Chapter Of the Unreasonableness of those extraordinary Restraints,

PART II.—Of the Unreasonableness of those extraordinary Restraints, upon other Principles.

  In the foregoing part of this chapter, I have endeavoured to show, even
  upon the principles of the commercial system, how unnecessary it is to lay
  extraordinary restraints upon the importation of goods from those
  countries with which the balance of trade is supposed to be
  disadvantageous.

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

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

  If the balance be even, and if the trade between the two places consist
  altogether in the exchange of their native commodities, they will, upon
  most occasions, not only both gain, but they will gain equally, or very
  nearly equally; each will, in this case, afford a market for a part of the
  surplus produce of the other; each will replace a capital which had been
  employed in raising and preparing for the market this part of the surplus
  produce of the other, and which had been distributed among, and given
  revenue and maintenance to, a certain number of its inhabitants. Some part
  of the inhabitants of each, therefore, will directly derive their revenue
  and maintenance from the other. As the commodities exchanged, too, are
  supposed to be of equal value, so the two capitals employed in the trade
  will, upon most occasions, be equal, or very nearly equal; and both being
  employed in raising the native commodities of the two countries, the
  revenue and maintenance which their distribution will afford to the
  inhabitants of each will be equal, or very nearly equal. This revenue and
  maintenance, thus mutually afforded, will be greater or smaller, in
  proportion to the extent of their dealings. If these should annually
  amount to £100,000, for example, or to £1,000,000, on each side, each of
  them will afford an annual revenue, in the one case, of £100,000, and, in
  the other, of £1,000,000, to the inhabitants of the other.

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

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

  If it was not with tobacco and East India goods, but with gold and silver,
  that England paid for the commodities annually imported from France, the
  balance, in this case, would be supposed uneven, commodities not being
  paid for with commodities, but with gold and silver. The trade, however,
  would in this case, as in the foregoing, give some revenue to the
  inhabitants of both countries, but more to those of France than to those
  of England. It would give some revenue to those of England. The capital
  which had been employed in producing the English goods that purchased this
  gold and silver, the capital which had been distributed among, and given
  revenue to, certain inhabitants of England, would thereby be replaced, and
  enabled to continue that employment. The whole capital of England would no
  more be diminished by this exportation of gold and silver, than by the
  exportation of an equal value of any other goods. On the contrary, it
  would, in most cases, be augmented. No goods are sent abroad but those for
  which the demand is supposed to be greater abroad than at home, and of
  which the returns, consequently, it is expected, will be of more value at
  home than the commodities exported. If the tobacco which in England is
  worth only £100,000, when sent to France, will purchase wine which is in
  England worth £110,000, the exchange will augment the capital of England
  by £10,000. If £100,000 of English gold, in the same manner, purchase
  French wine, which in England is worth £110,000, this exchange will
  equally augment the capital of England by £10,000. As a merchant, who has
  £110,000 worth of wine in his cellar, is a richer man than he who has only
  £100,000 worth of tobacco in his warehouse, so is he likewise a richer man
  than he who has only £100,000 worth of gold in his coffers. He can put
  into motion a greater quantity of industry, and give revenue, maintenance,
  and employment, to a greater number of people, than either of the other
  two. But the capital of the country is equal to the capital of all its
  different inhabitants; and the quantity of industry which can be annually
  maintained in it is equal to what all those different capitals can
  maintain. Both the capital of the country, therefore, and the quantity of
  industry which can be annually maintained in it, must generally be
  augmented by this exchange. It would, indeed, be more advantageous for
  England that it could purchase the wines of France with its own hardware
  and broad cloth, than with either the tobacco of Virginia, or the gold and
  silver of Brazil and Peru. A direct foreign trade of consumption is always
  more advantageous than a round-about one. But a round-about foreign trade
  of consumption, which is carried on with gold and silver, does not seem to
  be less advantageous than any other equally round-about one. Neither is a
  country which has no mines, more likely to be exhausted of gold and silver
  by this annual exportation of those metals, than one which does not grow
  tobacco by the like annual exportation of that plant. As a country which
  has wherewithal to buy tobacco will never be long in want of it, so
  neither will one be long in want of gold and silver which has wherewithal
  to purchase those metals.

  It is a losing trade, it is said, which a workman carries on with the
  alehouse; and the trade which a manufacturing nation would naturally carry
  on with a wine country, may be considered as a trade of the same nature. I
  answer, that the trade with the alehouse is not necessarily a losing
  trade. In its own nature it is just as advantageous as any other, though,
  perhaps, somewhat more liable to be abused. The employment of a brewer,
  and even that of a retailer of fermented liquors, are as necessary
  divisions of labour as any other. It will generally be more advantageous
  for a workman to buy of the brewer the quantity he has occasion for, than
  to brew it himself; and if he is a poor workman, it will generally be more
  advantageous for him to buy it by little and little of the retailer, than
  a large quantity of the brewer. He may no doubt buy too much of either, as
  he may of any other dealers in his neighbourhood; of the butcher, if he is
  a glutton; or of the draper, if he affects to be a beau among his
  companions. It is advantageous to the great body of workmen,
  notwithstanding, that all these trades should be free, though this freedom
  may be abused in all of them, and is more likely to be so, perhaps, in
  some than in others. Though individuals, besides, may sometimes ruin their
  fortunes by an excessive consumption of fermented liquors, there seems to
  be no risk that a nation should do so. Though in every country there are
  many people who spend upon such liquors more than they can afford, there
  are always many more who spend less. It deserves to be remarked, too, that
  if we consult experience, the cheapness of wine seems to be a cause, not
  of drunkenness, but of sobriety. The inhabitants of the wine countries are
  in general the soberest people of Europe; witness the Spaniards, the
  Italians, and the inhabitants of the southern provinces of France. People
  are seldom guilty of excess in what is their daily fare. Nobody affects
  the character of liberality and good fellowship, by being profuse of a
  liquor which is as cheap as small beer. On the contrary, in the countries
  which, either from excessive heat or cold, produce no grapes, and where
  wine consequently is dear and a rarity, drunkenness is a common vice, as
  among the northern nations, and all those who live between the tropics,
  the negroes, for example on the coast of Guinea. When a French regiment
  comes from some of the northern provinces of France, where wine is
  somewhat dear, to be quartered in the southern, where it is very cheap,
  the soldiers, I have frequently heard it observed, are at first debauched
  by the cheapness and novelty of good wine; but after a few months
  residence, the greater part of them become as sober as the rest of the
  inhabitants. Were the duties upon foreign wines, and the excises upon
  malt, beer, and ale, to be taken away all at once, it might, in the same
  manner, occasion in Great Britain a pretty general and temporary
  drunkenness among the middling and inferior ranks of people, which would
  probably be soon followed by a permanent and almost universal sobriety. At
  present, drunkenness is by no means the vice of people of fashion, or of
  those who can easily afford the most expensive liquors. A gentleman drunk
  with ale has scarce ever been seen among us. The restraints upon the wine
  trade in Great Britain, besides, do not so much seem calculated to hinder
  the people from going, if I may say so, to the alehouse, as from going
  where they can buy the best and cheapest liquor. They favour the wine
  trade of Portugal, and discourage that of France. The Portuguese, it is
  said, indeed, are better customers for our manufactures than the French,
  and should therefore be encouraged in preference to them. As they give us
  their custom, it is pretended we should give them ours. The sneaking arts
  of underling tradesmen are thus erected into political maxims for the
  conduct of a great empire; for it is the most underling tradesmen only who
  make it a rule to employ chiefly their own customers. A great trader
  purchases his goods always where they are cheapest and best, without
  regard to any little interest of this kind.

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

  That it was the spirit of monopoly which originally both invented and
  propagated this doctrine, cannot be doubted and they who first taught it,
  were by no means such fools as they who believed it. In every country it
  always is, and must be, the interest of the great body of the people, to
  buy whatever they want of those who sell it cheapest. The proposition is
  so very manifest, that it seems ridiculous to take any pains to prove it;
  nor could it ever have been called in question, had not the interested
  sophistry of merchants and manufacturers confounded the common sense of
  mankind. Their interest is, in this respect, directly opposite to that of
  the great body of the people. As it is the interest of the freemen of a
  corporation to hinder the rest of the inhabitants from employing any
  workmen but themselves; so it is the interest of the merchants and
  manufacturers of every country to secure to themselves the monopoly of the
  home market. Hence, in Great Britain, and in most other European
  countries, the extraordinary duties upon almost all goods imported by
  alien merchants. Hence the high duties and prohibitions upon all those
  foreign manufactures which can come into competition with our own. Hence,
  too, the extraordinary restraints upon the importation of almost all sorts
  of goods from those countries with which the balance of trade is supposed
  to be disadvantageous; that is, from those against whom national animosity
  happens ta be most violently inflamed.

  The wealth of neighbouring nations, however, though dangerous in war and
  politics, is certainly advantageous in trade. In a state of hostility, it
  may enable our enemies to maintain fleets and armies superior to our own;
  but in a state of peace and commerce it must likewise enable them to
  exchange with us to a greater value, and to afford a better market, either
  for the immediate produce of our own industry, or for whatever is
  purchased with that produce. As a rich man is likely to be a better
  customer to the industrious people in his neighbourhood, than a poor, so
  is likewise a rich nation. A rich man, indeed, who is himself a
  manufacturer, is a very dangerous neighbour to all those who deal in the
  same way. All the rest of the neighbourhood, however, by far the greatest
  number, profit by the good market which his expense affords them. They
  even profit by his underselling the poorer workmen who deal in the same
  way with him. The manufacturers of a rich nation, in the same manner, may
  no doubt be very dangerous rivals to those of their neighbours. This very
  competition, however, is advantageous to the great body of the people, who
  profit greatly, besides, by the good market which the great expense of
  such a nation affords them in every other way. Private people, who want to
  make a fortune, never think of retiring to the remote and poor provinces
  of the country, but resort either to the capital, or to some of the great
  commercial towns. They know, that where little wealth circulates, there is
  little to be got; but that where a great deal is in motion, some share of
  it may fall to them. The same maxim which would in this manner direct the
  common sense of one, or ten, or twenty individuals, should regulate the
  judgment of one, or ten, or twenty millions, and should make a whole
  nation regard the riches of its neighbours, as a probable cause and
  occasion for itself to acquire riches. A nation that would enrich itself
  by foreign trade, is certainly most likely to do so, when its neighbours
  are all rich, industrious and commercial nations. A great nation,
  surrounded on all sides by wandering savages and poor barbarians, might,
  no doubt, acquire riches by the cultivation of its own lands, and by its
  own interior commerce, but not by foreign trade. It seems to have been in
  this manner that the ancient Egyptians and the modern Chinese acquired
  their great wealth. The ancient Egyptians, it is said, neglected foreign
  commerce, and the modern Chinese, it is known, hold it in the utmost
  contempt, and scarce deign to afford it the decent protection of the laws.
  The modern maxims of foreign commerce, by aiming at the impoverishment of
  all our neighbours, so far as they are capable of producing their intended
  effect, tend to render that very commerce insignificant and contemptible.

  It is in consequence of these maxims, that the commerce between France and
  England has, in both countries, been subjected to so many discouragements
  and restraints. If those two countries, however, were to consider their
  real interest, without either mercantile jealousy or national animosity,
  the commerce of France might be more advantageous to Great Britain than
  that of any other country, and, for the same reason, that of Great Britain
  to France. France is the nearest neighbour to Great Britain. In the trade
  between the southern coast of England and the northern and north-western
  coast of France, the returns might be expected, in the same manner as in
  the inland trade, four, five, or six times in the year. The capital,
  therefore, employed in this trade could, in each of the two countries,
  keep in motion four, five, or six times the quantity of industry, and
  afford employment and subsistence to four, five, or six times the number
  of people, which all equal capital could do in the greater part of the
  other branches of foreign trade. Between the parts of France and Great
  Britain most remote from one another, the returns might be expected, at
  least, once in the year; and even this trade would so far be at least
  equally advantageous, as the greater part of the other branches of our
  foreign European trade. It would be, at least, three times more
  advantageous than the boasted trade with our North American colonies, in
  which the returns were seldom made in less than three years, frequently
  not in less than four or five years. France, besides, is supposed to
  contain 24,000,000 of inhabitants. Our North American colonies were never
  supposed to contain more than 3,000,000; and France is a much richer
  country than North America; though, on account of the more unequal
  distribution of riches, there is much more poverty and beggary in the one
  country than in the other. France, therefore, could afford a market at
  least eight times more extensive, and, on account of the superior
  frequency of the returns, four-and-twenty times more advantageous than
  that which our North American colonies ever afforded. The trade of Great
  Britain would be just as advantageous to France, and, in proportion to the
  wealth, population, and proximity of the respective countries, would have
  the same superiority over that which France carries on with her own
  colonies. Such is the very great difference between that trade which the
  wisdom of both nations has thought proper to discourage, and that which it
  has favoured the most.

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

  There is no commercial country in Europe, of which the approaching ruin
  has not frequently been foretold by the pretended doctors of this system,
  from all unfavourably balance of trade. After all the anxiety, however,
  which they have excited about this, after all the vain attempts of almost
  all trading nations to turn that balance in their own favour, and against
  their neighbours, it does not appear that any one nation in Europe has
  been, in any respect, impoverished by this cause. Every town and country,
  on the contrary, in proportion as they have opened their ports to all
  nations, instead of being ruined by this free trade, as the principles of
  the commercial system would lead us to expect, have been enriched by it.
  Though there are in Europe indeed, a few towns which, in same respects,
  deserve the name of free ports, there is no country which does so.
  Holland, perhaps, approaches the nearest to this character of any, though
  still very remote from it; and Holland, it is acknowledged, not only
  derives its whole wealth, but a great part of its necessary subsistence,
  from foreign trade.

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

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

  The balance of produce and consumption may be constantly in favour of a
  nation, though what is called the balance of trade be generally against
  it. A nation may import to a greater value than it exports for half a
  century, perhaps, together; the gold and silver which comes into it during
  all this time, may be all immediately sent out of it; its circulating coin
  may gradually decay, different sorts of paper money being substituted in
  its place, and even the debts, too, which it contracts in the principal
  nations with whom it deals, may be gradually increasing; and yet its real
  wealth, the exchangeable value of the annual produce of its lands and
  labour, may, during the same period, have been increasing in a much
  greater proportion. The state of our North American colonies, and of the
  trade which they carried on with Great Britain, before the commencement of
  the present disturbances, {This paragraph was written in the year 1775.}
  may serve as a proof that this is by no means an impossible supposition.