, frequently gold and silver.
It is thus that the same capital will in any country put into motion a
greater or smaller quantity of productive labour, and add a greater or
smaller value to the annual produce of its land and labour, according to
the different proportions in which it is employed in agriculture,
manufactures, and wholesale trade. The difference, too, is very great,
according to the different sorts of wholesale trade in which any part of it
is employed.
All wholesale trade, all buying in order to sell again by wholesale, maybe
reduced to three different sorts : the home trade, the foreign trade of
consumption, and the carrying trade. The home trade is employed in
purchasing in one part of the same country, and selling in another, the
produce of the industry of that country. It comprehends both the inland and
the coasting trade. The foreign trade of consumption is employed in
purchasing foreign goods for home consumption. The carrying trade is
employed in transacting the commerce of foreign countries, or in carrying
the surplus produce of one to another.
The capital which is employed in purchasing in one part of the country, in
order to sell in another, the produce of the industry of that country,
generally replaces, by every such operation, two distinct capitals, that had
both been employed in the agriculture or manufactures of that country, and
thereby enables them to continue that employment. When it sends out from the
residence of the merchant a certain value of commodities, it generally
brings hack in return at least an equal value of other commodities. When
both are the produce of domestic industry, it necessarily replaces, by every
such operation, two distinct capitals, which had both been employed in
Supporting productive labour, and thereby enables them to continue that
support. The capital which sends Scotch manufactures to London, and brings
back English corn and manufactures to Edinburgh, necessarily replaces, by
every such operation, two British capitals, which had both been employed in
the agriculture or manufactures of Great Britain.
The capital employed in purchasing foreign goods for home consumption, when
this purchase is made with the produce of domestic industry, replaces, too,
by every such operation, two distinct capitals; but one of them only is
employed in supporting domestic industry. The capital which sends British
goods to Portugal, and brings back Portuguese goods to Great Britain,
replaces, by every such operation, only one British capital. The other is a
Portuguese one. Though the returns, therefore, of the foreign trade of
consumption, should be as quick as those of the home trade, the capital
employed in it will give but one half of the encouragement to the industry
or productive labour of the country.
But the returns of the foreign trade of consumption are very seldom so quick
as those of the home trade. The returns of the home trade generally come in
before the end of the year, and sometimes three or four times in the year.
The returns of the foreign trade of consumption seldom come in before the
end of the year, and sometimes not till after two or three years. A capital,
therefore, employed in the home trade, will sometimes make twelve
operations, or be sent out and returned twelve times, before a capital
employed in the foreign trade of consumption has made one. If the capitals
are equal, therefore, the one will give four-and-twenty times more
encouragement and support to the industry of the country than the other.
The foreign goods for home consumption may sometimes be purchased, not with
the produce of domestic industry but with some other foreign goods. These
last, however, must have been purchased, either immediately with the produce
of domestic industry, or with something else that had been purchased with it;
for, the case of war and conquest excepted, foreign goods can never be
acquired, but in exchange for something that had been produced at home,
either immediately, or after two or more different exchanges. The effects,
therefore, of a capital employed in such a round-about foreign trade of
consumption, are, in every respect, the same as those of one employed in the
most direct trade of the same kind, except that the final returns are likely
to be still more distant, as they must depend upon the returns of two or
three distinct foreign trades. If the hemp and flax of Riga are purchased
with the tobacco of Virginia, which had been purchased with British
manufactures, the merchant must wait for the returns of two distinct foreign
trades, before he can employ the same capital in repurchasing a like
quantity of British manufactures. If the tobacco of Virginia had been
purchased, not with British manufactures, but with the sugar and rum of
Jamaica, which had been purchased with those manufactures, he must wait for
the returns of three. If those two or three distinct foreign trades should
happen to be carried on by two or three distinct merchants, of whom the
second buys the goods imported by the first, and the third buys those
imported by the second, in order to export them again, each merchant,
indeed, will, in this case, receive the returns of his own capital more
quickly ; but the final returns of the whole capital employed in the trade
will be just as slow as ever. Whether the whole capital employed in such a
round about trade belong to one merchant or to three, can make no
difference with regard to the country, though it may with regard to the
particular merchants. Three times a greater capital must in both cases be
employed, in order to exchange a certain value of British manufactures for a
certain quantity of flax and hemp, than would have been necessary, had the
manufactures and the flax and hemp been directly exchanged for one another.
The whole capital employed, therefore, in such a round-about foreign trade
of consumption, will generally give less encouragement and support to the
productive labour of the country, than an equal capital employed in a more
direct trade of the same kind.
Whatever be the foreign commodity with which the foreign goods for home
consumption are purchased, it can occasion no essential difference, either in
the nature of the trade, or in the encouragement and support which it can
give to the productive labour of the country from which it is carried on. If
they are purchased with the gold of Brazil, for example, or with the silver
of Peru, this gold and silver, like the tobacco of Virginia, must have been
purchased with something that either was the produce of the industry of the
country, or that had been purchased with something else that was so. So far,
therefore, as the productive labour of the country is concerned, the foreign
trade of consumption, which is carried on by means of gold and silver, has
all the advantages and all the inconveniencies of any other equally
round-about foreign trade of consumption; and will replace, just as fast, or
just as slow, the capital which is immediately employed in supporting that
productive labour. It seems even to have one advantage over any other
equally round-about foreign trade. The transportation of those metals from
one place to another, on account of their small bulk and great value, is
less expensive than that of almost any other foreign goods of equal value.
Their freight is much less, and their insurance not greater ; and no goods,
besides, are less liable to suffer by the carriage. An equal quantity of
foreign goods, therefore, may frequently be purchased with a smaller
quantity of the produce of domestic industry, by the intervention of gold
and silver, than by that of any other foreign goods. The demand of the
country may frequently, in this manner, be supplied more completely, and at
a smaller expense, than in any other. Whether, by the continual exportation
of those metals, a trade of this kind is likely to impoverish the country
from which it is carried on in any other way, I shall have occasion to
examine at great length hereafter.
That part of the capital of any country which is employed in the carrying
trade, is altogether withdrawn from supporting the productive labour of that
particular country, to support that of some foreign countries. Though it may
replace, by every operation, two distinct capitals, yet neither of them
belongs to that particular country. The capital of the Dutch merchant, which
carries the corn of Poland to Portugal, and brings back the fruits and wines
of Portugal to Poland, replaces by every such operation two capitals,
neither of which had been employed in supporting the productive labour of
Holland; but one of them in supporting that of Poland, and the other that of
Portugal. The profits only return regularly to Holland, and constitute the
whole addition which this trade necessarily makes to the annual produce of
the land and labour of that country. When, indeed, the carrying trade of any
particular country is carried on with the ships and sailors of that country,
that part of the capital employed in it which pays the freight is
distributed among, and puts into motion, a certain number of productive
labourers of that country. Almost all nations that have had any considerable
share of the carrying trade have, in fact, carried it on in this manner. The
trade itself has probably derived its name from it, the people of such
countries being the carriers to other countries. It does not, however, seem
essential to the nature of the trade that it should be so. A Dutch merchant
may, for example, employ his capital in transacting the commerce of Poland
and Portugal, by carrying part of the surplus produce of the one to the
other, not in Dutch, but in British bottoms. It maybe presumed, that he
actually does so upon some particular occasions. It is upon this account,
however, that the carrying trade has been supposed peculiarly advantageous
to such a country as Great Britain, of which the defence and security depend
upon the number of its sailors and shipping. But the same capital may
employ as many sailors and shipping, either in the foreign trade of
consumption, or even in the home trade, when carried on by coasting vessels,
as it could in the carrying trade. The number of sailors and shipping which
any particular capital can employ, does not depend upon the nature of the
trade, but partly upon the bulk of the goods, in proportion to their value,
and partly upon the distance of the ports between which they are to be
carried; chiefly upon the former of those two circumstances. The coal trade
from Newcastle to London, for example, employs more shipping than all the
carrying trade of England, though the ports are at no great distance. To
force, therefore, by extraordinary encouragements, a larger share of the
capital of any country into the carrying trade, than what would naturally go
to it, will not always necessarily increase the shipping of that country.
The capital, therefore, employed in the home trade of any country, will
generally give encouragement and support to a greater quantity of productive
labour in that country, and increase the value of its annual produce, more
than an equal capital employed in the foreign trade of consumption; and the
capital employed in this latter trade has, in both these respects, a still
greater advantage over an equal capital employed in the carrying trade. The
riches, and so far as power depends upon riches, the power of every country
must always be in proportion to the value of its annual produce, the fund
from which all taxes must ultimately be paid. But the great object of the
political economy of every country, is to increase the riches and power of
that country. It ought, therefore, to give no preference nor superior
encouragement to the foreign trade of consumption above the home trade, nor
to the carrying trade above either of the other two. It ought neither to
force nor to allure into either of those two channels a greater share of the
capital of the country, than what would naturally flow into them of its own
accord.
Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of things,
without any constraint or violence, naturally introduces it.
When the produce of any particular branch of industry exceeds what the
demand of the country requires, the surplus must be sent abroad, and
exchanged for something for which there is a demand at home. Without
such exportation, a part of the productive labour of the country must cease,
and the value of its annual produce diminish. The land and labour of Great
Britain produce generally more corn, woollens, and hardware, than the demand
of the home market requires. The surplus part of them, therefore, must be
sent abroad, and exchanged for something for which there is a demand at
home. It is only by means of such exportation, that this surplus can
acquired value sufficient to compensate the labour and expense of producing
it. The neighbourhood of the sea-coast, and the banks of all navigable
rivers, are advantageous situations for industry, only because they
facilitate the exportation and exchange of such surplus produce for
something else which is more in demand there.
When the foreign goods which are thus purchased with the surplus produce of
domestic industry exceed the demand of the home market, the surplus part
of them must be sent abroad again, and exchanged for something more in
demand at home. About 96,000 hogsheads of tobacco are annually purchased in
Virginia and Maryland with a part of the surplus produce of British
industry. But the demand of Great Britain does not require, perhaps, more
than 14,000. If the remaining 82,000, therefore, could not be sent abroad,
and exchanged for something more in demand at home, the importation of them
must cease immediately, and with it the productive labour of all those
inhabitants of Great Britain who are at present employed in preparing the
goods with which these 82,000 hogsheads are annually purchased. Those goods,
which are part of the produce of the land and labour of Great Britain,
having no market at home, and being deprived of that which they had abroad,
must cease to be produced. The most round-about foreign trade of
consumption, therefore, may, upon some occasions, be as necessary for
supporting the productive labour of the country, and the value of its annual
produce, as the most direct.
When the capital stock of any country is increased to such a degree that it
cannot be all employed in supplying the consumption, and supporting the
productive labour of that particular country, the surplus part of it
naturally disgorges itself into the carrying trade, and is employed in
performing the same offices to other countries. The carrying trade is the
natural effect and symptom of great national wealth; but it does not seem to
be the natural cause of it. Those statesmen who have been disposed to favour
it with particular encouragement, seem to have mistaken the effect and
symptom for the cause. Holland, in proportion to the extent of the land and
the number of it's inhabitants, by far the richest country in Europe, has
accordingly the greatest share of the carrying trade of Europe. England,
perhaps the second richest country of Europe, is likewise supposed to have a
considerable share in it; though what commonly passes for the carrying trade
of England will frequently, perhaps, be found to be no more than a
round-about foreign trade of consumption. Such are, in a great measure, the
trades which carry the goods of the East and West Indies and of America to
the different European markets. Those goods are generally purchased, either
immediately with the produce of British industry, or with something else
which had been purchased with that produce, and the final returns of those
trades are generally used or consumed in Great Britain. The trade which
is carried on in British bottoms between the different ports of the
Mediterranean, and some trade of the same kind carried on by British
merchants between the different ports of India, make, perhaps, the principal
branches of what is properly the carrying trade of Great Britain.
The extent of the home trade, and of the capital which can be employed in
it, is necessarily limited by the value of the surplus produce of all those
distant places within the country which have occasion to exchange their
respective productions with one another ; that of the foreign trade of
consumption, by the value of the surplus produce of the whole country, and
of what can be purchased with it; that of the carrying trade, by the value
of the surplus produce of all the different countries in the world. Its
possible extent, therefore, is in a manner infinite in comparison of that of
the other two, and is capable of absorbing the greatest capitals.
The consideration of his own private profit is the sole motive which
determines the owner of any capital to employ it either in agriculture, in
manufactures, or in some particular branch of the wholesale or retail trade.
The different quantities of productive labour which it may put into motion,
and the different values which it may add to the annual produce of the land
and labour of the society, according as it is employed in one or other of
those different ways, never enter into his thoughts. In countries,
therefore, where agriculture is the most profitable of all employments, and
farming and improving the most direct roads to a splendid fortune, the
capitals of individuals will naturally be employed in the manner most
advantageous to the whole society. The profits of agriculture, however, seem
to have no superiority over those of other employments in any part of
Europe. Projectors, indeed, in every corner of it, have, within these few
years, amused the public with most magnificent accounts of the profits to be
made by the cultivation and improvement of land. Without entering into any
particular discussion of their calculations, a very simple observation may
satisfy us that the result of them must be false. We see, every day, the
most splendid fortunes, that have been acquired in the course of a single
life, by trade and manufactures, frequently from a very small capital,
sometimes from no capital. A single instance of such a fortune, acquired by
agriculture in the same time, and from such a capital, has not, perhaps,
occurred in Europe, during the course of the present century. In all the
great countries of Europe, however, much good land still remains
uncultivated ; and the greater part of what is cultivated, is far from being
improved to the degree of which it is capable. Agriculture, therefore, is
almost everywhere capable of absorbing a much greater capital than has ever
yet been employed in it. What circumstances in the policy of Europe have
given the trades which are carried on in towns so great an advantage over
that which is carried on in the country, that private persons frequently
find it more for their advantage to employ their capitals in the most
distant carrying trades of Asia and America. than in the improvement and
cultivation of the most fertile fields in their own neighbourhood, I shall
endeavour to explain at full length in the two following books.
BOOK III.
OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS
CHAPTER I.
OF THE NATURAL PROGRESS OF OPULENCE.
The great commerce of every civilized society is that carried on between the
inhabitants of the town and those of the country. It consists in the
exchange of rude for manufactured produce, either immediately, or by the
intervention of money, or of some sort of paper which represents money. The
country supplies the town with the means of subsistence and the materials of
manufacture. The town repays this supply, by sending back a part of the
manufactured produce to the inhabitants of the country. The town, in which
there neither is nor can be any reproduction of substances, may very
properly be said to gain its whole wealth and subsistence from the country.
We must not, however, upon this account, imagine that the gain of the town
is the loss of the country. The gains of both are mutual and reciprocal, and
the division of labour is in this, as in all other cases, advantageous to all
the different persons employed in the various occupations into which it is
subdivided. The inhabitants of the country purchase of the town a greater
quantity of manufactured goods with the produce of a much smaller quantity
of their own labour, than they must have employed had they attempted to
prepare them themselves. The town affords a market for the surplus produce
of the country, or what is over and above the maintenance of the cultivators
; and it is there that the inhabitants of the country exchange it for
something else which is in demand among them. The greater the number and
revenue of the inhabitants of the town, the more extensive is the market
which it affords to those of the country ; and the more extensive that
market, it is always the more advantageous to a great number. The corn which
grows within a mile of the town, sells there for the same price with that
which comes from twenty miles distance. But the price of the latter must,
generally, not only pay the expense of raising it and bringing it to market,
but afford, too, the ordinary profits of agriculture to the farmer. The
proprietors and cultivators of the country, therefore, which lies in the
neighbourhood of the town, over and above the ordinary profits of
agriculture, gain, in the price of what they sell, the whole value of the
carriage of the like produce that is brought from more distant parts ; and
they save, besides, the whole value of this carriage in the price of what
they buy. Compare the cultivation of the lands in the neighbourhood of any
considerable town, with that of those which lie at some distance from it,
and you will easily satisfy yourself bow much the country is benefited by
the commerce of the town. Among all the absurd speculations that have been
propagated concerning the balance of trade, it has never been pretended that
either the country loses by its commerce with the town, or the town by that
with the country which maintains it.
As subsistence is, in the nature of things, prior to conveniency and luxury,
so the industry which procures the former, must necessarily be prior to that
which ministers to the latter. The cultivation and improvement of the
country, therefore, which affords subsistence, must, necessarily, be prior
to the increase of the town, which furnishes only the means of conveniency
and luxury. It is the surplus produce of the country only, or what is over
and above the maintenance of the cultivators, that constitutes the
subsistence of the town, which can therefore increase only with the increase
of the surplus produce. The town, indeed, may not always derive its whole
subsistence from the country in its neighbourhood, or even from the
territory to which it belongs, but from very distant countries; and this,
though it forms no exception from the general rule, has occasioned
considerable variations in the progress of opulence in different ages and
nations.
That order of things which necessity imposes, in general, though not in
every particular country, is in every particular country promoted by the
natural inclinations of man. If human institutions had never thwarted those
natural inclinations, the towns could nowhere have increased beyond what the
improvement and cultivation of the territory in which they were situated
could support; till such time, at least, as the whole of that territory was
completely cultivated and improved. Upon equal, or nearly equal profits,
most men will choose to employ their capitals, rather in the improvement and
cultivation of land, than either in manufactures or in foreign trade. The
man who employs his capital in land, has it more under his view and command
; and his fortune is much less liable to accidents than that of the trader,
who is obliged frequently to commit it, not only to the winds and the waves,
but to the more uncertain elements of human folly and injustice, by giving
great credits, in distant countries, to men with whose character and
situation he can seldom be thoroughly acquainted. The capital of the
landlord, on the contrary, which is fixed in the improvement of his land,
seems to be as well secured as the nature of human affairs can admit of. The
beauty of the country, besides, the pleasure of a country life, the
tranquillity of mind which it promises, and, wherever the injustice of human
laws does not disturb it, the independency which it really affords, have
charms that, more or less, attract everybody; and as to cultivate the ground
was the original destination of man, so, in every stage of his existence, he
seems to retain a predilection for this primitive employment.
Without the assistance of some artificers, indeed, the cultivation of land
cannot be carried on, but with great inconveniency and continual
interruption. Smiths, carpenters, wheelwrights and ploughwrights, masons and
bricklayers, tanners, shoemakers, and tailors, are people whose service the
farmer has frequent occasion for. Such artificers, too, stand occasionally
in need of the assistance of one another; and as their residence is not,
like that of the farmer, necessarily tied down to a precise spot, they
naturally settle in the neighbourhood of one another, and thus form a small
town or village. The butcher, the brewer, and the baker, soon join them,
together with many other artificers and retailers, necessary or useful for
supplying their occasional wants, and who contribute still further to
augment the town. The inhabitants of the town, and those of the country, are
mutually the servants of one another. The town is a continual fair or
market, to which the inhabitants of the country resort, in order to exchange
their rude for manufactured produce. It is this commerce which supplies the
inhabitants of the town, both with the materials of their work, and the
means of their subsistence. The quantity of the finished work which they
sell to the inhabitants of the country, necessarily regulates the quantity
of the materials and provisions which they buy. Neither their employment nor
subsistence, therefore, can augment, but in proportion to the augmentation
of the demand from the country for finished work ; and this demand can
augment only in proportion to the extension of improvement and cultivation.
Had human institutions, therefore, never disturbed the natural course of
things, the progressive wealth and increase of the towns would, in every
political society, be consequential, and in proportion to the improvement
and cultivation of the territory of country.
In our North American colonies, where uncultivated land is still to be had
upon easy terms, no manufactures for distant sale have ever yet been
established in any of their towns. When an artificer has acquired a little
more stock than is necessary for carrying on his own business in supplying
the neighbouring country, he does not, in North America, attempt to
establish with it a manufacture for more distant sale, but employs it in the
purchase and improvement of uncultivated land. From artificer he becomes
planter ; and neither the large wages nor the easy subsistence which that
country affords to artificers, can bribe him rather to work for other people
than for himself. He feels that an artificer is the servant of his
customers, from whom he derives his subsistence; but that a planter who
cultivates his own land, and derives his necessary subsistence from the
labour of his own family, is really a master, and independent of all the
world.
In countries, on the contrary, where there is either no uncultivated land,
or none that can be had upon easy terms, every artificer who has acquired
more stock than he can employ in the occasional jobs of the neighbourhood,
endeavours to prepare work for more distant sale. The smith erects some sort
of iron, the weaver some sort of linen or woollen manufactory. Those
different manufactures come, in process of time, to be gradually subdivided,
and thereby improved and refined in a great variety of ways, which may
easily be conceived, and which it is therefore unnecessary to explain any
farther.
In seeking for employment to a capital, manufactures are, upon equal or
nearly equal profits, naturally preferred to foreign commerce, for the same
reason that agriculture is naturally preferred to manufactures. As the
capital of the landlord or farmer is more secure than that of the
manufacturer, so the capital of the manufacturer, being at all times more
within his view and command, is more secure than that of the foreign
merchant. In every period, indeed, of every society, the surplus part both
of the rude and manufactured produce, or that for which there is no demand
at home, must be sent abroad, in order to be exchanged for something for
which there is some demand at home. But whether the capital which carries
this surplus produce abroad be a foreign or a domestic one, is of very
little importance. If the society has not acquired sufficient capital, both
to cultivate all its lands, and to manufacture in the completest manner the
whole of its rude produce, there is even a considerable advantage that the
rude produce should be exported by a foreign capital, in order that the
whole stock of the society may be employed in more useful purposes. The:
wealth of ancient Egypt, that of China and Indostan, sufficient1y
demonstrate that a nation may attain a very high degree of opulence, though
the greater part of its exportation trade be carried on by foreigners. The
progress of our North American and West Indian colonies, would have been
much less rapid, had no capital but what belonged to themselves been
employed in exporting their surplus produce.
According to the natural course of things, therefore, the greater part of
the capital of every growing society is, first, directed to agriculture,
afterwards to manufactures, and, last of all, to foreign commerce. This
order of things is so very natural, that in every society that had any
territory, it has always, I believe, been in some degree observed. Some of
their lands must have been cultivated before any considerable towns could be
established, and some sort of coarse industry of the manufacturing kind must
have been carried on in those towns, before they could well think of
employing themselves in foreign commerce.
But though this natural order of things must have taken place in some degree
in every such society, it has, in all the modern states of Europe, been in
many respects entirely inverted. The foreign commerce of some of their
cities has introduced all their finer manufactures, or such as were fit for
distant sale; and manufactures and foreign commerce together have given
birth to the principal improvements of agriculture. The manners and customs
which the nature of their original government introduced, and which remained
after that government was greatly altered, necessarily forced them into this
unnatural and retrograde order.
CHAPTER II.
OF THE DISCOURAGEMENT OF AGRICULTURE IN
THE ANCIENT STATE OF EUROPE, AFTER THE
FALL OF THE ROMAN EMPIRE.
When the German and Scythian nations overran the western provinces of the
Roman empire, the confusions which followed so great a revolution lasted for
several centuries. The rapine and violence which the barbarians exercised
against the ancient inhabitants, interrupted the commerce between the towns
and the country. The towns were deserted, and the country was left
uncultivated; and the western provinces of Europe, which had enjoyed a
considerable degree of opulence under the Roman empire, sunk into the lowest
state of poverty and barbarism. During the continuance of those confusions,
the chiefs and principal leaders of those nations acquired, or usurped to
themselves, the greater part of the lands of those countries. A great part
of them was uncultivated; but no part of them, whether cultivated or
uncultivated, was left without a proprietor. All of them were engrossed, and
the greater part by a few great proprietors.
This original engrossing of uncultivated lands, though a great, might have
been but a transitory evil. They might soon have been divided again, and
broke into small parcels, either by succession or by alienation. The law of
primogeniture hindered them from being divided by succession; the
introduction of entails prevented their being broke into small parcels by
alienation.
When land, like moveables, is considered as the means only of subsistence
and enjoyment, the natural law of succession divides it, like them, among
all the children of the family ; of all of whom the subsistence and
enjoyment may be supposed equally dear to the father. This natural law of
succession, accordingly, took place among the Romans who made no more
distinction between elder and younger, between male and female, in the
inheritance of lands, than we do in the distribution of moveables. But when
land was considered as the means, not of subsistence merely, but of power
and protection, it was thought better that it should descend undivided to
one. In those disorderly times, every great landlord was a sort of petty
prince. His tenants were his subjects. He was their judge, and in some
respects their legislator in peace and their leader in war. He made war
according to his own discretion, frequently against his neighbours, and
sometimes against his sovereign. The security of a landed estate, therefore,
the protection which its owner could afford to those who dwelt on it,
depended upon its greatness. To divide it was to ruin it, and to expose
every part of it to be oppressed and swallowed up by the incursions of its
neighbours. The law of primogeniture, therefore, came to take place, not
immediately indeed, but in process of time, in the succession of landed
estates, for the same reason that it has generally taken place in that of
monarchies, though not always at their first institution. That the power,
and consequently the security of the monarchy, may not be weakened by
division, it must descend entire to one of the children. To which of them so
important a preference shall be given, must be determined by some general
rule, founded not upon the doubtful distinctions of personal merit, but upon
some plain and evident difference which can admit of no dispute. Among the
children of the same family there can be no indisputable difference but that
of sex, and that of age. The male sex is universally preferred to the
female; and when all other things are equal, the elder everywhere takes
place of the younger. Hence the origin of the right of primogeniture, and of
what is called lineal succession.
Laws frequently continue in force long after the circumstances which first
gave occasion to them, and which could alone render them reasonable, are no
more. In the present state of Europe, the proprietor of a single acre of
land is as perfectly secure in his possession as the proprietor of 100,000.
The right of primogeniture, however, still continues to be respected ; and
as of all institutions it is the fittest to support the pride of family
distinctions, it is still likely to endure for many centuries. In every
other respect, nothing can be more contrary to the real interest of a
numerous family, than a right which, in order to enrich one, beggars all the
rest of the children.
Entails are the natural consequences of the law of primogeniture. They were
introduced to preserve a certain lineal succession, of which the law of
primogeniture first gave the idea, and to hinder any part of the original
estate from being carried out of the proposed line, either by gift, or
device, or alienation; either by the folly, or by the misfortune of any of
its successive owners. They were altogether unknown to the Romans. Neither
their substitutions, nor fidei commisses, bear any resemblance to entails,
though some French lawyers have thought proper to dress the modern
institution in the language and garb of those ancient ones.
When great landed estates were a sort of principalities, entails might not
be unreasonable. Like what are called the fundamental laws of some
monarchies, they might frequently hinder the security of thousands from
being endangered by the caprice or extravagance of one man. But in the
present state of Europe, when small as well as great estates derive their
security from the laws of their country, nothing can be more completely
absurd. They are founded upon the most absurd of all suppositions, the
supposition that every successive generation of men have not an equal right
to the earth, and to all that it possesses ; but that the property of the
present generation should be restrained and regulated according to the fancy
of those who died, perhaps five hundred years ago. Entails, however,
are still respected, through the greater part of Europe ; In those
countries, particularly, in which noble birth is a necessary qualification
for the enjoyment either of civil or military honours. Entails are thought
necessary for maintaining this exclusive privilege of the nobility to the
great offices and honours of their country; and that order having usurped
one unjust advantage over the rest of their fellow-citizens, lest their
poverty should render it ridiculous, it is thought reasonable that they
should have another. The common law of England, indeed, is said to abhor
perpetuities, and they are accordingly more restricted there than in any
other European monarchy ; though even England is not altogether without
them. In Scotland, more than one fifth, perhaps more than one third part of
the whole lands in the country, are at present supposed to be under strict
entail.
Great tracts of uncultivated land were in this manner not only engrossed by
particular families, but the possibility of their being divided again was as
much as possible precluded for ever. It seldom happens, however, that a
great proprietor is a great improver. In the disorderly times which gave
birth to those barbarous institutions, the great proprietor was sufficiently
employed in defending his own territories, or in extending his jurisdiction
and authority over those of his neighbours. He had no leisure to attend to
the cultivation and improvement of land. When the establishment of law and
order afforded him this leisure, he often wanted the inclination, and almost
always the requisite abilities. If the expense of his house and person
either equalled or exceeded his revenue, as it did very frequently, he had
no stock to employ in this manner. If he was an economist, he generally
found it more profitable to employ his annual savings in new purchases than
in the improvement of his old estate. To improve land with profit, like all
other commercial projects, requires an exact attention to small savings and
small gains, of which a man born to a great fortune, even though naturally
frugal, is very seldom capable. The situation of such a person naturally
disposes him to attend rather to ornament, which pleases his fancy, than to
profit, for which he has so little occasion. The elegance of his dress, of
his equipage, of his house and household furniture, are objects which, from
his infancy, he has been accustomed to have some anxiety about. The turn of
mind which this habit naturally forms, follows him when he comes to think of
the improvement of land. He embellishes, perhaps, four or five hundred acres
in the neighbourhood of his house, at ten times the expense which the land
is worth after all his improvements; and finds, that if he was to improve
his whole estate in the same manner, and he has little taste for any other,
he would be a bankrupt before he had finished the tenth part of it. There
still remain, in both parts of the united kingdom, some great estates which
have continued, without interruption, in the hands of the same family since
the times of feudal anarchy. Compare the present condition of those estates
with the possessions of the small proprietors in their neighbourhood, and
you will require no other argument to convince you how unfavourable such
extensive property is to improvement.
If little improvement was to be expected from such great proprietors, still
less was to be hoped for from those who occupied the land under them. In the
ancient state of Europe, the occupiers of land were all tenants at will.
They were all, or almost all, slaves, but their slavery was of a milder kind
than that known among the ancient Greeks and Romans, or even in our West
Indian colonies. They were supposed to belong more directly to the land than
to their master. They could, therefore, be sold with it, but not separately.
They could marry, provided it was with the consent of their master; and he
could not afterwards dissolve the marriage by selling the man and wife to
different persons. If he maimed or murdered any of them, he was liable to
some penalty, though generally but to a small one. They were not, however,
capable of acquiring property. Whatever they acquired was acquired to their
master, and he could take it from them at pleasure. Whatever cultivation and
improvement could be carried on by means of such slaves, was properly
carried on by their master. It was at his expense. The seed, the cattle, and
the instruments of husbandry, were all his. It was for his benefit. Such
slaves could acquire nothing but their daily maintenance. It was properly
the proprietor himself, therefore, that in this case occupied his own lands,
and cultivated them by his own bondmen. This species of slavery still
subsists in Russia, Poland, Hungary, Bohemia, Moravia, and other parts of
Germany. It is only in the western and south-western provinces of Europe
that it has gradually been abolished altogether.
But if great improvements are seldom to be expected from great proprietors,
they are least of all to be expected when they employ slaves for their
workmen. The experience of all ages and nations, I believe, demonstrates
that the work done by slaves, though it appears to cost only their
maintenance, is in the end the dearest of any. A person who can acquire no
property can have no other interest but to eat as much and to labour as
little as possible. Whatever work he does beyond what is sufficient to
purchase his own maintenance, can be squeezed out of him by violence only,
and not by any interest of his own. In ancient Italy, how much the
cultivation of corn degenerated, how unprofitable it became to the master,
when it fell under the management of slaves, is remarked both by Pliny and
Columella. In the time of Aristotle, it had not been much better in ancient
Greece. Speaking of the ideal republic described in the laws of Plato, to
maintain 5000 idle men (the number of warriors supposed necessary for its
defence), together with their women and servants, would require, he says, a
territory of boundless extent and fertility, like the plains of Babylon.
The pride of man makes him love to domineer, and nothing mortifies him so
much as to be obliged to condescend to persuade his inferiors. Wherever the
law allows it, and the nature of the work can afford it, therefore, he will
generally prefer the service of slaves to that of freemen. The planting of
sugar and tobacco can afford the expense of slave cultivation. The raising
of corn, it seems, in the present times, cannot. In the English colonies, of
which the principal produce is corn, the far greater part of the work is
done by freemen. The late resolution of the Quakers in Pennsylvania, to set
at liberty all their negro slaves, may satisfy us that their number cannot
be very great. Had they made any considerable part of their property, such a
resolution could never have been agreed to. In our sugar colonies., on the
contrary, the whole work is done by slaves, and in our tobacco colonies a
very great part of it. The profits of a sugar plantation in any of our West
Indian colonies, are generally much greater than those of any other
cultivation that is known either in Europe or America ; and the profits of a
tobacco plantation, though inferior to those of sugar, are superior to
those of corn, as has already been observed. Both can afford the expense of
slave cultivation but sugar can afford it still better than tobacco. The
number of negroes, accordingly, is much greater, in proportion to that of
whites, in our sugar than in our tobacco colonies.
To the slave cultivators of ancient times. gradually succeeded a species of
farmers, known at present in France by the name of metayers. They are called
in Latin Coloni Partiarii. They have been so long in disuse in England, that
at present I know no English name for them. The proprietor furnished them
with the seed, cattle, and instruments of husbandry, the whole stock, in
short, necessary for cultivating the farm. The produce was divided equally
between the proprietor and the farmer, after setting aside what was judged
necessary for keeping up the stock, which was restored to the proprietor,
when the farmer either quitted or was turned out of the farm.
Land occupied by such tenants is properly cultivated at the expense of the
proprietors, as much as that occupied by slaves. There is, however, one very
essential difference between them. Such tenants, being freemen, are capable
of acquiring property; and having a certain proportion of the produce of the
land, they have a plain interest that the whole produce should be as great
as possible, in order that their own proportion may be so. A slave, on the
contrary, who can acquire nothing but his maintenance, consults his own
ease, by making the land produce as little as possible over and above that
maintenance. It is probable that it was partly upon account of this
advantage, and partly upon account of the encroachments which the
sovereigns, always jealous of the great lords, gradually encouraged their
villains to make upon their authority, and which seem, at least, to have
been such as rendered this species of servitude altogether inconvenient,
that tenure in villanage gradually wore out through the greater part of
Europe. The time and manner, however, in which so important a revolution was
brought about, is one of the most obscure points in modern history. The
church of Rome claims great merit in it ; and it is certain, that so early
as the twelfth century, Alexander III. published a bull for the general
emancipation of slaves. It seems, however, to have been rather a pious
exhortation, than a law to which exact obedience was required from the
faithful. Slavery continued to take place almost universally for several
centuries afterwards, till it was gradually abolished by the joint operation
of the two interests above mentioned ; that of the proprietor on the one
hand, and that of the sovereign on the other. A villain, enfranchised, and
at the same time allowed to continue in possession of the land, having no
stock of his own, could cultivate it only by means of what the landlord
advanced to him, and must therefore have been what the French call a
metayer.
It could never, however, be the interest even of this last species of
cultivators, to lay out, in the further improvement of the land, any part of
the little stock which they might save from their own share of the produce ;
because the landlord, who laid out nothing, was to get one half of whatever
it produced. The tithe, which is but a tenth of the produce, is found to be
a very great hindrance to improvement. A tax, therefore, which amounted to
one half, must have been an effectual bar to it. It might be the interest of
a metayer to make the land produce as much as could be brought out of it by
means of the stock furnished by the proprietor ; but it could never be his
interest to mix any part of his own with it. In France, where five parts out
of six of the whole kingdom are said to be still occupied by this species of
cultivators, the proprietors complain, that their metayers take every
opportunity of employing their master's cattle rather in carriage than in
cultivation ; because, in the one case, they get the whole profits to
themselves, in the other they share them with their landlord. This species
of tenants still subsists in some parts of Scotland. They are called
steel-bow tenants. Those ancient English tenants, who are said by
Chief-Baron Gilbert and Dr Blackstone to have been rather bailiffs of the
landlord than farmers, properly so called, were probably of the same kind.
To this species of tenantry succeeded, though by very slow degrees, farmers,
properly so called, who cultivated the land with their own stock, paying a
rent certain to the landlord. When such farmers have a lease for a term of
years, they may sometimes find it for their interest to lay out part of
their capital in the further improvement of the farm; because they may
sometimes expect to recover it, with a large profit, before the expiration
of the lease. The possession, even of such farmers, however, was long
extremely precarious, and still is so in many parts of Europe. They could,
before the expiration of their term, be legally ousted of their leases by a
new purchaser; in England, even, by the fictitious action of a common
recovery. If they were turned out illegally by the violence of their master,
the action by which they obtained redress was extremely imperfect. It did
not always reinstate them in the possession of the land, but gave them
damages, which never amounted to a real loss. Even in England, the country,
perhaps of Europe, where the yeomanry has always been most respected, it was
not till about the 14th of Henry VII. that the action of ejectment was
invented, by which the tenant recovers, not damages only, but possession,
and in which his claim is not necessarily concluded by the uncertain
decision of a single assize. This action has been found so effectual a
remedy, that, in the modern practice, when the landlord has occasion to sue
for the possession of the land, he seldom makes use of the actions which
properly belong to him as a landlord, the writ of right or the writ of
entry, but sues in the name of his tenant, by the writ of ejectment. In
England, therefore the security of the tenant is equal to that of the
proprietor. In England, besides, a lease for life of forty shillings a-year
value is a freehold, and entitles the lessee to a vote for a member of
parliament ; and as a great part of the yeomanry have freeholds of this
kind, the whole order becomes respectable to their landlords, on account of
the political consideration which this gives them. There is, I believe,
nowhere in Europe, except in England, any instance of the tenant building
upon the land of which he had no lease, and trusting that the honour of his
landlord would take no advantage of so important an improvement. Those laws
and customs, so favourable to the yeomanry, have perhaps contributed more to
the present grandeur of England, than all their boasted regulations of
commerce taken together.
The law which secures the longest leases against successors of every kind,
is, so far as I know, peculiar to Great Britain. It was introduced into
Scotland so early as 1449, by a law of James II. Its beneficial influence,
however, has been much obstructed by entails ; the heirs of entail being
generally restrained from letting leases for any long term of years,
frequently for more than one year. A late act of parliament has, in this
respect, somewhat slackened their fetters, though they are still by much too
strait. In Scotland, besides, as no leasehold gives a vote for a member of
parliament, the yeomanry are upon this account less respectable to their
landlords than in England.
In other parts of Europe, after it was found convenient to secure tenants
both against heirs and purchasers, the term of their security was still
limited to a very short period ; in France, for example, to nine years from
the commencement of the lease. It has in that country, indeed, been lately
extended to twentyseven, a period still too short to encourage the tenant to
make the most important improvements. The proprietors of land were
anciently the legislators of every part of Europe. The laws relating to
land, therefore, were all calculated for what they supposed the interest of
the proprietor. It was for his interest, they had imagined, that no lease
granted by any of his predecessors should hinder him from enjoying, during a
long term of years, the full value of his land. Avarice and injustice are
always short-sighted, and they did not foresee how much this regulation must
obstruct improvement, and thereby hurt, in the long-run, the real interest
of the landlord.
The farmers, too, besides paying the rent, were anciently, it was supposed,
bound to perform a great number of services to the landlord, which were
seldom either specified in the lease, or regulated by any precise rule, but
by the use and wont of the manor or barony. These services, therefore. being
almost entirely arbitrary, subjected the tenant to many vexations. In
Scotland the abolition of all services not precisely stipulated in the
lease, has, in the course of a few years, very much altered for the better
the condition of the yeomanry of that country.
The public services to which the yeomanry were bound, were not less
arbitrary than the private ones. To make and maintain the high roads, a
servitude which still subsists, I believe, everywhere, though with different
degrees of oppression in different countries, was not the only one. When the
king's troops, when his household, or his officers of any kind, passed
through any part of the country, the yeomanry were bound to provide them
with horses, carriages, and provisions, at a price regulated by the
purveyor. Great Britain is, I believe, the only monarchy in Europe where the
oppression of purveyance has been entirely abolished. It still subsists in
France and Germany.
The public taxes, to which they were subject, were as irregular and
oppressive as the services The ancient lords, though extremely unwilling to
grant, themselves, any pecuniary aid to their sovereign, easily allowed him
to tallage, as they called it, their tenants, and had not knowledge enough
to foresee how much this must, in the end, affect their own revenue. The
taille, as it still subsists in France. may serve as an example of those
ancient tallages. It is a tax upon the supposed profits of the farmer, which
they estimate by the stock that he has upon the farm. It is his interest,
therefore, to appear to have as little as possible, and consequently to
employ as little as possible in its cultivation, and none in its
improvement. Should any stock happen to accumulate in the hands of a
French farmer, the taille is almost equal to a prohibition of its ever being
employed upon the land. This tax, besides, is supposed to dishonour whoever
is subject to it, and to degrade him below, not only the rank of a
gentleman, but that of a burgher ; and whoever rents the lands of another
becomes subject to it. No gentleman, nor even any burgher, who has stock,
will submit to this degradation. This tax, therefore, not only hinders the
stock which accumulates upon the land from being employed in its
improvement, but drives away all other stock from it. The ancient tenths and
fifteenths, so usual in England in former times, seem, so far as they
affected the land, to have been taxes of the same nature with the taille.
Under all these discouragements, little improvement could he expected from
the occupiers of land. That order of people, with all the liberty and
security which law can give, must always improve under great disadvantage.
The farmer, compared with the proprietor, is as a merchant who trades with
burrowed money, compared with one who trades with his own. The stock of both
may improve; but that of the one, with only equal good conduct, must always
improve more slowly than that of the other, on account of the large share
of the profits which is consumed by the interest of the loan. The lands
cultivated by the farmer must, in the same manner, with only equal good
conduct, be improved more slowly than those cultivated by the proprietor,
on account of the large share of the produce which is consumed in the rent,
and which, had the farmer been proprietor, he might have employed in the
further improvement of the land. The station of a farmer, besides, is, from
the nature of things, inferior to that of a proprietor. Through the greater
part of Europe, the yeomanry are regarded as an inferior rank of people,
even to the better sort of tradesmen and mechanics, and in all parts of
Europe to the great merchants and master manufacturers. It can seldom
happen, therefore, that a man of any considerable stock should quit the
superior, in order to place himself in an inferior station. Even in the
present state of Europe, therefore, little stock is likely to go from any
other profession to the improvement of land in the way of farming. More
does, perhaps, in Great Britain than in any other country, though even there
the great stocks which are in some places employed in farming, have
generally been acquired by fanning, the trade, perhaps, in which, of all
others, stock is commonly acquired most slowly. After small proprietors,
however, rich and great farmers are in every country the principal
improvers. There are more such, perhaps, in England than in any other
European monarchy. In the republican governments of Holland, and of Berne
in Switzerland, the farmers are said to be not inferior to those of England.
The ancient policy of Europe was, over and above all this, unfavourable to
the improvement and cultivation of land, whether carried on by the
proprietor or by the farmer ; first, by the general prohibition of the
exportation of corn, without a special licence, which seems to have been a
very universal regulation ; and, secondly, by the restraints which were laid
upon the inland commerce, not only of corn, but of almost every other part
of the produce of the farm, by the absurd laws against engrossers,
regraters, and forestallers, and by the privileges of fairs and markets. It
has already been observed in what manner the prohibition of the exportation
of corn, together with some encouragement given to the importation of
foreign corn, obstructed the cultivation of ancient Italy, naturally the most
fertile country in Europe, and at that time the seat of the greatest empire
in the world. To what degree such restraints upon the inland commerce of
this commodity, joined to the general prohibition of exportation, must have
discouraged the cultivation of countries less fertile, and less favourably
circumstanced, it is not, perhaps, very easy to imagine.
CHAPTER III.
OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN
EMPIRE.
The inhabitants of cities and towns were, after the fall of the Roman
empire, not more favoured than those of the country. They consisted, indeed,
of a very different order of people from the first inhabitants of the
ancient republics of Greece and Italy. These last were composed chiefly of
the proprietors of lands, among whom the public territory was originally
divided, and who found it convenient to build their houses in the
neighbourhood of one another, and to surround them with a wall, for the sake
of common defence. After the fall of the Roman empire, on the contrary, the
proprietors of land seem generally to have lived in fortified castles on
their own estates, and in the midst of their own tenants and dependants. The
towns were chiefly inhabited by tradesmen and mechanics, who seem, in those
days, to have been of servile, or very nearly of servile condition. The
privileges which we find granted by ancient charters to the inhabitants of
some of the principal towns in Europe, sufficiently show what they were
before those grants. The people to whom it is granted as a privilege, that
they might give away their own daughters in marriage without the consent of
their lord, that upon their death their own children, and not their lord,
should succeed to their goods, and that they might dispose of their own
effects by will, must, before those grants, have been either altogether, or
very nearly, in the same state of villanage with the occupiers of land in
the country.
They seem, indeed, to have been a very poor, mean set of people, who seemed
to travel about with their goods from place to place, and from fair to fair,
like the hawkers and pedlars of the present times. In all the different
countries of Europe then, in the same manner as in several of the Tartar
governments of Asia at present, taxes used to be levied upon the persons and
goods of travellers, when they passed through certain manors, when they went
over certain bridges, when they carried about their goods from place to
place in a fair, when they erected in it a booth or stall to sell them in.
These different taxes were known in England by the names of passage,
pontage, lastage, and stallage. Sometimes the king, sometimes a great lord,
who had, it seems, upon some occasions, authority to do this, would grant to
particular traders, to such particularly as lived in their own demesnes, a
general exemption from such taxes. Such traders, though in other respects of
servile, or very nearly of servile condition, were upon this account called
free traders. They, in return, usually paid to their protector a sort of
annual poll-tax. In those days protection was seldom granted without a
valuable consideration, and this tax might perhaps be considered as
compensation for what their patrons might lose by their exemption from other
taxes. At first, both those poll-taxes and those exemptions seem to have
been altogether personal, and to have affected only particular individuals,
during either their lives, or the pleasure of their protectors. In the very
imperfect accounts which have been published from Doomsday-book, of several
of the towns of England, mention is frequently made, sometimes of the tax
which particular burghers paid, each of them, either to the king, or to some
other great lord, for this sort of protection, and sometimes of the general
amount only of all those taxes. {see Brady's Historical Treatise of Cities
and Boroughs, p. 3. etc.}
But how servile soever may have been originally the condition of the
inhabitants of the towns, it appears evidently, that they arrived at liberty
and independency much earlier than the occupiers of land in the country.
That part of the king's revenue which arose from such poll-taxes in any
particular town, used commonly to be let in farm, during a term of years,
for a rent certain, sometimes to the sheriff of the county, and sometimes to
other persons. The burghers themselves frequently got credit enough to be
admitted to farm the revenues of this sort winch arose out of their own
town, they becoming jointly and severally answerable for the whole rent.
{See Madox, Firma Burgi, p. 18; also History of the Exchequer, chap. 10,
sect. v, p. 223, first edition.} To let a farm in this manner, was quite
agreeable to the usual economy of, I believe, the sovereigns of all the
different countries of Europe, who used frequently to let whole manors to
all the tenants of those manors, they becoming jointly and severally
answerable for the whole rent ; but in return being allowed to collect it in
their own way, and to pay it into the king's exchequer by the hands of their
own bailiff, and being thus altogether freed from the insolence of the
king's officers; a circumstance in those days regarded as of the greatest
importance.
At first, the farm of the town was probably let to the burghers, in the same
manner as it had been to other farmers, for a term of years only. In process
of time, however, it seems to have become the general practice to grant it
to them in fee, that is for ever, reserving a rent certain, never afterwards
to be augmented. The payment having thus become perpetual, the exemptions,
in return, for which it was made, naturally became perpetual too. Those
exemptions, therefore, ceased to be personal, and could not afterwards be
considered as belonging to individuals, as individuals, but as burghers of a
particular burgh, which, upon this account, was called a free burgh, for the
same reason that they had been called free burghers or free traders.
Along with this grant, the important privileges, above mentioned, that they
might give away their own daughters in marriage, that their children should
succeed to them, and that they might dispose of their own effects by will,
were generally bestowed upon the burghers of the town to whom it was given.
Whether such privileges had before been usually granted, along with the
freedom of trade, to particular burghers, as individuals, I know not. I
reckon it not improbable that they were, though I cannot produce any direct
evidence of it. But however this may have been, the principal attributes of
villanage and slavery being thus taken away from them, they now at least
became really free, in our present sense of the word freedom.
Nor was this all. They were generally at the same time erected into a
commonalty or corporation, with the privilege of having magistrates and a
town-council of their own, of making bye-laws for their own government, of
building walls for their own defence, and of reducing all their inhabitants
under a sort of military discipline, by obliging them to watch and ward;
that is, as anciently understood, to guard and defend those walls against
all attacks and surprises, by night as well as by day. In England they were
generally exempted from suit to the hundred and county courts : and all such
pleas as should arise among them, the pleas of the crown excepted, were left
to the decision of their own magistrates. In other countries, much greater
and more extensive jurisdictions were frequently granted to them. {See
Madox, Firma Burgi. See also Pfeffel in the Remarkable events under Frederick
II. and his Successors of the House of Suabia.}
It might, probably, be necessary to grant to such towns as were admitted to
farm their own revenues, some sort of compulsive jurisdiction to oblige
their own citizens to make payment. In those disorderly times, it might have
been extremely inconvenient to have left them to seek this sort of justice
from any other tribunal. But it must seem extraordinary, that the sovereigns
of all the different countries of Europe should have exchanged in this
manner for a rent certain, never more to be augmented, that branch of their
revenue, which was, perhaps, of all others, the most likely to be improved
by the natural course of things, without either expense or attention of
their own ; and that they should, besides, have in this manner voluntarily
erected a sort of independent republics in the heart of their own dominions.
In order to understand this, it must be remembered, that, in those days, the
sovereign of perhaps no country in Europe was able to protect, through the
whole extent of his dominions, the weaker part of his subjects from the
oppression of the great lords. Those whom the law could not protect, and who
were not strong enough to defend themselves, were obliged either to have
recourse to the protection of some great lord, and in order to obtain it, to
become either his slaves or vassals; or to enter into a league of mutual
defence for the common protection of one another. The inhabitants of cities
and burghs, considered as single individuals, had no power to defend
themselves; but by entering into a league of mutual defence with their
neighbours, they were capable of making no contemptible resistance. The
lords despised the burghers, whom they considered not only as a different
order, but as a parcel of emancipated slaves, almost of a different species
from themselves. The wealth of the burghers never failed to provoke their
envy and indignation, and they plundered them upon every occasion without
mercy or remorse. The burghers naturally hated and feared the lords. The
king hated and feared them too ; but though, perhaps, he might despise, he
had no reason either to hate or fear the burghers. Mutual interest,
therefore, disposed them to support the king, and the king to support them
against the lords. They were the enemies of his enemies, and it was his
interest to render them as secure and independent of those. enemies as he
could. By granting them magistrates of their own, the privilege of making
bye-laws for their own government, that of building walls for their own
defence, and that of reducing all their inhabitants under a sort of military
discipline, he gave them all the means of security and independency of the
barons which it was in his power to bestow. Without the establishment of
some regular government of this kind, without some authority to compel their
inhabitants to act according to some certain plan or system, no voluntary
league of mutual defence could either have afforded them any permanent
security, or have enabled them to give the king any considerable support. By
granting them the farm of their own town in fee, he took away from those
whom he wished to have for his friends, and, if one may say so, for his
allies, all ground of jealousy and suspicion, that he was ever afterwards to
oppress them, either by raising the farm-rent of their town, or by granting
it to some other farmer.
The princes who lived upon the worst terms with their barons, seem
accordingly to have been the most liberal in grants of this kind to their
burghs. King John of England, for example, appears to have been a most
munificent benefactor to his towns. {See Madox.} Philip I. of France lost
all authority over his barons. Towards the end of his reign, his son Lewis,
known afterwards by the name of Lewis the Fat, consulted, according to
Father Daniel, with the bishops of the royal demesnes, concerning the most
proper means of restraining the violence of the great lords. Their advice
consisted of two different proposals. One was to erect a new order of
jurisdiction, by establishing magistrates and a town-council in every
considerable town of his demesnes. The other was to form a new militia, by
making the inhabitants of those towns, under the command of their own
magistrates, march out upon proper occasions to the assistance of the king.
It is from this period, according to the French antiquarians, that we are to
date the institution of the magistrates and councils of cities in France. It
was during the unprosperous reigns of the princes of the house of Suabia,
that the greater part of the free towns of Germany received the first grants
of their privileges, and that the famous Hanseatic league first became
formidable. {See Pfeffel.}
The militia of the cities seems, in those times, not to have been inferior
to that of the country ; and as they could be more readily assembled upon
any sudden occasion, they frequently had the advantage in their disputes
with the neighbouring lords. In countries such as Italy or Switzerland, in
which, on account either of their distance from the principal seat of
government, of the natural strength of the country itself, or of some other
reason, the sovereign came to lose the whole of his authority; the cities
generally became independent republics, and conquered all the nobility in
their neighbourhood; obliging them to pull down their castles in the
country, and to live, like other peaceable inhabitants, in the city. This is
the short history of the republic of Berne, as well as of several other
cities in Switzerland. If you except Venice, for of that city the history is
somewhat different, it is the history of all the considerable Italian
republics, of which so great a number arose and perished between the end of
the twelfth and the beginning of the sixteenth century.
In countries such as France and England, where the authority of the
sovereign, though frequently very low, never was destroyed altogether, the
cities had no opportunity of becoming entirely independent. They became,
however, so considerable, that the sovereign could impose no tax upon them,
besides the stated farm-rent of the town, without their own consent. They
were, therefore, called upon to send deputies to the general assembly of the
states of the kingdom, where they might join with the clergy and the barons
in granting, upon urgent occasions, some extraordinary aid to the king.
Being generally, too, more favourable to his power, their deputies seem
sometimes to have been employed by him as a counterbalance in those
assemblies to the authority of the great lords. Hence the origin of the
representation of burghs in the states-general of all great monarchies in
Europe.
Order and good government, and along with them the liberty and security of
individuals, were in this manner established in cities, at a time when the
occupiers of land in the country, were exposed to every sort of violence.
But men in this defenceless state naturally content themselves with their
necessary subsistence ; because, to acquire more, might only tempt the
injustice of their oppressors. On the contrary, when they are secure of
enjoying the fruits of their industry, they naturally exert it to better
their condition, and to acquire not only the necessaries, but the
conveniencies and elegancies of life. That industry, therefore, which aims
at something more than necessary subsistence, was established in cities long
before it was commonly practised by the occupiers of land in the country.
If, in the hands of a poor cultivator, oppressed with the servitude of
villanage, some little stock should accumulate, he would naturally conceal
it with great care from his master, to whom it would otherwise have
belonged, and take the first opportunity of running away to a town. The law
was at that time so indulgent to the inhabitants of towns, and so desirous
of diminishing the authority of the lords over those of the country, that if
he could conceal himself there from the pursuit of his lord for a year, he
was free for ever. Whatever stock, therefore, accumulated in the hands of
the industrious part of the inhabitants of the country, naturally took
refuge in cities, as the only sanctuaries in which it could be secure to the
person that acquired it.
The inhabitants of a city, it is true, must always ultimately derive their
subsistence, and the whole materials and means of their industry, from the
country. But those of a city, situated near either the sea-coast or the
banks of a navigable river, are not necessarily confined to derive them from
the country in their neighbourhood. They have a much wider range, and
may draw them from the most remote corners of the world, either in exchange
for the manufactured produce of their own industry, or by performing the
office of carriers between distant countries, and exchanging the produce of
one for that of another. A city might, in this manner, grow up to great
wealth and splendour, while not only the country in its neighbourhood, but
all those to which it traded, were in poverty and wretchedness. Each of
those countries, perhaps, taken singly, could afford it but a small part,
either of its subsistence or of its employment ; but all of them taken
together, could afford it both a great subsistence and a great employment.
There were, however, within the narrow circle of the commerce of those
times, some countries that were opulent and industrious. Such was the Greek
empire as long as it subsisted, and that of the Saracens during the reigns
of the Abassides. Such, too, was Egypt till it was conquered by the Turks,
some part of the coast of Barbary, and all those provinces of Spain which
were under the government of the Moors.
The cities of Italy seem to have been the first in Europe which were raised
by commerce to any considerable degree of opulence. Italy lay in the centre
of what was at that time the improved and civilized part of the world. The
crusades, too, though, by the great waste of stock and destruction of
inhabitants which they occasioned, they must necessarily have retarded the
progress of the greater part of Europe, were extremely favourable to that of
some Italian cities. The great armies which marched from all parts to the
conquest of the Holy Land, gave extraordinary encouragement to the shipping
of Venice, Genoa, and Pisa, sometimes in transporting them thither, and
always in supplying them with provisions. They were the commissaries, if one
may say so, of those armies ; and the most destructive frenzy that ever
befel the European nations, was a source of opulence to those republics.
The inhabitants of trading cities, by importing the improved manufactures
and expensive luxuries of richer countries, afforded some food to the vanity
of the great proprietors, who eagerly purchased them with great quantities
of the rude produce of their own lands. The commerce of a great part of
Europe in those times, accordingly, consisted chiefly in the exchange of
their own rude, for the manufactured produce of more civilized nations. Thus
the wool of England used to be exchanged for the wines of France, and the
fine cloths of Flanders, in the same manner as the corn in Poland is at this
day, exchanged for the wines and brandies of France, and for the silks and
velvets of France and Italy.
A taste for the finer and more improved manufactures was, in this manner,
introduced by foreign commerce into countries where no such works were
carried on. But when this taste became so general as to occasion a
considerable demand, the merchants, in order to save the expense of carriage,
naturally endeavoured to establish some manufactures of the same kind in
their own country. Hence the origin of the first manufactures for distant
sale, that seem to have been established in the western provinces of Europe,
after the fall of the Roman empire.
No large country, it must be observed, ever did or could subsist without
some sort of manufactures being carried on in it ; and when it is said of
any such country that it has no manufactures, it must always be understood
of the finer and more improved, or of such as are fit for distant sale. In
every large country both the clothing and household furniture or the far
greater part of the people, are the produce of their own industry. This is
even more universally the case in those poor countries which are commonly
said to have no manufactures, than in those rich ones that are said to
abound in them. In the latter you will generally find, both in the clothes
and household furniture of the lowest rank of people, a much greater
proportion of foreign productions than in the former.
Those manufactures which are fit for distant sale, seem to have been
introduced into different countries in two different ways.
Sometimes they have been introduced in the manner above mentioned, by the
violent operation, if one may say so, of the stocks of particular merchants
and undertakers, who established them in imitation of some foreign
manufactures of the same kind. Such manufactures, therefore, are the offspring
of foreign commerce; and such seem to have been the ancient manufactures of
silks, velvets, and brocades, which flourished in Lucca during the
thirteenth century. They were banished from thence by the tyranny of one of
Machiavel's heroes, Castruccio Castracani. In 1310, nine hundred families
were driven out of Lucca, of whom thirty-one retired to Venice, and offered
to introduce there the silk manufacture. {See Sandi Istoria civile de
Vinezia, part 2 vol. i, page 247 and 256.} Their offer was accepted, many
privileges were conferred upon them, and they began the manufacture with
three hundred workmen. Such, too, seem to have been the manufactures of fine
cloths that anciently flourished in Flanders, and which were introduced into
England in the beginning of the reign of Elizabeth, and such are the present
silk manufactures of Lyons and Spitalfields. Manufactures introduced in this
manner are generally employed upon foreign materials, being imitations of
foreign manufactures. When the Venetian manufacture was first established,
the materials were all brought from Sicily and the Levant. The more ancient
manufacture of Lucca was likewise carried on with foreign materials. The
cultivation of mulberry trees, and the breeding of silk-woms, seem not to
have been common in the northern parts of Italy before the sixteenth
century. Those arts were not introduced into France till the reign of
Charles IX. The manufactures of Flanders were carried on chiefly with
Spanish and English wool. Spanish wool was the material, not of the first
woollen manufacture of England, but of the first that was fit for distant
sale. More than one half the materials of the Lyons manufacture is at this
day foreign silk; when it was first established, the whole, or very nearly
the whole, was so. No part of the materials of the Spitalfields manufacture
is ever likely to be the produce of England. The seat of such manufactures,
as they are generally introduced by the scheme and project of a few
individuals, is sometimes established in a maritime city, and sometimes in
an inland town, according as their interest, judgment, or caprice, happen to
determine.
At other times, manufactures for distant sale grow up naturally, and as it
were of their own accord, by the gradual refinement of those household and
coarser manufactures which must at all times be carried on even in the
poorest and rudest countries. Such manufactures are generally employed upon
the materials which the country produces, and they seem frequently to have
been first refined and improved In such inland countries as were not,
indeed, at a very great, but at a considerable distance from the sea-coast,
and sometimes even from all water carriage. An inland country, naturally
fertile and easily cultivated, produces a great surplus of provisions beyond
what is necessary for maintaining the cultivators; and on account of the
expense of land carriage, and inconveniency of river navigation, it may
frequently be difficult to send this surplus abroad. Abundance, therefore,
renders provisions cheap, and encourages a great number of workmen to settle
in the neighbourhood, who find that their industry can there procure them
more of the necessaries and conveniencies of life than in other places. They
work up the materials of manufacture which the land produces, and exchange
their finished work, or, what is the same thing, the price of it, for more
materials and provisions. They give a new value to the surplus part of the
rude produce, by saving the expense of carrying it to the water-side, or to
some distant market ; and they furnish the cultivators with something in
exchange for it that is either useful or agreeable to them, upon easier
terms than they could have obtained it before. The cultivators get a better
price for their surplus produce, and can purchase cheaper other
conveniencies which they have occasion for. They are thus both encouraged
and enabled to increase this surplus produce by a further improvement and
better cultivation of the land; and as the fertility of she land had given
birth to the manufacture, so the progress of the manufacture reacts upon the
land, and increases still further it's fertility. The manufacturers first
supply the neighbourhood, and afterwards, as their work improves and
refines, more distant markets. For though neither the rude produce, nor even
the coarse manufacture, could, without the greatest difficulty, support the
expense of a considerable land-carriage, the refined and improved
manufacture easily may. In a small bulk it frequently contains the price of
a great quantity of rude produce. A piece of fine cloth, for example which
weighs only eighty pounds, contains in it the price, not only of eighty
pounds weight of wool, but sometimes of several thousand weight of corn, the
maintenance of the different working people, and of their immediate
employers. The corn which could with difficulty have been carried abroad in
its own shape, is in this manner virtually exported in that of the complete
manufacture, and may easily be sent to the remotest corners of the world. In
this manner have grown up naturally, and, as it were, of their own accord,
the manufactures of Leeds, Halifax, Sheffield, Birmingham, and
Wolverhampton. Such manufactures are the offspring of agriculture. In the
modern history of Europe, their extension and improvement have generally
been posterior to those which were the offspring of foreign commerce.
England was noted for the manufacture of fine cloths made of Spanish wool,
more than a century before any of those which now flourish in the places
above mentioned were fit for foreign sale. The extension and improvement of
these last could not take place but in consequence of the extension and
improvement of agriculture, the last and greatest effect of foreign
commerce, and of the manufactures immediately introduced by it, and which I
shall now proceed to explain.
CHAPTER IV.
HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY.
The increase and riches of commercial and manufacturing towns contributed to
the improvement and cultivation of the countries to which they belonged, in
three different ways :
First, by affording a great and ready market for the rude produce of the
country, they gave encouragement to its cultivation and further improvement.
This benefit was not even confined to the countries in which they were
situated, but extended more or less to all those with which they had any
dealings. To all of them they afforded a market for some part either of
their rude or manufactured produce, and, consequently, gave some
encouragement to the industry and improvement of all. Their own country,
however, on account of its neighbourhood, necessarily derived the greatest
benefit from this market. Its rude produce being charged with less carriage,
the traders could pay the growers a better price for it, and yet afford it
as cheap to the consumers as that of more distant countries.
Secondly, the wealth acquired by the inhabitants of cities was frequently
employed in purchasing such lands as were to be sold, of which a great part
would frequently be uncultivated. Merchants are commonly ambitious of
becoming country gentlemen, and, when they do, they are generally the best
of all improvers. A merchant is accustomed to employ his money chiefly in
profitable projects ; whereas a mere country gentleman is accustomed to
employ it chiefly in expense. The one often sees his money go from him, and
return to him again with a profit; the other, when once he parts with it,
very seldom expects to see any more of it. Those different habits naturally
affect their temper and disposition in every sort of business. The merchant
is commonly a bold, a country gentleman a timid undertaker. The one is not
afraid to lay out at once a large capital upon the improvement of his land,
when he has a probable prospect of raising the value of it in proportion to
the expense ; the other, if he has any capital, which is not always the
case, seldom ventures to employ it in this manner. If he improves at all, it
is commonly not with a capital, but with what he can save out or his annual
revenue. Whoever has had the fortune to live in a mercantile town, situated
in an unimproved country, must have frequently observed how much more
spirited the operations of merchants were in this way, than those of mere
country gentlemen. The habits, besides, of order, economy, and attention, to
which mercantile business naturally forms a merchant, render him much fitter
to execute, with profit and success, any project of improvement.
Thirdly, and lastly, commerce and manufactures gradually introduced order
and good government, and with them the liberty and security of individuals,
among the inhabitants of the country, who had before lived almost in a
continual state of war with their neighbours, and of servile dependency upon
their superiors. This, though it has been the least observed, is by far the
most important of all their effects. Mr Hume is the only writer who, so far
as I know, has hitherto taken notice of it.
In a country which has neither foreign commerce nor any of the finer
manufactures, a great proprietor, having nothing for which he can exchange
the greater part of the produce of his lands which is over and above the
maintenance of the cultivators, consumes the whole in rustic hospitality at
home. If this surplus produce is sufficient to maintain a hundred or a
thousand men, he can make use of it in no other way than by maintaining a
hundred or a thousand men. He is at all times, therefore, surrounded with a
multitude of retainers and dependants, who, having no equivalent to give in
return for their maintenance, but being fed entirely by his bounty, must
obey him, for the same reason that soldiers must obey the prince who pays
them. Before the extension of commerce and manufactures in Europe, the
hospitality of the rich and the great, from the sovereign down to the
smallest baron, exceeded every thing which, in the present times, we can
easily form a notion of Westminster-hall was the dining-room of William
Rufus, and might frequently, perhaps, not be too large for his company. It
was reckoned a piece of magnificence in Thomas Becket, that he strewed the
floor of his hall with clean hay or rushes in the season, in order that the
knights and squires, who could not get seats, might not spoil their fine
clothes when they sat down on the floor to eat their dinner. The great Earl
of Warwick is said to have entertained every day, at his different manors,
30,000 people ; and though the number here may have been exaggerated, it
must, however, have been very great to admit of such exaggeration. A
hospitality nearly of the same kind was exercised not many years ago in many
different parts of the Highlands of Scotland. It seems to be common in all
nations to whom commerce and manufactures are little known. I have seen,
says Doctor Pocock, an Arabian chief dine in the streets of a town where he
had come to sell his cattle, and invite all passengers, even common
beggars, to sit down with him and partake of his banquet.
The occupiers of land were in every respect as dependent upon the great
proprietor as his retainers. Even such of them as were not in a state of
villanage, were tenants at will, who paid a rent in no respect equivalent to
the subsistence which the land afforded them. A crown, half a crown, a
sheep, a lamb, was some years ago, in the Highlands of Scotland, a common
rent for lands which maintained a family. In some places it is so at this
day; nor will money at present purchase a greater quantity of commodities
there than in other places. In a country where the surplus produce of a
large estate must be consumed upon the estate itself, it will frequently be
more convenient for the proprietor, that part of it be consumed at a
distance from his own house, provided they who consume it are as dependent
upon him as either his retainers or his menial servants. He is thereby saved
from the embarrassment of either too large a company, or too large a family.
A tenant at will, who possesses land sufficient to maintain his family for
little more than a quit-rent, is as dependent upon the proprietor as any
servant or retainer whatever, and must obey him with as little reserve. Such
a proprietor, as he feeds his servants and retainers at his own house, so he
feeds his tenants at their houses. The subsistence of both is derived from
his bounty, and its continuance depends upon his good pleasure.
Upon the authority which the great proprietors necessarily had, in such a
state of things, over their tenants and retainers, was founded the power of
the ancient barons. They necessarily became the judges in peace, and the
leaders in war, of all who dwelt upon their estates. They could maintain
order, and execute the law, within their respective demesnes, because each
of them could there turn the whole force of all the inhabitants against the
injustice of anyone. No other person had sufficient authority to do this.
The king, in particular, had not. In those ancient times, he was little more
than the greatest proprietor in his dominions, to whom, for the sake of
common defence against their common enemies, the other great proprietors
paid certain respects. To have enforced payment of a small debt within the
lands of a great proprietor, where all the inhabitants were armed, and
accustomed to stand by one another, would have cost the king, had he
attempted it by his own authority, almost the same effort as to extinguish a
civil war. He was, therefore, obliged to abandon the administration of
justice, through the greater part of the country, to those who were capable
of administering it; and, for the same reason, to leave the command of the
country militia to those whom that militia would obey.
It is a mistake to imagine that those territorial jurisdictions took their
origin from the feudal law. Not only the highest jurisdictions, both civil
and criminal, but the power of levying troops, of coining money, and even
that of making bye-laws for the government of their own people, were all
rights possessed allodially by the great proprietors of land, several
centuries before even the name of the feudal law was known in Europe. The
authority and jurisdiction of the Saxon lords in England appear to have been
as great before the Conquest as that of any of the Norman lords after it.
But the feudal law is not supposed to have become the common law of England
till after the Conquest. That the most extensive authority and jurisdictions
were possessed by the great lords in France allodially, long before the
feudal law was introduced into that country, is a matter of fact that admits
of no doubt. That authority, and those jurisdictions, all necessarily flowed
from the state of property and manners just now described. Without
remounting to the remote antiquities of either the French or English
monarchies, we may find, in much later times, many proofs that such effects
must always flow from such causes. It is not thirty years ago since Mr
Cameron of Lochiel, a gentleman of Lochaber in Scotland, without any legal
warrant whatever, not being what was then called a lord of regality, nor
even a tenant in chief, but a vassal of the Duke of Argyll, and with out
being so much as a justice of peace, used, notwithstanding, to exercise the
highest criminal jurisdictions over his own people. He is said to have done
so with great equity, though without any of the formalities of justice; and
it is not improbable that the state of that part of the country at that time
made it necessary for him to assume this authority, in order to maintain the
public peace. That gentleman, whose rent never exceeded £500 a-year,
carried, in 1745, 800 of his own people into the rebellion with him.
The introduction of the feudal law, so far from extending, may be regarded
as an attempt to moderate, the authority of the great allodial lords. It
established a regular subordination, accompanied with a long train of
services and duties, from the king down to the smallest proprietor. During
the minority of the proprietor, the rent, together with the management of
his lands, fell into the hands of his immediate superior ; and,
consequently, those of all great proprietors into the hands of the king, who
was charged with the maintenance and education of the pupil, and who, from
his authority as guardian, was supposed to have a right of disposing of him
in marriage, provided it was in a manner not unsuitable to his rank. But
though this institution necessarily tended to strengthen the authority of
the king, and to weaken that of the great proprietors, it could not do
either sufficiently for establishing order and good government among the
inhabitants of the country; because it could not alter sufficiently that
state of property and manners from which the disorders arose. The authority
of government still continued to be, as before, too weak in the head, and
too strong in the inferior members; and the excessive strength of the
inferior members was the cause of the weakness of the head. After the
institution of feudal subordination, the king was as incapable of
restraining the violence of the great lords as before. They still continued
to make war according to their own discretion, almost continually upon one
another, and very frequently upon the king; and the open country still
continued to be a scene of violence, rapine, and disorder.
But what all the violence of the feudal institutions could never have
effected, the silent and insensible operation of foreign commerce and
manufactures gradually brought about. These gradually furnished the great
proprietors with something for which they could exchange the whole surplus
produce of their lands, and which they could consume themselves. without
sharing it either with tenants or retainers. All for ourselves, and nothing
for other people, seems, in every age of the world, to have been the vile
maxim of the masters of mankind. As soon, therefore, as they could find a
method of consuming the whole value of their rents themselves, they had no
disposition to share them with any other persons. For a pair of diamond
buckles, perhaps, or for something as frivolous and useless, they exchanged
the maintenance, or, what is the same thing, the price of the maintenance of
1000 men for a year, and with it the whole weight and authority which it
could give them. The buckles, however, were to be all their own, and no
other human creature was to have any share of them; whereas, in the more
ancient method of expense, they must have shared with at least 1000 people.
With the judges that were to determine the preference, this difference was
perfectly decisive; and thus, for the gratification of the most childish,
the meanest, and the most sordid of all vanities they gradually bartered
their whole power and authority.
In a country where there is no foreign commerce, nor any of the finer
manufactures, a man of £10,000 a-year cannot well employ his revenue in any
other way than in maintaining, perhaps, 1000 families, who are all of them
necessarily at his command. In the present state of Europe, a man of £10,000
a-year can spend his whole revenue, and he generally does so, without
directly maintaining twenty people, or being able to command more than ten
footmen, not worth the commanding. Indirectly, perhaps, he maintains as
great, or even a greater number of people, than he could have done by the
ancient method of expense. For though the quantity of precious productions
for which he exchanges his whole revenue be very small, the number of
workmen employed in collecting and preparing it must necessarily have been
very great. Its great price generally arises from the wages of their labour,
and the profits of all their immediate employers. By paying that price, he
indirectly pays all those wages and profits, and thus indirectly contributes
to the maintenance of all the workmen and their employers. He generally
contributes, however, but a very small proportion to that of each; to a very
few, perhaps, not a tenth, to many not a hundredth, and to some not a
thousandth, or even a ten thousandth part of their whole annual maintenance.
Though he contributes, therefore, to the maintenance of them all, they are
all more or less independent of him, because generally they can all be
maintained without him.
When the great proprietors of land spend their rents in maintaining their
tenants and retainers, each of them maintains entirely all his own tenants
and all his own retainers. But when they spend them in maintaining tradesmen
and artificers, they may, all of them taken together, perhaps maintain as
great, or, on account of the waste which attends rustic hospitality, a
greater number of people than before. Each of them, however, taken singly,
contributes often but a very small share to the maintenance of any
individual of this greater number. Each tradesman or artificer derives his
subsistence from the employment, not of one, but of a hundred or a thousand
different customers. Though in some measure obliged to them all, therefore,
he is not absolutely dependent upon any one of them.
The personal expense of the great proprietors having in this manner
gradually increased, it was impossible that the number of their retainers
should not as gradually diminish, till they were at last dismissed
altogether. The same cause gradually led them to dismiss the unnecessary
part of their tenants. Farms were enlarged, and the occupiers of land, not.
withstanding the complaints of depopulation, reduced to the number necessary
for cultivating it, according to the imperfect state of cultivation and
improvement in those times. By the removal of the unnecessary mouths, and by
exacting from the farmer the full value of the farm, a greater surplus, or,
what is the same thing, the price of a greater surplus, was obtained for the
proprietor, which the merchants and manufacturers soon furnished him with a
method of spending upon his own person, in the same manner as he had done
the rest. The cause continuing to operate, he was desirous to raise his
rents above what his lands, in the actual state of their improvement, could
afford. His tenants could agree to this upon one condition only, that they
should be secured in their possession for such a term of years as might give
them time to recover, with profit, whatever they should lay not in the
further improvement of the land. The expensive vanity of the landlord made
him willing to accept of this condition ; and hence the origin of long
leases.
Even a tenant at will, who pays the full value of the land, is not
altogether dependent upon the landlord. The pecuniary advantages which they
receive from one another are mutual and equal, and such a tenant will expose
neither his life nor his fortune in the service of the proprietor. But if he
has a lease for along term of years, he is altogether independent; and his
landlord must not expect from him even the most trifling service, beyond
what is either expressly stipulated in the lease, or imposed upon him by the
common and known law of the country.
The tenants having in this manner become independent, and the retainers
being dismissed, the great proprietors were no longer capable of
interrupting the regular execution of justice, or of disturbing the peace of
the country. Having sold their birth-right, not like Esau, for a mess of
pottage in time of hunger and necessity, but, in the wantonness of plenty,
for trinkets and baubles, fitter to be the playthings of children than the
serious pursuits of men, they became as insignificant as any substantial
burgher or tradesmen in a city. A regular government was established in the
country as well as in the city, nobody having sufficient power to disturb
its operations in the one, any more than in the other.
It does not, perhaps, relate to the present subject, but I cannot help
remarking it, that very old families, such as have possessed some
considerable estate from father to son for many successive generations, are
very rare in commercial countries. In countries which have little commerce,
on the contrary, such as Wales, or the Highlands of Scotland, they are very
common. The Arabian histories seem to be all full of genealogies; and there
is a history written by a Tartar Khan, which has been translated into
several European languages, and which contains scarce any thing else; a
proof that ancient families are very common among those nations. In
countries where a rich man can spend his revenue in no other way than by
maintaining as many people as it can maintain, he is apt to run out, and his
benevolence, it seems, is seldom so violent as to attempt to maintain more
than he can afford. But where he can spend the greatest revenue upon his own
person, he frequently has no bounds to his expense, because he frequently
has no bounds to his vanity, or to his affection for his own person. In
commercial countries, therefore, riches, in spite of the most violent
regulations of law to prevent their dissipation, very seldom remain long in
the same family. Among simple nations, on the contrary, they frequently do,
without any regulations of law ; for among nations of shepherds, such as the
Tartars and Arabs, the consumable nature of their property necessarily
renders all such regulations impossible.
A revolution of the greatest importance to the public happiness, was in this
manner brought about by two different orders of people, who had not the
least intention to serve the public. To gratify the most childish vanity was
the sole motive of the great proprietors. The merchants and artificers, much
less ridiculous, acted merely from a view to their own interest, and in
pursuit of their own pedlar principle of turning a penny wherever a penny
was to be got. Neither of them had either knowledge or foresight of that
great revolution which the folly of the one, and the industry of the other,
was gradually bringing about.
It was thus, that, through the greater part of Europe, the commerce and
manufactures of cities, instead of being the effect, have been the cause and
occasion of the improvement and cultivation of the country.
This order, however, being contrary to the natural course of things, is
necessarily both slow and uncertain. Compare the slow progress of those
European countries of which the wealth depends very much upon their commerce
and manufactures, with the rapid advances of our North American colonies, of
which the wealth is founded altogether in agriculture. Through the greater
part of Europe, the number of inhabitants is not supposed to double in less
than five hundred years. In several of our North American colonies, it is
found to double in twenty or five-and-twenty years. In Europe, the law of
primogeniture, and perpetuities of different kinds, prevent the division of
great estates, and thereby hinder the multiplication of small proprietors. A
small proprietor, however, who knows every part of his little territory,
views it with all the affection which property, especially small property,
naturally inspires, and who upon that account takes pleasure, not only in
cultivating, but in adorning it, is generally of all improvers the most
industrious, the most intelligent, and the most successful. The same
regulations, besides, keep so much land out of the market, that there are
always more capitals to buy than there is land to sell, so that what is sold
always sells at a monopoly price. The rent never pays the interest of the
purchase-money, and is, besides, burdened with repairs and other occasional
charges, to which the interest of money is not liable. To purchase land, is,
everywhere in Europe, a most unprofitable employment of a small capital. For
the sake of the superior security, indeed, a man of moderate circumstances,
when he retires from business, will sometimes choose to lay out his little
capital in land. A man of profession, too whose revenue is derived from
another source often loves to secure his savings in the same way. But a
young man, who, instead of applying to trade or to some profession, should
employ a capital of two or three thousand pounds in the purchase and
cultivation of a small piece of land, might indeed expect to live very
happily and very independently, but must bid adieu for ever to all hope of
either great fortune or great illustration, which, by a different employment
of his stock, he might have had the same chance of acquiring with other
people. Such a person, too, though he cannot aspire at being a proprietor,
will often disdain to be a farmer. The small quantity of land, therefore,
which is brought to market, and the high price of what is brought thither,
prevents a great number of capitals from being employed in its cultivation
and improvement, which would otherwise have taken that direction. In North
America, on the contrary, fifty or sixty pounds is often found a sufficient
stock to begin a plantation with. The purchase and improvement of
uncultivated land is there the most profitable employment of the smallest as
well as of the greatest capitals, and the most direct road to all the
fortune and illustration which can be required in that country. Such land,
indeed, is in North America to be had almost for nothing, or at a price much
below the value of the natural produce; a thing impossible in Europe, or
indeed in any country where all lands have long been private property. If
landed estates, however, were divided equally among all the children, upon
the death of any proprietor who left a numerous family, the estate would
generally be sold. So much land would come to market, that it could no
longer sell at a monopoly price. The free rent of the land would go no
nearer to pay the interest of the purchase-money, and a small capital might
be employed in purchasing land as profitable as in any other way.
England, on account of the natural fertility of the soil, of the great
extent of the sea-coast in proportion to that of the whole country, and of
the many navigable rivers which run through it, and afford the conveniency
of water carriage to some of the most inland parts of it, is perhaps as well
fitted by nature as any large country in Europe to be the seat of foreign
commerce, of manufactures for distant sale, and of all the improvements
which these can occasion. From the beginning of the reign of Elizabeth, too,
the English legislature has been peculiarly attentive to the interest of
commerce and manufactures, and in reality there is no country in Europe,
Holland itself not excepted, of which the law is, upon the whole, more
favourable to this sort of industry. Commerce and manufactures have
accordingly been continually advancing during all this period. The
cultivation and improvement of the country has, no doubt, been gradually
advancing too; but it seems to have followed slowly, and at a distance, the
more rapid progress of commerce and manufactures. The greater part of the
country must probably have been cultivated before the reign of Elizabeth;
and a very great part of it still remains uncultivated, and the
cultivation of the far greater part much inferior to what it might be, The
law of England, however, favours agriculture, not only indirectly, by the
protection of commerce, but by several direct encouragements. Except in
times of scarcity, the exportation of corn is not only free, but encouraged
by a bounty. In times of moderate plenty, the importation of foreign corn is
loaded with duties that amount to a prohibition. The importation of live
cattle, except from Ireland, is prohibited at all times ; and it is but of
late that it was permitted from thence. Those who cultivate the land,
therefore, have a monopoly against their countrymen for the two greatest and
most important articles of land produce, bread and butcher's meat. These
encouragements, although at bottom, perhaps, as I shall endeavour to show
hereafter, altogether illusory, sufficiently demonstrate at least the good
intention of the legislature to favour agriculture. But what is of much more
importance than all of them, the yeomanry of England are rendered as secure
, as independent, and as respectable, as law can make them. No country,
therefore, which the right of primogeniture takes place, which pays tithes,
and where perpetuities, though contrary to the spirit of the law, are
admitted in some cases, can give more encouragement to agriculture than
England. Such, however, notwithstanding, is the state of its cultivation.
What would it have been, had the law given no direct encouragement to
agriculture besides what arises indirectly from the progress of commerce,
and had left the yeomanry in the same condition as in most other countries
of Europe ? It is now more than two hundred years since the beginning of the
reign of Elizabeth, a period as long as the course of human prosperity
usually endures.
France seems to have had a considerable share of foreign commerce, near a
century before England was distinguished as a commercial country. The marine
of France was considerable, according to the notions of the times, before
the expedition of Charles VIII. to Naples. The cultivation and improvement
of France, however, is, upon the whole, inferior to that of England. The law
of the country has never given the same direct encouragement to agriculture.
The foreign commerce of Spain and Portual to the other parts of Europe,
though chiefly carried on in foreign ships, is very considerable. That to
their colonies is carried on in their own, and is much greater, on account
of the great riches and extent of those colonies. But it has never
introduced any considerable manufactures for distant sale into either of
those countries, and the greater part of both still remains uncultivated.
The foreign commerce of Portugal is of older standing than that of any great
country in Europe, except Italy.
Italy is the only great country of Europe which seems to have been
cultivated and improved in every part, by means of foreign commerce and
manufactures for distant sale. Before the invasion of Charles VIII., Italy,
according to Guicciardini, was cultivated not less in the most mountainous
and barren parts of the country, than in the plainest and most fertile. The
advantageous situation of the country, and the great number of independent
status which at that time subsisted in it, probably contributed not a little
to this general cultivation. It is not impossible, too, notwithstanding this
general expression of one of the most judicious and reserved of modern
historians, that Italy was not at that time better cultivated than England
is at present.
The capital, however, that is acquired to any country by commerce and
manufactures, is always a very precarious and uncertain possession, till
some part of it has been secured and realized in the cultivation and
improvement of its lands. A merchant, it has been said very properly, is not
necessarily the citizen of any particular country. It is in a great measure
indifferent to him from what place he carries on his trade ; and a very
trifling disgust will make him remove his capital, and, together with it,
all the industry which it supports, from one country to another. No part of
it can be said to belong to any particular country, till it has been spread,
as it were, over the face of that country, either in buildings, or in the
lasting improvement of lands. No vestige now remains of the great wealth
said to have been possessed by the greater part of the Hanse Towns, except
in the obscure histories of the thirteenth and fourteenth centuries. It is
even uncertain where some of them were situated, or to what towns in Europe
the Latin names given to some of them belong. But though the misfortunes of
Italy, in the end of the fifteenth and beginning of the sixteenth centuries,
greatly diminished the commerce and manufactures of the cities of Lombardy
and Tuscany, those countries still continue to be among the most populous
and best cultivated in Europe. The civil wars of Flanders, and the Spanish
government which succeeded them, chased away the great commerce of Antwerp,
Ghent, and Bruges. But Flanders still continues to be one of the richest,
best cultivated, and most populous provinces of Europe. The ordinary
revolutions of war and government easily dry up the sources of that wealth
which arises from commerce only. That which arises from the more solid
improvements of agriculture is much more durable, and cannot be destroyed
but by those more violent convulsions occasioned by the depredations of
hostile and barbarous nations continued for a century or two together ; such
as those that happened for some time before and after the fall of the Roman
empire in the western provinces of Europe.
BOOK IV.
OF SYSTEMS OF POLITICAL ECONOMY.
Political economy, considered as a branch of the science of a
statesman or legislator, proposes two distinct objects; first, to
provide a plentiful revenue or subsistence for the people, or,
more properly, to enable them to provide such a revenue or
subsistence for themselves; and, secondly, to supply the state or
commonwealth with a revenue sufficient for the public services.
It proposes to enrich both the people and the sovereign.
The different progress of opulence in different ages and nations,
has given occasion to two different systems of political economy,
with regard to enrichiug the people. The one may be called the
system of commerce, the other that of agriculture. I shall
endeavour to explain both as fully and distinctly as I can, and
shall begin with the system of commerce. It is the modern system,
and is best understood in our own country and in our own times.
CHAPTER I.
OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM.
That wealth consists in money, or in gold and silver, is a
popular notion which naturally arises from the double function of
money, as the instrument of commerce, and as the measure of
value. In consequence of its being the instrument of commerce,
when we have money we can more readily obtain whatever else we
have occasion for, than by means of any other commodity. The
great affair, we always find, is to get money. When that is
obtained, there is no difficulty in making any subsequent
purchase. In consequence of its being the measure of value, we
estimate that of all other commodities by the quantity of money
which they will exchange for. We say of a rich man, that he is
worth a great deal, and of a poor man, that he is worth very
little money. A frugal man, or a man eager to be rich, is said to
love money ; and a careless, a generous, or a profuse man, is
said to be indifferent about it. To grow rich is to get money ;
and wealth and money, in short, are, in common language,
considered as in every respect synonymous.
A rich country, in the same manner as a rich man, is supposed to
be a country abounding in money ; and to heap up gold and silver
in any country is supposed to be the readiest way to enrich it.
For some time after the discovery of America, the first inquiry
of the Spaniards, when they arrived upon any unknown coast, used
to be, if there was any gold or silver to be found in the
neighbourhood? By the information which they received, they
judged whether it was worth while to make a settlement there, or
if the country was worth the conquering. Plano Carpino, a monk
sent ambassador from the king of France to one of the sons of the
famous Gengis Khan, says, that the Tartars used frequently to ask
him, if there was plenty of sheep and oxen in the kingdom of
France ? Their inquiry had the same object with that of the
Spaniards. They wanted to know if the country was rich enough to
be worth the conquering. Among the Tartars, as among all other
nations of shepherds, who are generally ignorant of the use of
money, cattle are the instruments of commerce and the measures of
value. Wealth, therefore, according to them, consisted in cattle,
as, according to the Spaniards, it consisted in gold and silver.
Of the two, the Tartar notion, perhaps, was the nearest to the
truth.
Mr Locke remarks a distinction between money and other moveable
goods. All other moveable goods, he says, are of so consumable a
nature, that the wealth which consists in them cannot be much
depended on; and a nation which abounds in them one year may,
without any exportation, but merely by their own waste and
extravagance, be in great want of them the next. Money, on the
contrary, is a steady friend, which, though it may travel about
from hand to hand, yet if it can be kept from going out of the
country, is not very liable to be wasted and consumed. Gold and
silver, therefore, are, according to him, the must solid and
substantial part of the moveable wealth of a nation ; and to
multiply those metals ought, he thinks, upon that account, to be
the great object of its political economy.
Others admit, that if a nation could be separated from all the
world, it would be of no consequence how much or how little money
circulated in it. The consumable goods, which were circulated by
means of this money, would only be exchanged for a greater or a
smaller number of pieces; but the real wealth or poverty of the
country, they allow, would depend altogether upon the abundance
or scarcity of those consumable goods. But it is otherwise, they
think, with countries which have connections with foreign
nations, and which are obliged to carry on foreign wars, and to
maintain fleets and armies in distant countries. This, they say,
cannot be done, but by sending abroad money to pay them with ;
and a nation cannot send much money abroad, unless it has a good
deal at home. Every such nation, therefore, must endeavour, in
time of peace, to accumulate gold and silver, that when occasion
requires, it may have wherewithal to carry on foreign wars.
In consequence of those popular notions, all the different
nations of Europe have studied, though to little purpose, every
possible means of accumulating gold and silver in their
respective countries. Spain and Portugal, the proprietors of the
principal mines which supply Europe with those metals, have
either prohibited their exportation under the severest penalties,
or subjected it to a considerable duty. The like prohibition
seems anciently to have made a part of the policy of most other
European nations. It is even to be found, where we should least
of all expect to find it, in some old Scotch acts of Parliament,
which forbid, under heavy penalties, the carrying gold or silver
forth of the kingdom. The like policy anciently took place both
in France and England.
When those countries became commercial, the merchants found this
prohibition, upon many occasions, extremely inconvenient. They
could frequently buy more advantageously with gold and silver,
than with any other commodity, the foreign goods which they
wanted, either to import into their own, or to carry to some
other foreign country. They remonstrated, therefore, against this
prohibition as hurtful to trade.
They represented, first, that the exportation of gold and silver,
in order to purchase foreign goods, did not always diminish the
quantity of those metals in the kingdom ; that, on the contrary,
it might frequently increase the quantity ; because, if the
consumption of foreign goods was not thereby increased in the
country, those goods might be re-exported to foreign countries,
and being there sold for a large profit, might bring back much
more treasure than was originally sent out to purchase them. Mr
Mun compares this operation of foreign trade to the seed-time and
harvest of agriculture. "If we only behold," says he, "the
actions of the husbandman in the seed. time, when he casteth away
much good corn into the ground, we shall account him rather a
madman than a husbandman. But when we consider his labours in the
harvest, which is the end of his endeavours, we shall find the
worth and plentiful increase of his actions."
They represented, secondly, that this prohibition could not
hinder the exportation of gold and silver, which, on account of
the smallness of their bulk in proportion to their value, could
easily be smuggled abroad. That this exportation could only be
prevented by a proper attention to what they called the balance
of trade. That when the country exported to a greater value than
it imported, a balance became due to it from foreign nations,
which was necessarily paid to it in gold and silver, and thereby
increased the quantity of those metals in the kingdom. But that
when it imported to a greater value than it exported, a contrary
balance became due to foreign nations, which was necessarily paid
to them in the same manner, and thereby diminished that quantity
: that in this case, to prohibit the exportation of those metals,
could not prevent it, but only, by making it more dangerous,
render it more expensive: that the exchange was thereby turned
more against the country which owed the balance, than it
otherwise might have been; the merchant who purchased a bill upon
the foreign country being obliged to pay the banker who sold it,
not only for the natural risk, trouble, and expense of sending
the money thither, but for the extraordinary risk arising from
the prohibition; but that the more the exchange was against any
country, the more the balance of trade became necessarily against
it; the money of that country becoming necessarily of so much
less value, in comparison with that of the country to which the
balance was due. That if the exchange between England and
Holland, for example, was five per cent. against England, it
would require 105 ounces of silver in England to purchase a bill
for 100 ounces of silver in Holland: that 105 ounces of silver in
England, therefore, would be worth only 100 ounces of silver in
Holland, and would purchase only a proportionable quantity of
Dutch goods ; but that 100 ounces of silver in Holland, on the
contrary, would be worth 105 ounces in England, and would
purchase a proportionable quantity of English goods; that the
English goods which were sold to Holland would be sold so much
cheaper, and the Dutch goods which were sold to England so much
dearer, by the difference of the exchange : that the one would
draw so much less Dutch money to England, and the other so much
more English money to Holland, as this difference amounted to:
and that the balance of trade, therefore, would necessarily be so
much more against England, and would require a greater balance of
gold and silver to be exported to Holland.
Those arguments were partly solid and partly sophistical. They
were solid, so far as they asserted that the exportation of gold
and silver in trade might frequently be advantageous to the
country. They were solid, too, in asserting that no prohibition
could prevent their exportation, when private people found any
advantage in exporting them. But they were sophistical, in
supposing, that either to preserve or to augment the quantity of
those metals required more the attention of government, than to
preserve or to augment the quantity of any other useful
commodities, which the freedom of trade, without any such
attention, never fails to supply in the proper quantity. They
were sophistical, too, perhaps, in asserting that the high price
of exchange necessarily increased what they called the
unfavourable balance of trade, or occasioned the exportation of a
greater quantity of gold and silver. That high price, indeed, was
extremely disadvantageous to the merchants who had any money to
pay in foreign countries. They paid so much dearer for the bills
which their bankers granted them upon those countries. But though
the risk arising from the prohibition might occasion some
extraordinary expense to the bankers, it would not necessarily
carry any more money out of the country. This expense would
generally be all laid out in the country, in smuggling the money
out of it, and could seldom occasion the exportation of a single
sixpence beyond the precise sum drawn for. The high price of
exchange, too, would naturally dispose the merchants to endeavour
to make their exports nearly balance their imports, in order that
they might have this high exchange to pay upon as small a sum as
possible. The high price of exchange, besides, must necessarily
have operated as a tax, in raising the price of foreign goods,
and thereby diminishing their consumption. It would tend,
therefore, not to increase, but to diminish, what they called the
unfavourable balance of trade, and consequently the exportation
of gold and silver.
Such as they were, however, those arguments convinced the people
to whom they were addressed. They were addressed by merchants to
parliaments and to the councils of princes, to nobles, and to
country gentlemen; by those who were supposed to understand
trade, to those who were conscious to them selves that they knew
nothing about the matter. That foreign trade enriched the
country, experience demonstrated to the nobles and country
gentlemen, as well as to the merchants ; but how, or in what
manner, none of them well knew. The merchants knew perfectly in
what manner it enriched themselves, it was their business to know
it. But to know in what manner it enriched the country, was no
part of their business. The subject never came into their
consideration, but when they had occasion to apply to their
country for some change in the laws relating to foreign trade. It
then became necessary to say something about the beneficial
effects of foreign trade, and the manner in which those effects
were obstructed by the laws as they then stood. To the judges who
were to decide the business, it appeared a most satisfactory
account of the matter, when they were told that foreign trade
brought money into the country, but that the laws in question
hindered it from bringing so much as it otherwise would do. Those
arguments, therefore, produced the wished-for effect. The
prohibition of exporting gold and silver was, in France and
England, confined to the coin of those respective countries. The
exportation of foreign coin and of bullion was made free. In
Holland, and in some other places, this liberty was extended even
to the coin of the country. The attention of government was
turned away from guarding against the exportation of gold and
silver, to watch over the balance of trade, as the only cause
which could occasion any augmentation or diminution of those
metals. From one fruitless care, it was turned away to another
care much more intricate, much more embarrassing, and just
equally fruitless. The title of Mun's book, England's Treasure in
Foreign Trade, became a fundamental maxim in the political
economy, not of England only, but of all other commercial
countries. The inland or home trade, the most important of all,
the trade in which an equal capital affords the greatest revenue,
and creates the greatest employment to the people of the country,
was considered as subsidiary only to foreign trade. It neither
brought money into the country, it was said, nor carried any out
of it. The country, therefore, could never become either richer
or poorer by means of it, except so far as its prosperity or
decay might indirectly influence the state of foreign trade.
A country that has no mines of its own, must undoubtedly draw its
gold and silver from foreign countries, in the same manner as one
that has no vineyards of its own must draw its wines. It does not
seem necessary, however, that the attention of government should
he more turned towards the one than towards the other object. A
country that has wherewithal to buy wine, will always get the
wine which it has occasion for ; and a country that has
wherewithal to buy gold and silver, will never be in want of
those metals. They are to be bought for a certain price, like all
other commodities; and as they are the price of all other
commodities, so all other commodities are the price of those
metals. We trust, with perfect security, that the freedom of
trade, without any attention of government, will always supply us
with the wine which we have occasion for; and we may trust, with
equal security, that it will always supply us with all the gold
and silver which we can afford to purchase or to employ, either
in circulating our commodities or in other uses.
The quantity of every commodity which human industry can either
purchace or produce, naturally regulates itself in every country
according to the effectual demand, or according to the demand of
those who are willing to pay the whole rent, labour, and profits,
which must be paid in order to prepare and bring it to market.
But no commodities regulate themselves more easily or more
exactly, according to this effectual demand, than gold and silver
; because, on account of the small bulk and great value of those
metals, no commodities can be more easily transported from one
place to another ; from the places where they are cheap, to those
where they are dear ; from the places where they exceed, to those
where they fall short of this effectual demand. If there were in
England, for example, an effectual demand for an additional
quantity of gold, a packet-boat could bring from Lisbon, or from
wherever else it was to be had, fifty tons of gold, which could
be coined into more than five millions of guineas. But if there
were an effectual demand for grain to the same value, to import
it would require, at five guineas a-ton, a million of tons of
shipping, or a thousand ships of a thousand tons each. The navy
of England would not be sufficient.
When the quantity of gold and silver imported into any country
exceeds the effectual demand, no vigilance of government can
prevent their exportation. All the sanguinary laws of Spain and
Portugal are not able to keep their gold and silver at home. The
continual importations from Peru and Brazil exceed the effectual
demand of those countries, and sink the price of those metals
there below that in the neighbouring countries. If, on the
contrary, in any particular country, their quantity fell short of
the effectual demand, so as to raise their price above that of
the neighbouring countries, the government would have no occasion
to take any pains to import them. If it were even to take pains
to prevent their importation, it would not be able to effectuate
it. Those metals, when the Spartans had got wherewithal to
purchase them, broke through all the barriers which the laws of
Lycurgus opposed to their entrance into Lacedaemon. All the
sanguinary laws of the customs are not able to prevent the
importation of the teas of the Dutch and Gottenburg East India
comnpanies; because somewhat cheaper than those of the British
company. A pound of tea, however, is about a hundred times the
bulk of one of the highest prices, sixteen shillings, that is
commonly paid for it in silver, and more than two thousand times
the bulk of the same price in gold, and, consequently, just so
many times more difficult to smuggle.
It is partly owing to the easy transportation of gold and silver,
from the places where they abound to those where they are wanted,
that the price of those metals does not fluctuate continually,
like that of the greater part of other commodities, which are
hindered by their bulk from shifting their situation, when the
market happens to be either over or under-stocked with them. The
price of those metals, indeed, is not altogether exempted from
variation ; but the changes to which it is liable are generally
slow, gradual, and uniform. In Europe, for example, it is
supposed, without much foundation, perhaps, that during the
course of the present and preceding century, they have been
constantly, but gradually, sinking in their value, on account of
the continual importations from the Spanish West Indies. But to
make any sudden change in the price of gold and silver, so as to
raise or lower at once, sensibly and remarkably, the money price
of all other commodities, requires such a revolution in commerce
as that occasioned by the discovery of America.
If, not withstanding all this, gold and silver should at any time
fall short in a country which has wherewithal to purchase them,
there are more expedients for supplying their place, than that of
almost any other commodity. If the materials of manufacture are
wanted, industry must stop. If provisions are wanted, the people
must starve. But if money is wanted, barter will supply its
place, though with a good deal of inconveniency. Buying and
selling upon credit, and the different dealers compensating their
credits with one another, once a-month, or once a-year, will
supply it with less inconveniency. A well-regulated paper-money
will supply it not only without any inconveniency, but, in some
cases, with some advantages. Upon every account, therefore, the
attention of government never was so unnecessarily employed, as
when directed to watch over the preservation or increase of the
quantity of money in any country.
No complaint, however, is more common than that of a scarcity of
money. Money, like wine, must always be scarce with those who
have neither wherewithal to buy it, nor credit to borrow it.
Those who have either, will seldom be in want either of the
money, or of the wine which they have occasion for. This
complaint, however, of the scarcity of money, is not always
confined to improvident spendthrifts. It is sometimes general
through a whole mercantile town and the country in its
neighbourhood. Over-trading is the common cause of it. Sober men,
whose projects have been disproportioned to their capitals, are
as likely to have neither wherewithal to buy money, nor credit to
borrow it, as prodigals, whose expense has been disproportioned
to their revenue. Before their projects can be brought to bear,
their stock is gone, and their credit with it. They run about
everywhere to borrow money, and everybody tells them that they
have none to lend. Even such general complaints of the scarcity
of money do not always prove that the usual number of gold and
silver pieces are not circulating in the country, but that many
people want those pieces who have nothing to give for them. When
the profits of trade happen to be greater than ordinary
over-trading becomes a general error, both among great and small
dealers. They do not always send more money abroad than usual,
but they buy upon credit, both at home and abroad, an unusual
quantity of goods, which they send to some distant market, in
hopes that the returns will come in before the demand for
payment. The demand comes before the returns, and they have
nothing at hand with which they can either purchase money or give
solid security for borrowing. It is not any scarcity of gold and
silver, but the difficulty which such people find in borrowing,
and which their creditor find in getting payment, that occasions
the general complaint of the scarcity of money.
It would be too ridiculous to go about seriously to prove, that
wealth does not consist in money, or in gold and silver ; but in
what money purchases, and is valuable only for purchasing. Money,
no doubt, makes always a part of the national capital ; but it
has already been shown that it generally makes but a small part,
and always the most unprofitable part of it.
It is not because wealth consists more essentially in money than
in goods, that the merchant finds it generally more easy to buy
goods with money, than to buy money with goods ; but because
money is the known and established instrument of commerce, for
which every thing is readily given in exchange, but which is not
always with equal readiness to be got in exchange for every
thing. The greater part of goods, besides, are more perishable
than money, and he may frequently sustain a much greater loss by
keeping them. When his goods are upon hand, too, he is more
liable to such demands for money as he may not be able to answer,
than when he has got their price in his coffers. Over and above
all this, his profit arises more directly from selling than from
buying; and he is, upon all these accounts, generally much more
anxious to exchange his goods for money than his money for goods.
But though a particular merchant, with abundance of goods in his
warehouse, may sometimes be ruined by not being able to sell them
in time, a nation or country is not liable to the same accident,
The whole capital of a merchant frequently consists in perishable
goods destined for purchasing money. But it is but a very small
part of the annual produce of the land and lahour of a country,
which can ever be destined for purchasing gold and silver from
their neighbours. The far greater part is circulated and consumed
among themselves; and even of the surplus which is sent abroad,
the greater part is generally destined for the purchase of other
foreign goods. Though gold and silver, therefore, could not be
had in exchange for the goods destined to purchase them, the
nation would not be ruined. It might, indeed, suffer some loss
and inconveniency, and be forced upon some of those expedients
which are necessary for supplying the place of money. The annual
produce of its land and labour, however, would be the same, or
very nearly the same as usual ; because the same, or very nearly
the same consumable capital would be employed in maintaining it.
And though goods do not always draw money so readily as money
draws goods, in the long-run they draw it more necessarily than
even it draws them. Goods can serve many other purposes besides
purchasing money, but money can serve no other purpose besides
purchasing goods. Money, therefore, necessarily runs after goods,
but goods do not always or necessarily run after money. The man
who buys, does not always mean to sell again, but frequently to
use or to consume ; whereas he who sells always means to buy
again. The one may frequently have done the whole, but the other
can never have done more than the one half of his business. It is
not for its own sake that men desire money, but for the sake of
what they can purchase with it.
Consumable commodities, it is said, are soon destroyed; whereas
gold and silver are of a more durable nature, and were it not for
this continual exportation, might be accumulated for ages
together, to the incredible augmentation of the real wealth of
the country. Nothing, therefore, it is pretended, can be more
disadvantageous to any country, than the trade which consists in
the exchange of such lasting for such perishable commodities. We
do not, however, reckon that trade disadvatageous, which consists
in the exchange of the hardware of England for the wines of
France, and yet hardware is a very durable commodity, and were it
not for this continual exportation, might too be accumulated for
ages together, to the incredible augmentation of the pots and
pans of the country. But it readily occurs, that the number of
such utensils is in every country necessarily limited by the use
which there is for them ; that it would be absurd to have more
pots and pans than were necessary for cooking the victuals
usually consumed there; and that, if the quantity of victuals
were to increase, the number of pots and pans would readily
increase along with it ; a part of the increased quantity of
victuals being employed in purchasing them, or in maintaining an
additional number of workmen whose business it was to make them.
It should as readily occur, that the quantity of gold and silver
is, in every country, limited by the use which there is for those
metals ; that their use consists in circulating commodities, as
coin, and in affording a species of household furniture, as
plate; that the quantity of coin in every country is regulated by
the value of the commodities which are to be circulated by it;
increase that value, and immediately a part of it will be sent
abroad to purchase, wherever it is to be had, the additional
quantity of coin requisite for circulating them : that the
quantity of plate is regulated by the number and wealth of those
private families who choose to indulge themselves in that sort of
magnificence; increase the number and wealth of such families,
and a part of this increased wealth will most probably be
employed in purchasing, wherever it is to be found, an additional
quantity of plate ; that to attempt to increase the wealth of any
country, either by introducing or by detaining in it an
unnecessary quantity of gold and silver, is as absurd as it would
be to attempt to increase the good cheer of private families, by
obliging them to keep an unnecessary number of kitchen utensils.
As the expense of purchasing those unnecessary utensils would
diminish, instead of increasing, either the quantity or goodness
of the family provisions; so the expense of purchasing an
unnecessary quantity of gold and silver must, in every country,
as necessarily diminish the wealth which feeds, clothes, and
lodges, which maintains and employs the people. Gold and silver,
whether in the shape of coin or of plate, are utensils, it must
he remembered, as much as the furniture of the kitchen. Increase
the use of them, increase the consumable commodities which are to
be circulated, managed, and prepared by means of them, and you
will infallibly increase the quantity ; but if you attempt by
extraordinary means to increase the quantity, you will as
infallibly diminish the use, and even the quantity too, which in
those metals can never be greater than what the use requires.
Were they ever to be accumulated beyond this quantity, their
transportation is so easy, and the loss which attends their lying
idle and unemployed so great, that no law could prevent their
being immediately sent out of the country.
It is not always necessary to accumulate gold and silver, in
order to enable a country to carry on foreign wars, and to
maintain fleets and armies in distant countries. Fleets and
armies are maintained, not with gold and silver, but with
consumable goods. The nation which, from the annual produce of
its domestic industry, from the annual revenue arising out of its
lands, and labour, and consumable stock, has wherewithal to
purchase those consumable goods in distant countries, can
maintain foreign wars there.
A nation may purchase the pay and provisions of an army in a
distant country three different ways ; by sending abroad either,
first, some part of its accumulated gold and silver ; or,
secondly, some part of the annual produce of its manufactures ;
or, last of all, some part of its annual rude produce.
The gold and silver which can properly be considered as
accumulated, or stored up in any country, may be distinguished
into three parts ; first, the circulating money; secondly, the
plate of private families; and, last of all, the money which may
have been collected by many years parsimony, and laid up in the
treasury of the prince.
It can seldom happen that much can be spared from the circulating
money of the country ; because in that there can seldom be much
redundancy. The value of goods annually bought and sold in any
country requires a certain quantity of money to circulate and
distribute them to their proper consumers, and can give
employment to no more. The channel of circulation necessarily
draws to itself a sum sufficient to fill it, and never admits any
more. Something, however, is generally withdrawn from this
channel in the case of foreign war. By the great number of people
who are maintained abroad, fewer are maintained at home. Fewer
goods are circulated there, and less money becomes necessary to
circulate them. An extraordinary quantity of paper money of some
sort or other, too, such as exchequer notes, navy bills, and bank
bills, in England, is generally issued upon such occasions, and,
by supplying the place of circulating gold and silver, gives an
opportunity of sending a greater quantity of it abroad. All this,
however, could afford but a poor resource for maintaining a
foreign war, of great expense, and several years duration.
The melting down of the plate of private families has, upon every
occasion, been found a still more insignificant one. The French,
in the beginning of the last war, did not derive so much
advantage from this expedient as to compensate the loss of the
fashion.
The accumulated treasures of the prince have in former times
afforded a much greater and more lasting resource. In the present
times, if you except the king of Prussia, to accumulate treasure
seems to be no part of the policy of European princes.
The funds which maintained the foreign wars of the present
century, the most expensive perhaps which history records, seem
to have had little dependency upon the exportation either of the
circulating money, or of the plate of private families, or of
the treasure of the prince. The last French war cost Great
Britain upwards of £90,000,000, including not only the
£75,000,000 of new debt that was contracted, but the additional
2s. in the pound land-tax, and what was annually borrowed of the
sinking fund. More than two-thirds of this expense were laid out
in distant countries; in Germany, Portugal, America, in the ports
of the Mediterranean, in the East and West Indies. The kings of
England had no accumulated treasure. We never heard of any
extraordinary quantity of plate being melted down. The
circulating gold and silver of the country had not been supposed
to exceed £18,000,000. Since the late recoinage of the gold,
however, it is believed to have been a good deal under-rated. Let
us suppose, therefore, according to the most exaggerated
computation which I remember to have either seen or heard of,
that, gold and silver together, it amounted to £30,000,000. Had
the war been carried on by means of our money, the whole of it
must, even according to this computation, have been sent out and
returned again, at least twice in a period of between six and
seven years. Should this be supposed, it would afford the most
decisive argument, to demonstrate how unnecessary it is for
government to watch over the preservation of money, since, upon
this supposition, the whole money of the country must have gone
from it, and returned to it again, two different times in so
short a period, without any body's knowing any thing of the
matter. The channel of circulation, however, never appeared more
empty than usual during any part of this period. Few people
wanted money who had wherewithal to pay for it. The profits of
foreign trade, indeed, were greater than usual during the whole
war, but especially towards the end of it. This occasioned, what
it always occasions, a general over-trading in all the ports of
Great Britain; and this again occasioned the usual complaint of
the scarcity of money, which always follows over-trading. Many
people wanted it, who had neither wherewithal to buy it, nor
credit to borrow it ; and because the debtors found it difficult
to borrow, the creditors found it difficult to get payment. Gold
and silver, however, were generally to be had for their value, by
those who had that value to give for them.
The enormous expense of the late war, therefore, must have been
chiefly defrayed, not by the exportation of gold and silver, but
by that of British commodities of some kind or other. When the
government, or those who acted under them, contracted with a
merchant for a remittance to some foreign country, he would
naturally endeavour to pay his foreign correspondent, upon whom
he granted a bill, by sending abroad rather commodities than gold
and silver. If the commodities of Great Britain were not in
demand in that country, he would endeavour to send them to some
other country in which he could purchase a bill upon that
country. The transportation of commodities, when properly suited
to the market, is always attended with a considerable profit;
whereas that of gold and silver is scarce ever attended with any.
When those metals are sent abroad in order to purchase foreign
commodities, the merchant's profit arises, not from the purchase,
but from the sale of the returns. But when they are sent abroad
merely to pay a debt, he gets no returns, and consequently no
profit. He naturally, therefore, exerts his invention to find out
a way of paying his foreign debts, rather by the exportation of
commodities, than by that of gold and silver. The great quantity
of British goods, exported during the course of the late war,
without bringing back any returns, is accordingly remarked by the
author of the Present State of the Nation.
Besides the three sorts of gold and silver above mentioned, there
is in all great commercial countries a good deal of bullion
alternately imported and exported, for the purposes of foreign
trade. This bullion, as it circulates among different commercial
countries, in the same manner as the national coin circulates in
every country, may be considered as the money of the great
mercantile republic. The national coin receives its movement and
direction from the commodities circulated within the precincts of
each particular country ; the money in the mercantile republic,
from those circulated between different countries. Both are
employed in facilitating exchanges, the one between different
individuals of the same, the other between those of different
nations. Part of this money of the great mercantile republic may
have been, and probably was, employed in carrying on the late
war. In time of a general war, it is natural to suppose that a
movement and direction should be impressed upon it, different
from what it usually follows in profound peace, that it should
circulate more about the seat of the war, and be more employed in
purchasing there, and in the neighbouring countries, the pay and
provisions of the different armies. But whatever part of this
money of the mercantile republic Great Britain may have annually
employed in this manner, it must have been annually purchased,
either with British commodities, or with something else that had
been purchased with them ; which still brings us back to
commodities, to the annual produce of the land and labour of the
country, as the ultimate resources which enabled us to carry on
the war. It is natural, indeed, to suppose, that so great an
annual expense must have been defrayed from a great annual
produce. The expense of 1761, for example, amounted to more than
£19,000,000. No accumulation could have supported so great an
annual profusion. There is no annual produce, even of gold and
silver, which could have supported it. The whole gold and
silver annually imported into both Spain and Portugal, according
to the best accounts, does not commonly much exceed £6,000,000
sterling, which, in some years, would scarce have paid four
months expense of the late war.
The commodities most proper for being transported to distatnt
countries, in order to purchase there either the pay and
provisions of an army, or some part of the money of the
mercantile republic to be employed in purchasing them, seem to be
the finer and more improved manufactures; such as contain a great
value in a small bulk, and can therefore be exported to a great
distance at little expense. A country whose industry produces a
great annual surplus of such manufactures, which are usually
exported to foreign countries, may carry on for many years a very
expensive foreign war, without either exporting any considerable
quantity of gold and silver, or even having any such quantity to
export. A considerable part of the annual surplus of its
manufactures must, indeed, in this case, be exported without
bringing back any returns to the country, though it does to the
merchant ; the government purchasing of the merchant his bills
upon foreign countries, in order to purchase there the pay and
provisions of an army. Some part of this surplus, however, may
still continue to bring back a return. The manufacturers during;
the war will have a double demand upon them, and be called upon
first to work up goods to be sent abroad, for paying the bills
drawn upon foreign countries for the pay and provisions of the
army: and, secondly, to work up such as are necessary for
purchasing the common returns that had usually been consumed in
the country. In the midst of the most destructive foreign war,
therefore, the greater part of manufactures may frequently
flourish greatly; and, on the contrary, they may decline on the
return of peace. They may flourish amidst the ruin of their
country, and begin to decay upon the return of its prosperity.
The different state of many different branches of the British
manufactures during the late war, and for some time after the
peace, may serve as an illustration of what has been just now
said.
No foreign war, of great expense or duration, could conveniently
be carried on by the exportation of the rude produce of the soil.
The expense of sending such a quantity of it into a foreign
country as might purchase the pay and provisions of an army would
be too great. Few countries, too, produce much more rude produce
than what is sufficient for the subsistence of their own
inhabitants. To send abroad any great quantity of it, therefore,
would be to send abroad a part of the necessary subsistence of
the people. It is otherwise with the exportation of manufactures.
The maintenance of the people employed in them is kept at home,
and only the surplus part of their work is exported. Mr Hume
frequently takes notice of the inability of the ancient kings of
England to carry on, without interruption, any foreign war of
long duration. The English in those days had nothing wherewithal
to purchase the pay and provisions of their armies in foreign
countries, but either the rude produce of the soil, of which no
considerable part could be spared from the home consumption, or a
few manufactures of the coarsest kind, of which, as well as of
the rude produce, the transportation was too expensive. This
inability did not arise from the want of money, but of the finer
and more improved manufactures. Buying and selling was transacted
by means of money in England then as well as now. The quantity of
circulating money must have borne the same proportion, to the
number and value of purchases and sales usually transacted at
that time, which it does to those transacted at present ; or,
rather, it must have borne a greater proportion, because there
was then no paper, which now occupies a great part of the
employment of gold and silver. Among nations to whom commerce and
manufactures are little known, the sovereign, upon extraordinary
occasions, can seldom draw any considerable aid from his
subjects, for reasons which shall be explained hereafter. It is
in such countries, therefore, that he generally endeavours to
accumulate a treasure, as the only resource against such
emergencies. Independent of this necessity, he is, in such a
situation, naturally disposed to the parsimony requisite for
accumulation. In that simple state, the expense even of a
sovereign is not directed by the vanity which delights in the
gaudy finery of a court, but is employed in bounty to his
tenants, and hospitality to his retainers. But bounty and
hospitality very seldom lead to extravagance; though vanity
almost always does. Every Tartar chief, accordingly, has a
treasure. The treasures of Mazepa, chief of the Cossacks in the
Ukraine, the famous ally of Charles XII., are said to have been
very great. The French kings of the Merovingian race had all
treasures. When they divided their kingdom among their different
children, they divided their treasures too. The Saxon princes,
and the first kings after the Conquest, seem likewise to have
accumulated treasures. The first exploit of every new reign was
commonly to seize the treasure of the preceding king, as the most
essential measure for securing the succession. The sovereigns of
improved and commercial countries are not under the same
necessity of accummlating treasures, because they can generally
draw from their subjects extraordinary aids upon extraordinary
occasions. They are likewise less disposed to do so. They
naturally, perhaps necessarily, follow the mode of the times ;
and their expense comes to be regulated by the same extravagant
vanity which directs that of all the other great proprietors in
their dominions. The insignificant pageantry of their court
becomes every day more brilliant; and the expense of it not only
prevents accumulation, but frequently encroaches upon the funds
destined for more necessary expenses. What Dercyllidas said of
the court of Persia, may be applied to that of several European
princes, that he saw there much splendour, but little strength,
and many servants, but few soldiers.
The importation of gold and silver is not the principal, much
less the sole benefit, which a nation derives from its foreign
trade. Between whatever places foreign trade is carried on, they
all of them derive two distinct benefits from it. It carries out
that surplus part of the produce of their land and labour for
which there is no demand among them, and brings back in return
for it something else for which there is a demand. It gives a
value to their superfluities, by exchanging them for something
else, which may satisfy a part of their wants and increase their
enjoyments. By means of it, the narrowness of the home market
does not hinder the division of labour in any particular branch
of art or manufacture from being carried to the highest
perfection. By opening a more extensive market for whatever part
of the produce of their labour may exceed the home consumption,
it encourages them to improve its productive power, and to
augment its annual produce to the utmost, and thereby to increase
the real revenue and wealth of the society. These great and
important services foreign trade is continually occupied in
performing to all the different countries between which it is
carried on. They all derive great benefit from it, though that in
which the merchant resides generally derives the greatest, as he
is generally more employed in supplying the wants, and carrying
out the superfluities of his own, than of any other particular
country. To import the gold and silver which may be wanted into
the countries which have no mines, is, no doubt a part of the
business of foreign commerce. It is, however, a most
insignificant part of it. A country which carried on foreign
trade merely upon this account, could scarce have occasion to
freight a ship in a century.
It is not by the importation of gold and silver that the
discovery of America has enriched Europe. By the abundance of the
American mines, those metals have become cheaper. A service of
plate can now be purchased for about a third part of the corn, or
a third part of the labour, which it would have cost in the
fifteenth century. With the same annual expense of labour and
commodities, Europe can annually purchase about three times the
quantity of plate which it could have purchased at that time. But
when a commodity comes to be sold for a third part of what bad
been its usual price, not only those who purchased it before can
purchase three times their former quantity, but it is brought
down to the level of a much greater number of purchasers, perhaps
to more than ten, perhaps to more than twenty times the former
number. So that there may be in Europe at present, not only more
than three times, but more than twenty or thirty times the
quantity of plate which would have been in it, even in its
present state of improvement, had the discovery of the American
mines never been made. So far Europe has, no doubt, gained a real
conveniency, though surely a very trifling one. The cheapness of
gold and silver renders those metals rather less fit for the
purposes of money than they were before. In order to make the
same purchases, we must load ourselves with a greater quantity of
them, and carry about a shilling in our pocket, where a groat
would have done before. It is difficult to say which is most
trifling, this inconveniency, or the opposite conveniency.
Neither the one nor the other could have made any very essential
change in the state of Europe. The discovery of America, however,
certainly made a most essential one. By opening a new and
inexhaustible market to all the commodities of Europe, it gave
occasion to new divisions of labour and improvements of art,
which in the narrow circle of the ancient commerce could never
have taken place, for want of a market to take off the greater
part of their produce. The productive powers of labour were
improved, and its produce increased in all the different
countries of Europe, and together with it the real revenue and
wealth of the inhabitants. The commodities of Europe were almost
all new to America, and many of those of America were new to
Europe. A new set of exchanges, therefore, began to take place,
which had never been thought of before, and which should
naturally have proved as advantageous to the new, as it certainly
did to the old continent. The savage injustice of the Europeans
rendered an event, which ought to have been beneficial to all,
ruinous and destructive to several of those unfortunate
countries.
The discovery of a passage to the East Indies by the Cape of Good
Hope, which happened much about the same time, opened perhaps a
still more extensive range to foreign commerce, than even that of
America, notwithstanding the greater distance. There were but two
nations in America, in any respect, superior to the savages, and
these were destroyed almost as soon as discovered. The rest were
mere savages. But the empires of China, Indostan, Japan, as well
as several others in the East Indies, without having richer mines
of gold or silver, were, in every other respect, much richer,
better cultivated, and more advanced in all arts and
manufactures, than either Mexico or Peru, even though we should
credit, what plainly deserves no credit, the exaggerated accounts
of the Spanish writers concerning the ancient state of those
empires. But rich and civilized nations can always exchange to a
much greater value with one another, than with savages and
barbarians. Europe, however, has hitherto derived much less
advantage from its commerce with the East Indies, than from that
with America. The Portuguese monopolized the East India trade to
themselves for about a century ; and it was only indirectly, and
through them, that the other nations of Europe could either send
out or receive any goods from that country. When the Dutch, in
the beginning of the last century, began to encroach upon them,
they vested their whole East India commerce in an exclusive
company. The English, French, Swedes, and Danes, have all
followed their example; so that no great nation of Europe has
ever yet had the benefit of a free commerce to the East Indies.
No other reason need be assigned why it has never been so
advantageous as the trade to America, which, between almost every
nation of Europe and its own colonies, is free to all its
subjects. The exclusive privileges of those East India companies,
their great riches, the great favour and protection which these
have procured them from their respective governments, have
excited much envy against them. This envy has frequently
represented their trade as altogether pernicious, on account of
the great quantities of silver which it every year exports from
the countries from which it is carried on. The parties concerned
have replied, that their trade by this continual exportation of
silver, might indeed tend to impoverish Europe in general, but
not the particular country from which it was carried on ;
because, by the exportation of a part of the returns to other
European countries, it annually brought home a much greater
quantity of that metal than it carried out. Both the objection
and the reply are founded in the popular notion which I have been
just now examining. It is therefore unnecessary to say any thing
further about either. By the annual exportation of silver to the
East Indies, plate is probably somrwhat dearer in Europe than it
otherwise might have been ; and coined silver probably purchases
a larger quantity both of labour and commodities. The former of
these two effects is a very small loss, the latter a very small
advantage ; both too insignificant to deserve any part of the
public attention. The trade to the East Indies, by opening a
market to the commodities of Europe, or, what comes nearly to the
same thing, to the gold and silver which is purchased with those
commodities, must necessarily tend to increase the annual
production of European commodities, and consequently the real
wealth and revenue of Europe. That it has hitherto increased them
so little, is probably owing to the restraints which it
everywhere labours under.
I thought it necessary, though at the hazard of being tedious, to
examine at full length this popular notion, that wealth consists
in money or in gold and silver. Money, in common language, as I
have already observed, frequently signifies wealth ; and this
ambiguity of expression has rendered this popular notion so
familiar to us, that even they who are convinced of its
absurdity, are very apt to forget their own principles, and, in
the course of their reasonings, to take it for granted as a
certain and undeniable truth. Some of the best English writers
upon commerce set out with observing, that the wealth of a
country consists, not in its gold and silver only, but in its
lands, houses, and consumable goods of all different kinds. In
the course of their reasonings, however, the lands, houses, and
consumable goods, seem to slip out of their memory; and the
strain of their argument frequently supposes that all wealth
consists in gold and silver, and that to multiply those metals is
the great object of national industry and commerce.
The two principles being established, however, that wealth
consisted in gold and silver, and that those metals could be
brought into a country which had no mines, only by the balance of
trade, or by exporting to a greater value than it imported ; it
necessarily became the great object of political economy to
diminish as much as possible the importation of foreign goods for
home consumption, and to increase as much as possible the
exportation of the produce of domestic industry. Its two great
engines for enriching the country, therefore, were restraints
upon importation, and encouragement to exportation.
The restraints upon importation were of two kinds.
First, restraints upon the importation of such foreign goods for
home consumption as could be produced at home, from whatever
country they were imported.
Secondly, restraints upon the importation of goods of almost all
kinds, from those particular countries with which the balance of
trade was supposed to be disadvantageous.
Those different restraints consisted sometimes in high duties,
and sometimes in absolute prohibitions.
Exportation was encouraged sometimes by drawbacks, sometimes by
bounties, sometimes by advantageous treaties of commerce with
foreign states, and sometimes by the establishment of colonies in
distant countries.
Drawbacks were given upon two different occasions. When the home
manufactures were subject to any duty or excise, either the whole
or a part of it was frequently drawn back upon their exportation
; and when foreign goods liable to a duty were imported, in order
to be exported again, either the whole or a part of this duty was
sometimes given back upon such exportation.
Bounties were given for the encouragemnent, either of some
beginning manufactures, or of such sorts of industry of other
kinds as were supposed to deserve particular favour.
By advantageous treaties of commerce, particular privileges were
procured in some foreign state for the goods and merchants of the
country, beyond what were granted to those of other countries.
By the establishment of colonies in distant countries, not only
particular privileges, but a monopoly was frequently procured for
the goods and merchants of the country which established them.
The two sorts of restraints upon importation above mentioned,
together with these four encouragements to exportation,
constitute the six principal means by which the commercial system
proposes to increase the quantity of gold and silver in any
country, by turning the balance of trade in its favour. I shall
consider each of them in a particular chapter, and, without
taking much farther notice of their supposed tendency to bring
money into the country, I shall examine chiefly what are likely
to be the effects of each of them upon the annual produce of its
industry. According as they tend either to increase or diminish
the value of this annual produce, they must evidently tend either
to increase or diminish the real wealth and revenue of the
country.
CHAPTER II.
OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH
GOODS AS CAN BE PRODUCED AT HOME.
By restraining, either by high duties, or by absolute
prohibitions, the importation of such goods from foreign
countries as can be produced at home, the monopoly of the home
market is more or less secured to the domestic industry employed
in producing them. Thus the prohibition of importing either live
cattle or salt provisions from foreign countries, secures to the
graziers of Great Britain the monopoly of the home market for
butcher's meat. The high duties upon the importation of corn,
which, in times of moderate plenty, amount to a prohibition, give
a like advantage to the growers of that commodity. The
prohibition of the importation of foreign woollen is equally
favourable to the woollen manufacturers. The silk manufacture,
though altogether employed upon foreign materials, has lately
obtained the same advantage. The linen manufacture has not yet
obtained it, but is making great strides towards it. Many other
sorts of manufactures have, in the same manner obtained in Great
Britain, either altogether, or very nearly, a monopoly against
their countrymen. The variety of goods, of which the importation
into Great Britain is prohibited, either absolutely, or under
certain circumstances, greatly exceeds what can easily be
suspected by those who are not well acquainted with the laws of
the customs.
That this monopoly of the home market frequently gives great
encouragement to that particular species of industry which enjoys
it, and frequently turns towards that employment a greater share
of both the labour and stock of the society than would otherwise
have gone to it, cannot be doubted. But whether it tends either
to increase the general industry of the society, or to give it
the most advantageous direction, is not, perhaps, altogether so
evident.
The general industry of the society can never exceed what the
capital of the society can employ. As the number of workmen that
can be kept in employment by any particular person must bear a
certain proportion to his capital, so the number of those that
can be continually employed by all the members of a great society
must bear a certain proportion to the whole capital of the
society, and never can exceed that proportion. No regulation of
commerce can increase the quantity of industry in any society
beyond what its capital can maintain. It can only divert a part
of it into a direction into which it might not otherwise have
gone; and it is by no means certain that this artificial
direction is likely to be more advantageous to the society, than
that into which it would have gone of its own accord.
Every individual is continually exerting himself to find out the
most advantageous employment for whatever capital he can command.
It is his own advantage, indeed, and not that of the society,
which he has in view. But the study of his own advantage
naturally, or rather necessarily, leads him to prefer that
employment which is most advantageous to the society.
First, every individual endeavours to employ his capital as near
home as he can, and consequently as much as he can in the support
of domestic industry, provided always that he can thereby obtain
the ordinary, or not a great deal less than the ordinary profits
of stock.
Thus, upon equal, or nearly equal profits, every wholesale
merchant naturally prefers the home trade to the foreign trade of
consumption, and the foreign trade of consumption to the carrying
trade. In the home trade, his capital is never so long out of his
sight as it frequently is in the foreign trade of consumption. He
can know better the character and situation of the persons whom
he trusts; and if he should happen to be deceived, he knows
better the laws of the country from which he must seek redress.
In the carrying trade, the capital of the merchant is, as it
were, divided between two foreign countries, and no part of it is
ever necessarily brought home, or placed under his own immediate
view and command. The capital which an Amsterdam merchant employs
in carrying corn from Koningsberg to Lisbon, and fruit and wine
from Lisbon to Koningsberg, must generally be the one half of it
at Koningsberg, and the other half at Lisbon. No part of it need
ever come to Amsterdam. The natural residence of such a merchant
should either be at Koningsberg or Lisbon ; and it can only be
some very particular circumstances which can make him prefer the
residence of Amsterdam. The uneasiness, however, which he feels
at being separated so far from his capital, generally determines
him to bring part both of the Koningsberg goods which he destines
for the market of Lisbon, and of the Lisbon goods which he
destines for that of Koningsberg, to Amsterdam ; and though this
necessarily subjects him to a double charge of loading and
unloading as well as to the payment of some duties and customs,
yet, for the sake of having some part of his capital always under
his own view and command, he willingly submits to this
extraordinary charge; and it is in this manner that every country
which has any considerable share of the carrying trade, becomes
always the emporium, or general market, for the goods of all the
different countries whose trade it carries on. The merchant, in
order to save a second loading and unloading, endeavours always
to sell in the home market, as much of the goods of all those
different countries as he can; and thus, so far as he can, to
convert his carrying trade into a foreign trade of consumption. A
merchant, in the same manner, who is engaged in the foreign trade
of consumption, when he collects goods for foreign markets, will
always be glad, upon equal or nearly equal profits, to sell as
great a part of them at home as he can. He saves himself the risk
and trouble of exportation, when, so far as he can, he thus
converts his foreign trade of consumption into a home trade. Home
is in this manner the centre, if I may say so, round which the
capitals of the inhabitants of every country are continually
circulating, and towards which they are always tending, though,
by particular causes, they may sometimes be driven off and
repelled from it towards more distant employments. But a capital
employed in the home trade, it has already been shown,
necessarily puts into motion a greater quantity of domestic
industry, and gives revenue and employment to a greater number of
the inhabitants of the country, than an equal capital employed in
the foreign trade of consumption; and one employed in the foreign
trade of consumption has the same advantage over an equal capital
employed in the carrying trade. Upon equal, or only nearly equal
profits, therefore, every individual naturally inclines to employ
his capital in the manner in which it is likely to afford the
greatest support to domestic industry, and to give revenue and
employment to the greatest number of people of his own country.
Secondly, every individual who employs his capital in the support
of domestic industry, necessarily endeavours so to direct that
industry, that its produce may be of the greatest possible value.
The produce of industry is what it adds to the subject or
materials upon which it is employed. In proportion as the value
of this produce is great or small, so will likewise be the
profits of the employer. But it is only for the sake of profit
that any man employs a capital in the support of industry; and he
will always, therefore, endeavour to employ it in the support of
that industry of which the produce is likely to be of the
greatest value, or to exchange for the greatest quantity either
of money or of other goods.
But the annual revenue of every society is always precisely equal
to the exchangeable value of the whole annual produce of its
industry, or rather is precisely the same thing with that
exchangeable value. As every individual, therefore, endeavours as
much as he can, both to employ his capital in the support of
domestic industry, and so to direct that industry that its
produce maybe of the greatest value; every individual necessarily
labours to render the annual revenue of the society as great as
he can. He generally, indeed, neither intends to promote the
public interest, nor knows how much he is promoting it. By
preferring the support of domestic to that of foreign industry,
he intends only his own security ; and by directing that industry
in such a manner as its produce may be of the greatest value, he
intends only his own gain; and he is in this, as in many other
cases, led by an invisible hand to promote an end which was no
part of his intention. Nor is it always the worse for the society
that it was no part of it. By pursuing his own interest, he
frequently promotes that of the society more effectually than
when he really intends to promote it. I have never known much
good done by those who affected to trade for the public good. It
is an affectation, indeed, not very common among merchants, and
very few words need be employed in dissuading them from it.
What is the species of domestic industry which his capital can
employ, and of which the produce is likely to be of the greatest
value, every individual, it is evident, can in his local
situation judge much better than any statesman or lawgiver can do
for him. The statesmn, who should attempt to direct private
people in what manner they ought to employ their capitals, would
not only load himself with a most unnecessary attention, but
assume an authority which could safely be trusted, not only to no
single person, but to no council or senate whatever. and which
would nowhere be so dangerous as in the hands of a man who had
folly and presumption enough to fancy himself fit to exercise it.
To give the monopoly of the home market to the produce of
domestic industry, in any particular art or manufacture, is in
some measure to direct private people in what manner they ought
to employ their capitals, and must in almost all cases be either
a useless or a hurtful regulation. If the produce of domestic can
be brought there as cheap as that of foreign industry, the
regulation is evidently useless. If it cannot, it must generally
be hurtful. It is the maxim of every prudent master of a family,
never to attempt to make at home what it will cost him more to
make than to buy. The tailor does not attempt to make his own
shoes, but buys them of the shoemaker. The shoemaker does not
attempt to make his own clothes, but employs a tailor. The farmer
attempts to make neither the one nor the other, but employs those
different artificers. All of them find it for their interest to
employ their whole industry in a way in which they have some
advantage over their neighbours, and to purchase with a part of
its produce, or, what is the same thing, with the price of a part
of it, whatever else they have occasion for.
What is prudence in the conduct of every private family, can
scarce be folly In that of a great kingdom. If a foreign country
can supply us with a commodity cheaper than we ourselves can make
it, better buy it of them with some part of the produce of our
own industry, employed in a way in which we have some advantage.
The general industry of the country being always in proportion to
the capital which employs it, will not thereby be diminished, no
more than that of the abovementioned artificers; but only left to
find out the way in which it can be employed with the greatest
advantage. It is certainly not employed to the greatest
advantage, when it is thus directed towards an object which it
can buy cheaper than it can make. The value of its annual produce
is certainly more or less diminished, when it is thus turned away
from producing commodities evidently of more value than the
commodity which it is directed to produce. According to the
supposition, that commodity could be purchased from foreign
countries cheaper than it can be made at home ; it could
therefore have been purchased with a part only of the
commodities, or, what is the same thing, with a part only of the
price of the commodities, which the industry employed by an equal
capital would have produced at home, had it been left to follow
its natural course. The industry of the country, therefore, is
thus turned away from a more to a less advantageous employment ;
and the exchangeable value of its annual produce, instead of
being increased, according to the intention of the lawgiver, must
necessarily be diminished by every such regulation.
By means of such regulations, indeed, a particular manufacture
may sometimes be acquired sooner than it could have been
otherwise, and after a certain time may be made at home as cheap,
or cheaper, than in the foreign country. But though the industry
of the society may be thus carried with advantage into a
particular channel sooner than it could have been otherwise, it
will by no means follow that the sum-total, either of its
industry, or of its revenue, can ever be augmented by any such
regulation. The industry of the society can augment only in
proportion as its capital augments, and its capital can augment
only in proportion to what can be gradually saved out of its
revenue. But the immediate effect of every such regulation is to
diminish its revenue; and what diminishes its revenue is
certainly not very likely to augment its capital faster than it
would have augmented of its own accord, had both capital and
industry been left to find out their natural employments.
Though, for want of such regulations, the society should never
acquire the proposed manufacture, it would not upon that account
necessarily be the poorer in anyone period of its duration. In
every period of its duration its whole capital and industry might
still have been employed, though upon different objects, in the
manner that was most advantageous at the time. In every period
its revenue might have been the greatest which its capital could
afford, and both capital and revenue might have been augmented
with the greatest possible rapidity.
The natural advantages which one country has over another, in
producing particular commodities, are sometimes so great, that it
is acknowledged by all the world to be in vain to struggle with
them. By means of glasses, hot-beds, and hot-walls, very good
grapes can be raised in Scotland, and very good wine, too, can be
made of them, at about thirty times the expense for which at
least equally good can be brought from foreign countries. Would
it be a reasonable law to prohibit the importation of all foreign
wines, merely to encourage the making of claret and Burgundy in
Scotland ? But if there would be a manifest absurdity in turning
towards any employment thirty times more of the capital and
industry of the country than would be necessary to purchase from
foreign countries an equal quantity of the commodities wanted,
there must be an absurdity, though not altogether so glaring, yet
exactly of the same kind, in turning towards any such employment
a thirtieth, or even a three hundredth part more of either.
Whether the advantages which one country has over another be
natural or acquired, is in this respect of no consequence. As
long as the one country has those advantages, and the other wants
them, it will always be more advantageous for the latter rather
to buy of the former than to make. It is an acquired advantage
only, which one artificer has over his neighbour, who exercises
another trade; and yet they both find it more advantageous to buy
of one another, than to make what does not belong to their
particular trades.
Merchants and manufacturers are the people who derive the
greatest advantage from this monopoly of the home market The
prohibition of the importation of foreign cattle and of salt
provisions, together with the high duties upon foreign corn,
which in times of moderate plenty amount to a prohibition, are
not near so advantageous to the graziers and farmers of Great
Britain, as other regulations of the same kind are to its
merchants and manufacturers. Manufactures, those of the finer
kind especially, are more easily transported from one country to
another than corn or cattle. It is in the fetching and carrying
manufactures, accordingly, that foreign trade is chiefly
employed. In manufactures, a very small advantage will enable
foreigners to undersell our own workmen, even in the home market.
It will require a very great one to enable them to do so in the
rude produce of the soil. If the free importation of foreign
manufactures were permitted, several of the home manufactures
would probably suffer,and some of them perhaps go to ruin
altogether, and a considerable part of the stock and industry at
present employed in them, would be forced to find out some other
employment. But the freest importation of the rude produce of the
soil could have no such effect upon the agriculture of the
country.
If the importation of foreign cattle, for example, were made ever
so free, so few could be imported, that the grazing trade of
Great Britain could be little affected by it. Live cattle are,
perhaps, the only commodity of which the transportation is more
expensive by sea than by land. By land they carry themselves to
market. By sea, not only the cattle, but their food and their
water too, must be carried at no small expense and inconveniency.
The short sea between Ireland and Great Britain, indeed, renders
the importation of Irish cattle more easy. But though the free
importation of them, which was lately permitted only for a
limited time, were rendered perpetual, it could have no
considerable effect upon the interest of the graziers of Great
Britain. Those parts of Great Britain which border upon the Irish
sea are all grazing countries. Irish cattle could never be
imported for their use, but must be drove through those very
extensive countries, at no small expense and inconveniency,
before they could arrive at their proper market. Fat cattle could
not be drove so far. Lean cattle, therefore, could only be
imported; and such importation could interfere not with the
interest of the feeding or fattening countries, to which, by
reducing the price of lean cattle it would rather be
advantageous, but with that of the breeding countries only. The
small number of Irish cattle imported since their importation was
permitted, together with the good price at which lean cattle
still continue to sell, seem to demonstrate, that even the
breeding countries of Great Britain are never likely to be much
affected by the free importation of Irish cattle. The common
people of Ireland, indeed, are said to have sometimes opposed
with violence the exportation of their cattle. But if the
exporters had found any great advantage in continuing the trade,
they could easily, when the law was on their side, have conquered
this mobbish opposition.
Feeding and fattening countries, besides, must always be highly
improved, whereas breeding countries are generally uncultivated.
The high price of lean cattle, by augmenting the value of
uncultivated land, is like a bounty against improvement. To any
country which was highly improved throughout, it would be more
advantageous to import its lean cattle than to breed them. The
province of Holland, accordingly, is said to follow this maxim at
present. The mountains of Scotland, Wales, and Northumberland,
indeed, are countries not capable of much improvement, and seem
destined by nature to be the breeding countries of Great Britain.
The freest importation of foreign cattle could have no other
effect than to hinder those breeding countries from taking
advantage of the increasing population and improvement of the
rest of the kingdom, from raising their price to an exorbitant
height, and from laying a real tax upon all the more improved and
cultivated parts of the country.
The freest importation of salt provisions, in the same manner,
could have as little effect upon the interest of the graziers of
Great Britain as that of live cattle. Salt provisions are not
only a very bulky commodity, but when compared with fresh meat
they are a commodity both of worse quality, and, as they cost
more labour and expense, of higher price. They could never,
therefore, come into competition with the fresh meat, though they
might with the salt provisions of the country. They might be used
for victualling ships for distant voyages, and such like uses,
but could never make any considerable part of the food of the
people. The small quantity of salt provisions imported from
Ireland since their importation was rendered free, is an
experimental proof that our graziers have nothing to apprehend
from it. It does not appear that the price of butchet's meat
has ever been sensibly affected by it.
Even the free importation of foreign corn could very little
affect the interest of the farmers of Great Britain. Corn is a
much more bulky commodity than butcher's meat. A pound of wheat
at a penny is as dear as a pound of butcher's meat at fourpence.
The small quantity of foreign corn imported even in times of the
greatest scarcity, may satisfy our farmers that they can have
nothing to fear from the freest importation. The average quantity
imported, one year with another, amounts only, according to the
very well informed author of the Tracts upon the Corn Trade, to
23,728 quarters of all sorts of grain, and does not exceed the
five hundredth and seventy-one part of the annual consumption.
But as the bounty upon corn occasions a greater exportation in
years of plenty, so it must, of consequence, occasion a greater
importation in years of scarcity, than in the actual state of
tillage would otherwise take place. By means of it, the plenty of
one year does not compensate the scarcity of another; and as the
average quantity exported is necessarily augmented by it, so must
likewise, in the actual state of tillage, the average quantity
imported. If there were no bounty, as less corn would be
exported, suit is probable that, one year with another, less
would be imported than at present. The corn-merchants, the
fetchers and carriers of corn between Great Britain and foreign
countries, would have much less employment, and might suffer
considerably ; but the country gentlemen and farmers could suffer
very little. It is in the corn-merchants, accordingly, rather
than the country gentlemen and farmers, that I have observed the
greatest anxiety for the renewal and continuation of the bounty.
Country gentlemen and farmers are, to their great honour, of all
people, the least subject to the wretched spirit of monopoly. The
undertaker of a great manufactory is sometimes alarmed if another
work of the same kind is established within twenty miles of him;
the Dutch undertaker of the woollen manufacture at Abbeville,
stipulated that no work of the same kind should be established
within thirty leagues of that city. Farmers and country
gentlemen, on the contrary, are generally disposed rather to
promote, than to obstruct, the cultivation and improvement of
their neighbours farms and estates. They have no secrets, such as
those of the greater part of manufacturers, but are generally
rather fond of communicating to their neighbours, and of
extending as far as possible any new practice which they may have
found to be advantageous. "Pius quaestus", says old Cato,
"stabilissimusque, minimeque invidiosus; minimeque male
cogitantes sunt, qui in eo studio occupati sunt." Country
gentlemen and farmers, dispersed in different parts of the
country, cannot so easily combine as merchants and manufacturers,
who being collected into towns, and accustomed to that exclusive
corporation spirit which prevails in them, naturally endeavour to
obtain, against all their countrymen, the same exclusive
privilege which they generally possess against the inhabitants of
their respective towns. They accordingly seem to have been the
original inventors of those restraints upon the importation of
foreign goods, which secure to them the monopoly of the home
market. It was probably in imitation of them, and to put
themselves upon a level with those who, they found, were disposed
to oppress them, that the country gentlemen and farmers of Great
Britain so far forgot the generosity which is natural to their
station, as to demand the exclusive privilege of supplying their
countrymen with corn and butcher's meat. They did not, perhaps,
take time to consider how much less their interest could be
affected by the freedom of trade, than that of the people whose
example they followed.
To prohibit, by a perpetual law, the importation of foreign corn
and cattle, is in reality to enact, that the population and
industry of the country shall, at no time, exceed what the rude
produce of its own soil can maintain.
There seem, however, to be two cases, in which it will generally
be advantageous to lay some burden upon foreign, for the
encouragement of domestic industry.
The first is, when some particular sort of industry is necessary
for the defence of the country. The defence of Great Britain, for
example, depends very much upon the number of its sailors and
shipping. The act of navigation, therefore, very properly
endeavours to give the sailors and shipping of Great Britain the
monopoly of the trade of their own country, in some cases, by
absolute prohibitions, and in others, by heavy burdens upon the
shipping of foreign countries. The following are the principal
dispositions of this act.
First, All ships, of which the owners, masters, and three-fourths
of the mariners, are not British subjects, are prohibited, upon
pain of forfeiting ship and cargo, from trading to the British
settlements and plantations, or from being employed in the
coasting trade of Great Britain.
Secondly, A great variety of the most bulky articles of
importation can be brought into Great Britain only, either in
such ships as are above described, or in ships of the country
where those goods are produced, and of which the owners, masters,
and three-fourths of the mariners, are of that particular country
; and when imported even in ships of this latter kind, they are
subject to double aliens duty. If imported in ships of any other
country, the penalty is forfeiture of ship and goods. When this
act was made, the Dutch were, what they still are, the great
carriers of Europe; and by this regulation they were entirely
excluded from being the carriers to Great Britain, or from
importing to us the goods of any other European country.
Thirdly, A great variety of the most bulky articles of
importation are prohibited from being imported, even in British
ships, from any country but that in which they are produced,
under pain of forfeiting ship and cargo. This regulation, too,
was probably intended against the Dutch. Holland was then, as
now, the great emporium for all European goods ; and by this
regulation, British ships were hindered from loading in Holland
the goods of any other European country.
Fourthly, Salt fish of all kinds, whale fins, whalebone, oil, and
blubber, not caught by and cured on board British vessels, when
imported into Great Britain, are subject to double aliens duty.
The Dutch, as they are still the principal, were then the only
fishers in Europe that attempted to supply foreign nations with
fish. By this regulation, a very heavy burden was laid upon their
supplying Great Britain.
When the act of navigation was made, though England and Holland
were not actually at war, the most violent animosity subsisted
between the two nations. It had begun during the government of
the long parliament, which first framed this act, and it broke
out soon after in the Dutch wars, during that of the Protector
and of Charles II. It is not impossible, therefore, that some of
the regulations of this famous act may have proceeded from
national animosity. They are as wise, however, as if they had all
been dictated by the most deliberate wisdom. National animosity,
at that particular time, aimed at the very same object which the
most deliberate wisdom would have recommended, the diminution of
the naval power of Holland, the only naval power which could
endanger the security of England.
The act of navigation is not favourable to foreign commerce, or
to the growth of that opulence which can arise from it. The
interest of a nation, in its commercial relations to foreign
nations, is, like that of a merchant with regard to the different
people with whom he deals, to buy as cheap, and to sell as dear
as possible. But it will be most likely to buy cheap, when, by
the most perfect freedom of trade, it encourages all nations to
bring to it the goods which it has occasion to purchase ; and,
for the same reason, it will be most likely to sell dear, when
its markets are thus filled with the greatest number of buyers.
The act of navigation, it is true, lays no burden upon foreign
ships that come to export the produce of British industry. Even
the ancient aliens duty, which used to be paid upon all goods,
exported as well as imported, has, by several subsequent acts,
been taken off from the greater part of the articles of
exportation. But if foreigners, either by prohibitions or high
duties, are hindered from coming to sell, they cannot always
afford to come to buy ; because, coming without a cargo, they
must lose the freight from their own country to Great Britain. By
diminishing the number of sellers, therefore, we necessarily
diminish that of buyers, and are thus likely not only to buy
foreign goods dearer, but to sell our own cheaper, than if there
was a more perfect freedom of trade. As defence, however, is of
much more importance than opulence, the act of navigation is,
perhaps, the wisest of all the commercial regulations of England.
The second case, in which it will generally be advantageous to
lay some burden upon foreign for the encouragement of domestic
industry, is when some tax is imposed at home upon the produce of
the latter. In this case, it seems reasonable that an equal tax
should be imposed upon the like produce of the former. This would
not give the monopoly of the borne market to domestic industry,
nor turn towards a particular employment a greater share of the
stock and labour of the country, than what would naturally go to
it. It would only hinder any part of what would naturally go to
it from being turned away by the tax into a less natural
direction, and would leave the competition between foreign and
domestic industry, after the tax, as nearly as possible upon the
same footing as before it. In Great Britain, when any such tax is
laid upon the produce of domestic industry, it is usual, at the
same time, in order to stop the clamorous complaints of our
merchants and manufacturers, that they will be undersold at home,
to lay a much heavier duty upon the importation of all foreign
goods of the same kind.
This second limitation of the freedom of trade, according to some
people, should, upon most occasions, be extended much farther
than to the precise foreign commodities which could come into
competition with those which had been taxed at home. When the
necessaries of life have been taxed in any country, it becomes
proper, they pretend, to tax not only the like necessaries of
life imported from other countries, but all sorts of foreign
goods which can come into competition with any thing that is the
produce of domestic industry. Subsistence, they say, becomes
necessarily dearer in consequence of such taxes ; and the price
of labour must always rise with the price of the labourer's
subsistence. Every commodity, therefore, which is the produce of
domestic industry, though not immediately taxed itself, becomes
dearer in consequence of such taxes, because the labour which
produces it becomes so. Such taxes, therefore, are really
equivalent, they say, to a tax upon every particular commodity
produced at home. In order to put domestic upon the same footing
with foreign industry, therefore, it becomes necessary, they
think, to lay some duty upon every foreign commodity, equal to
this enhancement of the price of the home commodities with which
it can come into competition.
Whether taxes upon the necessaries of life, such as those in
Great Britain upon soap, salt, leather, candles, etc. necessarily
raise the price of labour, and consequently that of all other
commodities, I shall consider hereafter, when I come to treat of
taxes. Supposing, however, in the mean time, that they have this
effect, and they have it undoubtedly, this general enhancement of
the price of all commodities, in consequence of that labour, is a
case which differs in the two following respects from that of a
particular commodity, of which the price was enhanced by a
particular tax immediately imposed upon it.
First, It might always be known with great exactness, how far the
price of such a commodity could be enhanced by such a tax ; but
how far the general enhancement of the price of labour might
affect that of every different commodity about which labour was
employed, could never be known with any tolerable exactness. It
would be impossible, therefore, to proportion, with any tolerable
exactness, the tax of every foreign, to the enhancement of the
price of every home commodity.
Secondly, Taxes upon the necessaries of life have nearly the same
effect upon the circumstances of the people as a poor soil and a
bad climate. Provisions are thereby rendered dearer, in the same
manner as if it required extraordinary labour and expense to
raise them. As, in the natural scarcity arising from soil and
climate, it would be absurd to direct the people in what manner
they ought to employ their capitals and industry, so is it
likewise in the artificial scarcity arising from such taxes. To
be left to accommodate, as well as they could, their industry to
their situation, and to find out those employments in which,
notwithstanding their unfavourable circumstances, they might have
some advantage either in the home or in the foreign market, is
what, in both cases, would evidently be most for their advantage.
To lay a new-tax upon them, because they are already overburdened
with taxes, and because they already pay too dear for the
necessaries of life, to make them likewise pay too dear for the
greater part of other commodities, is certainly a most absurd way
of making amends.
Such taxes, when they have grown up to a certain height, are a
curse equal to the barrenness of the earth, and the inclemency of
the heavens, and yet it is in the richest and most industrious
countries that they have been most generally imposed. No other
countries could support so great a disorder. As the strongest
bodies only can live and enjoy health under an unwholesome
regimen, so the nations only, that in every sort of industry have
the greatest natural and acquired advantages, can subsist and
prosper under such taxes. Holland is the country in Europe in
which they abound most, and which, from peculiar circumstances,
continues to prosper, not by means of them, as has been most
absurdly supposed, but in spite of them.
As there are two cases in which it will generally be advantageous
to lay some burden upon foreign for the encouragement of domestic
industry, so there are two others in which it may sometimes be a
matter of deliberation, in the one, how far it is proper to
continue the free importation of certain foreign goods; and, in
the other, how far, or in what manner, it may be proper to
restore that free importation, after it has been for some time
interrupted.
The case in which it may sometimes be a matter of deliberation
how far it is proper to continue the free importation of certain
foreign goods, is when some foreign nation restrains, by high
duties or prohibitions, the importation of some of our
manufactures into their country. Revenge, in this case, naturally
dictates retaliation, and that we should impose the like duties
and prohibitions upon the importation of some or all of their
manufactures into ours. Nations, accordingly, seldom fail to
retaliate in this manner. The French have been particularly
forward to favour their own manufactures, by restraining the
importation of such foreign goods as could come into competition
with them. In this consisted a great part of the policy of Mr
Colbert, who, notwithstanding his great abilities, seems in this
case to have been imposed upon by the sophistry of merchants and
manufacturers, who are always demanding a monopoly against their
countrymen. It is at present the opinion of the most intelligent
men in France, that his operations of this kind have not been
beneficial to his country. That minister, by the tariff of 1667,
imposed very high duties upon a great number of foreign
manufactures. Upon his refusing to moderate them in favour of the
Dutch, they, in 1671, prohibited the importation of the wines,
brandies, and manufactures of France. The war of 1672 seems to
have been in part occasioned by this commercial dispute. The
peace of Nimeguen put an end to it in 1678, by moderating some of
those duties in favour of the Dutch, who in consequence took off
their prohibition. It was about the same time that the French and
English began mutually to oppress each other's industry, by the
like duties and prohibitions, of which the French, however, seem
to have set the first example, The spirit of hostility which has
subsisted between the two nations ever since, has hitherto
hindered them from being moderated on either side. In 1697, the
Ehglish prohibited the importation of bone lace, the manufacture
of Flanders. The government of that country, at that time under
the dominion of Spain, prohibited, in return, the importation of
English woollens. In 1700, the prohibition of importing bone lace
into England was taken oft; upon condition that the importation
of English woollens into Flanders should be put on the same
footing as before.
There may be good policy in retaliations of this kind, when there
is a probability that they will procure the repeal of the high
duties or prohibitions complained of. The recovery of a great
foreign market will generally more than compensate the transitory
inconveniency of paying dearer during a short time for some sorts
of goods. To judge whether such retaliations are likely to
produce such an effect, does not, perhaps, belong so much to the
science of a legislator, whose deliberations ought to be governed
by general principles, which are always the same, as to the skill
of that insidious and crafty animal vulgarly called a statesman
or politician, whose councils are directed by the momentary
fluctuations of affairs. When there is no probability that any
such repeal can be procured, it seems a bad method of
compensating the injury done to certain classes of our people, to
do another injury ourselves, not only to those classes, but to
almost all the other classes of them. When our neighbours
prohibit some manufacture of ours, we generally prohibit, not
only the same, for that alone would seldom affect them
considerably, but some other manufacture of theirs. This may, no
doubt, give encouragement to some particular class of workmen
among ourselves, and, by excluding some of their rivals, may
enable them to raise their price in the home market. Those
workmen however, who suffered by our neighbours prohibition, will
not be benefited by ours. On the contrary, they, and almost all
the other classes of our citizens, will thereby be obliged to pay
dearer than before for certain goods. Every such law, therefore,
imposes a real tax upon the whole country, not in favour of that
particular class of workmen who were injured by our neighbours
prohibitions, but of some other class.
The case in which it may sometimes be a matter of deliberation,
how far, or in what manner, it is proper to restore the free
importation of foreign goods, after it has been for some time
interrupted, is when particular manufactures, by means of high
duties or prohibitions upon all foreign goods which can come into
competition with them, have been so far extended as to employ a
great multitude of hands. Humanity may in this case require that
the freedom of trade should be restored only by slow gradations,
and with a good deal of reserve and circumspection. Were those
high duties and prohibitions taken away all at once, cheaper
foreign goods of the same kind might be poured so fast into the
home market, as to deprive all at once many thousands of our
people of their ordinary employment and means of subsistence. The
disorder which this would occasion might no doubt be very
considerable. It would in all probability, however, be much less
than is commonly imagined, for the two following reasons.
First, All those manufactures of which any part is commonly
exported to other European countries without a bounty, could be
very little affected by the freest importation of foreign goods.
Such manufactures must be sold as cheap abroad as any other
foreign goods of the same quality and kind, and consequently must
be sold cheaper at home. They would still, therefore, keep
possession of the home market; and though a capricious man of
fashion might sometimes prefer foreign wares, merely because they
were foreign, to cheaper and better goods of the same kind that
were made at home, this folly could, from the nature of things,
extend to so few, that it could make no sensible impression upon
the general employment of the people. But a great part of all the
different branches of our woollen manufacture, of our tanned
leather, and of our hardware, are annually exported to other
European countries without any bounty, and these are the
manufactures which employ the greatest number of hands. The silk,
perhaps, is the manufacture which would suffer the most by this
freedom of trade, and after it the linen, though the latter much
less than the former.
Secondly, Though a great number of people should, by thus
restoring the freedom of trade, be thrown all at once out of
their ordinary employment and common method of subsistence, it
would by no means follow that they would thereby be deprived
either of employment or subsistence. By the reduction of the army
and navy at the end of the late war, more than 100,000 soldiers
and seamen, a number equal to what is employed in the greatest
manufactures, were all at once thrown out of their ordinary
employment : but though they no doubt suffered some
inconveniency, they were not thereby deprived of all employment
and subsistence. The greater part of the seamen, it is probable,
gradually betook themselves to the merchant service as they could
find occasion, and in the mean time both they and the soldiers
were absorbed in the great mass of the people, and employed in a
great variety of occupations. Not only no great convulsion, but
no sensible disorder, arose from so great a change in the
situation of more than 100,000 men, all accustomed to the use of
arms, and many of them to rapine and plunder. The number of
vagrants was scarce anywhere sensibly increased by it ; even the
wages of labour were not reduced by it in any occupation, so far
as I have been able to learn, except in that of seamen in the
merchant service. But if we compare together the habits of a
soldier and of any sort of manufacturer, we shall find that those
of the latter do not tend so much to disqualify him from being
employed in a new trade, as those of the former from being
employed in any. The manufacturer has always been accustomed to
look for his subsistence from his labour only ; the soldier to
expect it from his pay. Application and industry have been
familiar to the one; idleness and dissipation to the other. But
it is surely much easier to change the direction of industry from
one sort of labour to another, than to turn idleness and
dissipation to any. To the greater part of manufactures, besides,
it has already been observed, there are other collateral
manufactures of so similar a nature, that a workman can easily
transfer his industry from one of them to another. The greater
part of such workmen, too, are occasionally employed in country
labour. The stock which employed them in a particular manufacture
before, will still remain in the country, to employ an equal
number of people in some other way. The capital of the country
remaining the same, the demand for labour will likewise be the
same, or very nearly the same, though it may be exerted in
different places, and for different occupations. Soldiers and
seamen, indeed, when discharged from the king's service, are at
liberty to exercise any trade within any town or place of Great
Britain or Ireland. Let the same natural liberty of exercising
what species of industry they please, be restored to all his
Majesty's subjects, in the same manner as to soldiers and seamen
; that is, break down the exclusive privileges of corporations,
and repeal the statute of apprenticeship, both which are really
encroachments upon natural Liberty, and add to those the repeal
of the law of settlements, so that a poor workman, when thrown
out of employment, either in one trade or in one place, may seek
for it in another trade or in another place, without the fear
either of a prosecution or of a removal; and neither the public
nor the individuals will suffer much more from the occasional
disbanding some particular classes of manufacturers, than from
that of the soldiers. Our manufacturers have no doubt great merit
with their country, but they cannot have more than those who
defend it with their blood, nor deserve to be treated with more
delicacy.
To expect, indeed, that the freedom of trade should ever be
entirely restored in Great Britain, is as absurd as to expect
that an Oceana or Utopia should ever be established in it. Not
only the prejudices of the public, but, what is much more
unconquerable, the private interests of many individuals,
irresistibly oppose it. Were the officers of the army to oppose,
with the same zeal and unanimity, any reduction in the number of
forces, with which master manufacturers set themselves against
every law that is likely to increase the number of their rivals
in the home market ; were the former to animate their soldiers.
In the same manner as the latter inflame their workmen, to attack
with violence and outrage the proposers of any such regulation;
to attempt to reduce the army would be as dangerous as it has now
become to attempt to diminish, in any respect, the monopoly which
our manufacturers have obtained against us. This monopoly has so
much increased the number of some particular tribes of them,
that, like an overgrown standing army, they have become
formidable to the government, and, upon many occasions,
intimidate the legislature. The member of parliament who supports
every proposal for strengthening this monopoly, is sure to
acquire not only the reputation of understanding trade, but great
popularity and influence with an order of men whose numbers and
wealth render them of great importance. If he opposes them, on
the contrary, and still more, if he has authority enough to be
able to thwart them, neither the most acknowledged probity, nor
the highest rank, nor the greatest public services, can protect
him from the most infamous abuse and detraction, from personal
insults, nor sometimes from real danger, arising from the
insolent outrage of furious and disappointed monopolists.
The undertaker of a great manufacture, who, by the home markets
being suddenly laid open to the competition of foreigners, should
be obliged to abandon his trade, would no doubt suffer very
considerably. That part of his capital which had usually been
employed in purchasing materials, and in paying his workmen,
might, without much difficulty, perhaps, find another employment
; but that part of it which was fixed in workhouses, and in the
instruments of trade, could scarce be disposed of without
considerable loss. The equitable regard, therefore, to his
interest, requires that changes of this kind should never be
introduced suddenly, but slowly, gradually, and after a very long
warning. The legislature, were it possible that its deliberations
could be always directed, not by the clamorous importunity of
partial interests, but by an extensive view of the general good,
ought, upon this very account, perhaps, to be particularly
careful, neither to establish any new monopolies of this kind,
nor to extend further those which are already established. Every
such regulation introduces some degree of real disorder into the
constitution of the state, which it will be difficult afterwards
to cure without occasioning another disorder.
How far it may be proper to impose taxes upon the importation of
foreign goods, in order not to prevent their importation, but to
raise a revenue for government, I shall consider hereafter when I
come to treat of taxes. Taxes imposed with a view to prevent, or
even to diminish importation, are evidently as destructive of the
revenue of the customs as of the freedom of trade.
CHAPTER III.
OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF
ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS
SUPPOSED TO BE DISADVANTAGEOUS.
Part I - Of the Unreasonableness of those Restraints, even upon
the Principles of the Commercial System.
To lay extraordinary restraints upon the importation of goods of
almost all kinds, from those particular countries with which the
balance of trade is supposed to be disadvantageous, is the second
expedient by which the commercial system proposes to increase the
quantity of gold and silver. Thus, in Great Britain, Silesia
lawns may be imported for home consumption, upon paying certain
duties; but French cambrics and lawns are prohibited to be
imported, except into the port of London, there to be warehoused
for exportation. Higher duties are imposed upon the wines of
France than upon those of Portugal, or indeed of any other
country. By what is called the impost 1692, a duty of five
and-twenty per cent. of the rate or value, was laid upon all
French goods; while the goods of other nations were, the greater
part of them, subjected to much lighter duties, seldom exceeding
five per cent. The wine, brandy, salt, and vinegar of France,
were indeed excepted; these commodities being subjected to other
heavy duties, either by other laws, or by particular clauses of
the same law. In 1696, a second duty of twenty-five per cent. the
first not having been thought a sufficient discouragement, was
imposed upon all French goods, except brandy ; together with a
new duty of five-and-twenty pounds upon the ton of French wine,
and another of fifteen pounds upon the ton of French vinegar.
French goods have never been omitted in any of those general
subsidies or duties of five per cent. which have been imposed
upon all, or the greater part, of the goods enumerated in the
book of rates. If we count the one-third and two-third subsidies
as making a complete subsidy between them, there have been five
of these general subsidies; so that, before the commencement of
the present war, seventy-five per cent. may be considered as the
lowest duty to which the greater part of the goods of the growth,
produce, or manufacture of France, were liable. But upon the
greater part of goods, those duties are equivalent to a
prohibition. The French, in their turn, have, I believe, treated
our goods and manufactures just as hardly; though I am not so
well acquainted with the particular hardships which they have
imposed upon them. Those mutual restraints have put an end to
almost all fair commerce between the two nations; and smugglers
are now the principal importers, either of British goods into
France, or of French goods into Great Britain. The principles
which I have been examining, in the foregoing chapter, took their
origin from private interest and the spirit of monopoly ; those
which I am going te examine in this, from national prejudice and
animosity. They are, accordingly, as might well be expected,
still more unreasonable. They are so, even upon the principles of
the commercial system.
First, Though it were certain that in the case of a free trade
between France and England, for example, the balance would be in
favour of France, it would by no means follow that such a trade
would be disadvantageous to England, or that the general balance
of its whole trade would thereby be turned more against it. If
the wines of France are better and cheaper than those of
Portugal, or its linens than those of Germany, it would be more
advantageous for Great Britain to purchase both the wine and the
foreign linen which it had occasion for of France, than of
Portugal and Germany. Though the value of the annual importations
from France would thereby be greatly augmented, the value of the
whole annual importations would be diminished, in proportion as
the French goods of the same quality were cheaper than those of
the other two countries. This would be the case, even upon the
supposition that the whole French goods imported were to be
consumed in Great Britain.
But, Secondly, A great part of them might be re-exported to other
countries, where, being sold with profit, they might bring back a
return. equal in value, perhaps, to the prime cost of the whole
French goods imported. What has frequently been said of the East
India trade, might possibly be true of the French; that though
the greater part of East India goods were bought with gold and
silver, the re-exportation of a part of them to other countries
brought back more gold and silver to that which carried on the
trade, than the prime cost of the whole amounted to. One of the
most important branches of the Dutch trade at present, consists
in the carriage of French goods to other European countries. Some
part even of the French wine drank in Great Britain, is
clandestinely imported from Holland and Zealand. If there was
either a free trade between France and England, or if French
goods could be imported upon paying only the same duties as those
of other European nations, to be drawn back upon exportation,
England might have some share of a trade which is found so
advantageous to Holland.
Thirdly, and lastly, There is no certain criterion by which we
can determine on which side what is called the balance between
any two countries lies, or which of them exports to the greatest
value. National prejudice and animosity, prompted always by the
private interest of particular traders, are the principles which
generally direct our judgment upon all questions concerning it.
There are two criterions, however, which have frequently been
appealed to upon such occasions, the custom-house books and the
course of exchange. The custom-house books, I think, it is now
generally acknowledged, are a very uncertain criterion, on
account of the inaccuracy of the valuation at which the greater
part of goods are rated in them. The course of exchange is,
perhaps, almost equally so.
When the exchange between two places, such as London and Paris,
is at par, it is said to be a sign that the debts due from London
to Paris are compensated by those due from Paris to London. On
the contrary, when a premium is paid at London for a bill upon
Paris, it is said to be a sign that the debts due from London to
Paris are not compensated by those due from Paris to London, but
that a balance in money must be sent out from the latter place;
for the risk, trouble, and expense, of exporting which, the
premium is both demanded and given. But the ordinary state of
debt and credit between those two cities must necessarily be
regulated, it is said, by the ordinary course of their dealings
with one another. When neither of them imports from from other to
a greater amount than it exports to that other, the debts and
credits of each may compensate one another. But when one of them
imports from the other to a greater value than it exports to that
other, the former necessarily becomes indebted to the latter in a
greater sum than the latter becomes indebted to it: the debts and
credits of each do not compensate one another, and money must be
sent out from that place of which the debts overbalance the
credits. The ordinary course of exchange, therefore, being an
indication of the ordinary state of debt and credit between two
places, must likewise be an indication of the ordinary course of
their exports and imports, as these necessarily regulate that
state.
But though the ordinary course of exchange shall be allowed to be
a sufficient indication of the ordinary state of debt and credit
between any two places, it would not from thence follow, that the
balance of trade was in favour of that place which had the
ordinary state of debt and credit in its favour. The ordinary
state of debt and credit between any two places is not always
entirely regulated by the ordinary course of their dealings with
one another, but is often influenced by that of the dealings of
either with many other places. If it is usual, for example, for
the merchants of England to pay for the goods which they buy of
Hamburg, Dantzic, Riga, etc. by bills upon Holland, the ordinary
state of debt and credit between England and Holland will not be
regulated entirely by the ordinary course of the dealings of
those two countries with one another, but will be influenced by
that of the dealings in England with those other places. England
may be obliged to send out every year money to Holland, though
its annual exports to that country may exceed very much the
annual value of its imports from thence, and though what is
called the balance of trade may be very much in favour of
England.
In the way, besides, in which the par of exchange has hitherto
been computed, the ordinary course of exchange can afford no
sufficient indication that the ordinary state of debt and credit
is in favour of that country which seems to have, or which is
supposed to have, the ordinary course of exchange in its favour ;
or, in other words, the real exchange may be, and in fact often
is, so very different from the computed one, that, from the
course of the latter, no certain conclusion can, upon many
occasions, be drawn concerning that of the former.
When for a sum or money paid in England, containing, according to
the standard of the English mint, a certain number of ounces of
pure silver, you receive a bill for a sum of money to be paid in
France, containing, according to the standard of the French mint,
an equal number of ounces of pure silver, exchange is said to be
at par between England and France. When you pay more, you are
supposed to give a premium, and exchange is said to be against
England, and in favour of France. When you pay less, you are
supposed to get a premium, and exchange is said to be against
France, and in favour of England.
But, first, We cannot always judge of the value of the current
money of different countries by the standard of their respective
mints. In some it is more, in others it is less worn, clipt, and
otherwise degenerated from that standard. But the value of the
current coin of every country, compared with that of any other
country, is in proportion, not to the quantity of pure silver
which it ought to contain, but to that which it actually does
contain. Before the reformation of the silver coin in King
William's time, exchange between England and Holland, computed in
the usual manner, according to the standard of their respective
mints, was five-and twenty per cent. against England. But the
value of the current coin of England, as we learn from Mr
Lowndes, was at that time rather more than five-and-twenty per
cent. below its standard value. The real exchange, therefore, may
even at that time have been in favour of England, notwithstanding
the computed exchange was so much against it ; a smaller number
or ounces of pure silver, actually paid in England, may have
purchased a bill for a greater number of ounces of pure silver to
be paid in Holland, and the man who was supposed to give, may in
reality have got the premium. The French coin was, before the
late reformation of the English gold coin, much less wore than
the English, and was perhaps two or three per cent. nearer its
standard. If the computed exchange with France, therefore, was
not more than two or three per cent. against England, the real
exchange might have been in its favour. Since the reformation of
the gold coin, the exchange has been constantly in favour of
England, and against France.
Secondly, In some countries the expense of coinage is defrayed by
the government; in others, it is defrayed by the private people,
who carry their bullion to the mint, and the government even
derives some revenue from the coinage. In England it is defrayed
by the government; and if you carry a pound weight of standard
silver to the mint, you get back sixty-two shillings, containing
a pound weight of the like standard silver. In France a duty of
eight per cent. is deducted for the coinage, which not only
defrays the expense of it, but affords a small revenue to the
government. In England, as the coinage costs nothing, the current
coin can never be much more valuable than the quantity of bullion
which it actually contains. In France, the workmanship, as you
pay for it, adds to the value, in the same manner as to that of
wrought plate. A sum of French money, therefore, containing an
equal weight of pure silver, is more valuable than a sum of
English money containing an equal weight of pure silver, and must
require more bullion, or other commodities, to purchase it.
Though the current coin of the two countries, therefore, were
equally near the standards of their respective mints, a sum of
English money could not well purchase a sum of French money
containing an equal number of ounces of pure silver, nor,
consequently, a bill upon France for such a sum. If, for such a
bill, no more additional money was paid than what was sufficient
to compensate the expense of the French coinage, the real
exchange might be at par between the two countries; their debts
and credits might mutually compensate one another, while the
computed exchange was considerably in favour of France. If less
than this was paid, the real exchange might be in favour of
England, while the computed was in favour of France.
Thirdly, and lastly, In some places, as at Amsterdam, Hamburg,
Venice, etc. foreign bills of exchange are paid in what they call
bank money ; while in others, as at London, Lisbon, Antwerp,
Leghorn, etc. they are paid in the common currency of the
country. What is called bank money, is always of more value than
the same nominal sum of common currency. A thousand guilders in
the bank of Amsterdam, for example, are of more vallue than a
thousand guilders of Amsterdam currency. The difference between
them is called the agio of the bank, which at Amsterdam is
generally about five per cent. Supposing the current money of the
two countries equally near to the standard of their respective
mints, and that the one pays foreign bills in this common
currency, while the other pays them in bank money, it is evident
that the computed exchange may be in favour of that which pays in
bank money, though the real exchange should be in favour of that
which pays in current money; for the same reason that the
computed exchange may be in favour of that which pays in better
money, or in money nearer to its own standard, though the real
exchange should be in favour of that which pays in worse. The
computed exchange, before the late reformation of the gold coin,
was generally against London with Amsterdam, Hamburg, Venice,
and, I believe, with all other places which pay in what is called
bank money. It will by no means follow, however, that the real
exchange was against it. Since the reformation of the gold coin,
it has been in favour of London, even with those places. The
computed exchange has generally been in favour of London with
Lisbon, Antwerp, Leghorn, and, if you except France, I believe
with most other parts of Europe that pay in common currency ; and
it is not improbable that the real exchange was so too.
Digression concerning Banks of Deposit, particularly concerning
that of Amsterdam.
The currency of a great state, such as France or England,
generally consists almost entirely of its own coin. Should this
currency, therefore, be at any time worn, clipt, or otherwise
degraded below its standard value, the state, by a reformation of
its coin, can effectually re-establish its currency. But the
currency of a small state, such as Genoa or Hamburg, can seldom
consist altogether in its own coin, but must be made up, in a
great measure, of the coins of all the neighbouring states with
which its inhabitants have a continual intercourse. Such a state,
therefore, by reforming its coin, will not always be able to
reform its currency. If foreign bills of exchange are paid in
this currency, the uncertain value of any sum, of what is in its
own nature so uncertain, must render the exchange always very
much against such a state, its currency being in all foreign
states necessarily valued even below what it is worth.
In order to remedy the inconvenience to which this
disadvantageous exchange must have subjected their merchants,
such small states, when they began to attend to the interest of
trade, have frequently enacted that foreign bills of exchange of
a certain value should be paid, not in common currency, but by an
order upon, or by a transfer in the books of a certain bank,
established upon the credit, and under the protection of the
state, this bank being always obliged to pay, in good and true
money, exactly according to the standard of the state. The banks
of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have
been all originally established with this view, though some of
them may have afterwards been made subservient to other purposes.
The money of such banks, being better than the common currency of
the country, necessarily bore an agio, which was greater or
smaller, according as the currency was supposed to be more or
less degraded below the standard of the state. The agio of the
bank of Hamburg, for example, which is said to be commonly about
fourteen per cent. is the supposed difference between the good
standard money of the state, and the clipt, worn, and diminished
currency, poured into it from all the neighbouring states.
Before 1609, the great quantity of clipt and worn foreign coin
which the extensive trade of Amsterdam brought from all parts of
Europe, reduced the value of its currency about nine per cent.
below that of good money fresh from the mint. Such money no
sooner appeared, than it was melted down or carried away, as it
always is in such circumstances. The merchants, with plenty of
currency, could not always find a sufficient quantity of good
money to pay their bills of exchange ; and the value of those
bills, in spite of several regulations which were made to prevent
it, became in a great measure uncertain.
In order to remedy these inconveniencies, a bank was established
in 1609, under the guarantee of the city. This bank received both
foreign coin, and the light and worn coin of the country, at its
real intrinsic value in the good standard money of the country,
deducting only so much as was neccssary for defraying the expense
of coinage and the other necessary expense of management. For the
value which remained after this small deduction was made, it gave
a credit in its books. This credit was called bank money, which,
as it represented money exactly according to the standard of the
mint, was always of the same real value, and intrinsically worth
more than current money. It was at the same time enacted, that
all bills drawn upon or negotiated at Amsterdam, of the value of
600 guilders and upwards, should be paid in bank money, which at
once took away all uncertainty in the value of those bills. Every
merchant, in consequence of this regulation, was obliged to keep
an account with the bank, in order to pay his foreign bills of
exchange, which necessarily occasioned a certain demand for bank
money.
Bank money, over and above both its in trinsic superiority to
currency, and the additional value which this demand necessarily
gives it, has likewise some other advantages, It is secure from
fire, robbery, and other accidents; the city of Amsterdam is
bound for it; it can be paid away by a simple transfer, without
the trouble of counting, or the risk of transporting it from one
place to another. In consequence of those different advantages,
it seems from the beginning to have borne an agio; and it is
generally believed that all the money originally deposited in the
bank, was allowed to remain there, nobody caring to demand
payment of a debt which he could sell for a premium in the
market. By demanding payment of the bank, the owner of a bank
credit would lose this premium. As a shilling fresh from the mint
will buy no more goods in the market than one of our common worn
shillings, so the good and true money which might be brought from
the coffers of the bank into those of a private person, being
mixed and confounded with the common currency of the country,
would be of no more value than that currency, from which it could
no longer be readily distinguished. While it remained in the
coffers of the bank, its superiority was known and ascertained.
When it had come into those of a private person, its superiority
could not well be ascertained without more trouble than perhaps
the difference was worth. By being brought from the coffers of
the bank, besides, it lost all the other advantages of bank
money; its security, its easy and safe transferability, its use
in paying foreign bills of exchange. Over and above all this, it
could not be brought from those coffers, as will appear by and
by, without previously paying for the keeping.
Those deposits of coin, or those deposits which the bank was
bound to restore in coin, constituted the original capital of the
bank, or the whole value of what was represented by what is
called bank money. At present they are supposed to constitute but
a very small part of it. In order to facilitate the trade in
bullion, the bank has been for these many years in the practice
of giving credit in its books, upon deposits of gold and silver
bullion. This credit is generally about five per cent. below the
mint price of such bullion. The bank grants at the same time what
is called a recipice or receipt, entitling the person who makes
the deposit, or the bearer, to take out the bullion again at any
time within six months, upon transferring to the bank a quantity
of bank money equal to that for which credit had been given in
its books when the deposit was made, and upon paying one-fourth
per cent. for the keeping, if the deposit was in silver ; and
one-half per cent. if it was in gold; but at the same time
declaring, that in default of such payment, and upon the
expiration of this term, the deposit should belong to the bank,
at the price at which it had been received, or for which credit
had been given in the transfer books. What is thus paid for the
keeping of the deposit may be considered as a sort of warehouse
rent; and why this warehouse rent should be so much dearer for
gold than for silver, several different reasons have been
assigned. The fineness of gold, it has been said, is more
difficult to be ascertained than that of silver. Frauds are more
easily practised, and occasion a greater loss in the most
precious metal. Silver, besides, being the standard metal, the
state, it has been said, wishes to encourage more the making of
deposits of silver than those of gold.
Deposits of bullion are most commonly made when the price is
somewhat lower than ordinary, and they are taken out again when
it happens to rise. In Holland the market price of bullion is
generally above the mint price, for the same reason that it was
so in England before the late reformation of the gold coin. The
difference is said to be commonly from about six to sixteen
stivers upon the mark, or eight ounces of silver, of eleven parts
of fine and one part alloy. The bank price, or the credit which
the bank gives for the deposits of such silver (when made in
foreign coin, of which the fineness is well known and
ascertained, such as Mexico dollars), is twenty-two guilders the
mark : the mint price is about twenty-three guilders, and the
market price is from twenty-three guilders six, to twenty-three
guilders sixteen stivers, or from two to three per cent. above
the mint price.
The following are the prices at which the bank of Amsterdam at
present {September 1775} receives bullion and coin of different
kinds:
SILVER
Mexico dollars ................. 22 Guilders / mark
French crowns .................. 22
English silver coin ............. 22
Mexico dollars, new coin ........ 21 10
Ducatoons ....................... 3 0
Rix-dollars ..................... 2 8
Bar silver, containing 11-12ths fine silver, 21 Guilders / mark,
and in this proportion down to 1-4th fine, on which 5 guilders
are given. Fine bars, ................. 28 Guilders / mark.
GOLD
Portugal coin ................. 310 Guilders / mark
Guineas ....................... 310
Louis d'ors, new .............. 310
Ditto old .............. 300
New ducats .................... 4 19 8 per ducat
Bar or ingot gold is received in proportion to its fineness,
compared with the above foreign gold coin. Upon fine bars the
bank gives 340 per mark. In general, however, something more is
given upon coin of a known fineness, than upon gold and silver
bars, of which the fineness cannot be ascertained but by a
process of melting and assaying.
The proportions between the bank price, the mint price, and the
market price of gold bullion, are nearly the same. A person can
generally sell his receipt for the difference between the mint
price of bullion and the market price. A receipt for bullion is
almost always worth something, and it very seldom happens,
therefore, that anybody suffers his receipts to expire, or allows
his bullion to fall to the bank at the price at which it had been
received, either by not taking it out before the end of the six
months, or by neglecting to pay one fourth or one half per cent.
in order to obtain a new receipt for another six months. This,
however, though it happens seldom, is said to happen sometimes,
and more frequently with regard to gold than with regard to
silver, on account of the higher warehouse rent which is paid for
the keeping of the more precious metal.
The person who, by making a deposit of bullion, obtains both a
bank credit and a receipt, pays his bills of exchange as they
become due, with his bank credit; and either sells or keeps his
receipt, according as he judges that the price of bullion is
likely to rise or to fall. The receipt and the bank credit seldom
keep long together, and there is no occasion that they should.
The person who has a receipt, and who wants to take out bullion,
finds always plenty of bank credits, or bank money, to buy at the
ordinary price, and the person who has bank money, and wants to
take out bullion, finds receipts always in equal abundance.
The owners of bank credits, and the holders of receipts,
constitute two different sorts of creditors against the bank. The
holder of a receipt cannot draw out the bullion for which it is
granted, without re-assigning to the bank a sum of bank money
equal to the price at which the bullion had been received. If he
has no bank money of his own, he must purchase it of those who
have it. The owner of bank money cannot draw out bullion, without
producing to the bank receipts for the quantity which he wants.
If he has none of his own, he must buy them of those who have
them. The holder of a receipt, when he purchases bank money,
purchases the power of taking out a quantity of bullion, of which
the mint price is five per cent. above the bank price. The agio
of five per cent. therefore, which he commonly pays for it, is
paid, not for an imaginary, but for a real value. The owner of
bank money, when he purchases a receipt, purchases the power of
taking out a quantity of bullion, of which the market price is
commonly from two to three per cent. above the mint price. The
price which he pays for it, therefore, is paid likewise for a
real value. The price of the receipt, and the price of the bank
money, compound or make up between them the full value or price
of the bullion.
Upon deposits of the coin current in the country, the bank grant
receipts likewise, as well as bank credits; but those receipts
are frequently of no value and will bring no price in the market.
Upon ducatoons, for example, which in the currency pass for three
guilders three stivers each, the bank gives a credit of three
guilders only, or five per cent. below their current value. It
grants a receipt likewise, entitling the bearer to take out the
number of ducatoons deposited at any time within six months, upon
paying one fourth per cent. for the keeping. This receipt will
frequently bring no price in the market. Three guilders, bank
money, generally sell in the market for three guilders three
stivers, the full value of the ducatoons, if they were taken out
of the bank ; and before they can be taken out, one-fourth per
cent. must be paid for the keeping, which would be mere loss to
the holder of the receipt. If the agio of the bank, however,
should at any time fall to three per cent. such receipts might
bring some price in the market, and might sell for one and
three-fourths per cent. But the agio of the bank being now
generally about five per cent. such receipts are frequently
allowed to expire, or, as they express it, to fall to the bank.
The receipts which are given for deposits of gold ducats fall to
it yet more frequently, because a higher warehouse rent, or one
half per cent. must be paid for the keeping of them, before they
can be taken out again. The five per cent. which the bank gains,
when deposits either of coin or bullion are allowed to fall to
it, maybe considered as the warehouse rent for the perpetual
keeping of such deposits.
The sum of bank money, for which the receipts are expired, must
be very considerable. It must comprehend the whole original
capital of the bank, which, it is generally supposed, has been
allowed to remain there from the time it was first deposited,
nobody caring either to renew his receipt, or to take out his
deposit, as, for the reasons already assigned, neither the one
nor the other could be done without loss. But whatever may be the
amount of this sum, the proportion which it bears to the whole
mass of bank money is supposed to be very small. The bank of
Amsterdam has, for these many years past, been the great
warehouse of Europe for bullion, for which the receipts are very
seldom allowed to expire, or, as they express it, to fall to the
bank. The far greater part of the bank money, or of the credits
upon the books of the bank, is supposed to have been created, for
these many years past, by such deposits, which the dealers in
bullion are continually both making and withdrawing.
No demand can be made upon the bank, but by means of a recipice
or receipt. The smaller mass of bank money, for which the
receipts are expired, is mixed and confounded with the much
greater mass for which they are still in force; so that, though
there may be a considerable sum of bank money, for which there
are no receipts, there is no specific sum or portion of it which
may not at any time be demanded by one. The bank cannot be debtor
to two persons for the same thing; and the owner of bank money
who has no receipt, cannot demand payment of the bank till he
buys one. In ordinary and quiet times, he can find no difficulty
in getting one to buy at the market price, which generally
corresponds with the price at which he can sell the coin or
bullion it entitles him to take out of the bank.
It might be otherwise during a public calamity ; an invasion, for
example, such as that of the French in 1672. The owners of bank
money being then all eager to draw it out of the bank, in order
to have it in their own keeping, the demand for receipts might
raise their price to an exorbitant height. The holders of them
might form extravagant expectations, and, instead of two or three
per cent. demand half the bank money for which credit had been
given upon the deposits that the receipts had respectively been
granted for. The enemy, informed of the constitution of the bank,
might even buy them up, in order to prevent the carrying away of
the treasure. In such emergencies, the bank, it is supposed,
would break through its ordinary rule of making payment only to
the holders of receipts. The holders of receipts, who had no bank
money, must have received within two or three per cent. of the
value of the deposit for which their respective receipts had been
granted. The bank, therefore, it is said, would in this case make
no scruple of paying, either with money or bullion, the full
value of what the owners of bank money, who could get no
receipts, were credited for in its books; paying, at the same
time, two or three per cent. to such holders of receipts as had
no bank money, that being the whole value which, in this state of
things, could justly be supposed due to them.
Even in ordinary and quiet times, it is the interest of the
holders of receipts to depress the agio, in order either to buy
bank money (and consequently the bullion which their receipts
would then enable them to take out of the bank ) so much cheaper,
or to sell their receipts to those who have bank money, and who
want to take out bullion, so much dearer ; the price of a receipt
being generally equal to the difference between the market price
of bank money and that of the coin or bullion for which the
receipt had been granted. It is the interest of the owners of
bank money, on the contrary, to raise the agio, in order either
to sell their bank money so much dearer, or to buy a receipt so
much cheaper. To prevent the stock-jobbing tricks which those
opposite interests might sometimes occasion, the bank has of late
years come to the resolution, to sell at all times bank money for
currency at five per cent. agio, and to buy it in again at four
per cent. agio. In consequence of this resolution, the agio can
never either rise above five, or sink below four per cent. ; and
the proportion between the market price of bank and that of
current money is kept at all times very near the proportion
between their intrinsic values. Before this resolution was taken,
the market price of bank money used sometimes to rise so high as
nine per cent. agio, and sometimes to sink so low as par,
according as opposite interests happened to influence the market.
The bank of Amsterdam professes to lend out no part of what is
deposited with it, but for every guilder for which it gives
credit in its books, to keep in its repositories the value of a
guilder either in money or bullion. That it keeps in its
repositories all the money or bullion for which there are
receipts in force for which it is at all times liable to be
called upon, and which in reality is continually going from it,
and returning to it again, cannot well be doubted. But whether it
does so likewise with regard to that part of its capital for
which the receipts are long ago expired, for which, in ordinary
and quiet times, it cannot be called upon, and which, in reality,
is very likely to remain with it for ever, or as long as the
states of the United Provinces subsist, may perhaps appear more
uncertain. At Amsterdam, however, no point of faith is better
established than that, for every guilder circulated as bank
money, there is a correspondent guilder in gold or silver to be
found in the treasures of the bank. The city is guarantee that it
should be so. The bank is under the direction of the four
reigning burgomasters who are changed every year. Each new set of
burgomasters visits the treasure, compares it with the books,
receives it upon oath, and delivers it over, with the same awful
solemnity to the set which succeeds ; and in that sober and
religious country, oaths are not yet disregarded. A rotation of
this kind seems alone a sufficient security against any practices
which cannot be avowed. Amidst all the revolutions which faction
has ever occasioned in the government of Amsterdam, the
prevailing party has at no time accused their predecessors of
infidelity in the administration of the bank. No accusation could
have affected more deeply the reputation and fortune of the
disgraced party ; and if such an accusation could have been
supported, we may be assured that it would have been brought. In
1672, when the French king was at Utrecht, the bank of Amsterdam
paid so readily, as left no doubt of the fidelity with which it
had observed its engagements. Some of the pieces which were then
brought from its repositories, appeared to have been scorched
with the fire which happened in the town-house soon after the
bank was established. Those pieces, therefore, must have lain
there from that time.
What may be the amount of the treasure in the bank, is a question
which has long employed the speculations of the curious. Nothing
but conjecture can be offered concerning it. It is generally
reckoned, that there are about 2000 people who keep accounts with
the bank; and allowing them to have, one with another, the value
of £1500 sterling lying upon their respective accounts (a very
large allowance), the whole quantity of bank money, and
consequently of treasure in the bank, will amount to about
£3,000,000 sterling, or, at eleven guilders the pound sterling,
33,000,000 of guilders ; a great sum, and sufficient to carry on
a very extensive circulation, but vastly below the extravagant
ideas which some people have formed of this treasure.
The city of Amsterdam derives a considerable revenue from the
bank. Besides what may be called the warehouse rent above
mentioned, each person, upon first opening an account with the
bank, pays a fee of ten guilders ; and for every new account,
three guilder's three stivers; for every transfer, two stivers;
and if the transfer is for less than 300 guilders, six stivers,
in order to discourage the multiplicity of small transactions.
The person who neglects to balance his account twice in the year,
forfeits twenty-five guilders. The person who orders a transfer
for more than is upon his account, is obliged to pay three per
cent. for the sum overdrawn, and his order is set aside into the
bargain. The bank is supposed, too, to make a considerable profit
by the sale of the foreign coin or bullion which sometimes falls
to it by the expiring of receipts, and which is always kept till
it can be sold with advantage. It makes a profit, likewise, by
selling bank money at five per cent. agio, and buying it in at
four. These different emoluments amount to a good deal more than
what is necessary for paying the salaries of officers, and
defraying the expense of management. What is paid for the keeping
of bullion upon receipts, is alone supposed to amount to a neat
annual revenue of between 150,000 and 200,000 guilders. Public
utility, however, and not revenue, was the original object of
this institution. Its object was to relieve the merchants from
the inconvenience of a disadvantageous exchange. The revenue
which has arisen from it was unforeseen, and may be considered as
accidental. But it is now time to return from this long
digression, into which I have been insensibly led, in
endeavouring to explain the reasons why the exchange between the
countries which pay in what is called bank money, and those which
pay in common currency, should generally appear to be in favour
of the former, and against the latter. The former pay in a
species of money, of which the intrinsic value is always the
same, and exactly agreeable to the standard of their respective
mints ; the latter is a species of money, of which the intrinsic
value is continually varying, and is almost always more or less
below that standard.
PART II. - Of the Unreasonableness of those extraordinary
Restraints, upon other Principles.
In the foregoing part of this chapter, I have endeavoured to
show, even upon the principles of the commercial system, how
unnecessary it is to lay extraordinary restraints upon the
importation of goods from those countries with which the balance
of trade is supposed to be disadvantageous.
Nothing, however, can be more absurd than this whole doctrine of
the balance of trade, upon which, not only these restraints, but
almost all the other regulations of commerce, are founded. When
two places trade with one another, this doctrine supposes that,
if the balance be even, neither of them either loses or gains;
but if it leans in any degree to one side, that one of them
loses, and the other gains, in proportion to its declension from
the exact equilibrium. Both suppositions are false. A trade,
which is forced by means of bounties and monopolies, may be, and
commonly is, disadvantageous to the country in whose favour it is
meant to be established, as I shall endeavour to show hereafter.
But that trade which, without force or constraint, is naturally
and regularly carried on between any two places, is always
advantageous, though not always equally so, to both.
By advantage or gain, I understand, not the increase of the
quantity of gold and silver, but that of the exchangeable value
of the annual produce of the land and labour of the country, or
the increase of the annual revenue of its inhabitants.
If the balance be even, and if the trade between the two places
consist altogether in the exchange of their native commodities,
they will, upon most occasions, not only both gain, but they will
gain equally, or very nearly equally ; each will, in this case,
afford a market for a part of the surplus produce of the other;
each will replace a capital which had been employed in raising
and preparing for the market this part of the surplus produce of
the other, and which had been distributed among, and given
revenue and maintenance to, a certain number of its inhabitants.
Some part of the inhabitants of each, therefore, will directly
derive their revenue and maintenance from the other. As the
commodities exchanged, too, are supposed to be of equal value, so
the two capitals employed in the trade will, upon most occasions,
be equal, or very nearly equal ; and both being employed in
raising the native commodities of the two countries, the revenue
and maintenance which their distribution will afford to the
inhabitants of each will be equal, or very nearly equal. This
revenue and maintenance, thus mutually afforded, will be greater
or smaller, in proportion to the extent of their dealings. If
these should annually amount to £100,000, for example, or to
£1,000,000, on each side, each of them will afford an annual
revenue, in the one case, of £100,000, and, in the other, of
£1,000,000, to the inhabitants of the other.
If their trade should be of such a nature, that one of them
exported to the other nothing but native commodities, while the
returns of that other consisted altogether in foreign goods; the
balance, in this case, would still be supposed even, commodities
being paid for with commodities. They would, in this case too,
both gain, but they would not gain equally; and the inhabitants
of the country which exported nothing but native commodities,
would derive the greatest revenue from the trade. If England, for
example, should import from France nothing but the native
commodities of that country, and not having such commodities of
its own as were in demand there, should annually repay them by
sending thither a large quantity of foreign goods, tobacco, we
shall suppose, and East India goods ; this trade, though it would
give some revenue to the inhabitants of both countries, would
give more to those of France than to those of England. The whole
French capital annually employed in it would annually be
distributed among the people of France; but that part of the
English capital only, which was employed in producing the English
commodities with which those foreign goods were purchased, would
be annually distributed among the people of England. The greater
part of it would replace the capitals which had been employed in
Virginia, Indostan, and China, and which had given revenue and
maintenance to the inhabitants of those distant countries. If the
capitals were equal, or nearly equal, therefore, this employment
of the French capital would augment much more the revenue of the
people of France, than that of the English capital would the
revenue of the people of England. France would, in this case,
carry on a direct foreign trade of consumption with England;
whereas England would carry on a round-about trade of the same
kind with France. The different effects of a capital employed in
the direct, and of one employed in the round-about foreign trade
of consumption, have already been fully explained.
There is not, probably, between any two countries, a trade which
consists altogether in the exchange, either of native commodities
on both sides, or of native commodities on one side, and of
foreign goods on the other. Almost all countries exchange with
one another, partly native and partly foreign goods That country,
however, in whose cargoes there is the greatest proportion of
native, and the least of foreign goods, will always be the
principal gainer.
If it was not with tobacco and East India goods, but with gold
and silver, that England paid for the commodities annually
imported from France, the balance, in this case, would be
supposed uneven, commodities not being paid for with commodities,
but with gold and silver. The trade, however, would in this case,
as in the foregoing, give some revenue to the inhabitants of both
countries, but more to those of France than to those of England.
It would give some revenue to those of England. The capital which
had been employed in producing the English goods that purchased
this gold and silver, the capital which had been distributed
among, and given revenue to, certain inhabitants of England,
would thereby be replaced, and enabled to continue that
employment. The whole capital of England would no more be
diminished by this exportation of gold and silver, than by the
exportation of an equal value of any other goods. On the
contrary, it would, in most cases, be augmented. No goods are
sent abroad but those for which the demand is sup- posed to be
greater abroad than at home, and of which the returns,
consequently, it is expected, will be of more value at home than
the commodities exported. If the tobacco which in England is
worth only £100,000, when sent to France, will purchase wine
which is in England worth £110,000, the exchange will augment the
capital of England by £10,000. If £100,000 of English gold, in
the same manner, purchase French wine, which in England is worth
£110,000, this exchange will equally augment the capital of
England by £10,000. As a merchant, who has £110,000 worth of wine
in his cellar, is a richer man than he who has only £100,000
worth of tobacco in his warehouse, so is he likewise a richer man
than he who has only £100,000 worth of gold in his coffers. He
can put into motion a greater quantity of industry, and give
revenue, maintenance, and employment, to a greater number of
people, than either of the other two. But the capital of the
country is equal to the capital of all its different inhabitants;
and the quantity of industry which can be annually maintained in
it is equal to what all those different capitals can maintain.
Both the capital of the country, therefore, and the quantity of
industry which can be annually maintained in it, must generally
be augmented by this exchange. It would, indeed, be more
advantageous for England that it could purchase the wines of
France with its own hardware and broad cloth, than with either
the tobacco of Virginia, or the gold and silver of Brazil and
Peru. A direct foreign trade of consumption is always more
advantageous than a round-about one. But a round-about foreign
trade of consumption, which is carried on with gold and silver,
does not seem to be less advantageous than any other equally
round-about one. Neither is a country which has no mines, more
likely to be exhausted of gold and silver by this annual
exportation of those metals, than one which does not grow tobacco
by the like annual exportation of that plant. As a country which
has wherewithal to buy tobacco will never be long in want of it,
so neither will one be long in want of gold and silver which has
wherewithal to purchase those metals.
It is a losing trade, it is said, which a workman carries on with
the alehouse; and the trade which a manufacturing nation would
naturally carry on with a wine country, may be considered as a
trade of the same nature. I answer, that the trade with the
alehouse is not necessarily a losing trade. In its own nature it
is just as advantageous as any other, though, perhaps, somewhat
more liable to be abused. The employment of a brewer, and even
that of a retailer of fermented liquors, are as necessary
division's of labour as any other. It will generally be more
advantageous for a workman to buy of the brewer the quantity he
has occasion for, than to brew it himself ; and if he is a poor
workman, it will generally be more advantageous for him to buy it
by little and little of the retailer, than a large quantity of
the brewer. He may no doubt buy too much of either, as he may of
any other dealers in his neighbourhood; of the butcher, if he is
a glutton ; or of the draper, if he affects to be a beau among
his companions. It is advantageous to the great body of workmen,
notwithstanding, that all these trades should be free, though
this freedom may be abused in all of them, and is more likely to
be so, perhaps, in some than in others. Though individuals,
besides, may sometimes ruin their fortunes by an excessive
consumption of fermented liquors, there seems to be no risk that
a nation should do so. Though in every country there are many
people who spend upon such liquors more than they can afford,
there are always many more who spend less. It deserves to be
remarked, too, that if we consult experience, the cheapness of
wine seems to be a cause, not of drunkenness, but of sobriety.
The inhabitants of the wine countries are in general the soberest
people of Europe; witness the Spaniards, the Italians, and the
inhabitants of the southern provinces of France. People are
seldom guilty of excess in what is their daily fare. Nobody
affects the character of liberality and good fellowship, by being
profuse of a liquor which is as cheap as small beer. On the
contrary, in the countries which, either from excessive heat or
cold, produce no grapes, and where wine consequently is dear and
a rarity, drunkenness is a common vice, as among the northern
nations, and all those who live between the tropics, the negroes,
for example on the coast of Guinea. When a French regiment comes
from some of the northern provinces of France, where wine is
somewhat dear, to be quartered in the southern, where it is very
cheap, the soldiers, I have frequently heard it observed, are at
first debauched by the cheapness and novelty of good wine ; but
after a few months residence, the greater part of them become as
sober as the rest of the inhabitants. Were the duties upon
foreign wines, and the excises upon malt, beer, and ale, to be
taken away all at once, it might, in the same manner, occasion in
Great Britain a pretty general and temporary drunkenness among
the middling and inferior ranks of people, which would probably
be soon followed by a permanent and almost universal sobriety. At
present, drunkenness is by no means the vice of people of
fashion, or of those who can easily afford the most expensive
liquors. A gentleman drunk with ale has scarce ever been seen
among us. The restraints upon the wine trade in Great Britain,
besides, do not so much seem calculated to hinder the people from
going, if I may say so, to the alehouse, as from going where they
can buy the best and cheapest liquor. They favour the wine trade
of Portugal, and discourage that of France. The Portuguese, it is
said, indeed, are better customers for our manufactures than the
French, and should therefore be encouraged in preference to them.
As they give us their custom, it is pretended we should give them
ours. The sneaking arts of underling tradesmen are thus erected
into political maxims for the conduct of a great empire ; for it
is the most underling tradesmen only who make it a rule to employ
chiefly their own customers. A great trader purchases his goods
always where they are cheapest and best, without regard to any
little interest of this kind.
By such maxims as these, however, nations have been taught that
their interest consisted in beggaring all their neighbours. Each
nation has been made to look with an invidious eye upon the
prosperity of all the nations with which it trades, and to
consider their gain as its own loss. Commerce, which ought
naturally to be, among nations as among individuals, a bond of
union and friendship, has become the most fertile source of
discord and animosity. The capricious ambition of kings and
ministers has not, during the present and the preceding century,
been more fatal to the repose of Europe, than the impertinent
jealousy of merchants and manufacturers. The violence and
injustice of the rulers of mankind is an ancient evil, for which,
I am afraid, the nature of human affairs can scarce admit of a
remedy : but the mean rapacity, the monopolizing spirit, of
merchants and manufacturers, who neither are, nor ought to be,
the rulers of mankind, though it cannot, perhaps, be corrected,
may very easily be prevented from disturbing the tranquillity of
anybody but themselves.
That it was the spirit of monopoly which originally both invented
and propagated this doctrine, cannot be doubted and they who
first taught it, were by no means such fools as they who believed
it. In every country it always is, and must be, the interest of
the great body of the people, to buy whatever they want of those
who sell it cheapest. The proposition is so very manifest, that
it seems ridiculous to take any pains to prove it ; nor could it
ever have been called in question, had not the interested
sophistry of merchants and manufacturers confounded the common
sense of mankind. Their interest is, in this respect, directly
opposite to that of the great body of the people. As it is the
interest of the freemen of a corporation to hinder the rest of
the inhabitants from employing any workmen but themselves; so it
is the interest of the merchants and manufacturers of every
country to secure to themselves the monopoly of the home market.
Hence, in Great Britain, and in most other European countries,
the extraordinary duties upon almost all goods imported by alien
merchants. Hence the high duties and prohibitions upon all those
foreign manufactures which can come into competition with our
own. Hence, too, the extraordinary restraints upon the
importation of almost all sorts of goods from those countries
with which the balance of trade is supposed to be
disadvantageous; that is, from those against whom national
animosity happens ta be most violently inflamed.
The wealth of neighbouring nations, however, though dangerous in
war and politics, is certainly advantageous in trade. In a state
of hostility, it may enable our enemies to maintain fleets and
armies superior to our own; but in a state of peace and commerce
it must likewise enable them to exchange with us to a greater
value, and to afford a better market, either for the immediate
produce of our own industry, or for whatever is purchased with
that produce. As a rich man is likely to be a better customer to
the industrious people in his neighbourhood, than a poor, so is
likewise a rich nation. A rich man, indeed, who is himself a
manufacturer, is a very dangerous neighbour to all those who deal
in the same way. All the rest of the neighbourhood, however, by
far the greatest number, profit by the good market which his
expense affords them. They even profit by his underselling the
poorer workmen who deal in the same way with him. The
manufacturers of a rich nation, in the same manner, may no doubt
be very dangerous rivals to those of their neighbours. This very
competition, however, is advantageous to the great body of the
people, who profit greatly, besides, by the good market which the
great expense of such a nation affords them in every other way.
Private people, who want to make a fortune, never think of
retiring to the remote and poor provinces of the country, but
resort either to the capital, or to some of the great commercial
towns. They know, that where little wealth circulates, there is
little to be got; but that where a great deal is in motion, some
share of it may fall to them. The same maxim which would in this
manner direct the common sense of one, or ten, or twenty
individuals, should regulate the judgment of one, or ten, or
twenty millions, and should make a whole nation regard the riches
of its neighbours, as a probable cause and occasion for itself to
acquire riches. A nation that would enrich itself by foreign
trade, is certainly most likely to do so, when its neighbours are
all rich, industrious and commercial nations. A great nation,
surrounded on all sides by wandering savages and poor barbarians,
might, no doubt, acquire riches by the cultivation of its own
lands, and by its own interior commerce, but not by foreign
trade. It seems to have been in this manner that the ancient
Egyptians and the modern Chinese acquired their great wealth. The
ancient Egyptians, it is said, neglected foreign commerce, and
the modem Chinese, it is known, hold it in the utmost contempt,
and scarce deign to afford it the decent protection of the laws.
The modern maxims of foreign commerce, by aiming at the
impoverishment of all our neighbours, so far as they are capable
of producing their intended effect, tend to render that very
commerce insignificant and contemptible.
It is in consequence of these maxims, that the commerce between
France and England has, in both countries, been subjected to so
many discouragements and restraints. If those two countries,
however, were to consider their real interest, without either
mercantile jealousy or national animosity, the commerce of France
might be more advantageous to Great Britain than that of any
other country, and, for the same reason, that of Great Britain to
France. France is the nearest neighbour to Great Britain. In the
trade between the southern coast of England and the northern and
north-western coast of France, the returns might be expected, in
the same manner as in the inland trade, four, five, or six times
in the year. The capital, therefore, employed in this trade
could, in each of the two countries, keep in motion four, five,
or six times the quantity of industry, and afford employment and
subsistence to four, five, or six times the number of people,
which all equal capital could do in the greater part of the other
branches of foreign trade. Between the parts of France and Great
Britain most remote from one another, the returns might be
expected, at least, once in the year ; and even this trade would
so far be at least equally advantageous, as the greater part of
the other branches of our foreign European trade. It would be, at
least, three times more advantageous than the boasted trade with
our North American colonies, in which the returns were seldom
made in less than three years, frequently not in less than four
or five years. France, besides, is supposed to contain 24,000,000
of inhabitants. Our North American colonies were never supposed
to contain more than 3,000,000; and France is a much richer
country than North America; though, on account of the more
unequal distribution of riches, there is much more poverty and
beggary in the one country than in the other. France, therefore,
could afford a market at least eight times more extensive, and,
on account of the superior frequency of the returns,
four-and-twenty times more advantageous than that which our North
American colonies ever afforded. The trade of Great Britain would
be just as advantageous to France, and, in proportion to the
wealth, population, and proximity of the respective countries,
would have the same superiority over that which France carries on
with her own colonies. Such is the very great difference between
that trade which the wisdom of both nations has thought proper to
discourage, and that which it has favoured the most.
But the very same circumstances which would have rendered an open
and free commerce between the two countries so advantageous to
both, have occasioned the principal obstructions to that
commerce. Being nighbours, they are necessarily enemies, and the
wealth and power of each becomes, upon that account, more
formidable to the other; and what would increase the advantage of
national friendship, serves only to inflame the violence of
national animosity. They are both rich and industrious nations;
and the merchants and manufacturers of each dread the competition
of the skill and activity of those of the other. Mercantile
jealousy is excited, and both inflames, and is itself inflamed,
by the violence of national animosity, and the traders of both
countries have announced, with all the passionate confidence of
interested falsehood, the certain ruin of each, in consequence of
that unfavourable balance of trade, which, they pretend, would be
the infallible effect of an unrestrained commerce with the other.
There is no commercial country in Europe, of which the
approaching ruin has not frequently been foretold by the
pretended doctors of this system, from all unfavourably balance
of trade. After all the anxiety, however, which they have
excited about this, after all the vain attempts of almost all
trading nations to turn that balance in their own favour, and
against their neighbours, it does not appear that any one nation
in Europe has been, in any respect, impoverished by this cause.
Every town and country, on the contrary, in proportion as they
have opened their ports to all nations, instead of being ruined
by this free trade, as the principles of the commercial system
would lead us to expect, have been enriched by it. Though there
are in Europe indeed, a few towns which, in same respects,
deserve the name of free ports, there is no country which does
so. Holland, perhaps, approaches the nearest to this character of
any, though still very remote from it; and Holland, it is
acknowledged, not only derives its whole wealth, but a great part
of its necessary subsistence, from foreign trade.
There is another balance, indeed, which has already been
explained, very different from the balance of trade, and which,
according as it happens to be either favourable or unfavourable,
necessarily occasions the prosperity or decay of every nation.
This is the balance of the annual produce and consumption. If the
exchangeable value of the annual produce, it has already been
observed, exceeds that of the annual consumption, the capital of
the society must annually increase in proportion to this excess.
The society in this case lives within its revenue; and what is
annually saved out of its revenue, is naturally added to its
capital, and employed so as to increase still further the annual
produce. If the exchangeable value of the annual produce, on the
contrary, fall short of the annual consumption, the capital of
the society must annually decay in prorportion to this
deficiency. The expense of the society, in this case, exceeds its
revenue, and necessarily encroaches upon its capital. Its
capital, therefore, must necessarily decay, and, together with
it, the exchangeable value of the annual produce of its industry.
This balance of produce and consumption is entirely different
from what is called the balance of trade. It might take place in
a nation which had no foreign trade, but which was entirely
separated from all the world. It may take place in the whole
globe of the earth, of which the wealth, population, and
improvement, may be either gradually increasing or gradually
decaying.
The balance of produce and consumption may be constantly in
favour of a nation, though what is called the balance of trade be
generally against it. A nation may import to a greater value than
it exports for half a century, perhaps, together; the gold and
silver which comes into it during all this time, may be all
immediately sent out of it; its circulating coin may gradually
decay, different sorts of paper money being substituted in its
place, and even the debts, too, which it contracts in the
principal nations with whom it deals, may be gradually
increasing; and yet its real wealth, the exchangeable value of
the annual produce of its lands and labour, may, during the same
period, have been increasing in a much greater proportion. The
state of our North American colonies, and of the trade which they
carried on with Great Britain, before the commencement of the
present disturbances, {This paragraph was written in the year
1775.} may serve as a proof that this is by no means an
impossible supposition.
CHAPTER IV.
OF DRAWBACKS.
Merchants and manufacturers are not contented with the monopoly
of the home market, but desire likewise the most extensive
foreign sale for their goods. Their country has no jurisdiction
in foreign nations, and therefore can seldom procure them any
monopoly there. They are generally obliged, therefore, to content
themselves with petitioning for certain encouragements to
exportation.
Of these encouragements, what are called drawbacks seem to be the
most reasonable. To allow the merchant to draw back upon
exportation, either the whole, or a part of whatever excise or
inland duty is imposed upon domestic industry, can never occasion
the exportation of a greater quantity of goods than what would
have been exported had no duty been imposed. Such encouragements
do not tend to turn towards any particular employment a greater
share of the capital of the country, than what would go to that
employment of its own accord, but only to hinder the duty from
driving away any part of that share to other employments. They
tend not to overturn that balance which naturally establishes
itself among all the various employments of the society, but to
hinder it from being overturned by the duty. They tend not to
destroy, but to preserve, what it is in most cases advantageous
to preserve, the natural division and distribution of labour in
the society.
The same thing may be said of the drawbacks upon the
re-exportation of foreign goods imported, which, in Great
Britain, generally amount to by much the largest part of the duty
upon importation. By the second of the rules, annexed to the act
of parliament, which imposed what is now called the old subsidy,
every merchant, whether English or alien. was allowed to draw
back half that duty upon exportation ; the English merchant,
provided the exportation took place within twelve months; the
alien, provided it took place within nine months. Wines,
currants, and wrought silks, were the only goods which did not
fall within this rule, having other and more advantageous
allowances. The duties imposed by this act of parliament were, at
that time, the only duties upon the importation of foreign goods.
The term within which this, and all other drawbacks could be
claimed, was afterwards (by 7 Geo. I. chap. 21. sect. 10.)
extended to three years.
The duties which have been imposed since the old subsidy, are,
the greater part of them, wholly drawn back upon exportation.
This general rule, however, is liable to a great number of
exceptions; and the doctrine of drawbacks has become a much less
simple matter than it was at their first institution.
Upon the exportation of some foreign goods, of which it was
expected that the importation would greatly exceed what was
necessary for the home consumption, the whole duties are drawn
back, without retaining even half the old subsidy. Before the
revolt of our North American colonies, we had the monopoly of the
tobacco of Maryland and Virginia. We imported about ninety-six
thousand hogsheads, and the home consumption was not supposed to
exceed fourteen thousand. To facilitate the great exportation
which was necessary, in order to rid us of the rest, the whole
duties were drawn back, provided the exportation took place
within three years.
We still have, though not altogether, yet very nearly, the
monopoly of the sugars of our West Indian islands. If sugars are
exported within a year, therefore, all the duties upon
importation are drawn back; and if exported within three years,
all the duties, except half the old subsidy, which still
continues to be retained upon the exportation of the greater part
of goods. Though the importation of sugar exceeds a good deal
what is necessary for the home consumption, the excess is
inconsiderable, in comparison of what it used to be in tobacco.
Some goods, the particular objects of the jealousy of our own
manufacturers, are prohibited to be imported for home
consumption. They may, however, upon paying certain duties,be
imported and warehoused for exportation. But upon such
exportation no part of these duties is drawn back. Our
manufacturers are unwilling, it seems, that even this restricted
importation should be encouraged, and are afraid lest some part
of these goods should be stolen out of the warehouse, and thus
come into competition with their own. It is under these
regulations only that we can import wrought silks, French
cambrics and lawns, calicoes, painted, printed, stained, or dyed,
etc.
We are unwilling even to be the carriers of French goods, and
choose rather to forego a profit to ourselves than to suffer
those whom we consider as our enemies to make any profit by our
means. Not only half the old subsidy, but the second twenty-five
per cent. is retained upon the exportation of all French goods.
By the fourth of the rules annexed to the old subsidy, the
drawback allowed upon the exportation of all wines amounted to a
great deal more than half the duties which were at that time paid
upon their importation ; and it seems at that time to have been
the object of the legislature to give somewhat more than ordinary
encouragement to the carrying trade in wine. Several of the other
duties, too which were imposed either at the same time or
subsequent to the old subsidy, what is called the additional
duty, the new subsidy, the one-third and two-thirds subsidies,
the impost 1692, the tonnage on wine, were allowed to be wholly
drawn back upon exportation. All those duties, however, except
the additional duty and impost 1692, being paid down in ready
money upon importation, the interest of so large a sum occasioned
an expense, which made it unreasonable to expect any profitable
carrying trade in this article. Only a part, therefore of the
duty called the impost on wine, and no part of the twenty-five
pounds the ton upon French wines, or of the duties imposed in
1745, in 1763, and in 1778, were allowed to be drawn back upon
exportation. The two imposts of five per cent. imposed in 1779
and 1781, upon all the former duties of customs, being allowed to
be wholly drawn back upon the exportation of all other goods,
were likewise allowed to be drawn back upon that of wine. The
last duty that has been particularly imposed upon wine, that of
1780, is allowed to be wholly drawn back ; an indulgence which,
when so many heavy duties are retained, most probably could never
occasion the exportation of a single ton of wine. These rules
took place with regard to all places of lawful exportation,
except the British colonies in America.
The 15th Charles II, chap. 7, called an act for the encouragement
of trade, had given Great Britain the monopoly of supplying the
colonies with all the commodities of the growth or manufacture of
Europe, and consequently with wines. In a country of so extensive
a coast as our North American and West Indian colonies, where our
authority was always so very slender, and where the inhabitants
were allowed to carry out in their own ships their non-enumerated
commodities, at first to all parts of Europe, and afterwards to
all parts of Europe south of Cape Finisterre, it is not very
probable that this monopoly could ever be much respected ; and
they probably at all times found means of bringing back some
cargo from the countries to which they were allowed to carry out
one. They seem, however, to have found some difficulty in
importing European wines from the places of their growth; and
they could not well import them from Great Britain, where they
were loaded with many heavy duties, of which a considerable part
was not drawn back upon exportation. Madeira wine, not being an
European commodity, could be imported directly into America and
the West Indies, countries which, in all their non-enumerated
commodities, enjoyed a free trade to the island of Madeira. These
circumstances had probably introduced that general taste for
Madeira wine, which our officers found established in all our
colonies at the commencement of the war which began in 1755, and
which they brought back with them to the mother country, where
that wine had not been much in fashion before. Upon the
conclusion of that war, in 1763 (by the 4th Geo. III, chap. 15,
sect. 12), all the duties except £3, 10s. were allowed to be
drawn back upon the exportation to the colonies of all wines.
except French wines, to the commerce and consumption of which
national prejudice would allow no sort of encouragement. The
period between the granting of this indulgence and the revolt of
our North American colonies, was probably too short to admit of
any considerable change in the customs of those countries.
The same act which, in the drawbacks upon all wines, except
French wines, thus favoured the colonies so much more than other
countries, in those upon the greater part of other commodities,
favoured them much less. Upon the exportation of the greater part
of commodities to other countries, half the old subsidy was drawn
back. But this law enacted, that no part of that duty should be
drawn back upon the exportation to the colonies of any
commodities of the growth or manufacture either of Europe or the
East Indies, except wines, white calicoes, and muslins.
Drawbacks were, perhaps, originally granted for the encouragement
of the carrying trade, which, as the freight of the ship is
frequently paid by foreigners in money, was supposed to be
peculiarly fitted for bringing gold and silver into the country.
But though the carrying trade certainly deserves no peculiar
encouragement, though the motive of the institution was, perhaps,
abundantly foolish, the institution itself seems reasonable
enough. Such drawbacks cannot force into this trade a greater
share of the capital of the country than what would have gone to
it of its own accord, had there been no duties upon importation;
they only prevent its being excluded altogether by those duties.
The carrying trade, though it deserves no preference, ought not
to be precluded, but to be left free, like all other trades. It
is a necessary resource to those capitals which cannot find
employment, either in the agriculture or in the manufactures of
the country, either in its home trade, or in its foreign trade of
consumption.
The revenue of the customs, instead of suffering, profits from
such drawbacks, by that part of the duty which is retained. If
the whole duties had been retained, the foreign goods upon which
they are paid could seldom have been exported, nor consequently
imported, for want of a market. The duties, therefore, of which a
part is retained, would never have been paid.
These reasons seem sufficiently to justify drawbacks, and would
justify them, though the whole duties, whether upon the produce
of domestic industry or upon foreign goods, were always drawn
back upon exportation. The revenue of excise would, in this case
indeed, suffer a little, and that of the customs a good deal
more; but the natural balance of industry, the natural division
and distribution of labour, which is always more or less
disturbed by such duties, would be more nearly re-established by
such a regulation.
These reasons, however, will justify drawbacks only upon
exporting goods to those countries which are altogether foreign
and independent, not to those in which our merchants and
manufacturers enjoy a monopoly. A drawback, for example, upon the
exportation of European goods to our American colonies, will not
always occasion a greater exportation than what would have taken
place without it. By means of the monopoly which our merchants
and manufacturers enjoy there, the same quantity might
frequently, perhaps, be sent thither, though the whole duties
were retained. The drawback, therefore, may frequently be pure
loss to the revenue of excise and customs, without altering the
state of the trade, or rendering it in any respect more
extensive. How far such drawbacks can be justified as a proper
encouragement to the industry of our colonies, or how far it is
advantageous to the mother country that they should be exempted
from taxes which are paid by all the rest of their
fellow-subjects, will appear hereafter, when I come to treat of
colonies.
Drawbacks, however, it must always be understood, are useful only
in those cases in which the goods, for the exportation of which
they are given, are really exported to some foreign country, and
not clandestinely re-imported into our own. That some drawbacks,
particularly those upon tobacco, have frequently been abused in
this manner, and have given occasion to many frauds, equally
hurtful both to the revenue and to the fair trader, is well
known.
CHAPTER V.
OF BOUNTIES.
Bounties upon exportation are, in Great Britain, frequently
petitioned for, and sometimes granted, to the produce of
particular branches of domestic industry. By means of them, our
merchants and manufacturers, it is pretended, will be enabled to
sell their goods as cheap or cheaper than their rivals in the
foreign market. A greater quantity, it is said, will thus be
exported, and the balance of trade consequently turned more in
favour of our own country. We cannot give our workmen a monopoly
in the foreign, as we have done in the home market. We cannot
force foreigners to buy their goods, as we have done our own
countrymen. The next best expedient, it has been thought,
therefore, is to pay them for buying. It is in this manner that
the mercantile system proposes to enrich the whole country, and
to put money into all our pockets, by means of the balance of
trade.
Bounties, it is allowed, ought to be given to those branches of
trade only which cannot be carried on without them. But every
branch of trade in which the merchant can sell his goods for a
price which replaces to him, with the ordinary profits of stock,
the whole capital employed in preparing and sending them to
market, can be carried on without a bounty. Every such branch is
evidently upon a level with all the other branches of trade which
are carried on without bounties, and cannot, therefore, require
one more than they. Those trades only require bounties, in which
the merchant is obliged to sell his goods for a price which does
not replace to him his capital, together with the ordinary
profit, or in which he is obliged to sell them for less than it
really cost him to send them to market. The bounty is given in
order to make up this loss, and to encourage him to continue, or,
perhaps, to begin a trade, of which the expense is supposed to be
greater than the returns, of which every operation eats up a part
of the capital employed in it, and which is of such a nature,
that if all other trades resembled it, there would soon be no
capital left in the country.
The trades, it is to be observed, which are carried on by means
of bounties, are the only ones which can be carried on between
two nations for any considerable time together, in such a manner
as that one of them shall alway's and regularly lose, or sell its
goods for less than it really cost to send them to market. But if
the bounty did not repay to the merchant what he would otherwise
lose upon the price of his goods, his own interest would soon
oblige him to employ his stock in another way, or to find out a
trade in which the price of the goods would replace to him, with
the ordinary profit, the capital employed in sending them to
market. The effect of bounties, like that of all the other
expedients of the mercantile system, can only be to force the
trade of a country into a channel much less advantageous than
that in which it would naturally run of its own accord.
The ingenious and well-informed author of the Tracts upon the
Corn Trade has shown very clearly, that since the bounty upon the
exportation of corn was first established, the price of the corn
exported, valued moderately enough, has exceeded that of the corn
imported, valued very high, by a much greater sum than the amount
of the whole bounties which have been paid during that period.
This, he imagines, upon the true principles of the mercantile
system, is a clear proof that this forced corn trade is
beneficial to the nation, the value of the exportation exceeding
that of the importation by a much greater sum than the whole
extraordinary expense which the public has been at in order to
get it exported. He does not consider that this extraordinary
expense, or the bounty, is the smallest part of the expense which
the exportation of corn really costs the society. The capital
which the farmer employed in raising it must likewise be taken
into the account. Unless the price of the corn, when sold in the
foreign markets, replaces not only the bounty, but this capital,
together with the ordinary profits of stock, the society is a
loser by the difference, or the national stock is so much
diminished. But the very reason for which it has been thought
necessary to grant a bounty, is the supposed insufficiency of the
price to do this.
The average price of corn, it has been said, has fallen
considerably since the establishment of the bounty. That the
average price of corn began to fall somewhat towards the end of
the last century, and has continued to do so during the course of
the sixty-four first years of the present, I have already
endeavoured to show. But this event, supposing it to be real, as
I believe it to be, must have happened in spite of the bounty,
and cannot possibly have happened in consequence of it. It has
happened in France, as well as in England, though in France there
was not only no bounty, but, till 1764, the exportation of corn
was subjected to a general prohibition. This gradual fall in the
average price of grain, it is probable, therefore, is ultimately
owing neither to the one regulation nor to the other, but to that
gradual and insensible rise in the real value of silver, which,
in the first book of this discourse, I have endeavoured to show,
has taken place in the general market of Europe during the course
of the present century. It seems to be altogether impossible that
the bounty could ever contribute to lower the price of grain.
In years of plenty, it has already been observed, the bounty, by
occasioning an extraordinary exportation, necessarily keeps up
the price of corn in the home market above what it would
naturally fall to. To do so was the avowed purpose of the
institution. In years of scarcity, though the bounty is
frequently suspended, yet the great exportation which it
occasions in years of plenty, must frequently hinder, more or
less, the plenty of one year from relieving the scarcity of
another. Both in years of plenty and in years of scarcity,
therefore, the bounty necessarily tends to raise the money price
of corn somewhat higher than it otherwise would be in the home
market.
That in the actual state of tillage the bounty must necessarily
have this tendency, will not, I apprehend, be disputed by any
reasonable person. But it has been thought by many people, that
it tends to encourage tillage, and that in two different ways ;
first, by opening a more extensive foreign market to the corn of
the farmer, it tends, they imagine, to increase the demand for,
and consequently the production of, that commodity; and, secondly
by securing to him a better price than he could otherwise expect
in the actual state of tillage, it tends, they suppose, to
encourage tillage. This double encouragement must they imagine,
in a long period of years, occasion such an increase in the
production of corn, as may lower its price in the home market,
much more than the bounty can raise it in the actual state which
tillage may, at the end of that period, happen to be in.
I answer, that whatever extension of the foreign market can be
occasioned by the bounty must, in every particular year, be
altogether at the expense of the home market ; as every bushel of
corn, which is exported by means of the bounty, and which would
not have been exported without the bounty, would have remained in
the home market to increase the consumption, and to lower the
price of that commodity. The corn bounty, it is to be observed,
as well as every other bounty upon exportation, imposes two
different taxes upon the people; first, the tax which they are
obliged to contribute, in order to pay the bounty ; and,
secondly, the tax which arises from the advanced price of the
commodity in the home market, and which, as the whole body of the
people are purchasers of corn, must, in this particular
commodity, be paid by the whole body of the people. In this
particular commodity, therefore, this second tax is by much the
heaviest of the two. Let us suppose that, taking one year with
another, the bounty of 5s. upon the exportation of the quarter of
wheat raises the price of that commodity in the home market only
6d. the bushel, or 4s. the quarter higher than it otherwise would
have been in the actual state of the crop. Even upon this very
moderate supposition, the great body of the people, over and
above contributing the tax which pays the bounty of 5s. upon
every quarter of wheat exported, must pay another of 4s. upon
every quarter which they themselves consume. But according to the
very well informed author of the Tracts upon the Corn Trade, the
average proportion of the corn exported to that consumed at home,
is not more than that of one to thirty-one. For every 5s.
therefore, which they contribute to the payment of the first tax,
they must contribute £6:4s. to the payment of the second. So very
heavy a tax upon the first necessary of life-must either reduce
the subsistence of the labouring poor, or it must occasion some
augmentation in their pecuniary wages, proportionable to that in
the pecuniary price of their subsistence. So far as it operates
in the one way, it must reduce the ability of the labouring poor
to educate and bring up their children, and must, so far, tend to
restrain the population of the country. So far as it operate's in
the other, it must reduce the ability of the employers of the
poor, to employ so great a number as they otherwise might do, and
must so far tend to restrain the industry of the country. The
extraordinary exportation of corn, therefore occasioned by the
bounty, not only in every particular year diminishes the home,
just as much as it extends the foreign market and consumption,
but, by restraining the population and industry of the country,
its final tendency is to stint and restrain the gradual extension
of the home market ; and thereby, in the long-run, rather to
diminish than to augment the whole market and consumption of
corn.
This enhancement of the money price of corn, however, it has been
thought, by rendering that commodity more profitable to the
farmer, must necessarily encourage its production.
I answer, that this might be the case, if the effect of the
bounty was to raise the real price of corn, or to enable the
farmer, with an equal quantity of it, to maintain a greater
number of labourers in the same manner, whether liberal,
moderate, or scanty, than other labourers are commonly maintained
in his neighbourhood. But neither the bounty, it is evident, nor
any other human institution, can have any such effect. It is not
the real, but the nominal price of corn, which can in any
considerable degree be affected by the bounty. And though the
tax, which that institution imposes upon the whole body of the
people, may be very burdensome to those who pay it, it is of very
little advantage to those who receive it.
The real effect of the bounty is not so much to raise the real
value of corn, as to degrade the real value of silver ; or to
make an equal quantity of it exchange for a smaller quantity, not
only of corn, but of all other home made commodities; for the
money price of corn regulates that of all other home made
commodities.
It regulates the money price of labour, which must always be such
as to enable the labourer to purchase a quantity of corn
sufficient to maintain him and his family, either in the liberal,
moderate, or scanty manner, in which the advancing, stationary,
or declining, circumstances of the society, oblige his employers
to maintain him.
It regulates the money price of all the other parts of the rude
produce of land, which, in every period of improvement, must bear
a certain proportion to that of corn, though this proportion is
different in different periods. It regulates, for example, the
money price of grass and hay, of butcher's meat, of horses, and
the maintenance of horses, of land carriage consequently, or of
the greater part of the inland commerce of the country.
By regulating the money price of all the other parts of the rude
produce of land, it regulates that of the materials of almost all
manufactures; by regulating the money price of labour, it
regulates that of manufacturing art and industry ; and by
regulating both, it regulates that of the complete manufacture.
The money price of labour, and of every thing that is the
produce, either of land or labour, must necessarily either rise
or fall in proportion to the money price of corn.
Though in consequence of the bounty, therefore, the farmer should
be enabled to sell his corn for 4s. the bushel, instead of 3s:6d.
and to pay his landlord a money rent proportionable to this rise
in the money price of his produce; yet if, in consequence of this
rise in the price of corn, 4s. will purchase no more home made
goods of any other kind than 3s. 6d. would have done before,
neither the circumstances of the farmer, nor those of the
landlord, will be much mended by this change. The farmer will not
be able to cultivate much better ; the landlord will not be able
to live much better. In the purchase of foreign commodities, this
enhancement in the price of corn may give them some little
advantage. In that of home made commodities, it can give them
none at all. And almost the whole expense of the farmer, and the
far greater part even of that of the landlord, is in home made
commodities.
That degradation in the value of silver, which is the effect of
the fertility of the mines, and which operates equally, or very
nearly equally, through the greater part of the commercial world,
is a matter of very little consequence to any particular country.
The consequent rise of all money prices, though it does not make
those who receive them really richer, does not make them really
poorer. A service of plate becomes really cheaper, and every
thing else remains precisely of the same real value as before.
But that degradation in the value of silver, which, being the
effect either of the peculiar situation or of the political
institutions of a particular country, takes place only in that
country, is a matter of very great consequence, which, far from
tending to make anybody really richer, tends to make every body
really poorer. The rise in the money price of all commodities,
which is in this case peculiar to that country, tends to
discourage more or less every sort of industry which is carried
on within it, and to enable foreign nations, by furnishing almost
all sorts of goods for a smaller quantity of silver than its own
workmen can afford to do, to undersell them, not only in the
foreign, but even in the home market.
It is the peculiar situation of Spain and Portugal, as
proprietors of the mines. to be the distributers of gold and
silver to all the other countries of Europe. Those metals ought
naturally, therefore, to be somewhat cheaper in Spain and
Portugal than in any other part of Europe. The difference, how.
ever, should be no more than the amount of the freight and
insurance ; and, on account of the great value and small bulk of
those metals, their freight is no great matter, and their
insurance is the same as that of any other goods of equal value.
Spain and Portugal, therefore, could suffer very little from
their peculiar situation, if they did not aggravate its
disadvantages by their political institutions.
Spain by taxing, and Portugal by prohibiting, the exportation of
gold and silver, load that exportation with the expense of
smuggling, and raise the value of those metals in other countries
so much more above what it is in their own, by the whole amount
of this expense. When you dam up a stream of water, as soon as
the dam is full, as much water must run over the dam-head as if
there was no dam at all. The prohibition of exportation cannot
detain a greater quantity of gold and silver in Spain and
Portugal, than what they can afford to employ, than what the
annual produce of their land and labour will allow them to
employ, in coin, plate, gilding, and other ornaments of gold and
silver. When they have got this quantity, the dam is full, and
the whole stream which flows in afterwards must run over. The
annual exportation of gold and silver from Spain and Portugal,
accordingly, is, by all accounts, notwithstanding these
restraints, very near equal to the whole annual importation. As
the water, however, must always be deeper behind the dam-head
than before it, so the quantity of gold and silver which these
restraints detain in Spain and Portugal, must, in proportion to
the annual produce of their land and labour, be greater than what
is to be found in other countries. The higher and stronger the
dam-head, the greater must be the difference in the depth of
water behind and before it. The higher the tax, the higher the
penalties with which the prohibition is guarded, the more
vigilant and severe the police which looks after the execution of
the law, the greater must be the difference in the proportion of
gold and silver to the annual produce of the land and labour of
Spain and Portugal, and to that of other countries. It is said,
accordingly, to be very considerable, and that you frequently
find there a profusion of plate in houses, where there is nothing
else which would in other countries be thought suitable or
correspondent to this sort of magnificence. The cheapness of gold
and silver, or, what is the same thing, the dearness of all
commodities, which is the necessary effect of this redundancy of
the precious metals, discourages both the agriculture and
manufactures of Spain and Portugal, and enables foreign nations
to supply them with many sorts of rude, and with almost all sorts
of manufactured produce, for a smaller quantity of gold and
silver than what they themselves can either raise or make them
for at home. The tax and prohibition operate in two different
ways. They not only lower very much the value of the precious
metals in Spain and Portugal, but by detaining there a certain
quantity of those metals which would otherwise flow over other
countries, they keep up their value in those other countries
somewhat above what it otherwise would be, and thereby give those
countries a double advantage in their commerce with Spain and
Portugal. Open the flood-gates, and there will presently be less
water above, and more below the dam-head, and it will soon come
to a level in both places. Remove the tax and the prohibition,
and as the quantity of gold and silver will diminish considerably
in Spain and Portugal, so it will increase somewhat in other
countries ; and the value of those metals, their proportion to
the annual produce of land and labour, will soon come to a level,
or very near to a level, in all. The loss which Spain and
Portugal could sustain by this exportation of their gold and
silver, would be altogether nominal and imaginary. The nominal
value of their goods, and of the annual produce of their land and
labour, would fall, and would be expressed or represented by a
smaller quantity of silver than before; but their real value
would be the same as before, and would be sufficient to maintain,
command, and employ the same quantity of labour. As the nominaly
value of their goods would fall, the real value of what remained
of their gold and silver would rise, and a smaller quantity of
those metals would answer all the same purposes of commerce and
circulation which had employed a greater quantity before. The
gold and silver which would go abroad would not go abroad for
nothing, but would bring back an equal value of goods of some
kind or other. Those goods, too, would not be all matters of mere
luxury and expense, to be consumed by idle people, who produce
nothing in return for their consumption. As the real wealth and
revenue of idle people would not be augmented by this
extraordinary exportation of gold and silver, so neither would
their consumption be much augmented by it. Those goods would
probably, the greater part of them, and certainly some part of
them, consist in materials, tools, and provisions, for the
employment and maintenance of industrious people, who would
reproduce, with a profit, the full value of their consumption.
A part of the dead stock of the society would thus be turned into
active stock, and would put into motion a greater quantity of
industry than had been employed before. The annual produce of
their land and labour would immediately be augmented a little,
and in a few years would probably be augmented a great deal;
their industry being thus relieved from one of the most
oppressive burdens which it at present labours under.
The bounty upon the exportation of corn necessarily operates
exactly in the same way as this absurd policy of Spain and
Portugal. Whatever be the actual state of tillage, it renders our
corn somewhat dearer in the home market than it otherwise would
be in that state, and somewhat cheaper in the foreign; and as the
average money price of corn regulates, more or less, that of all
other commodities, it lowers the value of silver considerably in
the one, and tends to raise it a little in the other. It enables
foreigners, the Dutch in particular, not only to eat our corn
cheaper than they otherwise could do, but sometimes to eat it
cheaper than even our own people can do upon the same occasions;
as we are assured by an excellent authority, that of Sir Matthew
Decker. It hinders our own workmen from furnishing their goods
for so small a quantity of silver as they otherwise might do, and
enables the Dutch to furnish theirs for a smaller. It tends to
render our manufactures somewhat dearer in every market, and
theirs somewhat cheaper, than they otherwise would be, and
consequently to give their industry a double advantage over our
own.
The bounty, as it raises in the home market, not so much the
real, as the nominal price of our corn; as it augments, not the
quantity of labour which a certain quantity of corn can maintain
and employ, but only the quantity of silver which it will
exchange for ; it discourages our manufactures, without rendering
any considerable service, either to our farmers or country
gentlemen. It puts, indeed, a little more money into the pockets
of both, and it will perhaps be somewhat difficult to persuade
the greater part of them that this is not rendering them a very
considerable service. But if this money sinks in its value, in
the quantity of labour, provisions, and home-made commodities of
all different kinds which it is capable of purchasing, as much as
it rises in its quantity, the service will be little more than
nominal and imaginary.
There is, perhaps, but one set of men in the whole commonwealth
to whom the bounty either was or could be essentially
serviceable. These were the corn merchants, the exporters and
importers of corn. In years of plenty, the bounty necessarily
occasioned a greater exportation than would otherwise have taken
place ; and by hindering the plenty of the one year from
relieving the scarcity of another, it occasioned in years of
scarcity a greater importation than would otherwise have been
necessary. It increased the business of the corn merchant in
both; and in the years of scarcity, it not only enabled him to
import a greater quantity, but to sell it for a better price, and
consequently with a greater profit, than he could otherwise have
made, if the plenty of one year had not been more or less
hindered from relieving the scarcity of another. It is in this
set of men, accordingly, that I have observed the greatest zeal
for the continuance or renewal of the bounty.
Our country gentlemen, when they imposed the high duties upon the
exportation of foreign corn, which in times of moderate plenty
amount to a prohibition, and when they established the bounty,
seem to have imitated the conduct of our manufacturers. By the
one institution, they secured to themselves the monopoly of the
home market, and by the other they endeavoured to prevent that
market from ever being overstocked with their commodity. By both
they endeavoured to raise its real value, in the same manner as
our manufacturers had, by the like institutions, raised the real
value of many different sorts of manufactured goods. They did
not, perhaps, attend to the great and essential difference which
nature has established between corn and almost every other sort
of goods. When, either by the monopoly of the home market, or by
a bounty upon exportation, you enable our woollen or linen
manufacturers to sell their goods for somewhat a better price
than they otherwise could get for them, you raise, not only the
nominal, but the real price of those goods; you render them
equivalent to a greater quantity of labour and subsistence; you
increase not only the nominal, but the real profit, the real
wealth and revenue of those manufacturers ; and you enable them,
either to live better themselves, or to employ a greater quantity
of labour in those particular manufactures. You really encourage
those manufactures, and direct towards them a greater quantity of
the industry of the country than what would properly go to them
of its own accord. But when, by the like institutions, you raise
the nominal or money price of corn, you do not raise its real
value ; you do not increase the real wealth, the real revenue,
either of our farmers or country gentlemen ; you do not encourage
the growth of corn, because you do not enable them to maintain
and employ more labourers in raising it. The nature of things has
stamped upon corn a real value, which cannot be altered by merely
altering its money price. No bounty upon exportation, no monopoly
of the home market, can raise that value. The freest competition
cannot lower it, Through the world in general, that value is
equal to the quantity of labour which it can maintain, and in
every particular place it is equal to the quantity of labour
which it can maintain in the way, whether liberal, moderate, or
scanty, in which labour is commonly maintained in that place.
Woollen or linen cloth are not the regulating commodities by
which the real value of all other commodities must be finally
measured and determined ; corn is. The real value of every other
commodity is finally measured and detemnined by the proportion
which its average money price bears to the average money price of
corn. The real value of corn does not vary with those variations
in its average money price, which sometimes occur from one
century to another ; it is the real value of silver which varies
with them.
Bounties upon the exportation of any homemade commodity are
liable, first, to that general objection which may be made to all
the different expedients of the mercantile system ; the objection
of forcing some part of the industry of the country into a
channel less advantageous than that in which it would run of its
own accord ; and, secondly, to the particular objection of
forcing it not only into a channel that is less advantageous, but
into one that is actually disadvantageous ; the trade which
cannot be carried on but by means of a bounty being necessarily a
losing trade. The bounty upon the exportation of corn is liable
to this further objection, that it can in no respect promote the
raising of that particular commodity of which it was meant to
encourage the production. When our country gentlemen, therefore,
demanded the establishment of the bounty, though they acted in
imitation of our merchants and manufacturers, they did not act
with that complete comprehension of their own interest, which
commonly directs the conduct of those two other orders of people.
They loaded the public revenue with a very considerable expense:
they imposed a very heavy tax upon the whole body of the people ;
but they did not, in any sensible degree, increase the real value
of their own commodity; and by lowering somewhat the real value
of silver, they discouraged, in some degree, the general industry
of the country, and, instead of advancing, retarded more or less
the improvement of their own lands, which necessarily depend upon
the general industry of the country.
To encourage the production of any commodity, a bounty upon
production, one should imagine, would have a more direct
operation than one upon exportation. It would, besides, impose
only one tax upon the people, that which they must contribute in
order to pay the bounty. Instead of raising, it would tend to
lower the price of the commodity in the home market ; and
thereby, instead of imposing a second tax upon the people, it
might, at least in part, repay them for what they had contributed
to the first. Bounties upon production, however, have been very
rarely granted. The prejudices established by the commercial
system have taught us to believe, that national wealth arises
more immediately from exportation than from production. It has
been more favoured, accordingly, as the more immediate means of
bringing money into the country. Bounties upon production, it has
been said too, have been found by experience more liable to
frauds than those upon exportation. How far this is true, I know
not. That bounties upon exportation have been abused, to many
fraudulent purposes, is very well known. But it is not the
interest of merchants and manufacturers, the great inventors of
all these expedients, that the home market should be overstocked
with their goods; an event which a bounty upon production might
sometimes occasion. A bounty upon exportation, by enabling them
to send abroad their surplus part, and to keep up the price of
what remains in the home market, effectually prevents this. Of
all the expedients of the mercantile system, accordingly, it is
the one of which they are the fondest. I have known the different
undertakers of some particular works agree privately among
themselves to give a bounty out of their own pockets upon the
exportation of a certain proportion of the goods which they dealt
in. This expedient succeeded so well, that it more than doubled
the price of their goods in the home market, notwithstanding a
very considerable increase in the produce. The operation of the
bounty upon corn must have been wonderfully different, if it has
lowered the money price of that commodity.
Something like a bounty upon production, however, has been
granted upon some particular occasions. The tonnage bounties
given to the white herring and whale fisheries may, perhaps, be
considered as somewhat of this nature. They tend directly, it may
be supposed, to render the goods cheaper in the home market than
they otherwise would be. In other respects, their effects, it
must be acknowledged, are the same as those of bounties upon
exportation. By means of them, a part of the capital of the
country is employed in bringing goods to market, of which the
price does not repay the cost, together with the ordinary profits
of stock.
But though the tonnage bounties to those fisheries do not
contribute to the opulence of the nation, it may, perhaps, be
thought that they contribute to its defence, by augmenting the
number of its sailors and shipping. This, it may be alleged, may
sometimes be done by means of such bounties, at a much smaller
expense than by keeping up a great standing navy, if I may use
such an expression, in the same way as a standing army.
Notwithstanding these favourable allegations, however, the
following considerations dispose me to believe, that in granting
at least one of these bounties, the legislature has been very
grossly imposed upon:
First, The herring-buss bounty seems too large.
From the commencement of the winter fishing 1771, to the end of
the winter fishing 1781, the tonnage bounty upon the herring-buss
fishery has been at thirty shillings the ton. During these eleven
years, the whole number of barrels caught by the herring-buss
fishery of Scotland amounted to 378,347. The herrings caught and
cured at sea are called sea-sticks. In order to render them what
are called merchantable herrings, it is necessary to repack them
with an additional quantity of salt ; and in this case, it is
reckoned, that three barrels of sea-sticks are usually repacked
into two barrels of merchantable herrings. The number of barrels
of merchantable herrings, therefore, caught during these eleven
years, will amount only, according to this account, to 252,231¼.
During these eleven years, the tonnage bounties paid amounted to
£155,463:11s. or 8s:2¼d. upon every barrel of sea-sticks, and to
12s:3¾d. upon every barrel of merchantable herrings.
The salt with which these herrings are cured is sometimes Scotch,
and sometimes foreign salt ; both which are delivered, free of
all excise duty, to the fish-curers. The excise duty upon Scotch
salt is at present 1s:6d., that upon foreign salt 10s. the
bushel. A barrel of herrings is supposed to require about one
bushel and one-fourth of a bushel foreign salt. Two bushels are
the supposed average of Scotch salt. If the herrings are entered
for exportation, no part of this duty is paid up; if entered for
home consumption, whether the herrings were cured with foreign or
with Scotch salt, only one shilling the barrel is paid up. It was
the old Scotch duty upon a bushel of salt, the quantity which, at
a low estimation, had been supposed necessary for curing a barrel
of herrings. In Scotland, foreign salt is very little used for
any other purpose but the curing of fish. But from the 5th April
1771 to the 5th April 1782, the quantity of foreign salt imported
amounted to 936,974 bushels, at eighty-four pounds the bushel ;
the quantity of Scotch salt delivered from the works to the
fish-curers, to no more than 168,226, at fifty-six pounds the
bushel only. It would appear, therefore, that it is principally
foreign salt that is used in the fisheries. Upon every barrel of
herrings exported, there is, besides, a bounty of 2s:8d. and more
than two-thirds of the buss-caught herrings are exported. Put all
these things together, and you will find that, during these
eleven years, every barrel of buss-caught herrings, cured with
Scotch salt, when exported, has cost government 17s:11¾d.; and,
when entered for home consumption, 14s:3¾d.; and that every
barrel cured with foreign salt, when exported, has cost
government £1:7:5¾d. ; and, when entered for home consumption,
£1:3:9¾d. The price of a barrel of good merchantable herrings
runs from seventeen and eighteen to four and five-and-twenty
shillings ; about a guinea at an average. {See the accounts at
the end of this Book.}
Secondly, The bounty to the white-herring fishery is a
tonnage bounty, and is proportioned to the burden of the ship,
not to her diliglence or success in the fishery ; and it has, I
am afraid, been too common for the vessels to fit out for the
sole purpose of catching, not the fish but the bounty. In the
year 1759, when the bounty was at fifty shillings the ton, the
whole buss fishery of Scotland brought in only four barrels of
sea-sticks. In that year, each barrel of sea-sticks cost
government, in bounties alone, £113:15s.; each barrel of
merchantable herrings £159:7:6.
Thirdly, The mode of fishing, for which this tonnage bounty
in the white herring fishery has been given (by busses or decked
vessels from twenry 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 Isdands, the islands of Shetland, and the
northern and north-western coasts of Scotland, the countries in
whose neighbourhood the herring fishery is principally carried
on. are everywhere intersected by arms of the sea, which run up a
considerable way into the land, and which, in the language of the
country, are called sea-lochs. It is to these sea-lochs that the
herrings principally resort during the seasons in which they
visit these seas; for the visits of this, and, I am assured, of
many other sorts of fish, are not quite regular and constant. A
boat-fishery, therefore, seems to be the mode of fishing best
adapted to the peculiar situation of Scotland, the fishers
carrying the herrings on shore as fast as they are taken, to he
either cured or consumed fresh. But the great encouragement which
a bounty of 30s. the ton gives to the buss-fishery, is
necessarily a discouragement to the boat-fishery, which, having
no such bounty, cannot bring its cured fish to market upon the
same terms as the buss-fishery. The boat-fishery; accordingly,
which, before the establishment of the buss-bounty, was very
considerable, and is said to have employed a number of seamen,
not inferior to what the buss-fishery employs at present, is now
gone almost entirely to decay. Of the former extent, however, of
this now ruined and abandoned fishery, I must acknowledge that I
cannot pretend to speak with much precision. As no bounty
was-paid upon the outfit of the boat-fishery, no account was
taken of it by the officers of the customs or salt duties.
Fourthly, In many parts of Scotland, during certain seasons
of the year, herrings make no inconsiderable part of the food of
the common people. A bounty which tended to lower their price in
the home market, might countribute a good deal to the relief of a
great number of our fellow-subjects, whose circumstances are by
no means affuent. But the herring-bus bounty contributes to no
such good purpose. It has ruined the boat fishery, which is by
far the best adapted for the supply of the home market; and the
additional bounty of 2s:8d. the barrel upon exportation, carries
the greater part, more than two-thirds, of the produce of the
buss-fishery abroad. Between thirty and forty years ago, before
the establishment of the buss-bounty, 16s. the barrel, I have
been assured, was the common price of white herrings. Between ten
and fifteen years ago, before the boat-fishery was entirely
ruined, the price was said to have run from seventeen to twenty
shillings the barrel. For these last five years, it has, at an
average, been at twenty-five shillings the barrel. This high
price, however, may have been owing to the real scarcity of the
herrings upon the coast of Scotland. I must observe, too, that
the cask or barrel, which is usually sold with the herrings, and
of which the price is included in all the foregoing prices, has,
since the commencement of the American war, risen to about double
its former price, or from about 3s. to about 6s. I must likewise
observe, that the accounts I have received of the prices of
former times, have been by no means quite uniform and consistent,
and an old man of great accuracy and experience has assured me,
that, more than fifty years ago, a guinea was the usual price of
a barrel of good merchantable herrings; and this, I imagine, may
still be looked upon as the average price. All accounts, however,
I think, agree that the price has not been lowered in the home
market in consequence of the buss-bounty.
When the undertakers of fisheries, after such liberal bounties
have been bestowed upon them, continue to sell their commodity at
the same, or even at a higher price than they were accustomed to
do before, it might be expected that their profits should be very
great ; and it is not improbable that those of some individuals
may have been so. In general, however, I have every reason to
believe they have been quite otherwise. The usual effect of such
bounties is, to encourage rash undertakers to adventure in a
business which they do not understand; and what they lose by
their own negligence and ignorance, more than compensates all
that they can gain by the utmost liberality of government. In
1750, by the same act which first gave the bounty of 30s. the ton
for the encouragement of the white herring fishery (the 23d Geo.
II. chap. 24), a joint stock company was erected, with a capital
of £500,000, to which the subscribers (over and above all other
encouragements, the tonnage bounty just now mentioned, the
exportation bounty of 2s:8d. the barrel, the delivery of both
British and foreign salt duty free) were, during the space of
fourteen years, for every hundred pounds which they subscribed
and paid into the stock of the society, entitled to three pounds
a-year, to be paid by the receiver-general of the customs in
equal half-yearly payments. Besides this great company, the
residence of whose governor and directors was to be in London, it
was declared lawful to erect different fishing chambers in all
the different out-ports of the kingdom, provided a sum not less
than £10,000 was subscribed into the capital of each, to be
managed at its own risk, and for its own profit and loss. The
same annuity, and the same encouragements of all kinds, were
given to the trade of those inferior chambers as to that of the
great company. The subscription of the great company was soon
filled up, and several different fishing chambers were erected in
the different out-ports of the kingdom. In spite of all these
encouragements, almost all those different companies, both great
and small, lost either the whole or the greater part of their
capitals; scarce a vestige now remains of any of them, and the
white-herring fishery is now entirely, or almost entirely,
carried on by private adventurers.
If any particular manufacture was necessary, indeed, for the
defence of the society, it might not always be prudent to depend
upon our neighbours for the supply; and if such manufacture could
not otherwise be supported at home, it might not be unreasonable
that all the other branches of industry should be taxed in order
to support it. The bounties upon the exportation of British made
sail-cloth, and British made gunpowder, may, perhaps, both be
vindicated upon this principle.
But though it can very seldom be reasonable to tax the industry
of the great body of the people, in order to support that of some
particular class of manufacturers ; yet, in the wantonness of
great prosperity, when the public enjoys a greater revenue than
it knows well what to do with, to give such bounties to favourite
manufactures, may, perhaps, be as natural as to incur any other
idle expense. In public, as well as in private expenses, great
wealth, may, perhaps, frequently be admitted as an apology for
great folly. But there must surely be something more than
ordinary absurdity in continuing such profusion in times of
general difficulty and distress.
What is called a bounty, is sometimes no more than a drawback,
and, consequently, is not liable to the same objections as what
is properly a bounty. The bounty, for example, upon refined sugar
exported, may be considered as a drawback of the duties upon the
brown and Muscovado sugars, from which it is made; the bounty
upon wrought silk exported, a drawback of the duties upon raw and
thrown silk imported; the bounty upon gunpowder exported, a
drawback of the duties upon brimstone and saltpetre imported. In
the language of the customs, those allowances only are called
drawbacks which are given upon goods exported in the same form in
which they are imported. When that form has been so altered by
manufacture of any kind as to come under a new denomination, they
are called bounties.
Premiums given by the public to artists and manufacturers, who
excel in their particular occupations, are not liable to the same
objections as bounties. By encouraging extraordinary dexterity
and ingenuity, they serve to keep up the emulation of the workmen
actually employed in those respective occupations, and are not
considerable enough to turn towards any one of them a greater
share of the capital of the country than what would go to it of
its own accord. Their tendency is not to overturn the natural
balance of employments, but to render the work which is done in
each as perfect and complete as possible. The expense of
premiums, besides, is very trifling, that of bounties very great.
The bounty upon corn alone has sometimes cost the public, in one
year, more than £300,000.
Bounties are sometimes called premiums, as drawbacks are
sometimes called bounties. But we must, in all cases, attend to
the nature of the thing, without paying any regard to the word.
Digression concerning the Corn Trade and Corn Laws.
I cannot conclude this chapter concerning bounties, without
observing, that the praises which have been bestowed upon the law
which establishes the bounty upon the exportation of corn, and
upon that system of regulations which is connected with it, are
altogether unmerited. A particular examination of the nature of
the corn trade, and of the principal British laws which relate to
it, will sufficiently demonstrate the truth of this assertion.
The great importance of this subject must justify the length of
the digression.
The trade of the corn merchant is composed of four different
branches, which, though they may sometimes be all carried on by
the same person, are, in their own nature, four separate and
distinct trades. These are, first, the trade of the inland
dealer; secondly, that of the merchant-importer for home
consumption ; thirdly, that of the merchant-exporter of home
produce for foreign consumption ; and, fourthly, that of the
merchant-carrier, or of the importer of corn, in order to export
it again.
I. The interest of the inland dealer, and that of the great body
of the people, how opposite soever they may at first appear, are,
even in years of the greatest scarcity, exactly the same. It is
his interest to raise the price of his corn as high as the real
scarcity of the season requires, and it can never be his interest
to raise it higher. By raising the price, he discourages the
consumption, and puts every body more or less, but particularly
the inferior ranks of people, upon thrift and good management If,
by raising it too high, he discourages the consumption so much
that the supply of the season is likely to go beyond the
consumption of the season, and to last for some time after the
next crop begins to come in, he runs the hazard, not only of
losing a considerable part of his corn by natural causes, but of
being obliged to sell what remains of it for much less than what
he might have had for it several months before. If, by not
raising the price high enough, he discourages the consumption so
little, that the supply of the season is likely to fall short of
the consumption of the season, he not only loses a part of the
profit which he might otherwise have made, but he exposes the
people to suffer before the end of the season, instead of the
hardships of a dearth, the dreadful horrors of a famine. It is
the interest of the people that their daily, weekly, and monthly
consumption should be proportioned as exactly as possible to the
supply of the season. The interest of the inland corn dealer is
the same. By supplying them, as nearly as he can judge, in this
proportion, he is likely to sell all his corn for the highest
price, and with the greatest profit ; and his knowledge of the
state of the crop, and of his daily, weekly, and monthly sales,
enables him to judge, with more or less accuracy, how far they
really are supplied in this manner. Without intending the
interest of the people, he is necessarily led, by a regard to his
own interest, to treat them, even in years of scarcity, pretty
much in the same manner as the prudent master of a vessel is
sometimes obliged to treat his crew. When he foresees that
provisions are likaly to run short, he puts them upon short
allowance. Though from excess of caution he should sometimes do
this without any real necessity, yet all the inconveniencies
which his crew can thereby suffer are inconsiderable, in
comparison of the danger, misery, and ruin, to which they might
sometimes be exposed by a less provident conduct. Though, from
excess of avarice, in the same manner, the inland corn merchant
should sometimes raise the price of his corn somewhat higher than
the scarcity of the season requires, yet all the inconveniencies
which the people can suffer from this conduct, which effectually
secures them from a famine in the end of the season, are
inconsiderable, in comparison of what they might have been
exposed to by a more liberal way of dealing in the beginning of
it the corn merchant himself is likely to suffer the most by this
excess of avarice; not only from the indignation which it
generally excites against him, but, though he should escape the
effects of this indignation, from the quantity of corn which it
necessarily leaves upon his hands in the end of the season, and
which, if the next season happens to prove favourable, he must
always sell for a much lower price than he might otherwise have
had.
Were it possible, indeed, for one great company of merchants to
possess themselves of the whole crop of an extensive country, it
might perhaps be their interest to deal with it, as the Dutch are
said to do with the spiceries of the Moluccas, to destroy or
throw away a considerable part of it, in order to keep up the
price of the rest. But it is scarce possible, even by the
violence of law, to establish such an extensive monopoly with
regard to corn ; and wherever the law leaves the trade free, it
is of all commodities the least liable to be engrossed or
monopolized by the forced a few large capitals, which buy up the
greater part of it. Not only its value far exceeds what the
capitals of a few private men are capable of purchasing; but,
supposing they were capable of purchasing it, the manner in which
it is produced renders this purchase altogether impracticable.
As, in every civilized country, it is the commodity of which the
annual consumption is the greatest ; so a greater quantity of
industry is annually employed in pruducing corn than in producing
any other commodity. When it first comes from the ground, too, it
is necessarily divided among a greater number of owners than any
other commodity ; and these owners can never be collected into
one place, like a number of independent manufacturers, but are
necessarily scattered through all the different corners of the
country. These first owners either immediately supply the
consumers in their own neighbourhood, or they supply other inland
dealers, who supply those consumers. The inland dealers in corn,
therefore, including both the farmer and the baker, are
necessarily more numerous than the dealers in any other commodity
; and their dispersed situation renders it altogether impossible
for them to enter into any general combination. If, in a year of
scarcity, therefore, any of them should find that he had a good
deal more corn upon hand than, at the current price, he could
hope to dispose of before the end of the season, he would never
think of keeping up this price to his own loss, and to the sole
benefit of his rivals and competitors, but would immediately
lower it, in order to get rid of his corn before the new crop
began to come in. The same motives, the same interests, which
would thus regulate the conduct of any one dealer, would regulate
that of every other, and oblige them all in general to sell their
corn at the price which, according to the best of their judgment,
was most suitable to the scarcity or plenty of the season.
Whoever examines, with attention, the history of the dearths and
famines which have afflicted any part of Europe during either the
course of the present or that of the two preceding centuries, of
several of which we have pretty exact accounts, will find, I
believe, that a dearth never has arisen from any combination
among the inland dealers in corn, nor from any other cause but a
real scarcity, occasioned sometimes, perhaps, and in some
particular places, by the waste of war, but in by far the
greatest number of cases by the fault of the seasons; and that a
famine has never arisen from any other cause but the violence of
government attempting, by improper means, to remedy the
inconveniencies of a dearth.
In an extensive corn country, between all the different parts of
which there is a free commerce and communication, the scarcity
occasioned by the most unfavourable seasons can never be so great
as to produce a famine ; and the scantiest crop, if managed with
frugality and economy, will maintain, through the year, the same
number of people that are commonly fed in a more affluent manner
by one of moderate plenty. The seasons most unfavourable to the
crop are those of excessive drought or excessive rain. But as
corn grows equally upon high and low lands, upon grounds that are
disposed to be too wet, and upon those that are disposed to be
too dry, either the drought or the rain, which is hurtful to one
part of the country, is favourable to another ; and though, both
in the wet and in the dry season, the crop is a good deal less
than in one more properly tempered ; yet, in both, what is lost
in one part of the country is in some measure compensated by what
is gained in the other. In rice countries, where the crop not
only requires a very moist soil, but where, in a certain period
of its growing, it must be laid under water, the effects of a
drought are much more dismal. Even in such countries, however,
the drought is, perhaps, scarce ever so universal as necessarily
to occasion a famine, if the government would allow a free trade.
The drought in Bengal, a few years ago, might probably have
occasioned a very great dearth. Some improper regulations, some
injudicious restraints, imposed by the servants of the East India
Company upon the rice trade, contributed, perhaps, to turn that
dearth into a famine.
When the government, in order to remedy the inconveniencies of a
dearth, orders all the dealers to sell their corn at what it
supposes a reasonable price, it either hinders them from bringing
it to market, which may sometimes produce a famine even in the
beginning of the season ; or, if they bring it thither, it
enables the people, and thereby encourages them to consume it so
fast as must necessarily produce a famine before the end of the
season. The unlimited, unrestrained freedom of the corn trade, as
it is the only effectual preventive of the miseries of a famine,
so it is the best palliative of the inconveniencies of a dearth;
for the inconveniencies of a real scarcity cannot be remedied ;
they can only be palliated. No trade deserves more the full
protection of the law, and no trade requires it so much ; because
no trade is so much exposed to popular odium.
In years of scarcity, the inferior ranks of people impute their
distress to the avarice of the corn merchant, who becomes the
object of their hatred and indignation. Instead of making profit
upon such occasions, therefore, he is often in danger of being
utterly ruined, and of having his magazines plundered and
destroyed by their violence. It is in years of scarcity, however,
when prices are high, that the corn merchant expects to make his
principal profit. He is generally in contract with some farmers
to furnish him, for a certain number of years, with a certain
quantity of corn, at a certain price. This contract price is
settled according to what is supposed to be the moderate and
reasonable, that is, the ordinary or average price, which, before
the late years of scarcity, was commonly about 28s. for the
quarter of wheat, and for that of other grain in proportion. In
years of scarcity, therefore, the corn merchant buys a great part
of his corn for the ordinary price, and sells it for a much
higher. That this extraordinary profit, however, is no more than
sufficient to put his trade upon a fair level with other trades,
and to compensate the many losses which he sustains upon other
occasions, both from the perishable nature of the commodity
itself, and from the frequent and unforeseen fluctuations of its
price, seems evident enough, from this single circumstance, that
great fortunes are as seldom made in this as in any other trade.
The popular odium, however, which attends it in years of
scarcity, the only years in which it can be very profitable,
renders people of character and fortune averse to enter into it.
It is abandoned to an inferior set of dealers; and millers,
bakers, meal-men, and meal-factors, together with a number of
wretched hucksters, are almost the only middle people that, in
the home market, come between the grower and the consumer.
The ancient policy of Europe, instead of discountenancing this
popular odium against a trade so beneficial to the public, seems,
on the contrary, to have authorised and encouraged it.
By the 5th and 6th of Edward VI cap. 14, it was enacted, that
whoever should buy any corn or grain, with intent to sell it
again, should be reputed an unlawful engrosser, and should, for
the first fault, suffer two months imprisonment, and forfeit the
value of the corn ; for the second, suffer six months
imprisonment, and forfeit double the value; and, for the third,
be set in the pillory, suffer imprisonment during the king's
pleasure, and forfeit all his goods and chattels. The ancient
policy of most other parts of Europe was no better than that of
England.
Our ancestors seem to have imagined, that the people would buy
their corn cheaper of the farmer than of the corn merchant, who,
they were afraid, would require, over and above the price which
he paid to the farmer, an exorbitant profit to himself. They
endeavoured, therefore, to annihilate his trade altogether. They
even endeavoured to hinder, as much as possible, any middle man
of any kind from coming in between the grower and the consumer;
and this was the meaning of the many restraints which they
imposed upon the trade of those whom they called kidders, or
carriers of corn ; a trade which nobody was allowed to exercise
without a licence, ascertaining his qualifications as a man of
probity and fair dealing. The authority of three justices of the
peace was, by the statute of Edward VI. necessary in order to
grant this licence. But even this restraint was afterwards
thought insufficient, and, by a statute of Elizabeth, the
privilege of granting it was confined to the quarter-sessions.
The ancient policy of Europe endeavoured, in this manner, to
regulate agriculture, the great trade of the country, by maxims
quite different from those which it established with regard to
manufactures, the great trade of the towns. By leaving a farmer
no other customers but either the consumers or their immediate
factors, the kidders and carriers of corn, it endeavoured to
force him to exercise the trade, not only of a farmer, but of a
corn merchant, or corn retailer. On the contrary, it, in many
cases, prohibited the manufacturer from exercising the trade of a
shopkeeper, or from selling his own goods by retail. It meant, by
the one law, to promote the general interest of the country, or
to render corn cheap, without, perhaps, its being well understood
how this was to be done. By the other, it meant to promote that
of a particular order of men, the shopkeepers, who would be so
much undersold by the manufacturer, it was supposed, that their
trade would be ruined, if he was allowed to retail at all.
The manufacturer, however, though he had been allowed to keep a
shop, and to sell his own goods by retail, could not have
undersold the common shopkeeper. Whatever part of his capital he
might have placed in his shop, he must have withdrawn it from his
manufacture. In order to carry on his business on a level with
that of other people, as he must have had the profit of a
manufacturer on the one part, so he must have had that of a
shopkeper upon the other. Let us suppose, for example, that in
the particular town where he lived, ten per cent. was the
ordinary profit both of manufacturing and shopkeeping stock ; he
must in this case have charged upon every piece of his own goods,
which he sold in his shop, a profit of twenty per cent. When he
carried them from his workhouse to his shop, he must have valued
them at the price for which he could have sold them to a dealer
or shopkeeper, who would have bought them by wholesale. If he
valued them lower, he lost a part of the profit of his
manufacturing capital. When, again, he sold them from his shop,
unless he got the same price at which a shopkeeper would have
sold them, he lost a part of the profit of his shop- keeping
capital. Though he might appear, therefore, to make a double
profit upon the same piece of goods, yet, as these goods made
successively a part of two distinct capitals, he made but a
single profit upon the whole capital employed about them ; and if
he made less than his profit, he was a loser, and did not employ
his whole capital with the same advantage as the greater part of
his neighbours.
What the manufacturer was prohibited to do, the farmer was in
some measure enjoined to do ; to divide his capital between two
different employments; to keep one part of it in his granaries
and stack-yard, for supplying the occasional demands of the
market, and to employ the other in the cultivation of his land.
But as he could not afford to employ the latter for less than the
ordinary profits of farming stock, so he could as little afford
to employ the former for less than the ordinary profits of
mercantile stock. Whether the stock which really carried on the
business of a corn merchant belonged to the person who was called
a farmer, or to the person who was called a corn merchant, an
equal profit was in both cases requisite, in order to indemnify
its owner for employing it in this manner, in order to put his
business on a level with other trades, and in order to hinder him
from having an interest to change it as soon as possible for some
other. The farmer, therefore, who was thus forced to exercise the
trade of a corn merchant, could not afford to sell his corn
cheaper than any other corn merchant would have been obliged to
do in the case of a free competition.
The dealer who can employ his whole stock in one single branch of
business, has an advantage of the same kind with the workman who
can employ his whole labour in one single operation. As the
latter acquires a dexterity which enables him, with the same two
hands, to perform a much greater quantity of work, so the former
acquires so easy and ready a method of transacting his business,
of buying and disposing of his goods, that with the same capital
he can transact a much greater quantity of business. As the one
can commonly afford his work a good deal cheaper, so the other
can commonly afford his goods somewhat cheaper, than if his stock
and attention were both employed about a greater variety of
objects. The greater part of manufacturers could not afford to
retail their own goods so cheap as a vigilant and active
shopkeeper, whose sole business it was to buy them by wholesale
and to retail them again. The greater part of farmers could still
less afford to retail their own corn, to supply the inhabitants
of a town, at perhaps four or five miles distance from the
greater part of them, so cheap as a vigilant and active corn
merchant, whose sole business it was to purchase corn by
wholesale, to collect it into a great magazine, and to retail it
again.
The law which prohibited the manufacturer from exercising the
trade of a shopkeeper, endeavoured to force this division in the
employment of stock to go on faster than it might otherwise have
done. The law which obliged the farmer to exercise the trade of a
corn merchant, endeavoured to hinder it from going on so fast.
Both laws were evident violations of natural liberty, and
therefore unjust; and they were both, too, as impolitic as they
were unjust. It is the interest of every society, that things of
this kind should never either he forced or obstructed. The man
who employs either his labour or his stock in a greater variety
of ways than his situation renders necessary, can never hurt his
neighbour by underselling him. He may hurt himself, and he
generally does so. Jack-of-all-trades will never be rich, says
the proverb. But the law ought always to trust people with the
care of their own interest, as in their local situations they
must generally he 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 mercliant as fast as he could thresh it
out, his whole capital might have returned immediately to the
land, and have been employed in buying more cattle, and hiring
more servants, in order to improve and cultivate it better. But
by being obliged to sell his corn by retail, he was obliged to
keep a great part of his capital in his granaries and stack-yard
through the year, and could not therefore cultivate so well as
with the same capital he might otherwise have done. This law,
therefore, necessarily obstructed the improvement of the land,
and, instead of tending to render corn cheaper, must have tended
to render it scarcer, and therefore dearer, than it would
otherwise have been.
After the business of the farmer, that of the corn merchant is in
reality the trade which, if properly protected and encouraged,
would contribute the most to the raising of corn. It would
support the trade of the farmer, in the same manner as the trade
of the wholesale dealer supports that of the manufacturer.
The wholesale dealer, by affording a ready market to the
manufacturer, by taking his goods off his hand as fast as he can
make them, and by sometimes even advancing their price to him
before he has made them, enables him to keep his whole capital,
and sometimes even more than his whole capital, constantly
employed in manufacturing, and consequently to manufacture a much
greater quantity of goods than if he was obliged to dispose of
them himself to the immediate consumers, or even to the
retailers. As the capital of the wholesale merchant, too, is
generally sufficient to replace that of many manufacturers, this
intercourse between him and them interests the owner of a large
capital to support the owners of a great number of small ones,
and to assist them in those losses and misfortunes which might
otherwise prove ruinous to them.
An intercourse of the same kind universally established between
the farmers and the corn merchants, would be attended with
effects equally beneficial to the farmers. They would be enabled
to keep their whole capitals, and even more than their whole
capitals constantly employed in cultivation. In case of any of
those accidents to which no trade is more liable than theirs,
they would find in their ordinary customer, the wealthy corn
merchant, a person who had both an interest to support them, and
the ability to do it ; and they would not, as at present, be
entirely dependent upon the forbearance of their landlord, or the
mercy of his steward. Were it possible, as perhaps it is not, to
establish this intercourse universally, and all at once ; were it
possible to turn all at once the whole farming stock of the
kingdom to its proper business, the cultivation of land,
withdrawing it from every other employment into which any part of
it may be at present diverted; and were it possible, in order to
support and assist, upon occasion, the operations of this great
stock, to provide all at once another stock almost equally great;
it is not, perhaps, very easy to imagine how great, how
extensive, and how sudden, would be the improvement which this
change of circumstances would alone produce upon the whole face
of the country.
The statute of Edward VI. therefore, by prohibiting as much as
possible any middle man from coming in between the grower and the
consumer, endeavoured to annihilate a trade, of which the free
exercise is not only the best palliative of the inconveniencics
of a dearth, but the best preventive of that calamity ; after the
trade of the farmer, no trade contributing so much to the growing
of corn as that of the corn merchant.
The rigour of this law was afterwards softened by several
subsequent statutes, which successvely permitted the engrossing
of corn when the price of wheat should not exceed 20s. and 24s.
32s. and 40s. the quarter. At last, by the 15th of Charles II.
c.7, the engrossing or buying of corn, in order to sell it again,
as long as the price of wheat did not exceed 48s. the quarter,
and that of other grain in proportion, was declared lawful to all
persons not being forestallers, that is, not selling again in the
same market within three months. All the freedom which the trade
of the inland corn dealer has ever yet enjoyed was bestowed upon
it by this statute. The statute of the twelfth of the present
king, which repeals almost all the other ancient laws against
engrossers and forestallers, does not repeal the restrictions of
this particular statute, which therefore still continue in force.
This statute, however, authorises in some measure two very absurd
popular prejudices.
First, It supposes, that when the price of wheat has risen so
high as 48s. the quarter, and that of other grain in proportion,
corn is likely to be so engrossed as to hurt the people. But,
from what has been already said, it seems evident enough, that
corn can at no price be so engrossed by the inland dealers as to
hurt the people; and 48s. the quarter, besides, though it may be
considered as a very high price, yet, in years of scarcity, it is
a price which frequently takes place immediately after harvest,
when scarce any part of the new crop can be sold off, and when it
is impossible even for ignorance to suppose that any part of it
can be so engrossed as to hurt the people.
Secondly, It supposes that there is a certain price at which
corn is likely to be forestalled, that is, bought up in order to
be sold again soon after in the same market, so as to hurt the
people. But if a merchant ever buys up corn, either going to a
particular market, or in a particular market, in order to sell it
again soon after in the same market, it must be because he judges
that the market cannot be so liberally supplied through the whole
season as upon that particular occasion, and that the price,
therefore, must soon rise. If he judges wrong in this, and if the
price does not rise, he not only loses the whole profit of the
stock which he employs in this manner, but a part of the stock
itself, by the expense and loss which necessarily attend the
storing and keeping of corn. He hurts himself, therefore, much
more essentially than he can hurt even the particular people whom
he may hinder from supplying themselves upon that particular
market day, because they may afterwards supply themselves just as
cheap upon any other market day. If he judges right, instead of
hurting the great body of the people, he renders them a most
important service. By making them feel the inconveniencies of a
dearth somewhat earlier than they otherwise might do, he prevents
their feeling them afterwads so severely as they certainly would
do, if the cheapness of price encouraged them to consume faster
than suited the real scarcity of the season. When the scarcity is
real, the best thing that can be done for the people is, to
divide the inconvenience of it as equally as possible, through
all the different months and weeks and days of the year. The
interest of the corn merchant makes him study to do this as
exactly as he can; and as no other person can have either the
same interest, or the same knowledge, or the same abilities, to
do it so exactly as he, this most important operation of commerce
ought to be trusted entirely to him; or, in other words, the corn
trade, so far at least as concerns the supply of the home market,
ought to be left perfectly free.
The popular fear of engrossing and forestalling may be compared
to the popular terrors and suspicions of witchcraft. The
unfortunate wretches accused of this latter crime were not more
innocent of the misfortunes imputed to them, than those who have
been accused of the former. The law which put an end to all
prosecutions against witchcraft, which put it out of any man's
power to gratify his own malice by accusing his neighbour of that
imaginary crime, seems effectually to have put an end to those
fears and suspicions, by taking away the great cause which
encouraged and supported them. The law which would restore entire
freedom to the inland trade of corn, would probably prove as
effectual to put an end to the popular fears of engrossing and
forestalling.
The 15th of Charles II. c. 7, however, with all its
imperfections, has, perhaps, contributed more, both to the
plentiful supply of the home market, and to the increase of
tillage, than any other law in the statute book. It is from this
law that the inland corn trade has derived all the liberty and
protection which it has ever yet enjoyed ; and both the supply of
the home market and the interest of tillage are much more
effectually promoted by the inland, than either by the
importation or exportation trade.
The proportion of the average quantity of all sorts of grain
imported into Great Britain to that of all sorts of grain
consumed, it has been computed by the author of the Tracts upon
the Corn Trade, does not exceed that of one to five hundred and
seventy. For supplying the home market, therefore, the importance
of the inland trade must be to that of the importation trade as
five hundred and seventy to one.
The average quantity of all sorts of grain exported from Great
Britain does not, according to the same author, exceed the
one-and-thirtieth part of the annual produce. For the
encouragement of tillage, therefore, by providing a market for
the home produce, the importance of the inland trade must be to
that of the exportation trade as thirty to one.
I have no great faith in political arithmetic, and I mean not to
warrant the exactness of either of these computations. I mention
them only in order to show of how much less consequence, in the
opinion of the most judicious and experienced persons, the
foreign trade of corn is than the home trade. The great cheapness
of corn in the years immediately preceding the establishment of
the bounty may, perhaps with reason, 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.
II. The trade of the merchant-importer of foreign corn for home
consumption, evidently contributes to the immediate supply of the
home market, and must so far be immediately beneficial to the
great body of the people. It tends, indeed, to lower somewhat the
average money price of corn, but not to diminish its real value,
or the quantity of labour which it is capable of maintaining. If
importation was at all times free, our farmers and country
gentlemen would probably, one year with another, get less money
for their corn than they do at present, when importation is at
most times in effect prohibited ; but the money which they got
would be of more value, would buy more goods of all other kinds,
and would employ more labour. Their real wealth, their real
revenue, therefore, would be the same as at present, though it
might be expressed by a smaller quantity of silver, and they
would neither be disabled nor discouraged from cultivating corn
as much as they do at present. On the contrary, as the rise in
the real value of silver, in consequence of lowering the money
price of corn, lowers somewhat the money price of all other
commodities, it gives the industry of the country where it takes
place some advantage in all foreign markets and thereby tends to
encourage and increase that industry. But the extent of the home
market for corn must be in proportion to the general industry of
the country where it grows, or to the number of those who produce
something else, and therefore, have something else, or, what
comes to the same thing, the price of something else, to give in
exchange for corn. But in every country, the home market, as it
is the nearest and most convenient, so is it likewise the
greatest and most important market for corn. That rise in the
real value of silver, therefore, which is the effect of lowering
the average money price of corn, tends to enlarge the greatest
and most important market for corn, and thereby to encourage,
instead of discouraging its growth.
By the 22d of Charles II. c. 13, the importation of wheat,
whenever the price in the home market did not exceed 53s:4d. the
quarter, was subjected to a duty of 16s. the quarter; and to a
duty of 8s. whenever the price did not exceed £4. The former of
these two prices has, for more than a century past, taken place
only in times of very great scarcity ; and the latter has, so far
as I know, not taken place at all. Yet, till wheat has risen
above this latter price, it was, by this statute, subjected to a
very high duty; and, till it had risen above the former, to a
duty which amounted to a prohibition. The importation of other
sorts of grain was restrained at rates and by duties, in
proportion to the value of the grain, almost equally high. Before
the 13th of the present king, the following were the duties
payable upon the importation of the different sorts of grain :
Grain. Duties. Duties Duties.
Beans to 28s. per qr. 19s:10d. after till 40s. 16s:8d. then 12d.
Barley to 28s. - 19s:10d. - 32s. 16s. - 12d.
Malt is prohibited by the annual malt-tax bill.
Oats to 16s. - 5s:10d after - 9½d.
Pease to 40s. - 16s: 0d.after - 9¾d.
Rye to 36s. - 19s:10d. till 40s. 16s:8d - 12d.
Wheat to 44s. - 21s: 9d. till 53s:4d. 17s. - 8s.
till £4, and after that about 1s:4d.
Buck-wheat to 32s. per qr. to pay 16s.
These different duties were imposed, partly by the 22d of Charles
II. in place of the old subsidy, partly by the new subsidy, by
the one-third and two-thirds subsidy, and by the subsidy 1747.
Subsequent laws still further increased those duties.
The distress which, in years of scarcity, the strict execution of
those laws might have brought upon the people, would probably
have been very great ; but, upon such occasions, its execution
was generally suspended by temporary statutes, which permitted,
for a limited time, the importation of foreign corn. The
necessity of these temporary statutes sufficiently demonstrates
the impropriety of this general one.
These restraints upon importation, though prior to the
establishment of the bounty, were dictated by the same spirit, by
the same principles, which afterwards enacted that regulation.
How hurtful soever in themselves, these, or some other restraints
upon importation, became necessary in consequence of that
regulation. If, when wheat was either below 48s. the quarter, or
not much above it, foreign corn could have been imported, either
duty free, or upon paying only a small duty, it might have been
exported again, with the benefit of the bounty, to the great loss
of the public revenue, and to the entire perversion of the
institution, of which the object was to extend the market for the
home growth, not that for the growth of foreign countries.
III. The trade of the merchant-exporter of corn for foreign
consumption, certainly does not contribute directly to the
plentiful supply of the home market. It does so, however,
indirectly. From whatever source this supply maybe usually drawn,
whether from home growth, or from foreign importation, unless
more corn is either usually grown, or usually imported into the
country, than what is usually consumed in it. the supply of the
home market can never be very plentiful. But unless the surplus
can, in all ordinary cases, be exported, the growers will be
careful never to grow more, and the importers never to import
more, than what the bare consumption of the home market requires.
That market will very seldom be overstocked; but it will
generally be understocked ; the people, whose business it is to
supply it, being generally afraid lest their goods should be left
upon their hands. The prohibition of exportation limits the
improvement and cultivation of the country to what the supply of
its own inhabitants require. The freedom of exportation enables
it to extend cultivation for the supply of foreign nations.
By the 12th of Charles II. c.4, the exportation of corn was
permitted whenever the price of wheat did not exceed 40s. the
quarter, and that of other grain in proportion. By the 15th of
the same prince, this liberty was extended till the price of
wheat exceeded 48s. the quarter; and by the 22d, to all higher
prices. A poundage, indeed, was to be paid to the king upon such
exportation; but all grain was rated so low in the book of rates,
that this poundage amounted only, upon wheat to 1s., upon oats to
4d., and upon all other grain to 6d. the quarter. By the 1st of
William and Mary, the act which established this bounty, this
small duty was virtually taken off whenever the price of wheat
did not exceed 48s. the quarter; and by the 11th and 12th of
William III. c. 20, it was expressly taken off at all higher
prices.
The trade of the merchant-exporter was, in this manner, not only
encouraged by a bounty, but rendered much more free than that of
the inland dealer. By the last of these statutes, corn could be
engrossed at any price for exportation ; but it could not be
engrossed for inland sale, except when the price did not exceed
48s. the quarter. The interest of the inland dealer, however, it
has already been shown, can never be opposite to that of the
great body of the people. That of the merchant-exporter may, and
in fact sometimes is. If, while his own country labours under a
dearth, a neighbouring country should be afflicted with a famine,
it might be his interest to carry corn to the latter country, in
such quantities as might very much aggravate the calamities of
the dearth. The plentiful supply of the home market was not the
direct object of those statutes; but, under the pretence of
encouraging agriculture, to raise the money price of corn as high
as possible, and thereby to occasion, as much as possible, a
constant dearth in the home market. By the discouragement of
importation, the supply of that market; even in times of great
scarcity, was confined to the home growth ; and by the
encouragement of exportation, when the price was so high as 48s.
the quarter, that market was not, even in times of considerable
scarcity, allowed to enjoy the whole of that growth. The
temporary laws, prohibiting, for a limited time, the exportation
of corn, and taking off, for a limited time, the duties upon its
importation, expedients to which Great Britain has been obliged
so frequently to have recourse, sufficiently demonstrate the
impropriety of her general system. Had that system been good, she
would not so frequently have been reduced to the necessity of
departing from it.
Were all nations to follow the liberal system of free exportation
and free importation, the different states into which a great
continent was divided, would so far resemble the different
provinces of a great empire. As among the different provinces of
a great empire, the freedmn of the inland trade appears, both
from reason and experience, not only the best palliative of a
dearth, but the most effectual preventive of a famine; so would
the freedom of the exportation and importation trade be among the
different states into which a great continent was divided. The
larger the continent, the easier the communication through all
the different parts of it, both by land and by water, the less
would any one particular part of it ever be exposed to either of
these calamities, the scarcity of any one country being more
likely to be relieved by the plenty of some other. But very few
countries have entirely adopted this liberal system. The freedom
of the corn trade is almost everywhere more or less restrained,
and in many countries is confined by such absurd regulations, as
frequently aggravate the unavoidable misfortune of a dearth into
the dreadful calamity of a famine. The demand of such countries
for corn may frequently become so great and so urgent, that a
small state in their neighbourhood, which happened at the same
time to be labouring under some degree of dearth, could not
venture to supply them without exposing itself to the like
dreadful calamity. The very bad policy of one country may thus
render it, in some measure, dangerous and imprudent to establish
what would otherwise be the best policy in another. The unlimited
freedom of exportation, however, would be much less dangerous in
great states, in which the growth being much greater, the supply
could seldom be much affected by any quantity or corn that was
likely to he exported. In a Swiss canton, or in some of the
little states in Italy, it may, perhaps, sometimes be necessary
to restrain the exportation of corn. In such great countries as
France or England, it scarce ever can. To hinder, besides, the
farmer from sending his goods at all times to the best market, is
evidently to sacrifice the ordinary laws of justice to an idea of
public utility, to a sort of reasons of state ; an act or
legislative authority which ought to be exercised only, which can
be pardoned only, in cases of the most urgent necessity. The
price at which exportation of corn is prohibited, if it is ever
to be prohibited, ought always to be a very high price.
The laws concerning corn may everywhere be compared to the laws
concerning religion. The people feel themselves so much
interested in what relates either to their subsistence in this
life, or to their happiness in a life to come, that government
must yield to their prejudices, and, in order to preserve the
public tranquillity, establish that system which they approve of.
It is upon this account, perhaps. that we so seldom find a
reasonable system established with regard to either of those two
capital objects.
IV. The trade of the merchant-carrier, or of the importer of
foreign corn, in order to export it again, contributes to the
plentiful supply of the home market. It is not, indeed, the
direct purpose of his trade to sell his corn there ; but he will
generally be willing to do so, and even for a good deal less
money than he might expect in a foreign market; because he saves
in this manner the expense of loading and unloading, of freight
and insurance. The inhabitants of the country which, by means of
the carrying trade, becomes the magazine and storehouse for the
supply of other countries, can very seldom be in want themselves.
Though the carrying trade must thus contribute to reduce the
average money price of corn in the home market, it would not
thereby lower its real value; it would only raise somewhat the
real value of silver.
The carrying trade was in effect prohibited in Great Britain,
upon all ordinary occasions, by the high duties upon the
importation of foreign corn, of the greater part of which there
was no drawback; and upon extraordinary occasions, when a
scarcity made it necessary to suspend those duties by temporary
statutes, exportation was always prohibited. By this system of
laws, therefore, the carrying trade was in effect prohibited.
That system of laws, therefore, which is connected with the
establishment of the bounty, seems to deserve no part of the
praise which has been bestowed upon it. The improvement and
prosperity of Great Britain, which has been so often ascribed to
those laws, may very easily be accounted for by other causes.
That security which the laws in Great Britain give to every man,
that he shall enjoy the fruits of his own labour, is alone
sufficient to make any country flourish, notwithstanding these
and twenty other absurd regulations of commerce ; and this
security was perfected by the Revolution, much about the same
time that the bounty was established. The natural effort of every
individual to better his own condition, when suffered to exert
itself with freedom and security, is so powerful a principle,
that it is alone, and without any assistance, not only capable of
carrying on the society to wealth and prosperity, but of
surmounting a hundred impertinent obstructions, with which the
folly of human laws too often encumbers its operations: though
the effect of those obstructions is always, more or less, either
to encroach upon its freedom, or to diminish its security. In
Great Britain industry is perfectly secure; and though it is far
from being perfectly free, it is as free or freer than in any
other part of Europe.
Though the period of the greatest prosperity and improvement of
Great Britain has been posterior to that system of laws which is
connected with the bounty, we must not upon that account, impute
it to those laws. It has been posterior likewise to the national
debt ; but the national debt has most assuredly not been the
cause of it.
Though the system of laws which is connected with the bounty, has
exactly the same tendency with the practice of Spain and
Portugal, to lower somewhat the value of the precious metals in
the country where it takes place; yet Great Britain is certainly
one of the richest countries in Europe, while Spain and Portugal
are perhaps amongst the most beggarly. This difference of
situation, however, may easily be accounted for from two
different causes. First, the tax in Spain, the prohibition in
Portugal of exporting gold and silver, and the vigilant police
which watches over the execution of those laws, must, in two very
poor countries, which between them import annually upwards of six
millions sterling, operate not only more directly, but much more
forcibly, in reducing the value of those metals there, than the
corn laws can do in Great Britain. And, secondly, this bad policy
is not in those countries counterbalanced by the general liberty
and security of the people. Industry is there neither free nor
secure; and the civil and ecclesiastical governments of both
Spain and Portugal are such as would alone be sufficient to
perpetuate their present state of poverty, even though their
regulations of commerce were as wise as the greatest part of them
are absurd and foolish.
The 13th of the present king, c. 43, seems to have established a
new system with regard to the corn laws, in many respects better
than the ancient one, but in one or two respects perhaps not
quite so good.
By this statute, the high duties upon importation for home
consumption are taken off, so soon as the price of middling wheat
rises to 48s. the quarter; that of middling rye, pease, or beans,
to 32s.; that of barley to 24s. ; and that of oats to 16s. ; and
instead of them, a small duty is imposed of only 6d upon the
quarter of wheat, and upon that or other grain in proportion.
With regard to all those different sorts of grain, but
particularly with regard to wheat, the home market is thus opened
to foreign supplies, at prices considerably lower than before.
By the same statute, the old bounty of 5s. upon the exportation
of wheat, ceases so soon as the price rises to 44s. the quarter,
instead of 48s. the price at which it ceased before; that of
2s:6d. upon the exportation of barley, ceases so soon as the
price rises to 22s. instead of 24s. the price at which it ceased
before ; that of 2s:6d. upon the exportation of oatmeal, ceases
so soon as the price rises to 14s. instead of 15s. the price at
which it ceased before. The bounty upon rye is reduced from
3s:6d. to 3s. and it ceases so soon as the price rises to 28s.
instead of 32s. the price at which it ceased before. If bounties
are as improper as I have endeavoured to prove them to be, the
sooner they cease, and the lower they are, so much the better.
The same statute permits, at the lowest prices, the importation
of corn in order to be exported again, duty free, provided it is
in the mean time lodged in a warehouse under the joint locks of
the king and the importer. This liberty, indeed, extends to no
more than twenty-five of the different ports of Great Britain.
They are, however, the principal ones; and there may not,
perhaps, be warehouses proper for this purpose in the greater
part of the others.
So far this law seems evidently an improvement upon the ancient
system.
But by the same law, a bounty of 2s. the quarter is given for the
exportation of oats, whenever the price does not exceed fourteen
shillings. No bounty had ever been given before for the
exportation of this grain, no more than for that of pease or
beans.
By the same law, too, the exportation of wheat is prohibited so
soon as the price rises to forty-four shillings the quarter; that
of rye so soon as it rises to twenty-eight shillings; that of
barley so soon as it rises to twenty-two shillings ; and that of
oats so soon as they rise to fourteen shillings. Those several
prices seem all of them a good deal too low; and there seems to
be an impropriety, besides, in prohibiting exportation altogether
at those precise prices at which that bounty, which was given in
order to force it, is withdrawn. The bounty ought certainly
either to have been withdrawn at a much lower price, or
exportation ought to have been allowed at a much higher.
So far, therefore, this law seems to be inferior to the ancient
system. With all its imperfections, however, we may perhaps say
of it what was said of the laws of Solon, that though not the
best in itself, it is the best which the interest, prejudices,
and temper of the times, would admit of. It may perhaps in due
time prepare the way for a better.
CHAPTER VI.
OF TREATIES OF COMMERCE.
When a nation binds itself by treaty, either to permit the entry
of certain goods from one foreign country which it prohibits from
all others, or to exempt the goods of one country from duties to
which it subjects those of all others, the country, or at least
the merchants and manufacturers of the country, whose commerce is
so favoured, must necessarily derive great advantage from the
treaty. Those merchants and manufacturers enjoy a sort of
monopoly in the country which is so indulgent to them. That
country becomes a market, both more extensive and more
advantageous for their goods: more extensive, because the goods
of other nations being either excluded or subjected to heavier
duties, it takes off a greater quantity of theirs; more
advantageous, because the merchants of the favoured country,
enjoying a sort of monopoly there, will often sell their goods
for a better price than if exposed to the free competition of all
other nations.
Such treaties, however, though they may be advantageous to the
merchants and manufacturers of the favoured, are necessarily
disadvantageous to those of the favouring country. A monopoly is
thus granted against them to a foreign nation; and they must
frequently buy the foreign goods they have occasion for, dearer
than if the free competition of other nations was admitted. That
part of its own produce with which such a nation purchases
foreign goods, must consequently be sold cheaper; because, when
two things are exchanged for one another, the cheapness of the
one is a necessary consequence, or rather is the same thing, with
the dearness of the other. The exchangeable value of its annual
produce, therefore. is likely to be diminished by every such
treaty. This diminution, however, can scarce amount to any
positive loss, but only to a lessening of the gain which it might
otherwise make. Though it sells its goods cheaper than it
otherwise might do, it will not probably sell them for less than
they cost; nor, as in the case of bounties, for a price which
will not replace the capital employed in bringing them to market,
together with the ordinary profits of stock. The trade could not
go on long if it did. Even the favouring country, therefore, may
still gain by the trade, though less than if there was a free
competition.
Some treaties of commerce, however, have been supposed
advantageous, upon principles very different from these; and a
commercial country has sometimes granted a monopoly of this kind,
against itself, to certain goods of a foreign nation, because it
expected, that in the whole commerce between them, it would
annually sell more than it would buy, and that a balance in gold
and silver would be annually returned to it. It is upon this
principle that the treaty of commerce between England and
Portugal, concluded in 1703 by Mr Methuen, has been so much
commended. The following is a literal translation of that treaty,
which consists of three articles only.
ART. I.
His sacred royal majesty of Portugal promises, both in his own
name and that of his successors, to admit for ever hereafter,
into Portugal, the woollen cloths, and the rest of the woollen
manufactures of the British, as was accustomed, till they were
prohibited by the law ; nevertheless upon this condition :
ART. II.
That is to say, that her sacred royal majesty of Great Britain
shall, in her own name, and that of her successors, be obliged,
for ever hereafter, to admit the wines of the growth of Portugal
into Britain; so that at no time, whether there shall be peace or
war between the kingdoms of Britain and France, any thing more
shall be demanded for these wines by the name of custom or duty,
or by whatsoever other title, directly or indirectly, whether
they shall be imported into Great Britain in pipes or hogsheads,
or other casks, than what shall be demanded for the like quantity
or measure of French wine, deducting or abating a third part of
the custom or duty. But if, at any time, this deduction or
abatement of customs, which is to be made as aforesaid, shall in
any manner be attempted and prejudiced, it shall be just and
lawful for his sacred royal majesty of Portugal, again to
prohibit the woollen cloths, and the rest of the British woollen
manufactures.
ART. III.
The most excellent lords the plenipotentiaries promise and take
upon themselves, that their above named masters shall ratify this
treaty; and within the space of two months the ratification shall
be exchanged.
By this treaty, the crown of Portugal becomes bound to admit the
English woollens upon the same footing as before the prohibition;
that is, not to raise the duties which had been paid before that
time. But it does not become bound to admit them upon any better
terms than those of any other nation, of France or Holland, for
example. The crown of Great Britain, on the contrary, becomes
bound to admit the wines of Portugal, upon paying only two-thirds
of the duty which is paid for those of France, the wines most
likely to come into competition with them. So far this treaty,
therefore, is evidently advantageous to Portugal, and
disadvantageous to Great Britain.
It has been celebrated, however, as a masterpiece of the
commercial policy of England. Portugal receives annually from the
Brazils a greater quantity of gold than can be employed in its
domestic commerce, whether in the shape of coin or of plate. The
surplus is too valuable to be allowed to lie idle and locked up
in coffers; and as it can find no advantageous market at home, it
must, notwithstanding; any prohibition, be sent abroad, and
exchanged for something for which there is a more advantageous
market at home. A large share of it comes annually to England, in
return either for English goods, or for those of other European
nations that receive their returns through England. Mr Barretti
was informed, that the weekly packet-boat from Lisbon brings, one
week with another, more than £50,000 in gold to England. The sum
had probably been exaggerated. It would amount to more than
£2,600,000 a. year, which is more than the Brazils are supposed
to afford.
Our merchants were, some years ago, out of humour with the crown
of Portugal. Some privileges which had been granted them, not by
treaty, but by the free grace of that crown, at the solicitation,
indeed, it is probable, and in return for much greater favours,
defence and protection from the crown of Great Britain, had been
either infringed or revoked. The people, therefore, usually most
interested in celebrating the Portugal trade, were then rather
disposed to represent it as less advantageous than it had
commonly been imagined. The far greater part, almost the whole,
they pretended, of this annual importation of gold, was not on
account of Great Britain, but of other European nations; the
fruits and wines of Portugal annually imported into Great Britain
nearly compensating the value of the British goods sent thither.
Let us suppose, however, that the whole was on account of Great
Britain, and that it amounted to a still greater sum than Mr
Barretti seems to imagine ; this trade would not, upon that
account, be more advantageous than any other, in which, for the
same value sent out, we received an equal value of consumable
goods in return.
It is but a very small part of this importation which, it can be
supposed, is employed as an annual addition, either to the plate
or to the coin of the kingdom. The rest must all be sent abroad,
and exchanged for consumable goods of some kind or other. But if
those consumable goods were purchased directly with the produce
of English industry, it would be more for the advantage of
England, than first to purchase with that produce the gold of
Portugal, and afterwards to purchase with that gold those
consumable goods. A direct foreign trade of consumption is always
more advantageous than a round-about one; and to bring the same
value of foreign goods to the home market requires a much smaller
capital in the one way than in the ether. If a smaller share of
its industry, therefore, had been enmloyed in producing goods fit
for the Portugal market, and a greater in producing those lit for
the other markets, where those consumable goods for which there
is a demand in Great Britain are to be had, it would have been
more for the advantage of England. To procure both the gold which
it wants for its own use, and the consumable goods, would, in
this way, employ a much smaller capital than at present. There
would be a spare capital, therefore, to be employed for other
purposes, in exciting an additional quantity of industry, and in
raising a greater annual produce.
Though Britain were entirely excluded from the Portugal trade, it
could find very little difficulty in procuring all the annual
supplies of gold which it wants, either for the purposes of
plate, or of coin, or of foreign trade. Gold, like every other
commodity, is always somewhere or another to be got for its value
by those who have that value to give for it. The annual surplus
of gold in Portugal, besides, would still be sent abroad, and
though not carried away by Great Britain, would be carried away
by some other nation, which would be glad to sell it again for
its price, in the same manner as Great Britain does at present.
In buying gold of Portugal, indeed, we buy it at the first hand ;
whereas, in buying it of any other nation, except Spain, we
should buy it at the second, and might pay somewhat dearer. This
difference, however, would surely be too insignificant to deserve
the public attention.
Almost all our gold, it is said, comes from Portugal. With other
nations, the balance of trade is either against as, or not much
in our favour. But we should remember, that the more gold we
import from one country, the less we must necessarily import from
all others. The effectual demand for gold, like that for every
other commodity, is in every country limited to a certain
quantity. If nine-tenths of this quantity are imported from one
country, there remains a tenth only to be imported from all
others. The more gold, besides, that is annually imported from
some particular countries, over and above what is requisite for
plate and for coin, the more must necessarily be exported to some
others: and the more that most insignificant object of modern
policy, the balance of trade, appears to be in our favour with
some particular countries, the more it must necessarily appear to
be against us with many others.
It was upon this silly notion, however, that England could not
subsist without the Portugal trade, that, towards the end of the
late war, France and Spain, without pretending either offence or
provocation, required the king of Portugal to exclude all British
ships from his ports, and, for the security of this exclusion, to
receive into them French or Spanish garrisons. Had the king of
Portugal submitted to those ignominious terms which his
brother-in-law the king of Spain proposed to him, Britain would
have been freed from a much greater inconveniency than the loss
of the Portugal trade, the burden of supporting a very weak ally,
so unprovided of every thing for his own defence, that the whole
power of England, had it been directed to that single purpose,
could scarce, perhaps, have defended him for another campaign.
The loss of the Portugal trade would, no doubt, have occasioned a
considerable embarrassment to the merchants at that time engaged
in it, who might not, perhaps, have found out, for a year or two,
any other equally advantageous method of employing their
capitals; and in this would probably have consisted all the
inconveniency which England could have suffered from this notable
piece of commercial policy.
The great annual importation of gold and silver is neither for
the purpose of plate nor of coin, but of foreign trade. A
round-about foreign trade of consumption can be carried on more
advantageously by means of these metals than of almost any other
goods. As they are the universal instruments of commerce, they
are more readily received in return for all commodities than any
other goods ; and, on account of their small bulk and great
value, it costs less to transport them backward and forward from
one place to another than almost any other sort of merchandize,
and they lose less of their value by being so transported. Of all
the commodities, therefore, which are bought in one foreign
country, for no other purpose but to be sold or exchanged again
for some other goods in another, there are none so convenient as
gold and silver. In facilitating all the different round-about
foreign trades of consumption which are carried on in Great
Britain, consists the principal advantage of the Portugal trade;
and though it is not a capital advantage, it is, no doubt, a
considerable one.
That any annual addition which, it can reasonably be supposed, is
made either to the plate or to the coin of the kingdom, could
require but a very small annual importation of gold and silver,
seems evident enough; and though we had no direct trade with
Portugal, this small quantity could always, somewhere or another,
be very easily got.
Though the goldsmiths trade be very considerable in Great
Britain, the far greater part of the new plate which they
annually sell, is made from other old plate melted down ; so that
the addition annually made to the whole plate of the kingdom
cannot be very great, and could require but a very small annual
importation.
It is the same case with the coin. Nobody imagines, I beileve,
that even the greater part of the annual coinage, amounting, for
ten years together, before the late reformation of the gold coin,
to upwards of £800,000 a-year in gold, was an annual addition to
the money before current in the kingdom. In a country where the
expense of the coinage is defrayed by the government, the value
of the coin, even when it contains its full standard weight of
gold and silver, can never be much greater than that of an equal
quantity of those metals uncoined, because it requires only the
trouble of going to the mint, and the delay, perhaps, of a few
weeks, to procure for any quantity of uncoined gold and silver an
equal quantity of those metals in coin; but in every country the
greater part of the current coin is almost always more or less
worn, or otherwise degenerated from its standard. In Great
Britain it was, before the late reformation, a good deal so, the
gold being more than two per cent., and the silver more than
eight per cent. below its standard weight. But if forty-four
guineas and a-half, containing their full standard weight, a
pound weight of gold, could purchase very little more than a
pound weight of uncoined gold; forty-four guineas and a-half,
wanting a part of their weight, could not purchase a pound
weight, and something was to be added, in order to make up the
deficiency. The current price of gold bullion at market,
therefore, instead of being the same with the mint price, or
£46:14:6, was then about £47:14s., and sometimes about £48. When
the greater part of the coin, however, was in this degenerate
condition, forty four guineas and a-half, fresh from the mint,
would purchase no more goods in the market than any other
ordinary guineas; because, when they came into the coffers of the
merchant, being confounded with other money, they could not
afterwards be distinguished without more trouble than the
difference was worth. Like other guineas, they were worth no more
than £46:14:6. If thrown into the melting pot, however, they
produced, without any sensible loss, a pound weight of standard
gold, which could be sold at any time for between £47:14s. and
£48, either in gold or silver, as fit for all the purposes of
coin as that which had been melted down. There was an evident
profit, therefore, in melting down new-coined money; and it was
done so instantaneously, that no precaution of government could
prevent it. The operations of the mint were, upon this account,
somewhat like the web of Penelope; the work that was done in the
day was undone in the night. The mint was employed, not so much
in making daily additions to the coin, as in replacing the very
best part of it, which was daily melted down.
Were the private people who carry their gold and silver to the
mint to pay themselves for the coinage, it would add to the value
of those metals, in the same manner as the fashion does to that
of plate. Coined gold and silver would be more valuable than
uncoined. The seignorage, if it was not exorbitant, would add to
the bullion the whole value of the duty; because, the government
having everywhere the exclusive privilege of coining, no coin can
come to market cheaper than they think proper to afford it. If
the duty was exorbitant, indeed, that is, if it was very much
above the real value of the labour and expense requisite for
coinage, false coiners, both at home and abroad, might be
encouraged, by the great difference between the value of bullion
and that of coin, to pour in so great a quantity of counterfeit
money as might reduce the value of the government money. In
France, however, though the seignorage is eight per cent., no
sensible inconveniency of this kind is found to arise from it.
The dangers to which a false coiner is everywhere exposed, if he
lives in the country of which he counterfeits the coin, and to
which his agents or correspondents are exposed, if he lives in a
foreign country, are by far too great to be incurred for the sake
of a profit of six or seven per cent.
The seignorage in France raises the value of the coin higher than
in proportion to the quantity of pure gold which it contains.
Thus, by the edict of January 1726, the mint price of fine gold
of twenty-four carats was fixed at seven hundred and forty livres
nine sous and one denier one-eleventh the mark of eight Paris
ounces. {See Dictionnaire des Monnoies, tom. ii. article
Seigneurage, p. 439, par 81. Abbot de Bazinghen,
Conseiller-Commissaire en la Cour des Monnoies à Paris.} The gold
coin of France, making an allowance for the remedy of the mint,
contains twenty-one carats and three-fourths of fine gold, and
two carats one-fourth of alloy. The mark of standard gold,
therefore, is worth no more than about six hundred and
seventy-one livres ten deniers. But in France this mark of
standard gold is coined into thirty louis d'ors of twenty-four
livres each, or into seven hundred and twenty livres. The coin.
age, therefore, increases the value of a mark of standard gold
bullion, by the difference between six hundred and seventy-one
livres ten deniers and seven hundred and twenty livres, or by
forty-eight livres nineteen sous and two deniers.
A seignorage will, in many cases, take away altogether, and will
in all cases diminish, the profit of melting down the new coin.
This profit always arises from the difference between the
quantity of bullion which the common currency ought to contain
and that which it actually does contain. If this difference is
less than the seignorage, there will be loss instead of profit.
If it is equal to the seignorage, there will be neither profit
nor loss. If it is greater than the seignorage, there will,
indeed, be some profit, but less than if there was no seignorage.
If, before the late reformation of the gold coin, for example,
there had been a seignorage of five per cent. upon the coinage,
there would have been a loss of three per cent. upon the melting
down of the gold coin. If the seignorage had been two per cent.,
there would have been neither profit nor loss. If the seignorage
had been one per cent., there would have been a profit but of one
per cent. only, instead of two per cent. Wherever money is
received by tale, therefore, and not by weight, a seignorage is
the most effectual preventive of the melting down of the coin,
and, for the same reason, of its exportaticn. It is the best and
heaviest pieces that are commonly either melted down or exported,
because it is upon such that the largest profits are made.
The law for the encouragement of the coinage, by rendering it
duty-free, was first enacted during the reign of Charles II. for
a limited time, and afterwards continued, by different
prolongations, till 1769, when it was rendered perpetual. The
bank of England, in order to replenish their coffers with money,
are frequently obliged to carry bullion to the mint ; and it was
more for their interest, they probably imagined, that the coinage
should be at the expense of the government than at their own. It
was probably out of complaisance to this great company, that the
government agreed to render this law perpetual. Should the custom
of weighing gold, however, come to be disused, as it is very
likely to be on account of its inconveniency ; should the gold
coin of England come to be received by tale, as it was before the
late recoinage this great company may, perhaps, find that they
have, upon this, as upon some other occasions, mistaken their own
interest not a little.
Before the late recoinage, when the gold currency of England was
two per cent. below its standard weight, as there was no
seignorage, it was two per cent. below the value of that quantity
of standard gold bullion which it ought to have contained. When
this great company, therefore, bought gold bullion in order to
have it coined, they were obliged to pay for it two per cent.
more than it was worth after the coinage. But if there had been a
seignorage of two per cent. upon the coinage, the common gold
currency, though two per cent. below its standard weight, would,
notwithstanding, have been equal in value to the quantity of
standard gold which it ought to have contained ; the value of the
fashion compensating in this case the diminution of the weight.
They would, indeed, have had the seignorage to pay, which being
two per cent., their loss upon the whole transaction would have
been two per cent., exactly the same, but no greater than it
actually was.
If the seignorage had been five per cent. and the gold currency
only two per cent. below its standard weight, the bank would, in
this case, have gained three per cent. upon the price of the
bullion ; but as they would have had a seignorage of five per
cent. to pay upon the coinage, their loss upon the whole
transaction would, in the same manner, have been exactly two per
cent.
If the seignorage had been only one per cent., and the gold
currency two per cent. below its standard weight, the bank would,
in this case, have lost only one per cent. upon the price of the
bullion; but as they would likewise have had a seignorage of one
per cent. to pay, their loss upon the whole transaction would
have been exactly two per cent., in the same manner as in all
other cases.
If there was a reasonable seignorage, while at the same time the
coin contained its full standard weight, as it has done very
nearly since the late recoinage, whatever the bank might lose by
the seignorage, they would gain upon the price of the bullion;
and whatever they might gain upon the price of the bullion, they
would lose by the seignorage. They would neither lose nor gain,
therefore, upon the whole transaction, and they would in this, as
in all the foregoing cases, be exactly in the same situation as
if there was no seignorage.
When the tax upon a commodity is so moderate as not to encourage
smuggling, the merchant who deals in it, though he advances, does
not properly pay the tax, as he gets it back in the price of the
commodity. The tax is finally paid by the last purchaser or
consumer. But money is a commodity, with regard to which every
man is a merchant. Nobody buys it but in order to sell it again;
and with regard to it there is, in ordinary cases, no last
purchaser or consumer. When the tax upon coinage, therefore, is
so moderate as not to encourage false coining, though every body
advances the tax, nobody finally pays it; because every body gets
it back in the advanced value of the coin.
A moderate seignorage, therefore, would not, in any case, augment
the expense of the bank, or of any other private persons who
carry their bullion to the mint in order to be coined; and the
want of a moderate seignonage does not in any case diminish it.
Whether there is or is not a seignorage, if the currency contains
its full standard weight, the coinage costs nothing to anybody ;
and if it is short of that weight, the coinage must always cost
the difference between the quantity of bullion which ought to be
contained in it, and that which actually is contained in it.
The government, therefore, when it defrays the expense of
coinage, not only incurs some small expense, but loses some small
revenue which it might get by a proper duty; and neither the
bank, nor any other private persons, are in the smallest degree
benefited by this useless piece of public generosity.
The directors of the bank, however, would probably be unwilling
to agree to the impositon of a seignorage upon the authority of a
speculation which promises them no gain, but only pretends to
insure them from any loss. In the present state of the gold coin,
and as long as it continues to be received by weight, they
certainly would gain nothing by such a change. But if the custom
of weighing the gold coin should ever go into disuse, as it is
very likely to do, and if the gold coin should ever fall into the
same state of degradation in which it was before the late
recoinage, the gain, or more properly the savings, of the bank,
inconsequence of the imposition of a seignorage, would probably
be very considerable. The bank of England is the only company
which sends any considerable quantity of bullion to the mint, and
the burden of the annual coinage falls entirely, or almost
entirely, upon it. If this annual coinage had nothing to do but
to repair the unavoidable losses and necessary wear and tear of
the coin, it could seldom exceed fifty thousand, or at most a
hundred thousand pounds. But when the coin is degraded below its
standard weight, the annual coinage must, besides this, fill up
the large vacuities which exportation and the melting pot are
continually making in the current coin. It was upon this account,
that during the ten or twelve years immediately preceding the
late reformation of the gold coin, the annual coinage amounted,
at an average, to more than £850,000. But if there had been a
seignorage of four or five per cent. upon the gold coin, it would
probably, even in the state in which things then were, have put
an effectual stop to the business both of exportation and of the
melting pot. The bank, instead of losing every year about two and
a half per cent. upon the bullion which was to be coined into
more than eight hundred and fifty thousand pounds, or incurring
an annual loss of more than £21,250 pounds, would not probably
have incurred the tenth part of that loss.
The revenue allotted by parliament for defraying the expense of
the coinage is but fourteen thousand pounds a-year; and the real
expense which it costs the government, or the fees of the
officers of the mint, do not, upon ordinary occasions, I am
assured, exceed the half of that sum. The saving of so very small
a sum, or even the gaining of another, which could not well be
much larger, are objects too inconsiderable, it may be thought,
to deserve the serious attention of government. But the saving of
eighteen or twenty thousand pounds a-year, in case of an event
which is not improbable, which has frequently happened before,
and which is very likely to happen again, is surely an object
which well deserves the serious attention, even of so great a
company as the bank of England.
Some of the foregoing reasonings and observations might, perhaps,
have been more properly placed in those chapters of the first
book which treat of the origin and use of money, and of the
difference between the real and the nominal price of commodities.
But as the law for the encouragement of coinage derives its
origin from those vulgar prejudices which have been introduced by
the mercantile system, I judged it more proper to reserve them
for this chapter. Nothing could be more agreeable to the spirit
of that system than a sort of bounty upon the production of
money, the very thing which, it supposes, constitutes the wealth
of every nation. It is one of its many admirable expedients for
enriching the country.
CHAPTER VII.
OF COLONIES.
PART I.
Of the Motives for Establishing New Colonies.
The interest which occasioned the first settlement of the
different European colonies in America and the West Indies, was
not altogether so plain and distinct as that which directed the
establishment of those of ancient Greece and Rome.
All the different states of ancient Greece possessed, each of
them, but a very small territory; and when the people in anyone
of them multiplied beyond what that territory could easily
maintain, a part of them were sent in quest of a new habitation,
in some remote and distant part of the world ; the warlike
neighbours who surrounded them on all sides, rendering it
difficult for any of them to enlarge very much its territory at
home. The colonies of the Dorians resorted chiefly to Italy and
Sicily, which, in the times preceding the foundation of Rome,
were inhabited by barbarous and uncivilized nations; those of the
Ionians and Aeolians, the two other great tribes of the Greeks,
to Asia Minor and the islands of the Aegean sea, of which the
inhabitants sewn at that time to have been pretty much in the
same state as those of Sicily and Italy. The mother city, though
she considered the colony as a child, at all times entitled to
great favour and assistance, and owing in return much gratitude
and respect, yet considered it as an emancipated child, over whom
she pretended to claim no direct authority or jurisdiction. The
colony settled its own form of government, enacted its own laws,
elected its own magistrates, and made peace or war with its
neighbours, as an independent state, which had no occasion to
wait for the approbation or consent of the mother city. Nothing
can be more plain and distinct than the interest which directed
every such establishment.
Rome, like most of the other ancient republics, was originally
founded upon an agrarian law, which divided the public territory,
in a certain proportion, among the different citizens who
composed the state. The course of human affairs, by marriage, by
succession, and by alienation, necessarily deranged this original
division, and frequently threw the lands which had been allotted
for the maintenance of many different families, into the
possession of a single person. To remedy this disorder, for
such it was supposed to be, a law was made, restricting the
quantity of land which any citizen could possess to five hundred
jugera; about 350 English acres. This law, however, though we
read of its having been executed upon one or two occasions, was
either neglected or evaded, and the inequality of fortunes went
on continually increasing. The greater part of the citizens had
no land ; and without it the manners and customs of those times
rendered it difficult for a freeman to maintain his independency.
In the present times, though a poor man has no land of his own,
if he has a little stock, he may either farm the lands of
another, or he may carry on some little retail trade ; and if he
has no stock, he may find employment either as a country
labourer, or as an artificer. But among the ancient Romans, the
lands of the rich were all cultivated by slaves, who wrought
under an overseer, who was likewise a slave; so that a poor
freeman had little chance of being employed either as a farmer or
as a labourer. All trades and manufactures, too, even the retail
trade, were carried on by the slaves of the rich for the benefit
of their masters, whose wealth, authority, and protection, made
it difficult for a poor freeman to maintain the competition
against them. The citizens, therefore, who had no land, had
scarce any other means of subsistence but the bounties of the
candidates at the annual elections. The tribunes, when they had a
mind to animate the people against the rich and the great, put
them in mind of the ancient divisions of lands, and represented
that law which restricted this sort of private property as the
fundamental law of the republic. The people became clamorous to
get land, and the rich and the great, we may believe, were
perfectly determined not to give them any part of theirs. To
satisfy them in some measure, therefore, they frequently proposed
to send out a new colony. But conquering Rome was, even upon such
occasions, under no necessity of turning out her citizens to seek
their fortune, if one may so, through the wide world, without
knowing where they were to settle. She assigned them lands
generally in the conquered provinces of Italy, where, being
within the dominions of the republic, they could never form any
independent state, but were at best but a sort of corporation,
which, though it had the power of enacting bye-laws for its own
government, was at all times subject to the correction,
jurisdiction, and legislative authority of the mother city. The
sending out a colony of this kind not only gave some satisfaction
to the people, but often established a sort of garrison, too, in
a newly conquered province, of which the obedience might
otherwise have been doubtful. A Roman colony, therefore, whether
we consider the nature of the establishment itself, or the
motives for making it, was altogether different from a Greek one.
The words, accordingly, which in the original languages denote
those different establishments, have very different meanings. The
Latin word (colonia) signifies simply a plantation. The Greek
word (apoixia), on the contrary, signifies a separation of
dwelling, a departure from home, a going out of the house. But
though the Roman colonies were, in many respects, different from
the Greek ones, the interest which prompted to establish them was
equally plain and distinct. Both institutions derived their
origin, either from irresistible necessity, or from clear and
evident utility.
The establishment of the European colonies in America and the
West Indies arose from no necessity; and though the utility which
has resulted from them has been very great, it is not altogether
so clear and evident. It was not understood at their first
establishment, and was not the motive, either of that
establishment, or of the discoveries which gave occasion to it ;
and the nature, extent, and limits of that utility, are not,
perhaps, well understood at this day.
The Venetians, during the fourteenth and fifteenth centuries,
carried on a very advantageous commerce in spiceries and other
East India goods, which they distributed among the other nations
of Europe. They purchased them chiefly in Egypt, at that time
under the dominion of the Mamelukes, the enemies of the Turks, of
whom the Venetians were the enemies ; and this union of interest,
assisted by the money of Venice, formed such a connexion as gave
the Venetians almost a monopoly of the trade.
The great profits of the Venetians tempted the avidity of the
Portuguese. They had been endeavouring, during the course of the
fifteenth century, to find out by sea a way to the countries from
which the Moors brought them ivory and gold dust across the
desert. They discovered the Madeiras, the Canaries, the Azores,
the Cape de Verd islands, the coast of Guinea, that of Loango,
Congo, Angola, and Benguela, and, finally, the Cape of Good Hope.
They had long wished to share in the profitable traffic of the
Venetians, and this last discovery opened to them a probable
prospect of doing so. In 1497, Vasco de Gamo sailed from the port
of Lisbon with a fleet of four ships, and, after a navigation of
eleven months, arrived upon the coast of Indostan ; and thus
completed a course of discoveries which had been pursued with
great steadiness, and with very little interruption, for near a
century together.
Some years before this, while the expectations of Europe were in
suspense about the projects of the Portuguese, of which the
success appeared yet to be doubtful, a Genoese pilot formed the
yet more daring project of sailing to the East Indies by the
west. The situation of those countries was at that time very
imperfectly known in Europe. The few European travellers who had
been there, had magnified the distance, perhaps through
simplicity and ignorance ; what was really very great, appearing
almost infinite to those who could not measure it; or, perhaps,
in order to increase somewhat more the marvellous of their own
adventures in visiting regions so immensely remote from Europe.
The longer the way was by the east, Columbus very justly
concluded, the shorter it would be by the west. He proposed,
therefore, to take that way, as both the shortest and the surest,
and he had the good fortune to convince Isabella of Castile of
the probability of his project. He sailed from the port of Palos
in August 1492, near five years before the expedition of Vasco de
Gamo set out from Portugal; and, after a voyage of between two
and three months, discovered first some of the small Bahama or
Lucyan islands, and afterwards the great island of St. Domingo.
But the countries which Columbus discovered, either in this or in
any of his subsequent voyages, had no resemblance to those which
he had gone in quest of. Instead of the wealth, cultivation, and
populousness of China and Indostan, he found, in St. Domingo, and
in all the other parts of the new world which he ever visited,
nothing but a country quite covered with wood, uncultivated, and
inhabited only by some tribes of naked and miserable savages. He
was not very willing, however, to believe that they were not the
same with some of the countries described by Marco Polo, the
first European who had visited, or at least had left behind him
any description of China or the East Indies ; and a very slight
resemblance, such as that which he found between the name of
Cibao, a mountaim in St. Domingo, and that of Cipange, mentioned
by Marco Polo, was frequently sufficient to make him return to
this favourite prepossession, though contrary to the clearest
evidence. In his letters to Ferdinand and Isabella, he called the
countries which he had discovered the Indies. He entertained no
doubt but that they were the extremity of those which had been
described by Marco Polo, and that they were not very distant from
the Ganges, or from the countries which had been conquered by
Alexander. Even when at last convinced that they were different,
be still flattered himself that those rich countries were at no
great distance; and in a subsequent voyage, accordingly, went in
quest of them along the coast of Terra Firma, and towards the
Isthmus of Darien.
In consequence of this mistake of Columbus, the name of the
Indies has stuck to those unfortunate countries ever since; and
when it was at last clearly discovered that the new were
altogether different from the old Indies, the former were called
the West, in contradistinction to the latter, which were called
the East Indies.
It was of importance to Columbus, however, that the countries
which he had discovered, whatever they were, should be
represented to the court of Spain as of very great consequence ;
and, in what constitutes the real riches of every country, the
animal and vegetable productions of the soil, there was at that
time nothing which could well justify such a representation of
them.
The cori, something between a rat and a rabbit, and supposed by
Mr Buffon to be the same with the aperea of Brazil, was the
largest viviparous quadruped in St. Domingo. This species seems
never to have been very nurnerous; and the dogs and cats of the
Spaniards are said to have long ago almost entirely extirpated
it, as well as some other tribes of a still smaller size. These,
however, together with a pretty large lizard, called the ivana or
iguana, constituted the principal part of the animal food which
the land afforded.
The vegetable food of the inhabitants, though, from their want of
industry, not very abundant, was not altogether so scanty. It
consisted in Indian corn, yams, potatoes, bananas, etc., plants
which were then altogether unknown in Europe, and which have
never since been very much esteemed in it, or supposed to yield a
sustenance equal to what is drawn from the common sorts of grain
and pulse, which have been cultivated in this part of the world
time out of mind.
The cotton plant, indeed, afforded the material of a very
important manufacture, and was at that time, to Europeans,
undoubtedly the most valuable of all the vegetable productions of
those islands. But though, in the end of the fifteenth century,
the muslins and other cotton goods of the East Indies were much
esteemed in every part of Europe, the cotton manufacture itself
was not cultivated in any part of it. Even this production,
therefore, could not at that time appear in the eyes of Europeans
to be of very great consequence.
Finding nothing, either in the animals or vegetables of the newly
discovered countries which could justify a very advantageous
representation of them, Columbus turned his view towards their
minerals; and in the richness of their productions of this third
kingdom, he flattered himself he had found a full compensation
for the insignificancy of those of the other two. The little bits
of gold with which the inhabitants ornamented their dress, and
which, he was informed, they frequently found in the rivulets and
torrents which fell from the mountains, were sufficient to
satisfy him that those mountains abounded with the richest gold
mines. St. Domingo, therefore, was represented as a country
abounding with gold, and upon that account (according to the
prejudices not only of the present times, but of those times), an
inexhaustible source of real wealth to the crown and kingdom of
Spain. When Columbus, upon his return from his first voyage, was
introduced with a sort of triumphal honours to the sovereigns of
Castile and Arragon, the principal productions of the countries
which he had discovered were carried in solemn procession before
him. The only valuable part of them consisted in some little
fillets, bracelets, and other ornaments of gold, and in some
bales of cotton. The rest were mere objects of vulgar wonder and
curiosity ; some reeds of an extraordinary size, some birds of a
very beautiful plumage, and some stuffed skins of the huge
alligator and manati ; all of which were preceded by six or seven
of the wretched natives, whose singular colour and appearance
added greatly to the novelty of the show.
In consequence of the representations of Columbus, the council of
Castile determined to take possession of the countries of which
the inhabitants were plainly incapable of defending themselves.
The pious purpose of converting them to Christianity sanctified
the injustice of the project. But the hope of finding treasures
of gold there was the sole motive which prompted to undertake it;
and to give this motive the greater weight, it was proposed by
Columbus, that the half of all the gold and silver that should be
found there, should belong to the crown. This proposal was
approved of by the council.
As long as the whole, or the greater part of the gold which the
first adventurers imported into Europe was got by so very easy a
method as the plundering of the defenceless natives, it was not
perhaps very difficult to ,pay even this heavy tax ; but when the
natives were once fairly stript of all that they had, which, in
St. Domingo, and in all the other countries discovered by
Columbus, was done completely in six or eight years, and when, in
order to find more, it had become necessary to dig for it in the
mines, there was no longer any possibility of paying this tax.
The rigorous exaction of it, accordingly, first occasioned, it is
said, the total abandoning of the mines of St. Domingo, which
have never been wrought since. It was soon reduced, therefore, to
a third; then to a fifth; afterwards to a tenth; and at last to a
twentieth part of the gross produce of the gold mines. The tax
upon silver continued for a long time to be a fifth of the gross
produce. It was reduced to a tenth only in the course of the
present century. But the first adventurers do not appear to have
been much interested about silver. Nothing less precious than
gold seemed worthy of their attention.
All the other enterprizes of the Spaniards in the New World,
subsequent to those of Columbus, seem to have been prompted by
the same motive. It was the sacred thirst of gold that carried
Ovieda, Nicuessa, and Vasco Nugnes de Balboa, to the Isthmus of
Darien ; that carried Cortes to Mexico, Almagro and Pizarro to
Chili and Peru. When those adventurers arrived upon any unknown
coast, their first inquiry was always if there was any gold to be
found there ; and according to the information which they
received concerning this particular, they determined either to
quit the country or to settle in it.
Of all those expensive and uncertain projects, however, which
bring bankruptcy upon the greater part of the people who engage
in them, there is none, perhaps, more perfectly ruinous than the
search after new silver and gold mines. It is, perhaps, the most
disadvantageous lottery in the world, or the one in which the
gain of those who draw the prizes bears the least proportion to
the loss of those who draw the blanks; for though the prizes are
few, and the blanks many, the common price of a ticket is the
whole fortune of a very rich man. Projects of mining, instead of
replacing the capital employed in them, together with the
ordinary profits of stock, commonly absorb both capital and
profit. They are the projects, therefore, to which, of all
others, a prudent lawgiver, who desired to increase the capital
of his nation, would least choose to give any extraordinary
encouragement, or to turn towards them a greater share of that
capital than what would go to them of its own accord. Such, in
reality, is the absurd confidence which almost all men have in
their own good fortune, that wherever there is the least
probability of success, too great a share of it is apt to go to
them of its own accord.
But though the judgment of sober reason and experience concerning
such projects has always been extremely unfavourable, that of
human avidity has commonly been quite otherwise. The same passion
which has suggested to so many people the absurd idea of the
philosopher's stone, has suggested to others the equally absurd
one of immense rich mines of gold and silver. They did not
consider that the value of those metals has, in all ages and
nations, arisen chiefly from their scarcity, and that their
scarcity has arisen from the very small quantities of them which
nature has anywhere deposited in one place, from the hard and
intractable substances with which she has almost everywhere
surrounded those small quantities, and consequently from the
labour and expense which are everywhere necessary in order to
penetrate, and get at them. They flattered themselves that veins
of those metals might in many places be found, as large and as
abundant as those which are commonly found of lead, or copper, or
tin, or iron. The dream of Sir Waiter Raleigh, concerning the
golden city and country of El Dorado, may satisfy us, that even
wise men are not always exempt from such strange delusions. More
than a hundred years after the death of that great man, the
Jesuit Gumila was still convinced of the reality of that
wonderful country, and expressed, with great warmth, and, I dare
say, with great sincerity, how happy he should be to carry the
light of the gospel to a people who could so well reward the
pious labours of their missionary.
In the countries first discovered by the Spaniards, no gold and
silver mines are at present known which are supposed to be worth
the working. The quantities of those metals which the first
adventurers are said to have found there, had probably been very
much magnified, as well as the fertility of the mines which were
wrought immediately after the first discovery. What those
adventurers were reported to have found, however, was sufficient
to inflame the avidity of all their countrymen. Every Spaniard
who sailed to America expected to find an El Dorado. Fortune,
too, did upon this what she has done upon very few other
occasions. She realized in some measure the extravagant hopes of
her votaries; and in the discovery and conquest of Mexico and
Peru (of which the one happened about thirty, and the other about
forty, years after the first expedition of Columbus), she
presented them with something not very unlike that profusion of
the precious metals which they sought for.
A project of commerce to the East Indies, therefore, gave
occasion to the first discovery of the West. A project of
conquest gave occasion to all the establishments of the Spaniards
in those newly discovered countries. The motive which excited
them to this conquest was a project of gold and silver mines; and
a course of accidents which no human wisdom could foresee,
rendered this project much more successful than the undertakers
had any reasonable grounds for expecting.
The first adventurers of all the other nations of Europe who
attempted to make settlements in America, were animated by the
like chimerical views; but they were not equally successful. It
was more than a hundred years after the first settlement of the
Brazils, before any silver, gold, or diamond mines, were
discovered there. In the English, French, Dutch, and Danish
colonies, none have ever yet been discovered, at least none that
are at present supposed to be worth the working. The first
English settlers in North America, however, offered a fifth of
all the gold and silver which should be found there to the king,
as a motive for granting them their patents. In the patents of
Sir Waiter Raleigh, to the London and Plymouth companies, to the
council of Plymouth, etc. this fifth was accordingly reserved to
the crown. To the expectation of finding gold and silver mines,
those first settlers, too, joined that of discovering a
north-west passage to the East Indies. They have hitherto been
disappointed in both.
PART II.
Causes of the Prosperity of New Colonies.
The colony of a civilized nation which takes possession either of
a waste country, or of one so thinly inhabited that the natives
easily give place to the new settlers, advances more rapidly to
wealth and greatness than any other human society.
The colonies carry out with them a knowledge of agriculture and
of other useful arts, superior to what can grow up of its own
accord, in the course of many centuries, among savage and
barbarous nations. They carry out with them, too, the habit of
subordination, some notion of the regular government which takes
place in their own country, of the system of laws which support
it, and of a regular administration of justice; and they
naturally establish something of the same kind in the new
settlement. But among savage and barbarous nations, the natural
progress of law and government is still slower than the natural
progress of arts, after law and government have been so far
established as is necessary for their protection. Every colonist
gets more land than he can possibly cultivate. He has no rent,
and scarce any taxes, to pay. No landlord shares with him in its
produce, and, the share of the sovereign is commonly but a
trifle. He has every motive to render as great as possible a
produce which is thus to be almost entirely his own. But his land
is commonly so extensive, that, with all his own industry, and
with all the industry of other people whom he can get to employ,
he can seldom make it produce the tenth part of what it is
capable of producing. He is eager, therefore, to collect
labourers from all quarters, and to reward them with the most
liberal wages. But those liberal wages, joined to the plenty and
cheapness of land, soon make those labourers leave him, in order
to become landlords themselves, and to reward with equal
liberality other labourers, who soon leave them for the same
reason that they left their first master. The liberal reward of
labour encourages marriage. The children, during the tender years
of infancy, are well fed and properly taken care of ; and when
they are grown up, the value of their labour greatly overpays
their maintenance. When arrived at maturity, the high price of
labour, and the low price of land, enable them to establish
themselves in the same manner as their fathers did before them.
In other countries, rent and profit eat up wages, and the two
superior orders of people oppress the inferior one ; but in new
colonies, the interest of the two superior orders obliges them to
treat the inferior one with more generosity and humanity, at
least where that inferior one is not in a state of slavery. Waste
lands, of the greatest natural fertility, are to be had for a
trifle. The increase of revenue which the proprietor, who is
always the undertaker, expects from their improvement,
constitutes his profit, which, in these circumstances, is
commonly very great; but this great profit cannot be made,
without employing the labour of other people in clearing and
cultivating the land; and the disproportion between the great
extent of the land and the small number of the people, which
commonly takes place in new colonies, makes it difficult for him
to get this labour. He does not, therefore, dispute about wages,
but is willing to employ labour at any price. The high wages of
labour encourage population. The cheapness and plenty of good
land encourage improvement, and enable the proprietor to pay
those high wages. In those wages consists almost the whole price
of the land ; and though they are high, considered as the wages
of labour, they are low, considered as the price of what is so
very valuable. What encourages the progress of population and
improvement, encourages that of real wealth and greatness.
The progress of many of the ancient Greek colonies towards wealth
and greatness seems accordingly to have been very rapid. In the
course of a century or two, several of them appear to have
rivalled, and even to have surpassed, their mother cities.
Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy,
Ephesus and Miletus in Lesser Asia, appear, by all accounts, to
have been at least equal to any of the cities of ancient Greece.
Though posterior in their establishment, yet all the arts of
refinement, philosophy, poetry, and eloquence, seem to have been
cultivated as early, and to have been improved as highly in them
as in any part of the mother country The schools of the two
oldest Greek philosophers, those of Thales and Pythagoras, were
established, it is remarkable, not in ancient Greece, but the one
in an Asiatic, the other in an Italian colony. All those colonies
had established themselves in countries inhabited by savage and
barbarous nations, who easily gave place to the new settlers.
They had plenty of good land; and as they were altogether
independent of the mother city, they were at liberty to manage
their own affairs in the way that they judged was most suitable
to their own interest.
The history of the Roman colonies is by no means so brilliant.
Some of them, indeed, such as Florence, have, in the course of
many ages, and after the fall of the mother city, grown up to be
considerable states. But the progress of no one of them seems
ever to have been very rapid. They were all established in
conquered provinces, which in most cases had been fully inhabited
before. The quantity of land assigned to each colonist was seldom
very considerable, and, as the colony was not independent, they
were not always at liberty to manage their own affairs in the way
that they judged was most suitable to their own interest.
In the plenty of good land, the European colonies established in
America and the West Indies resemble, and even greatly surpass,
those of ancient Greece. In their dependency upon the mother
state, they resemble those of ancient Rome; but their great
distance from Europe has in all of them alleviated more or less
the effects of this dependency. Their situation has placed them
less in the view, and less in the power of their mother country.
In pursuing their interest their own way, their conduct has upon
many occasions been overlooked, either because not known or not
understood in Europe; and upon some occasions it has been fairly
suffered and submitted to, because their distance rendered it
difficult to restrain it. Even the violent and arbitrary
government of Spain has, upon many occasions, been obliged to
recall or soften the orders which had been given for the
government of her colonies, for fear of a general insurrection.
The progress of all the European colonies in wealth, population,
and improvement, has accordingly been very great.
The crown of Spain, by its share of the gold and silver, derived
some revenue from its colonies from the moment of their first
establishment. It was a revenue, too, of a nature to excite in
human avidity the most extravagant expectation of still greater
riches. The Spanish colonies, therefore, from the moment of their
first establishment, attracted very much the attention of their
mother country; while those of the other European nations were
for a long time in a great measure neglected. The former did not,
perhaps, thrive the better in consequence of this attention, nor
the latter the worse in consequence of this neglect. In
proportion to the extent of the country which they in some
measure possess, the Spanish colonies are considered as less
populous and thriving than those of almost any other European
nation. The progress even of the Spanish colonies, however, in
population and improvement, has certainly been very rapid and
very great. The city of Lima, founded since the conquest, is
represented by Ulloa as containing fifty thousand inhabitants
near thirty years ago. Quito, which had been but a miserable
hamlet of Indians, is represented by the same author as in his
time equally populous. Gemel i Carreri, a pretended traveller, it
is said, indeed, but who seems everywhere to have written upon
extreme good information, represents the city of Mexico as
containing a hundred thousand inhabitants ; a number which, in
spite of all the exaggerations of the Spanish writers, is
probably more than five times greater than what it contained in
the time of Montezuma. These numbers exceed greatly those of
Boston, New York, and Philadelphia, the three greatest cities of
the English colonies. Before the conquest of the Spaniards, there
were no cattle fit for draught, either in Mexico or Peru. The
lama was their only beast of burden, and its strength seems to
have been a good deal inferior to that of a common ass. The
plough was unknown among them. They were ignorant of the use of
iron. They had no coined money, nor any established instrument of
commerce of any kind. Their commerce was carried on by barter. A
sort of wooden spade was their principal instrument of
agriculture. Sharp stones served them for knives and hatchets to
cut with; fish bones, and the hard sinews of certain animals,
served them with needles to sew with; and these seem to have been
their principal instruments of trade. In this state of things, it
seems impossible that either of those empires could have been so
much improved or so well cultivated as at present, when they are
plentifully furnished with all sorts of European cattle, and when
the use of iron, of the plough, and of many of the arts of
Europe, have been introduced among them. But the populousness of
every country must be in proportion to the degree of its
improvement and cultivation. In spite of the cruel destruction of
the natives which followed the conquest, these two great empires
are probably more populous now than they ever were before; and
the people are surely very different; for we must acknowledge, I
apprehend, that the Spanish creoles are in many respects superior
to the ancient Indians.
After the settlements of the Spaniards, that of the Portuguese
in Brazil is the oldest of any European nation in America. But as
for a long time after the first discovery neither gold nor silver
mines were found in it, and as it afforded upon that account
little or no revenue to the crown, it was for a long time in a
great measure neglected ; and during this state of neglect, it
grew up to be a great and powerful colony. While Portugal was
under the dominion of Spain, Brazil was attacked by the Dutch,
who got possession of seven of the fourteen provinces into which
it is divided. They expected soon to conquer the other seven,
when Portugal recovered its independency by the elevation of the
family of Braganza to the throne. The Dutch, then, as enemies to
the Spaniards, became friends to the Portuguese, who were
likewise the enemies of the Spaniards. They agreed, therefore, to
leave that part of Brazil which they had not conquered to the
king of Portugal, who agreed to leave that part which they had
conquered to them, as a matter not worth disputing about, with
such good allies. But the Dutch government soon began to oppress
the Portuguese colonists, who, instead of amusing themselves with
complaints, took arms against their new masters, and by their own
valour and resolution, with the connivance, indeed, but without
any avowed assistance from the mother country, drove them out of
Brazil. The Dutch, therefore, finding it impossible to keep any
part of the country to themselves, were contented that it should
be entirely restored to the crown of Portugal. In this colony
there are said to be more than six hundred thousand people,
either Portuguese or descended from Portuguese, creoles,
mulattoes, and a mixed race between Portuguese and Brazilians. No
one colony in America is supposed to contain so great a number of
people of European extraction.
Towards the end of the fifteenth, and during the greater part of
the sixteenth century, Spain and Portugal were the two great
naval powers upon the ocean ; for though the commerce of Venice
extended to every part of Europe, its fleet had scarce ever
sailed beyond the Mediterranean. The Spaniards, in virtue of the
first discovery, claimed all America as their own; and though
they could not hinder so great a naval power as that of Portugal
from settling in Brazil, such was at that time the terror of
their name, that the greater part of the other nations of Europe
were afraid to establish themselves in any other part of that
great continent. The French, who attempted to settle in Florida,
were all murdered by the Spaniards. But the declension of the
naval power of this latter nation, in consequence of the defeat
or miscarriage of what they called their invincible armada, which
happened towards the end of the sixteenth century, put it out of
their power to obstruct any longer the settlements of the other
European nations. In the course of the seventeenth century,
therefore, the English, French, Dutch, Danes, and Swedes, all the
great nations who had any ports upon the ocean, attempted to make
some settlements in the new world.
The Swedes established themselves in New Jersey; and the number
of Swedish families still to be found there sufficiently
demonstrates, that this colony was very likely to prosper, had it
been protected by the mother country. But being neglected by
Sweden, it was soon swallowed up by the Dutch colony of New York,
which again, in 1674, fell under the dominion of the English.
The small islands of St. Thomas and Santa Cruz, are the only
countries in the new world that have ever been possessed by the
Danes. These little settlements, too, were under the government
of an exclusive company, which had the sole right, both of
purchasing the surplus produce of the colonies, and of supplying
them with such goods of other countries as they wanted, and
which, therefore, both in its purchases and sales, had not only
the power of oppressing them, but the greatest temptation to do
so. The government of an exclusive company of merchants is,
perhaps, the worst of all governments for any country whatever.
It was not, however, able to stop altogether the progress of
these colonies, though it rendered it more slow and languid. The
late king of Denmark dissolved this company, and since that time
the prosperity of these colonies has been very great.
The Dutch settlements in the West, as well as those in the East
Indies, were originally put under the government of an exclusive
company. The progress of some of them, therefore, though it has
been considerable in comparison with that of almost any country
that has been long peopled and established, has been languid and
slow in comparison with that of the greater part of new colonies.
The colony of Surinam, though very considerable, is still
inferior to the greater part of the sugar colonies of the other
European nations. The colony of Nova Belgia, now divided into the
two provinces of New York and New Jersey, would probably have
soon become considerable too, even though it had remained under
the government of the Dutch. The plenty and cheapness of good
land are such powerful causes of prosperity, that the very worst
government is scarce capable of checking altogether the efficacy
of their operation. The great distance, too, from the mother
country, would enable the colonists to evade more or less, by
smuggling, the monopoly which the company enjoyed against them.
At present, the company allows all Dutch ships to trade to
Surinam, upon paying two and a-half per cent. upon the value of
their cargo for a license; and only reserves to itself
exclusively, the direct trade from Africa to America, which
consists almost entirely in the slave trade. This relaxation in
the exclusive privileges of the company, is probably the
principal cause of that degree of prosperity which that colony at
present enjoys. Curacoa and Eustatia, the two principal islands
belonging to the Dutch, are free ports, open to the ships of all
nations; and this freedom, in the midst of better colonies, whose
ports are open to those of one nation only, has been the great
cause of the prosperity of those two barren islands.
The French colony of Canada was, during the greater part of the
last century, and some part of the present, under the government
of an exclusive company. Under so unfavourable an administration,
its progress was necessarily very slow, in comparison with that
of other new colonies; but it became much more rapid when this
company was dissolved, after the fall of what is called the
Mississippi scheme. When the English got possession of this
country, they found in it near double the number of inhabitants
which father Charlevoix had assigned to it between twenty and
thirty years before. That jesuit had travelled over the whole
country, and had no inclination to represent it as less
inconsiderable than it really was.
The French colony of St. Domingo was established by pirates and
freebooters, who, for a long time, neither required the
protection, nor acknowledged the authority of France; and when
that race of banditti became so far citizens as to acknowledge
this authority, it was for a long time necessary to exercise it
with very great gentleness. During this period, the population
and improvement of this colony increased very fast. Even the
oppression of the exclusive company, to which it was for some
time subjected with all the other colonies of France, though it
no doubt retarded, had not been able to stop its progress
altogether. The course of its prosperity returned as soon as it
was relieved from that oppression. It is now the most important
of the sugar colonies of the West Indies, and its produce is said
to be greater than that of all the English sugar colonies put
together. The other sugar colonies of France are in general all
very thriving.
But there are no colonies of which the progress has been more
rapid than that of the English in North America.
Plenty of good land, and liberty to manage their own affairs
their own way, seem to be the two great causes of the prosperity
of all new colonies.
In the plenty of good land, the English colonies of North
America, though no doubt very abundantly provided, are, however,
inferior to those of the Spaniards and Portuguese, and not
superior to some of those possessed by the French before the late
war. But the political institutions of the English colonies have
been more favourable to the improvement and cultivation of this
land, than those of the other three nations.
First, The engrossing of uncultivated land, though it has by
no means been prevented altogether, has been more restrained in
the English colonies than in any other. The colony law, which
imposes upon every proprietor the obligation of improving and
cultivating, within a limited time, a certain proportion of his
lands, and which, in case of failure, declares those neglected
lands grantable to any other person; though it has not perhaps
been very strictly executed, has, however, had some effect.
Secondly, In Pennsylvania there is no right of primogeniture,
and lands, like moveables, are divided equally among all the
children of the family. In three of the provinces of New England,
the oldest has only a double share, as in the Mosaical law.
Though in those provinces, therefore, too great a quantity of
land should sometimes be engrossed by a particular individual, it
is likely, in the course of a generation or two, to be
sufficiently divided again. In the other English colonies,
indeed, the right of primogeniture takes place, as in the law of
England: But in all the English colonies, the tenure of the
lands, which are all held by free soccage, facilitates alienation
; and the grantee of an extensive tract of land generally finds
it for his interest to alienate, as fast as he can, the greater
part of it, reserving only a small quit-rent. In the Spanish and
Portuguese colonies, what is called the right of majorazzo takes
place in the succession of all those great estates to which any
title of honour is annexed. Such estates go all to one person,
and are in effect entailed and unalienable. The French colonies,
indeed, are subject to the custom of Paris, which, in the
inheritance of land, is much more favourable to the younger
children than the law of England. But, in the French colonies, if
any part of an estate, held by the noble tenure of chivalry and
homage, is alienated, it is, for a limited time, subject to the
right of redemption, either by the heir of the superior, or by
the heir of the family; and all the largest estates of the
country are held by such noble tenures, which necessarily
embarrass alienation. But, in a new colony, a great uncultivated
estate is likely to be much more speedily divided by alienation
than by succession. The plenty and cheapness of good land, it has
already been observed, are the principal causes of the rapid
prosperity of new colonies. The engrossing of land, in effect,
destroys this plenty and cheapness. The engrossing of
uncultivated land, besides, is the greatest obstruction to its
improvement ; but the labour that is employed in the improvement
and cultivation of land affords the greatest and most valuable
produce to the society. The produce of labour, in this case, pays
not only its own wages and the profit of the stock which employs
it, but the rent of the land too upon which it is employed. The
labour of the English colonies, therefore, being more employed in
the improvement and cultivation of land, is likely to afford a
greater and more valuable produce than that of any of the other
three nations, which, by the engrossing of land, is more or less
diverted towards other employments.
Thirdly, The labour of the English colonists is not only
likely to afford a greater and more valuable produce, but, in
consequence of the moderation of their taxes, a greater
proportion of this produce belongs to themselves, which they may
store up and employ in putting into motion a still greater
quantity of labour. The Eng1ish colonists have never yet
contributed any thing towards the defence of the mother country,
or towards the support of its civil government. They themselves,
on the contrary, have hitherto been defended almost entirely at
the expense of the mother country ; but the expense of fleets and
armies is out of all proportion greater than the necessary
expense of civil government. The expense of their own civil
government has always been very moderate. It has generally been
confined to what was necessary for paying competent salaries to
the governor, to the judges, and to some other officers of
police, and for maintaining a few of the most useful public
works. The expense of the civil establishment of Massachusetts
Bay, before the commencement of the present disturbances, used to
be but about £18;000 a-year ; that of New Hampshire and Rhode
Island, £3500 each; that of Connecticut, £4000; that of New York
and Pennsylvania, £4500 each; that of New Jersey, £1200; that of
Virginia and South Carolina, £8000 each. The civil establishments
of Nova Scotia and Georgia are partly supported by an annual
grant of parliament; but Nova Scotia pays, besides, about £7000
a-year towards the public expenses of the colony, and Georgia
about £2500 a-year. All the different civil establishments in
North America, in short, exclusive of those of Maryland and North
Carolina, of which no exact account has been got, did not, before
the commencement of the present disturbances, cost the
inhabitants about £64,700 a-year; an ever memorable example, at
how small an expense three millions of people may not only be
governed but well governed. The most important part of the
expense of government, indeed, that of defence and protection,
has constantly fallen upon the mother country. The ceremonial,
too, of the civil government in the colonies, upon the reception
of a new governor, upon the opening of a new assembly, etc.
though sufficiently decent, is not accompanied with any expensive
pomp or parade. Their ecclesiastical government is conducted upon
a plan equally frugal. Tithes are unknown among them; and their
clergy, who are far from being numerous, are maintained either by
moderate stipends, or by the voluntary contributions of the
people. The power of Spain and Portugal, on the contrary, derives
some support from the taxes levied upon their colonies. France,
indeed, has never drawn any considerable revenue from its
colonies, the taxes which it levies upon them being generally
spent among them. But the colony government of all these three
nations is conducted upon a much more extensive plan, and is
accompanied with a much more expensive ceremonial. The sums spent
upon the reception of a new viceroy of Peru, for example, have
frequently been enormous. Such ceremonials are not only real
taxes paid by the rich colonists upon those particular occasions,
but they serve to introduce among them the habit of vanity and
expense upon all other occasions. They are not only very grievous
occasional taxes, but they contribute to establish perpetual
taxes, of the same kind, still more grievous ; the ruinous taxes
of private luxury and extravagance. In the colonies of all those
three nations, too, the ecclesiastical government is extremely
oppressive. Tithes take place in all of them, and are levied with
the utmost rigour in those of Spain and Portugal. All of them,
besides, are oppressed with a numerous race of mendicant friars,
whose beggary being not only licensed but consecrated by
religion, is a most grievous tax upon the poor people, who are
most carefully taught that it is a duty to give, and a very great
sin to refuse them their charity. Over and above all this, the
clergy are, in all of them, the greatest engrossers of land.
Fourthly, In the disposal of their surplus produce, or of
what is over and above their own consumption, the English
colonies have been more favoured, and have been allowed a more
extensive market, than those of any other European nation. Every
European nation has endeavoured, more or less, to monopolize to
itself the commerce of its colonies, and, upon that account, has
prohibited the ships of foreign nations from trading to them, and
has prohibited them from importing European goods from any
foreign nation. But the manner in which this monopoly has been
exercised in different nations, has been very different.
Some nations have given up the whole commerce of their colonies
to an exclusive company, of whom the colonists were obliged to
buy all such European goods as they wanted, and to whom they were
obliged to sell the whole of their surplus produce. It was the
interest of the company, therefore, not only to sell the former
as dear, and to buy the latter as cheap as possible, but to buy
no more of the latter, even at this low price, than what they
could dipose of for a very high price in Europe. It was their
interest not only to degrade in all cases the value of the
surplus produce of the colony, but in many cases to discourage
and keep down the natural increase of its quantity. Of all the
expedients that can well be contrived to stunt the natural growth
of a new colony, that of an exclusive company is undoubtedly the
most effectual. This, however, has been the policy of Holland,
though their company, in the course of the present century, has
given up in many respects the exertion of their exclusive
privilege. This, too, was the policy of Denmark, till the reign
of the late king. It has occasionally been the policy of France ;
and of late, since 1755, after it had been abandoned by all other
nations on account of its absurdity, it has become the policy of
Portugal, with regard at least to two of the principal provinces
of Brazil, Pernambucco, and Marannon.
Other nations, without establishing an exclusive company, have
confined the whole commerce of their colonies to a particular
port of the mother country, from whence no ship was allowed to
sail, but either in a fleet and at a particular season, or, if
single, in consequence of a particular license, which in most
cases was very well paid for. This policy opened, indeed, the
trade of the colonies to all the natives of the mother country,
provided they traded from the proper port, at the proper season,
and in the proper vessels. But as all the different merchants,
who joined their stocks in order to fit out those licensed
vessels, would find it for their interest to act in concert, the
trade which was carried on in this manner would necessarily be
conducted very nearly upon the same principles as that of an
exclusive company. The profit of those merchants would be almost
equally exorbitant and oppressive. The colonies would be ill
supplied, and would be obliged both to buy very dear, and to sell
very cheap. This, however, till within these few years, had
always been the policy of Spain; and the price of all European
goods, accordingly, is said to have been enormous in the Spanish
West Indies. At Quito, we are told by Ulloa, a pound of iron sold
for about 4s:6d., and a pound of steel for about 6s:9d. sterling.
But it is chiefly in order to purchase European goods that the
colonies part with their own produce. The more, therefore, they
pay for the one, the less they really get for the other, and the
dearness of the one is the same thing with the cheapness of the
other. The policy of Portugal is, in this respect, the same as
the ancient policy of Spain, with regard to all its colonies,
except Pernambucco and Marannon; and with regard to these it has
lately adopted a still worse.
Other nations leave the trade of their colonies free to all their
subjects, who may carry it on from all the different ports of the
mother country, and who have occasion for no other license than
the common despatches of the custom-house. In this case the
number and dispersed situation of the different traders renders
it impossible for them to enter into any general combination, and
their competition is sufficient to hinder them from making very
exorbitant profits. Under so liberal a policy, the colonies are
enabled both to sell their own produce, and to buy the goods of
Europe at a reasonable price; but since the dissolution of the
Plymouth company, when our colonies were but in their infancy,
this has always been the policy of England. It has generally,
too, been that of France, and has been uniformly so since the
dissolution of what in England is commonly called their
Mississippi company. The profits of the trade, therefore, which
France and England carry on with their colonies, though no doubt
somewhat higher than if the competition were free to all other
nations, are, however, by no means exorbitant ; and the price of
European goods, accordingly, is not extravagantly high in the
greater past of the colonies of either of those nations.
In the exportation of their own surplus produce, too, it is only
with regard to certain commodities that the colonies of Great
Britain are confined to the market of the mother country. These
commodities having been enumerated in the act of navigation, and
in some other subsequent acts, have upon that account been called
enumerated commodities. The rest are called non-enumerated, and
may be exported directly to other countries, provided it is in
British or plantation ships, of which the owners and three
fourths of the mariners are British subjects
Among the non-enumerated commodities are some of the most
important productions of America and the West Indies, grain of
all sorts, lumber, salt provisions, fish, sugar, and rum.
Grain is naturally the first and principal object of the culture
of all new colonies. By allowing them a very extensive market for
it, the law encourages them to extend this culture much beyond
the consumption of a thinly inhabited country, and thus to
provide beforehand an ample subsistence for a continually
increasing population.
In a country quite covered with wood, where timber consequently
is of little or no value, the expense of clearing the ground is
the principal obstacle to improvement. By allowing the colonies a
very extensive market for their lumber, the law endeavours to
facilitate improvement by raising the price of a commodity which
would otherwise be of little value, and thereby enabling them to
make some profit of what would otherwise be mere expense.
In a country neither half peopled nor half cultivated, cattle
naturally multiply beyond the consumption of the inhabitants, and
are often, upon that account, of little or no value. But it is
necessary, it has already been shown, that the price of cattle
should bear a certain proportion to that of corn, before the
greater part of the lands of any country can be improved. By
allowing to American cattle, in all shapes, dead and alive, a
very extensive market, the law endeavours to raise the value of a
commodity, of which the high price is so very essential to
improvement. The good effects of this liberty, however, must be
somewhat diminished by the 4th of Geo. III. c. 15, which puts
hides and skins among the enumerated commodities, and thereby
tends to reduce the value of American cattle.
To increase the shipping and naval power of Great Britain by the
extension of the fisheries of our colonies, is an object which
the legizslature seems to have had almost constantly in view.
Those fisheries, upon this account, have had all the
encouragement which freedom can give them, and they have
flourished accordingly. The New England fishery, in particular,
was, before the late disturbances, one of the most important,
perhaps, in the world. The whale fishery which, notwithstanding
an extravagant bounty, is in Great Britain carried on to so
little purpose, that in the opinion of many people ( which I do
not, however, pretend to warrant), the whole produce does not
much exceed the value of the bounties which are annually paid for
it, is in New England carried on, without any bounty, to a very
great extent. Fish is one of the principal articles with which
the North Americans trade to Spain, Portugal, and the
Mediterranean.
Sugar was originally an enumerated commodity, which could only be
exported to Great Britain; but in 1751, upon a representation of
the sugar-planters, its exportation was permitted to all parts of
the world. The restrictions, however, with which this liberty was
granted, joined to the high price of sugar in Great Britain, have
rendered it in a great measure ineffectual. Great Britain and her
colonies still continue to be almost the sole market for all
sugar produced in the British plantations. Their consumption
increases so fast, that, though in consequence of the increasing
improvement of Jamaica, as well as of the ceded islands, the
importation of sugar has increased very greatly within these
twenty years, the exportation to foreign countries is said to be
not much greater than before.
Rum is a very important article in the trade which the Americans
carry on to the coast of Africa, from which they bring back negro
slaves in return.
If the whole surplus produce of America, in grain of all sorts,
in salt provisions, and in fish, had been put into the
enumeration, and thereby forced into the market of Great Britain,
it would have interferred too much with the produce of the
industry of our own people. It was probably not so much from any
regard to the interest of America, as from a jealousy of this
interference, that those important commodities have not only been
kept out of the enumeration, but that the importation into Great
Britain of all grain, except rice, and of all salt provisions,
has, in the ordinary state of the law, been prohibited.
The non-enumerated commodities could originally be exported to
all parts of the world. Lumber and rice having been once put into
the enumeration, when they were afterwards taken out of it, were
confined, as to the European market, to the countries that lie
south of Cape Finisterre. By the 6th of George III. c. 52, all
non-enumerated commodities were subjected to the like
restriction. The parts of Europe which lie south of Cape
Finisterre are not manufacturing countries, and we are less
jealous of the colony ships carrying home from them any
manufactures which could interfere with our own.
The enumerated commodities are of two sorts ; first, such as are
either the peculiar produce of America, or as cannot be produced,
or at least are not produced in the mother country. Of this kind
are molasses, coffee, cocoa-nuts, tobacco, pimento, ginger,
whalefins, raw silk, cotton, wool, beaver, and other peltry of
America, indigo, fustick, and other dyeing woods; secondly, such
as are not the peculiar produce of America, but which are, and
may be produced in the mother country, though not in such
quantities as to supply the greater part of her demand, which is
principally supplied from foreign countries. Of this kind are all
naval stores, masts, yards, and bowsprits, tar, pitch, and
turpentine, pig and bar iron, copper ore, hides and skins, pot
and pearl ashes. The largest importation of commodities of the
first kind could not discourage the growth, or interfere with the
sale, of any part of the produce of the mother country. By
confining them to the home market, our merchants, it was
expected, would not only be enabled to buy them cheaper in the
plantations, and consequently to sell them with a better profit
at home, but to establish between the plantations and foreign
countries an advantageous carrying trade, of which Great Britain
was necessarily to be the centre or emporium, as the European
country into which those commodities were first to be imported.
The importation of commodities of the second kind might be so
managed too, it was supposed, as to interfere, not with the sale
of those of the same kind which were produced at home, but with
that of those which were imported from foreign countries ;
because, by means of proper duties, they might be rendered always
somewhat dearer than the former, and yet a good deal cheaper than
the latter. By confining such commodities to the home market,
therefore, it was proposed to discourage the produce, not of
Great Britain, but of some foreign countries with which the
balance of trade was believed to be unfavourable to Great
Britain.
The prohibition of exporting from the colonies to any other
country but Great Britain, masts, yards, and bowsprits, tar,
pitch, and turpentine, naturally tended to lower the price of
timber in the colonies, and consequently to increase the expense
of clearing their lands, the principal obstacle to their
improvement. But about the beginning of the present century, in
1703, the pitch and tar company of Sweden endeavoured to raise
the price of their commodities to Great Britain, by prohibiting
their exportation, except in their own ships, at their own price,
and in such quantities as they thought proper. In order to
counteract this notable piece of mercantile policy, and to render
herself as much as possible independent, not only of Sweden, but
of all the other northern powers, Great Britain gave a bounty
upon the importation of naval stores from America; and the effect
of this bounty was to raise the price of timber in America much
more than the confinement to the home market could lower it; and
as both regulations were enacted at the same time, their joint
effect was rather to encourage than to discourage the clearing of
land in America.
Though pig and bar iron, too, have been put among the enumerated
commodities, yet as, when imported from America, they are
exempted from considerable duties to which they are subject when
imported front any other country, the one part of the regulation
contributes more to encourage the erection of furnaces in America
than the other to discourage it. There is no manufacture which
occasions so great a consumption of wood as a furnace, or which
can contribute so much to the clearing of a country overgrown
with it.
The tendency of some of these regulations to raise the value of
timber in America, and thereby to facilitate the clearing of the
land, was neither, perhaps, intended nor understood by the
legislature. Though their beneficial effects, however, have been
in this respect accidental, they have not upon that account been
less real.
The most perfect freedom of trade is permitted between the
British colonies of America and the West Indies, both in the
enumerated and in the non-enumerated commodities Those colonies
are now become so populous and thriving, that each of them finds
in some of the others a great and extensive market for every part
of its produce. All of them taken together, they make a great
internal market for the produce of one another.
The liberality of England, however, towards the trade of her
colonies, has been confined chiefly to what concerns the market
for their produce, either in its rude state, or in what may be
called the very first stage of manufacture. The more advanced or
more refined manufactures, even of the colony produce, the
merchants and manufacturers of Great Britain chuse to reserve to
themselves, and have prevailed upon the legislature to prevent
their establishment in the colonies, sometimes by high duties,
and sometimes by absolute prohibitions.
While, for example, Muscovado sugars from the British plantations
pay, upon importation, only 6s:4d. the hundred weight, white
sugars pay £1:1:1; and refined, either double or single, in
loaves, £4:2:5 8/20ths. When those high duties were imposed,
Great Britain was the sole, and she still continues to be, the
principal market, to which the sugars of the British colonies
could be exported. They amounted, therefore, to a prohibition, at
first of claying or refining sugar for any foreign market, and at
present of claying or refining it for the market which takes off,
perhaps, more than nine-tenths of the whole produce. The
manufacture of claying or refining sugar, accordingly, though it
has flourished in all the sugar colonies of France, has been
little cultivated in any of those of England, except for the
market of the colonies themselves. While Grenada was in the hands
of the French, there was a refinery of sugar, by claying, at
least upon almost every plantation. Since it fell into those of
the English, almost all works of this kind have been given up;
and there are at present (October 1773), I am assured, not above
two or three remaining in the island. At present, however, by an
indulgence of the custom-house, clayed or refined sugar, if
reduced from loaves into powder, is commonly imported as
Muscovado.
While Great Britain encourages in America the manufacturing of
pig and bar iron, by exempting them from duties to which the like
commodities are subject when imported from any other country, she
imposes an absolute prohibition upon the erection of steel
furnaces and slit-mills in any of her American plantations. She
will not suffer her colonies to work in those more refined
manufactures, even for their own consumption ; but insists upon
their purchasing of her merchants and manufacturers all goods of
this kind which they have occasion for.
She prohibits the exportation from one province to another by
water, and even the canriage by land upon horseback, or in a
cart, of hats, of wools, and woollen goods, of the produce of
America; a regulation which effectually prevents the
establishment of any manufacture of such commodities for distant
sale, and confines the industry of her colonists in this way to
such coarse and household manufactures as a private family
commonly makes for its own use, or for that of some of its
neighbours in the same province.
To prohibit a great people, however, from making all that they
can of every part of their own produce, or from employing their
stock and industry in the way that they judge most advantageous
to themselves, is a manifest violation of the most sacred rights
of mankind. Unjust, however, as such prohibitions may be, they
have not hitherto been very hurtful to the colonies. Land is
still so cheap, and, consequently, labour so dear among them,
that they can import from the mother country almost all the more
refined or more advanced manufactures cheaper than they could
make them for themselves. Though they had not, therefore, been
prohibited from establishing such manufactures, yet, in their
present state of improvement, a regard to their own interest
would probably have prevented them from doing so. In their
present state of improvement, those prohibitions, perhaps,
without cramping their industry, or restraining it from any
employment to which it would have gone of its own accord, are
only impertinent badges of slavery imposed upon them, without any
sufficient reason, by the groundless jealousy of the merchants
and manufacturers of the mother country. In a more advanced
state, they might be really oppressive and insupportable.
Great Britain, too, as she confines to her own market some of the
most important productions of the colonies, so, in compensation,
she gives to some of them an advantage in that market, sometimes
by imposing higher duties upon the like productions when imported
from other countries, and sometimes by giving bounties upon their
importation from the colonies. In the first way, she gives an
advantage in the home market to the sugar, tobacco, and iron of
her own colonies; and, in the second, to their raw silk, to their
hemp and flax, to their indigo, to their naval stores, and to
their building timber. This second way of encouraging the colony
produce, by bounties upon importation, is, so far as I have been
able to learn, peculiar to Great Britain: the first is not.
Portugal does not content herself with imposing higher duties
upon the importation of tobacco from any other country, but
prohibits it under the severest penalties.
With regard to the importation of goods from Europe, England has
likewise dealt more liberally with her colonies than any other
nation.
Great Britain allows a part, almost always the half, generally a
larger portion, and sometimes the whole, of the duty which is
paid upon the importation of foreign goods, to be drawn back upon
their exportation to any foreign country. No independent foreign
country, it was easy to foresee, would receive them, if they came
to it loaded with the heavy duties to which almost all foreign
goods are subjected on their importation into Great Britain.
Unless, therefore, some part of those duties was drawn back upon
exportation, there was an end of the carrying trade; a trade so
much favoured by the mercantile system.
Our colonies, however, are by no means independent foreign
countries; and Great Britain having assumed to herself the
exclusive right of supplying them with all goods from Europe,
might have forced them (in the same manner as other countries
have done their colonies) to receive such goods loaded with all
the same duties which they paid in the mother country. But, on
the contrary, till 1763, the same drawbacks were paid upon the
exportation of the greater part of foreign goods to our colonies,
as to any independent foreign country. In 1763, indeed, by the
4th of Geo. III. c. 15, this indulgence was a good deal abated,
and it was enacted, " That no part of the duty called the old
subsidy should be drawn back for any goods of the growth,
production, or manufacture of Europe or the East Indies, which
should be exported from this kingdom to any British colony or
plantation in America; wines, white calicoes, and muslins,
excepted." Before this law, many different sorts of foreign goods
might have been bought cheaper in the plantations than in the
mother country, and some may still.
Of the greater part of the regulations concerning the colony
trade, the merchants who carry it on, it must be observed, have
been the principal advisers. We must not wonder, therefore, if,
in a great part of them, their interest has been more considered
than either that of the colonies or that of the mother country.
In their exclusive privilege of supplying the colonies with all
the goods which they wanted from Europe, and of purchasing all
such parts of their surplus produce as could not interfere with
any of the trades which they themselves carried on at home, the
interest of the colonies was sacrificed to the interest of those
merchants. In allowing the same drawbacks upon the re-exportation
of the greater part of European and East India goods to the
colonies, as upon their re-exportation to any independent
country, the interest of the mother country was sacrificed to it,
even according to the mercantile ideas of that interest. It was
for the interest of the merchants to pay as little as possible
for the foreign goods which they sent to the colonies, and,
consequently, to get back as much as possible of the duties which
they advanced upon their importation into Great Britain. They
might thereby be enabled to sell in the colonies, either the same
quantity of goods with a greater profit, or a greater quantity
with the same profit, and, consequently, to gain something either
in the one way or the other. It was likewise for the interest of
the colonies to get all such goods as cheap, and in as great
abundance as possible. But this might not always be for the
interest of the mother country. She might frequently suffer, both
in her revenue, by giving back a great part of the duties which
had been paid upon the importation of such goods; and in her
manufactures, by being undersold in the colony market, in
consequence of the easy terms upon which foreign manufactures
could be carried thither by means of those drawbacks. The
progress of the linen manufacture of Great Britain, it is
commonly said, has been a good deal retarded by the drawbacks
upon the re-exportation of German linen to the American colonies.
But though the policy of Great Britain, with regard to the trade
of her colonies, has been dictated by the same mercantile spirit
as that of other nations, it has, however, upon the whole, been
less illiberal and oppressive than that of any of them.
In every thing except their foreign trade, the liberty of the
English colonists to manage their own affairs their own way, is
complete. It is in every respect equal to that of their
fellow-citizens at home, and is secured in the same manner, by an
assembly of the representatives of the people, who claim the sole
right of imposing taxes for the support of the colony government.
The authority of this assembly overawes the executive power ; and
neither the meanest nor the most obnoxious colonist, as long as
he obeys the law, has any thing to fear from the resentment,
either of the governor, or of any other civil or military officer
in the province. The colony assemblies, though, like the house of
commons in England, they are not always a very equal
representation of the people, yet they approach more nearly to
that character ; and as the executive power either has not the
means to corrupt them, or, on account of the support which it
receives from the mother country, is not under the necessity of
doing so, they are, perhaps, in general more influenced by the
inclinations of their constituents. The councils, which, in the
colony legislatures, correspond to the house of lords in Great
Britain, are not composed of a hereditary nobility. In some of
the colonies, as in three of the governments of New England,
those councils are not appointed by the king, but chosen by the
representatives of the people. In none of the English colonies is
there any hereditary nobility. In all of them, indeed, as in all
other free countries, the descendant of an old colony family is
more respected than an upstart of equal merit and fortune; but he
is only more respected, and he has no privileges by which he can
be troublesome to his neighbours. Before the commencement of the
present disturbances, the colony assemblies had not only the
legislative, but a part of the executive power. In Connecticut
and Rhode Island, they elected the governor. In the other
colonies, they appointed the revenue officers, who collected the
taxes imposed by those respective assemblies, to whom those
officers were immediately responsible. There is more equality,
therefore, among the English colonists than among the inhabitants
of the mother country. Their manners are more re publican; and
their governments, those of three of the provinces of New England
in particular, have hitherto been more republican too.
The absolute governments of Spain, Portugal, and France, on the
contrary, take place in their colonies; and the discretionary
powers which such governments commonly delegate to all their
inferior officers are, on account of the great distance,
naturally exercised there with more than ordinary violence. Under
all absolute governments, there is more liberty in the capital
than in any other part of the country. The sovereign himself can
never have either interest or inclination to pervert the order of
justice, or to oppress the great body of the people. In the
capital, his presence overawes, more or less, all his inferior
officers, who, in the remoter provinces, from whence the
complaints of the people are less likely to reach him, can
exercise their tyranny with much more safety. But the European
colonies in America are more remote than the most distant
provinces of the greatest empires which had ever been known
before. The government of the English colonies is, perhaps, the
only one which, since the world began, could give perfect
security to the inhabitants of so very distant a province. The
administration of the French colonies, however, has always been
conducted with much more gentleness and moderation than that of
the Spanish and Portuguese. This superiority of conduct is
suitable both to the character of the French nation, and to what
forms the character of every nation, the nature of their
government, which, though arbitrary and violent in comparison
with that of Great Britain, is legal and free in comparison with
those of Spain and Portugal.
It is in the progress of the North American colonies, however,
that the superiority of the English policy chiefly appears. The
progress of the sugar colonies of France has been at least equal,
perhaps superior, to that of the greater part of those of
England; and yet the sugar colonies of England enjoy a free
government, nearly of the same kind with that which takes place
in her colonies of North America. But the sugar colonies of
France are not discouraged, like those of England, from refining
their own sugar; and what is still of greater importance, the
genius of their government naturally introduces a better
management of their negro slaves.
In all European colonies, the culture of the sugar-cane is
carried on by negro slaves. The constitution of those who have
been born in the temperate climate of Europe could not, it is
supposed, support the labour of digging the ground under the
burning sun of the West Indies ; and the culture of the
sugar-cane, as it is managed at present, is all hand labour ;
though, in the opinion of many, the drill plough might be
introduced into it with great advantage. But, as the profit and
success of the cultivation which is carried on by means of
cattle, depend very much upon the good management of those cattle
; so the profit and success of that which is carried on by slaves
must depend equally upon the good management of those slaves ;
and in the good management of their slaves the French planters, I
think it is generally allowed, are superior to the English. The
law, so far as it gives some weak protection to the slave against
the violence of his master, is likely to be better executed in a
colony where the government is in a great measure arbitrary, than
in one where it is altogether free. In ever country where the
unfortunate law of slavery is established, the magistrate, when
he protects the slave, intermeddles in some measure in the
management of the private property of the master ; and, in a free
country, where the master is, perhaps, either a member of the
colony assembly, or an elector of such a member, he dares not do
this but with the greatest caution and circumspection. The
respect which he is obliged to pay to the master, renders it more
difficult for him to protect the slave. But in a country where
the government is in a great measure arbitrary, where it is usual
for the magistrate to intermeddle even in the management of the
private property of individuals, and to send them, perhaps, a
lettre de cachet, if they do not manage it according to his
liking, it is much easier for him to give some protection to the
slave; and common humanity naturally disposes him to do so. The
protection of the magistrate renders the slave less contemptible
in the eyes of his master, who is thereby induced to consider him
with more regard, and to treat him with more gentleness. Gentle
usage renders the slave not only more faithful, but more
intelligent, and, therefore, upon a double account, more useful.
He approaches more to the condition of a free servant, and may
possess some degree of integrity and attachment to his master's
interest ; virtues which frequently belong to free servants, but
which never can belong to a slave, who is treated as slaves
commonly are in countries where the master is perfectly free and
secure.
That the condition of a slave is better under an arbitrary than
under a free government, is, I believe, supported by the history
of all ages and nations. In the Roman history, the first time we
read of the magistrate interposing to protect the slave from the
violence of his master, is under the emperors. When Vidius
Pollio, in the presence of Augustus, ordered one of his slaves,
who had committed a slight fault, to be cut into pieces and
thrown into his fish-pond, in order to feed his fishes, the
emperor commanded him, with indignation, to emancipate
immediately, not only that slave, but all the others that
belonged to him. Under the republic no magistrate could have had
authority enough to protect the slave, much less to punish the
master.
The stock, it is to be observed, which has improved the sugar
colonies of France, particularly the great colony of St Domingo,
has been raised almost entirely from the gradual improvement and
cultivation of those colonies. It has been almost altogether the
produce of the soil and of the industry of the colonists, or,
what comes to the same thing, the price of that produce,
gradually accumulated by good management, and employed in raising
a still greater produce. But the stock which has improved and
cultivated the sugar colonies of England, has, a great part of
it, been sent out from England, and has by no means been
altogether the produce of the soil and industry of the colonists.
The prosperity of the English sugar colonies has been in a great
measure owing to the great riches of England, of which a part has
overflowed, if one may say so, upon these colonies. But the
prosperity of the sugar colonies of France has been entirely
owing to the good conduct of the colonists, which must therefore
have had some superiority over that of the English; and this
superiority has been remarked in nothing so much as in the good
management of their slaves.
Such have been the general outlines of the policy of the
different European nations with regard to their colonies.
The policy of Europe, therefore, has very little to boast of,
either in the original establishment, or, so far as concerns
their internal government, in the subsequent prosperity of the
colonies of America.
Folly and injustice seem to have been the principles which
presided over and directed the first project of establishing
those colonies; the folly of hunting after gold and silver mines,
and the injustice of coveting the possession of a country whose
harmless natives, far from having ever injured the people of
Europe, had received the first adventurers with every mark of
kindness and hospitality.
The adventurers, indeed, who formed some of the latter
establishments, joined to the chimerical project of finding gold
and silver mines, other motives more reasonable and more
laudable; but even these motives do very little honour to the
policy of Europe.
The English puritans, restrained at home, fled for freedom to
America, and established there the four governments of New
England. The English catholics, treated with much greater
injustice, established that of Maryland ; the quakers, that of
Pennsylvania. The Portuguese Jews, persecuted by the inquisition,
stript of their fortunes, and banished to Brazil, introduced, by
their example, some sort of order and industry among the
transported felons and strumpets by whom that colony was
originally peopled, and taught them the culture of the
sugar-cane. Upon all these different occasions, it was not the
wisdom and policy, but the disorder and injustice of the European
governments, which peopled and cultivated America.
In effectuation some of the most important of these
establishments, the different governments of Europe had as little
merit as in projecting them. The conquest of Mexico was the
project, not of the council of Spain, but of a governor of Cuba ;
and it was effectuated by the spirit of the bold adventurer to
whom it was entrusted, in spite of every thing which that
governor, who soon repented of having trusted such a person,
could do to thwart it. The conquerors of Chili and Peru, and of
almost all the other Spanish settlements upon the continent of
America, carried out with them no other public encouragement, but
a general permission to make settlements and conquests in the
name of the king of Spain. Those adventures were all at the
private risk and expense of the adventurers. The government of
Spain contributed scarce any thing to any of them. That of
England contributed as little towards effectuating the
establishment of some of its most important colonies in North
America.
When those establishments were effectuated, and had become so
considerable as to attract the attention of the mother country,
the first regulations which she made with regard to them, had
always in view to secure to herself the monopoly of their
commerce; to confine their market, and to enlarge her own at
their expense, and, consequently, rather to damp and discourage,
than to quicken and forward the course of their prosperity. In
the different ways in which this monopoly has been exercised,
consists one of the most essential differences in the policy of
the different European nations with regard to their colonies. The
best of them all, that of England, is only somewhat less
illiberal and oppressive than that of any of the rest.
In what way, therefore, has the policy of Europe contributed
either to the first establishment, or to the present grandeur of
the colonies of America ? In one way, and in one way only, it has
contributed a good deal. Magna virum mater! It bred and formed
the men who were capable of achieving such great actions, and of
laying the foundation of so great an empire ; and there is no
other quarter of the world; of which the policy is capable of
forming, or has ever actually, and in fact, formed such men. The
colonies owe to the policy of Europe the education and great
views of their active and enterprizing founders; and some of the
greatest and most important of them, so far as concerns their
internal government, owe to it scarce anything else.
PART III.
Of the Advantages which Europe has derived From the Discovery of
America, and from that of a Passage to the East Indies by the
Cape of Good Hope.
Such are the advantages which the colonies of America have
derived from the policy of Europe.
What are those which Europe has derived from the discovery and
colonization of America?
Those advantages may be divided, first, into the general
advantages which Europe, considered as one great country, has
derived from those great events; and, secondly, into the
particular advantages which each colonizing country has derived
from the colonies which particularly belong to it, in consequence
of the authority or dominion which it exercises over them.
The general advantages which Europe, considered as one great
country, has derived from the discovery and colonization of
America, consist, first, in the increase of its enjoyments ; and,
secondly, in the augmentation of its industry.
The surplus produce of America imported into Europe, furnishes
the inhabitants of this great continent with a variety of
commodities which they could not otherwise have possessed ; some
for conveniency and use, some for pleasure, and some for ornament
; and thereby contributes to increase their enjoyments.
The discovery and colonization of America, it will readily be
allowed, have contributed to augment the industry, first, of all
the countries which trade to it directly, such as Spain,
Portugal, France, and England; and, secondly, of all those which,
without trading to it directly, send, through the medium of other
countries, goods to it of their own produce, such as Austrian
Flanders, and some provinces of Germany, which, through the
medium of the countries before mentioned, send to it a
considerable quantity of linen and other goods. All such
countries have evidently gained a more extensive market for their
surplus produce, and must consequently have been encouraged to
increase its quantity.
But that those great events should likewise have contributed to
encourage the industry of countries such as Hungary and Poland,
which may never, perhaps, have sent a single commodity of their
own produce to America, is not, perhaps, altogether so evident.
That those events have done so, however, cannot be doubted. Some
part of the produce of America is consumed in Hungary and Poland,
and there is some demand there for the sugar, chocolate. and
tobacco, of that new quarter of the world. But those commodities
must be purchased with something which is either the produce of
the industry of Hungary and Poland, or with something which had
been purchased with some part of that produce. Those commodities
of America are new values, new equivalents, introduced into
Hungary and Poland, to be exchanged there for the surplus produce
of these countries. By being carried thither, they create a new
and more extensive market for that surplus produce. They raise
its value, and thereby contribute to encourage its increase.
Though no part of it may ever be carried to America, it may be
carried to other countries, which purchase it with a part of
their share of the surplus produce of America, and it may find a
market by means of the circulation of that trade which was
originally put into motion by the surplus produce of America.
Those great events may even have contributed to increase the
enjoyments, and to augment the industry, of countries which not
only never sent any commodities to America, but never received
any from it. Even such countries may have received a greater
abundance of other commodities from countries, of which the
surplus produce had been augmented by means of the American
trade. This greater abundance, as it must necessarily have
increased their enjoyments, so it must likewise have augmented
their industry. A greater number of new equivalents, of some kind
or other, must have been presented to them to be exchanged for
the surplus produce of that industry. A more extensive market
must have been created for that surplus produce, so as to raise
its value, and thereby encourage its increase. The mass of
commodities annually thrown into the great circle of European
commerce, and by its various revolutions annually distributed
among all the different nations comprehended within it, must have
been augmented by the whole surplus produce of America. A greater
share of this greater mass, therefore, is likely to have fallen
to each of those nations, to have increased their enjoyments, and
augmented their industry.
The exclusive trade of the mother countries tends to diminish, or
at least to keep down below what they would otherwise rise to,
both the enjoyments and industry of all those nations in general,
and of the American colonies in particular. It is a dead weight
upon the action of one of the great springs which puts into
motion a great part of the business of mankind. By rendering the
colony produce dearer in all other countries, it lessens its
consumption, and thereby cramps the industry of the colonies, and
both the enjoyments and the industry of all other countries,
which both enjoy less when they pay more for what they enjoy, and
produce less when they get less for what they produce. By
rendering the produce of all other countries dearer in the
colonies, it cramps in the same manner the industry of all other
colonies, and both the enjoyments and the industry of the
colonies. It is a clog which, for the supposed benefit of some
particular countries, embarrasses the pleasures and encumbers the
industry of all other countries, but of the colonies more than of
any other. It not only excludes as much as possible all other
countries from one particular market, but it confines as much as
possible the colonies to one particular market; and the
difference is very great between being excluded from one
particular market when all others are open, and being confined to
one particular market when all others are shut up. The surplus
produce of the colonies, however, is the original source of all
that increase of enjoyments and industry which Europe derives
from the discovery and colonization of America, and the exclusive
trade of the mother countries tends to render this source much
less abundant than it otherwise would be.
The particular advantages which each colonizing country derives
from the colonies which particularly belong to it, are of two
different kinds ; first, those common advantages which every
empire derives from the provinces subject to its dominion ; and,
secondly, those peculiar advantages which are supposed to result
from provinces of so very peculiar a nature as the European
colonies of America.
The common advantages which every empire derives from the
provinces subject to its dominion consist, first, in the military
force which they furnish for its defence; and, secondly, in the
revenue which they furnish for the support of its civil
government. The Roman colonies furnished occasionally both the
one and the other. The Greek colonies sometimes furnished a
military force, but seldom any revenue. They seldom acknowledged
themselves subject to the dominion of the mother city. They were
generally her allies in war, but very seldom her subjects in
peace.
The European colonies of America have never yet furnished any
military force for the defence of the mother country. The
military force has never yet been sufficient for their own
defence; and in the different wars in which the mother countries
have been engaged, the defence of their colonies has generally
occasioned a very considerable distraction of the military force
of those countries. In this respect, therefore, all the European
colonies have, without exception, been a cause rather of weakness
than of strength to their respective mother countries.
The colonies of Spain and Portugal only have contributed any
revenue towards the defence of the mother country, or the support
of her civil government. The taxes which have been levied upon
those of other European nations, upon those of England in
particular, have seldom been equal to the expense laid out upon
them in time of peace, and never sufficient to defray that which
they occasioned in time of war. Such colonies, therefore, have
been a source of expense, and not of revenue, to their respective
mother countries.
The advantages of such colonies to their respective mother
countries, consist altogether in those peculiar advantages which
are supposed to result from provinces of so very peculiar a
nature as the European colonies of America; and the exclusive
trade, it is acknowledged, is the sole source of all those
peculiar advantages.
In consequence of this exclusive trade, all that part of the
surplus produce of the English colonies, for example, which
consists in what are called enumerated commodities, can be sent
to no other country but England. Other countries must afterwards
buy it of her. It must be cheaper, therefore, in England than it
can be in any other country, and must contribute more to increase
the enjoyments of England than those of any other country. It
must likewise contribute more to encourage her industry. For all
those parts of her own surplus produce which England exchanges
for those enumerated commodities, she must get a better price
than any other countries can get for the like parts of theirs,
when they exchange them for the same commodities. The
manufactures of England, for example, will purchase a greater
quantity of the sugar and tobacco of her own colonies than the
like manufactures of other countries can purchase of that sugar
and tobacco. So far, therefore, as the manufactures of England
and those of other countries are both to be exchanged for the
sugar and tobacco of the English colonies, this superiority of
price gives an encouragement to the former beyond what the latter
can, in these circumstances, enjoy. The exclusive trade of the
colonies, therefore, as it diminishes, or at least keeps down
below what they would otherwise rise to, both the enjoyments and
the industry of the countries which do not possess it, so it
gives an evident advantage to the countries which do possess it
over those other countries.
This advantage, however, will, perhaps, be found to be rather
what may be called a relative than an absolute advantage, and to
give a superiority to the country which enjoys it, rather by
depressing the industry and produce of other countries, than by
raising those of that particular country above what they would
naturally rise to in the case of a free trade.
The tobacco of Maryland and Virginia, for example, by means of
the monopoly which England enjoys of it, certainly comes cheaper
to England than it can do to France to whom England commonly
sells a considerable part of it. But had France and all other
European countries been at all times allowed a free trade to
Maryland and Virginia, the tobacco of those colonies might by
this time have come cheaper than it actually does, not only to
all those other countries, but likewise to England. The produce
of tobacco, in consequcnce of a market so much more extensive
than any which it has hitherto enjoyed, might, and probably
would, by this time have been so much increased as to reduce the
profits of a tobacco plantation to their natural level with those
of a corn plantation, which it is supposed they are still
somewhat above. The price of tobacco might, and probably would,
by this time have fallen somewhat lower than it is at present. An
equal quantity of the commodities, either of England or of those
other countries, might have purchased in Maryland and Virginia a
greater quantity of tobacco than it can do at present, and
consequently have been sold there for so much a better price. So
far as that weed, therefore, can, by its cheapness and abundance,
increase the enjoyments, or augment the industry, either of
England or of any other country, it would probably, in the case
of a free trade, have produced both these effects in somewhat a
greater degree than it can do at present. England, indeed, would
not, in this case, have had any advantage over other countries.
She might have bought the tobacco of her colonies somewhat
cheaper, and consequently have sold some of her own commodities
somewhat dearer, than she actually does ; but she could neither
have bought the one cheaper, nor sold the other dearer, than any
other country might have done. She might, perhaps, have gained an
absolute, but she would certainly have lost a relative advantage.
In order, however, to obtain this relative advantage in the
colony trade, in order to execute the invidious and malignant
project of excluding, as much as possible, other nations from any
share in it, England, there are very probable reasons for
believing, has not only sacrificed a part of the absolute
advantage which she, as well as every other nation, might have
derived from that trade, but has subjected herself both to an
absolute and to a relative disadvantage in almost every other
branch of trade.
When, by the act of navigation, England assumed to herself the
monopoly of the colony trade, the foreign capitals which had
before been employed in it, were necessarily withdrawn from it.
The English capital, which had before carried on but a part of
it, was now to carry on the whole. The capital which had before
supplied the colonies with but a part of the goods which they
wanted from Europe, was now all that was employed to supply them
with the whole. But it could not supply them with the whole;
and the goods with which it did supply them were necessarily sold
very dear. The capital which had before bought but a part of the
surplus produce of the colonies, was now all that was employed to
buy the whole. But it could not buy the whole at any thing near
the old price ; and therefore, whatever it did buy, it
necessarily bought very cheap. But in an employment of capital,
in which the merchant sold very dear, and bought very cheap, the
profit must have been very great, and much above the ordinary
level of profit in other branches of trade. This superiority of
profit in the colony trade could not fail to draw from other
branches of trade a part of the capital which had before been
employed in them. But this revulsion of capital, as it must have
gradually increased the competition of capitals in the colony
trade, so it must have gradually diminished that competition in
all those other branches of trade ; as it must have gradually
lowered the profits of the one, so it must have gradually raised
those of the other, till the profits of all came to a new level,
different from, and somewhat higher, than that at which they had
been before.
This double effect of drawing capital from all other trades, and
of raising the rate of profit somewhat higher than it otherwise
would have been in all trades, was not only produced by this
monopoly upon its first establishment, but has continued to be
produced by it ever since.
First, This monopoly has been continually drawing capital from
all other trades, to be employed in that of the colonies.
Though the wealth of Great Britain has increased very much since
the establishment of the act of navigation, it certainly has not
increased in the same proportion as that or the colonies. But the
foreign trade of every country naturally increases in proportion
to its wealth, its surplus produce in proportion to its whole
produce; and Great Britain having engrossed to herself almost the
whole of what may be called the foreign trade of the colonies,
and her capital not having increased in the same proportion as
the extent of that trade, she could not carry it on without
continually withdrawing from other branches of trade some part of
the capital which had before been employed in them, as well as
withholding from them a great deal more which would otherwise
have gone to them. Since the establishment of the act of
navigation, accordingly, the colony trade has been continually
increasing, while many other branches of foreign trade,
particularly of that to other parts of Europe, have been
continually decaying. Our manufactures for foreign sale, instead
of being suited, as before the act of navigation, to the
neighbouring market of Europe, or to the more distant one of the
countries which lie round the Mediterranean sea, have the greater
part of them, been accommodated to the still more distant one of
the colonies; to the market in which they have the monopoly,
rather than to that in which they have many competitors. The
causes of decay in other branches of foreign trade, which, by Sir
Matthew Decker and other writers, have been sought for in the
excess and improper mode of taxation, in the high price of
labour, in the increase of luxury, etc. may all be found in the
overgrowth of the colony trade. The mercantile capital of Great
Britain, though very great, yet not being infinite, and though
greatly increased since the act of navigation, yet not being
increased in the same proportion as the colony trade, that trade
could not possibly be carried on without withdrawing some part of
that capital from other branches of trade, nor consequently
without some decay of those other branches.
England, it must be observed, was a great trading country, her
mercantile capital was very great, and likely to become still
greater and greater every day, not only before the act of
navigation had established the monopoly of the corn trade, but
before that trade was very considerable. In the Dutch war, during
the government of Cromwell, her navy was superior to that of
Holland ; and in that which broke out in the beginning of the
reign of Charles II., it was at least equal, perhaps superior to
the united navies of France and Holland. Its superiority,
perhaps, would scarce appear greater in the present times, at
least if the Dutch navy were to bear the same proportion to the
Dutch commerce now which it did then. But this great naval
power could not, in either of those wars, be owing to the act of
navigation. During the first of them, the plan of that act had
been but just formed; and though, before the breaking out of the
second, it had been fully enacted by legal authority, yet no part
of it could have had time to produce any considerable effect, and
least of all that part which established the exclusive trade to
the colonies. Both the colonies and their trade were
inconsiderable then, in comparison of what they are how. The
island of Jamaica was an unwholesome desert, little inhabited,
and less cultivated. New York and New Jersey were in the
possession of the Dutch, the half of St. Christopher's in that of
the French. The island of Antigua, the two Carolinas,
Pennsylvania, Georgia, and Nova Scotia, were not planted.
Virginia, Maryland, and New England were planted; and though they
were very thriving colonies, yet there was not perhaps at that
time, either in Europe or America, a single person who foresaw,
or even suspected, the rapid progress which they have since made
in wealth, population, and improvement. The island of Barbadoes,
in short, was the only British colony of any consequence, of
which the condition at that time bore any resemblance to what it
is at present. The trade of the colonies, of which England, even
for some time after the act of navigation, enjoyed but a part
(for the act of navigation was not very strictly executed till
several years after it was enacted), could not at that time be
the cause of the great trade of England, nor of the great naval
power which was supported by that trade. The trade which at that
time supported that great naval power was the trade of Europe,
and of the countries which lie round the Mediterranean sea. But
the share which Great Britain at present enjoys of that trade
could not support any such great naval power. Had the growing
trade of the colonies been left free to all nations, whatever
share of it might have fallen to Great Britain, and a very
considerable share would probably have fallen to her, must have
been all an addition to this great trade of which she was before
in possession. In consequence of the monopoly, the increase of
the colony trade has not so much occasioned an addition to the
trade which Great Britain had before, as a total change in its
direction.
Secondly, This monopoly has necessarily contributed to keep up
the rate of profit, in all the different branches of British
trade, higher than it naturally would have been, had all nations
been allowed a free trade to the British colonies.
The monopoly of the colony trade, as it necessarily drew towards
that trade a greater proportion of the capital of Great Britain
than what would have gone to it of its own accord, so, by the
expulsion of all foreign capitals, it necessarily reduced the
whole quantity of capital employed in that trade below what it
naturally would have been in the case of a free trade. But, by
lessening the competition of capitals in that branch of trade, it
necessarily raised the rate of profit in that branch. By
lessening, too, the competition of British capitals in all other
branches of trade, it necessarily raised the rate of British
profit in all those other branches. Whatever may have been, at
any particular period since the establishment of the act of
navigation, the state or extent of the mercantile capital of
Great Britain, the monopoly of the colony trade must, during the
continuance of that state, have raised the ordinary rate of
British profit higher than it otherwise would have been, both in
that and in all the other branches of British trade. If, since
the establishment of the act of navigation, the ordinary rate of
British profit has fallen considerably. as it certainly has, it
must have fallen still lower, had not the monopoly established by
that act contributed to keep it up.
But whatever raises, in any country, the ordinary rate of profit
higher than it otherwise would be, necessarily subjects that
country both to an absolute, and to a relative disadvantage in
every branch of trade of which she has not the monopoly.
It subjects her to an absolute disadvantage ; because, in such
branches of trade, her merchants cannot get this greater profit
without selling dearer than they otherwise would do, both the
goods of foreign countries which they import into their own, and
the goods of their own country which they export to foreign
countries. Their own country must both buy dearer and sell
dearer; must both buy less, and sell less; must both enjoy less
and produce less, than she otherwise would do.
It subjects her to a relative disadvantage; because, in such
branches of trade, it sets other countries, which are not subject
to the same absolute disadvantage, either more above her or less
below her, than they otherwise would be. It enables them both to
enjoy more and to produce more, in proportion to what she enjoys
and produces. It renders their superiority greater, or their
inferiority less, than it otherwise would be. By raising the
price of her produce above what it otherwise would be, it enables
the merchants of other countries to undersell her in foreign
markets, and thereby to justle her out of almost all those
branches of trade, of which she has not the monopoly.
Our merchants frequently complain of the high wages of British
labour, as the cause of their manufactures being undersold in
foreign markets; but they are silent about the high profits of
stock. They complain of the extravagant gain of other people; but
they say nothing of their own. The high profits of British stock,
however, may contribute towards raising the price of British
manufactures, in many cases, as much, and in some perhaps more,
than the high wages of British labour.
It is in this manner that the capital of Great Britain, one may
justly say, has partly been drawn and partly been driven from the
greater part of the different branches of trade of which she has
not the monopoly ; from the trade of Europe, in particular, and
from that of the countries which lie round the Mediterranean sea.
It has partly been drawn from those branches of trade, by the
attraction of superior profit in the colony trade, in consequence
of the continual increase of that trade, and of the continual
insufficiency of the capital which had carried it on one year to
carry it on the next.
It has partly been driven from them, by the advantage which the
high rate of profit established in Great Britain gives to other
countries, in all the different branches of trade of which Great
Britain has not the monopoly.
As the monopoly of the colony trade has drawn from those other
branches a part of the British capital, which would otherwise
have been employed in them, so it has forced into them many
foreign capitals which would never have gone to them, had they
not been expelled from the colony trade. In those other branches
of trade, it has diminished the competition of British capitals,
and thereby raised the rate of British profit higher than it
otherwise would have been. On the contrary, it has increased the
competition of foreign capitals, and thereby sunk the rate of
foreign profit lower than it otherwise would have been. Both in
the one way and in the other, it must evidently have subjected
Great Britain to a relative disadvantage in all those other
branches of trade.
The colony trade, however, it may perhaps be said, is more
advantageous to Great Britain than any other; and the monopoly,
by forcing into that trade a greater proportion of the capital of
Great Britain than what would otherwise have gone to it, has
turned that capital into an employment, more advantageous to the
country than any other which it could have found.
The most advantageous employment of any capital to the country to
which it belongs, is that which maintains there the greatest
quantity of productive labour, and increases the most the annual
produce of the land and labour of that country. But the quantity
of productive labour which any capital employed in the foreign
trade of consumption can maintain, is exactly in proportion, it
has been shown in the second book, to the frequency of its
returns. A capital of a thousand pounds, for example, employed in
a foreign trade of consumption, of which the returns are made
regularly once in the year, can keep in constant employment, in
the country to which it belongs, a quantity of productive labour,
equal to what a thousand pounds can maintain there for a year. If
the returns are made twice or thrice in the year, it can keep in
constant employment a quantity of productive labour, equal to
what two or three thousand pounds can maintain there for a year.
A foreign trade of consumption carried on with a neighbouring,
is, upon that account, in general, more advantageous than one
carried on with a distant country ; and, for the same reason, a
direct foreign trade of consumption, as it has likewise been
shown in the second book, is in general more advantageous than a
round-about one.
But the monopoly of the colony trade, so far as it has operated
upon the employment of the capital of Great Britain, has, in all
cases, forced some part of it from a foreign trade of consumption
carried on with a neighbouring, to one carried on with a more
distant country, and in many cases from a direct foreign trade of
consumption to a round-about one.
First, The monopoly of the colony trade has, in all cases,
forced some part of the capital of Great Britain from a foreign
trade of consumption carried on with a neighbouring, to one
carried on with a more distant country.
It has, in all cases, forced some part of that capital from the
trade with Europe, and with the countries which lie round the
Mediterranean sea, to that with the more distant regions of
America and the West Indies ; from which the returns are
necessarily less frequent, not only on account of the greater
distance, but on account of the peculiar circumstances of those
countries. New colonies, it has already been observed, are always
understocked. Their capital is always much less than what they
could employ with great profit and advantage in the improvement
and cultivation of their land. They have a constant demand,
therefore, for more capital than they have of their own ; and, in
order to supply the deficiency of their own, they endeavour to
borrow as much as they can of the mother country, to whom they
are, therefore, always in debt. The most common way in which the
colonies contract this debt, is not by borrowing upon bond of the
rich people of the mother country, though they sometimes do this
too, but by running as much in arrear to their correspondents,
who supply them with goods from Europe, as those correspondents
will allow them. Their annual returns frequently do not amount to
more than a third, and sometimes not to so great a proportion of
what they owe. The whole capital, therefore, which their
correspondents advance to them, is seldom returned to Britain in
less than three, and sometimes not in less than four or five
years. But a British capital of a thousand pounds, for example,
which is returned to Great Britain only once in five years, can
keep in constant employment only one-fifth part of the British
industry which it could maintain, if the whole was returned once
in the year; and, instead of the quantity of industry which a
thousand pounds could maintain for a year, can keep in constant
employment the quantity only which two hundred pounds can
maintain for a year. The planter, no doubt, by the high price
which he pays for the goods from Europe, by the interest upon the
bills which he grants at distant dates, and by the commission
upon the renewal of those which he grants at near dates, makes
up, and probably more than makes up, all the loss which his
correspondent can sustain by this delay. But, though he make up
the loss of his correspondent, he cannot make up that of Great
Britain. In a trade of which the returns are very distant, the
profit of the merchant may be as great or greater than in one in
which they are very frequent and near ; but the advantage of the
country in which he resides, the quantity of productive labour
constantly maintained there, the annual produce of the land and
labour, must always be much less. That the returns of the trade
to America, and still more those of that to the West Indies, are,
in general, not only more distant, but more irregular and more
uncertain, too, than those of the trade to any part of Europe, or
even of the countries which lie round the Mediterranean sea, will
readily he allowed, I imagine, by everybody who has any
experience of those different branches of trade.
Secondly, The monopoly of the colony trade, has, in many
cases, forced some part of the capital of Great Britain from a
direct foreign trade of consumption, into a round-about one.
Among the enumerated commodities which can be sent to no other
market but Great Britain, there are several of which the quantity
exceeds very much the consumption of Great Britain, and of which,
a part, therefore, must be exported to other countries. But this
cannot be done without forcing some part of the capital of Great
Britain into a round-about foreign trade of consumption.
Maryland, and Virginia, for example, send annually to Great
Britain upwards of ninety-six thousand hogsheads of tobacco, and
the consumption of Great Britain is said not to exceed fourteen
thousand. Upwards of eighty-two thousand hogsheads,
therefore, must be exported to other countries, to France, to
Holland, and, to the countries which lie round the Baltic and
Mediterranean seas. But that part of the capital of Great
Britain which brings those eighty-two thousand hogsheads to Great
Britain, which re-exports them from thence to those other
countries, and which brings back from those other countries to
Great Britain either goods or money in return, is employed in a
round-about foreign trade of consumption; and is necessarily
forced into this employment, in order to dispose of this great
surplus. If we would compute in how many years the whole of this
capital is likely to come back to Great Britain, we must add to
the distance of the American returns that of the returns from
those other countries. If, in the direct foreign trade of
consumption which we carry on with America, the whole capital
employed frequently does not come back in less than three or four
years, the whole capital employed in this round-about one is not
likely to come back in less than four or five. If the one can
keep in constant employment but a third or a fourth part of the
domestic industry which could be maintained by a capital returned
once in the year, the other can keep in constant employment but a
fourth or a fifth part of that industry. At some of the outports
a credit is commonly given to those foreign correspondents to
whom they export them tobacco. At the port of London, indeed, it
is commonly sold for ready money: the rule is Weigh and pay. At
the port of London, therefore, the final returns of the whole
round-about trade are more distant than the returns from America,
by the time only which the goods may lie unsold in the warehouse;
where, however, they may sometimes lie long enough. But, had not
the colonies been confined to the market of Great Britain for the
sale of their tobacco, very little more of it would probably have
come to us than what was necessary for the home consumption. The
goods which Great Britain purchases at present for her own
consumption with the great surplus of tobacco which she exports
to other countries, she would, in this case, probably have
purchased with the immediate produce of her own industry, or with
some part of her own manufactures. That produce, those
manufactures, instead of being almost entirely suited to one
great market, as at present, would probably have been fitted to a
great number of smaller markets. Instead of one great round-about
foreign trade of consumption, Great Britain would probably have
carried on a great number of small direct foreign trades of the
same kind. On account of the frequency of the returns, a part,
and probably but a small part, perhaps not above a third or a
fourth of the capital which at present carries on this great
round-about trade, might have been sufficient to carry on all
those small direct ones; might have kept inconstant employment an
equal quantity of British industry ; and have equally supported
the annual produce of the land and labour of Great Britain. All
the purposes of this trade being, in this manner, answered by a
much smaller capital, there would have been a large spare capital
to apply to other purposes; to improve the lands, to increase the
manufactures, and to extend the commerce of Great Britain; to
come into competition at least with the other British capitals
employed in all those different ways, to reduce the rate of
profit in them all, and thereby to give to Great Britain, in all
of them, a superiority over other countries, still greater than
what she at present enjoys.
The monopoly of the colony trade, too, has forced some part of
the capital of Great Britain from all foreign trade of
consumption to a carrying trade; and, consequently from
supporting more or less the industry of Great Britain, to be
employed altogether in supporting partly that of the colonies,
and partly that of some other countries.
The goods, for example, which are annually purchased with the
great surplus of eighty-two thousand hogsheads of tobacco
annually re-exported from Great Britain, are not all consumed in
Great Britain. Part of them, linen from Germany and Holland, for
example, is returned to the colonies for their particular
consumption. But that part of the capital of Great Britain which
buys the tobacco with which this linen is afterwards bought, is
necessarily withdrawn from supporting the industry of Great
Britain, to be employed altogether in supporting, partly that of
the colonies, and partly that of the particular countries who pay
for this tobacco with the produce of their own industry.
The monopoly of the colony trade, besides, by forcing towards it
a much greater proportion of the capital of Great Britain than
what would naturally have gone to it, seems to have broken
altogether that natural balance which would otherwise have taken
place among all the different branches of British industry. The
industry of Great Britain, instead of being accommodated to a
great number of small markets, has been principally suited to one
great market. Her commerce, instead of running in a great number
of small channels, has been taught to run principally in one
great channel. But the whole system of her industry and commerce
has thereby been rendered less secure; the whole state of her
body politic less healthful than it otherwise would have been. In
her present condition, Great Britain resembles one of those
unwholesome bodies in which some of the vital parts are
overgrown, and which, upon that account, are liable to many
dangerous disorders, scarce incident to those in which all the
parts are more properly proportioned. A small stop in that great
blood-vessel, which has been artificially swelled beyond its
natural dimensions, and through which an unnatural proportion of
the industry and commerce of the country has been forced to
circulate, is very likely to bring on the most dangerous
disorders upon the whole body politic. The expectation of a
rupture with the colonies, accordingly, has struck the people of
Great Britain with more terror than they ever felt for a Spanish
armada, or a French invasion. It was this terror, whether well or
ill grounded, which rendered the repeal of the stamp act, among
the merchants at least, a popular measure. In the total
exclusion from the colony market, was it to last only for a few
years, the greater part of our merchants used to fancy that they
foresaw an entire stop to their trade; the greater part of our
master manufacturers, the entire ruin of their business; and the
greater part of our workmen, an end of their employment. A
rupture with any of our neighbours upon the continent, though
likely, too, to occasion some stop or interruption in the
employments of some of all these different orders of people, is
foreseen, however, without any such general emotion. The blood,
of which the circulation is stopt in some of the smaller vessels,
easily disgorges itself into the greater, without occasioning any
dangerous disorder; but, when it is stopt in any of the greater
vessels, convulsions, apoplexy, or death, are the immediate and
unavoidable consequences. If but one of those overgrown
manufactures, which, by means either of bounties or of the
monopoly of the home and colony markets, have been artificially
raised up to any unnatural height, finds some small stop or
interruption in its employment, it frequently occasions a mutiny
and disorder alarming to government, and embarrassing even to the
deliberations of the legislature. How great, therefore, would be
the disorder and confusion, it was thought, which must
necessarily be occasioned by a sudden and entire stop in the
employment of so great a proportion of our principal
manufacturers?
Some moderate and gradual relaxation of the laws which give to
Great Britain the exclusive trade to the colonies, till it is
rendered in a great measure free, seems to be the only expedient
which can, in all future times, deliver her from this danger ;
which can enable her, or even force her, to withdraw some part of
her capital from this overgrown employment, and to turn it,
though with less profit, towards other employments; and which, by
gradually diminishing one branch of her industry, and gradually
increasing all the rest, can, by degrees, restore all the
different branches of it to that natural, healthful, and proper
proportion, which perfect liberty necessarily establishes, and
which perfect liberty can alone preserve. To open the colony
trade all at once to all nations, might not only occasion some
transitory inconveniency, but a great permanent loss, to the
greater part of those whose industry or capital is at present
engaged in it. The sudden loss of the employment, even of the
ships which import the eighty-two thousand hogsheads of tobacco,
which are over and above the consumption of Great Britain, might
alone be felt very sensibly. Such are the unfortunate effects of
all the regulations of the mercantile system. They not only
introduce very dangerous disorders into the state of the body
politic, but disorders which it is often difficult to remedy,
without occasioning, for a time at least, still greater
disorders. In what manner, therefore, the colony trade ought
gradually to be opened ; what are the restraints which ought
first, and what are those which ought last, to be taken away ; or
in what manner the natural system of perfect liberty and justice
ought gradually to be restored, we must leave to the wisdom of
future statesmen and legislators to determine.
Five different events, unforeseen and unthought of, have very
fortunately concurred to hinder Great Britain from feeling, so
sensibly as it was generally expected she would, the total
exclusion which has now taken place for more than a year (from
the first of December 1774) from a very important branch of the
colony trade, that of the twelve associated provinces of North
America. First, those colonies, in preparing themselves for their
non-importation agreement, drained Great Britain completely of
all the commodities which were fit for their market ; secondly,
the extra ordinary demand of the Spanish flota has, this year,
drained Germany and the north of many commodities, linen in
particular, which used to come into competition, even in the
British market, with the manufactures of Great Britain; thirdly,
the peace between Russia and Turkey has occasioned an
extraordinary demand from the Turkey market, which, during the
distress of the country, and while a Russian fleet was cruizing
in the Archipelago, had been very poorly supplied ; fourthly, the
demand of the north of Europe for the manufactures of Great
Britain has been increasing from year to year, for some time
past; and, fifthly, the late partition, and consequential
pacification of Poland, by opening the market of that great
country, have, this year, added an extraordinary demand from
thence to the increasing demand of the north. These events are
all, except the fourth, in their nature transitory and
accidental; and the exclusion from so important a branch of the
colony trade, if unfortunately it should continue much longer,
may still occasion some degree of distress. This distress,
however, as it will come on gradually, will be felt much less
severely than if it had come on all at once ; and, in the mean
time, the industry and capital of the country may find a new
employment and direction, so as to prevent this distress from
ever rising to any considerable height.
The monopoly of the colony trade, therefore, so far as it has
turned towards that trade a greater proportion of the capital of
Great Britain than what would otherwise have gone to it, has in
all cases turned it, from a foreign trade of consumption with a
neighbouring, into one with a more distant country ; in many
cases from a direct foreign trade of consumption into a
round-about one; and, in some cases, from all foreign trade of
consumption into a carrying trade. It has, in all cases,
therefore, turned it from a direction in which it would have
maintained a greater quantity of productive labour, into one in
which it can maintain a much smaller quantity. By suiting,
besides, to one particular market only, so great a part of the
industry and commerce of Great Britain, it has rendered the whole
state of that industry and commerce more precarious and less
secure, than if their produce had been accommodated to a greater
variety of markets.
We must carefully distinguish between the effects of the colony
trade and those of the monopoly of that trade. The former are
always and necessarily beneficial ; the latter always and
necessarily hurtful. But the former are so beneficial, that the
colony trade, though subject to a monopoly, and, notwithstanding
the hurtful effects of that monopoly, is still, upon the whole,
beneficial, and greatly beneficial, though a good deal less so
than it otherwise would be.
The effect of the colony trade, in its natural and free state, is
to open a great though distant market, for such parts of the
produce of British industry as may exceed the demand of the
markets nearer home, of those of Europe, and of the countries
which lie round the Mediterranean sea. In its natural and free
state, the colony trade, without drawing from those markets any
part of the produce which had ever been sent to them, encourages
Great Britain to increase the surplus continually, by continually
presenting new equivalents to be exchanged for it. In its natural
and free state, the colony trade tends to increase the quantity
of productive labour in Great Britain, but without altering in
any respect the direction of that which had been employed there
before. In the natural and free state of the colony trade, the
competition of all other nations would hinder the rate of profit
from rising above the common level, either in the new market, or
in the new employment. The new market, without drawing any thing
from the old one, would create, if one may say so, a new produce
for its own supply ; and that new produce would constitute a new
capital for carrying on the new employment, which, in the same
manner, would draw nothing from the old one.
The monopoly of the colony trade, on the contrary, by excluding
the competition of other nations, and thereby raising the rate of
profit, both in the new market and in the new employment, draws
produce from the old market, and capital from the old employment.
To augment our share of the colony trade beyond what it otherwise
would be, is the avowed purpose of the monopoly. If our share of
that trade were to be no greater with, than it would have been
without the monopoly, there could have been no reason for
establishing the monopoly. But whatever forces into a branch of
trade, of which the returns are slower and more distant than
those of the greater part of other trades, a greater proportion
of the capital of any country, than what of its own accord would
go to that branch, necessarily renders the whole quantity of
productive labour annually maintained there, the whole annual
produce of the land and labour of that country, less than they
otherwise would be. It keeps down the revenue of the inhabitants
of that country below what it would naturally rise to, and
thereby diminishes their power of accumulation. It not only
hinders, at all times, their capital from maintaining so great a
quantity of productive labour as it would otherwise maintain, but
it hinders it from increasing so fast as it would otherwise
increase, and, consequently, from maintaining a still greater
quantity of productive labour.
The natural good effects of the colony trade, however, more than
counterbalance to Great Britain the bad effects of the monopoly ;
so that, monopoly and altogether, that trade, even as it is
carried on at present, is not only advantageous, but greatly
advantageous. The new market and the new employment which are
opened by the colony trade, are of much greater extent than that
portion of the old market and of the old employment which is lost
by the monopoly. The new produce and the new capital which has
been created, if one may say so, by the colony trade, maintain in
Great Britain a greater quantity of productive labour than what
can have been thrown out of employment by the revulsion of
capital from other trades of which the returns are more frequent.
If the colony trade, however, even as it is carried on at
present, is advantageous to Great Britain, it is not by means of
the monopoly, but in spite of the monopoly.
It is rather for the manufactured than for the rude produce of
Europe, that the colony trade opens a new market. Agriculture is
the proper business of all new colonies; a business which the
cheapness of land renders more advantageous than any other. They
abound, therefore, in the rude produce of land ; and instead of
importing it from other countries, they have generally a large
surplus to export. In new colonies, agriculture either draws
hands from all other employments, or keeps them from going to any
other employment. There are few hands to spare for the necessary,
and none for the ornamental manufactures. The greater part of the
manufactures of both kinds they find it cheaper to purchase of
other countries than to make for themselves. It is chiefly by
encouraging the manufactures of Europe, that the colony trade
indirectly encourages its agriculture. The manufacturers of
Europe, to whom that trade gives employment, constitute a new
market for the produce of the land, and the most advantageous of
all markets ; the home market for the corn and cattle, for the
bread and butcher's meat of Europe, is thus greatly extended by
means of the trade to America.
But that the monopoly of the trade of populous and thriving
colonies is not alone sufficient to establish, or even to
maintain, manufactures in any country, the examples of Spain and
Portugal sufficiently demonstrate. Spain and Portugal were
manufacturing countries before they had any considerable
colonies. Since they had the richest and most fertile in the
world, they have both ceased to be so.
In Spain and Portugal, the bad effects of the monopoly,
aggravated by other causes, have, perhaps, nearly overbalanced
the natural good effects of the colony trade. These causes seem
to be other monopolies of different kinds: the degradation of the
value of gold and silver below what it is in most other countries
; the exclusion from foreign markets by improper taxes upon
exportation, and the narrowing of the home market, by still more
improper taxes upon the transportation of goods from one part of
the country to another ; but above all, that irregular and
partial administration of justice which often protects the rich
and powerful debtor from the pursuit of his injured creditor, and
which makes the industrious part of the nation afraid to prepare
goods for the consumption of those haughty and great men, to whom
they dare not refuse to sell upon credit, and from whom they are
altogether uncertain of repayment.
In England, on the contrary, the natural good effects of the
colony trade, assisted by other causes, have in a great measure
conquered the bad effects of the monopoly. These causes seem to
be, the general liberty of trade, which, notwithstanding some
restraints, is at least equal, perhaps superior, to what it is in
any other country ; the liberty of exporting, duty free, almost
all sorts of goods which are the produce of domestic industry, to
almost any foreign country; and what, perhaps, is of still
greater importance, the unbounded liberty of transporting them
from one part of our own country to any other, without being
obliged to give any account to any public office, without being
liable to question or examination of any kind; but, above all,
that equal and impartial administration of justice, which renders
the rights of the meanest British subject respectable to the
greatest, and which, by securing to every man the fruits of his
own industry, gives the greatest and most effectual encouragement
to every sort of industry.
If the manufactures of Great Britain, however, have been
advanced, as they certainly have, by the colony trade, it has not
been by means of the monopoly of that trade, but in spite of the
monopoly. The effect of the monopoly has been, not to augment
the quantity, but to alter the quality and shape of a part of the
manufactures of Great Britain, and to accommodate to a market,
from which the returns are slow and distant, what would otherwise
have been accommodated to one from which the returns are frequent
and near. Its effect has consequently been, to turn a part of the
capital of Great Britain from an employment in which it would
have maintained a greater quantity of manufacturing industry, to
one in which it maintains a much smaller, and thereby to
diminish, instead of increasing, the whole quantity of
manufacturing industry maintained in Great Britain.
The monopoly of the colony trade, therefore, like all the other
mean and malignant expedients of the mercantile system, depresses
the industry of all other countries, but chiefly that of the
colonies, without in the least increasing, but on the contrary
diminishing, that of the country in whose favour it is
established.
The monopoly hinders the capital of that country, whatever may,
at any particular time, be the extent of that capital, from
maintaining so great a quantity of productive labour as it would
otherwise maintain, and from affording so great a revenue to the
industrious inhabitants as it would otherwise afford. But as
capital can be increased only by savings from revenue, the
monopoly, by hindering it from affording so great a revenue as it
would otherwise afford, necessarily hinders it from increasing so
fast as it would otherwise increase, and consequently from
maintaining a still greater quantity of productive labour, and
affording a still greater revenue to the industrious inhabitants
of that country. One great original source of revenue, therefore,
the wages of labour, the monopoly must necessarily have rendered,
at all times, less abundant than it otherwise would have been.
By raising the rate of mercantile profit, the monopoly
discourages the improvement of land. The profit of improvement
depends upon the difference between what the land actually
produces, and what, by the application of a certain capital, it
can be made to produce. If this difference affords a greater
profit than what can be drawn from an equal capital in any
mercantile employment, the improvement of land will draw capital
from all mercantile employments. If the profit is less,
mercantile employments will draw capital from the improvement of
land. Whatever, therefore, raises the rate of mercantile profit,
either lessens the superiority, or increases the inferiority of
the profit of improvement : and, in the one case, hinders capital
from going to improvement, and in the other draws capital from
it; but by discouraging improvement, the monopoly necessarily
retards the natural increase of another great original source of
revenue, the rent of land. By raising the rate of profit,
too, the monopoly necessarily keeps up the market rate of
interest higher than it otherwise would be. But the price of
land, in proportion to the rent which it affords, the number of
years purchase which is commonly paid for it, necessarily falls
as the rate of interest rises, and rises as the rate of interest
falls. The monopoly, therefore, hurts the interest of the
landlord two different ways, by retarding the natural increase,
first, of his rent, and, secondly, of the price which he would
get for his land, in proportion to the rent which it affords.
The monopoly, indeed, raises the rate of mercantile profit and
thereby augments somewhat the gain of our merchants. But as it
obstructs the natural increase of capital, it tends rather to
diminish than to increase the sum total of the revenue which the
inhabitants of the country derive from the profits of stock ; a
small profit upon a great capital generally affording a greater
revenue than a great profit upon a small one. The monopoly raises
the rate of profit, but it hinders the sum of profit from rising
so high as it otherwise would do.
All the original sources of revenue, the wages of labour, the
rent of land, and the profits of stock, the monopoly renders much
less abundant than they otherwise would be. To promote the little
interest of one little order of men in one country, it hurts the
interest of all other orders of men in that country, and of all
the men in all other countries.
It is solely by raising the ordinary rate of profit, that the
monopoly either has proved, or could prove, advantageous to any
one particular order of men. But besides all the bad effects
to the country in general, which have already been mentioned as
necessarily resulting from a higher rate of profit, there is one
more fatal, perhaps, than all these put together, but which, if
we may judge from experience, is inseparably connected with it.
The high rate of profit seems everywhere to destroy that
parsimony which, in other circumstances, is natural to the
character of the merchant. When profits are high, that sober
virtue seems to be superfluous, and expensive luxury to suit
better the affluence of his situation. But the owners of the
great mercantile capitals are necessarily the leaders and
conductors of the whole industry of every nation; and their
example has a much greater influence upon the manners of the
whole industrious part of it than that of any other order of men.
If his employer is attentive and parsimonious, the workman is
very likely to be so too; but if the master is dissolute and
disorderly, the servant, who shapes his work according to the
pattern which his master prescribes to him, will shape his life,
too, according to the example which he sets him. Accumulation is
thus prevented in the hands of all those who are naturally the
most disposed to accumulate; and the funds destined for the
maintenance of productive labour, receive no augmentation from
the revenue of those who ought naturally to augment them the
most. The capital of the country, instead of increasing,
gradually dwindles away, and the quantity of productive labour
maintained in it grows every day less and less. Have the
exorbitant profits of the merchants of Cadiz and Lisbon augmented
the capital of Spain and Portugal ? Have they alleviated the
poverty, have they promoted the industry, of those two beggarly
countries? Such has been the tone of mercantile expense in those
two trading cities, that those exorbitant profits, far from
augmenting the general capital of the country, seem scarce to
have been sufficient to keep up the capitals upon which they were
made. Foreign capitals are every day intruding themselves, if I
may say so, more and more into the trade of Cadiz and Lisbon. It
is to expel those foreign capitals from a trade which their own
grows every day more and more insufficient for carrying on, that
the Spaniards and Portuguese endeavour every day to straiten more
and more the galling bands of their absurd monopoly. Compare the
mercantile manners of Cadiz and Lisbon with those of Amsterdam,
and you will be sensible how differently the conduct and
character of merchants are affected by the high and by the low
profits of stock. The merchants of London, indeed, have not yet
generally become such magnificent lords as those of Cadiz and
Lisbon; but neither are they in general such attetitive and
parsimonious burghers as those of Amsterdam. They are supposed,
however, many of them, to be a good deal richer than the greater
part of the former, and not quire so rich as many of the latter:
but the rate of their profit is commonly much lower than that of
the former, and a good deal higher than that of the latter. Light
come, light go, says the proverb ; and the ordinary tone of
expense seems everywhere to be regulated, not so much according
to the real ability of spending, as to the supposed facility of
getting money to spend.
It is thus that the single advantage which the monopoly procures
to a single order of men, is in many different ways hurtful to
the general interest of the country.
To found a great empire for the sole purpose of raising up a
people of customers, may at first sight, appear a project fit
only for a nation of shopkeepers. It is, however, a project
altogether unfit for a nation of shopkeepers, but extremely fit
for a nation whose government is influenced by shopkeepers. Such
statesmen, and such statesmen only, are capable of fancying that
they will find some advantage in employing the blood and treasure
of their fellow-citizens, to found and maintain such an empire.
Say to a shopkeeper, Buy me a good estate, and I shall always buy
my clothes at your shop, even though I should pay somewhat dearer
than what I can have them for at other shops ; and you will not
find him very forward to embrace your proposal. But should
any other person buy you such an estate, the shopkeeper will be
much obliged to your benefactor if he would enjoin you to buy all
your clothes at his shop. England purchased for some of her
subjects, who found themselves uneasy at home, a great estate in
a distant country. The price, indeed, was very small, and instead
of thirty years purchase, the ordinary price of land in the
present times, it amounted to little more than the expense of the
different equipments which made the first discovery, reconoitered
the coast, and took a fictitious possession of the country. The
land was good, and of great extent; and the cultivators having
plenty of good ground to work upon, and being for some time at
liberty to sell their produce where they pleased, became, in the
course of little more than thirty or forty years (between 1620
and 1660), so numerous and thriving a people, that the
shopkeepers and other traders of England wished to secure to
themselves the monopoly of their custom. Without pretending,
therefore, that they had paid any part, either of the original
purchase money, or of the subsequent expense of improvement, they
petitioned the parliament, that the cultivators of America might
for the future be confined to their shop; first, for buying all
the goods which they wanted from Europe; and, secondly, for
selling all such parts of their own produce as those traders
might find it convenient to buy. For they did not find it
convenient to buy every part of it. Some parts of it imported
into England, might have interfered with some of the trades which
they themselves carried on at home. Those particular parts of it,
therefore, they were willing that the colonists should sell where
they could; the farther off the better; and upon that account
proposed that their market should be confined to the countries
south of Cape Finisterre. A clause in the famous act of
navigation established this truly shopkeeper proposal into a law.
The maintenance of this monopoly has hitherto been the principal,
or more properly, perhaps, the sole end and purpose of the
dominion which Great Britain assumes over her colonies. In the
exclusive trade, it is supposed, consists the great advantage of
provinces, which have never yet afforded either revenue or
military force for the support of the civil government, or the
defence of the mother country. The monopoly is the principal
badge of their dependency, and it is the sole fruit which has
hitherto been gathered from that dependency. Whatever expense
Great Britain has hitherto laid out in maintaining this
dependency, has really been laid out in order to support this
monopoly. The expense of the ordinary peace establishment of the
colonies amounted, before the commencement of the present
disturbances to the pay of twenty regiments of foot ; to the
expense of the artillery, stores, and extraordinary provisions,
with which it was necessary to supply them ; and to the expense
of a very considerable naval force, which was constantly kept up,
in order to guard from the smuggling vessels of other nations,
the immense coast of North America, and that of our West Indian
islands. The whole expense of this peace establishment was a
charge upon the revenue of Great Britain, and was, at the same
time, the smallest part of what the dominion of the colonies has
cost the mother country. If we would know the amount of the
whole, we must add to the annual expense of this peace
establishment, the interest of the sums which, in consequence of
their considering her colonies as provinces subject to her
dominion, Great Britain has, upon different occasions, laid out
upon their defence. We must add to it, in particular, the whole
expense of the late war, and a great part of that of the war
which preceded it. The late war was altogether a colony quarrel ;
and the whole expense of it, in whatever part of the world it
might have been laid out, whether in Germany or the East Indies,
ought justly to be stated to the account of the colonies. It
amounted to more than ninety millions sterling, including not
only the new debt which was contracted, but the two shillings in
the pound additional land tax, and the sums which were every year
borrowed from the sinking fund. The Spanish war which began in
1739 was principally a colony quarrel. Its principal object was
to prevent the search of the colony ships, which carried on a
contraband trade with the Spanish Main. This whole expense is, in
reality, a bounty which has been given in order to support a
monopoly. The pretended purpose of it was to encourage the
manufactures, and to increase the commerce of Great Britain. But
its real effect has been to raise the rate of mercantile profit,
and to enable our merchants to turn into a branch of trade, of
which the returns are more slow and distant than those of the
greater part of other trades, a greater proportion of their
capital than they otherwise would have done; two events which, if
a bounty could have prevented, it might perhaps have been very
well worth while to give such a bounty.
Under the present system of management, therefore, Great Britain
derives nothing but loss from the dominion which she assumes over
her colonies.
To propose that Great Britain should voluntarily give up all
authority over her colonies, and leave them to elect their own
magistrates, to enact their own laws, and to make peace and war,
as they might think proper, would be to propose such a measure as
never was, and never will be, adopted by any nation in the world.
No nation ever voluntarily gave up the dominion of any province,
how troublesome soever it might be to govern it, and how small
soever the revenue which it afforded might be in proportion to
the expense which it occasioned. Such sacrifices, though they
might frequently be agreeable to the interest, are always
mortifying to the pride of every nation; and, what is perhaps of
still greater consequence, they are always contrary to the
private interest of the governing part of it, who would thereby
be deprived of the disposal of many places of trust and profit,
of many opportunities of acquiring wealth and distinction, which
the possession of the most turbulent, and, to the great body of
the people, the most unprofitable province, seldom fails to
afford. The most visionary enthusiasts would scarce be capable of
proposing such a measure, with any serious hopes at least of its
ever being adopted. If it was adopted, however, Great Britain
would not only be immediately freed from the whole annual expense
of the peace establishment of the colonies, but might settle with
them such a treaty of commerce as would effectually secure to her
a free trade, more advantageous to the great body of the people,
though less so to the merchants, than the monopoly which she at
present enjoys. By thus parting good friends, the natural
affection of the colonies to the mother country, which, perhaps,
our late dissensions have well nigh extinguished, would quickly
revive. It might dispose them not only to respect, for whole
centuries together, that treaty of commerce which they had
concluded with us at parting, but to favour us in war as well as
in trade, and instead of turbulent and factious subjects, to
become our most faithful, affectionate, and generous allies; and
the same sort of parental affection on the one side, and filial
respect on the other, might revive between Great Britain and her
colonies, which used to subsist between those of ancient Greece
and the mother city from which they descended.
In order to render any province advantageous to the empire to
which it belongs, it ought to afford, in time of peace, a revenue
to the public, sufficient not only for defraying the whole
expense of its own peace establishment, but for contributing its
proportion to the support of the general government of the
empire. Every province necessarily contributes, more or less, to
increase the expense of that general government. If any
particular province, therefore, does not contribute its share
towards defraying this expense, an unequal burden must be thrown
upon some other part of the empire. The extraordinary revenue,
too, which every province affords to the public in time of war,
ought, from parity of reason, to bear the same proportion to the
extraordinary revenue of the whole empire, which its ordinary
revenue does in time of peace. That neither the ordinary nor
extraordinary revenue which Great Britain derives from her
colonies, bears this proportion to the whole revenue of the
British empire, will readily be allowed. The monopoly, it has
been supposed, indeed, by increasing the private revenue of the
people of Great Britain, and thereby enabling them to pay greater
taxes, compensates the deficiency of the public revenue of the
colonies. But this monopoly, I have endeavoured to show, though a
very grievous tax upon the colonies, and though it may increase
the revenue of a particular order of men in Great Britain,
diminishes, instead of increasing, that of the great body of the
people, and consequently diminishes, instead of increasing, the
ability of the great body of the people to pay taxes. The men,
too, whose revenue the monopoly increases, constitute a
particular order, which it is both absolutely impossible to tax
beyond the proportion of other orders, and extremely impolitic
even to attempt to tax beyond that proportion, as I shall
endeavour to show in the following book. No particular resource,
therefore, can be drawn from this particular order.
The colonies may be taxed either by their own assemblies, or by
the parliament of Great Britain.
That the colony assemblies can never be so managed as to levy
upon their constituents a public revenue, sufficient, not only to
maintain at all times their own civil and military establishment,
but to pay their proper proportion of the expense of the general
government of the British empire, seems not very probable. It was
a long time before even the parliament of England, though placed
immediately under the eye of the sovereign, could be brought
under such a system of management, or could be rendered
sufficiently liberal in their grants for supporting the civil and
military establishments even of their own country. It was only by
distributing among the particular members of parliament a great
part either of the offices, or of the disposal of the offices
arising from this civil and military establishment, that such a
system of management could be established, even with regard to
the parliament of England. But the distance of the colony
assemblies from the eye of the sovereign, their number, their
dispersed situation, and their various constitutions, would
render it very difficult to manage them in the same manner, even
though the sovereign had the same means of doing it; and those
means are wanting. It would be absolutely impossible to
distribute among all the leading members of all the colony
assemblies such a share, either of the offices, or of the
disposal of the offices, arising from the general government of
the British empire, as to dispose them to give up their
popularity at home, and to tax their constituents for the support
of that general government, of which almost the whole emoluments
were to be divided among people who were strangers to them. The
unavoidable ignorance of administration, besides, concerning the
relative importance of the different members of those different
assemblies, the offences which must frequently be given, the
blunders which must constantly be committed, in attempting to
manage them in this manner, seems to render such a system of
management altogether impracticable with regard to them.
The colony assemblies, besides, cannot be supposed the proper
judges of what is necessary for the defence and support of the
whole empire. The care of that defence and support is not
entrusted to them. It is not their business, and they have no
regular means of information concerning it. The assembly of a
province, like the vestry of a parish, may judge very properly
concerning the affairs of its own particular district, but can
have no proper means of judging concerning those of the whole
empire. It cannot even judge properly concerning the proportion
which its own province bears to the whole empire, or concerning
the relative degree of its wealth and importance, compared with
the other provinces; because those other provinces are not under
the inspection and superintendency of the assembly of a
particular province. What is necessary for the defence and
support of the whole empire, and in what proportion each part
ought to contribute, can be judged of only by that assembly which
inspects and super-intends the affairs of the whole empire.
It has been proposed, accordingly, that the colonies should be
taxed by requisition, the parliament of Great Britain determining
the sum which each colony ought to pay, and the provincial
assembly assessing and levying it in the way that suited best the
circumstances of the province. What concerned the whole empire
would in this way be determined by the assembly which inspects
and superintends the affairs of the whole empire ; and the
provincial affairs of each colony might still be regulated by its
own assembly. Though the colonies should, in this case, have no
representatives in the British parliament, yet, if we may judge
by experience, there is no probability that the parliamentary
requisition would be unreasonable. The parliament of England has
not, upon any occasion, shewn the smallest disposition to
overburden those parts of the empire which are not represented in
parliament. The islands of Guernsey and Jersey, without any means
of resisting the authority of parliament, are more lightly taxed
than any part of Great Britain. Parliament, in attempting to
exercise its supposed right, whether well or ill grounded, of
taxing the colonies, has never hitherto demanded of them anything
which even approached to a just proportion to what was paid by
their fellow subjects at home. If the contribution of the
colonies, besides, was to rise or fall in proportion to the rise
or fall of the land-tax, parliament could not tax them without
taxing, at the same time, its own constituents, and the colonies
might, in this case, be considered as virtually represented in
parliament.
Examples are not wanting of empires in which all the different
provinces are not taxed, if I may be allowed the expression, in
one mass ; but in which the sovereign regulates the sum which
each province ought to pay, and in some provinces assesses and
levies it as he thinks proper ; while in others he leaves it to
be assessed and levied as the respective states of each province
shall determine. In some provinces of France, the king not only
imposes what taxes he thinks proper, but assesses and levies them
in the way he thinks proper. From others he demands a certain
sum, but leaves it to the states of each province to assess and
levy that sum as they think proper. According to the scheme of
taxing by requisition, the parliament of Great Britain would
stand nearly in the same situation towards the colony assemblies,
as the king of France does towards the states of those provinces
which still enjoy the privilege of having states of their own,
the provinces of France which are supposed to be the best
governed.
But though, according to this scheme, the colonies could have no
just reason to fear that their share of the public burdens should
ever exceed the proper proportion to that of their
fellow-citizens at home, Great Britain might have just reason to
fear that it never would amount to that proper proportion. The
parliament of Great Britain has not, for some time past, had the
same established authority in the colonies, which the French king
has in those provinces of France which still enjoy the privilege
of having states of their own. The colony assemblies, if they
were not very favourably disposed (and unless more skilfully
managed than they ever have been hitherto, they are not very
likely to be so), might still find many pretences for evading or
rejecting the most reasonable requisitions of parliament. A
French war breaks out, we shall suppose; ten millions must
immediately be raised, in order to defend the seat of the empire.
This sum must be borrowed upon the credit of some parliamentary
fund mortgaged for paying the interest. Part of this fund
parliament proposes to raise by a tax to be levied in Great
Britain ; and part of it by a requisition to all the different
colony assemblies of America and the West Indies. Would people
readily advance their money upon the credit of a fund which
partly depended upon the good humour of all those assemblies, far
distant from the seat of the war, and sometimes, perhaps,
thinking themselves not much concerned in the event of it ? Upon
such a fund, no more money would probably be advanced than what
the tax to be levied in Great Britain might be supposed to answer
for. The whole burden of the debt contracted on account of the
war would in this manner fall, as it always has done hitherto,
upon Great Britain; upon a part of the empire, and not upon the
whole empire. Great Britain is, perhaps, since the world began,
the only state which, as it has extended its empire, has only
increased its expense, without once augmenting its resources.
Other states have generally disburdened themselves, upon their
subject and subordinate provinces, of the most considerable part
of the expense of defending the empire. Great Britain has
hitherto suffered her subject and subordinate provinces to
disburden themselves upon her of almost this whole expense. In
order to put Great Britain upon a footing of equality with her
own colonies, which the law has hitherto supposed to be subject
and subordinate, it seems necessary, upon the scheme of taxing
them by parliamentary requisition, that parliament should have
some means of rendering its requisitions immediately effectual,
in case the colony assemblies should attempt to evade or reject
them; and what those means are, it is not very easy to conceive,
and it has not yet been explained.
Should the parliament of Great Britain, at the same time, be ever
fully established in the right of taxing the colonies, even
independent of the consent of their own assemblies, the
importance of those assemblies would, from that moment, be at an
end, and with it, that of all the leading men of British America.
Men desire to have some share in the management of public
affairs, chiefly on account of the importance which it gives
them. Upon the power which the greater part of the leading men,
the natural aristocracy of every country, have of preserving or
defending their respective importance, depends the stability and
duration of every system of free government. In the attacks which
those leading men are continually making upon the importance of
one another, and in the defence of their own, consists the whole
play of domestic faction and ambition. The leading men of
America, like those of all other countries, desire to preserve
their own importance. They feel, or imagine, that if their
assemblies, which they are fond of calling parliaments, and of
considering as equal in authority to the parliament of Great
Britain, should be so far degraded as to become the humble
ministers and executive officers of that parliament, the greater
part of their own importance would be at an end. They have
rejected, therefore, the proposal of being taxed by parliamentary
requisition, and, like other ambitious and high-spirited men,
have rather chosen to draw the sword in defence of their own
importance.
Towards the declension of the Roman republic, the allies of Rome,
who had borne the principal burden of defending the state and
extending the empire, demanded to be admitted to all the
privileges of Roman citizens. Upon being refused, the social war
broke out. During the course of that war, Rome granted those
privileges to the greater part of them, one by one, and in
proportion as they detached themselves from the general
confederacy. The parliament of Great Britain insists upon taxing
the colonies ; and they refuse to be taxed by a parliament in
which they are not represented. If to each colony which should
detach itself from the general confederacy, Great Britain should
allow such a number of representatives as suited the proportion
of what it contributed to the public revenue of the empire, in
consequence of its being subjected to the same taxes. and in
compensation admitted to the same freedom of trade with its
fellow-subjects at home; the number of its representatives to be
augmented as the proportion of its contribution might afterwards
augment ; a new method of acquiring importance, a new and more
dazzling object of ambition, would be presented to the leading
men of each colony. Instead of piddling for the little prizes
which are to be found in what may be called the paltry raffle of
colony faction, they might then hope, from the presumption which
men naturally have in their own ability and good fortune, to draw
some of the great prizes which sometimes come from the wheel of
the great state lottery of British politics. Unless this or some
other method is fallen upon, and there seems to be none more
ubvious than this, of preserving the importance and of gratifying
the ambition of the leading men of America, it is not very
probable that they will ever voluntarily submit to us; and we
ought to consider, that the blood which must be shed in forcing
them to do so, is, every drop of it, the blood either of those
who are, or of those whom we wish to have for our fellow
citizens. They are very weak who flatter themselves that, in the
state to which things have come, our colonies will be easily
conquered by force alone. The persons who now govern the
resolutions of what they call their continental congress, feel in
themselves at this moment a degree of importance which, perhaps,
the greatest subjects in Europe scarce feel. From shopkeepers,
trades men, and attorneys, they are become statesmen and
legislators, and are employed in contriving a new form of
government for an extensive empire, which, they flatter
themselves, will become, and which, indeed, seems very likely to
become, one of the greatest and most formidable that ever was in
the world. Five hundred different people, perhaps, who, in
different ways, act immediately under the continental congress,
and five hundred thousand, perhaps, who act under those five
hundred, all feel, in the same manner, a proportionable rise in
their own importance. Almost every individual of the governing
party in America fills, at present, in his own fancy, a station
superior, not only to what he had ever filled before, but to what
he had ever expected to fill; and unless some new object of
ambition is presented either to him or to his leaders, if he has
the ordinary spirit of a man, he will die in defence of that
station.
It is a remark of the President Heynaut, that we now read with
pleasure the account of many little transactions of the Ligue,
which, when they happened, were not, perhaps, considered as very
important pieces of news. But everyman then, says he, fancied
himself of some importance ; and the innumerable memoirs which
have come down to us from those times, were the greater part of
them written by people who took pleasure in recording and
magnifying events, in which they flattered themselves they had
been considerable actors. How obstinately the city of Paris, upon
that occasion, defended itself, what a dreadful famine it
supported, rather than submit to the best, and afterwards the
most beloved of all the French kings, is well known. The greater
part of the citizens, or those who governed the greater part of
them, fought in defence of their own importance, which, they
foresaw, was to be at an end whenever the ancient government
should be re-established. Our colonies, unless they can be
induced to consent to a union, are very likely to defend
themselves, against the best of all mother countries, as
obstinately as the city of Paris did against one of the best of
kings.
The idea of representation was unknown in ancient times. When the
people of one state were admitted to the right of citizenship in
another, they had no other means of exercising that right, but by
coming in a body to vote and deliberate with the people of that
other state. The admission of the greater part of the inhabitants
of Italy to the privileges of Roman citizens, completely ruined
the Roman republic. It was no longer possible to distinguish
between who was, and who was not, a Roman citizen. No tribe could
know its own members. A rabble of any kind could be introduced
into the assemblies of the people, could drive out the real
citizens, and decide upon the affairs of the republic, as if they
themselves had been such. But though America were to send fifty
or sixty new representatives to parlimnent, the door-keeper of
the house of commons could not find any great difficulty in
distinguishing between who was and who was not a member. Though
the Roman constitution, therefore, was necessarily ruined by the
union of Rome with the allied states of Italy, there is not the
least probability that the British constitution would be hurt by
the union of Great Britain with her colonies. That
constitution, on the contrary, would be completed by it, and
seems to be imperfect without it. The assembly which deliberates
and decides concerning the affairs of every part of the empire,
in order to be properly informed, ought certainly to have
representatives from every part of it. That this union, however,
could be easily effectuated, or that difficulties, and great
difficulties, might not occur in the execution, I do not pretend.
I have yet heard of none, however, which appear insurmountable.
The principal, perhaps, arise, not from the nature of things, but
from the prejudices and opinions of the people, both on this and
on the other side of the Atlantic.
We on this side the water are afraid lest the multitude of
American representatives should overturn the balance of the
constitution, and increase too much either the influence of the
crown on the one hand, or the force of the democracy on the
other. But if the number of American representatives were to be
in proportion to the produce of American taxation, the number of
people to be managed would increase exactly in proportion to the
means of managing them, and the means of managing to the number
of people to be managed. The monarchical and democratical parts
of the constitution would, after the union, stand exactly in the
same degree of relative force with regard to one another as they
had done before.
The people on the other side of the water are afraid lest their
distance from the seat of government might expose them to many
oppressions ; but their representatives in parliament, of which
the number ought from the first to be considerable, would easily
be able to protect them from all oppression. The distance could
not much weaken the dependency of the representative upon the
constituent, and the former would still feel that he owed his
seat in parliament, and all the consequence which he derived from
it, to the good-will of the latter. It would be the interest of
the former, therefore, to cultivate that good-will, by
complaining, with all the authority of a member of the
legislature, of every outrage which any civil or military officer
might be guilty of in those remote parts of the empire. The
distance of America from the seat of government, besides, the
natives of that country might flatter themselves, with some
appearance of reason too, would not be of very long continuance.
Such has hitherto been the rapid progress of that country in
wealth, population, and improvement, that in the course of little
more than a century, perhaps, the produce of the American might
exceed that of the British taxation. The seat of the empire would
then naturally remove itself to that part of the empire which
contributed most to the general defence and support of the whole.
The discovery of America, and that of a passage to the East
Indies by the Cape of Good Hope, are the two greatest and most
important events recorded in the history of mankind. Their
consequences have already been great; but, in the short period of
between two and three centuries which has elapsed since these
discoveries were made, it is impossible that the whole extent of
their consequences can have been seen. What benefits or what
misfortunes to mankind may hereafter result from those great
events, no human wisdom can foresee. By uniting in some measure
the most distant parts of the world, by enabling them to relieve
one another's wants, to increase one another's enjoyments, and to
encourage one another's industry, their general tendency would
seem to be beneficial. To the natives, however, both of the East
and West Indies, all the commercial benefits which can have
resulted from those events have been sunk and lost in the
dreadful misfortunes which they have occasioned. These
misfortunes, however, seem to have arisen rather from accident
than from any thing in the nature of those events themselves. At
the particular time when these discoveries were made, the
superiority of force happened to be so great on the side of the
Europeans, that they were enabled to commit with impunity every
sort of injustice in those remote countries. Hereafter, perhaps,
the natives of those countries may grow stronger, or those of
Europe may grow weaker ; and the inhabitants of all the different
quarters of the world may arrive at that equality of courage and
force which, by inspiring mutual fear, can alone overawe the
injustice of independent nations into some sort of respect for
the rights of one another. But nothing seems more likely to
establish this equality of force, than that mutual communication
of knowledge, and of all sorts of improvements, which an
extensive commerce from all countries to all countries naturally,
or rather necessarily, carries along with it.
In the mean time, one of the principal effects of those
discoveries has been, to raise the mercantile system to a degree
of splendour and glory which it could never otherwise have
attained to. It is the object of that system to enrich a great
nation, rather by trade and manufactures than by the improvement
and cultivation of land, rather by the industry of the towns than
by that of the country. But in consequence of those discoveries,
the commercial towns of Europe, instead of being the
manufacturers and carriers for but a very small part of the world
(that part of Europe which is washed by the Atlantic ocean, and
the countries which lie round the Baltic and Mediterranean seas),
have now become the manufacturers for the numerous and thriving
cultivators of America, and the carriers, and in some respects
the manufacturers too, for almost all the different nations of
Asia, Africa, and America. Two new worlds have been opened to
their industry, each of them much greater and more extensive than
the old one, and the market of one of them growing still greater
and greater every day.
The countries which possess the colonies of America, and which
trade directly to the East Indies, enjoy indeed the whole show
and splendour of this great commerce. Other countries, however,
notwithstanding all the invidious restraints by which it is meant
to exclude them, frequently enjoy a greater share of the real
benefit of it. The colonies of Spain and. Portugal, for example,
give more real encouragement to the industry of other countries
than to that of Spain and Portugal. In the single article of
linen alone, the consumption of those colonies amounts, it is
said (but I do not pretend to warrant the quantity ), to more
than three millions sterling a-year. But this great consumption
is almost entirely supplied by France, Flanders, Holland, and
Germany. Spain and Portugal furnish but a small part of it. The
capital which supplies the colonies with this great quantity of
linen, is annually distributed among, and furnishes a revenue to,
the inhabitants of those other countries. The profits of it only
are spent in Spain and Portugal, where they help to support the
sumptuous profusion of the merchants of Cadiz and Lisbon.
Even the regulations by which each nation endeavours to secure to
itself the exclusive trade of its own colonies, are frequently
more hurtful to the countries in favour of which they are
established, than to those against which they are established.
The unjust oppression of the industry of other countries falls
back, if I may say so, upon the heads of the oppressors, and
crushes their industry more than it does that of those other
countries. By those regulations, for example, the merchant of
Hamburg must send the linen which he destines for the American
market to London, and he must bring back from thence the tobacco
which be destines for the German market; because he can neither
send the one directly to America, nor bring the other directly
from thence. By this restraint he is probably obliged to sell the
one somewhat cheaper, and to buy the other somewhat dearer, than
he otherwise might have done; and his profits are probably
somewhat abridged by means of it. In this trade, however, between
Hamburg and London, he certainly receives the returns of his
capital much more quickly than he could possibly have done in the
direct trade to America, even though we should suppose, what is
by no means the case, that the payments of America were as
punctual as those of London. In the trade, therefore, to
which those regulations confine the merchant of Hamburg, his
capital can keep in constant employment a much greater quantity
of German industry than he possibly could have done in the trade
from which he is excluded. Though the one employment, therefore,
may to him perhaps be less profitable than the other, it cannot
be less advantageous to his country. It is quite otherwise with
the employment into which the monpoly naturally attracts, if I
may say so, the capital of the London merchant. That employment
may, perhaps, be more profitable to him than the greater part of
other employments; but on account of the slowness of the returns,
it cannot be more advantageous to his country.
After all the unjust attempts, therefore, of every country in
Europe to engross to itself the whole advantage of the trade of
its own colonies, no country has yet been able to engross to
itself any thing but the expense of supporting in time of peace,
and of defending in time of war, the oppressive authority which
it assumes over them. The inconveniencies resulting from the
possession of its colonies, every country has engrossed to itself
completely. The advantages resulting from their trade, it
has been obliged to share with many other countries.
At first sight, no doubt, the monopoly of the great commerce of
America naturally seems to be an acquisition of the highest
value. To the undiscerning eye of giddy ambition it naturally
presents itself, amidst the confused scramble of politics and
war, as a very dazzling object to fight for. The dazzling
splendour of the object, however, the immense greatness of the
commerce, is the very quality which renders the monopoly of it
hurtful, or which makes one employment, in its own nature
necessarily less advantageous to the country than the greater
part of other employments, absorb a much greater proportion of
the capital of the country than what would otherwise have gone to
it.
The mercantile stock of every country, it has been shown in the
second book, naturally seeks, if one may say so, the employment
most advantageous to that country. If it is employed in the
carrying trade, the country to which it belongs becomes the
emporium of the goods of all the countries whose trade that stock
carries on. But the owner of that stock necessarily wishes to
dispose of as great a part of those goods as he can at home. He
thereby saves himself the trouble, risk, and expense of
exportation ; and he will upon that account be glad to sell them
at home, not only for a much smaller price, but with somewhat a
smaller profit, than he might expect to make by sending them
abroad. He naturally, therefore, endeavours as much as he can to
turn his carrying trade into a foreign trade of consumption, If
his stock, again, is employed in a foreign trade of consumption,
he will, for the same reason, be glad to dispose of, at home, as
great a part as he can of the home goods which he collects in
order to export to some foreign market, and he will thus
endeavour, as much as he can, to turn his foreign trade of
consumption into a home trade. The mercantile stock of every
country naturally courts in this manner the near, and shuns the
distant employment : naturally courts the employment in which the
returns are frequent, and shuns that in which they are distant
and slow; naturally courts the employment in which it can
maintain the greatest quantity of productive labour in the
country to which it belongs, or in which its owner resides, and
shuns that in which it can maintain there the smallest quantity.
It naturally courts the employment which in ordinary cases is
most advantageous, and shuns that which in ordinary cases is
least advantageous to that country.
But if, in any one of those distant employments, which in
ordinary cases are less advantageous to the country, the profit
should happen to rise somewhat higher than what is sufficient to
balance the natural preference which is given to nearer
employments, this superiority of profit will draw stock from
those nearer employments, till the profits of all return to their
proper level. This superiority of profit, however, is a proof
that, in the actual circumstances of the society, those distant
employments are somewhat understocked in proportion to other
employments, and that the stock of the society is not distributed
in the properest manner among all the different employments
carried on in it. It is a proof that something is either bought
cheaper or sold dearer than it ought to be, and that some
particular class of citizens is more or less oppressed, either by
paying more, or by getting less than what is suitable to that
equality which ought to take place, and which naturally does take
place, among all the different classes of them. Though the same
capital never will maintain the same quantity of productive
labour in a distant as in a near employment, yet a distant
employment maybe as necessary for the welfare of the society as a
near one; the goods which the distant employment deals in being
necessary, perhaps, for carrying on many of the nearer
employments. But if the profits of those who deal in such goods
are above their proper level, those goods will be sold dearer
than they ought to be, or somewhat above their natural price, and
all those engaged in the nearer employments will be more or less
oppressed by this high price. Their interest, therefore, in this
case, requires, that some stock should be withdrawn from those
nearer employments, and turned towards that distant one, in order
to reduce its profits to their proper level, and the price of the
goods which it deals in to their natural price. In this
extraordinary case, the public interest requires that some stock
should be withdrawn from those employments which, in ordinary
cases, are more advantageous, and turned towards one which, in
ordinary cases, is less advantageous to the public; and, in this
extraordinary case, the natural interests and inclinations of men
coincide as exactly with the public interests as in all other
ordinary cases, and lead them to withdraw stock from the near,
and to turn it towards the distant employments.
It is thus that the private interests and passions of individuals
naturally dispose them to turn their stock towards the
employments which in ordinary cases, are most advantagenus to the
society. But if from this natural preference they should turn too
much of it towards those employments, the fall of profit in them,
and the rise of it in all others, immediately dispose them to
alter this faulty distribution. Without any intervention of law,
therefore, the private interests and passions of men naturally
lead them to divide and distribute the stock of every society
among all the different employments carried on in it; as nearly
as possible in the proportion which is most agreeable to the
interest of the whole society.
All the different regulations of the mercantile system
necessarily derange more or less this natural and most
advantageous distribution of stock. But those which concern the
trade to America and the East Indies derange it, perhaps, more
than any other ; because the trade to those two great continents
absorbs a greater quantity of stock than any two other branches
of trade. The regulations, however, by which this derangement is
effected in those two different branches of trade, are not
altogether the same. Monopoly is the great engine of both ; but
it is a different sort of monopoly. Monopoly of one kind or
another, indeed, seems to be the sole engine of the mercantile
system.
In the trade to America, every nation endeavours to engross as
much as possible the whole market of its own colonies, by fairly
excluding all other nations from any direct trade to them. During
the greater part of the sixteenth century, the Portuguese
endeavoured to manage the trade to the East Indies in the same
manner, by claiming the sole right of sailing in the Indian seas,
on account of the merit of having first found out the road to
them. The Dutch still continue to exclude all other European
nations from any direct trade to their spice islands. Monopolies
of this kind are evidently established against all other European
nations, who are thereby not only excluded from a trade to which
it might be convenient for them to turn some part of their stock,
but are obliged to buy the goods which that trade deals in,
somewhat dearer than if they could import them themselves
directly from the countries which produced them.
But since the fall of the power of Portugal, no European nation
has claimed the exclusive right of sailing in the Indian seas, of
which the principal ports are now open to the ships of all
European nations. Except in Portugal, however, and within these
few years in France, the trade to the East Indies has, in every
European country, been subjected to an exclusive company.
Monopolies of this kind are properly established against the very
nation which erects them. The greater part of that nation are
thereby not only excluded from a trade to which it might be
convenient for them to turn some part of their stock, but are
obliged to buy the goods which that trade deals in somewhat
dearer than if it was open and free to all their countrymen.
Since the establishment of the English East India company, for
example, the other inhabitants of England, over and above being
excluded from the trade, must have paid, in the price of the East
India goods which they have consumed, not only for all the
extraordinary profits which the company may have made upon those
goods in consequence of their monopoly, but for all the
extraordinary waste which the fraud and abuse inseparable from
the management of the affairs of so great a company must
necessarily have occasioned. The absurdity of this second kind of
monopoly, therefore, is much more manifest than that of the
first.
Both these kinds of monopolies derange more or less the natural
distribution of the stock of the society ; but they do not always
derange it in the same way.
Monopolies of the first kind always attract to the particular
trade in which they are established a greater proportion of the
stock of the society than what would go to that trade of its own
accord.
Monopolies of the second kind may sometimes attract stock towards
the particular trade in which they are established, and sometimes
repel it from that trade, according to different circumstances.
In poor countries, they naturally attract towards that trade more
stock than would otherwise go to it. In rich countries, they
naturally repel from it a good deal of stock which would
otherwise go to it.
Such poor countries as Sweden and Denmark, for example, would
probably have never sent a single ship to the East Indies, had
not the trade been subjected to an exclusive company. The
establishment of such a conpany necessarily encourages
adventurers. Their monopoly secures them against all competitors
in the home market, and they have the same chance for foreign
markets with the traders of other nations. Their monopoly shows
them the certainty of a great profit upon a considerable quantity
of goods, and the chance of a considerable profit upon a great
quantity. Without such extraordinary encouragement, the poor
traders of such poor countries would probably never have thought
of hazarding their small capitals in so very distant and
uncertain an adventure as the trade to the East Indies must
naturally have appeared to them.
Such a rich country as Holland, on the contrary, would probably,
in the case of a free trade, send many more ships to the East
Indies than it actually does. The limited stock of the Dutch East
India company probably repels from that trade many great
mercantile capitals which would otherwise go to it. The
mercantile capital of Holland is so great, that it is, as it
were, continually overflowing, sometimes into the public funds of
foreign countries, sometimes into loans to private traders and
adventurers of foreign countries, sometimes into the most
round-about foreign trades of consumption, and sometimes into the
carrying trade. All near employments being completely filled up,
all the capital which can be placed in them with any tolerable
profit being already placed in them, the capital of Holland
necessarily flows towards the most distant employments. The trade
to the East Indies, if it were altogether free, would probably
absorb the greater part of this redundant capital. The East
Indies offer a market both for the manufactures of Europe, and
for the gold and silver, as well as for the several other
productions of America, greater and more extensive than both
Europe and America put together.
Every derangement of the natural distribution of stock is
necessarily hurtful to the society in which it takes place;
whether it be by repelling from a particular trade the stock
which would otherwise go to it, or by attracting towards a
particular trade that which would not otherwise come to it. If,
without any exclusive company, the trade of Holland to the East
Indies would be greater than it actually is, that country must
suffer a considerable loss, by part of its capital being excluded
from the employment most convenient for that port. And, in the
same manner, if, without an exclusive company, the trade of
Sweden and Denmark to the East Indies would be less than it
actually is, or, what perhaps is more probable, would not exist
at all, those two countries must likewise suffer a considerable
loss, by part of their capital being drawn into an employment
which must be more or less unsuitable to their present
circumstances. Better for them, perhaps, in the present
circumstances, to buy East India goods of other nations, even
though they should pay somewhat dearer, than to turn so great a
part of their small capital to so very distant a trade, in which
the returns are so very slow, in which that capital can maintain
so small a quantity of productive labour at home, where
productive labour is so much wanted, where so little is done, and
where so much is to do.
Though without an exclusive company, therefore, a particular
country should not be able to carry on any direct trade to the
East Indies, it will not from thence follow, that such a company
ought to be established there, but only that such a country ought
not, in these circumstances, to trade directly to the East
Indies. That such companies are not in general necessary for
carrying on the East India trade, is sufficiently demonstrated by
the experience of the Portuguese, who enjoyed almost the whole of
it for more than a century together, without any exclusive
company.
No private merchant, it has been said, could well have capital
sufficient to maintain factors and agents in the different ports
of the East Indies, in order to provide goods for the ships which
he might occasionally send thither; and yet, unless he was able
to do this, the difficulty of finding a cargo might frequently
make his ships lose the season for returning; and the expense of
so long a delay would not only eat up the whole profit of the
adventure, but frequently occasion a very considerable loss. This
argument, however, if it proved any thing at all, would prove
that no one great branch of trade could be carried on without an
exclusive company, which is contrary to the experience of all
nations. There is no great branch of trade, in which the capital
of any one private merchant is sufficient for carrying on all the
subordinate branches which must be carried on, in order to carry
on the principal one. But when a nation is ripe for any great
branch of trade, some merchants naturally turn their capitals
towards the principal, and some towards the subordinate branches
of it; and though all the different branches of it are in this
manner carried on, yet it very seldom happens that they are all
carried on by the capital of one private merchant. If a nation,
therefore, is ripe for the East India trade, a certain portion of
its capital will naturally divide itself among all the different
branches of that trade. Some of its merchants will find it for
their interest to reside in the East Indies, and to employ their
capitals there in providing goods for the ships which are to be
sent out by other merchants who reside in Europe. The settlements
which different European nations have obtained in the East
Indies, if they were taken from the exclusive companies to which
they at present belong, and put under the immediate protection of
the sovereign, would render this residence both safe and easy, at
least to the merchants of the particular nations to whom those
settlements belong. If, at any particular time, that part of the
capital of any country which of its own accord tended and
inclined, if I may say so, towards the East India trade, was not
sufficient for carrying on all those different branches of it, it
would be a proof that, at that particular time, that country was
not ripe for that trade, and that it would do better to buy for
some time, even at a higher price, from other European nations,
the East India goods it had occasion for, than to import them
itself directly from the East Indies. What it might lose by the
high price of those goods, could seldom be equal to the loss
which it would sustain by the distraction of a large portion of
its capital from other employments more necessary, or more
useful, or more suitable to its circumstances and situation, than
a direct trade to the East Indies.
Though the Europeans possess many considerable settlements both
upon the coast of Africa and in the East Indies, they have not
yet established, in either of those countries, such numerous and
thriving colonies as those in the islands and continent of
America. Africa, however, as well as several of the countries
comprehended under the general name of the East Indies, is
inhabited by barbarous nations. But those nations were by no
means so weak and defenceless as the miserable and helpless
Americans ; and in proportion to the natural fertility of the
countries which they inhabited, they were, besides, much more
populous. The most barbarous nations either of Africa or of the
East Indies, were shepherds; even the Hottentots were so. But the
natives of every part of America, except Mexico and Peru, were
only hunters and the difference is very great between the number
of shepherds and that of hunters whom the same extent of equally
fertile territory can maintain. In Africa and the East Indies,
therefore, it was more difficult to displace the natives, and to
extend the European plantations over the greater part of the
lands of the original inhabitants. The genius of exclusive
companies, besides, is unfavourable, it has already been
observed, to the growth of new colonies, and has probably been
the principal cause of the little progress which they have made
in the East Indies. The Portuguese carried on the trade both to
Africa and the East Indies, without any exclusive companies; and
their settlements at Congo, Angola, and Benguela, on the coast of
Africa, and at Goa in the East Indies though much depressed by
superstition and every sort of bad government, yet bear some
resemblance to the colonies of America, and are partly inhabited
by Portuguese who have been established there for several
generations. The Dutch settlmnents at the Cape of Good Hope and
at Batavia, are at present the most considerable colonies which
the Europeans have established, either in Africa or in the East
Indies; and both those settlements an peculiarly fortunate in
their situation. The Cape of Good Hope was inhabited by a race of
people almost as barbarous, and quite as incapable of defending
themselves, as the natives of America. It is, besides, the
half-way house, if one may say so, between Europe and the East
Indies, at which almost every European ship makes some stay, both
in going and returning. The supplying of those ships with every
sort of fresh provisions, with fruit, and sometimes with wine,
affords alone a very extensive market for the surplus produce of
the colonies. What the Cape of Good Hope is between Europe and
every part of the East Indies, Batavia is between the principal
countries of the East Indies. It lies upon the most frequented
road from Indostan to China and Japan, and is nearly about
mid-way upon that road. Almost all the ships too, that sail
between Europe and China, touch at Batavia; and it is, over and
above all this, the centre and principal mart of what is called
the country trade of the East Indies; not only of that part of it
which is carried on by Europeans, but of that which is carried on
by the native Indians; and vessels navigated by the inhabitants
of China and Japan, of Tonquin, Malacca, Cochin-China, and the
island of Celebes, are frequently to be seen in its port. Such
advantageous situations have enabled those two colonies to
surmount all the obstacles which the oppressive genius of an
exclusive company may have occasionally opposed to their growth.
They have enabled Batavia to surmount the additional disadvantage
of perhaps the most unwholesome climate in the world.
The English and Dutch companies, though they have established no
considerable colonies, except the two above mentioned, have both
made considerable conquests in the East Indies. But in the manner
in which they both govern their new subjects, the natural genius
of an exclusive company has shewn itself most distinctly. In the
spice islands, the Dutch are said to burn all the spiceries which
a fertile season produces, beyond what they expect to dispose of
in Europe with such a profit as they think sufficient. In the
islands where they have no settlements, they give a premium to
those who collect the young blossoms and green leaves of the
clove and nutmeg trees, which naturally grow there, but which
this savage policy has now, it is said. almost completely
extirpated. Even in the islands where they have settlements, they
have very much reduced, it is said, the number of those trees. If
the produce even of their own islands was much greater than what
suited their market, the natives, they suspect, might find means
to convey some part of it to other nations; and the best way,
they imagine, to secure their own monopoly, is to take care that
no more shall grow than what they themselves carry to market. By
different arts of oppression, they have reduced the population of
several of the Moluccas nearly to the number which is sufficient
to supply with fresh provisions, and other necessaries of life,
their own insignificant garrisons, and such of their ships as
occasionally come there for a cargo of spices. Under the
government even of the Portuguese, however, those islands are
said to have been tolerably well inhabited. The English company
have not yet had time to establish in Bengal so perfectly
destructive a system. The plan of their government, however, has
had exactly the same tendency. It has not been uncommon, I am
well assured, for the chief, that is, the first clerk or a
factory, to order a peasant to plough up a rich field of poppies,
and sow it with rice, or some other grain. The pretence was, to
prevent a scarcity of provisions; but the real reason, to give
the chief an opportunity of selling at a better price a large
quantity of opium which he happened then to have upon hand. Upon
other occasions, the order has been reversed ; and a rich field
of rice or other grain has been ploughed up, in order to make
room for a plantation of poppies, when the chief foresaw that
extraordinary profit was likely to be made by opium. The servants
of the company have, upon several occasions, attempted to
establish in their own favour the monopoly of some of the most
important branches, not only of the foreign, but of the inland
trade of the country. Had they been allowed to go on, it is
impossible that they should not, at some time or another, have
attempted to restrain the production of the particular articles
of which they had thus usurped the monopoly, not only to the
quantity which they themselves could purchase, but to that which
they could expect to sell with such a profit as they might think
sufficient. In the course of a century or two, the policy of the
English company would, in this manner, have probably proved as
completely destructive as that of the Dutch.
Nothing, however, can be more directly contrary to the real
interest of those companies, considered as the sovereigns of the
countries which they have conquered, than this destructive plan.
In almost all countries, the revenue of the sovereign is drawn
from that of the people. The greater the revenue of the people,
therefore, the greater the annual produce of their land and
labour, the more they can afford to the sovereign. It is his
interest, therefore, to increase as much as possible that annual
produce. But if this is the interest of every sovereign, it is
peculiarly so of one whose revenue, like that of the sovereign of
Bengal, arises chiefly from a land-rent. That rent must
necessarily be in proportion to the quantity and value of the
produce; and both the one and the other must depend upon the
extent of the market. The quantity will always be suited, with
more or less exactness, to the consumption of those who can
afford to pay for it; and the price which they will pay will
always be in proportion to the eagerness of their competition. It
is the interest of such a sovereign, therefore, to open the most
extensive market for the produce of his country, to allow the
most perfect freedom of commerce, in order to increase as much as
possible the number and competition of buyers ; and upon this
account to abolish, not only all monopolies, but all restraints
upon the transportation of the home produce from one part of the
country to mother, upon its exportation to foreign countries, or
upon the importation of goods of' any kind for which it can be
exchanged. He is in this manner most likely to increase both the
quantity and value of that produce, and consequently of his own
share of it, or of his own revenue.
But a company of merchants, are, it seems, incapable of
considering themselves as sovereigns, even after they have become
such. Trade, or buying in order to sell again, they still
consider as their principal business, and by a strange absurdity,
regard the character of the sovereign as but an appendix to that
of the merchant ; as something which ought to be made subservient
to it, or by means of which they may be enabled to buy cheaper in
India, and thereby to sell with a better profit in Europe. They
endeavour, for this purpose, to keep out as much as possible all
competitors from the market of the countries which are subject to
their government, and consequently to reduce, at least, some part
of the surplus produce of those countries to what is barely
sufficient for supplying their own demand, or to what they can
expect to sell in Europe, with such a profit as they may think
reasonable. Their mercantile habits draw them in this manner,
almost necessarily, though perhaps insensibly, to prefer, upon
all ordinary occasions, the little and transitory profit of the
monopolist to the great and permanent revenue of the sovereign;
and would gradually lead them to treat the countries subject to
their government nearly as the Dutch treat the Moluccas. It is
the interest of the East India company, considered as sovereigns,
that the European goods which are carried to their Indian
dominions should be sold there as cheap as possible; and that the
Indian goods which are brought from thence should bring there as
good a price, or should be sold there as dear as possible. But
the reverse of this is their interest as merchants. As
sovereigns, their interest is exactly the same with that of the
country which they govern. As merchants, their interest is
directly opposite to that interest.
But if the genius of such a government, even as to what concerns
its direction in Earope, is in this manner essentially, and
perhaps incurably faulty, that of its administration in India is
still more so. That administration is necessarily composed of a
council of merchants, a profession no doubt extremely
respectable, but which in no country in the world carries along
with it that sort of authority which naturally overawes the
people, and without force commands their willing obedience. Such
a council can command obedience only by the military force with
which they are accompanied ; and their government is, therefore,
necessarily military and despotical. Their proper business,
however, is that of merchants. It is to sell, upon their master's
account, the European goods consigned to them, and to buy, in
return, Indian goods for the European market. It is to sell the
one as dear, and to buy the other as cheap as possible, and
consequently to exclude, as much as possible, all rivals from the
particular market where they keep their shop. The genius of the
administration, therefore, so far as concerns the trade of the
company, is the same as that of the direction. It tends to make
government subservient to the interest of monopoly, and
consequently to stunt the natural growth of some parts, at least,
of the surplus produce of the country, to what is barely
sufficient for answering the demand of the company,
All the members of the administration besides, trade more or less
upon their own account; and it is in vain to prohibit them from
doing so. Nothing can be more completely foolish than to expect
that the clerk of a great counting-house, at ten thousand miles
distance, and consequently almost quite out of sight, should,
upon a simple order from their master, give up at once doing any
sort of business upon their own account abandon for ever all
hopes of making a fortune, of which they have the means in their
hands; and content themselves with the moderate salaries which
those masters allow them, and which, moderate as they are, can
seldom be augmented, being commonly as large as the real profits
of the company trade can afford. In such circumstances, to
prohibit the servants of the company from trading upon their own
account, can have scarce any other effect than to enable its
superior servants, under pretence of executing their master's
order, to oppress such of the inferior ones as have had the
misfortune to fall under their displeasure. The servants
naturally endeavour to establish the same monopoly in favour of
their own private trade as of the public trade of the company. If
they are suffered to act as they could wish, they will establish
this monopoly openly and directly, by fairly prohibiting all
other people from trading in the articles in which they choose to
deal; and this, perhaps, is the best and least oppressive way of
establishing it. But if, by an order from Europe, they are
prohibited from doing this, they will, notwithstanding, endeavour
to establish a monopoly of the same kind secretly and indirectly,
in a way that is much more destructive to the country. They will
employ the whole authority of government, and pervert the
administration of Justice, in order to harass and ruin those who
interfere with them in any branch of commerce, which by means of
agents, either concealed, or at least not publicly avowed, they
may choose to carry on. But the private trade of the servants
will naturally extend to a much greater variety of articles than
the public trade of the company. The public trade of the company
extends no further than the trade with Europe, and comprehends a
part only of the foreign trade of the country. But the private
trade of the servants may extend to all the different branches
both of its inland and foreign trade. The monopoly of the company
can tend only to stunt the natural growth of that part of the
surplus produce which, in the case of a free trade, would be
exported to Europe. That of the servants tends to stunt the
natural growth of every part of the produce in which they choose
to deal; of what is destined for home consumption, as well as of
what is destined for exportation; and consequently to degrade the
cultivation of the whole country, and to reduce the number of its
inhabitants. It tends to reduce the quantity of every sort of
produce, even that of the necessaries of life, whenever the
servants of the country choose to deal in them, to what those
servants can both afford to buy and expect to sell with such a
profit as pleases them.
From the nature of their situation, too, the servants must be
more disposed to support with rigourous severity their own
interest, against that of the country which they govern, than
their masters can be to support theirs. The country belongs to
their masters, who cannot avoid having some regard for the
interest of what belongs to them; but it does not belong to the
servants. The real interest of their masters, if they were
capable of understanding it, is the same with that of the
country; {The interest of every proprietor of India stock,
however, is by no means the same with that of the country in the
government of which his vote gives him some influence. - See book
v, chap. 1, part ii.}and it is from ignorance chiefly, and the
meanness of mercantile prejudice, that they ever oppress it. But
the real interest of the servants is by no means the same with
that of the country, and the most perfect information would not
necessarily put an end to their oppressions. The regulations,
accordingly, which have been sent out from Europe, though they
have been frequently weak, have upon most occasions been well
meaning. More intelligence, and perhaps less good meaning, has
sometimes appeared in those established by the servants in India.
It is a very singular government in which every member of the
administration wishes to get out of the country, and consequently
to have done with the government, as soon as he can, and to whose
interest, the day after he has left it, and carried his whole
fortune with him, it is perfectly indifferent though the whole
country was swallowed up by an earthquake.
I mean not, however, by any thing which I have here said, to
throw any odious imputation upon the general character of the
servants of the East India company, and touch less upon that of
any particular persons. It is the system of government, the
situation in which they are placed, that I mean to censure, not
the character of those who have acted in it. They acted as their
situation naturally directed, and they who have clamoured the
loudest against them would probably not have acted better
themselves. In war and negotiation, the councils of Madras and
Calcutta, have upon several occasions, conducted themselves with
a resolution and decisive wisdom, which would have done honour to
the senate of Rome in the best days of that republic. The members
of those councils, however, had been bred to professions very
different from war and politics. But their situation alone,
without education, experience, or even example, seems to have
formed in them all at once the great qualities which it required,
and to have inspired them both with abilities and virtues which
they themselves could not well know that they possessed. If upon
some occasions, therefore, it has animated them to actions of
magnanimity which could not well have been expected from them, we
should not wonder if, upon others, it has prompted them to
exploits of somewhat a different nature.
Such exclusive companies, therefore, are nuisances in every
respect; always more or less inconvenient to the countries in
which they are established, and destructive to those which have
the misfortune to fall under their government.
CHAPTER VIII.
CONCLUSION OF THE MERCANTILE SYSTEM.
Though the encouragement of exportation, and the discouragement
of importation, are the two great engines by which the mercantile
system proposes to enrich every country, yet, with regard to some
particular commodities, it seems to follow an opposite plan : to
discourage exportation, and to encourage importation. Its
ultimate object, however, it pretends, is always the same, to
enrich the country by an advantageous balance of trade. It
discourages the exportation of the materials of manufacture, and
of the instruments of trade, in order to give our own workmen an
advantage, and to enable them to undersell those of other nations
in all foreign markets; and by restraining, in this manner, the
exportation of a few commodities, of no great price, it proposes
to occasion a much greater and more valuable exportation of
others. It encourages the importation of the materials of
manufacture, in order that our own people may be enabled to work
them up more cheaply, and thereby prevent a greater and more
valuable importation of the manufactured commodities. I do not
observe, at least in our statute book, any encouragement given to
the importation of the instruments of trade. When manufactures
have advanced to a certain pitch of greatness, the fabrication of
the instruments of trade becomes itself the object of agreat
number of very important manufactures. To give any particular
encouragement to the importation of such instruments, would
interfere too much with the interest of those manufactures. Such
importation, therefore, instead of being encouraged, has
frequently been prohibited. Thus the importation of wool cards,
except from Ireland, or when brought in as wreck or prize goods,
was prohibited by the 3rd of Edward IV. ; which prohibition was
renewed by the 39th of Elizabeth, and has been continued and
rendered perpetual by subsequent laws.
The importation of the materials of manufacture has sometimes
been encouraged by an exemption from the duties to which other
goods are subject, and sometimes by bounties.
The importation of sheep's wool from several different countries,
of cotton wool from all countries, of undressed flax, of the
greater part of dyeing drugs, of the greater part of undressed
hides from Ireland, or the British colonies, of seal skins from
the British Greenland fishery, of pig and bar iron from the
British colonies, as well as of several other materials of
manufacture, has been encouraged by an exemption from all duties,
if properly entered at the custom-house. The private interest of
our merchants and manufacturers may, perhaps, have extorted from
the legislature these exemptions, as well as the greater part of
our other commercial regulations. They are, however, perfectly
just and reasonable; and if, consistently with the necessities of
the state, they could be extended to all the other materials of
manufacture, the public would certainly be a gainer.
The avidity of our great manufacturers, however, has in some
cases extended these exemptions a good deal beyond what can
justly be considered as the rude materials of their work. By the
24th Geo. II. chap. 46, a small duty of only 1d. the pound was
imposed upon the importation of foreign brown linen yarn, instead
of much higher duties, to which it had been subjected before,
viz. of 6d. the pound upon sail yarn, of 1s. the pound upon all
French and Dutch yarn, and of £2:13:4 upon the hundred weight of
all spruce or Muscovia yarn. But our manufacturers were not long
satisfied with this reduction: by the 29th of the same king,
chap. 15, the same law which gave a bounty upon the exportation
of British and Irish linen, of which the price did not exceed
18d. the yard, even this small duty upon the importation of brown
linen yarn was taken away. In the different operations, however,
which are necessary for the preparation of linen yarn, a good
deal more industry is employed, than in the subsequent operation
of preparing linen cloth from linen yarn. To say nothing of the
industry of the flax-growers and flaxdressers, three or four
spinners at least are necessary in order to keep one weaver in
constant employment; and more than four-fifths of the whole
quantity of labour necessary for the preparation of linen cloth,
is employed in that of linen yarn ; but our spinners are poor
people; women commonly scattered about in all different parts of
the country, without support or protection. It is not by the sale
of their work, but by that of the complete work of the weavers,
that our great master manufacturers make their profits. As it is
their interest to sell the complete manufacture as dear, so it is
to buy the materials as cheap as possible. By extorting from the
legislature bounties upon the exportation of their own linen,
high duties upon the importation of all foreign linen, and a
total prohibition of the home consumption of some sorts of French
linen, they endeavour to sell their own goods as dear as
possible. By encouraging the importation of foreign linen yarn,
and thereby bringing it into competition with that which is made
by our own people, they endeavour to buy the work of the poor
spinners as cheap as possible. They are as intent to keep down
the wages of their own weavers, as the earnings of the poor
spinners ; and it is by no means for the benefit of the workmen
that they endeavour either to raise the price of the complete
work, or to lower that of the rude materials. It is the industry
which is carried on for the benefit of the rich and the powerful,
that is principally encouraged by our mercantile system. That
which is carried on for the benefit of the poor and the indigent
is too often either neglected or oppressed.
Both the bounty upon the exportation of linen, and the exemption
from the duty upon the importation of foreign yarn, which were
granted only for fifteen years, but continued by two different
prolongations, expire with the end of the session of parliament
which shall immediately follow the 24th of June 1786.
The encouragement given to the importation of the materials of
manufacture by bounties, has been principally confined to such as
were imported from our American plantations.
The first bounties of this kind were those granted about the
beginning of the present century, upon the importation of naval
stores from America. Under this denomination were comprehended
timber fit for masts, yards, and bowsprits; hemp, tar, pitch, and
turpentine. The bounty, however, of £1 the ton upon
masting-timber, and that of £6 the ton upon hemp, were extended
to such as should be imported into England from Scotland. Both
these bounties continued, without any variation, at the same
rate, till they were severally allowed to expire; that upon hemp
on the 1st of January 1741, and that upon masting-timber at the
end of the session of parliament immediately following the 24th
June 1781.
The bounties upon the importation of tar, pitch, and turpentine,
underwent, during their continuance, several alterations.
Originally, that upon tar was £4 the ton ; that upon pitch the
same; and that upon turpentine £3 the ton. The bounty of £4 the
ton upon tar was afterwards confined to such as had been prepared
in a particular manner ; that upon other good, clean, and
merchantable tar was reduced to £2:4s. the ton. The bounty upon
pitch was likewise reduced to £1, and that upon turpentine to
£1:10s. the ton.
The second bounty upon the importation of any of the materials of
manufacture, according to the order of time, was that granted by
the 21st Geo. II. chap.30, upon the importation of indigo from
the British plantations. When the plantation indigo was worth
three-fourths of the price of the best French indigo, it was, by
this act, entitled to a bounty of 6d. the pound. This bounty,
which, like most others, was granted only for a limited time, was
continued by several prolongations, but was reduced to 4d. the
pound. It was allowed to expire with the end of the session of
parliament which followed the 25th March 1781.
The third bounty of this kind was that granted (much about the
time that we were beginning sometimes to court, and sometimes to
quarrel with our American colonies), by the 4th. Geo. III. chap.
26, upon the importation of hemp, or undressed flax, from the
British plantations. This bounty was granted for twenty-one
years, from the 24th June 1764 to the 24th June 1785. For the
first seven years, it was to be at the rate of £8 the ton; for
the second at £6; and for the third at £4. It was not extended to
Scotland, of which the climate (although hemp is sometimes raised
there in small quantities, and of an inferior quality) is not
very fit for that produce. Such a bounty upon the importation of
Scotch flax in England would have been too great a discouragement
to the native produce of the southern part of the united kingdom.
The fourth bounty of this kind was that granted by the 5th Geo.
III. chap. 45, upon the importation of wood from America. It was
granted for nine years from the 1st January 1766 to the 1st
January 1775. During the first three years, it was to be for
every hundred-and-twenty good deals, at the rate of £1, and for
every load containing fifty cubic feet of other square timber, at
the rate of 12s. For the second three years, it was for deals, to
be at the rate of 15s., and for other squared timber at the rate
of 8s.; and for the third three years, it was for deals, to be at
the rate of 10s.; and for every other squared timber at the rate
of 5s.
The fifth bounty of this kind was that granted by the 9th Geo.
III. chap. 38, upon the importation of raw silk from the British
plantations. It was granted for twenty-one years, from the 1st
January 1770, to the 1st January 1791. For the first seven years,
it was to be at the rate of £25 for every hundred pounds value ;
for the second, at £20; and for the third, at £15. The management
of the silk-worm, and the preparation of silk, requires so much
hand-labour, and labour is so very dear in America, that even
this great bounty, I have been informed, was not likely to
produce any considerable effect.
The sixth Bounty of this kind was that granted by 11th Geo. III.
chap. 50, for the importation of pipe, hogshead, and barrelstaves
and leading from the British plantations. It was granted for nine
years, from 1st January 1772 to the 1st January 1781. For the
first three years, it was, for a certain quantity of each, to be
at the rate of £6; for the second three years at £4; and for the
third three years at £2.
The seventh and last bounty of this kind was that granted by the
19th Geo. III chap. 37, upon the importation of hemp from
Ireland. It was granted in the same manner as that for the
importation of hemp and undressed flax from America, for
twenty-one years, from the 24th June 1779 to the 24th June 1800.
The term is divided likewise into three periods, of seven years
each; and in each of those periods, the rate of the Irish bounty
is the same with that of the American. It does not, however, like
the American bounty, extend to the importation of undressed flax.
It would have been too great a discouragement to the cultivation
of that plant in Great Britain. When this last bounty was
granted, the British and Irish legislatures were not in much
better humour with one another, than the British and American had
been before. But this boon to Ireland, it is to be hoped, has
been granted under more fortunate auspices than all those to
America. The same commodities, upon which we thus gave bounties,
when imported from America, were subjected to considerable duties
when imported from any other country. The interest of our
American colonies was regarded as the same with that of the
mother country. Their wealth was considered as our wealth.
Whatever money was sent out to them, it was said, came all back
to us by the balance of trade, and we could never become a
farthing the poorer by any expense which we could lay out upon
them. They were our own in every respect, and it was an expense
laid out upon the improvement of our own property, and for the
profitable employment of our own people. It is unnecessary, I
apprehend, at present to say anything further, in order to expose
the folly of a system which fatal experience has now sufficiently
exposed. Had our American colonies really been a part of Great
Britain, those bounties might have been considered as bounties
upon production, and would still have been liable to all the
objections to which such bounties are liable, but to no other.
The exportation of the materials of manufacture is sometimes
discouraged by absolute prohibitions, and sometimes by high
duties.
Our woollen manufacturers have been more successful than any
other class of workmen, in persuading the legislature that the
prosperity of the nation depended upon the success and extension
of their particular business. They have not only obtained a
monopoly against the consumers, by an absolute prohibition of
importing woollen cloths from any foreign country; but they have
likewise obtained another monopoly against the sheep farmers and
growers of wool, by a similar prohibition of the exportation of
live sheep and wool. The severity of many of the laws which have
been enacted for the security of the revenue is very justly
complained of, as imposing heavy penalties upon actions which,
antecedent to the statutes that declared them to be crimes, had
always been understood to be innocent. But the cruellest of our
revenue laws, I will venture to affirm, are mild and gentle, in
comparison to some of those which the clamour of our merchants
and manufacturers has extorted from the legisiature, for the
support of their own absurd and oppressive monopolies. Like the
laws of Draco, these laws may be said to be all written in blood.
By the 8th of Elizabeth, chap. 3, the exporter of sheep, lambs,
or rams, was for the first offence, to forfeit all his goods for
ever, to suffer a year's imprisonment, and then to have his left
hand cut off in a market town, upon a market day, to be there
nailed up; and for the second offence, to be adjudged a felon,
and to suffer death accordingly. To prevent the breed of our
sheep from being propagated in foreign countries, seems to have
been the object of this law. By the 13th and 14th of Charles II.
chap. 18, the exportation of wool was made felony, and the
exporter subjected to the same penalties and forfeitures as a
felon.
For the honour of the national humanity, it is to be hoped that
neither of these statutes was ever executed. The first of them,
however, so far as I know, has never been directly repealed, and
serjeant Hawkins seems to consider it as still in force. It may,
however, perhaps be considered as virtually repealed by the 12th
of Charles II. chap. 32, sect. 3, which, without expressly taking
away the penalties imposed by former statutes, imposes a new
penalty, viz. that of 20s. for every sheep exported, or attempted
to be exported, together with the forfeiture of the sheep, and of
the owner's share of the sheep. The second of them was expressly
repealed by the 7th and 8th of William III. chap. 28, sect. 4, by
which it is declared that " Whereas the statute of the 13th and
14th of king Charles II. made against the exportation of wool,
among other things in the said act mentioned, doth enact the same
to be deemed felony, by the severity of which penalty the
prosecution of offenders hath not been so effectually put in
execution ; be it therefore enacted, by the authority aforesaid,
that so much of the said act, which relates to the making the
said offence felony, be repealed and made void."
The penalties, however, which are either imposed by this milder
statute, or which, though imposed by former statutes, are not
repealed by this one, are still sufficiently severe. Besides the
forfeiture of the goods, the exporter incurs the penalty of 3s.
for every pound weight of wool, either exported or attempted to
be exported, that is, about four or five times the value. Any
merchant, or other person convicted of this offence, is disabled
from requiring any debt or account belonging to him from any
factor or other person. Let his fortune be what it will,
whether he is or is not able to pay those heavy penalties, the
law means to ruin him completely. But, as the morals of the great
body of the people are not yet so corrupt as those of the
contrivers of this statute, I have not heard that any advantage
has ever been taken of this clause. If the person convicted of
this offence is not able to pay the penalties within three months
after judgment, he is to be transported for seven years; and if
he returns before the expiration of that term, he is liable to
the pains of felony, without benefit of clergy. The owner of the
ship, knowing this offence, forfeits all his interest in the ship
and furniture. The master and mariners, knowing this offence,
forfeit all their goods and chattels, and suffer three months
imprisonment. By a subsequent statute, the master suffers six
months imprisonment.
In order to prevent exportation, the whole inland commerce of
wool is laid under very burdensome and oppressive restrictions.
It cannot be packed in any box, barrel, cask, case, chest, or any
other package, but only in packs of leather or pack-cloth, on
which must be marked on the outside the words WOOL or YARN, in
large letters, not less than three inches long, on pain of
forfeiting the same and the package, and 8s. for every pound
weight, to be paid by the owner or packer. It cannot be loaden on
any horse or cart, or carried by land within five miles of the
coast, but between sun-rising, and sun-setting, on pain of
forfeiting the same, the horses and carriages. The hundred next
adjoining to the sea coast, out of, or through which the wool is
carried or exported, forfeits £20, if the wool is under the value
of £10; and if of greater value, then treble that value, together
with treble costs, to be sued for within the year. The execution
to be against any two of the inhabitants, whom the sessions must
reimburse, by an assessment on the other inhabitants, as in the
cases of robbery. And if any person compounds with the hundred
for less than this penalty, he is to be imprisoned for five
years; and any other person may prosecute. These regulations take
place through the whole kingdom.
But in the particular counties of Kent and Sussex, the
restrictions are still more troublesome. Every owner of wool
within ten miles of the sea coast must give an account in
writing, three days after shearing, to the next officer of the
customs, of the number of his fleeces, and of the places where
they are lodged. And before he removes any part of them, he must
give the like notice of the number and weight of the fleeces, and
of the name and abode of the person to whom they are sold, and of
the place to which it is intended they should be carried. No
person within fifteen miles of the sea, in the said counties, can
buy any wool, before he enters into bond to the king, that no
part of the wool which he shall so buy shall be sold by him to
any other person within fifteen miles of the sea. If any wool is
found carrying towards the sea side in the said counties, unless
it has been entered and security given as aforesaid, it is
forfeited, and the offender also forfeits 3s. for every pound
weight. if any person lay any wool, not entered as aforesaid,
within fifteen miles of the sea, it must be seized and forfeited
; and if, after such seizure, any person shall claim the same, he
must give security to the exchequer, that if he is cast upon
trial he shall pay treble costs, besides all other penalties.
When such restrictions are imposed upon the inland trade, the
coasting trade, we may believe, cannot be left very free. Every
owner of wool, who carrieth, or causeth to be carried, any wool
to any port or place on the sea coast, in order to be from thence
transported by sea to any other place or port on the coast, must
first cause an entry thereof to be made at the port from whence
it is intended to be conveyed, containing the weight, marks, and
number, of the packages, before he brings the same within five
miles of that port, on pain of forfeiting the same, and also the
horses, carts, and other carriages; and also of suffering and
forfeiting, as by the other laws in force against the exportation
of wool. This law, however (1st of William III. chap. 32), is so
very indulgent as to declare, that this shall not hinder any
person from carrying his wool home from the place of shearing,
though it be within five miles of the sea, provided that in ten
days after shearing, and before he remove the wool, he do under
his hand certify to the next officer of the customs the true
number of fleeces, and where it is housed; and do not remove the
same, without certifying to such officer, under his hand, his
intention so to do, three days before. Bond must be given that
the wool to be carried coast-ways is to be landed at the
particular port for which it is entered outwards; and if my part
of it is landed without the presence of an officer, not only the
forfeiture of the wool is incurred, as in other goods, but the
usual additional penalty of 3s. for every pound weight is
likewise incurred.
Our woollen manufacturers, in order to justify their demand of
such extraordinary restrictions and regulations, confidently
asserted, that English wool was of a peculiar quality, superior
to that of any other country; that the wool of other countries
could not, without some mixture of it, be wrought up into any
tolerable manufacture; that fine cloth could not be made without
it ; that England, therefore, if the exportation of it could be
totally prevented, could monopolize to herself almost the whole
woollen trade of the world; and thus, having no rivals, could
sell at what price she pleased, and in a short time acquire the
most incredible degree of wealth by the most advantageous balance
of trade. This doctrine, like most other doctrines which are
confidently asserted by any considerable number of people, was,
and still continues to be, most implicitly believed by a much
greater number: by almost all those who are either unacquainted
with the woollen trade, or who have not made particular
inquiries. It is, however, so perfectly false, that English wool
is in any respect necessary for the making of fine cloth, that it
is altogether unfit for it. Fine cloth is made altogether of
Spanish wool. English wool, cannot be even so mixed with Spanish
wool, as to enter into the composition without spoiling and
degrading, in some degree, the fabric of the cloth.
It has been shown in the foregoing part of this work, that the
effect of these regulations has been to depress the price of
English wool, not only below what it naturally would be in the
present times, but very much below what it actually was in the
time of Edward III. The price of Scotch wool, when, in
consequence of the Union, it became subject to the same
regulations, is said to have fallen about one half. It is
observed by the very accurate and intelligent author of the
Memoirs of Wool, the Reverend Mr. John Smith, that the price of
the best English wool in England, is generally below what wool of
a very inferior quality commonly sells for in the market of
Amsterdam. To depress the price of this commodity below what may
be called its natural and proper price, was the avowed purpose of
those regulations ; and there seems to be no doubt of their
having produced the effect that was expected from them.
This reduction of price, it may perhaps be thought, by
discouraging the growing of wool, must have reduced very much the
annual produce of that commodity, though not below what it
formerly was, yet below what, in the present state of things, it
would probably have been, had it, in consequence of an open and
free market, been allowed to rise to the natural and proper
price. I am, however, disposed to believe, that the quantity of
the annual produce cannot have been much, though it may, perhaps,
have been a little affected by these regulations. The growing of
wool is not the chief purpose for which the sheep farmer employs
his industry and stock. He expects his profit, not so much from
the price of the fleece, as from that of the carcase; and the
average or ordinary price of the latter must even, in many cases,
make up to him whatever deficiency there may be in the average or
ordinary price of the former. It has been observed, in the
foregoing part of this work, that 'whatever regulations tend to
sink the price, either of wool or of raw hides, below what it
naturally would be, must, in an improved and cultivated country,
have some tendency to raise the price of butcher's meat. The
price, both of the great and small cattle which are fed on
improved and cultivated land, must be sufficient to pay the rent
which the landlord, and the profit which the farmer, has reason
to expect from improved and cultivated land. If it is not, they
will soon cease to feed them. Whatever part of this price,
therefore, is not paid by the wool and the hide, must be paid by
the carcase. The less there is paid for the one, the more must be
paid for the other. In what manner this price is to be divided
upon the different parts of the beast, is indifferent to the
landlords and farmers, provided it is all paid to them. In an
improved and cultivated country, therefore, their interest as
landlords and farmers cannot be much affected by such
regulations, though their interest as consumers may, by the rise
in the price of provisions.' According to this reasoning,
therefore, this degradation in the price of wool is not likely,
in an improved and cultivated country, to occasion any diminution
in the annual produce of that commodity; except so far as, by
raising the price of mutton, it may somewhat diminish the demand
for, and consequently the production of, that particular species
of butcher's meat, Its effect, however, even in this way, it is
probable, is not very considerable.
But though its effect upon the quantity of the annual produce may
not have been very considerable, its effect upon the quality, it
may perhaps be thought, must necessarily have been very great.
The degradation in the quality of English wool, if not below what
it was in former times, yet below what it naturally would have
been in the present state of improvement and cultivation, must
have been, it may perhaps be supposed, very nearly in proportion
to the degradation of price. As the quality depends upon the
breed, upon the pasture, and upon the management and cleanliness
of the sheep, during the whole progress of the growth of the
fleece, the attention to these circumstances, it may naturally
enough be imagined, can never be greater than in proportion to
the recompence which the price of the fleece is likely to make
for the labour and expense which that attention requires. It
happens, however, that the goodness of the fleece depends, in a
great measure, upon the health, growth, and bulk of the animal:
the same attention which is necessary for the improvement of the
carcase is, in some respect, sufficient for that of the fleece.
Notwithstanding the degradation of price, English wool is said to
have been improved considerably during the course even of the
present century. The improvement, might, perhaps, have been
greater if the price had been better; but the lowness of price,
though it may have obstructed, yet certainly it has not
altogether prevented that improvement.
The violence of these regulations, therefore, seems to have
affected neither the quantity nor the quality of the annual
produce of wool, so much as it might have been expected to do
(though I think it probable that it may have affected the latter
a good deal more than the former); and the interest of the
growers of wool, though it must have been hurt in some degree,
seems upon the whole, to have been much less hurt than could well
have been imagined.
These considerations, however, will not justify the absolute
prohibition of the exportation of wool ; but they will fully
justify the imposition of a considerable tax upon that
exportation.
To hurt, in any degree, the interest of any one order of
citizens, for no other purpose but to promote that of some other,
is evidently contrary to that justice and equality of treatment
which the sovereign owes to all the different orders of his
subjects. But the prohibition certainly hurts, in some degree,
the interest of the growers of wool, for no other purpose but to
promote that of the manufacturers.
Every different order of citizens is bound to contribute to the
support of the sovereign or commonwealth. A tax of five, or even
of ten shillings, upon the exportation of every tod of wool,
would produce a very considerable revenue to the sovereign. It
would hurt the interest of the growers somewhat less than the
prohibition, because it would not probably lower the price of
wool quite so much. It would afford a sufficient advantage to the
manufacturer, because, though he might not buy his wool
altogether so cheap as under the prohibition, he would still buy
it at least five or ten shillings cheaper than any foreign
manufacturer could buy it, besides saving the freight and
insurance which the other would be obliged to pay. It is scarce
possible to devise a tax which could produce any considerable
revenue to the sovereign, and at the same time occasion so little
inconveniency to anybody.
The prohibition, notwithstanding all the penalties which guard
it, does not prevent the exportation of wool. It is exported, it
is well known. in great quantities. The great difference between
the price in the home and that in the foreign market, presents
such a temptation to smuggling, that all the rigour of the law
cannot prevent it. This illegal exportation is advantageous to
nobody but the smuggler. A legal exportation, subject to a tax,
by affording a revenue to the sovereign, and thereby saving the
imposition of some other, perhaps more burdensome and
inconvenient taxes, might prove advantageous to all the different
subjects of the state.
The exportation of fuller's earth, or fuller's clay, supposed to
be necessary for preparing and cleansing the woollen
manufactures, has been subjected to nearly the same penalties as
the exportation of wool. Even tobacco-pipe clay, though
acknowledged to be different from fuller's clay, yet, on account
of their resemblance, and because fuller's clay might sometimes
be exported as tobacco-pipe clay, has been laid under the same
prohibitions and penalties.
By the 13th and 14th of Charles II. chap, 7, the exportation, not
only of raw hides, but of tanned leather, except in the shape of
boots, shoes, or slippers, was prohibited ; and the law gave a
monopoly to our boot-makers and shoe-makers, not only against our
graziers, but against our tanners. By subsequent statutes, our
tanners have got themselves exempted from this monopoly, upon
paying a small tax of only one shilling on the hundred weight of
tanned leather, weighing one hundred and twelve pounds. They have
obtained likewise the drawback of two-thirds of the excise duties
imposed upon their commodity, even when exported without further
manufacture. All manufactures of leather may be exported duty
free ; and the exporter is besides entitled to the drawback of
the whole duties of excise. Our graziers still continue
subject to the old monopoly. Graziers, separated from one
another, and dispersed through all the different corners of the
country, cannot, without great difficulty, combine together for
the purpose either of imposing monopolies upon their
fellow-citizens, or of exempting themselves from such as may have
been imposed upon them by other people. Manufacturers of all
kinds, collected together in numerous bodies in all great cities,
easily can. Even the horns of cattle are prohibited to be
exported ; and the two insignificant trades of the horner and
comb-maker enjoy, in this respect, a monopoly against the
graziers.
Restraints, either by prohibitions, or by taxes, upon the
exportation of goods which are partially, but not completely
manufactured, are not peculiar to the manufacture of leather. As
long as anything remains to be done, in order to fit any
commodity for immediate use and consumption, our manufacturers
think that they themselves ought to have the doing of it. Woollen
yarn and worsted are prohibited to be exported, under the same
penalties as wool even white cloths we subject to a duty upon
exportation; and our dyers have so far obtained a monopoly
against our clothiers. Our clothiers would probably have been
able to defend themselves against it; but it happens that the
greater part of our principal clothiers are themselves likewise
dyers. Watch-cases, clock-cases, and dial-plates for clocks and
watches, have been prohibited to be exported. Our clock-makers
and watch-makers are, it seems, unwilling that the price of this
sort of workmanship should be raised upon them by the competition
of foreigners.
By some old statutes of Edward III, Henry VIII. and Edward VI.
the exportation of all metals was prohibited. Lead and tin were
alone excepted, probably on account of the great abundance of
those metals; in the exportation of which a considerable part of
the trade of the kingdom in those days consisted. For the
encouragement of the mining trade, the 5th of William and Mary,
chap.17, exempted from this prohibition iron, copper, and mundic
metal made from British ore. The exportation of all sorts of
copper bars, foreign as well as British, was afterwards permitted
by the 9th and 10th of Willimn III. chap 26. The exportation of
unmanufactured brass, of what is called gun-metal, bell-metal,
and shroff metal, still continues to be prohibited. Brass
manufactures of all sorts may be exported duty free.
The exportation of the materials of manufacture, where it is not
altogether prohibited, is, in many cases, subjected to
considerable duties.
By the 8th Geo. I. chap.15, the exportation of all goods, the
produce of manufacture of Great Britain, upon which any duties
had been imposed by former statutes, was rendered duty free. The
following goods, however, were excepted: alum, lead, lead-ore,
tin, tanned leather, copperas, coals, wool, cards, white woollen
cloths, lapis calaminaris, skins of all sorts, glue, coney hair
or wool, hares wool, hair of all sorts, horses, and litharge of
lead. If you except horses, all these are either materials of
manufacture, or incomplete manufactures (which may be considered
as materials for still further manufacture), or instruments of
trade. This statute leaves them subject to all the old duties
which had ever been imposed upon them, the old subsidy, and one
per cent. outwards.
By the same statute, a great number of foreign drugs for dyers
use are exempted from all duties upon importation. Each of them,
however, is afterwards subjected to a certain duty, not indeed a
very heavy one, upon exportation. Our dyers, it seems, while they
thought it for their interest to encourage the importation of
those drugs, by an exemption from all duties, thought it likewise
for their own interest to throw some small discouragement upon
their exportation. The avidity, however, which suggested this
notable piece of mercantile ingenuity, most probably disappointed
itself of its object. It necessarily taught the importers to be
more careful than they might otherwise have been, that their
importation should not exceed what was necessary for the supply
of the home market. The home market was at all times likely to be
more scantily supplied ; the commodities were at all times likely
to be somewhat dearer there than they would have been, had the
exportation been rendered as free as the importation.
By the above-mentioned statute, gum senega, or gum arabic, being
among the enumerated dyeing drugs, might be imported duty free.
They were subjected, indeed, to a small poundage duty, amounting
only to threepence in the hundred weight, upon their
re-exportation. France enjoyed, at that time, an exclusive trade
to the country most productive of those drugs, that which lies in
the neighbourhood of the Senegal ; and the British market could
not be easily supplied by the immediate importation of them from
the place of growth. By the 25th Geo. II. therefore, gum senega
was allowed to be imported (contrary to the general dispositions
of the act of navigation) from any part of Europe. As the law,
however, did not mean to encourage this species of trade, so
contrary to the general principles of the mercantile policy of
England, it imposed a duty of ten shillings the hundred weight
upon such importation, and no part of this duty was to be
afterwards drawn back upon its exportation. The successful war
which began in 1755 gave Great Britain the same exclusive trade
to those countries which France had enjoyed before. Our
manufactures, as soon as the peace was made, endeavoured to avail
themselves of this advantage, and to establish a monopoly in
their own favour both against the growers and against the
importers of this comnmdity. By the 5th of Geo. III. therefore,
chap. 37, the exportation of gum senega, from his majesty's
dominions in Africa, was confined to Great Britain, and was
subjected to all the same restrictions, regulations, forfeitures,
and penalties, as that of the enumerated commodities of the
British colonies in America and the West Indies. Its importation,
indeed, was subjected to a small duty of sixpence the hundred
weight; but its re-exportation was subjected to the enormous duty
of one pound ten shillings the hundred weight. It was the
intention of our manufacturers, that the whole produce of those
countries should be imported into Great Britain; and in order
that they themselves might he enabled to buy it at their own
price, that no part of it should be exported again, but at such
an expense as would sufficiently discourage that exportation.
Their avidity, however, upon this, as well as upon many other
occasions, disappointed itself of its object. This enormous duty
presented such a temptation to smuggling, that great quantities
of this commodity were clandestinely exported, probably to all
the manufacturing countries of Europe, but particularly to
Holland, not only from Great Britain, but from Afrira. Upon this
account, by the 14th Geo. III. chap.10, this duty upon
exportation was reduced to five shillings the hundred weight.
In the book of rates, according to which the old subsidy was
levied, beaver skins were estimated at six shillings and eight
pence a piece; and the different subsidies and imposts which,
before the year 1722, had been laid upon their importation,
amounted to one-fifth part of the rate, or to sixteen pence upon
each skin; all of which, except half the old subsidy, amounting
only to twopence, was drawn back upon exportation. This duty,
upon the importation of so important a material of manufacture,
had been thought too high; and, in the year 1722, the rate was
reduced to two shillings and sixpence, which reduced the duty
upon importation to sixpence, and of this only one-half was to be
drawn back upon exportation. The same successful war put the
country most productive of beaver under the dominion of Great
Britain ; and beaver skins being among the enumerated
commodities, the exportation from America was consequently
confined to the market of Great Britain. Our manufacturers soon
bethought themselves of the advantage which they might make of
this circumstance; and in the year 1764, the duty upon the
importation of beaver skin was reduced to one penny, but the duty
upon exportation was raised to sevenpence each skin, without any
drawback of the duty upon importation. By the same law, a duty of
eighteen pence the pound was imposed upon the exportation of
beaver wool or woumbs, without making any alteration in the duty
upon the importation of that commodity, which, when imported by
British, and in British shipping, amounted at that time to
between fourpence and fivepence the piece.
Coals may be considered both as a material of manufacture, and as
an instrument of trade. Heavy duties, accordingly, have been
imposed upon their exportation, amounting at present (1783) to
more than five shillings the ton, or more than fifteen shillings
the chaldron, Newcastle measure ; which is, in most cases, more
than the original value of the commodity at the coal-pit, or even
at the shipping port for exportation.
The exportation, however, of the instruments of trade, properly
so called, is commonly restrained, not by high duties, but by
absolute prohibitions. Thus, by the 7th and 8th of William III
chap.20, sect.8, the exportation of frames or engines for
knitting gloves or stockings, is prohibited, under the penalty,
not only of the forfeiture of such frames or engines, so
exported, or attempted to be exported, but of forty pounds, one
half to the king, the other to the person who shall inform or sue
for the same. In the same manner, by the 14th Geo. III. chap. 71,
the exportation to foreign parts, of any utensils made use of in
the cotton, linen, woollen, and silk manufactures, is prohibited
under the penalty, not only of the forfeiture of such utensils,
but of two hundred pounds, to be paid by the person who shall
offend in this manner ; and likewise of two hundred pounds, to be
paid by the master of the ship, who shall knowingly suffer such
utensils to be loaded on board his ship.
When such heavy penalties were imposed upon the exportation of
the dead instruments of trade, it could not well be expected that
the living instrument, the artificer, should be allowed to go
free. Accordingly, by the 5th Geo. I. chap. 27, the person who
shall be convicted of enticing any artificer, of or in any of the
manufactures of Great Britain, to go into any foreign parts, in
order to practise or teach his trade, is liable, for the first
offence, to be fined in any sum not exceeding one hundred pounds,
and to three months imprisomnent, and until the fine shall be
paid ; and for the second offence, to be fined in any sum, at the
discretion of the court, and to imprisonment for twelve months,
and until the fine shall be paid. By the 23d Geo. II. chap. 13,
this penalty is increased, for the first offence, to five hundred
pounds for every artificer so enticed, and to twelve months
imprisonment, and until the fine shall be paid ; and for the
second offence, to one thousand pounds, and to two years
imprisonment, and until the fine shall be paid.
By the former of these two statutes, upon proof that any person
has been enticing any artificer, or that any artificer has
promised or contracted to go into foreign parts, for the purposes
aforesaid, such artificer may be obliged to give security, at the
discretion of the court, that he shall not go beyond the seas,
and may be committed to prison until he give such security.
If any artificer has gone beyond the seas, and is exercising or
teaching his trade in any foreign country, upon warning being
given to him by any of his majesty's ministers or consuls abroad,
or by one of his majesty's secretaries of state, for the time
being, if he does not, within six months after such warning,
return into this realm, and from henceforth abide and inhabit
continually within the same, he is from thenceforth declared
incapable of taking any legacy devised to him within this
kingdom, or of being executor or administrator to any person, or
of taking any lands within this kingdom, by descent, devise, or
purchase. He likewise forfeits to the king all his lands, goods,
and chattels; is declared an alien in every respect; and is put
out of the king's protection.
It is unnecessary, I imagine, to observe how contrary such
regulations are to the boasted liberty of the subject, of which
we affect to be so very jealous ; but which, in this case, is so
plainly sacrificed to the futile interests of our merchants and
manufacturers.
The laudable motive of all these regulations, is to extend our
own manufactures, not by their own improvement, but by the
depression of those of all our neighbours, and by putting an end,
as much as possible, to the troublesome competition of such
odious and disagreeable rivals. Our master manufacturers think it
reasonable that they themselves should have the monopoly of the
ingenuity of all their countrymen. Though by restraining, in some
trades, the number of apprentices which can be employed at one
time, and by imposing the necessity of a long apprenticeship in
all trades, they endeavour, all of them, to confine the knowledge
of their respective employments to as small a number as possible
; they are unwilling, however, that any part of this small number
should go abroad to instruct foreigners.
Consumption is the sole end and purpose of all production ; and
the interest of the producer ought to be attended to, only so far
as it may be necessary for promoting that of the consumer.
The maxim is so perfectly self-evident, that it would be absurd
to attempt to prove it. But in the mercantile system, the
interest of the consumer is almost constantly sacrificed to that
of the producer ; and it seems to consider production, and not
consumption, as the ultimate end and object of all industry and
commerce.
In the restraints upon the importation of all foreign commodities
which can come into competition with those of our own growth or
manufacture, the interest of the home consumer is evidently
sacrificed to that of the producer. It is altogether for the
benefit of the latter, that the former is obliged to pay that
enhancement of price which this monopoly almost always occasions.
It is altogether for the benefit of the producer, that bounties
are granted upon the exportation of some of his productions. The
home consumer is obliged to pay, first the tax which is necessary
for paying the bounty ; and, secondly, the still greater tax
which necessarily arises from the enhancement of the price of the
commodity in the home market.
By the famous treaty of commerce with Portugal, the consumer is
prevented by duties from purchasing of a neighbouring country, a
commodity which our own climate does not produce ; but is obliged
to purchase it of a distant country, though it is acknowledged,
that the commodity of the distant country is of a worse quality
than that of the near one. The home consumer is obliged to submit
to this inconvenience, in order that the producer may import into
the distant country some of his productions, upon more
advantageous terms than he otherwise would have been allowed to
do. The consumer, too, is obliged to pay whatever enhancement in
the price of those very productions this forced exportation may
occasion in the home market.
But in the system of laws which has been established for the
management of our American and West Indian colonies, the interest
of the home consumer has been sacrificed to that of the producer,
with a more extravagant profusion than in all our other
commercial regulations. A great empire has been established for
the sole purpose of raising up a nation of customers, who should
be obliged to buy, from the shops of our different producers, all
the goods with which these could supply them. For the sake of
that little enhancement of price which this monopoly might afford
our producers, the home consumers have been burdened with the
whole expense of maintaining and defending that empire. For this
purpose, and for this purpose only, in the two last wars, more
than two hundred millions have been spent, and a new debt of more
than a hundred and seventy millions has been contracted, over and
above all that had been expended for the same purpose in former
wars. The interest of this debt alone is not only greater
than the whole extraordinary profit which, it never could be
pretended, was made by the monopoly of the colony trade, but than
the whole value of that trade, or than the whole value of the
goods which, at an average, have been annually exported to the
colonies.
It cannot be very difficult to determine who have been the
contrivers of this whole mercantile system; not the consumers, we
may believe, whose interest has been entirely neglected; but the
producers, whose interest has been so carefully attended to ; and
among this latter class, our merchants and manufacturers have
been by far the principal architects. In the mercantile
regulations which have been taken notice of in this chapter, the
interest of our manufacturers has been most peculiarly attended
to; and the interest, not so much of the consumers, as that of
some other sets of producers, has been sacrificed to it.
CHAPTER IX.
OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL
ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE
OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY
COUNTRY.
The agricultural systems of political economy will not require so
long an explanation as that which I have thought it necessary to
bestow upon the mercantile or commercial system.
That system which represents the produce of land as the sole
source of the revenue and wealth of every country, has so far as
I know, never been adopted by any nation, and it at present
exists only in the speculations of a few men of great learning
and ingenuity in France. It would not, surely, be worth while to
examine at great length the errors of a system which never has
done, and probably never will do, any harm in any part of the
world. I shall endeavour to explain, however, as distinctly as I
can, the great outlines of this very ingenious system.
Mr. Colbert, the famous minister of Lewis XIV. was a man of
probity, of great industry, and knowledge of detail ; of great
experience and acuteness in the examination of public accounts;
and of abilities, in short, every way fitted for introducing
method and good order into the collection and expendture of the
public revenue. That minister had unfortunately embraced all the
prejudices of the mercantile system, in its nature and essence a
system of restraint and regulation, and such as could scarce fail
to be agreeable to a laborious and plodding man of business, who
had been accustomed to regulate the different departments of
public offices, and to establish the necessary checks and
controlls for confining each to its proper sphere. The industry
and commerce of a great country, he endeavoured to regulate upon
the same model as the departments of a public office ; and
instead of allowing every man to pursue his own interest his own
way, upon the liberal plan of equality, liberty, and justice, he
bestowed upon certain branches of industry extraordinary
privileges, while he laid others under as extraordinary
restraints. He was not only disposed, like other European
ministers, to encourage more the industry of the towns than that
of the country; but, in order to support the industry of the
towns, he was willing even to depress and keep down that of the
country. In order to render provisions cheap to the inhabitants
of the towns, and thereby to encourage manufactures and foreign
commerce, he prohibited altogether the exportation of corn, and
thus excluded the inhabitants of the country from every foreign
market, for by far the most important part of the produce of
their industry. This prohibition, joined to the restraints
imposed by the ancient provincial laws of France upon the
transportation of corn from one province to another, and to the
arbitrary and degading taxes which are levied upon the
cultivators in almost all the provinces, discouraged and kept
down the agriculture of that country very much below the state to
which it would naturally have risen in so very fertile a soil,
and so very happy a climate. This state of discouragement and
depression was felt more or less in every different part of the
country, and many different inquiries were set on foot concerning
the causes of it. One of those causes appeared to be the
preference given, by the institutions of Mr. Colbert, to the
industry of the towns above that of the country.
If the rod be bent too much one way, says the proverb, in order
to make it straight, you must bend it as much the other. The
French philosophers, who have proposed the system which
represents agriculture as the sole source of the revenue and
wealth of every country, seem to have adopted this proverbial
maxim; and, as in the plan of Mr. Colbert, the industry of the
towns was certainly overvalued in comparison with that of the
country, so in their system it seems to be as certainly
under-valued.
The different orders of people, who have ever been supposed to
contribute in any respect towards the annual produce of the land
and labour of the country, they divide into three classes. The
first is the class of the proprietors of land. The second is the
class of the cultivators, of farmers and country labourers, whom
they honour with the peculiar appellation of the productive
class. The third is the class of artificers, manufacturers, and
merchants, whom they endeavour to degrade by the humiliating
appellation of the barren or unproductive class.
The class of proprietors contributes to the annual produce, by
the expense which they may occasionally lay out upon the
improvement of the land, upon the buildings, drains, inclosures,
and other ameliorations, which they may either make or maintain
upon it, and by means of which the cultivators are enabled, with
the same capital, to raise a greater produce, and consequently to
pay a greater rent. This advanced rent may be considered as the
interest or profit due to the proprietor, upon the expense or
capital which be thus employs in the improvement of his land.
Such expenses are in this system called ground expenses (depenses
foncieres).
The cultivators or farmers contribute to the annual produce, by
what are in this system called the original and annual expenses
(depenses primitives, et depenses annuelles), which they lay out
upon the cultivation of the land. The original expenses consist
in the instruments of husbandry, in the stock of cattle, in the
seed, and in the maintenance of the farmer's family, servants,
and cattle, during at least a great part of the first year of his
occupancy, or till he can receive some return from the land. The
annual expenses consist in the seed, in the wear and tear of
instruments of husbandry, and in the annual maintenance of the
farmer's servants and cattle, and of his family too, so far as
any part of them can be considered as servants employed in
cultivation. That part of the produce of the land which remains
to him after paying the rent, ought to be sufficient, first, to
replace to him, within a reasonable time, at least during the
term of his occupancy, the whole of his original expenses,
together with the ordinary profits of stock; and, secondly, to
replace to him annually the whole of his annual expenses,
together likewise with the ordinary profits of stock. Those two
sorts of expenses are two capitals which the farmer employs in
cultivation; and unless they are regularly restored to him,
together with a reasonable profit, he cannot carry on his
employment upon a level with other employments; but, from a
regard to his own interest, must desert it as soon as possible,
and seek some other. That part of the produce of the land which
is thus necessary for enabling the farmer to continue his
business, ought to be considered as a fund sacred to cultivation,
which, if the landlord violates, he necessarily reduces the
produce of his own land, and, in a few years, not only disables
the farmer from paying this racked rent, but from paying the
reasonable rent which he might otherwise have got for his land.
The rent which properly belongs to the landlord, is no more than
the neat produce which remains after paying, in the completest
manner, all the necessary expenses which must be previously laid
out, in order to raise the gross or the whole produce. It is
because the labour of the cultivators, over and above paying
completely all those necessary expenses, affords a neat produce
of this kind, that this class of people are in this system
peculiarly distinguished by the honourable appellation of the
productive class. Their original and annual expenses are for the
same reason called, In this system, productive expenses, because,
over and above replacing their own value, they occasion the
annual reproduction of this neat produce.
The ground expenses, as they are called, or what the landlord
lays out upon the improvement of his land, are, in this system,
too, honoured with the appellation of productive expenses. Till
the whole of those expenses, together with the ordinary profits
of stock, have been completely repaid to him by the advanced rent
which he gets from his land, that advanced rent ought to be
regarded as sacred and inviolable, both by the church and by the
king ; ought to be subject neither to tithe nor to taxation. If
it is otherwise, by discouraging the improvement of land, the
church discourages the future increase of her own tithes, and the
king the future increase of his own taxes. As in a well ordered
state of things, therefore, those ground expenses, over and above
reproducing in the completest manner their own value, occasion
likewise, after a certain time, a reproduction of a neat produce,
they are in this system considered as productive expenses.
The ground expenses of the landlord, however, together with the
original and the annual expenses of the farmer, are the only
three sorts of expenses which in this system are considered as
productive. All other expenses, and all other orders of people,
even those who, in the common apprehensions of men, are regarded
as the most productive, are, in this account of things,
represented as altogether barren and unproductive.
Artificers and manufacturers, in particular, whose industry, in
the common apprehensions of men, increases so much the value of
the rude produce of land, are in this system represented as a
class of people altogether barren and unproductive. Their labour,
it is said, replaces only the stock which employs them, together
with its ordinary profits. That stock consists in the materials,
tools, and wages, advanced to them by their employer; and is the
fund destined for their employment and maintenance. Its profits
are the fund destined for the maintenance of their employer.
Their employer, as he advances to them the stock of materials,
tools, and wages, necessary for their employment, so he advances
to himself what is necessary for his own maintenance; and this
maintenance he generally proportions to the profit which he
expects to make by the price of their work. Unless its price
repays to him the maintenance which he advances to himself, as
well as the materials, tools, and wages, which he advances to his
workmen, it evidently does not repay to him the whole expense
which he lays out upon it. The profits of manufacturing stock,
therefore, are not, like the rent of land, a neat produce which
remains after completely repaying the whole expense which must be
laid out in order to obtain them. The stock of the farmer yields
him a profit, as well as that of the master manufacturer; and it
yields a rent likewise to another person, which that of the
master manufacturer does not. The expense, therefore, laid out in
employing and maintaining artificers and manufacturers, does no
more than continue, if one may say so, the existence of its own
value, and does not produce any new value. It is, therefore,
altogether a barren and unproductive expense. The expense, on the
contrary, laid out in employing farmers and country labourers,
over and above continuing the existence of its own value,
produces a new value the rent of the landlord. It is, therefore,
a productive expense.
Mercantile stock is equally barren and unproductive with
manufacturing stock. It only continues the existence of its own
value, without producing any new value. Its profits are only the
repayment of the maintenance which its employer advances to
himself during the time that he employs it, or till he receives
the returns of it. They are only the repayment of a part of the
expense which must be laid out in employing it.
The labour of artificers and manufacturers never adds any thing
to the value of the whole annual amount of the rude produce of
the land. It adds, indeed, greatly to the value of some
particular parts of it. But the consumption which, in the mean
time, it occasions of other parts, is precisely equal to the
value which it adds to those parts; so that the value of the
whole amount is not, at any one moment of time, in the least
augmented by it. The person who works the lace of a pair of fine
ruffles for example, will sometimes raise the value of, perhaps,
a pennyworth of flax to £30 sterling. But though, at first sight,
he appears thereby to multiply the value of a part of the rude
produce about seven thousand and two hundred times, he in reality
adds nothing to the value of the whole annual amount of the rude
produce. The working of that lace costs him, perhaps, two years
labour. The £30 which he gets for it when it is finished, is no
more than the repayment of the subsistence which he advances to
himself during the two years that he is employed about it. The
value which, by every day's, month's, or year's labour, he adds
to the flax, does no more than replace the value of his own
consumption during that day, month, or year. At no moment of
time, therefore, does he add any thing to the value of the whole
annual amount of the rude produce of the land : the portion of
that produce which he is continually consuming, being always
equal to the value which he is continually producing. The extreme
poverty of the greater part of the persons employed in this
expensive, though trifling manufacture, may satisfy us that the
price of their work does not, in ordinary cases, exceed the value
of their subsistence. It is otherwise with the work of farmers
and country labourers. The rent of the landlord is a value which,
in ordinary cases, it is continually producing over and above
replacing, in the most complete manner, the whole consumption,
the whole expense laid out upon the employment and maintenance
both of the workmen and of their employer.
Artificers, manufacturers, and merchants, can augment the revenue
and wealth of their society by parsimony only ; or, as it is
expressed in this system, by privation, that is, by depriving
themselves of a part of the funds destined for their own
subsistence. They annually reproduce nothing but those funds.
Unless, therefore, they annually save some part of them, unless
they annually deprive themselves of the enjoyment of some part of
them, the revenue and wealth of their society can never be, in
the smallest degree, augmented by means of their industry.
Farmers and country labourers, on the contrary, may enjoy
completely the whole funds destined for their own subsistence,
and yet augment, at the same time, the revenue and wealth of
their society. Over and above what is destined for their own
subsistence, their industry annually affords a neat produce, of
which the augmentation necessarily augments the revenue and
wealth of their society. Nations, therefore, which, like France
or England, consist in a great measure, of proprietors and
cultivators, can be enriched by industry and enjoyment.
Nations, on the contrary, which, like Holland and Hamburgh, are
composed chiefly of merchants, artificers, and manufacturers, can
grow rich only through parsimony and privation. As the interest
of nations so differently circumstanced is very different, so is
likewise the common character of the people. In those of the
former kind, liberality, frankness, and good fellowship,
naturally make a part of their common character ; in the latter,
narrowness, meanness, and a selfish disposition, averse to all
social pleasure and enjoyment.
The unproductive class, that of merchants, artificers, and
manufacturers, is maintained and employed altogether at the
expense of the two other classes, of that of proprietors, and of
that of cultivators. They furnish it both with the materials of
its work, and with the fund of its subsistence, with the corn and
cattle which it consumes while it is employed about that work.
The proprietors and cultivators finally pay both the wages of all
the workmen of the unproductive class, and the profits of all
their employers. Those workmen and their employers are properly
the servants of the proprietors and cultivators. They are only
servants who work without doors, as menial servants work within.
Both the one and the other, however, are equally maintained at
the expense of the same masters. The labour of both is equally
unproductive. It adds nothing to the value of the sum total of
the rude produce of the land. Instead of increasing the value of
that sum total, it is a charge and expense which must be paid out
of it.
The unproductive class, however, is not only useful, but greatly
useful, to the other two classes. By means of the industry of
merchants, artificers, and manufacturers, the proprietors and
cultivators can purchase both the foreign goods and the
manufactured produce of their own country, which they have
occasion for, with the produce of a much smaller quantity of
their own labour, than what they would be obliged to employ, if
they were to attempt, in an awkward and unskilful manner, either
to import the one, or to make the other, for their own use. By
means of the unproductive class, the cuitivators are delivered
from many cares, which would otherwise distract their attention
from the cultivation of land. The superiority of produce, which
in consequence of this undivided attention, they are enabled to
raise, is fully sufficient to pay the whole expense which the
maintenance and employment of the unproductive class costs either
the proprietors or themselves. The industry of merchants,
artificers, and manufacturers, though in its own nature
altogether unproductive, yet contributes in this manner
indirectly to increase the produce of the land. It increases the
productive powers of productive labour, by leaving it at liberty
to confine itself to its proper employment, the cultivation of
land ; and the plough goes frequently the easier and the better,
by means of the labour of the man whose business is most remote
from the plough.
It can never be the interest of the proprietors and cultivators,
to restrain or to discourage, in any respect, the industry of
merchants, artificers, and manufacturers. The greater the liberty
which this unproductive class enjoys, the greater will be the
competition in all the different trades which compose it, and the
cheaper will the other two classes be supplied, both with foreign
goods and with the manufactured produce of their own country.
It can never be the interest of the unproductive class to oppress
the other two classes. It is the surplus produce of the land, or
what remains after deducting the maintenance, first of the
cultivators, and afterwards of the proprietors, that maintains
and employs the unproductive class. The greater this surplus, the
greater must likewise be the maintenance and employment of that
class. The establishment of perfect justice, of perfect liberty,
and of perfect equality, is the very simple secret which most
effectually secures the highest degree of prosperity to all the
three classes.
The merchants, artificers, and manufacturers of those mercantile
states, which, like Holland and Hamburgh, consist chiefly of this
unproductive class, are in the same manner maintained and
employed altogether at the expense of the proprietors and
cultivators of land. The only difference is, that those
proprietors and cultivators are, the greater part of them, placed
at a most inconvenient distance from the merchants, artificers,
and manufacturers, whom they supply with the materials of their
work and the fund of their subsistence; are the inhabitants of
other countries, and the subjects of other governments.
Such mercantile states, however, are not only useful, but greatly
useful, to the inhabitants of those other countries. They fill
up, in some measure, a very important void ; and supply the place
of the merchants, artificers, and manufacturers, whom the
inhabitants of those countries ought to find at home, but whom,
from some defect in their policy, they do not find at home.
It can never be the interest of those landed nations, if I may
call them so, to discourage or distress the industry of such
mercantile states, by imposing high duties upon their trade, or
upon the commodities which they furnish. Such duties, by
rendering those commodities dearer, could serve only to sink the
real value of the surplus produce of their own land, with which,
or, what comes to the same thing, with the price of which those
commodities are purchased. Such duties could only serve to
discourage the increase of that surplus produce, and consequently
the improvement and cultivation of their own land. The most
effectual expedient, on the contrary, for raising the value of
that surplus produce, for encouraging its increase, and
consequently the improvement and cultivation of their own land,
would be to allow the most perfect freedom to the trade of all
such mercantile nations.
This perfect freedom of trade would even be the most effectual
expedient for supplying them, in due time, with all the
artificers, manufacturers, and merchants, whom they wanted at
home; and for filling up, in the properest and most advantageous
manner, that very important void which they felt there.
The continual increase of the surplus produce of their land
would, in due time, create a greater capital than what would be
employed with the ordinary rate of profit in the improvement and
cultivation of land; and the surplus part of it would naturally
turn itself to the employment of artificers and manufacturers, at
home. But these artificers and manufacturers, finding at home
both the materials of their work and the fund of their
subsistence, might immediately, even with much less art and skill
be able to work as cheap as the little artificers and
manufacturers of such mercantile states, who had both to bring
from a greater distance. Even though, from want of art and skill,
they might not for some time be able to work as cheap, yet,
finding a market at home, they might be able to sell their work
there as cheap as that of the artificers and manufacturers of
such mercantile states. which could not be brought to that market
but from so great a distance ; and as their art and skill
improved, they would soon be able to sell it cheaper. The
artificers and manufacturers of such mercantile states,
therefore, would immediately be rivalled in the market of those
landed nations, and soon after undersold and justled out of it
altogether. The cheapness of the manufactures of those landed
nations, in consequence of the gradual improvements of art and
skill, would, in due time, extend their sale beyond the home
market, and carry them to many foreign markets, from which they
would, in the same manner, gradually justle out many of the
manufacturers of such mercantile nations.
This continual increase, both of the rude and manufactured
produce of those landed nations, would, in due time, create a
greater capital than could, with the ordinary rate of profit, be
employed either in agriculture or in manufactures. The surplus of
this capital would naturally turn itself to foreign trade and be
employed in exporting, to foreign countries, such parts of the
rude and manufactured produce of its own country, as exceeded the
demand of the home market. In the exportation of the produce of
their own country, the merchants of a landed nation would have an
advantage of the same kind over those of mercantile nations,
which its artificers and manufacturers had over the artificers
and manufacturers of such nations; the advantage of finding at
home that cargo, and those stores and provisions, which the
others were obliged to seek for at a distance. With inferior art
and skill in navigation, therefore, they would be able to sell
that cargo as cheap in foreign markets as the merchants of such
mercantile nations; and with equal art and skill they would be
able to sell it cheaper. They would soon, therefore, rival those
mercantile nations in this branch of foreign trade, and, in due
time, would justle them out of it altogether.
According to this liberal and generous system, therefore, the
most advantageous method in which a landed nation can raise up
artificers, manufacturers, and merchants of its own, is to grant
the most perfect freedom of trade to the artificers,
manufacturers, and merchants of all other nations. It thereby
raises the value of the surplus produce of its own land, of which
the continual increase gradually establishes a fund, which, in
due time, necessarily raises up all the artificers,
manufacturers, and merchants, whom it has occasion for.
When a landed nation on the contrary, oppresses, either by high
duties or by prohibitions, the trade of foreign nations, it
necessarily hurts its own interest in two different ways. First,
by raising the price of all foreign goods, and of all sorts of
manufactures, it necessarily sinks the real value of the surplus
produce of its own land, with which, or, what comes to the same
thing, with the price of which, it purchases those foreign goods
and manufactures. Secondly, by giving a sort of monopoly of the
home market to its own merchants, artificers, and manufacturers,
it raises the rate of mercantile and manufacturing profit, in
proportion to that of agricultural profit; and, consequently,
either draws from agriculture a part of the capital which had
before been employed in it, or hinders from going to it a part of
what would otherwise have gone to it. This policy, therefore,
discourages agriculture in two different ways; first, by sinking
the real value of its produce, and thereby lowering the rate of
its profits; and, secondly, by raising the rate of profit in all
other employments. Agriculture is rendered less advantageous, and
trade and manufactures more advantageous, than they otherwise
would be; and every man is tempted by his own interest to turn,
as much as he can, both his capital and his industry from the
former to the latter employments.
Though, by this oppressive policy, a landed nation should be able
to raise up artificers, manufacturers, and merchants of its own,
somewhat sooner than it could do by the freedom of trade; a
matter, however, which is not a little doubtful ; yet it would
raise them up, if one may say so, prematurely, and before it was
perfectly ripe for them. By raising up too hastily one species of
industry, it would depress another more valuable species of
industry. By raising up too hastily a species of industry which
duly replaces the stock which employs it, together with the
ordinary profit, it would depress a species of industry which,
over and above replacing that stock, with its profit, affords
likewise a neat produce, a free rent to the landlord. It would
depress productive labour, by encouraging too hastily that labour
which is altogether barren and unproductive.
In what manner, according to this system, the sum total of the
annual produce of the land is distributed among the three classes
above mentioned, and in what manner the labour of the
unproductive class does no more than replace the value of its own
consumption, without increasing in any respect the value of that
sum total, is represented by Mr Quesnai, the very ingenious and
profound author of this system, in some arithmetical formularies.
The first of these formularies, which, by way of eminence, he
peculiarly distinguishes by the name of the Economical Table,
represents the manner in which he supposes this distribution
takes place, in a state of the most perfect liberty, and,
therefore, of the highest prosperity; in a state where the annual
produce is such as to afford the greatest possible neat produce,
and where each class enjoys its proper share of the whole annual
produce. Some subsequent formularies represent the manner in
which he supposes this distribution is made in different states
of restraint and regulation ; in which, either the class of
proprietors, or the barren and unproductive class, is more
favoured than the class of cultivators ; and in which either the
one or the other encroaches, more or less, upon the share which
ought properly to belong to this productive class. Every such
encroachment, every violation of that natural distribution, which
the most perfect liberty would establish, must, according to this
system, necessarily degrade, more or less, from one year to
another, the value and sum total of the annual produce, and must
necessarily occasion a gradual declension in the real wealth and
revenue of the society ; a declension, of which the progress must
be quicker or slower, according to the degree of this
encroachment, according as that natural distribution, which the
most perfect liberty would establish, is more or less violated.
Those subsequent formularies represent the different degrees of
declension which, according to this system, correspond to the
different degrees in which this natural distribution of things is
violated.
Some speculative physicians seem to have imagined that the health
of the human body could be preserved only by a certain precise
regimen of diet and exercise, of which every, the smallest
violation, necessarily occasioned some degree of disease or
disorder proportionate to the degree of the violation.
Experience, however, would seem to shew, that the human body
frequently preserves, to all appearance at least, the most
perfect state of health under a vast variety of different
regimens; even under some which are generally believed to be very
far from being perfectly wholesome. But the healthful state of
the human body, it would seem, contains in itself some unknown
principle of preservation, capable either of preventing or of
correcting, in many respects, the bad effects even of a very
faulty regimen. Mr Quesnai, who was himself a physician, and a
very speculative physician, seems to have entertained a notion of
the same kind concerning the political body, and to have imagined
that it would thrive and prosper only under a certain precise
regimen, the exact regimen of perfect liberty and perfect
justice. He seems not to have considered, that in the political
body, the natural effort which every man is continually making to
better his own condition, is a principle of preservation capable
of preventing and correcting, in many respects, the bad effects
of a political economy, in some degree both partial and
oppressive. Such a political economy, though it no doubt retards
more or less, is not always capable of stopping altogether, the
natural progress of a nation towards wealth and prosperity, and
still less of making it go backwards. If a nation could not
prosper without the enjoyment of perfect liberty and perfect
justice, there is not in the world a nation which could ever have
prospered. In the political body, however, the wisdom of nature
has fortunately made ample provision for remedying many of the
bad effects of the folly and injustice of man ; it the same
manner as it has done in the natural body, for remedying those of
his sloth and intemperance.
The capital error of this system, however, seems to lie in its
representing the class of artificers, manufacturers, and
merchants, as altogether barren and unproductive. The following
observations may serve to shew the impropriety of this
representation : ˜
First, this class, it is acknowledged, reproduces annually the
value of its own annual consmnption, and continues, at least, the
existence of the stock or capital which maintains and employs it.
But, upon this account alone, the denomination of barren or
unproductive should seem to be very improperly applied to it. We
should not call a marriage barren or unproductive, though it
produced only a son and a daughter, to replace the father and
mother, and though it did not increase the number of the human
species, but only continued it as it was before. Farmers and
country labourers, indeed, over and above the stock which
maintains and employs them, reproduce annually a neat produce, a
free rent to the landlord. As a marriage which affords three
children is certainly more productive than one which affords only
two, so the labour of farmers and country labourers is certainly
more productive than that of merchants, artificers, and
manufacturers. The superior produce of the one class, however,
does not, render the other barren or unproductive.
Secondly, it seems, on this account, altogether improper to
consider artificers, manufacturers, and merchants, in the same
light as menial servants. The labour of menial servants does not
continue the existence of the fund which maintains and employs
them. Their maintenance and employment is altogether at the
expense of their masters, and the work which they perform is not
of a nature to repay that expense. That work consists in services
which perish generally in the very instant of their performance,
and does not fix or realize itself in any vendible commodity,
which can replace the value of their wages and maintenance. The
labour, on the contrary, of artificers, manufacturers, and
merchants, naturally does fix and realize itself in some such
vendible commodity. It is upon this account that, in the chapter
in which I treat of productive and unproductive labour, I have
classed artificers, manufacturers, and merchants among the
productive labourers, and menial servants among the barren or
unproductive.
Thirdly, it seems, upon every supposition, improper to say,
that the labour of artificers, manufacturers, and merchants, does
not increase the real revenue of the society. Though we should
suppose, for example, as it seems to be supposed in this system,
that the value of the daily, monthly, and yearly consumption of
this class was exactly equal to that of its daily, monthly, and
yearly production; yet it would not from thence follow, that its
labour added nothing to the real revenue, to the real value of
the annual produce of the land and labour of the society. An
artificer, for example, who, in the first six months after
harvest, executes ten pounds worth of work, though he should, in
the same time, consume ten pounds worth of corn and other
necessaries, yet really adds the value of ten pounds to the
annual produce of the land and labour of the society. While he
has been consuming a half-yearly revenue of ten pounds worth of
corn and other necessaries, he has produced an equal value of
work, capable of purchasing, either to himself, or to some other
person, an equal half-yearly revenue. The value, therefore, of
what has been consumed and produced during these six months, is
equal, not to ten, but to twenty pounds. It is possible, indeed,
that no more than ten pounds worth of this value may ever have
existed at any one moment of time. But if the ten pounds worth of
corn and other necessaries which were consumed by the artificer,
had been consumed by a soldier, or by a menial servant, the value
of that part of the annual produce which existed at the end of
the six months, would have been ten pounds less than it actually
is in consequence of the labour of the artificer. Though the
value of what the artificer produces, therefore, should not, at
any one moment of time, be supposed greater than the value he
consumes, yet, at every moment of time, the actually existing
value of goods in the market is, in consequence of what he
produces, greater than it otherwise would be.
When the patrons of this system assert, that the consumption of
artificers, manufacturer's, and merchants, is equal to the value
of what they produce, they probably mean no more than that their
revenue, or the fund destined for their consumption, is equal to
it. But if they had expressed themselves more accurately, and
only asserted, that the revenue of this class was equal to the
value of what they produced, it might readily have occurred to
the reader, that what would naturally be saved out of this
revenue, must necessarily increase more or less the real wealth
of the society. In order, therefore, to make out something like
an argument, it was necessary that they should express themselves
as they have done ; and this argument, even supposing things
actually were as it seems to presume them to be, turns out to be
a very inconclusive one.
Fourthly, farmers and country labourers can no more augment,
without parsimony, the real revenue, the annual produce of the
land and labour of their society, than artificers, manufacturers,
and merchants. The annual produce of the land and labour of any
society can be augmented only in two ways ; either, first, by
some improvement in the productive powers of the useful labour
actually maintained within it; or, secondly, by some increase in
the quantity of that labour.
The improvement in the productive powers of useful labour
depends, first, upon the improvement in the ability of the
workman; and, secondly, upon that of the machinery with which be
works. But the labour of artificers and manufacturers, as it is
capable of being more subdivided, and the labour of each workman
reduced to a greater simplicity of operation, than that of
farmers and country labourers; so it is likewise capable of both
these sorts of improvement in a much higher degree {See book i
chap. 1.} In this respect, therefore, the class of cultivators
can have no sort of advantage over that of artificers and
manufacturers.
The increase in the quantity of useful labour actually employed
within any society must depend altogether upon the increase of
the capital which employs it ; and the increase of that capital,
again, must be exactly equal to the anount of the savings from
the revenue, either of the particular persons who manage and
direct the employment of that capital, or of some other persons,
who lend it to them. If merchants, artificers, and manufacturers
are, as this system seems to suppose, naturally more inclined to
parsimony and saving than proprietors and cultivators, they are,
so far, more likely to augment the quantity of useful labour
employed within their society, and consequently to increase its
real revenue, the annual produce of its land and labour.
Fifthly and lastly, though the revenue of the inhabitants of
every country was supposed to consist altogether, as this system
seems to suppose, in the quantity of subsistence which their
industry could procure to them; yet, even upon this supposition,
the revenue of a trading and manufacturing country must, other
things being equal, always be much greater than that of one
without trade or manufactures. By means of trade and
manufactures, a greater quantity of subsistence can be annually
imported into a particular country, than what its own lands, in
the actual state of their cultivation, could afford. The
inhabitants of a town, though they frequently possess no lands of
their own, yet draw to themselves, by their industry, such a
quantity of the rude produce of the lands of other people, as
supplies them, not only with the materials of their work, but
with the fund of their subsistence. What a town always is with
regard to the country in its neighbourhood, one independent state
or country may frequently be with regard to other independent
states or countries. It is thus that Holland draws a great part
of its subsistence from other countries; live cattle from
Holstein and Jutland, and corn from almost all the different
countries of Europe. A small quantity of manufactured produce,
purchases a great quantity of rude produce. A trading and
manufacturing country, therefore, naturally purchases, with a
small part of its manufactured produce, a great part of the rude
produce of other countries; while, on the contrary, a country
without trade and manufactures is generally obliged to purchase,
at the expense of a great part of its rude produce, a very small
part of the manufactured produce of other countries. The one
exports what can subsist and accommodate but a very few, and
imports the subsistence and accommodation of a great number. The
other exports the accommodation and subsistence of a great
number, and imports that of a very few only. The inhabitants of
the one must always enjoy a much greater quantity of subsistence
than what their own lands, in the actual state of their
cultivation, could afford. The inhabitants of the other must
always enjoy a much smaller quantity.
This system, however, with all its imperfections, is perhaps the
nearest approximation to the truth that has yet been published
upon the subject of political economy ; and is upon that account,
well worth the consideration of every man who wishes to examine
with attention the principles of that very important science.
Though in representing the labour which is employed upon land as
the only productive labour, the notions which it inculcates are,
perhaps, too narrow and confined ; yet in representing the wealth
of nations as consisting, not in the unconsumable riches of
money, but in the consumable goods annually reproduced by the
labour of the society, and in representing perfect liberty as the
only effectual expedient for rendering this annual reproduction
the greatest possible, its doctrine seems to be in every respect
as just as it is generous and liberal. Its followers are very
numerous ; and as men are fond of paradoxes, and of appearing to
understand what surpasses the comprehensions of ordinary people,
the paradox which it maintains, concerning the unproductive
nature of manufacturing labour, has not, perhaps, contributed a
little to increase the number of its admirers. They have for some
years past made a pretty considerable sect, distinguished in the
French republic of letters by the name of the Economists. Their
works have certainly been of some service to their country; not
only by bringing into general discussion, many subjects which had
never been well examined before, but by influencing, in some
measure, the public administration in favour of agriculture. It
has been in consequence of their representations, accordingly,
that the agriculture of France has been delivered from several of
the oppressions which it before laboured under. The term, during
which such a lease can be granted, as will be valid against every
future purchaser or proprietor of the land, has been prolonged
from nine to twenty-seven years. The ancient provincial
restraints upon the transportation of corn from one province of
the kingdom to another, have been entirely taken away; and the
liberty of exporting it to all foreign countries, has been
established as the common law of the kingdom in all ordinary
cases. This sect, in their works, which are very numerous, and
which treat not only of what is properly called Political
Economy, or of the nature and causes or the wealth of nations,
but of every other branch of the system of civil government, all
follow implicitly, and without any sensible variation, the
doctrine of Mr. Qttesnai. There is, upon this account, little
variety in the greater part of their works. The most distinct and
best connected account of this doctrine is to be found in a
little book written by Mr. Mercier de la Riviere, some time
intendant of Martinico, entitled, The natural and essential Order
of Political Societies. The admiration of this whole sect for
their master, who was himself a man of the greatest modesty and
simplicity, is not inferior to that of any of the ancient
philosophers for the founders of their respective systems. 'There
have been since the world began,' says a very diligent and
respectable author, the Marquis de Mirabeau, 'three great
inventions which have principally given stability to political
societies, independent of many other inventions which have
enriched and adorned them. The first is the invention of writing,
which alone gives human nature the power of transmitting, without
alteration, its laws, its contracts, its annals, and its
discoveries. The second is the invention of money, which binds
together all the relations between civilized societies. The third
is the economical table, the result of the other two, which
completes them both by perfecting their object ; the great
discovery of our age, but of which our posterity will reap the
benefit.'
As the political economy of the nations of modern Europe has been
more favourable to manufactures and foreign trade, the industry
of the towns, than to agriculture, the industry of the country;
so that of other nations has followed a different plan, and has
been more favourable to agriculture than to manufactures and
foreign trade.
The policy of China favours agriculture more than all other
employments. In China, the condition of a labourer is said to be
as much superior to that of an artificer, as in most parts of
Europe that of an artificer is to that of a labourer. In China,
the great ambition of every man is to get possession of a little
bit of land, either in property or in lease ; and leases are
there said to be granted upon very moderate terms, and to be
sufficiently secured to the lessees. The Chinese have little
respect for foreign trade. Your beggarly commerce ! was the
language in which the mandarins of Pekin used to talk to Mr. De
Lange, the Russian envoy, concerning it {See the Journal of Mr.
De Lange, in Bell's Travels, vol. ii. p. 258, 276, 293.}. Except
with Japan, the Chinese carry on, themselves, and in their own
bottoms, little or no foreign trade ; and it is only into one or
two ports of their kingdom that they even admit the ships of
foreign nations. Foreign trade, therefore, is, in China, every
way confined within a much narrower circle than that to which it
would naturally extend itself, if more freedom was allowed to it,
either in their own ships, or in those of foreign nations.
Manufactures, as in a small bulk they frequently contain a great
value, and can upon that account be transported at less expense
from one country to another than most parts of rude produce, are,
in almost all countries, the principal support of foreign trade.
In countries, besides, less extensive, and less favourably
circumstanced for inferior commerce than China, they generally
require the support of foreign trade. Without an extensive
foreign market, they could not well flourish, either in countries
so moderately extensive as to afford but a narrow home market, or
in countries where the communication between one province and
another was so difficult, as to render it impossible for the
goods of any particular place to enjoy the whole of that home
market which the country could afford. The perfection of
manufacturing industry, it must be remembered, depends altogether
upon the division of labour ; and the degree to which the
division of labour can be introduced into any manufacture, is
necessarily regulated, it has already been shewn, by the extent
of the market. But the great extent of the empire of China, the
vast multitude of its inhabitants, the variety of climate, and
consequently of productions in its different provinces, and the
easy communication by means of water-carriage between the greater
part of them, render the home market of that country of so great
extent, as to be alone sufficient to support very great
manufactures, and to admit of very considerable subdivisions of
labour. The home market of China is, perhaps, in extent, not much
inferior to the market of all the different countries of Europe
put together. A more extensive foreign trade, however, which to
this great home market added the foreign market of all the rest
of the world, especially if any considerable part of this trade
was carried on in Chinese ships, could scarce fail to increase
very much the manufactures of China, and to improve very much the
productive powers of its manufacturing industry. By a more
extensive navigation, the Chinese would naturally learn the art
of using and constructing, themselves, all the different machines
made use of in other countries, as well as the other improvements
of art and industry which are practised in all the different
parts of the world. Upon their present plan, they have little
opportunity of improving themselves by the example of any other
nation, except that of the Japanese.
The policy of ancient Egypt, too, and that of the Gentoo
government of Indostan, seem to have favoured agriculture more
than all other employments.
Both in ancient Egypt and Indostan, the whole body of the people
was divided into different casts or tribes each of which was
confined, from father to son, to a particular employment, or
class of employments. The son of a priest was necessarily a
priest; the son of a soldier, a soldier; the son of a labourer, a
labourer ; the son of a weaver, a weaver ; the son of a tailor, a
tailor, etc. In both countries, the cast of the priests holds the
highest rank, and that of the soldiers the next; and in both
countries the cast of the farmers and labourers was superior to
the casts of merchants and manufacturers.
The government of both countries was particularly attentive to
the interest of agriculture. The works constructed by the ancient
sovereigns of Egypt, for the proper distribution of the waters of
the Nile, were famous in antiquity, and the ruined remains of
some of them are still the admiration of travellers. Those of the
same kind which were constructed by the ancient sovereigns of
Indostan, for the proper distribution of the waters of the
Ganges, as well as of many other rivers, though they have been
less celebrated, seem to have been equally great. Both countries,
accordingly, though subject occasionally to dearths, have been
famous for their great fertility. Though both were extremely
populous, yet, in years of moderate plenty, they were both able
to export great quantities of grain to their neighbours.
The ancient Egyptians had a superstitious aversion to the sea;
and as the Gentoo religion does not permit its followers to light
a fire, nor consequently to dress any victuals, upon the water,
it, in effect, prohibits them from all distant sea voyages.
Both the Egyptians and Indians must have depended almost
altogether upon the navigation of other nations for the
exportation of their surplus produce; and this dependency, as it
must have confined the market, so it must have discouraged the
increase of this surplus produce. It must have discouraged, too,
the increase of the manufactured produce, more than that of the
rude produce. Manufactures require a much more extensive market
than the most important parts of the rude produce of the land. A
single shoemaker will make more than 300 pairs of shoes in the
year; and his own family will not, perhaps, wear out six pairs.
Unless, therefore, he has the custom of, at least, 50 such
families as his own, he cannot dispose of the whole product of
his own labour. The most numerous class of artificers will
seldom, in a large country, make more than one in 50, or one in a
100, of the whole number of families contained in it. But in such
large countries, as France and England, the number of people
employed in agriculture has, by some authors been computed at a
half, by others at a third and by no author that I know of, at
less that a fifth of the whole inhabitants of the country. But as
the produce of the agriculture of both France and England is, the
far greater part of it, consumed at home, each person employed in
it must, according to these computations, require little more
than the custom of one, two, or, at most, of four such families
as his own, in order to dispose of the whole produce of his own
labour. Agriculture, therefore, can support itself under the
discouragement of a confined market much better than
manufactures. In both ancient Egypt and Indostan, indeed, the
confinement of the foreign market was in some measure compensated
by the conveniency of many inland navigations, which opened, in
the most advantageous manner, the whole extent of the home market
to every part of the produce of every different district of those
countries. The great extent of Indostan, too, rendered the home
market of that country very great, and sufficient to support a
great variety of manufactures. But the small extent of ancient
Egypt, which was never equal to England, must at all times, have
rendered the home market of that country too narrow for
supporting any great variety of manufactures. Bengal accordingly,
the province of Indostan which commonly exports the greatest
quantity of rice, has always been more remarkable for the
exportation of a great variety of manufactures, than for that of
its grain. Ancient Egypt, on the contrary, though it exported
some manufactures, fine linen in particular, as well as some
other goods, was always most distinguished for its great
exportation of grain. It was long the granary of the Roman
empire.
The sovereigns of China, of ancient Egypt, and of the different
kindoms into which Indostan has, at different times, been
divided, have always derived the whole, or by far the most
considerable part, of their revenue, from some sort of land tax
or land rent. This land tax, or land rent, like the tithe in
Europe, consisted in a certain proportion, a fifth, it is said,
of the produce of the land, which was either delivered in kind,
or paid in money, according to a certain valuation, and which,
therefore, varied from year to year, according to all the
variations of the produce. It was natural, therefore, that the
sovereigns of those countries should be particularly attentive to
the interests of agriculture, upon the prosperity or declension
of which immediately depended the yearly increase or diminution
of their own revenue.
The policy of the ancient republics of Greece, and that of Rome,
though it honoured agriculture more than manufactures or foreign
trade, yet seems rather to have discouraged the latter
employments, than to have given any direct or intentional
encouragement to the former. In several of the ancient states of
Greece, foreign trade was prohibited altogether; and in several
others, the employments of artificers and manufacturers were
considered as hurtful to the strength and agility of the human
body, as rendering it incapable of those habits which their
military and gymnastic exercises endeavoured to form in it, and
as thereby disqualifying it, more or less, for undergoing the
fatigues and encountering the dangers of war. Such occupations
were considered as fit only for slaves, and the free citizens of
the states were prohibited from exercising them. Even in those
states where no such prohibition took place, as in Rome and
Athens, the great body of the people were in effect excluded from
all the trades which are now commonly exercised by the lower sort
of the inhabitants of towns. Such trades were, at Athens and
Rome, all occupied by the slaves of the rich, who exercised them
for the benefit of their masters, whose wealth, power, and
protection, made it almost impossible for a poor freeman to find
a market for his work, when it came into competition with that of
the slaves of the rich. Slaves, however, are very seldom
inventive ; and all the most important improvements, either in
machinery, or in the arrangement and distribution of work, which
facilitate and abridge labour have been the discoveries of
freemen. Should a slave propose any improvement of this kind, his
master would be very apt to consider the proposal as the
suggestion of laziness, and of a desire to save his own labour at
the master's expense. The poor slave, instead of reward would
probably meet with much abuse, perhaps with some punishment. In
the manufactures carried on by slaves, therefore, more labour
must generally have been employed to execute the same quantity of
work, than in those carried on by freemen. The work of the farmer
must, upon that account, generally have been dearer than that of
the latter. The Hungarian mines, it is remarked by Mr.
Montesquieu, though not richer, have always been wrought with
less expense, and therefore with more profit, than the Turkish
mines in their neighbourhood. The Turkish mines are wrought by
slaves; and the arms of those slaves are the only machines which
the Turks have ever thought of employing. The Hungarian mines are
wrought by freemen, who employ a great deal of machinery, by
which they facilitate and abridge their own labour. From the very
little that is known about the price of manufactures in the times
of the Greeks and Romans, it would appear that those of the finer
sort were excessively dear. Silk sold for its weight in gold. It
was not, indeed, in those times an European manufacture ; and as
it was all brought from the East Indies, the distance of the
carriage may in some measure account for the greatness of the
price. The price, however, which a lady, it is said, would
sometimes pay for a piece of very fine linen, seems to have been
equally extravagant ; and as linen was always either an European,
or at farthest, an Egyptian manufacture, this high price can be
accounted for only by the great expense of the labour which must
have been employed about It, and the expense of this labour again
could arise from nothing but the awkwardness of the machinery
which is made use of. The price of fine woollens, too, though not
quite so extravagant, seems, however, to have been much above
that of the present times. Some cloths, we are told by Pliny
{Plin. 1. ix.c.39.}, dyed in a particular manner, cost a hundred
denarii, or £3:6s:8d. the pound weight. Others, dyed in another
manner, cost a thousand denarii the pound weight, or £33:6s:8d.
The Roman pound. it must be remembered, contained only twelve of
our avoirdupois ounces. This high price, indeed, seems to have
been principally owing to the dye. But had not the cloths
themselves been much dearer than any which are made in the
present times, so very expensive a dye would not probably have
been bestowed upon them. The disproportion would have been too
great between the value of the accessory and that of the
principal. The price mentioned by the same author {Plin. 1.
viii.c.48.}, of some triclinaria, a sort of woollen pillows or
cushions made use of to lean upon as they reclined upon their
couches at table, passes all credibility; some of them being said
to have cost more than £30,000, others more than £300,000. This
high price, too, is not said to have arisen from the dye. In the
dress of the people of fashion of both sexes, there seems to have
been much less variety, it is observed by Dr. Arbuthnot, in
ancient than in modern times; and the very little variety which
we find in that of the ancient statues, confirms his observation.
He infers from this, that their dress must, upon the whole, have
been cheaper than ours; but the conclusion does not seem to
follow. When the expense of fashionable dress is very great, the
variety must be very small. But when, by the improvements in the
productive powers of manufacturing art and industry, the expense
of any one dress comes to be very moderate, the variety will
naturally be very great. The rich, not being able to distinguish
themselves by the expense of any one dress, will naturally
endeavour to do so by the multitude and variety of their dresses.
The greatest and most important branch of the commerce of every
nation, it has already been observed, is that which is carried on
between the inhabitants of the town and those of the country. The
inhabitants of the town draw from the country the rude produce,
which constitutes both the materials of their work and the fund
of their subsistence ; and they pay for this rude produce, by
sending back to the country a certain portion of it manufactured
and prepared for immediate use. The trade which is carried on
between these two different sets of people, consists ultimately
in a certain quantity of rude produce exchanged for a certain
quantity of manufactured produce. The dearer the latter,
therefore, the cheaper the former; and whatever tends in any
country to raise the price of manufactured produce, tends to
lower that of the rude produce of the land, and thereby to
discourage agriculture. The smaller the quantity of
manufactured produce, which any given quantity of rude produce,
or, what comes to the same thing, which the price of any given
quantity of rude produce, is capable of purchasing, the smaller
the exchangeable value of that given quantity of rude produce;
the smaller the encouragement which either the landlord has to
increase its quantity by improving, or the farmer by cultivating
the land. Whatever, besides, tends to diminish in any country the
number of artificers and manufacturers, tends to diminish the
home market, the most important of all markets, for the rude
produce of the land, and thereby still further to discourage
agriculture.
Those systems, therefore, which preferring agriculture to all
other employments, in order to promote it, impose restraints upon
manufactures and foreign trade, act contrary to the very end
which they propose, and indirectly discourage that very species
of industry which they mean to promote. They are so far, perhaps,
more inconsistent than even the mercantile system. That system,
by encouraging manufactures and foreign trade more than
agriculture, turns a certain portion of the capital of the
society, from supporting a more advantageous, to support a less
advantageous species of industry. But still it really, and in the
end, encourages that species of industry which it means to
promote. Those agricultural systems, on the contrary, really, and
in the end, discourage their own favourite species of industry.
It is thus that every system which endeavours, either, by
extraordinary encouragements to draw towards a particular species
of industry a greater share of the capital of the society than
what would naturally go to it, or, by extraordinary restraints,
to force from a particular species of industry some share of the
capital which would otherwise be employed in it, is, in reality,
subversive of the great purpose which it means to promote. It
retards, instead of accelerating the progress of the society
towards real wealth and greatness ; and diminishes, instead of
increasing, the real value of the annual produce of its land and
labour.
All systems, either of preference or of restraint, therefore,
being thus completely taken away, the obvious and simple system
of natural liberty establishes itself of its own accord. Every
man, as long as he does not violate the laws of justice, is left
perfectly free to pursue his own interest his own way, and to
bring both his industry and capital into competition with those
of any other man, or order of men. The sovereign is completely
discharged from a duty, in the attempting to perform which he
must always be exposed to innumerable delusions, and for the
proper performance of which, no human wisdom or knowledge could
ever be sufficient ; the duty of superintending the industry of
private people, and of directing it towards the employments most
suitable to the interests of the society. According to the system
of natural liberty, the sovereign has only three duties to attend
to; three duties of great importance, indeed, but plain and
intelligible to common understandings: first, the duty of
protecting the society from the violence and invasion of other
independent societies ; secondly, the duty of protecting, as far
as possible, every member of the society from the injustice or
oppression of every other member of it, or the duty of
establishing an exact administration of justice ; and, thirdly,
the duty of erecting and maintaining certain public works, and
certain public institutions, which it can never be for the
interest of any individual, or small number of individuals to
erect and maintain ; because the profit could never repay the
expense to any individual, or small number of individuals, though
it may frequently do much more than repay it to a great society.
The proper performance of those several duties of the sovereign
necessarily supposes a certain expense ; and this expense again
necessarily requires a certain revenue to support it. In the
following book, therefore, I shall endeavour to explain, first,
what are the necessary expenses of the sovereign or commonwealth;
and which of those expenses ought to be defrayed by the general
contribution of the whole society ; and which of them, by that of
some particular part ouly, or of some particular members of the
society: secondly, what are the different methods in which the
whole society may be made to contribute towards defraying the
expenses incumbent on the whole society ; and what are the
principal advantages and inconveniencies of each of those methods
: and thirdly, what are the reasons and causes which have induced
almost all modern governments to mortgage some part of this
revenue, or to contract debts; and what have been the effects of
those debts upon the real wealth, the annual produce of the land
and labour of the society. The following book, therefore, will
naturally be divided into three chapters.
APPENDIX TO BOOK IV
The two following accounts are subjoined, in order to illustrate
and confirm what is said in the fifth chapter of the fourth book,
concerning the Tonnage Bounty to the Whit-herring Fishery. The
reader, I believe, may depend upon the accuracy of both accounts.
An account of Busses fitted out in Scotland for eleven Years, with
the Number of empty Barrels carried out, and the Number of Barrels
of Herrings caught; also the Bounty, at a Medium, on each Barrel of
Sea-sricks, and on each Barrel when fully packed.
Years Number of Empty Barrels Barrels of Her- Bounty paid on
Busses carried out rings caught the Busses
£. s. d.
1771 29 5,948 2,832 2,885 0 0
1772 168 41,316 22,237 11,055 7 6
1773 190 42,333 42,055 12,510 8 6
1774 240 59,303 56,365 26,932 2 6
1775 275 69,144 52,879 19,315 15 0
1776 294 76,329 51,863 21,290 7 6
1777 240 62,679 43,313 17,592 2 6
1778 220 56,390 40,958 16,316 2 6
1779 206 55,194 29,367 15,287 0 0
1780 181 48,315 19,885 13,445 12 6
1781 135 33,992 16,593 9,613 15 6
Totals 2,186 550,943 378,347 £165,463 14 0
Sea-sticks 378,347 Bounty, at a medium, for each
barrel of sea-sticks, £ 0 8 2¼
But a barrel of sea-sticks
being only reckoned two thirds
of a barrel fully packed, one
third to be deducted, which
¹/³deducted 126,115 brings the bounty to £ 0 12 3¾
Barrels fully
packed 252,231
And if the herings are exported, there is besides a
premium of £ 0 2 8
So the bounty paid by government in money for each
barrel is £ 0 14 11¾
But if to this, the duty of the salt usually taken
credit for as expended in curing each barrel, which
at a medium, is, of foreign, one bushel and one-
fourth of a bushel, at 10s. a-bushel, be added, viz 0 12 6
the bounty on each barrel would amount to £ 1 7 5¾
If the herrings are cured with British salt, it will
stand thus, viz.
Bounty as before £ 0 14 11¾
But if to this bounty, the duty on two bushels of
Scotch salt, at 1s.6d. per bushel, supposed to be
the quantity, at a medium, used in curing each
barrel is added, viz. 0 3 0
The bounty on each barrel will amount to £ 0 17 11¾
And when buss herrings are enterd for home
consumption in Scotland, and pay the shilling a
barrel of duty, the bounty stands thus, to wit,
as before £ 0 12 3¾
From which the shilling a barrel is to be deducted 0 1 0
£ 0 11 3¾
But to that there is to be added again, the duty of
the foreign salt used curing a barrel of herring viz 0 12 6
So that the premium allowed for each barrel of her-
rings entered for home consumption is £ 1 3 9¾
If the herrings are cured in British salt, it will
stand as follows viz.
Bounty on each barrel brought in by the busses, as
above £ 0 12 3¾
From which deduct 1s. a-barrel, paid at the time
they are entered for home consumption 0 1 0
£ 0 11 3¾
But if to the bounty, the the duty on two bushel
of Scotch salt, at 1s.6d. per bushel supposed to
be the quantity, at a medium, used in curing each
barrel, is added, viz 0 3 0
the premium for each barrel entered for home
consumption will be £ 1 14 3¾
Though the loss of duties upon herrings exported cannot, perhaps,
properly be considerd as bounty, that upon herrings entered for
home consumption certainly may.
An account of the Quantity of Foreign Salt imported into Scotland,
and of Scotch Salt delivered Duty-free from the Works there, for
the Fishery, from the 5th. of April 1771 to the 5th. of April 1782
with the Medium of both for one Year.
Foreign Salt Scotch Salt delivered
PERIOD imported from the Works
Bushels Bushels
From 5th. April 1771 to
5th. April 1782 936,974 168,226
Medium for one year 85,159½ 15,293¼
It is to be observed, that the bushel of foreign salt weighs 48lbs.,
that of British weighs 56lbs. only.
BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH
CHAPTER I.
OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH.
PART I. Of the Expense of Defence.
The first duty of the sovereign, that of protecting the society
from the violence and invasion of other independent societies,
can be performed only by means of a military force. But the
expense both of preparing this military force in time of peace,
and of employing it in time of war, is very different in the
different states of society, in the different periods of
improvement.
Among nations of hunters, the lowest and rudest state of society,
such as we find it among the native tribes of North America,
every man is a warrior, as well as a hunter. When he goes to war,
either to defend his society, or to revenge the injuries which
have been done to it by other societies, he maintains himself by
his own labour, in the same manner as when he lives at home. His
society (for in this state of things there is properly neither
sovereign nor commonwealth) is at no sort of expense, either to
prepare him for the field, or to maintain him while he is in it.
Among nations of shepherds, a more advanced state of society,
such as we find it among the Tartars and Arabs, every man is, in
the same manner, a warrior. Such nations have commonly no fixed
habitation, but live either in tents, or in a sort of covered
waggons, which are easily transported from place to place. The
whole tribe, or nation, changes its situation according to the
different seasons of the year, as well as according to other
accidents. When its herds and flocks have consumed the forage of
one part of the country, it removes to another, and from that to
a third. In the dry season, it comes down to the banks of the
rivers; in the wet season, it retires to the upper country. When
such a nation goes to war, the warriors will not trust their
herds and flocks to the feeble defence of their old men, their
women and children; and their old men, their women and children,
will not be left behind without defence, and without subsistence.
The whole nation, besides, being accustomed to a wandering life,
even in time of peace, easily takes the field in time of war.
Whether it marches as an army, or moves about as a company of
herdsmen, the way of life is nearly the same, though the object
proposed by it be very different. They all go to war together,
therefore, and everyone does as well as he can. Among the
Tartars, even the women have been frequently known to engage in
battle. If they conquer, whatever belongs to the hostile tribe is
the recompence of the victory ; but if they are vanquished, all
is lost; and not only their herds and flocks, but their women and
children. become the booty of the conqueror. Even the greater
part of those who survive the action are obliged to submit to him
for the sake of immediate subsistence. The rest are commonly
dissipated and dispersed in the desert.
The ordinary life, the ordinary exercise of a Tartar or Arab,
prepare him sufficiently for war. Running, wrestling,
cudgel-playing, throwing the javelin, drawing the bow, etc. are
the common pastimes of those who live in the open air, and are
all of them the images of war. When a Tartar or Arab actually
goes to war, he is maintained by his own herds and flocks, which
he carries with him, in the same manner as in peace. His chief or
sovereign (for those nations have all chiefs or sovereigns) is at
no sort of expense in preparing him for the field ; and when he
is in it, the chance of plunder is the only pay which he either
expects or requires.
An army of hunters can seldom exceed two or three hundred men.
The precarious subsistence which the chace affords, could seldom
allow a greater number to keep together for any considerable
time. An army of shepherds, on the contrary, may sometimes amount
to two or three hundred thousand. As long as nothing stops their
progress, as long as they can go on from one district, of which
they have consumed the forage, to another, which is yet entire;
there seems to be scarce any limit to the number who can march on
together. A nation of hunters can never be formidable to the
civilized nations in their neighbourhood; a nation of shepherds
may. Nothing can be more contemptible than an Indian war in North
America; nothing, on the contrary, can be more dreadful than a
Tartar invasion has frequently been in Asia. The judgment of
Thucydides, that both Europe and Asia could not resist the
Scythians united, has been verified by the experience of all
ages. The inhabitants of the extensive, but defenceles plains of
Scythia or Tartary, have been frequently united under the
dominion of the chief of some conquering horde or clan; and the
havock and devastation of Asia have always signalized their
union. The inhabitants of the inhospitable deserts of Arabia, the
other great nation of shepherds, have never been united but once,
under Mahomet and his immediate successors. Their union, which
was more the effect of religious enthusiasm than of conquest, was
signalized in the same manner. If the hunting nations of America
should ever become shepherds, their neighbourhood would be much
more dangerous to the European colonies than it is at present.
In a yet more advanced state of society, among those nations of
husbandmen who have little foreign commerce, and no other
manufactures but those coarse and household ones, which almost
every private family prepares for its own use, every man, in the
same manner, either is a warrior, or easily becomes such. Those
who live by agricuiture generally pass the whole day in the open
air, exposed to all the inclemencies of the seasons. The
hardiness of their ordinary life prepares them for the fatigues
of war, to some of which their necessary occupations bear a great
analogy. The necessary occupation of a ditcher prepares him to
work in the trenches, and to fortify a camp, as well as to
inclose a field. The ordinary pastimes of such husbandmen are the
same as those of shepherds, and are in the same manner the images
of war. But as husbandmen have less leisure than shepherds, they
are not so frequently employed in those pastimes. They are
soldiers but soldiers not quite so much masters of their
exercise. Such as they are, however, it seldom costs the
sovereign or commonwealth any expense to prepare them for the
field.
Agriculture, even in its rudest and lowest state, supposes a
settlement, some sort of fixed habitation, which cannot be
abandoned without great loss. When a nation of mere husbandmen,
therefore, goes to war, the whole people cannot take the field
together. The old men, the women and children, at least, must
remain at home, to take care of the habitation. All the men of
the military age, however, may take the field, and in small
nations of this kind, have frequently done so. In every nation,
the men of the military age are supposed to amount to about a
fourth or a fifth part of the whole body of the people. If the
campaign, too, should begin after seedtime, and end before
harvest, both the husbandman and his principal labourers can be
spared from the farm without much loss. He trusts that the work
which must be done in the mean time, can be well enough executed
by the old men, the women, and the children. He is not unwilling,
therefore, to serve without pay during a short campaign ; and it
frequently costs the sovereign or commonwealth as little to
maintain him in the field as to prepare him for it. The citizens
of all the different states of ancient Greece seem to have served
in this manner till after the second Persian war; and the people
of Peloponnesus till after the Peloponnesian war. The
Peloponnesians, Thucydides observes, generally left the field in
the summer, and returned home to reap the harvest. The Roman
people, under their kings, and during the first ages of the
republic, served in the same manner. It was not till the seige of
Veii, that they who staid at home began to contribute something
towards maintaining those who went to war. In the European
monarchies, which were founded upon the ruins of the Roman
empire, both before, and for some time after, the establishment
of what is properly called the feudal law, the great lords, with
all their immediate dependents, used to serve the crown at their
own expense. In the field, in the same manner as at home, they
maintained themselves by their own revenue, and not by any
stipend or pay which they received from the king upon that
particular occasion.
In a more advanced state of society, two different causes
contribute to render it altogether impossible that they who take
the field should maintain themselves at their own expense. Those
two causes are, the progress of manufactures, and the improvement
in the art of war.
Though a husbandman should be employed in an expedition, provided
it begins after seedtime, and ends before harvest, the
interruption of his business will not always occasion any
considerable diminution of his revenue. Without the intervention
of his labour, Nature does herself the greater part of the work
which remains to be done. But the moment that an artificer, a
smith, a carpenter, or a weaver, for example, quits his
workhouse, the sole source of his revenue is completely dried up.
Nature does nothing for him ; he does all for himself. When he
takes the field, therefore, in defence of the public, as he has
no revenue to maintain himself, he must necessarily be maintained
by the public. But in a country, of which a great part of the
inhabitants are artificers and manufacturers, a great part of the
people who go to war must be drawn from those classes, and must,
therefore, be maintained by the public as long as they are
employed in its service,
When the art of war, too, has gradually grown up to be a very
intricate and complicated science; when the event of war ceases
to be determined, as in the first ages of society, by a single
irregular skirmish or battle ; but when the contest is generally
spun out through several different campaigns, each of which lasts
during the greater part of the year; it becomes universally
necessary that the public should maintain those who serve the
public in war, at least while they are employed in that service.
Whatever, in time of peace, might be the ordinary occupation of
those who go to war, so very tedious and expensive a service
would otherwise be by far too heavy a burden upon them. After the
second Persian war, accordingly, the armies of Athens seem to
have been generally composed of mercenary troops, consisting,
indeed, partly of citizens, but partly, too, of foreigners; and
all of them equally hired and paid at the expense of the state.
From the time of the siege of Veii, the armies of Rome received
pay for their service during the time which they remained in the
field. Under the feudal governments, the military service, both
of the great lords, and of their immediate dependents, was, after
a certain period, universally exchanged for a payment in money,
which was employed to maintain those who served in their stead.
The number of those who can go to war, in proportion to the whole
number of the people, is necessarily much smaller in a civilized
than in a rude state of society. In a civilized society, as the
soldiers are maintained altogether by the labour of those who are
not soldiers, the number of the former can never exceed what the
latter can maintain, over and above maintaining, in a manner
suitable to their respective stations, both themselves and the
other officers of government and law, whom they are obliged to
maintain. In the little agrarian states of ancient Greece, a
fourth or a fifth part of the whole body of the people considered
the themselves as soldiers, and would sometimes, it is said, take
the field. Among the civilized nations of modern Europe, it is
commonly computed, that not more than the one hundredth part of
the inhabitants of any country can be employed as soldiers,
without ruin to the country which pays the expense of their
service.
The expense of preparing the army for the field seems not to have
become considerable in any nation, till long after that of
maintaining it in the field had devolved entirely upon the
sovereign or commonwealth. In all the different republics of
ancient Greece, to learn his military exercises, was a necessary
part of education imposed by the state upon every free citizen.
In every city there seems to have been a public field, in which,
under the protection of the public magistrate, the young people
were taught their different exercises by different masters. In
this very simple institution consisted the whole expense which
any Grecian state seems ever to have been at, in preparing its
citizens for war. In ancient Rome, the exercises of the Campus
Martius answered the same purpose with those of the Gymnasium in
ancient Greece. Under the feudal governments, the many public
ordinances, that the citizens of every district should practise
archery, as well as several other military exercises, were
intended for promoting the same purpose, but do not seem to have
promoted it so well. Either from want of interest in the officers
entrusted with the execution of those ordinances, or from some
other cause, they appear to have been universally neglected; and
in the progress of all those governments, military exercises seem
to have gone gradually into disuse among the great body of the
people.
In the republics of ancient Greece and Rome, during the whole
period of their existence, and under the feudal govermnents, for
a considerable time after their first establishment, the trade of
a soldier was not a separate, distinct trade, which constituted
the sole or principal occupation of a particular class of
citizens; every subject of the state, whatever might be the
ordinary trade or occupation by which he gained his livelihood,
considered himself, upon all ordinary occasions, as fit likewise
to exercise the trade of a soldier, and, upon many extraordinary
occasions, as bound to exercise it.
The art of war, however, as it is certainly the noblest of all
arts, so, in the progress of improvement, it necessarily becomes
one of the most complicated among them. The state of the
mechanical, as well as some other arts, with which it is
necessarily connected, determines the degree of perfection to
which it is capable of being carried at any particular time. But
in order to carry it to this degree of perfection, it is
necessary that it should become the sole or principal occupation
of a particular class of citizens; and the division of labour is
as necessary for the improvement of this, as of every other art.
Into other arts, the division of labour is naturally introduced
by the prudence of individuals, who find that they promote their
private interest better by confining themselves to a particular
trade, than by exercising a great number. But it is the wisdom of
the state only, which can render the trade of a soldier a
particular trade, separate and distinct from all others. A
private citizen, who, in time of profound peace, and without any
particular encouragement from the public, should spend the
greater part of his time in military exercises, might, no doubt,
both improve himself very much in them, and amuse himself very
well; but he certainly would not promote his own interest. It is
the wisdom of the state only, which can render it for his
interest to give up the greater part of his time to this peculiar
occupation ; and states have not always had this wisdom, even
when their circumstances had become such, that the preservation
of their existence required that they should have it.
A shepherd has a great deal of leisure; a husbmdman, in the rude
state of husbandry, has some; an artificer or manufacturer has
none at all. The first may, without any loss, employ a great deal
of his time in martial exercises ; the second may employ some
part of it ; but the last cannot employ a single hour in them
without some loss, and his attention to his own interest
naturally leads him to neglect them altogether. Those
improvements in husbandry, too, which the progress of arts and
manufactures necessarily introduces, leave the husbandman as
little leisure as the artificer. Military exercises come to be as
much neglected by the inhabitants of the country as by those of
the town, and the great body of the people becomes altogether
unwarlike. That wealth, at the same time, which always follows
the improvements of agriculture and manufactures, and which, in
reality, is no more than the accumulated produce of those
improvements, provokes the invasion of all their neighbours. An
industrious, and, upon that account, a wealthy nation, is of all
nations the most likely to be attacked ; and unless the state
takes some new measure for the public defence, the natural habits
of the people render them altogether incapable of defending
themselves.
In these circumstances, there seem to be but two methods by which
the state can make any tolerable provision for the public
defence.
It may either, first, by means of a very rigorous police, and in
spite of the whole bent of the interest, genius, and inclinations
of the people, enforce the practice of military exercises, and
oblige either all the citizens of the military age, or a certain
number of them, to join in some measure the trade of a soldier to
whatever other trade or profession they may happen to carry on.
Or, secondly, by maintaining and employing a certain number of
citizens in the constant practice of military exercises, it may
render the trade of a soldier a particular trade, separate and
distinct from all others.
If the state has recourse to the first of those two expedients,
its military force is said to consist in a militia; if to the
second, it is said to consist in a standing army. The practice of
military exercises is the sole or principal occupation of the
soldiers of a standing army, and the maintenance or pay which the
state affords them is the principal and ordinary fund of their
subsistence. The practice of military exercises is only the
occasional occupation of the soldiers of a militia, and they
derive the principal and ordinary fund of their subsistence from
some other occupation. In a militia, the character of the
labourer, artificer, or tradesman, predominates over that of the
soldier; in a standing army, that of the soldier predominates
over every other character ; and in this distinction seems to
consist the essential difference between those two different
species of military force.
Militias have been of several different kinds. In some countries,
the citizens destined for defending the state seem to have been
exercised only, without being, if I may say so, regimented; that
is, without being divided into separate and distinct bodies of
troops, each of which performed its exercises under its own
proper and permanent officers. In the republics of ancient Greece
and Rome, each citizen, as long as he remained at home, seems to
have practised his exercises, either separately and
independently, or with such of his equals as he liked best; and
not to have been attached to any particular body of troops, till
he was actually called upon to take the field. In other
countries, the militia has not only been exercised, but
regimented. In England, in Switzerland, and, I believe, in every
other country of modern Europe, where any imperfect military
force of this kind has been established, every militiaman is,
even in time of peace, attached to a particular body of troops,
which performs its exercises under its own proper and permanent
officers.
Before the invention of fire-arms, that army was superior in
which the soldiers had, each individually, the greatest skill and
dexterity in the use of their arms. Strength and agility of body
were of the highest consequence, and commonly determined the fate
of battles. But this skill and dexterity in the use of their arms
could be acquired only, in the same manner as fencing is at
present, by practising, not in great bodies, but each man
separately, in a particular school, under a particular master, or
with his own particular equals and companions. Since the
invention of fire-arms, strength and agility of body, or even
extraordinary dexterity and skill in the use of arms, though they
are far from being of no consequence, are, however, of less
consequence. The nature of the weapon, though it by no means puts
the awkward upon a level with the skilful, puts him more nearly
so than he ever was before. All the dexterity and skill, it is
supposed, which are necessary for using it, can be well enough
acquired by practising in great bodies.
Regularity, order, and prompt obedience to command, are qualities
which, in modern armies, are of more importance towards
determining the fate of battles, than the dexterity and skill of
the soldiers in the use of their arms. But the noise of
fire-arms, the smoke, and the invisible death to which every man
feels himself every moment exposed, as soon as he comes within
cannon-shot, and frequently a long time before the battle can be
well said to be engaged, must render it very difficult to
maintain any considerable degree of this regularity, order, and
prompt obedience, even in the beginning of a modern battle. In an
ancient battle, there was no noise but what arose from the human
voice ; there was no smoke, there was no invisible cause of
wounds or death. Every man, till some mortal weapon actually did
approach him, saw clearly that no such weapon was near him.
In these circumstances, and among troops who had some confidence
in their own skill and dexterity in the use of their arms, it
must have been a good deal less difficult to preserve some degree
of regularity and order, not only in the beginning, but through
the whole progress of an ancient battle, and till one of the two
armies was fairly defeated. But the habits of regularity, order,
and prompt obedience to command, can be acquired only by troops
which are exercised in great bodies.
A militia, however, in whatever manner it may be either
disciplined or exercised, must always be much inferior to a well
disciplined and well exercised standing army.
The soldiers who are exercised only once aweek, or once a-month,
can never be so expert in the use of their arms, as those who are
exercised every day, or every other day; and though this
circumstance may not be of so much consequence in modern, as it
was in ancient times, yet the acknowledged superiority of the
Prussian troops, owing, it is said, very much to their superior
expertness in their exercise, may satisfy us that it is, even at
this day, of very considerable consequence.
The soldiers, who are bound to obey their officer only once
a-week, or once a-month, and who are at all other times at
liberty to manage their own affairs their own way, without being,
in any respect, accountable to him, can never be under the same
awe in his presence, can never have the same disposition to ready
obedience, with those whose whole life and conduct are every day
directed by him, and who every day even rise and go to bed, or at
least retire to their quarters, according to his orders. In what
is called discipline, or in the habit of ready obedience, a
militia must always be still more inferior to a standing army,
than it may sometimes be in what is called the manual exercise,
or in the management and use of its arms. But, in modern war, the
habit of ready and instant obedience is of much greater
consequence than a considerable superiority in the management of
arms.
Those militias which, like the Tartar or Arab militia, go to war
under the same chieftains whom they are accustomed to obey in
peace, are by far the best. In respect for their officers, in the
habit of ready obedience, they approach nearest to standing
armies The Highland militia, when it served under its own
chieftains, had some advantage of the same kind. As the
Highlanders, however, were not wandering, but stationary
shepherds, as they had all a fixed habitation, and were not, in
peaceable times, accustomed to follow their chieftain from place
to place; so, in time of war, they were less willing to follow
him to any considerable distance, or to continue for any long
time in the field. When they had acquired any booty, they were
eager to return home, and his authority was seldom sufficient to
detain them. In point of obedience, they were always much
inferior to what is reported of the Tartars and Arabs. As the
Highlanders, too, from their stationary life, spend less of their
time in the open air, they were always less accustomed to
military exercises, and were less expert in the use of their arms
than the Tartars and Arabs are said to be.
A militia of any kind, it must be observed, however, which has
served for several successive campaigns in the field, becomes in
every respect a standing army. The soldiers are every day
exercised in the use of their arms, and, being constantly under
the command of their officers, are habituated to the same prompt
obedience which takes place in standing armies. What they
were before they took the field, is of little importance. They
necessarily become in every respect a standing army, after they
have passed a few campaigns in it. Should the war in America drag
out through another campaign, the American militia may become, in
every respect, a match for that standing army, of which the
valour appeared, in the last war at least, not inferior to that
of the hardiest veterans of France and Spain.
This distinction being well understood, the history of all ages,
it will be found, hears testimony to the irresistible superiority
which a well regulated standing army has over a militia.
One of the first standing armies, of which we have any distinct
account in any well authenticated history, is that of Philip of
Macedon. His frequent wars with the Thracians, Illyrians,
Thessalians, and some of the Greek cities in the neighbourhood of
Macedon, gradually formed his troops, which in the beginning were
probably militia, to the exact discipline of a standing army.
When he was at peace, which he was very seldom, and never for any
long time together, he was careful not to disband that army. It
vanquished and subdued, after a long and violent struggle,
indeed, the gallant and well exercised militias of the principal
republics of ancient Greece; and afterwards, with very little
struggle, the effeminate and ill exercised militia of the great
Persian empire. The fall of the Greek republics, and of the
Persian empire was the effect of the irresistible superiority
which a standing arm has over every other sort of militia. It
is the first great revolution in the affairs of mankind of which
history has preserved any distinct and circumstantial account.
The fall of Carthage, and the consequent elevation of Rome, is
the second. All the varieties in the fortune of those two famous
republics may very well be accounted for from the same cause.
From the end of the first to the beginning of the second
Carthaginian war, the armies of Carthage were continually in the
field, and employed under three great generals, who succeeded one
another in the command; Amilcar, his son-in-law Asdrubal, and his
son Annibal: first in chastising their own rebellious slaves,
afterwards in subduing the revolted nations of Africa; and
lastly, in conquering the great kingdom of Spain. The army which
Annibal led from Spain into Italy must necessarily, in those
different wars, have been gradually formed to the exact
discipline of a standing army. The Romans, in the meantime,
though they had not been altogether at peace, yet they had not,
during this period, been engaged in any war of very great
consequence; and their military discipline, it is generally said,
was a good deal relaxed. The Roman armies which Annibal
encountered at Trebi, Thrasymenus, and Cannae, were militia
opposed to a standing army. This circumstance, it is probable,
contributed more than any other to determine the fate of those
battles.
The standing army which Annibal left behind him in Spain had the
like superiority over the militia which the Romans sent to oppose
it; and, in a few years, under the command of his brother, the
younger Asdrubal, expelled them almost entirely from that
country.
Annibal was ill supplied from home. The Roman militia, being
continually in the field, became, in the progress of the war, a
well disciplined and well exercised standing army ; and the
superiority of Annibal grew every day less and less. Asdrubal
judged it necessary to lead the whole, or almost the whole, of
the standing army which he commanded in Spain, to the assistance
of his brother in Italy. In this march, he is said to have been
misled by his guides ; and in a country which he did not know,
was surprised and attacked, by another standing army, in every
respect equal or superior to his own, and was entirely defeated.
When Asdrubal had left Spain, the great Scipio found nothing to
oppose him but a militia inferior to his own. He conquered and
subdued that militia, and, in the course of the war, his own
militia necessarily became a well disciplined and well exercised
standing army. That standing army was afterwards carried to
Africa, where it found nothing but a militia to oppose it. In
order to defend Carthage, it became necessary to recal the
standing army of Annibal. The disheartened and frequently
defeated African militia joined it, and, at the battle of Zama,
composed the greater part of the troops of Annibal. The event of
that day determined the fate of the two rival republics.
From the end of the second Carthaginian war till the fall of the
Roman republic, the armies of Rome were in every respect standing
armies. The standing army of Macedon made some resistance to
their arms. In the height of their grandeur, it cost them two
great wars, and three great battles, to subdue that little
kingdom, of which the conquest would probably have been still
more difficult, had it not been for the cowardice of its last
king. The militias of all the civilized nations of the ancient
world, of Greece, of Syria, and of Egypt, made but a feeble
resistance to the standing armies of Rome. The militias of some
barbarous nations defended themselves much better. The
Scythian or Tartar militia, which Mithridates drew from the
countries north of the Euxine and Caspian seas, were the most
formidable enemies whom the Romans had to encounter after the
second Carthaginian war. The Parthian and German militias, too,
were always respectable, and upon several occasions, gained very
considerable advantages over the Roman armies. In general,
however, and when the Roman armies were well commanded, they
appear to have been very much superior; and if the Romans did not
pursue the final conquest either of Parthia or Germany, it was
probably because they judged that it was not worth while to add
those two barbarous countries to an empire which was already too
large. The ancient Parthians appear to have been a nation of
Scythian or Tartar extraction, and to have always retained a good
deal of the manners of their ancestors. The ancient Germans were,
like the Scythians or Tartars, a nation of wandering shepherds,
who went to war under the same chiefs whom they were accustomed
to follow in peace. 'Their militia was exactly of the same kind
with that of the Scythians or Tartars, from whom, too, they were
probably descended.
Many different causes contributed to relax the discipline of the
Roman armies. Its extreme severity was, perhaps, one of those
causes. In the days of their grandeur, when no enemy appeared
capable of opposing them, their heavy armour was laid aside as
unnecessarily burdensome, their laborious exercises were
neglected, as unnecessarily toilsome. Under the Roman emperors,
besides, the standing armies of Rome, those particularly which
guarded the German and Pannonian frontiers, became dangerous to
their masters, against whom they used frequently to set up their
own generals. In order to render them less formidable, according
to some authors, Dioclesian, according to others, Constantine,
first withdrew them from the frontier, where they had always
before been encamped in great bodies, generally of two or three
legions each, and dispersed them in small bodies through the
different provincial towns, from whence they were scarce ever
removed, but when it became necessary to repel an invasion. Small
bodies of soldiers, quartered in trading and manufacturing towns,
and seldom removed from those quarters, became themselves trades
men, artificers, and manufacturers. The civil came to predominate
over the military character ; and the standing armies of Rome
gradually degenerated into a corrupt, neglected. and
undisciplined militia, incapable of resisting the attack of the
German and Scythian militias, which soon afterwards invaded the
western empire. It was only by hiring the militia of some of
those nations to oppose to that of others, that the emperors were
for some time able to defend themselves. The fall of the western
empire is the third great revolution in the affairs of mankind,
of which ancient history has preserved any distinct or
circumstantial account. It was brought about by the
irresistible superiority which the militia of a barbarous has
over that of a civilized nation; which the militia of a nation of
shepherds has over that of a nation of husbandmen, artificers,
and manufacturers. The victories which have been gained by
militias have generally been, not over standing armies, but over
other militias, in exercise and discipline inferior to
themselves. Such were the victories which the Greek militia
gained over that of the Persian empire; and such, too, were those
which, in later times, the Swiss militia gained over that of the
Austrians and Burgundians.
The military force of the German and Scythian nations, who
established themselves upon ruins of the western empire,
continued for some time to be of the same kind in their new
settlements, as it had been in their original country. It was a
militia of shepherds and husbandmen, which, in time of war, took
the field under the command of the same chieftains whom it was
accustomed to obey in peace. It was, therefore, tolerably well
exercised, and tolerably well disciplined. As arts and industry
advanced, however, the authority of the chieftains gradually
decayed, and the great body of the people had less time to spare
for military exercises. Both the discipline and the exercise of
the feudal militia, therefore, went gradually to ruin, and
standing armies were gradually introduced to supply the place of
it. When the expedient of a standing army, besides, had once been
adopted by one civilized nation, it became necessary that all its
neighbours should follow the example. They soon found that their
safety depended upon their doing so, and that their own militia
was altogether incapable of resisting the attack of such an army.
The soldiers of a standing army, though they may never have seen
an enemy, yet have frequently appeared to possess all the courage
of veteran troops, and, the very moment that they took the field,
to have been fit to face the hardiest and most experienced
veterans. In 1756, when the Russian army marched into Poland, the
valour of the Russian soldiers did not appear inferior to that of
the Prussians, at that time supposed to be the hardiest and most
experienced veterans in Europe. The Russian empire, however, had
enjoyed a profound peace for near twenty years before, and could
at that time have very few soldiers who had ever seen an enemy.
When the Spanish war broke out in 1739, England had enjoyed a
profound peace for about eight-and-twenty years. The valour of
her soldiers, however, far from being corrupted by that long
peace, was never more distinguished than in the attempt upon
Carthagena, the first unfortunate exploit of that unfortunate
war. In a long peace, the generals, perhaps, may sometimes forget
their skill; but where a well regulated standing army has been
kept up, the soldiers seem never to forget their valour.
When a civilized nation depends for its defence upon a militia,
it is at all times exposed to be conquered by any barbarous
nation which happens to be in its neighbourhood. The frequent
conquests of all the civilized countries in Asia by the Tartars,
sufficiently demonstrates the natural superiority which the
militia of a barbarous has over that of a civilized nation. A
well regulated standing army is superior to every militia.
Such an army, as it can best be maintained by an opulent and
civilized nation, so it can alone defend such a nation against
the invasion of a poor and barbarous neighbour. It is only by
means of a standing army, therefore, that the civilization of any
country can be perpetuated, or even preserved, for any
considerable time.
As it is only by means of a well regulated standing army, that a
civilized country can be defended, so it is only by means of it
that a barbarous country can be suddenly and tolerably civilized.
A standing army establishes, with an irresistible force, the law
of the sovereign through the remotest provinces of the empire,
and maintains some degree of regular government in countries
which could not otherwise admit of any. Whoever examines with
attention, the improvements which Peter the Great introduced into
the Russian empire, will find that they almost all resolve
themselves into the establishment of a well regulated standing
army. It is the instrument which executes and maintains all his
other regulations. That degree of order and internal peace, which
that empire has ever since enjoyed, is altogether owing to the
influence of that army.
Men of republican principles have been jealous of a standing
army, as dangerous to liberty. It certainly is so, wherever the
interest of the general, and that of the principal officers, are
not necessarily connected with the support of the constitution of
the state. The standing army of Czesar destroyed the Roman
republic. The standing army of Cromwell turned the long
parliament out of doors. But where the sovereign is himself the
general, and the principal nobility and gentry of the country the
chief officers of the army ; where the military force is placed
under the command of those who have the greatest interest in the
support of the civil authority, because they have themselves the
greatest share of that authority, a standing army can never be
dangerous to liberty. On the contrary, it may, in some cases, be
favourable to liberty. The security which it gives to the
sovereign renders unnecessary that troublesome jealousy, which,
in some modern republics, seems to watch over the minutest
actions, and to be at all times ready to disturb the peace of
every citizen. Where the security of the magistrate, though
supported by the principal people of the country, is endangered
by every popular discontent; where a small tumult is capable of
bringing about in a few hours a great revolution, the whole
authority of government must be employed to suppress and punish
every murmur and complaint against it. To a sovereign, on the
contrary, who feels himself supported, not only by the natural
aristocracy of the country, but by a well regulated standing
army, the rudest, the most groundless, and the most licentious
remonstrances, can give little disturbance. He can safely pardon
or neglect them, and his consciousness of his own superiority
naturally disposes him to do so. That degree of liberty which
approaches to licentiousness, can be tolerated only in countries
where the sovereign is secured by a well regulated standing army.
It is in such countries only, that the public safety does not
require that the sovereign should be trusted with any
discretionary power, for suppressing even the impertinent
wantonness of this licentious liberty.
The first duty of the sovereign, therefore, that of defending the
society from the violence and injustice of other independent
societies, grows gradually more and more expensive, as the
society advances in civilization. The military force of the
society, which originally cost the sovereign no expense, either
in time of peace, or in time of war, must, in the progress of
improvement, first be maintained by him in time of war, and
afterwards even in time of peace.
The great change introduced into the art of war by the invention
of fire-arms, has enhanced still further both the expense of
exercising and disciplining any particular number of soldiers in
time of peace, and that of employing them in time of war. Both
their arms and their ammunition are become more expensive. A
musket is a more expensive machine than a javelin or a bow and
arrows; a cannon or a mortar, than a balista or a catapulta. The
powder which is spent in a modern review is lost irrecoverably,
and occasions a very considerable expense. The javelins and
arrows which were thrown or shot in an ancient one, could easily
be picked up again, and were, besides, of very little value. The
cannon and the mortar are not only much dearer, but much heavier
machines than the balista or catapulta; and require a greater
expense, not only to prepare them for the field, but to carry
them to it. As the superiority of the modern artillery, too, over
that of the ancients, is very great ; it has become much more
difficult, and consequently much more expensive, to fortify a
town, so as to resist, even for a few weeks, the attack of that
superior artillery. In modern times, many different causes
contribute to render the defence of the society more expensive.
The unavoidable effects of the natural progress of improvement
have, in this respect, been a good deal enhanced by a great
revolution in the art of war, to which a mere accident, the
invention of gunpowder, seems to have given occasion.
In modern war, the great expense of firearms gives an evident
advantage to the nation which can best afford that expense; and,
consequently, to an opulent and civilized, over a poor and
barbarous nation. In ancient times, the opulent and civilized
found it difficult to defend themselves against the poor and
barbarous nations. In modern times, the poor and barbarous find
it difficult to defend themselves against the opulent and
civilized. The invention of fire-arms, an invention which at
first sight appears to be so pernicious, is certainly favourable,
both to the permanency and to the extension of civilization.
PART II.
Of the Expense of Justice
The second duty of the sovereign, that of protecting, as far as
possible, every member of the society from the injustice or
oppression of every other member of it, or the duty of
establishing an exact administration of justice, requires two
very different degrees of expense in the different periods of
society.
Among nations of hunters, as there is scarce any property, or at
least none that exceeds the value of two or three days labour ;
so there is seldom any established magistrate, or any regular
administration of justice. Men who have no property, can injure
one another only in their persons or reputations. But when one
man kills, wounds, beats, or defames another, though he to whom
the injury is done suffers, he who does it receives no benefit.
It is otherwise with the injuries to property. The benefit of the
person who does the injury is often equal to the loss of him who
suffers it. Envy, malice, or resentment, are the only passions
which can prompt one man to injure another in his person or
reputation. But the greater part of men are not very frequently
under the influence of those passions; and the very worst men are
so only occasionally. As their gratification, too, how agreeable
soever it may be to certain characters, is not attended with any
real or permanent advantage, it is, in the greater part of men,
commonly restrained by prudential considerations. Men may live
together in society with some tolerable degree of security,
though there is no civil magistrate to protect them from the
injustice of those passions. But avarice and ambition in the
rich, in the poor the hatred of labour and the love of present
ease and enjoyment, are the passions which prompt to invade
property ; passions much more steady in their operation, and much
more universal in their influence. Wherever there is a great
property, there is great inequality. For one very rich man, there
must be at least five hundred poor, and the affluence of the few
supposes the indigence of the many. The affluence of the rich
excites the indignation of the poor, who are often both driven by
want, and prompted by envy to invade his possessions. It is only
under the shelter of the civil magistrate, that the owner of that
valuable property, which is acquired by the labour of many years,
or perhaps of many successive generations, can sleep a single
night in security. He is at all times surrounded by unknown
enemies, whom, though he never provoked, he can never appease,
and from whose injustice he can be protected only by the powerful
arm of the civil magistrate, continually held up to chastise it.
The acquisition of valuable and extensive property, therefore,
necessarily requires the establishment of civil government. Where
there is no property, or at least none that exceeds the value of
two or three days labour, civil government is not so necessary.
Civil government supposes a certain subordination. But as the
necessity of civil government gradually grows up with the
acquisition of valuable property; so the principal causes, which
naturally introduce subordination, gradually grow up with the
growth of that valuable property.
The causes or circumstances which naturally introduce
subordination, or which naturally and antecedent to any civil
institution, give some men some superiority over the greater part
of their brethren, seem to be four in number.
The first of those causes or circumstances, is the superiority of
personal qualifications, of strength, beauty, and agility of body
; of wisdom and virtue; of prudence, justice, fortitude, and
moderation of mind. The qualifications of the body, unless
supported by those of the mind, can give little authority in any
period of society. He is a very strong man, who, by mere strength
of body, can force two weak ones to obey him. The qualifications
of the mind can alone give very great authority They are however,
invisible qualities; always disputable, and generally disputed.
No society, whether barbarous or civilized, has ever found it
convenient to settle the rules of precedency of rank and
subordination, according to those invisible qualities; but
according to something that is more plain and palpable.
The second of those causes or circumstances, is the superiority
of age. An old man, provided his age is not so far advanced as to
give suspicion of dotage, is everywhere more respected than a
young man of equal rank, fortune, and abilities. Among nations of
hunters, such as the native tribes of North America, age is the
sole foundation of rank and precedency. Among them, father is the
appellation of a superior ; brother, of an equal ; and son, of an
inferior. In the most opulent and civilized nations, age
regulates rank among those who are in every other respect equal ;
and among whom, therefore, there is nothing else to regulate it.
Among brothers and among sisters, the eldest always takes place ;
and in the succession of the paternal estate, every thing which
cannot be divided, but must go entire to one person, such as a
title of honour, is in most cases given to the eldest. Age is a
plain and palpable quality, which admits of no dispute.
The third of those causes or circumstances, is the superiority of
fortune. The authority of riches, however, though great in every
age of society, is, perhaps, greatest in the rudest ages of
society, which admits of any considerable inequality of fortune.
A Tartar chief, the increase of whose flocks and herds is
sufficient to maintain a thousand men, cannot well employ that
increase in any other way than in maintaining a thousand men. The
rude state of his society does not afford him any manufactured
produce any trinkets or baubles of any kind, for which he can
exchange that part of his rude produce which is over and above
his own consumption. The thousand men whom he thus maintains,
depending entirely upon him for their subsistence, must both obey
his orders in war, and submit to his jurisdiction in peace. He is
necessarily both their general and their judge, and his
chieftainship is the necessary effect of the superiority of his
fortune. In an opulent and civilized society, a man may possess a
much greater fortune, and yet not be able to command a dozen of
people. Though the produce of his estate may be sufficient to
maintain, and may, perhaps, actually maintain, more than a
thousand people, yet, as those people pay for every thing which
they get from him, as he gives scarce any thing to any body but
in exchange for an equivalent, there is scarce anybody who
considers himself as entirely dependent upon him, and his
authority extends only over a few menial servants. The authority
of fortune, however, is very great, even in an opulent and
civilized society. That it is much greater than that either of
age or of personal qualities, has been the constant complaint of
every period of society which admitted of any considerable
inequality of fortune. The first period of society, that of
hunters, admits of no such inequality. Universal poverty
establishes their universal equality ; and the superiority,
either of age or of personal qualities, are the feeble, but the
sole foundations of authority and subordination. There is,
therefore, little or no authority or subordination in this period
of society. The second period of society, that of shepherds,
admits of very great inequalities of fortune, and there is no
period in which the superiority of fortune gives so great
authority to those who possess it. There is no period,
accordingly, in which authority and subordination are more
perfectly established. The authority of an Arabian scherif is
very great; that of a Tartar khan altogether despotical.
The fourth of those causes or circumstances, is the superiority
of birth. Superiority of birth supposes an ancient superiority of
fortune in the family of the person who claims it. All families
are equally ancient ; and the ancestors of the prince, though
they may be better known, cannot well be more numerous than those
of the beggar. Antiquity of family means everywhere the antiquity
either of wealth, or of that greatness which is commonly either
founded upon wealth, or accompanied with it. Upstart greatness is
everywhere less respected than ancient greatness. The hatred of
usurpers, the love of the family of an ancient monarch, are in a
great measure founded upon the contempt which men naturally have
for the former, and upon their veneration for the latter. As a
military officer submits, without reluctance, to the authority of
a superior by whom he has always been commanded, but cannot bear
that his inferior should be set over his head; so men easily
submit to a family to whom they and their ancestors have always
submitted; but are fired with indignation when another family, in
whom they had never acknowledged any such superiority, assumes a
dominion over them.
The distinction of birth, being subsequent to the inequality of
fortune, can have no place in nations of hunters, among whom all
men, being equal in fortune, must likewise be very nearly equal
in birth. The son of a wise and brave man may, indeed, even among
them, be somewhat more respected than a man of equal merit, who
has the misfortune to be the son of a fool or a coward. The
difference, however will not be very great; and there never was,
I believe, a great family in the world, whose illustration was
entirely derived from the inheritance of wisdom and virtue.
The distinction of birth not only may, but always does, take
place among nations of shepherds. Such nations are always
strangers to every sort of luxury, and great wealth can scarce
ever be dissipated among them by improvident profusion. There are
no nations, accordingly, who abound more in families revered and
honoured on account of their descent from a long race of great
and illustrious ancestors ; because there are no nations among
whom wealth is likely to continue longer in the same families.
Birth and fortune are evidently the two circumstances which
principally set one man above another. They are the two great
sources of personal distinction, and are, therefore, the
principal causes which naturally establish authority and
subordination among men. Among nations of shepherds, both those
causes operate with their full force. The great shepherd or
herdsman, respected on account of his great wealth, and of the
great number of those who depend upon him for subsistence, and
revered on account of the nobleness of his birth, and of the
immemorial antiquity or his illustrious family, has a natural
authority over all the inferior shepherds or herdsmen of his
horde or clan. He can command the united force of a greater
number of people than any of them. His military power is greater
than that of any of them. In time of war, they are all of them
naturally disposed to muster themselves under his banner, rather
than under that of any other person ; and his birth and fortune
thus naturally procure to him some sort of executive power. By
commanding, too, the united force of a greater number of people
than any of them, he is best able to compel any one of them, who
may have injured another, to compensate the wrong. He is the
person, therefore, to whom all those who are too weak to defend
themselves naturally look up for protection. It is to him that
they naturally complain of the injuries which they imagine have
been done to them ; and his interposition, in such cases, is more
easily submitted to, even by the person complained of, than that
of any other person would be. His birth and fortune thus
naturally procure him some sort of judicial authority.
It is in the age of shepherds, in the second period of society,
that the inequality of fortune first begins to take place, and
introduces among men a degree of authority and subordination,
which could not possibly exist before. It thereby introduces some
degree of that civil government which is indispensably necessary
for its own preservation; and it seems to do this naturally, and
even independent of the consideration of that necessity. The
consideration of that necessity comes, no doubt, afterwards, to
contribute very much to maintain and secure that authority and
subordination. The rich, in particular, are necesarily interested
to support that order of things, which can alone secure them in
the possession of their own advantages. Men of inferior wealth
combine to defend those of superior wealth in the possession of
their property, in order that men of superior wealth may combine
to defend them in the possession of theirs. All the inferior
shepherds and herdsmen feel, that the security of their own herds
and flocks depends upon the security of those of the great
shepherd or herdsman; that the maintenance of their lesser
authority depends upon that of his greater authority ; and that
upon their subordination to him depends his power of keeping
their inferiors in subordination to them. They constitute a sort
of little nobility, who feel themselves interested to defend the
property, and to support the authority, of their own little
sovereign. in order that he may be able to defend their property,
and to support their authority. Civil government, so far as it is
instituted for the security of property, is, in reality,
instituted for the defence of the rich against the poor, or of
those who have some property against those who have none at all.
The judicial authority of such a sovereign, however, far from
being a cause of expense, was, for a long time, a source of
revenue to him. The persons who applied to him for justice were
always willing to pay for it, and a present never failed to
accompany a petition. After the authority of the sovereign, too,
was thoroughly established, the person found guilty, over and
above the satisfaction which he was obliged to make to the party,
was like-wise forced to pay an amercement to the sovereign. He
had given trouble, he had disturbed, he had broke the peace of
his lord the king, and for those offences an amercement was
thought due. In the Tartar governments of Asia, in the
governments of Europe which were founded by the German and
Scythian nations who overturned the Roman empire, the
administration of justice was a considerable source of revenue,
both to the sovereign, and to all the lesser chiefs or lords who
exercised under him any particular jurisdiction, either over some
particular tribe or clan, or over some particular territory or
district. Originally, both the sovereign and the inferior chiefs
used to exercise this jurisdiction in their own persons.
Afterwards, they universally found it convenient to delegate it
to some substitute, bailiff, or judge. This substitute, however,
was still obliged to account to his principal or constituent for
the profits of the jurisdiction. Whoever reads the instructions
(They are to be found in Tyrol's History of England) which were
given to the judges of the circuit in the time of Henry II will
see clearly that those judges were a sort of itinerant factors,
sent round the country for the purpose of levying certain
branches of the king's revenue. In those days, the administration
of justice not only afforded a certain revenue to the sovereign,
but, to procure this revenue, seems to have been one of the
principal advantages which he proposed to obtain by the
administration of justice.
This scheme of making the administration of justice subservient
to the purposes of revenue, could scarce fail to be productive of
several very gross abuses. The person who applied for justice
with a large present in his hand, was likeiy to get something
more than justice; while he who applied for it with a small one
was likely to get something less. Justice, too, might frequently
be delayed, in order that this present might be repeated. The
amercement, besides, of the person complained of, might
frequently suggest a very strong reason for finding him in the
wrong, even when he had not really been so. That such abuses were
far from being uncommon, the ancient history of every country in
Europe bears witness.
When the sovereign or chief exercises his judicial authority in
his own person, how much soever he might abuse it, it must have
been scarce possible to get any redress ; because there could
seldom be any body powerful enough to call him to account. When
he exercised it by a bailiff, indeed, redress might sometimes be
had. If it was for his own benefit only, that the bailiff had
been guilty of an act of injustice, the sovereign himself might
not always be unwilling to punish him, or to oblige him to repair
the wrong. But if it was for the benefit of his sovereign; if it
was in order to make court to the person who appointed him, and
who might prefer him, that he had committed any act of oppression
; redress would, upon most occasions, be as impossible as if the
sovereign had committed it himself. In all barbarous governments,
accordingly, in all those ancient governments of Europe in
particular, which were founded upon the ruins of the Roman
empire, the administration of justice appears for a long time to
have been extremely corrupt ; far from being quite equal and
impartial, even under the best monarchs, and altogether
profligate under the worst.
Among nations of shepherds, where the sovereign or chief is only
the greatest shepherd or herdsman of the horde or clan, he is
maintained in the same manner as any of his vassals or subjects,
by the increase of his own herds or flocks. Among those nations
of husbandmen, who are but just come out of the shepherd state,
and who are not much advanced beyond that state, such as the
Greek tribes appear to have been about the time of the Trojan
war, and our German and Scythian ancestors, when they first
settled upon the ruins of the western empire; the sovereign or
chief is, in the same manner, only the greatest landlord of the
country, and is maintained in the same manner as any other
landlord, by a revenue derived from his own private estate. or
from what, in modern Europe, was called the demesne of the crown.
His subjects, upon ordinary occasions, contribute nothing to his
support, except when, in order to protect them from the
oppression of some of their fellow-subjects, they stand in need
of his authority. The presents which they make him upon such
occasions constitute the whole ordinary revenue, the whole of the
emoluments which, except, perhaps, upon some very extraordinary
emergencies, he derives from his dominion over them. When
Agamemnon, in Homer, offers to Achilles, for his friendship, the
sovereignty of seven Greek cities, the sole advantage which he
mentions as likely to be derived from it was, that the people
would honour him with presents. As long as such presents, as long
as the emoluments of justice, or what may be called the fees of
court, constituted, in this manner, the whole ordinary revenue
which the sovereign derived from his sovereignty, it could not
well be expected, it could not even decently be proposed, that he
should give them up altogether. It might, and it frequently was
proposed, that he should regulate and ascertain them. But after
they had been so regulated and ascertained, how to hinder a
person who was all-powerful from extending them beyond those
regulations, was still very difficult, not to say impossible.
During the continuance of this state of things, therefore, the
corruption of justice, naturally resulting from the arbitrary and
uncertain nature of those presents, scarce admitted of any
effectual remedy.
But when, from different causes, chiefly from the continually
increasing expense of defending the nation against the invasion
of other nations, the private estate of the sovereign had become
altogether insufficient for defraying the expense of the
sovereignty; and when it had become necessary that the people
should, for their own security, contribute towards this expense
by taxes of different kinds; it seems to have been very commonly
stipulated, that no present for the administration of justice
should, under any pretence, be accepted either by the sovereign,
or by his bailiffs and substitutes, the judges. Those presents,
it seems to have been supposed, could more easily be abolished
altogether, than effectually regulated and ascertained. Fixed
salaries were appointed to the judges, which were supposed to
compensate to them the loss of whatever might have been their
share of the ancient emoluments of justice; as the taxes more
than compensated to the sovereign the loss of his. Justice was
then said to be administered gratis.
Justice, however, never was in reality administered gratis in any
country. Lawyers and attorneys, at least, must always be paid by
the parties; and if they were not, they would perform their duty
still worse than they actually perform it. The fees annually paid
to lawyers and attorneys, amount, in every court, to a much
greater sum than the salaries of the judges. The circumstance of
those salaries being paid by the crown, can nowhere much diminish
the necessary expense of a law-suit. But it was not so much to
diminish the expense, as to prevent the corruption of justice,
that the judges were prohibited from receiving my present or fee
from the parties.
The office of judge is in itself so very honourable, that men are
willing to accept of it, though accompanied with very small
emoluments. The inferior office of justice of peace, though
attended with a good deal of trouble, and in most cases with no
emoluments at all, is an object of ambition to the greater part
of our country gentlemen. The salaries of all the different
judges, high and low, together with the whole expense of the
administration and execution of justice, even where it is not
managed with very good economy, makes, in any civilized country,
but a very inconsiderable part of the whole expense of
government.
The whole expense of justice, too, might easily be defrayed by
the fees of court ; and, without exposing the administration of
justice to any real hazard of corruption, the public revenue
might thus be entirely discharged from a certain, though perhaps
but a small incumbrance. It is difficult to regulate the fees of
court effectually, where a person so powerful as the sovereign is
to share in them and to derive any considerable part of his
revenue from them. It is very easy, where the judge is the
principal person who can reap any benefit from them. The law can
very easily oblige the judge to respect the regulation though it
might not always be able to make the sovereign respect it. Where
the fees of court are precisely regulated and ascertained where
they are paid all at once, at a certain period of every process,
into the hands of a cashier or receiver, to be by him distributed
in certain known proportions among the different judges after the
process is decided and not till it is decided ; there seems to be
no more danger of corruption than when such fees are prohibited
altogether. Those fees, without occasioning any considerable
increase in the expense of a law-suit, might be rendered fully
sufficient for defraying the whole expense of justice. But
not being paid to the judges till the process was determined,
they might be some incitement to the diligence of the court in
examining and deciding it. In courts which consisted of a
considerable number of judges, by proportioning the share of each
judge to the number of hours and days which he had employed in
examining the process, either in the court, or in a committee, by
order of the court, those fees might give some encouragement to
the diligence of each particular judge. Public services are never
better performed, than when their reward comes only in
consequence of their being performed, and is proportioned to the
diligence employed in performing them. In the different
parliaments of France, the fees of court (called epices and
vacations) constitute the far greater part of the emoluments of
the judges. After all deductions are made, the neat salary paid
by the crown to a counsellor or judge in the parliament of
Thoulouse. in rank and dignity the second parliament of the
kingdom, amounts only to 150 livres, about £6:11s. sterling
a-year. About seven years ago, that sum was in the same place the
ordinary yearly wages of a common footman. The distribuion of
these epices, too, is according to the diligence of the judges. A
diligent judge gains a comfortable, though moderate revenue, by
his office; an idle one gets little more than his salary.
Those parliaments are, perhaps, in many respects, not very
convenient courts of justice; but they have never been accused ;
they seem never even to have been suspected of corruption.
The fees of court seem originaliy to have been the principal
support of the different courts of justice in England. Each
court endeavoured to draw to itself as much business as it could,
and was, upon that account, willing to take cognizance of many
suits which were not originally intended to fall under its
jurisdiction. The court of king's bench, instituted for the trial
of criminal causes only, took cognizance of civil suits; the
plaintiff pretending that the defendant, in not doing him
justice, had been guilty of some trespass or misdemeanour. The
court of exchequer, instituted for the levying of the king's
revenue, and for enforcing the payment of such debts only as were
due to the king, took cognizance of all other contract debts ;
the plantiff alleging that he could not pay the king, because the
defendant would not pay him. In consequence of such fictions, it
came, in many cases, to depend altogether upon the parties,
before what court they would choose to have their cause tried,
and each court endeavoured, by superior dispatch and
impartiality, to draw to itself as many causes as it could. The
present admirable constitution of the courts of justice in
England was, perhaps, originally, in a great measure, formed by
this emulation, which anciently took place between their
respective judges : each judge endeavouring to give, in his own
court, the speediest and most effectual remedy which the law
would admit, for every sort of injustice. Originally, the courts
of law gave damages only for breach of contract. The court of
chancery, as a court of conscience, first took upon it to enforce
the specific performance of agreements. When the breach of
contract consisted in the non-payment of money, the damage
sustained could be compensated in no other way than by ordering
payment, which was equivalent to a specific performance of the
agreement. In such cases, therefore, the remedy of the courts
of law was sufficient. It was not so in others. When the
tenant sued his lord for having unjustly outed him of his lease,
the damages which he recovered were by no means equivalent to the
possession of the land. Such causes, therefore, for some time,
went all to the court of chancery, to the no small loss of the
courts of law. It was to draw back such causes to themselves,
that the courts of law are said to have invented the artificial
and fictitious writ of ejectment, the most effectual remedy for
an unjust outer or dispossession of land.
A stamp-duty upon the law proceedings of each particular court,
to be levied by that court, and applied towards the maintenance
of the judges, and other officers belonging to it, might in the
same manner, afford a revenue sufficient for defraying the
expense of the administration of justice, without bringing any
burden upon the general revenue of the society. The judges,
indeed, might in this case, be under the temptation of
multiplying unnecessarily the proceedings upon every cause, in
order to increase, as much as possible, the produce of such a
stamp-duty. It has been the custom in modern Europe to regulate,
upon most occasions, the payment of the attorneys and clerks of
court according to the number of pages which they had occasion to
write; the court, however, requiring that each page should
contain so many lines, and each line so many words. In order to
increase their payment, the attorneys and clerks have contrived
to multiply words beyond all necessity, to the corruption of the
law language of, I believe, every court of justice in Europe.
A like temptation might, perhaps, occasion a like corruption in
the form of law proceedings.
But whether the administration of justice be so contrived as to
defray its own expense, or whether the judges be maintained by
fixed salaries paid to them from some other fund, it does not
seen necessary that the person or persons entrusted with the
executive power should be charged with the management of that
fund, or with the payment of those salaries. That fund might
arise from the rent of landed estates, the management of each
estate being entrusted to the particular court which was to be
maintained by it. That fund might arise even from the
interest of a sum of money, the lending out of which might, in
the same manner, be entrusted to the court which was to be
maintained by it. A part, though indeed but a small part of the
salary of the judges of the court of session in Scotland, arises
from the interest of a sum of money. The necessary instability of
such a fund seems, however, to render it an improper one for the
maintenance of an institution which ought to last for ever.
The separation of the judicial from the executive power, seems
originally to have arisen from the increasing business of the
society, in consequence of its increasing improvement. The
administration of justice became so laborious and so complicated
a duty, as to require the undivided attention of the person to
whom it was entrusted. The person entrusted with the executive
power, not having leisure to attend to the decision of private
causes himself, a deputy was appointed to decide them in his
stead. In the progress of the Roman greatness, the consul was too
much occupied with the political affairs of the state, to attend
to the administration of justice. A praetor, therefore, was
appointed to administer it in his stead. In the progress of the
European monarchies, which were founded upon the ruins of the
Roman empire, the sovereigns and the great lords came universally
to consider the administration of justice as an office both too
laborious and too ignoble for them to execute in their own
persons. They universally, therefore, discharged themselves of
it, by appointing a deputy, bailiff or judge.
When the judicial is united to the executive power, it is scarce
possible that justice should not frequently be sacrificed to what
is vulgarly called politics. The persons entrusted with the
great interests of the state may even without any corrupt views,
sometimes imagine it necessary to sacrifice to those interests
the rights of a private man. But upon the impartial
administration of justice depends the liberty of every
individual, the sense which he has of his own security. In order
to make every individual feel himself perfectly secure in the
possession of every right which belongs to him, it is not only
necessary that the judicial should be separated from the
executive power, but that it should be rendered as much as
possible independent of that power. The judge should not be
liable to be removed from his office according to the caprice of
that power. The regular payment of his salary should not depend
upon the good will, or even upon the good economy of that power.
PART III.
Of the Expense of public Works and public Institutions.
The third and last duty of the sovereign or commonwealth, is that
of erecting and maintaining those public institutions and those
public works, which though they may be in the highest degree
advantageous to a great society, are, however, of such a nature,
that the profit could never repay the expense to any individual,
or small number of individuals; and which it, therefore, cannot
be expected that any individual, or small number of individuals,
should erect or maintain. The performance of this duty requires,
too, very different degrees of expense in the different periods
of society.
After the public institutions and public works necessary for the
defence of the socicty, and for the administration of justice,
both of which have already been mentioned, the other works and
institutions of this kind are chiefly for facilitating the
commerce of the society, and those for promoting the instruction
of the people. The institutions for instruction are of two kinds:
those for the education of the youth, and those for the
instruction of people of all ages. The consideration of the
manner in which the expense of those different sorts of public
works and institutions may be most properly defrayed will divide
this third part of the present chapter into three different
articles.
ARTICLE I. - Of the public Works and Institutions for
facilitating the Commerce of the Society.
And, first, of those which are necessary for facilitating
Commerce in general.
That the erection and maintenance of the public works which
facilitate the commerce of any country, such as good roads,
bridges, navigable canals, harbours, etc. must require very
different degrees of expense in the different periods of society,
is evident without any proof. The expense of making and
maintaining the public roads of any country must evidently
increase with the annual produce of the land and labour of that
country, or with the quantity and weight of the goods which it
becomes necessary to fetch and carry upon those roads. The
strength of a bridge must be suited to the number and weight of
the carriages which are likely to pass over it. The depth and the
supply of water for a navigable canal must be proportioned to the
number and tonnage of the lighters which are likely to carry
goods upon it; the extent of a harbour, to the number of the
shipping which are likely to take shelter in it.
It does not seem necessary that the expense of those public works
should be defrayed from that public revenue, as it is commonly
called, of which the collection and application are in most
countries, assigned to the executive power. The greater part of
such public works may easily be so managed, as to afford a
particular revenue, sufficient for defraying their own expense
without bringing any burden upon the general revenue of the
society.
A highway, a bridge, a navigable canal, for example, may, in most
cases, be both made add maintained by a small toll upon the
carriages which make use of them ; a harbour, by a moderate
port-duty upon the tonnage of the shipping which load or unload
in it. The coinage, another institution for facilitating
commerce, in many countries, not only defrays its own expense,
but affords a small revenue or a seignorage to the sovereign. The
post-office, another institution for the same purpose, over and
above defraying its own expense, affords, in almost all
countries, a very considerable revenue to the sovereign.
When the carriages which pass over a highway or a bridge, and the
lighters which sail upon a navigable canal, pay toll in
proportion to their weight or their tonnage, they pay for the
maintenance of those public works exactly in proportion to the
wear and tear which they occasion of them. It seems scarce
possible to invent a more equitable way of maintaining such
works. This tax or toll, too, though it is advanced by the
carrier, is finally paid by the consumer, to whom it must always
be charged in the price of the goods. As the expense of carriage,
however, is very much reduced by means of such public works, the
goods, notwithstanding the toll, come cheaper to the consumer
than they could otherwise have done, their price not being so
much raised by the toll, as it is lowered by the cheapness of the
carriage. The person who finally pays this tax, therefore, gains
by the application more than he loses by the payment of it. His
payment is exactly in proportion to his gain. It is, in reality,
no more than a part of that gain which he is obliged to give up,
in order to get the rest. It seems impossible to imagine a
more equitable method of raising a tax.
When the toll upon carriages of luxury, upon coaches,
post-chaises, etc. is made somewhat higher in proportion to their
weight, than upon carriages of necessary use, such as carts,
waggons, etc. the indolence and vanity of the rich is made to
contribute, in a very easy manner, to the relief of the poor, by
rendering cheaper the transportation of heavy goods to all the
different parts of the country.
When high-roads, bridges, canals, etc. are in this manner made
and supported by the commerce which is carried on by means of
them, they can be made only where that commerce requires them,
and, consequently, where it is proper to make them. Their
expense, too, their grandeur and magnificence, must be suited to
what that commerce can afford to pay. They must be made,
consequently, as it is proper to make them. A magnificent
high-road cannot be made through a desert country, where there is
little or no commerce, or merely because it happens to lead to
the country villa of the intendant of the province, or to that of
some great lord, to whom the intendant finds it convenient to
make his court. A great bridge cannot be thrown over a river at a
place where nobody passes, or merely to embellish the view from
the windows of a neighbouring palace ; things which sometimes
happen in countries, where works of this kind are carried on by
any other revenue than that which they themselves are capable of
affording.
In several different parts of Europe, the toll or lock-duty upon
a canal is the property of private persons, whose private
interest obliges them to keep up the canal. If it is not kept in
tolerable order, the navigation necessarily ceases altogether,
and, along with it, the whole profit which they can make by the
tolls. If those tolls were put under the management of
commissioners, who had themselves no interest in them, they might
be less attentive to the maintenance of the works which produced
them. The canal of Languedoc cost the king of France and the
province upwards of thirteen millions of livres, which (at
twenty-eight livres the mark of silver, the value of French money
in the end of the last century) amounted to upwards of nine
hundred thousand pounds sterling. When that great work was
finished, the most likely method, it was found, of keeping it in
constant repair, was to make a present of the tolls to Riquet,
the engineer who planned and conducted the work. Those tolls
constitute, at present, a very large estate to the different
branches of the family of that gentleman, who have, therefore, a
great interest to keep the work in constant repair. But had those
tolls been put under the management of commissioners, who had no
such interest, they might perhaps, have been dissipated in
ornamental and unnecessary expenses, while the most essential
parts of the works were allowed to go to ruin.
The tolls for the maintenance of a highroad cannot, with any
safety, be made the property of private persons. A high-road,
though entirely neglected, does not become altogether impassable,
though a canal does. The proprietors of the tolls upon a
high-road, therefore, might neglect altogether the repair of the
road, and yet continue to levy very nearly the same tolls. It is
proper, therefore, that the tolls for the maintenance of such a
work should be put under the managmnent of commissioners or
trustees.
In Great Britain, the abuses which the trustees have committed in
the management of those tolls, have, in many cases, been very
justly complained of. At many turnpikes, it has been said, the
money levied is more than double of what is necessary for
executing, in the completest manner, the work, which is often
executed in a very slovenly manner, and sometimes not executed at
all. The system of repairing the high-roads by tolls of this
kind, it must be observed, is not of very long standing. We
should not wonder, therefore, if it has not yet been brought to
that degree of perfection of which it seems capable. If mean and
improper persons are frequently appointed trustees ; and if
proper courts of inspection and account have not yet been
established for controlling their conduct, and for reducing the
tolls to what is barely sufficient for executing the work to be
done by them ; the recency of the institution both accounts and
apologizes for those defects, of which, by the wisdom of
parliament, the greater part may, in due time, be gradually
remedied.
The money levied at the different turnpikes in Great Britain, is
supposed to exceed so much what is necessary for repairing the
roads, that the savings which, with proper economy, might be made
from it, have been considered, even by some ministers, as a very
great resource, which might, at some time or another, be applied
to the exigencies of the state. Government, it has been said, by
taking the management of the turnpikes into its own hands, and by
employing the soldiers, who would work for a very small addition
to their pay, could keep the roads in good order, at a much less
expense than it can be done by trustees, who have no other
workmen to employ, but such as derive their whole subsistence
from their wages. A great revenue, half a million, perbaps {Since
publishing the two first editions of this book, I have got good
reasons to believe that all the turnpike tolls levied in Great
Britain do not procduce a neat revenue that amounts to half a
million ; a sum which, under the management of government, would
not be sufficient to keep, in repair five of the principal roads
in the kingdom}, it has been pretended, might in this manner be
gained, without laying any new burden upon the people; and the
turnpike roads might be made to contribute to the general expense
of the state, in the same manner as the post-office does at
present.
That a considerable revenue might be gained in this manner, I
have no doubt, though probably not near so much as the projectors
of this plan have supposed. The plan itself, however, seems
liable to several very important objections.
First, If the tolls which are levied at the turnpikes should ever
be considered as one of the resources for supplying the
exigencies of the state, they would certainly be augmented as
those exigencies were supposed to require. According to the
policy of Great Britain, therefore, they would probably he
augmented very fast. The facility with which a great revenue
could be drawn from them, would probably encourage administration
to recur very frequently te this resource. Though it may,
perhaps, be more than doubtful whether half a million could by
any economy be saved out of the present tolls, it can scarcely be
doubted, but that a million might be saved out of them, if they
were doubled ; and perhaps two millions, if they were tripled {I
have now good reason to believe that all these conjectural sums
are by much too large.}. This great revenue, too, might be levied
without the appointment of a single new officer to collect and
receive it. But the turnpike tolls, being continually augmented
in this manner, instead of facilitating the inland commerce of
the country, as at present, would soon become a very great
incumbrance upon it. The expense of transporting all heavy goods
from one part of the country to another, would soon be so much
increased, the market for all such goods, consequently, would
soon be so much narrowed, that their production would be in a
great measure discouraged, and the most important branches of the
domestic industry of the country annihilated altogether.
Secondly, A tax upon carriages, in proportion to their weight,
though a very equal tax when applied to the sole purpose of
repairing the roads, is a very unequal one when applied to any
other purpose, or to supply the common exigencies of the state.
When it is applied to the sole purpose above mentioned, each
carriage is supposed to pay exactly for the wear and tear which
that carriage occasions of the roads. But when it is applied to
any other purpose, each carriage is supposed to pay for more than
that wear and tear, and contributes to the supply of some other
exigency of the state. But as the turnpike toll raises the price
of goods in proportion to their weight and not to their value, it
is chiefly paid by the consumers of coarse and bulky, not by
those of precious and light commodities. Whatever exigency of the
state, therefore, this tax might be intended to supply, that
exigency would be chiefly supplied at the expense of the poor,
not of the rich; at the expense of those who are least able to
supply it, not of those who are most able.
Thirdly, If government should at any time neglect the reparation
of the high-roads, it would be still more difficult, than it is
at present, to compel the proper application of any part of the
turnpike tolls. A large revenue might thus be levied upon the
people, without any part of it being applied to the only purpose
to which a revenue levied in this manner ought ever to be
applied. If the meanness and poverty of the trustees of turnpike
roads render it sometimes difficult, at present, to oblige them
to repair their wrong ; their wealth and greatness would render
it ten times more so in the case which is here supposed.
In France, the funds destined for the reparation of the
high-roads are under the immediate direction of the executive
power. Those funds consist, partly in a certain number of days
labour, which the country people are in most parts of Europe
obliged to give to the reparation of the highways; and partly in
such a portion of the general revenue of the state as the king
chooses to spare from his other expenses.
By the ancient law of France, as well as by that of most other
parts of Europe, the labour of the country people was under the
direction of a local or provincial magistracy, which had no
immediate dependency upon the king's council. But, by the
present practice, both the labour of the country people, and
whatever other fund the king may choose to assign for the
reparation of the high-roads in any particular province or
generality, are entirely under the management of the intendant ;
an officer who is appointed and removed by the king's council who
receives his orders from it, and is in constant correspondence
with it. In the progress of despotism, the authority of the
executive power gradually absorbs that of every other power in
the state, and assumes to itself the management of every branch
of revenue which is destined for any public purpose. In France,
however, the great post-roads, the roads which make the
communication between the principal towns of the kingdom, are in
general kept in good order; and, in some provinces, are even a
good deal superior to the greater part of the turnpike roads of
England. But what we call the cross roads, that is, the far
greater part of the roads in the country, are entirely neglected,
and are in many places absolutely impassable for any heavy
carriage. In some places it is even dangerous to travel on
horseback, and mules are the only conveyance which can safely be
trusted. The proud minister of an ostentatious court, may
frequently take pleasure in executing a work of splendour and
magnificence, such as a great highway, which is frequently seen
by the principal nobility, whose applauses not only flatter his
vanity, but even contribute to support his interest at court. But
to execute a great number of little works, in which nothing that
can be done can make any great appearance, or excite the smallest
degree of admiration in any traveller, and which, in short, have
nothing to recommend them but their extreme utility, is a
business which appears, in every respect, too mean and paltry to
merit the attention of so great a magistrate. Under such an
administration therefore, such works are almost always entirely
neglected.
In China, and in several other governments of Asia, the executive
power charges itself both with the reparation of the high-roads,
and with the maintenance of the navigable canals. In the
instructions which are given to the governor of each province,
those objects, it is said, are constantly recommended to him, and
the judgment which the court forms of his conduct is very much
regulated by the attention which he appears to have paid to this
part of his instructions. This branch of public police,
accordingly, is said to be very much attended to in all those
countries, but particularly in China, where the high-roads, and
still more the navigable canals, it is pretended, exceed very
much every thing of the same kind which is known in Europe. The
accounts of those works, however, which have been transmitted to
Europe, have generally been drawn up by weak and wondering
travellers; frequently by stupid and lying missionaries. If they
had been examined by more intelligent eyes, and if the accounts
of them had been reported by more faithful witnesses, they would
not, perhaps, appear to be so wonderful. The account which
Bernier gives of some works of this kind in Indostan, falls very
short of what had been reported of them by other travellers, more
disposed to the marvellous than he was. It may too, perhaps, be
in those countries, as it is in France, where the great roads,
the great communications, which are likely to be the subjects of
conversation at the court and in the capital, are attended to,
and all the rest neglected. In China, besides, in Indostan, and
in several other governments of Asia, the revenue of the
sovereign arises almost altogether from a land tax or land rent,
which rises or falls with the rise and fall of the annual produce
of the land. The great interest of the sovereign, therefore, his
revenue, is in such countries necessarily and immediately
connected with the cultivation of the land, with the greatness of
its produce, and with the value of its produce. But in order to
render that produce both as great and as valuable as possible, it
is necessary to procure to it as extensive a market as possible,
and consequently to establish the freest, the easiest, and the
least expensive communication between all the different parts of
the country; which can be done only by means of the best roads
and the best navigable canals. But the revenue of the sovereign
does not, in any part of Europe, arise chiefly from a land tax or
land rent. In all the great kingdoms of Europe, perhaps, the
greater part of it may ultimately depend upon the produce of the
land: but that dependency is neither so immediate nor so evident.
In Europe, therefore, the sovereign does not feel himself so
directly called upon to promote the increase, both in quantity
and value of the produce of the land, or, by maintaining good
roads and canals, to provide the most extensive market for that
produce. Though it should be true, therefore, what I
apprehend is not a little doubtful, that in some parts of Asia
this department of the public police is very properly managed by
the executive power, there is not the least probability that,
during the present state of things, it could be tolerably managed
by that power in any part of Europe.
Even those public works, which are of such a nature that they
cannot afford any revenue for maintaining themselves, but of
which the convecniency is nearly confined to some particular
place or district, are always better maintained by a local or
provincial revenue, under the management of a local and
provincial administration, than by the general revenue of the
state, of which the executive power must always have the
management. Were the streets of London to be lighted and paved at
the expense of the treasury, is there any probability that they
would be so well lighted and paved as they are at present, or
even at so small an expense ? The expense, besides, instead of
being raised by a local tax upon the inhabitants of each
particular street, parish, or district in London, would, in this
case, be defrayed out of the general revenue of the state, and
would consequently be raised by a tax upon all the inhabitants of
the kingdom, of whom the greater part derive no sort of benefit
from the lighting and paving of the streets of London.
The abuses which sometimes creep into the local and provincial
administration of a local and provincial revenue, how enormous
soever they may appear, are in reality, however, almost always
very trifling in comparison of those which commonly take place in
the administration and expenditure of the revenue of a great
empire. They are, besides, much more easily corrected. Under the
local or provincial administration of the justices of the peace
in Great Britain, the six days labour which the country people
are obliged to give to the reparation of the highways, is not
always, perhaps, very judiciously applied, but it is scarce ever
exacted with any circumstance of cruelty or oppression. In
France, under the administration of the intendants, the
application is not always more judicious, and the exaction is
frequently the most cruel and oppressive. Such corvees, as they
are called, make one of the principal instruments of tyranny by
which those officers chastise any parish or communeaute, which
has had the misfortune to fall under their dspleasure.
Of the public Works and Institution which are necessary for
facilitating particular Branches of Commerce.
The object of the public works and institutions above mentioned,
is to facilitate commerce in general. But in order to facilitate
some particular branches of it, particular institutions are
necessary, which again require a particular and extraordinary
expense.
Some particular branches of commerce which are carried on with
barbarous and uncivilized nations, require extraordinary
protection. An ordinary store or counting-house could give
little security to the goods of the merchants who trade to the
western coast of Africa. To defend them from the barbarous
natives, it is necessary that the place where they are deposited
should be in some measure fortified. The disorders in the
government of Indostan have been supposed to render a like
precaution necessary, even among that mild and gentle people; and
it was under pretence of securing their persons and property from
violence, that both the English and French East India companies
were allowed to erect the first forts which they possessed in
that country. Among other nations, whose vigorous government will
suffer no strangers to possess any fortified place within their
territory, it may be necessary to maintain some ambassador,
minister, or consul, who may both decide, according to their own
customs, the differences arising among his own countrymen, and,
in their disputes with the natives, may by means of his public
character, interfere with more authority and afford them a more
powerful protection than they could expect from any private man.
The interests of commerce have frequently made it necessary to
maintain ministers in foreign countries, where the purposes
either of war or alliance would not have required any. The
commerce of the Turkey company first occasioned the establishment
of an ordinary ambassador at Constantinople. The first English
embassies to Russia arose altogether from commercial interests.
The constant interference with those interests, necessarily
occasioned between the subjects of the different states of
Europe, has probably introduced the custom of keeping, in all
neighbouring countries, ambassadors or ministers constantly
resident, even in the time of peace. This custom, unknown to
ancient times, seems not to be older than the end of the
fifteenth, or beginning of the sixteenth century; that is, than
the time when commerce first began to extend itself to the
greater part of the nations of Europe, and when they first began
to attend to its interests.
It seems not unreasonable, that the extraordinary expense which
the protection of any particular branch of commerce may occasion,
should be defrayed by a moderate tax upon that particular branch;
by a moderate fine, for example, to be paid by the traders when
they first enter into it; or, what is more equal, by a particular
duty of so much per cent. upon the goods which they either import
into, or export out of, the particular countries with which it is
carried on. The protection of trade, in general, from pirates and
freebooters, is said to have given occasion to the first
institution of the duties of customs. But, if it was thought
reasonable to lay a general tax upon trade, in order to defray
the expense of protecting trade in general, it should seem
equally reasonable to lay a particular tax upon a particular
branch of trade, in order to defray the extraordinary expense of
protecting that branch.
The protection of trade, in general, has always been considered
as essential to the defence of the commonwealth, and, upon that
account, a necessary part of the duty of the executive power. The
collection and application of the general duties of customs,
therefore, have always been left to that power. But the
protection of any particular branch of trade is a part of the
general protection of trade; a part, therefore, of the duty of
that power; and if nations always acted consistently, the
particular duties levied for the purposes of such particular
protection, should always have been left equally to its disposal.
But in this respect, as well as in many others, nations have not
always acted consistently; and in the greater part of the
commercial states of Europe, particular companies of merchants
have had the address to persuade the legislature to entrust to
them the performance of this part of the duty of the sovereign,
together with all the powers which are necessarily connected with
it.
These companies, though they may, perhaps, have been useful for
the first introduction of some branches of commerce, by making,
at their own expense, an experiment which the state might not
think it prudent to make, have in the long-run proved,
universally, either burdensome or useless, and have either
mismanaged or confined the trade.
When those companies do not trade upon a joint stock, but are
obliged to admit any person, properly qualified, upon paying a
certain fine, and agreeing to submit to the regulations of the
company, each member trading upon his own stock, and at his own
risk, they are called regulated companies. When they trade upon a
joint stock, each member sharing in the common profit or loss, in
proportion to his share in this stock, they are called
joint-stock companies. Such companies, whether regulated or
joint-stock, sometimes have, and sometimes have not, exclusive
privileges.
Regulated companies resemble, in every respect, the corporation
of trades, so common in the cities and towns of all the different
countries of Europe; and are a sort of enlarged monopolies of the
same kind. As no inhabitant of a town can exercise an
incorporated trade, without first obtaining his freedom in the
incorporation, so, in most cases, no subject of the state can
lawfully carry on any branch of foreign trade, for which a
regulated company is established, without first becoming a member
of that company. The monopoly is more or less strict, according
as the terms of admission are more or less difficult, and
according as the directors of the company have more or less
authority, or have it more or less in their power to manage in
such a manner as to confine the greater part of the trade to
themselves and their particular friends. In the most ancient
regulated companies, the privileges of apprenticeship were the
same as in other corporations, and entitled the person who had
served his time to a member of the company, to become himself a
member, either without paying any fine, or upon paying a much
smaller one than what was exacted of other people. The usual
corporation spirit, wherever the law does not restrain it,
prevails in all regulated companies. When they have been allowed
to act according to their natural genius, they have always, in
order to confine the competition to as small a number of persons
as possible, endeavoured to subject the trade to many burdensome
regulations. When the law has restrained them from doing this,
they have become altogether useless and insignificant.
The regulated companies for foreign commerce which at present
subsist in Great Britain, are the ancient merchant-adventurers
company, now commonly called the Hamburgh company, the Russia
company, the Eastland company, the Turkey company, and the
African company.
The terms of admission into the Hamburgh company are now said to
be quite easy ; and the directors either have it not in their
power to subject the trade to any troublesome restraint or
regulations, or, at least, have not of late exercised that power.
It has not always been so. About the middle of the last century,
the fine for admission was fifty, and at one time one hundred
pounds, and the conduct of the company was said to be extremely
oppressive. In l643, in 1645, and in 1661, the clothiers and free
traders of the west of England complained of them to parliament,
as of monopolists, who confined the trade, and oppressed the
manufactures of the country. Though those complaints produced no
act of parliament, they had probably intimidated the company so
far, as to oblige them to reform their conduct. Since that time,
at least, there have been no complaints against them. By the 10th
and 11th of William III. c.6, the fine for admission into the
Russia company was reduced to five pounds; and by the 25th of
Charles II. c.7, that for admission into the Eastland company to
forty shillings ; while, at the same time, Sweden, Denmark, and
Norway, all the countries on the north side of the Baltic, were
exempted from their exclusive charter. The conduct of those
companies had probably given occasion to those two acts of
parliament. Before that time, Sir Josiah Child had
represented both these and the Hamburgh company as extremely
oppressive, and imputed to their bad management the low state of
the trade, which we at that time carried on to the countries
comprehended within their respective charters. But though such
companies may not, in the present times, be very oppressive, they
are certainly altogether useless. To be merely useless, indeed,
is perhaps, the highest eulogy which can ever justly be bestowed
upon a regulated company; and all the three companies above
mentioned seem, in their present state, to deserve this eulogy.
The fine for admission into the Turkey company was formerly
twenty-five pounds for all persons under twenty-six years of age,
and fifty pounds for all persons above that age. Nobody but mere
merchants could be admitted; a restriction which excluded all
shop-keepers and retailers. By a bye-law, no British manufactures
could be exported to Turkey but in the general ships of the
company; and as those ships sailed always from the port of
London, this restriction confined the trade to that expensive
port, and the traders to those who lived in London and in its
neighbourhood. By another bye-law, no person living within twenty
miles of London, and not free of the city, could be admitted a
member ; another restriction which, joined to the foregoing,
necessarily excluded all but the freemen of London. As the time
for the loading and sailing of those general ships depended
altogether upon the directors, they could easily fill them with
their own goods, and those of their particular friends, to the
exclusion of others, who, they might pretend, had made their
proposals too late. In this state of things, therefore, this
company was, in every respect, a strict and oppressive monopoly.
Those abuses gave occasion to the act of the 26th of George II.
c. 18, reducing the fine for admission to twenty pounds for all
persons, without any distinction of ages, or any restriction,
either to mere merchants, or to the freemen of London; and
granting to all such persons the liberty of exporting, from all
the ports of Great Britain, to any port in Turkey, all British
goods, of which the exportation was not prohibited, upon paying
both the general duties of customs, and the particular duties
assessed for defraying the necessary expenses of the company ;
and submitting, at the same time, to the lawful authority of the
British ambassador and consuls resident in Turkey, and to the
bye-laws of the company duly enacted. To prevent any oppression
by those bye-laws, it was by the same act ordained, that if any
seven members of the company conceived themselves aggrieved by
any bye-law which should be enacted after the passing of this
act, they might appeal to the board of trade and plantations (to
the authority of which a committee of the privy council has now
succeeded), provided such appeal was brought within twelve months
after the bye-law was enacted; and that, if any seven members
conceived themselves aggrieved by any bye-law which had been
enacted before the passing of this act, they might bring a like
appeal, provided it was within twelve months after the day on
which this act was to take place. The experience of one year,
however, may not always be sufficient to discover to all the
members of a great company the pernicious tendency of a
particular bye-law ; and if several of them should afterwards
discover it, neither the board of trade, nor the committee of
council, can afford them any redress. The object, besides, of the
greater part of the bye-laws of all regulated companies, as well
as of all other corporations, is not so much to oppress those who
are already members, as to discourage others from becoming so;
which may be done, not only by a high fine, but by many other
contrivances. The constant view of such companies is always to
raise the rate of their own profit as high as they can; to keep
the market, both for the goods which they export, and for those
which they import, as much understocked as they can ; which can
be done only by restraining the competition, or by discouraging
new adventurers from entering into the trade. A fine, even of
twenty pounds, besides, though it may not, perhaps, be sufficient
to discourage any man from entering into the Turkey trade, with
an intention to continue in it, may be enough to discourage a
speculative merchant from hazarding a single adventure in it. In
all trades, the regular established traders, even though not
incorporated, naturally combine to raise profits, which are noway
so likely to be kept, at all times, down to their proper level,
as by the occasional competition of speculative adventurers. The
Turkey trade, though in some measure laid open by this act of
parliament, is still considered by many people as very far from
being altogether free. The Turkey company contribute to maintain
an ambassador and two or three consuls, who, like other public
ministers, ought to be maintained altogether by the state, and
the trade laid open to all his majesty's subjects. The different
taxes levied by the company, for this and other corporation
purposes, might afford a revenue much more than sufficient to
enable a state to maintain such ministers.
Regulated companies, it was observed by Sir Josiah Child, though
they had frequently supported public ministers, had never
maintained any forts or garrisons in the countries to which they
traded; whereas joint-stock companies frequently had. And, in
reality, the former seem to be much more unfit for this sort of
service than the latter. First, the directors of a regulated
company have no particular interest in the prosperity of the
general trade of the company, for the sake of which such forts
and garrisons are maintained. The decay of that general trade may
even frequently contribute to the advantage of their own private
trade; as, by diminishing the number of their competitors, it may
enable them both to buy cheaper, and to sell dearer. The
directors of a joint-stock company, on the contrary, having only
their share in the profits which are made upon the common stock
committed to their management, have no private trade of their
own, of which the interest can be separated from that of the
general trade of the company. Their private interest is connected
with the prosperity of the general trade of the company, and with
the maintenance of the forts and garrisons which are necessary
for its defence. They are more likely, therefore, to have that
continual and careful attention which that maintenance
necessarily requires. Secondly, The directors of a joint-stock
company have always the management of a large capital, the joint
stock of the company, a part of which they may frequently employ,
with propriety, in building, repairing, and maintaining such
necessary forts and garrisons. But the directors of a regulated
company, having the management of no common capital, have no
other fund to employ in this way, but the casual revenue arising
from the admission fines, and from the corporation duties imposed
upon the trade of the company. Though they had the same interest,
therefore, to attend to the maintenance of such forts and
garrisons, they can seldom have the same ability to render that
attention effectual. The maintenance of a public minister,
requiring scarce any attention, and but a moderate and limited
expense, is a business much more suitable both to the temper and
abilities of a regulated company.
Long after the time of Sir Josiah Child, however, in 1750, a
regulated company was established, the present company of
merchants trading to Africa ; which was expressly charged at
first with the maintenance of all the British forts and garrisons
that lie between Cape Blanc and the Cape of Good Hope, and
afterwards with that of those only which lie between Cape Rouge
and the Cape of Good Hope. The act which establishes this
company (the 23rd of George II. c.51 ), seems to have had two
distinct objects in view; first, to restrain effectually the
oppressive and monopolizing spirit which is natural to the
directors of a regulated company ; and, secondly, to force them,
as much as possible, to give an attention, which is not natural
to them, towards the maintenance of forts and garrisons.
For the first of these purposes, the fine for admission is
limited to forty shillings. The company is prohibited from
trading in their corporate capacity, or upon a joint stock ; from
borrowing money upon common seal, or from laying any restraints
upon the trade, which may be carried on freely from all places,
and by all persons being British subjects, and paying the fine.
The government is in a committee of nine persons, who meet at
London, but who are chosen annually by the freemen of the company
at London, Bristol, and Liverpool ; three from each place. No
committeeman can be continued in office for more than three years
together. Any committee-man might be removed by the board of
trade and plantations, now by a committee of council, after being
heard in his own defence. The committee are forbid to export
negroes from Africa, or to import any African goods into Great
Britain. But as they are charged with the maintenance of forts
and garrisons, they may, for that purpose export from Great
Britain to Africa goods and stores of different kinds. Out of the
moneys which they shall receive from the company, they are
allowed a sum, not exceeding eight hundred pounds, for the
salaries of their clerks and agents at London, Bristol, and
Liverpool, the house-rent of their offices at London, and all
other expenses of management, commission, and agency, in England.
What remains of this sum, after defraying these different
expenses, they may divide among themselves, as compensation for
their trouble, in what manner they think proper. By this
constitution, it might have been expected, that the spirit of
monopoly would have been effectually restrained, and the first of
these purposes sufficiently answered. It would seem, however,
that it had not. Though by the 4th of George III. c.20, the fort
of Senegal, with all its dependencies, had been invested in the
company of merchants trading to Africa, yet, in the year
following (by the 5th of George III. c.44), not only Senegal and
its dependencies, but the whole coast, from the port of Sallee,
in South Barbary, to Cape Rouge, was exempted from the
jurisdiction of that company, was vested in the crown, and the
trade to it declared free to all his majesty's subjects. The
company had been suspected of restraining the trade and of
establishing some sort of improper monopoly. It is not, however,
very easy to conceive how, under the regulations of the 23d
George II. they could do so. In the printed debates of the house
of commons, not always the most authentic records of truth, I
observe, however, that they have been accused of this. The
members of the committee of nine being all merchants, and the
governors and factors in their different forts and settlements
being all dependent upon them, it is not unlikely that the latter
might have given peculiar attention to the consignments and
commissions of the former, which would establish a real monopoly.
For the second of these purposes, the maintenance of the forts
and garrisons, an annual sum has been allotted to them by
parliament, generally about £13,000. For the proper application
of this sum, the committee is obliged to account annually to the
cursitor baron of exchequer; which account is afterwards to be
laid before parliament. But parliament, which gives so little
attention to the application of millions, is not likely to give
much to that of £13,000 a-year; and the cursitor baron of
exchequer, from his profession and education, is not likely to be
profoundly skilled in the proper expense of forts and garrisons.
The captains of his majesty's navy, indeed, or any other
commissioned officers, appointed by the board of admiralty, may
inquire into the condition of the forts and garrisons, and report
their observations to that board. But that board seems to have no
direct jurisdiction over the committee, nor any authority to
correct those whose conduct it may thus inquire into; and the
captains of his majesty's navy, besides, are not supposed to be
always deeply learned in the science of fortification. Removal
from an office, which can he enjoyed only for the term of three
years, and of which the lawful emoluments, even during that term,
are so very small, seems to be the utmost punishment to which any
committee-man is liable, for any fault, except direct
malversation, or embezzlement, either of the public money, or of
that of the company ; and the fear of the punishment can never be
a motive of sufficient weight to force a continual and careful
attention to a business to which he has no other interest to
attend. The committee are accused of having sent out bricks and
stones from England for the reparation of Cape Coast Castle, on
the coast of Guinea ; a business for which parliament had several
times granted an extraordinary sum of money. These bricks and
stones, too, which had thus been sent upon so long a voyage, were
said to have been of so bad a quality, that it was necessary to
rebuild, from the foundation, the walls which had been repaired
with them. The forts and garrisons which lie north of Cape Rouge,
are not only maintained at the expense of the state, but are
under the immediate government of the executive power ; and why
those which lie south of that cape, and which, too, are, in part
at least, maintained at the expense of the state, should be under
a different government, it seems not very easy even to imagine a
good reason. The protection of the Mediterranean trade was the
original purpose or pretence of the garrisons of Gibraltar and
Minorca ; and the maintenance and government of those garrisons
have always been, very properly, committed, not to the Turkey
company, but to the executive power. In the extent of its
dominion consists, in a great measure, the pride and dignity of
that power ; and it is not very likely to fail in attention to
what is necessary for the defence of that dominion. The garrisons
at Gibraltar and Minorca, accordingly, have never been neglected.
Though Minorca has been twice taken, and is now probably lost for
ever, that disaster has never been imputed to any neglect in the
executive power. I would not, however, be understood to
insinuate, that either of those expensive garrisons was ever,
even in the smallest degree, necessary for the purpose for which
they were originally dismembered from the Spanish monarchy. That
dismemberment, perhaps, never served any other real purpose than
to alienate from England her natural ally the king of Spain, and
to unite the two principal branches of the house of Bourbon in a
much stricter and more permanent alliance than the ties of blood
could ever have united them.
Joint-stock companies, established either by royal charter, or by
act of parliament, are different in several respects, not only
from regulated companies, but from private copartneries.
First, In a private copartnery, no partner without the consent of
the company, can transfer his share to another person, or
introduce a new member into the company. Each member, however,
may, upon proper warning, withdraw from the copartnery, and
demand payment from them of his share of the common stock. In a
joint-stock company, on the contrary, no member can demand pay
ment of his share from the company; but each member can, without
their consent, transfer his share to another person, and thereby
introduce a new member. The value of a share in a joint stock is
always the price which it will bring in the market ; and this may
be either greater or less in any proportion, than the sum which
its owner stands credited for in the stock of the company.
Secondly, In a private copartnery, each partner is bound for the
debts contracted by the company, to the whole extent of his
fortune. In a joint-stock company, on the contrary, each partner
is bound only to the extent of his share.
The trade of a joint-stock company is always managed by a court
of directors. This court, indeed, is frequently subject, in many
respects, to the control of a general court of proprietors.
But the greater part of these proprietors seldom pretend to
understand any thing of the business of the company; and when the
spirit of faction happens not to prevail among them, give
themselves no trouble about it, but receive contentedly such
halfyearly or yearly dividend as the directors think proper to
make to them. This total exemption front trouble and front risk,
beyond a limited sum, encourages many people to become
adventurers in joint-stock companies, who would, upon no account,
hazard their fortunes in any private copartnery. Such companies,
therefore, commonly draw to themselves much greater stocks, than
any private copartnery can boast of. The trading stock of the
South Sea company at one time amounted to upwards of thirty-three
millions eight hundred thousand pounds. The divided capital
of the Bank of England amounts, at present, to ten millions seven
hundred and eighty thousand pounds. The directors of such
companies, however, being the managers rather of other people's
money than of their own, it cannot well be expected that they
should watch over it with the same anxious vigilance with which
the partners in a private coparnery frequently watch over their
own. Like the stewards of a rich man, they are apt to consider
attention to small matters as not for their master's honour, and
very easily give themselves a dispensation from having it.
Negligence and profusion, therefore, must always prevail, more or
less, in the management of the affairs of such a company. It is
upon this account, that joint-stock companies for foreign trade
have seldom been able to maintain the competition against private
adventurers. They have, accordingly, very seldom succeeded
without an exclusive privilege ; and frequently have not
succeeded with one. Without an exclusive privilege, they have
commonly mismanaged the trade. With an exclusive privilege, they
have both mismanaged and confined it.
The Royal African company, the predecessors of the present
African company, had an exclusive privilege by charter ; but as
that charter had not been confirmed by act of parliament, the
trade, in consequence of the declaration of rights, was, soon
after the Revolution, laid open to all his majesty's subjects.
The Hudson's Bay company are, as to their legal rights, in the
same situation as the Royal African company. Their exclusive
charter has not been confirmed by act of parliament. The South
Sea company, as long as they continued to be a trading company,
had an exclusive privilege confirmed by act of parliament; as
have likewise the present united company of merchants trading to
the East Indies.
The Royal African company soon found that they could not maintain
the competition against private adventurers, whom,
notwithstanding the declaration of rights, they continued for
some time to call interlopers, and to persecute as such. In 1698,
however, the private adventurers were subjected to a duty of ten
per cent. upon almost all the different branches of their trade,
to be employed by the company in the maintenance of their forts
and garrisons. But, notwithstanding this heavy tax, the company
were still unable to maintain the competition. Their stock and
credit gradually declined. In 1712, their debts had become so
great, that a particular act of parliament was thought necessary,
both for their security and for that of their creditors. It was
enacted, that the resolution of two-thirds of these creditors in
number and value should bind the rust, both with regard to the
time which should be allowed to the company for the payment of
their debts, and with regard to any other agreement which it
might be thought proper to make with them concerning those debts.
In 1730, their affairs were in so great disorder, that they were
altogether incapable of maintaining their forts and garrisons,
the sole purpose and pretext of their institution. From that
year till their final dissolution, the parliament judged it
necessary to allow the annual sum of £10,000 for that purpose.
In 1732, after having been for many years losers by the trade of
carrying negroes to the West Indies, they at last resolved to
give it up altogether ; to sell to the private traders to America
the negroes which they purchased upon the coast; awl to employ
their servants in a trade to the inland parts of Africa for gold
dust, elephants teeth, dyeing drugs, etc. But their success in
this more confined trade was not greater than in their former
extensive one. Their affairs continued to go gradually to
decline, till at last, being in every respect a bankrupt company,
they were dissolved by act of parliament, and their forts and
garrisons vested in the present regulated company of merchants
trading to Africa. Before the erection of the Royal African
company, there had been three other joint-stock companies
successively established, one after another, for the African
trade. They were all equally unsuccessful. They all, however, had
exclusive charters, which, though not confirmed by act of
parliament, were in those days supposed to convey a real
exclusive privilege.
The Hudson's Bay company, before their misfortunes in the late
war, had been much more fortunate than the Royal African company.
Their necessary expense is much smaller. The whole number of
people whom they maintain in their different settlements and
habitations, which they have honoured with the name of forts, is
said not to exceed a hundred and twenty persons. This number,
however, is sufficient to prepare beforehand the cargo of furs
and other goods necessary for loading their ships, which, on
account of the ice, can seldom remain above six or eight weeks in
those seas. This advantage of having a cargo ready prepared,
could not, for several years, be acquired by private adventurers
; and without it there seems to be no possibility of trading to
Hudson's Bay. The moderate capital of the company, which, it is
said, does not exceed one hundred and ten thousand pounds, may,
besides, be sufficient to enable them to engross the whole, or
almost the whole trade and surplus produce, of the miserable
though extensive country comprehended within their charter. No
private adventurers, accordingly, have ever attempted to trade to
that country in competition with them. This company, therefore,
have always enjoyed an exclusive trade, in fact, though they may
have no right to it in law. Over and above all this, the moderate
capital of this company is said to be divided among a very small
number of proprietors. But a joint-stock company, consisting of a
small number of proprietors, with a moderate capital, approaches
very nearly to the nature of a private copartnery, and may be
capable of nearly the same degree of vigilance and attention. It
is not to be wondered at, therefore, if, in consequence of these
different advantages, the Hudson's Bay company had, before the
late war, been able to carry on their trade with a considerable
degree of success. It does not seem probable, however, that their
profits ever approached to what the late Mr Dobbs imagined them.
A much more sober and judicious writer, Mr Anderson, author of
the Historical and Chronological Deduction of Commerce, very
justly observes, that upon examining the accounts which Mr Dobbs
himself has given for several years together, of their exports
and imports, and upon making proper allowances for their
extraordinary risk and expense, it does not appear that their
profits deserve to be envied, or that they can much, if at all,
exceed the ordinary profits of trade.
The South Sea company never had any forts or garrisons to
maintain, and therefore were entirely exempted from one great
expense, to which other joint-stock companies for foreign trade
are subject; but they had an immense capital divided among an
immense number of proprietors. It was naturally to be expected,
therefore, that folly, negligence, and profusion, should prevail
in the whole management of their affairs. The knavery and
extravagance of their stock-jobbing projects are sufficiently
known, and the explication of them would be foreign to the
present subject. Their mercantile projects were not much better
conducted. The first trade which they engaged in, was that of
supplying the Spanish West Indies with negroes, of which (in
consequence of what was called the Assiento Contract granted them
by the treaty of Utrecht) they had the exclusive privilege. But
as it was not expected that much profit could be made by this
trade, both the Portuguese and French companies, who had enjoyed
it upon the same terms before them, having been ruined by it,
they were allowed, as compensation, to send annually a ship of
acertain burden, to trade directly to the Spanish West Indies. Of
the ten voyages which this annual ship was allowed to make, they
are said to have gained considerably by one, that of the Royal
Caroline, in 1731 ; and to have been losers, more or less, by
almost all the rest. Their ill success was imputed, by their
factors and agents, to the extortion and oppression of the
Spanish government ; but was, perhaps, principally owing to the
profusion and depredations of those very factors and agents; some
of whom are said to have acquired great fortunes, even in one
year. In 1734, the company petitioned the king, that they might
be allowed to dispose of the trade and tonnage of their annual
ship, on account of the little profit which they made by it, and
to accept of such equivalent as they could obtain from the king
of Spain.
In 1724, this company had undertaken the whale fishery. Of this,
indeed, they had no monopoly ; but as long as they carried it on,
no other British subjects appear to have engaged in it. Of the
eight voyages which their ships made to Greenland, they were
gainers by one, and losers by all the rest. After their eighth
and last voyage, when they had sold their ships, stores, and
utensils, they found that their whole loss upon this branch,
capital and interest included, amounted to upwards of £237,000.
In 1722, this company petitioned the parliament to be allowed to
divide their immense capital of more than thirty-three millions
eight hundred thousand pounds, the whole of which had been lent
to government, into two equal parts; the one half, or upwards of
£16,900,000, to be put upon the same footing with other
government annuities, and not to be subject to the debts
contracted, or losses incurred, by the directors of the company,
in the prosecution of their mercantile projects ; the other half
to remain as before, a trading stock, and to be subject to those
debts and losses. The petition was too reasonable not to be
granted. In 1733, they again petitioned the parliament, that
three-fourths of their trading stock might be turned into annuity
stock, and only one-fourth remain as trading stock, or exposed to
the hazards arising from the bad management of their directors.
Both their annuity and trading stocks had, by this time, been
reduced more than two millions each, by several different
payments from government ; so that this fourth amounted only to
£3,662,784:8:6. In 1748, all the demands of the company upon the
king of Spain, in consequence of the assiento contract, were, by
the treaty of Aix-la-Chapelle, given up for what was supposed an
equivalent. An end was put to their trade with the Spanish West
Indies; the remainder of their trading stock was turned into an
annuity stock ; and the company ceased, in every respect, to be a
trading company.
It ought to be observed, that in the trade which the South Sea
company carried on by means of their annual ship, the only trade
by which it ever was expected that they could make any
considerable profit, they were not without competitors, either in
the foreign or in the home market. At Carthagena, Porto Bello,
and La Vera Cruz, they had to encounter the competition of the
Spanish merchants, who brought from Cadiz to those markets
European goods, of the same kind with the outward cargo of their
ship ; and in England they had to encounter that of the English
merchants, who imported from Cadiz goods of the Spanish West
Indies, of the same kind with the inward cargo. The goods, both
of the Spanish and English merchants, indeed, were, perhaps,
subject to higher duties. But the loss occasioned by the
negligence, profusion, and malversation of the servants of the
company, had probably been a tax much heavier than all those
duties. That a joint-stock company should be able to carry on
successfully any branch of foreign trade, when private
adventurers can come into any sort of open and fair competition
with them, seems contrary to all experience.
The old English East India company was established in 1600, by a
charter from Queen Elizabeth. In the first twelve voyages which
they fitted out for India, they appear to have traded as a
regulated company, with separate stocks, though only in the
general ships of the company. In 1612, they united into a joint
stock. Their charter was exclusive, and, though not confirmed
by act of parliament, was in those days supposed to convey a real
exclusive privilege. For many years, therefore, they were not
much disturbed by interlopers. Their capital, which never
exceeded £744,000, and of which £50 was a share, was not so
exorbitant, nor their dealings so extensive, as to afford either
a pretext for gross negligence and profusion, or a cover to gross
malversation. Notwithstanding some extraordinary losses,
occassioned partly by the malice of the Dutch East India company,
and partly by other accidents, they carried on for many years a
successful trade. But in process of time, when the principles of
liberty were better understood, it became every day more and more
doubtful, how far a royal charter, not confirmed by act of
parliament, could convey an exclusive privilege. Upon this
question the decisions of the courts of justice were not uniform,
but varied with the authority of government, and the humours of
the times. Interlopers multiplied upon them; and towards the
end of the reign of Charles II., through the whole of that of
James II., and during a part of that of William III., reduced
them to great distress. In 1698, a proposal was made to
parliament, of advancing two millions to government, at eight per
cent. provided the subscribers were erected into a new East India
company, with exclusive privileges. The old East India company
offered seven hundred thousand pounds, nearly the amount of their
capital, at four per cent. upon the same conditions. But such was
at that time the state of public credit, that it was more
convenient for government to borrow two millions at eight per
cent. than seven hundred thousand pounds at four. The proposal of
the new subscribers was accepted, and a new East India company
established in consequence. The old East India company, however,
had a right to continue their trade till 1701. They had, at the
same time, in the name of their treasurer, subscribed very
artfully three hundred and fifteen thousand pounds into the stock
of the new. By a negligence in the expression of the act of
parliament, which vested the East India trade in the subscribers
to this loan of two millions, it did not appear evident that they
were all obliged to unite into a joint stock. A few private
traders, whose subscriptions amounted only to seven thousand two
hundred pounds, insisted upon the privilege of trading separately
upon their own stocks, and at their own risks. The old East India
company had a right to a separate trade upon their own stock till
1701 ; and they had likewise, both before and after that period,
a right, like that or other private traders, to a separate trade
upon the £315,000, which they had subscribed into the stock of
the new company. The competition of the two companies with the
private traders, and with one another, is said to have well nigh
ruined both. Upon a subsequent occasion, in 1750, when a proposal
was made to parliament for putting the trade under the management
of a regulated company, and thereby laying it in some measure
open, the East India company, in opposition to this proposal,
represented, in very strong terms, what had been, at this time,
the miserable effects, as they thought them, of this competition.
In India, they said, it raised the price of goods so high, that
they were not worth the buying ; and in England, by overstocking
the market, it sunk their price so low, that no profit could be
made by them. That by a more plentiful supply, to the great
advantage and conveniency of the public, it must have reduced
very much the price of India goods in the English market, cannot
well be doubted; but that it should have raised very much their
price in the Indian market, seems not very probable, as all the
extraordinary demand which that competition could occasion must
have been but as a drop of water in the immense ocean of Indian
commerce. The increase of demand, besides, though in the
beginning it may sometimes raise the price of goods, never fails
to lower it in the long-run. It encourages production, and
thereby increases the competition of the producers, who, in order
to undersell one another, have recourse to new divisions or
labour and new improvements of art, which might never otherwise
have been thought of. The miserable effects of which the
company complained, were the cheapness of consumption, and the
encouragement given to production ; precisely the two effects
which it is the great business of political economy to promote.
The competition, however, of which they gave this doleful
account, had not been allowed to be of long continuance. In 1702,
the two companies were, in some measure, united by an indenture
tripartite, to which the queen was the third party ; and in 1708,
they were by act of parliament, perfectly consolidated into one
company, by their present name of the United Company of Merchants
trading to the East Indies. Into this act it was thought worth
while to insert a clause, allowing the separate traders to
continue their trade till Michaelmas 1711 ; but at the same time
empowering the directors, upon three years notice, to redeem
their little capital of seven thousand two hundred pounds, and
thereby to convert the whole stock of the company into a joint
stock. By the same act, the capital of the company, in
consequence of a new loan to government, was augmented from two
millions to three millions two hundred thousand pounds. In 1743,
the company advanced another million to government. But this
million being raised, not by a call upon the proprietors, but by
selling annuities and contracting bond-debts, it did not augment
the stock upon which the proprietors could claim a dividend. It
augmented, however, their trading stock, it being equally liable
with the other three millions two hundred thousand pounds, to the
losses sustained, and debts contracted by the company in
prosecution of their mercantile projects. From 1708, or at least
from 1711, this company, being delivered from all competitors,
and fully established in the monopoly of the English commerce to
the East Indies, carried on a succesful trade, and from their
profits, made annually a moderate dividend to their proprietors.
During the French war, which began in 1741, the ambition of Mr.
Dupleix, the French governor of Pondicherry, involved them in the
wars of the Carnatic, and in the politics of the Indian princes.
After many signal successes, and equally signal losses, they at
last lost Madras, at that time their principal settlement in
India. It was restored to them by the treaty of Aix-la-Chapelle;
and, about this time the spirit of war and conquest seems to have
taken possession of their servants in India, and never since to
have left them. During the French war, which began in 1755,
their arms partook of the general good fortune of those of Great
Britain. They defended Madras, took Pondicherry, recovered
Calcutta, and acquired the revenues of a rich and extensive
territory, amounting, it was then said, to upwards of three
millions a-year. They remained for several years in quiet
possession of this revenue; but in 1767, administration laid
claim to their territorial acquisitions, and the revenue arising
from them, as of right belonging to the crown ; and the company,
in compensation for this claim, agreed to pay to government
£400,000 a-year. They had, before this, gradually augmented their
dividend from about six to ten per cent. ; that is, upon their
capital of three millions two hundred thousand pounds, they had
increased it by £128,000, or had raised it from one hundred and
ninety-two thousand to three hundred and twenty thousand pounds
a-year. They were attempting about this time to raise it still
further, to twelve and a-half per cent., which would have made
their annual payments to their proprietors equal to what they had
agreed to pay annually to government, or to £400,000 a-year. But
during the two years in which their agreement with government was
to take place, they were restrained from any further increase of
dividend by two successive acts of parliament, of which the
object was to enable them to make a speedier progress in the
payment of their debts, which were at this time estimated at
upwards of six or seven millions sterling. In 1769, they renewed
their agreement with government for five years more, and
stipulated, that during the course of that period, they should be
allowed gradually to increase their dividend to twelve and a-half
per cent; never increasing it, however, more than one per cent.
in one year. This increase of dividend, therefore, when it had
risen to its utmost height, could augment their annual payments,
to their proprietors and government together, but by £680,000 ,
beyond what they had been before their late territorial
acquisitions. What the gross revenue of those territorial
acquisitions was supposed to amount to, has already been
mentioned ; and by an account brought by the Cruttenden East
Indiaman in 1769, the neat revenue, clear of all deductions and
military charges, was stated at two millions forty-eight thousand
seven hundred and forty-seven pounds. They were said, at the same
time, to possess another revenue, arising partly from lands, but
chiefly from the customs established at their different
settlements, amounting to £439,000. The profits of their trade,
too, according to the evidence of their chairman before the house
of commons, amounted, at this time, to at least £400,000 a-year ;
according to that of their accountant, to at least £500,000;
according to the lowest account, at least equal to the highest
dividend that was to be paid to their proprietors. So great a
revenue might certainly have afforded an augmentation of
£680,000 in their annual payments ; and, at the same time, have
left a large sinking fund, sufficient for the speedy reduction of
their debt. In 1773, however, their debts, instead of being
reduced, were augmented by an arrear to the treasury in the
payment of the four hundred thousand pounds ; by another to the
custom-house for duties unpaid; by a large debt to the bank, for
money borrowed; and by a fourth, for bills drawn upon them from
India, and wantonly accepted, to the amount of upwards of twelve
hundred thousand pounds. The distress which these accumulated
claims brought upon them, obliged them not only to reduce all at
once their dividend to six per cent. but to throw themselves upon
the mercy of govermnent, and to supplicate, first, a release from
the further payment of the stipulated £400,000 a-year ; and,
secondly, a loan of fourteen hundred thousand, to save them from
immediate bankruptcy. The great increase of their fortune had, it
seems, only served to furnish their servants with a pretext for
greater profusion, and a cover for greater malversation, than in
proportion even to that increase of fortune. The conduct of their
servants in India, and the general state of their affairs both in
India and in Europe, became the subject of a parliamentary
inquiry: in consequence of which, several very important
alterations were made in the constitution of their government,
both at home and abroad. In India, their principal settlements or
Madras, Bombay, and Calcutta, which had before been altogether
independent of one another, were subjected to a governor-general,
assisted by a council of four assessors, parliament assuming to
itself the first nomination of this governor and council, who
were to reside at Calcutta ; that city having now become, what
Madras was before, the most important of the English settlements
in India. The court of the Mayor of Calcutta, originally
instituted for the trial of mercantile causes, which arose in the
city and neighbourlood, had gradually extended its jurisdiction
with the extension of the empire. It was now reduced and confined
to the original purpose of its institution. Instead of it, a new
supreme court of judicature was established, consisting of a
chief justice and three judges, to be appointed by the crown. In
Europe, the qualification necessary to entitle a proprietor to
vote at their general courts was raisted, from five hundred
pounds, the original price of a share in the stock of the
company, to a thousand pounds. In order to vote upon this
qualification, too, it was declared necessary, that he should
have possessed it, if acquired by his own purchase, and not by
inheritance, for at least one year, instead of six months, the
term requisite before. The court of twenty-four directors had
before been chosen annually; but it was now enacted, that each
director should, for the future, be chosen for four years ; six
of them, however, to go out of office by rotation every year, and
not be capable of being re-chosen at the election of the six new
directors for the ensuing year. In consequence of these
alterations, the courts, both of the proprietors and directors,
it was expected, would be likely to act with more dignity and
steadiness than they had usually done before. But it seems
impossible, by any alterations, to render those courts, in any
respect, fit to govern, or even to share in the government of a
great empire; because the greater part of their members must
always have too little interest in the prosperity of that empire,
to give any serious attention to what may promote it. Frequently
a man of great, sometimes even a man of small fortune, is willing
to purchase a thousand pounds share in India stock, merely for
the influence which he expects to aquire by a vote in the court
of proprietors. It gives him a share, though not in the plunder,
yet in the appointment of the plunderers of India; the court of
directors, though they make that appointment, being necessarily
more or less under the influence of the proprietors, who not only
elect those directors, but sometimes over-rule the appointments
of their servants in India. Provided he can enjoy this
influence for a few years, and thereby provide for a certain
number of his friends, he frequently cares little about the
dividend, or even about the value of the stock upon which his
vote is founded. About the prosperity of the great empire,
in the government of which that vote gives him a share, he seldom
cares at all. No other sovereigns ever were, or, from the nature
of things, ever could be, so perfectly indifferent about the
happiness or misery of their subjects, the improvement or waste
of their dominions, the glory or disgrace of their
administration, as, from irresistible moral causes, the greater
part of the proprietors of such a mercantile company are, and
necessarily must be. This indifference, too, was more likely to
be increased than diminished by some of the new regulations which
were made in consequence of the parliamentary inquiry. By a
resolution of the house of commons, for example, it was declared,
that when the £1,400,000 lent to the company by government,
should be paid, and their bond-debts be reduced to £1,500,000,
they might then, and not till then, divide eight per cent. upon
their capital; and that whatever remained of their revenues and
neat profits at home should be divided into four parts; three of
them to be paid into the exchequer for the use of the public, and
the fourth to be reserved as a fund, either for the further
reduction of their bond-debts, or for the discharge of other
contingent exigencies which the company might labour under. But
if the company were bad stewards and bad sovereigns, when the
whole of their neat revenue and profits belonged to themselves,
and were at their own disposal, they were surely not likely to be
better when three-fourths of them were to belong to other people,
and the other fourth, though to be laid out for the benefit of
the company, yet to be so under the inspection and with the
approbation of other people.
It might be more agreeable to the company, that their own
servants and dependants should have either the pleasure of
wasting, or the profit of embezzling, whatever surplus might
remain, after paying the proposed dividend of eight per cent.
than that it should come into the hands of a set of people with
whom those resolutions could scarce fail to set them in some
measure at variance. The interest of those servants and
dependants might so far predominate in the court of proprietors,
as sometimes to dispose it to support the authors of depredations
which had been committed in direct violation of its own
authority. With the majority of proprietors, the support even of
the authority of their own court might sometimes be a matter of
less consequence than the support of those who had set that
authority at defiance.
The regulations of 1773, accordingly, did not put an end to the
disorder of the company's government in India. Notwithstanding
that, during a momentary fit of good conduct, they had at one
time collected into the treasury of Calcutta more than £3,000,000
sterling ; notwithstanding that they had afterwards extended
either their dominion or their depredations over a vast accession
of some of the richest and most fertile countries in India, all
was wasted and destroyed. They found themselves altogether
unprepared to stop or resist the incursion of Hyder Ali; and in
consequence of those disorders, the company is now (1784) in
greater distress than ever ; and, in order to prevent immediate
bankruptcy, is once more reduced to supplicate the assistance of
government. Different plans have been proposed by the
different parties in parliament for the better management of its
affairs; and all those plans seem to agree in supposing, what was
indeed always abundantly evident, that it is altogether unfit to
govern its territorial possessions. Even the company itself seems
to be convinced of its own incapacity so far, and seems, upon
that account willing to give them up to government.
With the right of possessing forts and garrisons in distant and
barbarous countries is necessarily connected the right of making
peace and war in those countries. The joint-stock companies,
which have had the one right, have constantly exercised the
other, and have frequently had it expressly conferred upon them.
How unjustly, how capriciously, how cruelly, they have commonly
exercised it, is too well known from recent experience.
When a company of merchants undertake, at their own risk and
expense, to establish a new trade with some remote and barbarous
nation, it may not be unreasonable to incorporate them into a
joint-stock company, and to grant them, in case of their success,
a monopoly of the trade for a certain number of years. It is
the easiest and most natural way in which the state can
recompense them for hazarding a dangerous and expensive
experiment, of which the public is afterwards to reap the
benefit. A temporary monopoly of this kind may be vindicated,
upon the same principles upon which a like monopoly of a new
machine is granted to its inventor, and that of a new book to its
author. But upon the expiration of the term, the monopoly ought
certainly to determine; the forts and garrisons, if it was found
necessary to establish any, to be taken into the hands of
government, their value to be paid to the company, and the trade
to be laid open to all the subjects of the state. By a
perpetual monopoly, all the other subjects of the state are taxed
very absurdly in two different ways : first, by the high price of
goods, which, in the case of a free trade, they could buy much
cheaper ; and, secondly, by their total exclusion from a branch
of business which it might be both convenient and profitable for
many of them to carry on. It is for the most worthless of all
purposes, too, that they are taxed in this manner. It is merely
to enable the company to support the negligence, profusion, and
malversation of their own servants, whose disorderly conduct
seldom allows the dividend of the company to exceed the ordinary
rate of profit in trades which are altogether free, and very
frequently makes a fall even a good deal short of that rate.
Without a monopoly, however, a joint-stock company, it would
appear from experience, cannot long carry on any branch of
foreign trade. To buy in one market, in order to sell with profit
in another, when there are many competitors in both; to watch
over, not only the occasional variations in the demand, but the
much greater and more frequent variations in the competition, or
in the supply which that demand is likely to get from other
people; and to suit with dexterity and judgment both the quantity
and quality of each assortment of goods to all these
circumstances, is a species of warfare, of which the operations
are continually changing, and which can scarce ever be conducted
successfully, without such an unremitting exertion of vigilance
and attention as cannot long be expected from the directors of a
joint-stock company. The East India company, upon the redemption
of their funds, and the expiration of their exclusive privilege,
have a right, by act of parliament, to continue a corporation
with a joint stock, and to trade in their corporate capacity to
the East Indies, in common with the rest of their fellow
subjects. But in this situation, the superior vigilance and
attention of a private adventurer would, in all probability, soon
make them weary of the trade.
An eminent French author, of great knowledge in matters of
political economy, the Abbe Morellet, gives a list of fifty-five
joint-stock companies for foreign trade, which have been
established in different parts of Europe since the year 1600, and
which, according to him, have all failed from mismanagement,
notwithstanding they had exclusive privileges. He has been
misinformed with regard to the history of two or three of them,
which were not joint-stock companies and have not failed. But, in
compensation, there have been several joint-stock companies which
have failed, and which he has omitted.
The only trades which it seems possible for a joint-stock company
to carry on successfully, without an exclusive privilege, are
those, of which all the operations are capable of being reduced
to what is called a routine, or to such a uniformity of method as
admits of little or no variation. Of this kind is, first, the
banking trade ; secondly, the trade of insurance from fire and
from sea risk, and capture in time of war ; thirdly, the trade of
making and maintaining a navigable cut or canal; and, fourthly,
the similar trade of bringing water for the supply of a great
city.
Though the principles of the banking trade may appear somewhat
abstruse, the practice is capable of being reduced to strict
rules. To depart upon any occasion from those rules, in
consequence of some flattering speculation of extraordinary gain,
is almost always extremely dangerous and frequently fatal to the
banking company which attempts it. But the constitution of
joint-stock companies renders them in general, more tenacious of
established rules than any private copartnery. Such companies,
therefore, seem extremely well fitted for this trade. The
principal banking companies in Europe, accordingly, are
joint-stock companies, many of which manage their trade very
successfully without any exclusive privilege. The bank of England
has no other exclusive privilege, except that no other banking
company in England shall consist of more than six persons.
The two banks of Edinburgh are joint-stock companies, without any
exclusive privilege.
The value of the risk, either from fire, or from loss by sea, or
by capture, though it cannot, perhaps, be calculated very
exactly, admits, however, of such a gross estimation, as renders
it, in some degree, reducible to strict rule and method. The
trade of insurance, therefore, may be carried on successfully by
a joint-stock company, without any exclusive privilege. Neither
the London Assurance, nor the Royal Exchange Assurance companies
have any such privilege.
When a navigable cut or canal has been once made, the management
of it becomes quite simple and easy, and it is reducible to
strict rule and method. Even the making of it is so, as it may be
contracted for with undertakers, at so much a mile, and so much a
lock. The same thing may be said of a canal, an aqueduct, or a
great pipe for bringing water to supply a great city. Such
under-takings, therefore, may be, and accordingly frequently are,
very successfully managed by joint-stock companies, without any
exclusive privilege.
To establish a joint-stock company, however, for any undertaking,
merely because such a company might be capable of managing it
successfully ; or, to exempt a particular set of dealers from
some of the general laws which take place with regard to all
their neighbours, merely because they might be capable of
thriving, if they had such an exemption, would certainly not be
reasonable. To render such an establishment perfectly reasonable,
with the circumstance of being reducible to strict rule and
method, two other circumstances ought to concur. First, it
ought to appear with the clearest evidence, that the undertaking
is of greater and more general utility than the greater part of
common trades ; and, secondly, that it requires a greater capital
than can easily be collected into a private copartnery. If a
moderate capital were sufficient, the great utility of the
undertaking would not be a sufficient reason for establishing a
joint-stock company; because, in this case, the demand for what
it was to produce, would readily and easily be supplied by
private adventurers. In the four trades above mentioned, both
those circumstances concur.
The great and general utility of the banking trade, when
prudently managed, has been fully explained in the second book of
this Inquiry. But a public bank, which is to support public
credit, and, upon particular emergencies, to advance to
government the whole produce of a tax, to the amount, perhaps, of
several millions, a year or two before it comes in, requires a
greater capital than can easily be collected into any private
copartnery.
The trade of insurance gives great security to the fortunes of
private people, and, by dividing among a great many that loss
which would ruin an individual, makes it fall light and easy upon
the whole society. In order to give this security, however, it is
necessary that the insurers should have a very large capital.
Before the establishment of the two joint-stock companies for
insurance in London, a list, it is said, was laid before the
attorney-general, of one hundred and fifty private iusurers, who
had failed in the course of a few years.
That navigable cuts and canals, and the works which are sometimes
necessary for supplying a great city with water, are of great and
general utility, while, at the same time, they frequently require
a greater expense than suits the fortunes of private people, is
sufficiently obvious.
Except the four trades above mentioned, I have not been able to
recollect any other, in which all the three circumstances
requisite for rendering reasonable the establislment of a
joint-stock company concur. The English copper company of
London, the lead-smelting company, the glass-grinding company,
have not even the pretext of any great or singular utility in the
object which they pursue ; nor does the pursuit of that object
seem to require any expense unsuitable to the fortunes of many
private men. Whether the trade which those companies carry on, is
reducible to such strict rule and method as to render it fit for
the management of a joint-stock company, or whether they have any
reason to boast of their extraordinary profits, I do not pretend
to know. The mine-adventurers company has been long ago bankrupt.
A share in the stock of the British Linen company of Edinburgh
sells, at present, very much below par, though less so than it
did some years ago. The joint-stock companies, which are
established for the public-spirited purpose of promoting some
particular manufacture, over and above managing their own affairs
ill, to the diminution of the general stock of the society, can,
in other respects, scarce ever fail to do more harm than good.
Notwithstanding the most upright intentions, the unavoidable
partiality of their directors to particular branches of the
manufacture, of which the undertakers mislead and impose upon
them, is a real discouragement to the rest, and necessarily
breaks, more or less, that natural proportion which would
otherwise establish itself between judicious industry and profit,
and which, to the general industry of the country, is of all
encouragements the greatest and the most effectual.
ART. II. ˜ Of the Expense of the Institution for the Education of
Youth.
The institutions for the education of the youth may, in the same
manner, furnish a revenue sufficient for defraying their own
expense. The fee or honorary, which the scholar pays to the
master, naturally constitutes a revenue of this kind.
Even where the reward of the master does not arise altogether
from this natural revenue, it still is not necessary that it
should be derived from that general revenue of the society, of
which the collection and application are, in most countries,
assigned to the executive power. Through the greater part of
Europe, accordingly, the endowment of schools and colleges makes
either no charge upon that general revenue, or but a very small
one. It everywhere arises chiefly from some local or provincial
revenue, from the rent of some landed estate, or from the
interest of some sum of money, allotted and put under the
management of trustees for this particular purpose, sometimes by
the sovereign himself, and sometimes by some private donor.
Have those public endowments contributed in general, to promote
the end of their institution ? Have they contributed to encourage
the diligence, and to improve the abilities, of the teachers?
Have they directed the course of education towards objects more
useful, both to the individual and to the public, than those to
which it would naturally have gone of its own accord ? It should
not seem very difficult to give at least a probable answer to
each of those questions.
In every profession, the exertion of the greater part of those
who exercise it, is always in proportion to the necessity they
are under of making that exertion. This necessity is greatest
with those to whom the emoluments of their profession are the
only source from which they expect their fortune, or even their
ordinary revenue and subsistence. In order to acquire this
fortune, or even to get this subsistence, they must, in the
course of a year, execute a certain quantity of work of a known
value; and, where the competition is free, the rivalship of
competitors, who are all endeavouring to justle one another out
of employment, obliges every man to endeavour to execute his work
with a certain degree of exactness. The greatness of the objects
which are to be acquired by success in some particular
professions may, no doubt, sometimes animate the exertions of a
few men of extraordinary spirit and ambition. Great objects,
however, are evidently not necessary, in order to occasion the
greatest exertions. Rivalship and emulation render excellency,
even in mean professions, an object of ambition, and frequently
occasion the very greatest exertions. Great objects, on the
contrary, alone and unsupported by the necessity of application,
have seldom been sufficient to occasion any considerable
exertion. In England, success in the profession of the law leads
to some very great objects of ambition ; and yet how few men,
born to easy fortunes, have ever in this country been eminent in
that profession?
The endowments of schools and colleges have necessarily
diminished, more or less, the necessity of application in the
teachers. Their subsistence, so far as it arises from their
salaries, is evidently derived from a fund, altogether
independent of their success and reputation in their particular
professions.
In some universities, the salary makes but a part, and frequently
but a small part, of the emoluments of the teacher, of which the
greater part arises from the honoraries or fees of his pupils.
The necessity of application, though always more or less
diminished, is not, in this case, entirely taken away. Reputation
in his profession is still of some importance to him, and he
still has some dependency upon the affection, gratitude, and
favourable report of those who have attended upon his
instructions; and these favourable sentiments he is likely to
gain in no way so well as by deserving them, that is, by the
abilities and diligence with which he discharges every part of
his duty.
In other universities, the teacher is prohibited from receiving
any honorary or fee from his pupils, and his salary constitutes
the whole of the revenue which he derives from his office.
His interest is, in this case, set as directly in opposition to
his duty as it is possible to set it. It is the interest of
every man to live as much at his ease as he can; and if his
emoluments are to be precisely the same, whether he does or does
not perform some very laborious duty, it is certainly his
interest, at least as interest is vulgarly understood, either to
neglect it altogether, or, if he is subject to some authority
which will not suffer him to do this, to perform it in as
careless and slovenly a manner as that authority will permit.
If he is naturally active and a lover of labour, it is his
interest to employ that activity in any way from which he can
derive some advantage, rather than in the performarnce of his
duty, from which he can derive none.
If the authority to which he is subject resides in the body
corporate, the college, or university, of which he himself is a
member, and in which the greater part of the other members are,
like himself, persons who either are, or ought to be teachers,
they are likely to make a common cause, to be all very indulgent
to one another, and every man to consent that his neighbour may
neglect his duty, provided he himself is allowed to neglect his
own. In the university of Oxford, the greater part of the public
professors have, for these many years, given up altogether even
the pretence of teaching.
If the authority to which he is subject resides, not so much in
the body corporate, of which he is a member, as in some other
extraneous persons, in the bishop of the diocese, for example, in
the governor of the province, or, perhaps, in some minister of
state, it is not, indeed, in this case, very likely that he will
be suffered to neglect his duty altogether. All that such
superiors, however, can force him to do, is to attend upon his
pupils a certain number of hours, that is, to give a certain
number of lectures in the week, or in the year. What those
lectures shall be, must still depend upon the diligence of the
teacher ; and that diligence is likely to be proportioned to the
motives which he has for exerting it. An extraneous jurisdiction
of this kind, besides, is liable to be exercised both ignorantly
and capriciously. In its nature, it is arbitrary and
discretionary; and the persons who exercise it, neither attending
upon the lectures of the teacher themselves, nor perhaps
understanding the sciences which it is his business to teach, are
seldom capable of exercising it with judgment. From the insolence
of office, too, they are frequently indifferent how they exercise
it, and are very apt to censure or deprive him of his office
wantonly and without any just cause. The person subject to such
jurisdiction is necessarily degraded by it, and, instead of being
one of the most respectable, is rendered one of the meanest and
most contemptible persons in the society. It is by powerful
protection only, that he can effectually guard himself against
the bad usage to which he is at all times exposed; and this
protection he is most likely to gain, not by ability or diligence
in his profession, but by obsequiousness to the will of his
superiors, and by being ready, at all times, to sacrifice to that
will the rights, the interest, and the honour of the body
corporate, of which he is a member. Whoever has attended for any
considerable time to the administration of a French university,
must have had occasion to remark the effects which naturally
result from an arbitrary and extraneous jurisdiction of this
kind.
Whatever forces a certain number of students to any college or
university, independent of the merit or reputation of the
teachers, tends more or less to diminish the necessity of that
merit or reputation.
The privileges of graduates in arts, in law, physic, and
divinity, when they can be obtained only by residing a certain
number of years in certain universities, necessarily force a
certain number of students to such universities, independent of
the merit or reputation of the teachers. The privileges of
graduates are a sort of statutes of apprenticeship, which have
contributed to the improvement of education just as the other
statutes of apprenticeship have to that of arts and manufactures.
The charitable foundations of scholarships, exhibitions,
bursaries, etc. necessarily attach a certain number of students
to certain colleges, independent altogether of the merit of those
particular colleges. Were the students upon such charitable
foundations left free to choose what college they liked best,
such liberty might perhaps contribute to excite some emulation
among different colleges. A regulation, on the contrary, which
prohibited even the independent members of every particular
college from leaving it, and going to any other, without leave
first asked and obtained of that which they meant to abandon,
would tend very much to extinguish that emulation.
If in each college, the tutor or teacher, who was to instruct
each student in all arts and sciences, should not be voluntarily
chosen by the student, but appointed by the head of the college ;
and if, in case of neglect, inability, or bad usage, the student
should not be allowed to change him for another, without leave
first asked and obtained ; such a regulation would not only tend
very much to extinguish all emulation among the different tutors
of the same college, but to diminish very much, in all of them,
the necessity of diligence and of attention to their respective
pupils. Such teachers, though very well paid by their
students, might be as much disposed to neglect them, as those who
are not paid by them at all or who have no other recompense but
their salary.
If the teacher happens to be a man of sense, it must be an
unpleasant thing to him to be conscious, while he is lecturing to
his students, that he is either speaking or reading nonsense, or
what is very little better than nonsense. It must, too, be
unpleasant to him to observe, that the greater part of his
students desert his lectures ; or perhaps, attend upon them with
plain enough marks of neglect, contempt, and derision. If he is
obliged, therefore, to give a certain number of lectures, these
motives alone, without any other interest, might dispose him to
take some pains to give tolerably good ones. Several different
expedients, however, may be fallen upon, which will effectually
blunt the edge of all those incitements to diligence. The
teacher, instead of explaining to his pupils himself the science
in which he proposes to instruct them, may read some book upon
it; and if this book is written in a foreign and dead language,
by interpreting it to them into their own, or, what would give
him still less trouble, by making them interpret it to him, and
by now and then making an occasional remark upon it, he may
flatter himself that he is giving a lecture. The slightest
degree of knowledge and application will enable him to do this,
without exposing himself to contempt or derision, by saying any
thing that is really foolish, absurd, or ridiculous. The
discipline of the college, at the same time, may enable him to
force all his pupils to the most regular attendance upon his sham
lecture, and to maintain the most decent and respectful behaviour
during the whole time of the performance.
The discipline of colleges and universities is in general
contrived, not for the benefit of the students, but for the
interest, or, more properly speaking, for the ease of the
masters. Its object is, in all cases, to maintain the authority
of the master, and, whether he neglects or performs his duty, to
oblige the students in all cases to behave to him as if he
performed it with the greatest diligence and ability. It seems to
presume perfect wisdom and virtue in the one order, and the
greatest weakness and folly in the other. Where the masters,
however, really perform their duty, there are no examples, I
believe, that the greater part of the students ever neglect
theirs. No discipline is ever requisite to force attendance
upon lectures which are really worth the attending, as is well
known wherever any such lectures are given. Force and restraint
may, no doubt, be in some degree requisite, in order to oblige
children, or very young boys, to attend to those parts of
education, which it is thought necessary for them to acquire
during that early period of life ; but after twelve or thirteen
years of age, provided the master does his duty, force or
restraint can scarce ever be necessary to carry on any part of
education. Such is the generosity of the greater part of young
men, that so far from being disposed to neglect or despise the
instructions of their master, provided he shews some serious
intention of being of use to them, they are generally inclined to
pardon a great deal of incorrectness in the performance of his
duty, and sometimes even to conceal from the public a good deal
of gross negligence.
Those parts of education, it is to be observed, for the teaching
of which there are no public institutions, are generally the best
taught. When a young man goes to a fencing or a dancing school,
he does not, indeed, always learn to fence or to dance very well;
but he seldom fails of learning to fence or to dance. The good
effects of the riding school are not commonly so evident. The
expense of a riding school is so great, that in most places it is
a public institution. The three most essential parts of literary
education, to read, write, and account, it still continues to be
more common to acquire in private than in public schools; and it
very seldom happens, that anybody fails of acquiring them to the
degree in which it is necessary to acquire them.
In England, the public schools are much less corrupted than the
universities. In the schools, the youth are taught, or at least
may be taught, Greek and Latin; that is, everything which the
masters pretend to teach, or which it is expected they should
teach. In the universities, the youth neither are taught, nor
always can find any proper means of being taught the sciences,
which it is the business of those incorporated bodies to teach.
The reward of the schoolmaster, in most cases, depends
principally, in some cases almost entirely, upon the fees or
honoraries of his scholars. Schools have no exclusive privileges.
In order to obtain the honours of graduation, it is not necessary
that a person should bring a certificate of his having studied a
certain number of years at a public school. If, upon examination,
he appears to understand what is taught there, no questions are
asked about the place where he learnt it.
The parts of education which are commonly taught in universities,
it may perhaps be said, are not very well taught. But had it not
been for those institutions, they would not have been commonly
taught at all; and both the individual and the public would have
suffered a good deal from the want of those important parts of
education.
The present universities of Europe were originally, the greater
part of them, ecclesiastical corporations, instituted for the
education of churchmen. They were founded by the authority of the
pope; and were so entirely under his immediate protection, that
their members, whether masters or students, had all of them what
was then called the benefit of clergy, that is, were exempted
from the civil jurisdiction of the countries in which their
respective universities were situated, and were amenable only to
the ecclesiastical tribunals. What was taught in the greater part
of those universities was suitable to the end of their
institution, either theology, or something that was merely
preparatory to theology.
When Christianity was first established by law, a corrupted Latin
had become the common language of all the western parts of
Europe. The service of the church, accordingly, and the
translation of the Bible which were read in churches, were both
in that corrupted Latin; that is, in the common language of the
country, After the irruption of the barbarous nations who
overturned the Roman empire, Latin gradually ceased to be the
language of any part of Europe. But the reverence of the people
naturally preserves the established forms and ceremonies of
religion long after the circumstances which first introduced and
rendered them reasonable, are no more. Though Latin, therefore,
was no longer understood anywhere by the great body of the
people, the whole service of the church still continued to be
performed in that language. Two different languages were
thus established in Europe, in the same manner as in ancient
Egypt: a language of the priests, and a language of the people; a
sacred and a profane, a learned and an unlearned language. But it
was necessary that the priests should understand something of
that sacred and learned language in which they were to officiate;
and the study of the Latin language therefore made, from the
beginning, an essential part of university education.
It was not so with that either of the Greek or of the Hebrew
language. The infallible decrees of the church had pronounced the
Latin translation of the Bible, commonly called the Latin
Vulgate, to have been equally dictated by divine inspiration, and
therefore of equal authority with the Greek and Hebrew originals.
The knowledge of those two languages, therefore, not being
indispensably requsite to a churchman, the study of them did not
for along time make a necessary part of the common course of
university education. There are some Spanish universities, I
am assured, in which the study of the Greek language has never
yet made any part of that course. The first reformers found the
Greek text of the New Testament, and even the Hebrew text of the
Old, more favourable to their opinions than the vulgate
translation, which, as might naturally be supposed, had been
gradually accommodated to support the doctrines of the Catholic
Church. They set themselves, therefore, to expose the many errors
of that translation, which the Roman catholic clergy were thus
put under the necessity of defending or explaining. But this
could not well be done without some knowledge of the original
languages, of which the study was therefore gradually introduced
into the greater part of universities; both of those which
embraced, and of those which rejected, the doctrines of the
reformation. The Greek language was connected with every part of
that classical learning, which, though at first principally
cultivated by catholics and Italians, happened to come into
fashion much about the same time that the doctrines of the
reformation were set on foot. In the greater part of
universities, therefore, that language was taught previous to the
study of philosophy, and as soon as the student had made some
progress in the Latin. The Hebrew language having no connection
with classical learning, and, except the Holy Scriptures, being
the language of not a single book in any esteem the study of it
did not commonly commence till after that of philosophy, and when
the student had entered upon the study of theology.
Originally, the first rudiments, both of the Greek and Latin
languages, were taught in universities; and in some universities
they still continue to be so. In others, it is expected that the
student should have previously acquired, at least, the rudiments
of one or both of those languages, of which the study continues
to make everywhere a very considerable part of university
education.
The ancient Greek philosophy was divided into three great
branches; physics, or natural philosophy; ethics, or moral
philosophy; and logic. This general division seems perfectly
agreeable to the nature of things.
The great phenomena of nature, the revolutions of the heavenly
bodies, eclipses, comets; thunder and lightning, and other
extraordinary meteors; the generation, the life, growth, and
dissolution of plants and animals; are objects which, as they
necessarily excite the wonder, so they naturally call forth the
curiosity of mankind to inquire into their causes.
Superstition first attempted to satisfy this curiosity, by
referring all those wonderful appearances to the immediate a
gency of the gods. Philosophy afterwards endeavoured to account
for them from more familiar causes, or from such as mankind were
better acquainted with, than the agency of the gods. As those
great phenomena are the first objects of human curiosity, so the
science which pretends to explain them must naturally have been
the first branch of philosophy that was cuitivated. The first
philosophers, accordingly, of whom history has preserved any
account, appear to have been natural philosophers.
In every age and country of the world, men must have attended to
the characters, designs, and actions of one another; and many
reputable rules and maxims for the conduct of human life must
have been laid down and approved of by common consent. As soon as
writing came into fashion, wise men, or those who fancied
themselves such, would naturally endeavour to increase the number
of those established and respected maxims, and to express their
own sense of what was either proper or improper conduct,
sometimes in the more artificial form of apologues, like what are
called the fables of Aesop; and sometimes in the more simple one
of apophthegms or wise sayings, like the proverbs of Solmnon, the
verses of Theognis and Phocyllides, and some part of the works of
Hesiod. They might continue in this manner, for a long time,
merely to multiply the number of those maxims of prudence and
morality, without even attempting to arrange them in any very
distinct or methodical order, much less to connect them together
by one or more general principles, from which they were all
deducible, like effects from their natural causes. The beauty of
a systematical arrangement of different observations, connected
by a few common principles, was first seen in the rude essays of
those ancient times towards a system of natural philosophy.
Something of the same kind was afterwards attempted in morals.
The maxims of common life were arranged in some methodical order,
and connected together by a few common principles, in the same
manner as they had attempted to arrange and connect the phenomena
of nature. The science which pretends to investigate and
explain those connecting principles, is what is properly called
Moral Philosophy.
Different authors gave different systems, both of natural and
moral philosophy. But the arguments by which they supported those
different systems, far from being always demonstrations, were
frequently at best but very slender probabilities, and sometimes
mere sophisms, which had no other foundation but the inaccuracy
and ambiguity of common language. Speculative systems, have,
in all ages of the world, been adopted for reasons too frivolous
to have determined the judgment of any man of common sense, in a
matter of the smallest pecuniary interest. Gross sophistry has
scarce ever had any influence upon the opinions of mankind,
except in matters of philosophy and speculation ; and in these it
has frequently had the greatest. The patrons of each system of
natural and moral philosophy, naturally endeavoured to expose the
weakness of the arguments adduced to support the systems which
were opposite to their own. In examining those arguments, they
were necessarily led to consider the difference between a
probable and a demonstrative argument, between a fallacious and a
conclusive one; and logic, or the science of the general
principles of good and bad reasoning, necessarily arose out of
the observations which a scrutiny of this kind gave occasion to ;
though, in its origin, posterior both to physics and to ethics,
it was commonly taught, not indeed in all, but in the greater
part of the ancient schools of philosophy, previously to either
of those sciences. The student, it seems to have been thought,
ought to understand well the difference between good and bad
reasoning, before he was led to reason upon subjects of so great
importance.
This ancient division of philosophy into three parts was, in the
greater part of the universities of Europe, changed for another
into five.
In the ancient philosophy, whatever was taught concerning the
nature either of the human mind or of the Deity, made a part of
the system of physics. Those beings, in whatever their
essence might be supposed to consist, were parts of the great
system of the universe, and parts, too, productive of the most
important effects. Whatever human reason could either
conclude or conjecture concerning them, made, as it were, two
chapters, though no doubt two very important ones, of the science
which pretended to give an account of the origin and revolutions
of the great system of the universe. But in the universities of
Europe, where philosophy was taught only as subservient to
theology, it was natural to dwell longer upon these two chapters
than upon any other of the science. They were gradually more and
more extended, and were divided into many inferior chapters; till
at last the doctrine of spirits, of which so little can be known,
came to take up as much room in the system of philosophy as the
doctrine of bodies, of which so much can be known. The doctrines
concerning those two subjects were considered as making two
distinct sciences. What are called metaphysics, or
pnemnatics, were set in opposition to physics, and were
cultivated not only as the more sublime, but, for the purposes of
a particular profession, as the more useful science of the two.
The proper subject of experiment and observation, a subject in
which a careful attention is capable of making so many useful
discoveries, was almost entirely neglected. The subject in
which, after a very few simple and almost obvious truths, the
most careful attention can discover nothing but obscurity and
uncertainty, and can consequently produce nothing but subtlelies
and sophisms, was greatly cultivated.
When those two sciences had thus been set in opposition to one
another, the comparison between them naturally gave birth to a
third, to what was called ontology, or the science which treated
of the qualities and attributes which were common to both the
subjects of the other two sciences. But if subtleties and
sophisms composed the greater part of the metaphysics or
pneumatics of the schools, they composed the whole of this cobweb
science of ontology, which was likewise sometimes called
metaphysics.
Wherein consisted the happiness and perfection of a man,
considered not only as an individual, but as the member of a
family, of a state, and of the great society of mankind, was the
object which the ancient moral philosophy proposed to
investigate. In that philosophy, the duties of human life were
treated of as subservient to the happiness and perfection of
human life, But when moral, as well as natural philosophy, came
to be taught only as subservient to theology, the duties of human
life were treated of as chiefly subservient to the happiness of a
life to come. In the ancient philosophy, the perfection of virtue
was represented as necessarily productive, to the person who
possessed it, of the most perfect happiness in this life. In the
modern philosophy, it was frequently represented as generally, or
rather as almost always, inconsistent with any degree of
happiness in this life; and heaven was to be earned only by
penance and mortification, by the austerities and abasement of a
monk, not by the liberal, generous, and spirited conduct of a
man. Casuistry, and an ascetic morality, made up, in most cases,
the greater part of the moral philosophy of the schools. By far
the most important of all the different branches of philosophy
became in this manner by far the most corrupted.
Such, therefore, was the common course of philosophical education
in the greater part of the universities in Europe. Logic was
taught first; ontology came in the second place; pneumatology,
comprehending the doctrine concerning the nature of the human
soul and of the Deity, in the third; in the fourth followed a
debased system of moral philosophy, which was considered as
immediately connected with the doctrines of pneumatology, with
the immortality of the human soul, and with the rewards and
punishments which, from the justice of the Deity, were to be
expected in a life to come: a short and superficial system of
physics usually concluded the course.
The alterations which the universities of Europe thus introduced
into the ancient course of philosophy were all meant for the
education of ecclesiastics, and to render it a more proper
introduction to the study of theology But the additional quantity
of subtlety and sophistry, the casuistry and ascetic morality
which those alterations introduced into it, certainly did not
render it more for the education of gentlemen or men of the
world, or more likely either to improve the understanding or to
mend the heart.
This course of philosophy is what still continues to be taught in
the greater part of the universities of Europe, with more or less
diligence, according as the constitution of each particular
university happens to render diligence more or less necessary to
the teachers. In some of the richest and best endowed
universities, the tutors content themselves with teaching a few
unconnected shreds and parcels of this corrupted course ; and
even these they commonly teach very negligently and
superficially.
The improvements which, in modern times have been made in several
different branches of philosophy, have not, the greater part of
them, been made in universities, though some, no doubt, have. The
greater part of universities have not even been very forward to
adopt those improvements after they were made; and several of
those learned societies have chosen to remain, for a long time,
the sanctuaries in which exploded systems and obsolete prejudices
found shelter and protection, after they had been hunted out of
every other corner of the world. In general, the richest and best
endowed universities have been slowest in adopting those
improvements, and the most averse to permit any considerable
change in the established plan of education. Those improvements
were more easily introduced into some of the poorer universities,
in which the teachers, depending upon their reputation for the
greater part of their subsistence, were obliged to pay more
attention to the current opinions of the world.
But though the public schools and universities of Europe were
originally intended only for the education of a particular
profession, that of churchmen ; and though they were not always
very diligent in instructing their pupils, even in the sciences
which were supposed neccessary for that profession; yet they
gradually drew to themselves the education of almost all other
people, particularly of almost all gentlemen and men of fortune.
No better method, it seems, could be fallen upon, of spending,
with any advantage, the long interval between infancy and that
period of life at which men begin to apply in good earnest to the
real business of the world, the business which is to employ them
during the remainder of their days. The greater part of what is
taught in schools and universities, however, does not seem to be
the most proper preparation for that business.
In England, it becomes every day more and more the custom to send
young people to travel in foreign countries immediately upon
their leaving school, and without sending them to any university.
Our young people, it is said, generally return home much improved
by their travels. A young man, who goes abroad at seventeen or
eighteen, and returns home at one-and-twenty, returns three or
four years older than he was when he went abroad ; and at that
age it is very difficult not to improve a good deal in three or
four years. In the course of his travels, he generally acquires
some knowledge of one or two foreign languages; a knowledge,
however, which is seldom sufficient to enable him either to speak
or write them with propriety. In other respects, he commonly
returns home more conceited, more unprincipled, more dissipated,
and more incapable of my serious application, either to study or
to business, than he could well have become in so short a time
had he lived at home. By travelling so very young, by spending in
the most frivolous dissipation the most previous years of his
life, at a distance from the inspection and controul of his
parents and relations, every useful habit, which the earlier
parts of his education might have had some tendency to form in
him, instead of being riveted and confirmed, is almost
necessarily either weakened or effaced. Nothing but the discredit
into which the universities are allowing themselves to fall,
could ever have brought into repute so very absurd a practice as
that of travelling at this early period of life. By sending his
son abroad, a father delivers himself, at least for some time,
from so disagreeable an object as that of a son unemployed,
neglected, and going to ruin before his eyes.
Such have been the effects of some of the modern institutions for
education.
Different plans and different institutions for education seem to
have taken place in other ages and nations.
In the republics of ancient Greece, every free citizen was
instructed, under the direction of the public magistrate, in
gymnastic exercises and in music. By gynmastic exercises, it was
intended to harden his body, to sharpen his courage, and to
prepare him for the fatigues and dangers of war ; and as the
Greek militia was, by all accounts, one of the best that ever was
in the world, this part of their public education must have
answered completely the purpose for which it was intended. By the
other part, music, it was proposed, at least by the philosophers
and historians, who have given us an account of those
institutions, to humanize the mind, to soften the temper, and to
dispose it for performing all the social and moral duties of
public and private life.
In ancient Rome, the exercises of the Campus Martius answered the
same purpose as those of the Gymnasium in ancient Greece, and
they seem to have answered it equally well. But among the Romans
there was nothing which corresponded to the musical education of
the Greeks. The morals of the Romans, however, both in private
and public life, seem to have been, not only equal, but, upon the
whole, a good deal superior to those of the Greeks. That they
were superior in private life, we have the express testimony of
Polybius, and of Dionysius of Halicarnassus, two authors well
acquainted with both nations; and the whole tenor of the Greek
and Roman history bears witness to the superiority of the public
morals of the Romans. The good temper and moderation of
contending factions seem to be the most essential circumstances
in the public morals of a free people. But the factions of the
Greeks were almost always violent and sanguinary ; whereas, till
the time of the Gracchi, no blood had ever been shed in any Roman
faction; and from the time of the Gracchi, the Roman republic may
be considered as in reality dissolved. Notwithstanding,
therefore, the very respectable authority of Plato, Aristotle,
and Polybius, and notwithstanding the very ingenious reasons by
which Mr. Montesquieu endeavours to support that authority, it
seems probable that the musical education of the Greeks had no
great effect in mending their morals, since, without any such
education, those of the Romans were, upon the whole, superior.
The respect of those ancient sages for the institutions of their
ancestors had probably disposed them to find much political
wisdom in what was, perhaps, merely an ancient custom, continued,
without interruption, from the earliest period of those
societies, to the times in which they had arrived at a
considerable degree of refinement. Music and dancing are the
great amusements of almost all barbarous nations, and the great
accomplishments which are supposed to fit any man for
entertaining his society. It is so at this day among the negroes
on the coast of Africa. It was so among the ancient Celtes, among
the ancient Scandinavians, and, as we may learn from Homer, among
the ancient Greeks, in the times preceding the Trojan war. When
the Greek tribes had formed themselves into little republics, it
was natural that the study of those accomplishments should for a
long time make a part of the public and common education of the
people.
The masters who instructed the young people, either in music or
in military exercises, do not seem to have been paid, or even
appointed by the state, either in Rome or even at Athens, the
Greek republic of whose laws and customs we are the best
informed. The state required that every free citizen should fit
himself for defending it in war, and should upon that account,
learn his military exercises. But it left him to learn them of
such masters as he could find ; and it seems to have advanced
nothing for this purpose, but a public field or place of
exercise, in which he should practise and perform them.
In the early ages, both of the Greek and Roman republics, the
other parts of education seem to have consisted in learning to
read, write, and account, according to the arithmetic of the
times. These accomplishments the richer citizens seem frequently
to have acquired at home, by the assistance of some demestic
pedagogue, who was, generally, either a slave or a freedman ; and
the poorer citizens in the schools of such masters as made a
trade of teaching for hire. Such parts of education, however,
were abandoned altogether to the care of the parents or guardians
of each individual. It does not appear that the state ever
assumed any inspection or direction of them. By a law of Solon,
indeed, the children were acquitted from maintaining those
parents who had neglected to instruct them in some profitable
trade or business.
In the progress of refinement, when philosophy and rhetoric came
into fashion, the better sort of people used to send their
children to the schools of philosophers and rhetoricians, in
order to be instructed in these fashionable sciences. But those
schools were not supported by the public. They were, for a long
time, barely tolerated by it. The demand for philosophy and
rhetoric was, for a long time, so small, that the first professed
teachers of either could not find constant employment in any one
city, but were obliged to travel about from place to place. In
this manner lived Zeno of Elea, Protagoras, Gorgias, Hippias, and
many others. As the demand increased, the school, both of
philosophy and rhetoric, became stationary, first in Athens, and
afterwards in several other cities. The state, however, seems
never to have encouraged them further. than by assigning to some
of them a particular place to teach in, which was sometimes done,
too, by private donors. The state seems to have assigned the
Academy to Plato, the Lyceum to Aristotle, and the Portico to
Zeno of Citta, the founder of the Stoics. But Epicurus bequeathed
his gardens to his own school. Till about the time of Marcus
Antoninus, however, no teacher appears to have had any salary
from the public, or to have had any other emoluments, but what
arose from the honorarius or fees of his scholars. The bounty
which that philosophical emperor, as we learn from Lucian,
bestowed upon one of the teachers of philosophy, probably lasted
no longer than his own life. There was nothing equivalent to the
privileges of graduation; and to have attended any of those
schools was not necessary, in order to be permitted to practise
any particular trade or profession. If the opinion of their own
utility could not draw scholars to them, the law neither forced
anybody to go to them, nor rewarded anybody for having gone to
them. The teachers had no jurisdiction over their pupils, nor any
other authority besides that natural authority which superior
virtue and abilities never fail to procure from young people
towards those who are entrusted with any part of their education.
At Rome, the study of the civil law made a part of the education,
not of the greater part of the citizens, but of some particular
families. The young people, however, who wished to acquire
knowledge in the law, had no public school to go to, and had no
other method of studying it, than by frequenting the company of
such of their relations and friends as were supposed to
understand it. It is, perhaps, worth while to remark, that though
the laws of the twelve tables were many of them copied from those
of some ancient Greek republics, yet law never seems to have
grown up to be a science in any republic of ancient Greece. In
Rome it became a science very early, and gave a considerable
degree of illustration to those citizens who had the reputation
of understanding it. In the republics of ancient Greece,
particularly in Athens, the ordinary courts of justice consisted
of numerous, and therefore disorderly, bodies of people, who
frequently decided almost at random, or as clamour, faction, and
party-spirit, happened to determine. The ignominy of an unjust
decision, when it was to be divided among five hundred, a
thousand, or fifteen hundred people (for some of their courts
were so very numerous), could not fall very heavy upon any
individual. At Rome, on the contrary, the principal courts
of justice consisted either of a single judge, or of a small
number of judges, whose characters, especially as they
deliberated always in public, could not fail to be very much
affected by any rash or unjust decision. In doubtful cases such
courts, from their anxiety to avoid blame, would naturally
endeavour to shelter themselves under the example or precedent of
the judges who had sat before them, either in the same or in some
other court. This attention to practice and precedent,
necessarily formed the Roman law into that regular and orderly
system in which it has been delivered down to us ; and the like
attention has had the like effects upon the laws of every other
country where such attention has taken place. The superiority of
character in the Romans over that of the Greeks, so much remarked
by Polybius and Dionysius of Halicarnassus, was probably more
owing to the better constitution of their courts of justice, than
to any of the circumstances to which those authors ascribe it.
The Romans are said to have been particularly distinguished for
their superior respect to an oath. But the people who were
accustomed to make oath only before some diligent and well
informed court of justice, would naturally be much more attentive
to what they swore, than they who were accustomed to do the same
thing before mobbish and disorderly assemblies.
The abilities, both civil and military, of the Greeks and Romans,
will readily be allowed to have been at least equal to those of
any modern nation. Our prejudice is perhaps rather to overrate
them. But except in what related to military exercises, the state
seems to have been at no pains to form those great abilities; for
I cannot be induced to believe that the musical education of the
Greeks could be of much consequence in forming them. Masters,
however, had been found, it seems, for instructing the better
sort of people among those nations, in every art and science in
which the circumstances of their society rendered it necessary or
convenient for them to be instructed. The demand for such
instruction produced, what it always produces, the talent for
giving it; and the emulation which an unrestrained competition
never fails to excite, appears to have brought that talent to a
very high degree of perfection. In the attention which the
ancient philosophers excited, in the empire which they acquired
over the opinions and principles of their auditors, in the
faculty which they possessed of giving a certain tone and
character to the conduct and conversation of those auditors, they
appear to have been much superior to any modern teachers. In
modern times, the diligence of public teachers is more or less
corrupted by the circumstances which render them more or less
independent of their success and reputation in their particular
professions. Their salaries, too, put the private teacher, who
would pretend to come into competition with them, in the same
state with a merchant who attempts to trade without a bounty, in
competition with those who trade with a considerable one. If he
sells his goods at nearly the same price, he cannot have the same
profit ; and poverty and beggary at least, if not bankruptcy and
ruin, will infallibly be his lot. If he attempts to sell
them much dearer, he is likely to have so few customers, that his
circumstances will not be much mended. The privileges of
graduation, besides, are in many countries necessary, or at least
extremely convenient, to most men of learned professions, that
is, to the far greater part of those who have occasion for a
learned education. But those privileges can be obtained only by
attending the lectures of the public teachers. The most careful
attendance upon the ablest instructions of any private teacher
cannot always give any title to demand them. It is from these
different causes that the private teacher of any of the sciences,
which are commonly taught in universities, is, in modern times,
generally considered as in the very lowest order of men of
letters. A man of real abilities can scarce find out a more
humiliating or a more unprofitable employment to turn them to.
The endowments of schools and colleges have in this manner not
only corrupted the diligence of public teachers, but have
rendered it almost impossible to have any good private ones.
Were there no public institutions for education, no system, no
science, would be taught, for which there was not some demand, or
which the circumstances of the times did not render it either
necessary or convenient, or at least fashionable to learn. A
private teacher could never find his account in teaching either
an exploded and antiquated system of a science acknowledged to be
useful, or a science universally believed to be a mere useless
and pedantic heap of sophistry and nonsense. Such systems,
such sciences, can subsist nowhere but in those incorporated
societies for education, whose prosperity and revenue are in a
great measure independent of their industry. Were there no public
institutions for education, a gentleman, after going through,
with application and abilities, the most complete course of
education which the circumstances of the times were supposed to
afford, could not come into the world completely ignorant of
everything which is the common subject of conversation among
gentlemen and men of the world.
There are no public institutions for the education of women, and
there is accordingly nothing useless, absurd, or fantastical, in
the common course of their education. They are taught what their
parents or guardians judge it necessary or useful for them to
learn, and they are taught nothing else. Every part of their
education tends evidently to some useful purpose ; either to
improve the natural attractions of their person, or to form their
mind to reserve, to modesty, to chastity, and to economy ; to
render them both likely to became the mistresses of a family, and
to behave properly when they have become such. In every part of
her life, a woman feels some conveniency or advantage from every
part of her education. It seldom happens that a man, in any
part of his life, derives any conveniency or advantage from some
of the most laborious and troublesome parts of his education.
Ought the public, therefore, to give no attention, it may be
asked, to the education of the people ? Or, if it ought to give
any, what are the different parts of education which it ought to
attend to in the different orders of the people? and in what
manner ought it to attend to them ?
In some cases, the state of society necessarily places the
greater part of individuals in such situations as naturally form
in them, without any attention of government, almost all the
abilities and virtues which that state requires, or perhaps can
admit of. In other cases, the state of the society does not place
the greater part of individuals in such situations; and some
attention of government is necessary, in order to prevent the
almost entire corruption and degeneracy of the great body of the
people.
In the progress of the division of labour, the employment of the
far greater part of those who live by labour, that is, of the
great body of the people, comes to be confined to a few very
simple operations; frequently to one or two. But the
understandings of the greater part of men are necessarily formed
by their ordinary employments. The man whose whole life is spent
in performing a few simple operations, of which the effects, too,
are perhaps always the same, or very nearly the same, has no
occasion to exert his understanding, or to exercise his
invention, in finding out expedients for removing difficulties
which never occur. He naturally loses, therefore, the habit of
such exertion, and generally becomes as stupid and ignorant as it
is possible for a human creature to become. The torpor of his
mind renders him not only incapable of relishing or bearing a
part in any rational conversation, but of conceiving any
generous, noble, or tender sentiment, and consequently of forming
any just judgment concerning many even of the ordinary duties of
private life. Of the great and extensive interests of his country
he is altogether incapable of judging; and unless very particular
pains have been taken to render him otherwise, he is equally
incapable of defending his country in war. The uniformity of his
stationary life naturally corrupts the courage of his mind, and
makes him regard, with abhorrence, the irregular, uncertain, and
adventurous life of a soldier. It corrupts even the activity
of his body, and renders him incapable of exerting his strength
with vigour and perseverance in any other employment, than that
to which he has been bred. His dexterity at his own particular
trade seems, in this manner, to be acquired at the expense of his
intellectual, social, and martial virtues. But in every improved
and civilized society, this is the state into which the labouring
poor, that is, the great body of the people, must necessarily
fall, unless government takes some pains to prevent it.
It is otherwise in the barbarous societies, as they are commonly
called, of hunters, of shepherds, and even of husbandmen in that
rude state of husbandry which precedes the improvement of
manufactures, and the extension of foreign commerce. In such
societies, the varied occupations of every man oblige every man
to exert his capacity, and to invent expedients for removing
difficulties which are continually occurring. Invention is
kept alive, and the mind is not suffered to fall into that drowsy
stupidity, which, in a civilized society, seems to benumb the
understanding of almost all the inferior ranks of people. In
those barbarous societies, as they are called, every man, it has
already been observed, is a warrior. Every man, too, is in some
measure a statesman, and can form a tolerable judgment concerning
the interest of the society, and the conduct of those who govern
it. How far their chiefs are good judges in peace, or good
leaders in war, is obvious to the observation of almost every
single man among them. In such a society, indeed, no man can well
acquire that improved and refined understanding which a few men
sometimes possess in a more civilized state. Though in a rude
society there is a good deal of variety in the occupations of
every individual, there is not a great deal in those of the whole
society. Every man does, or is capable of doing, almost every
thing which any other man does, or is capable of being. Every man
has a considerable degree of knowledge, ingenuity, and invention
but scarce any man has a great degree. The degree, however, which
is commonly possessed, is generally sufficient for conducting the
whole simple business of the society. In a civilized state, on
the contrary, though there is little variety in the occupations
of the greater part of individuals, there is an almost infinite
variety in those of the whole society These varied occupations
present an almost infinite variety of objects to the
contemplation of those few, who, being attached to no particular
occupation themselves, have leisure and inclination to examine
the occupations of other people. The contemplation of so great a
variety of objects necessarily exercises their minds in endless
comparisons and combinations, and renders their understandings,
in an extraordinary degree, both acute anti comprehensive. Unless
those few, however, happen to be placed in some very particular
situations, their great abilities, though honourable to
themselves, may contribute very little to the good government or
happiness of their society. Notwithstanding the great abilities
of those few, all the nobler parts of the human character may be,
in a great measure, obliterated and extinguished in the great
body of the people.
The education of the common people requires, perhaps, in a
civilized and commercial society, the attention of the public,
more than that of people of some rank and fortune. People of some
rank and fortune are generally eighteen or nineteen years of age
before they enter upon that particular business, profession, or
trade, by which they propose to distinguish themselves in the
world. They have, before that, full time to acquire, or at least
to fit themselves for afterwards acquiring, every accomplishment
which can recommend them to the public esteem, or render them
worthy of it. Their parents or guardians are generally
sufficiently anxious that they should be so accomplished, and are
in most cases, willing enough to lay out the expense which is
necessary for that purpose. If they are not always properly
educated, it is seldom from the want of expense laid out upon
their education, but from the improper application of that
expense. It is seldom from the want of masters, but from the
negligence and incapacity of the masters who are to be had, and
from the difficulty, or rather from the impossibility, which
there is, in the present state of things, of finding any better.
The employments, too, in which people of some rank or fortune
spend the greater part of their lives, are not, like those of the
common people, simple and uniform. They are almost all of them
extremely complicated, and such as exercise the head more than
the hands. The understandings of those who are engaged in such
employments, can seldom grow torpid for want of exercise. The
employments of people of some rank and fortune, besides, are
seldom such as harass them from morning to night. They generally
have a good deal of leisure, during which they may perfect
themselves in every branch, either of useful or ornamental
knowledge, of which they may have laid the foundation, or for
which they may have acquired some taste in the earlier part of
life.
It is otherwise with the common people. They have little time to
spare for education. Their parents can scarce afford to maintain
them, even in infancy. As soon as they are able to work, they
must apply to some trade, by which they can earn their
subsistence. That trade, too, is generally so simple and uniform,
as to give little exercise to the understanding; while, at the
same time, their labour is both so constant and so severe, that
it leaves them little leisure and less inclination to apply to,
or even to think of any thing else.
But though the common people cannot, in any civilized society, be
so well instructed as people of some rank and fortune; the most
essential parts of education, however, to read, write, and
account, can be acquired at so early a period of life, that the
greater part, even of those who are to be bred to the lowest
occupations, have time to acquire them before they can be
employed in those occupations. For a very small expense, the
public can facilitate, can encourage and can even impose upon
almost the whole body of the people, the necessity of acquiring
those most essential parts of education.
The public can facilitate this acquisition, by establishing in
every parish or district a little school, where children maybe
taught for a reward so moderate, that even a common labourer may
afford it ; the master being partly, but not wholly, paid by the
public ; because, if he was wholly, or even principally, paid by
it, he would soon learn to neglect his business. In Scotland, the
establishment of such parish schools has taught almost the whole
common people to read, and a very great proportion of them to
write and account. In England, the establishment of charity
schools has had an effect of the same kind, though not so
universally, because the establishmnent is not so universal. If,
in those little schools, the books by which the children are
taught to read, were a little more instructive than they commonly
are; and if, instead of a little smattering in Latin, which the
children of the common people are sometimes taught there, and
which can scarce ever be of any use to them, they were instructed
in the elementary parts of geometry and mechanics ; the literary
education of this rank of people would, perhaps, be as complete
as can be. There is scarce a common trade, which does not afford
some opportunities of applying to it the principles of geometry
and mechanics, and which would not, therefore, gradually exercise
and improve the common people in those principles, the necessary
introduction to the most sublime, as well as to the most useful
sciences.
The public can encourage the acquisition of those most essential
parts of education, by giving small premiums, and little badges
of distinction, to the children of the common people who excel in
them.
The public can impose upon almost the whole body of the people
the necessity of acquiring the most essential parts of education,
by obliging every man to undergo an examination or probation in
them, before he can obtain the freedom in any corporation, or be
allowed to set up any trade, either in a village or town
corporate.
It was in this manner, by facilitating the acquisition of their
military and gymnastic exercises, by encouraging it, and even by
imposing upon the whole body of the people the necessity of
learning those exercises, that the Greek and Roman republics
maintained the martial spirit of their respective citizens. They
facilitated the acquisition of those exercises, by appointing a
certain place for learning and practising them, and by granting
to certain masters the privilege of teaching in that place. Those
masters do not appear to have had eirher salaries or exclusive
privileges of any kind. Their reward consisted altogether in what
they got from their scholars ; and a citizen, who had learnt his
exercises in the public gymnasia, had no sort of legal advantage
over one who had learnt them privately, provided the latter had
learned them equally well. Those republics encouraged the
acquisition of those exercises, by bestowing little premiums and
badges of distinction upon those who excelled in them. To have
gained a prize in the Olympic, Isthmian, or Nemaean games, gave
illustration, not only to the person who gained it, but to his
whole family and kindred. The obligation which every citizen was
under, to serve a certain number of years, if called upon, in the
armies of the republic, sufficiently imposed the necessity of
learning those exercises, without which he could not be fit for
that service.
That in the progress of improvement, the practice of military
exercises, unless government takes proper pains to support it,
goes gradually to decay, and, together with it, the martial
spirit of the great body of the people, the example of modern
Europe sufficiently demonstrates. But the security of every
society must always depend, more or less, upon the martial spirit
of the great body of the people. In the present times, indeed,
that martial spirit alone, and unsupported by a well-disciplined
standing army, would not, perhaps, be sufficient for the defence
and security of any society. But where every citizen had the
spirit of a soldier, a smaller standing army would surely be
requisite. That spirit, besides, would necessarily diminish very
much the dangers to liberty, whether real or imaginary, which are
commonly apprehended from a standing army. As it would very much
facilitate the operations of that army against a foreign invader;
so it would obstruct them as much, if unfortunately they should
ever be directed against the constitution of the state.
The ancient institutions of Greece and Rome seem to have been
much more effectual for maintaining the martial spirit of the
great body of the people, than the establishment of what are
called the militias of modern times. They were much more simple.
When they were once established, they executed themselves, and it
required little or no attention from government to maintain them
in the most perfect vigour. Whereas to maintain, even in
tolerable execution, the complex regulations of any modern
militia, requires the continual and painful attention of
government, without which they are constantly falling into total
neglect and disuse. The influence, besides, of the ancient
institutions, was much more universal. By means of them, the
whole body of the people was completely instructed in the use of
arms ; whereas it is but a very small part of them who can ever
be so instructed by the regulations of any modern militia,
except, perhaps, that of Switzerland. But a coward, a man
incapable either of defending or of revenging himself, evidently
wants one of the most essential parts of the character of a man.
He is as much mutilated and deformed in his mind as another is in
his body, who is either deprived of some of its most essential
members, or has lost the use of them. He is evidently the more
wretched and miserable of the two; because happiness and misery,
which reside altogether in the mind, must necessarily depend more
upon the healthful or unhealthful, the mutilated or entire state
of the mind, than upon that of the body. Even though the martial
spirit of the people were of no use towards the defence of the
society, yet, to prevent that sort of mental mutilation,
deformity, and wretchedness, which cowardice necessarily involves
in it, from spreading themselves through the great body of the
people, would still deserve the most serious attention of
government; in the same manner as it would deserve its most
serious attention to prevent a leprosy, or any other loathsome
and offensive disease, though neither mortal nor dangerous, from
spreading itself among them; though, perhaps, no other public
good might result from such attention, besides the prevention of
so great a public evil.
The same thing may be said of the gross ignorance and stupidity
which, in a civilized society, seem so frequently to benumb the
understandings of all the inferior ranks of people. A man without
the proper use of the intellectual faculties of a man, is, if
possible, more contemptible than even a coward, and seems to be
mutilated and deformed in a still more essential part of the
character of human nature. Though the state was to derive no
advantage from the instruction of the inferior ranks of people,
it would still deserve its attention that they should not be
altogether uninstructed. The state, however, derives no
inconsiderable advantage from their instruction. The more they
are instructed, the less liable they are to the delusions of
enthusiasm and superstition, which, among ignorant nations
frequently occasion the most dreadful disorders. An instructed
and intelligent people, besides, are always more decent and
orderly than an ignorant and stupid one. They feel themselves,
each individually, more respectable, and more likely to obtain
the respect of their lawful superiors, and they are, therefore,
more disposed to respect those superiors. They are more disposed
to examine, and more capable of seeing through, the interested
complaints of faction and sedition; and they are, upon that
account, less apt to be misled into any wanton or unnecessary
opposition to the measures of government. In free countries,
where the safety of government depends very much upon the
favourable judgment which the people may form of its conduct, it
must surely be of the highest importance, that they should not be
disposed to judge rashly or capriciously concerning it.
Art. III. ˜ Of the Expense of the Institutions for the
Instruction of People of all Ages.
The institutions for the instruction of people of all ages, are
chiefly those for religious instruction. This is a species of
instruction, of which the object is not so much to render the
people good citizens in this world, as to prepare them for
another and a better world in the life to come. The teachers
of the doctrine which contains this instruction, in the same
manner as other teachers, may either depend altogether for their
subsistence upon the voluntary contributions of their hearers; or
they may derive it from some other fund, to which the law of
their country may entitle them ; such as a landed estate, a tythe
or land tax. an established salary or stipend. Their exertion,
their zeal and industry, are likely to be much greater in the
former situation than in the latter. In this respect, the
teachers of a new religion have always had a considerable
advantage in attacking those ancient and established systems, of
which the clergy, reposing themselves upon their benefices, had
neglected to keep up the fervour of faith and devotion in the
great body of the people; and having given themselves up to
indolence, were become altogether incapable of making any
vigorous exertion in defence even of their own establishment. The
clergy of an established and well endowed religion frequently
become men of learning and elegance, who possess all the virtues
of gentlemen, or which can recommend them to the esteem of
gentlemen; but they are apt gradually to lose the qualities, both
good and bad, which gave them authority and influence with the
inferior ranks of people, and which had perhaps been the original
causes of the success and establishment of their religion. Such a
clergy, when attacked by a set of popular and bold, though
perhaps stupid and ignorant enthusiasts, feel themselves as
perfectly defenceless as the indolent, effeminate, and full fed
nations of the southern parts of Asia, when they were invaded by
the active, hardy, and hungry Tartars of the north. Such a
clergy, upon such an emergency, have commonly no other resource
than to call upon the civil magistrate to persecute, destroy, or
drive out their adversaries, as disturbers of the public peace.
It was thus that the Roman catholic clergy called upon the civil
magistrate to persecute the protestants, and the church of
England to persecute the dissenters; and that in general every
religious sect, when it has once enjoyed, for a century or two,
the security of a legal establishment, has found itself incapable
of making any vigorous defence against any new sect which chose
to attack its doctrine or discipline. Upon such occasions, the
advantage, in point of learning and good writing, may sometimes
be on the side of the established church. But the arts of
popularity, all the arts of gaining proselytes, are constantly on
the side of its adversaries. In England, those arts have been
long neglected by the well endowed clergy of the established
church, and are at present chiefly cultivated by the dissenters
and by the methodists. The independent provisions, however,
which in many places have been made for dissenting teachers, by
means of voluntary subscriptions, of trust rights, and other
evasions of the law, seem very much to have abated the zeal and
activity of those teachers. They have many of them become very
learned, ingenious, and respectable men; but they have in general
ceased to be very popular preachers. The methodists, without half
the learning of the dissenters, are much more in vogue.
In the church of Rome the industry and zeal of the inferior
clergy are kept more alive by the powerful motive of
self-interest, than perhaps in any established protestant church.
The parochial clergy derive many of them, a very considerable
part of their subsistence from the voluntary oblations of the
people; a source of revenue, which confession gives them many
opportunities of improving. The mendicant orders derive their
whole subsistence from such oblations. It is with them as with
the hussars and light infantry of some armies; no plunder, no
pay. The parochial clergy are like those teachers whose reward
depends partly upon their salary, and partly upon the fees or
honoraries which they get from their pupils ; and these must
always depend, more or less, upon their industry and reputation.
The mendicant orders are like those teachers whose subsistence
depends altogether upon their industry. They are obliged,
therefore, to use every art which can animate the devotion of the
common people. The establishment of the two great mendicant
orders of St Dominic and St. Francis, it is observed by
Machiavel, revived, in the thirteenth and fourteenth centuries,
the languishing faith and devotion of the catholic church. In
Roman catholic countries, the spirit of devotion is supported
altogether by the monks, and by the poorer parochial clergy. The
great digititartes of the church, with all the accomplishments of
gentlemen and men of the world, and sometimes with those of men
of learning, are careful to maintain the necessary discipline
over their inferiors, but seldom give themselves any trouble
about the instruction of the people.
"Most of the arts and professions in a state," says by far the
most illustrious philosopher and historian of the present age,
"are of such a nature, that, while they promote the interests of
the society, they are also useful or agreeable to some
individuals; and, in that case, the constant rule of the
magistrate, except, perhaps, on the first introduction of any
art, is, to leave the profession to itself, and trust its
encouragement to the individuals who reap the benefit of it. The
artizans, finding their profits to rise by the favour of their
customers, increase, as much as possible, their skill and
industry ; and as matters are not disturbed by any injudicious
tampering, the commodity is always sure to be at all times nearly
proportioned to the demand.
" But there are also some callings which, though useful and even
necessary in a state, bring no advantage or pleasure to any
individual; and the supreme power is obliged to alter its conduct
with regard to the retainers of those professions. It must
give them public encouragement in order to their subsistence; and
it must provide against that negligence to which they will
naturally be subject, either by annexing particular ho0nours to
profession, by establishing a long subordination of ranks, and a
strict dependence, or by some other expedient. The persons
employed in the finances, fleets, and magistracy, are instances
of this order of men.
"It may naturally be thought, at first sight, that the
ecclesiastics belong to the first class, and that their
encouragement, as well as that of lawyers and physicians, may
safely be entrusted to the liberality of individuals, who are
attached to their doctrines. and who find benefit or consolation
from their spiritual ministry and assistance. Their industry and
vigilance will, no doubt, be whetted by such an additional
motive; and their skill in the profession, as well as their
address in governing the minds of the people, must receive daily
increase, from their increasing practice, study, and attention.
" But if we consider the matter more closely, we shall find that
this interested diligence of the clergy is what every wise
legislator will study to prevent ; because, in every religion
except the true. it is highly pernicious, and it has even a
natural tendency to pervert the truth, by infusing into it a
strong mixture of superstition, folly, and delusion. Each
ghostly practitioner, in order to render himself more precious
and sacred in the eyes of his retainers, will inspire them with
the most violent abhorrence of all other sects, and continually
endeavour, by some novelty, to excite the languid devotion of his
audience. No regard will be paid to truth, morals, or decency, in
the doctrines inculcated. Every tenet will be adopted that best
suits the disorderly affections of the human frame. Customers
will be drawn to each conventicle by new industry and address, in
practising on the passions and credulity of the populace. And, in
the end, the civil magistrate will find that he has dearly paid
for his intended frugality, in saving a fixed establishment for
the priests ; and that, in reality, the most decent and
advantageous composition, which he can make with the spiritual
guides, is to bribe their indolence, by assigning stated salaries
to their profession, and rendering it superfluous for them to be
farther active, than merely to prevent their flock from straying
in quest of new pastors. And in this manner ecclesiastical
establishments, though commonly they arose at first from
religious views, prove in the end advantageous to the political
interests of society."
But whatever may have been the good or bad effects of the
independent provision of the clergy, it has, perhaps, been very
seldom bestowed upon them from any view to those effects.
Times of violent religious controversy have generally been times
of equally violent political faction. Upon such occasions, each
political party has either found it, or imagined it, for his
interest, to league itself with some one or other of the
contending religious sects. But this could be done only by
adopting, or, at least, by favouring the tenets of that
particular sect. The sect which had the good fortune to be
leagued with the conquering party necessarily shared in the
victory of its ally, by whose favour and protection it was soon
enabled, in some degree, to silence and subdue all its
adversaries. Those adversaries had generally leagued
themselves with the enemies of the conquering party, and were,
therefore the enemies of that party. The clergy of this
particular sect having thus become complete masters of the field,
and their influence and authority with the great body of the
people being in its highest vigour, they were powerful enough to
overawe the chiefs and leaders of their own party, and to oblige
the civil magistrate to respect their opinions and inclinations.
Their first demand was generally that he should silence and
subdue all their adversaries; and their second, that he should
bestow an independent provision on themselves. As they had
generally contributed a good deal to the victory, it seemed not
unreasonable that they should have some share in the spoil.
They were weary, besides, of humouring the people, and of
depending upon their caprice for a subsistence. In making this
demand, therefore, they consulted their own ease and comfort,
without troubling themselves about the effect which it might
have, in future times, upon the influence and authority of their
order. The civil magistrate, who could comply with their
demand only by giving them something which he would have chosen
much rather to take, or to keep to himself, was seldom very
forward to grant it. Necessity, however, always forced him
to submit at last, though frequently not till after many delays,
evasions, and affected excuses.
But if politics had never called in the aid of religion, had the
conquering party never adopted the tenets of one sect more than
those of another, when it had gained the victory, it would
probably have dealt equally and impartially with all the
different sects, and have allowed every man to choose his own
priest, and his own religion, as he thought proper. There would,
and, in this case, no doubt, have been, a great multitude of
religious sects. Almost every different congregation might
probably have had a little sect by itself, or have entertained
some peculiar tenets of its own. Each teacher, would, no doubt,
have felt himself under the necessity of making the utmost
exertion, and of using every art, both to preserve and to
increase the number of his disciples. But as every other teacher
would have felt himself under the same necessity, the success of
no one teacher, or sect of teachers, could have been very great.
The interested and active zeal of religious teachers can be
dangerous and troublesome only where there is either but one sect
tolerated in the society, or where the whole of a large society
is divided into two or three great sects; the teachers of each
acting by concert, and under a regular discipline and
subordination. But that zeal must be altogether innocent,
where the society is divided into two or three hundred, or,
perhaps, into as many thousand small sects, of which no one could
be considerable enough to disturb the public tranquillity.
The teachers of each sect, seeing themselves surrounded on all
sides with more adversaries than friends, would be obliged to
learn that candour and moderation which are so seldom to be found
among the teachers of those great sects, whose tenets, being
supported by the civil magistrate, are held in veneration by
almost all the inhabitants of extensive kingdoms and empires, and
who, therefore, see nothing round them but followers, disciples,
and humble admirers. The teachers of each little sect, finding
themselves almost alone, would be obliged to respect those of
almost every other sect; and the concessions which they would
mutually find in both convenient and agreeable to make one to
another, might in time, probably reduce the doctrine of the
greater part of them to that pure and rational religion, free
from every mixture of absurdity, imposture, or fanaticism, such
as wise men have, in all ages of the world, wished to see
established ; but such as positive law has, perhaps, never yet
established, and probably never will establish in any country ;
because, with regard to religion, positive law always has been,
and probably always will be, more or less influenced by popular
superstition and enthusiasm. This plan of ecclesiastical
government, or, more properly, of no ecclesiastical government,
was what the sect called Independents (a sect, no doubt, of very
wild enthusiasts), proposed to establish in England towards the
end of the civil war. If it had been established, though of a
very unphilosophical origin, it would probably, by this time,
have been productive of the most philosophical good temper and
moderation with regard to every sort of religious principle. It
has been established in Pennsylvania, where, though the quakers
happen to be the most numerous, the law, in reality, favours no
one sect more than another ; and it is there said to have been
productive of this philosophical good temper and moderation,
But though this equality of treatment should not be productive of
this good temper and moderation in all, or even in the greater
part of the religious sects of a particular country; yet,
provided those sects were sufficiently numerous, and each of them
consequently too small to disturb the public tranquillity, the
excessive zeal of each for its particular tenets could not well
be productive of any very hurtful effects, but, on the contrary,
of several good ones; and if the government was perfectly
decided, both to let them all alone, and to oblige them all to
let alone one another, there is little danger that they would not
of their own accord, subdivide themselves fast enough, so as soon
to become sufficiently numerous.
In every civilized society, in every society where the
distinction of ranks has once been completely established, there
have been always two different schemes or systems of morality
current at the same time; of which the one may be called the
strict or austere; the other the liberal, or, if you will, the
loose system. The former is generally admired and revered by the
common people; the latter is commonly more esteemed and adopted
by what are called the people of fashion. The degree of
disapprobation with which we ought to mark the vices of levity,
the vices which are apt to arise from great prosperity, and from
the excess of gaiety and good humour, seems to constitute the
principal distinction between those two opposite schemes or
systems. In the liberal or loose system, luxury, wanton, and even
disorderly mirth, the pursuit of pleasure to some degree of
intemperance, the breach of chastity, at least in one of the two
sexes, etc. provided they are not accompanied with gross
indecency, and do not lead to falsehood and injustice, are
generally treated with a good deal of indulgence, and are easily
either excused or pardoned altogether. In the austere system, on
the contrary, those excesses are regarded with the utmost
abhorrence and detestation. The vices of levity are always
ruinous to the common people, and a single week's thoughtlessness
and dissipation is often sufficient to undo a poor workman for
ever, and to drive him, through despair, upon committing the most
enormous crimes. The wiser and better sort of the common people,
therefore, have always the utmost abhorrence and detestation of
such excesses, which their experience tells them are so
immediately fatal to people of their condition. The disorder and
extravagance of several years, on the contrary, will not always
ruin a man of fashion ; and people of that rank are very apt to
consider the power of indulging in some degree of excess, as one
of the advantages of their fortune ; and the liberty of doing so
without censure or reproach, as one of the privileges which
belong to their station. In people of their own station,
therefore, they regard such excesses with but a small degree of
disapprobation, and censure them either very slightly or not at
all.
Almost all religious sects have begun among the common people,
from whom they have generally drawn their earliest, as well as
their most numerous proselytes. The austere system of morality
has, accordingly, been adopted by those sects almost constantly,
or with very few exceptions; for there have been some. It was the
system by which they could best recommend themselves to that
order of people, to whom they first proposed their plan of
reformation upon what had been before established. Many of them,
perhaps the greater part of them, have even endeavoured to gain
credit by refining upon this austere system, and by carrying it
to some degree of folly and extravagance; and this excessive
rigour has frequently recommended them, more than any thing else,
to the respect and veneration of the common people.
A man of rank and fortune is, by his station, the distinguished
member of a great society, who attend to every part of his
conduct, and who thereby oblige him to attend to every part of
it himself. His authority and consideration depend very much upon
the respect which this society bears to him. He dares not do
anything which would disgrace or discredit him in it; and he is
obliged to a very strict observation of that species of morals,
whether liberal or austere, which the general consent of this
society prescribes to persons of his rank and fortune. A man of
low condition, on the contrary, is far from being a distinguished
member of any great society. While he remains in a country
village, his conduct may be attended to, and he may be obliged to
attend to it himself. In this situation, and in this situation
only, he may have what is called a character to lose. But as soon
as he comes into a great city, he is sunk in obscurity and
darkness. His conduct is observed and attended to by nobody; and
he is, therefore, very likely to neglect it himself, and to
abandon himself to every sort of low profligacy and vice. He
never emerges so effectually from this obscurity, his conduct
never excites so much the attention of any respectable society,
as by his becoming the member of a small religious sect. He from
that moment acquires a degree of consideration which he never had
before. All his brother sectaries are, for the credit of the
sect, interested to observe his conduct; and, if he gives
occasion to any scandal, if he deviates very much from those
austere morals which they almost always require of one another,
to punish him by what is always a very severe punishment, even
where no evil effects attend it, expulsion or excommunication
from the sect. In little religious sects, accordingly, the morals
of the common people have been almost always remarkably regular
and orderly ; generally much more so than in the established
church. The morals of those little sects, indeed, have frequently
been rather disagreeably rigorous and unsocial.
There are two very easy and effectual remedies, however, by whose
joint operation the state might, without violence, correct
whatever was unsocial or disagreeably rigorous in the morals of
all the little sects into which the country was divided.
The first of those remedies is the study of science and
philosophy, which the state might render almost universal among
all people of middling or more than middling rank and fortune ;
not by giving salaries to teachers in order to make them
negligent and idle, but by instituting some sort of probation,
even in the higher and more difficult sciences, to be undergone
by every person before he was permitted to exercise any liberal
profession, or before he could be received as a candidate for any
honourable office, of trust or profit. if the state imposed upon
this order of men the necessity of learning, it would have no
occasion to give itself any trouble about providing them with
proper teachers. They would soon find better teachers for
themselves, than any whom the state could provide for them.
Science is the great antidote to the poison of enthusiasm and
superstition; and where all the superior ranks of people were
secured from it, the inferior ranks could not be much exposed to
it.
The second of those remedies is the frequency and gaiety of
public diversions. The state, by encouraging, that is, by giving
entire liberty to all those who, from their own interest, would
attempt, without scandal or indecency, to amuse and divert the
people by painting, poetry, music, dancing; by all sorts of
dramatic representations and exhibitions; would easily dissipate,
in the greater part of them, that melancholy and gloomy humour
which is almost always the nurse of popular superstition and
enthusiasm. Public diversions have always been the objects of
dread and hatred to all the fanatical promoters of those popular
frenzies. The gaiety and good humour which those diversions
inspire, were altogether inconsistent with that temper of mind
which was fittest for their purpose, or which they could best
work upon. Dramatic representations, besides, frequently exposing
their artifices to public ridicule, and sometimes even to public
execration, were, upon that account, more than all other
diversions, the objects of their peculiar abhorrence.
In a country where the law favoured the teachers of no one
religion more than those of another, it would not be necessary
that any of them should have any particular or immediate
dependency upon the sovereign or executive power ; or that he
should have anything to do either in appointing or in dismissing
them from their offices. In such a situation, he would have no
occasion to give himself any concern about them, further than to
keep the peace among them, in the same manner as among the rest
of his subjects, that is, to hinder them from persecuting,
abusing, or oppressing one another. But it is quite
otherwise in countries where there is an established or governing
religion. The sovereign can in this case never be secure,
unless he has the means of influencing in a considerable degree
the greater part of the teachers of that religion.
The clergy of every established church constitute a great
incorporation. They can act in concert, and pursue their interest
upon one plan, and with one spirit as much as if they were under
the direction of one man ; and they are frequently, too, under
such direction. Their interest as an incorporated body is
never the same with that of the sovereign, and is sometimes
directly opposite to it. Their great interest is to maintain
their authority with the people, and this authority depends upon
the supposed certainty and importance of the whole doctrine which
they inculcate, and upon the supposed necessity of adopting every
part of it with the most implicit faith, in order to avoid
eternal misery. Should the sovereign have the imprudence to
appear either to deride, or doubt himself of the most trifling
part of their doctrine, or from humanity, attempt to protect
those who did either the one or the other, the punctilious honour
of a clergy, who have no sort of dependency upon him, is
immediately provoked to proscribe him as a profane person, and to
employ all the terrors of religion, in order to oblige the people
to transfer their allegiance to some more orthodox and obedient
prince. Should he oppose any of their pretensions or usurpations,
the danger is equally great. The princes who have dared in this
manner to rebel against the church, over and above this crime of
rebellion, have generally been charged, too, with the additional
crime of heresy, notwithstanding their solemn protestations of
their faith, and humble submission to every tenet which she
thought proper to prescribe to them. But the authority of
religion is superior to every other authority. The fears which it
suggests conquer all other fears. When the authorized teachers of
religion propagate through the great body of the people,
doctrines subversive of the authority of the sovereign, it is by
violence only, or by the force of a standing army, that he can
maintain his authority. Even a standing army cannot in this case
give him any lasting security ; because if the soldiers are not
foreigners, which can seldom be the case, but drawn from the
great body of the people, which must almost always be the case,
they are likely to be soon corrupted by those very doctrines. The
revolutions which the turbulence of the Greek clergy was
continually occasioning at Constantinople, as long as the eastern
empire subsisted; the convulsions which, during the course of
several centuries, the turbulence of the Roman clergy was
continually occasioning in every part of Europe, sufficiently
demonstrate how precarious and insecure must always be the
situation of the sovereign, who has no proper means of
influencing the clergy of the established and governing religion
of his country.
Articles of faith, as well as all other spiritual matters, it is
evident enough, are not within the proper department of a
temporal sovereign, who, though he may be very well qualified for
protecting, is seldom supposed to be so for instructing the
people. With regard to such matters, therefore, his authority can
seldom be sufficient to counterbalance the united authority of
the clergy of the established church. The public
tranquillity, however, and his own security, may frequently
depend upon the doctrines which they may think proper to
propagate concerning such matters. As he can seldom directly
oppose their decision, therefore, with proper weight and
authority, it is necessary that he should be able to influence it
; and he can influence it only by the fears and expectations
which he may excite in the greater part of the individuals of the
order. Those fears and expectations may consist in the fear of
deprivation or other punishment, and in the expectation of
further preferment.
In all Christian churches, the benefices of the clergy are a sort
of freeholds, which they enjoy, not during pleasure, but during
life or good behaviour. If they held them by a more
precarious tenure, and were liable to be turned out upon every
slight disobligation either of the sovereign or of his ministers,
it would perhaps be impossible for them to maintain their
authority with the people, who would then consider them as
mercenary dependents upon the court, in the sincerity of whose
instructions they could no longer have any confidence. But should
the sovereign attempt irregularly, and by violence, to deprive
any number of clergymen of their freeholds, on account, perhaps,
of their having propagated, with more than ordinary zeal, some
factious or seditious doctrine, he would only render, by such
persecution, both them and their doctrine ten times more popular,
and therefore ten times more troublesome and dangerous, than they
had been before. Fear is in almost all cases a wretched
instrument of govermnent, and ought in particular never to be
employed against any order of men who have the smallest
pretensions to independency. To attempt to terrify them, serves
only to irritate their bad humour, and to confirm them in an
opposition, which more gentle usage, perhaps, might easily induce
them either to soften, or to lay aside altogether. The violence
which the French government usually employed in order to oblige
all their parliaments, or sovereign courts of justice, to
enregister any unpopular edict, very seldom succeeded. The means
commonly employed, however, the imprisonment of all the
refractory members, one would think, were forcible enough. The
princes of the house of Stuart sometimes employed the like means
in order to influence some of the members of the parliament of
England, and they generally found them equally intractable. The
parliament of England is now managed in another manner ; and a
very small experiment, which the duke of Choiseul made, about
twelve years ago, upon the parliament of Paris, demonstrated
sufficiently that all the parliaments of France might have been
managed still more easily in the same manner. That experiment was
not pursued. For though management and persuasion are always
the easiest and safest instruments of government as force and
violence are the worst and the most dangerous; yet such, it
seems, is the natural insolence of man, that he almost always
disdains to use the good instrument, except when he cannot or
dare not use the bad one. The French government could and durst
use force, and therefore disdained to use management and
persuasion. But there is no order of men, it appears I believe,
from the experience of all ages, upon whom it is so dangerous or
rather so perfectly ruinous, to employ force and violence, as
upon the respected clergy of an established church. The
rights, the privileges, the personal liberty of every individual
ecclesiastic, who is upon good terms with his own order, are,
even in the most despotic governments, more respected than those
of any other person of nearly equal rank and fortune. It is so in
every gradation of despotism, from that of the gentle and mild
government of Paris, to that of the violent and furious
government of Constantinople. But though this order of men can
scarce ever be forced, they may be managed as easily as any other
; and the security of the sovereign, as well as the public
tranquillity, seems to depend very much upon the means which he
has of managing them ; and those means seem to consist altogether
in the preferment which he has to bestow upon them.
In the ancient constitution of the Christian church, the bishop
of each diocese was elected by the joint votes of the clergy and
of the people of the episcopal city. The people did not long
retain their right of election; and while they did retain it,
they almost always acted under the influence of the clergy, who,
in such spiritual matters, appeared to be their natural guides.
The clergy, however, soon grew weary of the trouble of managimg
them, and found it easier to elect their own bishops themselves.
The abbot, in the same manner, was elected by the monks of the
monastery, at least in the greater part of abbacies. All the
inferior ecclesiastical benefices comprehended within the diocese
were collated by the bishop, who bestowed them upon such
ecclesiastics as he thought proper. All church preferments were
in this manner in the disposal of the church. The sovereign,
though he might have some indirect influence in those elections,
and though it was sometimes usual to ask both his consent to
elect, and his approbation of the election, yet had no direct or
sufficient means of managing the clergy. The ambition of every
clergyman naturally led him to pay court, not so much to his
sovereign as to his own order, from which only he could expect
preferment.
Through the greater part of Europe, the pope gradually drew to
himself, first the collation of almost all bishoprics and
abbacies, or of what were called consistorial benefices, and
afterwards, by various machinations and pretences, of the greater
part of inferior benefices comprehended within each diocese,
little more being left to the bishop than what was barely
necessary to give him a decent authority with his own clergy. By
this arrangement the condition of the sovereign was still worse
than it had been before. The clergy of all the different
countries of Europe were thus formed into a sort of spiritual
army, dispersed in different quarters indeed, but of which all
the movements and operations could now be directed by one head,
and conducted upon one uniform plan. The clergy of each
particular country might be considered as a particular detachment
of that army, of which the operations could easily be supported
and seconded by all the other detachments quartered in the
different countries round about. Each detachment was not only
independent of the sovereign of the country in which it was
quartered, and by which it was maintained, but dependent upon a
foreign sovereign, who could at any time turn its arms against
the sovereign of that particular country, and support them by the
arms of all the other detachments.
Those arms were the most formidable that can well be imagined. In
the ancient state of Europe, before the establishment of arts and
manufactures, the wealth of the clergy gave them the same sort of
influence over the common people which that of the great barons
gave them over their respective vassals, tenants, and retainers.
In the great landed estates, which the mistaken piety both of
princes and private persons had bestowed upon the church,
jurisdictions were established, of the same kind with those of
the great barons, and for the same reason. In those great landed
estates, the clergy, or their bailiffs, could easily keep the
peace, without the support or assistance either of the king or of
any other person; and neither the king nor any other person could
keep the peace there without the support and assistance of the
clergy. The jurisdictions of the clergy, therefore, in their
particular baronies or manors, were equally independent, and
equally exclusive of the authority of the king's courts, as those
of the great temporal lords. The tenants of the clergy were, like
those of the great barons, almost all tenants at will, entirely
dependent upon their immediate lords, and, therefore, liable to
be called out at pleasure, in order to fight in any quarrel in
which the clergy might think proper to engage them. Over and
above the rents of those estates, the clergy possessed in the
tithes a very large portion of the rents of all the other estates
in every kingdom of Europe. The revenues arising from both those
species of rents were, the greater part of them, paid in kind, in
corn, wine, cattle, poultry, etc. The quantity exceeded greatly
what the clergy could themselves consume; and there were neither
arts nor manufactures, for the produce of which they could
exchange the surplus. The clergy could derive advantage from this
immense surplus in no other way than by employing it, as the
great barons employed the like surplus of their revenues, in the
most profuse hospitality, and in the most extensive charity. Both
the hospitality and the charity of the ancient clergy,
accordingly, are said to have been very great. They not only
maintained almost the whole poor of every kingdom, but many
knights and gentlemen had frequently no other means of
subsistence than by travelling about from monastery to monastery,
under pretence of devotion, but in reality to enjoy the
hospitality of the clergy. The retainers of some particular
prelates were often as numerous as those of the greatest
lay-lords ; and the retainers of all the clergy taken together
were, perhaps, more numerous than those of all the lay-lords.
There was always much more union among the clergy than among the
lay-lords. The former were under a regular discipline and
subordination to the papal authority. The latter were under no
regular discipline or subordination, but almost always equally
jealous of one another, and of the king. Though the tenants and
retainers of the clergy, therefore, had both together been less
numerous than those of the great lay-lords, and their tenants
were probably much less numerous, yet their union would have
rendered them more formidable. The hospitality and charity of the
clergy, too, not only gave them the command of a great temporal
force, but increased very much the weight of their spiritual
weapons. Those virtues procured them the highest respect and
veneration among all the inferior ranks of people, of whom many
were constantly, and almost all occasionally, fed by them.
Everything belonging or related to so popular an order, its
possessions, its privileges, its doctrines, necessarily appeared
sacred in the eyes of the common people; and every violation of
them, whether real or pretended, the highest act of sacrilegious
wickedness and profaneness. In this state of things, if the
sovereign frequently found it difficult to resist the confederacy
of a few of the great nobility, we cannot wonder that he should
find it still more so to resist the united force of the clergy of
his own dominions, supported by that of the clergy of all the
neighbouring dominions. In such circumstances, the wonder is, not
that he was sometimes obliged to yield, but that he ever was able
to resist.
The privileges of the clergy in those ancient times (which to
us, who live in the present times, appear the most absurd), their
total exemption from the secular jurisdiction, for example, or
what in England was called the benefit ofclergy, were the
natural, or rather the necessary, consequences of this state of
things. How dangerous must it have been for the sovereign to
attempt to punish a clergyman for any crime whatever, if his
order were disposed to protect him, and to represent either the
proof as insufficient for convicting so holy a man, or the
punishment as too severe to be inflicted upon one whose person
had been rendered sacred by religion ? The sovereign could, in
such circumstances, do no better than leave him to be tried by
the ecclesiastical courts, who, for the honour of their own
order, were interested to restrain, as much as possible, every
member of it from committing enormous crimes, or even from giving
occasion to such gross scandal as might disgust the minds of the
people.
In the state in which things were, through the greater part of
Europe, during the tenth, eleventh, twelfth, and thirteenth
centuries, and for some time both before and after that period,
the constitution of the church of Rome may be considered as the
most formidable combination that ever was formed against the
authority and security of civil government, as well as against
the liberty, reason, and happiness of mankind, which can flourish
only where civil government is able to protect them. In that
constitution, the grossest delusions of superstition were
supported in such a manner by the private interests of so great a
number of people, as put them out of all danger from any assault
of human reason; because, though human reason might, perhaps,
have been able to unveil, even to the eyes of the common people,
some of the delusions of superstition, it could never have
dissolved the ties of private interest. Had this constitution
been attacked by no other enemies but the feeble efforts of human
reason, it must have endured for ever. But that immense and
well-built fabric, which all the wisdom and virtue of man could
never have shaken, much less have overturned, was, by the natural
course of things, first weakened, and afterwards in part
destroyed; and is now likely, in the course of a few centuries
more, perhaps, to crumble into ruins altogether.
The gradual improvements of arts, manufactures, and commerce, the
same causes which destroyed the power of the great barons,
destroyed, in the same manner, through the greater part of
Europe, the whole temporal manufactures, and commerce, the
clergy, like the great barons, found something for which they
could exchange their rude produce, and thereby discovered the
means of spending their whole revenues upon their own persons,
without giving any considerable share of them to other people.
Their charity became gradually less extensive, their hospitality
less liberal, or less profuse. Their retainers became
consequently less numerous, and, by degrees, dwindled away
altogether. The clergy, too, like the great barons, wished to get
a better rent from their landed estates, in order to spend it, in
the same manner, upon the gratification of their own private
vanity and folly. But this increase of rent could be got only by
granting leases to their tenants, who thereby became, in a great
measure, independent of them. The ties of interest, which bound
the inferior ranks of people to the clergy, were in this manner
gradually broken and dissolved. They were even broken and
dissolved sooner than those which bound the same ranks of people
to the great barons ; because the benefices of the church being,
the greater part of them, much smaller than the estates of the
great barons, the possessor of each benefice was much sooner able
to spend the whole of its revenue upon his own person. During the
greater part of the fourteenth and fifteenth centuries, the power
of the great barons was, through the greater part of Europe, in
full vigour. But the temporal power of the clergy, the absolute
command which they had once had over the great body of the people
was very much decayed. The power of the church was, by that time,
very nearly reduced, through the greater part of Europe, to what
arose from their spiritual authority ; and even that spiritual
authority was much weakened, when it ceased to he supported by
the charity and hospitality of the clergy. The inferior ranks of
people no longer looked upon that order as they had done before;
as the comforters of their distress, and the relievers of their
indigence. On the contrary, they were provoked and disgusted by
the vanity, luxury, and expense of the richer clergy, who
appeared to spend upon their own pleasures what had always before
been regarded as the patrimony of the poor.
In this situation of things, the sovereigns in the different
states of Europe endeavoured to recover the influence which they
had once had in the disposal of the great benefices of the
church; by procuring to the deans and chapters of each diocese
the restoration of their ancient right of electing the bishop ;
and to the monks of each abbacy that of electing the abbot. The
re-establishing this ancient order was the object of several
statutes enacted in England during the course of the fourteenth
century, particularly of what is called the statute of provisors
; and of the pragmatic sanction, established in France in the
fifteenth century. In order to render the election valid, it was
necessary that the sovereign should both consent to it before
hand, and afterwards approve of the person elected; and though
the election was still supposed to be free, he had, however all
the indirect means which his situation necessarily afforded him,
of influencing the clergy in his own dominions. Other
regulations, of a similar tendency, were established in other
parts of Europe. But the power of the pope, in the collation of
the great benefices of the church, seems, before the reformation,
to have been nowhere so effectually and so universally restrained
as in France and England. The concordat afterwards, in the
sixteenth century, gave to the kings of France the absolute right
of presenting to all the great, or what are called the
consistorial, benefices of the Gallican church.
Since the establishment of the pragmatic sanction and of the
concordat, the clergy of France have in general shewn less
respect to the decrees of the papal court, than the clergy of any
other catholic country. In all the disputes which their sovereign
has had with the pope, they have almost constantly taken part
with the former. This independency of the clergy of France upon
the court of Rome seems to be principally founded upon the
pragmatic sanction and the concordat. In the earlier periods of
the monarchy, the clergy of France appear to have been as much
devoted to the pope as those of any other country. When Robert,
the second prince of the Capetian race, was most unjustly
excommunicated by the court of Rome, his own servants, it is
said, threw the victuals which came from his table to the dogs,
and refused to taste any thing themselves which had been polluted
by the contact of a person in his situation. They were taught to
do so, it may very safely be presumed, by the clergy of his own
dominions.
The claim of collating to the great benefices of the church, a
claim in defence of which the court of Rome had frequently
shaken, and sometimes overturned, the thrones of some of the
greatest sovereigns in Christendom, was in this manner either
restrained or modified, or given up altogether, in many different
parts of Europe, even before the time of the reformation. As the
clergy had now less influence over the people, so the state had
more influence over the clergy. The clergy, therefore, had both
less power, and less inclination, to disturb the state.
The authority of the church of Rome was in this state of
declension, when the disputes which gave birth to the reformation
began in Germany, and soon spread themselves through every part
of Europe. The new doctrines were everywhere received with a high
degree of popular favour. They were propagated with all that
enthusiastic zeal which commonly animates the spirit of party,
when it attacks established authority. The teachers of those
doctrines, though perhaps, in other respects, not more learned
than many of the divines who defended the established church,
seem in general to have been better acquainted with
ecclesiastical history, and with the origin and progress of that
system of opinions upon which the authority of the church was
established ; and they had thereby the advantage in almost every
dispute. The austerity of their manners gave them authority with
the common people, who contrasted the strict regularity of their
conduct with the disorderly lives of the greater part of their
own clergy. They possessed, too, in a much higher degree than
their adversaries, all the arts of popularity and of gaining
proselytes; arts which the lofty and dignified sons of the church
had long neglected, as being to them in a great measure useless.
The reason of the new doctrines recommended them to some, their
novelty to many; the hatred and contempt of the established
clergy to a still greater number: but the zealous, passionate,
and fanatical, though frequently coarse and rustic eloquence,
with which they were almost everywhere inculcated, recommended
them to by far the greatest number.
The success of the new doctrines was almost everywhere so great,
that the princes, who at that time happened to be on bad terms
with the court of Rome, were, by means of them, easily enabled,
in their own dominions, to overturn the church, which having lost
the respect and veneration of the inferior ranks of people, could
make scarce any resistance. The court of Rome had disobliged some
of the smaller princes in the northern parts of Germany, whom it
had probably considered as too insignificant to be worth the
managing. They universally, therefore, established the
reformation in their own dominions. The tyranny of Christiern
II., and of Troll archbishop of Upsal, enabled Gustavus Vasa to
expel them both from Sweden. The pope favoured the tyrant and the
archbishop, and Gustavus Vasa found no difficulty in establishing
the reformation in Sweden. Christiern II. was afterwards deposed
from the throne of Denmark, where his conduct had rendered him as
odious as in Sweden. The pope, however, was still disposed to
favour him; and Frederic of Holstein, who had mounted the throne
in his stead, revenged himself, by following the example of
Gustavus Vasa. The magistrates of Berne and Zurich, who had no
particular quarrel with the pope, established with great ease the
reformation in their respective cantons, where just before some
of the clergy had, by an imposture somewhat grosser than
ordinary, rendered the whole order both odious and contemptible.
In this critical situation of its affairs the papal court was at
sufficient pains to cultivate the friendship of the powerful
sovereigns of France and Spain, of whom the latter was at that
time emperor of Germany. With their assistance, it was enabled,
though not without great difficulty, and much bloodshed, either
to suppress altogether, or to obstruct very much, the progress of
the reformation in their dominions. It was well enough inclined,
too, to be complaisant to the king of England. But from the
circumstances of the times, it could not be so without giving
offence to a still greater sovereign, Charles V., king of Spain
and emperor of Germany. Henry VIII., accordingly, though he did
not embrace himself the greater part of the doctrines of the
reformation, was yet enabled, by their general prevalence, to
suppress all the monasteries, and to abolish the authority of the
church of Rome in his dominions. That he should go so far,
though he went no further, gave some satisfaction to the patrons
of the reformation, who, having got possession of the government
in the reign of his son and successor completed, without any
difficulty, the work which Henry VIII. had begun.
In some countries, as in Scotland, where the government was weak,
unpopular, and not very firmly established, the reformation was
strong enough to overturn, not only the church, but the state
likewise, for attempting to support the church.
Among the followers of the reformation, dispersed in all the
different countries of Europe, there was no general tribunal,
which, like that of the court of Rome, or an oecumenical council,
could settle all disputes among them, and, with irresistible
authority, prescribe to all of them the precise limits of
orthodoxy. When the followers of the reformation in one country,
therefore, happened to differ from their brethren in another, as
they had no common judge to appeal to, the dispute could never be
decided; and many such disputes arose among them. Those
concerning the government of the church, and the right of
conferring ecclesiastical benefices, were perhaps the most
interesting to the peace and welfare of civil society. They
gave birth, accordingly, to the two principal parties or sects
among the followers of the reformation, the Lutheran and
Calvinistic sects, the only sects among them, of which the
doctrine and discipline have ever yet been established by law in
any part of Europe.
The followers of Luther, together with what is called the church
of England, preserved more or less of the episcopal government,
established subordination among the clergy, gave the sovereign
the disposal of all the bishoprics, and other consistorial
benefices within his dominions, and thereby rendered him the real
head of the church; and without depriving the bishop of the right
of collating to the smaller benefices within his diocese, they,
even to those benefices, not only admitted, but favoured the
right of presentation, both in the sovereign and in all other lay
patrons. This system of church government was, from the
beginning, favourable to peace and good order, and to submission
to the civil sovereign. It has never, accordingly, been the
occasion of any tumult or civil commotion in any country in which
it has once been established. The church of England, in
particular, has always valued herself, with great reason, upon
the unexceptionable loyalty of her principles. Under such a
government, the clergy naturally endeavour to recommend
themselves to the sovereign, to the court, and to the nobility
and gentry of the country, by whose influence they chiefly expect
to obtain preferment. They pay court to those patrons, sometimes,
no doubt, by the vilest flattery and assentation ; but
fruquently, too, by cultivating all those arts which best
deserve, and which are therefore most likely to gain them, the
esteem of people of rank and fortune; by their knowledge in all
the different branches of useful and ornamental learning, by the
decent liberality of their manners, by the social good humour of
their conversation, and by their avowed contempt of those absurd
and hypocritical austerities which fanatics inculcate and pretend
to practise, in order to draw upon themselves the veneration, and
upon the greater part of men of rank and fortune, who avow that
they do not practise them, the abhorrence of the common people.
Such a clergy, however, while they pay their court in this manner
to the higher ranks of life, are very apt to neglect altogether
the means of maintaining their influence and authority with the
lower. They are listened to, esteemed, and respected by their
superiors; but before their inferiors they are frequently
incapable of defending, effectually, and to the conviction of
such hearers, their own sober and moderate doctrines, against the
most ignorant enthusiast who chooses to attack them.
The followers of Zuinglius, or more properly those of Calvin, on
the contrary, bestowed upon the people of each parish, whenever
the church became vacant, the right of electing their own pastor;
and established, at the same time, the most perfect equality
among the clergy. The former part of this institution, as long as
it remained in vigour, seems to have been productive of nothing
but disorder and confusion, and to have tended equally to corrupt
the morals both of the clergy and of the people. The latter part
seems never to have had any effects but what were perfectly
agreeable.
As long as the people of each parish preserved the right of
electing their own pastors, they acted almost always under the
influence of the clergy, and generally of the most factious and
fanatical of the order. The clergy, in order to preserve their
influence in those popular elections, became, or affected to
become, many of them, fanatics themselves, encouraged fanaticism
among the people, and gave the preference almost always to the
most fanatical candidate. So small a matter as the appointment of
a parish priest, occasioned almost always a violent contest, not
only in one parish, but in all the neighbouring parishes who
seldom failed to take part in the quarrel. When the parish
happened to be situated in a great city, it divided all the
inhabitants into two parties; and when that city happened, either
to constitute itself a little republic, or to be the head and
capital of a little republic, as in the case with many of the
considerable cities in Switzerland and Holland, every paltry
dispute of this kind, over and above exasperating the animosity
of all their other factions, threatened to leave behind it, both
a new schism in the church, and a new faction in the state.
In those small republics, therefore, the magistrate very soon
found it necessary, for the sake of preserving the public peace,
to assume to himself the right of presenting to all vacant
benefices. In Scotland, the most extensive country in which
this presbyterian form of church government has ever been
established, the rights of patronage were in effect abolished by
the act which established presbytery in the beginning of the
reign of William III. That act, at least, put in the power of
certain classes of people in each parish to purchase, for a very
small price, the right of electing their own pastor. The
constitution which this act established, was allowed to subsist
for about two-and-twenty years, but was abolished by the 10th of
queen Anne, ch.12, on account of the confusions and disorders
which this more popular mode of election had almost everywhere
occasioned. In so extensive a country as Scotland, however, a
tumult in a remote parish was not so likely to give disturbance
to government as in a smaller state. The 10th of queen Anne
restored the rights of patronage. But though, in Scotland, the
law gives the benefice, without any exception to the person
presented by the patron; yet the church requires sometimes (for
she has not in this respect been very uniform in her decisions) a
certain concurrence of the people, before she will confer upon
the presentee what is called the cure of souls, or the
ecclesiastical jurisdiction in the parish. She sometimes, at
least, from an affected concern for the peace of the parish,
delays the settlement till this concurrence can be procured. The
private tampering of some of the neighbouring clergy, sometimes
to procure, but more frequently to prevent this concurrence, and
the popular arts which they cultivate, in order to enable them
upon such occasions to tamper more effectually, are perhaps the
causes which principally keep up whatever remains of the old
fanatical spirit, either in the clergy or in the people of
Scotland.
The equality which the presbyterian form of church government
establishes among the clergy, consists, first, in the equality of
authority or ecclesiastical jurisdiction; and, secondly, in the
equality of benefice. In all presbyterian churches, the equality
of authority is perfect; that of benefice is not so. The
difference, however, between one benefice and another, is seldom
so considerable, as commonly to tempt the possessor even of the
small one to pay court to his patron, by the vile arts of
flattery and assentation, in order to get a better. In all the
presbyterian churches, where the rights of patronage are
thoroughly established, it is by nobler and better arts, that the
established clergy in general endeavour to gain the favour of
their superiors; by their learning, by the irreproachable
regularity of their life, and by the faithful and diligent
discharge of their duty. Their patrons even frequently complain
of the independency of their spirit, which they are apt to
construe into ingratitude for past favours, but which, at worse,
perhaps, is seldom anymore than that indifference which naturally
arises from the consciousness that no further favours of the kind
are ever to be expected. There is scarce, perhaps, to be
found anywhere in Europe, a more learned, decent, independent,
and respectable set of men, than the greater part of the
presbyterian clergy of Holland, Geneva, Switzerland, and
Scotland.
Where the church benefices are all nearly equal, none of them can
be very great; and this mediocrity of benefice, though it may be,
no doubt, carried too far, has, however, some very agreeable
effects. Nothing but exemplary morals can give dignity to a
man of small fortune. The vices of levity and vanity
necessarily render him ridiculous, and are, besides, almost as
ruinous to him as they are to the common people. In his own
conduct, therefore, he is obliged to follow that system of morals
which the common people respect the most. He gains their esteem
and affection, by that plan of life which his own interest and
situation would lead him to follow. The common people look upon
him with that kindness with which we naturally regard one who
approaches somewhat to our own condition, but who, we think,
ought to be in a higher. Their kindness naturally provokes
his kindness. He becomes careful to instruct them, and attentive
to assist and relieve them. He does not even despise the
prejudices of people who are disposed to be so favourable to him,
and never treats them with those contemptuous and arrogant airs,
which we so often meet with in the proud dignitaries of opulent
and well endowed churches. The presbyterian clergy, accordingly,
have more influence over the minds of the common people, than
perhaps the clergy of any other established church. It is,
accordingly, in presbyterian countries only, that we ever find
the common people converted, without persecution completely, and
almost to a man, to the established church.
In countries where church benefices are, the greater part of
them, very moderate, a chair in a university is generally a
better establishment than a church benefice. The
universities have, in this case, the picking and chusing of their
members from all the churchmen of the country, who, in every
country, constitute by far the most numerous class of men of
letters. Where church benefices, on the contrary, are many of
them very considerable, the church naturally draws from the
universities the greater part of their eminent men of letters;
who generally find some patron, who does himself honour by
procuring them church preferment. In the former situation, we
are likely to find the universities filled with the most eminent
men of letters that are to be found in the country. In the
latter, we are likely to find few eminent men among them, and
those few among the youngest members of the society, who are
likely, too, to be drained away from it, before they can have
acquired experience and knowledge enough to be of much use to it.
It is observed by Mr. de Voltaire, that father Porée, a jesuit of
no great eminence in the republic of letters, was the only
professor they had ever had in France, whose works were worth the
reading. In a country which has produced so many eminent men of
letters, it must appear somewhat singular, that scarce one of
them should have been a professor in a university. The famous
Cassendi was, in the beginning of his life, a professor in the
university of Aix. Upon the first dawning of his genius, it was
represented to him, that by going into the church he could easily
find a much more quiet and comfortable subsistence, as well as a
better situation for pursuing his studies; and he immediately
followed the advice. The observation of Mr. de Voltaire may
be applied, I believe, not only to France, but to all other Roman
Catholic countries. We very rarely find in any of them an eminent
man of letters, who is a professor in a university, except,
perhaps, in the professions of law and physic; professions from
which the church is not so likely to draw them. After the church
of Rome, that of England is by far the richest and best endowed
church in Christendom. In England, accordingly, the church is
continually draining the universities of all their best and
ablest members; and an old college tutor who is known and
distinguished in Europe as an eminent man of letters, is as
rarely to be found there as in any Roman catholic country, In
Geneva, on the contrary, in the protestant cantons of
Switzerland, in the protestant countries of Germany, in Holland,
in Scotland, in Sweden, and Denmark, the most eminent men of
letters whom those countries have produced, have, not all indeed,
but the far greater part of them, been professors in
universities. In those countries, the universities are
continually draining the church of all its most eminent men of
letters.
It may, perhaps, be worth while to remark, that, if we except the
poets, a few orators, and a few historians, the far greater part
of the other eminent men of letters, both of Greece and Rome,
appear to have been either public or private teachers; generally
either of philosophy or of rhetoric. This remark will be
found to hold true, from the days of Lysias and Isocrates, of
Plato and Aristotle, down to those of Plutarch and Epictetus,
Suetonius, and Quintilian. To impose upon any man the necessity
of teaching, year after year, in any particular branch of science
seems in reality to be the most effectual method for rendering
him completely master of it himself. By being obliged to go
every year over the same ground, if he is good for any thing, he
necessarily becomes, in a few years, well acquainted with every
part of it. and if, upon any particular point, he should form too
hasty an opinion one year, when he comes, in the course of his
lectures to reconsider the same subject the year thereafter, he
is very likely to correct it. As to be a teacher of science is
certainly the natural employment of a mere man of letters ; so is
it likewise, perhaps, the education which is most likely to
render him a man of solid learning and knowledge. The mediocrity
of church benefices naturally tends to draw the greater part of
men of letters in the country where it takes place, to the
employment in which they can be the most useful to the public,
and at the same time to give them the best education, perhaps,
they are capable of receiving. It tends to render their learning
both as solid as possible, and as useful as possible.
The revenue of every established church, such parts of it
excepted as may arise from particular lands or manors, is a
branch, it ought to be observed, of the general revenue of the
state, which is thus diverted to a purpose very different from
the defence of the state. The tithe, for example, is a real land.
tax, which puts it out of the power of the proprietors of land to
contribute so largely towards the defence of the state as they
otherwise might be able to do. The rent of land, however, is,
according to some, the sole fund; and, according to others, the
principal fund, from which, in all great monarchies, the
exigencies of the state must be ultimately supplied. The more of
this fund that is given to the church, the less, it is evident,
can be spared to the state. It may be laid down as a certain
maxim, that all other things being supposed equal, the richer the
church, the poorer must necessarily be, either the sovereign on
the one hand, or the people on the other; and, in all cases, the
less able must the state be to defend itself. In several
protestant countries, particularly in all the protestant cantons
of Switzerland, the revenue which anciently belonged to the Roman
catholic church, the tithes and church lands, has been found a
fund sufficient, not only to afford competent salaries to the
established clergy, but to defray, with little or no addition,
all the other expenses of the state. The magistrates of the
powerful canton of Berne, in particular, have accumulated, out of
the savings from this fund, a very large sum, supposed to amount
to several millions; part or which is deposited in a public
treasure, and part is placed at interest in what are called the
public funds of the different indebted nations of Europe; chiefly
in those of France and Great Britain. What may be the amount of
the whole expense which the church, either of Berne, or of any
other protestant canton, costs the state, I do not pretend to
know. By a very exact account it appears, that, in 1755, the
whole revenue of the clergy of the church of Scotland, including
their glebe or church lands, and the rent of their manses or
dwelling-houses, estimated according to a reasonable valuation,
amounted only to £68,514:1:5 1/12d. This very moderate revenue
affords a decent subsistence to nine hundred and fortyfour
ministers. The whole expense of the church, including what is
occasionally laid out for the building and reparation of
churches, and of the manses of ministers, cannot well be supposed
to exceed eighty or eighty-five thousand pounds a-year. The most
opulent church in Christendom does not maintain better the
uniformity of faith, the fervour of devotion, the spirit of
order, regularity, and austere morals, in the great body of the
people, than this very poorly endowed church of Scotland. All the
good effects, both civil and religious, which an established
church can be supposed to produce, are produced by it as
completely as by any other. The greater part of the protestant
churches of Switzerland, which, in general, are not better
endowed than the church of Scotland, produce those effects in a
still higher degree. In the greater part of the protestant
cantons. there is not a single person to be found. who does not
profess himself to be of the established church. If he professes
himself to be of any other, indeed, the law obliges him to leave
the canton. But so severe, or, rather, indeed, so oppressive a
law, could never have been executed in such free countries, had
not the diligence of the clergy beforehand converted to the
established church the whole body of the people, with the
exception of, perhaps, a few individuals only. In some parts of
Switzerland, accordingly, where, from the accidental union of a
protestant and Roman catholic country, the conversion has not
been so complete, both religions are not only tolerated, but
established by law.
The proper performance of every service seems to require, that
its pay or recompence should be, as exactly as possible,
proportioned to the nature of the service. If any service is very
much underpaid, it is very apt to suffer by the meanness and
incapacity of the greater part of those who are employed in it.
If it is very much overpaid, it is apt to suffer, perhaps still
more, by their negligence and idleness. A man of a large revenue,
whatever may be his profession, thinks he ought to live like
other men of large revenues; and to spend a great part of his
time in festivity, in vanity, and in dissipation. But in a
clergyman, this train of life not only consumes the time which
ought to be employed in the duties of his function, but in the
eyes of the common people, destroys almost entirely that sanctity
of character, which can alone enable him to perform those duties
with proper weight and authority.
PART IV.
Of the Expense of supporting the Dignity of the Sovereign.
Over and above the expenses necessary for enabling the sovereign
to perform his several duties, a certain expense is requisite for
the support of his dignity. This expense varies, both with the
different periods of improvement, and with the different forms of
government.
In an opulent and improved society, where all the different
orders of people are growing every day more expensive in their
houses, in their furniture, in their tables, in their dress, and
in their equipage; it cannot well be expected that the sovereign
should alone hold out against the fashion. He naturally,
therefore, or rather necessarily, becomes more expensive in all
those different articles too. His dignity even seems to require
that he should become so.
As, in point of dignity, a monarch is more raised above his
subjects than the chief magistrate of any republic is ever
supposed to be above his fellow-citizens ; so a greater expense
is necessary for supporting that higher dignity. We naturally
expect more splendour in the court of a king, than in the
mansion-house of a doge or burgo-master.
CONCLUSION.
The expense of defending the society, and that of supporting the
dignity of the chief magistrate, are both laid out for the
general benefit of the whole society. It is reasonable,
therefore, that they should be defrayed by the general
contribution of the whole society ; all the different members
contributing, as nearly as possible, in proportion to their
respective abilities.
The expense of the administration of justice, too, may no doubt
be considered as laid out for the benefit of the whole society.
There is no impropriety, therefore, in its being defrayed by the
general contribution of the whole society. The persons, however,
who give occasion to this expense, are those who, by their
injustice in one way or another, make it necessary to seek
redress or protection from the courts of justice. The persons,
again, most immediately benefited by this expense, are those whom
the courts of justice either restore to their rights, or maintain
in their rights. The expense of the administration of justice,
therefore, may very properly be defrayed by the particular
contribution of one or other, or both, of those two different
sets of persons, according as different occasions may require,
that is, by the fees of court. It cannot be necessary to have
recourse to the general contribution of the whole society, except
for the conviction of those criminals who have not themselves any
estate or fund sufficient for paying those fees.
Those local or provincial expenses, of which the benefit is local
or provincial (what is laid out, for example, upon the police of
a particular town or district), ought to be defrayed by a local
or provincial revenue, and ought to be no burden upon the general
revenue of the society. It is unjust that the whole society
should contribute towards an expense, of which the benefit is
confined to a part of the society.
The expense of maintaining good roads and communications is, no
doubt, beneficial to the whole society, and may, therefore,
without any injustice, be defrayed by the general contributions
of the whole society. This expense, however, is most immediately
and directly beneficial to those who travel or carry goods from
one place to another, and to those who consume such goods. The
turnpike tolls in England, and the duties called peages in other
countries, lay it altogether upon those two different sets of
people, and thereby discharge the general revenue of the society
from a very considerable burden.
The expense of the institutions for education and religious
instruction, is likewise, no doubt, beneficial to the whole
society, and may, therefore, without injustice, be defrayed by
the general contribution of the whole society. This expense,
however, might, perhaps, with equal propriety, and even with some
advantage, be defrayed altogether by those who receive the
immediate benefit of such education and instruction, or by the
voluntary contribution of those who think they have occasion for
either the one or the other.
When the institutions, or public works, which are beneficial to
the whole society, either cannot be maintained altogether, or are
not maintained altogether, by the contribution of such particular
members of the society as are most immediately benefited by them
; the deficiency must, in most cases, be made up by the general
contribution of the whole society. The general revenue of the
society, over and above defraying the expense of defending the
society, and of supporting the dignity of the chief magistrate,
must make up for the deficiency of many particular branches of
revenue. The sources of this general or public revenue, I shall
endeavour to explain in the following chapter.
CHAPTER II.
OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY.
The revenue which must defray, not only the expense of defending
the society and of supporting the dignity of the chief
magistrate, but all the other necessary expenses of government,
for which the constitution of the state has not provided any
particular revenue may be drawn, either, first, from some fund
which peculiarly belongs to the sovereign or commonwealth, and
which is independent of the revenue of the people ; or, secondly,
from the revenue of the people.
PART I.
Of the Funds, or Sources, of Revenue, which may peculiarly belong
to the Sovereign or Commowealth.
The funds, or sources, of revenue, which may peculiarly belong to
the sovereign or commonwealth, must consist, either in stock, or
in land.
The sovereign, like, any other owner of stock, may derive a
revenue from it, either by employing it himself, or by lending
it. His revenue is, in the one case, profit, in the other
interest.
The revenue of a Tartar or Arabian chief consists in profit. It
arises principally from the milk and increase of his own herds
and flocks, of which he himself superintends the management, and
is the principal shepherd or herdsman of his own horde or tribe.
It is, however, in this earliest and rudest state of civil
government only, that profit has ever made the principal part of
the public revenue of a monarchical state.
Small republics have sometimes derived a considerable revenue
from the profit of mercantile projects. The republic of Hamburgh
is said to do so from the profits of a public wine-cellar and
apothecary's shop.{See Memoires concernant les Droits et
Impositions en Europe, tome i. page 73. This work was compiled by
the order of the court, for the use of a commision employed for
some years past in considering the proper means for reforming the
finances of France. The account of the French taxes, which takes
up three volumes in quarto, may be regarded as perfectly
authentic. That of those of other European nations was compiled
from such information as the French ministers at the different
courts could procure. It is much shorter, and probably not quite
so exact as that of the French taxes.} That state cannot be very
great, of which the sovereign has leisure to carry on the trade
of a wine-merchant or an apothecary. The profit of a public bank
has been a source of revenue to more considerable states. It
has been so, not only to Hamhurgh, but to Venice and Amsterdam. A
revenue of this kind has even by some people been thought not
below the attention of so great an empire as that of Great
Britain. Reckoning the ordinary dividend of the bank of England
at five and a-half per cent., and its capital at ten millions
seven hundred and eighty thousand pounds, the neat annual profit,
after paying the expense of management, must amount, it is said,
to five hundred and ninety-two thousand nine hundred pounds.
Government, it is pretended, could borrow this capital at three
per cent. interest, and, by taking the management of the bank
into its own hands, might make a clear profit of two hundred and
sixty-nine thousand five hundred pounds a-year. The orderly,
vigilant, and parsimonious administration of such aristocracies
as those of Venice and Amsterdam, is extremely proper, it appears
from experience, for the management of a mercantile project of
this kind. But whether such a government us that of England,
which, whatever may be its virtues, has never been famous for
good economy; which, in time of peace, has generally conducted
itself with the slothful and negligent profusion that is,
perhaps, natural to monarchies ; and, in time of war, has
constantly acted with all the thoughtless extravagance that
democracies are apt to fall into, could be safely trusted with
the management of such a project, must at least be a good deal
more doubtful.
The post-office is properly a mercantile project. The government
advances the expense of establishing the different offices, and
of buying or hiring the necessary horses or carriages, and is
repaid, with a large profit, by the duties upon what is carried.
It is, perhaps, the only mercantile project which has been
successfully managed by, I believe, every sort of government. The
capital to be advanced is not very considerable. There is no
mystery in the business. The returns are not only certain but
immediate.
Princes, however, have frequently engaged in many other
mercantile projects, and have been willing, like private persons,
to mend their fortunes, by becoming adventurers in the common
branches of trade. They have scarce ever succeeded. The profusion
with which the affairs of princes are always managed, renders it
almost impossible that they should. The agents of a prince regard
the wealth of their master as inexhaustible; are careless at what
price they buy, are careless at what price they sell, are
careless at what expense they transport his goods from one place
to another. Those agents frequently live with the profusion of
princes ; and sometimes, too, in spite of that profusion, and by
a proper method of making up their accounts, acquire the fortunes
of princes. It was thus, as we are told by Machiavel, that
the agents of Lorenzo of Medicis, not a prince of mean abilities,
carried on his trade. The republic of Florence was several
times obliged to pay the debt into which their extravagance had
involved him. He found it convenient, accordingly to give up the
business of merchant, the business to which his family had
originally owed their fortune, and, in the latter part of his
life, to employ both what remained of that fortune, and the
revenue of the state, of which he had the disposal, in projects
and expenses more suitable to his station.
No two characters seem more inconsistent than those of trader and
sovereign. If the trading spirit of the English East India
company renders them very bad sovereigns, the spirit of
sovereignty seems to have rendered them equally bad traders.
While they were traders only, they managed their trade
successfully, and were able to pay from their profits a moderate
dividend to the proprietors of their stock. Since they became
sovereigns, with a revenue which, it is said, was originally more
than three millions sterling, they have been obliged to beg the
ordinary assistance of government, in order to avoid immediate
bankruptcy. In their former situation, their servants in India
considered themselves as the clerks of merchants ; in their
present situation, those servants consider themselves as the
ministers of sovereigns.
A state may sometimes derive some part of its public revenue from
the interest of money, as well as from the profits of stock. If
it has amassed a treasure, it may lend a part of that treasure,
either to foreign states, or to its own subjects.
The canton of Berne derives a considerable revenue by lending a
part of its treasure to foreign states, that is, by placing it in
the public funds of the different indebted nations of Europe,
chiefly in those of France and England. The security of this
revenue must depend, first, upon the security of the funds in
which it is placed, or upon the good faith of the government
which has the management of them; and, secondly, upon the
certainty or probability of the continuance of peace with the
debtor nation. In the case of a war, the very first act of
hostility on the part of the debtor nation might be the
forfeiture of the funds of its credit or. This policy of lending
money to foreign states is, so far as I know peculiar to the
canton of Berne.
The city of Hamburgh {See Memoire concernant les Droites et
Impositions en Europe tome i p. 73.}has established a sort of
public pawn-shop, which lends money to the subjects of the state,
upon pledges, at six per cent. interest. This pawn-shop, or
lombard, as it is called, affords a revenue, it is pretended, to
the state, of a hundred and fifty thousand crowns, which, at four
and sixpence the crown, amounts to £33,750 sterling.
The government of Pennsylvania, without amassing any treasure,
invented a method of lending, not money, indeed, but what is
equivalent to money, to its subjects. By advancing to private
people, at interest, and upon land security to double the value,
paper bills of credit, to be redeemed fifteen years after their
date ; and, in the mean time, made transferable from hand to
hand, like banknotes, and declared by act of assembly to be a
legal tender in all payments from one inhabitant of the province
to another, it raised a moderate revenue, which went a
considerable way towards defraying an annual expense of about
£4,500, the whole ordinary expense of that frugal and orderly
government. The success of an expedient of this kind must
have depended upon three different circumstances: first, upon the
demand for some other instrument of commerce, besides gold and
silver money, or upon the demand for such a quantity of
consumable stock as could not be had without sending abroad the
greater part of their gold and silver money, in order to purchase
it; secondly, upon the good credit of the government which made
use of this expedient ; and, thirdly, upon the moderation with
which it was used, the whole value of the paper bills of credit
never exceeding that of the gold and silver money which would
have been necessary for carrying on their circulation, had there
been no paper bills of credit. The same expedient was, upon
different occations, adopted by several other American colonies;
but, from want of this moderation, it produced, in the greater
part of them, much more disorder than conveniency.
The unstable and perishable nature of stock and credit, however,
renders them unfit to be trusted to as the principal funds of
that sure, steady, and permanent revenue, which can alone give
security and dignity to government. The government of no great
nation, that was advanced beyond the shepherd state, seems ever
to have derived the greater part of its public revenue from such
sources.
Land is a fund of more stable and permanent nature ; and the rent
of public lands, accordingly, has been the principal source of
the public revenue of many a great nation that was much advanced
beyond the shepherd state. From the produce or rent of the public
lands, the ancient republics of Greece and Italy derived for a
long the the greater part of that revenue which defrayed the
necessary expenses of the commonwealth. The rent of the crown
lands constituted for a long time the greater part of the revenue
of the ancient sovereigns of Europe.
War, and the preparation for war, are the two circumstances
which, in modern times, occasion the greater part of the
necessary expense or all great states. But in the ancient
republics of Greece and Italy, every citizen was a soldier, and
both served, and prepared himself for service, at his own
expense. Neither of those two circumstances, therefore, cou1d
occasion any very considerable expense to the state. The rent of
a very moderate landed estate might be fully sufficient for
defraying all the other necessary expenses of government.
In the ancient monarchies of Europe, the manners and customs of
the time sufficiently prepared the great body of the people for
war; and when they took the field, they were, by the condition of
their feudal tenures, to be maintained either at their own
expense, or at that of their immediate lords, without bringing
any new charge upon the sovereign. The other expenses of
government were, the greater part of them, very moderate. The
administration of justice, it has been shewn, instead of being a
cause of expense was a source of revenue. The labour of the
country people, for three days before, and for three days after,
harvest, was thought a fund sufficient for making and maintaining
all the bridges, highways, and other public works, which the
commerce of the country was supposed to require. In those
days the principal expense of the sovereign seems to have
consisted in the maintenance of his own family and household. The
officers of his household, accordingly, were then the great
officers of state. The lord treasurer received his rents.
The lord steward and lord chamberlain looked after the expense of
his family. The care of his stables was committed to the lord
constable and the lord marshal. His houses were all built in the
form of castles, and seem to have been the principal fortresses
which he possessed. The keepers of those houses or castles might
be considered as a sort of military governors. They seem to have
been the only military officers whom it was necessary to maintain
in time of peace. In these circumstances, the rent of a great
landed estate might, upon ordinary occasions, very well defray
all the necessary expenses of government.
In the present state of the greater part of the civilized
monarchies of Europe, the rent of all the lands in the country,
managed as they probably would be, if they all belonged to one
proprietor, would scarce, perhaps, amount to the ordinary revenue
which they levy upon the people even in peaceable times. The
ordinary revenue of Great Britain, for example, including not
only what is necessary for defraying the current expense of the
year, but for paying the interest of the public debts, and for
sinking a part of the capital of those debts, amounts to upwards
of ten millions a-year. But the land tax, at four shillings
in the pound, falls short of two millions a-year. This land
tax, as it is called however, is supposed to be one-fifth, not
only of the rent of all the land, but of that of all the houses,
and of the interest of all the capital stock of Great Britain,
that part of it only excepted which is either lent to the public,
or employed as farming stock in the cultivation of land. A very
considerable part of the produce of this tax arises from the rent
of houses and the interest of capital stock. The land tax of the
city of London, for example, at four shillings in the pound,
amounts to £123,399: 6: 7; that of the city of Westminster to
£63,092: 1: 5; that of the palaces of Whitehall and St. James's,
to £30,754: 6: 3. A certain proportion of the land tax is, in
the same manner, assessed upon all the other cities and towns
corporate in the kingdom ; and arises almost altogether, either
from the rent of houses, or from what is supposed to be the
interest of trading and capital stock. According to the
estimation, therefore, by which Great Britain is rated to the
land tax, the whole mass of revenue arising from the rent of all
the lands, from that of all the houses, and from the interest of
all the capital stock, that part of it only excepted which is
either lent to the public, or employed in the cultivation of
land, does not exceed ten millions sterling a-year, the ordinary
revenue which government levies upon the people, even in
peaceable times. The estimation by which Great Britain is rated
to the land tax is, no doubt, taking the whole kingdom at an
average, very much below the real value ; though in several
particular counties and districts it is said to be nearly equal
to that value. The rent of the lands alone, exclusive of that of
houses and of the interest of stock, has by many people been
estimated at twenty millions; an estimation made in a great
measure at random, and which, I apprehend, is as likely to be
above as below the truth. But if the lands of Great Britain,
in the present state of their cultivation, do not afford a rent
of more than twenty millions a-year, they could not well afford
the half, most probably not the fourth part of that rent, if they
all belonged to a single proprietor, and were put under the
negligent, expensive, and oppressive management of his factors
and agents. The crown lands of Great Britain do not at present
afford the fourth part of the rent which could probably be drawn
from them if they were the property of private persons. If the
crown lands were more extensive, it is probable, they would be
still worse managed.
The revenue which the great body of the people derives from land
is, in proportion, not to the rent, but to the produce of the
land. The whole annual produce of the land of every country,
if we except what is reserved for seed, is either annually
consumed by the great body of the people, or exchanged for
something else that is consumed by them. Whatever keeps down the
produce of the land below what it would otherwise rise to, keeps
down the revenue of the great body of the people, still more than
it does that of the proprietors of land. The rent of land, that
portion of the produce which belongs to the proprietors, is
scarce anywhere in Great Britain supposed to be more than a third
part of the whole produce. If the land which, in one state of
cultivation, affords a revenue of ten millions sterling a-year,
would in another afford a rent of twenty millions ; the rent
being, in both cases, supposed a third part of the produce, the
revenue of the proprietors would be less than it otherwise might
be, by ten millions a-year only; but the revenue of the great
hotly of the people would be less than it otherwise might be, by
thirty millions a-year, deducting only what would be necessary
for seed. The population of the country would be less by the
number of people which thirty millions a-year, deducting always
the seed, could maintain, according to the particular mode of
living, and expense which might take place in the different ranks
of men, among whom the remainder was distributed.
Though there is not at present in Europe, any civilized state of
any kind which derives the greater part of its public revenue
from the rent of lands which are the property of the state; yet,
in all the great monarchies of Europe, there are still many large
tracts of land which belong to the crown. They are generally
forest, and sometimes forests where, after travelling several
miles, you will scarce find a single tree; a mere waste and loss
of country, in respect both of produce and population. In every
great monarchy of Europe, the sale of the crown lands would
produce a very large sum of money, which, if applied to the
payment of the public debts, would deliver from mortgage a much
greater revenue than any which those lands have even afforded to
the crown. In countries where lands, improved and cultivated very
highly, and yielding, at the time of sale, as great a rent as can
easily be got from them, commonly sell at thirty years purchase;
the unimproved, uncultivated, and low-rented crown lands, might
well be expected to sell at forty, fifty, or sixty years
purchase. The crown might immediately enjoy the revenue
which this great price would redeem from mortgage. In the course
of a few years, it would probably enjoy another revenue. When the
crown lands had become private property, they would, in the
course of a few years, become well improved and well cultivated.
The increase of their produce would increase the population of
the country, by augmenting the revenue and consumption of the
people. But the revenue which the crown derives from the duties
or custom and excise, would necessarily increase with the revenue
and consumption of the people.
The revenue which, in any civilized monarchy, the crown derives
from tlhe crown lands, though it appears to cost nothing to
individuals, in reality costs more to the society than perhaps
any other equal revenue which the crown enjoys. It would, in
all cases, be for the interest of the society, to replace this
revenue to the crown by some other equal revenue, and to divide
the lands among the people, which could not well be done better,
perhaps, than by exposing them to public sale.
Lands, for the purposes of pleasure and magnificence, parks,
gardens, public walks, etc. possessions which are everywhere
considered as causes of expense, not as sources of revenue, seem
to be the only lands which, in a great and civilized monarchy,
ought to belong to the crown.
Public stock and public lands, therefore, the two sources of
revenue which may peculiarly belong to the sovereign or
commonwealth, being both improper and insufficient funds for
defraying the necessary expense of any great and civilized state
; it remains that this expense must, the greater part of it, be
defrayed by taxes of one kind or another; the people contributing
a part of their own private revenue, in order to make up a public
revenue to the sovereign or commonwealth.
PART II.
Of Taxes.
The private revenue of individuals, it has been shown in the
first book of this Inquiry, arises, ultimately from three
different sources ; rent, profit, and wages. Every tax must
finally be paid from some one or other of those three different
sources of revenue, or from all of them indifferently. I shall
endeavour to give the best account I can, first, of those taxes
which, it is intended should fall upon rent; secondly, of those
which, it is intended should fall upon profit ; thirdly, of those
which, it is intended should fall upon wages ; and fourthly, of
those which, it is intended should fall indifferently upon all
those three different sources of private revenue. The particular
consideration of each of these four different sorts of taxes will
divide the second part of the present chapter into four articles,
three of which will require several other subdivisions. Many of
these taxes, it will appear from the following review, are not
finally paid from the fund, or source of revenue, upon which it
is intended they should fall.
Before I enter upon the examination of particular taxes,it is
necessary to premise the four following maximis with regard to
taxes in general.
1. The subjects of every state ought to contribute towards the
support of the government, as nearly as possible, in proportion
to their respective abilities; that is, in proportion to the
revenue which they respectively enjoy under the protection of the
state. The expense of government to the individuals of a great
nation, is like the expense of management to the joint tenants of
a great estate, who are all obliged to contribute in proportion
to their respective interests in the estate. In the obsevation or
neglect of this maxim, consists what is called the equality or
inequality of taxation. Every tax, it must be observed once
for all, which falls finally upon one only of the three sorts of
revenue above mentioned, is necessarily unequal, in so far as it
does not affect the other two. In the following examination of
different taxes, I shall seldom take much farther notice of this
sort of inequality; but shall, in most cases, confine my
observations to that inequality which is occasioned by a
particular tax falling unequally upon that particular sort of
private revenue which is affected by it.
2. The tax which each individual is bound to pay, ought to be
certain and not arbitrary. The time of payment, the manner of
payment, the quantity to be paid, ought all to be clear and plain
to the contributor, and to every other person. Where it is
otherwise, every person subject to the tax is put more or less in
the power of the tax-gatherer, who can either aggravate the tax
upon any obnoxious contributor, or extort, by the terror of such
aggravation, some present or perquisite to himself. The
uncertainty of taxation encourages the insolence, and favours the
corruption, of an order of men who are naturally unpopular, even
where they are neither insolent nor corrupt. The certainty of
what each individual ought to pay is, in taxation, a matter of so
great importance, that a very considerable degree of inequality,
it appears, I believe, from the experience of all nations, is not
near so great an evil as a very small degree of uncertainty.
3. Every tax ought to be levied at the time, or in the manner, in
which it is most likely to be convenient for the contributor to
pay it. A tax upon the rent of land or of houses, payable at the
same term at which such rents are usually paid, is levied at the
time when it is most likely to be convenient for the contributor
to pay ; or when he is most likely to have wherewithall to pay.
Taxes upon such consumable goods as are articles of luxury, are
all finally paid by the consumer, and generally in a manner that
is very convenient for him. He pays them by little and little, as
he has occasion to buy the goods. As he is at liberty too, either
to buy or not to buy, as he pleases, it must be his own fault if
he ever suffers any considerable inconveniecy from such taxes.
4. Every tax ought to be so contrived, as both to take out and to
keep out of the pockets of the people as little as possible, over
and above what it brings into the public treasury of the state. A
tax may either take out or keep out of the pockets of the people
a great deal more than it brings into the public treasury, in the
four following ways. First, the levying of it may require a great
number of officers, whose salaries may eat up the greater part of
the produce of the tax, and whose perquisites may impose another
additional tax upon the people. Secondly, it may obstruct the
industry of the people, and discourage them from applying to
certain branches of business which might give maintenance and
employment to great multitudes. While it obliges the people
to pay, it may thus diminish, or perhaps destroy, some of the
funds which might enable them more easily to do so. Thirdly, by
the forfeitures and other penalties which those unfortunate
individuals incur, who attempt unsuccessfully to evade the tax,
it may frequently ruin them, and thereby put an end to the
benefit which the community might have received from the
employment of their capitals. An injudicious tax offers a great
temptation to smuggling. But the penalties of smuggling must
arise in proportion to the temptation. The law, contrary to all
the ordinary principles of justice, first creates the temptation,
and then punishes those who yield to it; and it commonly enhances
the punishment, too, in proportion to the very circumstance which
ought certainly to alleviate it, the temptation to commit the
crime.{ See Sketches of the History of Man page 474, and Seq.}
Fourthly, by subjecting the people to the frequent visits and the
odious examination of the tax-gatherers, it may expose them to
much unnecessary trouble, vexation, and oppression ; and though
vexation is not, strictly speaking, expense, it is certainly
equivalent to the expense at which every man would be willing to
redeem himself from it. It is in some one or other of these four
different ways, that taxes are frequently so much more burdensome
to the people than they are beneficial to the sovereign.
The evident justice and utility of the foregoing maxims have
recommended them, more or less, to the attention of all nations.
All nations have endeavoured, to the best of their judgment, to
render their taxes as equal as they could contrive ; as certain,
as convenient to the contributor, both the time and the mode of
payment, and in proportion to the revenue which they brought to
the prince, as little burdensome to the people. The following
short review of some of the principal taxes which have taken
place in different ages and countries, will show, that the
endeavours of all nations have not in this respect been equally
successful.
ARTICLE I. ˜ Taxes upon Rent ˜ Taxes upon the Rent of Land.
A tax upon the rent of land may either be imposed according to a
certain canon, every district being valued at a curtain rent,
which valuation is not afterwards to be altered; or it may be
imposed in such a manner, as to vary with every variation in the
real rent of the land, and to rise or fall with the improvement
or declension of its cultivation.
A land tax which, like that of Great Britain, is assessed upon
each district according to a certain invariable canon, though it
should be equal at the time of its first establishment,
necessarily becomes unequal in process of time, according to the
unequal degrees of improvement or neglect in the cultivation of
the different parts of the country. In England, the valuation,
according to which the different counties and parishes were
assessed to the land tax by the 4th of William and Mary, was very
unequal even at its first establishment. This tax, therefore, so
far offends against the first of the four maxims above mentioned.
It is perfectly agreeable to the other three. It is perfectly
certain. The time of payment for the tax, being the same as that
for the rent, is as convenient as it can be to the contributor.
Though the landlord is, in all cases, the real contributor, the
tax is commonly advanced by the tenant, to whom the landlord is
obliged to allow it in the payment of the rent. This tax is
levied by a much smaller number of officers than any other which
affords nearly the same revenue. As the tax upon each district
does not rise with the rise of the rent, the sovereign does not
share in the profits of the landlord's improvements. Those
improvements sometimes contribute, indeed, to the discharge of
the other landlords of the district. But the aggravation of the
tax, which this may sometimes occasion upon a particular estate,
is always so very small, that it never can discourage those
improvements, nor keep down the produce of the land below what it
would otherwise rise to. As it has no tendency to diminish the
quantity, it can have none to raise the price of that produce.
It does not obstruct the industry of the people; it subjects the
landlord to no other inconveniency besides the unavoidable one of
paying the tax.
The advantage, however, which the land-lord has derived from the
invariable constancy of the valuation. by which all the lands of
Great Britain are rated to the land-tax, has been principally
owing to some circumstances altogether extraneous to the nature
of the tax
It has been owing in part, to the great prosperity of almost
every part of the country, the rents of almost all the estates of
Great Britain having, since the time when this valuation was
first established, been continually rising, and scarce any of
them having fallen. The landlords, therefore, have almost all
gained the difference between the tax which they would have paid,
according to the present rent of their estates, and that which
they actually pay according to the ancient valuation. Had the
state of the country been different, had rents been gradually
falling in consequence of the declension of cultivation, the
landlords would almost all have lost this difference. In the
state of things which has happened to take place since the
revolution, the constancy of the valuation has been advantageous
to the landlord and hurtful to the sovereign. In a different
state of things it might have been advantageous to the sovereign
and hurtful to the landlord.
As the tax is made payable in money, so the valuation of the land
is expressed in money. Since the establishment of this valuation,
the value of silver has been pretty uniform, and there has been
no alteration in the standard of the coin, either as to weight or
fineness. Had silver risen considerably in its value, as it seems
to have done in the course of the two centuries which preceded
the discovery of the mines of America, the constancy of the
valuation might have proved very oppressive to the landlord. Had
silver fallen considerably in its value, as it certainly did for
about a century at least after the discovery of those mines, the
same constancy of valuation would have reduced very much this
branch of the revenue of the sovereign. Had any considerable
alteration been made in the standard of the money, either by
sinking the same quantity of silver to a lower denomination, or
by raising it to a higher ; had an ounce of silver, for example,
instead of being coined into five shillings and two pence, been
coined either into pieces which bore so low a denomination as two
shillings and seven pence, or into pieces which bore so high a
one as ten shillings and four pence, it would, in the one case,
have hurt the revenue of the proprietor, in the other that of the
sovereign.
In circumstances, therefore, somewhat different from those which
have actually taken place, this constancy of valuation might have
been a very great inconveniency, either to the contributors or to
the commonwealth. In the course of ages, such circumstances,
however, must at some time or other happen. But though empires,
like all the other works of men, have all hitherto proved mortal,
yet every empire aims at immortality. Every constitution,
therefore, which it is meant should be as permanent as the empire
itseif, ought to be convenient, not in certain circumstances
only, but in all circumstances; or ought to be suited, not to
those circumstances which are transitory, occasional, or
accidental, but to those which are necessary, and therefore
always the same.
A tax upon the rent of land, which varies with every variation of
the rent, or which rises and falls according to the improvement
or neglect of cultivation, is recommended by that sect of men of
letters in France, who call themselves the economists, as the
most equitable of all taxes. All taxes, they pretend, fall
ultimately upon the rent of land, and ought, therefore, to be
imposed equally upon the fund which must finally pay them. That
all taxes ought to fall as equally as possible upon the fund
which must finally pay them, is certainly true. But without
entering into the disagreeable discussion of the metaphysical
arguments by which they support their very ingenious theory, it
will sufficiently appear, from the following review, what are the
taxes which fall finally upon the rent of the land, and what are
those which fall finally upon some other fund.
In the Venetian territory, all the arable lands which are given
in lease to farmers are taxed at a tenth of the rent. { Memoires
concernant les Droits, p. 240, 241.} The leases are recorded in a
public register, which is kept by the officers of revenue in each
province or district. When the proprietor cultivates his own
lands, they are valued according to an equitable estimation, and
he is allowed a deduction of one-fifth of the tax; so that for
such land he pays only eight instead of ten per cent. of the
supposed rent.
A land-tax of this kind is certainly more equal than the land-tax
of England. It might not, perhaps, be altogether so certain, and
the assessment of the tax might freqnently occasion a good deal
more trouble to the landlord. It might, too, be a good deal more
expensive in the levying.
Such a system of administration, however, might, perhaps, be
contrived, as would in a great measure both prevent this
uncertainty, and moderate this expense.
The landlord and tenant, for example, might jointly be obliged to
record their lease in a public register. Proper penalties might
be enacted against concealing or misrepresenting any of the
conditions; and if part of those penalties were to be paid to
either of the two parties who informed against and convicted the
other of such concealment or misrepresentation, it would
effectually deter them from combining together in order to
defraud the public revenue. All the conditions of the lease might
be sufficiently known from such a record.
Some landlords, instead of raising the rent, take a fine for the
renewal of the lease. This practice is, in most cases, the
expedient of a spendthrift, who, for a sum of ready money sells a
future revenue of much greater value. It is, in most cases,
therefore, hurtful to the landlord; it is frequently hurtful to
the tenant ; and it is always hurtful to the community. It
frequently takes from the tenant so great a part of his capital,
and thereby diminishes so much his ability to cultivate the land,
that he finds it more difficult to pay a small rent than it would
otherwise have been to pay a great one. Whatever diminishes his
ability to cultivate, necessarily keeps down, below what it would
otherwise have been, the most important part of the revenue of
the community. By rendering the tax upon such fines a good deal
heavier than upon the ordinary rent, this hurtful practice might
be discouraged, to the no small advantage of all the different
parties concerned, of the landlord, of the tenant, of the
sovereign, and of the whole community.
Some leases prescribe to the tenant a certain mode of
cultivation, and a certain succession of crops, during the whole
continuance of the lease. This condition, which is generally the
effect of the landlord's conceit of his own superior knowledge (a
conceit in most cases very ill-founded), ought always to be
considered as an additional rent, as a rent in service, instead
of a rent in money. In order to discourage the practice, which is
generally a foolish one, this species of rent might be valued
rather high, and consequently taxed somewhat higher than common
money-rents.
Some landlords, instead of a rent in money, require a rent in
kind, in corn, cattle, poultry, wine, oil, etc. ; others, again,
require a rent in service. Such rents are always more hurtful to
the tenant than beneficial to the landlord. They either take
more, or keep more out of the pocket of the former, than they put
into that of the latter. In every country where they take
place, the tenants are poor and beggarly, pretty much according
to the degree in which they take place. By valuing, in the same
manner, such rents rather high, and consequently taxing them
somewhat higher than common money-rents, a practice which is
hurtful to the whole community, might, perhaps, be sufficiently
discouraged.
When the landlord chose to occupy himself a part of his own
lands, the rent might be valued according to an equitable
arbitration of the farmers and landlords in the neighbourhood,
and a moderate abatement of the tax might be granted to him, in
the same manner as in the Venetian territory, provided the rent
of the lands which he occupied did not exceed a certain sum. It
is of importance that the landlord should be encouraged to
cultivate a part of his own land. His capital is generally
greater than that of the tenant, and, with less skill, he can
frequently raise a greater produce. The landlord can afford to
try experiments, and is generally disposed to do so. His
unsuccessful experiments occasion only a moderate loss to
himself. His successful ones contribute to the improvement and
better cultivation of the whole country. It might be of
importance, however, that the abatement of the tax should
encourage him to cultivate to a certain extent only. If the
landlords should, the greater part of them, be tempted to farm
the whole of their own lands, the country (instead of sober and
industrious tenants, who are bound by their own interest to
cultivate as well as their capital and skill will allow them)
would be filled with idle and profligate bailiffs, whose abusive
management would soon degrade the cultivation, and reduce the
annual produce of the land, to the diminution, not only of the
revenue of their masters, but of the most important part of that
of the whole society.
Such a system of administration might, perhaps, free a tax of
this kind from any degree of uncertainty, which could occasion
either oppression or inconveniency to the contributor ; and
might, at the same time, serve to introduce into the common
management of land such a plan of policy as might contribute a
good deal to the general improvement and good cultivation of the
country.
The expense of levying a land-tax, which varied with every
variation of the rent, would, no doubt, be somewhat greater than
that of levying one which was always rated according to a fixed
valuation. Some additional expense would necessarily be incurred,
both by the different register-offices which it would be proper
to establish in the different districts of the country, and by
the different valuations which might occasionally be made of the
lands which the proprietor chose to occupy himself. The expense
of all this, however, might be very moderate, and much below what
is incurred in the levying of many other taxes, which afford a
very inconsiderable revenue in comparison of what might easily be
drawn from a tax of this kind.
The discouragement which a variable land-tax of this kind might
give to the improvement of land, seems to be the most important
objection which can be made to it. The landlord would certainly
be less disposed to improve, when the sovereign, who contributed
nothing to the expense, was to share in the profit of the
improvement. Even this objection might, perhaps, be obviated, by
allowing the landlord, before he began his improvement, to
ascertain, in conjunction with the officers of revenue, the
actual value of his lands, according to the equitable arbitration
of a certain number of landlords and farmers in the
neighbourhood, equally chosen by both parties: and by rating him,
according to this valuation, for such a number of years as might
be fully sufficient for his complete indemnification. To draw the
attention of the sovereign towards the improvement of the land,
from a regard to the increase of his own revenue, is one or the
principal advantages proposed by this species of land-tax. The
term, therefore, allowed, for the indemnification of the
landlord, ought not to he a great deal longer than what was
necessary for that purpose, lest the remoteness of the interest
should discourage too much this attention. It had better,
however, be somewhat too long, than in any respect too short. No
incitement to the attention of the sovereign can ever
counterbalance the smallest discouragement to that of the
landlord. The attention of the sovereign can be, at best, but a
very general and vague consideration of what is likely to
contribute to the better cultivation of the greater part of his
dominions. The attention of the landlord is a particular and
minute consideration of what is likely to be the most
advantageous application of every inch of ground upon his estate.
The principal attention of the sovereign ought to be, to
encourage, by every means in his power, the attention both of the
landlord and of the farmer, by allowing both to pursue their own
interest in their own way, and according to their own judgment ;
by giving to both the most perfect security that they shall enjoy
the full recompence of their own industry ; and by procuring to
both the most extensive market for every part of their produce,
in consequence of establishing the easiest and safest
communications, both by land and by water, through every part of
his own dominions, as well as the most unbounded freedom of
exportation to the dominions of all other princes.
If, by such a system of administration, a tax of this kind could
be so managed as to give, not only no discouragement, but, on the
contrary, some encouragement to the improvement or land, it does
not appear likely to occasion any other inconveniency to the
landlord, except always the unavoidable one of being obliged to
pay the tax.
In all the variations of the state of the society, in the
improvement and in the declension of agriculture ; in all the
variations in the value of silver, and in all those in the
standard of the coin, a tax of this kind would, of its own
accord, and without any attention of government, readily suit
itself to the actual situation of things, and would be equally
just and equitable in all those different changes. It would,
therefore, be much more proper to be established as a perpetual
and unalterable regulation, or as what is called a fudamental law
of the commonwealth, than any tax which was always to be levied
according to a certain valuation.
Some states, instead of the simple and obvious expedient of a
register of leases, have had recourse to the laborious and
expensive one of an actual survey and valuation of all the lands
in the country. They have suspected, probably, that the lessor
and lessee, in order to defraud the public revenue, might combine
to conceal the real terms of the lease. Doomsday-book seems to
have been the result of a very accurate survey of this kind.
In the ancient dominions of the king of Prussia, the land-tax is
assessed according to an actual survey and valuation, which is
reviewed and altered from time to time.{ Memoires concurent les
Droits, etc. tom, i. p. 114, 115, 116, etc.} According to that
valuation, the lay proprietors pay from twenty to twenty-five per
cent. of their revenue; ecclesiastics from forty to forty-five
per cent. The survey and valuation of Silesia was made by order
of the present king, it is said, with great accuracy. According
to that valuation, the lands belonging to the bishop of Breslaw
are taxed at twenty-five per cent. of their rent. The other
revenues of the ecclesiastics of both religions at fifty per
cent. The commanderies of the Teutonic order, and of that of
Malta, at forty per cent. Lands held by a noble tenure, at
thirty-eight and one-third per cent. Lands held by a base
tenure, at thirty-five and one-third per cent.
The survey and valuation of Bohemia is said to have been the work
of more than a hundred years. It was not perfected till after the
peace of 1748, by the orders of the present empress queen. {
Id.tom i p.85,84.} The survey of the duchy of Milan, which was
begun in the time of Charles VI., was not perfected till after
1760 It is esteemed one of the most accurate that has ever been
made. The survey of Savoy and Piedmont was executed under the
orders of the late king of Sardinia. {Id. p. 280, etc. ; also p,
287. etc. to 316.}
In the dominions of the king of Prussia, the revenue of the
church is taxed much higher than that of lay proprietors. The
revenue of the church is, the greater part of it, a burden upon
the rent of land. It seldom happens that any part of it is
applied towards the improvement of land; or is so employed as to
contribute, in any respect, towards increasing the revenue of the
great body of the people. His Prussian majesty had probably, upon
that account, thought it reasonable that it should contribute a
good deal more towards relieving the exigencies of the state. In
some countries, the lands of the church are exempted from all
taxes. In others, they are taxed more lightly than other lands.
In the duchy of Milan, the lands which the church possessed
before 1575, are rated to the tax at a third only or their value.
In Silesia, lands held by a noble tenure are taxed three per
cent. higher than those held by a base tenure. The honours and
privileges of different kinds annexed to the former, his Prussian
majesty had probably imagined, would sufficiently compensate to
the proprietor a small aggravation of the tax; while, at the same
time, the humiliating inferiority of the latter would be in some
measure alleviated, by being taxed somewhat more lightly. In
other countries, the system of taxation, instead of alleviating,
aggravates this inequality. In the dominions of the king of
Sardinia, and in those provinces of France which are subject to
what is called the real or predial taille, the tax falls
altogether upon the lands held by a base tenure. Those held by a
noble one are exempted.
A land tax assessed according to a general survey and valuation,
how equal soever it may be at first, must, in the course of a
very moderate period of time, become unequal. To prevent its
becoming so would require the continual and painful attention of
government to all the variations in the state and produce of
every different farm in the country. The governments of Prussia,
of Bohemia, of Sardinia, and of the duchy of Milan, actually
exert an attention of this kind ; an attention so unsuitable to
the nature of government, that it is not likely to be of long
continuance, and which, if it is continued, will probably, in the
long-run, occasion much more trouble and vexation than it can
possibly bring relief to the contributors.
In 1666, the generality of Montauban was assessed to the real or
predial taille, according, it is said, to a very exact survey and
valuation. { Memoires concernant les Droits, etc. tom. ii p. 139,
etc.} By 1727, this assessment had become altogether unequal. In
order to remedy this inconveniency, government has found no
better expedient, than to impose upon the whole generality an
additional tax of a hundred and twenty thousand livres. This
additional tax is rated upon all the different districts subject
to the taille according to the old assessment. But it is levied
only upon those which, in the actual state of things, are by that
assessment under-taxed ; and it is applied to the relief of those
which, by the same assessment, are over-taxed. Two districts, for
example, one of which ought, in the actual state of things, to be
taxed at nine hundred, the other at eleven hundred livres, are,
by the old assessment, both taxed at a thousand livres. Both
these districts are, by the additional tax, rated at eleven
hundred livres each. But this additional tax is levied only upon
the district under-charged, and it is applied altogether to the
relief of that overcharged, which consequently pays only nine
hundred livres. The government neither gains nor loses by the
additional tax, which is applied altogether to remedy the
inequalities arising from the old assessment. The application
is pretty much regulated according to the discretion of the
intendant of the generality, and must, therefore, be in a great
measure arbitrary.
Taxes which are proportioned, not in the Rent, but to the
Produce of Land.
Taxes upon the produce of land are, In reality, taxes upon
the rent ; and though they may be originally advanced by the
farmer, are finally paid by the landlord. When a certain portion
of the produce is to be paid away for a tax, the farmer computes
as well as he can, what the value of this portion is, one year
with another, likely to amount to, and he makes a proportionable
abatement in the rent which he agrees to pay to the landlord.
There is no farmer who does not compute beforehand what the
church tythe, which is a land tax of this kind, is, one year with
another, likely to amount to.
The tythe, and every other land tax of this kind, under the
appearance of perfect equality, are very unequal taxes; a certain
portion of the produce being in differrent situations, equivalent
to a very different portion of the rent. In some very rich
lands, the produce is so great, that the one half of it is fully
sufficient to replace to the farmer his capital employed in
cultivation, together with the ordinary profits of farming stock
in the neighbourhood. The other half, or, what comes to the
same thing, the value of the other half, he could afford to pay
as rent to the landlord, if there was no tythe. But if a tenth of
the produce is taken from him in the way of tythe, he must
require an abatement of the fifth part of his rent, otherwise he
cannot get back his capital with the ordinary profit. In
this case, the rent of the landlord, instead of amounting to a
half, or five-tenths of the whole produce, will amount only to
four-tenths of it. In poorer lands, on the contrary, the produce
is sometimes so small, and the expense of cultivation so great,
that it requires four-fifths of the whole produce, to replace to
the farmer his capital with the ordinary profit. In this
case, though there was no tythe, the rent of the landlord could
amount to no more than one-fifth or two-tenths of the whole
produce. But if the farmer pays one-tenth of the produce in
the way of tythe, he must require an equal abatement of the rent
of the landlord, which will thus be reduced to one-tenth only of
the whole produce. Upon the rent of rich lands the tythe may
sometimes be a tax of no more than one-fifth part, or four
shillings in the pound ; whereas upon that of poorer lands, it
may sometimes be a tax of one half, or of ten shillings in the
pound.
The tythe, as it is frequently a very unequal tax upon the rent,
so it is always a great discouragement, both to the improvements
of the landlord, and to the cultivation of the farmer. The one
cannot venture to make the most important, which are generally
the most expensive improvements; nor the other to raise the most
valuable, which are generally, too, the most expensive crops;
when the church, which lays out no part of the expense, is to
share so very largely in the profit. The cultivation of madder
was, for a long time, confined by the tythe to the United
Provinces, which, being presbyterian countries, and upon that
account exempted from this destructive tax, enjoyed a sort of
monopoly of that useful dyeing drug against the rest of Europe.
The late attempts to introduce the culture of this plant into
England, have been made only in consequence of the statute, which
enacted that five shillings an acre should be received in lieu of
all manner of tythe upon madder.
As through the greater part of Europe, the church, so in many
different countries of Asia, the state, is principally supported
by a land tax, proportioned not to the rent, but to the produce
of the land. In China, the principal revenue of the sovereign
consists in a tenth part of the produce of all the lands of the
empire. This tenth part, however, is estimated so very
moderately, that, in many provinces, it is said not to exceed a
thirtieth part of the ordinary produce. The land tax or land rent
which used to be paid to the Mahometan government of Bengal,
before that country fell into the hands of the English East India
company, is said to have amounted to about a fifth part of the
produce. The land tax of ancient Egypt is said likewise to have
amounted to a fifth part.
In Asia, this sort of land tax is said to interest the sovereign
in the improvement and cultivation of land. The sovereigns
of China, those of Bengal while under the Mahometan govermnent,
and those of ancient Egypt, are said, accordingly, to have been
extremely attentive to the making and maintaining of good roads
and navigable canals, in order to increase, as much as possible,
both the quantity and value of every part of the produce of the
land, by procuring to every part of it the most extensive market
which their own dominions could afford. The tythe of the church
is divided into such small portions that no one of its
proprietors can have any interest of this kind. The parson of a
parish could never find his account. in making a road or canal to
a distant part of the country, in order to extend the market for
the produce of his own particular parish. Such taxes, when
destined for the maintenance of the state, have some advantages,
which may serve in some measure to balance their inconveniency.
When destined for the maintenance of the church, they are
attended with nothing but inconveniency.
Taxes upon the produce of land may be levied, either in kind, or,
according to a certain valuation in money.
The parson of a parish, or a gentleman of small fortune who lives
upon his estate, may sometimes, perhaps find some advantage in
receiving, the one his tythe, and the other his rent, in kind.
The quantity to be collected, and the district within which it is
to be collected, are so small, that they both can oversee, with
their own eyes, the collection and disposal of every part of what
is due to them. A gentleman of great fortune, who lived in the
capital, would be in danger of suffering much by the neglect, and
more by the fraud, of his factors and agents, if the rents of an
estate in a distant province were to be paid to him in this
manner. The loss of the sovereign, from the abuse and depredation
of his tax-gatherers, would necessarily be much greater. The
servants of the most careless private person are, perhaps, more
under the eye of their master than those of the most careful
prince; and a public revenue, which was paid in kind, would
suffer so much from the mismanagement of the collectors, that a
very small part of what was levied upon the people would ever
arrive at the treasury of the prince. Some part of the public
revenue of China, however, is said to be paid in this manner. The
mandarins and other tax-gatherers will, no doubt, find their
advantage in continuing the practice of a payment, which is so
much more liable to abuse than any payment in money.
A tax upon the produce of land, which is levied in money, may be
levied, either according to a valuation, which varies with all
the variations of the market price ; or according to a fixed
valuation, a bushel of wheat, for example, being always valued at
one and the same money price, whatever may be the state of the
market. The produce of a tax levied in the former way will vary
only according to the variations in the real produce of the land,
according to the improvement or neglect of cultivation. The
produce of a tax levied in the latter way will vary, not only
according to the variations in the produce of the land, but
according both to those in the value of the precious metals, and
those in the quantity of those metals which is at different times
contained in coin of the same denomination. The produce of the
former will always bear the same proportion to the value of the
real produce of the land. The produce of the latter may, at
different times, bear very different proportions to that value.
When, instead either of a certain portion of the produce of land,
or of the price of a certain portion, a certain sum of money is
to be paid in full compensation for all tax or tythe; the tax
becomes, in this case, exactly of the same nature with the land
tax of England. It neither rises nor falls with the rent of the
land. It neither encourages nor discourages improvement. The
tythe in the greater part of those parishes which pay what is
called a modus, in lieu of all other tythe is a tax of this kind.
During the Mahometan government of Bengal, instead of the payment
in kind of the fifth part of the produce, a modus, and, it is
said, a very moderate one, was established in the greater part of
the districts or zemindaries of the country. Some of the servants
of the East India company, under pretence of restoring the public
revenue to its proper value, have, in some provinces, exchanged
this modus for a payment in kind. Under their management,
this change is likely both to discourage cultivation, and to give
new opportunities for abuse in the collection of the public
revenue, which has fallen very much below what it was said to
have been when it first fell under the management of the company.
The servants of the company may, perhaps, have profited by the
change, but at the expense, it is probable, both of their masters
and of the country.
Taxes upon the Rent of Houses.
The rent of a house may be distinguished into two parts, of which
the one may very properly be called the building-rent; the other
is commonly called the ground-rent.
The building-rent is the interest or profit of the capital
expended in building the house. In order to put the trade of a
builder upon a level with other trades, it is necessary that this
rent should be sufficient, first, to pay him the same interest
which he would have got for his capital, if he had lent it upon
good security ; and, secondly, to keep the house in constant
repair, or, what comes to the same thing, to replace, within a
certain term of years, the capital which had been employed in
building it. The building-rent, or the ordinary profit of
building, is, therefore, everywhere regulated by the ordinary
interest of money. Where the market rate of interest is four per
cent. the rent of a house, which, over and above paying the
ground-rent, affords six or six and a-half per cent. upon the
whole expense of building, may, perhaps, afford a sufficient
profit to the builder. Where the market rate of interest is five
per cent. it may perhaps require seven or seven and a half per
cent. If, in proportion to the interest of money, the trade of
the builders affords at any time much greater profit than this,
it will soon draw so much capital from other trades as will
reduce the profit to its proper level. If it affords at any time
much less than this, other trades will soon draw so much capital
from it as will again raise that profit.
Whatever part of the whole rent of a house is over and above what
is sufficient for affording this reasonable profit, naturally
goes to the ground-rent; and, where the owner of the ground and
the owner of the building are two different persons, is, in most
cases, completely paid to the former. This surplus rent is the
price which the inhabitant of the house pays for some real or
supposed advantage of the situation. In country houses, at a
distance from any great town, where there is plenty of ground to
chuse upon, the ground-rent is scarce anything, or no more than
what the ground which the house stands upon would pay, if
employed in agriculture. In country villas, in the neighbourhood
of some great town, it is sometimes a good deal higher; and the
peculiar conveniency or beauty of situation is there frequently
very well paid for. Ground-rents are generally highest in the
capital, and in those particular parts of it where there happens
to be the greatest demand for houses, whatever be the reason of
that demand, whether for trade and business, for pleasure and
society, or for mere vanity and fashion.
A tax upon house-rent, payable by the tenant, and proportioned to
the whole rent of each house, could not, for any considerable
time at least, affect the building-rent. If the builder did not
get his reasonable profit, he would be obliged to quit the trade;
which, by raising the demand for building, would, in a short
time, bring back his profit to its proper level with that of
other trades. Neither would such a tax fall altogether upon the
ground-rent; but it would divide itself in such a manner, as to
fall partly upon the inhabitant of the house. and partly upon the
owner of the ground.
Let us suppose, for example, that a particular person judges that
he can afford for house-rent all expense of sixty pounds a-year;
and let us suppose, too, that a tax of four shillings in the
pound, or of one-fifth, payable by the inhabitant, is laid upon
house-rent. A house of sixty pounds rent will, in that case, cost
him seventy-two pounds a-year, which is twelve pounds more than
he thinks he can afford. He will, therefore, content himself with
a worse house, or a house of fifty pounds rent, which, with the
additional ten pounds that he must pay for the tax, will make up
the sum of sixty pounds a-year, the expense which he judges he
can afford, and, in order to pay the tax, he will give up a part
of the additional conveniency which he might have had from a
house of ten pounds a-year more rent. He will give up, I say, a
part of this additional conveniency; for he will seldom be
obliged to give up the whole, but will, in consequence of the
tax, get a better house for fifty pounds a-year, than he could
have got if there had been no tax for as a tax of this kind, by
taking away this particular competitor, must diminish the
competition for houses of sixty pounds rent, so it must likewise
diminish it for those of fifty pounds rent, and in the same
manner for those of all other rents, except the lowest rent, for
which it would for some time increase the competition. But
the rents of every class of houses for which the competition was
diminished, would necessarily be more or less reduced. As no part
of this reduction, however, could for any considerable time at
least, affect the building-rent, the whole of it must, in the
long-run, necessarily fall upon the ground-rent. The final
payment of this tax, therefore, would fall partly upon the
inhabitant of the house, who, in order to pay his share, would be
obliged to give up a part of his conveniency ; and partly upon
the owner of the ground, who, in order to pay his share, would be
obliged to give up a part of his revenue. In what proportion this
final payment would be divided between them, it is not, perhaps,
very easy to ascertain. The division would probably be very
different in different circumstances, and a tax of this kind
might, according to those different circumstances, affect very
unequally, both the inhabitant of the house and the owner of the
ground.
The inequality with which a tax of this kind might fall upon the
owners of different ground-rents, would arise altogether from the
accidental inequality of this division. But the inequality
with which it might fall upon the inhabitants of different
houses, would arise, not only from this, but from another cause.
The proportion of the expense of house-rent to the whole expense
of living, is different in the different degrees of fortune. It
is, perhaps, highest in the highest degree, and it diminishes
gradually through the inferior degrees, so as in general to be
lowest in the lowest degree. The necessaries of life occasion the
great expense of the poor. They find it difficult to get food,
and the greater part of their little revenue is spent in getting
it. The luxuries and vanities of life occasion the principal
expense of the rich ; and a magnificent house embellishes and
sets off to the best advantage all the other luxuries and
vanities which they possess. A tax upon house-rents, therefore,
would in general fall heaviest upon the rich ; and in this sort
of inequality there would not, perhaps, be any thing very
unreasonable It is not very unreasonable that the rich should
contribute to the public expense, not only in proportion to their
revenue, but something more than in that proportion.
The rent of houses, though it in some respects resembles the rent
of land, is in one respect essentially different from it. The
rent of land is paid for the use of a productive subject. The
land which pays it produces it. The rent of houses is paid for
the use of an unproductive subject. Neither the house, nor the
ground which it stands upon, produce anything. The person who
pays the rent, therefore, must draw it from some other source of
revenue, distinct from and independent of this subject. A tax
upon the rent of houses, so far as it falls upon the inhabitants,
must be drawn from the same source as the rent itself, and must
be paid from their revenue, whether derived from the wages of
labour, the profits of stock, or the rent of land. So far as it
falls upon the inhabitants, it is one of those taxes which fall,
not upon one only, but indifferently upon all the three different
sources of revenue ; and is, in every respect, of the same nature
as a tax upon any other sort of consumable commodities. In
general, there is not perhaps, any one article of expense or
consumption by which the liberality or narrowness of a man's
whole expense can be better judged of than by his house-rent. A
proportional tax upon this particular article of expense might,
perhaps, produce a more considerable revenue than any which has
hitherto been drawn from it in any part of Europe. If the tax,
indeed, was very high, the greater part of people would endeavour
to evade it as much as they could, by contenting themselves with
smaller houses, and by turning the greater part of their expense
into some other channel.
The rent of houses might easily be ascertained with sufficient
accuracy, by a policy of the same kind with that which would be
necesary for ascertaining the ordinary rent of land. Houses not
inhabited ought to pay no tax. A tax upon them would fall
altogether upon the proprietor, who would thus be taxed for a
subject which afforded him neither conveniency nor revenue.
Houses inhabited by the proprietor ought to be rated, not
according to the expense which they might have cost in building,
but according to the rent which an equitable arbitration might
judge them likely to bring if leased to a tenant. If rated
according to the expense which they might have cost in building,
a tax of three or four shillings in the pound, joined with other
taxes, would ruin almost all the rich and great families of this,
and, I believe, of every other civilized country. Whoever will
examine with attention the different town and country houses of
some of the richest and greatest families in this country, will
find that, at the rate of only six and a-half, or seven per cent.
upon the original expense of building, their house-rent is nearly
equal to the whole neat rent of their estates. It is the
accumulated expense of several successive generations, laid out
upon objects of great beauty and magnificence, indeed, but, in
proportion to what they cost, of very small exchangeable value.{
Since the first publication of this book, a tax nearly upon the
above-mentioned principles thas been imposed.}
Ground-rents are a still more proper subject of taxation than the
rent of houses. A tax upon ground-rents would not raise the rent
of houses; it would fall altogether upon the owner of the
ground-rent, who acts always as a monopolist, and exacts the
greatest rent which can be got for the use of his ground. More or
less can be got for it, according as the competitors happen to be
richer or poorer, or can afford to gratify their fancy for a
particular spot of ground at a greater or smaller expense.
In every country, the greatest number of rich competitors is in
the capital, and it is there accordingly that the highest
ground-rents are always to be found. As the wealth of those
competitors would in no respect be increased by a tax upon
ground-rents, they would not probably be disposed to pay more for
the use of the ground. Whether the tax was to be advanced by the
inhabitant or by the owner of the ground, would be of little
importance. The more the inhabitant was obliged to pay for the
tax, the less he would incline to pay for the ground ; so that
the final payment of the tax would fall altogether upon the owner
of the ground-rent. The ground-rents of uninhabited houses ought
to pay no tax.
Both ground-rents, and the ordinary rent of land, are a species
of revenue which the owner, in many cases, enjoys without any
care or attention of his own. Though a part of this revenue
should be taken from him in order to defray the expenses of the
state, no discouragement will thereby be given to any sort of
iudustry. The annual produce of the land and labour of the
society, the real wealth and revenue of the great body of the
people, might be the same after such a tax as before.
Ground-rents, and the ordinary rent of land, are therefore,
perhaps, the species of revenue which can best bear to have a
peculiar tax imposed upon them.
Ground-rents seem, in this respect, a more proper subject of
peculiar taxation, than even the ordinary rent of land. The
ordinary rent of land is, in many cases, owing partly, at least,
to the attention and good management of the landlord. A very
heavy tax might discourage, too much, this attention and good
management. Ground-rents, so far as they exceed the ordinary rent
of land, are altogether owing to the good government of the
sovereign, which, by protecting the industry either of the whole
people or of the inhabitants of some particular place, enables
them to pay so much more than its real value for the ground which
they build their houses upon; or to make to its owner so much
more than compensation for the loss which he might sustain by
this use of it. Nothing can be more reasonable, than that a fund,
which owes its existence to the good government of the state,
should be taxed peculiarly, or should contribute something more
than the greater part of other funds, towards the support of that
government.
Though, in many different countries of Europe, taxes have been
imposed upon the rent of houses, I do not know of any in which
ground-rents have been considered as a separate subject of
taxation. The contrivers of taxes have, probably, found some
difficulty in ascertaining what part of the rent ought to be
considered as ground-rent, and what part ought to be considered
as building-rent. It should not, however, seem very difficult to
distinguish those two parts of the rent from one another.
In Great Britain the rent of houses is supposed to be taxed in
the same proportion as the rent of land, by what is called the
annual land tax. The valuation, according to which each different
parish and district is assessed to this tax, is always the same.
It was originally extremely unequal, and it still continues to be
so. Through the greater part of the kingdom this tax falls still
more lightly upon the rent of houses than upon that of land.
In some few districts only, which were originally rated high, and
in which the rents of houses have fallen considerably, the land
tax of three or four shillings in the pound is said to amount to
an equal proportion of the real rent of houses. Untenanted
houses, though by law subject to the tax, are, in most districts,
exempted from it by the favour of the assessors; and this
exemption sometimes occasions some little variation in the rate
of particular houses, though that of the district is always the
same. Improvements of rent, by new buildings, repairs, etc. go to
the discharge of the district, which occasions still further
variations in the rate of particular houses.
In the province of Holland,{ Memoires concernant les Droits, etc.
p. 223.} every house is taxed at two and a-half per cent. of its
value, without any regard, either to the rent which it actually
pays, or to the circumstance of its being tenanted or untenanted.
There seems to be a hardship in obliging the proprietor to pay a
tax for an untenanted house, from which he can derive no revenue,
especially so very heavy a tax. In Holland, where the market rate
of interest does not exceed three per cent., two and a-half per
cent. upon the whole value of the house must, in most cases,
amount to more than a third of the building-rent, perhaps of the
whole rent. The valuation, indeed, according to which the houses
are rated, though very unequal, is said to be always below the
real value. When a house is rebuilt, improved, or enlarged, there
is a new valuation, and the tax is rated accordingly.
The contrivers of the several taxes which in England have, at
different times, been imposed upon houses, seem to have imagined
that there was some great difficulty in ascertaining, with
tolerable exactness, what was the real rent of every house. They
have regulated their taxes, therefore, according to some more
obvious circumstance, such as they had probably imagined would,
in most cases, bear some proportion to the rent.
The first tax of this kind was hearth-money; or a tax of two
shillings upon every hearth. In order to ascertain how many
hearths were in the house, it was necessary that the tax-gatherer
should enter every room in it. This odious visit rendered the tax
odious. Soon after the Revolution, therefore, it was abolished as
a badge of slavery.
The next tax of this kind was a tax of two shillings upon every
dwelling-house inhabited. A house with ten windows to pay four
shillings more. A house with twenty windows and upwards to pay
eight shillings. This tax was afterwards so far altered, that
houses with twenty windows, and with less than thirty, were
ordered to pay ten shillings, and those with thirty windows and
upwards to pay twenty shillings. The number of windows can, in
most cases, be counted from the outside, and, in all cases,
without entering every room in the house. The visit of the
tax-gatherer, therefore, was less offensive in this tax than in
the hearth-money.
This tax was afterwards repealed, and in the room of it was
established the window-tax, which has undergone two several
alterations and augmentations. The window tax, as it stands at
present (January 1775), over and above the duty of three
shillings upon every house in England, and of one shilling upon
every house in Scotland, lays a duty upon every window, which in
England augments gradually from twopence, the lowest rate upon
houses with not more than seven windows, to two shillings, the
highest rate upon houses with twenty-five windows and upwards.
The principal objection to all such taxes is their inequality; an
inequality of the worst kind, as they must frequently fall much
heavier upon the poor than upon the rich. A house of ten pounds
rent in a country town, may sometimes have more windows than a
house of five hundred pounds rent in London ; and though the
inhabitant of the former is likely to be a much poorer man than
that of the latter, yet, so far as his contribution is regulated
by the window tax, he must contribute more to the support of the
state. Such taxes are, therefore, directly contrary to the first
of the four maxims above mentioned. They do not seem to offend
much against any of the other three.
The natural tendency of the window tax, and of all other taxes
upon houses, is to lower rents. The more a man pays for the tax,
the less, it is evident, he can afford to pay for the rent. Since
the imposition of the window tax, however, the rents of houses
have, upon the whole, risen more or less, in almost every town
and village of Great Britain, with which I am acquainted.
Such has been, almost everywhere, the increase of the demand for
houses, that it has raised the rents more than the window tax
could sink them ; one of the many proofs of the great prosperity
of the country, and of the increasing revenue of its inhabitants.
Had it not been for the tax, rents would probably have risen
still higher.
ARTICLE II. ˜ Taxes upon Profit, or upon the Revenue arising
from Stock.
The revenue or profit arising from stock naturally divides itself
into two parts; that which pays the interest, and which belongs
to the owner of the stock ; and that surplus part which is over
and above what is necessary for paying the interest.
This latter part of profit is evidently a subject not taxable
directly. It is the compensation, and, in most cases, it is no
more than a very moderate compensation for the risk and trouble
of employing the stock. The employer must have this compensation,
otherwise he cannot, consistently with his own interest, continue
the employment. If he was taxed directly, therefore, in
proportion to the whole profit, he would be obliged either to
raise the rate of his profit, or to charge the tax upon the
interest of money ; that is, to pay less interest. If he raised
the rate of his profit in proportion to the tax, the whole tax,
though it might be advanced by him, would be finally paid by one
or other of two different sets of people, according to the
different ways in which he might employ the stock of which he had
the management. If he employed it as a farming stock, in the
cultivation of land, he could raise the rate of his profit only
by retaining a greater portion, or, what comes to the same thing,
the price of a greater portion, of the produce of the land; and
as this could be done only by a reduction of rent, the final
payment of the tax would fall upon the landlord. If he employed
it as a mercantile or manufacturing stock, he could raise the
rate of his profit only by raising the price of his goods; in
which case, the final payment of the tax would fall altogether
upon the consumers of those goods. If he did not raise the rate
of his profit, he would be obliged to charge the whole tax upon
that part of it which was allotted for the interest of money. He
could afford less interest for whatever stock he borrowed, and
the whole weight of the tax would, in this case, fall ultimately
upon the interest of money. So far as he could not relieve
himself from the tax in the one way, he would be obliged to
relieve himself in the other.
The interest of money seems, at first sight, a subject equally
capable of being taxed directly as the rent of land. Like the
rent of land, it is a neat produce, which remains, after
completely compensating the whole risk and trouble of employing
the stock. As a tax upon the rent of land cannot raise rents,
because the neat produce which remains, after replacing the stock
of the farmer, together with his reasonable profit, cannot be
greater after the tax than before it, so, for the same reason, a
tax upon the interest of money could not raise the rate of
interest; the quantity of stock or money in the country, like the
quantity of land, being supposed to remain the same after the tax
as before it. The ordinary rate of profit, it has been shewn, in
the first book, is everywhere regulated by the quantity of stock
to be employed, in proportion to the quantity of the employment,
or of the business which must be done by it. But the quantity
of the employment, or of the business to be done by stock, could
neither be increased nor diminished by any tax upon the interest
of money. If the quantity of the stock to be employed, therefore,
was neither increased nor diminished by it, the ordinary rate of
profit would necessarily remain the same. But the portion of this
profit, necessary for compensating the risk and trouble of the
employer, would likewise remain the same ; that risk and trouble
being in no respect altered. The residue, therefore, that portion
which belongs to the owner of the stock, and which pays the
interest of money, would necessarily remain the same too. At
first sight, therefore, the interest of money seems to be a
subject as fit to be taxed directly as the rent of land.
There are, however, two different circumstances, which render the
interest of money a much less proper subject of direct taxation
than the rent of land.
First, the quantity and value of the land which any man
possesses, can never be a secret, and can always be ascertained
with great exactness. But the whole amount of the capital stock
which he possesses is almost always a secret, and can scarce ever
be ascertained with tolerable exactness. It is liable, besides,
to almost continual variations. A year seldom passes away,
frequently not a month, sometimes scarce a single day, in which
it does not rise or fall more or less. An inquisition into every
man's private circumstances, and an inquisition which, in order
to accommodate the tax to them, watched over all the fluctuations
of his fortune, would be a source of such continual and endless
vexation as no person could support.
Secondly, land is a subject which cannot be removed; whereas
stock easily may. The proprietor of land is necessarily a citizen
of the particular country in which his estate lies. The
proprietor of stock is properly a citizen of the world, and is
not necessarily attached to any particular country. He would be
apt to abandon the country in which he was exposed to a vexatious
inquisition, in order to be assessed to a burdensome tax ; and
would remove his stock to some other country, where he could
either carry on his business, or enjoy his fortune more at his
ease. By removing his stock, he would put an end to all the
industry which it had maintained in the country which he left.
Stock cultivates land ; stock employs labour. A tax which tended
to drive away stock from any particular country, would so far
tend to dry up every source of revenue, both to the sovereign and
to the society. Not only the profits of stock, but the rent of
land, and the wages of labour, would necessarily be more or less
diminished by its removal.
The nations, accordingly, who have attempted to tax the revenue
arising from stock, instead of any severe inquisition of this
kind, have been obliged to content themselves with some very
loose, and, therefore, more or less arbitrary estimation. The
extreme inequality and uncertainty of a tax assessed in this
manner, can be compensated only by its extreme moderation; in
consequence of which, every man finds himself rated so very much
below his real revenue, that he gives himself little disturbance
though his neighbour should be rated somewhat lower.
By what is called the land tax in England, it was intended that
the stock should be taxed in the same proportion as land. When
the tax upon land was at four shillings in the pound, or at
one-fifth of the supposed rent, it was intended that stock should
be taxed at one-fifth of the supposed interest. When the present
annual land tax was first imposed, the legal rate of interest was
six per cent. Every hundred pounds stock, accordingly, was
supposed to be taxed at twenty-four shillings, the fifth part of
six pounds. Since the legal rate of interest has been reduced to
five per cent. every hundred pounds stock is supposed to be taxed
at twenty shillings only. The sum to be raised, by what is called
the land tax, was divided between the country and the principal
towns. The greater part of it was laid upon the country; and of
what was laid upon the towns, the greater part was assessed upon
the houses. What remained to be assessed upon the stock or trade
of the towns (for the stock upon the land was not meant to be
taxed) was very much below the real value of that stock or trade.
Whatever inequalities, therefore, there might be in the original
assessment, gave little disturbance. Every parish and district
still continues to be rated for its land, its houses, and its
stock, according to the original assessment; and the almost
universal prosperity of the country, which, in most places, has
raised very much the value of all these, has rendered those
inequalities of still less importance now. The rate, too, upon
each district, continuing always the same, the uncertainty of
this tax, so far as it might he assessed upon the stock of any
individual, has been very much diminished, as well as rendered of
much less consequence. If the greater part of the lands of
England are not rated to the land tax at half their actual value,
the greater part of the stock of England is, perhaps, scarce
rated at the fiftieth part of its actual value. In some towns,
the whole land tax is assessed upon houses; as in Westminster,
where stock and trade are free. It is otherwise in London.
In all countries, a severe inquisition into the circumstances of
private persons has been carefully avoided.
At Hamburg, {Memoires concernant les Droits, tom. i, p.74} every
inhabitant is obliged to pay to the state one fourth per cent. of
all that he possesses; and as the wealth of the people of Hamburg
consists principally in stock, this tax maybe considered as a tax
upon stock. Every man assesses himself, and, in the presence
of the magiatrate, puts annually into the public coffer a certain
sum of money, which he declares upon oath, to be one fourth per
cent. of all that he possesses, but without declaring what it
amounts to, or being liable to any examination upon that subject.
This tax is generally suppused to be paid with great fidelity. In
a small republic, where the people have entire confidence in
their magistrates, are convinced of the necessity of the tax for
the support of the state, and believe that it will be faithfully
applied to that purpose, such conscientious and voluntary payment
may sometimes be expected. It is not peculiar to the people of
Hamburg.
The canton of Underwald, in Switzerland, is frequently ravaged by
storms and inundations, and it is thereby exposed to
extraordinary expenses. Upon such occasions the people
assemble, and every one is said to declare with the greatest
frankness what he is worth, in order to be taxed accordingly. At
Zurich, the law orders, that in cases of necessity, every one
should be taxed in proportion to his revenue; the amount of which
he is obliged to declare upon oath. They have no suspicion, it is
said, that any of their fellow citizens will deceive them.
At Basil, the principal revenue of the state arises from a small
custom upon goods exported. All the citizens make oath, that
they will pay every three months all the taxes imposed by law.
All merchants, and even all inn-keepers, are trusted with keeping
themselves the account of the goods which they sell, either
within or without the territory. At the end of every three
months, they send this account to the treasurer, with the amount
of the tax computed at the bottom of it. It is not suspected
that the revenue suffers by this confidence.{ Memoires concernant
les Droits, tom. i p. 163, 167,171.}
To oblige every citizen to declare publicly upon oath, the amount
of his fortune, must not, it seems, in those Swiss cantons, be
reckoned a hardship. At Hamburg it would be reckoned the
greatest. Merchants engaged in the hazardous projects of trade,
all tremble at the thoughts of being obliged, at all times, to
expose the real state of their circumstances. The ruin of their
credit, and the miscarriage of their projects, they foresee,
would too often be the consequence. A sober and parsimonious
people, who are strangers to all such projects, do not feel that
they have occasion for any such concealment.
In Holland, soon after the exaltation of the late prince of
Orange to the stadtholdership, a tax of two per cent. or the
fiftieth penny, as it was called, was imposed upon the whole
substance of every citizen. Every citizen assesed himself, and
paid his tax, in the same manner as at Hamburg, and it was in
general supposed to have been paid with great fidelity. The
people had at that time the greatest affection for their new
government, which they had just established by a general
insurrection. The tax was to be paid but once, in order to
relieve the state in a particular exigency. It was, indeed, too
heavy to be permanent. In a country where the market rate of
interest seldom exceeds three per cent., a tax of two per cent.
amounts to thirteen shillings and four pence in the pound, upon
the highest neat revenue which is commonly drawn from stock. It
is a tax which very few people could pay, without encroaching
more or less upon their capitals. In a particular exigency, the
people may, from great public zeal, make a great effort, and give
up even a part of their capital, in order to relieve the state.
But it is impossible that they should continue to do so for any
considerable time; and if they did, the tax would soon ruin them
so completely, as to render them altogether incapable of
supporting the state.
The tax upon stock, imposed by the land tax bill in England,
though it is proportioned to the capital, is not intended to
diminish or, take away any part of that capital. It is meant
only to be a tax upon the interest of money, proportioned to that
upon the rent of land; so that when the latter is at four
shillings in the pound, the former may be at four shillings in
the pound too. The tax at Hamburg, and the still more moderate
taxes of Underwald and Zurich, are meant, in the same manner, to
be taxes, not upon the capital, but upon the interest or neat
revenue of stock. That of Holland was meant to be a tax upon the
capital.
Taxes upon the Profit of particular Employments.
In some countries, extraordinary taxes are imposed upon the
profits of stock ; sometimes when employed in particular branches
of trade, and sometimes when employed in agriculture.
Of the former kind, are in England, the tax upon hawkers and
pedlars, that upon hackney-coaches and chairs, and that which the
keepers of ale-houses pay for a licence to retail ale and
spiritous liquors. During the late war, another tax of the same
kind was proposed upon shops. The war having been undertaken, it
was said, in defence of the trade of the country, the merchants,
who were to profit by it, ought to contribute towards the support
of it.
A tax, however, upon the profits of stock employed in any
particular branch of trade, can never fall finally upon the
dealers (who must in all ordinary cases have their reasonable
profit, and, where the competition is free, can seldom have more
than that profit), but always upon the consumers, who must be
obliged to pay in the price of the goods the tax which the dealer
advances ; and generally with some overcharge.
A tax of this kind, when it is proportioned to the trade of the
dealer, is finally paid by the consumer, and occasions no
oppression to the dealer. When it is not so proportioned, but is
the same upon all dealers, though in this case, too, it is
finally paid by the consumer, yet it favours the great, and
occasions some oppression to the small dealer. The tax of
five shillings a-week upon every hackney coach, and that of ten
shillings a-year upon every hackney chair, so far as it is
advanced by the different keepers of such coaches and chairs, is
exactly enough proportioned to the extent of their respective
dealings. It neither favours the great, nor oppresses the smaller
dealer. The tax of twenty shillings a-year for a licence to
sell ale; of forty shillings for a licence to sell spiritous
liquors ; and of forty shillings more for a licence to sell wine,
being the same upon all retailers, must necessarily give some
advantage to the great, and occasion some oppression to the small
dealers. The former must find it more easy to get back the tax in
the price of their goods than the latter. The moderation of the
tax, however, renders this inequality of less importance; and it
may to many people appear not improper to give some
discouragement to the multiplication of little ale-houses.
The tax upon shops, it was intended, should be the same upon all
shops. It could not well have been otherwise. It would have been
impossible to proportion, with tolerable exactness, the tax upon
a shop to the extent of the trade carried on in it, without such
an inquisition as would have been altogether insupportable in a
free country. If the tax had been considerable, it would have
oppressed the small, and forced almost the whole retail trade
into the hands of the great dealers. The competition of the
former being taken away, the latter would have enjoyed a monopoly
of the trade ; and, like all other monopolists, would soon have
combined to raise their profits much beyond what was necessary
for the payment of the tax. The final payment, instead of falling
upon the shop-keeper, would have fallen upon the consumer, with a
considerable overcharge to the profit of the shop-keeper. For
these reasons, the project of a tax upon shops was laid aside,
and in the room of it was substituted the subsidy, 1759.
What in France is called the personal taille, is perhaps, the
most important tax upon the profits of stock employed in
agriculture, that is levied in any part of Europe.
In the disorderly state of Europe, during the prevalence of the
feudal government, the sovereign was obliged to content himself
with taxing those who were too weak to refuse to pay taxes. The
great lords, though willing to assist him upon particular
emergencies, refused to subject themselves to any constant tax,
and he was not strong enough to force them. The occupiers of land
all over Europe were, the greater part of them, originally
bond-men. Through the greater part of Europe, they were gradually
emancipated. Some of them acquired the property of landed
estates, which they held by some base or ignoble tenure,
sometimes under the king, and sometimes under some other great
lord, like the ancient copy-holders of England. Others, without
acquiring the property, obtained leases for terms of years, of
the lands which they occupied under their lord, and thus became
less dependent upon him. The great lords seem to have beheld the
degree of prosperity and independency, which this inferior order
of men had thus come to enjoy, with a malignant and contemptuous
indignation, and willingly consented that the sovereign should
tax them. In some countries, this tax was confined to the lands
which were held in property by an ignoble tenure ; and, in this
case, the taille was said to be real. The land tax established by
the late king of Sardinia, and the taille in the provinces of
Languedoc, Provence, Dauphine, and Britanny ; in the generality
of Montauban, and in the elections of Agen and Condom, as well as
in some other districts of France; are taxes upon lands held in
property by an ignoble tenure. In other countries, the tax
was laid upon the supposed profits of all those who held, in farm
or lease, lands belonging to other people, whatever might be the
tenure by which the proprietor held them ; and in this case, the
taille was said to be personal. In the greater part of those
provinces of France, which are called the countries of elections,
the taille is of this kind. The real taille, as it is imposed
only upon a part of the lands of the country, is necessarily an
unequal, but it is not always an arbitrary tax, though it is so
upon some occasions. The personal taille, as it is intended to be
proportioned to the profits of a certain class of people, which
can only be guessed at, is necessarily both arbitrary and
unequal.
In France, the personal taille at present (1775) annually imposed
upon the twenty generalities, called the countries of elections,
amounts to 40,107,239 livres, 16 sous. {Memoires concernant les
Droits, etc tom. ii, p.17.} the proportion in which this sum is
assessed upon those different provinces, varies from year to
year, according to the reports which are made to the king's
council concerning the goodness or badness of the crops, as well
as other circumstances, which may either increase or diminish
their respective abilities to pay. Each generality is divided
into a certain number of elections; and the proportion in which
the sum imposed upon the whole generatlity is divided among those
different elections, varies likewise from year to year, according
to the reports made to the council concerning their respective
abilities. It seems impossible, that the council, with the
best intentions, can ever proportion, with tolerable exactness,
either of these two assessments to the real abilities of the
province or district upon which they are respectively laid.
Ignorance and misinformation must always, more or less. mislead
the most upright council. The proportion which each parish ought
to support of what is assessed upon the whole election, and that
which each individual ought to support of what is assessed upon
his particular parish, are both in the same manner varied from
year to year, according as circumstances are supposed to require.
These circumstances are judged of, in the one case, by the
officers of the election, in the other, by those of the parish;
and both the one and the other are, more or less, under the
direction and influence of the intendant. Not only ignorance
and misinformation, but friendship, party animosity, and private
resentment, are said frequently to mislead such assessors. No man
subject to such a tax, it is evident, can ever be certain, before
he is assessed, of what he is to pay. He cannot even be certain
after he is assessed. If any person has been taxed who ought to
have been exempted, or if any person has been taxed beyond his
proportion, though both must pay in the mean time, yet if they
complain, and make good their complaints, the whole parish is
reimposed next year, in order to reimburse them. If any of
the contributors become bankrupt or insolvent, the collector is
obliged to advance his tax ; and the whole parish is reimposed
next year, in order to reimburse the collector. If the collector
himself should become bankrupt, the parish which elects him must
answer for his conduct to the receiver-general of the election.
But, as it might be troublesome for the receiver to prosecute the
whole parish, he takes at his choice five or six of the richest
contributors, and obliges them to make good what had been lost by
the insolvency of the collector. The parish is afterwards
reimposed, in order to reimburse those five or six. Such
reimpositions are always over and above the taille of the
particular year in which they are laid on.
When a tax is imposed upon the profits of stock in a particular
branch of trade, the traders are all careful to bring no more
goods to market than what they can sell at a price sufficient to
reimburse them from advancing the tax. Some of them withdraw a
part of their stocks from the trade, and the market is more
sparingly supplied than before. The price of the goods rises, and
the final payment of the tax falls upon the consumer. But when a
tax is imposed upon the profits of stock employed in agriculture,
it is not the interest of the farmers to withdraw any part of
their stock from that employment. Each farmer occupies a certain
quantity of land, for which he pays rent. For the proper
cultivation of this land, a certain quantity of stock is
necessary; and by withdrawing any part of this necessary
quantity, the farmer is not likely to be more able to pay either
the rent or the tax. In order to pay the tax, it can never be his
interest to diminish the quantity of his produce, nor
consequently to supply the market more sparingly than before. The
tax, therefore, will never enable him to raise the price of his
produce, so as to reimburse himself, by throwing the final
payment upon the consumer. The farmer, however, must have his
reasonable profit as well as every other dealer, otherwise he
must give up the trade. After the imposition of a tax of this
kind, he can get this reasonable profit only by paying less rent
to the landlord. The more he is obliged to pay in the way of tax,
the less he can afford to pay in the way of rent. A tax of this
kind, imposed during the currency of a lease, may, no doubt,
distress or ruin the farmer. Upon the renewal of the lease, it
must always fall upon the landlord.
In the countries where the personal taille takes place, the
farmer is commonly assessed in proportion to the stock which he
appears to employ in cultivation. He is, upon this account,
frequently afraid to have a good team of horses or oxen, but
endeavours to cultivate with the meanest and most wretched
instrutnents of husbandry that he can. Such is his distrust in
the justice of his assessors, that he counterfeits poverty, and
wishes to appear scarce able to pay anything, for fear of being
obliged to pay too much. By this miserable policy, he does not,
perhaps, always consult his own interest in the most effectual
manner ; and he probably loses more by the diminution of his
produce, than he saves by that of his tax. Though, in consequence
of this wretched cultivation, the market is, no doubt, somewhat
worse supplied; yet the small rise of price which this may
occasion, as it is not likely even to indemnify the farmer for
the diminution of his produce, it is still less likely to enable
him to pay more rent to the landlord. The public, the farmer, the
landlord, all suffer more or less by this degraded cultivation.
That the personal taille tends, in many different ways, to
discourage cultivation, and consequently to dry up the principal
source of the wealth of every great country, I have already had
occasion to observe in the third book of this Inquiry.
What are called poll-taxes in the southern provinces of North
America, and the West India islands, annual taxes of so much
a-head upon every negro, are properly taxes upon the profits of a
certain species of stock employed in agriculture. As the
planters, are the greater part of them, both farmers and
landlords, the final payment of the tax falls upon them in their
quality of landlords, without any retribution.
Taxes of so much a head upon the bondmen employed in cultivation,
seem anciently to have been common all over Europe. There
subsists at present a tax of this kind in the empire of Russia.
It is probably upon this account that poll-taxes of all kinds
have often been represented as badges of slavery. Every tax,
however, is, to the person who pays it, a badge, not of slavery,
but of liberty. It denotes that he is subject to government,
indeed ; but that, as he has some property, he cannot himself be
the property of a master. A poll tax upon slaves is altogether
different from a poll-tax upon freemen. The latter is paid by the
persons upon whom it is imposed; the former, by a different set
of persons. The latter is either altogether arbitrary, or
altogether unequal, and, in most cases, is both the one and the
other; the former, though in some respects unequal, different
slaves being of different values, is in no respect arbitrary.
Every master, who knows the number of his own slaves, knows
exactly what he has to pay. Those different taxes, however, being
called by the same name, have been considered as of the same
nature.
The taxes which in Holland are imposed upon men and maid
servants, are taxes, not upon stock, but upon expense; and so far
resemble the taxes upon consumable commodities. The tax of a
guinea a-head for every man-servant, which has lately been
imposed in Great Britain, is of the same kind. It falls heaviest
upon the middling rank. A man of two hundred a-year may keep a
single man-servant. A man of ten thousand a-year will not keep
fifty. It does not affect the poor.
Taxes upon the profits of stock, in particular employments, can
never affect the interest of money. Nobody will lend his money
for less interest to those who exercise the taxed, than to those
who exercise the untaxed employments. Taxes upon the revenue
arising from stock in all employments, where the government
attempts to levy them with any degree of exactness, will, in many
cases, fall upon the interest of money. The vingtieme, or
twentieth penny, in France, is a tax of the same kind with what
is called the land tax in England, and is assessed, in the same
manner, upon the revenue arising upon land, houses, and stock. So
far as it affects stock, it is assessed, though not with great
rigour, yet with much more exactness than that part of the land
tax in England which is imposed upon the same fund. It, in many
cases, falls altogether upon the interest of money. Money is
frequently sunk in France, upon what are called contracts for the
constitution of a rent ; that is, perpetual annuities, redeemable
at any time by the debtor, upon payment of the sum originally
advanced, but of which this redemption is not exigible by the
creditor except in particular cases. The vingtieme seems not
to have raised the rate of those annuities, though it is exactly
levied upon them all.
APPENDIX TO ARTICLES I. AND II. ˜ Taxes upon the Capital Value of
Lands, Houses, and Stock.
While property remains in the possession of the same person,
whatever permanent taxes may have been imposed upon it, they have
never been intended to diminish or take away any part of its
capital value, but only some part of the revenue arising from it.
But when property changes hands, when it is transmitted either
from the dead to the living, or from the living to the living,
such taxes have frequently been imposed upon it as necessarily
take away some part of its capital value.
The transference of all sorts of property from the dead to the
living, and that of immoveable property of land and houses from
the living to the living, are transactions which are in their
nature either public and notorious, or such as cannot be long
concealed. Such transactions, therefore, may be taxed directly.
The transference of stock or moveable property, from the living
to the living, by the lending of money, is frequently a secret
transaction, and may always be made so. It cannot easily,
therefore, be taxed directly. It has been taxed indirectly in two
different ways; first, by requiring that the deed, containing the
obligation to repay, should be written upon paper or parchment
which had paid a certain stamp duty, otherwise not to be valid ;
secondly, by requiring, under the like penalty of invalidity,
that it should be recorded either in a public or secret register,
and by imposing certain duties upon such registration. Stamp
duties, and duties of registration, have frequently been imposed
likewise upon the deeds transferring property of all kinds from
the dead to the living, and upon those transferring immoveable
property from the living to the living ; transactions which might
easily have been taxed directly.
The vicesima hereditatum, or the twentieth penny of inheritances,
imposed by Augustus upon the ancient Romans, was a tax upon the
transference of property from the dead to the living. Dion
Cassius, { Lib. 55. See also Burman. de Vectigalibus Pop. Rom.
cap. xi. and Bouchaud de l'impot du vingtieme sur les
successions.} the author who writes concerning it the least
indistinctly, says, that it was imposed upon all successions,
legacies and donations, in case of death, except upon those to
the nearest relations, and to the poor.
Of the same kind is the Dutch tax upon successions. { See
Memoires concernant les Droits, etc. tom i, p. 225.} Collateral
successions are taxed according to the degree of relation, from
five to thirty per cent. upon the whole value of the succession.
Testamentary donations, or legacies to collaterals, are subject
to the like duties. Those from husband to wife, or from wife to
husband, to the fiftieth penny. The luctuosa hereditas, the
mournful succession of ascendants to descendants, to the
twentieth penny only. Direct successions, or those of
descendants to ascendants, pay no tax. The death of a father, to
such of his children as live in the same house with him, is
seldom attended with any increase, and frequently with a
considerable diminution of revenue ; by the loss of his industry,
of his office, or of some life-rent estate, of which he may have
been in possession. That tax would be cruel and oppressive,
which aggravated their loss, by taking from them any part of his
succession. It may, however, sometimes be otherwise with
those children, who, in the language of the Roman law, are said
to be emancipated; in that of the Scotch law, to be
foris-familiated ; that is, who have received their portion, have
got families of their own, and are supported by funds separate
and independent of those of their father. Whatever part of his
succession might come to such children, would be a real addition
to their fortune, and might, therefore, perhaps, without more
inconveniency than what attends all duties of this kind, be
liable to some tax.
The casualties of the feudal law were taxes upon the transference
of land, both from the dead to the living, and from the living to
the living. In ancient times, they constituted, in every part
of Europe, one of the principal branches of the revenue of the
crown.
The heir of every immediate vassal of the crown paid a certain
duty, generally a year's rent, upon receiving the investiture of
the estate. If the heir was a minor, the whole rents of the
estate. during the continuance of the minority, devolved to the
superior, without any other charge besides the maintenance of the
minor, and the payment of the widow's dower, when there happened
to be a dowager upon the land. When the minor came to de of age,
another tax, called relief, was still due to the superior, which
generally amounted likewise to a year's rent. A long minority,
which, in the present times, so frequently disburdens a great
estate of all its incumbrances. and restores the family to their
ancient splendour, could in those times have no such effect. The
waste, and not the disincumbrance of the estate, was the common
effect of a long minority.
By a feudal law, the vassal could not alienate without the
consent of his superior, who generally extorted a fine or
composition on granting it. This fine, which was at first
arbitrary, came, in many countries, to be regulated at a certain
portion of the price of the land. In some countries, where the
greater part of the other feudal customs have gone into disuse,
this tax upon the alienation of land still continues to make a
very considerable branch of the revenue of the sovereign. In the
canton of Berne it is so high as a sixth part of the price of all
noble fiefs, and a tenth part of that of all ignoble
ones.{Memoires concernant les Droits, etc, tom.i p.154} In the
canton of Lucern, the tax upon the sale of land is not universal,
and takes place only in certain districts. But if any person
sells his land in order to remove out of the territory, he pays
ten per cent. upon the whole price of the sale. { id. p.157.}
Taxes of the same kind, upon the sale either of all lands, or of
lands held by certain tenures, take place in many other
countries, and make a more or less considerable branch of the
revenue of the sovereign.
Such transactions may be taxed indirectly, by means either of
stamp duties, or of duties upon registration; and those duties
either may, or may not, be proportioned to the value of the
subject which is transferred.
In Great Britain, the stamp duties are higher or lower, not so
much according to the value of the property transferred (an
eighteen-penny or half-crown stamp being sufficient upon a bond
for the largest sum of money), as according to the nature of the
deed. The highest do not exceed six pounds upon every sheet of
paper, or skin of parchment ; and these high duties fall chiefly
upon grants from the crown, and upon certain law proceedings,
without any regard to the value of the subject. There are, in
Great Britain, no duties on the registration of deeds or
writings, except the fees of the officers who keep the register ;
and these are seldom more than a reasonable recompence for their
labour. The crown derives no revenue from them.
In Holland {Memoires concernant les Droits, etc. tom. i. p 223,
224, 225.} there are both stamp duties and duties upon
registration ; which in some cases are, and in some are not,
proportioned to the value of the property transferred. All
testaments must be written upon stamped paper, of which the price
is proportioned to the property disposed of ; so that there are
stamps which cost from three pence or three stivers a-sheet, to
three hundred florins, equal to about twenty-seven pounds ten
shillings of our money. If the stamp is of an inferior price to
what the testator ought to have made use of, his succession is
confiscated. This is over and above all their other taxes on
succession. Except bills of exchange, and some other mercantile
bills, all other deeds, bonds, and contracts, are subject to a
stamp duty. This duty, however, does not rise in proportion to
the value of the subject. All sales of land and of houses, and
all mortgages upon either, must be registered, and, upon
registration, pay a duty to the state of two and a-half per cent.
upon the amount of the price or of the mortgage. This duty is
extended to the sale of all ships and vessels of more than two
tons burden, whether decked or undecked. These, it seems, are
considered as a sort of houses upon the water. The sale of
moveables, when it is ordered by a court of justice, is subject
to the like duty of two and a-half per cent.
In France, there are both stamp duties and duties upon
registration. The former are considered as a branch of the
aids of excise, and, in the provinces where those duties take
place, are levied by the excise officers. The latter are
considered as a branch of the domain of the crown and are levied
by a different set of officers.
Those modes of taxation by stamp duties and by duties upon
registration, are of very modern invention. In the course of
little more than a century, however, stamp duties have, in
Europe, become almost universal, and duties upon registration
extremely common. There is no art which one government sooner
learns of another, than that of draining money from the pockets
of the people.
Taxes upon the transference of property from the dead to the
living, fall finally, as well as immediately, upon the persons to
whom the property is transferred. Taxes upon the sale of
land fall altogether upon the seller. The seller is almost
always under the necessity of selling, and must, therefore, take
such a price as he can get. The buyer is scarce ever under the
necessity of buying, and will, therefore, only give such a price
as he likes. He considers what the land will cost him, in tax and
price together. The more he is obliged to pay in the way of tax,
the less he will be disposed to give in the way of price. Such
taxes, therefore, fall almost always upon a necessitous person,
and must, therefore, be frequently very cruel and oppressive.
Taxes upon the sale of new-built houses, where the building is
sold without the ground, fall generally upon the buyer, because
the builder must generally have his profit ; otherwise he must
give up the trade. If he advances the tax, therefore, the buyer
must generally repay it to him. Taxes upon the sale of old
houses, for the same reason as those upon the sale of land, fall
generally upon the seller ; whom, in most cases, either
conveniency or necessity obliges to sell. The number of new-built
houses that are annually brought to market, is more or less
regulated by the demand. Unless the demand is such as to afford
the builder his profit, after paying all expenses, he will build
no more houses. The number of old houses which happen at any time
to come to market, is regulated by accidents, of which the
greater part have no relation to the demand. Two or three great
bankruptcies in a mercantile town, will bring many houses to
sale, which must be sold for what can be got for them. Taxes upon
the sale of ground-rents fall altogether upon the seller, for the
same reason as those upon the sale of lands. Stamp duties, and
duties upon the registration of bonds and contracts for borrowed
money, fall altogether upon the borrower, and, in fact, are
always paid by him. Duties of the same kind upon law proceedings
fall upon the suitors. They reduce to both the capital value of
the subject in dispute. The more it costs to acquire any
property, the less must be the neat value of it when acquired.
All taxes upon the transference of property of every kind, so far
as they diminish the capital value of that property, tend to
diminish the funds destined for the maintenance of productive
labour. They are all more or less unthrifty taxes that
increase the revenue of the sovereign, which seldom maintains any
but unproductive labourers, at the expense of the capital of the
people, which maintains none but productive.
Such taxes, even when they are proportioned to the value of the
property transferred, are still unequal; the frequency of
transference not being always equal in property of equal value.
When they are not proportioned to this value, which is the case
with the greater part of the stamp duties and duties of
registration, they are still more so. They are in no respect
arbitrary, but are, or may be, in all cases, perfectly clear and
certain. Though they sometimes fall upon the person who is not
very able to pay, the time of payment is, in most cases,
sufficiently convenient for him. When the payment becomes due, he
must, in most cases, have the more to pay. They are levied at
very little expense, and in general subject the contributors to
no other inconveniency, besides always the unavoidable one of
paying the tax.
In France, the stamp duties are not much complained of. Those
of registration, which they call the Controle, are. They give
occasion, it is pretended, to much extortion in the officers of
the farmers-general who collect the tax, which is in a great
measure arbitrary and uncertain. In the greater part of the
libels which have been written against the present system of
finances in France, the abuses of the controle make a principal
article. Uncertainty, however, does not seem to be necessarily
inherent in the nature of such taxes. If the popular
complaints are well founded, the abuse must arise, not so much
from the nature of the tax as from the want of precision and
distinctness in the words of the edicts or laws which impose it.
The registration of mortgages, and in general of all rights upon
immoveable property, as it gives great security both to creditors
and purchasers, is extremely advantageous to the public. That of
the greater part of deeds of other kinds, is frequently
inconvenient and even dangerous to individuals, without any
advantage to the public. All registers which, it is acknowledged,
ought to be kept secret, ought certainly never to exist. The
credit of individuals ought certainly never to depend upon so
very slender a security, as the probity and religion of the
inferior officers of revenue. But where the fees of registration
have been made a source of revenue to the sovereign,
register-officcs have commonly been multiplied without end, both
for the deeds which ought to be registered, and for those which
ought not. In France there are several different sorts of secret
registers. This abuse, though not perhaps a necessary, it must be
acknowledged, is a very natural effect of such taxes.
Such stamp duties as those in England upon cards and dice, upon
newspapers and periodical pamphlets, etc. are properly taxes upon
consumption; the final payment falls upon the persons who use or
consume such commodities. Such stamp duties as those upon
licences to retail ale, wine, and spiritous liquors, though
intended, perhaps, to fall upon the profits of the retailers, are
likewise finally paid by the consumers of those liquors. Such
taxes, though called by the same name, and levied by the same
officers, and in the same manner with the stamp duties above
mentioned upon the transference of property, are, however, of a
quite different nature, and fall upon quite different funds.
ARTICLE III. ˜ Taxes upon the Wages of Labour.
The wages of the inferior classes of work men, I have
endeavoured to show in the first book are everywhere necessarily
regulated by two different circumstances; the demand for labour,
and the ordinary or average price of provisions. The demand for
labour, according as it happens to be either increasing
stationary or declining ; or to require an increasing,
stationary, or declining population. regulates the subsistence of
the labourer, and determines in what degree it shall be either
liberal, moderate, or scanty. The ordinary average price of
provisions determines the quantity of money which must be paid to
the workman, in order to enable him, one year with another, to
purchase this liberal, moderate, or scanty subsistence. While the
demand for the labour and the price of provisions, therefore,
remain the same, a direct tax upon the wages of labour can have
no other effect, than to raise them somewhat higher than the tax.
Let us suppose, for example, that, in a particular place, the
demand for labour and the price of provisions were such as to
render ten shillings a-week the ordinary wages of labour ; and
that a tax of one-fifth, or four shillings in the pound, was
imposed upon wages. If the demand for labour and the price of
provisions remained the same, it would still be necessary that
the labourer should, in that place, earn such a subsistence as
could be bought only for ten shillings a-week; so that, after
paying the tax, he should have ten shillings a-week free wages.
But, in order to leave him such free wages, after paying such a
tax, the price of labour must, in that place, soon rise, not to
twelve sillings aweek only, but to twelve and sixpence ; that is,
in order to enable him to pay a tax of one-fifth, his wages must
necessarily soon rise, not one-fifth part only, but one-fourth.
Whatever was the proportion of the tax, the wages of labour must,
in all cases rise, not only in that proportion, but in a higher
proportion. If the tax for example, was one-tenth, the wages
of labour must necessarily soon rise, not one-tenth part only,
but one-eighth.
A direct tax upon the wages of labour, therefore, though the
labourer might, perhaps, pay it out of his hand, could not
properly be said to be even advanced by him ; at least if the
demand for labour and the average price of provisions remained
the same after the tax as before it. In all such cases, not only
the tax, but something more than the tax, would in reality be
advanced by the person who immediately employed him. The final
payment would, in different cases, fall upon different persons.
The rise which such a tax might occasion in the wages of
manufacturing labour would be advanced by the master
manufacturer, who would both be entitled and obliged to charge
it, with a profit, upon the price of his goods. The final payment
of this rise of wages, therefore, together with the additional
profit of the master manufacturer would fall upon the consumer.
The rise which such a tax might occasion in the wages of country
labour would be advanced by the farmer, who, in order to maintain
the same number of labourers as before, would be obliged to
employ a greater capital. In order to get back this greater
capital, together with the ordinary profits of stock, it would be
necessary that he should retain a larger portion, or, what comes
to the same thing, the price of a larger portion, of the produce
of the land, and, consequently, that he should pay less rent to
the landlord. The final payment of this rise of wages, therefore,
would, in this case, fall upon the landlord, together with the
additional profit of the farmer who had advanced it. In all
cases, a direct tax upon the wages of labour must, in the
long-run, occasion both a greater reduction in the rent of land,
and a greater rise in the price of manufactured goods than would
have followed from the proper assessment of a sum equal to the
produce of the tax, partly upon the rent of land, and partly upon
consumable commodities.
If direct taxes upon the wages of labour have not always
occasioned a proportionable rise in those wages, it is because
they have generally occasioned a considerable fall in the demand
of labour. The declension of industry, the decrease of
employment for the poor, the diminution of the annual produce of
the land and labour of the country, have generally been the
effects of such taxes. In consequence of them, however, the price
of labour must always be higher than it otherwise would have been
in the actual state of the demand ; and this enhancenmnt of
price, together with the profit of those who advance it, must
always be finally paid by the landlords and comsumers.
A tax upon the wages of country labour does not raise the price
of the rude produce of land in proportion to the tax; for the
same reason that a tax upon the farmer's profit does not raise
that price in that proportion.
Absurd and destructive as such taxes are, however, they take
place in many countries. In France, that part of the taille which
is charged upon the industry of workmen and day-laboururs in
country villages, is properly a tax of this kind. Their wages are
computed according to the common rate of the district in which
they reside ; and, that they may be as little liable as possible
to any overcharge, their yearly gains are estimated at no more
than two hundred working days in the year. {Memoires concernant
les Droits, etc. tom. ii. p. 108.} The tax of each individual is
varied from year to year, according to different circumstances,
of which the collector or the commissary, whom intendant appoints
to assist him, are the judges. In Bohemia, in consequence of
the alteration in the system of finances which was begun in 1748,
a very heavy tax is imposed upon the industry of artificers. They
are divided into four classes. The highest class pay a hundred
florins a year, which, at two-and-twenty pence half penny
a-florin, amounts to £9:7:6. The second class are taxed at
seventy ; the third at fifty ; and the fourth, comprehending
artificers in villages, and the lowest class of those in towns,
at twenty-five florins.{ Memoires concemant les Droits, etc. tom.
iii. p. 87.}
The recompence of ingenious artists, and of men of liberal
professions, I have endeavoured to show in the first book,
necessarily keeps a certain proportion to the emoluments of
inferior trades. A tax upon this recompence, therefore, could
have no other effect than to raise it somewhat higher than in
proportion to the tax. If it did not rise in this manner, the
ingenious arts and the liberal professions, being; no longer upon
a level with other trades, would be so much deserted, that they
would soon return to that level.
The emoluments of offices are not, like those of trades and
professions, regulated by the free competition of the market, and
do not, therefore, always bear a just proportion to what the
nature of the employment requires. They are, perhaps, in most
countries, higher than it requires; the persons who have the
administration of government being generally disposed to regard
both themselves and their immediate dependents, rather more than
enough. The emoluments of offices, therefore, can, in most cases,
very well bear to be taxed. The persons, besides, who enjoy
public offices, especially the more lucrative, are, in all
countries, the objects of general envy ; and a tax upon their
emolmnents, even though it should be somewhat higher than upon
any other sort of revenue, is always a very popular tax. In
England, for example, when, by the land-tax, every other sort of
revenue was supposed to be assessed at four shillings in the
pound, it was very popular to lay a real tax of five shillings
and sixpence in the pound upon the salaries of offices which
exceeded a hundred pounds a-year; the pensions of the younger
branches of the royal family, the pay of the officers of the army
and navy, and a few others less obnoxious to envy, excepted.
There are in England no other direct taxes upon the wages of
labour.
ARTICLE IV. ˜ Taxes which it is intended should fall
indifferently upon every different Species of Revenue.
The taxes which it is intended should fall indifferently upon
every different species of revenue, are capitation taxes, and
taxes upon consunmble commodities. Those must be paid
indifferently, from whatever revenue the contributors may possess
; from the rent of their land, from the profits of their stock,
or from the wages of their labour.
Capitation Taxes.
Capitation taxes, if it is attempted to proportion them to the
fortune or revenue of each contributor, become altogether
arbitrary. The state of a man's fortune varies from day to day ;
and, without an inquisition, more intolerable than any tax, and
renewed at least once every year, can only be guessed at. His
assessment, therefore, must, in most cases, depend upon the good
or bad humour of his assessors, and must, therefore, be
altogether arbitrary and uncertain.
Capitation taxes, if they are proportioned, not to the supposed
fortune, but to the rank of each contributor, become altogether
unequal ; the degrees of fortune being frequently unequal in the
same degree of rank.
Such taxes, therefore, if it is attempted to render them equal,
become altogether arbitrary and uncertain ; and if it is
attempted to render them certain and not arbitrary, become
altogether unequal. Let the tax be light or heavy, uncertainty is
always a great grievance. In a light tax, a considerable degree
of inequality may be supported; in a heavy one, it is altogether
intolerable.
In the different poll-taxes which took place in England during
the reign of William III. the contributors were, the greater part
of them, assessed according to the degree of their rank; as
dukes, marquises, earls, viscounts, barons, esquires, gentlemen,
the eldest and youngest sons of peers, etc. All shop-keepers and
tradesmen worth more than three hundred pounds, that is, the
better sort of them, were subject to the same assessment, how
great soever might be the difference in their fortunes. Their
rank was more considered than their fortune. Several of those
who, in the first poll-tax, were rated according to their
supposed fortune were afterwards rated according to their rank.
Serjeants, attorneys, and proctors at law, who, in the first
poll-tax, were assessed at three shillings in the pound of their
supposed income, were afterwards assessed as gentlemen. In the
assessment of a tax which was not very heavy, a considerable
degree of inequality had been found less insupportable than any
degree of uncertainty.
In the capitation which has been levied in France, without-any
interruption, since the beginning of the present century, the
highest orders of people are rated according to their rank, by an
invariable tariff; the lower orders of people, according to what
is supposed to be their fortune, by an assessment which varies
from year to year. The officers of the king's court, the judges,
and other officers in the superior courts of justice, the
officers of the troops, etc are assessed in the first manner. The
inferior ranks of people in the provinces are assessed in the
second. In France, the great easily submit to a considerable
degree of inequality in a tax which, so far as it affects them,
is not a very heavy one; but could not brook the arbitrary
assessment of an intendant.
The inferior ranks of people must, in that country, suffer
patiently the usage which their superiors think proper to give
them.
In England, the different poll-taxes never produced the sum which
had been expected from them, or which it was supposed they might
have produced, had they been exactly levied. In France, the
capitation always produces the sum expected from it. The mild
government of England, when it assessed the different ranks of
people to the poll-tax, contented itself with what that
assessment happened to produce, and required no compensation for
the loss which the state might sustain, either by those who could
not pay, or by those who would not pay (for there were many
such), and who, by the indulgent execution of the law, were not
forced to pay. The more severe government of France assesses upon
each generality a certain sum, which the intendant must find as
he can. If any province complains of being assessed too high, it
may, in the assessment of next year, obtain an abatement
proportioned to the overcharge of the year before ; but it must
pay in the mean time. The intendant, in order to be sure of
finding the sum assessed upon his generality, was empowered to
assess it in a larger sum, that the failure or inability of some
of the contributors might be compensated by the overcharge of the
rest ; and till 1765, the fixation of this surplus assessment was
left altogether to his discretion. In that year, indeed, the
council assumed this power to itself. In the capitation of the
provinces, it is observed by the perfectly well informed author
of the Memoirs upon the Impositions in France, the proportion
which falls upon the nobility, and upon those whose privileges
exempt them from the taille, is the least considerable. The
largest falls upon those subject to the taille, who are assessed
to the capitation at so much a-pound of what they pay to that
other tax.
Capitation taxes, so far as they are levied upon the lower ranks
of people, are direct taxes upon the wages of labour, and are
attended with all the inconveniencics of such taxes.
Capitation taxes are levied at little expense ; and, where they
are rigorously exacted, afford a very sure revenue to the state.
It is upon this account that, in countries where the case,
comfort, and security of the inferior ranks of people are little
attended to, capitation taxes are very common. It is in general,
however, but a small part of the public revenue, which, in a
great empire, has ever been drawn from such taxes ; and the
greatest sum which they have ever afforded, might always have
been found in some other way much more convenient to the people.
Taxes upon Consumable Commodities.
The impossibility of taxing the people, in proportion to their
revenue, by any capitation, seems to have given occasion to the
invention of taxes upon consumable commodities. The state not
knowing how to tax, directly and proportionably, the revenue of
its subjects, endeavours to tax it indirectly by taxing their
expense, which, it is supposed, will, in most cases, be nearly in
proportion to their revenue. Their expense is taxed, by taxing
the consumable commodities upon which it is laid out.
Consumable commodities are either necessaries or luxuries.
By necessaries I understand, not only the commodities which are
indispensibly necessary for the support of life, but whatever the
custom of the country renders it indecent for creditable people,
even of the lowest order, to be without. A linen shirt, for
example, is, strictly speaking, not a necessary of life. The
Greeks and Romans lived, I suppose, very comfortably, though they
had no linen. But in the present times, through the greater part
of Europe, a creditable day-labourer would be ashamed to appear
in public without a linen shirt, the want of which would be
supposed to denote that disgraceful degree of poverty, which, it
is presumed, nobody can well fall into without extreme bad
conduct. Custom. in the same manner, has rendered leather shoes a
necessary of life in England. The poorest creditable person, of
either sex, would be ashamed to appear in public without them. In
Scotland, custom has rendered them a necessary of life to the
lowest order of men ; but not to the same order of women, who
may, without any discredit, walk about barefooted. In France,
they are necessaries neither to men nor to women; the lowest rank
of both sexes appearing there publicly, without any discredit,
sometimes in wooden shoes, and sometimes barefooted. Under
necessaries, therefore, I comprehend, not only those things which
nature, but those things which the established rules of decency
have rendered necessary to the lowest rank of people. All other
things I call luxuries, without meaning, by this appellation, to
throw the smallest degree of reproach upon the temperate use of
them. Beer and ale, for example, in Great Britain, and wine, even
in the wine countries, I call luxuries. A man of any rank may,
without any reproach, abstain totally from tasting such liquors.
Nature does not render them necessary for the support of life ;
and custom nowhere renders it indecent to live without them.
As the wages of labour are everywhere regulated, partly by the
demand for it, and partly by the average price of the necessary
articles of subsistence; whatever raises this average price must
necessarily raise those wages; so that the labourer may still be
able to purchase that quantity of those necessary articles which
the state of the demand for labour, whether increasing,
stationary, or declining, requires that he should have.{See book
i.chap. 8} A tax upon those articles necessarily raises their
price somewhat higher than the amount of the tax, because the
dealer, who advances the tax, must generally get it back, with a
profit. Such a tax must, therefore, occasion a rise in the wages
of labour, proportionable to this rise of price.
It is thus that a tax upon the necessaries of life operates
exactly in the same manner as a direct tax upon the wages of
labour. The labourer, though he may pay it out of his hand,
cannot, for any considerable time at least, be properly said even
to advance it. It must always, in the long-run, be advanced to
him by his immediate employer, in the advanced state of wages.
His employer, if he is a manufacturer, will charge upon the price
of his goods the rise of wages, together with a profit, so that
the final payment of the tax, together with this overcharge, will
fall upon the consumer. If his employer is a farmer, the final
payment, together with a like overcharge, will fall upon the rent
of the landlord.
It is otherwise with taxes upon what I call luxuries, even upon
those of the poor. The rise in the price of the taxed
commodities, will not necessarily occasion any rise in the wages
of labour. A tax upon tobacco, for example, though a luxury of
the poor, as well as of the rich, will not raise wages. Though it
is taxed in England at three times, and in France at fifteen
times its original price, those high duties seem to have no
effect upon the wages of labour. The same thing maybe said of the
taxes upon tea and sugar, which, in England and Holland, have
become luxuries of the lowest ranks of people; and of those upon
chocolate, which, in Spain, is said to have become so.
The different taxes which, in Great Britain, have, in the course
of the present century, been imposed upon spiritous liquors, are
not supposed to have had any effect upon the wages of labour. The
rise in the price of porter, occasioned by an additional tax of
three shillings upon the barrel of strong beer, has not raised
the wages of common labour in London. These were about eighteen
pence or twenty pence a-day before the tax, and they are not more
now.
The high price of such commodities does not necessarily diminish
the ability of the inferior ranks of people to bring up families.
Upon the sober and industrious poor, taxes upon such commodities
act as sumptuary laws, and dispose them either to moderate, or to
refrain altogether from the use of superfluities which they can
no longer easily afford. Their ability to bring up families, in
consequence of this forced frugality, instead of being
diminished, is frequently, perhaps, increased by the tax. It is
the sober and industrious poor who generally bring up the most
numerous families, and who principally supply the demand for
useful labour. All the poor, indeed, are not sober and
industrious ; and the dissolute and disorderly might continue to
indulge themselves in the use of such commodities, after this
rise of price, in the same manner as before, without regarding
the distress which this indulgence might bring upon their
families. Such disorderly persons, however, seldom rear up
numerous families, their children generally perishing from
neglect, mismanagement, and the scantiness or unwholesomeness of
their food. If by the strength of their constitution, they
survive the hardships to which the bad conduct of their parents
exposes them, yet the example of that bad conduct commonly
corrupts their morals ; so that, instead of being useful to
society by their industry, they become public nuisances by their
vices and disorders. Through the advanced price of the luxuries
of the poor, therefore, might increase somewhat the distress of
such disorderly families, and thereby diminish somewhat their
ability to bring up children, it would not probably diminish much
the useful population of the country.
Any rise in the average price of necessaries, unless it be
compensated by a proportionable rise in the wages of labour, must
necessarily diminish, more or less, the ability of the poor to
bring up numerous families, and, consequently, to supply the
demand for useful labour; whatever may be the state of that
demand, whether increasing, stationary, or declining; or such as
requires an increasing, stationary, or declining population.
Taxes upon luxuries have no tendency to raise the price of any
other commodities, except that of the commodities taxed. Taxes
upon necessaries, by raising the wages of labour, necessarily
tend to raise the price of all manufactures, and consequently to
diminish the extent of their sale and consumption. Taxes upon
luxuries are finally paid by the consumers of the commodities
taxed, without any retribution. They fall indifferently upon
every species of revenue, the wages of labour, the profits of
stock, and the rent of land. Taxes upon necessaries, so far as
they affect the labouring poor, are finally paid, partly by
landlords, in the diminished rent of their lands, and partly by
rich consumers, whether landlords or others, in the advanced
price of manufactured goods; and always with a considerable
overcharge. The advanced price of such manufactures as are real
necessaries of life, and are destined for the consumption of the
poor, of coarse woollens, for example, must be compensated to the
poor by a farther advancement of their wages. The middling and
superior ranks of people, if they understood their own interest,
ought always to oppose all taxes upon the necessaries of life, as
well as all taxes upon the wages of labour. The final payment of
both the one and the other falls altogether upon themselves, and
always with a considerable overcharge. They fall heaviest
upon the landlords, who always pay in a double capacity ; in that
of landlords, by the reduction, of their rent ; and in that of
rich consumers, by the increase of their expense. The observation
of Sir Matthew Decker, that certain taxes are, in the price of
certain goods, sometimes repeated and accumulated four or five
times, is perfectly just with regard to taxes upon the
necessaries of life. In the price of leather, for example,
you must pay not only for the tax upon the leather of your own
shoes, but for a part of that upon those of the shoemaker and the
tanner. You must pay, too, for the tax upon the salt, upon the
soap, and upon the candles which those workmen consume while
employed in your service ; and for the tax upon the leather,
which the saltmaker, the soap-maker, and the candle-maker
consume, while employed in their service.
In Great Britain, the principal taxes upon the necessaries of
life, are those upon the four commodities just now mentioned,
salt, leather, soap, and candles.
Salt is a very ancient and a very universal subject of taxation.
It was taxed among the Romans, and it is so at present in, I
believe, every part of Europe. The quantity annually consumed by
any individual is so small, and may be purchased so gradually,
that nobody, it seems to have been thought, could feel very
sensibly even a pretty heavy tax upon it. It is in England taxed
at three shillings and fourpence a bushel; about three times the
original price of the commodity. In some other countries, the tax
is still higher. Leather is a real necessary of life. The use of
linen renders soap such. In countries where the winter nights
are long, candles are a necessary instrument of trade.
Leather and soap are in Great Britain taxed at three halfpence
a-pound; candles at a penny; taxes which, upon the original price
of leather, may amount to about eight or ten per cent. ; upon
that of soap, to about twenty or five-and-twenty per cent. ; and
upon that of candles to about fourteen or fifteen per cent.;
taxes which, though lighter than that upon salt, are still very
heavy. As all those four commodities are real necessaries of
life, such heavy taxes upon them must increase somewhat the
expense of the sober and industrious poor, and must consequently
raise more or less the wages of their labour.
In a country where the winters are so cold as in Great Britain,
fuel is, during that season, in the strictest sense of the word,
a necessary of life, not only for the purpose of dressing
victuals, but for the comfortable subsistence of many different
sorts of workmen who work within doors ; and coals are the
cheapest of all fuel. The price of fuel has so important an
influence upon that of labour, that all over Great Britain,
manufactures have confined themselves principally to the coal
contries; other parts of the country, on account of the high
price of this necessary article, not being able to work so cheap.
In some manufactures, besides, coal is a necessary instrument of
trade ; as in those of glass, iron, and all other metals. If a
bounty could in any case be reasonable, it might perhaps be so
upon the transportation of coals from those parts of the country
in which they abound, to those in which they are wanted.
But the legislature, instead of a bounty, has imposed a tax of
three shillings and threepence a-ton upon coals carried
coastways; which, upon most sorts of coal, is more than sixty per
cent. of the original price at the coal pit. Coals carried,
either by land or by inland navigation, pay no duty. Where they
are naturally cheap, they are consumed duty free ; where they are
naturally dear, they are loaded with a heavy duty.
Such taxes, though they raise the price of subsistence, and
consequently the wages of labour, yet they afford a considerable
revenue to government, which it might not be easy to find in any
other way. There may, therefore, be good reasons for continuing
them. The bounty upon the exportation of corn, so far us it
tends, in the actual state of tillage, to raise the price of that
necessary article, produces all the like bad effects ; and
instead of affording any revenue, frequently occasions a very
great expense to government. The high duties upon the importation
of foreign corn, which, in years of moderate plenty, amount to a
prohibition; and the absolute prohibition of the importation,
either of live cattle, or of salt provisions, which takes place
in the ordinary state of the law, and which, on account of the
scarcity, is at present suspended for a limited time with regard
to Ireland and the British plantations, have all had the bad
effects of taxes upon the necessaries of life, and produce no
revenue to government. Nothing seems necessary for the repeal of
such regulations, but to convince the public of the futility of
that system in consequence of which they have been established.
Taxes upon the necessaries of life are much higher in many other
countries than in Great Britain. Duties upon flour and meal when
ground at the mill, and upon bread when baked at the oven, take
place in many countries. In Holland the money-price of the:
bread consumed in towns is supposed to be doubled by means of
such taxes. In lieu of a part of them, the people who live in the
country, pay every year so much a-head, according to the sort of
bread they are supposed to consume. Those who consume wheaten
bread pay three guilders fifteen stivers; about six shillings and
ninepence halfpenny. Those, and some other taxes of the same
kind, by raising the price of labour, are said to have ruined the
greater part of the manufactures of Holland {Memoires concernant
les Droits, etc. p. 210, 211.}. Similar taxes, though not quite
so heavy, take place in the Milanese, in the states of Genoa, in
the duchy of Modena, in the duchies of Parma, Placentia, and
Guastalla, and the Ecclesiastical state. A French author {Le
Reformateur} of some note, has proposed to reform the finances of
his country, by substituting in the room of the greater part of
other taxes, this most ruinous of all taxes. There is nothing so
absurd, says Cicero, which has not sometimes been asserted by
some philosophers.
Taxes upon butcher's meat are still more common than those upon
bread. It may indeed be doubted, whether butcher's meat is any
where a necessary of life. Grain and other vegetables, with the
help of milk, cheese, and butter, or oil, where butter is not to
be had, it is known from experience, can, without any butcher's
meat, afford the most plentiful, the most wholesome, the most
nourishing, and the most invigorating diet. Decency nowhere
requires that any man should eat butcher's meat, as it in most
places requires that he should wear a linen shirt or a pair of
leather shoes.
Consumable commodities, whether necessaries or luxuries, may be
taxed in two different ways. The consumer may either pay an
annual sum on account of his using or consuming goods of a
certain kind; or the goods may be taxed while they remain in the
hands of the dealer, and before they are delivered to the
consumer. The consumable goods which last a considerable time
before they are consumed altogether, are most properly taxed in
the one way ; those of which the consumption is either immediate
or more speedy, in the other. The coach-tax and plate tax are
examples of the former method of imposing ; the greater part of
the other duties of excise and customs, of the latter.
A coach may, with good management, last ten or twelve years. It
might be taxed, once for all, before it comes out of the hands of
the coach-maker. But it is certainly more convenient for the
buyer to pay four pounds a-year for the privilege of keeping a
coach, than to pay all at once forty or forty-eight pounds
additional price to the coach-maker ; or a sum equivalent to what
the tax is likely to cost him during the time he uses the same
coach. A service of plate in the same manner, may last more
than a century. It is certainly-easier for the consumer to
pay five shillings a-year for every hundred ounces of plate, near
one per cent. of the value, than to redeem this long annuity at
five-and-twenty or thirty years purchase, which would enhance the
price at least five-and-twenty or thirty per cent. The
different taxes which affect houses, are certainly more
conveniently paid by moderate annual payments, than by a heavy
tax of equal value upon the first building or sale of the house.
It was the well-known proposal of Sir Matthew Decker, that all
commodities, even those of which the consumption is either
immediate or speedy, should be taxed in this manner; the dealer
advancing nothing, but the consumer paying a certain annual sum
for the licence to consume certain goods. The object of his
scheme was to promote all the different branches of foreign
trade, particularly the carrying trade, by taking away all duties
upon importation and exportation, and thereby enabling the
merchant to employ his whole capital and credit in the purchase
of goods and the freight of ships, no part of either being
diverted towards the advancing of taxes, The project, however, of
taxing, in this manner, goods of immediate or speedy consumption,
seems liable to the four following very important objections.
First, the tax would be more unequal, or not so well proportioned
to the expense and consumption of the different contributors, as
in the way in which it is commonly imposed. The taxes upon ale,
wine, and spiritous liquors, which are advanced by the dealers,
are finally paid by the different consumers, exactly in
proportion to their respective consumption. But if the tax were
to be paid by purchasing a licence to drink those liquors, the
sober would, in proportion to his consumption, be taxed much more
heavily than the drunken consumer. A family which exercised great
hospitality, would be taxed much more lightly than one who
entertained fewer guests. Secondly, this mode of taxation, by
paying for an annual, half-yearly, or quarterly licence to
consume certain goods, would diminish very much one of the
principal conveniences of taxes upon goods of speedy consumption;
the piece-meal payment. In the price of threepence halfpenny,
which is at present paid for a pot of porter, the different taxes
upon malt, hops, and beer, together with the extraordinary profit
which the brewer charges for having advanced than, may perhaps
amount to about three halfpence. If a workman can conveniently
spare those three halfpence, he buys a pot of porter. If he
cannot, he contents himself with a pint; and, as a penny saved is
a penny got, he thus gains a farthing by his temperance. He pays
the tax piece-meal, as he can afford to pay it, and when he can
afford to pay it, and every act of payment is perfectly
voluntary, and what he can avoid if he chuses to do so. Thirdly,
such taxes would operate less as sumptuary laws. When the licence
was once purchased, whether the purchaser drunk much or drunk
little, his tax would be the same. Fourthly, if a workman were to
pay all at once, by yearly, half-yearly, or quarlerly payments, a
tax equal to what he at present pays, with little or no
inconveniency, upon all the different pots and pints of porter
which he drinks in any such period of time, the sum might
frequently distress him very much. This mode of taxation,
therefore, it seems evident, could never, without the most
grievous oppression, produce a revenue nearly equal to what is
derived from the present mode without any oppression. In several
countries, however, commodities of an immediate or very speedy
consumption are taxed in this manner. In Holland, people pay so
much a-head for a licence to drink tea. I have already mentioned
a tax upon bread, which, so far as it is consumed in farm houses
and country villages, is there levied in the same manner.
The duties of excise are imposed chiefly upon goods of home
produce, destined for home consumption. They are imposed only
upon a few sorts of goods of the most general use. There can
never be any doubt, either concerning the goods which are subject
to those duties, or concerning the particular duty which each
species of goods is subject to. They fall almost altogether upon
what I call luxuries, excepting always the four duties above
mentioned, upon salt, soap, leather, candles, and perhaps that
upon green glass.
The duties of customs are much more ancient than those of excise.
They seem to have been called customs, as denoting customary
payments, which had been in use for time immemorial. They appear
to have been originally considered as taxes upon the profits of
merchants. During the barbarous times of feudal anarchy,
merchants, like all the other inhabitants of burghs, were
considered as little better than emancipated bondmen, whose
persons were despised, and whose gains were envied. The great
nobility, who had consented that the king should tallage the
profits of their own tenants, were not unwilling that he should
tallage likewise those of an order of men whom it was much less
their interest to protect. In those ignorant times, it was
not understood, that the profits of merchants are a subject not
taxable directly ; or that the final payment of all such taxes
must fall, with a considerable overcharge, upon the consumers.
The gains of alien merchants were looked upon more unfavourably
than those of English merchants. It was natural, therefore.
that those of the former should be taxed more heavily than those
of the latter. This distinction between the duties upon
aliens and those upon English merchants, which was begun from
ignorance, has been continued front the spirit of monopoly, or in
order to give our own merchants an advantage, both in the home
and in the foreign market.
With this distinction, the ancient duties of customs were imposed
equally upon all sorts of goods, necessaries as well its
luxuries, goods exported as well as goods imported. Why should
the dealers in one sort of goods, it seems to have been thought,
be more favoured than those in another ? or why should the
merchant exporter be more favoured than the merchant importer?
The ancient customs were divided into three branches. The first,
and, perhaps, the most ancient of all those duties, was that upon
wool and leather. It seems to have been chiefly or altogether an
exportation duty. When the woollen manufacture came to be
established in England, lest the king should lose any part of his
customs upon wool by the exportation of woollen cloths, a like
duty was imposed upon them. The other two branches were,
first, a duty upon wine, which being imposed at so much a-ton,
was called a tonnage; and, secondly, a duty upon all other goods,
which being imposed at so much a-pound of their supposed value,
was called a poundage. In the forty-seventh year of Edward III.,
a duty of sixpence in the pound was imposed upon all goods
exported and imported, except wools, wool-felts, leather, and
wines which were subject to particular duties. In the
fourteenth of Richard II., this duty was raised to one shilling
in the pound ; but, three years afterwards, it was again reduced
to sixpence. It was raised to eightpence in the second year of
Henry IV. ; and, in the fourth of the same prince, to one
shilling. From this time to the ninth year of William III.,
this duty continued at one shilling in the pound. The duties
of tonnage and poundage were generally granted to the king by one
and the same act of parliament, and were called the subsidy of
tonnage and poundage. The subsidy of poundage having
continued for so long a time at one shilling in the pound, or at
five per cent., a subsidy came, in the language of the customs,
to denote a general duty of this kind of five per cent. This
subsidy, which is now called the old subsidy, still continues to
be levied, according to the book of rates established by the
twelfth of Charles II. The method of ascertnining, by a book
of rates, the value of goods subject to this duty, is said to be
older than the time of James I. The new subsidy, imposed by the
ninth and tenth of William III., was an additional five per cent.
upon the greater part of goods. The one-third and the two-third
subsidy made up between them another five per cent. of which they
were proportionable parts. The subsidy of 1747 made a fourth five
per cent. upon the greater part of goods; and that of 1759, a
fifth upon some particular sorts of goods. Besides those five
subsidies, a great variety of other duties have occasionally been
imposed upon particular sorts of goods, in order sometimes to
relieve the exigencie's of the state, and sometimes to regulate
the trade of the country, according to the principles of the
mercantile system.
That system has come gradually more and more into fashion. The
old subsidy was imposed indifferently upon exportation, as well
as importation. The four subsequent subsidies, as well as the
other duties which have since been occasionally imposed upon
particular sorts of goods, have, with a few exceptions, been laid
altogether upon importation. The greater part of the ancient
duties which had been imposed upon the exportation of the goods
of home produce and manufacture, have either been lightened or
taken away altogether. In most cases, they have been taken
away. Bounties have even been given upon the exportation of some
of them. Drawbacks, too, sometimes of the whole, and, in most
cases, of a part of the duties which are paid upon the
importation of foreign goods, have been granted upon their
exportation. Only half the duties imposed by the old subsidy upon
importation, are drawn back upon exportation; but the whole of
those imposed by the latter subsidies and other imposts are, upon
the greater parts of the goods, drawn back in the same manner.
This growing favour of exportation, and discouragmnent of
importation, have suffered only a few exceptions, which chiefly
concern the materials of some manufactures. These our
merchants and manufacturers are willing should come as cheap as
possible to themselves, and as dear as possible to their rivals
and competitors in other countries. Foreign materiais are,
upon this account, sometimes allowed to be imported duty-free;
spanish wool, for example, flax, and raw linen yarn. The
exportation of the materials of home produce, and of those which
are the particular produce of our colonies, has sometimes been
prohibited, and sometimes subjected to higher duties. The
exportation of English wool has been prohibited. That of beaver
skins, of beaver wool, and of gum-senega, has been subjected to
higher duties ; Great Britain, by the conquests of Canada and
Senegal, having got almost the monopoly of those commodities.
That the mercantile system has not been very favourable to the
revenue of the great body of the people, to the annual produce of
the land and labour of the country, I have endeavoured to show in
the fourth book of this Inquiry. It seems not to have been more
favourable to the revenue of the sovereign; so far, at least, as
that revenue depends upon the duties of customs.
In consequence of that system, the importation of several sorts
of goods has been prohibited altogether. This prohibition
has, in some cases, entirely prevented, and in others has very
much diminished, the importation of those commodities, by
reducing the importers to the necessity of smuggling. It has
entirely prevented the importation of foreign wollens; and it has
very much diminished that of foreign silks and velvets, In both
cases, it has entirely annihilated the revenue of customs which
might have been levied upon such importation.
The high duties which have been imposed upon the importation of
many different sorts of foreign goods in order to discourage
their consumption in Great Britain, have, in many cases, served
only to encourage smuggling, and, in all cases, have reduced the
revenues of the customs below what more moderate duties would
have afforded. The saying of Dr. Swift, that in the arithmetic of
the customs, two and two, instead of making four, make sometimes
only one, holds perfectly true with regard to such heavy duties,
which never could have been imposed, had not the mercantile
system taught us, in many cases, to employ taxation as an
instrument, not of revenue, but of monopoly.
The bounties which are sometimes given upon the exportation of
home produce and manufactures, and the drawbacks which are paid
upon the re-exportation of the greater part of foreign goods,
have given occasion to many frauds, and to a species of
smuggling, more destructive of the public revenue than any other.
In order to obtain the bounty or drawback, the goods, it is well
known, are sometimes shipped, and sent to sea, but soon
afterwards clandestinely re-landed in some other part of the
country. The defalcation of the revenue of customs occasioned by
bounties and drawbacks, of which a great part are obtained
fraudulently, is very great. The gross produce of the
customs, in the year which ended on the 5th of January 1755,
amounted to £5,068,000. The bounties which were paid out of
this revenue, though in that year there was no bounty upon corn,
amounted to £167,806. The drawbacks which were paid upon
debentures and certificates, to £2,156,800. Bounties and
drawbacks together amounted to £2,324,600. In consequence of
these deductions, the revenue of the customs amounted only to
£2,743,400 ; from which deducting £287,900 for the expense of
management, in salaries and other incidents, the neat revenue of
the customs for that year comes out to be £2,455,500. The expense
of management, amounts, in this manner, to between five and six
per cent. upon the gross revenue of the customs ; and to
something more than ten per cent. upon what remains of that
revenue, after deducting what is paid away in bounties and
drawbacks.
Heavy duties being imposed upon almost all goods imported, our
merchant importers smuggle as much, and make entry of as little
as they can. Our merchant exporters, on the contrary, make entry
of more than they export ; sometimes out of vanity, and to pass
for great dealers in goods which pay no duty gain a bounty back.
Our exports, in consequence of these different frauds, appear
upon the custom-house books greatly to overbalance our imports,
to the unspeakable comfort of those politicians, who measure the
national prosperity by what they call the balance of trade.
All goods imported, unless particularly exempted, and such
exemptions are not very numerous, are liable to some duties of
customs. If any goods are imported, not mentioned in the book of
rates, they are taxed at 4s:9¾d. for every twenty shillings
value, according to the oath of the importer, that is, nearly at
five subsidies, or five poundage duties. The book of rates is
extremely comprehensive, and enumerates a great variety of
articles, many of them little used, and, therefore, not well
known. It is, upon this account, frequently uncertain under what
article a particular sort of goods ought to be classed, and,
consequently what duty they ought to pay. Mistakes with regard to
this sometimes ruin the custom-house officer, and frequently
occasion much trouble, expense, and vexation to the importer.
In point of perspicuity, precision, and distinctness, therefore,
the duties of customs are much inferior to those of excise.
In order that the greater part of the members of any society
should contribute to the public revenue, in proportion to their
respective expense, it does not seem necessary. that every single
article of that expense should be taxed. The revenue which is
levied by the duties of excise is supposed to fall as equally
upon the contributors as that which is levied by the duties of
customs; and the duties of excise are imposed upon a few articles
only of the most general used and consumption. It has been the
opinion of many people, that, by proper management, the duties of
customs might likewise, without any loss to the public revenue,
and with great advantage to foreign trade, be confined to a few
articles only.
The foreign articles, of the most general use and consumption in
Great Britain, seem at present to consist chiefly in foreign
wines and brandies ; in some of the productions of America and
the West Indies, sugar, rum, tobacco, cocoa-nuts, etc. and in
some of those of the East Indies, tea, coffee, china-ware,
spiceries of all kinds, several sorts of piece-goods, etc.
These different articles afford, the greater part of the perhaps,
at present, revenue which is drawn from the duties of customs.
The taxes which at present subsist upon foreign manufactures, if
you except those upon the few contained in the foregoing
enumeration, have, the greater part of them, been imposed for the
purpose, not of revenue, but of monopoly, or to give our own
merchants an advantage in the home market. By removing all
prohibitions, and by subjecting all foreign manufactures to such
moderate taxes, as it was found from experience, afforded upon
each article the greatest revenue to the public, our own workmen
might still have a considerable advantage in the home market ;
and many articles, some of which at present afford no revenue to
government, and others a very inconsiderable one, might afford a
very great one.
High taxes, sometimes by diminishing the consumption of the taxed
commodities, and sometimes by encouraging smuggling frequently
afford a smaller revenue to government than what might be drawn
from more moderate taxes.
When the diminution of revenue is the effect of the diminutiun of
consumption, there can be but one remedy, and that is the
lowering of the tax.
When the diminution of revenue is the effect of the encouragement
given to smuggling, it may, perhaps, be remedied in two ways;
either by diminishing the temptation to smuggle, or by increasing
the difficulty of smuggling. The temptation to smuggle can be
diminished only by the lowering of the tax ; and the difficulty
of smuggling can be increased only by establishing that system of
administration which is most proper for preventing it.
The excise laws, it appears, I believe, from experience, obstruct
and embarrass the operations of the smuggler much more
effectually than those of the customs. By introducing into the
customs a system of administration as similar to that of the
excise as the nature of the different duties will admit, the
difficulty of smuggling might be very much increased. This
alteration, it has been supposed by many people, might very
easily be brought about.
The importer of commodities liable to any duties of customs, it
has been said, might, at his option, be allowed either to carry
them to his own private warehouse ; or to lodge them in a
warehouse, provided either at his own expense or at that of the
public, but under the key of the custom-house officer, and never
to be opened but in his presence. If the merchant carried them to
his own private warehouse, the duties to be immediately paid, and
never afterwards to be drawn back ; and that warehouse to be at
all times subject to the visit and examination of the
custom-house officer, in order to ascertain how far the quantity
contained in it corresponded with that for which the duty had
been paid. If he carried them to the public warehouse, no duty to
be paid till they were taken out for home comsumption. If taken
out for exportation, to be duty-free; proper security being
always given that they should be so exported. The dealers in
those particular commodities, either by wholesale or retail, to
be at all times subject to the visit and examination of the
custom-house officer; and to be obliged to justify, by proper
certificates, the payment of the duty upon the whole quantity
contained in their shops or warehouses. What are called the
excise duties upon rum imported, are at present levied in this
manner ; and the same system of administration might, perhaps, be
extended to all duties upon goods imported ; provided always that
those duties were, like the duties of excise, confined to a few
sorts of goods of the most general use and consumption. If they
were extended to almost all sorts of goods, as at present, public
warehouses of sufficient extent could not easily be provided; and
goods of a very delicate nature, or of which the preservation
required much care and attention, could not safely be trusted by
the merchant in any warehouse but his own.
If, by such a system of administration, smuggling to any
considerable extent could be prevented, even under pretty high
duties ; and if every duty was occasionally either heightened or
lowered according as it was most likely, either the one way or
the other, to afford the greatest revenue to the state; taxation
being always employed as an instrument of revenue, and never of
monopoly ; it seems not improbable that a revenue, at least equal
to the present neat revenue of the customs, might be drawn from
duties upon the importation of only a few sorts of goods of the
most general use and consumption ; and that the duties of customs
might thus be brought to the same degree of simplicity,
certainty, and precision, as those of excise. What the revenue at
present loses by drawbacks upon the re-exportation of foreign
goods, which are afterwards re-landed and consumed at home,
would, under this system, be saved altogether. If to this saving,
which would alone be very considerable, were added the abolition
of all bounties upon the exportation of home produce ; in all
cases in which those bounties were not in reality drawbacks of
some duties of excise which had before been advanced ; it cannot
well be doubted, but that the neat revenue of customs might,
after an alteration of this kind, be fully equal to what it had
ever been before.
If, by such a change of system, the public revenue suffered no
loss, the trade and manufactures of the country would certainly
gain a very considerable advantage. The trade in the commodities
not taxed, by far the greatest number would be perfectly free,
and might be carried on to and from all parts of the world with
every possible advantage. Among those commodities would be
comprehended all the necessaries of life, and all the materials
of manufacture. So far as the free importation of the necessaries
of life reduced their average money price in the home market, it
would reduce the money price of labour, but without reducing in
any respect its real recompence. The value of money is in
proportion to the quantity of the necessaries of life which it
will purchase. That of the necessaries of life is altogether
independent of the quantity of money which can be had for them.
The reduction in the money price of labour would necessarily be
attended with a proportionable one in that of all home
manufactures, which would thereby gain some advantage in all
foreign markets. The price of some manufactures would be reduced,
in a still greater proportion, by the free importation of the raw
materials. If raw silk could be imported from China and Indostan,
duty-free, the silk manufacturers in England could greatly
undersell those of both France and Italy. There would be no
occasion to prohibit the importation of foreign silks and
velvets. The cheapness of their goods would secure to our own
workmen, not only the possession of a home, but a very great
command of the foreign market. Even the trade in the commodities
taxed, would be carried on with much more advantage than at
present. If those commodities were delivered out of the public
warehouse for foreign exportation, being in this case exempted
from all taxes, the trade in them would be perfectly free. The
carrying trade, in all sorts of goods, would, under this system,
enjoy every possible advantage. If these commodities were
delivered out for home consumption, the importer not being
obliged to advance the tax till he had an opportunity of selling
his goods, either to some dealer, or to some consumer, he could
always afford to sell them cheaper than if he had been obliged to
advance it at the moment of importation. Under the same taxes,
the foreign trade of consumption, even in the taxed commodities,
might in this manner be carried on with much more advantage than
it is at present.
It was the object of the famous excise scheme of Sir Robert
Walpole, to establish, with regard to wine and tobacco, a system
not very unlike that which is here proposed. But though the bill
which was then brought into Parliament, comprehended those two
commodities only, it was generally supposed to be meant as an
introduction to a more extensive scheme of the same kind.
Faction, combined with the interest of smuggling merchants,
raised so violent, though so unjust a clamour, against that bill,
that the minister thought proper to drop it ; and, from a dread
of exciting a clamour of the same kind, none of his successors
have dared to resume the project.
The duties upon foreign luxuries, imported for home consumption,
though they sometimes fall upon the poor, fall principally upon
people of middling or more than middling fortune. Such are, for
example, the duties upon foreign wines, upon coffee, chocolate,
tea, sugar, etc.
The duties upon the cheaper luxuries of home produce, destined
for home consumption, fall pretty equally upon people of all
ranks, in proportion to their respective expense. The poor pay
the duties upon malt, hops, beer, and ale, upon their own
consumption ; the rich, upon both their own consumption and that
of their servants.
The whole consumption of the inferior ranks of people, or of
those below the middling rank, it must be observed, is, in every
country, much greater, not only in quantity, but in value, than
that of the middling, and of those above the middling rank. The
whole expense of the inferior is much greater titan that of the
superior ranks. In the first place, almost the whole capital of
every country is annually distributed among the inferior ranks of
people, as the wages of productive labour. Secondly, a great
part of the revenue, arising from both the rent of land and the
profits of stock, is annually distributed among the same rank, in
the wages and maintenance of menial servants, and other
unproductive labourers. Thirdly, some part of the profits of
stock belongs to the same rank, as a revenue arising from the
employment of their small capitals. The amount of the profits
annually made by small shopkeepers, tradesmen, and retailers of
all kinds, is everywhere very considerable, and makes a very
considerable portion of the annual produce. Fourthly and lastly,
some part even of the rent of land belongs to the same rank ; a
considerable part to those who are somewhat below the middling
rank, and a small part even to the lowest rank ; common labourers
sometimes possessing in property an acre or two of land. Though
the expense of those inferior ranks of people, therefore, taking
them individually, is very small, yet the whole mass of it,
taking them collectively, amounts always to by much the largest
portion of the whole expense of the society ; what remains of the
annual produce of the land and labour of the country, for the
consumption of the superior ranks, being always much less, not
only in quantity, but in value. The taxes upon expense,
therefore, which fall chiefly upon that of the superior ranks of
people, upon the smaller portion of the annual produce, are
likely to be much less productive than either those which fall
indifferently upon the expense of all ranks, or even those which
fall chiefly upon that of the inferior ranks, than either those
which fall indifferently upon the whole annual produce, or those
which fall chiefly upon the larger portion of it. The excise upon
the materials and manufacture of home-made fermented and
spirituous liquors, is, accordingly, of all the different taxes
upon expense, by far the most productive ; and this branch of the
excise falls very much, perhaps principally, upon the expense of
the common people. In the year which ended on the 5th of July
1775, the gross produce of this branch of the excise amounted to
£3,341,837:9:9.
It must always be remembered, however, that it is the luxuries,
and not the necssary expense of the inferior ranks of people,
that ought ever to be taxed. The final payment of any tax upon
their necessary expense, would fall altogether upon the superior
ranks of people; upon the smaller portion of the annual produce,
and not upon the greater. Such a tax must, in all cases, either
raise the wages of labour, or lessen the demand for it. It could
not raise the wages of labour, without throwing the final payment
of the tax upon the superior ranks of people. It could not lessen
the demand for labour, without lessening the annual produce of
the land and labour of the country, the fund upon which all taxes
must be finally paid. Whatever might be the state to which a tax
of this kind reduced the demand for labour, it must always raise
wages higher than they otherwise would be in that state ; and the
final payment of this enhancement of wages must, in all cases,
fall upon the superior ranks of people.
Fermented liquors brewed, and spiritous liquors distilled, not
for sale, but for private use, are not in Great Britain liable to
any duties of excise. This exemption, of which the object is to
save private families from the odious visit and examination of
the tax-gatherer, occasions the burden of those duties to fall
frequently much lighter upon the rich than upon the poor. It is
not, indeed, very common to distil for private use, though it is
done sometimes. But in the country, many middling and almost all
rich and great families, brew their own beer. Their strong beer,
therefore, costs them eight shillings a-barrel less than it costs
the common brewer, who must have his profit upon the tax, as well
as upon all the other expense which he advances. Such families,
therefore, must drink their beer at least nine or ten shillings
a-barrel cheaper than any liquor of the same quality can be drank
by the common people, to whom it is everywhere more convenient to
buy their beer, by little and little, from the brewery or the
ale-house. Malt, in the same manner, that is made for the use of
a private family, is not liable to the visit or examination of
the tax-gatherer but, in this case the family must compound at
seven shillings and sixpence a-head for the tax. Seven shillings
and sixpence are equal to the excise upon ten bushels of malt; a
quantity fully equal to what all the different members of any
sober family, men, women, and children, are, at an average,
likely to consume. But in rich and great families, where country
hospitality is much practised, the malt liqours consumed by the
members of the family make but a small part of the consmnption of
the house. Either on account of this composition, however, or for
other reasons, it is not near so common to malt as to brew for
private use. It is difficult to imagine any equitable reason, why
those who either brew or distil for private use should not be
subject to a composition of the same kind.
A greater revenue than what is at present drawn from all the
heavy taxes upon malt, beer, and ale, might be raised, it has
frequently been said, by a much lighter tax upon malt; the
opportunities of defrauding the revenue being much greater in a
brewery than in a malt-house ; and those who brew for private use
being exempted from all duties or composition for duties, which
is not the case with those who malt for private use.
In the porter brewery of London, a quarter of malt is commonly
brewed into more than two barrels and a-half, sometimes into
three barrels of porter. The different taxes upon malt amount to
six shillings a-quarter ; those upon strong ale and beer to eight
shillings a-barrel. In the porter brewery, therefore, the
different taxes upon malt, beer, and ale, amount to between
twenty-six and thirty shillings upon the produce of a quarter of
malt. In the country brewery for common country sale, a quarter
of malt is seldom brewed into less than two barrels of strong,
and one barrel of small beer ; frequently into two barrels and
a-half of strong beer. The different taxes upon small beer amount
to one shilling and fourpence a-barrel. In the country brewery,
therefore, the different taxes upon malt, beer, and ale, seldom
amount to less than twenty-three shillings and fourpence,
frequently to twenty-six shillings, upon the produce of a quarter
of malt. Taking the whole kingdom at an average, therefore, the
whole amount of the duties upon malt, beer, and ale, cannot be
estimated at less than twenty-four or twenty-five shillings upon
the produce of a quarter of malt. But by taking off all the
different duties upon beer and ale, and by trebling the malt tax,
or by raising it from six to eighteen shilling's upon the quarter
of malt, a greater revenue, it is said, might be raised by this
single tax, than what is at present drawn from all those heavier
taxes.
In 1772, the old malt tax produced......... £722,023: 11 : 11
The additional....£356,776: 7 : 9¾
In 1775, the old tax protluced....... ...... £561,627: 3 : 7½
The additonal... £278,650: 15 : 3¾
In l774, the old tax produced ............ £624,614: 17 : 5¾
The additional....£310,745: 2 : 8½
In 1775, the old tax produced ....... .....£657,357: 0 : 8¼
The additional....£323,785: 12 : 6¼
£5,855,580: 12 : 0¾
Average of these four years .............. £958,895: 3 : 0
In 1772, the country excise produced.......£1,243,120: 5 : 3
The London brewery 408,260: 7 : 2¾
In 1773, the country excise................£1,245,808: 3 : 3
The London brewery 405,406: 17 : 10½
In 1774, the country excise................£1,246,373: 14 : 5½
The London brewery 320,601: 18 : 0¼
In 1775, the country excise................£1,214,583: 6 : 1¼
The London brewery 463,670: 7 : 0¼
4)£6,547,832: 19 : 2¼
Average of these four years ..............£1,636,958: 4 : 9½
To which adding the average malt tax........ 958,895: 3 : 0¼
The whole amount of those different
taxes comes out to be........£2,595,835: 7 : 10
But, by trebling the malt tax,
or by raising it from six to
eighteen shillings upon the quarter
of malt, that single tax would produce.....£2,876,685: 9 : 0
A sum which exceeds the
foregoing by.... 280,832: 1 : 3
Under the old malt tax, indeed, is comprehended a tax of four
shillings upon the hogshead of cyder, and another of ten
shillings upon the barrel of mum. In 1774, the tax upon cyder
produced only £3,083:6:8. It probably fell somewhat short of its
usual amount ; all the different taxes upon cyder, having, that
year, produced less than ordinary. The tax upon mum, though much
heavier, is still less productive, on account of the smaller
consumption of that liquor. But to balance whatever may be the
ordinary amount of those two taxes, there is comprehended under
what is called the country excise, first, the old excise of six
shillings and eightpence upon the hogshead of cyder; secondly, a
like tax of six shillings and eightpence upon the hogshead of
verjuice; thirdly, another of eight shillings and ninepence upon
the hogshead of vinegar ; and, lastly, a fourth tax of
elevenpence upon the gallon of mead or metheglin. The produce of
those different taxes will probably much more than counterbalance
that of the duties imposed, by what is called the annual malt
tax, upon cyder and mum.
Malt is consumed, not only in the brewery of beer and ale, but in
the manufacture of low wines and spirits. If the malt tax were to
be raised to eighteen shillings upon the quarter, it might be
necessary to make some abatement in the different excises which
are imposed upon those particular sorts of low wines and spirits,
of which malt makes any part of the materials. In what are called
malt spirits, it makes commonly but a third part of the
materials; the other two-thirds being either raw barley , or
one-third barley and one-third wheat. In the distillery of malt
spirits, both the opportunity and the temptation to smuggle are
much greater than either in a brewery or in a malt-house ; the
opportunity, on account of the smaller bulk and greater value of
the commodity, and the temptation, on account of the superior
height of the duties, which amounted to 3s. 10 2/3d. upon the
gallon of spirits.{Though the duties directly imposed upon proof
spirits amount only to 2s. 6d per gallon, these, added to the
duties upon the low wines, from which they are distilled, amount
to 3s 10 2/3d. Both low wines and proof spirits are, to prevent
frauds, now rated according to what they gauge in the wash.}
By increasing the duties upon malt, and reducing those upon
the distillery, both the opportunities and the temptation to
smuggle would be diminished, which might occasion a still further
augmentation of revenue.
It has for some time past been the policy of Great Britain to
discourage the consumption of spiritous liquors, on account of
their supposed tendency to ruin the health and to corrupt the
morals of the common people. According to this policy, the
abatement of the taxes upon the distillery ought not to be so
great as to reduce, in any respect, the price of those liquors.
Spiritous liquors might remain as dear as ever; while, at the
same time, the wholesome and invigorating liquors of beer and ale
might be considerably reduced in their price. The people might
thus be in part relieved from one of the burdens of which they at
present complain the most; while, at the same time, the revenue
might be considerably augmented.
The objections of Dr. Davenant to this alteration in the present
system of excise duties, seem to be without foundation. Those
objections are, that the tax, instead of dividing itself, as at
present, pretty equally upon the profit of the maltster, upon
that of the brewer and upon that of the retailer, would so far as
it affected profit, fall altogether upon that of the maltster ;
that the maltster could not so easily get back the amount of the
tax in the advanced price of his malt, as the brewer and retailer
in the advanced price of their liquor; and that so heavy a tax
upon malt might reduce the rent and profit of barley land.
No tax can ever reduce, for any considerable time, the rate of
profit in any particular trade, which must always keep its level
with other trades in the neighbourhood. The present duties upon
malt, beer, and ale, do not affect the profits of the dealers in
those commodities, who all get back the tax with an additional
profit, in the enhanced price of their goods. A tax, indeed, may
render the goods upon which it is imposed so dear, as to diminish
the consumption of them. But the consumption of malt is in malt
liquors; and a tax of eighteen shillings upon the quarter of malt
could not well render those liquors dearer than the different
taxes, amounting to twenty-four or twenty-five shillings, do at
present. Those liquors, on the contrary, would probably
become cheaper, and the consumption of them would be more likely
to increase than to diminish.
It is not very easy to understand why it should be more difficult
for the maltster to get back eighteen shillings in the advanced
price of his malt, than it is at present for the brewer to get
back twenty-four or twenty-five, sometimes thirty shillings, in
that of his liquor. The maltster, indeed, instead of a tax of six
shillings, would be obliged to advance one of eighteen shilling
upon every quarter of malt. But the brewer is at present obliged
to advance a tax of twenty-four or twentyfive, sometimes thirty
shillings, upon every quarter of malt which he brews. It
could not be more inconvenient for the maltster to advance a
lighter tax, than it is at present for the brewer to advance a
heavier one. The maltster does not always keep in his granaries a
stock of malt, which it will require a longer time to dispose of
than the stock of beer and ale which the brewer frequently keeps
in his cellars. The former, therefore, may frequently get the
returns of his money as soon as the latter. But whatever
inconveniency might arise to the maltster from being obliged to
advance a heavier tax, it could easily be remedied, by granting
him a few months longer credit than is at present commonly given
to the brewer.
Nothing could reduce the rent and profit of barley land, which
did not reduce the demand for barley. But a change of system,
which reduced the duties upon a quarter of malt brewed into beer
and ale, from twentyfour and twenty-five shillings to eighteen
shillings, would be more likely to increase than diminish that
demand. The rent and profit of barley land, besides, must always
be nearly equal to those of other equally fertile and equally
well cultivated land. If they were less, some part of the
barley land would soon be turned to some other purpose; and if
they were greater, more land would soon be turned to the raising
of barley. When the ordinary price of any particular produce of
land is at what may be called a monopoly price, a tax upon it
necessarily reduces the rent and profit of the land which grows
it. A tax upon the produce of those precious vineyards, of which
the wine falls so much short of the effectual demand, that its
price is always above the natural proportion to that of the
produce of other equally fertile and equally well cultivated
land, would necessarily reduce the rent and profit of those
vineyards. The price of the wines being already the highest that
could be got for the quantity commonly sent to market, it could
not be raised higher without diminishing that quantity ; and the
quantity could not be diminished without still greater loss,
because the lands could not be turned to any other equally
valuable produce. The whole weight of the tax, therefore, would
fall upon the rent and profit; properly upon the rent of the
vineyard. When it has been proposed to lay any new tax upon
sugar, our sugar planters have frequently complained that the
whole weight of such taxes fell not upon the consumer, but upon
the producer; they never having been able to raise the price of
their sugar after the tax higher than it was before. The price
had, it seems, before the tax, been a monopoly price ; and the
arguments adduced to show that sugar was an improper subject of
taxation, demonstrated perhaps that it was a proper one ; the
gains of monopolists, whenever they can be come at, being
certainly of all subjects the most proper. But the ordinary price
of barley has never been a monopoly price ; and the rent and
profit of barley land have never been above their natural
proportion to those of other equally fertile and equally well
cultivated land. The different taxes which have been imposed upon
malt, beer, and ale, have never lowered the price of barley ;
have never reduced the rent and profit of barley land. The price
of malt to the brewer has constantly risen in proportion to the
taxes imposed upon it ; and those taxes, together with the
different duties upon beer and ale, have constantly either raised
the price, or, what comes to the same thing, reduced the quality
of those commodities to the consumer. The final payment of those
taxes has fallen constantly upon the consumer, and not upon the
producer.
The only people likely to suffer by the change of system here
proposed, are those who brew for their own private use. But
the exemption, which this superior rank of people at present
enjoy, from very heavy taxes which are paid by the poor labourer
and artificer, is surely most unjust and unequal, and ought to be
taken away, even though this change was never to take place. It
has probably been the interest of this superior order of people,
however, which has hitnerto prevented a change of system that
could not well fail both to increase the revenue and to relieve
the people.
Besides such duties as those of custom and excise above
mentioned, there are several others which affect the price of
goods more unequally and more indirectly. Of this kind are the
duties, which, in French, are called peages, which in old Saxon
times were called the duties of passage, and which seem to have
been originally established for the same purpose as our turnpike
tolls, or the tolls upon our canals and navigable rivers, for the
maintenance of the road or of the navigation. Those duties, when
applied to such purposes, are most properly imposed according to
the bulk or weight of the goods. As they were originally local
and provincial duties, applicable to local and provincial
purposes, the administration of them was, in most cases,
entrusted to the particular town, parish, or lordship, in which
they were levied; such communities being, in some way or other,
supposed to be accountable for the application. The
sovereign, who is altogether unaccountable, has in many countries
assumed to himself the administration of those duties; and though
he has in most cases enhanced very much the duty, he has in many
entirely neglected the application. If the turnpike tolls of
Great Britain should ever become one of the resources of
government, we may learn, by the example of many other nations,
what would probably be the consequence. Such tolls, no doubt,
are finally paid by the consumer; but the consumer is not taxed
in proportion to his expense, when he pays, not according to the
value, but according to the bulk or weight of what he consumes.
When such duties are imposed, not according to the bulk or
weight, but according to the supposed value of the goods, they
become properly a sort of inland customs or excise, which
obstruct very much the most important of all branches of
commerce, the interior commerce of the country.
In some small states, duties similar to those passage duties are
imposed upon goods carried across the territory, either by land
or by water, from one foreign country to another. These are in
some countries called transit-duties. Some of the little
Italian states which are situated upon the Po, and the rivers
which run into it, derive some revenue from duties of this kind,
which are paid altogether by foreigners, and which, perhaps, are
the only duties that one state can impose upon the subjects of
another, without obstruction in any respect, the industry or
commerce of its own. The most important transit-duty in the
world, is that levied by the king of Denmark upon all merchant
ships which pass through the Sound.
Such taxes upon luxuries, as the greater part of the duties of
customs and excise, though they all fall indifferently upon every
different species of revenue, and are paid finally, or without
any retribution, by whoever consumes the commodities upon which
they are imposed ; yet they do not always fall equally or
proportionally upon the revenue of every individual. As every
man's humour regulates the degree of his consumption, every man
contributes rather according to his humour, than proportion to
his revenue: the profuse contribute more, the parsimonious less,
than their proper proportion. During the minority of a man of
great fortune, he contributes commonly very little, by his
consumption, towards the support of that state from whose
protection he derives a great revenue. Those who live in another
country, contribute nothing by their consumption towards the
support of the government of that country, in which is situated
the source of their revenue. If in this latter country there
should be no land tax, nor any considerable duty upon the
transference either of moveable or immoveable property, as is the
case in Ireland, such absentees may derive a great revenue from
the protection of a government, to the support of which they do
not contribute a single shilling. This inequality is likely to be
greatest in a country of which the government is, in some
respects, subordinate and dependant upon that of some other. The
people who possess the most extensive property in the dependant,
will, in this case, generally chuse to live in the governing
country. Ireland is precisely in this situation; and we
cannot therefore wonder, that the proposal of a tax upon
absentees should be so very popular in that country. It might,
perhaps, be a little difficult to ascertain either what sort, or
what degree of absence, would subject a man to be taxed as an
absentee, or at what precise time the tax should either begin or
end. If you except, however, this very peculiar situation, any
inequality in the contribution of individuals which can arise
from such taxes, is much more than compensated by the very
circumstance which occasions that inequality; the circumstance
that every man's contribution is altogether voluntary ; it being
altogether in his power, either to consume, or not to consume,
the commodity taxed. Where such taxes, therefore, are
properly assessed, and upon proper commodities, they are paid
with less grumbling than any other. When they are advanced by the
merchant or manufacturer, the consumer, who finally pays them,
soon comes to confound them with the price of the commodities,
and almost forgets that he pays any tax.
Such taxes are, or may be, perfectly certain; or may be assessed,
so as to leave no doubt concerning either what ought to be paid,
or when it ought to be paid; concerning either the quantity or
the time of payment. What ever uncertainty there may sometimes
be, either in the duties of customs in Great Britain, or in other
duties of the same kind in other countries, it cannot arise from
the nature of those duties, but from the inaccurate or unskilful
manner in which the law that imposes them is expressed.
Taxes upon luxuries generally are, and always may be, paid
piece-meal, or in proportion as the contributors have occasion to
purchase the goods upon which they are imposed. In the time and
mode of payment, they are, or may be, of all taxes the most
convenient. Upon the whole, such taxes, therefore, are perhaps as
agreeable to the three first of the four general maxims
concerning taxation, as any other. They offend in every
respect against the fourth.
Such taxes, in proportion to what they bring into the public
treasury of the state, always take out, or keep out, of the
pockets of the people, more than almost any other taxes. They
seem to do this in all the four different ways in which it is
possible to do it.
First, the levying of such taxes, even when imposed in the most
judicious manner, requires a great number of custom-house and
excise officers, whose salaries and perquisites are a real tax
upon the people, which brings nothing into the treasury of the
state. This expense, however, it must be acknowledged, is more
moderate in Great Britain than in most other countries. In
the year which ended on the 5th of July, 1775, the gross produce
of the different duties, under the management of the
commissioners of excise in England, amounted to £5,507,308:18:8¼,
which was levied at an expense of little more than five and
a-half per cent. From this gross produce, however, there
must be deducted what was paid away in bounties and drawbacks
upon the exportation of exciseable goods, which will reduce the
neat produce below five millions. {The neat produce of that year,
after deducting all expenses and allowances, amounted to
£4,975,652:19:6.} The levying of the salt duty, and excise
duty, but under a different management, is much more expensive.
The neat revenue of the customs does not amount to two millions
and a-half, which is levied at an expense of more than ten per
cent., in the salaries of officers and other incidents. But the
perquisites of custom-house officers are everywhere much greater
than their salaries ; at some ports more than double or triple
those salaries. If the salaries of officers, and other
incidents, therefore, amount to more than ten per cent. upon the
neat revenue of the customs, the whole expense of levying that
revenue may amount, in salaries and perquisites together, to more
than twenty or thirty per cent. The officers of excise receive
few or no perquisites ; and the administration of that branch of
the revenue being of more recent establishment, is in general
less corrupted than that of the customs, into which length of
time has introduced and authorised many abuses. By charging upon
malt the whole revenue which is at present levied by the
different duties upon malt and malt liquors, a saving, it is
supposed, of more than £50,000, might be made in the annual
expense of the excise. By confining the duties of customs to a
few sorts of goods, and by levying those duties according to the
excise laws, a much greater saving might probably be made in the
annual expense of the customs.
Secondly, such taxes necessarily occasion some obstruction or
discouragement to certain branches of industry. As they always
raise the price of the commodity taxed, they so far discourage
its consumption, and consequently its production. If it is a
commodity of home growth or manufacture, less labour comes to be
employed in raising and producing it. If it is a foreign
commodity of which the tax increases in this manner the price,
the commodities of the same kind which are made at home may
thereby, indeed, gain some advantage in the home market, and a
greater quantity of domestic industry may thereby be turned
toward preparing them. But though this rise of price in a foreign
cotnmodity, may encourage domestic industry in one particular
branch, it necessarily discourages that industry in almost every
other. The dearer the Birmingham manufacturer buys his foreign
wine, the cheaper he necessarily sells that part of his hardware
with which, or, what comes to the same thing, with the price of
which, he buys it. That part of his hardware, therefore, becomes
of less value to him, and he has less encouragement to work at
it. The dearer the consumers in one country pay for the surplus
produce of another, the cheaper they necessarily sell that part
of their own surplus produce with which, or, what comes to the
same thing, with the price of which, they buy it. That part of
their own surplus produce becomes of less value to them, and they
have less encouragement to increase its quantity. All taxes
upon consumable commodities, therefore, tend to reduce the
quantity of productive labour below what it otherwise would be,
either in preparing the commodities taxed, if they are home
commodities, or in preparing those with which they are purchased,
if they are foreign commodities. Such taxes, too, always alter,
more or less, the natural direction of national industry, and
turn it into a channel always different from, and generally less
advantageous, than that in which it would have run of its own
accord.
Thirdly, the hope of evading such taxes by smuggling, gives
frequent occasion to forfeitures and other penalties, which
entirely ruin the smuggler ; a person who, though no doubt highly
blameable for violating the laws of his country, is frequently
incapable of violating those of natural justice, and would have
been, in every respect. an excellent citizen, had not the laws of
his country made that a crime which nature never meant to be so.
In those corrupted governments, where there is at least a general
suspicion of much unnecessary expense, and great misapplication
of the public revenue, the laws which guard it are little
respected. Not many people are scrupulous about smuggling, when,
without perjury, they can find an easy and safe opportunity of
doing so. To pretend to have any scruple about buying smuggled
goods, though a manifest encouragement to the violation of the
revenue laws, and to the perjury which almost always attends it,
would, in most countries. be regarded as one of those pedantic
pieces of hypocrisy which, instead of gaining credit with
anybody, serve only to expose the person who affects to practise
them to the suspicion of buing a greater knave than most of his
neighbours. By this indulgence of the public, the smuggler is
often encouraged to continue a trade, which he is thus taught to
consider as in some measure innocent; and when the severity of
the revenue laws is ready to fall upon him, he is frequently
disposed to defend with violence, what he has been accustomed to
regard as his just property. From being at first, perhaps, rather
imprudent than criminal, he at last too often becomes one of the
hardiest and most determined violators of the laws of society. By
the ruin of the smuggler, his capital, which had before been
employed in maintaining productive labour, is absorbed either in
the revenue of the state, or in that of the revenue officer; and
is employed in maintaining unproductive, to the diminution of the
general capital of the society, and of the useful industry which
it might otherwise have maintained.
Fourthly, such taxes, by subjecting at least the dealers in the
taxed commodities, to the frequent visits and odious examination
of the tax-gatherers, expose them sometimes, no doubt, to some
degree of oppression, and always to much trouble and vexation;
and though vexation, as has already been said, is not strictly
speaking expense, it is certainly equivalent to the expense at
which every man would be willing to redeem himself from it. The
laws of excise, though more effectual for the purpose for which
they were instituted, are, in this respect, more vexatious than
those of the customs. When a merchant has imported goods subject
to certain duties of customs; when he has paid those duties, and
lodged the goods in his warehouse ; he is not, in most cases,
liable to any further trouble or vexation from the custom-house
officer. It is otherwise with goods subject to duties of excise.
The dealers have no respite from the continual visits and
examination of the excise officers. The duties of excise are,
upon this account, more unpopular than those of the customs; and
so are the officers who levy them. Those officers, it is
pretended, though in general, perhaps, they do their duty fully
as well as those of the customs ; yet, as that duty obliges them
to be frequently very troublesome to some of their neighbours,
commonly contract a certain hardness of character, which the
others frequently have not. This observation, however, may very
probably be the mere suggestion of fraudulent dealers, whose
smuggling is either prevented or detected by their diligence.
The inconveniencies, however, which are, perhaps, in some degree
inseparable from taxes upon consumable communities, fall as light
upon the people of Great Britain as upon those of any other
country of which the government is nearly as expensive. Our
state is not perfect, and might be mended; but it is as good, or
better, than that of most of our neighbours.
In consequence of the notion, that duties upon consumable goods
were taxes upon the profits of merchants, those duties have, in
some countries, been repeated upon every successive sale of the
goods. If the profits of the merchant-importer or
merchant-manufacturer were taxed, equality seemed to require that
those of all the middle buyers, who intervened between either of
them and the consumer, should likewise be taxed. The famous
alcavala of Spain seems to have been established upon this
principle. It was at first a tax of ten per cent. afterwards
of fourteen per cent. and it is at present only six per cent.
upon the sale of every sort of property whether moveable or
immoveable ; and it is repeated every time the property is
sold.{Memoires concernant les Droits, etc. tom. i, p. 15} The
levying of this tax requires a multitude of revenue officers,
sufficient to guard the transportation of goods, not only from
one province to another, but from one shop to another. It
subjects, not only the dealers in some sorts of goods, but those
in all sorts, every farmer, every manufacturer, every merchant
and shopkeeper, to the continual visit and examination of the
tax-gatherers. Through the greater part of the country in
which a tax of this kind is established, nothing can be produced
for distant sale. The produce of every part of the country must
be proportioned to the consumption of the neighbourhood. It is to
the alcavala, accordingly, that Ustaritz imputes the ruin of the
manufactures of Spain. He might have imputed to it, likewise, the
declension of agriculture, it being imposed not only upon
manufactures, but upon the rude produce of the land.
In the kingdom of Naples, there is a similar tax of three per
cent. upon the value of all contracts, and consequently upon that
of all contracts of sale. It is both lighter than the Spanish
tax, and the greater part of towns and parishes are allowed to
pay a composition in lieu of it. They levy this composition in
what manner they please, generally in a way that gives no
interruption to the interior commerce of the place. The
Neapolitan tax, therefore, is not near so ruinous as the Spanish
one.
The uniform system of taxation, which, with a few exception of no
great consequence, takes place in all the different parts of the
united kingdom of Great Britain, leaves the interior commerce of
the country, the inland and coasting trade, almost entirely free.
The inland trade is almost perfectly free ; and the greater part
of goods may be carried from one end of the kingdom to the other,
without requiring any permit or let-pass, without being subject
to question, visit or examination, from the revenue officers.
There are a few exceptions, but they are such as can give no
interruption to any important branch of inland commerce of the
country. Goods carried coastwise, indeed, require certificates or
coast-cockets. If you except coals, however, the rest are almost
all duty-free. This freedom of interior commerce, the effect of
the uniformity of the system of taxation, is perhaps one of the
principal causes of the prosperity of Great Britain ; every great
country being necessarily the best and most extensive market for
the greater part of the productions of its own industry. If the
same freedom in consequence of the same uniformity, could be
extended to Ireland and the plantations, both the grandeur of the
state, and the prosperity of every part of the empire, would
probably be still greater than at present.
In France, the different revenue laws which take place in the
different provinces, require a multitude of revenue officers to
surround, not only the frontiers of the kingdom, but those of
almost each particular province, in order either to prevent the
importation of certain goods, or to subject it to the payment of
certain duties, to the no small interruption of the interior
commerce of the country. Some provinces are allowed to commpound
for the gabelle, or salt tax ; others are exempted from it
altogether. Some provinces are exempted from the exclusive sale
of tobacco, which the farmers-general enjoy through the greater
part of the kingdom. The aides, which correspond to the excise in
England, are very different in different provinces. Some
provinces are exempted from them, and pay a composition or
equivalent. In those in which they take place, and are in farm,
there are many local duties which do not extend beyond a
particular town or district. The traites, which correspond to our
customs, divide the kingdom into three great parts; first, the
provinces subject to the tariff of 1664, which are called the
provinces of the five great farms, and under which are
comprehended Picardy, Normandy, and the greater part of the
interior provinces of the kingdom ; secondly, the provinces
subject to the tariff of 1667, which are called the provinces
reckoned foreign, and under which are comprehended the greater
part of the frontier provinces; and, thirdly, those provinces
which are said to be treated as foreign, or which, because they
are allowed a free commerce with foreign countries, are, in their
commerce with the other provinces of France, subjected to the
same duties as other foreign countries. These are Alsace, the
three bishoprics of Mentz, Toul, and Verdun, and the three cities
of Dunkirk, Bayonne, and Marseilles. Both in the provinces of the
five great farms (called so on account of an ancient division of
the duties of customs into five great branches, each of which was
originally the subject of a particular farm, though they are now
all united into one), and in those which are said to be reckoned
foreign, there are many local duties which do not extend beyond a
particular town or district. There are some such even in the
provinces which are said to be treated as foreign, particularly
in the city of Marseilles. It is unnecessary to observe how much
both the restraints upon the interior commerce of the country,
and the number of the revenue officers, must be multiplied, in
order to guard the frontiers of those different provinces and
districts which are subject to such different systems of
taxation.
Over and above the general restraints arising from this
complicated system of revenue laws, the commerce of wine (after
corn, perhaps, the most important production of France) is, in
the greater part of the provinces, subject to particular
restraints arising from the favour which has been shown to the
vineyards of particular provinces and districts above those of
others. The provinces most famous for their wines, it will be
found, I believe, are those in which the trade in that article is
subject to the fewest restraints of this kind. The extensive
market which such provinces enjoy, encourages good management
both in the cultivation of their vineyards, and in the subsequent
preparation of their wines.
Such various and complicated revenue laws are not peculiar to
France. The little duchy of Milan is divided into six provinces,
in each of which there is a different system of taxation, with
regard to several different sorts of consumable goods. The still
smaller territories of the duke of Parma are divided into three
or four, each of which has, in the same manner, a system of its
own. Under such absurd management, nothing but the great
fertility of the soil, and happiness of the climate, could
preserve such countries from soon relapsing into the lowest state
of poverty and barbarism.
Taxes upon consumable commodities may either he levied by an
administration, of which the officers are appointed by
govermnent, and are immediately accountable to government, of
which the revenue must, in this case, vary from year to year,
according to the occasional variations in the produce of the tax
; or they may be let in farm for a rent certain, the farmer being
allowed to appoint his own officers, who, though obliged to levy
the tax in the manner directed by the law, are under his
immediate inspection, and are immediately accountable to him. The
best and most frugal way of levying a tax can never be by farm.
Over and above what is necessary for paying the stipulated rent,
the salaries of the officers, and the whole expense of
administration, the farmer must always draw from the produce of
the tax a certain profit, proportioned at least to the advance
which he makes, to the risk which he runs, to the trouble which
he is at, and to the knowledge and skill which it requires to
manage so very complicated a concern. Government, by establishing
an administration under their own immediate inspection, of the
same kind with that which the farmer establishes, might at least
save this profit, which is almost always exorbitant. To farm any
considerable branch of the public revenue requires either a great
capital, or a great credit; circumstances which would alone
restrain the competition for such an undertaking to a very small
number of people. Of the few who have this capital or credit, a
still smaller number have the necessary knowledge or experience;
another circumstance which restrains the competition still
further. The very few who are in condition to become competitors,
find it more for their interest to combine together ; to become
copartners, instead of competitors; and, when the farm is set up
to auction, to offer no rent but what is much below the real
value. In countries where the public revenues are in farm, the
farmers are generally the most opulent people. Their wealth would
alone excite the public indignation; and the vanity which almost
always accompanies such upstart fortunes, the foolish ostentation
with which they commonly display that wealth, excite that
indignation still more.
The farmers of the public revenue never find the laws too severe,
which punish any attempt to evade the payment of a tax. They have
no bowels for the contributors, who are not their subjects, and
whose universal bankruptcy, if it should happen the day after the
farm is expired, would not much affect their interest. In the
greatest exigencies of the state, when the anxiety of the
sovereign for the exact payment of his revenue is necessarily the
greatest, they seldom fail to complain, that without laws more
rigorous than those which actually took place, it will be
impossible for them to pay even the usual rent. In those moments
of public distress, their commands cannot he disputed. The
revenue laws, therefore, become gradually more and more severe.
The most sanguinary are always to be found in countries where the
greater part of the public revenue is in farm ; the mildest, in
countries where it is levied under the immediate inspection of
the sovereign. Even a bad sovereign feels more compassion for his
people than can ever be expected from the farmers of his revenue.
He knows that the permanent grandeur of his family depends upon
the prosperity of his people, and he will never knowingly ruin
that prosperity for the sake of any momentary interest of his
own. It is otherwise with the farmers of his revenue, whose
grandeur may frequently be the effect of the ruin, and not of the
prosperity, of his people.
A tax is sometimes not only farmed for a certain rent, but the
farmer has, besides, the monopoly of the commodity taxed. In
France, the duties upon tobacco and salt are levied in this
manner. In such cases, the farmer, instead of one, levies two
exorbitant profits upon the people; the profit of the farmer, and
the still more exorbitant one of the monopolist. Tobacco being a
luxury, every man is allowed to buy or not to buy as he chuses ;
but salt being a necessary, every man is obliged to buy of the
farmer a certain quantity of it ; because, if he did not buy this
quantity of the farmer, he would, it is presumed, buy it of some
smuggler. The taxes upon both commodities are exorbitant. The
temptation to smuggle, consequently, is to many people
irresistible; while, at the same time, the rigour of the law, and
the vigilance of the farmer's officers, render the yielding to
the temptation almost certainly ruinous. The smuggling of
salt and tobacco sends every year several hundred people to the
galleys, besides a very considerable number whom it sends to the
gibbet. Those taxes, levied in this manner, yield a very
considerable revenue to government. In 1767, the farm of tobacco
was let for twenty-two millions five hundred and forty-one
thousand two hundred and seventy-eight livres a-year; that of
salt for thirty-six millions four hundred and ninety-two thousand
four hundred and four livres. The farm, in both cases, was to
commence in 1768, and to last for six years. Those who consider
the blood of the people as nothing, in comparison with the
revenue of the prince, may, perhaps, approve of this method of
levying taxes. Similar taxes and monopolies of salt and
tobacco have been established in many other countries,
particularly in the Austrian and Prussian dominions, and in the
greater part of the states of Italy.
In France, the greater part of the actual revenue of the crown is
derived from eight different sources; the taille, the capitation,
the two vingtiemes, the gabelles, the aides, the traites, the
domaine, and the farm of tobacco. The live last are, in the
greater part of the provinces, under farm. The three first are
everywhere levied by an administration, under the immediate
inspection and direction of government ; and it is universally
acknowledged, that in proportion to what they take out of the
pockets of the people, they bring more into the treasury of the
prince than the other five, of which the administration is much
more wasteful and expensive.
The finances of France seem, in their present state, to admit of
three very obvious reformations. First, by abolishing the
taille and the capitation, and by increasing the number of the
vingtiemes, so as to produce an additional revenue equal to the
amount of those other taxes, the revenue of the crown might be
preserved; the expense of collection might be much diminished ;
the vexation of the inferior ranks of people, which the taille
and capitation occassion, might be entirely prevented; and the
superior ranks might not be more burdened than the greater part
of them are at present. The vingtieme, I have already observed,
is a tax very nearly of the same kind with what is called the
land tax of England. The burden of the taille, it is
acknowledged, falls finally upon the proprietors of land ; and as
the greater part of the capitation is assessed upon those who are
subject to the taille, at so much a-pound of that other tax, the
final payment of the greater part of it must likewise fall upon
the same order of people. Though the number of the vingtiemes,
therefore, was increased, so as to produce an additional revenue
equal to the amount of both those taxes, the superior ranks of
people might not be more burdened than they are at present; many
individuals, no doubt, would, on account of the great
inequalities with which the taille is commonly assessed upon the
estates and tenants of different individuals. The interest and
opposition of such favoured subjects, are the obstacles most
likely to prevent this, or any other reformation of the same
kind. Secondly, by rendering the gabelle, the aides, the traites,
the taxes upon tobacco, all the different customs and excises,
uniform in all the different parts of the kingdom, those taxes
might be levied at much less expense, and the interior commerce
of the kingdom might be rendered as free as that of England.
Thirdly, and lastly, by subjecting all those taxes to an
administration under the immediate inspection and direction or
government, the exorbitant profits of the farmers-general might
be added to the revenue of the state. The opposition arising from
the private inte rest of individuals, is likely to be as
effectual for preventing the two last as the first-mentioned
scheme of reformation.
The French system of taxation seems, in every respect, inferior
to the British. In Great Britain, ten millions sterling are
annually levied upon less than eight millions of people, without
its being possible to say that any particular order is oppressed.
From the Collections of the Abbé Expilly, and the observations of
the author of the Essay upon the Legislation and Commerce of
Corn, it appears probable that France, including the provinces of
Lorraine and Bar, contains about twenty-three or twenty-four
millions of people; three times the number, perhaps, contained in
Great Britain. The soil and climate of France are better than
those of Great Britain. The country has been much longer in a
state of improvement and cultivation, and is, upon that account,
better stocked with all those things which it requires a long
time to raise up and accumulate ; such as great towns, and
convenient and well-built houses, both in town and country. With
these advantages, it might be expected, that in France a revenue
of thirty millions might be levied for the support of the state,
with as little inconvenience as a revenue of ten millions is in
Great Britain. In 1765 and 1766, the whole revenue paid into the
treasury of France, according to the best, though, I acknowledge,
very imperfect accounts which I could get of it, usually run
between 308 and 325 millions of livres ; that is, it did not
amount to fifteen millions sterling; not the half of what might
have been expected, had the people contributed in the same
proportion to their numbers as the people of Great Britain. The
people of France, however, it is generally acknowledged, are much
more oppressed by taxes than the people of Great Britain. France,
however, is certainly the great empire in Europe, which, after
that of Great Britain, enjoys the mildest and most indulgent
government.
In Holland, the heavy taxes upon the necessaries of life have
ruined, it is said, their principal manufacturers, and are likely
to discourage, gradually, even their fisheries and their trade in
ship-building. The taxes upon the necessaries of life are
inconsiderable in Great Britain, and no manufacture has hitherto
been ruined by them. The British taxes which bear hardest on
manufactures, are some duties upon the importation of raw
materials, particularly upon that of raw silk. The revenue of the
States-General and of the different cities, however, is said to
amount to more than five millions two hundred and fifty thousand
pounds sterling ; and as the inhabitants of the United Provinces
cannot well be supposed to amount to more than a third part of
those of Great Britain, they must, in proportion to their number,
be much more heavily taxed.
After all the proper subjects of taxation have been exhausted, if
the exigencies of the state still continue to require new taxes,
they must be imposed upon improper ones. The taxes upon the
necessaries of life, therefore, may be no impeachment of the
wisdom of that republic, which, in order to acquire and to
maintain its independency, has, in spite of its meat frugality,
been involved in such expensive wars as have obliged it to
contract great debts. The singular countries of Holland and
Zealand, besides, require a considerable expense even to preserve
their existence, or to prevent their being swallowed up by the
sea, which must have contributed to increase considerably the
load of taxes in those two provinces. The republican form of
government seems to be the principal support of the present
grandeur of Holland. The owners of great capitals, the great
mercantile families, have generally either some direct share, or
some indirect influence, in the administration of that
government. For the sake of the respect and authority which they
derive from this situation, they are willing to live in a country
where their capital, if they employ it themselves, will bring
them less profit, and if they lend it to another, less interest;
and where the very moderate revenue which they can draw from it
will purchase less of the necessaries and conveniencies of life
than in any other part of Europe. The residence of such wealthy
people necessarily keeps alive, in spite of all disadvantages, a
certain degree of industry in the country. Any public calamity
which should destroy the republican form of government, which
should throw the whole administration into the hands of nobles
and of soldiers, which should annihilate altogether the
importance of those wealthy merchants, would soon render it
disagreeable to them to live in a country where they were no
longer likely to be much respected. They would remove both their
residence and their capital to some other country, and the
industry and commerce of Holland would soon follow the capitals
which supported them.
CHAPTER III.
OF PUBLIC DEBTS.
In that rude state of society which precedes the extension of
commerce and the improvement of manufactures ; when those
expensive luxuries, which commerce and manufactures can alone
introduce, are altogether unknown ; the person who possesses a
large revenue, I have endeavoured to show in the third book of
this Inquiry, can spend or enjoy that revenue in no other way
than by maintaining nearly as many people as it can maintain. A
large revenue may at all times be said to consist in the command
of a large quantity of the necessaries of life. In that rude
state of things, it is commonly paid in a large quantity of those
necessaries, in the materials of plain food and coarse clothing,
in corn and cattle, in wool and raw hides. When neither commerce
nor manufactures furnish any thing for which the owner can
exchange the greater part of those materials which are over and
above his own consumption, he can do nothing with the surplus,
but feed and clothe nearly as many people as it will feed and
clothe. A hospitality in which there is no luxury, and a
liberality in which there is no ostentation, occasion, in this
situation of things, the principal expenses of the rich and the
great. But these I have likewise endeavoured to show, in the same
book, are expenses by which people are not very apt to ruin
themselves. There is not, perhaps, any selfish pleasure so
frivolous, of which the pursuit has not sometimes ruined even
sensible men. A passion for cock-fighting has ruined many. But
the instances, I believe, are not very numerous, of people who
have been ruined by a hospitality or liberality of this kind;
though the hospitality of luxury, and the liberality of
ostentation have ruined many. Among our feudal ancestors, the
long time during which estates used to continue in the same
family, sufficiently demonstrates the general disposition of
people to live within their income. Though the rustic
hospitality, constantly exercised by the great landholders, may
not, to us in the present times, seem consistent with that order
which we are apt to consider as inseparably connected with good
economy; yet we must certainly allow them to have been at least
so far frugal, as not commonly to have spent their whole income.
A part of their wool and raw hides, they had generally an
opportunity of selling for money. Some part of this money,
perhaps, they spent in purchasing the few objects of vanity and
luxury, with which the circumstances of the times could furnish
them ; but some part of it they seem commonly to have hoarded.
They could not well, indeed, do any thing else but hoard whatever
money they saved. To trade, was disgraceful to a gentleman; and
to lend money at interest, which at that time was considered as
usury, and prohibited bylaw, would have been still more so. In
those times of violence and disorder, besides, it was convenient
to have a hoard of money at hand, that in case they should be
driven from their own home, they might have something of known
value to carry with them to some place of safety. The same
violence which made it convenient to hoard, made it equally
convenient to conceal the hoard. The frequency of treasure-trove,
or of treasure found, of which no owner was known, sufficiently
demonstrates the frequency, in those times, both of hoarding and
of concealing the hoard. Treasure-trove was then considered as an
important branch of the revenue of the sovereign. All the
treasure-truve of the kingdom would scarce, perhaps, in the
present times, make an important branch of the revenue of a
private gentleman of a good estate.
The same disposition, to save and to hoard, prevailed in the
sovereign, as well as in the subjects. Among nations, to whom
commerce and manufacture are little known, the sovereign, it has
already been observed in the Fourth book, is in a situation which
naturally disposes him to the parsimony requisite for
accumulation. In that situation, the expense, even of a
sovereign, cannot be directed by that vanity which delights in
the gaudy finery of a court. The ignorance of the times affords
but few of the trinkets in which that finery consists. Standing
armies are not then necessary; so that the expense, even of a
sovereign, like that of any other great lord can be employed in
scarce any thing but bounty to his tenants, and hospitality to
his retainers. But bounty and hospitality very seldom lead to
extravagance; though vanity almost always does. All the ancient
sovereigns of Europe, accordingly, it has already been observed,
had treasures. Every Tartar chief, in the present times, is said
to have one.
In a commercial country, abounding with every sort of expensive
luxury, the sovereign, in the same manner as almost all the great
proprietors in his dominions, naturally spends a great part of
his revenue in purchasing those luxuries. His own and the
neighbouring countries supply him abundantly with all the costly
trinkets which compose the splendid, but insignificant, pageantry
of a court. For the sake of an inferior pageantry of the same
kind, his nobles dismiss their retainers, make their tenants
independent, and become gradually themselves as insignificant as
the greater part of the wealthy burghers in his dominions.
The same frivolous passions, which influence their conduct,
influence his. How can it be supposed that he should be the only
rich man in his dominions who is insensible to pleasures of this
kind ? If he does not, what he is very likely to do, spend upon
those pleasures so great a part of his revenue as to debilitate
very much the defensive power of the state, it cannot well be
expected that he should not spend upon them all that part of it
which is over and above what is necessary for supporting that
defensive power. His ordinary expense becomes equal to his
ordinary revenue, and it is well if it does not frequently exceed
it. The amassing of treasure can no longer be expected; and when
extraordinary exigencies require extraordinary expenses, he must
necessarily call upon his subjects for an extraordinary aid. The
present and the late king of Prussia are the only great princes
of Europe, who, since the death of Henry IV. of France, in 1610,
are supposed to have amassed any considerable treasure. The
parsimony which leads to accumulation has become almost as rare
in republican as in monarchical governments. The Italian
republics, the United Provinces of the Netherlands, are all in
debt. The canton of Berne is the single republic in Europe which
has amassed any considerable treasure. The other Swiss republics
have not. The taste for some sort of pageantry, for splendid
buildings, at least, and other public ornaments, frequently
prevails as much in the apparently sober senate-house of a little
republic, as in the dissipated court of the greatest king.
The want of parsimony, in time of peace, imposes the necessity of
contracting debt in time of war. When war comes, there is no
money in the treasury, but what is necessary for carrying on the
ordinary expense of the peace establishment. In war, an
establishment of three or four times that expense be. comes
necessary for the defence of the state ; and consequently, a
revenue three or four times greater than the peace revenue.
Supposing that the sovereign should have, what he scarce ever
has, the immediate means of augmenting his revenue in proportion
to the augmentation of his expense; yet still the produce of the
taxes, from which this increase of revenue must be drawn, will
not begin to come into the treasury, till perhaps ten or twelve
months after they are imposed. But the moment in which war
begins, or rather the moment in which it appears likely to begin,
the army must be augmented, the fleet must be fitted out, the
garrisoned towns must be put into a posture of defence; that
army, that fleet, those garrisoned towns, must be furnished with
arms, ammunition, and provisions. An immediate and great
expense must be incurred in that moment of immediate danger,
which will not wait for the gradual and slow returns of the new
taxes. In this exigency, government can have no other resource
but in borrowing.
The same commercial state of society which, by the operation of
moral causes, brings government in this manner into the necessity
of borrowing, produces in the subjects both an ability and an
inclination to lend. If it commonly brings along with it the
necessity of borrowing, it likewise brings with it the facility
of doing so.
A country abounding with merchants and manufacturers, necessarily
abounds with a set of people through whose hands, not only their
own capitals, but the capitals of all those who either lend them
money, or trust them with goods, pass as frequently, or more
frequently, than the revenue of a private man, who, without trade
or business, lives upon his income, passes through his hands. The
revenue of such a man can regularly pass through his hands only
once in a year. But the whole amount of the capital and credit of
a merchant, who deals in a trade of which the returns are very
quick, may sometimes pass through his hands two, three, or four
times in a year. A country abounding with merchants and
manufacturers, therefore, necessarily abounds with a set of
people, who have it at all times in their power to advance, if
they chuse to do so, a very large sum of money to government.
Hence the ability in the subjects of a commercial state to lend.
Commerce and manufactures can seldom flourish long in any state
which does not enjoy a regular administration of justice; in
which the people do not feel themselves secure in the possession
of their property ; in which the faith of contracts is not
supported by law ; and in which the authority of the state is not
supposed to be regularly employed in enforcing the payment of
debts from all those who are able to pay. Commerce and
manufactures, in short, can seldom flourish in any state, in
which there is not a certain degree of confidence in the justice
of government. The same confidence which disposes great merchants
and manufacturers upon ordinary occasions, to trust their
property to the protection of a particular government, disposes
them, upon extraordinary occasions, to trust that government with
the use of their property. By lending money to government, they
do not even for a moment diminish their ability to carry on their
trade and manufactures; on the contrary, they commonly augment
it. The necessities of the state render government, upon most
occasions willing to borrow upon terms extremely advantageous to
the lender. The security which it grants to the original
creditor, is made transferable to any other creditor ; and from
the universal confidence in the justice of the state, generally
sells in the market for more than was originally paid for it. The
merchant or monied man makes money by lending money to
government, and instead of diminishing. increases his trading
capital. He generally considers it as a favour, therefore, when
the administration admits him to a share in the first
subscription for a new loan. Hence the inclination or willingness
in the subjects of a commercial state to lend.
The government of such a state is very apt to repose itself upon
this ability and willingness of its subjects to lend it their
money on extraordinary occasions. It foresees the facility of
borrowing, and therefore dispenses itself from the duty of
saving.
In a rude state of society, there are no great mercantile or
manufacturing capitals. The individuals, who hoard whatever money
they can save, and who conceal their hoard, do so from a distrust
of the justice of government ; from a fear, that if it was known
that they had a hoard, and where that hoard was to be found, they
would quickly be plundered. In such a state of things, few people
would be able, and nobody would be willing to lend their money to
government on extraordinary exigencies. The sovereign feels that
he must provide for such exigencies by saving, because he
foresees the absolute impossibility of borrowing. This foresight
increases still further his natural disposition to save.
The progress of the enormous debts which at present oppress, and
will in the long-run probably ruin, all the great nations of
Europe, has been pretty uniform. Nations, like private men, have
generally begun to borrow upon what may be called personal
credit, without assigning or mortgaging any particular fund for
the payment of the debt; and when this resource has failed them,
they have gone on to borrow upon assignments or mortgages of
particular funds.
What is called the unfunded debt of Great Britain, is contracted
in the former of those two ways. It consists partly in a debt
which bears, or is supposed to bear, no interest, and which
resembles the debts that a private man contracts upon account;
and partly in a debt which bears interest, and which resembles
what a private man contracts upon his bill or promissory-note.
The debts which are due, either for extraordinary services, or
for services either not provided for, or not paid at the time
when they are performed; part of the extraordinaries of the army,
navy, and ordnance, the arrears of subsidies to foreign princes,
those of seamen's wages, etc. usually constitute a debt of the
first kind. Navy and exchequer bills, which are issued sometimes
in payment of a part of such debts, and sometimes for other
purposes, constitute a debt of the second kind; exchequer bills
bearing interest from the day on which they are issued, and navy
bills six months after they are issued. The bank of England,
either by voluntarily discounting those bills at their current
value, or by agreeing with government for certain considerations
to circulate exchequer bills, that is, to receive them at par,
paying the interest which happens to be due upon them, keeps up
their value, and facilitates their circulation, and thereby
frequently enables government to contract a very large debt of
this kind. In France, where there is no bank, the state bills
(billets d'etat { See Examen des Reflections Politiques sur les
Finances.}) have sometimes sold at sixty and seventy per cent.
discount. During the great recoinage in king William's time, when
the bank of England thought proper to put a stop to its usual
transactions, exchequer bills and tallies are said to have sold
from twenty-five to sixty per cent. discount; owing partly, no
doubt, to the supposed instability of the new government
established by the Revolution, but partly, too, to the want of
the support of the bank of England.
When this resource is exhausted, and it becomes necessary, in
order to raise money, to assign or mortgage some particular
branch of the public revenue for the payment of the debt,
government has, upon different occasions, done this in two
different ways. Sometimes it has made this assignment or mortgage
for a short period of time only, a year, or a few years, for
example; and sometimes for perpetuity. In the one case, the fund
was supposed sufficient to pay, within the limited time, both
principal and interest of the money borrowed. In the other, it
was supposed sufticient to pay the interest only, or a perpetual
annuity equivalent to the interest, government being at liberty
to redeem, at any time, this annuity, upon paying back the
principal sum borrowed. When money was raised in the one way. it
was said to be raised by anticipation ; when in the other, by
perpetual funding, or, more shortly, by funding.
In Great Britain, the annual land and malt taxes are regularly
anticipated every year, by virtue of a borrowing clause
constantly inserted into the acts which impose them. The bank of
England generally advances at an interest, which, since the
Revolution, has varied from eight to three per cent., the sums of
which those taxes are granted, and receives payment as their
produce gradually comes in. If there is a deficiency, which there
always is, it is provided for in the supplies of the ensuing
year. The only considerable branch of the public revenue which
yet remains unmortgaged, is thus regularly spent before it comes
in. Like an improvident spendthrift, whose pressing occasions
will not allow him to wait for the regular payment of his
revenue, the state is in the constant practice of borrowing of
its own factors and agents, and of paying interest for the use of
its own money.
In the reign of king William, and during a great part of that of
queen Anne, before we had become so familiar as we are now with
the practice of perpetual funding, the greater part of the new
taxes were imposed but for a short period of time (for four,
five, six, or seven years only), and a great part of the grants
of every year consisted in loans upon anticipations of the
produce of those taxes. The produce being frequently insufficient
for paying, within the limited term, the principal and interest
of the money borrowed, deficiencies arose; to make good which, it
became necessary to prolong the term.
In 1697, by the 8th of William III., c. 20, the deficiencies of
several taxes were charged upon what was then called the first
general mortgage or fund, consisting of a prolongation to the
first of August 1706, of several different taxes, which would
have expired within a shorter term, and of which the produce was
accumulated into one general fund. The deficiencies charged upon
this prolonged term amounted to £5,160,459: 14: 9½.
In 1701, those duties, with some others, were still further
prolonged, for the like purposes, till the first of August 1710,
and were called the second general mortgage or fund. The
deficiencies charged upon it amounted to £2,055,999: 7: 11½.
In 1707, those duties were still further prolonged, as a fund for
new loans. to the first of August 1712, and were called the third
general mortgage or fund. The sum borrowed upon it was
£983,254:11:9¼.
In 1708, those duties were all (except the old subsidy of tonnage
and poundage, of which one moiety only was made a part of this
fund, and a duty upon the importation of Scotch linen, which had
been taken off by the articles of union) still further continued,
as a fund for new loans, to the first of August 1714, and were
called the fourth general mortgage or fund. The sum borrowed upon
it was £925,176:9:2¼.
In 1709, those duties were all ( except the old subsidy of
tonnage and poundage, which was now left out of this fund
altogether ) still further continued, for the same purpose, to
the first of August 1716, and were called the fifth general
mortgage or fund. The sum borrowed upon it was £922,029:6s.
In 1710, those duties were again prolonged to the first of August
1720, and were called the sixth general mortgage or fund. The sum
borrowed upon it was £1,296,552:9:11¾.
In 1711, the same duties (which at this time were thus subject to
four different anticipations), together with several others, were
continued for ever, and made a fund for paying the interest of
the capital of the South-sea company, which had that year
advanced to government, for paying debts, and making good
deficiencies, the sum of £9,177,967:15:4d, the greatest loan
which at that time had ever been made.
Before this period, the principal, so far as I have been able to
observe, the only taxes, which, in order to pay the interest of a
debt, had been imposed for perpetuity, were those for paying the
interest of the money which had been advanced to government by
the bank and East-India company, and of what it was expected
would be advanced, but which was never advanced, by a projected
land bank. The bank fund at this time amounted to
£3,375,027:17:10½, for which was paid an annuity or interest of
£206,501:15:5d. The East-India fund amounted to £3,200,000, for
which was paid an annuity or interest of £160,000; the bank fund
being at six per cent., the East-India fund at five per cent.
interest.
In 1715, by the first of George I., c. 12, the different taxes
which had been mortgaged for paying the bank annuity, together
with several others, which, by this act, were likewise rendered
perpetual, were accumulated into one common fund, called the
aggregate fund, which was charged not only with the payment of
the bank annuity, but with several other annuities and burdens of
different kinds. This fund was afterwards augmented by the third
of George I., c.8., and by the fifth of George I., c. 3, and the
different duties which were then added to it were likewise
rendered perpetual.
In 1717, by the third of George I., c. 7, several other taxes
were rendered perpetual, and accumulated into another common
fund, called the general fund, for the payment of certain
annuities, amounting in the whole to £724,849:6:10½.
In consequence of those different acts, the greater part of the
taxes, which before had been anticipated only for a short term of
years were rendered perpetual, as a fund for paying, not the
capital, but the interest only, of the money which had been
borrowed upon them by different successive anticipations.
Had money never been raised but by anticipation, the course of a
few years would have liberated the public revenue, without any
other attention of government besides that of not overloading the
fund, by charging it with more debt than it could pay within the
limited term, and not of anticipating a second time before the
expiration of the first anticipation. But the greater part of
European governments have been incapable of those attentions.
They have frequently overloaded the fund, even upon the first
anticipation; and when this happened not to be the case, they
have generally taken care to overload it, by anticipating a
second and a third time, before the expiration of the first
anticipation. The fund becoming in this manner altogether
insufficient for paying both principal and interest of the money
borrowed upon it, it became necessary to charge it with the
interest only, or a perpetual annuity equal to the interest ; and
such improvident anticipations necessarily gave birth to the more
ruinous practice of perpetual funding. But though this practice
necessarily puts off the liberation of the public revenue from a
fixed period, to one so indefinite that it is not very likely
ever to arrive ; yet, as a greater sum can, in all cases, be
raised by this new practice than by the old one of anticipation,
the former, when men have once become familiar with it, has, in
the great exigencies of the state, been universally preferred to
the latter. To relieve the present exigency, is always the object
which principally interests those immediately concerned in the
administration of public affairs. The future liberation of the
public revenue they leave to the care of posterity.
During the reign of queen Anne, the market rate of interest had
fallen from six to five per cent.; and, in the twelfth year of
her reign, five per cent. was declared to be the highest rate
which could lawfully be taken for money borrowed upon private
security. Soon after the greater part of the temporary taxes of
Great Britain had been rendered perpetual, and distributed into
the aggregate, South-sea, and general funds, the creditors of the
public, like those of private persons, were induced to accept of
five per cent. for the interest of their money, which occasioned
a saving of one per cent. upon the capital of the greater part or
the debts which had been thus funded for perpetuity, or of
one-sixth of the greater part of the annuities which were paid
out of the three great funds above mentioned. This saving left a
considerable surplus in the produce of the different taxes which
had been accumulated into those funds, over and above what was
necessary for paying the annuities which were now charged upon
them, and laid the foundation of what has since been called the
sinking fund. In 1717, it amounted to £523,454:7:7½. In 1727, the
interest of the greater part of the public debts was still
further reduced to four per cent.; and, in 1753 and 1757, to
three and a-half, and three per cent., which reductions still
further augmented the sinking fund.
A sinking fund, though instituted for the payment of old,
facilitates very much the contracting of new debts. It is a
subsidiary fund, always at hand, to be mortgaged in aid of any
other doubtful fund, upon which money is proposed to be raised in
any exigency of the state. Whether the sinking fund of Great
Britain has been more frequently applied to the one or to other
of those two purposes, will sufficiently appear by and by.
Besides those two methods of borrowing, by anticipations and by a
perpetual funding, there are two other methods, which hold a sort
of middle place between them ; these are, that of borrowing upon
annuities for terms of years, and that of borrowing upon
annuities for lives.
During the reigns of king William and queen Anne, large sums were
frequently borrowed upon annuities for terms of years, which were
sometimes longer and sometimes shorter. In 1695, an act was
passed for borrowing one million upon an annuity of fourteen per
cent., or £140,000 a-year, for sixteen years. In 1691, an act was
passed for borrowing a million upon annuities for lives, upon
terms which, in the present times, would appear very
advantageous; but the subscription was not filled up. In the
following year, the deficiency was made good, by borrowing upon
annuities for lives, at fourteen per cent. or a little more than
seven years purchase. In 1695, the persons who had purchased
those annuities were allowed to exchange them for others of
ninety-six years, upon paying into the exchequer sixty-three
pounds in the hundred ; that is, the difference between fourteen
per cent. for life, and fourteen per cent. for ninety-six years,
was sold for sixty-three pounds, or for four and a-half years
purchase. Such was the supposed instability of government, that
even these terms procured few purchasers. In the reign of queen
Anne, money was, upon different occasions, borrowed both upon
annuities for lives, and upon annuities for terms of thirty-two,
of eighty-nine, of ninety-eight, and of ninety-nine years. In
1719, the proprietors of the annuities for thirty-two years were
induced to accept, in lieu of them, South-sea stock to the amount
of eleven and a-half years purchase of the annuities, together
with an additional quantity of stock, equal to the arrears which
happened then to be due upon them. In 1720, the greater part of
the other annuities for terms of years, both long and short, were
subscribed into the same fund. The long annuities, at that time,
amounted to £666,821: 8:3½ a-year. On the 5th of January 1775,
the remainder of them, or what was not subscribed at that time,
amounted only to £136,453:12:8d.
During the two wars which began in 1739 and in 1755, little money
was borrowed, either upon annuities for terms of years, or upon
those for lives. An annuity for ninety-eight or ninety-nine
years, however, is worth nearly as much as a perpetuity, and
should therefore, one might think, be a fund for borrowing nearly
as much. But those who, in order to make family settlements, and
to provide for remote futurity, buy into the public stocks, would
not care to purchase into one of which the value was continually
diminishing ; and such people make a very considerable
proportion, both of the proprietors and purchasers of stock. An
annuity for a long term of years, therefore, though its intrinsic
value may be very nearly the same with that of a perpetual
annuity, will not find nearly the same number of purchasers. The
subscribers to a new loan, who mean generally to sell their
subscription as soon as possible, prefer greatly a perpetual
annuity, redeemable by parliament, to an irredeemable annuity,
for a long term of years, of only equal amount. The value of the
former may be supposed always the same, or very nearly the same;
and it makes, therefore, a more convenient transferable stock
than the latter.
During the two last-mentioned wars, annuities, either for terms
of years or for lives, were seldom granted, but as premiums to
the subscribers of a new loan, over and above the redeemable
annuity or interest, upon the credit of which the loan was
supposed to be made. They were granted, not as the proper fund
upon which the money was borrowed, but as an additional
encouragement to the lender.
Annuities for lives have occasionally been granted in two
different ways ; either upon separate lives, or upon lots of
lives, which, in French, are called tontines, from the name of
their inventor. When annuities are granted upon separate lives,
the death of every individual annuitant disburdens the public
revenue, so far as it was affected by his annuity. When annuities
are granted upon tontines, the liberation of the public revenue
does not commence till the death of all the annuitants
comprehended in one lot, which may sometimes consist of twenty or
thirty persons, of whom the survivors succeed to the annuities of
all those who die before them; the last survivor succeeding to
the annuities of the whole lot. Upon the same revenue, more money
can always be raised by tontines than by annuities for separate
lives. An annuity, with a right of survivorship, is really worth
more than an equal annuity for a separate life ; and, from the
confidence which every man naturally has in his own good fortune,
the principle upon which is founded the success of all lotteries,
such an annuity generally sells for something more than it is
worth. In countries where it is usual for government to raise
money by granting annuities, tontines are, upon this account,
generally preferred to annuities for separate lives. The
expedient which will raise most money, is almost always preferred
to that which is likely to bring about, in the speediest manner,
the liberation of the public revenue.
In France, a much greater proportion of the public debts consists
in annuities for lives than in England. According to a memoir
presented by the parliament of Bourdeaux to the king, in 1764,
the whole public debt ot France is estimated at twenty-four
hundred millions of livres; of which the capital, for which
annuities for lives had been granted, is supposed to amount to
three hundred millions, the eighth part of the whole public debt.
The annuities themselves are computed to amount to thirty
millions a-year, the fourth part of one hundred and twenty
millions, the supposed interest of that whole debt. These
estimations, I know very well, are not exact; but having been
presented by so very respectable a body as approximations to the
truth, they may, I apprehend, be considered as such. It is not
the different degrees of anxiety in the two governments of France
and England for the liberation of the public revenue, which
occasions this difference in their respective modes of borrowing
; it arises altogether from the different views and interests of
the lenders.
In England, the seat of government being in the greatest
mercantile city in the world, the merchants are generally the
people who advance money to government. By advancing it, they do
not mean to diminish, but, on the contrary, to increase their
mercantile capitals; and unless they expected to sell, with some
profit, their share in the subscription for a new loan, they
never would subscribe. But if, by advancing their money, they
were to purchase, instead of perpetual annuities, annuities for
lives only, whether their own or those of other people, they
would not always be so likely to sell them with a profit.
Annuities upon their own lives they would always sell with loss;
because no man will give for an annuity upon the life of another,
whose age and state of health are nearly the same with his own,
the same price which he would give for one upon his own. An
annuity upon the life of a third person, indeed, is, no doubt, of
equal value to the buyer and the seller; but its real value
begins to diminish from the moment it is granted, and continues
to do so, more and more, as long as it subsists. It can never,
therefore, make so convenient a transferable stock as a perpetual
annuity, of which the real value may be supposed always the same,
or very nearly the same.
In France, the seat of government not being in a great mercantile
city, merchants do not make so great a proportion of the people
who advance money to government. The people concerned in the
finances, the farmers-general, the receivers of the taxes which
are not in farm, the court-bankers, etc. make the greater part of
those who advance their money in all public exigencies. Such
people are commonly men of mean birth, but of great wealth, and
frequently of great pride. They are too proud to marry their
equals, and women of quality disdain to marry them. They
frequently resolve, therefore, to live bachelors; and having
neither any families of their own, nor much regard for those of
their relations, whom they are not always very fond of
acknowledging, they desire only to live in splendour during their
own time, and are not unwilling that their fortune should end
with themselves. The number of rich people, besides, who are
either averse to marry, or whose condition of life renders it
either improper or inconvenient for them to do so, is much
greater in France than in England. To such people, who have
little or no care for posterity, nothing can be more convenient
than to exchange their capital for a revenue, which is to last
just as long, and no longer, than they wish it to do.
The ordinary expense of the greater part of modern governments,
in time of peace, being equal, or nearly equal, to their ordinary
revenue, when war comes, they are both unwilling and unable to
increase their revenue in proportion to the increase of their
expense. They are unwilling, for fear of offending the people,
who, by so great and so sudden an increase of taxes, would soon
be disgusted with the war ; and they are unable, from not well
knowing what taxes would be sufficient to produce the revenue
wanted. The facility of borrowing delivers them from the
embarrassment which this fear and inability would otherwise
occasion. By means of borrowing, they are enabled, with a very
moderate increase of taxes, to raise, from year to year, money
sufficient for carrying on the war; and by the practice of
perpetual funding, they are enabled, with the smallest possible
increase of taxes, to raise annually the largest possible sum of
money. In great empires, the people who live in the capital, and
in the provinces remote from the scene of action, feel, many of
them, scarce any inconveniency from the war, but enjoy, at their
ease, the amusement of reading in the newspapers the exploits of
their own fleets and armies. To them this amusement compensates
the small difference between the taxes which they pay on account
of the war, and those which they had been accustomed to pay in
time of peace. They are commonly dissatisfied with the return of
peace, which puts an end to their amusement, and to a thousand
visionary hopes of conquest and national glory, from a longer
continuance of the war.
The return of peace, indeed, seldom relieves them from the
greater part of the taxes imposed during the war. These are
mortgaged for the interest of the debt contracted, in order to
carry it on. If, over and above paying the interest of this debt,
and defraying the ordinary expense of government, the old
revenue, together with the new taxes, produce some surplus
revenue, it may, perhaps, be converted into a sinking fund for
paying off the debt. But, in the first place, this sinking fund,
even supposing it should be applied to no other purpose, is
generally altogether inadequate for paying, in the course of any
period during which it can reasonably be expected that peace
should continue, the whole debt contracted during the war ; and,
in the second place, this fund is almost always applied to other
purposes.
The new taxes were imposed for the sole purpose of paying the
interest of the money borrowed upon them. If they produce more,
it is generally something which was neither intended nor
expected, and is, therefore, seldom very considerable. Sinking
funds have generally arisen, not so much from any surplus of the
taxes which was over and above what was necessary for paying the
interest or annuity originally charged upon them, as from a
subsequent reduction of that interest ; that of Holland in 1655,
and that of the ecclesiastical state in 1685, were both formed in
this manner. Hence the usual insufficiency of such funds.
During the most profound peace, various events occur, which
require an extraordinary expense ; and government finds it always
more convenient to defray this expense by misapplying the sinking
fund, than by imposing a new tax. Every new tax is immediately
felt more or less by the people. It occasions always some murmur,
and meets with some opposition. The more taxes may have been
multiplied, the higher they may have been raised upon every
different subject of taxation; the more loudly the people
complain of every new tax, the more difficult it becomes, too,
either to find out new subjects of taxation, or to raise much
higher the taxes already imposed upon the old. A momentary
suspension of the payment of debt is not immediately felt by the
people, and occasions neither murmur nor complaint. To borrow of
the sinking fund is always an obvious and easy expedient for
getting out of the present difficulty. The more the public debts
may have been accumulated, the more necessary it may have become
to study to reduce them; the more dangerous, the more ruinous it
may be to missapply any part of the sinking fund ; the less
likely is the public debt to be reduced to any considerable
degree, the more likely, the more certainly, is the sinking fund
to be misapplied towards defraying all the extraordinary expenses
which occur in time of peace. When a nation is already
overburdened with taxes, nothing but the necessities of a new
war, nothing but either the animosity of national vengeance, or
the anxiety for national security, can induce the people to
submit, with tolerable patience, to a new tax. Hence the usual
misapplication of the sinking fund.
In Great Britain, from the time that we had first recourse to the
ruinous expedient of perpetual funding, the reduction of the
public debt, in time of peace, has never borne any proportion to
its accumulation in time of war. It was in the war which began in
1668, and was concluded by the treaty of Ryswick, in 1697, that
the foundation of the present enormous debt of Great Britain was
first laid.
On the 31st of December 1697, the public debts of Great Britain,
funded and unfunded, amounted to £21,515,742:13:8½. A great part
of those debts had been contracted upon short anticipations, and
some part upon annuities for lives; so that, before the 31st of
December 1701, in less than four years, there had partly been
paid off; and partly reverted to the public, the sum of
£5,121,041:12:0¾d; a greater reduction of the public debt than
has ever since been brought about in so short a period of time.
The remaining debt, therefore, amounted only to
£16,394,701:1:7¼d.
In the war which began in 1702, and which was concluded by the
treaty of Utrecht, the public debts were still more accumulated.
On the 31st of December 1714, they amounted to £53,681,076:5:6½.
The subscription into the South-sea fund, of the short and long
annuities, increased the capital of the public debt ; so that, on
the 31st of December 1722, it amounted to £55,282,978:1:3 5/6.
The reduction of the debt began in 1723, and went on so slowly,
that, on the 31st of December 1739, during seventeen years-of
profound peace, the whole sum paid off was no more than
£8,328,554:17:11 3/12, the capital of the public debt, at that
time, amounting to £46,954,623:3:4 7/12.
The Spanish war, which began in 1739, and the French war which
soon followed it, occasioned a further increase of the debt,
which, on the 31st of December 1748, after the war had been
concluded by the treaty of Aix-la-Chapelle, amounted to
£78,293,313:1:10¾. The most profound peace, of 17 years
continuance, had taken no more than £8,328,354, 17:11¼ from it. A
war, of less than nine years continuance, added £31,338,689:18: 6
1/6 to it. {See James Postlethwaite's History of the Public
Revenue.}
During the administration of Mr. Pelham, the interest of the
public debt was reduced, or at least measures were taken for
reducing it, from four to three per cent.; the sinking fund was
increased, and some part of the publie debt was paid off. In
1755, before the breaking out of the late war, the funded debt of
Great Britain amounted to £72,289,675. On the 5th of January
1763, at the conclusion of the peace, the funded debt amounted
debt to £122,603,336:8:2¼. The unfunded debt has been stated at
£13,927,589:2:2. But the expense occasioned by the war did not
end with the conclusion of the peace ; so that, though on the 5th
of January 1764, the funded debt was increased (partly by a new
loan, and partly by funding a part of the unfunded debt) to
£129,586,789:10:1¾, there still remained (according to the very
well informed author of Considerations on the Trade and Finances
of Great Britain) an unfunded debt, which was brought to account
in that and the following year, of £9,975,017: 12:2 15/44d. In
1764, therefore, the public debt of Great Britain, funded and
unfunded together, amounted, according to this author, to
£139,561,807:2:4. The annuities for lives, too, which had been
granted as premiums to the subscribers to the new loans in 1757,
estimated at fourteen years purchase, were valued at £472,500 ;
and the annuities for long terms of years, granted as premiums
likewise, in 1761 and 1762, estimated at twenty-seven and a-half
years purchase, were valued at £6,826,875. During a peace of
about seven years continuance, the prudent and truly patriotic
administration of Mr. Pelham was not able to pay off an old debt
of six millions. During a war of nearly the same continuance, a
new debt of more than seventy-five millions was contracted.
On the 5th of January 1775, the funded debt of Great Britain
amounted to £124,996,086, 1:6¼d. The unfunded, exclusive of a
large civil-list debt, to £4,150,236:3:11 7/8. Both together, to
£129,146,322:5:6. According to this account, the whole debt paid
off, during eleven years of profound peace, amounted only to
£10,415,476:16:9 7/8. Even this small reduction of debt, however,
has not been all made from the savings out of the ordinary
revenue of the state. Several extraneous sums, altogether
independent of that ordinary revenue, have contributed towards
it. Amongst these we may reckon an additional shilling in the
pound land tax, for three years; the two millions received from
the East-India company, as indemnification for their territorial
acquisitions ; and the one hundred and ten thousand pounds
received from the bank for the renewal of their charter. To these
must be added several other sums, which, as they arose out of the
late war, ought perhaps to be considered as deductions from the
expenses of it. The principal are,
The produce of French prizes .............. £690,449: 18: 9
Composition for French prisoners ......... 670,000: 0: 0
What has been received from the sale
of the ceded islands ......................... 95,500: 0: 0
Total, .....................................£1,455,949: 18: 9
If we add to this sum the balance of the earl of Chatham's and
Mr. Calcraft's accounts, and other army savings of the same kind,
together with what has been received from the bank, the
East-India company, and the additional shilling in the pound land
tax, the whole must be a good deal more than five millions. The
debt, therefore, which, since the peace, has been paid out of the
savings from the ordinary revenue of the state, has not, one year
with another, amounted to half a million a-year. The sinking fund
has, no doubt, been considerably augmented since the peace, by
the debt which had been paid off, by the reduction of the
redeemable four per cents to three per cents, and by the
annuities for lives which have fallen in; and, if peace were to
continue, a million, perhaps, might now be annually spared out of
it towards the discharge of the debt. Another million,
accordingly, was paid in the course of last year ; but at the
same time, a large civil-list debt was left unpaid, and we are
now involved in a new war, which, in its progress, may prove as
expensive as any of our former wars.{It has proved more expensive
than any one of our former wars, and has involved us in an
additional debt of more than one hundred millions. During a
profound peace of eleven years, little more than ten millions of
debt was paid; during a war of seven years, more than one hundred
millions was contracted.} The new debt which will probably be
contracted before the end of the next campaign, may, perhaps, be
nearly equal to all the old debt which has been paid off from the
savings out of the ordinary revenue of the state. It would be
altogether chimerical, therefore, to expect that the public debt
should ever be completely discharged, by any savings which are
likely to be made from that ordinary revenue as it stands at
present.
The public funds of the different indebted nations of Europe,
particularly those of England, have, by one author, been
represented as the accumulation of a great capital, superadded to
the other capital of the country, by means of which its trade is
extended, its manufactures are multiplied, and its lands
cultivated and improved, much beyond what they could have been by
means of that other capital only. He does not consider that the
capital which the first creditors of the public advanced to
government, was, from the moment in which he advanced it, a
certain portion of the annual produce, turned away from serving
in the function of a capital, to serve in that of a revenue ;
from maintaining productive labourers, to maintain unproductive
ones, and to be spent and wasted, generally in the course of the
year, without even the hope of any future reproduction. In return
for the capital which they advanced, they obtained, indeed, an
annuity of the public funds, in most cases, of more than equal
value. This annuity, no doubt, replaced to them their capital,
and enabled them to carry on their trade and business to the
same, or, perhaps, to a greater extent than before; that is, they
were enabled, either to borrow of other people a new capital,
upon the credit of this annuity or, by selling it, to get from
other people a new capital of their own, equal, or superior, to
that which they had advanced to government. This new capital,
however, which they in this manner either bought or borrowed of
other people, must have existed in the country before, and must
have been employed, as all capitals are, in maintaining
productive labour. When it came into the hands of those who had
advanced their money to government, though it was, in some
respects, a new capital to them, it was not so to the country,
but was only a capital withdrawn from certain employments, in
order to be turned towards others. Though it replaced to them
what they had advanced to government, it did not replace it to
the country. Had they not advanced this capital to government,
there would have been in the country two capitals, two portions
of the annual produce, instead of one, employed in maintaining
productive labour.
When, for defraying the expense of government, a revenue is
raised within the year, from the produce of free or unmortgaged
taxes, a certain portion of the revenue of private people is only
turned away from maintaining one species of unproductive labour,
towards maintaining another. Some part of what they pay in those
taxes, might, no doubt, have been accumulated into capital, and
consequently employed in maintaining productive labour ; but the
greater part would probably have been spent, and consequently
employed in maintaining unproductive labour. The public expense,
however, when defrayed in this manner, no doubt hinders, more or
less, the further accumulation of new capital; but it does not
necessarily occasion the destruction of any actually-existing
capital.
When the public expense is defrayed by funding, it is defrayed by
the annual destruction of some capital which had before existed
in the country; by the perversion of some portion of the annual
produce which had before been destined for the maintenance of
productive labour, towards that of unproductive labour. As in
this case, however, the taxes are lighter than they would have
been, had a revenue sufficient for defraying the same expense
been raised within the year ; the private revenue of individuals
is necessarily less burdened, and consequently their ability to
save and accumulate some part of that revenue into capital, is a
good deal less impaired. If the method of funding destroys more
old capital, it, at the same time, hinders less the accumulation
or acquisition of new capital, than that of defraying the public
expense by a revenue raised within the year. Under the system of
funding, the frugality and industry of private people can more
easily repair the breaches which the waste and extravagance of
government may occasionally make in the general capital of the
society.
It is only during the continuance of war, however, that the
system of funding has this advantage over the other system. Were
the expense of war to be defrayed always by a revenue raised
within the year, the taxes from which that extraordinary revenue
was drawn would last no longer than the war. The ability of
private people to accumulate, though less during the war, would
have been greater during the peace, than under the system of
funding. War would not necessarily have occasioned the
destruction of any old capitals, and peace would have occasioned
the accumulation of many more new. Wars would, in general, be
more speedily concluded, and less wantonly undertaken. The people
feeling, during continuance of war, the complete burden of it,
would soon grow weary of it; and government, in order to humour
them, would not be under the necessity of carrying it on longer
than it was necessary to do so. The foresight of the heavy and
unavoidable burdens of war would hinder the people from wantonly
calling for it when there was no real or solid interest to fight
for. The seasons during which the ability of private people to
accumulate was somewhat impaired, would occur more rarely, and be
of shorter continuance. Those, on the contrary, during which that
ability was in the highest vigour would be of much longer
duration than they can well be under the system of funding.
When funding, besides, has made a certain progress, the
multiplication of taxes which it brings along with it, sometimes
impairs as much the ability of private people to accumulate, even
in time of peace, as the other system would in time of war. The
peace revenue of Great Britain amounts at present to more than
ten millions a-year. If free and unmortgaged, it might be
sufficient, with proper management, and without contracting a
shilling of new debt, to carry on the most vigorous war. The
private revenue of the inhabitants of Great Britain is at present
as much incumbered in time of peace, their ability to accumulate
is as much impaired, as it would have been in the time of the
most expensive war, had the pernicious system of funding never
been adopted.
In the payment of the interest of the public debt, it has been
said, it is the right hand which pays the left. The money does
not go out of the country. It is only a part of the revenue of
one set of the inhabitants which is transferred to another ; and
the nation is not a farthing the poorer. This apology is founded
altogether in the sophistry of the mercantile system; and, after
the long examination which I have already bestowed upon that
system, it may, perhaps, be unnecessary to say anything further
about it. It supposes, besides, that the whole public debt is
owing to the inhabitants of the country, which happens not to be
true ; the Dutch, as well as several other foreign nations,
having a very considerable share in our public funds. But though
the whole debt were owing to the inhabitants of the country, it
would not, upon that account, be less pernicious.
Land and capital stock are the two original sources of all
revenue, both private and public. Capital stock pays the wages of
productive labour, whether employed in agriculture, manufactures,
or commerce. The management of those two original sources of
revenue belongs to two different sets of people; the proprietors
of land, and the owners or employers of capital stock.
The proprietor of land is interested, for the sake of his own
revenue, to keep his estate in as good condition as he can, by
building and repairing his tenants houses, by making and
maintaining the necessary drains and inclosures, and all those
other expensive improvements which it properly belongs to the
landlord to make and maintain. But, by different land taxes, the
revenue of the landlord may be so much diminished, and, by
different duties upon the necessaries and conveniencies of life,
that diminished revenue may be rendered of so little real value,
that he may find himself altogether unable to make or maintain
those expensive improvements. When the landlord, however, ceases
to do his part, it is altogether impossible that the tenant
should continue to do his. As the distress of the landlord
increases, the agriculture of the country must necessarily
decline.
When, by different taxes upon the necessaries and conveniencies
of life, the owners and employers of capital stock find, that
whatever revenue they derive from it, will not, in a particular
country, purchase the same quantity of those necessaries and
conveniencies which an equal revenue would in almost any other,
they will be disposed to remove to some other. And when, in order
to raise those taxes, all or the greater part of merchants and
manufacturers, that is, all or the greater part of the employers
of great capitals, come to be continually exposed to the
mortifying and vexatious visits of the tax-gatherers, this
disposition to remove will soon be changed into an actual
removing. The industry of the country will necessarily fall with
the removal of the capital which supported it, and the ruin of
trade and manufactures will follow the declension of agriculture.
To transfer from the owners of those two great sources of
revenue, land, and capital stock, from the persons immediately
interested in the good condition of every particular portion of
land, and in the good management of every particular portion of
capital stock, to another set of persons (the creditors of the
public, who have no such particular interest ), the greater part
of the revenue arising from either, must, in the long-run,
occasion both the neglect of land, and the waste or removal of
capital stock. A creditor of the public has, no doubt, a general
interest in the prosperity of the agriculture, manufactures, and
commerce of the country ; and consequently in the good condition
of its land, and in the good management of its capital stock.
Should there be any general failure or declension in any of these
things, the produce of the different taxes might no longer be
sufficient to pay him the annuity or interest which is due to
him. But a creditor of the public, considered merely as such, has
no interest in the good condition of any particular portion of
land, or in the good management of any particular portion of
capital stock. As a creditor of the public, he has no knowledge
of any such particular portion. He has no inspection of it. He
can have no care about it. Its ruin may in some cases be unknown
to him, and cannot directly affect him.
The practice of funding has gradually enfeebled every state which
has adopted it. The Italian republics seem to have begun it.
Genoa and Venice, the only two remaining which can pretend to an
independent existence, have both been enfeebled by it. Spain
seems to have learned the practice from the Italian republics,
and (its taxes being probably less judicious than theirs) it has,
in proportion to its natural strength, been-still more enfeebled.
The debts of Spain are of very old standing. It was deeply in
debt before the end of the sixteenth century, about a hundred
years before England owed a shilling. France, not. withstanding
all its natural resources, languishes under an oppressive load of
the same kind. The republic of the United Provinces is as much
enfeebled by its debts as either Genoa or Venice. Is it likely
that, in Great Britain alone, a practice, which has brought
either weakness or dissolution into every other country, should
prove altogether innocent ?
The system of taxation established in those different countries,
it may be said, is inferior to that of England. I believe it is
so. But it ought to be remembered, that when the wisest
government has exhausted all the proper subjects of taxation, it
must, in cases of urgent necessity, have recourse to improper
ones. The wise republic of Holland has, upon some occasions, been
obliged to have recourse to taxes as inconvenient as the greater
part of those of Spain. Another war, begun before any
considerable liberation of the public revenue had been brought
about, and growing in its progress as expensive as the last war,
may, from irresistible necessity, render the British system of
taxation as oppressive as that of Holland, or even as that of
Spain. To the honour of our present system of taxation,
indeed, it has hitherto given so little embarrassment to
industry, that, during the course even of the most expensive
wars, the frugality and good conduct of individuals seem to have
been able, by saving and accumulation, to repair all the breaches
which the waste and extravagance of government had made in the
general capital of the society. At the conclusion of the late
war, the most expensive that Great Britain ever waged, her
agriculture was as flourishing, her manufacturers as numerous and
as fully employed, and her commerce as extensive, as they had
ever been before. The capital, therefore, which supported all
those different branches of industry, must have been equal to
what it had ever been before. Since the peace, agriculture has
been still further improved; the rents of houses have risen in
every town and village of the country, a proof of the increasing
wealth and revenue of the people; and the annual amount of the
greater part of the old taxes, of the principal branches of the
excise and customs, in particular, has been continually
increasing, an equally clear proof of an increasing consumption,
and consequently of an increasing produce, which could alone
support that consumption. Great Britain seems to support with
ease, a burden which, half a century ago, nobody believed her
capable of supporting, Let us not, however, upon this account,
rashly conclude that she is capable of supporting any burden; nor
even be too confident that she could support. without great
distress, a burden a little greater than what has already been
laid upon her.
When national debts have once been accumulated to a certain
degree, there is scarce, I believe, a single instance of their
having been fairly and completely paid. The liberation of the
public revenue, if it has ever been brought about at all, has
always been brought about by a bankruptcy ; sometimes by an
avowed one, though frequently by a pretended payment.
The raising of the denomination of the coin has been the most
usual expedient by which a real public bankruptcy has been
disguised under the appearance of a pretended payment. If a
sixpence, for example, should, either by act of parliament or
royal proclamation. be raised to the denomination of a shilling,
and twenty sixpences to that of a pound sterling ; the person
who, under the old denomination, had borrowed twenty shillings,
or near four ounces of silver, would, under the new, pay with
twenty sixpences, or with something less than two ounces. A
national debt of about a hundred and twenty-eight millions, near
the capital of the funded and unfunded debt of Great Britain,
might, in this manner, be paid with about sixty-four millions of
our present money. It would, indeed, be a pretended payment only,
and the creditors of the public would really be defrauded of ten
shillings in the pound of what was due to them. The calamity,
too, would extend much further than to the creditors of the
public, and those of every private person would suffer a
proportionable loss; and this without any advantage, but in most
cases with a great additional loss, to the creditors of the
public. If the creditors of the public, indeed, were generally
much in debt to other people, they might in some measure
compensate their loss by paying their creditors in the same coin
in which the public had paid them. But in most countries, the
creditors of the public are, the greater part of them, wealthy
people, who stand more in the relation of creditors than in that
of debtors, towards the rest of their fellow citizens. A
pretended payment of this kind, therefore, instead of
alleviating, aggravates, in most cases, the loss of the creditors
of the public; and, without any advantage to the public, extends
the calamity to a great number of other innocent people. It
occasions a general and most pernicious subversion of the
fortunes of private people; enriching, in most cases, the idle
and profuse debtor, at the expense of the industrious and frugal
creditor ; and transporting a great part of the national capital
from the hands which were likely to increase and improve it, to
those who are likely to dissipate and destroy it. When it becomes
necessary for a state to declare itself bankrupt, in the same
manner as when it becomes necessary for an individual to do so, a
fair, open, and avowed bankruptcy, is always the measure which is
both least dishonourable to the debtor, and least hurtful to the
creditor. The honour of a state is surely very poorly provided
for, when, in order to cover the disgrace of a real bankruptcy,
it has recourse to a juggling trick of this kind, so easily seen
through, and at the same time so extremely pernicious.
Almost all states, however, ancient as well as modern, when
reduced to this necessity, have, upon some occasions, played this
very juggling trick. The Romans, at the end of the first Punic
war, reduced the As, the coin or denomination by which they
computed the value of all their other coins, from containing
twelve ounces of copper, to contain only two ounces; that is,
they raised two ounces of copper to a denomination which had
always before expressed the value of twelve ounces. The republic
was, in this manner, enabled to pay the great debts which it had
contracted with the sixth part of what it really owed. So sudden
and so great a bankruptcy, we should in the present times be apt
to imagine, must have occasioned a very violent popular clamour.
It does not appear to have occasioned any. The law which enacted
it was, like all other laws relating to the coin, introduced and
carried through the assembly of the people by a tribune, and was
probably a very popular law. In Rome, as in all other ancient
republics, the poor people were constantly in debt to the rich
and the great, who, in order to secure their votes at the annual
elections, used to lend them money at exorbitant interest, which,
being never paid, soon accumulated into a sum too great either
for the debtor to pay, or for any body else to pay for him. The
debtor, for fear of a very severe execution, was obliged, without
any further gratuity, to vote for the candidate whom the creditor
recommended. In spite of all the laws against bribery and
corruption, the bounty of the candidates, together with the
occasional distributions of coin which were ordered by the
senate, were the principal funds from which, during the latter
times of the Roman republic, the poorer citizens derived their
subsistence. To deliver themselves from this subjection to their
creditors, the poorer citizens were continually calling out,
either for an entire abolition of debts, or for what they called
new tables ; that is, for a law which should entitle them to a
complete acquittance, upon paying only a certain proportion of
their accumulated debts. The law which reduced the coin of all
denominations to a sixth part of its former value, as it enabled
them to pay their debts with a sixth part of what they really
owed, was equivalent to the most advantageous new tables. In
order to satisfy the people, the rich and the great were, upon
several different occasions, obliged to consent to laws, both for
abolishing debts, and for introducing new tables; and they
probably were induced to consent to this law, partly for the same
reason, and partly that, by liberating the public revenue, they
might restore vigour to that government, of which they themselves
had the principal direction. An operation of this kind would
at once reduce a debt of £128,000,000 to £21,333,333:6:8. In the
course of the second Punic war, the As was still further reduced,
first, from two ounces of copper to one ounce, and afterwards
from one ounce to half an ounce ; that is, to the twenty-fourth
part of its original value. By combining the three Roman
operations into one, a debt of a hundred and twenty-eight
millions of our present money, might in this manner be reduced
all at once to a debt of £5,333,333:6:8. Even the enormous debt
of Great Britain might in this manner soon be paid.
By means of such expedients, the coin of, I believe, all nations,
has been gradually reduced more and more below its original
value, and the same nominal sum has been gradually brought to
contain a smaller and a smaller quantity of silver.
Nations have sometimes, for the same purpose, adulterated the
standard of their coin ; that is, have mixed a greater quantity
of alloy in it. If in the pound weight of our silver coin, for
example, instead of eighteen penny-weight, according to the
present standard, there were mixed eight ounces of alloy; a pound
sterling, or twenty shillings of such coin, would be worth little
more than six shillings and eightpence of our present money. The
quantity of silver contained in six shillings and eightpence of
our present money, would thus be raised very nearly to the
denomination of a pound sterling. The adulteration of the
standard has exactly the same effect with what the French call an
augmentation, or a direct raising of the denomination of the
coin.
An augmentation, or a direct raising of the denomination of the
coin, always is, and from its nature must be, an open and avowed
operation. By means of it, pieces of a smaller weight and bulk
are called by the same name, which had before been given to
pieces of a greater weight and bulk. The adulteration of the
standard, on the contrary, has generally been a concealed
operation. By means of it, pieces are issued from the mint, of
the same denomination, and, as nearly as could be contrived, of
the same weight, bulk, and appearance, with pieces which had been
current before of much greater value. When king John of
France,{See Du Cange Glossary, voce Moneta; the Benedictine
Edition.} in order to pay his debts, adulterated his coin, all
the officers of his mint were sworn to secrecy. Both operations
are unjust. But a simple augmentation is an injustice of open
violence; whereas an adulteration is an injustice of treacherous
fraud. This latter operation, therefore, as soon as it has been
discovered, and it could never be concealed very long, has always
excited much greater indignation than the former. The coin, after
any considerable augmentation, has very seldom been brought back
to its former weight ; but after the greatest adulterations, it
has almost always been brought back to its former fineness. It
has scarce ever happened, that the fury and indignation of the
people could otherwise be appeased.
In the end of the reign of Henry VIII., and in the beginning of
that of Edward VI., the English coin was not only raised in its
denomination, but adulterated in its standard. The like frauds
were practised in Scotland during the minority of James VI. They
have occasionally been practised in most other countries.
That the public revenue of Great Britain can never be completely
liberated, or even that any considerable progress can ever be
made towards that liberation, while the surplus of that revenue,
or what is over and above defraying the annual expense of the
peace establishment, is so very small, it seems altogether in
vain to expect. That liberation, it is evident, can never be
brought about, without either some very considerable augmentation
of the public revenue, or some equally considerable reduction of
the public expense.
A more equal land tax, a more equal tax upon the rent of houses,
and such alterations in the present system of customs and excise
as those which have been mentioned in the foregoing chapter,
might, perhaps, without increasing the burden of the greater part
of the people, but only distributing the weight of it more
equally upon the whole, produce a considerable augmentation of
revenue. The most sanguine projector, however, could scarce
flatter himself, that any augmentation of this kind would be such
as could give any reasonable hopes, either of liberating the
public revenue altogether, or even of making such progress
towards that liberation in time of peace, as either to prevent or
to compensate the further accumulation of the public debt in the
next war.
By extending the British system of taxation to all the different
provinces of the empire, inhabited by people either of British or
European extraction, a much greater augmentation of revenue might
be expected. This, however, could scarce, perhaps, be done,
consistently with the principles of the British constitution,
without admitting into the British parliament, or, if you will,
into the states-general of the British empire, a fair and equal
representation of all those different provinces ; that of each
province bearing the same proportion to the produce of its taxes,
as the representation of Great Britain might bear to the produce
of the taxes levied upon Great Britain. The private interest of
many powerful individuals, the confirmed prejudices of great
bodies of people, seem, indeed, at present, to oppose to so great
a change, such obstacles as it may be very difficult, perhaps
altogether impossible, to surmount. Without, however, pretending
to determine whether such a union be practicable or
impracticable, it may not, perhaps, be improper, in a speculative
work of this kind, to consider how far the British system of
taxation might be applicable to all the different provinces of
the empire ; what revenue might be expected from it, if so
applied ; and in what manner a general union of this kind might
be likely to affect the happiness and prosperity of the
differrent provinces comprehended within it. Such a speculation,
can, at worst, be regarded but as a new Utopia, less amusing,
certainly, but no more useless and chimerical than the old one.
The land-tax, the stamp duties, and the different duties of
customs and excise, constitute the four principal branches of the
British taxes.
Ireland is certainly as able, and our American and West India
plantations more able, to pay a land tax, than Great Britain.
Where the landlord is subject neither to tythe nor poor's rate,
he must certainly be more able to pay such a tax, than where he
is subject to both those other burdens. The tythe, where there is
no modus, and where it is levied in kind, diminishes more what
would otherwise be the rent of the landlord, than a land tax
which really amounted to five shillings in the pound. Such a
tythe will be found, in most cases, to amount to more than a
fourth part of the real rent of the land, or of what remains
after replacing completely the capital of the farmer, together
with his reasonable profit. If all moduses and all impropriations
were taken away, the complete church tythe of Great Britain and
Ireland could not well be estimated at less than six or seven
millions. If there was no tythe either in Great Britain or
Ireland, the landlords could afford to pay six or seven millions
additional land tax, without being more burdened than a very
great part of them are at present. America pays no tythe, and
could, therefore, very well afford to pay a land tax. The lands
in America and the West Indies, indeed, are, in general, not
tenanted nor leased out to farmers. They could not, therefore, be
assessed according to any rent roll. But neither were the lands
of Great Britain, in the 4th of William and Mary, assessed
according to any rent roll, but according to a very loose and
inaccurate estimation. The lands in America might be assessed
either in the same manner, or acording to an equitable valuation,
in consequence of an accurate survey, like that which was lately
made in the Milanese, and in the dominions of Austria, Prussia,
and Sardinia.
Stamp duties, it is evident, might be levied without any
variation, in all countries where the forms of law process, and
the deeds by which property, both real and personal, is
transferred, are the same, or nearly the same.
The extension of the custom-house laws of Great Britain to
Ireland and the plantations, provided it was accompanied, as in
justice it ought to be, with an extension of the freedom of
trade, would be in the highest degree advantageous to both. All
the invidious restraints which at present oppress the trade of
Ireland, the distinction between the enumerated and
non-enumerated commodities of America, would be entirely at an
end. The countries north of Cape Finisterre would be as open to
every part of the produce of America, as those south of that cape
are to some parts of that produce at present. The trade between
all the different parts of the British empire would, in
consequence of this uniformity in the custom-house laws, be as
free as the coasting trade of Great Britain is at present. The
British empire would thus afford, within itself, an immense
internal market for every part of the produce of all its
different provinces. So great an extension of market would soon
compensate, both to Ireland and the plantations, all that they
could suffer from the increase of the duties of customs.
The excise is the only part of the British system of taxation,
which would require to be varied in any respect, according as it
was applied to the different provinces of the empire. It might be
applied to Ireland without any variation ; the produce and
consumption of that kingdom being exactly of tho same nature with
those of Great Britain. In its application to America and the
West Indies, of which the produce and consumption are so very
different from those of Great Britain, some modification might be
necessary, in the same manner as in its application to the cyder
and beer counties of England.
A fermented liquor, for example, which is called beer, but which,
as it is made of molasses, bears very little resemblance to our
beer, makes a considerable part of the common drink of the people
in America. This liquor, as it can be kept only for a few days,
cannot, like our beer, be prepared and stored up for sale in
great breweries ; but every private family must brew it for their
own use, in the same manner as they cook their victuals. But to
subject every private family to the odious visits and examination
of the tax-gatherers, in the same manner as we subject the
keepers of ale-houses and the brewers for public sale, would be
altogether inconsistent with liberty. If, for the sake of
equality, it was thought necessary to lay a tax upon this liquor,
it might be taxed by taxing the material of which it is made,
either at the place of manufacture, or, if the circumstances of
the trade rendered such an excise improper, by laying a duty upon
its importation into the colony in which it was to be consumed.
Besides the duty of one penny a-gallon imposed by the British
parliament upon the importation of molasses into America, there
is a provincial tax of this kind upon their importation into
Massachusetts Bay, in ships belonging to any other colony, of
eight-pence the hogshead; and another upon their importation from
the northern colonies into South Carolina, of five-pence the
gallon. Or, if neither of these methods was found convenient,
each family might compound for its consumption of this liquor,
either according to the number of persons of which it consisted,
in the same manner as private families compound for the malt tax
in England; or according to the different ages and sexes of those
persons, in the same manner as several different taxes are levied
in Holland ; or, nearly as Sir Matthew Decker proposes, that all
taxes upon consumable commodities should be levied in England.
This mode of taxation, it has already been observed, when applied
to objects of a speedy consumption, is not a very convenient one.
It might be adopted, however, in cases where no better could be
done.
Sugar, rum, and tobacco, are commodities which are nowhere
necessaries of life, which are become objects of almost universal
consumption, and which are, therefore, extremely proper subjects
of taxation. If a union with the colonies were to take place,
those commodities might be taxed, either before they go out of
the hands of the manufacturer or grower ; or, if this mode of
taxation did not suit the circumstances of those persons, they
might be deposited in public warehouses, both at the place of
manufacture, and at all the different ports of the empire, to
which they might afterwards be transported, to remain there,
under the joint custody of the owner and the revenue officer,
till such time as they should be delivered out, either to the
consumer, to the merchant-retailer for home consumption, or to
the merchant-exporter; the tax not to be advanced till such
delivery. When delivered out for exportation, to go duty-free,
upon proper security being given, that they should really be
exported out of the empire. These are, perhaps, the principal
commodities, with regard to which the union with the colonies
might require some considerable change in the present system of
British taxation.
What might be the amount of the revenue which this system of
taxation, extended to all the different provinces of the empire,
might produce, it must, no doubt, be altogether impossible to
ascertain with tolerable exactness. By means of this system,
there is annually levied in Great Britain, upon less than eight
millions of people, more than ten millions of revenue. Ireland
contains more than two millions of people, and, according to the
accounts laid before the congress, the twelve associated
provinces of America contain more than three. Those accounts,
however, may have been exaggerated, in order, perhaps, either to
encourage their own people, or to intimidate those of this
country ; and we shall suppose, therefore, that our North
American and West Indian colonies, taken together, contain no
more than three millions ; or that the whole British empire, in
Europe and America, contains no more than thirteen millions of
inhabitants. If, upon less than eight millions of inhabitants,
this system of taxation raises a revenue of more than ten
millions sterling; it ought, upon thirteen millions of
inhabitants, to raise a revenue of more than sixteen millions two
hundred and fifty thousand pounds sterling. From this revenue,
supposing that this system could produce it, must be deducted the
revenue usually raised in Ireland and the plantations, for
defraying the expense of the respective civil governments. The
expense of the civil and military establishment of Ireland,
together with the interest of the public debt, amounts, at a
medium of the two years which ended March 1775, to something less
than seven hundred and fifty thousand pounds ayear. By a very
exact account of the revenue of the principal colonies of America
and the West Indies, it amounted, before the commencement of the
present disturbances, to a hundred and forty-one thousand eight
hundred pounds. In this account, however, the revenue of
Maryland, of North Carolina, and of all our late acquisitions,
both upon the continent, and in the islands, is omitted; which
may, perhaps, make a difference of thirty or forty thousand
pounds. For the sake of even numbers, therefore, let us suppose
that the revenue necessary for supporting the civil government of
Ireland and the plantations may amount to a million. There would
remain, consequently, a revenue of fifteen millions two hundred
and fifty thousand pounds, to be applied towards defraying the
general expense of the empire, and towards paying the public
debt. But if, from the present revenue of Great Britain, a
million could, in peaceable times, be spared towards the payment
of that debt, six millions two hundred and fifty thousand pounds
could very well be spared from this improved revenue. This great
sinking fund, too, might be augmented every year by the interest
of the debt which had been discharged the year before ; and
might, in this manner, increase so very rapidly, as to be
sufficient in a few years to discharge the whole debt, and thus
to restore completely the at-present debilitated and languishing
vigour of the empire. In the meantime, the people might be
relieved from some of the most burdensome taxes; from those which
are imposed either upon the necessaries of life, or upon the
materials of manufacture. The labouring poor would thus be
enabled to live better, to work cheaper, and to send their goods
cheaper to market. The cheapness of their goods would increase
the demand for them, and consequently for the labour of those who
produced them. This increase in the demand for labour would both
increase the numbers, and improve the circumstances of the
labouring poor. Their consumption would increase, and, together
with it, the revenue arising from all those articles of their
consumption upon which the taxes might be allowed to remain.
The revenue arising from this system of taxation, however, might
not immediately increase in proportion to the number of people
who were subjected to it. Great indulgence would for some time be
due to those provinces of the empire which were thus subjected to
burdens to which they had not before been accustomed; and even
when the same taxes came to be levied everywhere as exactly as
possible, they would not everywhere produce a revenue
proportioned to the numbers of the people. In a poor country, the
consumption of the principal commodities subject to the duties of
customs and excise, is very small; and in a thinly inhabited
country, the opportunities of smuggling are very great. The
consumption of malt liquors among the inferior ranks of people in
Scotland is very small ; and the excise upon malt, beer, and ale,
produces less there than in England, in proportion to the numbers
of the people and the rate of the duties, which upon malt is
different, on account of a supposed difference of quality. In
these particular branches of the excise, there is not, I
apprehend, much more smuggling in the one country than in the
other. The duties upon the distillery, and the greater part of
the duties of customs, in proportion to the numbers of people in
the respective countries, produce less in Scotland than in
England, not only on account of the smaller consumption of the
taxed commodities, but of the much greater facility of smuggling.
In Ireland, the inferior ranks of people are still poorer than in
Scotland, and many parts of the country are almost as thinly
inhabited. In Ireland, therefore, the consumption of the taxed
commodities might, in proportion to the number of the people, be
still less than in Scotland, and the facility of smuggling nearly
the same. In America and the West Indies, the white people, even
of the lowest rank, are in much better circumstances than those
of the same rank in England ; and their consumption of all the
luxuries in which they usually indulge themselves, is probably
much greater. The blacks, indeed, who make the greater part of
the inhabitants, both of the southern colonies upon the continent
and of the West India islands, as they are in a state of slavery,
are, no doubt, in a worse condition than the poorest people
either in Scotland or Ireland. We must not, however, upon that
account, imagine that they are worse fed, or that their
consumption of articles which might be subjected to moderate
duties, is less than that even of the lower ranks of people in
England. In order that they may work well, it is the interest of
their master that they should be fed well, and kept in good
heart, in the same manner as it is his interest that his working
cattle should be so. The blacks, accordingly, have almost
everywhere their allowance of rum, and of molasses or
spruce-beer, in the same manner as the white servants ; and this
allowance would not probably be withdrawn, though those articles
should be subjected to moderate duties. The consumption of the
taxed commodities, therefore, in proportion to the number of
inhabitants, would probably be as great in America and the West
Indies as in any part of the British empire. The opportunities of
smuggling, indeed, would be much greater ; America, in proportion
to the extent of the country, being much more thinly inhabited
than either Scotland or Ireland. If the revenue, however, which
is at present raised by the different duties upon malt and malt
liquors, were to be levied by a single duty upon malt, the
opportunity of smuggling in the most important branch of the
excise would be almost entirely taken away ; and if the duties of
customs, instead of being imposed upon almost all the different
articles of importation, were confined to a few of the most
general use and consumption, and if the levying of those duties
were subjected to the excise laws, the opportunity of smuggling,
though not so entirely taken away, would be very much diminished.
In consequence of those two apparently very simple and easy
alterations, the duties of customs and excise might probably
produce a revenue as great, in proportion to the consumption of
the most thinly inhabited province, as they do at present, in
proportion to that of the most populous.
The Americans, it has been said, indeed, have no gold or silver
money, the interior commerce of the country being carried on by a
paper currency; and the gold and silver, which occasionally come
among them, being all sent to Great Britain, in return for the
commodities which they receive from us. But without gold and
silver, it is added, there is no possibility of paying taxes. We
already get all the gold and silver which they have. How is it
possible to draw from them what they have not ?
The present scarcity of gold and silver money in America, is not
the effect of the poverty of that country, or of the inability of
the people there to purchase those metals. In a country where the
wages of labour are so much higher, and the price of provisions
so much lower than in England, the greater part of the people
must surely have wherewithal to purchase a greater quantity, if
it were either necessary or convenient for them to do so. The
scarcity of those metals, therefore, must be the effect of
choice, and not of necessity.
It is for transacting either domestic or foreign business, that
gold or silver money is either necessary or convenient.
The domestic business of every country, it has been shewn in the
second book of this Inquiry, may, at least in peaceable times, be
transacted by means of a paper currency, with nearly the same
degree of conveniency as by gold and silver money. It is
convenient for the Americans, who could always employ with
profit, in the improvement of their lands, a greater stock than
they can easily get, to save as much as possible the expense of
so costly an instrument of commerce as gold and silver; and
rather to employ that part of their surplus produce which would
be necessary for purchasing those metals, in purchasing the
instruments of trade, the materials of clothing, several parts of
household furniture, and the iron work necessary for building and
extending their settlements and plantations ; in purchasing not
dead stock, but active and productive stock. The colony
governments find it for their interest to supply the people with
such a quantity of paper money as is fully sufficient, and
generally more than sufficient, for transacting their domestic
business. Some of those governments, that of Pennsylvania,
particularly, derive a revenue from lending this paper money to
their subjects, at an interest of so much per cent. Others, like
that of Massachusetts Bay, advance, upon extraordinary
emergencies, a paper money of this kind for defraying the public
expense; and afterwards, when it suits the conveniency of the
colony, redeem it at the depreciated value to which it gradually
falls. In 1747, {See Hutchinson's History of Massachusetts Bay
vol. ii. page 436 et seq.} that colony paid in this manner the
greater part of its public debts, with the tenth part of the
money for which its bills had been granted. It suits the
conveniency of the planters, to save the expense of employing
gold and silver money in their domestic transactions; and it
suits the conveniency of the colony governments, to supply them
with a medium, which, though attended with some very considerable
disadvantages, enables them to save that expense. The redundancy
of paper money necessarily banishes gold and silver from the
domestic transactions of the colonies, for the same reason that
it has banished those metals from the greater part of the
domestic transactions in Scotland ; and in both countries, it is
not the poverty, but the enterprizing and projecting spirit of
the people, their desire of employing all the stock which they
can get, as active and productive stock, which has occasioned
this redundancy of paper money.
In the exterior commerce which the different colonies carry on
with Great Britain, gold and silver are more or less employed,
exactly in proportion as they are more or less necessary. Where
those metals are not necessary, they seldom appear. Where they
are necessary, they are generally found.
In the commerce between Great Britain and the tobacco colonies,
the British goods are generally advanced to the colonists at a
pretty long credit, and are afterwards paid for in tobacco, rated
at a certain price. It is more convenient for the colonists to
pay in tobacco than in gold and silver. It would be more
convenient for any merchant to pay for the goods which his
correspondents had sold to him, in some other sort of goods which
he might happen to deal in, than in money. Such a merchant would
have no occasion to keep any part of his stock by him unemployed,
and in ready money, for answering occasional demands. He could
have, at all times, a larget quantity of goods in his shop or
warehouse, and he could deal to a greater extent. But it seldom
happens to be convenient for all the correspondents of a merchant
to receive payment for the goods which they sell to him, in goods
of some other kind which he happens to deal in. The British
merchants who trade to Virginia and Maryland, happen to be a
particular set of correspondents, to whom it is more convenient
to receive payment for the goods which they sell to those
colonies in tobacco, than in gold and silver. They expect to make
a profit by the sale of the tobacco ; they could make none by
that of the gold and silver. Gold and silver, therefore, very
seldom appear in the commerce between Great Britain and the
tobacco colonies. Maryland and Virginia have as little occasion
for those metals in their foreign, as in their domestic commerce.
They are said, accordingly, to have less gold and silver money
than any other colonies in America. They are reckoned, however,
as thriving, and consequently as rich, as any of their
neighbours.
In the northern colonies, Pennsylvania, New York, New Jersey, the
four governments of New England, etc. the value of their own
produce which they export to Great Britain is not equal to that
of the manufactures which they import for their own use, and for
that of some of the other colonies, to which they are the
carriers. A balance, therefore, must be paid to the
mother-country in gold and silver and this balance they generally
find.
In the sugar colonies, the value of the produce annually exported
to Great Britain is much greater than that of all the goods
imported from thence. If the sugar and rum annually sent to the
mother-country were paid for in those colonies, Great Britain
would be obliged to send out, every year, a very large balance in
money ; and the trade to the West Indies would, by a certain
species of politicians, be considered as extremely
disadvantageous. But it so happens, that many of the principal
proprietors of the sugar plantations reside in Great Britain.
Their rents are remitted to them in sugar and rum, the produce of
their estates. The sugar and rum which the West India merchants
purchase in those colonies upon their own account, are not equal
in value to the goods which they annually sell there. A balance,
therefore, must necessarily be paid to them in gold and silver,
and this balance, too, is generally found.
The difficulty and irregularity of payment from the different
colonies to Great Britain, have not been at all in proportion to
the greatness or smallness of the balances which were
respectively due from them. Payments have, in general, been more
regular from the northern than from the tobacco colonies, though
the former have generally paid a pretty large balance in money,
while the latter have either paid no balance, or a much smaller
one. The difficulty of getting payment from our different sugar
colonies has been greater or less in proportion, not so much to
the extent of the balances respectively due from them, as to the
quantity of uncultivated land which they contained; that is, to
the greater or smaller temptation which the planters have been
under of over-trading, or of undertaking the settlement and
plantation of greater quantities of waste land than suited the
extent of their capitals. The returns from the great island of
Jamaica, where there is still much uncultivated land, have, upon
this account, been, in general, more irregular and uncertain than
those from the smaller islands of Barbadoes, Antigua, and St.
Christopher's, which have, for these many years, been completely
cultivated, and have, upon that account, afforded less field for
the speculations of the planter. The new acquisitions of Grenada,
Tobago, St. Vincent's, and Dominica, have opened a new field for
speculations of this kind ; and the returns front those islands
have of late been as irregular and uncertain as those from the
great island of Jamaica.
It is not, therefore, the poverty of the colonies which
occasions, in the greater part of them, the present scarcity of
gold and silver money. Their great demand for active and
productive stock makes it convenient for them to have as little
dead stock as possible, and disposes them, upon that account, to
content themselves with a cheaper, though less commodious
instrument of commerce, than gold and silver. They are thereby
enabled to convert the value of that gold and silver into the
instruments of trade, into the materials of clothing, into
household furniture, and into the iron work necessary for
building and extending their settlements and plantations. In
those branches of business which cannot be transacted without
gold and silver money, it appears, that they can always find the
necessary quantity of those metals; and if they frequently do not
find it, their failure is generally the effect, not of their
necessary poverty, but of their unnecessary and excessive
enterprise. It is not because they are poor that their payments
are irregular and uncertain, but because they are too eager to
become excessively rich. Though all that part of the produce of
the colony taxes, which was over and above what was necessary for
defraying the expense of their own civil and military
establishments, were to be remitted to Great Britain in gold and
silver, the colonies have abundantly wherewithal to purchase the
requisite quantity of those metals. They would in this case be
obliged, indeed, to exchange a part of their surplus produce,
with which they now purchase active and productive stock, for
dead stock. In transacting their domestic business, they
would be obliged to employ a costly, instead of a cheap
instrument of commerce; and the expense of purchasing this costly
instrument might damp somewhat the vivacity and ardour of their
excessive enterprise in the improvement of land. It might not,
however, be necessary to remit any part of the American revenue
in gold and silver. It might be remitted in bills drawn upon, and
accepted by, particular merchants or companies in Great Britain,
to whom a part of the surplus produce of America had been
consigned, who would pay into the treasury the American revenue
in money, after having themselves received the value of it in
goods ; and the whole business might frequently be transacted
without exporting a single ounce of gold or silver from America.
It is not contrary to justice, that both Ireland and America
should contribute towards the discharge of the public debt of
Great Britain. That debt has been contracted in support of the
government established by the Revolution ; a government to which
the protestants of Ireland owe, not only the whole authority
which they at present enjoy in their own country, but every
security which they possess for their liberty, their property,
and their religion; a government to which several of the colonies
of America owe their present charters, and consequently their
present constitution; and to which all the colonies of America
owe the liberty, security, and property, which they have ever
since enjoyed. That public debt has been contracted in the
defence, not of Great Britain alone, but of all the different
provinces of the empire. The immense debt contracted in the late
war in particular, and a great part of that contracted in the war
before, were both properly contracted in defence of America.
By a union with Great Britain, Ireland would gain, besides the
freedom of trade, other advantages much more important, and which
would much more than compensate any increase of taxes that might
accompany that union. By the union with England, the
middling and inferior ranks of people in Scotland gained a
complete deliverance from the power of an aristocracy, which had
always before oppressed them. By a union with Great Britain, the
greater part of people of all ranks in Ireland would gain an
equally complete deliverance from a much more oppressive
aristocracy ; an aristocracy not founded, like that of Scotland,
in the natural and respectable distinctions of birth and fortune,
but in the most odious of all distinctions, those of religious
and political prejudices; distinctions which, more than any
other, animate both the insolence of the oppressors, and the
hatred and indignation of the oppressed, and which commonly
render the inhabitants of the same country more hostile to one
another than those of different countries ever are. Without a
union with Great Britain, the inhabitants of Ireland are not
likely, for many ages, to consider themselves as one people.
No oppressive aristocracy has ever prevailed in the colonies.
Even they, however, would, in point of happiness and
tranquillity, gain considerably by a union with Great Britain. It
would, at least, deliver them from those rancourous and virulent
factions which are inseparable from small democracies, and which
have so frequently divided the affections of their people, and
disturbed the tranquillity of their governments, in their form so
nearly democratical. In the case of a total separation from Great
Britain, which, unless prevented by a union of this kind, seems
very likely to take place, those factions would be ten times more
virulent than ever. Before the commencement of the present
disturbances, the coercive power of the mother-country had always
been able to restrain those factions from breaking out into any
thing worse than gross brutality and insult. If that coercive
power were entirely taken away, they would probably soon break
out into open violence and bloodshed. In all great countries
which are united under one uniform government, the spirit of
party commonly prevails less in the remote provinces than in the
centre of the empire. The distance of those provinces from the
capital, from the principal seat of the great scramble of faction
and ambition, makes them enter less into the views of any of the
contending parties, and renders them more indifferent and
impartial spectators of the conduct of all. The spirit of party
prevails less in Scotland than in England. In the case of a
union, it would probably prevail less in Ireland than in
Scotland; and the colonies would probably soon enjoy a degree of
concord and unanimity, at present unknown in any part of the
British empire. Both Ireland and the colonies, indeed, would be
subjected to heavier taxes than any which they at present pay. In
consequence, however, of a diligent and faithful application of
the public revenue towards the discharge of the national debt,
the greater part of those taxes might not be of long continuance,
and the public revenue of Great Britain might soon be reduced to
what was necessary for maintaining a moderate
peace-establishment.
The territorial acquisitions of the East India Company, the
undoubted right of the Crown, that is, of the state and people of
Great Britain, might be rendered another source of revenue, more
abundant, perhaps, than all those already mentioned. Those
countries are represented as more fertile, more extensive, and,
in proportion to their extent, much richer and more populous than
Great Britain. In order to draw a great revenue from them, it
would not probably be necessary to introduce any new system of
taxation into countries which are already sufficiently, and more
than sufficiently, taxed. It might, perhaps, be more proper to
lighten than to aggravate the burden of those unfortunate
countries, and to endeavour to draw a revenue from them, not by
imposing new taxes, but by preventing the embezzlement and
misapplication of the greater part of those which they already
pay.
If it should be found impracticable for Great Britain to draw any
considerable augmentation of revenue from any of the resources
above mentioned, the only resource which can remain to her, is a
diminution of her expense. In the mode of collecting and in that
of expending the public revenue, though in both there may be
still room for improvement, Great Britain seems to be at least as
economical as any of her neighbours. The military establishment
which she maintains for her own defence in time of peace, is more
moderate than that of any European state, which can pretend to
rival her either in wealth or in power. None of these articles,
therefore, seem to admit of any considerable reduction of
expense. The expense of the peace-establishment of the
colonies was, before the commencement of the present
disturbances, very considerable, and is an expense which may,
and, if no revenue can be drawn from them, ought certainly to be
saved altogether. This constant expense in time of peace, though
very great, is insignificant in comparison with what the defence
of the colonies has cost us in time of war. The last war, which
was undertaken altogether on account of the colonies, cost Great
Britain, it has already been observed, upwards of ninety
millions. The Spanish war of 1739 was principally undertaken on
their account; in which, and in the French war that was the
consequence of it, Great Britain, spent upwards of forty millions
; a great part of which ought justly to be charged to the
colonies. In those two wars, the colonies cost Great Britain much
more than double the sum which the national debt amounted to
before the commencement of the first of them. Had it not been for
those wars, that debt might, and probably would by this time,
have been completely paid; and had it not been for the colonies,
the former of those wars might not, and the latter certainly
would not, have been undertaken. It was because the colonies were
supposed to be provinces of the British Empire, that this expense
was laid out upon them. But countries which contribute neither
revenue nor military force towards the support of the empire,
cannot be considered as provinces. They may, perhaps, be
considered as appendages, as a sort of splendid and shewy
equipage of the empire. But if the empire can no longer support
the expense of keeping up this equipage, it ought certainly to
lay it down ; and if it cannot raise its revenue in proportion to
its expense, it ought at least to accommodate its expense to its
revenue. If the colonies, notwithstanding their refusal to submit
to British taxes, are still to be considered as provinces of the
British empire, their defence, in some future war, may cost Great
Britain as great an expense as it ever has done in any former
war. The rulers of Great Britain have, for more than a century
past, amused the people with the imagination that they possessed
a great empire on the west side of the Atlantic. This empire,
however, has hitherto existed in imagination only. It has
hitherto been, not an empire, but the project of an empire ; not
a gold mine, but the project of a gold mine; a project which has
cost, which continues to cost, and which, if pursued in the same
way as it has been hitherto, is likely to cost, immense expense,
without being likely to bring any profit ; for the effects of the
monopoly of the colony trade, it has been shewn, are to the great
body of the people, mere loss instead of profit. It is surely now
time that our rulers should either realize this golden dream, in
which they have been indulging themselves, perhaps, as well as
the people ; or that they should awake from it themselves, and
endeavour to awaken the people. If the project cannot be
completed, it ought to be given up. If any of the provinces of
the British empire cannot be made to contribute towards the
support of the whole empire, it is surely time that Great Britain
should free herself from the expense of defending those provinces
in time of war, and of supporting any part of their civil or
military establishment in time of peace; and endeavour to
accommodate her future views and designs to the real mediocrity
of her circumstances.
End of The Project Gutenberg Etext of Wealth of Nations, by Adam Smith
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