An Inquiry into the Principles of Political Economy. Being an Essay on the Science of Domestic Policy in Free Nations, in which are particularly considered Population, Agriculture, Trade, Industry, Money, Coin, Interest, Circulation, Banks, Exchange, Public Credit, and Taxes. by Sir James Steuart

Sir James Steuart (1767)


An Inquiry into the Principles of Political Economy


Book II


Of Trade and Industry


Before I enter upon this second book, I must premise a word of connexion, in order to conduct the ideas of my reader by the same way through which the chain of my own thoughts, and the distribution of my plan have naturally led me.

My principal view hitherto has been to prepare the way for an examination of the principles of modern politics, by inquiring into those which have, less or more, operated regular effects in all the ages of the world.

In doing this, I confess, it has been impossible for me not to anticipate many things which, according to the plan I have laid down, will in some measure involve me in repetitions.

I propose to investigate principles which are all relative and depending upon one another. It is impossible to treat of these with distinctness, without applying them to the objects on which they have an influence; and as the same principles extend their influence to several branches of my subject, those of my readers who keep them chiefly in their eye, will not find great variety in the different applications of them.

In all compositions of this kind, two things are principally requisite. The first is, to represent such ideas as are abstract, clearly, simply, and uncompounded. This part resembles the forging out the links of a chain. The second is, to dispose those ideas in a proper order; that is, according to their most immediate relations. When such a composition is laid before a good understanding, memory finishes the work, by cementing the links together; and provided any one of them can be retained, the rest will follow of course.

Now the relations between the different principles of which I treat, are indeed striking to such as are accustomed to abstract reasoning, but not near so much as when the application of them is made to different examples.

The principle of self-interest will serve as a general key to this inquiry; and it may, in one sense, be considered as the ruling principle of my subject, and may therefore be traced throughout the whole. This is the main spring, and only motive which a statesman should make use of, to engage a free people to concur in the plans which he lays down for their government.

I beg I may not here be understood to mean, that self-interest should conduct the statesman: by no means. Self-interest, when considered with regard to him, is public spirit; and it can only be called self-interest, when it is applied to those who are to be governed by it.

From this principle, men are engaged to act in a thousand different ways, and every action draws after it certain necessary consequences. The question therefore constantly under consideration comes to be, what will mankind find it their interest to do, under such and such circumstances?

In order to exhaust the subject of political economy, I have proposed to treat the principles of it in relation to circumstances; and as these are infinite, I have taken them by the more general combinations, which modern policy has formed. These, for the sake of order, I have represented as all hanging in a chain of consequences, and depending on one another. See Book I. Chapter ii.

I found this the best method for distributing my plan, from which it is natural to infer, that it will also prove the best for enabling my readers to retain it.

I shall do what I can to diversify, by various circumstances, the repetitions which this disposition must lead me into. There is no seeing a whole kingdom, without passing now and then through a town which one has seen before. I shall therefore imitate the traveller, who, upon such occasions, makes his stay very short, unless some new curiosity should happen to engage his attention.

I have said, that self-interest is the ruling principle of my subject, and I have so explained myself, as to prevent any one from supposing, that I consider it as the universal spring of human actions. Here is the light in which I want to represent this matter.

The best way to govern a society, and to engage every one to conduct himself according to a plan, is for the statesman to form a system of administration, the most consistent possible with the interest of every individual, and never to flatter himself that his people will be brought to act in general, and in matters which purely regard the public, from any other principle than private interest. This is the utmost length to which I pretend to carry my position. As to what regards the merit and demerit of actions in general, I think it fully as absurd to say, that no action is truly virtuous, as to affirm, that none is really vicious.

It might perhaps be expected, that, in treating of politics, I should have brought in public spirit also, as a principle of action; whereas all I require with respect to this principle is merely a restraint from it; and even this is, perhaps, too much to be taken for granted. Were public spirit, instead of private utility, to become the spring of action in the individuals of a well-governed state, I apprehend, it would spoil all. Let me explain myself.

Public spirit, in my way of treating this subject, is as superfluous in the governed, as it ought to be all-powerful in the statesman; at least, if it is not altogether superfluous, it is fully as much so, as miracles are in a religion once fully established. Both are admirable at setting out, but would shake every thing loose, were they to continue to be common and familiar. Were miracles wrought every day, the laws of nature would no longer be laws: and were every one to act for the public, and neglect himself, the statesman would be bewildered, and the supposition is ridiculous.

I expect, therefore, that every man is to act for his own interest in what regards the public; and, politically speaking, every one ought to do so. It is the combination of every private interest which forms the public good, and of this the public, that is, the statesman only, can judge. You must love your country. Why? Because it is yours. But you must not prefer your own interest to that of your country. This, I agree, is perfectly just and right: but this means no more, than that you are to abstain from acting to its prejudice, even though your own private interest should demand it; that is, you should abstain from unlawful gain. Count Julian, for example, who, from private resentment, it is said, brought the Moors into Spain, and ruined his country, transgressed this maxim. A spy in an army, or in a cabinet, who betrays the secrets of his country, and he who sells his trust, are in the same case: defrauding the state is, among many others, a notorious example of this. To suppose men, in general, honest in such matters, would be absurd. The legislature therefore ought to make good laws, and those who transgress them ought to be speedily, severely, and most certainly punished. This belongs to the coercive part of government, and, falling beyond the limits of my subject, is ever taken for granted.

Were the principle of public spirit carried farther; were a people to become quite disinterested; there would be no possibility of governing them. Every one might consider the interest of his country in a different light, and many might join in the ruin of it, by endeavouring to promote its advantages. Were a rich merchant to begin and sell his goods without profit, what would become of trade? Were another to defray the extraordinary expence of some workmen in a hard year, in order to enable them to carry on their industry, without raising their price, what would become of others, who had not the like advantages? Were a man of a large landed estate to sell his grain at a low price in a year of scarcity, what would become of the poor farmers? Were people to feed all who would ask charity, what would become of industry? These operations of public spirit ought to be left to the public, and all that is required of individuals is, not to endeavour to defeat them.

This is the regular distribution of things, and it is this only which comes under my consideration.

In ill-administered governments, I admire as much as any one every act of public spirit, every sentiment of disinterestediness, and nobody can have a higher esteem for every person remarkable for them.

The less attentive any government is to do their duty, the more essential it is that every individual be animated by that spirit, which then languishes in the very part where it ought to flourish with the greatest strength and vigour; and on the other hand, the more public spirit is shewn in the administration of public affairs, the less occasion has the state for assistance from individuals.

Now as I suppose my statesman to do his duty in the most minute particulars, so I allow every one of his subjects to follow the dictates of his private interest. All I require is an exact obedience to the laws. This also is the interest of every one; for he who transgresses ought most undoubtedly to be punished: and this is all the public spirit which any perfect government has occasion for.

Chapter I: Of the reciprocal Connections between Trade and Industry

I am now going to treat of trade and industry, two different subjects, but which are as thoroughly blended together, as those we have discussed in the first book. Similar to these in their mutual operations, they are reciprocally aiding and assisting to each other, and it is by the constant vibration of the balance between them, that both are carried to their height of perfection and refinement.

TRADE is an operation, by which the wealth, or work, either of individuals, or of societies, may, by a set of men called merchants, be exchanged, for an equivalent, proper for supplying every want, without any interruption to industry, or any check upon consumption.

INDUSTRY is the application to ingenious labour in a free man, in order to procure, by the means of trade, an equivalent, fit for the supplying every want.

I must observe, that these definitions are only just, relatively to my subject, and to one another: for trade may exist without industry, because things produced partly by nature may be exchanged between men; industry may be exercised without trade, because a man may be very ingenious in working to supply his own consumption, and where there is no exchange, there can be no trade. Industry likewise implies something more than labour. Industry, as I understand the term, must be voluntary; labour may be forced: the one and the other may produce the same effect, but the political consequences are vastly different.

Industry, therefore, is applicable to free men only; labour may be performed by slaves.

Let me examine this last distinction a little more closely, the better to try whether it be just, and to point out the consequences which result from it.

I have said, that without the assistance of one of the three principles of multiplication, to wit, slavery, industry, or charity, there was no possibility of making mankind subsist, so as to be serviceable to one another, in greater numbers than those proportioned to the spontaneous fruits of the earth. Slavery and industry are quite compatible with the selfish nature of man, and may therefore be generally established in any society: charity, again, is a refinement upon humanity, and therefore, I apprehend, it must ever be precarious.

Now I take slavery and industry to be equally compatible with great multiplication, but incompatible with one another, without great restrictions laid upon the first. It is a very hard matter to introduce industry into a country where slavery is established; because of the unequal competition between the work of slaves and that of free men, supposing both equally admitted to market. Here is the reason:

The slaves have all their particular masters, who can take better care of them, than any statesman can take of the industrious freemen; because their liberty is an obstacle to his care. The slaves have all their wants supplied by the master, who may keep them within the limits of sobriety. He may either recruit their numbers from abroad, or take care of the children, just as he finds it his advantage. If breeding from the slaves should prove unprofitable, either their children will die for want of care, or by promiscuous living few will be born, or by keeping the sexes asunder, they will be prevented from breeding at all. A troop of manufacturing slaves, considered in a political light, will be found all employed, all provided for, and their work, when brought to market by the master, may he afforded much cheaper, than the like performed by freemen, who must every one provide for himself, and who may perhaps have a separate house, a wife, and children, to maintain, and all this from an industry which produces no more, nay not so much, as that of a single slave, who has no avocation from labour. Why do large undertakings in the manufacturing way ruin private industry, but by coming nearer to the simplicity of slaves? Could the sugar-islands be cultivated to any advantage by hired labour? Were not the expences of rearing children supposed to be great, would slaves ever be imported? Certainly not: and yet it is still a doubt with me, whether or not a proper regulation for bringing up the children of slaves might not turn this expedient to a better account, than the constant importation of them. But this is foreign to the present purpose. All I intend here to observe is the consequences of a competition between the work of slaves and that of free men; from which competition I infer, that, without judicious regulations, it must be impossible for industry ever to get the better of the disadvantages to which it will necessarily be exposed at first, in a state where slavery is already introduced.

These regulations ought to be made with a view to prevent the competition between the industrious freemen and the masters of slaves, by appropriating the occupation of each to different objects: to confine slavery, for example, to the country, that is, to set the slaves apart for agriculture, and to exclude them from every other service of work. With such a regulation perhaps industry might succeed. This was not the case of old; industry did not succeed as at present: and to this I attribute the simplicity of those times.

It is not so difficult to introduce slavery into a state where liberty is established; because such a revolution might be brought about by force, and, for the reasons and violence, which make every thing give way above-mentioned, I must conclude, that the consequences of such a revolution would tend to extinguish, or at least, without the greatest industry: but were such precaution, greatly to check the progress of precautions properly taken; were slavery reduced to a temporary and conditional service, and put under proper regulations; it might prove, of all others, the most excellent expedient for rendering the lower classes of a people happy and flourishing; and for preventing that abusive procreation, from which the great misery to which they are exposed at present chiefly proceeds. But as every modification of slavery is quite contrary to the spirit of modern times, I shall carry such speculations no farther. Thus much I have thought it necessary to observe, by the way, only for the sake of some principles which I shall have occasion afterwards to apply to our own economy for where-ever any notable advantage is found accompanying slavery, it is the duty of a modern statesman to fall upon a method of profiting by it, without wounding the spirit of European liberty. And this he may accomplish in a thousand ways, by the aid of good laws, calculated for cutting off from the lower classes of a people any interest they can have in involving themselves in want and misery, opening to them at the same time an easy progress towards ease and prosperity.

Here follows an exposition of the principles, from which I was led to say, in a former chapter, that the failure of the slavish form of feudal government, and the extension thereby given to civil and domestic liberty, were the source from which the whole system of modern policy has sprung.

Under the feudal form, the higher classes were perhaps more free than at present, but the lower classes were either slaves, or under a most servile dependence, which, as to the consequence of interrupting the progress of private industry, is entirely the same thing.

I cannot pretend to advance, as a confirmation of this doctrine, that the establishment of slavery in our colonies in America was made with a view to promote agriculture, and to curb manufactures in the new world, because I do not know much of the sentiments of politicians at that time: but if it be true, that slavery has the effect of advancing agriculture, and other laborious operations which are of a simple nature, and at the same time of discouraging invention and ingenuity; and if the mother-country has occasion for the produce of the first, in order to subsist or to employ those who are taken up at home in the prosecution of the latter; then I must conclude, that slavery has been very luckily, if not politically, established to compass such an end: and therefore, if any colony, where slavery is not common, shall ever begin to rival the industry of the mother-country, a very good way of frustrating the attempt will be, to encourage the introduction of slaves into such colonies without any restrictions, and to allow it to work its natural effect.

Having given the definition of trade and industry, as relative to my inquiry, I come now to examine their immediate connections, the better to cement the subject of this book, with the principles deduced in the former.

In treating of the reciprocal wants of a society, and in shewing how naturally their being supplied by labour and ingenuity tends to increase population on one hand, and agriculture on the other, the better to simplify our ideas, we supposed the transition to be direct from the manufacturer to the consumer, and both to be members of the same society. Matters now become more complex, by the introduction of trade among different nations, which is a method of collecting and distributing the produce of industry, by the interposition of a third principle. Trade receives from a thousand hands, and distributes to as many.

To ask, whether trade owes its beginning to industry, or industry to trade, is like asking, whether the motion of the heart is owing to the blood, or the motion of the blood to the heart. Both the one and the other, I suppose, are formed by such insensible degrees, that it is impossible to determine where the motion begins. But so soon as the body comes to be perfectly formed, I have little doubt of the heart's being the principle of circulation. Let me apply this to the present question.

A man must first exist, before he can feel want; he must want, that is, desire, before he will demand; and he must demand, before he can receive. This is a natural chain, and from it we have concluded in Book I, that population is the cause, and agriculture the effect.

By a parallel reason it may be alleged, that as wants excite to industry, and are considered as the cause of it; and as the produce of industry cannot be exchanged without trade; so trade must be an effect of industry. To this I agree: but I must observe, that this exchange does not convey my idea of trade, although I admit, that it is the root from which the other springs; it is the seed, but not the plant; and trade, as we have defined it, conveys another idea. The workmen must not be interrupted, in order to seek for an exchange, nor the consumer put to the trouble of finding out the manufacturer. The object of trade therefore is no more than a new want, which calls for a set of men to supply it; and trade has a powerful effect in promoting industry, by facilitating the consumption of its produce.

While wants continue simple and few, a workman finds time enough to distribute all his work: when wants become more multiplied, men must work harder; time becomes precious; hence trade is introduced. They who want to consume, send the merchant, in a manner, to the workman for his labour, and do not go themselves; the workman sells to this interposed person, and does not look out for a consumer. Let me now take a familiar instance of infant trade, in order to shew how it grows and refines: this will illustrate what I have been saying.

I walk out of the gates of a city in a morning, and meet with five hundred persons, men and women, every one bringing to market a small parcel of herbs, chickens, eggs, fruits, &c. It occurs to me immediately that these people must have little to do at home, since they come to market for so small a value. Some years afterwards, I find nothing but horses, carts, and waggons, carrying the same provisions. I must then conclude, that either those I used to meet before are no more in the country, but purged off, as being found useless, after a method has been found of collecting all their burdens into a few carts; or that they have found out a more profitable employment than carrying eggs and greens to market. Whichever happens to be the case, this change will point out the introduction of what I call trade; to wit, this collecting of eggs, fruit, fowl, &c. from twenty hands, in order to distribute it to as many more within the walls. The consequence is, that a great deal of labour is saved; that is to say, the cart gives time to twenty people to labour, if they are disposed to it; and when wants increase, they will be ready to supply them.

We cannot therefore say, that trade will force industry, or that industry will force trade; but we may say, that trade will facilitate industry, and that industry will support trade. Both the one and the other however depend upon a third principle; to wit, a taste for superfluity, in those who have an equivalent to give for it. This taste will produce demand, and this again will become the main spring of the whole operation.

Chapter II: Of Demand

This is no new subject; it is only going over what has been treated of very extensively in the first book, under another name, and relatively to other circumstances. These ideas were there kept as simple as possible; here they take a more complex form, and appear in a new dress.

The wants of mankind were said to promote their multiplication, by augmenting the demand for the food of the free hands, who, by supplying these wants, are enabled to offer an equivalent for their food, to the farmers who produced it; and as this way of bartering is a representation of trade in its infancy, it is no wonder that trade, when grown up, should still preserve a resemblance to it.

Demand, considered as a term appropriated to trade, will now be used instead of wants; the term used in the first book relatively to bartering; we must therefore expect, that the operations of the same principle, under different appellations, will constantly appear similar, in every application we can make of it to different circumstances.

Whether this term be applied to bartering or to trade, it must constantly appear reciprocal. If I demand a pair of shoes, the shoemaker either demands money, or something else for his own use. To prevent therefore the ambiguity of a term, which, from the sterility of language, is taken in different acceptations, according to the circumstances which are supposed to accompany it, I shall endeavour shortly to analyze it.

First, Demand is ever understood to be relative to merchandize. A demand for money, except in bills of exchange, is never called demand. When those who have merchandize upon hand, are desirous of converting them into money, they are said to offer to sale; and if, in order to find a buyer, they lower their price, then, instead of saying the demand for money is high, we say the demand for goods is low.

Secondly, Suppose a ship to arrive at a port loaded with goods, with an intention to purchase others in return, the operation becomes only double. The ship offers to sale, and the demand of the port is said to be high or low, according to the height of the price offered, not according to the quantity demanded, or number of demanders. When all is sold, then the ship becomes demander. and if his demand be proportionally higher than the former, we say upon the whole, that the demand is for the commodities of the port; that is, the port offers, and the ship demands. This I call reciprocal demand.

Thirdly, Demand is either simple or compound. Simple, when the demander is but one, compound, when they are more. But this is not so much relative to persons as to interests. Twenty people demanding from the same determinate interest form but a simple demand; it becomes compound or high, when different interests produce a competition. It may therefore be said, that when there is no competition among buyers, demand is simple, let the quantity demanded be great or small, let the buyers be few or many. When therefore in the contract of barter, the demand upon one side is simple, upon the other compound, that which is compound is constantly called the demand, the other not.

Fourthly, Demand is either great or small: great, when the quantity demanded is great; small, when the quantity demanded is small.

Fifthly, Demand is either high or low. high, when the competition among the buyers is great; low, when the competition among the sellers is great. From these definitions it follows, that the consequence of a great demand, is a great sale; the consequence of a high demand, is a great price. The consequence of a small demand, is a small sale; the consequence of a low demand, is a small price.

Sixthly, The nature of demand is to encourage industry. and when, it is regularly made, the effect of it is, that the supply for the most part is found to be in proportion to it, and then the demand is commonly simple. It becomes compound from other circumstances. As when it is irregular, that is, unexpected, or when the usual supply fails; the consequence of which is, that the provision made for the demand, falling short of the just proportion, occasions a competition among the buyers, and raises the current, that is, the ordinary prices. From this it is, that we commonly say, demand raises prices. Prices are high or low according to demand. These expressions are just; because the sterility of language obliges us there to attend to circumstances which are only implied.

Demand is understood to be high or low, relatively to the common rate of it, or to the competition between buyers, to obtain the provision made for it. When demand is understood to be relative to the quantity demanded, it must be called great or small, as has been said.

Seventhly, Demand has not always the same effect in raising prices. we must therefore carefully attend to the difference between a demand for things of the first necessity for life, and for things indifferent; also between a demand made by the immediate consumers, and one made by merchants, who buy in order to sell again. In both cases the competition will have different effects. Things of absolute necessity must be procured, let the price be ever so great: consumers who have no view to profit, but to satisfy their desires, will enter into a stronger competition than merchants, who are animated by no passion, and who are regulated in what they offer by their prospect of gain alone. Hence the great difference in the price of grain in different years; hence the uniform standard of the price of merchandize, at the India sales and in fairs of distribution, such as Franckfort, Beaucaire, &c., hence, also, the advantage which consumers find in making their provision at the same time that merchants make theirs; hence the sudden rise and fall in the price of labouring cattle in country markets, where every one provides for himself.

Let what has been said suffice at setting out: this principle will be much better explained by its application as we advance, than by all the abstract distinctions I am capable to give of it.

Chapter III: Of the first Principles of bartering, and how this grows into Trade

I must now begin by tracing trade to its source, in order to reduce it to its first principles.

The most simple of all trade, is that which is carried on by bartering the necessary articles of subsistence. If we suppose the earth free to the first possessor, this person who cultivates it will first draw from it his own food, and the surplus will be the object of barter: he will give this in exchange to any one who will supply his other wants. This (as has been said) supposes naturally both a surplus quantity of food produced by labour, and also free hands; for he who makes a trade of agriculture cannot supply himself with all other necessaries, as well as food; and he who makes a trade of supplying the farmers with such necessaries in exchange for his surplus of food, cannot be employed in producing that food. The more the necessities of man increase, cateris paribus, the more free hands are required to supply them; and the more free hands are required, the more surplus food must be produced by additional labour, to supply their demand.

This is the least complex kind of trade, and may be carried on to a greater or less extent, in different countries, according to the different degrees of the wants to be supplied. In a country where there is no money, nor any thing equivalent to it, I imagine the wants of mankind will be confined to few objects; to wit, the removing the inconveniences of hunger, thirst, cold, heat, danger, and the like. A free man who by his industry can procure all the comforts of a simple life, will enjoy his rest, and work no more: And, in general, all increase of work will cease, so soon as the demand for the purposes mentioned comes to be satisfied. There is a plain reason for this. When the free hands have procured, by their labour, wherewithal to supply their wants, their ambition is satisfied; so soon as the husbandmen have produced the necessary surplus for relieving theirs, they work no more. Here then is a natural stop put to industry, consequently to bartering. This, in the first book we have called the moral impossibility of augmenting numbers.

The next thing to be examined, is, how bartering grows into trade, properly so called and understood, according to the definition given of it above; how trade comes to be extended among men; how manufactures, more ornamental than useful, come to be established; and how men come to submit to labour, in order to acquire what is not absolutely necessary for them.

This, in a free society, I take to be chiefly owing to the introduction of money, and a taste for superfluities in those who possess it.

In ancient times, money was not wanting; but the taste for superfluities not being in proportion to it, the specie was locked up. This was the case in Europe four hundred years ago. A new taste for superfluity has drawn, perhaps, more money into circulation, from our own treasures, than from the mines of the new world. The poor opinion we entertain of the riches of our forefathers, is founded upon the modern way of estimating wealth, by the quantity of coin in circulation, from which we conclude, that the greatest part of the specie now in our hands must have come from America.

It is more, therefore, through the taste for superfluity, than in consequence of the quantity of coin, that trade comes to be established; and it is in consequence of trade only that we see industry carry things in our days to so high a pitch of refinement and delicacy. Let me illustrate this by comparing together the different operations of barter, sale, and commerce.

When reciprocal wants are supplied by barter, there is not the smallest occasion for money: this is the most simple of all combinations.

When wants are multiplied, bartering becomes (for obvious reasons) more difficult; upon this money is introduced. This is the common price of all things: it is a proper equivalent in the hands of those who feel a want, perfectly calculated to supply the occasions of those who, by industry, can relieve it. This operation of buying and selling is a little more complex than the former, but still we have here no idea of trade, because we have not introduced the merchant, by whose industry it is carried on.

Let this third person be brought into play, and the whole operation becomes clear. What before we called wants, is here represented by the consumer; what we called industry, by the manufacturer; what we called money, by the merchant. The merchant here represents the money, by substituting credit in its place; and as the money was invented to facilitate barter, so the merchant with his credit, is a new refinement upon the use of money. The merchant, I say, renders money still more effectual in performing the operations of buying and selling. This operation is trade: it relieves both parties of the whole trouble of transportation, and adjusting wants to wants, or wants to money. the merchant represents by turns both the consumer, the manufacturer, and the money. To the consumer he appears as the whole body of manufacturers; to the manufacturers, as the whole body of consumers; and to the one and the other class his credit supplies the use of money. This is sufficient at present for an illustration. I must now return to the simple operations of money in the hands of the two contracting parties, the buyer and the seller, in order to show how men come to submit to labour in order to acquire superfluities.

So soon as money is introduced into a country it becomes, as we have said above, an universal object of want to all the inhabitants. The consequence is, that the free hands of the state, who before stopped working, because all their wants were provided for, having this new object of ambition before their eyes, endeavour, by refinements upon their labour, to remove the smaller inconveniences which result from a simplicity of manners. People, I shall suppose, who formerly knew but one sort of clothing for all seasons, willingly part with a little money to procure for themselves different sorts of apparel properly adapted to summer and inter, which the ingenuity of manufacturers, and their desire of getting money, may have suggested to their invention.

I shall not here pursue the gradual progress of industry, in bringing manufactures to perfection; nor interrupt my subject with any farther observations upon the advantages resulting to industry, from the establishment of civil and domestic liberty; but shall only suggest, that these refinements seem more generally owing to the industry and invention of the manufacturers (who by their ingenuity daily contrive means of softening or relieving inconveniences, which mankind seldom perceive to be such, till the way of removing them be contrived) than to the taste for luxury in the rich, who, to indulge their ease, engage the poor to become industrious.

Let any man make an experiment of this nature upon himself, by entering into the first shop. He will nowhere so quickly discover his wants as there. Every thing he sees appears either necessary, or at least highly convenient; and he begins to wonder (especially if he be rich) how he could have been so long without that which the ingenuity of the workman alone had invented, in order that from the novelty it might excite his desire; for when it is bought, he ill never once think more of it perhaps, nor ever apply it to the use for which it at first appeared so necessary.

Here then is a reason why mankind labour though not in want. They become desirous of possessing the very instruments of luxury, which their avarice or ambition prompted them to invent for the use of others.

What has been said represents trade in its infancy, or rather the materials with which this great fabric is built.

We have formed an idea of the wants of mankind multiplied even to luxury, and abundantly supplied by the employment of all the free hands set apart for that purpose. But if we suppose the workman himself disposing of his work, and purchasing with it food from the farmer, cloths from the clothier, and in general seeking for the supply of every want from the hands of the person directly employed for the purpose of relieving it; this will not convey an idea of trade, according to our definition.

Trade and commerce are an abbreviation of this long process; a scheme invented and set on foot by merchants, from a principle of gain, supported and extended among men, from a principle of general utility to every individual, rich or poor, to every society, great or small.

Instead of a pin-maker exchanging his pins with fifty different persons, for whose labour he has occasion, he sells all to the merchant for money or for credit; and, as occasion offers, he purchases all his wants, either directly from those who supply them, or from other merchants who deal with manufacturers in the same way his merchant dealt with him.

Another advantage of trade is, that industrious people in one part of the country, may supply customers in another, though distant. They may establish themselves in the most commodious places for their respective business, and help one another reciprocally, without making the distant parts of the country suffer for want of their labour. They are likewise exposed to no avocation from their work, by seeking for customers.

Trade produces many excellent advantages; it marks out to the manufacturers when their branch is under or overstocked with hands. If it be understocked, they will find more demand than they can answer: if it be overstocked, the sale will be slow.

Intelligent men, in every profession, will easily discover when these appearances are accidental, and when they proceed from the real principles of trade. which are here the object of our inquiry.

Posts, and correspondence by letters, are a consequence of trade, by the means of which merchants are regularly informed of every augmentation or diminution of industry in every branch, in every part of the country. From this knowledge they regulate the prices they offer; and as they are many, they, from the principles of competition which we shall hereafter examine, serve as a check upon one another.

From the current prices, the manufacturers are as well informed as if they kept the correspondence themselves: the statesman feels perfectly where hands are wanting, and young people destined to industry, obey, in a manner, the call of the public, and fall naturally in to supply the demand.

Two great assistances to merchants, especially in the infancy of trade, are public markets for collecting the work of small dealers, and large undertakings in the manufacturing way by private hands. By these means the merchants come at the knowledge of the quantity of work in the market, as on the other hand the manufacturers learn, by the sale of the goods, the extent of the demand for them. These two things being justly known, the price of goods is easily fixed, as we shall presently see.

Public sales serve to correct the small inconveniences which proceed from the operations of trade. A set of manufacturers got all together into one town, and entirely taken up with their industry, are thereby as well informed of the rate of the market, as if every one of them carried thither his work; and upon the arrival of the merchant, who readily takes it off their hands, he has not the least advantage over them from his knowledge of the state of demand. This man both buys and sells in what is called wholesale (that is by large parcels) and from him retailers purchase, who distribute the goods to every consumer throughout the country. These last buy from wholesale merchants in every branch, that proportion of every kind of merchandize which is suitable to the demand of their borough, city, or province.

Thus, all inconveniences are prevented, at some additional cost to the consumer, who, for reasons we shall afterwards point out, must naturally reimburse the whole expence. The distance of the manufacturer, the obscurity of his dwelling, the caprice in selling his work, are quite removed; the retailer has all in his shop, and the public buys at a current price.

Chapter IV: How the Prices of Goods are determined by Trade

In the price of goods, I consider two things as really existing, and quite different from one another; to wit; the real value of the commodity, and the profit upon alienation. The intention of this chapter is to establish this distinction, and to shew how the operation of trade severally influences the standard of the one and the other; that is to say, how trade has the effect of rendering fixed and determinate, two things which would otherwise be quite vague and uncertain.

I. The first thing to be known of any manufacture when it comes to be sold, is, how much of it a person can perform in a day, a week, a month, according to the nature of the work, which may require more or less time to bring it to perfection. In making such estimates, regard is to be had to what, upon an average only, a workman of the country in general may perform, without supposing him the best or the worst in his profession; or having any peculiar advantage or disadvantage as to the place where he works.

Hence the reason why some people thrive by their industry, and others not; why some manufactures flourish in one place and not in another.

II. The second thing to be known, is the value of the workman's subsistence and necessary expence, both for supplying his personal wants, and providing the instruments belonging to his profession, which must be taken upon an average as above; except when the nature of the work requires the presence of the workman in the place of consumption; for although some trades, and almost every manufacture, may be carried on in places at a distance, and therefore may fall under one general regulation as to prices, yet others there are which, by their nature, require the presence of the workman in the place of consumption; and in this case the prices must be regulated by circumstances relative to every particular place.

III. The third and last thing to be known, is the value of the materials, that is the first matter employed by the workman; and if the object of his industry be the manufacture of another, the same process of inquiry must be gone through with regard to the first, as with regard to the second: and thus the most complex manufactures may be at last reduced to the greatest simplicity. I have been more particular in this analysis of manufactures than was absolutely necessary in this place, that I might afterwards with the greater ease, point out the methods of diminishing the prices of them.

These three articles being known, the price of manufacture is determined. It cannot be lower than the amount of all the three, that is, than the real value; whatever it is higher, is the manufacturer's profit. This will ever be in proportion to demand, and therefore will fluctuate according to circumstances.

Hence appears the necessity of a great demand, in order to promote flourishing manufactures.

By the extensive dealings of merchants, and their constant application to the study of the balance of work and demand, all the above circumstances are known to them, and are made known to the industrious, who regulate their living and expence according to their certain profit. I call it certain, because under these circumstances they seldom overvalue their work, and by not overvaluing it, they are sure of a sale: a proof of this may be had from daily experience.

Employ a workman in a country where there is little trade or industry, he proportions his price always to the urgency of your want, or your capacity to pay; but seldom to his own labour. Employ another in a country of trade, he will not impose upon you, unless perhaps you be a stranger, which supposes your being ignorant of the value; but employ the same workman in a work not usual in the country, consequently not demanded, consequently not regulated as to the value, he will proportion his price as in the first supposition.

We may therefore conclude from what has been said, that in a country where trade is established, manufactures must flourish, from the ready sale, the regulated price of work, and certain profit resulting from industry. Let us next inquire into the consequences of such a situation.

Chapter V: How foreign Trade opens to an industrious People, and the Consequences of it to the Merchants who set it on foot

The first consequence of the situation described in the preceding chapter, is, that wants are easily supplied, for the adequate value of the thing wanted.

The next consequence is, the opening of foreign trade under its two denominations of passive and active. Strangers and people of distant countries finding the difficulty of having their wants supplied at home, and the ease of having them supplied from this country, immediately have recourse to it. This is passive trade. The active is when merchants, who have executed this plan at home with success, begin to transport the labour of their countrymen into other regions, which either produce, or are capable of producing such articles of consumption, proper to be manufactured, as are most demanded at home; and consequently will meet with the readiest sale, and fetch the largest profits. Here then is the opening of foreign trade, under its two denominations of active and passive: but as we are at present considering the consequences of this new state of things with respect to the merchants, we shall take no farther notice, in this place, of that division: it will naturally come in afterwards.

What then are the consequences of this new commerce to our merchants, who have left their homes in quest of gain abroad?

The first is, that arriving in any new country, they find themselves in the same situation, with regard to the inhabitants, as the workmen in the country of no trade, with regard to those who employed him; that is, they proportion the price of their goods to the eagerness of acquiring, or the capacity of paying, in the inhabitants, but never to their real value.

The first profits then, upon this trade, must be very considerable; and the demand from such a country will be high or low, great or small, according to the spirit, not the real wants of the people: for these in all countries, as has been said, must first be supplied by the inhabitants themselves, before they cease to labour.

If the people of this not-trading country (as we shall now call it) be abundantly furnished with commodities useful to the traders, they will easily part with them, at first, for the instruments of luxury and ease; but the great profit of the traders will insensibly increase the demand for the productions of their new correspondents; this will have the effect of producing a competition between themselves, and thereby of throwing the demand on their side, from the principles I shall afterwards explain. This is perpetually a disadvantage in traffic: the most it; and unpolished nations in the world quickly perceive the effects of are taught to profit of the discovery, in spite of the address of those who are the most expert in commerce.

The traders will, therefore, be very fond of falling upon every method and contrivance to inspire this people with a taste of refinement and delicacy. Abundance of fine presents, consisting of every instrument of luxury and superfluity, the best adapted to the genius of the people, will be given to the prince and leading men among them. Workmen will even be employed at home to study the taste of the strangers, and to captivate their desires by every possible means. The more eager they are of presents, the more lavish the traders will be in bestowing and diversifying them. It is an animal put up to fatten, the more he eats the sooner he is fit for slaughter. When their taste for superfluity is fully formed, when the relish for their former simplicity is sophisticated, poisoned, and obliterated, then they are surely in the fetters of the traders, and the deeper they go, the less possibility there is of their getting out. The presents then will die away, having served their purpose; and if, afterwards, they are found to be continued, it will probably be to support the competition against other nations, who will incline to share of the profits.

If, on the contrary, this not-trading nation does not abound with commodities useful to the traders, these will make little account of trading with them, whatever their turn may be; but if we suppose this country inhabited by a laborious people, who, having taken a taste for refinement from the traders, apply themselves to agriculture, in order to produce articles of subsistence, they will solicit the merchants to give them part of their manufactures in exchange for these; and this trade will undoubtedly have the effect of multiplying numbers in the trading nation. But if food cannot be furnished, nor any other branch of production found out to support the correspondence, the taste for refinement will soon die away, and trade will stop in this quarter.

Had it not been for the furs in those countries adjacent to Hudson's Bay, and in Canada, the Europeans never would have thought of supplying instruments of luxury to those nations; and if the inhabitants of those regions had not taken a taste for the instruments of luxury furnished to them by the Europeans, they never would have become so indefatigable nor so dexterous hunters. At the same time we are not to suppose, that ever these Americans would have come to Europe in quest of our manufactures. It is therefore owing to our merchants, that those nations are become in any degree fond of refinement; and this taste, in all probability, will not soon exceed the proportion of the productions of their country. From these beginnings of foreign trade it is easy to trace its increase.

One step towards this, is the establishing correspondences in foreign countries; and these are more or less necessary in proportion as the country where they are established is more or less polished or acquainted with trade. They supply the want of posts, and point out to the merchants what proportion the productions of the country bear to the demand of the inhabitants for manufactures. This communicates an idea of commerce to the not-trading nation, and they insensibly begin to fix a determinate value upon their own productions, which perhaps bore no determinate value at all before.

Let me trace a little the progress of this refinement in the savages, in order to shew how it has the effect of throwing the demand upon the traders, and of creating a competition among them, for the productions of the new country.

Experience shews, that in a new-discovered country, merchants constantly find some article or other of its productions, which turns out to a great account in commerce; and we see that the longer such a trade subsists, and the more the inhabitants take a taste for European manufactures, the more their own productions rise in their value, and the less profit is made by trading with them, even in cases where the trade is carried on by companies; which is a very wise institution for one reason, that it cuts off a competition between our merchants.

This we shall shew, in its proper place, to be the best means of keeping prices low in favour of the nation; however it may work a contrary effect with respect to individuals who must buy from these monopolies.

When companies are not established, and when trade is open, our merchants, by their eagerness to profit of the new trade, betray the secrets of it, they enter into competition for the purchase of the foreign produce, and this raises prices and favours the commerce of the most ignorant savages.

Some account for this in a different manner. They allege that it is not this competition which raises prices; because there is also a competition among the savages, which of them shall get the merchandise; and this may be sufficient to counter-balance the other, but in proportion as the quantity of goods demanded by the savages, as an exchange for the produce of their country, becomes greater, a less quantity of this produce must be given for every parcel of the goods.

To this I answer, That I cannot admit this apparent reason to be consistent with the principles of trade, however ingenious the conceit may be.

The merchant constantly considers his own profit in parting with his goods, and is not influenced by the reasons of expediency which the savages may find, to offer him less than formerly; for were this principle of proportion admitted generally, the price of merchandise would always be at the discretion of the buyers.

The objection here stated is abundantly plain; but it must be resolved in a very different manner. Here are two solutions:

First, Prices, I have said, are made to rise, according as demand is high, not according as it is great. Now, in the objection, it is said, that, in proportion as the demand is great, a less proportion of the equivalent must go to every parcel of the merchandise; which I apprehend to be false; and this shews the necessity of making a distinction between the high and the great demand, things entirely different in trade, and which communicate quite different ideas.

Secondly, In all trade there is an exchange, and in all exchange, we have said, there is a reciprocal demand implied: it must therefore be exactly inquired into, on which hand the competition between the demanders is found; that is to say, on which hand it is strongest; according to the distinction in the second chapter.

If the inhabitants of the country be in competition for the manufactures, goods will rise in their price most undoubtedly, let the quantity of the produce they have to offer be large or small; but so soon as these prices rise above the faculties, or desire of buying, in certain individuals, their demand will stop, and their equivalent will be prevented from coming into commerce. This will disappoint the traders; and therefore, as their gains are supposed to be great, either a competition will take place among themselves, who shall carry off the quantity remaining, supposing them to have separate interests; or, if they are united, they may, from a view of expediency, voluntarily sink their price, in order to bring it within the compass of the faculties, or intention, to buy in those who are still possessed of a portion of what they want.

It is from the effects of competition among sellers that I apprehend prices are brought down, not from any imaginary proportion of quantity to quantity in the market. But of this more afterwards, in its proper place.

So soon as the price of manufactures is brought as low as possible, in the new nation; if the surplus of their commodities does not suffice to purchase a quantity of manufactures proportioned to their wants, this people must begin to labour: for labour is the necessary consequence of want, real or imaginary; and by labour it will be supplied.

When this comes to be the case, we immediately find two trading nations instead of one; the balance of which trade will always be in favour of the most industrious and frugal; as shall be fully explained in another place.

Let me now direct my inquiry more particularly towards the consequences of this new state of things produced by commerce, relative to the not-trading nation, in order to shew the effect of a passive foreign trade. I shall spare no pains in illustrating, upon every occasion, as I go along, the fundamental principles of commerce, demand, and competition, even perhaps at the expence of appearing tiresome to some of my readers.

Chapter VI: Consequences of the Introduction of a passive Foreign Trade among a People who live in Simplicity and Idleness

We now suppose the arrival of traders, all in one interest, with instruments of luxury and refinement, at a port in a country of great simplicity of manners, abundantly provided by nature with great advantages for commerce, and peopled by a nation capable of adopting a taste for superfluities.

The first thing the merchants do, is to expose their goods, and point out the advantages of many things, either agreeable or useful to mankind in general, such as wines, spirits, instruments of agriculture, arms, and ammunition for hunting, nets for fishing, manufactures for clothing, and the like. The advantages of these are presently perceived, and such commodities are eagerly sought after. The natives on their side produce what they most esteem, generally something superfluous or ornamental. The traders, after examining all circumstances, determine the object of their demand, giving the least quantity possible in return for this superfluity, in order to impress the inhabitants with a high notion of the value of their own commodities; but as this parsimony may do more hurt than good to their interest, they are very generous in making presents, from the principles mentioned above.

When the exchange is completed, and the traders depart, regret is commonly mutual; the one and the other are sorry that the superfluities of the country fall short. A return is promised by the traders, and assurances are given by the natives of a better provision another time.

What are the first consequences of this revolution? Is it not evident, that, in order to supply an equivalent for this new want, more hands must be set to work than formerly? And it is evident also, that this augmentation of industry will not essentially increase numbers; as was supposed to be the effect of it through the whole train of our reasoning in the first book. Why? Because there the produce of the industry was supposed to be consumed at home; and here it is intended to be exported. But if we can find out any additional consumption at home even implied by this new trade, I think it will have the effect of augmenting numbers. An example will make this plain.

Let me suppose the superfluity of this country to be the skins of wild beasts, not proper for food; the manufacture sought for, brandy. The brandy is sold for furs. He who has furs, or he who can spare time to hunt for them, will drink brandy in proportion: but I cannot find out any reason to conclude, from this simple operation, that one man more in the country must necessarily be fed, (for I have taken care to suppose, that the flesh of the animals is not proper for food) or that any augmentation of agriculture must of consequence ensue from this new traffic.

But let me throw in a circumstance which may imply an additional consumption at home, and then examine the consequences.

A poor creature, who has no equivalent to offer for food, who is miserable, and ready to perish for want of subsistence, goes a hunting, and kills a wolf; he comes to a farmer with the skin, and says; you are well fed, but you have no brandy; if you will give me a loaf I will give you this skin, which the strangers are so fond of, and they will give you brandy. But, says the farmer, I have no more bread than what is sufficient for my own family. As for that, replies the other, I will come and dig in your ground, and you and I will settle our account as to the small quantity I desire of you. The bargain is made; the poor fellow gets his loaf, and lives at least; perhaps he marries, and the farmer gets a dram. But had it not been for this dram, (that is, this new want,) which was purchased by the industry of this poor fellow, by what argument could he have induced the farmer to part with a loaf?

I here exclude the sentiment of charity. This alone, as I have often observed, is a principle of multiplication, and if it was admitted here it would ruin all my supposition; but as true it is, on the other hand, that could the poor fellow have got bread by begging, he would not probably have gone a-hunting.

Here then it appears, that the very dawning of trade, in the most unpolished countries, implies a multiplication. This is enough to point out the first step, and to connect the subject of our present inquiries with what has been already discussed in relation to other circumstances. I proceed.

So soon as all the furs are disposed of, and a taste for superfluity introduced, both the traders and the natives will be equally interested in the advancement of industry in this country. Many new objects of profit for the first will be discovered, which the proper employment of the inhabitants, in reaping the natural advantages of their soil and climate, will make effectual. The traders will therefore endeavour to set on foot many branches of industry among the savages, and the allurements of brandy, arms, and clothing, will animate these in the pursuit of them. Let me here digress for a few lines.

If we suppose slavery to be established in this country, then all the slaves will be set to work, in order to provide furs and other things demanded by the traders, that the masters may thereby be enabled to indulge themselves in the superfluities brought to them by the merchants. When liberty is the system, every one, according to his disposition, becomes industrious, in order to procure such enjoyments for himself.

In the first supposition, it is the head of the master which conducts the labour of the slave, and turns it towards ingenuity: in the second, every head is at work, and every hand is improving in dexterity. Where hands therefore are principally necessary, the slaves have the advantage; where heads are principally necessary, the advantage lies in favour of the free. Set a man to labour at so much a day, he will go on at a regular rate, and never seek to improve his method: let him be hired by the piece, he will find a thousand expedients to extend his industry. This is exactly the difference between the slave and the free man. From this I account for the difference between the progress of industry in ancient and modern times. Why was a peculium given to slaves, but to engage them to become dextrous? Had there been no peculium and no libertini, or free men, who had been trained to labour, there would have been little more industry any where, than there was in the republic of Lycurgus, where, I apprehend, neither the one or the other was to be found. I return.

When once this revolution is brought about; when those who formerly lived in simplicity become industrious. Matters put on a new face. Is not this operation quite similar to that represented in the fifth chapter of the first book? There I found the greatest difficulty, in shewing how the mutual operations of supplying food and other wants could have the effect of promoting population and agriculture, among a people who were supposed to have no idea of the system proposed to be put in execution. Here the plan appears familiar and easy. The difference between them seems to resemble that of a child's learning a language by grammar, or learning it by the ear in the country where it is spoken. In the first case, many throw the book aside, but in the other none ever fail of success.

I have said, that matters put on a new face; that is to say, we now find two trading nations instead of one, with this difference, however, that as hitherto we have supposed the merchants all in one interest, the compound demand, that is, the competition of the buyers, has been, and must still continue on the side of the natives. This is a great prejudice to their interest, but as it is not supposed sufficient to check their industry, nor to restrain their consumption of the manufactures, let me here examine a little more particularly the consequences of the principle of demand in such a situation; for although I allow, that it can never change sides, yet it may admit of different modifications, and produce different effects, as we shall presently perceive.

The merchants we suppose all in one interest, consequently there can he no competition among them; consequently no check can be put upon their raising their prices, as long as the prices they demand are complied with. So soon as they are raised to the full extent of the abilities of the natives, or of their inclination to buy, the merchants have the choice of three things, which are all perfectly in their option, and the preference to be given to the one or the other depends entirely upon themselves, and upon the circumstances I am going to point out.

First, they may support the high demand; that is, not lower their price; which will preserve a high estimation of the manufactures in the opinion of the inhabitants, and render the profits upon their trade the greatest possible. This part they may possibly take, if they perceive the natives doubling their diligence, in order to become able, in time, to purchase considerable cargoes at a high value; from which supposition is implied a strong disposition in the people to become luxurious, since nothing but want of ability prevents them from complying with the highest demand: but still another circumstance must concur, to engage the merchants not to lower their price. The great proportion of the goods they seek for, in return, must be found in the hands of a few. This will be the case if slavery be established; for then there must be many poor, and few rich: and they are commonly the rich consumers who proportion the price they offer, rather to their desires, than to the value of the thing.

The second thing which may be done is, to open the door to a great demand; that is, to lower their prices. This will sink the value of the manufactures in the opinion of the inhabitants, and render profits less in proportion, although indeed, upon the voyage, the profits may be greater.

This part they will take, if they perceive the inhabitants do not incline to consume great quantities of the merchandize at a high value, either from want of abilities or inclination; and also, if the profits upon the trade depend upon a large consumption, as is the case in merchandize of a low value, and suited chiefly to the occasions of the lower sort. Such motives of expediency will be sufficient to make them neglect a high demand, and prefer a great one; and the more, when there is a likelihood that the consumption of low-priced goods in the beginning may beget a taste for others of a higher value, and thus extend in general the taste of superfluity.

A third part to be taken, is the least politic, and perhaps the most familiar. It is to profit by the competition between the buyers, and encourage the rising of demand as long as possible; when this comes to a stop, to make a kind of auction, by first bringing down the prices to the level of the highest bidders, and so to descend by degrees, in proportion as demand sinks. Thus we may say with propriety, according to our definitions of demand, that it commonly becomes great, in proportion as prices sink. By this operation, the traders will profit as much as possible, and sell off as much of their goods as the profits will permit.

I say, this plan, in a new discovered country, is not politic, as it both discovers a covetousness and a want of faith in the merchants, and also throws open the secrets of their trade to those who ought to be kept ignorant of them.

Let me next suppose, that the large profits of our merchants shall be discovered by others, who arrive at the same ports in a separate interest, and who enter into no combination with the first, which might prevent the natural effects of competition.

Let the state of demand among the natives be supposed the same as formerly, both as to height and greatness, in consequence of the operation of the different principles, which might have induced our merchants to follow one or other of the plans we have been describing; we must however still suppose, that they have been careful to preserve considerable profits upon every branch.

If we suppose the inhabitants to have increased in numbers, wealth, and taste for superfluity, since the last voyage, demand will be found rather on the rising hand. Upon the arrival of the merchants in competition with the former, both will offer to sale; but if both stand to the same prices, it is very natural to suppose, that the former dealers will obtain a preference; as, cateris paribus, it is always an advantage to know and to be known. The last comers, therefore, have no other way left to counterbalance this advantage, but to lower their prices.

This is a new phaenomenon: here the fall of prices is not voluntary as formerly; not consented to from expediency; not owing to a failure of demand, but to the influence of a new principle of commerce, to wit, a double competition. This I shall now examine with all the care I am capable of.

Chapter VII: Of double Competition

When competition is much stronger on one side of the contract than on the other, I call it simple, and then it is a term synonymous with what I have called compound demand. This is the species of competition which is implied in the term high demand, or when it is said, that demand raises prices.

Double competition is, when, in a certain degree, it takes place on both sides of the contract at once, or vibrates alternately from one to the other. This is what restrains prices to the adequate value of the merchandize.

I frankly confess I feel a great want of language to express my ideas, and it is for this reason I employ so many examples, the better to communicate certain combinations of them, which otherwise would be inexplicable.

The great difficulty is to distinguish clearly between the principles of demand, and those of competition; here then follows the principal differences between the two, relatively to the effects they severely produce in the mercantile contract of buying and selling, which I here express shortly by the word contract.

Simple demand is what brings the quantity of a commodity to market. Many demand, who do not buy; many offer, who do not sell. This demand is called great or small; it is said to increase, to augment to swell; and is expressed by these and other synonymous terms, which mark an augmentation or diminution of quantity. In this species, two people never demand the same thing, but a part of the same thing, or things quite alike.

Compound demand is the principle which raises prices, and never can make them sink; because in this case more than one demands the very same thing. It is solely applicable to the buyers, in relation to the price they offer. This demand is called high or low, and is said to rise, to fall, to mount, to sink, and is expressed by these and other synonymous terms.

Simple competition, when between buyers, is the same as compound or high demand, but differs from it so far, as this may equally take place among sellers, which compound demand cannot, and then it works a contrary effect: it makes prices sink, and is synonymous with low demand: it is this competition which overturns the balance of work and demand; of which afterwards.

Double competition is what is understood to take place in almost every operation of trade; it is this which prevents the excessive rise of prices; it is this which prevents their excessive fall. While double competition prevails, the balance is perfect, trade and industry flourish.

The capital distinction, therefore, between the terms demand and competition is, that demand is constantly relative to the buyers, and when money is not the price, as in barter, then it is relative to that side upon which the greatest competition is found.

We therefore say, with regard to prices, demand is high or low. With regard to the quantity of merchandize, demand is great or small. With regard to competition, it is always called great or small, strong or weak.

Competition, I have said, is, with equal propriety, applicable to both parties in the contract. A competition among buyers is a proper expression: a competition among sellers, who have the merchandize, is full as easily understood, though it be not quite so striking, for reasons which an example will make plain.

You come to a fair where you find a great variety of every kind of merchandize, in the possession of different merchants. These, by offering their goods to sale, constitute a tacit competition; every one of them wishes to sell in preference to another, and at the same time with the best advantage to himself.

The buyers begin, by cheapening at every shop. The first price asked marks the covetousness of the seller; the first price offered, that of the buyer. From this operation, I say, competition begins to work its effects on both sides, and so becomes double. The principles which influence this operation are now to be deduced.

It is impossible to suppose the same degree of eagerness, either to buy or to sell, among several merchants; because the degree of eagerness I take to be exactly in proportion to their view of profit; and as this must necessarily be influenced and regulated by different circumstances, that buyer, who has the best prospect of selling again with profit, obliges him, whose prospect is not so good, to content himself with less; and that seller, who has bought to the best advantage, obliges him, who has paid dearer for the merchandize, to moderate his desire of gain.

It is from these principles, that competition among buyers and sellers must take place. This is what confines the fluctuation of prices within limits which are compatible with the reasonable profits of both buyers and sellers; for, as has been said, in treating of trade, we must constantly suppose the whole operation of buying and selling to be performed by merchants; the buyer cannot be supposed to give so high a price as that which he expects to receive, when he distributes to the consumers, nor can the seller be supposed to accept of one so low as that which he paid to the manufacturer. This competition is properly called double, because of the difficulty to determine upon which side it stands; the same merchant may have it in his favour upon certain articles, and against him upon others; it is continually in vibration, and the arrival of every post may less or more pull down the heavy scale.

In every transaction between merchants, the profit resulting from the sale must be exactly distinguished from the value of the merchandize. The first may vary, the last never can. It is this profit alone which can be influenced by competition; and it is for this reason we find such uniformity every where in the prices of goods of the same quality.

The competition between sellers does not appear so striking, as that between buyers; because he who offers to sale, appears passive only in the first operation; whereas the buyers present themselves one after another; they make a demand, and when the merchandize is refused to one at a certain price, a second either offers more, or does not offer at all: but so soon as another seller finds his account in accepting the price the first had refused, then the first enters into competition, provided his profits will admit his lowering the first price; and thus competition takes place among the sellers, until the profits upon their trade prevent prices from falling lower.

In all markets, I have said, this competition is varying, though insensibly, on many occasions; but in others, the vibrations are very perceptible. Sometimes it is found strongest on the side of the buyers, and in proportion as this grows, the competition between the sellers diminishes. When the competition between the former has raised prices to a certain standard, it comes to a stop; then the competition changes sides, and takes place among the sellers, eager to profit of the highest price. This makes prices fall, and according as they fall, the competition among the buyers diminishes. They still wait for the lowest period. At last it comes; and then perhaps some new circumstance, by giving the balance a kick, disappoints their hopes. If therefore it ever happens, that there is but one interest upon one side of the contract, as in the example in the former chapter, where we supposed the sellers united, you perceive, that the rise of the price, occasioned by the competition of the buyers, and even its coming to a stop, could not possibly have the effect of producing any competition on the other side; and therefore, if prices come afterwards to sink, the fall must have proceeded from the prudential considerations of adapting the price to the faculties of those, who, from the height of it, had withdrawn their demand.

From these principles of competition, the forestalling of markets is made a crime, because it diminishes the competition which ought to take place between different people, who have the same merchandize to offer to sale. The forestaller buys all up, with an intention to sell with more profit, as he has by that means taken other competitors out of the way, and appears with a single interest on one side of the contract, in the face of many competitors on the other. This person is punished by the state, because he has prevented the price of the merchandize from becoming justly proportioned to the real value; he has robbed the public, and enriched himself; and in the punishment, he makes restitution. Here occur two questions to be resolved, for the sake of illustration.

Can competition among buyers possibly take place, when the provision made is more than sufficient to supply the quantity demanded? On the other hand, can competition take place among the sellers, when the quantity demanded exceeds the total provision made for it?

I think it may in both cases; because in the one and the other, there is a competition implied on one side of the contract, and the very nature of this competition implies a possibility of its coming on the other, provided separate interests be found upon both sides. But, to be more particular:

First, Experience shews, that however justly the proportion between the demand and the supply may be determined in fact, it is still next to impossible to discover it exactly, and therefore buyers can only regulate the prices they offer, by what they may reasonably expect to sell for again. The sellers, on the other hand, can only regulate the prices they expect, by what the merchandize has cost them when brought to market. We have already shewn, how, under such circumstances, the several interests of individuals affect each other, and make the balance vibrate.

Secondly, The proportion between the supply and the demand is seldom other than relative among merchants, who are supposed to buy and sell, not from necessity, but from a view to profit. What I mean by relative is, that their demand is great or small, according to prices: there may be a great demand for grain at 35 shillings per quarter, and no demand at all for it at 40 shillings, I say, among merchants.

Here I must observe, how essential it is, to attend to the smallest circumstance in matters of this kind. The circumstance I here have in my eye, is the difference I find in the effect of competition, when it takes place purely among merchants on both sides of the contract, and when it happens, that either the consumers mingle themselves with the merchant-buyers, or the manufacturers, that is, the furnishers mingle themselves with the merchant-sellers. This combination I shall illustrate, by the solution of another question, and then conclude my chapter with a few reflections upon the whole.

Can there be no case formed, where the competition upon one side may subsist, without a possibility of its taking place on the other, although there should be separate interests upon both?

I answer. The case is hardly supposable among merchants who buy and sell with a view to profit; but it is absolutely supposable, and that is all, when the direct consumers are the buyers; when the circumstances of one of the parties is perfectly known; and when the competition is so strong upon one side, as to prevent a possibility of its becoming double, before the whole provision is sold off, or the demand satisfied. Let me have recourse to examples.

Grain arriving in a small quantity, at a port where the inhabitants are starving, produces so great a competition among the consumers, who are the buyers, that their necessity becomes evident; all the grain is generally bought up before prices can rise so high as to come to a stop; because nothing but want of money, that is, an impossibility of complying with the prices demanded by the merchants, can restrain them: but if you suppose, even here, that prices come naturally to a stop; or that, after some time, they fall lower, from prudential considerations, then there is a possibility of a competition taking place among the sellers, from the principles above deduced. If, on the contrary, the stop is not natural, but occasioned by the interposition of the magistrate, from humanity, or the like, there will be no competition, because then the principles of commerce are suspended; the sellers are restrained on one side, and they restrain the buyers on the other. Or rather, indeed, it is the magistrate, or compassion, who in a manner fixes the price, and performs the office of both buyer and seller.

A better example still may be found, in a competition among sellers; where it may be so strong, as to render a commodity in a manner of no value at all, as in the case of an uncommon and unexpected draught of fish, in a place of small consumption, when no preparations have been made for salting them. There can then be no competition among the buyers; because the market cannot last, and they find themselves entirely masters, to give what price they please, being sure the sellers must accept of it, or lose their merchandize. In the first example, humanity commonly stops the activity of the principle of competition; in the other it is stopt by a certain degree of fair-dealing, which forbids the accepting of a merchandize for nothing.

In proportion therefore as the rising of prices can stop demand, or the sinking of prices can increase it, in the same proportion will competition prevent either the rise or the fall from being carried beyond a certain length: and if such a case can be put, where the rising of prices cannot stop demand, nor the lowering of prices augment it, in such cases double competition does not subsist; because these circumstances unite the most separate interests of buyers and sellers in the mercantile contract, and when upon one side there is no separate interest, there can then be no competition.

From what has been said, we may form a judgment of the various degrees of competition. A book not worth a shilling, a fish of a few pounds weight, are often sold for considerable sums. The buyers here are not merchants. When an ambassador leaves a court in a hurry, his effects are sold for less than the half of their value: he is no merchant, and his situation is known. When, at a public market, there are found consumers, who buy their provision, or manufacturers, who dispose of their goods for present subsistence; the merchants, who are respectively upon the opposite side of the contract to these, profit of their competition; and those who are respectively upon the same side with them, stand by with patience, until they have finished their business. Then matters come to be carried on between merchant and merchant, and then, I allow, that profits may rise and fall, in the proportion of quantity to demand; that is to say, if the provision is less than the demand, the competition among the demanders, or the rise of the price, will be in the compound proportion of the falling short of the commodity, and of the prospect of selling again with profit. It is this proportion which regulates the competition, and keeps it within bounds. It can affect the profits only upon the transaction; the intrinsic value of the commodity stands immoveable: nothing is ever sold below the real value; nothing is ever bought for more than it may probably bring. I mean in general. Whereas so soon as consumers and needy manufacturers mingle in the operation, all proportion is lost. The competition between them is too strong for the merchants; the balance vibrates by jerks. In such markets merchants seldom appear: the principal objects there, are the fruits and productions of the earth, and articles of the first necessity for life, not manufactures strictly so called. A poor fellow often sells, to purchase bread to eat; not to pay what he did eat, while he was employed in the work he disposes of. The consumer often measures the value of what he is about to purchase, by the weight of his purse, and his desire to consume.

As these distinctions cannot be conveyed in the terms by which we are obliged to express them, and as they must frequently be implied, in treating of matters relating to trade and industry, I thought the best way was, to clear up my own ideas concerning them, and to lay them in order before my reader, before I entered farther into my subject.

All difference of opinion upon matters of this nature proceeds, as I believe, from our language being inadequate to express our ideas; from our inattention in using terms, which appear synonymous, and are not so; and from our natural propensity to include, under general rules, things which upon some occasions, common reason requires to be set asunder.

Chapter VIII: Of what is called Expence, Profit, and Loss

As we have been employed in explaining of terms, it will not be amiss to say a word concerning those which stand in the title of this chapter.

The term expence, when simply expressed, without any particular relation, is always understood to be relative to money. This kind I distinguish under the three heads, of private, public, and national.

  1. Private expence is, what a private person, or private society, lays out, either to provide articles of consumption, or something more permanent, which may be conducive to their ease, convenience, or advantage. Thus we say, a large domestic expence, relatively to one who spends a great income. We say, a merchant has been at great expence for magazines, for living, for clerks, &c. but never that he has been at any in buying goods. In the same way a manufacturer may expend for building, machines, horses, and carriages, but never for the matter he manufactures. When a thing is bought, in order to be sold again, the sum employed is called money advanced; when it is bought not to be sold, it may be said to be expended.
  2. Public expence is, the employment of that money, which has been contributed by individuals, for the current service of the state. The contribution, or gathering it together, represents the effects of many articles of private expence; the laying it out when collected, is public expence.
  3. National expence, is what is expended out of the country: this is what diminishes national wealth. The principal distinction to be here attended to, is between public expence, or the laying out of public money, and national expence, which is the alienating the nation's wealth in favour of strangers. Thus the greatest public expence imaginable, may be no national expence; because the money may remain at home. On the other hand, the smallest public, or even private expence, may be a national expence, because the money may go abroad.

Profit, and loss, I divide into positive, relative, and compound. Positive profit, implies no loss to any body; it results from an augmentation of labour, industry, or ingenuity, and has the effect of swelling or augmenting the public good.

Positive loss, implies no profit to any body; it is what results from the cessation of the former, or of the effects resulting from it, and may be said to diminish the public good.

Relative profit, is what implies a loss to somebody, it marks a vibration of the balance of wealth between parties, but implies no addition to the general stock.

Relative loss, is what, on the contrary, implies a profit to somebody; it also marks a vibration of the balance, but takes nothing from the general stock.

The compound is easily understood; it is that species of profit and loss which is partly relative, and partly positive. I call it compound, because both kinds may subsist inseparably in the same transaction.

Chapter IX: The general Consequences resulting to a trading Nation, upon the opening of an active foreign Commerce

Did I not intend to give myself to very general topics in this chapter I might in a manner exhaust the whole subject of modern economy under this title; for I apprehend that the whole system of modern politics is founded upon the basis of an active foreign trade.

A nation which remains passive in her commerce, is at the mercy of those who are active, and must be greatly favoured, indeed, by natural advantages, or by a constant flux of gold and silver from her mines, to be able to support a correspondence, not entirely hurtful to the augmentation of her wealth.

These things shall be more enlarged upon as we go along: the point in hand, is to consider the consequences of this trade, relatively to those who are actors in the operation.

When I look upon the wide field which here opens to my view, I am perplexed with too great a variety of objects. In one part, I see a decent and comely beginning of industry, wealth flowing gently in, to recompence ingenuity; numbers augmenting, and every one becoming daily more useful to another; agriculture proportionally extending itself; no violent revolutions; no exorbitant profits; no insolence among the rich; no excessive misery among the poor; multitudes employed in producing; great economy upon consumption; and all the instruments of luxury, daily produced by the hands of the diligent, going out of the country for the service of strangers; not remaining at home for the gratification of sensuality. At last augmentations come insensibly to a stop. Then these rivers of wealth, which were in brisk circulation through the whole world, and which returned to this trading nation as blood returns to the heart, to be thrown out again only by new pulsations, begin to be obstructed in their course; and flowing abroad more slowly than before, come to form stagnations at home. These, impatient of restraint, soon burst out into domestic circulation. Upon this cities swell in magnificence of buildings; the face of the country is adorned with palaces, and becomes covered with groves; luxury shines triumphant in every part; inequality becomes more striking to the eye; and want and misery appear more deformed, from the contrast; even fortune grows more whimsical in her inconstancy. the beggar of the other day, now rides in his coach; and he who was born in a bed of state, is seen to die in an alms-house. Such are the effects of great domestic circulation.

The statesman looks about with amazement; he, who was wont to consider himself as the first man in the society in every respect, perceives himself eclipsed by the lustre of private wealth, which avoids his grasp when he attempts to seize it. This makes his government more complex and more difficult to be carried on; he must now avail himself of art and address as well as of power and authority. By the help of cajoling and intrigues, he gets a little into debt; this lays a foundation for public credit, which, growing by degrees, and in its progress assuming many new forms, becomes, from the most tender beginnings, a most formidable monster, striking terror into those who cherished it in its infancy. Upon this, as upon a triumphant war-horse, the statesman gets a-stride, he then appears formidable anew; his head turns giddy; he is choaked with the dust he has raised; and at the moment he is ready to fall, he finds, to his utter astonishment and surprise, a strong monied interest, of his own creating, which, instead of swallowing him up as he apprehended, flies to his support. Through this he gets the better of all opposition, he establishes taxes, multiplies them, mortgages his fund of subsistence, either becomes a bankrupt, and rises again from his ashes; or if he be less audacious, he stands trembling and tottering for a while on the brink of the political precipice. From one or the other of these perilous situations, he begins to discover an endless path which, after a multitude of windings, still returns into itself, and continues an equal course through this vast labyrinth: but of this last part, more in the fourth book.

It is now full time to leave off rhapsody, and return to reasoning and cool inquiry, concerning the more immediate and more general effects and revolutions produced by the opening of a foreign trade in a nation of industry.

The first and most sensible alteration will be an increase of demand for manufacturers, because by supplying the wants of strangers, the number of consumers will now be considerably augmented. What again will follow upon this, must depend upon circumstances.

If this revolution in the state of demand should prove too violent, the consequence of it will be to raise demand; if it should prove gradual, it will increase it. I hope this distinction is well understood, and that the consequence appears just: for, if the supply do not increase in proportion to the demand, a competition will ensue among the demanders; which is the common effect of such sudden revolutions. If, on the other hand, a gentle increase of demand should be accompanied with a proportional supply, the whole industrious society will grow in vigour, and in wholesome stature, without being sensible of any great advantage or inconvenience; the change of their circumstances will even be imperceptible.

The immediate effects of the violent revolution will, in this example, be flattering to some, and disagreeable to others. Wealth will be found daily to augment, from the rising of prices, in many branches of industry. This will encourage the industrious classes, and the idle consumers at home will complain. I have already dwelt abundantly long upon the effects resulting from this to the lower classes of the people, in providing them with a certain means of subsistence. Let me now examine in what respect the higher classes will be likewise made to feel the good effects of this general change, although at first they may suffer a temporary inconvenience from it.

Farmers, as has been observed, will have a greater difficulty in finding servants, who, instead of labouring the ground, will choose to turn themselves to manufactures. This we have considered in the light of purging the lands of superfluous mouths; but every consequence in this great chain of politics draws other consequences after it, and as they follow one another, things put on different faces, which affect classes differently. The purging of the land is but one of the first; here follows another.

The desertion of the hands employed in a trifling agriculture will at first, no doubt, embarrass the farmers, and raise the price of wages; but in a little time every thing becomes balanced in a trading nation, because here every industrious man must advance prosperity, in spite of all combinations of circumstances.

In the case before us, the relative profits upon farming must soon become greater than formerly, because of the additional expence of servants which must affect the whole class of farmers; consequently, this additional expence, instead of turning out to be a loss to either landlord or farmer, will, after some little time, turn out to the advantage of both: because the produce of the ground, being indispensably necessary to every body, must in every article increase in its value, in proportion to the expence of raising it. Thus in a short time accounts will be nearly balanced on all hands; that is to say, the same proportion of wealth will, cateris paribus, continue the same among the industrious. I say among the industrious; for those who are either idle, or negligent, will be great losers.

A proprietor of land, inattentive to the causes of his farmer's additional expence, may very imprudently suffer his rents to fall, instead of assisting him on a proper occasion, in order to make them afterwards rise the higher.

Those who live upon a determinate income in money, and who are nowise employed in traffic, nor in any scheme of industry, will, by the augmentation of prices, be found in worse circumstances than before.

In a trading nation every man must turn his talents to account, or he will undoubtedly be left behind in this universal emulation, in which the most industrious, the most ingenious, and the most frugal will constantly carry off the prize.

This consideration ought to be a spur to every body. The richest men in a trading nation have no security against poverty, I mean proportional poverty; for though they diminish nothing of their income, yet by not increasing it in proportion to others, they lose their rank in wealth, and from the first class in which they stood, they will slide insensibly down to a lower.

This is one consequence of an additional beneficial trade, that it raises demand and increases wealth; but if we suppose no proportional augmentation of supply, it will prove at best but an airy dream which lasts for a moment, and when the gilded scene is passed away, numberless are the inconveniences which are seen to follow.

I shall now point out the natural consequences of this augmentation of wealth drawn from foreign nations, when, in proportion to the augmentation of mouths, and of the demand for the produce of industry, the statesman remains inattentive to increase the supply both of food and manufactures.

In such a situation profits will daily swell, and every scheme for reducing them within the bounds of moderation, will be looked upon as a hurtful and unpopular measure: be it so; but let us examine the consequences.

We have said, that the rise of demand for manufactures naturally increases the value of work: now I must add, that under such circumstances, the augmentation of riches, in a country, either not capable of improvement as to the soil, or where precautions have not been taken for facilitating a multiplication of inhabitants, by the importation of subsistence, will be productive of the most calamitous consequences.

On one side, this wealth will effectually diminish the mass of the food before produced; and on the other, will increase the number of useless consumers. The first of these circumstances will raise the demand for food; and the second will diminish the number of useful free hands, and consequently raise the price of manufactures: here are shortly the outlines of this progress.

The more rich and luxurious a people are, the more delicate they become in their manner of living; if they fed on bread formerly, they will now feed on meat; if they fed on meat, they will now feed on fowl. The same ground which feeds a hundred with bread, and a proportional quantity of animal food, will not maintain an equal number of delicate livers. Food must then become more scarce; demand for it rises; the rich are always the strongest in the market; they consume the food, and the poor are forced to starve. Here the wide door to modern distress opens, to wit, a hurtful competition for subsistence. Farther, when a people become rich, they think less of economy; a number of useless servants are hired, to become an additional dead weight on consumption; and when their starving countrymen cannot supply the extravagance of the rich so cheaply as other nations, they either import instruments of foreign luxury, or seek to enjoy them out of their own country, and thereby make restitution of their gains.

Is it not therefore evident, that if, before things come to this pass, additional subsistence be not provided by one method or other, the number of inhabitants must diminish; although riches may daily increase by a balance of additional matter, supposed to be brought into the country in consequence of the hitherto beneficial foreign trade. This is not all. I say farther, that the beneficial trade will last for a time only. For the infallible consequence of the rise of prices at home will be, that those nations which at first consumed your manufactures, perceiving the gradual increase of their price, will begin to work for themselves; or finding out your rivals who can supply them cheaper, will open their doors to them. These again, perceiving the great advantages gained by your traders, will begin to supply the market; and since every thing must be cheaper in countries where we do not suppose the concurrence of all the circumstances mentioned above, these nations will supplant you, and be enriched in their turn.

Here comes a new revolution. Trade is come to a stop: what then becomes of all the hands which were formerly employed in supplying the foreign demands?

Were revolutions as sudden as we are obliged to represent them, all would go to wreck; in proportion as they happen by quicker or slower degrees, the inconveniences are greater or smaller.

Prices, we have said, are made to rise by competition. If the competition of the strangers was what raised them, the distress upon the manufacturers will be in proportion to the suddenness of their deserting the market. If the competition was divided between the strangers and the home consumers, the inconveniences which ensue will be less; because the desertion of the strangers will be in some measure made up by an increase of home consumption which will follow upon the fall of prices. And if, in the third case, the natives have been so imprudent as not only to support a competition with the strangers, and thereby disgust them from coming any more to market, but even to continue the competition between themselves, the whole loss sustained by the revolution will be national. Wealth will cease to augment, but the inconveniences, instead of being felt by the manufacturers, will affect the state only; these manufacturers will continue in affluence, extolling the generosity of their countrymen, and despising the poverty of the strangers who had enriched them.

Domestic luxury will here prove an expedient for preserving from ruin the industrious part of a people, who, in subsisting themselves, had enriched their country. No change will follow in their condition; they will go on with a painful assiduity to labour, and if the consequences of it become now hurtful to one part of the state, they must, at least, be allowed to be essentially necessary for the support of the other.

But that luxury is no necessary concomitant of foreign trade, in a nation where the true principles of it are understood, will appear very plain, from a contrast I am now going to point out, in the example of a modern state, renowned for its commerce and frugality. The country I mean, is Holland.

A set of industrious and frugal people were assembled in a country, by nature subject to many inconveniences, the removing of which necessarily employed abundance of hands. Their situation upon the continent, the power of their former masters, and the ambition of their neighbours, obliged them to keep great bodies of troops. These troops added to the numbers of the community, without either enriching the state by their labour exported, or producing food for themselves or countrymen.

The scheme of a commonwealth was calculated to draw together the industrious; but it has been still more useful in subsisting them: the republican form of government, being there greatly subdivided, vests authority sufficient in every part of it, to make suitable provision for their own subsistence; and the tye which unites them, regards matters of public concern only. Had the whole been governed by one sovereign, or by one council, this important matter never could have been effectuated.

I imagine it would be impossible for the most able minister that ever lived, to provide nourishment for a country so extended as France, or even as England, supposing these as fully peopled as Holland is: even although it should be admitted that a sufficient quantity of food might be found in other countries for their subsistence. The enterprise would be too great, abuses would multiply; the consequence would be, that the inhabitants would die for want. But in Holland the case is different, every little town takes care of its own inhabitants; and this care, being the object of application and profit to so many persons, is accomplished with success.

When once it is laid down as a maxim in a country, that food must of necessity be got from abroad, in order to feed the inhabitants at home, the corn trade becomes considerable, and at the same time certain, regular, and permanent. This was the case in Holland: as the inhabitants were industrious, the necessary consequence has been, a very extraordinary multiplication; and at the same time such an abundance of grain, that instead of being in want themselves, they often supply their neighbours. There are many examples of England's being supplied with grain from thence, and, which is still more extraordinary, from the re-exportation of the very produce of its own fruitful soil.

It is therefore evident, that the only way to support industry, is to provide a supply of subsistence, constantly proportional to the demand that may be made for it. This is a precaution indispensably necessary for preventing hurtful competition. This is the particular care of the Dutch: so long as it can be effectual, their state can fear no decline; but whenever they come to be distressed in the markets, upon which they depend for subsistence, they will sink into ruin. It is by mere dint of frugality, cheap and parsimonious living, that the navigation of this industrious people is supported. Constant employment, and an accumulation of almost imperceptible gains, fills their coffers with wealth, in spite of the large outgoings to which their own proper nourishment yearly forces them. The large profits upon industry in other countries, which are no proof of the generosity of the consumers, but a fatal effect of the unsteady price of subsistence, is far from dazzling their eyes. They seldom are found in the list of competitors at any foreign port; if they have their cargo to make, they wait with pleasure in their own vessels, consuming their own provisions, and at last accept of what others have left. It may be said, that many other circumstances concur in favour of the Dutch, besides the article of subsistence. I shall not dispute this matter; but only remind my reader of what was said in the first book; to wit, that if a computation be made of the hands employed in providing subsistence, and of those who are severally taken up in supplying every other want, their numbers will be found nearly to balance one another in the most luxurious countries. From this I conclude, that the article of food, among the lower classes, must bear a very high proportion to all the other articles of their consumption; and therefore a diminution upon the price of subsistence, it at all times, must be of and still more an uniformity in the value of infinite consequence to manufacturers, who are obliged to buy it. From this consideration, let us judge of the consequence of such sudden augmentations upon the price of grain, as are familiar to us; 30 or 40 per cent seems nothing. Now this augmentation operates upon one-half of the whole expence of a labouring man: let any one who lives in tolerable affluence make the application of this to himself, and examine how he would manage his affairs if, by accidents of rains or winds, one-half of his expences were to rise 30 per cent without a possibility of restraining them; for this is unfortunately the case with all the lower classes. From whence I conclude, that the keeping food cheap, and still more the preserving it at all times at an equal standard, is the fountain of the wealth of Holland; and that any hurtful competition in this article must beget a disorder which will affect the whole of the manufacturers of a state.

Chapter X: Of the Balance of Work and Demand

It is quite impossible to go methodically through the subject of political economy, without being led into anticipations. We have frequently mentioned this balance of work and demand, and shewed how important a matter it is for a statesman to attend to it. The thing, therefore, in general is well understood; and all that remains to be done, is to render our ideas more determinate concerning it, and more adequate, if possible, to the principles we have been laying down.

We have treated fully of demand, and likewise of competition. We have observed how different circumstances influence these terms, so as to make them represent ideas entirely different; and we have said that double competition supports the balance we are now to speak of, and that single competition overturns it.

The word demand in this chapter is taken in the most simple acceptation; and when we say that the balance between work and demand is to be sustained in equilibrio, as far as possible, we mean that the quantity supplied should be in proportion to the quantity demanded, that is, wanted. While the balance stands justly poised, prices are found in the adequate proportion of the real expence of making the goods, with a small addition for profit to the manufacturer and merchant.

I have, in the fourth chapter, observed how necessary a thing it is to distinguish the two constituent parts of every price; the value, and the profit. Let the number of persons be ever so great, who, upon the sale of a piece of goods, share in the profits; it is still essential, in such enquiries as these, to suppose them distinctly separate from the real value of the commodity. and the best way possible to discover exactly the proportion between the one and the other, is by a scrupulous watchfulness over the balance we are now treating of, as we shall presently see.

The value and profits, combined in the price of a manufacture produced by one man, are easily distinguished by means of the analysis we have laid down in the fourth chapter. As long as any market is fully supplied with this sort of work, and no more; those who are employed in it live by their trade, and gain no unreasonable profit: because there is then no violent competition upon one side only, neither between the workmen, nor between those who buy from them, and the balance gently vibrates under the influence of a double competition. This is the representation of a perfect balance.

This balance is overturned in four different ways.

Either the demand diminishes, and the work remains the same:

Or the work diminishes, and the demand remains:

Or the demand increases, and the work remains:

Or the work increases, and the demand remains.

Now each of these four relations between demand and work may, or may not, produce a competition upon one side of the contract only.

This must be explained.

If demand diminishes, and work remains the same, which is the first case, either those who furnish the work will enter into competition, in which case they will hurt each other, and prices will fall below the reasonable standard of the even balance; or they will not enter into competition, and then prices continuing as formerly, the whole demand will be supplied, and the remainder of the work will lie upon hand.

This is a symptom of decaying trade.

Let us now, on the other hand, suppose demand to increase, and work to remain as before.

This example points out no diminution on either side, as was the case before, but an augmentation upon one; and is either a symptom of growing luxury at home, or of an increase in foreign trade.

Here the same alternation of circumstances occurs. The demanders will either enter into competition and raise the price of work, or they will enter into no competition; but being determined not to exceed the ordinary standard of the perfect balance, will defer making their provision till another time, or supply themselves in another market; that is to say, the new demand will cease as soon as it is made, for want of a supply.

Whenever, therefore, this perfect balance of work and demand is overturned by the force of a simple competition, or by one of the scale preponderating, one of two things must happen; either a part of the demand is not answered, or a part of the goods is not sold.

These are the immediate effects of the overturning of the balance.

Let me next point out the object of the statesman's care, relatively to such effects, and shew the consequences of their being neglected.

We may now simplify our ideas, and instead of the former, make use of other expressions which may convey them.

Let us therefore say, that the fall or rise upon either side of the balance, is positive, or relative. Positive, when the side we talk of really augments beyond, or diminishes below the usual standard. Relative, when there is no alteration upon the side we speak of, and that the subversion of the balance is owing to an alteration on the other side.

As for example:

Instead of saying demand diminishes, and work remains the same, let us say, demand diminishes positively, or work increases relatively; according as the subject may lead us to speak either of the one or of the other. This being premised.

If the scale of work shall preponderate positively, it should be inquired, whether the quantity furnished has really swelled, in all respects, beyond the proportion of the consumption, (in which case the statesman should diminish the number of hands, by throwing a part of them into a new channel) or whether the imprudence only of the workmen has made them produce their work unseasonably; in which case proper information and even assistance should be given them, to prevent merchants from taking advantage of their want of experience: but these last precautions are necessary in the infancy of industry only.

If a statesman should be negligent on this occasion; if he should allow natural consequences to follow upon one another, just as circumstances shall determine; then it may happen, that workmen will keep upon hand that part of their goods which exceeds the demand, until necessity forces them to enter into competition with one another, and sell for what they can get. Now this competition is hurtful, because it is all on one side, and because we have supposed the prepondering of the scale of work to be an overturning of a perfect balance, which can by no means be set right, consistently with a scheme of thriving, but by the scale of demand becoming heavier, and re-establishing a double competition. Were this to happen before the workmen come to sell in competition, then the balance would again be even, after what I call a short vibration, which is no subversion; but when the scale of work remains too long in the same position, and occasions a strong, hurtful, and lasting competition, upon one side only, then, I say, the balance is overturned; because this diminishes the reasonable profits, or perhaps, indeed, obliges the workmen to sell below prime cost. The effect of this is, that the workmen fall into distress, and that industry suffers a discouragement; and this effect is certain.

But it may be asked, Whether, by this fall of prices, demand will not be increased? That is to say, will not the whole of the goods be sold off?

I answer, That this may, or may not, be the effect of the fall, according to circumstances: it is a contingent consequence of the simple, but not the certain effect of the double competition: but the distress of the workmen is a certain and unavoidable consequence of the simple competition.

But supposing this contingent consequence to happen, will it not set the balance even, by increasing the demand? I answer, the balance is then made even by a violent shock given to industry, but it is not set even from any principle which can support it, or make it flourish. Here is the criterion of a perfect balance: A positive moderate profit must balance a positive moderate profit; the balance must vibrate, and no loss must befound on either side. In the example before us, the balance stands even, it is true; the work and the demand are equally poised as to quantity; but it is a relative profit, which hangs in the scale, opposite to a relative loss. I wish this may be well understood; farther illustrations will make it clear.

Next, let me suppose the scale of demand to preponderate positively. In this case, the statesman should be still more upon his guard, to provide a proportional supply; because the danger here may at first put on a shew of profit, and deceive him.

The consequences of this subversion of the balance are either,

First, That a competition will take place among the demanders only, which will raise profits. Now if, after a short vibration, the supply comes to be increased by the statesman's care, no harm will ensue; competition will change sides, and profits will come down again to the perfect standard. But if the scale of demand remains preponderating, and so keeps profits high, the consequence will be, that, in a little time, not only the immediate seller of the goods, but also every one who has contributed to the manufacture, will insist upon sharing these new profits. Now the evil is not, that every one should share, or that the profits should swell, as long as they are supported by demand, and as long as they can truly be considered as precarious; but the mischief is, that, in consequence of this wide repartition, and by such profits subsisting for a long time, they insensibly become consolidated, or, as it were, transformed into the intrinsic value of the goods. This, I say, is brought about by time; because the habitual extraordinary gains of every one employed induce the more luxurious among them to change their way of life insensibly, and fall into the habit of making greater consumptions, and engage the more slothful to remain idle, till they are exhausted. When therefore it happens, that large profits have been made for a considerable time, and that they have had the effect of forming a taste for a more expensive way of living among the industrious, it will not be the cessation of the demand, nor the swelling of the supply, which will engage them to part with their gains. Nothing will produce this effect but sharp necessity; and the bringing down of their profits, and the throwing the workmen into distress, are then simultaneous; which proves the truth of what I have said, that these profits become, by long habit, virtually consolidated with the real value of the merchandize. These are the consequences of a neglected simple competition, which raises the profits upon industry, and keeps the balance overturned for a considerable time.

Secondly, Let me examine the consequences of this overturn in the actual preponderancy of demand, when it does not occasion a competition among the demanders, and consequently, when it does not increase the profits upon industry.

This case can only happen, when the commodity is not a matter of great necessity, or even of great use; since the desire of procuring it is not sufficient to engage the buyers to raise their price; unless, indeed, this difference should proceed from the ease of providing the same, in other markets, as cheap as formerly. This last is a dangerous circumstance, and loudly calls for the attention of the statesman. He must prevent the desertion of the market, by a speedy supply for all the demand, and must even perhaps give encouragement to manufacturers, to enable them to diminish the prices fixed by the regular standard. This is the situation of a nation which is in the way of losing branches of her foreign trade; of which afterwards.

Whatever therefore be the consequences of the actual preponderancy of the scale of demand; that is, whether it tend to raise profits, or to discredit the market; the statesman's care should be directed immediately towards making the balance come even of itself, without any shock, and that as soon as possible, by increasing the supply. For if it be allowed to stand long in this overturned state, natural consequences will operate a forced restitution; that is, the rise in the price, or the call of a foreign market, will effectually cut off a proportional part of the demand, and leave the balance in an equilibrium, disadvantageous to trade and industry.

In the former case, the manufacturers were forced to starve, by an natural restitution, when the relative profits and loss of individuals balanced one another. Here the manufacturers are enriched for a little time, by a rise of profits, relative to the loss the nation sustains, by not supplying the whole demand. This results from the competition of their customers; but so soon as these profits become consolidated with the intrinsic value, they will cease to have the advantage of profits, and, becoming in a manner necessary to the existence of the goods, will cease to be considered as advantageous. These forced restitutions then, brought about, as we have said, by selling goods below their value, by cutting off a part of the demand, or by sending it to another market, resembles the operation of a carrier, who sets his ass's burden even, by laying a stone upon the lightest end of it. He however loses none of his merchandise; but the absurdity of the statesman is still greater, for he appears willingly to open the heavy end of the load, and to throw part of his merchandise into the highway.

I hope, by this time, I have sufficiently shewn the difference in effect between the simple and the double competition; between the vibrations of this balance of work and demand, and the overturning of it. When it vibrates in moderation, and by short alternate risings and sinkings, then industry and trade go on prosperously, and are in harmony with each other; because both parties gain. The industrious man is recompensed in proportion to his ingenuity; the intrinsic value of goods does not vary, nor deceive the merchant; profits on both sides fluctuate according to demand, but never get time to consolidate with, and swell the real value, and never altogether disappear, and starve the workman.

This happy state cannot be supported but by the care of the statesman; and when he is found negligent in the discharge of this part of his duty, the consequence is, that either the spirit of industry, which, it is supposed, has cost him much pains to cultivate, is extinguished, or the produce of it rises to so high a value, as to be out of the reach of a multitude of purchasers.

The progress towards the one or the other of these extremes is easily perceived, by attending to the successive overturnings of the balance. When these are often repeated on the same side, and the balance set right, by a succession of forced restitutions only, the same scale preponderating a-new, then is the last period soon accomplished. When, on the contrary, the overturnings are alternate, sometimes the scale of demand overturning the balance, sometimes the scale of work, the last period is more distant. Trade and industry subsist longer, but they remain in a state of perpetual convulsion. On the other hand, when the balance gently vibrates, then work and demand, that is, trade and industry, like agriculture and population, prove mutually assisting to each other, in promoting their reciprocal augmentation.

In order therefore to preserve a trading state from decline, the greatest care must be taken, to support a perfect balance between the hands employed in work and the demand for their labour. That is to say, according to former definitions, to prevent demand from ever standing long at an immoderate height, by providing at all times a supply, sufficient to answer the greatest that ever can be made: or, in other words, still, in order to accustom my readers to certain expressions, to encourage the great, and to discourage the high demand. In this case, competition will never be found too strong on either side of the contract, and profits will be moderate, but sure, on both.

If, on the contrary, there be found too many hands for the demand, work will fall too low for workmen to be able to live; or, if there be too few, work will rise, and manufactures will not be exported.

For want of this just balance, no trading state has ever been of long duration, after arriving at a certain height of prosperity. We perceive in history the rise, progress, grandeur, and decline of Sydon, Tyre, Carthage, Alexandria, and Venice, not to come nearer home. While these states were on the growing hand, they were powerful; when once they came to their height, they immediately found themselves labouring under their own greatness. The reason of this appears from what has been said.

While there is a demand for the trade of any country, inhabitants are always on the increasing hand. This is evident from what has been so often repeated in the first book, and confirmed by thousands of examples. There never was any branch of trade established in any kingdom, province, city, or even village; but such kingdoms, province, &c. increased in inhabitants. While this gradual increase of people is in proportion to the growing demand for hands, the balance between work and demand is exactly kept up: but as all augmentations must at last come to a stop, when this happens, inconveniences must ensue, greater or less, according to the negligence or attention of the statesman, and the violence or suddenness of the revolution.

Chapter XI: Why in Time this Balance is destroyed

Let us now examine what may be the reason why, in a trading and industrious nation, time necessarily destroys the perfect balance between work and demand.

We have already pointed out one general cause, to wit, the natural stop which must at last be put to augmentations of every kind.

Let us now apply this to circumstances, in order to discover in what manner natural causes operate this stop, either by preventing the increase of work, on one side of the balance, or the increase of demand, on the other. When once we discover how the stop is put to augmentations, we may safely conclude, that the continuation of the same, or similar causes, will soon produce a diminution, and operate a decline.

We have traced the progress of industry, and shewn how it goes hand in hand with the augmentation of subsistence, which is the principal allurement to labour. Now the augmentation of food is relative to the soil, and as long as this can be brought to produce, at an expence proportioned to the value of the returns, agriculture, without any doubt, will go forward in every country of industry. But so soon as the progress of agriculture demands an additional expence, which the natural return, at the stated prices of subsistence, will not defray, agriculture comes to a stop, and so would numbers, did not the consequences of industry push them forward, in spite of small difficulties. The industrious then, I say, continue to multiply, and the consequence is, that food becomes scarce, and that the inhabitants enter into competition for it.

This is no contingent consequence, it is an infallible one; because food is an article of the first necessity, and here the provision is supposed to fall short of demand. This raises the profits of those who have food ready to sell; and as the balance upon this article must remain overturned for some time, without the interposition of the statesman, these profits will be consolidated with the price, and give encouragement to a more expensive improvement of the soil. I shall here interrupt the examination of the consequences of this revolution as to agriculture, until I have examined the effects which the rise of the price of food produces on industry, and on the demand for it.

This augmentation on the value of subsistence must necessarily raise the price of all work, because we are here speaking of an industrious people fully employed, and because subsistence is one of the three articles which compose the intrinsic value of their work, as has been said.

The rise therefore, upon the price of work, not being any augmentation of that part of the price which we call profits, as happens to be the case when a rise in demand has produced a competition among the buyers, cannot be brought down but by increasing the supply of subsistence; and were a statesman to mistake the real cause of the rise, and apply the remedy of increasing the quantity of work, in order to bring down the market, instead of augmenting the subsistence, he would occasion a great disorder; he would introduce the hurtful simple competition between people who labour for moderate profits, mentioned in the last chapter, and would throw such a discouragement upon their industry, as would quickly extinguish it altogether. On the other hand, did he imprudently augment the subsistence, by large importations, he would put an end to the expensive improvements of the soil, and this whole enterprise would fall to nothing. Here then is a dilemma, out of which he can extricate himself by a right application of public money, only.

Such a necessary rise in the price of labour may either affect foreign exportation, or it may not, according to circumstances. If it does, the price of subsistence, at any rate, must be brought down at least to those who supply the foreign demand; if it does not affect foreign exportation, matters may be allowed to go on; but still the remedy must be ready at hand, to be applied the moment it becomes expedient.

There is one necessary augmentation upon the prices of industry, brought about by a very natural cause, viz. the increase of population, which may imply a more expensive improvement of the soil; that is, an extension of agriculture. This augmentation may very probably put a stop to the augmentation of demand for many branches of manufactures, consequently may stop the progress of industry; and if the same causes continue to operate in a greater degree, it may also cut off a part of the former demand, may discredit the market, open a door to foreign consumption, and produce the inconveniences of poverty and distress, in proportion to the degree of negligence in the statesman.

I shall now give another example, of a very natural augmentation upon the intrinsic value of work, which does not proceed from the increase of population, but from the progress of industry itself; which implies no internal vice in a state, but which is the necessary consequence of the reformation of a very great one. This augmentation must be felt less or more in every country, in proportion as industry becomes extended.

We have said, that the introduction of manufactures naturally tends. to purge the lands of superfluous mouths: now this is a very slow and gradual operation. A consequence of it was said to be (Book I. Chapter xx.) an augmentation of the price of labour, because those who have been purged off, must begin to gain their whole subsistence at the expence of those who employ them.

If therefore, in the infancy of industry, any branch of it shall find itself assisted in a particular province, by the cheap labour of those mouths superfluously fed by the land, examples of which are very frequent, this advantage must diminish, in proportion as the cause of it ceases; that is, in proportion as industry is extended, and as the superfluous mouths are of consequence purged off.

This circumstance is of the last importance to be attended to by a statesman. Perhaps it was entirely owing to it, that industry was enabled to set up its head in this corner. How many examples could I give, of this assistance given to manufactures in different provinces, where I have found the value of a day's work, of spinning, for example, not equal to half the nourishment of the person. This is a great encouragement to the making of cloths; and accordingly we see some infant manufactures dispute the market with the produce of the greatest dexterity; the distaff dispute prices with the wheel. But when these provinces come to be purged of their superfluous mouths, spinning becomes a trade, and the spinners must live by it. Must not then prices naturally rise? And if these are not supported by the statesman, or if assistance is not given to these poor manufacturers, to enable them to increase their dexterity, in order to compensate what they are losing in cheapness, will not their industry fail? Will not the poor spinners be extinguished? For it is not to be expected, that the landlord will receive them back again from a principle of charity, after he has discovered their former uselessness.

A third cause of a necessary augmentation upon the intrinsic value of goods proceeds from taxes. A statesman must be very negligent indeed, if he does not attend to the immediate consequences of his own proper operations. I shall not enlarge on this at present, as it would be an necessary anticipation; but I shall return, to resume the part of my reasoning which I broke off abruptly.

I have observed, how the same cause which stops the progress of industry, gives an encouragement to agriculture: how the rise in the price of subsistence necessarily increases the price of work to an industrious and well-employed people: how this cuts off a part of the demand for work, or sends it to a foreign market.

Now all these consequences are entirely just, and yet they seem Contradictory to another part of my reasoning, (Book I, Chapter xvi.) where I set forth the advantages of a prodigal consumption of the earth's produce as advantageous to agriculture, by increasing the price of subsistence, without taking notice, on the other hand, of the hurt thereby done to industry, which supports the consumption of that produce.

The one and the other chain of consequences is equally just, and they appear contradictory upon the supposition only, that there is no statesman at the helm. These contradictions represent the alternate overturn of the balance. The duty of the statesman is, to support the double competition every where, and to permit the gentle alternate vibrations only of the two scales.

When the progress of industry has augmented numbers, and made subsistence scarce, he must estimate to what height it is expedient that the price of subsistence should rise. If he finds, that, in order to encourage the breaking up of new lands, the price of it must rise too high and stand high too long, to preserve the intrinsic value of goods at the same standard as formerly; then he must assist agriculture with his purse, in order that exportation may not be discouraged. This will have the effect of increasing subsistence, according to the true proportion of the augmentation required, without raising the price of it too high. And if this operation be the work of time, and the demand for the augmentation be pressing, he must continue to assist his agriculture and have subsistence imported, or brought from abroad, during that interval. This supply he may cut off whenever he pleases, that is, whenever it ceases to be necessary.

If the supply comes from a sister country, it must be so taken, as to occasion no violent revolution when it comes to be interrupted a-new. As for example: One province demands a supply of grain from another, for a few years only, until their own soil can be improved, so as to provide them sufficiently. The statesman should encourage agriculture, no doubt, in the province furnishing, and let the farmers know the extent of the demand, and the time it may probably last, as near as possible; but he must discourage the plucking up of vineyards, and even perhaps the breaking up of great quantities of old pasture; because, upon the ceasing of the demand, such changes upon the agriculture of the province furnishing, may occasion a hurtful revolution.

While this foreign supply is allowed to come in, the statesman should be closely employed in giving such encouragement to agriculture at home, according to the principles hereafter to be deduced, as may nearly balance the discouragement given to it by this newly permitted importation. If this step be neglected, the consequence may be, that the foreign supply will go on increasing every year, and will extinguish the agriculture already established in the country, instead of supplying a temporary exigency, which is within the power of the country itself to furnish. These, I suppose, were the principles attended to by the government of England, upon opening their ports for the importation of provisions from Ireland.

The principle, therefore, being to support a gentle increase of food, inhabitants, work, and demand, the statesman must suffer small vibrations in the balance, which, by alternate competition, may favour both sides of the contract; but whenever the competition stands too long upon either side, and threatens a subversion of the balance, then, with an artful hand, he must endeavour to load the lighter scale, and never, but in cases of the greatest necessity, have recourse to the expedient of taking any thing from the heavier.

In treating of the present state of France, we observed, in the chapter above-cited, how the vibration of the balance of agriculture and population may carry food and numbers to their height; but as foreign trade was not there the direct object of inquiry, I did not care to introduce this second balance of work and demand, for fear of perplexing my subject. I hope I have now abundantly shewn the force of the different principles, and it must depend upon the judgment of the statesman to combine them together, and adapt them to his plan: a thing impossible to be even chalked out by any person who is not immediately at the head of the affairs of a nation. My work resembles the formation of the pure colours for painting, it is the artist's business to mix them: all I can pretend to, is to reason consequentially from suppositions. If at any time I go farther, I exceed my plan, and I confess the fault.

I shall now conclude my chapter by introducing a new subject. I have been at pains to shew how the continued neglect of a statesman, in watching over the vibrations of the balance of work and demand, naturally produces a total subversion of it; but this is not, of itself, sufficient to undo an industrious people. Other nations must be taught to profit of the disorder; and this is what I call the competition between nations.

Chapter XII: Of the Competition between Nations

Mankind daily profit by experience, and acquire knowledge at their own cost.

We have said that what lays the foundation of foreign trade, is the ease and convenience which strangers find in having their wants supplied by those who have set industry on foot. The natural consequence of this foreign demand is to bring in wealth, and to promote augmentations of every kind. As long as these go on, it will be impossible for other nations to rival the traders, because their situation is every day growing better: dexterity increasing diminishes the price of work; every circumstance, in short, becomes more favourable; the balance never vibrates, but by one of the scales growing positively heavier, and it is constantly coming even by an increase of weight on the other side. We have seen how these revolutions never can raise the intrinsic value of goods, and have observed that this is the road to greatness.

The slower any man travels, the longer he is in coming to his journey's end; and when his health requires travelling, and that he cannot go far from home, he rides out in a morning and comes home to dinner.

This represents another kind of vibration of the balance, and when things are come to such a height as to render a train of augmentations impossible, the next best expedient is, to permit alternate vibrations of diminution and augmentation.

Work augments, I shall suppose, and no more demand can be procured; it may then be a good expedient to diminish hands, by making soldiers of them; by employing them in public works; or by sending them out of the country to become useful in its colonies. These operations give a relative weight to the scale of demand, and revive a competition on that side. Then the industrious hands must be gently increased a-new, and the balance kept in vibration as long as possible. By these alternate augmentations and diminutions, hurtful revolutions, and the subversion of the balance, may be prevented. This is an expedient for standing still without harm, when one cannot go forward to advantage.

If such a plan be followed, an industrious nation will continue in a situation to profit of the smallest advantage from revolutions in other countries, occasioned by the subversion of their balance; which may present an opportunity of new vibrations by alternate augmentations.

On such occasions, the abilities of a statesman are discovered, in directing and conducting what I call the delicacy of national competition. We shall then observe him imitating the mariners, who do not take in their sails when the wind falls calm, but keep them trimmed and ready to profit of the least breath of a favourable gale. Let me follow my comparison: The trading nations of Europe represent a fleet of ships, every one striving who shall get first to a certain port. The statesman of each is the master. The same wind blows upon all; and this wind is the principle of self-interest, which engages every consumer to seek the cheapest and the best market. No trade wind can be more general, or more constant than this; the natural advantages of each country represent the degree of goodness of each vessel; but the master who sails his ship with the greatest dexterity, and he who can lay his rivals under the lee of his sails, will, caeteris paribus, undoubtedly get before them, and maintain his advantage.

While a trading nation, which has got an established advantage over her rivals, can be kept from declining, it will be very difficult, if not impossible, for any other to enter into competition with her: but when the balance begins to vibrate by alternate diminutions; when a decrease of demand operates a failure of supply; when this again is kept low, in order to raise the competition of consumers; and when, instead of restoring the balance by a gentle augmentation, a people are engaged, from the allurements of high profits, to discourage every attempt to bring down the market; then the scissors of foreign rivalship will fairly trim off the superfluity of demand; prices will fall, and a return of the same circumstances will prepare the way for another vibration downwards.

Such operations as these, are just what is requisite for facilitating the competition of rival nations; and are the only means possible to engage those who did not formerly work, to begin and supply themselves.

Did matters stand so, the evil would be supportable; strangers would supply the superfluities only of demand, and the balance would still be found in a kind of equilibrium at home. But, alas ! even this happy state can be of short duration only. The beginnings of trade with the strangers will prove just as favourable to the vibration of their balance, by augmentations, as it was formerly to the home-traders; and now every augmentation to those, must imply a diminution to the others. What will then become of such hands, in the trading nation, as subsist by supplying the foreign market only? Will not this revolution work the same effect, as to these, as if an additional number of hands had been employed to supply the same consumption? And will not this utterly destroy the balance among the traders, by throwing an unsurmountable competition on the side of the supply? It will however have a different effect from what might have happened, if the same number of hands had been thrown into the trading nation; for, in this case, they might destroy the consolidated profits only upon labour, and perhaps restore the balance: the inconvenience would be equally felt by every workman, but profit would result to the public. But in the other case, the old traders will find no foreign sale for their work; these branches of industry will fall below the price of subsistence, and the new beginners will have reasonable profits in supplying their own wants, I say reasonable, because this transition of trade from one nation to another, never can be sudden or easy; and can take place in proportion only to the rise in the intrinsic value of goods in that which is upon the decline, not in proportion to the rise in their profits upon the sale of them: for as long as the most extravagant profits do not become consolidated, as we have said, with the value of the work, a diminution of competition among the consumers, which may be occasioned by a beginning of foreign industry, will quickly make them disappear; and this will prove a fatal blow to the first undertakings of the rival nations. But when once they are fairly so consolidated, that prices can no more come down of themselves, and that the statesman will not lend his helping hand, then the new beginners pluck up courage, and set out by making small profits: because in all new undertakings there is mismanagement and considerable loss; and nothing discourages mankind from new undertakings more than difficult beginnings.

As long, therefore, as a trading state is upon the rising hand, or even not upon the decline, and while the balance is kept right without the expedient of alternate diminutions, work will always be supplied from this quarter, cheaper than it possibly can be furnished from any other, where the same dexterity does not prevail. But when a nation begins to lose ground, then the very columns which supported her grandeur, begin, by their weight, to precipitate her decline. The wealth of her citizens will support and augment the home demand, and encourage that blind fondness for high profits, which it is impossible to preserve. The moment these consolidate to a certain degree, they have the effect of banishing from the market the demand of strangers, who only can enrich her. It is in vain to look for their return after the nation has discovered her mistake, although she should be able to correct it; because, before this can happen, her rivals will have profited of the golden opportunity, and during the infatuation of the traders, will, even by their assistance, have got fairly over the painful struggle against their superior dexterity.

Thus it happens, that so soon as matters begin to go backward in a trading nation, and that by the increase of their riches, luxury and extravagance take place of economy and frugality among the industrious; when the inhabitants themselves foolishly enter into competition with strangers for their own commodities; and when a statesman looks coolly on, with his arms across, or takes it into his head, that it is not his business to interpose, the prices of the dextrous workman will rise above the amount of the mismanagement, loss, and reasonable profits, of the new beginners; and when this comes to be the case, trade will decay where it flourished most, and take root in a new soil. This I call a competition between nations.

Chapter XIII: How far the Form of Government of a particular Country may be favourable or unfavourable to a Competition with other Nations, in matters of Commerce

The question before us, though relative to another science, is not altogether foreign to this. I introduce it in this place, not so much for the sake of connexion, as by way of an illustration, which at the same time that it may serve as an exercise upon general principles, may also prove a relaxation to the mind, after so long a chain of close reasoning.

In setting out, I informed my readers that I intended to treat of the political economy of free nations only; and upon every occasion where I have mentioned slavery, I have pointed out how far the nature of it is contrary to the advancement of private industry, the inseparable concomitant of foreign and domestic trade.

No term is less understood than that of liberty, and it is not my intention, at present, to enter into a particular inquiry into all the different acceptations of it.

By a people's being free, I understand no more than their being governed by general laws, well known, not depending upon the ambulatory will of any man, or any set of men, and established so as not to be changed, but in a regular and uniform way; for reasons which regard the body of the society, and not through favour or prejudice to particular persons, or particular classes. So far as a power of dispensing with, restraining or extending general laws, is left in the hands of any governor, so far I consider public liberty as precarious. I do not say it is hereby hurt; this will depend upon the use made of such prerogatives. According to this definition of liberty, a people may be found to enjoy freedom under the most despotic forms of government; and perpetual service itself, where the master's power is limited according to natural equity, is not altogether incompatible with liberty in the servant.

Here new ideas present themselves concerning the general principles of subordination and dependence among mankind; which I shall lay before my reader before I proceed, submitting the justness of them to his decision.

As these terms are both relative, it is proper to observe, that by subordination is implied an authority which superiors have over inferiors; and by dependence, is implied certain advantages which the inferiors draw from their subordination: a servant is under subordination to his master, and depends upon him for his subsistence.

Dependence is the only bond of society and I have observed, in the fourth chapter of the first book, that the dependence of one man upon another for food, is a very natural introduction to slavery. This was the first contrivance mankind fell upon, in order to become useful to one another.

Upon the abolishing of slavery, from a principle of christianity, the next step taken was the establishment of an extraordinary subordination between the different classes of the people; this was the principle of the feudal government.

The last refinement, and that which has brought liberty to be generally extended to the lowest denominations of a people, without destroying that dependence necessary to serve as a band of society, was the introduction of industry.. by this is implied, the circulation of an adequate equivalent for every service, which procures to the rich every advantage they could expect to reap, either from the servitude or dependence of the poor'; and to these again, every comfort they could wish to enjoy under the mildest slavery, or most gentle subordination.

From this exposition, I divide dependence into three kinds. The first natural, between parents and children; the second political between masters and servants, lords and vassals, Princes and subjects; the third commercial, between the rich and the industrious.

May I be allowed to transgress the limits of my subject for a few lines, and to dip so far into the principles of the law of nature, as to enquire, how far subordination among men is thereby authorized? I think I may decide, that so far as the subordination is in proportion to the dependence, sofar it is reasonable and just. This represents an even balance. If the scale of subordination is found too weighty, tyranny ensues; and licentiousness is implied, in proportion as it rises above the level. From this let me draw some conclusions.

First, He who depended upon another, for the preservation of a life justly forfeited, and at all times in the power of him who spared it, was, by the civil law, called a slave. This surely is the highest degree of dependence.

Secondly, He who depends upon another for every thing necessary for his subsistence, seems to be in the second degree; this is the dependence of children upon their parents.

Thirdly, He who depends upon another for the means of procuring subsistence to himself by his own labour, stands in the third degree: this I take to have been the case between the feudal lords, and the lowest classes of their vassals, the labourers of the ground.

Fourthly, He who depends totally upon the sale of his own industry, stands in the fourth degree: this is the case of tradesmen and manufacturers, with respect to those who employ them.

These I take to be the different degrees of subordination between man and man, considered as members of the same society.

In proportion, therefore, as certain classes, or certain individuals become more dependent than formerly, in the same proportion ought their just subordination to increase: and in proportion as they become less dependent than formerly, in the same proportion ought this just subordination to diminish. This seems to be a rational principle: next for the application.

I deduce the origin of the great subordination under the feudal government, from the necessary dependence of the lower classes for their subsistence. They consumed the produce of the land, as the price of their subordination, not as the reward of their industry in making it produce.

I deduce modern liberty from the independence of the same classes, by the introduction of industry, and circulation of an adequate equivalent for every service.

If this doctrine be applied in order to resolve the famous question so much debated, concerning the origin of supreme authority, so far as it is a question of the law of nature, I do not find the decision so very difficult: All authority is in proportion to dependence, and must vary according to circumstances.

I think it is as rational to say, that the fatherly power proceeded originally from the act of the children, as to say, that the great body of the people who were fed, and protected by a few great lords, was the fountain of power, and creator of subordination. Those who have no other equivalent to give for their food and protection, must pay in personal service, respect, and submission; and so soon as they come to be a situation to pay a proper equivalent for these dependences, so far they acquire a title to liberty and independence. The feudal lords, therefore, who, with reason, had an entire authority over many of their vassals, being subdued by their King; the usurpation was upon their rights, not upon the rights of the lower classes: but when a King came to extend the power he had over the vassals of the lords, to the inhabitants of cities, who had been independent of this subordination, his usurpation became evident.

The rights of Kings, therefore, are to be sought for in history; and not founded upon the supposition of tacit contracts between them and their people, inferred from the principles of an imaginary law of nature, which makes all mankind equal: nature can never be in opposition to common reason.

The general principle I have laid down, appears, in my humble opinion, more rational than this imaginary contract; and as consonant to the full with the spirit of free government. If the original tacit contract of government between Prince and people is admitted universally, then all governments ought to be similar; and every subordination, which appears contrary to the entire liberty and independence of the lowest classes, ought to be construed as tyrannical: whereas, according to my principle, the subordination of classes may, in different countries, be vastly different; the prerogative of one sovereign may, from different circumstances, be far more extended than that of another.

May not one have attained the sovereignty (by the free election of the people, I suppose) because of the great extent of his possessions, number of his vassals and dependents, quantity of wealth, alliances and connexions with neighbouring sovereigns? Had not, for example, such a person as Hugh Capet, the greatest feudal lord of his time, a right to a much more extensive jurisdiction over his subjects, than could reasonably be aspired to by a King of Poland, sent from France, or from Germany, and set at the head of a republic, where he has not one person depending upon him for any thing?

The power of Princes, as Princes, must then be distinguished from the power they derive from other circumstances, which do not necessarily follow in consequence of their elevation to the throne. It would, I think, be the greatest absurdity to advance, that the title of King abolishes, of itself, the subordination due to the person who exercises the office of that high magistracy.

Matter of fact, which is stronger than all reasoning, demonstrates the force of the principle here laid down. Do we not see how subordination rises and falls under different reigns, under a rich Elizabeth, and a necessitous Charles, under a powerful Austrian, and a distressed Bavarian Emperor? I proceed no farther in the examination of this matter: perhaps my reader has decided that I have gone too far already.

From these principles may be deduced the boundaries of subordination. A people who depend upon nothing but their own industry for their subsistence, ought to be under no farther subordination than what is necessary for their protection. And as the protection of the whole body of such a people implies the protection of every individual, so every political subordination should there be general and equal: no person, no class should be under a greater subordination than another. This is the subordination of the laws; and whenever laws establish a subordination more than what is proportionate to the dependence of those who are subordinate, so far such laws may be considered as contrary to natural equity, and arbitrary.

These things premised, I come to the question proposed, namely, How far particular forms of government are favourable or unfavourable to a competition with other nations, in point of commerce?

If we reason from facts, and from experience, we shall find, that trade and industry have been found to flourish best under the republican form, and under those which have come the nearest to it. May I be allowed to say, that, perhaps, one principal reason for this has been, that under these forms the administration of the laws has been the most uniform, and consequently, that most liberty has actually been there enjoyed.. I say actually, because I have said above, that in my acceptation of the term, liberty is equally compatible with monarchy as with democracy; I do not say the enjoyment of it is equally secure under both; because under the first it is much more liable to be destroyed. The life of the democratical system is equality. Monarchy conveys the idea of the greatest inequality possible. Now, if, on one side, the equality of the democracy secures liberty; on the other, the moderation in expence discourages industry; and if, on one side, the inequality of the monarchy endangers liberty, the progress of luxury encourages industry on the other. From whence we may conclude, that the democratical system is naturally the best for giving birth to foreign trade; the monarchical, for the refinement of the luxurious arts, and for promoting a rapid circulation of inland commerce.

The danger which liberty is exposed to under monarchy, and the discouragement to industry, from the frugality of the democracy, are only the natural and immediate effects of the two forms of government; and these inconveniences will take place only, while statesmen neglect the interest of commerce, so far as not to make it an object of administration.

The disadvantage, therefore, of the monarchical form, in point of trade and industry, does not proceed from the inequality it establishes among the citizens, but from the consequence of this inequality, which is very often accompanied with an arbitrary and undeterminate subordination between the individuals of the higher classes, and those of the lower; or between those vested with the execution of the laws, and the body of the people. The moment it is found that any subordination within the monarchy, between subject and subject, is left without proper bounds prescribed, liberty is so far at an end. Nay monarchy itself is hereby hurt, as this undeterminate subordination implies an arbitrary power in the state, not vested in the monarch. Arbitrary power never can be delegated; for if it be arbitrary, it may be turned against the monarch, as well as against the subject.

I might therefore say, that when such a power in individuals is constitutional in the monarchy, such monarchy is not a government, but a tyranny, and therefore falls without the limits of our subject; and when such a power is anti-constitutional, and yet is exercised, that it is an abuse, and should be overlooked. But as the plan of this inquiry engages me to investigate the operations of general principles, and the consequences they produce, I cannot omit, in this place, to point out those which flow from an indeterminate subordination, from whatever cause it may proceed.

Whether this indeterminate subordination between individuals, be a vice in the constitution of the government, or an abuse, it is the same thing as to the consequences which result from it. It is this which checks and destroys industry, and which in a great measure prevents its progress from being equal in all countries. This difference in the form or administration of governments, is the only one which it is essentially necessary to examine in this inquiry. and, so essential it is, in my opinion, that I imagine it would be less hurtful, in a plan for the establishment of commerce, fairly, and at once to enslave the lower classes of the inhabitants, and to make them vendible like other commodities, than to leave them nominally free, burthened with their own maintenance, charged with the education of their children, and at the same time under an irregular subordination; that is, liable at every moment to be loaded with new prestations or impositions, either in work or otherwise, and to be fined or imprisoned at will by their superiors.

It produces no difference, whether these irregularities be exercised by those of the superior classes, or by the statesman and his substitutes. It is the irregularity of the exactions more than the extent of them which ruins industry. It renders living precarious, and the very idea of industry should carry along with it, not only an assured livelihood, but a certain profit over and above.

Let impositions be ever so high, provided they be proportional, general, gradually augmented, and permanent, they may have indeed the effect of stopping foreign trade, and of starving the idle, but they never will ruin the industrious; as we shall have occasion to shew in treating of taxation. Whereas, when they are arbitrary, falling unequally upon individuals of the same condition, sudden, and frequently changing their object, it is impossible for industry to stand its ground. Such a system of economy introduces an unequal competition among those of the same class, it stops industrious people in the middle of their career, discourages others from exposing to the eyes of the public the ease of their circumstances, consequently encourages hoarding; this again excites rapaciousness upon the side of the statesman, who sees himself frustrated in his schemes of laying hold of private wealth.

From this a new set of inconveniences follow. He turns his views upon solid property. This inspires the landlords with indignation against him who can load them at will; and with envy against the monied interest, who can baffle his attempts. This class again is constantly upon the catch to profit of the public distress for want of money. What is the consequence of all this? It is that the lowest classes of the people, who ought by industry to enrich the state, find on one hand the monied interest constantly amassing, in order to lend to the state, instead of distributing among them, by seasonable loans, their superfluous income, with a view to share the reasonable profits of their ingenuity; and on the other hand, they find the emissaries of taxation robbing them of the seed before it is sown, instead of waiting for a share in the harvest.

Under the feudal form of government, liberty and independence were confined to the nobility. Birth opened the door of preferment to some, and birth as effectually shut it against others. I have often observed how, by reason and from experience, such a form of government must be unfavourable both to trade and industry.

From reason it is plain, that industry must give wealth, and wealth will give power, if he who possesses it be left the master to employ it as he pleases. A government could not therefore encourage a system which tended to throw power into the hands of those who were made to obey only. It was consequently very natural for the nobility to be jealous of wealthy merchants, and of every one who became easy and independent by means of his own industry; experience proved how exactly this principle regulated their administration.

A statesman ought, therefore, to consider attentively every circumstance of the constitution of his country, before he sets on foot the modern system of trade and industry. I am far from being of opinion that this is the only road to happiness, security, and ease; though, from the general taste of the times I live in, it be the system I am principally employed to examine. A country may be abundantly happy, and sufficiently formidable to those who come to attack it, without being extremely rich. Riches indeed are forbid to all who have neither mines, or foreign trade.

If a country be found labouring under many natural disadvantages from inland situation, barren soil, distant carriage, it would be in vain to attempt a competition with other nations in foreign markets. All that can be then undertaken is a passive trade, and that so far only as it can bring in additional wealth. When little money can be acquired, the statesman's application must be, to make that already acquired to circulate as much as possible, in order to give bread to every one in the society.

In countries where the government is vested in the hands of the great lords, as is the case in all aristocracies, as was the case under the feudal government, and as it still is the case in many countries in Europe, where trade, however, and industry are daily gaining ground; the statesman who sets the new system of political economy on foot, may depend upon it, that either his attempt will fail, or the constitution of the government will change. If he destroys all arbitrary dependence between individuals, the wealth of the industrious will share, if not totally root out the power of the grandees. If he allows such a dependence to subsist, his project will fail.

While Venice and Genoa flourished, they were obliged to open the doors of their senate to the wealthy citizens, in order to prevent their being broken down. What is venal nobility? The child of commerce, the indispensable consequence of industry, and a middle term, which our Gothic ancestors found themselves obliged to adopt, in order not entirely to lose their own rank in the state. Money, they found, must carry off the fasces, (sic), so they chose rather to adopt the wealthy plebeians, and to clothe ignoble shoulders with their purple mantle, than to allow these to wrest all authority out of the hands of the higher class. By this expedient, a sudden revolution has often been prevented. Some kingdoms have been quit for a bloody rebellion or a long civil war. Other countries have likewise demonstrated the force of the principles here laid down: a wealthy populace has broken their chains to pieces, and overturned the very foundations of the feudal system.

All these violent convulsions have been owing to the short-sightedness of statesmen; who, inattentive to the consequences of growing wealth and industry, foolishly imagined that hereditary subordination was to subsist among classes, whose situation, with respect to each other, was entirely changed.

The pretorian cohorts were at first subordinate to the orders of the Emperors, and were the guards of the city of Rome. The Janissaries are understood to be under the command of the principal officers of the Port. So soon as the leading men of Rome and Constantinople, who naturally were entitled to govern the state, applied to these tumultuous bodies for their protection and assistance, they in their turn, made sensible of their own importance, changed the constitution, and shared in the government.

A milder revolution, entirely similar, is taking place in modern times; and an attentive spectator may find amusement in viewing the progress of it in many states of Europe. Trade and industry are in vogue; and their establishment is occasioning a wonderful fermentation with the remaining fierceness of the feudal constitution.

Trade and industry owed their establishment to war and to ambition; and perhaps mankind may hope to see the day when this establishment will put an end to the first, by exposing the expensive folly of the latter.

Trade and industry, I say, owed their establishment to the ambition of princes who supported and favoured the plan in the beginning, principally with a view to enrich themselves, and thereby to become formidable to their neighbours. But they did not discover, until experience taught them, that the wealth they drew from such fountains was but the overflowing of the spring; and that an opulent, bold, and spirited people, having the fund of the prince's wealth in their own hands, have it also in their own power, when it becomes strongly their inclination, to shake off his authority. The consequence of this change has been the introduction of a more mild, and a more regular plan of administration. The money gatherers are become more useful to princes, than the great lords; and those who are fertile in expedients for establishing public credit, and for drawing money from the coffers of the rich, by the imposition of taxes, have been preferred to the most wise and most learned counsellors.

As this system is new, no wonder if it has produced phenomena both new and surprising. Formerly, the power of Princes was employed to destroy liberty, and to establish arbitrary subordination; but in our days, we have seen those who have best comprehended the true principles of the new plan of politics, arbitrarily limiting the power of the higher classes, and thereby applying their authority towards the extension of public liberty, by extinguishing every subordination, but that due to the established laws.

The fundamental maxim of some of the greatest ministers, has been to restrain the power of the great lords. The natural inference that people drew from such a step, was, that the minister thereby intended to make every thing depend on the prince's will only. This I do not deny. But what use have we seen made of this new acquisition of power? Those who look into events with a political eye, may perceive several acts of the most arbitrary authority exercised by some late European sovereigns, with no other view than to establish public liberty upon a more extensive bottom.

And although the prerogative of some princes be increased considerably beyond the bounds of the ancient constitution, even to such a degree as perhaps justly to deserve the name of usurpation; yet the consequences resulting from the revolution, cannot every where be said, upon the whole, to have impaired what I call public liberty. I should be at no loss to prove this assertion from matters of fact, and by examples, did I think it proper: it seems better to prove it from reason.

When once a state begins to subsist by the consequences of industry, there is less danger to be apprehended from the power of the sovereign. The mechanism of his administration becomes more complex, and, as was observed in the introduction to the first book, he finds himself so bound up by the laws of his political economy, that every transgression of them runs him into new difficulties.

I speak of governments only which are conducted systematically, constitutionally, and by general laws; and when I mention princes, I mean their councils. The principles I am enquiring into, regard the cool administration of their government; it belongs to another branch of politics, to contrive bulwarks against their passions, vices and weaknesses, as men.

I say, therefore, that from the time states have begun to be supported by the consequences of industry, the plan of administration has become more moderate; has been changing and refining by degrees; and every change, as has been often observed, must be accompanied with inconveniences.

It is of governments as of machines, the more they are simple, the more they are solid and lasting; the more they are artfully composed, the more they become useful; but the more apt they are to be out of order.

The Lacedemonian form may be compared to the wedge, the most solid and compact of all the mechanical powers. Those of modern states to watches, which are continually going wrong; sometimes the spring is found too weak, at other times too strong for the machine: and when the wheels are not made according to a determinate proportion, by the able hands of a Graham, or a Julien le Roy, they do not tally well with one another; then the machine stops, and if it be forced, some part gives way; and the workman's hand becomes necessary to set it right.

Chapter XIV: Security, Ease and Happiness, no inseparable Concomitants of Trade and Industry

The republic of Lycurgus represents the most perfect plan of political economy, in my humble opinion, anywhere to be met with, either in ancient or modern times. That it existed cannot be called in question, any more than that it proved the most durable of all those established among the Greeks; and if at last it came to fail, it was more from the abuses which gradually were introduced into it, than from any vice in the form.

The simplicity of the institution made the solidity of it; and had the Lacedemonians at all times adhered to the principles of their government, and spirit of their constitution, they might have perhaps subsisted to this very day.

My intention, in this chapter, is not to enter into a critical disquisition concerning the mechanism of every part of the Spartan republic; but to compare the general plan of Lycurgus's political economy with the principles we have been laying down.

Of this plan we have a description in the life of this legislator written by Plutarch, one of the most judicious authors to be met with in any age.

This historian flourished at least 800 years after the institution of the plan he describes. A plan never reduced into a system of written laws, but stamped at first upon the minds of the Spartans by the immediate authority of the gods, which made them submit to the most violent revolution that perhaps ever took place in any nation, and which they supported for so many ages by the force of education alone.

As the whole of Lycurgus's laws was transmitted by tradition only, it is not to be supposed, that the description Plutarch, or indeed any of the ancients, have given us of this republic, can be depended on with certainty as a just representation of every part of the system laid down by that great statesman. But on the other hand, we may be very sure, that as to the outlines of the institution, we have them transmitted to us in all their purity'. and, in what relates to my subject, I have no occasion to touch on any particulars which may admit of the smallest controversy, as to the matter of fact.

Property among the Lacedemonians, at the time when Lycurgus planned his institution, was very unequally divided: the consequence of which, says our historian, was to draw many poor people into the city, where the wealth was gathered into few hands; that is according to our language, the luxury of the rich, who lived in the city, had purged the lands of useless mouths, and the instability of the government had rendered industry precarious, which must have opened the door to general distress among all the lower classes.

The first step our legislator took, was to prepare the spirit of the people, so as to engage them to submit to a total reform, which could not fail of being attended with innumerable inconveniences.

For this purpose he went to Delphi, without having communicated his design to any body. The Pythia declared him to be the darling of the gods, and rather a god than a man; and publicly gave out, that Apollo had delivered to him alone the plan of a republic which far exceeded every other in perfection.

What a powerful engine was this in the hands of a profound politician, who had travelled over the world with a previous intention to explore the mysteries of the science of government! and what advantages did such an authentic recommendation, coming directly (as was believed) from the voice of the Divinity, give him over a superstitious people, in establishing whatever form of government he thought most proper!

The sagacious Lacedemonian did not, however, entirely depend upon the blind submission of his countrymen to the dictates of the oracle; but wisely judged that some preparatory steps might still be necessary. He communicated, therefore, his plan, first to his friends, and then by degrees to the principal people of the state, who certainly never could have been brought to relish an innovation so prejudicial to their interest, had it not been from the deepest reverence and submission to the will of the gods. Assured of their assistance, he appeared in the market place, accompanied by his party, all in arms; and having imposed respect, he laid the foundation of his government by the nomination of a senate.

Whatever regards any other object than his plan of political economy, shall be here passed over in silence. It is of no consequence to my inquiry, where the supreme power was vested: it is sufficient to know that there was an authority enough in the state to support the execution of his plan.

He destroyed all inequality at one stroke. The property of all the lands of the state was thrown together, and became at the disposal of the legislator. Every branch of industry was proscribed to the citizens. And a monied interest was made to disappear, by the introduction of iron coin. The lands he divided into equal lots, according to the number of citizens.

Thus all were rendered entirely equal in point of fortune, as neither wealth, industry, or lands, could give a superiority to any body. From this part of the plan I conclude, that Lycurgus discovered the utter insufficiency of an agrarian law for establishing equality among the individuals of a state, without proscribing, at the same time, both wealth and industry. A circumstance which seems to have escaped every other statesman in ancient times, as well as the modern patrons of equality and simplicity of manners. The lands were cultivated by the Helotes, who were nourished from them, and who were obliged to deliver the surplus, that is, a determinate quantity of fruits, to the proprietor of the lot. Every necessary mechanic art was likewise exercised by this body of slaves.

By this distribution, the produce of the earth (that is every article of nourishment) came free and without cost to every individual of the state. The Spartan landlords were rather overseers of the slaves, and collectors of the public subsistence, than direct proprietors of the soil which produced it. For although every man was fed from his own lands, and provided his own portion, yet this portion was regulated, and was to be consumed in public; and any one who pretended to eat alone, or before he came to the public hall, was held in the utmost contempt.

Their clothing was the most simple possible, perfectly alike, and could be purchased for a small value. This frugality produced no bad effect; because no man lived by his industry. Arts, as has been said, were exercised by the Helotes, the property of private citizens; and if such masters as entertained manufacturing slaves gained by the traffic (as some must do) every method of profiting of their superior riches was cut off.

The Spartans were continually together; they had nothing to do but to divert themselves; and their amusements were mostly martial exercises. The regulations of these numerous assemblies (which were compared, with great elegance and justness, to swarms of bees) cut off all outward marks of distinction. There was not a possibility for luxury to introduce itself, either in eating, drinking, clothing, furniture, or any other expence.

Here then was a whole nation fed and provided for gratuitously; there was not the least occasion for industry. the usefulness of which, we have shewn principally to consist in its proving an expedient for procuring for the necessitous, what the Spartans found provided for them without labour.

Under such circumstances we may conclude, from the principles we have laid down, that a people thus abundantly nourished, must have multiplied exceedingly. And so no doubt they did. But the regulation of the lots permitted no more than a fixed number of citizens. Whenever, therefore, numbers were found to exceed this standard, the supernumeraries were dismissed, and sent to form colonies. And when the Helotes increased too much, and thereby began to rise above the proportion of the labour required of them, in order to prevent the consuming the food of their masters, which they had in their hands, and thereby becoming idle, licentious, and consequently dangerous to the state, it was permitted to destroy them by way of a military exercise, conducted by stratagem and address; arts which this people constantly preferred in war, to labour, strength and intrepidity.

This appears a very barbarous custom, and I shall not offer any thing as an apology for it, but the ferocity of the manners of those times. Abstracting from the cruelty, the restraining the numbers of this class within certain limits, was absolutely necessary. The Lacedemonian slaves were in many respects far happier than those of other nations. They were in reality a body of farmers, which paid a certain quantity of fruits out of every lot; to wit, 70 medimni of barley: their numbers were not recruited from abroad, as elsewhere, but supported by their own propagation; consequently there was an absolute necessity either to prevent the over multiplication of them, or to diminish an income proportioned exactly to the necessities of the state: and what expedient could be fallen upon? They were slaves, and therefore, could not be inrolled in the number of citizens; they could not be sold to strangers, for money which was forbid; and they were of no use to industry. No wonder then if the fierceness of the manners of those days permitted the inhuman treatment they received; which, however, Plutarch is far from attributing to the primitive institution of Lycurgus. Besides, when we see that the freemen themselves were obliged to quit the country the moment their numbers exceeded a certain standard, it was not to be expected, that useless slaves should be permitted to multiply at discretion.

From this sketch of Lycurgus's political economy, we find the state abundantly provided with every necessary article; an effectual stop put to abusive procreation among the citizens; and a corrective for the over multiplication of the slaves. The next care of a statesman is to regulate the employment of a people.

Every freeman in the state was bred up from his infancy to arms. No family care could prevent him from serving the state as a soldier: his children were no load upon him; it was the business of the Helotes to supply them with provisions: of the servants in town to prepare these, and the public tables were always ready furnished. The whole youth of Sparta was educated not as the children of their parents, but of the state. They imbibed the same sentiments of frugality, temperance, and love of simplicity. They exercised the same employment, and were occupied in the same way in every respect. The simplicity of Lycurgus's plan, rendered this a practicable scheme. The multiplicity and variety of employments among us, makes it absolutely necessary to trust the parents with the education of their children; whereas in Sparta, there were not two employments for a free man; there was neither orator, lawyer, physician, or politician, by profession to be found. The institutions of their lawgiver were constantly inculcated by the old upon the minds of the young; every thing they heard or saw, was relative to war. The very gods were represented in armour, and every precept they were taught, tended to banish superfluity, and to establish moderation and hard living.

The youth were continually striving together in all military exercises; such as boxing and wrestling. To keep up, therefore, a spirit of emulation, and to banish animosity at the same time, sharp, satirical expressions were much encouraged; but these were always to be seasoned with something gracious or polite. The grave demeanour likewise, and downcast look which they were ordered to observe in the streets, and the injunction of keeping their hands within their robes, might very naturally be calculated to prevent quarrels, and especially blows, at times when the authority of a public assembly could not moderate the vivacity of their passions. By these arts, the Spartans lived in great harmony in the midst of a continual war.

Under such regulations a people must enjoy security from foreign attacks; and certainly the intention of the legislator never was to extend the limits of Laconia by conquest. What people could ever think of attacking the Lacedemonians, where nothing but blows could be expected?

They enjoyed ease in the most supreme degree; they were abundantly provided with every necessary of life; although, I confess, the enjoyment of these, in so austere a manner, would not be relished by any modern society. But habit is all in things of this kind. A coarse meal, to a good stomach, has more relish than all the delicacies of the most exquisite preparation to a depraved appetite; and if the pleasures of love be reckoned among the pleasures of life, enough of it might have been met with in the manners of this people. It does not belong to my subject to enter into particular details on this head. But the most rational pleasure among men, the delightful communication of society, was here enjoyed to the utmost extent. The whole republic was continually gathered together in bodies, and their studies, their occupations and their amusements, were the same. One taste was universal; and the young and the old being constantly together, the first under the immediate inspection and authority of the latter, the same sentiments were transmitted from generation to generation. The Spartans were so pleased, and so satisfied with their situation, that they despised the manners of every other nation. If this does not transmit an idea of happiness, I am at a loss to form one. Security, ease, and happiness, therefore, are not inseparable concomitants of trade and industry.

Lycurgus had penetration enough to perceive the weak side of his institution. He was no stranger to the seducing influence of luxury; and plainly foresaw, that the consequences of industry, which procures to mankind a great variety of new objects of desire, and a wonderful facility in satisfying them, would easily root out the principles he had endeavoured to instil into his countrymen, if the state of simplicity should ever come to be corrupted by foreign communications. He affected, therefore, to introduce several customs which could not fail of disgusting and shocking the delicacy of neighbouring states. He permitted the dead to be buried within the walls; the handling of dead bodies was not reckoned pollution among the Lacedemonians. He forbade bathing, so necessary for cleanliness in a hot country; and the coarseness and dirtiness of their clothes, and sweat from their hard exercises, could not fail to disgust strangers from coming among them. On the other hand, nothing was found at Sparta which could engage a stranger to wish to become one of their number. And to prevent the contagion of foreign customs from getting in, by means of the citizens themselves, he forbade the Spartans to travel; and excluded from any employment in the state, those who had got a foreign education. Nothing indeed but a Spartan breeding could have fitted a person to live among them.

The theft encouraged among the Lacedemonians was calculated to make them artful and dextrous; and contained not the smallest tincture of vice. It was generally of something eatable, and the frugality of their table prompted them to it; while on the other hand, their being exposed to the like reprisals, made them watchful and careful of what belonged to themselves; and the pleasure of punishing an unsuccessful attempt, in part indemnified them for the trouble of being constantly upon their guard. A Lacedemonian had nothing of any value that could be stolen; and it is the desire and intention of making unlawful gain which renders theft either criminal or scandalous.

The hidden intercourse between the Spartans and their young wives was no doubt, calculated to impress upon the minds of the fair sex, the wide difference there is between an act of immodesty, and that of simply appearing naked in the public exercises; two things which we are apt to confound, from the impression of our own customs only. I am persuaded that many a young person has felt her modesty as much hurt by taking off her handkerchief, the first time she appeared at court, as any Lacedemonian girl could have done by stripping before a thousand people; yet both her reason and common sense, must make her sensible of the difference between a compliance with a custom in a matter of dress, and a palpable transgression against the laws of her honour, and the modesty of her sex.

I have called this Lacedemonian republic a perfect plan of political economy; because it was a system, uniform and consistent in all its parts. There, no superfluity was necessary, because there was no occasion for industry, to give bread to any body. There, no superfluity was permitted, because the moment the limits of the absolutely necessary are transgressed, the degrees of excess are quite indeterminate, and become purely relative. The same thing which appears superfluity to a peasant, appears necessary to a citizen; and the utmost luxury of this class frequently does not come up to what is thought the mere necessary for one in a higher rank. Lycurgus stopt at the only determined frontier, the pure physical necessary. All beyond this was considered as abusive.

The only things in commerce among the Spartans were,

First, What might remain to them of the fruits of their lot, over their own consumption; and secondly, The work of the slaves employed in trades. The numbers of these could not be many, as the timber of their houses was worked with the saw and axe only; and every utensil was made with the greatest simplicity. A small quantity, therefore, of iron coin, as I imagine, must have been sufficient for carrying on the circulation at Sparta. The very nature of their wants must, as I have said, terminate all their commerce, in the exchange of the surplus-food of their portions of land, with the work of the manufacturing slaves, who must have been fed from it.

As the Lacedemonians had no mercantile communications with other nations, the iron coin was no more than a bank note of no intrinsic value, as I suppose, but a middle term introduced for keeping accounts, and for facilitating barter. An additional argument for this opinion of the coin being of no intrinsic value, is, that it is said to have been rendered unserviceable for other uses, by being slaked in vinegar; in order consequently to destroy, as they imagined, any intrinsic value which might otherwise remain. If this coin, therefore, was made of an extra-ordinary weight, it must have been entirely with a political view of discouraging commerce and circulation, an institution quite consistent with the general plan, and nowise a consequence of the baseness of the metal of which it was made: a small quantity of this, with the stamp of public authority for its currency and value, would have answered every purpose equally well.

Let me now conclude this chapter by an illustration of the subject, which will still more clearly point out the force of the principles upon which this Lacedemonian republic was established.

Were any Prince in Europe, whose subjects, I shall suppose, may amount to six millions of inhabitants, one half employed in agriculture, the other half employed in trade and industry, or living upon a revenue already acquired; were such a Prince, I say, supposed to have authority sufficient to engage his people to adopt a new plan of economy, calculated to secure them against the designs of a powerful neighbour, who, I shall suppose, has formed schemes of invading and subduing them.

Let him engage the whole proprietors of land to renounce their several possessions: or if that supposition should appear too absurd, let him contract debts to the value of the whole property of the nation; let the land-tax be imposed at twenty shillings in the pound, and then let him become bankrupt to the creditors. Let the income of all the lands be collected throughout the country for the use of the state; let all the luxurious arts be proscribed; and let those employed in them be formed, under the command of the former land proprietors, into a body of regular troops, officers and soldiers, provided with every thing necessary for their maintenance, and that of their wives and families at the public expence. Let me carry the supposition farther. Let every superfluity be cut off; let the peasants be enslaved, and obliged to labour the ground with no view of profit to themselves, but for simple subsistence; let the use of gold and silver be proscribed; and let all these metals be shut up in a public treasure. Let no foreign trade, and very little domestic be encouraged; but let every man, willing to serve as a soldier, be received and taken care of; and those who either incline to be idle, or who are found superfluous, be sent out of the country. I ask, what confederacy among the modern European Princes, would carry on a successful war against such a people? What article would be wanting to their ease, that is, to their ample subsistence? Their happiness would depend upon the temper of their mind. And what country could defend itself against the attack of such an enemy? Such a system of political economy, I readily grant, is not likely to take place: but if ever it did, would it not effectually dash to pieces the whole fabric of trade and industry which has been forming for so many years? And would it not quickly oblige every other nation to adopt, as far as possible, a similar conduct, from a principle of self-preservation.

Chapter XV: A general View of the Principles to be attended to by a Statesman, who resolves to establish Trade and Industry upon a lasting Footing

The two preceding chapters I have introduced purposely to swerve as an illustration of general principles, and as a relaxation to the mind, like a farce between the acts of a serious opera. I now return to the place where I broke off my subject, at the end of the twelfth chapter.

It is a great assistance to memory, now and then to assemble our ideas, after certain intervals, in going through an extensive subject. Every branch of it must, in setting out, be treated with simplicity, and all combinations not absolutely necessary, must be banished from the theory. When this theory again comes to be applied to examples, combinations will crowd in, and every one of these must be attended to.

For this reason nothing can appear more inconsistent than the spirit which runs through some parts of this book, if compared with that which prevailed in the first. There luxury was looked on with a favourable eye, and every augmentation of superfluity was considered as a method of advancing population. We were then employed in drawing mankind, as, it were, out of a state of idleness, in order to increase their numbers, and engage them to cultivate the earth. We had no occasion to divide them into societies having separate interests, because the principles we treated of were common to all. We therefore considered the industrious, who are the providers, and the luxurious, who are the consumers, as children of the same family, and as being under the care of the same father.

We are now engaged in a more complex operation; we represent different societies, animated with a different spirit; some given to industry and frugality, others to dissipation and luxury. This creates separate interests among nations, and every one must be supposed to be under the government of a statesman, who is wholly taken up in advancing the good of those he governs, though at the expence of other societies which lie round him.

This presents a new idea, and gives birth to new principles. The general society of mankind treated of in the first book, is here in a manner divided into two: the industrious providers are supposed to live in one country, the luxurious consumers in another. The principles of the first book remain here in full vigour. Luxury still tends as much as ever to the advancement of industry, the statesman's business only is, to remove the seat of it from his own country. When this can be accomplished without detriment to industry at home, he has an opportunity of joining all the advantages of ancient simplicity to the wealth and power which attend upon the luxury of modern states. He may preserve his people in sobriety, and moderation as to every expence, as to every consumption, and make them enjoy, at the same time, riches and superiority over all their neighbours.

Such would be the state of trading nations, were they employed in supplying the wants or extravagant consumption of strangers only, and did they not insensibly adopt the very manners with which they strive to inspire others.

As often, therefore, as we suppose a people applying themselves to the advancement of foreign trade, we must simplify our ideas, by dismissing all political combinations of other circumstances; that is to say, we must suppose this spirit universal, and then point out the principles which influence the success of it.

We must encourage economy, frugality, and a simplicity of manners, discourage the consumption of every thing that can be exported, and excite a taste for superfluity in neighbouring nations. When such a system can no more be supported to its full extent, by the scale of foreign demand becoming positively lighter; then in order to set the balance even again, without taking any thing out of the heavier scale, and to preserve and to give bread to those who have enriched the state; an additional home consumption, proportioned to the deficiency of foreign demand, must be encouraged. For were the same simplicity of manners still kept up, the infallible consequence would be a forced restitution of the balance, by the distress, misery, and at last extinction of the supernumerary workmen.

I must therefore, upon such occasions, consider the introduction of luxury, or superfluous consumption, as a rational and moral consequence of the deficiency of foreign trade.

I am, however, far from thinking that the luxury of every modern state, is in proportion only to such failure; and I readily admit, that many examples may be produced where the progress of luxury at home and the domestic competitions with strangers who come to market, have been the cause both of the decline and extinction of their foreign, trade but as my business is chiefly to point out principles, and to shew their effects, it is here sufficient to observe, that in proportion as foreign trade declines, either a proportional augmentation upon home consumption must take place, or a number of the industrious, proportioned to the diminution of former consumption, must decrease. By the first, what I call a natural restitution of the balance is brought about, from the principles above deduced; by the second, what I call a forced one.

Here then is an example, where the introduction of luxury may be a rational and prudent step of administration; and as long as the progress of it is not accelerated from any other motive, but that of preserving the industrious, by giving them employment; the same spirit, under the direction of an able statesman, will soon throw industry into a new channel, better calculated for reviving foreign trade, and for promoting the public good, by substituting the call of foreigners instead of that of domestic luxury.

I hope, from what I have said, that the political effects of luxury, or the consumption of superfluity, are sufficiently understood. These I have hitherto considered as advantageous to those classes only who are made to subsist by them; I reserve for another occasion the pointing out how they influence the imposition of taxes, and how the abuse of consumption in the rich may affect the prosperity of a state.

So soon as all foreign trade has come to a stop, without a scheme for recalling it, and domestic consumption has filled up its place in consuming the work, and giving bread to the industrious, we fund ourselves obliged to reason again upon the principles of the first book. The statesman has once more both the producers and the consumers under his care. The consumers can live without employment, the producers cannot. The first seldom have occasion for the statesman's protection; the last constantly stand in need of it. There is a perpetual fluctuation in the balance between these two classes, from which a multitude of new principles arise; and these render the administration of government infinitely more difficult, and require superior talents in the person who is at the helm. I shall here point out the most striking effects only of the fluctuation and overturn of this new balance, which in the subsequent chapters shall be more fully illustrated.

First, In proportion as the consumers become extravagant, the producers become wealthy; and when the former become bankrupts, the latter fill their place.

Secondly, As the former become frugal and economical, the latter languish; when those begin to hoard, and to adopt a simple life, these are extinguished: all extremes are vicious.

Thirdly, If the produce of industry consumed in a country surpass the income of those who do not work, the balance due by the consumers must be paid to the suppliers by a proportional alienation of their funds. This vibration of the balance gives a very correct idea of what is meant by relative profit and loss. The nation here loses nothing by the change produced.

Fourthly, When, on the other hand, the annual produce of industry consumed in a country, does not amount to the value of the income of those who do not work, the balance of income saved; must either be locked up in chests, made into plate, lent to foreigners, or fairly exported as the price of foreign consumption.

Fifthly, The scales stand even when there is no balance on either side; that is, when the domestic consumption is just equivalent to the annual income of the funds. I do not pretend to decide at present whether this exact equilibrium marks the state of perfection in a country where there is no foreign trade, (of which we are now treating,) or whether it would be better to have small vibrations between the two scales; but I think I may say, that all subversions of the balance on either side must be hurtful, and therefore should be prevented.

Let this suffice at present, upon a subject which shall be more fully treated of afterwards.

Let us next fix our attention upon the interests of a people entirely taken up in the prosecution of foreign trade. So long as this spirit prevails, I say, that it is the duty of a statesman to encourage frugality, sobriety, and an application to labour in his own people, and to excite in foreign nations a taste for superfluities as much as possible.

While a people are occupied in the prosecution of foreign trade, the mutual relations between the individuals of the state, will not be so intimate as when the producers and consumers live in the same society; such trade implies, and even necessarily creates a chain of foreign dependences; which proportionally diminish the mutual dependence which formerly subsisted among the citizens. Now the use of dependences, I have said, is to form a band of society, capable of making the necessitous subsist out of the superfluities of the rich, and to keep mankind in peace and harmony with one another.

Trade, therefore, and foreign communications, form a new kind of a society among nations; and consequently render the occupation of statesman more complex. He must, as before, be attentive to provide food, other necessaries and employment for all his people; but as the foreign connections make these very circumstances depend upon the entertaining a good correspondence with neighbouring nations, he must acquire a proper knowledge of their domestic situation, so as to reconcile, as much as may be, the interests of both parties, by engaging the strangers to furnish articles of the first necessity, when the precious metals cannot be procured; and to accept, in return, the most consumable superfluities which industry can invent. And, last of all, he must inspire his own people with a spirit of emulation in the exercise of frugality, temperance, economy, and an application to labour and ingenuity. If this spirit of emulation be not kept up, another will take place; for emulation is inseparable from the nature of man; and if the citizens cannot be made to vie with one another, in the practice of moderation, the wealth they must acquire, will soon make them vie with strangers, in luxury and dissipation.

While a spirit of moderation prevails in a trading nation, it may rest assured, that as far as in this particular it excels the nations with whom it corresponds, so far will it increase the proportion of its wealth, power, and superiority, over them. These are lawful pursuits among men, when purchased by success in so laudable an emulation.

If it be true, that superfluity, intemperance, prodigality, and idleness, qualities diametrically opposite to the former, corrupt the human mind, and lead to violence and injustice; is it not very wisely calculated by the Author of all things, that a sober people, living under a good government should, by industry and moderation, necessarily acquire wealth, which is the best means of warding off the violence of those, with whom they are bound in the great society of mankind? And is it not also most wisely ordained, that in proportion as a people contract vicious habits, which may lead to excess and injustice, the very consequence of their dissipation (poverty) should deprive them of the power of doing harm? But such reflections seem rather to be too great a refinement on my subject, and exceed the bounds of political economy.

When we treat of a virtuous people applying to trade and industry, let us consider their interest only, in preserving these sentiments; and examine the political evil of their falling off from them. When we treat of a luxurious nation, where the not-working part is given to excesses in all kinds of consumption, and the working-part to labour and ingenuity, in order to supply them, let us examine the consequences of such a spirit, with respect to foreign trade: and if we find, that a luxurious turn in the rich is prejudicial to it, let us try if we can discover the methods for engaging the inhabitants to correct their manners from a motive of self-interest. These things premised.

I shall now give a short sketch of the general principles upon which a system of foreign trade may be established, and preserved as long as possible; and of the methods by which it may be again recovered, when, from the natural advantages and superior ability of administration in rival nations, (not from vices at home,) a people may have lost for a time every advantage they used to draw from their foreign commerce.

The first general principle is to employ, as usefully as possible, a certain number of the society, in producing objects of the first necessity, always more than sufficient to supply the inhabitants; and to contrive means of enabling every one of the free hands to procure subsistence for himself, by the exercise of some species of industry.

These first objects compassed, I consider the people as abundantly provided with what is purely necessary; and also with a surplus prepared for an additional number of free hands, so soon as a demand can be procured for their labour. In the mean time, the surplus will be an article of exportation; but no sooner will demand come from abroad, for a greater quantity of manufactures than formerly, than such demand will have the effect of gradually multiplying the inhabitants up to the proportion of the surplus above mentioned, provided the statesman be all along careful to employ these additional numbers, which an useful multiplication must have produced, in supplying the additional demand: then with the equivalent they receive from strangers, they will at the same time enrich the country, and purchase for themselves that part of the national productions, which had been permitted to be exported, for want only of a demand for it at home.

He must, at the same time, continue to give a proper encouragement to the advancement of agriculture, in order that there may be constantly found a surplus of subsistence (for without a surplus there can never be enough); this must be allowed to be exported, and ought to be considered as the provision of those industrious hands which are yet unborn.

He must cut off all foreign competition, above a certain standard price, for that quantity of subsistence which is necessary for home consumption; and, by premiums upon exportation, he must discharge the farmers of any superfluous load, which may remain upon their hands when prices fall too low. This important matter shall be explained at large in another place, when we come to treat of the policy of grain.

If natural causes should produce a rise in the price of subsistence, which cannot be brought down by any encouragement he can give to agriculture, he must then lay the whole community under contribution, in order to indemnify those who work for strangers, for the advance upon the price of their food; or he must indemnify the strangers in another way, for the advance in the price of manufactures.

He must consider the manufactures of superfluity, as wrought up for the use of strangers, and discourage all domestic competition for them, by every possible means.

He must do what he can, constantly to proportion the supply to the demand made for them; and when the supply necessarily comes to exceed the demand, in spite of all his care, he must then consider what remains over the demand, as a superfluity of the strangers; and for the support of the equal balance between work and demand, he must promote the sale of this superfluity even within the country (under certain restrictions however), until the hands employed in such branches where a redundancy is found, can be more usefully set to work in another way.

He must consider the advancement of the common good as a direct object of private interest to every individual, and by a disinterested administration of the public money, he must plainly make it appear that it is so.

From this principle flows the authority, vested in all governments, to load the community with taxes, in order to advance the prosperity of the state. And this object can be nowise better obtained than by applying the amount of them to the keeping an even balance between work and demand. Upon this the health of a trading state principally depends.

If the failure of foreign demand be found to proceed from the superior natural advantages of other countries, he must double his diligence to promote luxury among his neighbours; he must support simplicity at home; he must increase his bounties upon exportation; and his expence in relieving manufactures, as oft as the price of their industry falls below the expence of their subsistence.

While these operations are conducted with coolness and perseverance, while the allurements of the wealth acquired do not frustrate the execution, the statesman may depend upon seeing foreigners return to his ports, so soon as their own dissipation, and want of frugality, come to compensate the advantages which nature had formerly given them over their frugal and industrious neighbours.

If this plan be pursued, foreign trade will increase in proportion to the number of inhabitants; and domestic luxury will serve as an instrument only in the hands of the statesman to increase demand at home, when the supply becomes too great for foreign consumption. In other words, the rich citizens will be engaged to consume what is superfluous, in order to keep the balance even in favour of the industrious, and in favour of the nation.

The whole purport of this plan is to point out the operation of three very easy principles.

The first, That in a country entirely taken up with the object of foreign trade, no competition should be allowed to come from abroad for articles of the first necessity, and principally for food, so as to raise prices beyond a certain standard.

The second, That no domestic competition should be encouraged upon articles of superfluity, so as to raise prices beyond a certain standard.

The third, That when these standards cannot be preserved, and that, from natural causes, prices get above them, public money must be thrown into the scale to bring prices to the level of those of exportation.

The greater the extent of foreign trade in any nation is, the lower these standards must be kept; the less the extent of it is, the higher they may be allowed to rise. Consequently,

Were nobody in a nation employed in producing the necessaries of life, and all the industrious employed in supplying other articles of consumption, the prices of necessaries might be allowed to fall as low as possible. There would be no occasion for a standard in favour of those who live by producing them.

Were no man in the state employed in supplying strangers, the prices of superfluities might be allowed to rise as high as possible, and a standard would also become useless, as the sole design of it is to favour exportation.

But as neither of these suppositions can ever take place, and as in every nation there is a part employed in producing, and a part in consuming; and as it is the surplus only of industry which can be exported; a standard is necessary for supporting the reciprocal interests of both parties at home; and the public money must be made to operate upon the price of the surplus of industry only so as to make it exportable, even in cases where the national prices upon home consumption have got up beyond the proper standard. Let me set this matter in another light, the better to communicate an idea which I think is still a little obscure.

Were food and other necessaries the pure gift of nature in any country, I should have laid it down as a principle to discourage all foreign competition for them, either below or above any certain standard; because in this case the lower the price of them be, it is so much the better, since no inconvenience can result from thence to any industrious person. But as the production of these is in itself a manufacture, or an object of industry, a certain standard must be kept up in favour of those who live by producing them.

On the other hand, as to the manufactures of superfluity, domestic competition should be discouraged, beyond a certain standard, in order that prices may not rise above those offered by foreigners; but it might be encouraged below the standard, in order to promote consumption and give bread to manufacturers. But were there no foreign demand at all, there would be no occasion for any standard, and the nation's wealth would thereby circulate only with greater or less rapidity in proportion as prices might rise or fall. The study of the balance between work and demand, would still continue a principal object of attention in the statesman, not with a view to enrich the state, but in order to preserve every member of it in health and vigour. On the other hand, the object of a standard regards foreign trade, and the acquisition of new wealth, at the expence of other nations. The rich, therefore, of a trading state must not be allowed to increase their consumption of superfluities to the full proportion of the constant supply; because an ample surplus must remain for exportation; and the only way to prevent foreigners from supplying themselves, is to prevent prices from getting up beyond the standard, at which these foreigners can produce them.

Farther, were every one of the society in the same pursuit after industry, there would be no occasion for the public to be laid under contribution for advancing the general welfare; but as there is constantly a part employed in enriching the state, by the sale of their work to strangers, and a part employed in making these riches circulate at home, by the consumption of superfluities, I think it is a good expedient to throw a part of domestic circulation into the public coffers by the name of taxes; that when the consequences of private wealth come necessarily to raise prices, a statesman may be enabled to defray the expense of bounties upon that part which can be exported, and thereby enable the nation to continue to supply foreigners at the same price as formerly.

The farther these principles can be carried into execution, the longer a state will flourish; and the longer she will support her superiority. When foreign demand begins to fail, so as not to be recalled, either industry must decline, or domestic luxury must begin. The consequences of both may be easily guessed at, and the principles which influence them shall be particularly examined in the following chapter.

Chapter XVI: Illustration of some Principles laid down in the former Chapter, relative to the Advancement and Support of foreign Trade

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 best 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 economy 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 economy 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 economy.

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.

Chapter XVII: Symptoms of Decay in foreign Trade

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 economy, 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 synonymous 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 economists 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.

Chapter XVIII: Methods of lowering the Price of Manufactures, in order to make them vendible in foreign Markets

The multiplicity of relations between the several parts of political economy, 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 economy.

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 economy, 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.

Chapter XIX: Of infant, foreign, and inland Trade, with respect to the several Principles which influence them

I have always found it easier to retain the geography of a country, from the inspection of maps, after travelling over the regions there represented, than before; as most prefaces are best understood, after reading the book which they are calculated to introduce. Let this serve as an apology for presenting to my readers a chapter of distribution, in the middle of my subject.

I intend at present to take a view of the whole region of trade, divided into its different districts, in order to point out a ruling principle in each, from which every other must naturally flow, or may be deduced by an easy reasoning. These I shall lay before my reader, that from them he may distribute his ideas in the same order I have done. Hence the terms I shall be obliged to use will be rendered more adequate, in expressing the ideas I may have occasion to convey by them.

I divide trade into infant, foreign, and inland.

First. Infant trade, taken in a general acceptation, may be understood to be that species, which has for its object the supplying the necessities of the inhabitants of a country; because it is commonly antecedent to the supplying the wants of strangers. This species has been known in all ages, and in all countries, in a less or a greater degree, in proportion to the multiplication of the wants of mankind, and in proportion to the number of those who depend on their ingenuity for procuring subsistence.

The general principles which direct a statesman in the proper encouragement of this commerce, relate to two objects.

First, To promote the ease and happiness of the higher classes, in making their wealth subservient to their wants and inclinations.

Secondly, To promote the ease and happiness of the lower classes, by turning their natural faculties to an infallible means of relieving their necessities.

This communicates the idea of a free society; because it implies the circulation of a real equivalent for every thing transferred, and for every service performed; to acquire which, mankind submit with pleasure to the hardest labour.

In the first book, I had little occasion to consider trade under different denominations; or as influenced by any other principle than that of promoting the multiplication of mankind, and the extension of agriculture, by drawing the wealth of the rich into the hands of the industrious. This operation, when carried no farther, is a true representation of infant trade.

But now I must set this matter in a new light: and consider this infant trade as a basis for establishing a foreign commerce. In itself it is a mean only of gratifying the desires of those who have the equivalent to give; and of providing it for those who have it not. We are next to examine how a statesman may, by proper care, convert it into the means of procuring to his people a great superiority over all the neighbouring nations; by diminishing, on one hand, the quantity they have of this general equivalent (wealth); and by increasing, on the other, the absolute quantity of it at home; in such a manner as not only to promote the circulation of that part of it which is necessary to supply the wants of all the citizens, but by a surplus of it, to render other nations dependent upon them, in most operations of their political economy.

The statesman who resolves to improve this infant trade into foreign commerce, must examine the wants of other nations, and consider the productions of his own country. He must then determine, what kinds of manufactures are best adapted for supplying the first, and for consuming the latter. He must introduce the use of such manufactures among his subjects; and endeavour to extend his population and his agriculture, by encouragements given to these new branches of consumption. He must provide his people with the best masters; he must supply them with every useful machine; and above all, he must relieve them of their work, when home-demand is not sufficient for the consumption of it.

A considerable time must of necessity be required to bring a people to a dexterity in manufactures. The branches of these are many; and every one requires a particular slight of hand, which cannot be acquired but under the eye of a skilful master, able to point out the rudiments of the art. People do not perceive this inconvenience, in countries where the arts are already introduced; and many a projector has been ruined for want of attention to it.

In the more simple operations of manufacturing, where apprenticeships are not in use, every one teaches another. The new beginners are put among a number who are already perfect: all the instructions they get is, do as you see others do before you. This is an advantage which an established industry has over another newly set on foot; and this I apprehend to be the reason why we see certain manufactures, after remaining long in a state of infancy, make in a few years a most astonishing progress. What loss must be at first incurred! what numbers of aspiring geniuses overpowered by unsuccessful beginnings, when a statesman does not concern himself in the operation! If he assist his subjects, by laying a prohibition upon foreign work, this expedient will become the means of encouraging the most extravagant profits, unless, at the same time, he extend the manufacture, by multiplying the hands employed in it. I allow, indeed, that as long as the gates of a kingdom are kept shut, and that no foreign communication is permitted, large profits do little harm, and tend to promote dexterity and refinement. This is a very good method for laying a foundation for manufactures: but so soon as dexterity has been thus sufficiently encouraged, and that abundance of excellent masters have been provided; then the statesman, in order to carry the plan into execution, ought to multiply the number of scholars; and a new generation must be brought up in frugality, and in the enjoyment of the most moderate profits.

The ruling principle, therefore, which ought to direct a statesman in promoting and improving the infant trade of his people, is to encourage the manufacturing of every branch of natural productions, by extending the home-consumption of them; by excluding all competition with strangers; by permitting the rise of profits, so far as to promote dexterity and emulation in invention and improvement; by relieving the industrious of their work, as often as demand for it falls short; and, until it can be exported to advantage, it may be exported with loss, at the expence of the public. He must likewise spare no expence in procuring the ablest masters in every branch of industry, nor any cost in making the first establishments, in providing machines, and every other thing necessary or useful to make the undertaking succeed. He must keep constantly an eye upon the profits made in every branch of industry, and so soon as he finds that the real value of the manufacture comes so low as to render it exportable, he must employ the hands, as above, and put an end to these profits he had permitted as the means only of bringing the manufacture to its perfection. In proportion as the prices of every species of industry are brought down to the standard of exportation, in such proportion will this species of trade lose its original character, and adopt the second.

Secondly, Foreign trade has been explained sufficiently: the ruling principles of which are to banish luxury; to encourage frugality; to fix the lowest standard of prices possible; and to watch, with the greatest attention, over the vibrations of the balance between work and demand. While this is preserved, no internal vice can affect the prosperity of it. And when the natural advantages of other nations constitute a rivalship, not otherwise to be overcome, the statesman must counterbalance these advantages by the weight and influence of public money; and when this expedient becomes also ineffectual, foreign trade is at an end; and out of its ashes arises the third species, which I call inland commerce.

Thirdly, The more general principles of in land commerce have been occasionally considered in the first book, and more particularly hinted at in the 15th chapter of this; but there are still many new relations to be examined, from which new principles will arise: these shall be illustrated in the subsequent chapters of this book. I shall here point out the general heads only, which will serve to particularize and distinguish this third species of trade, from the two preceding.

Inland commerce, in the present acceptation of the term, is supposed to take place upon the total extinction of foreign trade. The statesman must, in such a case, as in the other two species, attend to supplying the wants of the rich, in relieving the necessities of the poor, by the circulation of the equivalent as above; but as formerly he had it in his eye to watch over the balance of work and demand, so now he must principally attend to the balance of wealth, as it vibrates between consumers and manufacturers; that is, between the rich and the industrious. The effects of this vibration have been shortly pointed out, Chapter xv.

In conducting a foreign trade, his business was to establish the lowest standard possible as to prices; and to confine profits within the narrowest bounds: but as now there is no question of exportation, this object of his care in a great measure disappears; and high profits made by the industrious will have then no other effect than to draw the balance of wealth more speedily to their side. The higher profits rise, the more quickly will the industrious be enriched, the more quickly will the consumers become poor, and the more necessary will it be to cut off every foreign communication in the way of trade.

From this political situation of any state, arises the fundamental principle of taxation; which is, that, at the time of the vibration of the balance between the consumer and the manufacturer, the state should, by the imposition of a tax, advance the dissipation of the first, and share in the profits of the latter. This branch of our subject I shall not here anticipate; but I shall, in the remaining chapters of this book, make it sufficiently evident, that so soon as the wealth of a state becomes considerable enough to introduce luxury, and put an end to foreign trade; and when, from the excessive rise of prices, all hopes of restoring it are lost, then taxes become necessary, both for the support of government on the one hand, and, on the other, to serve as an expedient for recalling foreign trade in spite of all the pernicious effects of luxury to extinguish it.

I hope from this short recapitulation and exposition of principles, I have sufficiently communicated to my reader the distinctions I want to establish, between what I have called infant, foreign, and inland trade. Such distinctions are very necessary to be retained, because it is proper they should be applied in many places of this treatise, in order to qualify general propositions: these cannot be avoided, without a perpetual repetition of such restrictions, which would tire the reader, appear frivolous to him, and divert his attention.

I shall only add, that we are not to suppose the commerce of any nation confined to any one of the three species. I have considered them separately, according to custom, in order to point out their different principles. It is the business of statesmen to compound them according to circumstances.

Chapter XX: Of Luxury

My reader may perhaps be surprized to find this subject formally introduced, after all I have said of it in the first book, under a definition which renders the term sufficiently clear, by distinguishing it from sensuality and excess; and by confining it to the providing of superfluities, in favour of a consumption, which necessarily must produce the good effects of giving employment and bread to the industrious.

This simple acceptation of the term, was the most proper for explaining the political effects of extraordinary consumption. I cannot however deny, that the word luxury commonly conveys a more complex idea; and did I take no notice of this circumstance, it might be thought that I had purposely confined the meaning of a general term to a particular acceptation, in order to lead to error, and with a view to conceal the vicious influence of modern economy over the minds of mankind; which influence, if vicious, cannot fail to affect even their political happiness.

My intention therefore, in this chapter, is to relax the mind of my reader, while I set before him my ideas concerning luxury, taken in the most extensive acceptation of the word, in such an order, as first to vindicate the definition I have given of it, by shewing that it is a proper one; and secondly, to reconcile the sentiments of those who appear to combat one another, on a subject wherein all must agree, when terms are fully understood.

For this purpose, I shall set out by distinguishing luxury, as it affects our different interest, by producing hurtful consequences; from luxury, as it regards the moderate gratification of our natural or rational desires. I must separate objects which are but too frequently confounded, and analyze this complicated term, by specifying the ideas it contains, under partial definitions.

The interests affected by luxury, I take to be four: first, the moral, as it hurts the mind; secondly, the physical, as it hurts the body; the domestic, as it hurts the fortune; and the political, as it hurts the state.

The natural desires which proceed from our animal economy, and which are gratified by luxury, may be also reduced to four, viz. hunger, thirst, love, and ease or indolence. The moderate gratification of these desires, and physical happiness, is the same thing. The immoderate gratification of them is excess; and if this also be implied by luxury, no man, I believe, ever seriously became its apologist.

The first point to be explained is, what is to be understood by excess. What appears an excess to one man, may appear moderation to another. I therefore measure the excess by the bad effects it produces on the mind, the body, the fortune, and the. state. and when we speak of luxury as a vice, it is requisite to point out the particular bad effects it produces to one, more, or all the interests which may be affected by it: when this is neglected, ambiguities ensue, which involve people in inextricable disputes.

In order to communicate my thoughts upon this subject with the more precision, I shall give an example of the harm resulting to the mind, the body, the fortune, and the state, from the excessive gratification of the several natural desires above mentioned.

First, As to the mind, eating to excess produces the inconvenience of rendering the perceptions dull, and of making a person unfit for study or application.

Drinking confounds the understanding, and often prevents our discovering the most palpable relations of things.

Love fixes our ideas too much upon the same object, makes all our pursuits and pleasures analogous to itself, and consequently renders them trifling and superficial.

Ease, that is, too great a fondness for it, destroys activity, damps our resolution, and misleads the decisions of our judgment on every occasion, where one side of the question implies an obstacle to the enjoyment of a favourite indolence.

These are examples of the moral evils proceeding from luxury in the most general acceptation of the term. While the gratification of these desires is accompanied by no such inconveniences, I think it is a proof, that there has been no moral excess, or that no moral evil has been directly implied in the gratification. But I cannot equally determine that there has been no luxury in the enjoyment of superfluity.

Secondly, The physical inconveniences which follow from all the four, terminate in the hurt they do the body, health or constitution. If no such harm follows upon the gratification of our desires, I find no physical evil: but still luxury, I think, may be implied in every acceptation of the term.

Thirdly, If the domestic inconveniences of the four species be examined, they all centre in one, viz. the dissipation of fortune, upon which depends the future ease of the proprietor, and the well-being of his posterity. When luxury is examined with respect to this object, the idea we conceive of it admits of a new modification. An excess here is compatible with a very moderate gratification of our most natural desires. It is not eating nor drinking, love nor indolence which are hurtful to the fortune, but the expence attending such gratifications. All these are frequently indulged even to excess, in a moral and physical sense, by people who are daily becoming more wealthy by these very means.

Fourthly, Some political inconveniences of luxury have been already pointed out. The extinction of foreign trade is the most striking. But the loss of trade conveys no ideas of any moral, physical, or domestic excess; and still it is vicious so far as it affects the well-being of a state. Besides this particular evil, I very willingly agree, that as far as the good government of a state depends upon the application and capacity, as well as the integrity of those who sit at the helm, or who are employed in the administration or direction of public affairs, so far may the moral inconveniences of luxury mentioned above, affect the prosperity of a state. The consequences of excessive luxury, moral and physical, as well as the dissipation of private fortunes, may render both the statesman, and those whom he employs, negligent in their duty, unfit to discharge it, rapacious and corrupt. These may, indirectly, be reckoned among the political evils attending luxury, so far as they take place. But on the other hand, as they cannot be called the necessary effects of the cause to which they are here ascribed, that is, of moral, physical and domestic luxury, I do not think they can with propriety be implied in the definition of the term. They are rather to be attributed to the imperfection of the human mind, than to any other second cause which may occasionally contribute to their production. They may proceed from avarice, as well as from prodigality.

I hope this short exposition of a matter, not absolutely falling within the limits of my subject, will suffice to prove that my definition of luxury, describes at least the most essential requisite towards determining it; namely, the providing of superfluity with a view to consumption. This is inseparable from our ideas of luxury, but vicious excess certainly is not. A sober man may have a most delicate table, as well as a glutton; and a virtuous man may enjoy the pleasures of love and ease with as much sensuality as a Heliogabalus. But no man can become luxurious, in our acceptation of the word, without giving bread to the industrious, without encouraging emulation, industry, and agriculture; and without producing the circulation of an adequate equivalent for every service. This last is the palladium of liberty, the fountain of gentle dependence, and the agreeable band of union among free societies.

Let me therefore conclude my chapter, with a metaphysical observation. The use of words, is to express ideas; the more simple any idea is, the more easy it is to convey it by a word. Whenever therefore, language furnishes several words, which are called synonymous, we may conclude, that the idea conveyed by them is not simple. On every such occasion, it is doing a service to language, to render such words as little synonymous as possible, and to point out the particular differences between the ideas they convey.

Let us now apply this remark to the point under consideration. I find the three terms, luxury, sensuality, and excess, generally considered in a synonymous light, notwithstanding the characteristic differences which distinguish them. Luxury consists in providing the objects of sensuality, so far as they are superfluous. Sensuality consists in the actual enjoyment of them, and excess implies an abuse of enjoyment. A person, therefore, according to these definitions, may be very luxurious from vanity, pride, ostentation, or with a political view of encouraging consumption, without having a turn for sensuality, or a tendency to fall into excess. Sensuality, on the other hand, might have been indulged in a Lacedemonian republic, as well as at the court of Artaxerxes. Excess indeed, seems more closely connected with sensuality, than with luxury; but the difference is so great, that I apprehend sensuality must in a great measure be extinguished before excess can begin.

Chapter XXI: Of Physical and Political Necessaries

After having cleared up our ideas concerning luxury, it follows naturally, to examine what is meant by physical-necessary.

I have observed in the third chapter of the first book, that in most countries where food is limited to a determinate quantity, inhabitants are fed in a regular progression down from plenty and ample subsistence, to the last period of want, and dying from hunger. It is ample subsistence where no degree of superfluity is implied, which communicates an idea of the physical-necessary. It is the top of this ladder; it is the first rank among men who enjoy no superfluity whatsoever. A man enjoys the physical-necessary as to food, when he is fully fed; if he is likewise sufficiently clothed, and well defended against every thing which may hurt him, he enjoys his full physical-necessary. The moment he begins to add to this, he may be considered as moving upwards into another class, to wit, that of the luxurious, or consumers of superfluity; of which there are to be found, in most countries, as many stages upward, as there are stages downwards, from where he stood before. This is one general idea of the question. Let me now look for another.

If we examine the state of many animals which have no appetites leading them to excess, we may form a very just idea of a physical-necessary for man. When they are free from labour, and have food at will, they enjoy their full physical-necessary. They are then in the height of beauty, and enjoy the greatest degree of happiness they are capable of. Animals which are forced to labour, prove to us very plainly, that this physical-necessary is not fixed to a point, but that it may vary like most other things: every one perceives the difference between labouring cattle which are well fed, and those which are indifferently, or ill fed; all however, I suppose to live in health, and to work according to their strength. This represents the nature of a physical-necessary for man.

In all the inferior classes in every nation, we find various degrees of ease among the individuals; and yet upon the whole, it would be hard to determine, which are those who enjoy superfluity; which are those who possess the pure physical-necessary; and which are those who fall below it. The cause of this ambiguity must here be explained.

The nature of man furnishes him with some desires relative to his wants, which do not proceed from his animal economy, but which are entirely similar to them in their effects. These proceed from the affections of his mind, are formed by habit and education, and when once regularly established, create another kind of necessary, which, for the sake of distinction, I shall call political. The similitude between these two species of necessary, is therefore the cause of ambiguity.

This political-necessary has for its object, certain articles of physical superfluity, which distinguishes what we call rank in society.

Rank is determined by birth, education, or habit. A man with difficulty submits to descend from a higher way of living to a lower and when an accidental circumstance has raised him for a while, above the level of that rank where his birth or education had placed him, his ambition prompts him to support himself in his elevation. If his attempt be a rational scheme, he is generally approved of; the common consent of his fellow-citizens prescribes a certain political-necessary for him, proportioned to his ambition; and when at any time this comes to fail, he is considered to be in want.

If on the other hand, a person either from vanity, or from no rational prospect of success, form a scheme of rising above the rank where birth or education had placed him, his fellow-citizens do not consent to prescribe for him a political-necessary suitable to his ambition; and when this fails him, he is considered to fall back only into the class to which he properly belonged. But if the political-necessary suitable to this rank should come to fail, then he is supposed to be deprived of his political-necessary.

The measure of this last species of necessary, is determined by general opinion only, and therefore can never be justly ascertained; and as this opinion may have for its object even those who are below the level of the physical-necessary, it often happens, that we find great difficulties in determining its exact limits.

It may appear absurd, to suppose any one to enjoy superfluity (which we have called the characteristic of political-necessary) to whom any part of the physical-necessary is found wanting. However absurd this may appear, yet nothing is more common among men, and the reason arises from what has been observed above. The desires which proceed from the affections of his mind, are often so strong as to make him comply with them at the expence of becoming incapable of satisfying those which his animal economy necessarily demands.

From this it happens, that however easy it may be to conceive an accurate idea of a physical-necessary for other animals, nothing is more difficult, than to prescribe the proper limits for it with regard to man.

This being the case, let us suppose the condition of those who enjoy but little superfluity, and who fill the lower classes of the people, to be distinguished into three denominations; to wit, the highest, middle, and lowest degree of physical-necessary, and then let us ask, how we may form an estimation of the respective value of the consumption implied in each, in order to determine the minimum as to the profits upon industry. This question is of great importance; because we have shewn that the prosperity of foreign trade depends on the cheapness of manufacturing; and this again never can fall below the proportion or value of the physical-necessary for manufacturers.

One very good method of estimating the value of the total consumption implied by this necessary quantity, is to compute the expence of those who live in communities, such as in hospitals, workhouses, armies, convents, according to the different degrees of ease, severally enjoyed by those who compose them. In running over the few articles of expence in such establishments, it will be easy to discern between those, which relate to the supply of the physical, and those which relate to the supply of the political-necessary: ammunition bread is an example of the first; a monk's hood and long sleeves, are a species of the latter.

When once the real value of a man's subsistence is found, the statesman may the better judge of the degree of ease, necessary or expedient to allow for the several classes of the laborious and ingenious inhabitants.

As we have divided this physical-necessary into three degrees; the highest, middle, and lowest; the next question is, which of the three degrees is the most expedient to be established, as the standard value of the industry of the very lowest class of a people?

I answer, that in a society, it is requisite that the individual of the most puny constitution for labour and industry, and of the most slender genius for works of ingenuity, having no natural defect, and enjoying health, should be able by a labour proportioned to his force, to gain the lowest degree of the physical-necessary; for in this case, by far the greatest part of the industrious will be found in the second class, and the strong and healthy all in the first.

The difference between the highest class and the lowest, I do not apprehend to be very great. A small quantity added to what is barely sufficient, makes enough: but this small quantity is the most difficult to acquire, and a desire to surmount this difficulty is the most powerful spur to industry. The moment a person begins to live by his industry, let his livelihood be ever so poor, he immediately forms little objects of ambition, compares his situation with that of his fellows who are a degree above him, and considers a shade more of ease, as I may call it, as an advancement, not of his happiness only, but also of his rank.

There are still more varieties to be met with in the condition of those who are confined to the sphere of the physical-necessary. The labour of a strong man ought to be otherwise recompensed than that of a puny creature. But in every state there is found labour of different kinds, some requiring more, and some less strength, and all must be paid for; but as a weakly person does not commonly require so much nourishment as the strong and robust, the difference of his gains may be compensated by the smallness of his consumption.

What we mean by the first class of the physical-necessary, is when a person gains wherewithal to be well fed, well clothed, and well defended against the injuries of heat and cold, without any superfluity. This I say, a strong healthy person should be able to gain by the exercise of the lowest denominations of industrious labour, and without a possibility of being deprived of it, by the competition of others of the same profession.

Could a method be fallen upon to prevent competition among industrious people of the same profession, the moment they come to be reduced within the limits of the physical-necessary, it would prove the best security against decline in a modern state, and the most solid basis of a lasting prosperity.

But as we have observed in the first book, the thing is impossible, while marriage subsists on the present footing. From this one circumstance, the condition of the industrious of the same profession, is rendered totally-different. Some are loaded with a family, others are not. The only expedient, therefore, for a statesman, is to keep the general principles constantly in his eye, to destroy this competition as much as he can, at least in branches for exportation; to avoid, in his administration, every measure which may tend to promote it, by constituting a particular advantage in favour of some individuals of the same class above others; and if the management of public affairs necessarily implies such inconveniences, he must find out a method of indemnifying those who suffer by the competition.

We may therefore, in this place, lay down two principles: First, that no competition should be encouraged among those who labour for a physical-necessary: secondly, that in a state which flourishes by her foreign trade, competition is to be encouraged in every branch of manufactures for exportation, until the competitors have reduced one another within the limits of this necessary.

Farther, I must observe, that this physical-necessary ought to be the highest degree of ease, which any one should be able to acquire with labour and industry, where no peculiar ingenuity is required. This also is a point deserving the attention of a statesman. For how frequently do we find, in great cities, different employments, such as carrying of water, and other burdens, sawing of wood, &c. erected into confraternities, which prevent competition, and raise profits beyond the standard of the physical-necessary? This, I apprehend, to be a discouragement to ingenuity, and have the bad effect of rendering living dear, without answering any one of the intentions of establishing corporations, as shall be shewn in another place. The physical-necessary, therefore, ought to be the reward of labour and industry; whatever any workman gains above this standard, ought to be in consequence of his superior ingenuity.

It is not at all necessary to ascertain the limits between these two classes; they will sufficiently distinguish themselves by the simple operation of competition. Let a particular person fall upon an ingenious invention, he will profit by it, and rise above the lower classes which are confined to the physical-necessary; but if the invention be such as may be easily copied, he will quickly be rivalled to such a degree as to reduce his profits within the bounds of the physical-necessary; so soon as this comes to be the case, his ingenuity disappears, because it ceases to be peculiar to him.

Here arises a question: whence does it happen that certain workmen avoid this competition, and make considerable gains by their employment, while others are rivalled in their endeavours to retain a bare physical-necessary?

There is a combination of several causes to produce these effects, which we shall examine separately; leaving to the reader to judge, how far these causes may extend profits beyond the physical-necessary.

First, We have said (Chapter 9.) that the value of a workman's labour is determined from the quantity performed, in general, by those of his profession, neither supposing them the best or the worst, or as having any advantage or disadvantage, from the place of their abode. A workman therefore, who, to an extraordinary dexterity, joins the advantages of place, must gain more than another.

Secondly, We have often remarked, that competition between workmen of the same profession, diminishes the profits upon their labour. From this it follows, that in such arts where the least competition is found, there must be the largest profits. Now several circumstances prevent competition. First, An extraordinary dexterity in any art, and especially in those where the whole excellency depends upon great accuracy and a refined taste, such as watch-making, painting of all kinds, making mathematical instruments, and the like; all which set a celebrated artist in a manner above a possibility of rivalship, and make him the master of his price, as experience shews. Secondly, The difficulty of acquiring the dexterity requisite, resulting both from the time and expence of apprenticeships, proves a plain obstacle to a numerous competition. Few there are, who having the stock sufficient to defray the loss of several years fruitless application, have also the turn necessary to lead them to a particular branch of ingenuity. Thirdly, Many there are, who have skill and capacity sufficient to enter into competition, but are obliged to work for others, because of the expensive apparatus of instruments, machines, lodging, and many other things necessary for setting out as a master in the art. These, and similar causes, prevent competition, and support large profits. Fourthly, Masters increase their profits greatly by sharing those of their journeymen: this share, the first have a just title to, from the constant employment they provide for the latter. and the certainty these again have of gaining their physical-necessary, together with a profit proportional to their dexterity, makes them willing to share with their master. The fifth cause of considerable gains, and the last I shall mention, is the most effectual of all, viz. great economy, and parsimonious living. In proportion to the combination of these circumstances, the fortune of the artist will increase, which is the answer to the first part of the question proposed.

We are next to enquire how it happens that many industrious people are rivalled in an industry which brings no more than a bare physical-necessary. This must proceed from some disadvantage either in their personal or political situation. In their personal situation, when they are loaded with a numerous family, interrupted by sickness, or other accidental avocations. In their political situation, when they happen to be under a particular subordination from which others are free, or to be loaded with taxes which others do not pay.

I shall only add, that in computing the value of the physical-necessary of the lowest denomination, a just allowance must be made for all interruptions of labour: no person can be supposed to work every free day; and the labour of the year must defray the expence of the year. This is evident. Farther, neither humanity, or policy, that is the interest of a state, can recommend a rigorous economy upon this essential quantity. If the great abuses upon the price of labour be corrected, those which remain imperceptible to the public eye, will prove no disadvantage to exportation; and as long as this goes on with success, the state is in health and vigour. Exportation of work is another pulse of the political body.

Chapter XXII: Preliminary Reflections upon inland Commerce

I resume the subject, which, as a rest to the mind, I dropt at the end of the 19th chapter.

I am now to treat directly of inland commerce, which has been sufficiently distinguished from infant, and foreign trade.

We are to consider ourselves now as transported into a new country, where foreign trade had been carried to the greatest height possible; until the luxury of the inhabitants, the carelessness, perhaps, of the statesman, and the natural advantages of other nations, added to the progress of their industry and refinement, had concurred to cut it off, and thereby to dry up the source which had till then been constantly augmenting the national opulence.

We must examine the natural effects of this revolution; we must point out how every inconvenience proceeding from it may be avoided, and how a statesman may regulate his conduct, so as to prevent the exportation of any part of that wealth which the nation may have heaped up within herself, during the prosperity of her foreign trade. How he may keep the whole of his people constantly employed, and by what means he may promote an equable circulation of domestic wealth, through the hands of the lower classes, which will prove an adequate equivalent given by the rich, for the services rendered them by the industrious poor. How, by a judicious imposition of taxes, he may draw together an equitable proportion of every man's annual income, without reducing any one below the standard of a full physical-necessary. How he may, with this public fund, preserve in vigour every branch of industry, and be enabled also, by the means of it, to profit of the smallest revolution in the situation of other nations, so as to reestablish the foreign trade of his own people. And lastly, how the society may be thereby sufficiently defended against foreign enemies, by a body of men regularly supported and maintained at the public charge, without occasioning any sudden revolution hurtful to industry, either when it becomes necessary to increase their numbers, in order to carry on an unavoidable war, or to diminish them, upon the return of peace and tranquillity. This is, in few words, the object of a statesman's attention when he finds himself at the head of a people living upon their own wealth without any mercantile connections with strangers.

How hurtful soever the natural and immediate effects of political revolutions may have been formerly, when the mechanism of government was more simple than at present, they are now brought under such restrictions, by the complicated system of modern economy, that the evil which might otherwise result from them may be guarded against with ease.

As often, therefore, as we find a notable prejudice resulting to a state, from a change of their circumstances, gradually taking place, we may safely conclude, that negligence, or want of abilities, in those who have the direction of public affairs, has more than any other cause been the occasion of it.

It was observed, in the third chapter of the first book, that before the introduction of modern economy, which is made to subsist by the means of taxes, a state was seldom found to be interested in watching over the actions of the people. They bought and sold, transferred, transported, modified, and compounded productions and manufactures, for public use, and private consumption, just as they thought fit. Now it is precisely in these operations that a modern state is chiefly interested; because proportional taxes are made to affect a people on every such occasion.

The interest the state has in levying these impositions, gives a statesman an opportunity of laying such operations under certain restrictions; by the means of which, upon every change of circumstances, he can produce the effect he thinks fit. Do the people buy from foreigners what they can find at home? he imposes a duty upon importation. Do they sell what they ought to manufacture? he shuts the gates of the country. Do they transfer or transport at home? he accelerates or retards the operation, as best suits the common interest. Do they modify or compound what the public good requires to be consumed in its simple state? he can either prevent it by a positive prohibition, or he may permit such consumption to the more wealthy only, by subjecting it to a duty.

So powerful an influence over the operations of a whole people, vests an authority in a modern statesman, which in former ages, even under the most absolute governments, was utterly unknown. The truth of this remark will appear upon reflecting on the force of some states, at present in Europe, where the sovereign power is extremely limited, in every arbitrary exercise of it, and where, at the same time, it is found to operate over the wealth of the inhabitants, in a manner far more efficacious than the most despotic and arbitrary authority possibly can do.

It is the order and regularity in the administration of the complicated modern economy, which alone can put a statesman in a capacity to exert the whole force of his people. The more he has their actions under his influence, the easier it is for him to make them concur in advancing the general good.

Here it is objected, that any free people who invest a statesman with a power to control their most trivial actions, must be out of their wits, and considered as submitting to a voluntary slavery of the worst nature, as it must be the most difficult to be shaken off. This I agree to; supposing the power vested to be of an arbitrary nature, such as we have described in the thirteenth chapter of this book. But while the legislative power is exerted in acquiring an influence only over the actions of individuals, in order to promote a scheme of political economy, uniform and consistent in all its parts, the consequence will be so far from introducing slavery among the people, that the execution of the plan will prove absolutely inconsistent with every arbitrary or irregular measure.

The power of a modern prince, let it be by the constitution of his kingdom, ever so absolute, immediately becomes limited so soon as he establishes the plan of economy which we are endeavouring to explain. If his authority formerly resembled the solidity and force of the wedge (which may indifferently be made use of, for splitting of timber, stones and other hard bodies, and which may be thrown aside and taken up again at pleasure), it will at length come to resemble the delicacy of the watch, which is good for no other purpose than to mark the progression of time, and which is immediately destroyed, if put to any other use, or touched with any but the gentlest hand.

As modern economy, therefore, is the most effectual bridle ever was invented against the folly of despotism; so the wisdom of so great a power never shines with greater lustre, than when we see it exerted in planning and establishing this economy, as a bridle against the wanton exercise of itself in succeeding generations. I leave it to my reader to seek for examples in the conduct of our modern Princes, which may confirm what, I think, reason seems to point out: were they less striking, I might be tempted to mention them.

The part of our subject we are now to treat of, will present us with a system of political economy, still more complicated than any thing we have hitherto met with.

While foreign trade flourishes and is extended, the wealth of a nation increases daily; but force is not so easily exerted, as after this wealth begins to circulate more at home, as we shall easily shew. But, on the other hand, the force she exerts is much more easily recruited. In the first case, her frugality enables her to draw new supplies out of the coffers of her neighbours; in the last, her luxury affords a resource from the wealth of her own citizens.

In opening my chapter, I have introduced my reader into a new country; or indeed I may say, that I have brought him back into that which we had under our consideration in the first book.

Here luxury and superfluous consumption will strike his view almost at every step. He will naturally compare the system of frugality, which we have dismissed, with that of dissipation, which we are now to take up; and he may very naturally conclude, that the introduction of the latter, must prove a certain forerunner of destruction. The examples found in history of the greatest monarchies being broken to pieces, so soon as the taste for simplicity was lost, seem to justify this conjecture. It is, therefore, necessary to examine circumstances a little, that we may compare, in this particular also, the economy of the ancients with our own; in order to discover whether the introduction of luxury be as hurtful at present, as it formerly proved to those states which made so great a figure in the world; and which are known from history only, and judged of from the few scattered ruins, which remain to bear testimony of their former greatness.

Luxury is the child of wealth; and wealth is acquired by states, as by private people, either by a lucrative, or by an onerous title, as the civilians speak. The lucrative title, by which a state acquires, is either by rapine, or from her mines; the onerous title, or that for a valuable consideration, is by industry.

The wealth of the ancient monarchs of Babylon, Persia, Greece, and Rome, was the effect of rapine; whereas industry enriched the cities of Sydon, Tyre, Carthage, Athens, and Alexandria. The luxury of the first, proved the ruin of the luxurious; the luxury of the last, advanced their grandeur: because they had no rivals to take advantage of the natural effects of this luxury, in cutting off the profits of their foreign trade. Peace was as hurtful to the plunderers, as war was destructive to the industrious.

When an empire was at war, its wealth was thereby made to circulate for an equivalent in services performed. So soon as peace was restored, every one returned, as it were, to a state of slavery. The monarch then possessed himself of all the wealth, and distributed it by caprice. Fortunes were made in an instant, and no body knew how: they were lost again by transitions equally violent and sudden. The luxury of those days was attended with the most excessive oppression. Extraordinary consumption was no proof of the circulation of any adequate equivalent in favour of the industrious: it had not the effect of giving bread to the poor, nor of proportionally diminishing the wealth of the rich. The great remained constantly great; and the more they were prodigal, the more the small were brought into distress. In one word, luxury had nothing to recommend it, but that quality which solely constitutes the abuse of it in modern times; to wit, the excessive gratification of the passions of the great, which frequently brought on the corruption of their manners.

When such a state became luxurious, public affairs were neglected because it was not from a right administration that wealth was to be procured. War, under such circumstances, worked effects almost similar to the springing up of industry in modern times; it procured employment, and this produced a more regular circulation, as has been said.

On the other hand, the wealth and luxury of the trading cities above mentioned, which was of the same species with that of modern times, proceeded from the alienation of their work; that is, from their industry. Nothing was got for nothing, and when they were forced to go to war, they found themselves obliged either to dissipate their wealth, by hiring troops, or to abandon the resources of it, the labour of their industrious citizens. Thus the punic wars exalted the grandeur of plundering Rome, and blotted out the existence of industrious Carthage. I do not here pretend to vindicate the justness of these reflections in every circumstance, and it is foreign to my present purpose to be more particular; all I seek for, is to point out the different effects of luxury in ancient and modern times.

Ancient luxury was quite arbitrary; consequently could be laid under no limitations, but produced the worst effects, which naturally and mechanically could proceed from it.

Modern luxury is systematical; it cannot make one step, but at the expence of an adequate equivalent, acquired by those who stand the most in need of the protection and assistance of their fellow citizens; and without producing a vibration in the balance of their wealth. This balance is in the hands of the statesman, who may receive a contribution upon every such vibration. He has the reins in his hand, and may turn, restrain, and direct the luxury of his people, towards whatever object he thinks fit.

Luxury here is so far from drawing on a neglect of public affairs, that it requires the closest application to the administration of them, in order to support it. When these are neglected, the industrious will be brought to starve, consumption and taxes will diminish; that is, luxury will insensibly disappear, and hoarding will succeed it. These and similar consequences will undoubtedly take place, and mechanically follow one another, when a skilful hand is not applied to prevent them.

It is impossible not to perceive the advantages of supporting a flourishing inland trade, after the extinction of foreign commerce. By such means elegance of taste, and the polite arts, may be carried to the highest pitch. The whole of the inhabitants may be employed in working and consuming; all may be made to live in plenty and in ease, by the means of a swift circulation, which will produce a reasonable equality of wealth among all the inhabitants. Luxury can never be the cause of inequality, though it may be the effect of it. Hoarding and parsimony form great fortunes, luxury dissipates them and restores equality.

Such a situation would surely be of all others the most agreeable, and the most advantageous, were all mankind collected into one society, or were the country where it is established cut off from every communication with other nations.

The balance between work and demand would then only influence the balance of wealth among individuals, and the subversions of it would do little harm. If hands became scarce, the balance would turn the quicker in favour of the laborious, and the idle would grow poor. If hands became too plentiful (which indeed is hardly to be expected) every thing would be bought the cheaper; but the same quantity of national wealth would still remain without any diminution.

Where is, therefore, the great advantage of foreign trade?

I answer by putting another question. Where is the great advantage of a person's making a large fortune in his own country? A man of a small estate may, no doubt, be as happy as another with a great one; and the same thing would be true of nations, were all equally inspired with a spirit of peace and justice; or were they subordinate to a higher temporal power, which could protect the weak against the violence and injustice of the strong.

It is, therefore, the separate interests of nations who incline to communicate together, and consume part of one another's commodities, which renders the consideration of the principles of trade, a matter of great importance.

While nations contented themselves with their own productions, while the difference of their customs, and contrast of their prejudices were great, the connections between them were not very intimate.

From this proceeds the great diversity of languages and dialects. When a traveller finds a sudden transition from one language to another, or from one dialect to another, it is a proof that the manners of such people have been long different, and that they have had little communication with one another. On the contrary, when dialects change by degrees, as in the provinces of the same country, it is a proof that there has been no great repugnancy in their customs. In like manner, when we find several languages, at present different, but plainly deriving from the same source, we may conclude, that there was a time when such nations were connected by correspondence, or that the language has been transplanted from one to the other, by the migration of colonies. But I insensibly wander from my subject.

I have said, that when nations contented themselves with their own productions, connections between them were not very intimate. While trade was carried on by the exchange of consumable commodities, this operation also little interested the state: consumption then was equal on both sides; and no balance was found upon either. But so soon as the precious metals became an object of commerce, and when, by being rendered an universal equivalent for everything; they become also the measure of power between nations, then the acquisition, or at least the preservation of a proportional quantity of them, became to the more prudent, an object of the last importance.

We have seen how a foreign trade, well conducted, has the necessary effect of drawing wealth from all other nations. We have seen in what manner the benefit resulting from this trade may come to a stop, and how the balance of it may come round to the other side. We are now to examine how the same prudence which set foreign trade on foot, and supported it as long as possible, may put an effectual stop to it, and at the same time guard against a sudden revolution; to the end that a nation enriched by commerce may not, by blindly or mechanically carrying it on, when the balance is against her, fall into those inconveniences which other nations must have experienced during her prosperity.

Chapter XXIII: When a Nation, which has enriched herself by a reciprocal Commerce in Manufactures with other Nations, finds the Balance of Trade turn against her, it is her Interest to put a Stop to it altogether

Trade having subsisted long in the nation we are now to keep in our eye, I shall suppose that, through length of time, her neighbours have learned to supply one article of their own and other people's wants cheaper than she can do. What is to be done? Nobody will buy from her, when they can be supplied from another quarter at a less price. I say, what is to be done? For if there be no check put upon trade, and if the statesman do not interpose with the greatest care, it is certain, that merchants will import the produce, and even the manufactures of rival nations; the inhabitants will buy them preferably to their own; the wealth of the nation will be exported; and her industrious manufacturers will be brought to starve. We may therefore look upon this, as a problem in trade, to be resolved by the principles already established.

First, then, it must be inquired, if, in the branch in which she is undersold, her rivals enjoy a natural advantage above her, which no superior industry, frugality, or address on her side, can counterbalance? If this he the case, there are three different courses to be pursued, according to circumstances.

First, To renounce this branch of commerce entirely, and to take the commodities wanted from foreigners, as they can furnish them cheaper.

Secondly, To prohibit the importation of such commodities altogether.

Thirdly, To impose a duty upon importation, in order to raise the price of them so high as to make them dearer than the same kind of commodity produced at home.

The first course may be taken, if, upon examining how the hands employed in a manufacture may be disposed of, it be found, that they may easily be thrown into another branch of industry, in which the nation's natural advantages are as superior to her rivals, as theirs are superior to hers in the branch she intends to abandon; and provided her neighbours will agree to open their ports to the free importation of the commodities in question. For though there may be little profit in a trade by exchange, I still think it advisable to continue correspondence, and to avoid every occasion of cutting off commerce with other nations. A laborious, economical, and sagacious nation, such as I suppose our traders to be, will be able to profit of many circumstances, which would infallibly turn to the disadvantage of others less expert in commerce, with whom she trades; and in expectation of favourable revolutions, she ought not rashly, nor because of small inconveniences, to renounce trading with them; especially if luxury should appear there to be on the growing hand.

But suppose the rival nation will not consent to receive the manufactures, which the traders may produce with great natural advantages, what course is then the best to be taken?

I think she ought to encourage, for her own consumption, the branch in which she is rivalled, though she must give over exporting it; and, in this case, it must be examined, whether the importation of it should be prohibited altogether, (which is the second course mentioned above) or whether it be more advisable to prefer the last scheme, viz. to allow such commodities to be imported, with a duty which may raise their price to so just a height as neither to suffer them to he sold so cheap as to discourage the domestic fabrication, nor so dear, as to raise the profits of manufactures above a reasonable standard, in case of an augmentation of demand.

The second course must be taken, when the natural advantages of the foreign nations are so great, as to oblige the statesman to raise duties to such a height as to give encouragement to smuggling.

The third course seems the best, when the advantages of the rivals are more inconsiderable; in which case, the traders may, in time, and by the progress of luxury among their neighbours, or from other revolutions, which frequently happen in trading nations, regain their former advantages.

This may be the decision, in case a nation be rivalled in a branch where she has not equal advantages with her neighbours; and when she cannot compensate this inconvenience, either by her frugality or industry, or by the means of a proper application of her national wealth. These operations have been already fully explained, and are now considered as laid aside; not that we suppose they can ever cease to operate their effects in all nations; but in order to simplify our ideas, and to point out the principles which ought to direct a statesman's conduct upon occasions, where from different combinations of circumstances, he finds better expedients impracticable.

Let me next suppose a nation to be rivalled in her staple manufactures; that is, in those where she has the greatest natural advantages.

Whenever such a case happens, it must proceed from some vice within the state. Either from the progress of luxury in the workmen, which must proceed from consolidated profits, or from accidental disadvantages; such as dearness of subsistence, or from taxes injudiciously imposed. These (I mean all, except the taxes, of which afterwards) must be removed upon the principles above laid down: and if this cannot be compassed, no matter why; then comes the fatal period, when all foreign reciprocal commerce in manufactures must be given up. For if no profit can be made upon branches where a nation has the greatest natural advantages, it is more than probable, that every other branch will prove at least equally disadvantageous. If upon this revolution the ports of the nation be not shut against the importation of foreign manufactures, merchants will introduce them, and this will drain off the nation's wealth, and bring the industrious to starve.

It is upon this principle that incorporations are established. Of these we shall say a word, and conclude our chapter.

Cities and corporations, may be considered as nations, where luxury and taxes have rendered living so expensive, that goods cannot be furnished but at a high rate. If labour, therefore, of all kinds, were permitted to be brought from the provinces, or from the country, to supply the demand of the capital and smaller corporations, what would become of tradesmen and manufacturers who have their residence there? If these, on the other hand, were to remove beyond the liberties of such corporations, what would become of the public revenue, collected in these little states, as I may call them?

By the establishment of corporations, a statesman is enabled to raise high impositions upon all sorts of consumption; and notwithstanding these have the necessary consequence of increasing the price of labour, yet by other regulations, (of which afterwards,) the bad consequences thereby resulting to foreign trade may be avoided, and every article of exportation be prevented from rising above the proper standard for making it vendible, in spite of all foreign competition.

The plan of modern taxation seems first to have been introduced into cities, while the country was subject to the barons, and remained in a manner quite free from it. Cities having obtained the privilege of incorporation, began, in consequence of the powers vested in their magistrates, to levy taxes: and finding the inconveniences resulting from external competition (foreign trade), they erected the different classes of their industrious into confraternities, or corporations of a lower denomination, with power to prevent the importation of work from their fellow tradesmen not of the society.

Here arises a question.

Why are corporations complained of in many countries, as being a check upon industry; if the establishment of them proceed from so plain a principle as this here laid down?

Let me draw my answer from another question. Why are they not complained of in all countries?

The difference between the situation of one country and another, will plainly point out the principle which ought to regulate the establishment and government of corporations. When this is well understood, all disputes concerning the general utility, or harm arising from them will be at an end: and the question will be brought to the proper issue; to wit, their relative utility considered with respect to the actual situation of the country where they are established. In one province a corporation will be found to be useful, in another just the contrary.

First then it must be agreed, on all hands, that the principle laid down is just. Nobody ever advanced, that the industry carried on in towns, where living is dear, ought to suffer a competition with that of the country, where living is cheap; I mean for the direct consumption of the citizens. But it may be alleged, that no subaltern corporation should enjoy an exclusive privilege against those who share of every burthen imposed by the great corporation from which they draw their existence: and that they have no right of exclusion against citizens; but against strangers only, who are not under the same jurisdiction, nor liable to the same burthens. Here the dispute lies between the members of the great corporation and those of the smaller. Now, I say, while no other interest is concerned, the decision of this question ought to be left to the corporation itself. But the moment the public good comes to be affected by certain privileges enjoyed by individuals, such privileges should either be abolished, or put under limitations.

In countries where industry stands at a determinate height, while the consumption of cities neither augments or diminishes; while those who live upon an income acquired, live uniformly in the same way; while this regular consumption is regularly supplied, by a certain number of citizens sufficient to supply it; while the hands employed for this purpose are in a perfect proportion to the demand made upon them; in such countries, I say, any diminution of the privileges of corporations, would be a mean of overturning the equal balance between work and demand.

We have said above, that when hands become too many for the work, profits fall below the necessary standard of subsistence; that the industrious enter into competition for the physical-necessary, and hurt one another. Here then is the principle which the corporation ought to keep in its eye: the profits under every trade ought to be in proportion to the demand for it.

In order the better to support this proportion, many towns in Germany have the subaltern corporations of trades restrained to certain numbers. There is a determinate number of apothecaries, joiners, smiths, &c. allowed in every town, and no more; according as employment is found for them. This seems a good regulation. I do not say but it may be abused. But the power of administration must be lodged somewhere; and if in a country where industry is making little progress, corporations were laid open, the consequence would be, that every workman would starve another, and the consumers would be ill served.

On the other hand, when industry springs up, when the manners of a people change all of a sudden, or by quick degrees, as has been the case in many countries in Europe within these threescore years: it is a mark of a narrow capacity not to perceive that a change of administration becomes necessary; and if on such revolutions those who are at the head of corporations should wish to profit of the increase of demand, in order to raise prices in favour of the incorporated workmen, the infallible consequence would be, to make the city become deserted, and deprived of a trade, which otherwise would necessarily fall to her share, in consequence of the advantage she must draw from establishments already made for supplying every branch of consumption.(1*) But let the principle above mentioned be constantly followed; let profits be kept at a right standard; let hands be increased according to demand; let the city workmen gain no advantage over those of the country which may not be compensated by the difference of the price of living; let the disadvantages again on the side of the town affect their own consumption only, not the surplus of their industry; let every convenience for carrying on foreign trade (every thing here is understood to be foreign, which does not enter into the consumption of the town) be provided for in the suburbs, or, if you please, in a place out of the town walled in for this purpose; let markets there be held for every kind of work coming from the country; and then the true intent of a corporation will be answered. If it be found that the prosperity of trade demands still more liberty, then the corporation may be thrown open; but on the other hand, every burthen must be taken off, and every incorporated member must be indemnified by the state, for the loss he is thereby made to suffer.

The great change daily operating on the spirit of European nations, where corporations have been long established, without any great inconvenience having been found to arise from them, suggest these reflections, which seem naturally to flow from the principles to which we refer. I shall only add, that from the practice of imposing taxes within these little republics (as I have called them) Princes seem to have taken the hint of extending this system; by first appropriating to the public revenue, what the cities had established in favour of themselves, and then by enlarging the plan as circumstances favoured their design. That this is the true origin of the modern plan of taxation (I mean that upon consumption) may be gathered from hence; that the right of imposing taxes appears no where, almost, to have been essentially attached to royalty, even in those kingdoms, where Princes have long enjoyed an unlimited constitutional authority over the persons of their subjects. An authority, which I take to be the least equivocal characteristic of an absolute and unlimited power. I know of no Christian monarchy (except, perhaps, Russia) where either the consent of states, or the approbation or concurrence of some political body within the state, has not been requisite to make the imposition of taxes constitutional; and if more exceptions be found, I believe it will not be difficult to trace the origin of such an exertion of sovereign authority, without ascending to a very high antiquity. The prerogative of Princes in former times, was measured by the power they could constitutionally exercise over the persons of their subjects; that of modern princes, by the power they have over their purse.

Having, therefore, shewn the necessity of putting a stop to foreign reciprocal commerce in manufactures, so soon as in every branch this trade becomes disadvantageous to a nation; the next question is how to proceed in the execution of so great an undertaking, so as to avoid a sudden and violent revolution in the economy of the state, which is of all things the most dangerous: the hurt, therefore, ought to be foreseen at a great distance, in order to be methodically prevented.

Chapter XXIV: What is the proper Method to put a Stop to a foreign Trade in Manufactures, when the Balance of it turns against a Nations?

It must not be understood, from what was said in the last chapter, that so soon as the balance of foreign trade, either on the whole, or on any branch of manufacture, is found to be against a nation, that a statesman should then at once put a total stop to it. This is too violent a remedy ever to be applied with success.

It is hardly possible, that a considerable revolution in the trade of a nation should happen suddenly, either to its advantage, or disadvantage, unless in times of civil discord, or foreign wars, which at present do not enter into the question.

A sagacious statesman will, at all times, keep a watchful eye upon every branch of foreign commerce, especially upon importations. These consist either in the natural produce of other countries, or in such produce increased in its value by manufacture.

In all trade, two things are to be considered in the commodity sold. The first is the matter; the second is the labour employed to render this matter useful.

The matter exported from a country, is what the country loses; the price of the labour exported, is what it gains.

If the value of the matter imported be greater than the value of what is exported, the country gains. If a greater value of labour be imported, than exported, the country loses. Why? Because in the first case, strangers must have paid, in matter, the surplus of labour exported; and in the second case, because the country must have paid to strangers, in matter, the surplus of labour imported.

It is therefore a general maxim, to discourage the importation of work. and to encourage the exportation of it.

When any manufacture begins to be imported, which was usually made at home, it is a mark that either the price of it begins to rise within the country, or that strangers are making a new progress in it. On the other hand, when the importation of manufactures consumed within a country comes to diminish, and when merchants begin to lose upon such branches of trade, it is a proof that industry at home is gaining ground in those articles. The statesman then must take the hint, and set out by gently clogging the importation of those commodities, not so as to put a stop to it all at once; because this might have the effect of carrying profits too high upon the home-fabrication of them.

All sudden revolutions are to be avoided. A sudden stop upon a large importation, raises the prices of domestic industry by jerks, as it were; they do not rise gradually; and these extraordinary profits engage too many people to endeavour to share in them. This occasions a desertion from other branches of industry equally profitable to the state. Such revolutions do great harm; because it is a long time before people come to be informed of their true cause, and during the uncertainty, they are in a wilderness, as it were, surprised and delighted with the consequences of them, according as their several interests are affected by them. Every one accounts for the phenomena in a different way. Some are for applying remedies against the inconveniences; while others are totally taken up in profiting to the utmost of every momentary advantage. In a word, nothing is more hurtful than a sudden revolution in so complicated an interest as that of the whole class of the industrious, in a modern society. When therefore such changes happen, in spite of all a statesman can do, the best way to prevent the inconveniences which they draw along with them, is to inform the public of the true causes of every change, favourable or hurtful to the several classes of inhabitants. This also seems to be the best method to engage every one to concur in rendering the proper remedies effectual, when the inconveniences themselves cannot be prevented. So much for a scheme for encouraging growing manufactures, or for supporting them in their decline. I proceed next to consider the methods for preventing the loss of others already established.

We have said, that the importation of any article of consumption usually provided at home, was a proof by no means equivocal of a foreign rivalship. I shall say nothing at present, of the methods to be used as a remedy for this inconvenience: these have been already discussed. We must now suppose, every one that might be contrived for this purpose, to have become ineffectual; and foreign industry to be so far gaining ground, as daily, more and more, to supply the several branches of domestic consumption.

Upon this, the statesman will begin by laying the importation of such commodities under certain restrictions. If these do not prove sufficient, they will be increased: and if the augmentation produces frauds, difficult to be prevented, the articles will be prohibited altogether. By this method of proceeding, it will be found, that without any violent or sudden prohibition laid all at once upon foreign trade. by little and little, every pernicious branch of it will be cut off, till at last it will cease altogether, as in the case mentioned above; to wit, when the most advantageous branches of it cannot be carried on without loss.

Something, however, must here be added, in order to restrain so general a plan of administration. Nothing is more complex than the interests of trade, considered with respect to a whole nation. It is hardly possible for a people to have every branch of trade favourable for the increase of her wealth: consequently, a statesman who, upon the single inspection of one branch, would lay the importation of it under limitations, in proportion as he found the balance upon it unfavourable to the nation, might very possibly undo a flourishing commerce.

He must first examine minutely every use to which the merchandize imported is put: if a part is re-exported with profit, this profit must be deducted from the balance of loss incurred by the consumption of the remainder. If it be consumed upon the account of other branches of industry, which are thereby advanced, the balance of loss may still be more than compensated. If it be a mean of supporting a correspondence with a neighbouring nation, otherwise advantageous, the loss resulting from it may be submitted to, in a certain degree. But if upon examining the whole chain of consequences, he find the nation's wealth not at all increased, nor her trade encouraged, in proportion to the damage at first incurred by the importation; I believe he may decide such a branch of trade to be hurtful; and therefore that it ought to be cut off, in the most prudent manner, according to the general rule.

The first object of the care of a statesman, who governs a nation, which is upon the point of losing her foreign trade, without any prospect or probability of recovering it, is to preserve the wealth she has already acquired. No motive ought to engage him to sacrifice this wealth, the safety alone of the whole society excepted, when suddenly threatened by foreign enemies. The gratification of particular people's habitual desires, although the wealth they possess may enable them, without the smallest hurt to their private fortunes, to consume the productions of other nations; the motive of preventing hoards; that of promoting a brisk circulation within the country; the advantages to be by caring on a trade made by merchants, who may enrich themselves disadvantageous to the nation; to say all in one word, even the supporting of the same number of inhabitants, ought not to engage his consent to the diminution of national wealth.

Here follow my reasons for carrying this proposition so very far as to recommend the incurring of the loss of a part of the inhabitants to that of any considerable part of the wealth acquired; and I flatter myself, that when duly examined, I may avoid the smallest imputation of Machiavellian principles, in consequence of so bold an assertion.

While a people are fed with the produce of their own lands, the preservation of their numbers is quite consistent with the preservation of their wealth. If, therefore, in such a case, their numbers should be diminished upon a decay of foreign trade, either by the exportation of their food, or by their lands becoming uncultivated, I should never hesitate to lay the blame upon the statesman's administration.

But an industrious people may (as has been said) carry their numbers far beyond the proportion of their own growth. The deficiency must then be supplied from abroad, and must be paid for with the balance of the trade in their favour. Now when this balance comes to turn against them, and when, consequently, a stop is put to the disadvantageous foreign trade, upon the principles we have been laying down, the statesman is reduced to this alternative; either annually to allow a part of the wealth already got, to be exported, in order to buy subsistence for the surplus of his people, as I may call them; or to reduce their numbers by degrees (either by encouragements given to their leaving the country, or by establishing colonies, &c.) until they be brought down to the just proportion of the growth of national subsistence. If he prefers the first, supposing the execution of such a plan to be possible, the consequence will be, that so soon as all the wealth is spent, the whole society, except the proprietors of the lands, and those who cultivate them, must go to destruction. If he prefers the second, he will remain independent of all the world with respect to the inhabitants he will preserve. They will remain in a capacity of maintaining themselves, and he may alter the plan of his political economy as best may suit his circumstances, relatively to other nations. While all his subjects are employed and provided for, he will remain at the head of a flourishing and a happy people.

It may be here objected, that the first alternative is an impossible supposition. I allow it to be so, if you suppose it to be carried the length to which I have traced it; because no power whatsoever in a statesman can go so far as to preserve numbers at the expense of the whole riches of his people. But I can very easily suppose a case, where numbers may be supported at an eminent loss to a state which finds itself in the situation in which we have represented it in our supposition.

Suppose a prince, upon the failure of his foreign trade, to increase his army, in proportion as he finds his industrious hands become idle by a deficiency of demand for their labour; suppose him to fill his magazines for their subsistence by foreign importation, leaving the produce of his country to feed the rest of his subjects. By such a plan, every body will remain employed, and also provided for, and such a prince may be looked upon as a most humane governor. This I willingly agree to. I should love such a prince; but the more I loved him, the more I should regret that his project must fail, from a physical impossibility of its being long supported; and when it comes to fail by the exhausting of his wealth, it will not be his regrets which will give bread to his soldiers, nor employment to his industrious subjects, who will no longer find an equivalent for their labour.

Let this suffice at present, upon the general principles which influence the stop necessary to be put to the importation of foreign commodities, and to the diminution of national wealth, in the case we have had before us.

Next, as to the articles of exportation. The most profitable branches of exportation are those of work, the less profitable those of pure natural produce. When work cannot be exported in all its perfection, because of its high price, it is better to export it with a moderate degree of perfection, than not at all; and if even this cannot be done to advantage, then will a people be obliged to renounce manufacturing except for themselves: and then, if domestic consumption do not increase in proportion to the deficiency of foreign demand, a certain number of hands will be idle, and a certain quantity of natural produce will remain upon hand. The first must disappear in a short time; they will starve or desert; the last will become an article of exportation. Here then is a new species of trade which takes place upon the extinction of the other. When a nation has been forced to reduce her exportations to articles of pure natural produce, in conformity to the principles we have been laying down, then the plan proposed in the title of this chapter is executed. She is then brought as low in point of trade as she can be, but, at the same time, she may enjoy her natural advantages in spite of fortune; and in proportion to them, she may, with a good government and frugality, retain a balance of trade in her favour, which will constantly go on in augmenting her national wealth.

There is, therefore, a period at which foreign trade may stop in every article, but in natural produce. I do not know whether this period be at a great distance, when the state of trade is considered relatively to certain nations of Europe.

Were industry and frugality found to prevail equally in every part of these great political bodies, or were luxury and superfluous consumption every where carried to the same height, trade might, without any hurt, be thrown entirely open. It would then cease to be an object of a statesman's care and concern. On the other hand, were all nations equally careful to check every branch of unprofitable commerce, a general stagnation of trade would soon be brought about. Manufactures would no more be the object of traffic; every nation would supply itself, and nothing would be either exported or imported, but natural productions.

But as industry and idleness, luxury and frugality, are constantly changing their balance throughout the nations of Europe, able merchants make it their business to inform themselves of these fluctuations, and able statesmen profit of the discovery for the re-establishment of their own commerce; and when they find that this can no more be carried on with the manufactures or produce of their own country, they engage their merchants to become carriers for their neighbours, and by these means, form as it were a third and last entrenchment, which, while they can defend it, will not suffer their foreign trade to be quite extinguished; because, by this last expedient, it may continue for some time to increase their national stock. It is in order to cut off even this resource, that some nations lay not only importations under restraint, but also the importers. Let such precautions be carried to a certain length on all hands, and we shall see an end to the whole system of foreign trade, so much à-la-mode, that it appears to become more and more the object of the attention as well as of the imitation of all modern statesmen.

Chapter XXV: When a rich Nation finds her Foreign Trade reduced to the Articles of Natural Produce, what is the best Plan to be followed? and what are the Consequences of such a Change of Circumstances?

There is now no more question of a trading nation; this character is lost, the moment there is a stop put to the export of the labour and ingenuity of her people.

The first objects of her care should now be to increase, by every possible means, the quantity of her natural produce; to be as frugal as possible in the consumption of it, and to export the surplus to the best advantage.

If she find the exportation of subsistence going forward, while some of her people remain in want, she may rest assured that industry is suffering from some internal vice; and the most probable cause of such an effect may be an unequal competition between those of the lower classes, who work for a physical necessary. This must be removed, and the statesman should never rest until he has set the balance of work and demand so far right, as to prevent the scale of work at least from preponderating; for this is the door by which misery gets in among a people.

The preponderation of the scale of demand will not now be so hurtful; because this alteration of the balance will only raise prices, accelerate circulation, and keep the other balance, to wit, that of wealth (of which we shall treat in the following chapter), in a constant vibration, without diminution of the public stock.

Another object of a statesman's care in these supposed circumstances, is to prohibit the importation of all work, and even the natural produce of any other country conducive to luxury; for although I have said, that superfluous consumption can do little harm when the interests of foreign trade do not enter into the question so as to prevent exportation, by raising prices at home; and though the importation of foreign produce, in exchange for like commodities of national growth, do no hurt to a state with respect to her wealth; yet if such importation be an article of mere superfluity, I think a statesman should prudently itself a proof of discourage it; because the search after superfluities is of a luxurious turn, and I should wish to see this turn improved so as to promote national purposes only, that is, the augmentation and subsistence of useful inhabitants.

Let me illustrate this by an example. Foreign wines, I shall suppose, become à-la-mode, as a part of the luxury of an elegant table. A statesman by his example, may discourage this, by introducing many other articles of expense in entertainments sufficient to compensate it. The furniture of apartments may be rendered more magnificent, ornaments of the side-board, decoration of desserts, new amusements immediately after dinner, may be introduced, which would have an air of refinement and delicacy.

By such examples he may easily substitute one expense, which may become a national improvement, in the place of another, where the luxury produces no such effect. And when prodigality and expense have neither the good effect of giving bread to the poor, nor of accelerating circulation at home in favour of the public, I can see no reason why a statesman should interest himself for their support; and much less, why a speculative person, who investigates the methods only of making mankind happy by rendering mutual services to each other, should strain a subject, in order to find arguments proper to make either the apology or panegyric of the various schemes of dissipation.

I need not add, as a restriction upon this principle of discouraging the importation of foreign commodities, that when such a branch of trade becomes necessary to be carried on, in order to engage a neighbouring nation reciprocally to consume of home-superfluities; in this case, the luxury of the consumers of the foreign produce has an evident tendency to national improvement. If, for example, delicate wines, and raw silk, be imported as a return for salt herrings and raw hides, the support of such trade is evidently the means of making the rich consume these articles of home-production, by converting them into burgundy and velvet.

These considerations regard the augmentation or at least the preservation of national wealth. If they are attended to, it is hardly possible that any part of what is already acquired, can go abroad; and in this case the whole balance of the exportation of natural produce becomes clear again.

There are still several things to be observed with regard to the exportation of natural produce. Such articles as are in great abundance, and are not produced in other countries, as wines in the southern countries of Europe, ought always to be exported by the natives, because considerable profits must be made upon such a trade; and on such occasions, a people ought to be wise enough to keep such profits for themselves.

But if other nations will not receive them, unless they be imported by their own subjects, then the statesman may impose a duty upon exportation, which is one way of sharing the profits with the carriers. All the precaution necessary, in imposing this duty, is not to raise it so high as to diminish the demand; nor to give an encouragement to a neighbouring nation, to enter into competition for such a branch of trade.

Neighbouring states which furnish the same articles of natural produce, regulate, commonly, the duties upon exportation, in such a manner as nearly to compensate all differences which strangers may find, between trading with one or with the other. Or they grant particular privileges to the nations with whom they find it most for their advantage to trade.

If the natural advantages upon such articles are less considerable, no duty can be imposed. Exportation may then be encouraged by granting still greater privileges to strangers or others, who may promote the exportation at little cost to the state.

If, in the last place, the natural produce of a country be common to others, where it is perhaps equally plentiful, it will be difficult to procure the exportation of it; and yet it may happen, that too great an abundance of it at home may occasion inconveniences. In this case, the statesman must give a premium or bounty upon exportation, as the only method of getting rid of a superfluity, which may so much influence the whole mass of the commodity produced, as to sink the price of the industry of those employed in it, below the standard of their physical necessary. By giving, therefore, this premium, he will support industry in this branch; he will take nothing from the national wealth; and the exportation, which takes place in consequence of the bounty, will be clear gain. This is an uncommon operation in trade, but it has so intimate a connection with the doctrine of taxes, and the proper application of public money, that I will postpone the farther consideration of it until I come to these branches of my subject; and the rather, because this book is swelling beyond its due proportion.

I have little occasion to speak of importations into a country which exports no manufactures. The ruling principle in such cases, is to suffer no importation but what tends to encourage the exportation of the surplus of natural produce, and which, at the same time, has no tendency to rival any branch of domestic industry. Thus it is much better for a northern country to pamper the taste of her rich inhabitants with wines and spices, than to discourage agriculture by the importation of rice and foreign grain; supposing the alternative offered to her choice, and the one as well as the other to be the returns for her own superfluity exported.

I come next to the consideration of her inland trade, and consumption of her own manufactures. Here there is no question of either an increase or diminution of her wealth, but merely of making it circulate in the best manner to keep every body employed. Several considerations must here influence our statesman's conduct, and a due regard must be had to every one of them. I shall reduce them to three different heads, and pass them in review very cursorily, as we have already sufficiently explained the principles upon which they depend.

First, To regulate consumption and the progress of luxury, in proportion to the hands which are found to supply them.

Secondly, To regulate the multiplication of inhabitants according to the extent of the fertility of the soil. These two considerations must constantly go hand in hand.

So long, therefore, as the statesman finds his country still capable of improvement, so long may he encourage a demand for work, and even countenance new branches of superfluous consumption; since the equivalent to be given for them must of necessity prove an encouragement to agriculture. But whenever the country becomes thoroughly cultivated and peopled to the full proportion of its own produce, a check must be put to multiplication, that is, to luxury, otherwise misery and depopulation will follow; unless indeed we suppose, that numbers ought to be supported even at the expence of national wealth; the fatal consequences of which we have already pointed out.

Thirdly, He should regulate the distribution of the classes of his people, according to the political situation of the country.

This is the most complicated case of all. It would be imprudent, for example, in a very small state situated on the continent, to distribute all its inhabitants into producers and consumers, as we have called them on several occasions; that is, into those who live upon a revenue already acquired, and those who are constantly employed in acquiring one by supplying the wants of the other. There must be a third class; to wit, those who are maintained and taken care of at the expense of the whole community, in order to serve as a defence. This set of men give no real equivalent for what they receive; that is to say, none which can circulate or pass from hand to hand; but still they are usefully employed as members of a society mutually tied together by the band of reciprocal dependence. Here no vice is implied; but at the same time, the statesman must attend to the consequences of such a distribution of classes.

The richer any state is, the more it has to fear from its neighbours; consequently, the greater proportion of the inhabitants must be maintained for its defence, at the expense of the industry of the other inhabitants. This must diminish the number of free hands employed in manufactures, and in supplying articles of consumption: consequently, it would be imprudent to encourage the progress of luxury, while public safety calls for a diminution of the hands which must supply it. If in such circumstances luxury do not suffer a check, demand will rise above the proper standard; living will become dearer daily, prices will rise, and they will prove an obstacle to the recovery of foreign trade; an object of which a prudent statesman will never lose sight for a moment.

It is for these and other such considerations, that many small states are found to fortify their capital; to keep a body of soldiers in constant pay, bearing a great proportion to the number of the inhabitants; to form arsenals well stored with artillery, and to institute sumptuary laws and other regulations proper to check luxury. Nothing is so wise in every respect! Their territory cannot be extended nor improved, nor can their inhabitants be augmented, but at the expence of their wealth; for such as gain their livelihood at the expence of strangers, are at present out of the question. Were their own citizens therefore permitted, out of the abundance of their wealth, to give bread to as many workmen as their extravagance could maintain, the public stock would be constantly diminishing, in proportion to the foreign subsistence imported for these supernumeraries, and paid for at the expence of the luxurious; which would be just so much squandered out of the general wealth.

In other states which are extended, powerful by means of wealth, and strong by nature and situation, whose safety is connected with the general system of European politics, which secures them against conquest; such as Spain, France, Great Britain, &c. the progress of luxury does little harm (as these territories are still capable of infinite improvements) provided it does not descend to the lower classes of the people.

It ought to be the particular care of a statesman to check its progress there, otherwise there will be small hopes of ever recovering foreign trade. Whereas, if the lower classes of a people continue frugal and industrious, from these very circumstances trade may open anew, and be recovered by degrees, in proportion as luxury comes to get footing in other nations, where the common people are less laborious and frugal.

Luxury, among those who live upon a revenue already got, and who, by their rank in the state, are not calculated for industry, has the good effect of affording bread to those who supply them; but there never can be any advantage in having luxury introduced among the lower classes, because it is then a mean only of rendering their subsistence more chargeable, and consequently more precarious.

Having thus briefly laid together the principal objects of a statesman's care, upon the cessation of the foreign trade of his people, I shall finish my chapter, by pointing out some general consequences relative to the spirit, government, and manners of a people, which reason and experience shew to be naturally connected with such a revolution.

Nothing is more certain than that the spirit of a nation changes according to circumstances. While foreign trade flourishes, the minds of the monied people are turned towards gain. Money, in such hands, is generally employed to procure more, not to purchase instruments of luxury; except for the consumption of those prodigal strangers who are thereby becoming daily poorer. It is this desire of becoming rich, which produces frugality. A man is commonly frugal while he is making a fortune; another very commonly becomes extravagant in the enjoyment of it; just so would it be with nations, were a wise statesman never to interpose.

When, by the cessation of foreign trade, the mercantile part of a nation find themselves cut off from the profits they used to draw from strangers; and on the other hand, perceive the barriers of the nation gradually shutting against every article of unprofitable correspondence, they begin to withdraw their stocks from trade, and seek to place them within the country. This money is frequently lent to landed men, hitherto living within bounds, for two most substantial reasons. First, because there was little money to be borrowed, from the high rate of interest, owing to the great profits on foreign trade; and because the national stock was then only forming. The second, because the taste of the times was frugality. But when once the money usually employed in buying up loads of work for the foreign markets, comes to fall into the hands of landed men, they begin to acquire a taste for luxury. This taste is soon improved and extended by an infinity of arts, which employ the hands formerly taken up in furnishing the goods for exportation. Thus by degrees we see a rich, industrious, frugal, trading nation, transformed into a rich, ingenious, luxurious, and polite nation.

As the statesman formerly kept his attention fixed on the preservation of an equal balance between work and demand, and on every branch of commerce, in order to prevent the carrying off any part of the wealth already acquired; he must now direct his attention towards the effects of the domestic operations of his wealth. He was formerly interested in its accumulation; he must now guard against the consequences of its circulation.

While the bulk of a nation's riches is in foreign trade, they do not circulate within the country; they circulate with strangers, against whom the balance is constantly found. In this case, the richest man in a state may appear among the poorest at home. In foreign countries you may hear of the wealth of a merchant, who is your next door neighbour at home, and who, from his way of living, you never knew to be worth a shilling. The circulation of money from home-consumption will then be very small; consequently, taxes must be very low; consequently, government will be poor.

So soon as all this load of money which formerly was continually going backwards and forwards, and scarcely penetrated into the country, is taken out of foreign trade, and thrown into domestic circulation, a new scene opens.

Every one now begins to appear rich. That wealth which formerly made the admiration of foreigners, now astonishes the proprietors themselves. The use of money, formerly, was to make more of it: the use of money now, is to give it in exchange for those or such like commodities, which were then consumed by strangers only.

It is this revolution in the spirit of a people, which renders the consideration of the balance of their wealth an object of the greatest political concern: because upon the constant fluctuation of it, among the several classes of inhabitants, is laid the foundation of public opulence.

Government must constantly be respected, feared, and obeyed by the people governed; consequently, it must be powerful, and its power must be of a nature analogous to that of the subjects. If you suppose a great authority vested in the grandees of a kingdom, in consequence of the number and dependence of their vassals, the crown must have still a more powerful vassalage at its command: if they are powerful by riches, the crown must be rich. Without preserving this just balance, no government can subsist. All power consists in men, or in money.

If upon the cessation of foreign trade we suppose a vast quantity of wealth thrown into domestic circulation, the statesman must follow new maxims. He must promote the circulation of it so as to fill up the blank of foreign consumption, and preserve all the industrious who have enriched him. The quicker the circulation is found to be, the better opportunity will the industrious have of becoming rich speedily; and the idle and extravagant will become the more quickly poor. Another consequence equally certain is, that the quicker the circulation be, the sooner will wealth become equally divided; and the more equally it be divided, the more equality will be found in power. From these principles it will follow, that upon such a revolution of national circumstances, a popular government may very probably take place, if the statesman do not take proper care to prevent it.

This may be accomplished by the imposition of taxes, and these may be differently laid on, according to the spirit of the government.

By taxes a statesman is enriched, and by means of his wealth, he is enabled to keep his subjects in awe, and to preserve his dignity and consideration.

By the distribution of taxes, and manner of levying them, the power is thrown into such hands as the spirit of the constitution requires it should be found in. Are they imposed in a monarchy, where every man is taught to tremble at the King's name, the great men will be made rich by his bounty, and the lower classes will be loaded and kept poor; that they may, on easier terms, be engaged to fill those armies which the Prince entertains to support his authority at home, and his influence abroad.

Here independent people will always be looked upon with an evil eye, and considered as rivals to the Prince, who ought to be the only independent person in the state.

In limited governments, where the sovereign has not the sole power of taxation, they will be laid on more equally, and less arbitrarily; provided the theory of them in general be well understood. Here every man must know what he is to pay, and when; and the amount of the tax must bear a proportion, on one hand, to the exigencies of the state; and on the other, to the quantity of circulation which takes place upon the payment of it; that is, a man must not be made to pay all the state can demand of him for a year, upon his making a trifling, though most essential, acquisition of a necessary article of subsistence.

I think I have observed one remarkable difference in the point of view in levying taxes in countries, where these two forms of government are established.

Under the pure monarchy, the Prince seems jealous, as it were, of growing wealth, and therefore imposes taxes upon people who are growing richer. Under the limited government they are calculated chiefly to affect those who from rich are growing poorer.

Thus the monarch imposes a tax upon industry; where every one is rated in proportion to the gain he is supposed to make by his profession. The poll-tax and taille, are likewise proportioned to the supposed opulence of every one liable to them. These, with others of the same nature, are calculated (as it is alleged) to establish an equality in the load supported by the subjects; by making the industrious, and money-gatherers, contribute in proportion to their gains, although the capital stock from which these profits arise be concealed from the eyes of the public.

In limited governments, impositions are more generally laid upon consumption. They encourage industry, and leave the full profits of it to make up a stock for the industrious person. When the stock is made, that is, when it ceases to grow, it commonly begins to decrease: the number of prudent people, who live precisely upon their income, is very small. It is therefore upon the dissipation of wealth, in the hands of private people, that the state is enriched. Thus the carreer towards poverty is only a little abridged: he who is in the way of spending his estate will get at the end of it, if his life be spared; and therefore there is no harm done to him, and much good done to the state, in making a part of his wealth circulate through the public coffers.

The only precaution necessary to be taken in taxing consumption, is, to render the impositions universally equal, and to prevent their affecting what is purely necessary. or producing an unequal competition between people of the same denomination. Such impositions have still a worse effect, than those which fall upon growing wealth: they prevent the poor from being able to subsist themselves. A fellow-feeling excites compassion among those of the lower classes; they endeavour to assist each other, and by this operation, like a pack of cards, set up by children upon a table, the first that is thrown down tumbles down another, until all are laid flat; that is, misery invades the lower classes: more than one half of a people.

From these principles (which I have been obliged to anticipate) we may gather the necessity of taxes, in states where foreign trade begins to decay. Without them, there is no security for government against the power of domestic wealth. Formerly, Princes lived upon their domain, or patrimonial estate. What domain would be sufficient, at present, to support the expence of government? And if government be not able to hold the reins of every principle of action within the state, it is no government, but an idol, that is, an object of a voluntary respect. The statesman, therefore, must hold the reins; and not commit the management of the horses to the discretion of those whom he is employed to conduct.

Another consequence of taxes, is, that the more luxury prevails, the more the state becomes rich: if luxury, therefore, breeds licentiousness, it at the same time provides a curb against its bad effects.

This augmentation of wealth produces a double advantage to the statesman: for, besides the increase of the public revenue, the progress of luxury changing the balance of wealth constantly, by removing it from the rich and extravagant, to the poor and laborious, renders those who were formerly rich, and consequently powerful, dependent upon him for their support. By the acquisition of such persons, he gains additional credit, and supports his authority. Thus wealth and power circulate and go hand in hand.

It may be asked, how these principles can be reconciled with the vigour and strength commonly found in the government of flourishing trading nations; for in such we must suppose few taxes, consequently a poor and therefore a weak government; and a rich, consequently, a powerful people?

I answer, that under such circumstances, a people are commonly taken up with their trade, and are therefore peaceable; and as their wealth does not appear, being constantly in circulation with strangers, the influence of it is not felt at home. While wealth is employed in pursuit of farther gains, it cannot give power. consequently, as to all political effects at home, it is as if it did not exist; and therefore there is no occasion for the state to be possessed of a wealth they have no occasion to employ. If such a nation be attacked by her enemies, she becomes wealthy in an instant; every one contributes to ward off the common danger: but if, on the contrary, her tranquillity be disturbed at home, the rebellion generally proves successful; which is a confirmation of the principles laid down. I might illustrate this from many historical remarks. I shall suggest only to my reader, to examine the nature of the Dutch revolutions, and to compare the success of rebellions in France and England, during the last century, with others of a fresher date. Here the reader may consult the learned Mr Hume's observation upon the commencement of the civil war. History of Great Britain, vol. i. p. 325.

When, therefore, foreign trade has ceased for some time, and luxury has filled up the void, a considerable part of national wealth begins to circulate through the public treasury. It is natural then for great men to resort to court, in order to partake of the profits of government; and for the statesman to be fond of attaching such people to his interest, in order to be a constant check upon the turbulent spirit, which new-gotten wealth may excite in the minds of one set of people, and desperate fortunes raise in those of others.

While there was little circulation of money in Europe, and few taxes, there was small profit to be made in the following of Kings. These were more formidable to their enemies than profitable to their friends. The great men of the state lived upon their lands, and their grandeur resembled that of the Prince; it consisted in the number and dependence of their vassals; who got as little by their Lord, as he did by the King. The poor in those days were plundered of the little money they had, by the great; now the great are stripped of the largest sums, by the numbers of poor, who demand from them on all hands, the just equivalent for their industry.

When Princes find their great men all about them, all asking, and all depending for different marks of their favour, they may perceive the great change of their situation, produced by luxury, and a swift circulation. This revolution has not been sudden, it has been the work of several centuries; and I think we may distinguish three different stages during this period.

The first during the grandeur of the feudal government: then the great barons were to be consulted, and engaged to concur in the King's wars, because they were those who paid the expence, and suffered the greatest loss. These are called by some the days of liberty; because the states of every country in Europe almost, were then in all their glory: they are called so with great reason, when we consider the condition of the great only.

In those days there were seldom any troubles or disturbances in the state, seldom any civil wars levied against the King, but such as were supported by the grandees; who, either jealous of their own just rights, or ambitious of acquiring others at the expence of the crown, used to compel their vassals, or engage them by the constitutional influence they had over them, to disturb the public tranquillity.

The second stage, I think, may be said to have begun with the times of industry, and the springing up of trade. Such Princes, whose subjects began to enrich themselves at the expence of other nations, found, on one side, the means of limiting the power of the great lords, in favour of the extension of public liberty. The lords, on the other side, when they wanted to disturb the public tranquillity, did not, as formerly, vindicate their own privileges, so much as they combined with the people and moved them to revolt, on popular considerations.

This may be called the period of confusion, out of which has arisen certain determinate forms of government; some drawing nearer to the monarchical, others nearer to the popular form, according as the power of Princes has been more or less able to support itself, during the shock of the revolution, and the overturn of the balance between public and private opulence.

The third and last stage, of which I shall speak at present, may be fixed at the period when the proportion of the public revenue became adequate to the mass of national wealth; when general laws were made to govern, and not the arbitrary power of the great. The grandees now, from being a bridle on royal authority, are often found dependent upon it for their support. The extraordinary flux of money into the treasury, enables Princes to keep splendid courts, where every kind of pleasure and amusement is to be had. This draws together the rich men of the state. The example of the sovereign prompts these to an imitation of his expence, this imitation increases consumption, which in its turn augments the King's income, as it diminishes that of every other person.

When the great men of a kingdom have exhausted their estates, in paying a regular court to the Prince, they employ the credit they have acquired with him during the time of their dissipation, to obtain marks of his favour, in order to support them in their decline. By these they are enabled to live in as much state as before. They find no difference in their situation; unless perhaps they should accidentally reflect, that the fund which produced their former opulence, was in their own possession; whereas that of their present wealth is in the hands of their master.

To compensate this difference, they are made to acquire, by the favour of the court, advantages which they never could have enjoyed from the largest independent fortune.

The luxurious system of living, every where introduced, draws the wealthy together, either in the capital or in other great cities of the kingdom; where every one compares the expence and figure he makes, with that of others who are about him. A person honoured with the King's favour, of the same quality with another, acquires, from this circumstance, a great superiority. He commands, I shall suppose, in the place; he is the person to whom people must apply, in order to obtain favours, perhaps justice; he is adorned with a title, or outward mark of distinction, which procures him respect and consideration; and, which is still more, he is on the road to a farther elevation. It requires a great stock both of philosophy and good sense, not to be dazzled with these advantages. Independence, compared with them, is but a negative happiness. To be truly happy, we must have power, and have other people to depend on us.

Chapter XXVI: Of the Vibration of the Balance of Wealth between the Subjects of a modern State

We have frequently mentioned this balance, as an object of great importance to a statesman who is at the head of a luxurious nation; which having lost its foreign trade, has substituted in the place of it, an extensive inland commerce. This will supply the loss of the former, so far, as equally to provide employment, and, consequently, subsistence, to every one inclined to be industrious; although it must prove quite ineffectual for augmenting the national wealth already acquired.

I shall first explain what I mean by the balance of wealth vibrating between the members of society; from which will be seen why I rank this also among the political balances of a modern state.

It has been observed in the beginning of the nineteenth chapter, that the great characteristic of what we call liberty, is the circulation of an adequate equivalent for every thing transferred and every service performed.

By wealth I understand the circulating adequate equivalent.

The desires of the rich, and the means of gratifying them, make them call for the services of the poor: the necessities of the poor, and their desire of becoming rich, make them cheerfully answer the summons; they submit to the hardest labour and comply with the inclinations of the wealthy, for the sake of an equivalent in money.

This permutation between the two classes, is what we call circulation; and the effects produced by it upon the political situation of the parties, at the precise time of the circulation, and the consequences, after it is completely effected, explain what is called the balance of wealth.

To render our ideas more correct, let us consider the money on one side, and the prestations, as the civilians call them, or performances of any kind, on the other, as reciprocal equivalents for one other; and then let us examine the nature of those prestations which tend to put these equivalents into circulation; that is to say, what are the things which money can purchase.

These we may divide, with the lawyers, into corporeal and incorporeal. The corporeal may again be divided into consumable and inconsumable; and the incorporeal into personal service, and what the lawyers call jura, rights in or to any thing whatever. I cannot fully explain myself without the help of this distribution.

Let us next consider the effects of the circulation of money, as it has for its object, the acquisition of the four several species here laid down.

First, of inconsumable things. Secondly, of things consumable. Thirdly, of personal service. Fourthly, of rights acquired in or to any thing whatever.

First, the only thing inconsumable is the surface of the earth. This must not be taken in a philosophical, and far less in a chemical sense. A thing is consumed, so far as it concerns our inquiry, the moment it becomes useless, or even when it is lost.

The surface of the earth, therefore, is the only thing inconsumable; because, generally speaking, it never can cease to be useful, and never can be lost; it may be changed, but the earth must always have a surface. What is said of the surface, may be understood likewise of that small part of its body accessible to man, for supplying him with what he finds useful there, as the produce of mines.

Next to the earth itself, nothing is less consumable than her metals, consequently coin may very properly be classed under the head of things inconsumable; although it may be lost, and even worn out in circulation.

Let us now consider the effects of circulation in the purchase of land. (A), I shall suppose, has a piece of land, and (B) has one thousand pounds weight of gold coin, which the laws of society have constituted to be an adequate circulating equivalent for every thing vendible. They agree to make an exchange. Before the exchange, the balance of their wealth is equal; the coin is worth the land, the land is worth the coin; the exchange makes no alteration, nor has it the effect of making any afterwards; the new landlord may apply himself to the improvement of the soil, the moneyed man to the turning of his thousand weight of gold coin to the best advantage; consequently, by this transaction, no vibration of the balance seems to be affected.

If coin itself be the object of sale, the consequences are much the same. (A) has a guinea, (B) has twenty-one shillings, the exchange they make produces no alteration in their circumstances. The same holds good in other species of circulation, such as the transmission of money by inheritance. (A) dies and leaves his money to (B); here the possessor of the money changes only his name, perhaps his inclinations, and that is all. In like manner, a person pays his debts, and withdraws his bond, or other security; no balance is affected by this circulation, matters stand between the parties just as before.

The nature, therefore, of circulation, when one inconsumable commodity is given for another, is, that it operates no vibration in the balance of wealth between the parties; because, in order to produce this, one must remain richer than he was before, and the other proportionately poorer.

Secondly, under the second head of alienation, to wit, that of consumable commodities, is comprehended every thing corporeal, except money, and land, which money may purchase. Here two things deserve our attention. First, the simple substance, or the production of nature; the other, the modification, or the work of man. The first I shall call the intrinsic worth, the other, the useful value. The value of the first must always be estimated according to its usefulness after the modification it has received is entirely destroyed, and when by the nature of the thing both must be consumed together, then the total value is the sum of both. The value of the second must be estimated according to the labour it has cost to produce it. An example will make this plain.

The intrinsic worth of any silk, woollen, or linen manufacture, is less than the primitive value employed, because it is rendered almost unserviceable for any other use but that for which the manufacture is intended. But the intrinsic substance of a loaf of bread loses nothing by the modification, because the last cannot be consumed without the first. In a piece of silver-plate curiously wrought, the intrinsic worth subsists entire, and independent of the useful value, because it loses nothing by the modification. The intrinsic value, therefore, is constantly something real in itself; the labour employed in the modification represent a portion of a man's time, which having been usefully employed, has given a form to some substance which has rendered it useful, ornamental, or, in short, fit for man, mediately or immediately.

Let us now apply these distinctions to the different circumstances which attend consumption, in order to perceive their effects.

The consumption of the intrinsic value of any commodity, takes place the moment the matter employed begins to diminish, and is completed so soon as it is consumed totally. The consumption of the useful value proceeds in like manner, in proportion as the use it is put to makes the value of it diminish, or disappear altogether.

Let us next take an example, and examine the effects of circulation in the purchase of things consumable, as to the vibration of the balance of wealth. (A) has a piece of coin, (B) has something which his labour has produced; they make an exchange. (A) hitherto has neither gained or lost, neither has (B); but (A) begins to make use of what he had purchased with his coin, and in using it a part disappears; that moment the balance begins to turn against him. (B), on the other hand, exchanges his piece of coin with another, whom we shall call (C), and gets in return a piece of wood; if (B) puts this piece of wood into the fire, in proportion as the wood consumes, the balance is returning to its level between (A) and (B), and is changing in favour of (C). If (B), instead of burning his wood, makes a beam of it for supporting his house, the balance will turn more slowly, because the wood is then longer in consuming; but if he makes some useful piece of furniture of one part of his wood, he may warm himself with the remaining part of it, and with the coin he gets for his work, may buy a beam for his house, and even food to eat. If (B) stops at this period, and works no more, he will find himself just upon a level with (A), so soon as his fire is burnt out, his beam rotten, and his food consumed; and the whole balance will be found in favour of (C); provided that by his industry he has been able to procure for himself all his necessaries, and preserve the piece of coin entire. Here then is the spur to industry; to wit, the acquisition of this balance, which gives a relative superiority even among those of the lowest classes, and determines their rank as well as their political-necessary, according to the principles laid down in the twenty-first chapter.

The essential characteristic of this vibration of the balance of wealth, is the change in the relative proportion of riches between individuals. But it must be observed, that under this second species we are to consider the change of proportion no farther than as it is produced by the circulation of a free adequate equivalent, of such a nature as to be transferable to another hand without any diminution. The consumption, therefore, is the only thing which makes the balance turn. While the consumable commodity remains entire in the hands of the purchaser, he still remains possessor of the value, and may, by inverting the operation, return to the possession of the same species of wealth he had before.

Here it may be asked, if money be absolutely necessary for producing a vibration of this balance by the means of consumption. We may easily conceive the greatest inequality between the members of a state, without supposing the existence of money. We may suppose the property of lands unequally divided, and a great surplus of subsistence found in the hands of one individual, which may by him be given in exchange for the produce of industry. Under such circumstances then it may be asked, if without money there can be such a thing as a vibration in the balance of wealth? supposing in this case the term wealth to imply, in general, the means of purchasing whatever man can perform or produce.

I answer, that no doubt the balance may be susceptible of small vibrations, because even in the exchange of consumable commodities, the consumption may go on faster on one side than on the other; but I think, unless the inconsumable fund of wealth (which is what gives the superiority, and which in the example alleged, we supposed to be coin) can be made to change hands according to the adequate proportion of the consumption made, we cannot say properly, that a vibration can be operated in any considerable degree.

Let us suppose (A) to be a proprietor of a bit of land, and (B) an industrious workman; in order that (B) may purchase the land of (A), it must be supposed that (A) is very extravagant, and that he inclines to consume a much greater proportion of work than what is equivalent to all the surplus produce of his land. Now in order to supply (A) to the value of the land itself, (B) must distribute his work to many different persons, and take in exchange, not such things as he has use for himself, but such as may be found useful to (A). But so soon as (A) has paid to (B) the whole surplus of his land, what fund of credit will he find in order to engage (B) to furnish more? He cannot pay him in land, because this fund is not susceptible of circulation; and every expedient that could be fallen upon to keep accounts clear between them, is neither more or less than the introduction of money, either real or symbolical.

By real money, is meant what we call coin, or a modification of the precious metals, which by general agreement among men, and under the authority of a state, carries along with it its own intrinsic value.

By symbolical money, I understand what is commonly called credit, or an expedient for keeping accounts of debt and credit between parties, expressed in those denominations of money which are realized in the coin. Bank notes, credit in bank, bills, bonds, and merchants' books (where credit is given and taken) are some of the many species of credit included under the term symbolical money.

In the example before us, we may suppose that (A) having no more circulating equivalent to give (B) for his work, and being desirous to consume of it to the value of his land, shall agree to issue notes of hand, every one of which shall carry in it a right to an acre of land, to a fruit tree, to ten yards of the course of a river, &c. and that every such parcel of property, shall be esteemed at a certain proportion of work. This agreement made, he goes on with his consumption, and pays regularly, and adequately, the value of what he receives; and in proportion as consumption proceeds on the side of (A), the balance of wealth must turn in favour of (B); whereas while (A) kept his bit of land, and (B) his faculty of working up an equivalent for the surplus of it, the balance stood even: because the land on one hand, and the industry on the other, produced adequate equivalents for each other. The produce of both was consumable, and was supposed to be consumed; which operation being over, the land and the industry remained as before, ready to produce anew. Here then is the effect of credit or symbolical money. Now I ask, whether the notes of hand given by (A) to (B), do not contain as real a value, as if he had given gold or silver? and farther, whether it appears, that the country where they live becomes any richer by this invention? does this note any more than declare, who is the proprietor of the value contained?

Nothing is so easy as to invent a money which may make land circulate as well as houses, and every other thing which is of a nature to preserve the same value during the time of circulation. Whatever has a value, may change hands for an equivalent, and whenever this value is determined, and cannot vary, it may be made to circulate, as well as a pound of gold or silver made into coin, and in the circulation to produce a vibration in the balance of wealth.

Those nations, therefore, who circulate their metals only, confine industry to the proportion of the mass of them. Those who can circulate their lands, their houses, their manufactures, nay their personal service, even their hours, may produce an encouragement for industry far beyond what could be done by metals only. And this may be done, when the progress of industry demands a circulation beyond the power of the metals to perform.

This anticipation of the subject of the following books, is here thrown in merely to enable my reader to form to himself an idea of the extent of the subject we are at present upon, and to help him to judge to what length luxury, that is consumption, may be carried. Since, by what we have said, it appears that there is no impossibility for a people to throw the whole intrinsic value of their country into circulation. All may be cut into paper, as it were, or stamped upon copper, tin, or iron, and made to pass current as an adequate equivalent for the produce of industry: and as there are no bounds to be set to consumption and prodigality, it might be possible, by such an invention, in the compass of a year, to circulate an equivalent in consumable commodities produced by industry, for the whole property of the most extended and most wealthy kingdom. That this is no chimerical supposition, appears plain by the activity of many modern geniuses, who, in an inconsiderable space of time, find means to get through the greatest fortunes; that is to say, in our language, they throw them into circulation by the means of the symbolical money of bonds, mortgages, and accounts. But does this species of circulation increase the riches of the state? surely no more than it would increase the riches of France or England, to carry all the plate in the two kingdoms to be coined at the mint. The use of symbolical money is no more than to enable those who have effects, which by their nature cannot circulate (and which, by-the-bye, are the principal cause of inequality), to give, to the full extent of all their worth, an adequate circulating equivalent for the services they demand. In other words, it is a method of melting down, as it were, the very causes of inequality, and of rendering fortunes equal.

The patrons therefore of Agrarian laws and of universal equality, instead of crying down luxury and superfluous consumption, ought rather to be contriving methods for rendering them more universal. If they blame what is called perpetual substitutions of property or entails (made by parents in favour of their posterity as yet unborn), because they are in some respects prejudicial to industry; they should not, I think, find fault with this charming leveller dissipation, the nurse of industry, and the only thing intended to be prevented by such entails.

Some have persuaded themselves, that an equality of fortune would banish luxury and superfluous consumption. Among the rest, is M. de Montesquieu, an author for whom I have the highest esteem, and who has, in this respect, been copied by many others. But I never found his idea set in a clear light. Equality of fortune would certainly change the nature of luxury, it would diminish the consumption of some, and would augment the consumption of others; but without making people idle, it could never destroy industry itself, and while this subsists in an equal degree, there must be the same quantity of what it produces regularly consumed. Farther this proposition never can be advanced, but on the supposition that the luxurious person, that is, the consumer, must be richer than he who supplies him. This I cannot by any means admit to be true. Must the carter who drinks a pot of beer be richer than the ale-houseman? Must a country-girl, who buys a bit of ribband, be richer than the haberdasher who sells it? Must the beau be richer than his taylor? the traveller than the banker who gives him his money? the client than the lawyer? the sick than the physician?

How then does it appear that equality must prevent luxury, unless we suppose every one confined to an absolute physical-necessary, and either deprived of the faculty of contriving, or of the power of acquiring any thing beyond it. This principle Lycurgus alone laid down for the basis of his republic; and yet riches were known in Sparta, as well as poverty.

Absolute equality, de facto, is an absurd supposition, if applied to a human society. Must not frugality amass, and prodigality dissipate? These opposite dispositions are of themselves sufficient to destroy, at once, the best regulations for supporting equality; and, when carried to a certain length, must substitute in its place as great an inequality as the quantity of circulation is capable to produce. Whatever circulates may stagnate. Why was there so great an equality at Sparta? because there was little circulation. Why are the Capucins in a state of perfect equality? because among them there is no circulation at all.

If therefore such variations in the balance of wealth depend on the difference of genius among men, what scheme can be laid down for preserving equality, better than that of an unlimited industry equivalent to an universal circulation of all property, whereby dissipation may correct the effects of hoarding, and hoarding again correct those of dissipation? This is the most effectual remedy both against poverty and overgrown riches; because the rich and the poor are thereby perpetually made to change conditions. In these alterations in their respective situations, the parties who are changing by degrees, must surely in their progress towards a total alteration, become, at one time or other, upon a level, that is, to an equality; as the buckets in a well meet, before they can pass one another.

Thirdly, The first species of things incorporeal, which may be purchased with money, is personal service; such as daily labour, the attendance of a menial servant, the advice of a physician, of a lawyer, the assistance of skilful people in order to acquire knowledge, the service of those employed in the administration of public affairs at home and abroad, or for the defence of a kingdom by sea or land; the residence of great men at court, who do honour to princes, and make their authority respected; and even when money is given to procure amusement, pleasure, or dissipation, when no durable and transferable value is given in return.

There is a kind of resemblance between the species here enumerated, and what we called the useful value in consumable commodities. In the one and the other, there is an equivalent given for a man's time usefully employed; but the difference between them lies in this: that the useful value being supported, or having for a substratum, as the schoolmen call it, the intrinsic substance, is thereby rendered permanent and vendible; whereas here, for want of a permanent and transferable substance, the personal services, though producing advantages which are sufficiently felt, cannot however be transferred for the adequate price they cost.

The circulation produced by this third species of acquisition, operates an instantaneous vibration of the balance. The moment the personal service is performed, it may be said to be consumed; and although the purchaser has received a just equivalent for the money given, and in some cases may even be thereby put in a situation to indemnify himself of all his expence, by performing the like services to others, yet every body must perceive that such services cannot properly be considered as a circulation of the former.

Fourthly, The acquisition of the other species of things incorporeal, that is, rights, produces little more balance, when an adequate circulating equivalent is given for them, than the sale of land; because a right implies no more than a power to use, that is, to consume; and, by the use, the right is not diminished: it is balanced by the use of the money; the money therefore and the right being both permanent, there is no vibration in the scales. Of this species are all servitudes; the purchasing of privileges or immunities, even the lending of money at interest, may here not improperly be classed.

Here it will, perhaps, be alleged, that an example may be given, where the creation of such a right, though purchased with an adequate circulating equivalent, produces the greatest vibration possible in the balance of wealth. It is when a state contracts debts, and when the public creditors acquire a right to general impositions on the people for the payment of their interest. This objection requires a little explanation in order to be removed and I have proposed it chiefly for the sake of introducing an illustration of my subject.

If it be said, that in this example a vibration in the balance of wealth within the state is implied, then I say that it must take place either, first, between the creditors and the state, or, secondly, between the state and the people, or, thirdly, between the creditors and the people. But,

First, The creditors acquire no balance against the state because they have given one inconsumable commodity for another; to wit, money for an annual income. The money is worth the income, the income is worth the money. If therefore any change in the balance comes afterwards to take place, it must be in consequence of other operations quite independent of this transaction. But let us suppose, which is but too frequently the case, that here money must be considered as a consumable commodity, because it is only borrowed in order to be spent. In this light does not the creditor seem to acquire a balance in his favour against the state, so soon as the money is actually spent? I answer in the negative: because a state, by expending the money borrowed remains with respect to the creditors just as wealthy as before. It is the people who pay the interest, for which the state gives them in return no adequate transferable equivalent.

Secondly, Here it is urged, that this being the case, the state has acquired a balance against the people according to the principles above laid down, where it was said, that upon occasions, where money is given for personal service, and where nothing transferable is given in return, the balance turns instantaneously in favour of him who received the money.

To this I answer, that as to the interest paid by the people, the state does not receive it for herself, but for the creditors. The personal services are then supposed to be already paid for, and the vibration has taken place before the interest becomes due. Therefore the balance does not turn between the state and the people.

In the levying of taxes which are destined to pay the interest of money already spent, the public gives no adequate equivalent on one hand; and on the other, it is not enriched with respect to the people, any more than it was impoverished with respect to the creditors, by spending the money borrowed; and since there is no reciprocal change in the situation of the two parties, I do not see how we can infer any vibration in the balance of wealth between them. We shall presently see between whom the balance is made to vibrate.

Thirdly, The balance between the creditors and the people is what at first sight appears to be principally affected; because the first receive a constant retribution from the latter, in consequence of the loan. But neither is any true vibration found here, either adequate to the loan, or to the money spent. First, because the creditors themselves are part of the people who contribute towards all impositions on consumptions, which are commonly the most regular, the most permanent, the most generally appropriated for the payment of the interest. Secondly, because the money spent by the state, if spent at home, returns to other hands indeed, but still returns to the people, of whom we are here speaking. And, thirdly, because there is no transaction at all between the creditors and the people.

Objection. By this way of reasoning it would appear, that the exhausting of a people by taxes, makes no vibration in the balance of their wealth.

Answer. If the people be exhausted, it must be by enriching strangers. This case should at present be excluded, as we have laid aside the consideration of foreign relations. But allowing this circumstance also to be implied in the objections made, I agree that every penny of money sent out of a country, for no real and permanent equivalent received in return, operates a vibration in the wealth between nation and nation; but none between subject and subject. To this it is answered, that when taxes are high, many people are ruined while others are enriched: this operates a vibration. I allow it; but then I reply, that by the very supposition in every such case, the money must remain at home; whereas in the former, it was supposed to be expended abroad. Now we are not at present examining the effects of debts and taxes, in changing the balance between man and man, but only between the three cumulative interests above specified, the state, the people and the creditors.

Let me now ask, what is the effect of taxes on the vibration of the balance of wealth between individuals?

I answer, that whoever pays a tax, appears to pay for a personal service. He receives no corporeal equivalent which can be alienated by him for the same value; and he who is employed by the state, and is paid with the produce of taxes, acquires a balance in his favour against those who pay them. When the amount of taxes goes abroad for foreign services, there can be no alteration upon the balance at home, as has been said; neither is there any when it remains at home: the people, that is, the whole nation taken together, and the creditors, are as rich as before. Let this suffice at present, as to the effects of debts and taxes upon the balance of national wealth.

Industry is the only method of making wealth circulate, so as to change its balance between the parties; all kinds of circulation which produce no such change, are foreign to the present purpose.

A man dies and leaves his wealth to another, nobody loses by this, but he who is no more; a second pays his debts, neither debtor, or creditor can be said to change circumstances by the operation. A merchant buys a quantity of merchandize for ready money, he thereby loses no balance of his wealth; it is true he has given money for consumable effects; but the balance does not operate until the consumption takes place, and as he is not supposed to buy in order to consume, I rank this branch of circulation among those which do not influence the balance.

Thus we find two different kinds of circulation in a state; one which makes the balance turn, and one which does not. These objects are of no small consequence to be attended to in the right imposition of taxes, as shall, in its proper place, be more fully explained. At present it is sufficient to observe, that the proper time of laying On taxes is at the time of circulation: because the imposition may then be always exactly proportioned to the sum circulating; consequently, to the faculties of the persons severally interested.

In all excises, or taxes upon consumption, it is the money of the consumer which is taxed, in the instant of the payment; so that he against whom the balance is to turn, has the additional load to pay. This species of tax, imposed at the time of circulation, is what produces the largest sums to a state. I never heard of a proper expedient for taxing the person in whose favour the balance is to turn, though from the principles which are afterwards to be laid down, we may perhaps discover one.

As for the other species of circulation, where the balance does not turn, it is not so much the custom to impose very considerable taxes upon it: there are however several examples to be met with, which point out how they may be imposed. The casualities paid upon the change of vassals or upon the fall of lives, in leases upon lands in England; the confirmation of testaments in Scotland; investitures in Germany; the centiéme denier, the lods et ventes, and the control upon the acts of notaries in France; the emoluments of the Rota in Spain, and in many Roman Catholic countries, are of this species. Upon the same principle, taxes more or less considerable might be laid upon every branch of this kind of circulation; for which purpose, it would be highly necessary to find out all the ramifications of it, by analysing it to the bottom, as we have hitherto run through it very superficially.

Chapter XXVII: Circulation and the Balance of Wealth, objects worthy of the attention of a modern Statesman

Having explained the nature of circulation, and of this balance, we are next to point out the objects of a statesman's attention concerning them.

I. He ought to form to himself a clear and distinct idea of the nature, properties, and effects of circulation; a word frequently made use of without much meaning, and in a vague and undeterminate sense.

The term circulation is, perhaps, one of the most expressive in any language, and is therefore easily understood. It represents the successive transition of money, or transferable commodities, from hand to hand, and their return, as it were in a circle, to the point from which they set out. This is the rough idea which every one, who understands the word at all, must form its meaning. But a statesman's perceptions should be more accurate as well as more complex.

He must combine the consequences which result from this successive transition, and attend to the effects produced by it. He must not consider the money only, which is a permanent value, passing from hand to hand, but weigh the consequences of the variety of consumption which it draws along with it, in its progress.

Before a guinea can travel from London to York, it may be the means of consuming a thousand times its value, and as much more, before it can return to London again. Every stop the guinea makes in its course, marks a want of desire to consume, in him who possesses it, for the time. If, therefore, in any country, there were but one guinea in circulation, all consumption would stop (or barter would take place) the moment it fell into the hands of a miser. This leads us to the second object of a statesman' s attention.

II. He ought at all times to maintain a just proportion between the produce of industry, and the quantity of circulating equivalent, in the hands of his subjects, for the purchase of it; that, by a steady and judicious administration, he may have it in his power at all times, either to check prodigality and hurtful luxury, or to extend industry and domestic consumption, according as the circumstances of his people shall require the one or the other corrective, to be applied to the natural bent and spirit of the times.

For this purpose, he must examine the situation of his country, relatively to three objects, viz. the propensity of the rich to consume; the disposition of the poor to be industrious; and the proportion of circulating money, with respect to the one and the other.

If the quantity of money in circulation is below the proportion of the two first, industry will never be able to exert itself; because the equivalent in the hands of the consumers, is then below the proportion of their desires to consume, and of those of the industrious to produce. Let me illustrate this by a familiar example taken from a party at quadrille.

When, on dealing the cards, every one puts in a fish into the stake, according to the old English fashion, a very few fishes are sufficient for the circulation of the game: but when you play the aces, the consolation and the multiplication of beasts according to the French custom, you must have a box with contracts, fishes, and counters; so reducing all to the lowest denomination, every player has occasion for above five hundred marks. It is therefore plain, that the number of marks ought to be in proportion to the circulation of the game. But at play, as in a state, circumstances render this circulation very irregular. Fortune may run so equally among the players, during a considerable time, that none of them may have occasion to pay away above the value of a hundred counters, and while this equality continues, there will not be found the smallest interruption in the circulation. But let one of the players have a run of good luck, you will soon see three of the boxes empty and all the circulating marks heaped up before the winner. Fortune at quadrille, forms stagnations of the circulating equivalent, as industry and frugality form them in a state. At this period of the game, must not the players stop, or must they not fall upon a way of drawing back their marks into circulation? If they borrow back from the winner, this represents loan. If they buy back their marks with money from their purses, it represents what I call throwing solid property into circulation.

From this familiar example, we may judge how necessary it is that the circulating fund be constantly kept up to the proportion of the occasions for it. It is impossible to determine the proportion of coin necessary for carrying on the circulation of a country, especially of one where neither loan, or paper-credit, that is, the melting down of solid property, are familiarly known. Here is the reason: the solution of the question does not depend upon the quantity of coin alone, but also upon the disposition of those who are the possessors of it; and as these dispositions are constantly changing, the question thereby becomes insoluble.

It is, therefore, the business of a statesman, who intends to promote circulation, to be upon his guard against every cause of stagnation; and when he has it not in his power to remove these political obstructions, as I may call them, by drawing the coin of the country out of its repositories; he ought (in proportion as the other political interests of his people are found to require it) to facilitate the introduction of symbolical money to supply its place.

A great political genius is better discovered by the extent of his perceptions, than by the minute exactness of them in every part of the detail. It is far better for a statesman to be able to discern (though superficially) every object of government under all its relations, than to be able to trace any one with the greatest accuracy. This is apt to occupy him too much, and no one relation should ever engross his whole attention.

I cannot omit in this place taking notice of a very judicious remark of M. de Melon, an eminent political French writer, who was employed by the Duke of Orleans in state affairs, during his regency of the kingdom.

'It belongs only (says he) to one who has had the direction of every branch of government to lay down a general plan of administration, and even then, one must not expect from such a person, very particular details with respect to many objects, of which he himself is entirely ignorant, and which he has been obliged to confide to the care of others subordinate to him. A person who can stoop to a minute exactness in small affairs, proves commonly very unequal to the administration of great ones. It is enough for such a person to know principles by experience and reflection, and how to apply fundamental maxims as occasion requires.'

I apply this observation to the point in hand. A statesman who allows himself to be entirely taken up in promoting circulation, and the advancement of every species of luxurious consumption, may carry matters too far, and destroy the industry he wishes to promote. This is the case, when the consequence of domestic consumption raises prices, and thereby hurts exportation.

A principal object of his attention must therefore be, to judge when it is proper to encourage consumption, in favour of industry: and when to discourage it, in favour of a reformation upon the growth of luxury.

If the country he governs be in a state of simplicity, and that he wishes to awaken a taste for industry and refinement, he must, as has been said, encourage domestic consumption, for the sake of multiplying, and giving bread to the industrious; he must facilitate circulation, by drawing into the hands of the public what coin there is in the country, in case he finds any part of it locked up; and he must supply the actual deficiency of the metals, by such a proportion of paper-credit, as may abundantly supply the deficiency.

In every country where simplicity prevails, and where there is any considerable quantity of coin, a great proportion of it must be locked up: because there the consumption must be small; consequently, little circulation; consequently, either little coin, or many treasures. In such cases, therefore, a statesman must engage the possessors of these riches to part with them, at the desire of those who can give security for their worth: and he must establish the standard of an annual retribution for the loan. If this be difficult to be brought about, from the want of confidence in the moneyed men, he may, in their favour, contrive expedients to become the borrower himself, at the expence of the alienation of certain rights, or the creation of new privileges, in lieu of interest; and when he has engaged them to part with their coin, he may lend it out to such as have both solid property and a desire to consume; but who, for want of a circulating fund to purchase superfluities, have hitherto lived in simplicity.

The introduction, therefore, of loans upon interest, is a very good expedient to accelerate circulation, and to give birth to industry.

Objection. But here it is objected, that such a plan is looked upon by some nations to be contrary to the precepts of the Christian religion, and therefore a statesman cannot permit it.

To this I can make no answer, because I am no casuist; but I can propose an expedient which will supply the defect of borrowing at interest; and, as it may serve to illustrate the principles I am now upon, I shall here introduce it.

The intention of permitting loans upon interest, is not to provide a revenue to those who have ready money locked up, but to obtain the use of a circulating equivalent to those who have a sufficient security to pledge for it. If the statesman, therefore, shall find himself withheld by the canons of his church, from drawing the coin of his subjects into circulation, by permitting the loan of it upon interest, nothing is more easy than to invent another species of circulation, where no interest at all is necessary.

Let him open an office, where every proprietor of lands may receive, by virtue of a mortgage thereon, a certain proportional value of circulating paper of different denominations, the most proper for circulation. He may therein specify a term of payment in favour of the debtor; in order to give him an opportunity to call in his obligation, and relieve the engagement of his property. But this term being elapsed, the land is to belong to the creditor, or the paper to become payable by the state, if required, which may in consequence become authorised either to sell the land engaged, or to retain a proportional value of the income, or of the property of the land itself, as shall be judged most expedient.

Farther, let him constitute a real security for all debts upon every species of solid property, with the greatest facility in the liquidation of them, in favour of those who shall have given credit to the proprietors for merchandise of any kind. To compass this, let all entails, substitutions, and fidei commissa, or trusts, restraining the alienation of land-property, be dissolved; and let such property be rendered as saleable as household furniture. Let such principles influence the spirit of the government; let this sort of paper-credit be modified and extended according to circumstances, and a taste for consumption will soon take place.

The greatest of all obstacles to industry in its fancy, is the general want of credit on both sides. The consumers having no circulating value, the difficulty of liquidating what they owe by the alienation of their lands, prevents their getting credit; and the many examples of industrious people giving way, on account of bad payments, discourages others from assisting them in the beginning of their undertaking.

From these principles we may gather, that a statesman who intends to increase industry and domestic consumption, should set out by providing a circulating fund of one kind or other, which ought always to be ready, and constantly at the command of those who have any sort of real equivalent to give for the consumption they incline to make; for as specie may oftentimes be scarce, a contrivance must be fallen upon immediately to supply the want of it.

The utility of this kind of credit, or paper-money, is principally at the instant of its entering into circulation; because it is then only that it supplies the want of real specie; and by this invention the desire to consume creates, as it were, the circulating equivalent, without which the alienation of the produce of industry would not have taken place; consequently, the industry itself would have suffered a check.

But in the after-circulation of this paper-money from hand to hand, this utility comes to cease; because the subsequent consumer, who has another man's paper to give in exchange, is already provided with a circulating equivalent, and therefore, were it not for the wearing of the specie, or difficulty of procuring it, it is quite indifferent both to the state, as well as to circulation, whether this paper continue to pass current, or whether it be taken up, and realized by the debtor, and gold and silver be made to circulate in its place.

Let me now endeavour to make this whole doctrine still more plain, by an example.

Suppose a country where there is a million of pieces of gold employed necessarily in carrying on the ordinary circulation, a million of pieces of the same value locked up, because the proprietors have no desire to spend them. Suppose the revenue of the solid property of the country to be worth also a million a year; and that if the fund itself could be sold, it might be worth twenty millions of the same specie. Suppose no such thing as credit or paper-money to be known, and that every man who inclined to make any consumption, must be previously provided with a part of the circulating million, before he can satisfy his inclination.

Under these circumstances, the statesman resolves to establish industry, and finding that by his people's taking a taste for a greater consumption, the million which was formerly sufficient for carrying on circulation, is no longer so; he proposes to those who have the other million locked up, to borrow it from them at 5 per cent and the better to engage them to comply with his proposal, he offers to impose duties upon the whole of the inhabitants to the annual amount of fifty thousand pieces of gold, to be paid annually to the creditors, in return for their treasure. If this scheme be adopted, he may, upon good security, lend out his million in small sums, to every one who inclines to borrow; or by premiums and other encouragements given to his infant manufactures, he may throw it into the hands of the public, that is, into circulation. Here is one method for increasing the quantity of a circulating fund, when an augmentation upon the consumption of the produce of industry comes to demand it.

But let us now suppose this regular plan of borrowing to be contrary to what is called the constitution of the state, to religion, or to the spirit of the people, what must be done to supply the place of such a scheme?

The statesman must then fall upon another contrivance, by extending the use of pledges, and instead of moveables, accept of lands, houses, &c. The Monte pieta at Rome issues paper money upon moveable security deposited in their hands. Let the statesman, without exacting interest, do the same upon the lands of his subjects, the best of all securities. While the lands subsist, this paper-money must retain its value; because I suppose the regulations to be such as to make it convey an indisputable right to the lands engaged. The advantage of such an establishment will be, that as formerly no man could purchase the smallest produce of industry, without having a part of the circulating million of pieces of gold; every body now who has an inclination to consume, may immediately procure paper-money in proportion to his worth, and receive in return whatever he desires to possess.

Now let me suppose that this paper-money shall in time, and from the growing taste for superfluities, amount to the value of five millions of pieces of gold. I ask, whether the real value of this paper is any way diminished, because it exceeds, by far, all the gold and silver in the country, and consequently cannot all at once be realized by the means of the coin? Certainly not: because it does not draw its value from any representation of these metals, but from the lands to which it conveys a right. Next, I ask, if the country is thereby become any richer? I answer, also, in the negative: because the property of the lands, if sold being supposed worth twenty millions, the proprietors of the paper are here supposed to have acquired, by their industry, five millions of the twenty; and no more than the remaining fifteen millions belong to the landlords.

Let us now suppose a million of this paper-money to fall into the hands of those who have no inclination to spend it. This is the case of the frugal, or money-hoarding persons: will they not naturally choose to realize their paper, by taking possession of the lands represented by it? The moment this operation takes place, the million of paper-money is annihilated, and the circulating capital is reduced to four millions of paper, and one million of specie. Suppose, on the other hand, that those who have treasures which they cannot lend at interest, seeing a paper money in circulation, which conveys a right to solid property, shall first purchase it with their million of pieces of gold, and afterwards lay hold of a proportional part of the land: what effect will this double operation produce upon the circulating fund? I answer, that the currency, instead of being composed, as formerly, of one million of coin and five millions of paper, will, at first, on the buying up of the paper, consist of two millions of coin and five millions of paper; and so soon as the million of paper bought up comes to be realized upon the land, it will be thereby extinguished; consequently the circulating coin will be raised to two millions, and the paper will be reduced to four. Here then is a very rational method of drawing all the coin of the country from the treasures of the frugal, without the help of interest. Let me take one step farther, and then I will stop, that I may not too far anticipate the subject of the fourth book.

I suppose, that the statesman, perceiving that the constant circulation of the coin insensibly wears it away, and reflecting that the value of it is entirely in proportion to its weight, and that the diminution of the mass must be an effectual diminution of the real riches of his country, shall call in the metals and deposit them in a treasure, and shall deliver, in their place, a paper-money, having a security upon the coin locked up. Is it not plain, that while the treasure remains, the paper circulated will carry along with it as real (though not so intrinsic) a value as the coin itself could have done? But if this treasure comes to be spent, what will the case be then? It is evident, that the paper, conveying a right to the coin, will then as effectually lose its value, as the other species of paper conveying a right to the lands, and issued, as we have supposed, by the proprietors of them, would have lost its value, had an earthquake swallowed up, or a foreign conqueror seized, the solid property engaged as a security for it.

The expedient, therefore, of symbolical money, which is no more than a species of what is called credit, is principally useful to encourage consumption, and to increase the demand for the produce of industry. And bringing the largest quantity of coin possible into a country, cannot supply the want of it in this respect; because the credit is constantly at hand to every one who has property, and the other may fail them on a thousand occasions. A man who has credit may purchase at all times, though he may frequently be without a shilling in his pocket.

Whenever, therefore, the interest of a state requires that the rich inhabitants should increase their consumption, in favour of the industrious poor, then the statesman should fall upon every method to maintain a proportion between the progress of industry, and the gradual augmentation of the circulating fund, by enabling the inhabitants to throw with ease their solid property into circulation whenever coin is found wanting. Here entails are pernicious.

On the other hand, when luxury begins to make too great a progress, and when it threatens to be prejudicial to foreign trade, then may solid property be rendered more unwieldy, and entails may then become useful: all moveable debts, except bills of exchange in foreign circulation, may be stripped of their privileges, and particularly, as in France, of the right of arresting the person of the debtor. Usury ought then to be punished severely; even something like the Senatus Consultum Macedonianum, which made the contract of loan void on the side of the borrowers, while they remained under the power of their fathers, may be introduced. Merchants' accounts should no more be allowed to enjoy a preference to other debts; but on the contrary, be made liable to a short prescription. In a word, domestic circulation should be clogged, and foreign circulation accelerated. When foreign trade again comes to a stop, then the former plan may be taken up a-new, and domestic circulation accelerated and facilitated, in proportion as the produce of industry and taste for superfluity require it.

III. A statesman ought carefully to distinguish between those branches of circulation which operate a vibration in the balance of wealth, and those which do not, in order to regulate the taxes which he may think proper to lay upon his people.

In treating of this third object of a statesman's attention, I shall confine myself to the application of those principles which point out the necessity of taxation among a luxurious people, become wealthy by the means of a foreign trade which they now have lost; and where the industrious can no longer be made to subsist but by means of a great domestic circulation. This is the object of our present inquiry.

In every case where the balance of wealth is made to vibrate by circulation, there is an opportunity of imposing a tax upon consumption, perfectly proportioned to the quantity of the circulation. Now by the imposition of taxes, and the right employment of the amount of them, a statesman has it in his power to retard or to promote the consumption of any branch of industry. By the imposition of duties he may either check luxury when he finds it calling off too many hands from other more necessary occupations; or by granting premiums, he may promote consumption or exportation upon branches where it is expedient to increase the hands employed, which last is the reverse of taxation; or in the third place, when foreign trade begins to bear a small proportion to domestic consumption, he may profit of luxury, and draw a part of the wealth of the luxurious into the public treasure, by gently augmenting the impositions upon it; for when taxes are gently increased, consumption is not checked; consequently, this is the proper method to be followed, when luxury does no harm. But when it proves hurtful, the rise in the impositions should be sudden, that they may operate the effects of violent revolutions which are always accompanied with inconveniences, and on such occasions every inconvenience will mark the success of the operation. An example will make this plain.

If you want to check the drinking of spirituous liquors, let every alteration of your economy concerning them, either as to the impositions upon the consumption, or regulations in retailing them, proceed by jerks as it were; if you want to increase the revenue, from the propensity people have to poison themselves with spirits, your augmentations and alterations may be gentle and progressive.

Here let me observe by the way, that the best method for a statesman to curb any sort of vice among his people, is to set out by facilitating the gratification of it, in order to bring it once upon a regular and systematical footing, and then by sudden and violent revolutions in the administration of the economy of it, to destroy it and root it out.

Were all the strumpets in London received into a large and convenient building, whither the dissolute might repair for a while with secrecy and security, in a short time, no loose women would be found in the streets. And it cannot be doubted, but that by having them all together under certain regulations, which might render their lives more easy than they are at present, the progress of debauchery, and its hurtful consequences, might in a great measure be prevented. At Paris, they are to be found in their houses, because the police never troubles them there, while they commit no riot or disturbance. But when they are persecuted in their habitations, they break forth into the streets, and by the open exercise of their profession, the delicacy of modesty is universally hurt and but too frequently blunted, and the example which those prostitutes openly set to their own sex, debauches more women than all the rakes in town do.

I hope this digression will not be misconstructed into an apology for public stews, in which, instead of following good regulations for suppressing the vices with which they are filled, the principal object is frequently to encourage the abuses for the sake of making them turn to account as a branch of revenue. Such a plan of administration represents a statesman who turns against his people those arms, which he had provided for their defence. My intention is very different, it is to curb vice as much as possible, and to shut up what cannot be rooted out within the bounds of order, and to remove it as a nuisance from the eyes of the public, and from the contagious imitation of the innocent. I now come to the object of a statesman's attention, relative to that branch of circulation which implies no vibration of the balance of wealth between the parties concerned.

The more perfect and the more extended any statesman's knowledge is of the circumstances and situation of every individual in the state he governs, the more he has it in his power to do them good or harm. I always suppose his inclinations to be virtuous and benevolent.

The circulation of large sums of money brings riches to light for a moment, which before and after are commonly hid from the eyes of the public. These branches of property therefore, which have once made their appearance in this species of circulation, should not be lost sight of until they come naturally to melt away, by returning into the other branch of which we have been speaking; that is, until they be fairly spent, and the balance be made to turn against the former proprietors of them. After this revolution, they will circulate for a while in small sums, and remain imperceptible; until with time they come to form new stagnations; then they will be lent out again, or employed in the purchase of lands; and falling once more under the eye of the state, they will again become an object of the same attention as formerly.

Nothing is more reasonable, than that all property which produces an annual determinate income, should be made to contribute to the common burthens of a state. But those taxes which are intended to operate upon so moveable a property as ready money, ought to be imposed with a most gentle hand, and even so as not to appear directly to affect it. The statesman here must load his wealthy citizens with duties, as Horace loads his sovereign with adulation, never addressing his compliments directly to the emperor, but conveying them to him in the most elegant manner, through the channel of an interposed person. Thus people, possessing large capitals of ready money, which in a moment they can transport beyond the reach of the most extended jurisdiction, may have certain privileges granted them which may attach them to the country, (in England, for example, a vote in a county or borough,) and then in consequence of their rank, not because of their money, be made to come under a sort of capitation, or other similar imposition bearing another name. Might not the creditors of this nation be represented in parliament, and in consequence of so great a privilege, and the additional security thereby granted to the funds, be made afterwards to come under taxation as well as other proprietors of a determinate revenue? An admirable hint for the imposition of such taxes, is to be met with in a certain great European monarchy, where the highest order of knighthood is distinguished with a ribband, a star, and a pension of about an hundred and thirty pounds sterling a year. But so soon as any one is raised to this dignity, he pays exactly this very sum in lieu of capitation. The pension was given by the prince who instituted the order; the capitation followed in a subsequent reign, and now appears rather a mark of distinction than a burthen.

IV. The next object of a statesman's attention, proper to be taken notice of, is the different political considerations which must occur to him when he compares the consequences of turning the balance of wealth against the industrious members of a state, with those vibrations which take place against the not working part of the inhabitants. In other words, the different effect of taxes, as they severally affect those who consume in order to reproduce, and those who consume in order to gratify their desires.

The one and the other consumption implies a vibration in the balance of wealth, and whenever there is a vibration, there we have said that a proportional tax may be imposed.

But as the intention of taxes, as I understand them, is to advance only the public good, by throwing a part of the wealth of the rich into the hands of the industrious poor, and not to exhaust one part of a nation in order to enrich another; from hence it follows, that no necessary article of consumption should ever be taxed to an industrious person, but in such a way as to enable him to draw back the full amount of it, from those who consume his work. By this means, the whole load of taxes, must fall upon the other class of inhabitants, to wit, those who live upon the produce of a fund already acquired.

Let me here observe, by the way, that if taxes are rightly laid on, no industrious person, any more than another who lives upon his income, will ever be able to draw back one farthing of such impositions as he has paid upon his consumption of superfluity. This shall in its proper place be made sufficiently plain; at present it would be a superfluous anticipation of the doctrine of taxation, to point out the methods of compassing this end. My intention at present is to recapitulate only the objects of a statesman's attention, with regard to the consequences of circulation, and the vibrations of the balance of wealth; and having shewn how nearly those principles are connected with those of taxation, this alone is sufficient to shew their importance.

V. A statesman ought to attend to the difference between the foreign and domestic circulation of the national wealth.

This object, though in part relative to foreign commerce, must not be passed over without observation. In fact, there is no nation entirely deprived of foreign communications; therefore, although a statesman, who is at the head of a luxurious people, may act in general as if there were none at all, yet still he ought to be attentive to the consequences of circulation with his neighbours, so far as it does or may take place.

Every commercial correspondence with foreign nations, not carried on by the exchange of consumable commodities, must produce a vibration of the balance of wealth, either in favour or prejudice of the interest we have in our eye. But it does not follow, because there is a vibration, that therefore a statesman has the same liberty of imposing taxes upon every article of consumption, as if the two scales were vibrating within the country subject to his administration.

When the consumers are his subjects, he may safely impose a tax on the goods imported; and although he should gradually augment the duty, so as to diminish the consumption of such goods, as well as the amount of the duty, he will, by discouraging the importation of them, most amply indemnify his people by keeping their wealth at home.

When the foreigners are the consumers, the case is very different: for you cannot oblige a man who is not your subject, to pay beyond the advantage he gains by your correspondence. It is therefore, as has been said, upon the exportation only of goods, where the nation has great natural advantages over her neighbours, that any duty can be raised.

VI. The last object I shall mention as worthy of a statesman's attention, is, the rules of conduct he should prescribe to himself, as to extending or contracting taxation, according as he finds a variation in the proportion between the FOREIGN and DOMESTIC circulation of his country.

For this purpose he must know exactly the proportions of the one and the other; he must compare the quantity of domestic consumption, with the produce of industry and quantity of importations.

If domestic consumption be equal to the sum of both, the country must annually lose the value imported. In this case, taxes are to be raised by sudden jerks, especially upon importations; not to increase the produce of them, but to prevent the increase of luxury and dissipation of national wealth.

If domestic consumption do not exceed the produce of industry, this will prove that exportation is at least equal to importation. In this case the exportation must be supported; and when this can no otherwise be done, a part of the taxes levied upon home-consumption must be distributed in premiums upon the articles of exportation; and when this also becomes ineffectual, then all importations for home-consumption must be cut off according to the principles above laid down.

If the domestic consumption should really fall short of the produce of industry, it marks a flourishing foreign trade. Prices then must be kept low, as has been abundantly explained; consequently there will be less profit from taxes; because every penny imposed, which affects the price of exportable goods, must be refunded out of the net produce of them, and all the expence of collecting this part will be entirely lost to the public: the remainder, therefore, will be greater or less, according as foreign trade is great or small.

In proportion, therefore, as domestic circulation gains ground, foreign trade must decay, and taxes become necessary; in order, with the amount of them, to correct the bad effects of luxury, by giving larger premiums to support exportation. And in proportion as a statesman's endeavours to support by these means the trade of his country becomes ineffectual, from the growing taste of dissipation in his subjects, the utility of an opulent exchequer will be more and more discovered; as he will be thereby enabled both to support his own authority against the influence of a great load of riches thrown into domestic circulation, and to defend his luxurious and wealthy subjects from the effects of the jealousy of those nations which enriched them.

To conclude: the exportation of work, and the supporting of a superiority in the competition of foreign markets (as has been said, and as shall be farther explained) seem to be the most rational inducements to engage a statesman to begin a scheme of imposing considerable taxes upon his people, while they enjoy any share of foreign commerce. If such taxes continue to subsist after the extinction of it, and are then found necessary; this necessity is itself a consequence of the change in the spirit and manners of a people become rich and luxurious.

The charge of government, under such circumstances, must greatly increase, as well as the price of every commodity. Is it not very natural, that he who is employed by the state should receive an equivalent proportioned to the value of his services? Is it to be supposed, that a person born in a high rank, who, from this circumstance alone, acquires an advantage in most nations, hardly to be made up by any acquired abilities, will dedicate his time and his attendance for the remuneration which might satisfy an inferior? The talents of great men deserve reward as much as those of the lowest among the industrious; and the state is with reason made to pay for every service she receives. This circulation of an adequate equivalent, we have said to be the palladium of liberty, the band of gentle dependence among freemen; and the same spirit ought to animate every part of the political body. That nothing is to be done for nothing, is a fundamental political maxim in every free government, and obligations, not liquidated by a just equivalent, form pretensions beyond their worth; and are constantly accompanied with discontent at one time or other.

Another use of taxes, after the extinction of foreign trade, is to assist circulation, by performing, as it were, the function of the heart of a child, when at its birth that of the mother can be of no farther use to it. The public treasure, by receiving from the amount of taxes, a continual flux of money, may throw it out into the most proper channels, and thereby keep that industry alive, which formerly flourished, and depended upon the prosperity of foreign commerce only.

In proportion, therefore, as a statesman perceives the rivers of wealth (as we have called them above), which were in brisk circulation with all the world, begin to flow abroad more slowly, and to form stagnations, which break out into domestic circulation, he ought to set a plan of taxation on foot, as a fund for premiums to indemnify exportation for the loss it must sustain from the rise of prices, occasioned by luxury; and also for securing the state itself, against the influence of domestic riches, as well as for recompensing those who are employed in its service.

This system ought to be carried on and extended in proportion to the decay of foreign trade; and when this comes in a manner to cease, then the increase of taxes, and the judicious application of them, going hand in hand, the state itself will support circulation, by receiving with one hand, while it is giving out with the other; until by a prudent management under the care and direction of an able statesman, through time and perseverance, every internal vice be corrected, and foreign commerce be made once more to flourish from the principles we have been laying down, and from what may be farther said to illustrate them in the subsequent books of this inquiry.

While industry is kept alive there is still ground for hope. Manners change, and the same luxury which extinguished foreign trade, by calling home the wealth employed in that species of circulation, may afterwards, by keeping industry alive at home, and by throwing a sufficient power of wealth into the hands of a good statesman, render the recovery of that trade no difficult project, to one who has an instrument in his possession so irresistible in removing every obstacle in the way of his undertaking.

This represents a kind of circulation of the spirit and manners of a people, who, under the government of able statesmen, may be rendered happy in every situation; and since, from the nature of man, no prosperity can be permanent, the next best thing to be done, is, to the yield to the force which cannot be resisted; and, by address and management, to reconduct a people to the height of their former prosperity, after having made them travel (as I may say) with as little inconvenience as possible, through all the stages of decline.

Chapter XXVIII: Circulation considered with regard to the Rise and Fall of the Price of Subsistence and Manufactures

The intention of this chapter is to apply the principles we have been in search of, to the solution of some questions, which have been treated by those great masters of political reasoning, Messrs de Montesquieu and Hume. The ideas they have broached are so pretty, and the theory they have laid down for determining the rise and fall of prices so simple, and so extensive, that it is no wonder to see it adopted by almost every one who has written after them.

I have not forgot how much I was pleased when I first perused these authors, from the easy distribution which a general theory enabled me to make of certain classes of my ideas then lying without order, in that great repository of human crudities, the memory; which frequently retains more materials, than people, commonly, have either time, or perhaps capacity rightly to digest.

I am very far from pretending to any superiority of understanding over those gentlemen whose opinions I intend to review. accident alone has led me to a more minute examination of the particular circumstances, upon which they have founded their general maxims; and, in consequence of my inquiries, I think I have discovered, that in this, as in every other part of the science of political economy, there is hardly such a thing as a general rule to be laid down.

There is no real or adequate proportion between the value of money and of goods; and yet in every country we find one established. How is this to be accounted for?

We have, in the fourth chapter of this book, already inquired into the principles which point out the influence of trade upon the variation of the price of goods; but the question now comes to be, how to fix and determine the fundamental price, which is the object of variation. It has been said, that the price of a manufacture is to be known by the expence of living of the workman, the sum it costs him to bring his work to perfection, and his reasonable profit. We are now to examine what it is, which in all countries must determine the standard prices of these articles of the first necessity; since the value of them does necessarily influence that of all others.

The best way to come at truth, in all questions of this nature, is to simplify them as much as possible, that they may be first clearly understood.

Whenever a question arises about price, an alienation is necessarily implied; and when we suppose a common standard in the price of any thing, we must suppose the alienation of it to be frequent and familiar. Now I must here observe, that in countries where simplicity reigns (which are those where the decision of this question ought regularly to be sought for, since it is there only where a complication of circumstances do not concur to raise the prices of subsistence) it is hardly possible to determine any standard for the price of articles of the first necessity.

Let us examine the state of those hunting Indians who live by their bow, and of other nations where the inhabitants exercise, I may say universally, that species of agriculture which I have called a direct method of subsistence, and we shall find that the articles of food and necessaries are hardly found in commerce: no person purchases them; because the principal occupation of every body is to procure them for himself. What answer would a Scotch highlander have given any one, fifty years ago, who should have asked him, for how much he sold a quart of his milk, a dozen of his eggs, or a load of his turf? In many provinces, unacquainted with trade and industry, there are many things which bear no determinate price; because they are seldom or never sold.

Sale alone can determine prices, and frequent sale only can fix a standard. Now the frequent sale of articles of the first necessity marks a distribution of inhabitants into labourers, and what we have called free hands. The first are those who produce the necessaries of life; the last are those who must buy them: and as the fund with which they purchase is produced from their industry, it follows, that without industry there can be no sale of articles of subsistence; consequently, no standard price determined.

Another consequence of this reasoning, is, that the sale of subsistence implies a superfluity of it in the hands of the seller, and a proper equivalent for it in the hands of the buyer; and when the equivalent is not money, it also implies a superfluity of the produce of some sort of industry; consequently, by the exchange of superfluities upon certain articles, a man procures to himself a sufficiency upon every one. This represents that gentle dependence which unites the members of a free society.

Does it not follow from this analysis of the question, that the prices of articles of the first necessity depend rather upon the occupation and distribution of the classes of inhabitants, than either upon the abundance of these necessaries, or of the money to purchase them; since many examples may be found, where these articles have borne little or no price, even in countries where money was not wanting. The reason therefore of low prices, is not the vast abundance of the things to be sold, but the little occasion any body has to buy them; every one being provided with them in one way or other, without being obliged to go to market.

How many familiar examples occur every where of this economy! do we not find in every country, even where the numbers of the industrious free are multiplied exceedingly, more than one half of the inhabitants fed directly from the earth? Few of the class of farmers ever go to market for subsistence. Ask a country gentleman the expence of his living, he will tell you the sum of money he yearly spends, perhaps the quantity of his rents in kind, which he consumes in his house, and the rent of the lands he holds himself in farm; but it will never come into his head to reckon the value of every chicken, sheep, or bullock, with which his farm provides him, which he consumes without estimation, and which in many countries he could not dispose of for any determinate value.

From this I still conclude, that it is in countries of industry only where the standard prices of articles of the first necessity can be determined; and since in these, many circumstances concur to render them either higher or lower than in other places, it follows, that in themselves they bear no determinate proportion whatsoever, to the quantity of gold and silver in the country, as I hope presently to make still more evident.

What is it then which determines the standard value of these articles, in countries of industry? Here follows the best answer I can give to this question.

The standard price of subsistence is determined from two considerations. The first from the number of those who are obliged to buy, that is to say, of those who have them not of their own, and who are not provided with them, in lieu of service, by those who have. The second is, from the degree of employment found for those who are obliged to purchase them.

The number of the buyers of subsistence, nearly determines the quantity to be sold: because it is a necessary article, and must be provided in a determinate proportion for every one: and the more the sale is frequent, the more the price is determinate. Next as to the standard: this, I apprehend, must depend upon the faculties of the buyers; and these again must be determined by the extent of those of the greatest numbers of them; that is to say, by the extent of the faculties of the lower classes of the people. This is the reason why bread, in the greatest famine, never can rise above a certain price; for did it exceed the faculties of the great classes of a people, their demand would be withdrawn, which would leave the market overstocked for the consumption of the rich; consequently, such persons, who in times of scarcity are forced to starve, can be such only whose faculties fall, unfortunately, below the standard of those of the great class; consequently, in countries of industry, the price of subsistence never can rise beyond the powers to purchase of that numerous class who enjoy nothing beyond their physical necessary; consequently, never to such an immoderate height as to starve considerable numbers of the people; a thing which very commonly happens in countries where industry is little known, where multitudes depend merely upon the charity of others, and who have no resource left, so soon as this comes to fail them.

The faculties, therefore, of those who labour for a physical-necessary, must, in industrious nations, determine the standard value of subsistence, and the value in money which they receive for their work will determine the standard of their faculties, which must rise or fall according to the proportion of the demand for their labour.

By this exposition of the matter, I do not pretend to have dissipated every obscurity. The question still remains complex, as the nature of it requires it should do; and the solution of it depends upon farther considerations, which now lead me to the examination of the doctrine of Messrs de Montesquieu and Hume, concerning the influence of riches upon the increase of prices. I shall begin by shortly laying this doctrine before my readers, in three propositions.

First, The prices (say they) of commodities are always proportioned to the plenty of money in the country. So that the augmentation of wealth even fictitious, such as paper, affects the state of prices, in proportion to its quantity.

Secondly, The coin and current money in a country is the representation of all the labour and commodities of it. So that in proportion as there is more or less of this representation (money), there goes a greater or less quantity of the thing represented (commodities, &c.) to the same quantity of it. From this it follows that

Thirdly, Increase commodities, they become cheaper; increase money, they rise in their value.

Nothing can be more beautiful than these ideas. They appear, at first sight, sufficiently extensive to comprehend every variation of circumstances which can happen. Who was the first author of this doctrine, I cannot say. I find it in Mr Locke, and in the Spectator for the 19th of October 1711; but they have been beautifully illustrated by Monsr de Montesquieu; and Mr Hume has extended the theory, and diversified it prettily in his political discourses; which have done much honour to that gentleman, and drawn the approbation of the learned world so much, that there is hardly a nation in Europe which has not the pleasure of reading them in their own language.

Upon examining this theory, when I came to treat of the matters it is calculated to influence, I found I could not make it answer to the principles I had pursued, in the most natural order in which I had been able to deduce them: and this consideration obliged me, with regret, to lay it aside, and to follow another, much more complex. I have already expressed the mortification I have always had upon finding myself forced to strike out a general rule, and this, of all others, had at first hit my fancy the most; but I am obliged to say, that upon a close examination of the three propositions, I am forced to range this ingenious exposition of a most interesting subject, among those general and superficial maxims which never fail to lead to error.

In order to set the matter in as clear a light as possible, I shall make a short application of my own principles, relating to the decision of the main question, namely the causes of the rise and fall of prices, and conclude my chapter with some remarks upon the three propositions above laid down, submitting the whole to the better judgment of my reader. I have laid it down as a principle, that it is the complicated operations of demand and competition, which determines the standard price of everything. If there be many labourers, and little demand, work will be cheap. If the increase of riches, therefore, have the effect of raising demand, work will increase in its value, because there competition is implied; but if it has only the effect of augmenting demand, prices will stand as formerly. What then will become of the additional quantity of coin, or paper-money? I answer, that in both cases it will enter into circulation, in proportion to the rise or augmentation of demand; with this difference, that in the first case, it will have the effect of raising prices; because the supply is not supposed to augment in proportion: in the second, prices will stand as they were; because the supply is supposed to augment in proportion. These are the consequences of the augmentation of wealth, when it has the effect of either raising or augmenting demand. But if upon the increase of riches it be found that the state of demand remains without any variation, then the additional coin will probably be locked up, or converted into plate; because they who have it, not being inspired with a desire of increasing their consumption, and far less with the generous sentiment of giving their money away, their riches will remain without producing more effect than if they had remained in the mine. As for paper-money, so soon as it has served the first purpose of supplying the demand of him who borrowed it, because he had at that time no coin) it will return upon the debtor in it, and become realized; because of the little use found for it in carrying on circulation.

Let the specie of a country, therefore, be augmented or diminished, in ever so great a proportion, commodities will still rise and fall according to the principles of demand and competition; and these will constantly depend upon the inclinations of those who have property or any kind of equivalent whatsoever to give; but never upon the quantity of coin they are possessed of.

Let the quantity of the coin be ever so much increased, it is the desire of spending it alone, which will raise prices. Let it be diminished ever so low, while there is real property of any denomination in the country, and a competition to consume in those who possess it, prices will be high, by the means of barter, symbolical money, mutual prestations, and a thousand other inventions. Let me give an example.

Suppose a country where prices are determined, and where the specie is sufficient for the circulation: is it not plain, that if this country have a communication with other nations, there must, in carrying on trade, be a proportion between the prices of many kinds of merchandize, and that the sudden augmentation or diminution of the specie at home, supposing it could of itself operate the effects of raising or sinking prices, would be restrained in its operation by foreign competition? But let us suppose it cut off from every communication whatsoever, which seems the only case where this theory can operate with any appearance of justness, will any body pretend, that the frugal or extravagant turn of the inhabitants will have no influence upon prices; and will it be asserted, that no variation in the spirit of a people, as to frugality and dissipation, can take place, except upon a variation in the quantity of their gold and silver?

It may be answered, that as to articles of superfluity, no doubt the genius of a people, together with the quantity of the specie, may influence prices; but that in articles of indispensable necessity, they must constantly remain in proportion to the mass of riches. This I cannot admit to be just. Let me take the example of grain, which is the most familiar. Is it not plain, from what we have said above, that the proportion of wealth, found in the hands of the lowest class of the people, constantly regulates the price of it; consequently, let the rich be ever so wealthy, the price of subsistence can never rise above the faculties of the poor industrious. And is it not also plain, that those of the lowest class of the people, who purchase subsistence must buy it with the returns they receive from the rich for their industry? Now if the quantity of the wealth of the rich does not regulate their demand for the service of the poor, must it not follow, that the price of grain, as well as of every other thing offered to sale, must depend upon the degree of competition among the rich for the labour of the poor, that is, upon the demand for industry and not on the quantity of wealth in the country?

Nobody ever denied, that the extraordinary demand for a commodity had the effect of raising the price of it: and certainly nobody will deny, that the demand for a particular commodity may be greater at one time than at another, though the same quantity of this commodity be found at both times in the country; and the same quantity of specie likewise not only in the country, but also in circulation.

I acknowledge that in a country where there is much coin, and where credit is little known, a high and extraordinary demand for an article of superfluity may raise the price more than in another where the coin is more scarce; because, on certain occasions, the price of a thing may have no other bounds than the extent of the faculties of the buyer. In like manner, in other countries, where there is scarcely coin, or credit, it may be impossible for the highest demand to raise the price of such things even to the common standard established in those where there is great wealth. But these instances appear to be too particular to serve for the foundation of a general rule, with respect to the state of prices in the present situation of the nations of Europe, which, less or more, are all in communication with one another.

I cannot here omit taking notice of two very remarkable circumstances which we learn from undoubted historical authority, which seem to contradict one another, and which throw a great obscurity upon the principles I have been endeavouring to explain. I shall therefore introduce them by way of illustration, and when they are examined, I hope they will confirm my doctrine.

The first is, that in Scotland, formerly, when coin and credit were certainly very rare, the price of eight pounds weight of oatmeal, which is now commonly sold at eight pence sterling, was then valued at no more than two-thirds of one penny: and that a labouring man used to receive one penny and one third of a penny sterling for his week's subsistence; that is to say, the value of sixteen pounds of oatmeal, which to this day is the regulated quantity given for this purpose.

There is a very curious confirmation of the authenticity of this computation, in an hospital at old Aberdeen; where in former times, some proprietors of lands had settled a certain quantity of oatmeal in favour of the poor of the hospital, with a liberty to the hospital to accept the meal in kind, or the conversion at two-thirds of a penny for every eight pounds weight. They imprudently chose the last, and to this very day they are paid according to this standard. Now it is certainly impossible that any degree of plenty whatsoever, or any failing of demand, could at present reduce the price of this commodity so very low consequently, it may be said that it is the augmentation of wealth, not that of demand, which raises prices.

The second fact we learn from antiquity, that at the time when Greece and Rome abounded in wealth, when every rarity, and the work of the choicest artists was carried to an excessive price, an ox was bought for a mere trifle, and grain was cheaper perhaps than ever it was in Scotland.

If the application of our principles to the circumstances of those times, produce a solution of these apparent inconsistencies; and if we thereby can discover that the low prices of grain, both in Scotland, where there was little money, and at Rome where there was a great deal, was entirely owing to the little demand for articles of subsistence; will it not follow, that our principle is just, and that the other, notwithstanding the ingenuity of the thought, must fail in exactness; since it will appear, that low prices may be equally compatible with wealth, and with poverty.

Now as to Scotland in former times, as in all countries where there is little industry; where the inhabitants are mostly fed directly from the earth, without any alienation of her fruits taking place; where agriculture is exercised purely as a method of subsisting; where rents are low, and where, consequently, the free hands, who live upon them for the price of their industry, must be few; the demand for grain in the public markets must be very small; consequently, prices will be very low, whether there be little, or whether there be much money in the country. The reason is plain. The demand is proportioned here, not to the number of those who consume, but of those who. buy now those who consume, are all the inhabitants, but those who buy, are the few industrious only who are free, and who gain an independent livelihood by their own labour and ingenuity: now the price of their week's subsistence in Scotland was formerly one penny one third, consequently the subsistence they bought could not rise above this standard.

Next as to the state of Greece and Rome, where slavery was established. Those who were fed by the labour of their own slaves, by those of the state, or by the grain gratuitously distributed to the people, had no occasion to go to market; consequently, they did not enter into competition with the buyers. Farther, the simplicity of manners, and the few manufactures then known, made wants in general less extensive; consequently, the number of the industrious free was small, and they were the only persons who could have occasion to purchase food and necessaries; consequently, the competition of the buyers must have been small in proportion, and prices low.

Add to this the reflections which naturally present themselves upon examining the nature of supplying the markets. These were supplied partly from the surplus produced upon the lands of the great men, laboured by slaves; who being fed from the lands, the surplus cost in a manner nothing to the proprietors; and as the number of those who had occasion to buy, were very few, this surplus was sold cheap. Besides, the grain distributed to the people gratis, must necessarily have kept down the market, as a part of it would naturally, sometimes, be found superfluous to those who received it; and consequently, come to be sold in competition with that raised at private expence.

But when a fine mullet was brought to market, or when an artist appeared with a curious piece of work, the case was very different. The rich had plenty of money, who all appeared in competition for the preference; consequently, prices rose to an extravagant height. The luxury of those times, though excessive, was confined to a few, and as money, in general, circulated but slowly through the hands of the multitude, it was constantly accumulating in those of the rich, who found no measure, but their own caprice, in regulating the prices of what they wished to possess, and had money to purchase.

From what has been said, it appears, that the riches of a country have no determinate influence upon prices; although, I allow, they may accidentally affect them: (what I mean is, that they may influence them; but they cannot regulate them:) and if we depart from the principles above laid down, to wit, that prices are regulated by the complicated operation of demand and competition, in order to follow the other, we must add a restriction (which I observe Mr Hume has attended to on one occasion, although he has lost sight of it on several others), to wit, that the price of every commodity is in proportion to the sum of money circulating in the market for that commodity; which is almost my proposition in other words: for the money to be employed in the purchase of any commodity, is just the measure of the demand. But even here, the money in the market destined only for the purchase of a particular commodity, does not regulate the price of it. Nothing but the finishing of the transaction, that is, the convention between the buyer and seller, can determine the price, and this must depend upon inclination, not weight of money, as an example will make plain.

I shall suppose grain to have been at forty shillings per quarter, in a country market, for several months together, where the ordinary demand for the current consumption is twenty quarters every market day. If at any time an extraordinary demand should happen, which may exceed all that is to be found in the market, there will be a competition among the buyers, which will have the effect of raising the market. Now, according to the doctrine of our learned author, it may be said, that the corn rises in proportion to the quantity of the specie which is in the market, and that it is because of this increase of specie, that the grain rises in its price. I answer, first, allowing this to be true, can it be said, that a particular temporary, or perhaps accidental demand for a few quarters of corn, more than usual, implies any augmentation of the quantity of money, or the smallest diminution either upon the total consumption, or total quantity of grain contained in the country? For if the demand have risen in one market, it must probably have diminished in another, since the Same inhabitants cannot consume in two places. This I think every person must agree to, without farther illustration. But I say farther, that prices will not rise in proportion to the money in the market; but in proportion to the desire of acquiring grain in those who have this money.

Suppose the whole quantity of grain in the market to be thirty quarters; if there be no demand for more, these will be sold at forty shillings as the twenty quarters would have been. But suppose the demand to be for sixty quarters, and that there is a hundred and twenty pounds sterling ready to be employed for corn, does it follow, that grain will rise to four pounds a quarter, because the money in the market bears this proportion to the quantity of grain? Certainly not.

We must therefore, I think, adopt the other principle, and follow the proportions of demand and competition; and then we shall find, that if the sellers want to raise their price up to the proportion of the money in the market, all demand will cease, as effectually as if it had never been made; and the sellers will afterwards be obliged to accept of such a moderate augmentation as shall be in proportion to the urgency of the demand, but never in proportion to the money ready to be employed.

The circulation of every country, as we have shewn above, must ever be in proportion to the industry of the inhabitants, producing the commodities which come to market: whatever part of these commodities is consumed by the very persons who produce them, enters not into the it. If the coin circulation of grain, nor does it in anywise affect prices of of a country, therefore, fall below the proportion of the produce of industry offered to sale, industry itself will come to a stop; or inventions, such as symbolical money, will be fallen upon to provide an equivalent for it. But if the specie be found above the proportion of the industry, it will have no effect in raising prices, nor will it enter into circulation: it will be hoarded up in treasures, where it must wait not only the call of a desire in the proprietors to consume, but of the industrious to satisfy this call.

We may therefore conclude, in consequence of the principles we have laid down, that, whatever be the quantity of money in any nation, in correspondence with the rest of the world, there never can remain in circulation, but a quantity nearly proportional to the consumption of the rich, and to the labour and industry of the poor inhabitants. The value of each particular species of which consumption is determined by a complication of circumstances at home and abroad; consequently, the proportion is not determined by the quantity of money actually in the country.

If the contrary is maintained, and if it be still affirmed that the proportion between specie and manufactures must be reciprocal and determinate, then I am authorised to draw this conclusion, to wit: That if the greatest produce of industry must be sold for what specie is found in the country, let the sum be ever so small; so in like manner, the smallest produce of industry must be sold for all the specie found in the country, let the sum be ever so great. Consequently, in the first case, we must suppose, that the industrious will never seek for a better price from abroad; and in the second, that the moneyed people must spend all they have in supplying their most moderate wants, and never seek for cheaper merchandize than what they can find at home. Consequently there can be no foreign trade, nor can there ever be any hoarding.

I shall now conclude my chapter, with a few observations upon the three propositions as they stand in their order.

Prop. 1. Prices are in proportion to the plenty of money. And thus the augmenting even of fictitious wealth, such as paper, affects the state of prices, according to its quantity.

From this, Mr Hume disapproves of the introduction of paper money, when specie is wanting, and says, that if nothing were allowed to circulate but gold and silver, the quantity being less, prices would be lower.

This is neither more or less than a project to destroy credit, with a view to support trade and industry. Because it would effectually prevent any person from making a consumption, except at the time he happened to be provided with ready money. Does the paper-money in England keep up the prices of grain at present, January 1759? And will not every article of necessaries fall, in a short time, as low in this country as in any other in Europe; if the same measures continue to be followed?

Were all paper-money in this kingdom proscribed at once, no doubt the prices of many things would fall very considerably; but such a fall would neither be universal or equable. The reason of this fall would not be, because the specie would become proportionally divided among all the inhabitants, according to the value of their property; nor because of the small quantity of it, since prices abroad would still regulate many at home: but because of the sudden revolution, and the violent overturn thereby produced on the balance of work and demand. The scale of the first would preponderate to such a degree, that those classes of the industrious, who work for daily subsistence in furnishing superfluities, would enter into so strong a competition with one another, that the price of their work would fall to nothing, while subsistence would remain at the price of exportation. If it be asked what could occasion this difference, I answer, because the workmen who supply superfluities, adapted to the taste of their own nation, would find no more demand for them, from the want of credit, or of a circulating fund at home to buy with; and strangers would not profit of the fall in the price of a superfluity not adapted to their own taste; but they would very willingly become purchasers of every bushel of grain become superfluous, and thereby starve so many of the inhabitants; and this last circumstance would keep the price of subsistence upon a pretty even level with that of other countries.

But if we suppose all communication cut off with strangers, would this proportion between money and prices then hold true? By no means. Here is the reason: there are many ways of alienating goods or natural produce, without the assistance of specie. Immense quantities of both may be consumed by barter, or in lieu of service, where money is never heard of; now all this portion alienated, enters into the mass of what is called produce and manufactures which come to market; but can have no influence upon the specie, nor can specie have any upon it, since the money remains inactive during these operations.

Another reason is, that there is no such thing as preserving specie of a country in an equal repartition, so as to serve the occasions of every body in proportion to their worth. The reason is manifest: money, like every other thing, will come into the hands of those who give the greatest value for it, and when the quantity of it is small in any country, where nothing can be procured without it, such proprietors of lands as have the greatest desire to consume, will purchase the specie by giving a higher interest, or by selling their lands cheaper than other people.

This alone is sufficient to prove that the repartition of specie can never be in proportion to property; and this also destroys the supposition of prices rising and falling according to the proportion of it, even in a country cut off from every foreign communication. But here is still another proof: any individual who has, by mortgaging his lands, got together a large proportion of the specie of his country, will raise prices in his own neighbourhood, by making an extraordinary demand for work; and the rest of the same country, drained of their circulating value, must diminish their demand; consequently, prices will fall elsewhere. I now come to the second proposition.

The coin and current money of a country, is the representation of all its labour and commodities; so that in proportion as there is more or less of this representation, a greater or less quantity of it will go for the same quantity of the thing represented.

To this representation I cannot agree, and I apprehend this to be the source of the error. A proper equivalent for labour and manufactures may, in one sense, be called a representation; but there is no necessity for this equivalent to consist in coin. Are not meat and clothes an equivalent for personal service? Is not a free house and a bit of land, a very good equivalent for all the manufactures a country weaver can work up for me who am his landlord? Were there not one penny of coin in the country, would it follow, that there could be no alienation, or that every thing might there be got for nothing?

Coin has an intrinsic value; and when it comes into a country, it adds to the value of the country, as if a portion of territory were added to it: but it has no title to represent any thing vendible, by preference, or to be considered as the only equivalent for all things alienable. It is made a common price, on no other account than because of its rarity, its solidity, its being of a nature to circulate; and suffers a correct division without end, and because it carries its value along with it, which is a proper equivalent for every thing; and at the same time is by its nature little liable to vary.

Were, indeed, a statesman to perform the operation of circulation and commerce, by calling in, from time to time, all the proprietors of specie in one body, and all those of alienable commodities, workmen, &c. in another'. and were he, after informing himself of the respective quantities of each, to establish a general tariff of prices, according to our author's rule; this idea of representation might easily be admitted; because the parcels of manufactures would then seem to be adapted to the pieces of the specie, as the rations of forage for the horses of an army are made larger or smaller, according as the magazines are well or ill provided at the time: but has this any resemblance to the operations of commerce?

The idea of coin being the representation of all the industry and manufactures of a country, is pretty; and has been invented for the sake of making a general rule for operating an easy distribution of things extremely complex in their nature. From this comes error. We substitute a complex term, sometimes in one sense, and sometimes in another, and we draw conclusions as if it expressed a fixed and determinate idea.

If in algebra, x, y, z, &c. ever stood for more than a single idea, the science would become useless; but as they never represent but the very same notion, they never change their nature through all manner of transpositions.

It is not the same of terms in any other science, as abundantly appears from the question now before us: coin is called a representation because it is an equivalent; and because it is a representation, it must bear an exact proportion to the thing represented. And since in some particular examples, this representation appears to hold; therefore the rule is made general, although circumstances may be different. If, for example, a merchant, or a private person, has in hand a thousand pounds worth of grain, no doubt that the thousandth part of the merchandize is worth the thousandth part of the sum; because both are determinate in their quantity and quality. but the parcels of this corn, though exactly proportioned to the price of the whole, do not draw their value from this proportion, but from the total value of the whole mass; which is determined from the complicated operations of demand and competition, as has been said, and not from the specie of the country which can bear no proportion either to the quantity or quality of the grain.

There may be vast quantities of coin in a country of little industry; and, vice versa, coin is constantly an equivalent, but never a representation more than any other equivalent which may be contrived. Were the doctrine of this second proposition true, every commodity in a country should be sold like a parcel of the grain in the foregoing example, by the rule of three; as the property of all the labour and manufactures of the country is to the part I intend to alienate, so is all the gold and silver in the country to the part I am entitled to receive. This ideal of regulating prices may be very philosophical, but it is not very mercantile. I now proceed to the third and last proposition. Increase the commodities, they become cheaper: increase the money, they rise in their value.

This proposition is much too general; the first part of it is commonly true, the last part is more commonly false.

What can increase commodities, but a demand for them? If the demand be equal to the augmentation, there will be no alteration in the price.

Let extraordinary plenty increase subsistence, it will naturally fall in the price; but it may be hoarded up, and made to rise in spite of the plenty; it may be demanded from abroad; this also will make it rise.

Let the production of superfluities, not exportable, be produced by workmen whose branch is overstocked, prices will undoubtedly fall. The same observations are true of a diminution in the quantity of commodities. If this diminish by degrees, from a diminution of demand, the price of them will not rise.

If the quantity of subsistence fall below the necessary consumption of the inhabitants, the price of it will undoubtedly rise.

If the articles of superfluity be diminished, prices will rise in proportion only to the eagerness to buy, that is, to the competition, not to the deficiency. On the other hand, as to coin or money.

Increase the money, nothing can be concluded as to prices, because it is not certain that people will increase their expences in proportion to their wealth; and although they should, the moment their additional demand has the effect of producing a sufficient supply, prices will return to the old standard.

But diminish the quantity of specie usually employed in circulation, you both retard this, and hurt the industrious; because we suppose the former quantity exactly sufficient to preserve both in the just proportion to the desires and wants of the inhabitants.

These are but a few of the numberless modifications necessary to be applied to this general rule; and I hope what I have said will justify the observation I have made on the whole doctrine; to wit, that it is much more specious than solid, in every one of its three branches.

Let me just propose one question more upon this subject, and then I shall conclude.

Suppose the specie of Europe to continue increasing in quantity every year, until it amounts to ten times the present quantity, will prices rise in proportion?

I answer, that such an augmentation might happen, without the smallest alteration upon prices, or that it might occasion a very great one, according to circumstances. Were industry to increase to ten times what it is at present, that is to say, were the produce of it to increase to ten times its present value, according to the actual standard of prices, the value of every manufacture and produce might remain without alteration. This supposition is possible: because no man can tell to what extent demand may carry industry. If, on the other hand the scale of demand could be supposed to preponderate, so as to draw all the wealth into circulation, without having the effect of augmenting the supply (which I take to be impossible) then prices would rise to ten times the present standard, at least in many articles.

This solution is entirely consistent both with Mr Hume's principle and mine; because nothing is so easy in an hypothesis, as to establish proportions between things, which in themselves are beyond all the powers of computation.

Chapter XXIX: Circulation with foreign Nations, the same thing as the Balance of Trade

We have endeavoured to shew in a former chapter, how the circulation of money, given in exchange for consumable commodities, produces a vibration in the balance of domestic wealth: we are now to apply the same principles to the circulation of foreign trade; in order to find out, if there can really be such a thing as a balance upon it, which may enrich one country, and impoverish another.

It has been said, that when money is given for a consumable commodity, the person who gets it acquires a balance in his favour, so soon as he with whom he has exchanged, has begun to consume.

That if two consumable commodities are exchanged, the balance comes to a level, when both are consumed. That it is the wealth only which is found in circulation, which can change its balance; the remainder must be found locked up, made into plate, or employed in foreign trade. And it has been observed, that the quantity of money found in circulation, is ever in proportion to the sale of the produce of industry and manufactures; and that when the precious metals are not sufficient to carry on a circulation, proportionable to the demands of those who have any real equivalent to give, symbolical money may be made to fill up the void, when the interest of the state comes to require it.

We have also laid it down as a kind of general rule, that while luxury tends only to keep up demand to the reasonable proportion of the power and inclination in the industrious part of a people to supply it, then it is advantageous to a nation; and that so soon as it begins to make the scale of home-demand preponderate, by forming a competition among the natives, to consume what strangers seek for, then it is hurtful, and has an evident tendency to root out foreign trade. These principles are all analogous to one another, and should be retained while we examine the question before us.

I must still add, that the fluctuation of the balance of wealth is constantly inclining in favour of the industrious, and against the idle consumer. This however admits of a restriction, viz. the industrious must be supposed to be frugal; and the idle, extravagant. For if the industrious man consume the full produce of his own industry, he will have laboured to increase his consumption only, not his wealth: and if the idle person, by his frugality, keeps within the bounds of his yearly income, he will thereby repair every disadvantage incurred by his sloth, the balance then will stand even between them; the industry in one scale, and the fund already provided in the other, will keep both parties on a level as before.

In order, therefore, to make the balance of domestic wealth turn in favour of a poor man, he must be both industrious and frugal.

Now let us apply these principles to a whole nation, considered as an individual in the great society of mankind. An industrious person who conducts his affairs with prudence, must either be in a way of growing richer by his industry, or of spending his income with economy and discretion: so I must suppose a nation which is well governed, either to be growing richer by foreign trade, or at least in a state of not becoming poorer by it.

It is as much the duty of every statesman to watch over the conduct of those who hold the foreign correspondence of his people, as it is the duty of the master of a family to watch over those he sends to market.

I find it is the opinion of the learned Mr Hume, that there is no such thing as a balance of trade, that money over all the world is like a fluid, which must ever be upon a level, and that so soon as in any nation this level is destroyed by any accident, while the nation preserves the number of its inhabitants, and its industry, the wealth must return to a level as before.

To prove this, he supposes four fifths of all the money in Great Britain to be annihilated in one night, the consequence of which he imagines would be, that all labour and commodities would sink in their price, and that foreign markets would therefore be entirely supplied by this industrious people, who would immediately begin to draw back such a proportion of wealth, as would soon put them again upon a level with their neighbours.

This reasoning is consistent with the principles we have examined, and humbly rejected in the preceding chapter. both stand upon the same foundation, and lead to a chain of consequences totally different from the principles laid down in this inquiry.

My intention is not so much to refute the opinions of others, as briefly to pass them in review. General propositions, such as those we have been treating of, are only true or false, according as they are understood to be accompanied with certain restrictions, applications, and limitations: I shall therefore say nothing as to the proposition itself, but examine only how far the sudden annihilation of a great proportion of a nation's wealth, can naturally be followed by the consequence which has been supposed.

For this purpose, let me suggest another consequence (different from that of the author, and flowing from the doctrine we have established) which possibly might happen, upon the annihilation of four fifths of all the money in Great Britain. I shall take no notice of the effects which so sudden a revolution might occasion; these have not been attended to by the author, and therefore I shall consider them as out of the question. I shall suppose the event to have happened, prices to have been reduced, and every immediate inconvenience to have been prevented. My only inquiry shall be concerning the unavoidable consequences of such a revolution, as to foreign trade, as to drawing back the money annihilated, and as to the preserving the same number of inhabitants, and the same degree of industry as before. If I can shew, that the event alone of annihilating the specie, and reducing prices in proportion (which I shall allow to be the consequence of it) will have the effect of annihilating both industry and the industrious, it cannot afterwards be insisted on, that the revolution can have the effect of drawing back a proportional part of the general wealth of Europe: because the preservation of the industrious is considered as the requisite for this purpose.

Here then is the consequence, which, in my humble opinion, would very probably happen upon so extraordinary an emergency; and I flatter myself that my reader has already anticipated my decision.

The inhabitants of Great Britain, who, upon such an occasion, would be found in possession of all the exportable necessaries of life, and of many other kinds of goods demanded in foreign markets, instead of selling them to their poor countrymen, for a price proportioned to our author's tariff, namely to the diminution of the specie, which he takes to be the representation of them, would export them to France, to Holland, or to any other country where they could get the best price, and the inhabitants of Britain would starve.

If it be replied, that the exportation would not be allowed. I answer, that such a prohibition would be highly seasonable; but quite contrary to the principle of laying trade open, and impossible to be effectual, as this author justly observes, when he says, 'Can one imagine, 'that all commodities could be sold in France, for a tenth of the price 'they would yield on the other side of the Pyrenées, without finding 'their way thither, and drawing from that immense treasure?' Suppose this phrase to run thus: Can any one imagine, that provisions could be sold in Britain, for a fourth part of the price they would yield on the other side of the water, without finding their way thither, and drawing from that immense treasure? This is entirely inconsistent with our principles, and ruins the whole of Mr Hume's former supposition: because the exportation of them would annihilate the inhabitants.

From this I conclude, that a nation, though industrious and populous, may reduce itself to poverty in the midst of wealthy neighbours, as a private person, though rich, may reduce himself to want, in the midst of the amusements and luxury of London or of Paris. And that both the one and the other, by following a different conduct, may amass great sums of wealth, far above the proportion of it among their neighbours.

This is not a matter of long discussion. It is not by the importation of foreign commodities, and by the exportation of gold and silver, that a nation becomes poor; it is by consuming these commodities when imported. The moment the consumption begins, the balance turns; consequently, it is evidently against the principles which we now examine, either to sell at home, or destroy, confiscated goods. The only way of repairing the damage done by such frauds, is to export the merchandize, and, by selling it cheap in other countries, to hurt the trade of the country which first had furnished it. From this also we may conclude, that those nations which trade to India, by sending out gold and silver, for a return in superfluities of the most consumable nature, the consumption of which they prohibit at home, do not in effect spend their own specie, but that of their neighbours who purchase the returns of it for their own consumption. Consequently, a nation may become immensely rich by the constant exportation of her specie, and importation of all sorts of consumable commodities. But she would do well to beware of this trade, when her inhabitants have taken a luxurious turn, lest she should come to resemble the drunkard, who commenced wine-merchant, in order to make excellent cheer in wine with all his friends who came to see him; or the milliner, who took it into her head to wear the fine laces she used to make up for her customers.

If a rich nation, where luxury is carried to the highest pitch, where a desire of gain serves as a spur to industry, where all the poor are at work, in order to turn the balance of domestic wealth in their favour; if such a nation, I say, be found to consume not only the whole work of the inhabitants, but part of that of other countries, it must have a balance of trade against it, equivalent to the amount of foreign consumption; and this must be paid for in specie, or in an annual interest, to the diminution of the former capital. Let this trade continue long enough, they will not only come at the end of their metals, but they may render themselves virtually tributary to other nations, by paying to them annually a part of the income of their lands, as the interest due upon the accumulated balances of many years' unfavourable trade.

Is it not, therefore, the duty of a statesman to prevent the consumption of foreign produce? If tapestry or other elegant furniture, such as is seen in a certain great capital in Europe, were allowed to be imported into a neighbouring nation; who doubts but this article would carry money out of that nation?

It may be answered, that as much elegance of another kind may be sent in return. True; and it would be very lucky if this could be the case; but then you must suppose an equality of elegance in both countries; and farther, you must suppose a reciprocal taste for the respective species of elegance. Now the taste of one of the countries may be common to both; but not that of the other, though nothing inferior, perhaps, in the opinion of a third party. And the difference may proceed from this; that the young people of one country travel into the other, where the inhabitants stay at home: a circumstance which would prove very prejudicial to the country of the travellers, if a wise statesman did not, by seasonable prohibitions upon certain articles of foreign consumption, prevent the bad consequences of adopting a taste for what his subjects cannot produce.

This furnishes a hint, that it might not be a bad maxim in a great monarchy, to have houses built and furnished in the capital for every foreign minister, where the general distribution of the apartments of each might be, as much as possible, analogous to the taste of the country for whose minister it is calculated: but as to the furniture, to have it made of the most elegant domestic manufactures easily transportable, nicely adapted also to the uses and fashions of each foreign country. Such a regulation could never fail of being highly acceptable, as it would prove a great saving to foreign ministers, and would insensibly give them a taste for the manufactures and luxury of the country they reside in. On the other hand, I should be so far from expecting a return of this civility, that I would recommend the bestowing of a set of furniture, as a gratification to every minister sent abroad by the state, who should regularly sell it off in the place of his residence, upon the expiration of his commission. Such an expence would not cost one penny to the nation, and would be a means of captivating unwary strangers, who might be thereby made to pay dearly for such marks of politeness and civility. I return.

Without being expert in the computation of exports and imports, or very accurate in examining the different courses of exchange between the different cities of Europe, a statesman may lay it down as a maxim, that whatever foreign commodity, of whatsoever kind it be, is found to be consumed within the nation he governs, so far the balance of trade is against her; and that so far as any commodity produced either by the soil, or labour of the inhabitants, is consumed by foreigners, so far the balance is for her.

A nation may in some measure be compared to a country gentleman, who lives upon his land. This I suppose to be his all. From it he draws directly his nourishment, perhaps his clothes are wrought up in his family. If he be so very frugal as never to go to market for any thing, all the spare produce which he can sell will be clear money in his purse. If he indulge now and then in a bottle of wine, which his farm does not produce, he must go to market with his purse in his hand; and so soon as his bottle is out, I think he is effectually so much poorer than he was before. If he go on, and increase his consumption of such things as he is obliged to buy, he will run out the money he had in his purse, and be reduced to the simple production of his farm. If then this country gentleman be poorer, certainly somebody must be richer; and as it is nobody in his family it must be some of his neighbours.

Just so a nation which has no occasion to have recourse to foreign markets, in order to supply her own consumption, must certainly grow rich in proportion to her exportation.

These riches again will not circulate at home, in proportion to the domestic consumption of natural produce and manufactures, but in proportion to the alienation of them for money: the surplus wealth will stagnate in one way or other, in the hands of the money gatherers, who are the small consumers.

While there is found a sufficient quantity of money for carrying on reciprocal alienations; those money gatherers will not be able to employ their stagnated wealth within the nation; but so soon as this gathering has had the effect of diminishing the specie, below the proportion found necessary to carry on the circulation, it will begin to be lent out, and so it will return to circulate for a time, until by the operation of the same causes it will fall back again into its former repositories.

Should it be here objected, that upon the augmentation of a nation's riches, no money can stagnate; because prices rising in proportion to the augmentation of riches, all the additional wealth must be thrown into circulation; surely both reason and experience must point out the weakness of such an objection.

While a favourable balance, therefore, is preserved upon foreign trade, a nation grows richer daily; and still prices remain regulated as before, by the complicated operations of demand and competition; and when one nation is growing richer, others must be growing poorer: this is an example of a favourable balance of trade.

When this superfluity of riches is profited of by the luxurious individuals only, instead of being turned to profit by the state itself, with a view to secure the advantages thereby acquired, then the balance takes a contrary turn: this is the case whenever foreign importations for consumption are either permitted as a gratification to the luxurious desires of the wealthy., or because of the rise in the price of goods at home, in consequence of domestic competition. If it be permitted purely in favour of the first, it marks a levity and want of attention unworthy of a statesman; if on account of the second, it shows either an ignorance of the real consequences of so temporary an expedient, or a disregard for the welfare of the lower classes of the people.

Every augmentation of prices at home, must be a necessary consequence of many domestic circumstances, and must be removed by correcting them, as has been, I think, made clear. But let it be supposed, that from the augmentation of wealth alone, manufacturers can no more produce work so cheap as other nations; I think that both in humanity and prudence, a people should submit to the inconvenience of paying dearer. In humanity, because by the introduction of foreign manufactures, you starve those very people, who by their labour have enriched you: in prudence, because by opening your ports to such importation you deliberately throw away that superiority of riches you have been at so much pains to acquire.

I freely grant, that particular people do not regulate either their expence or their schemes of getting money, with a view to promote the public good. One who has a coat to buy, will be very glad to find a piece of foreign manufacture at a cheap rate; a merchant will wish to smuggle goods on which there is a high duty. But the question is, Whether a statesman is to wink at such abuses? I think it is much the same question, as if it were asked, whether the master of a family should, in good economy, allow his servants to invite their friends to drink in his cellar, instead of carrying them to a public house.

But suppose it be said, that 'by laying trade open, you are sure that wealth will naturally come to a balance, in all countries, and that all fears of a wrong balance of trade are only the effect of a gloomy imagination'. See Hume's Political Discourses, Sect. v.

Several answers may be made to this objection. The first, that it is in order to prevent this kind of balance, that a nation ever gives itself disquiet: for by balance here, is understood an equality of wealth; and rich nations are they only who are anxious, lest they should be brought to such an equality. In the question here before us, it is the loss of this superiority of wealth which is understood by a balance turning against a trading nation. If, therefore, it be the interest of a nation, poor in respect of its neighbours, to have trade laid open, that wealth may, like a fluid, come to an equilibrium; I am sure it is the interest of a rich nation, to cut off the communications of hurtful trade, by such impediments as restrictions, duties, and prohibitions, upon importation; in order that, as by dykes, its wealth may be kept above the level of the surrounding element.

Another answer is, that laying trade open would not have the effect proposed; because it would destroy industry in some countries, at least, if not every where. A manufacture must be very solidly established indeed, not to suffer any prejudice, by a permission to import the like commodities from other countries. The very nature of luxury is such, that it frequently prompts people to consume, from caprice and novelty, what is really inferior to home-production. It may be answered, that this argument cuts two ways: for if a nation from caprice consume foreign commodities, why may not other nations from caprice likewise, take off those which are left on hand? This reasoning may appear good, in a theory which does not take in every political consideration. But a poor manufacturer who cannot find work, because the branch he works in is supplied from abroad, cannot live till the caprice of foreigners shall make them demand his labour. If a certain number of inhabitants be employed in a necessary branch of Consumption, there must be a certain demand preserved for it; and whatever can render this precarious, will ruin the undertaking, and those employed in it.

A third answer is, that any nation who would open its ports to all manner of foreign importation, without being assured of a reciprocal permission from all its neighbours, would, I think, very soon be ruined; and if this be true, it is a proof that a balance of trade is a possible supposition, and that proper restrictions upon importation may turn to the advantage of a state.

In order to promote industry, a statesman must act, as well as permit and protect. Could ever the woollen manufacture have been introduced into France, from the consideration of the great advantage England had drawn from it, had not the king undertaken the support of it, by granting many privileges to the undertakers, and by laying strict prohibitions on all foreign cloths? Is there any other way of establishing a new manufacture any where?

Laying, therefore, trade quite open would have this effect; it would destroy, at first at least, all the luxurious arts; consequently, it would diminish consumption; consequently, diminish the quantity of circulating cash; consequently, it would promote hoarding; and consequently, would bring on poverty in all the states of Europe. Nothing, I imagine, but an universal monarchy, governed by the same laws, and administered according to one plan well concerted, can be compatible with an universally open trade. While there are different states, there must be separate interests; and when no one statesman is found at the head of these interests, there can be no such thing as a common good; and when there is no common good, every interest must be considered separately. But as this scheme of laying trade quite open, is not a thing likely to happen, we may save ourselves the trouble of inquiring more particularly into what might be its consequences; it is enough to observe, that they must, in their nature, be exceedingly complex, and if we have mentioned some of them, it has been to apply principles only, and shew how consequences may follow one another: to foretel what must follow is exceedingly difficult, if not impossible.

In discoursing of the balance of trade, I have hitherto considered it so far only as the specie of a country is augmented by it. In the subsequent books, where we shall have occasion to bring this subject once more upon the carpet, I shall shew how a balance may be extremely favourable without augmenting the mass of the precious metals; to wit, by providing subsistence for an additional number of inhabitants; by increasing the quantity of shipping, which is an article of wealth; by constituting all other nations debtors to it; by the importation of many durable commodities, which may be considered also as articles of wealth; as a well furnished house, a well stored cellar, an ample wardrobe, and a fine stable of horses, are articles which enhance the value of the inheritance of a landed man.

Then we shall have occasion to shew how industry heightens the permanent value of a nation, as agriculture increases its annual produce.

Chapter XXX: Miscellaneous Questions and Observations relative to Trade and Industry

In the former chapters, we have been treating of the nature and consequences of circulation, the effects of augmentations and diminutions of specie, and the doctrine of Mr Hume concerning the balance of trade. The perspicuity with which this author writes, renders his ideas easy to be conceived; and when people understand one another, most disputes are soon at an end.

In order, therefore, to throw a little more light upon the nature of the balance of trade between nations, let me examine the following questions while we have the subject of the last chapter fresh in our memory.

Question 1. Can any judgment be formed concerning the state of the balance of trade of a nation, barely from the quantity of specie that is found in it?

I answer in the negative. A great proportion of all the specie of Europe, may be found in a country against which the balance of trade has stood regularly for many years. An inconsiderable proportion of it may be found in another, which has had it as regularly in its favour for the same time. Here follows the proof of this proposition.

The balance upon every article of trade may be favourable to a nation, which squanders away more than the returns of it, upon foreign wars. The balance of every article of trade may be against a country, which receives more than all the loss incurred, either from her mines, or from countries tributary to her, or who willingly furnish subsidies upon many political considerations.

Besides these varieties, there are still other circumstances to be combined, relative to the specie itself. The money found in a country, may either be said to belong absolutely to the country, when neither the state itself, or the particular people of it, are in debt to foreigners; or only so by virtue of a loan. Now, whether it is borrowed or not, the property of it belongs to the country; but the difference consists in this, that when it is borrowed, the acquisition of the metals adds nothing to the national patrimony, that is to say, there is no acquisition of wealth thereby made; but when it is gained by industry, the money adds to the real value of the country, in consequence of the principles laid down in the 26th chapter.

May not a nation, then, having very little gold and silver, open a subscription for millions, at so much per cent? Will not strangers lend to her, when her own subjects cannot? May she not yearly, by paying away the interest of the money borrowed, and by a heavy balance of trade against her, be constantly diminishing her specie, and yet by new contracts, keep up, and even increase the mass of the circulating value, to such a degree, as to be possessed of a greater proportion of specie than any of her neighbours? Farther.

Is it not certain, that all nations will endeavour to throw their ready money, not necessary for their own circulation, into that country where the interest of money is high with respect to their own, and where consequently the value of property in land is low; since they may either draw a high interest from it, or make the acquisition of solid property? Forbidding therefore the acquisition of solid property to strangers, is, in effect, a prohibition upon the gratuitous importation of specie. I allow there may be examples of people who make such purchases, with a view to draw the rents of the lands bought, out of the country; but whatever be the intention at the time of purchase, such however is the effect of an established fortune in a country, that, sooner or later, it draws the proprietor to it; and when this does not happen, a subsequent alienation commonly takes place.

Were the purchase, therefore, of lands permitted universally, and were it established, that property in land, to a certain value, should give a right to naturalization, I have little doubt but large sums would be brought into those countries, where lands are found to be the cheapest; and as no exportable commodity is given in return, the specie of such counties will mark the quantity of lands sold, as well as that of merchandize exported. For want of a sufficient extension of these and many other combinations, which it would be easy to contrive, Mr Belloni, in his Dissertation upon Commerce, Chapter 1. Sect. 5. falls into several mistakes, when he judges of the exportation of commodities of a particular country, by the quantities of money found in it.

'It being the case (says he) that the plenty of coin, wherever it be found, points out the plenty of those goods of which it is the measure: Such persons, therefore, have justly been called rich, and such kingdoms wealthy, where there is found a great quantity of coin. On the other hand again, if we consider the state of a kingdom, and of the coin which is in it, supposing always the intrinsic value of the coin to be preserved (which is nothing else but the measure of the goods and of the price which is given for them), we must necessarily conclude, as every one must acknowledge, that in such countries where we find plenty of coin there must be a considerable trade in exporting goods for the use of strangers; and on the contrary, wherever coin is found to be scarce we may conclude that a great importation of foreign goods has taken place of the coin, which must have gone abroad for the payment of them.'

These consequences are just, only so far as money comes into a country or goes out of it, as the price of merchandize exported or imported. But how much money has not this author himself drawn into Rome from England, for the exportation of nothing but the bills of travellers?

On the other hand, may not a country, which is actually in possession of great quantities of gold and silver, call in these metals and circulate, in their place, a symbolical money; may not a nation then, as well as a private person, employ this specie in a profitable foreign trade, and gain daily by it? May she not, after some time, withdraw her stock, by calling in her debts? And may she not also call in her paper, and remain with an additional acquisition of specie in her pocket? Consequently, during the circulation of the paper, no judgment can be formed as to the balance of her trade, by examining the state of her specie; because I can suppose that at this time every shilling of it may be in the hands of strangers. Consequently, the richest nation in Europe may be the poorest in circulating specie.

'The writings of Mr Gee (says Mr Hume in his Political Discourse upon the Balance of Trade) struck the nation with an universal panic, when they saw it plainly demonstrated, by a detail of particulars, that the balance was against them for so considerable a sum as must leave them without a single shilling in five or six years. But, luckily, twenty years have since elapsed, along with an expensive foreign war; and yet 'tis commonly supposed that money is still more plentiful among us than in any former period.' I quote from the French translation.

Mr Gee was in the wrong to conclude, that the balance of trade would have the effect of carrying off the coin: and Mr Hume has been misled by this mistake, to conclude, that Mr Gee's calculations were false. I know nothing as to the matter of fact; nor whether Mr Gee was a good or a bad judge of the question he treated; but, from what has been said, I hope it appears, that the state of the coin in England, at the time Mr Hume wrote, was no proof on either side.

To judge of the balance of trade is one thing; to judge of the wealth of a nation as to specie is another. England may greatly increase her specie by her trade, and greatly diminish it by her wars: perhaps this may be the fact. She may also, at certain times, have a balance of trade against her; and great sums laid out in foreign wars may be the means of making it return in her favour. Should this nation begin to pay off her debts to strangers, in ready coin, might she not soon diminish, perhaps exhaust, the specie she is now possessed of; yet surely none ever became poorer by paying off their debts. Nothing is so easy as to have specie, when one has solid property to pledge for it; and nothing can be worse judged, than to purchase specie from strangers, at the expence of paying an interest for it, when one can contrive a circulating value in paper-money, representing the solid value which must be pledged to strangers for the loan of their metals.

But still it may be asked, how it happens, that notwithstanding the most unfavourable balance of trade, no nation ever found herself entirely drained of her specie; and since we have proved, that the specie of a country may be diminished by a disadvantageous trade, what are the principles which prevent the total dissipation of it?

This is a very curious question, and opens a door to a multitude of new ideas, which will furnish abundant matter of speculation, when we come to treat more directly of credit. I shall here examine it in general, for the sake only of applying the principles we have laid down.

First, It may be said, that as common prudence prevents a private person from spending to his last shilling; so the like prudence commonly engages a people to put a stop to trade, before it has time totally to drain them. Although most people drink wine, there is no reason why every body should be drunk.

Secondly, Nothing is so complicated as the balance of trade, considered among many nations. The general wealth circulates from one to another, as the money which the farmer gives the landlord circulates back to the farmer. In the number of hands through which the money passes, some are of the class of the luxurious, some of the frugal; the first represents those nations who lose by the balance, the latter those who gain. But the most industrious nations of all, and those who, considered abstractedly from extraordinary accidents, appear in the way to swallow up the wealth of all the rest, are, by the means of such accidents, made liable to terrible restitutions. How many millions, for example, has England restored to the continent, in consequence of her wars and subsidies? She then lays a foundation for many more years of favourable balance, and accordingly we see it return to her, as the money which the state spends within the nation returns into the Exchequer at the end of the year.

Thirdly, It may be asked, how it happens that no nation has ever spent to its last farthing, as many an individual has done? I answer, that I am far from believing that this has never happened; nay, I believe there is nothing more frequent or familiar than this very case, provided the riches of a country be here supposed to mean no more than the specie absolutely belonging to herself, not borrowed from other nations.

I have said above, that the acquisition of money by industry increased the real value of a country, as much as the addition of a portion of territory; now what should hinder a people from spending their ready money, and preserving their land at the same time? Because a young gentleman, whose father has left him a fine estate in land, and ten thousand pounds in ready money, has spent the ten thousand pounds, does it follow, that he is not worth a shilling? Upon this view of the question, it will, I believe, be granted, that Dr Swift's idea that all the specie of Ireland would in a short time be exported, in consequence of an unfavourable balance of trade, is very far from being chimerical, and may be exactly true; although at this time there be six times more coin in circulation than ever; just as a person who is running through his fortune, has commonly more money in his hands than his father used to have, when he was acquiring it. Let Ireland pay her debts to England, and then reckon her specie. Let England pay hers to all the world, and then weigh her gold and silver. Suppose that on summing up the accounts, there is not found one shilling in either country, is this any proof of their being undone? By no means: coin is one article of our wealth, but never can be the measure of it.

I know little of the state of Ireland; but if it be true, that paper money is increasing daily in that country, it is, I suppose, because the specie is daily exported to England, as the returns of estates belonging to people who reside there, and that the Irish, instead of buying it back again for their own use in circulation, augment their paper, in proportion to the progress of their industry; and buy such quantities only of specie as are necessary for paying the balance of their trade. Now by buying specie, I do not suppose, that they bring any over to Ireland, in order to send it back to England; but that they send over goods to the value, which the English merchants pay in specie, or in English paper, to those who are creditors upon Ireland, for the value of their rents, &c.

Suppose then, for a farther illustration of some principles, that all the lands of Ireland belonged to Englishmen residing in their own country, and annually drawing from Ireland the income belonging to them, what would the consequence be? I answer, that as long as this portion of the produce of lands, which goes for rent, (and which we have said to be the fund provided for the subsistence of the free hands who purchase their own necessaries,) can be bought and consumed by the Irish themselves, that is, in other words, while in Ireland there is a demand for this portion of the fruits, it will be paid for, either in coin, to the diminution of their specie, or in something which may be converted into money; that is, by the produce of their industry, and thus, by the means of trade, will come into the hands of the English proprietors, either in specie, or in any other form they judge proper.

That so soon as the demand for this portion of fruits comes to fail, for want of money, or industry, in Ireland, to purchase it, what remains on hand will be sent over to England in kind; or, by the way of trade, be made to circulate with other nations (in beef, butter, tallow, &c.) who will give silver and gold for it, to the proprietors of the Irish lands. By such a diminution of demand in the country, for the fruits of the earth, the depopulation of Ireland is implied; because they who consumed them formerly, consume them no more; that is to say, they are dead, or have left the country.

To conclude; a great part of the value of a country is its produce and manufactures; but it does not follow that these should as necessarily draw into a country a proportional sum of the gold and silver of Europe, as a shoal of small fishes draws water-fowl, or as charity draws the poor, or as beauty draws admiration.

Quest. 2. Can no rule be found to judge of the balance of trade from the state of specie, or at least to perceive the effects of this balance in augmenting or diminishing the mass of riches?

Could it be supposed that specie never circulated between nations, but in the way of trade, and in exchange for exportable commodities, the following rules might be laid down.

First, In nations where the earth produces neither gold or silver, and where these metals are imported as the returns of industry only, the balance in their favour, from the introduction of specie, to this day, would be measured by the quantity of it which they possess. Here Mr Belloni's opinion is just.

Secondly, The consumption made by any nation for the same term of years, is equal to the whole natural produce and labour of the inhabitants for that time, minus the quantity of such produce and labour, as is, or has been, equal in value to the actual national specie.

Thirdly, On the other hand, in nations where gold and silver are produced by the earth, the balance of trade against them, from the time these metals became the object of trade to this day, may be estimated by the quantity of them which has been exported.

Fourthly, and farther; the consumption made by such nations, for the same term of years, is equal to the whole natural produce and labour of the inhabitants for that time, plus the quantity of such produce and labour, as is, or has been, equal to the quantity of these metals exported.

These rules are by much too general to be laid down as principles; because trade is not concerned in every acquisition or alienation of specie; but they may serve, in the mean time, to illustrate the doctrine we have been considering, and even in many cases may be found pretty exact. For example:

If it be true, that in any nation of Europe, there be now just as much silver and gold as there was ten years ago, and if that nation, during this period, has supported, without borrowing from strangers, an expensive war which may have cost it, I suppose, five millions fairly exported in coin, it is certain that, during this period, the home-consumption must have been the value of five millions less than the natural produce, labour, and industry of the inhabitants; which sum of five millions must have come from abroad in coin, and in return for a like value of the production, labour, &c. remaining over and above their own consumption, and exported for this return in ready specie.

In this supposition, the national wealth (the metals) stands as before; the balance of it only is changed. How this change is performed, and what are its consequences, may be discovered by an application of the principles already laid down.

Quest. 3. What were the effects of riches before the introduction of trade and industry?

I never can sufficiently recommend to my readers to compare circumstances in the economy of the ancients, with these of modern politics; because I see a multitude of new doctrines laid down, which, I think, never would have been broached, had such circumstances been properly attended to. I have endeavoured to shew, that the price of goods, but especially of articles of the first necessity, have little or no connection with the quantities of specie in a country The slightest inspection into the state of circulation, in different ages, will fortify our reasoning: but the general taste of dissipation, which is daily gaining ground, makes people now imagine, that wealth and circulation are synonymous terms; whereas nothing is more contrary both to reason and matter of fact. A slight review of this matter, in different ages, will set it in a clearer light than a more abstract reasoning can do.

It is a question with me, whether the mines of Potosi and Brazil, have produced more riches to Spain and Portugal, within these two hundred years, than the treasures heaped up in Asia, Greece, and Egypt, after the death of Alexander, furnished to the Romans, during the two hundred years which followed the defeat of Perseus, and the conquest of Macedonia.

From the treasures mentioned by all the historians who have written of the conquest of these kingdoms by the Romans, I do not think I am far from truth, when I compare the treasures of the frugal Greeks to the mines of the new world.

What effect, as to circulation, had the accumulation of these vast treasures? Not any to accelerate it, surely: and no person, the least conversant in antiquity, will pretend that the circulating specie in those times bore as great a proportion to their treasures, as what is at present circulating among us bears to the wealth of the most economising Prince in Europe. If any one doubt of this particular, let him listen to Appian, who will inform him, that the successors of Alexander, the possessors of these immense riches, lived with the greatest frugality. These treasures were then, as I have said, a real addition to the value of their kingdoms but had not the smallest influence upon prices. In those days of small circulation, the prices of every thing must have been vastly low, not from the great abundance of them, but because of the little demand; and as a proof of this, I cite the example of a country, which, within the space of fifty years, possessed in specie, at one time, considerably beyond the worth of the land, houses, slaves, merchandize, natural produce, moveables, and ready money, at another. The example is mentioned by Mr Hume; and I am surprized the consequence of it did not strike him. For if the money they possessed was greatly above the worth of all their property, moveable and immoveable, surely it never could be considered as a representation of their industry, which made so small a part of the whole. Athens possessed, before the Peloponnesian war, a treasure of ten thousand talents; and fifty years afterwards, all Athens, in the several articles above specified, did not amount to the value of six thousand. Hume's Political Discourses upon the Balance of Trade.

These treasures were spent in the war, and they had been laid up for no other purpose. Therefore I was in the right, when I observed above, Chapter 22., that war in ancient times had the effect that industry has now: it was the only means of making wealth circulate. But, peace producing a general stagnation of circulation, people returned to the ancient simplicity of their manners, and the prices of subsistence remained on the former footing; because there was no increase of appetite, or rising of demand upon any necessary article. So much for the state of wealth during the days of frugality.

The Romans subdued all those kingdom of the Greeks, and drew their treasures to Rome. The republic went to destruction, and a succession of the most prodigal princes ever known in history succeeded one another for about two hundred years. Those monstrous treasures were then thrown into circulation: and I must now give an idea of the effects produced by such a revolution.

I have already observed (Chapter 28.), that in consequence of the great prodigality of those times, the price of superfluities rose to a monstrous height; while the price of necessaries kept excessively low. The fact is indisputable; and any one who inclines to satisfy himself father, may look into that valuable collection of examples of ancient luxury, wealth, and, at the same time, of simplicity, found in Dr Wallace's Dissertation upon the Numbers of Mankind in ancient and modern Times, p. 132. et seq.

But how is it to be accounted for, that the price of superfluities should stand so high, while the price of necessaries was so low? The reason is plain, from the principles we have laid down. The circulation of money had no resemblance to that of modern times: fortunes were made by corruption, fraud, concussion, rapine, and penury; not by trade and industry. Seneca amassed in four years 2,400,000 pounds sterling. An augur was found to be worth 3 millions sterling. M. Antony owed on the ides of March, 322,916 pounds sterling, and paid it before the calends of April. We know of no such circulation. Every revolution was violent: the powerful were rapacious and prodigal, the weak were poor and lived in the greatest simplicity: consequently, the objects of the desires for the rich were immensely dear; and the necessaries for the poor were excessively cheap. This is a confirmation of the principles we have laid down in Chapter 28., that the price of subsistence must ever be in proportion to the faculties of the numerous classes of those who buy: that the price of every thing must be in proportion to the demand for it; and that in every case, where the supply can naturally be increased in proportion to the demand, there must be a determinate proportion between the price of such articles and that of subsistence. Now in the examples given by Dr Wallace, of things which sold at monstrous prices, we find such only as could not be increased according to demand: here is the enumeration of them. Large asses brought from Spain, peacocks, fine doves, mullets, lampreys, peaches, large asparagus, purple, wool, jewels, carpets, vestes Byssinae, slaves skilled in the finer arts, pictures, statues, books, and rewards to those who taught the sciences. By casting a glance upon the catalogue, we may easily perceive that the extraordinary price must have proceeded from the impossibility of augmenting the supply in proportion to the demand; not from the abundance of the money, which had no effect in raising the price of necessaries. The cheapness, again, of these did not proceed from the vast plenty of them; but because the price remained in proportion to the faculties of the numerous poor; and because the augmentation of the wealth of the rich never could increase their consumption of any necessary article. Had the Roman empire been governed with order and tranquillity, this taste of luxury, by precipitating money into the hands of the numerous classes, would, in time, have wrought the effects of multiplying the number of the industrious; consequently, of increasing the demand for vendible subsistence; consequently, of raising the price of it. And, on the other hand, the introduction of a more adequate proportion between services and rewards given by the public, would have checked the other branch of circulation which produced those monstrous fortunes, to wit, rapine and corruption: and, industry receiving a regular encouragement, every article of extraordinary demand for delicate aliments, birds, fishes, fruits, &c. would have been supplied with sufficient abundance; and consequently, would have fallen in its price. But while either despotism or slavery were the patrimonial inheritance of every one on coming into the world, we are not to expect to see the same principles operate, as in ages where the monarch and the peasant are born equally free to enjoy the provision made for them by their forefathers.

Quest. 7. In what manner, therefore, may a statesman establish industry, so as not to destroy simplicity, nor occasion a sudden revolution in the manners of his people, the great classes of which are supposed to live secure in ease and happiness; and, at the same time, so as to provide with necessaries every one who may be in want?

The observations we are going to make will point out the answer to this question: they will still farther unfold the political economy of the ancients, and explain how manners remained so pure from vicious luxury, notwithstanding the great and sumptuous works carried on, which strike us with so lofty an idea of their useful magnificence and noble simplicity. These observations will also confirm the justness of a distinction made, in the first chapter of this book, between labour and industry; by shewing that labour may ever be procured, even by force, at the expence of furnishing man with his physical-necessary, from which no superfluity can proceed: whereas industry cannot be established, but by means of an adequate equivalent, proportioned, not to the absolutely necessary, but to the reasonable desire of the industrious; which equivalent becomes afterwards the means of diffusing a luxurious disposition among all the classes of a people.

If a statesman find certain individuals in want, he must either feed them, in which case he may employ them as he thinks fit; or he must give them a piece of land, as the means of feeding themselves. If he give the land, he can require no equivalent for it, because a person who has nothing can give nothing but his labour; and if he be obliged to labour for his food, he cannot purchase with labour the earth itself, which produces it. If it be asked, whether a statesman does better to give the food, or to give the land? I think it will appear very evident, that the first is the better course, because he can then exact an equivalent; and since in either way the person is fed, the produce of his labour is always clear gain. But in order to give the food, he must have it to give; in which case it must either be a surplus-produce of public lands, or a contribution from the people. In both which cases, is implied an industry carried on beyond the personal wants of those who labour the ground. If this fund be applied in giving bread to those whom he employed in improving the soil of the country in general, it will have no immediate effect in destroying the simplicity of their manners; it will extend the fund only of their subsistence. If he employs them in making highways, aqueducts, common sewers, bridges, and the like; it will extend the correspondence between the different places of the country, and render living in cities more easy and agreeable: and these changes have an evident tendency towards destroying simplicity. But here let it be remarked, that the simplicity of individuals is not hurt by the industry carried on at the expence of the public. The superfluous food at the statesman's disposal, is given to people in necessity, who are employed in relieving the wants of the public, not of private persons. But if, for example, in consequence of the roads made, any inhabitant shall incline to remove from place to place in a chariot, instead of riding on horseback, or walking, he must engage somebody to make the machine: this is a farther extension to occupation, on the side of those who labour. but the consequence of the employment is very different, when considered with regard to the simplicity of manners. The reason is plain: the ingenuity here must be paid for; and this superfluity in the hands of the workman is a fund for his becoming luxurious.

Industry destroys simplicity of manners in him who gives an equivalent for an article of superfluity; and the equivalent given frequently gives rise to a subordinate species of luxury in the workman. When industry therefore meets with encouragement from individuals, who given an equivalent in order to satisfy growing desires, it is a proof that they are quitting the simplicity of their manners. In this case, the wants and desires of mankind are the sources of industry, which was the supposition in the first book; because, in fact, the industry of Europe is owing to this cause alone.

But the industry of ancient times was very different, when the multitude of slaves ready to execute whatever was demanded, either by the state or by their masters, for the equivalent of simple maintenance only, prevented wealth from ever falling into the hands of industrious free men; and he who has no circulating equivalent to give for satisfying a desire for superfluity, must remain in his former simplicity. The labour therefore of those days producing no circulation, could not corrupt the manners of the people; because, remaining constantly poor, they never could increase their consumption of superfluity.

I must, in this place, insert the authority of an ancient author, in order both to illustrate and to prove the justness of this representation of the political economy of the ancients.

There remains a discourse of Xenophon upon the improvement of the revenue of the state of Athens. Concerning the authenticity of this work, I have not the smallest doubt. It is a chef d'oeuvre of its kind, and from it more light is to be had, in relation to the subject we are here upon, than from any thing I have ever seen, ancient or modern.

From this ancient monument we learn the sentiments of the author with regard to the proper employment of the three principal classes of the Athenian people, viz. the citizens, the strangers, and the slaves. From the plan he lays down we plainly discover, that, in the state of Athens, (more renowned than any other of antiquity for the arts of luxury and refinement,) it never entered into the imagination of any politician to introduce industry even among the lowest classes of the citizens; and Xenophon 's plan was to reap all the benefits we at present enjoy from it, without producing any change upon the spirit of the Athenian people.

The state at this time used to impose taxes upon their confederate cities, in order to maintain their own common people, and Xenophon's intention in this discourse was to lay down a plan for improving the revenue of the state in such a manner as out of it to give every citizen a pension of three oboli a day, or three pence three farthings of our money.

I shall not here go through every branch of his plan, nor point out the resources he had fallen upon to form a sufficient fund for this purpose; but he says, that in case of any deficiency in the domestic revenue of the state, people from all quarters, Princes and strangers of note, in all countries, would be proud of contributing towards it, for the honour of being recorded in the public monuments of Athens, and having their names transmitted to posterity as benefactors to the state in the execution of so grand a design.

In our days, such an idea would appear ridiculous; in the days of Xenophon, it was perfectly rational. At that time great quantities of gold and silver were found locked up in the coffers of the rich: this was in a great measure useless to them, in the common course of life, and was the more easily parted with from a sentiment of vanity or ostentation.

In our days, the largest income is commonly found too small for the current expence of the proprietor. From whence it happens, that presents, great expence at funerals and marriages, godfathers' gifts, &c. so very familiar among ourselves in former times, are daily going out of fashion. These are extraordinary and unforeseen expences which our ancestors were fond of; because they Battered their vanity, without diminishing the fund of their current expence: but as now we have no full coffers to fly to, we find them excessively burthensome, and endeavour to retrench them as soon as we can, not from frugality, God knows, but in consequence of a change in our manners.

Besides providing this daily pension of three pence three farthings a day for every citizen of Athens, rich and poor, he proposed to build, at the public charge, many trading vessels, a great many inns and houses of entertainment for all strangers in the sea-ports, to erect shops, warehouses, exchanges, &c. the rents of which would increase the revenue, and add great beauty and magnificence to the city. In short, Xenophon recommends to the state to perform, by the hands of their slaves and strangers, what a free people in our days are constantly employed in doing in every country and industry. While the Athenian citizens continued to receive their daily pensions, proportioned to the value of their pure physical-necessary, their business being confined to their service in the army in time of war, their attendance in public assemblies, and the theatres in times of peace, clothed like a parcel of capucins, they, as became freemen, were taught to despise industrious labour, and to glory in the austerity and simplicity of their manners. The pomp and magnificence of the Persian Emperors were a subject of ridicule in Greece, and a proof of their barbarity, and of the slavery of their subjects. From this plain representation of Xenophon's plan, I hope, the characteristic difference between the ancient and modern economy is manifest; and for such readers as take a particular delight in comparing the systems of simplicity and luxury, I recommend the perusal of this most valuable discourse.

To put this matter past all dispute, and to prove that the simplicity of the manners, as well as the idleness of the common people of Athens in Xenophon's time, proceeded from refinement not from ignorance, I shall here insert a passage from President Goguet's Origin of Laws, Arts, and Sciences, with the authorities he cites in part 3d, book 4th, Chapter 3d.

'Hesiod and Plutarch have observed,' says he, 'that, in the ages I am now speaking of (before the reign of Cyrus) commerce was held in great honour among the Greeks. No labour, say these authors, was accounted shameful, no art, no trade, placed any difference among men. This maxim, so reasonable and so useful to such a nation as the Greeks, was, nevertheless, altered. We see by the works of Xenophon, of Plato, of Aristotle, and of many other writers of merit, that, in their age, all professions which were calculated to gain money, were regarded as unworthy of a freeman. Aristotle maintains, that, in a well ordered state, they will never give the right of citizens to artisans. Plato would have a citizen punished who should enter into commerce. In fine, we see these two philosophers, whose sentiments, on the principles and maxims of government, are otherwise so opposite, agreeing to recommend that the lands should be cultivated by slaves: only. It is very surprising,' concludes the President, 'that with such principles, which all the Greeks appear to have imbibed, they should ever have been so intelligent in commerce, and so powerful at sea, as they are known to have been in some ages.'

Putting, therefore, all these circumstances together, and comparing them with the contrast, which is found, as to every particular, in our times, I think it is but doing justice to the moderns, to allow, that the extensive luxury, which daily diffuses itself through every class of a people, is more owing to the abolishing of slavery, the equal distribution of riches, and the circulation of an adequate equivalent for every service, than to any greater corruption of our manners, than what prevailed among the ancients.

In order to have industry directed towards the object of public utility, the public, not individuals, must have the equivalent to give. Must not the employment be adapted to the taste of him who purchases it? Now, in ancient times, most public works were performed either by slaves, or at the price of the pure physical-necessary of free men. We find the price of a pyramid, recorded to us by Herodotus, in the quantity of turnips, onions, and garlic, consumed by the builders of it. Those who made the via appia, I apprehend, were just as poor when it was finished as the day it was begun; and this must always be the case, when the work requires no peculiar dexterity in the workmen. If, on the other hand, examples can be brought where workmen gained high wages, then the consequences must have been the same as in our days.

As long, therefore, as industry is not directed to such objects as require a particular address, which, by the principles laid down in the twenty-first chapter, raises profits above the physical-necessary, the industrious never can become rich; and if they be paid in money, this money must return into the hands of those who feed them: and if no superfluity be found any where but in the hands of the state, such industry may be the means of consuming a surplus of subsistence, but never can draw one penny into circulation. This I apprehend to be a just application of our principles, to the state of industry under the Roman republic: and it is this species of industry which we call labour. We are not therefore to ascribe the taste for simplicity in those days to the virtue of the times. A man who had riches, and who spent them, spent them no doubt then, as at present, to gratify his desires; and if the simplicity of the times furnished no assistance to his own invention, in diversifying them, the consequence was, that the money was not spent, but locked up. I have heard many a man say, had I so much money I should not know how to spend it. The thing is certainly true; for people do not commonly take it into their head to lay it out for the public.

Nobody, I believe, will deny that money is better employed in building a house, or in producing something useful and permanent, than in providing articles of mere transitory superfluity. But what principle of politics can influence the taste of the proprietors of wealth? This being the case, a statesman is brought to a dilemma; either to allow industry to run into a channel little beneficial to the state, little permanent in its nature, or to deprive the poor of the advantage resulting from it. May I not farther suggest, that a statesman, who is at the head of a people, whose taste is directed towards a trifling species of expence, does very well to diminish the fund of their prodigality, by calling in, by the means of taxes, a part of the circulating equivalent which they give for it? When once he is enriched by these contributions, he comes to be in the same situation with ancient statesmen, with this difference, that they had their slaves at their command, whom they fed and provided for; and that he has the free, for the sake of an equivalent with which they feed and provide for themselves. He then can set public works on foot, and by his example, inspire a taste for industry of a more rational kind, which may advance the public good and procure a lasting benefit to the nation.

I have frequently said, that the acquisition of money, by the sale of industry to strangers, or in return for consumable commodities, was a way of augmenting the general worth of a nation. Now I say, that whoever can transform the most consumable commodities of a country into the most durable and most beneficial works, makes a high improvement. If therefore meat and drink, which are of all things the most consumable, can be turned into harbours, high roads, canals, and public buildings, is not the improvement inexpressible? This is in the power of every statesman to accomplish, who has subsistence at his disposal; and beyond the power of all those who have it not. There is no absolute occasion for money to improve a country. All the magnificent buildings which ornament Italy, are more properly the representation of a scanty subsistence, than of the gold and silver in that country at the time they were executed. Let me now conclude with a few miscellaneous observations on what has been said.

Observation 1. When I admire the magnificence and grandeur of public works in any country, such as stupendous churches, amphitheatres, roads, dykes, canals; in a word, when I examine Holland, the greatest work perhaps ever done by man, I am never struck with the expence. I compare them with the numbers of men only who have lived to perform them. When I see another country well inhabited, where no such works appear, the contrast suggests abundance of reflections.

As to the first, I conclude, that while these works were carrying on, either slavery or taxes must have been established; because it seldom happens, that a prince will, out of his own patrimony, launch out into such expences, purely to serve the public. Public works are carried on by the public; and for this purpose, either the persons or purses of individuals, must be at its command. The first I call slavery; that is service: the second taxes; that is public contributions in money or in necessaries.

Observation 2. I farther conclude, that nothing is to be gathered from those works, which should engage us to entertain a high opinion of the wealth, or other species of magnificence in the people who executed them. All that can be determined positively concerning their economy as to this particular, is, that at the time they were performed, agriculture must have been exercised as a trade, in order to furnish a surplus sufficient to maintain the workmen; or that subsistence must have come from abroad, either as a return for other species of industry, or gratuitously, that is, by rapine, tribute, &c.

Observation 3. That the consequence of such works, is, to make meat, drink, and necessaries circulate from the hands of those who have a superfluity of them, into those who are employed to labour; or to oblige those who formerly worked for themselves only, to work also in part for others. To execute this, there must be a subordination: for who will increase his labour, voluntarily, in order to feed people who do not work for himself, but for the public? This combination was neglected throughout the first book; because we there left mankind at liberty to follow the bent of their inclinations. This was necessary to give a right idea of the subject we then intended to treat, and to point out the different effects of slavery and liberty; but now, that we have formed trading nations, and riveted a multitude of reciprocal dependences, which tie the members of them together, there is less danger in introducing restraints; because the advantages which people find, from living in a well ordered society, make them put up the better with the inconveniences of supporting and improving it. It is an universal principle, that instruction should be given with gentleness. A young horse is to be caressed when the saddle is first put upon his back: any thing that appears harsh, let it be ever so useful or necessary, must be forborn in the beginning, in order to captivate the inclination of the creature which we incline to instruct.

Observation 4. When a statesman knows the extent and quality of the territory of his country, so as to be able to estimate what numbers it may feed; he may lay down his plan of political economy, and chalk out a distribution of inhabitants, as if the number were already complete. It will depend upon his judgment alone, and upon the combination of circumstances, foreign and domestic, to distribute, and to employ the classes, at every period during this execution, in the best manner to advance agriculture, so as to bring all the lands to a thorough cultivation. A ruling principle here, is, to keep the husbandman closely employed, that their surplus may be carried as high as possible; because this surplus is the main spring of all alienation and industry. The next thing is to make this surplus circulate; no man must eat of it for nothing. What a prodigious difference does a person find, when he considers two countries, equally great, equally fertile, equally cultivated, equally peopled, the one under the economy here represented; the other, where every one is employed in feeding and providing for himself only.

A statesman, therefore, under such circumstances, should reason thus: I have a country which maintains a million of inhabitants, I suppose, and which is capable of maintaining as many more; I find every one employed in providing for himself, and considering the simplicity of their manners, a far less number will be sufficient to do all the work: the consequence is, that many are almost idle, while others, who have many children, are starving. Let me call my people together, and shew them the inconvenience of having no roads. He then proposes that every one who chooses to apply to this work, shall be fed and taken care of by the community, and his lands distributed to those who incline to take them. The advantage is felt, the people are engaged to work a little harder, so as to undertake the cultivation of the portions of those who have abandoned them. Upon this revolution, labour is increased, the soil continues cultivated as before, and the additional labour of the farmers appears in a fine high road. Is this any more than a method to engage one part of a people to labour, in order to maintain another?

Observation 5. Here I ask, whether it be not better to feed a man, in order to make him labour and be useful, than to feed him in order to make him live and digest his victuals? This last was the case of multitudes during the ages of ancient slavery, as well as the consequence of ill-directed modern charity. One and the other being equally well calculated for producing a simplicity of manners: and Horace has painted it to the life, when he says,

Nos numerus sumus, et fruges consumere nati.

This I have heard humorously translated, though nastily I confess; We add to the number of t-d mills. A very just representation of many of the human species! to their shame be it spoken, as it equally casts a reflection on religion and on government.

Consistently with these principles, we find no great or public work carried on in countries of great liberty. Nothing of this kind is to be seen among the Tartars or hunting Indians. These I call free nations, but not our European republics, where I have found just as much subordination and constraint as any where else.

I have on several occasions, let drop some expressions with regard to charity, which I am sensible may be misinterpreted. It will therefore be proper to make some apology, which nobody can suspect of insincerity; because my reason for introducing it, is with a view to a farther illustration of my subject.

When I see a rich and magnificent monastery of begging friars, adorned with profusion of sculpture, a stupendous pile of building, stately towers, incrustations of marble, beautiful pavements; when I compare the execution and the expence of all these, with the faculties of a person of the largest fortune, I find there is no proportion between what the beggars have executed with the produce of private charities, and what any Lord has done with his overgrown estate. Nay monasteries there are which, had they been executed by princes, would have been cited by historians, from generation to generation, as eternal monuments of the greatest prodigality and dissipation. Here then is an effect of charity, which I have heard condemned by many, and I think without much reason. What prostitution of riches! say they: how usefully might all this money have been employed, in establishing manufactures, building a navy, and in many other good purposes? Whereas I am so entirely taken up with the effects arising from the execution of the work, that I seldom give myself time to reflect upon the use of it. The building of this monastery has fed the industrious poor, has encouraged the liberal arts, has improved the taste of the inhabitants, has opened the door to the curiosity of strangers: and when I examine my purse, I find that instead of having contributed to the building of it from a charitable disposition, my curiosity to see it has obliged me to contribute my proportion of the expence. I spend my money in that country, and so do other strangers, without bringing any thing away for it. No balance of trade is clearer than this. The miraculous tongue of St. Anthony of Padua, has brought more clear money into that city than the industry of a thousand weavers could have done: the charity given is not to the monks, but to the poor whom they employ. If young wits, therefore, make a jest of such a devotion; I ask, who ought to be laughed at, those who give, or those who receive money for the show?

In a country where such works are usually carried on, they cease in a great measure to be useful, whenever they are finished; and a new one should be set on foot directly, or what will become of those who are without employment? It must not be concluded from this, that the usefulness of public works is not a principal consideration. The more a work is useful after it is done, so much the better; because it may then have the effect of giving bread to those who have not built it. But whether useful or not afterwards, it must be useful while it is going on; and many, who with pleasure will give a thousand pounds to adorn a church, would not give a shilling to build Westminster bridge, or the port of Rochefort; and the poor live equally by the execution of either. Expensive public works, are therefore a mean of giving bread to the poor, and of advancing industry, without hurting the simplicity of manners; which is an answer to the seventh question.

Observation 6. Great works found in one country and none found in another, is no proof that the first have surpassed the second in labour and industry: the contrast marks only the different division of property, or taste of expence. Every undertaking points out a particular interest. Palaces are a representation of rich individuals; snug boxes, in the neighbourhood of cities, represent small but easy fortunes; huts point out poverty; aqueducts, highways, &c. testify an opulent common good: and if these be found in a country where no vestige of private expence appears, I then must conclude that they have been executed by slaves, or by oppression; otherwise somebody, at least, would have gained by the execution; and his gains would appear in one species of expence or another.

Observation 7. In countries where fortunes have been unequally divided, where there have been few rich and many poor, it is common to find lasting monuments of labour; because great fortunes only are capable of producing them. As a proof of this let us compare the castles of ancient times (I mean four or five hundred years ago) with the houses built of late. At that time fortunes were much more unequal than at present, and accordingly we find the habitations of the great in most countries not numerous, but of an extraordinary bulk and solidity. Now a building is never to be judged of by the money it cost, but by the labour it required. From the houses in a country, I judge of the opulence of the great, and of the proportion of fortunes among the inhabitants. The taste in which these old castles are built, marks the power of those who built them, and, as their numbers are small, we may judge from the nature of man, who loves imitation, that the only reason for it was, that there were few in a condition to build them. Why do we find in modern times a far less disproportion between the convenience with which every body is lodged, than formerly; but merely because riches from the operations of industry above-described are more equally divided.

Observation 8. From this we may conclude, that lasting monuments are no adequate measure of the industry of a country. The expence of a modern prince, in a splendid court, numerous armies, frequent journeys, magnificent banquets, operas, masquerades, tournaments, and shews, may give employment and bread to as many hands, as the taste of him who built the pyramid; and the smoke of the gun-powder at the reviews, and of the flambeaus and wax lights at the entertainments, may be of as great use to posterity, as the shadow of the pyramid, which is the only visible effect producted by it; but the one remains for ever, the other leaves no vestige behind it. The very remaining of the work, however useless in itself, becomes advantageous, so far as it is ornamental, and inspires sentiments of emulation to succeeding princes, the effects of which will still be productive of the good consequences of keeping people employed. The expence of the other flatters the senses, and gives delight: there is no choice here. All such useless expence gratifies vanity only; accident alone makes one species permanent, another transitory.

Those who have money may be engaged to part with it in favour of the poor, but never forced to part with it to the prejudice of their posterity. Inspire, if you can, a good and useful taste of expence; nothing so right; but never check the dissipation of ready money, with a view to preserve private fortunes. Leave such precautions to the prudence of every individual. Every man, no doubt, has as good a right to perpetuate and provide for his own posterity, as a state has to perpetuate the welfare of the whole community; it is the combination of every private interest which forms the common weal. From this I conclude, that, without the strongest reasons to the contrary, perpetual substitutions of property should be left as free to those who possess lands, as locking up in chests should be permitted to those who have much money.

Question 8. What are the principles which influence the establishment of mercantile companies; and what effects do these produce upon the interests of trade?

There is a close connection between the principles relating to companies and those we have examined in the twenty-third chapter, concerning corporations. The one and the other have excellent consequences, and both are equally liable to abuse. A right examination of principles is the best method to advance the first, and to prevent the latter.

The advantages of companies are chiefly two.

  1. That by uniting the stocks of several merchants together, an enterprise far beyond the force of any one, becomes practicable to the community.
  2. That by uniting the interests of several merchants, who direct their foreign commerce towards the same object, the competition between them abroad is taken away; and whatever is thus gained, is so much clear profit, not only to the company, but to the society of which they are members.

It is in consideration of the last circumstance, that companies for foreign commerce have a claim to extensive privileges. But no encouragement given to such associations should be carried farther than the public good necessarily requires it should be. The public may reward the ingenuity, industry and inventions of particular members, and support a private undertaking as far as is reasonable; but every encouragement given ought to be at the expence of the whole community, not at that of particular denominations of inhabitants.

The disadvantages proceeding from companies are easily to be guessed at, from the very nature of the advantages we have been setting forth: and the relation between the one and the other will point out the remedies.

First, the weight of money in the hands of companies, and the public encouragement given them, crush the efforts of private adventurers, while their success inspires emulation, and a desire in every individual to carry on a trade equally profitable.

Here a statesman ought nicely to examine the advantages which the company reaps from the incorporation of their stock, and those which proceed from the public encouragement given to the undertaking; that with an impartial hand, he may make an equal distribution of public benefits. And when he finds it impossible to contribute to the advancement of the public good, by communicating the privileges of companies to private adventurers, he ought to facilitate the admittance of every person properly qualified into such associations.

Secondly, The second disadvantage of companies, is, a concomitant of that benefit so sensibly felt by the state, from the union of their interest, while they purchase in foreign markets: the same union which, at the time of buying, secures the company from all competitions, proves equally disadvantageous to those who purchase from them at home. They are masters of their price, and can regulate their profits by the height of demand; whereas they ought to keep them constantly proportioned to the real value of the merchandize.

The advantage resulting from the union of many private stocks is common to all companies; but those we have mentioned to proceed from the union of their interest, is peculiar to those who carry on an exclusive trade in certain distant parts of the world. We have, in a former chapter, laid down the maxims which influence the conduct of a statesman in regulating the prices of merchandize, by watching over the balance of work and demand, and by preserving the principles of competition in their full activity. But here a case presents itself, where, upon one side of the contract, competition can have no effect, and where its introduction is forbidden for the sake of the public good, because it destroys the exclusive privilege of the company to trade in certain countries.

What method, therefore, can be fallen upon to preserve the advantage which the nation reaps from the company's buying in foreign parts without being exposed to competition; and at the same time to prevent the disadvantage to which the individuals of the society are exposed at home, when they endeavour, in competition with one another, to purchase from a company, who, in virtue of the same exclusive privilege, are united in their interest, and become masters to demand what price they think fit?

It may be answered, that it cannot be said of companies as of private dealers, that they profit of every little circumstance of competition, to raise their price. Companies have a fixed standard, and all the world buys from them at the same rate; so that retailers, who supply the consumption, have in one respect this notable advantage, that as all buy from them at the same price, no one can undersell another; and the competition between themselves secures the public from exorbitant prices.

I agree that these advantages are felt, and that they are real; but still they prove no more than that the establishment of companies is not so hurtful to the interest of those who consume their goods, as it would be could they profit to the utmost of their exclusive privilege in selling by retail. But it does not follow from this, that the profits upon such a trade do not rise (in consequence of their privilege) above the standard proper for making the whole commerce of a nation flourish. The very jealousy and dissatisfaction, conceived by other merchants, equally industrious and equally well deserving of the public, because of the great advantages enjoyed by those who are incorporated, under the protection of exclusive privileges, is a hurt to trade in general, is contrary to that principle of impartiality which should animate a good statesman, and should be prevented if possible. Let us therefore go to the bottom of this affair; and, by tracing the progress of such mercantile undertakings, as are proper objects for the foundation of companies, and which entitle them to demand and to obtain certain exclusive privileges, let us endeavour to find out a method by which a statesman may establish such societies, so as to have it in his power to lay their inland sales under certain regulations, capable to supply the want of competition; and to prevent the profits of exclusive trade from rising, considerably, above the level of that which is carried on without any such assistance from the public.

While the interest of companies is in few hands, the union of the members is more intimate, and their affairs are carried on with more secrecy. This is always the case in the infancy of such undertakings. But the want of experience frequently occasions considerable losses; and while this continues to be the case, no complaints are heard against such associations. Few pretend to rival their undertaking, and it becomes at first more commonly the object of raillery than of jealousy. During this period, the statesman should lay the foundation of his authority; he ought to spare no pains nor encouragement to support the undertaking; he ought to inquire into the capacity of those at the head of it; order their projects to be laid before him; and when he finds them reasonable, and well planned, he ought to take unforeseen losses upon himself: he is working for the public, not for the company; and the more care and expence he is at in setting the undertaking on foot, the more he has a right to direct the prosecution of it towards the general good. This kind of assistance given, entitles him to the inspection of their books; and from this, more than any thing, he will come at the exact knowledge of every circumstance relating to their trade. By this method of proceeding, there will be no complaints on the side of the adventurers, they will engage with cheerfulness, being made certain of the public assistance in every reasonable undertaking; their stock becomes in a manner insured, individuals are encouraged to give them credit, and from creditors they will naturally become associates in the undertaking. So soon as the project comes to such a bearing as to draw jealousy, the bottom may be enlarged by opening the doors to new associates, instead of permitting the original proprietors to augment, and thus the fund of the company their stock with borrowed money; may be increased in proportion to the employment found for it, and every one will be satisfied.

When things are conducted in this way, the authority of public inspection is no curb upon the trade; the individuals who serve the company are cut off from the possibility of defrauding; no mysteries, no secrets, from which abuses arise, will be encouraged; trade will become honourable and secure, not fraudulent and precarious; because it will grow under the inspection of its protector, who protects it for the public good only.

Why do companies demand exclusive privileges, and why are they ever granted, but as a recompense to those who have been at great expence in acquiring a knowledge which has cost nothing to the state? And why do they exert their utmost efforts in order to conceal the secrets of their trade, and to be the only sharers in the profits of it, but to make the public refund tenfold the expence of their undertaking?

When companies are once firmly established, the next care of a statesman is, to prevent the profits of their trade from rising above a certain standard. We speak at present of those only, whom by exclusive privileges, are exposed to no competition at their sales. One very good method to keep down prices, is, to lay companies under a necessity of increasing their stock as their trade can bear it, by the admission of new associates; for by increasing the company's stock, you increase, I suppose, the quantity of goods they dispose of, and consequently diminish the competition of those who demand of them: but as even this will not have the effect of reducing prices to the adequate value of the merchandize (a thing to be done by competition only), the statesman himself may interpose an extraordinary operation. He may support high profits to the company, upon all articles of luxury consumed at home, and favour the keeping down of the prices of such goods as are either for exportation or manufacture.

This can be done when he has companies only to deal with: in every other case, the principles of competition between different merchants, trading in the same goods, upon separate interests, makes the thing impossible. But where the interests of the sellers, which are the company, are united, and where there is no competition, they are masters of their price, according to the principles laid down in the seventh chapter. Now, provided the dividend upon the whole stock be a sufficient recompense both for the value of the fund, and the industry of those who are employed to turn it to account, the end is accomplished. Extraordinary profits upon any particular species of trade cast a discouragement upon all others.

We very frequently see that great trading companies become the means of establishing public credit; on which occasions, it is proper to distinguish between the trading stock of the company, which remains in their possession, and the actions, bonds, annuities, contracts, &c. which carry their name, and which have nothing but the name in common. The price of the first is constantly regulated by the profits upon the trade; the price of the other, by the current value of money.

Let me next observe the advantage which might result to a nation, from a prudent interposition of the statesman, in the regulation of a tariff of prices for such goods as are put to sale without any competition on the side of the sellers.

The principles we have laid down, direct us to proscribe, as much as possible, all foreign consumption, especially that of work: and to encourage as much as possible the exportation of it. Now, if what the India company of England, for example, sells to strangers, and exports for a return in money, be equal to the money she herself has formerly exported, the balance upon the India trade will stand even. But if the competition of the French and Dutch be found hurtful to the English company in her outward sales, may not the government of this nation lend a hand towards rising the profits of the company, upon tea, china, and japan wares, which are articles of superfluity consumed by the rich at home, in order to enable the company to afford her silk and cotton stuffs to strangers, at a more reasonable rate? These operations, I say, are practicable, where a company sells without competition, but are never to be undertaken, but when the state of its affairs are perfectly well known; because the prices of exportable goods might, perhaps, be kept up by abuse and mismanagement, and not by the superior advantages which other nations have in carrying on a like commerce. The only remedy against abuse is reformation. But how often do we see a people lid under contribution in order to support that abuse!

Companies, we have said, owe their exclusive privileges to the difficulties to which an infant commerce is exposed: these difficulties once surmounted, and the company established upon a solid foundation, new objects of profit present themselves daily; so much, that the original institution is frequently eclipsed, by the accessary interests of the society. It is therefore the business of a statesman to take care that the exclusive privileges granted to a society, for a certain purpose, be not extended to other interests, nowise relative to that which set the society on foot, and gave it a name. And when exclusive privileges are given, a statesman should never fail to stipulate for himself, a particular privilege of inspection into all the affairs of the company, in order to be able to take measures which may effectually prevent bad consequences to the general interest of the nation, or to that of particular classes.

Let this suffice at present, as to the privileges enjoyed by companies in foreign trade. Let me now examine the nature of such societies in general, in order to discover their influence on the mercantile interests of a nation, and how they tend to bring every branch of trade to perfection, when they are established and carried on under the eye of a wise administration.

Besides the advantages and disadvantages above mentioned, there are others found to follow the establishment of trading companies. The first proceed from union, that is, a common interest; the last from disunion, that is, from separate interests.

A common interest unites, and a separate interest disunites the members of every society; and did not the first preponderate among mankind, there would be no society at all. Those of the same nation may have a common interest relative to foreigners, and a separate interest relative to one another. those of the same profession may have a common interest relative to the object of their industry, and a separate interest relative to the carrying it on: the members of the same mercantile company may have the same interest in the dividend, and a separate interest in the administration of the fund which produces it. The children of the same family, nay even a man and his wife, though tied by the bonds of common interest, may be disjoined by the effects of a separate one. Mankind are like loadstones, they draw by one pole, and repel by another. And a statesman, in order to cement his society, should know how to engage every one, as far as possible, to turn his attracting pole towards the particular centre of common good.

From this emblematical representation of human society, I infer, that it is dangerous to the common interest, to permit too close an union between the members of any subaltern society. When the members of these are bound together, as it were by every articulation, they in some measure become independent of the great body. when the union is less intimate, they admit of other connections, which cement them to the general mass.

Companies ought to be permitted, consistently with these principles. Their mercantile interests alone ought to be united, so far as union is required to carry on their undertaking with reasonable profits; but beyond this, every collateral advantage by which the associates might profit, in consequence of their union, ought to be cut off; and the public should take care to support the interest of private persons against them, on all occasions, where they take advantage of their union to hurt the right of individuals. Let me illustrate this by an example. Several weavers, fishermen, or those of any other class of the industrious, unite their stocks, in order to overcome those difficulties to which single workmen are exposed, from a multiplication of expences, which can be saved by their association. This company makes a great demand for the materials necessary for carrying on their business. By this demand they attach to themselves a great many of the industrious not incorporated, who thereby get bread and employment. So far these find an advantage: but in proportion as the undertaking is extended, and the company becomes able to engross the whole, or a considerable part of such a manufacture, they destroy all competition for it: and by forming a single interest, in the purchase of it, as well as in the sale of their own manufactures, they profit in the first case, by reducing the gains of those who are not incorporated, below the proper standard; and in the second, they raise their own profits too far above what is necessary.

The method, therefore, to prevent such abuses, is, for a statesman to interpose; not by restraining the operations of the company, but by opposing the force of principles similar to those by which they profit, in such a manner as to render their unjust dealings ineffectual. If the weavers oppress the spinners, for instance, methods may be fallen upon, if not by incorporating the last, at least by uniting their interests, so as to prevent a hurtful competition among them. If the dealers in wool in England, profiting of the prohibition to export this commodity, should enter into a concert against the growers of it, in order to have the wool at their own price; government may easily disappoint them, by receiving in every county, at a reasonable price, all the wool which remains unsold. This quantity government may export, with far less hurt to England, than what the nation suffers by the concert among the wool merchants against the landed interest. He may likewise discourage too extensive companies, by establishing and supporting others, which may serve to preserve competition; and he may punish, severely, every transgression of the laws tending to establish an arbitrary dependence on the company. In short, while such societies are forming, he ought to be their protector; and, when they are formed, he ought to take those under his protection, whom they might be apt to oppress.

In establishing companies for manufactures, it is a good expedient to employ none in such undertakings, but those who have been bred to the different branches of their business. When people of fortune, ignorant and projecting, interest themselves in infant manufactures, under the pretext of public spirit, though merely with a view to become suddenly rich, they are so bent upon making vast profits, proportioned to their stock, that their hopes are generally disappointed, and the undertaking fails. Pains-taking people, bred to frugality, content themselves with smaller gains; but under the public protection, these will swell into a large sum, and the accumulation of small profits will form a new class of opulent people, who adopt, or rather retain the sentiments of frugality with which they were born.

Thus, for instance, in establishing fisheries, instead of private subscriptions from those who put in their money from public spirit, and partly with a view to draw an interest for it; or from those who are allured by the hopes of being great gainers in the end, (the last I call projectors) the public should defray the great expence: and coopers, sail-makers, rope-makers, ship-carpenters, net-makers; in short, every one useful to the undertaking, should be gratuitously taken in for a small share of the profits; and by their being lodged together in a building, or town, proper for carrying it on, every workman becomes an undertaker to the company, for the articles of his own work. No man concerned directly in the inter-prize, should reside elsewhere than in the place: any one of the associates may undertake to furnish what cannot be manufactured at home at fixed prices. Thus the whole expence of the public in the support of the undertaking, may circulate through the hands of those who carry it on; and every one become a check upon another, for the sake of the dividend upon the general profits. One great advantage in carrying on undertakings in this manner, is, that although those concerned draw no profit at all upon the undertaking itself, they find their account in it, upon the several branches of their own industry. The herring trade was at first set on foot in Holland by a company of merchants, who failed; and their stock of busses, stores, &c. being sold at an under value, were bought by private people, who had been instructed (at the expence of the company's miscarriage) in every part of the trade, and who carried it on with success. Had the company been set up at first in the manner here mentioned, their trade never would have suffered any check.

Quest. 9. What are the principles which influence the fluctuations in the price of subsistence, in countries where agriculture, trade, and industry are solidly established? And by what rule can we form a judgment, when such prices are too high for the prosperity of manufacturers, and when they are too low for the interests of agriculture?

The price of subsistence is fixed, as has been said, (Chapter 28 of this book,) by the quantity which can be brought to market, and the number of those who must buy it. This price may rise and fall according to circumstances. When the quantity at any time brought to market, exceeds the demand of the day, the sellers who are the most pressed for money, lower the price. When the quantity at any time brought to market, is less than the demand of the day, the buyers who are the most pressed to have food raise the price by their competition. In countries of agriculture, of industry, and of free-trade with the world, such fluctuations are confined within certain limits, namely, they cannot rise higher than the faculties of the buyers can afford to pay for the shortest subsistence; they cannot sink lower than what the goods can be exported for with profit.

The faculties of the buyers of subsistence, are very different; because every man here may be supposed to be a buyer, except the farmers, and such landlords whose rents are paid in articles of subsistence. The faculties, therefore, of the lowest and most numerous class, are these which circumscribe the rising of the price.

Let me call the classes who buy, by the letters of the alphabet a, b, c, d, e, f. If there be subsistence to be sold, amply sufficient, and no more than sufficient, for these six classes, which I suppose to be ranged according to the ease of their circumstances, from a, the highest, to f, the lowest; then the price of full subsistence will be in proportion to the faculties of f. Should the provision prove insufficient for the ample subsistence of all the classes, the price will rise; and f will be able to buy a part only. But should this part become less than the shortest subsistence for f, the demand of f would be withdrawn from the market, which then would be overstocked for the demand of the higher classes.

Now in countries of industry, this never can be the case; because the class f is there the most numerous of any; and before it can be reduced to the last stage of want, the diminution of its consumption will far exceed all deficiencies of crops, and will carry the supply for the higher classes far beyond the proportion of their demand; and prices will fall: to prevent which fall, the proprietors of the subsistence mechanically adjust the price they sell at, to the abilities of the lowest class to purchase the shortest subsistence; and beyond this prices never can rise.

Let me apply this reasoning to the situation of Scotland for three years preceding March 1768.

The price of oat-meal, in the southern parts of the country was, during this period, constantly at or above one shilling per peck of eight pounds Amsterdam weight; and no misery was complained of by day-labourers who gain three shillings and sixpence and four shillings per week. This I reckon the class f in Scotland. From which I must conclude, that one shilling per peck of oat-meal, is compatible with the faculties of the Scots class of f. Again, four shillings per week is 10 l.8s. per annum; and the usual computation for the food of a strong man in oat-meal is six bolls one half per annum, (or 832 pounds Amsterdam weight,) which, at one shilling per peck, is 5 l. 4s. From this it appears, that in Scotland, and according to the manner of living in this country, as long as the grain consumed by our lowest class, does not exceed the value of one half of their gains, no distress is found. I must further observe, that this computation as to their gains, regards married men with wives and children; and as it is a matter of fact, well known here, that families do subsist on such gains, and at such prices; the ascertaining of this circumstance is far more useful for determining the important question concerning the proportion between the faculties of the lowest classes, and the rate of subsistence, than any calculation which can be made. From this I am led to demand, if prices be higher, and wages lower in England, than with us?

A quarter of wheat is reckoned for the subsistence of an inhabitant in England: and in France, where the people live in a manner upon bread alone, three septiers, or thirteen Winchester bushels, is a very reasonable allowance. There is also another very good way of comparing gains in England, with the rate of markets; namely, by observing how the sober married men among foot soldiers are found to live.

If a foot soldier have eight pence per diem, he is in a higher class than a Scots labourer who gains eight pence per diem; because he is paid for Sundays, as well as days of sickness and interruption from labour. The gains of the soldier are four shillings and eight pence every week in the year, the gains of the Scots labourer are four shillings, when he meets with no interruption.

Now in England, the lowest class, except the foot soldier, and the most numerous of any in the kingdom, is the country labourer who gains at least one shilling a day, in all seasons, of the year; as it appears from a late publication, intitled, 'A Six Weeks Tower through the Southern Counties of England and Wales.'

This author informs us, that in 1767, when high prices were so much complained of, bread was universally almost, at two-pence per pound, beef and mutton at four-pence; and that two-pence per diem is supposed to be equal to small beer; and in p. 179, he observes, that one shilling per diem the year round, with small beer, that is to say fourteen pence per diem, is excessively cheap labour. Now allowing an English labourer one pound and an half of bread, and three quarters of a pound of meat, with small beer, the expence will be eight-pence a day; consequently his food is but one penny more than one half of his wages, and day labourers are evidently the lowest class of industrious people all over England. What therefore are we to think of the universal clamour raised in the nation at that time, upon account of the distress of the industrious poor? What judgement are we to form concerning the universal acquiescence to the truth of these complaints by those who must have been the best informed concerning the true state of the matter? unless we suppose it to have been all a mere farce, or what the French call the secret of the comedy, to wit, a thing which every one knows, although nobody be supposed either to know it or to believe it.

The soldiers are evidently the class f in England. But the number of them is so small, when compared with any of the industrious classes, especially with the day labourers, that were it not for the frequent celibacy among them, I am persuaded high prices would greatly distress them, before any other class of men. The smallness of their numbers, I say, is an additional disadvantage to them; because it is the great number of the lowest class, which (for the reason already given) chiefly prevents prices from rising above their abilities to purchase a short subsistence.

While a foot soldier, then, can subsist upon his pay, at the rate of the English market, I never shall believe that any class of industrious people there, can be in such want as to require an extraordinary relief from the state; one especially which involves the landed interest (that is the farmers) in so great a distress, as to have the price of their grain diminished, without augmenting the quantity of it. This is the material difference between a reduction of prices when produced by plenty, and when produced by importation.

If it be said, that it is great severity to reduce people who labour hard, to the subsistence of an idle soldier, I answer, that people who labour hard, and those who added to their diligence, have also a share of ingenuity in their several professions, constantly receive wages proportionally higher. The example of the soldier is taken in order to form an estimate only of the price at which people may subsist; and not to determine the rate of wages; which the rate of demand for their labour will constantly regulate, independently of the price of subsistence; and this leads me to another branch of this doctrine, which is, That the rate of wages is in proportion to the value of the work performed, relatively to the person who employs the workman, and not in proportion to the price of subsistence.

This I take to be an universal principle, in all countries of industry. It is this which distinguishes the industrious free-man from the poor slave. The industrious free-man must share in the profits of him who employs him; the poor slave can demand of his master no more than subsistence.

Let therefore subsistence be ever so cheap, the free-man will insist upon wages in proportion to the value of his work, when brought to market. Should his employer tell him, that because subsistence is at a low price, he must therefore work cheaper, he will tell his employer, that since on this account he sells no cheaper to his customers, neither will he work cheaper for him; and his argument is good; because were subsistence to rise ever so high, this would be no inducement to his employer to raise his wages in proportion, as long as the rate of the market for goods or labour, stands the same as at other times.

When the rate of the market for goods or labour is therefore raised upon any branch of industry; whether in consequence of a rise in the price of subsistence, or in consequence of a higher demand; then wages will rise, in spite of all attempts to circumscribe them. If, on the other hand, the rate of the market for goods or labour shall either stand the same, or even diminish, the employer will give no augmentation of wages, let provisions be ever so dear.

The poor slave, again, who gets no more than his subsistence at all times, is in the situation of the poor labouring horse, who is fed with the same provender, let it be dear or cheap.

What I have said, I take to be a fair and candid representation of general principles, which no state can alter: and when an attempt is made to counteract them, it will not succeed. Some individuals, indeed, may be relieved by it; but by stopping a small hole, a breach will be made in another part.

In every industrious society, the lowest class is frequently found reduced to the barely necessary. The competition among themselves to obtain employment at any rate, produces this effect; and competition must be allowed its free course.

I must now set forth the strongest objection which can be made against this whole doctrine; and, in my answer to it, I shall have an opportunity of explaining my meaning better than as yet I have done. The objection is this:

If it be true that in an industrious nation where, upon the average, grain is annually exported, the price of the shortest subsistence can at no time rise above the faculties of the lowest class of those who go to market; then we must say, that no scarcity whatsoever can there reduce the quantity of subsistence below what is barely necessary to feed the people.

Were I at once frankly to avow this consequence, and say, that in industrious nations, who on the average of years are subsisted on their own growth, the difference of crops is not greater than the difference between ample and bare subsistence, many at first sight, might be startled at so bold an assertion.

I must therefore say, that where crops are so precarious, as, in some years, to deprive the people of the shortest subsistence, no nation can be industrious. What trade, what industry can stand its ground, while a part of the inhabitants are absolutely starving?

I have only one objection more to obviate, which is: That the supposition I have been reasoning on, to wit that England produces in the worst years a bare subsistence for all her inhabitants, cannot be admitted to be true.

The fact I apprehend to be really so: as I may, however, be mistaken, I must next propose a proper remedy even against this problematical want (of) subsistence.

We cannot reasonably suppose this deficiency to exceed (on the average of years) the greatest quantity of subsistence that ever was imported in any one year. Now this quantity is not equal to 200,000 quarters of all sorts of grain, as has been observed above. Let government, therefore, be at the expence of laying up upon the first appearance of plenty, 200,000 quarters of wheat and rye. Let them be deposited in some of the most considerable ports in the kingdom, and let none of this quantity ever be sold cheaper than at the price which at present is thought so high as to engage us to take off the duties on importation.

Were it to be issued at a lower rate than this the whole intention of such granaries would be defeated. Nay, were they to contain many millions of quarters in place of 200,000, still were they opened at a cheaper rate than at the highest price which grain ever ought to bear, they would soon be exhausted; because it is the high price only which circumscribes the consumption of the lowest class to the barely necessary, even in the times of free importation.

I am very far from wishing to see any industrious person in distress for want of food. The expedients I have been proposing, namely the raising of their wages, and establishing a granary, would, I am persuaded, prove much more certain and salutary expedients than any other, to prevent so great a distress. But I think, on the other hand, that the more soberly our lowest classes are made to live at all times, the cheaper may our manufactures be sold; and the better will foreign Markets for them be supplied.

Every one will acknowledge, that the cheapness of subsistence is never attended with a proportional fall in the price of commodities; and many know by experience, that it is more commonly attended with the riot and idleness of those upon whom the greatness of this nation principally depends, namely, the lower classes of our people.

I shall therefore conclude by observing, First, That the best, and indeed the only way to judge of reasonable prices, is to compare, as I have said, the gains of the lower classes with the price of the shortest subsistence; and that as long as the latter does not rise above the proportion of the first, nothing is to be feared. Secondly, That while there remains some small advantage in this proportion in favour of the lower classes, no great harm can ensue; but as soon as all proportion is totally lost, by the low price of provisions, industry runs a great risk to suffer in place of gaining ground.

Thirdly, That this proportion is to be maintained by granaries in years of scarcity, and by bounties in years of plenty. And, fourthly, That until experience shall evince, that the expedients here proposed are ineffectual, all importation should be laid aside, as a remedy violent in its nature; destructive to agriculture, and tending to diminish the balance of our trade, with which alone we can discharge the heavy debt we owe to other nations.

Bounties which promote exportation, and which raise the prices of grain to the due proportion of the gains of the lowest class, even in years of plenty, resemble, in a great measure, an excise laid upon the luxury of the lower classes. The difference consists in this; that in bounties, the public incurs an expence, which not only remains at home, but has the effect of bringing in a great addition of wealth from our neighbours. This first circulates among ourselves, and at last finds its way into the exchequer. An excise again, brings money directly thither, without any circulation at all among ourselves, which is undoubtedly less advantageous to a trading nation.

Importation in England did not, while the ports were open in 1768 produce, I confess, any very hurtful consequences; because it then happened, that no nation in Europe enjoyed so great plenty of wheat, as to bring the price of this grain, so low as to hurt the English farmer. But it was not so in Scotland; where a very small importation of the poorest subsistence (oat-meal) will at any time bring our markets so low as to throw many of our farmers into the greatest distress.


1. The cities of the Austrian Netherlands are, from these causes, at present in a state of depopulation; and the industrious classes are assembling in the villages, which are beginning to rival the populousness of the cities. In these villages, the privileges of the cities are not established. Privileges which will in all probability end in their bankruptcy as well as depopulation. The depopulation will follow from the causes already mentioned; the bankruptcy from the sums these corporations lend to the sovereign, on the credit of new impositions constantly laying upon every branch of consumption. This is so true, that the acquisition of this country (one of the most fertile and most populous in Europe) would hardly be worth the having, if the debts due to the corporations were to be fairly paid, and their ruinous privileges (as they are called) allowed to subsist without alteration.

Contents | next chapter