Sir James Steuart (1767)
I am now to give an illustration of some things relating to that species of trade which is carried on with other nations, laid down, I think, in too general terms in the former chapter.
I have constantly in view to separate and distinguish the principles of foreign trade, from those which influence the advancement of an inland commerce, and a brisk circulation only; operations which produce very different effects, equally meriting the attention of a statesman.
The very existence of foreign trade, implies a separate interest between those nations who are found on the opposite sides of the mercantile contract, namely the buyers and the sellers, as both endeavour to make the hest bargain possible for themselves. These transactions imply a mutual dependence upon one another, which may either be necessary or contingent. It is necessary, when one of the nations cannot subsist without the assistance of the other, as is the case between the province of Holland, and those countries which supply it with grain; or contingent, when the wants of a particular nation cannot be supplied by their own inhabitants, from a want of skill and dexterity, only.
Wherever, therefore, one nation finds another necessarily depending upon her for particular branches of traffic, there is a certain foundation for foreign trade; where the dependence is contingent, there is occasion for management, and for the hand of an able statesman.
The best way to preserve every advantage is, to examine how far they are necessary, and how far they are only contingent, to consider in what respect the nation may be most easily rivalled by her neighbours, and in what respect she has natural advantages which cannot be taken from her.
The natural advantages are chiefly to be depended on: France, for example, never can be rivalled in her wines. Other countries may enjoy great advantages from their situation, mines, rivers, sea-ports, fishing, timber, and certain productions proper to the soil. If you abstract from these natural advantages, all nations are upon an equal footing as to trade. Industry and labour are no properties attached to place, any more than oeconomy and sobriety.
This proposition may be called in question, upon the principles of M. de Montesquieu, who deduces the origin of many laws, customs, and even religions, from the influence of climate. This great man reasoned from fact and from experience, and from the power and tendency of natural causes, to produce certain effects, when they are not checked by other circumstances; but in my method of treating this subject, I do not suppose that these causes are ever to be allowed to produce their natural and immediate effects, when such effects would be followed by a political inconvenience: but I constantly suppose a statesman at the head of government, who makes every circumstance concur in promoting the execution of the plan he has laid down.
First, If a nation then has formed a scheme of being long great and powerful by trade, she must first apply closely to the manufacturing every natural produce of the country. For this purpose a sufficient number of hands must be employed: for if hands be found wanting, the natural produce will be exported without receiving any additional value from labour; and the consequences of this natural advantage will be lost.
The price of food, and all necessaries for manufacturers, must be found at an easy rate.
And, in the last place, if oeconomy and sobriety in the workmen, and good regulations on the part of the statesman, are not kept up, the end will not be obtained: for if the manufacture, when brought to market, do not retain the advantages which the manufacturer had in the beginning, by employing the natural produce of the country; it is the same thing as if the advantage had not existed. I shall illustrate this by an example.
I shall suppose wool to be better, more plentiful, and cheaper, in one country than in another, and both to be rivals in the woollen trade. It is natural that the last should desire to buy wool of the first, and that the other should desire to keep it at home, in order to manufacture it. Here then is a natural advantage which the first country has over the latter, and which cannot be taken from her. I shall suppose that subsistence is as cheap in one country as in the other; that is to say, that bread and every other necessary of life is at the same price. If the workmen of the first country (by having been the founders of the cloth manufacture, and by having had, for a long tract of years, so great a superiority over other nations, as to make them, in a manner, absolutely dependent upon them for cloths) shall have raised their prices from time to time; and if, in consequence of large profits, long enjoyed without rivalship, these profits shall have been consolidated with the real value, in consequence of an habitually greater expence in living, which implies an augmentation of wages; this country may thereby lose all the advantages it had from the low price and superior quality of its wool. But if, on the other hand, the workmen in the last country work less, be less dextrous, pay extravagant prices for wool at prime cost, and be at great expence in carriage; if manufactures cannot be carried on successfully, but by public authority, and if private workmen be crushed with excessive taxes upon their industry; all the accidental advantages which the last country had over the first, may come to be more than balanced, and the first may regain those which nature first had given her. But this should by no means make the first country rest secure. These accidental inconveniences found in the rival nation may come to cease; and therefore her only real security for this branch, will be the cheapness of the workmanship.
Secondly, In speaking of a standard price, for goods in the last chapter, I established a distinction between one regulated by the height of foreign demand, and another kept as low as the possibility of supplying the manufacture can admit. This requires a little explanation.
It must not here be supposed that a people, from a principle of public spirit, will ever be engaged to relinquish the profit of a rise in foreign demand; and as this rise may proceed from circumstances and events which are entirely hid from the manufacturers, such revolutions are unavoidable. We must therefore restrain the generality of our former proposition, and observe, that the indispensible vibrations of this foreign demand do no harm; but that the statesman should be constantly on his guard to prevent the subversion of the balance, or the smallest consolidation of extraordinary profits with the real value. This he may accomplish, as has been observed, by multiplying hands in those branches of exportation, upon which profits have risen. This will increase the home supply, and frustrate his own people of extraordinary gains, which would otherwise terminate in a prejudice to foreign trade.
A statesman may sometimes, out of a principle of benevolence, perhaps of natural equity towards the classes of the industrious, as well as from sound policy, permit extraordinary profits, as an encouragement to some of the more elegant arts, which serve as an ornament to a country; which establish a reputation for taste and refinement in favour of a people, and thereby make strangers prefer articles of their production, which have no superior merit but the name of the country they come from: but even these, he never ought to allow to rise so high in the price as to prove an encouragement to other nations to establish a successful rivalship.
Thirdly, The encouragement recommended to be given to the domestic consumption of superfluities, as oft as the foreign demand for them happens to fall so low as to be followed with the distress of the workmen, requires a little farther explanation.
If what I laid down in the last chapter with respect to this encouragement be taken literally, I own it appears an absurd supposition, because it both implies a degree of public spirit in those who are in a capacity to purchase the superfluities, no where to be met with, and at the same time a self-denial, in discontinuing the demand, so soon as another branch of foreign trade is opened for the employment of the industrious; one and the other being equally contrary to the principles upon which we have founded the whole scheme of our political oeconomy.
I have elsewhere observed, that were revolutions to happen as suddenly as I am obliged to represent them, all would go into confusion.
What, therefore, is recommended upon such an exigence comes to this. That when a statesman finds, that the natural taste of his people does not lead them to profit of the surplus of commodities which lie upon hand, and which used to be exported, he should interpose his authority and management in such a way as to prevent the distress of the workmen, and when, by a sudden fall in a foreign demand, this distress becomes unavoidable, without a more powerful interposition, he should then himself become the purchaser, if others will not; or, by premiums or bounties on the exportation of the surplus which lies upon hand, promote the sale of it at any rate, until the supernumerary hands can be otherwise provided for. And although I allow that the rich people of a state are not commonly led, from a principle either of public spirit or self-denial, to concur in such political operations; yet we cannot deny, that it is in the power of a good governor, by exposing the political state of certain classes of the people, to prevail with men of substance to join in schemes for their relief; and this is all I intend to recommend in practice. My point of view is to lay down the principles, and I never recommend them farther than they may be rendered possible in execution, by preparatory steps, and by properly working on the spirit of the people.
If manufacturers be found without employment, we are not immediately to accuse the statesman, nor conclude that it proceeds from a decay of trade, until the cause of it be inquired into. If upon examination it be found, that for some years past food has been at a higher rate than in neighbouring countries, the statesman may be to blame: for it is certain, that a trading nation, by turning part of her commerce into a proper channel, may always be able to establish a just balance in this particular. And though it be not expedient in years of scarcity to bring the price of grain very low, yet it is generally possible to keep it at the rate it sells for in all rival nations, which, with regard to the present point, is the same thing.
If this want of employment for manufacturers do not proceed from the high prices of living, but for want of commissions from the merchants, the causes of this diminution of demand must be examined into. It may be accidental, and happen from causes which may cease in a little time, and trade may return to flourish as before. It may also happen upon the establishment of new undertakings in different places of the country, from which, by reason of some natural advantage, or a more frugal disposition in the workmen, or from the proximity of place; certain markets may be supplied, which formerly were furnished by those industrious people who are now found to be without employment. In these last suppositions, the distress of the manufacturers is no proof of any decay of trade in general, but, on the contrary, it may contribute to destroy the bad effects of consolidated profits, by obliging those who formerly shared them, to abandon the ease of their circumstances, and to submit a-new to a painful industry, barely sufficient to procure subsistence. When such revolutions are sudden, they prove hard to bear, and throw people into great distress. It is partly to prevent such inconveniences, that we have recommended the lowest standard possible in the price of articles of exportation.
Two causes there are, which very commonly mark a decline of trade, to wit; 1. When foreign markets, usually supplied by the trading nation, begin to be furnished, let it be in the most trifling article, by others, not used to supply them. Or, 2. When the country itself is furnished from abroad with such manufactures as were formerly made at home.
These circumstances prove one of two things, either that there are workmen in other countries, who, from advantages which they have acquired by nature, or by industry and frugality, finding a demand for their work, take the bread out of the mouths of those formerly employed, and deprive them of certain branches of their foreign trade: or, that these foreign workmen, having profited of the increased luxury and dissipation of the former traders, have begun to supply the markets with certain articles of consumption, the profits upon which being small, are, without much rivalship, insensibly yielded up to them by the workmen of the other trading nation, who find better bread in serving their own wealthy countrymen.
Against the first cause of decline, I see no better remedy than patience, as I have said already, and a perseverance in frugality and oeconomy, until the unwary beginners shall fall into the inconveniences generally attending upon wealth and ease.
The second cause of decline it is far more difficult to remove. The root of it lies deep, and is ingrafted with the spirit and manners of the whole people, high and low. The lower classes have contracted a taste for superfluity and expence which they are enabled to gratify, by working for their own countrymen; while they despise the branches of foreign trade as low and unprofitable. The higher classes again depend upon the lower classes, for the gratification of a thousand little trifling desires, formed by the taste for dissipation, and supported by habit, fashion, and a love of expence.
Here then is a system set on foot, whereby the poor are made rich, and the rich are made happy, in the enjoyment of a perpetual variety of every thing, which can remove the inconveniences to which human nature is exposed. Thus both parties become interested to support it, and vie with one another in the ingenuity of contriving new wants; the one from the immediate satisfaction of removing them; the other from the profit of furnishing the means, and from the hopes of one day sharing in them.
But even for this great evil, the very nature of man points out a remedy. It is the business of a statesman to lay hold of it. The remedy flows from the instability of every taste not founded upon rational desires.
In every country of luxury, we constantly find certain classes of workmen in distress, from the change of modes. Were a statesman upon his guard to employ such as are forced to be idle, before they betake themselves to new inventions, for the support of the old plan, or before they contract an abandoned and vicious habit, he would get them cheap, and might turn their labour both to the advantage of the state and to the discouragement of luxury.
I confess, however, that while a luxurious taste in the rich subsists, industrious people will always be ready to supply the instruments of it to the utmost extent; and I also allow, that such a taste has infinite allurements, especially while youth and health enable a rich man to in it. Those, however, who are systematically luxurious, that is, from a formed taste and confirmed habit, are but few, in comparison of those who become so from levity, vanity, and the imitation of others. The last are those who principally support and extend the system; but they are not the most incorrigible. Were it not for imitation, every age would seek after, and be satisfied with the gratification of natural desires. Twenty-five might think of dress, horses, hunting, dogs, and generous wines: forty, of a plentiful table, and the pleasures of society: sixty, of coaches, elbow-chairs, soft carpets, and instruments of ease. But the taste for imitation blends all ages together. The old fellow delights in horses and fine clothes; the youth rides in his chariot on springs, and lolls in an easy chair, large enough to serve him for a bed. All this proceeds from the superfluity of riches and taste for imitation, not from the real allurements of ease and taste for luxury, as every one must feel, who has conversed at all with the great and rich. Fashion, which I understand here to be a synonimous term for imitation, leads most people into superfluous expence, which is so far from being an article of luxury, that it is frequently a load upon the person who complies with it. All such branches of expence, it is in the power of a statesman to cut off, by setting his own example, and that of his favourites and servants, against the caprice of fashion.
The levity and changeableness of mankind, as I have said, will even assist him. A generation of oeconomists is sometimes found to succeed a generation of spendthrifts; and we now see, almost over all Europe, a system of sobriety succeeding an habitual system of drunkenness. Drunkenness, and a multitude of useless servants, were the luxury of former times.
Every such revolution may be profited of by an able statesman, who must set a good example on the one hand, while, on the other, he must profit of every change of taste, in order to re-establish the foreign trade of his subjects. An example of frugality, in the head of a luxurious people, would do finite harm, were it intended to reform the morals of the rich only, without indemnifying the poor for the diminution upon consumption.
At the same time, therefore, that luxury comes to lose ground at home, a door must be opened, to serve as an out-let for the work of those hands which must be thereby made idle; and which, consequently must fall into distress.
This is no more than the principle before laid down, in the fifteenth chapter, reversed: there we said, that when foreign demand begins to decline, domestic luxury must be made to increase, in order to soften the shock of the sudden revolution in favour of the industrious. For the same reason here we say, that foreign trade must be opened upon every diminution of domestic luxury.
How few Princes do we find either frugal or magnificent from political considerations! And, this being the case, is it not necessary to lay before them the natural consequences of the one and the other? And it is still more necessary to point out the methods to be taken in order to avoid the inconveniences which may proceed from either.
Under a prodigal administration, the number of people will increase. The statesman therefore should keep a watchful eye upon the supplying of subsistence. Under a frugal reign, numbers will diminish, if the statesman do not open every channel which may carry off the superfluous productions of industry. Here is the reason: a diminution of expence at home, is a diminution of employment; and this again implies a diminution of people; because it interrupts the circulation of the subsistence which made them live; but if foreign trade he made to fill up the void, the nation will preserve its people, and the savings of the Prince will be compensated by the balance coming in from strangers.
These topics are delivered as hints only; and the amplification of them might not improperly have a place here; did I not expect to bring them in to greater advantage, after examining the principles of taxation, and pointing out those which direct the application of public money.
The multiplicity of relations between the several parts of political oeconomy, forces me to a frequent repetition of principles. I have no other rule to judge whether such repetitions be superfluous, or necessary, but by the tendency they have to give me a more distinct view of my subject. This is commonly the case when the same principles are applied to different combinations of circumstances.
Almost every thing to be said on the head mentioned in the title of this chapter, has been already taken notice of; and my present intention is merely to lay together ideas which appear scattered, because they have been occasionally brought in by their relations to other matters.
The methods of lowering the price of manufactures, so as to render them exportable, are of two kinds.
The first, such as proceed from a good administration, and which bring down prices within the country, in consequence of natural causes.
The second, such as operate upon that part only which comes to be exported in consequence of a proper application of public money.
As I have not yet inquired into the methods of providing a public fund, it would, I think, be contrary to order to examine in this place the doctrine of premiums for bringing down the price of manufactures. This operation will come in more naturally afterwards, and the general distinction here mentioned, is only introduced by the by, that my readers may retain it and apply it as we go along.
The end proposed is to lower the price of manufactures, so that they may be exported. The first thing therefore to be known, is the cause from whence it happens, that certain manufactures cannot be furnished at home so cheap as in other countries; the second, how to apply the proper remedy for lowering the price of them.
The causes of high prices, that is, of prices relatively higher than they are found to be in other nations, are reducible to four heads; which I shall lay down in their order, and then point out the methods of removing them likewise, in their order.
First, The consolidation of high profits with the real value of the manufacture. This cause operates in countries where luxury has gained ground, and where domestic competition has called off too many of the hands, which were formerly content to serve at a lower price, and for smaller gains.
Secondly, The rise in the price of articles of the first necessity. This cause operates when the progress of industry has been more rapid than that of agriculture. The progress of industry, as we have shewn, necessarily implies an augmentation of useful inhabitants; and as these have commonly wherewithal to purchase subsistence, the moment their numbers swell above the proportion of the food produced by agriculture, or above what is found in the markets of the country, or brought from abroad, they enter into competition and raise the price of it. Here then let it be observed, by the by, that what raises the price of subsistence is the augmentation of the number of useful inhabitants, that is, of such as are easy in their circumstances. Let the wretched be ever so many, let abusive procreation go on ever so far, such inhabitants will have little effect in raising the price of food, but a very great one in increasing the misery of their own class. A proof of this is to be met with in many provinces where the number of poor is very great, and where at the same time the price of necessaries is very low; whereas no instance can be found where a number of the industrious being got together, does not occasion an immediate rise on most of the articles of subsistence.
Thirdly, The natural advantages of other countries. This operates in spite of all the precautions of the most frugal and laborious people. Let them deprive themselves of every superfluity; let them be ever so diligent and ingenious; let every circumstance be improved to the utmost by the statesman for the establishment of foreign trade; the advantage of climate and situation may give such a superiority to the people of another country, as to render a direct competition with them impossible.
Fourthly, The superior dexterity of other nations in working up their manufactures, their knowledge in the science of trade, the promptitude of their payments, the advantage they have in turning their money to account in the intervals of their own direct circulation, the superior abilities of their statesman, the application of their public money, in one word, the perfection of their political oeconomy.
Before I enter upon the method of removing these several inconveniences, I must observe, that as we are at present treating of the relative height of the price of manufactures, a competition between nations is constantly implied. It is this which obliges a statesman to be principally attentive to the rise of prices. The term competition is relative to, and conveys the idea of emulation between two parties striving to compass the same end. I must therefore distinguish between the endeavours which one nation makes to retain a superiority already got, and the endeavours which another nation makes in order to acquire it. The first I shall call a competition to retain; the second, a competition to acquire.
The first three heads represent the inconveniences to which the competitors to retain are liable; and the fourth comprehends those to which the competitors to acquire are most commonly exposed.
Having digested our subject into order, I shall run through the principles which severally influence the removing of every inconvenience, whether incident to a nation whose foreign trade is already well established, or to another naturally calculated for entering into a competition for the acquisition of it.
In proposing a remedy for the particular causes of the rise of prices above mentioned, we must suppose every one entirely simple, and uncompounded with the others; a thing which in fact seldom happens. This I do for the sake of distinctness; and the principal difficulty in practice is to combine the remedies in proportion to the complication of the disease. I now come to the first of the four causes of high prices, to wit, consolidated profits.
The whole doctrine of these has been abundantly set forth in the 10th chapter. We there explained the nature of them, shewed how the subversion of the balance, by a long preponderancy of the scale of demand, had the effect of consolidating profits in a country of luxury; and observed, that the reducing them to the proper standard could never fail of bringing those who had long enjoyed them, into distress.
The question now before us is how to reduce them, when foreign trade cannot otherwise be retained, let the consequences be ever so hurtful to certain individuals. When the well being of a nation comes in competition with a temporary inconvenience to some of the inhabitants, the general good must be preferred to particular considerations.
I have observed above, that domestic luxury, by offering high prices upon certain species of industry, calls off many hands employed to supply the articles of exportation, upon which profits are generally very moderate. The first natural and immediate effect of this, is, to diminish the hands employed in furnishing the foreign demand; consequently, to diminish the supply; consequently, to occasion a simple competition on the side of the strangers, who are the purchasers; consequently, to augment profits to the furnishers until by the rise and consolidation of such profits the market is deserted.
The very progress here laid down, points out the remedy. The number of hands employed in these particular branches must be multiplied; and if the luxurious taste and wealth of the country prevent any one who can do better, from betaking himself to a species of industry lucrative to the nation, but ungrateful to those who exercise it, the statesman must collect the children of the wretched into workhouses, and breed them to this employment, under the best regulations possible for saving every article of necessary expence; here likewise may be employed occasionally those above mentioned, whom the change of modes may have cast out of employment, until they can be better provided for. This is also an outlet for foundlings, since many of those who work for foreign exportation, are justly to be ranked in the lowest classes of the people; and in the first book we proposed, that every one brought up at the expence of public charity, should be thrown in for recruiting these classes, which can with greatest difficulty support their own numbers by propagation.
Here let me observe, that although it be true in general, that the greatest part of exportable manufactures do yield but very middling profits, from the extension of industry in different countries, yet sundry exceptions may be found; especially in nations renowned for their elegance of taste. But how quickly do we see these lucrative branches of foreign trade cut off, in consequence of the very inconvenience we here seek a remedy for. The reason is plain. When strangers demand such manufactures, they share only in the instruments of foreign luxury, which bring every where considerable profits to the manufacturer. These high profits easily establish a rivalship in favour of the nation to whom they are supplied; because a hint is sufficient to enable such as exercise a similar profession at home, to supply their own inhabitants. This being the case, an able statesman should be constantly attentive to every growing taste among foreign nations for the inventions of his people; and so soon as his luxurious workmen have set any one on foot, he may throw this branch into the hands of the most frugal, in order to support it, and then give them such encouragement as to prevent the rivalship of those strangers at least, who are accustomed to work for larger profits. This is one method of turning a branch of luxury into an article of foreign trade. Let me illustrate this by an example.
What great advantages do not the French reap from the exportation of their modes? But how quickly do we find their varnishes, gauzes, ribbands, and colifichets, imitated by other nations? For no other reason but because of the large, or consolidated profits enjoyed by the French workmen themselves, who, fertile in new inventions, and supported by their reputation for the elegance of their taste in matters of dress, have got into possession of the right of prescribing to all Europe the standard of taste in articles of mere superfluity. This however is no permanent prerogative; and that elegant people, by long setting the example, and determining the standard of refinement in some luxurious arts, will at last inspire a similar taste into their scholars, who will thereby be enabled to supplant them. Whereas were they careful to supply all their inventions at the lowest prices possible, they would ever continue to be the only furnishers.
The method therefore of reducing consolidated profits, whether upon articles of exportation, or home consumption, is to increase the number of hands employed in supplying them; and the more gradually this change is made to take place, the fewer inconveniences will result to those who will thereby be forced to renounce them.
A country which has an extensive territory, and great opportunities of extending her agriculture (such as in a former chapter I supposed the present situation of France to be) may, under a good administration, find the progress of luxury very compatible with the prosperity of her foreign trade; because inhabitants may be multiplied at discretion. But so soon as subsistence becomes hard to be obtained, this expedient is cut off. A statesman must then make the best of the inhabitants he has, luxury must suffer a check; and those who are employed in supplying home consumption at high prices, must be made to reduce their consolidated profits, in order to bring the price of their manufactures within such bounds as to make them vendible in foreign markets.
If manufacturers become luxurious in their way of living, it must proceed from their extraordinary profits. These they may still continue to have, as long as the produce of their work is consumed at home. But no merchant will pretend to sell it out of the country; because, in this case, he will find the labour of other people who are less luxurious, and consequently work cheaper, in competition with him.
To re-establish then the foreign trade, these consolidated profits must be put an end to, by attacking luxury when circumstances render an augmentation of people inconvenient, and prices will fall of course.
This will occasion great complaints among all sorts of tradesmen. The cry will be, that trade is ruined, manufacturers are starving, and the state is undone: but the truth will be, that manufacturers will, by their labour, begin to enrich their own nation, at the expence of all those who trade with her, instead of being enriched at the expence of their own countrymen; and by a revolution only in the balance of wealth at home.
It will prove very discouraging to any statesman to attempt a sudden reform of this abuse of consolidated profits, and to attack the luxury of his own people. The best way therefore is to prevent matters from coming to such as pass, as to demand so dangerous and difficult a remedy.
There is hardly a possibility of changing the manners of a people, but by a proper attention to the education of the youth. All methods, therefore, should be fallen upon to supply manufactures with new hands; and lest the contagion of example should get the better of all precautions, the seat of manufactures might be changed; especially when they are found in great and populous cities, where living is dear: in this case, others should be erected in the provinces where living is cheap. The state must encourage these new undertakings; numbers of children must be taken in, in order to be bred early to industry and frugality; this again will encourage people to marry and propagate, as it will contribute towards discharging them of the load of a numerous family. If such a plan as this be followed, how inconsiderable will the number of poor people become in a little time; and as it will insensibly multiply the useful inhabitants, out of that youth which recruited and supported the numbers of the poor, so the taxes appropriated for the relief of poverty may be then wholly applied, in order to prevent it.
Laws of naturalization have been often proposed in a nation, where consolidated profits have occasioned the inconveniences for which we have here been proposing a remedy. By this expedient many flatter themselves to draw industrious strangers into the country, who being accustomed to live more frugally, and upon less profits, may, by their example and competition, beat down the price of work among the inhabitants.
Several circumstances concur to defeat the success of this scheme. The first is, that consolidated profits are not the only inconvenience to be removed: there is also a complication of high prices upon many necessaries. Secondly, as no real change has been proposed as a concomitant of such naturalization-laws (such as a regulation for augmenting the supply of subsistence, and fixing the price of it within proper bounds) these strangers, who, as such, must be exposed to extraordinary expence, are not able to subsist, nor consequently to work so cheap as they did at home. Besides, what can be supposed to be their motive of coming, if it be not to have higher wages, and to live better?
Here then is a nation sending for strangers, in order that they may work cheaper; and strangers flocking into the country in hopes of selling their work dearer. This is just the case with two friends who are about making a bargain; the seller imagines that his friend will not grudge a good price. The buyer, on the other hand, flatters himself that his friend will sell to him cheaper than to another. This seldom fails to produce discontent on both sides.
Besides, unless the quantity of food be increased, if strangers are imported to eat part of it, natives must in some degree starve and if you augment the quantity of food, and keep it at a little lower price than in neighbouring nations, your own inhabitants will multiply; the state may take great numbers of them into their service when young; they soon come to be able to do something in the manufacturing way; they may be bound for a number of years, sufficient to indemnify the public for the first expence; and the encouragement alone of having bread cheaper than elsewhere, will bring you as many strangers as you incline to receive, provided a continual supply of food can be procured in proportion to the increase of the people.
But I imagine that it is always better for a state to multiply by means of its own inhabitants, than by that of strangers; for many reasons which to me appear obvious.
We come now to the second cause of high prices, to wit, a rise in the value of the articles of the first necessity, which we have said proceeds from the progress of industry having outstripped the progress of agriculture. Let me set this idea in a clearer light; for here it is expressed in too general terms to be rightly viewed on all sides.
The idea of inhabitants being multiplied beyond the proportion of subsistence, seems to imply that there are too many already; and the demand for their industry having been the cause of their multiplication, proves that formerly there were too few. Add to this, that if, notwithstanding the rise upon the price of work proceeding from the scarcity of subsistence, the scale of home demand be found to preponderate, at the expence of foreign trade, this circumstance proves farther, that however the inhabitants may be already multiplied above the proportion of subsistence, their numbers are still too few for what is demanded of them at home; and for what is required of them towards promoting the prosperity of their country, in supporting their trade abroad.
From this exposition of the matter, the remedy appears evident: both inhabitants and subsistence must be augmented. The question comes to be, in what manner, and with what precautions, must these operations be performed?
Inhabitants are multiplied by reducing the price of subsistence to the value, which demand has fixed upon the work of those who are to consume it. This can in no other way be accomplished than by augmenting the quantity, by importation from foreign parts, when the country cannot be made to produce more of itself.
Here the interposition of a statesman is absolutely necessary; since great loss may often be incurred by bringing down the price of grain in a year of scarcity. Premiums, therefore, must be given upon importation, until a plan can be executed for the extending of agriculture; of which in another place. This must be gone about with the greatest circumspection; for if grain be thereby made to fall too low, you ruin the landed interest, and although (as we have said above) all things soon become balanced in a trading nation, yet sudden and violent revolutions, such as this must be, are always to be apprehended. They are ever dangerous; and the spirit of every class of inhabitants must be kept up.
By a discredit cast upon any branch of industry, the hands employed in it may be made to abandon it, to the great detriment of the whole. This will infallibly happen, when violent transitions do not proceed from natural causes, as in the example here before us, namely, when the price of grain is supposed to be brought down, from the increase of its quantity by importation, and not by plenty. Because upon the falling of the market by importation, the poor farmer has nothing to make up for the low price he gets for his grain; whereas when the fall proceeds from plenty, he has an additional quantity.
In years, therefore, of general scarcity, a statesman should not, by premiums given, reduce the price of grain, but in a reciprocal proportion to the quantity wanted: that is to say, the more grain is wanted, the less the price should be diminished.
It may appear a very extensive project for any government to undertake to keep down the prices of grain, in years of general scarcity. I allow it to be politically impossible to keep prices low, because if all Europe be taken together, the produce of the whole is one with another consumed by the inhabitants; and in a year when there is a general scarcity, it would be very hard, if not impossible, (without having previously established a plan for this purpose) to make any nation live in plenty while others are starving. All therefore that is proposed, is to keep the prices of grain in as just a proportion as possible to the plenty of the year.
Now if a government do not interpose, this never can be the case. I shall suppose the inhabitants of a country to consume, in a year of moderate plenty, six millions of quarters of grain; if in a year of scarcity it shall be found, that one million of quarters, or indeed a far less quantity, be wanting, the five millions of quarters produced, will rise in their price to perhaps double the ordinary value, instead of being increased by one fifth only. But if you examine the case in countries where trade is not well established, as in some inland provinces on the continent, it is no extraordinary thing to see grain bearing three times the price it is worth in ordinary years of plenty, and yet if in such a year there were wanting six months' provisions for the inhabitants of a great kingdom, all the rest of Europe would perhaps hardly be able to keep them from starving.
It is the fear of want and not real want, which makes grain rise to immoderate prices. Now as this extraordinary revolution in the rise of it, does not proceed from a natural cause, to wit, the degree of scarcity, but from the avarice and evil designs of men who hoard it up, it produces as bad consequences to that part of the inhabitants of a country employed in manufactures, as the fall of grain would produce to the farmers, in case the prices should be, by importation, brought below the just proportion of the quantity produced in the nation.
Besides the importation of grain, there is another way of increasing the quantity of subsistence very considerably, in some countries of Europe. In a year of scarcity, could not the quantity of food be considerably augmented by a prohibition to make malt liquors, allowing the importation of wines and brandies; or indeed without laying any restraint upon the liberty of the inhabitants as to malt liquors, I am persuaded that the liberty of importing wines duty free, would, in years of scarcity, considerably augment the quantity of subsistence.
This is not a proper place to examine the inconvenience which might result to the revenue by such a scheme: because we are here talking of those expedients only which might be fallen upon to preserve a balance on foreign trade. An exchequer which is filled at the expence of this, will not continue long in a flourishing condition.
These appear to be the most rational temporary expedients to diminish the price of grain in years of scarcity; we shall afterwards examine the principles upon which a plan may be laid down to destroy all precariousness in the price of subsistence.
Precautions of another kind must be taken in years of plenty; for high prices occasioned by exportation are as hurtful to the poor tradesman as if they were occasioned by scarcity. And low prices occasioned by importation are as hurtful to the poor husbandman as if his crop had failed him.
A statesman therefore, should be very attentive to put the inland trade in grain upon the best footing possible, to prevent the frauds of merchants, and to promote an equal distribution of food in all corners of the country. and by the means of importation and exportation, according to plenty and scarcity, to regulate a just proportion between the general plenty of the year in Europe, and the price of subsistence; always observing to keep it somewhat lower at home, than it can be found in any nation rival in trade. If this method be well observed, inhabitants will multiply; and this is a principal step towards reducing the expence of manufactures; because you increase the number of hands, and consequently diminish the price of labour.
Another expedient found to operate most admirable effects in reducing the price of manufactures (in those countries where living is rendered dear, by a hurtful competition among the inhabitants for the subsistence produced) is the invention and introduction of machines. We have, in a former chapter, answered the principal objections which have been made against them, in countries where the numbers of the idle, or triflingly industrious are so great, that every expedient which can abridge labour is looked upon by some as a scheme for starving the poor. There is no solidity in this objection; and if there were, we are not at present in quest of plans for feeding the poor; but for accumulating the wealth of a trading nation, by enabling the industrious to feed themselves at the expence of foreigners. The introduction of machines is found to reduce prices in a surprising manner. And if they have the effect of taking bread from hundreds, formerly employed in performing their simple operations, they have that also of giving bread to thousands, by extending numberless branches of ingenuity, which, without the machines, would have remained circumscribed within very narrow limits. What progress has not building made within these hundred years? Who doubts that the convenience of great iron works, and saw mills, prompts many to build? But this taste has greatly contributed to increase, not to diminish, the number both of smiths and carpenters, as well as to extend navigation. I shall add only in favour of such expedients, that experience shews the advantage gained by certain machines to be more than enough to compensate every inconvenience arising from consolidated profits, and expensive living; and that the first inventors gain thereby a superiority which nothing but adopting the same invention can counterbalance.
The third cause of high prices we have said to be owing to the natural advantage which neighbouring nations reap from their climate, soil, or situation.
Here no rise of prices is implied in the country in question, they are only supposed to have become relatively high by the opportunity other nations have had to furnish the same articles at a lower rate, in consequence of their natural advantages.
Two expedients may be used, in order to defeat the bad effects of a competition which cannot be got the better of in the ordinary way. The first is, to assist the branches in distress with the public money. The other is patience, and perseverance in frugality, as has been already observed. A short example of the first will be sufficient in this place to make the thing fully understood. I have already said, that I purposely postpone an ample dissertation upon the principles which influences such operations.
Let me suppose a nation which is accustomed to export to the value of a million sterling of fish every year, to be undersold in this article by another which has found a fishery on its own coasts, so abundant as to enable it to undersell the first by 20 per cent. In this case, let the statesman buy up all the fish of his subjects, and undersell his competitors at every foreign market, at the loss to himself of perhaps 250,000l. What is the consequence? That the million he paid for the fish remains at home, and that 750,000l. comes in from abroad for the prices of them. How is the 250,000l. to be made up? By a general imposition upon all the inhabitants. This returns into the public coffers, and all stands as it was. If this expedient be not followed, what will be the consequence? That those employed in the fishery will starve; that the fish taken will either remain upon hand, or be sold by the proprietors at a great loss; they will be undone, and the nation for the future will lose the acquisition of 750,000l. a year.
To abridge this operation premiums are given upon exportation, which comes to the same thing, and this is a refinement on the application of this very principle: but premiums are often abused. It belongs to the department of the coercive power of government to put a stop to such abuse. All I shall say upon the matter is, that if there be a crime called high treason, which is punished with greater severity than highway robbery, and assassination, I should be apt (were I a statesman) to put at the head of this bloody list, every attempt to defeat the application of public money, for the purposes here mentioned. The multiplicity of frauds alone discourages a wise government from proceeding upon this principle, and disappoints the scheme. If severe punishment can in its turn put a stop to frauds, I believe it will be thought very well applied.
While a statesman is thus defending the foreign trade of his country by an extraordinary operation performed upon the circulation of its wealth, he must at the same time employ the second expedient with equal address. He must be attentive to support sobriety at home, and wait patiently until abuses among his neighbours shall produce some of the inconveniences we have already mentioned. So soon as this comes to be the case, he has gained his point; the premiums then may cease; the public money may be turned into another channel; or the tax may be suppressed altogether, according as circumstances may require.
I need not add, that the more management and discretion be used in such operations, the less jealousy will be conceived by other rival nations. And as we are proposing this plan for a state already in possession of a branch of foreign trade, ready to be disputed by others, having superior natural advantages, it is to be presumed that the weight of money, at least is on her side. This, if rightly employed, will prove an advantage, more than equal to any thing which can be brought against it; and if such an operation comes to raise the indignation of her rival, it will on the other hand, reconcile the favour of every neutral state, who will find a palpable benefit from the competition, and will never fail to give their money to those who sell the cheapest. In a word, no private trader can stand in competition with a nation's wealth. Premiums are an engine in commerce, which nothing can resist but a similar operation.
Hitherto we have been proposing methods for removing the inconveniences which accompany wealth and superiority, and for preserving the advantages which result from foreign trade already established: we must now change sides, and adopt the interest of those nations who labour under the weight of a heavy competition with their rich neighbours, versed in commerce, dextrous in every art and manufacture, and conducted by a statesman of superior abilities, who sets all engines to work, in order to make the most of every favourable circumstance.
It is no easy matter for a state unacquainted with trade and industry, even to form a distant prospect of rivalship with such a nation, as long as the abuses attending upon their wealth are not supposed to have crept in among them. Consequently, it would be the highest imprudence to attempt, at first setting out, any thing that could excite their jealousy.
The first thing to be inquired into is the state of natural advantages. If any branch of natural produce, such as grain, cattle, wines, fruits, timber, or the like, are here found of so great importance to the rival nations, that they will purchase them with money, not with an exchange of their manufactures, such branches of trade may be kept open with them. If none such can be found, the first step is to cut off all communication of trade by exchange with such a people; and to apply closely to the supply of every want at home, without having recourse to foreigners.
So soon as these wants begin to be supplied, and that a surplus is found, other nations must be sought for, who enjoy less advantages and trade may be carried on with them in a lower way. People here must glean before they can expect to reap. But by gleaning every year they will add to their stock of wealth, and the more it is made subservient to public uses, the faster it will increase.
The beginners will have certain advantages inseparable from their infant state; to wit, a series of augmentation of all kinds, of which we have so frequently made mention. If these can be preserved in an equable progression; if the balance of work and demand, and that of population and agriculture, can be kept in a gentle vibration, by alternate augmentations; and if a plan of oeconomy, equally good with that of the rivals, be set on foot and pursued; time will bring every natural advantage of climate, soil, situation, and extent, to work their full effects; and in the end they will decide the superiority.
I shall now conclude my chapter, with some observations on the difference between theory and practice, so far as regards the present subject.
In theory, we have considered every one of the causes which produce high prices, and prevent exportation, as simple and uncompounded: in practice they are seldom ever so. This circumstance makes the remedies difficult, and sometimes dangerous. Difficult, from the complication of the disease; dangerous, because the remedy against consolidated profits which is to increase the number of manufacturers, will do infinite harm, if applied to remove that which proceeds from dear subsistence, which calls for a supply of food, not of mouths, as has been said.
Another great difference between theory and practice occurs in the fourth case; where we suppose a nation unacquainted with trade, to set out upon a competition with those who are in possession of it. When I examine the situation of some countries of Europe (Spain perhaps) to which the application of these principles may be made, I find that it is precisely in such nations, where the other disadvantages of consolidated profits, and even the high prices of living, are carried to the greatest height; and that the only thing which keeps one shilling of specie among them, is the infinite advantage they draw from their mines, and from the sale of their pure and unmanufactured natural productions, added to their simplicity of life, occasioned by the wretchedness of the lower classes, which alone prevents these also from consuming foreign commodities. Were money in these countries as equally distributed as in those of trade and industry, it would quickly be exported. Every one would extend his consumption of foreign commodities, and the wealth would disappear. But this is not the case; the rich keep their money in their coffers; because lending at interest, there, is very wisely laid under numberless obstructions. The vice, therefore, is not so much that the lending of money at interest is forbid, as that the people are not put in a situation to have any pressing occasion for borrowing it, as a mean of advancing their industry. Were they taught to supply their own wants, the state might encourage circulation by loan; but as they run to strangers for this supply, their money is far better locked up.
Upon a right use and application of these general principles, according to the different combinations of circumstances, in a nation whose principal object is an extensive and profitable foreign trade, I imagine a statesman may both establish and preserve, for a very long time, a great superiority in point of commerce; provided peace can be preserved: for in time of war, every populous nation, if great and extended, will find such difficulties in procuring food, and such numbers of hands gratuitously to maintain, that what formerly made its greatness will hasten its ruin.