An Inquiry into the Principles of Political Oeconomy
by James Steuart

Book II

Of Trade and Industry

Introduction

    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 oeconomy, 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. Chap. 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.

Chap. 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 oeconomy 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.

Chap. 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.

Chap. 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.

Chap. 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 flourishiug 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.

Chap. 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.

Chap. 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.


Chap. 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
synonimous 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 synonimous
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 synonimous 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
synonimous 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 cheapning 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 synonimous, 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.


Chap. 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.

Chap. 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 oeconomy 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
oeconomy 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 oeconomy; 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.

Chap. X

Of the Balance of Work and Demand

    It is quite impossible to go methodically through the subject
of political oeconomy, 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
recompenced 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.

Chap. 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. Chap. 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,
Chap. 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.

Chap. 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 oeconomy 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.

Chap. 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 oeconomy 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 oeconomy 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 oeconomy 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 indispensible 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 oeconomy, 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.

Chap. XIV

Security, Ease and Happiness, no inseparable Concomitants of
Trade and Industry

    The republic of Lycurgus represents the most perfect plan of
political oeconomy, 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 oeconomy 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
oeconomy, 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, cloathing, 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 oeconomy, 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 cloaths, 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 oeconomy; 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 oeconomy, 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
oeconomy, 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.

Chap. 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 oeconomy, 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 oeconomical, 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, oeconomy, 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 oeconomy.
    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.


Chap. 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 hest bargain possible for
themselves. These transactions imply a mutual dependence upon one
another, which may either be necessary or contingent. It is
necessary, when one of the nations cannot subsist without the
assistance of the other, as is the case between the province of
Holland, and those countries which supply it with grain; or
contingent, when the wants of a particular nation cannot be
supplied by their own inhabitants, from a want of skill and
dexterity, only.
    Wherever, therefore, one nation finds another necessarily
depending upon her for particular branches of traffic, there is a
certain foundation for foreign trade; where the dependence is
contingent, there is occasion for management, and for the hand of
an able statesman.
    The best way to preserve every advantage is, to examine how
far they are necessary, and how far they are only contingent, to
consider in what respect the nation may be most easily rivalled
by her neighbours, and in what respect she has natural advantages
which cannot be taken from her.
    The natural advantages are chiefly to be depended on: France,
for example, never can be rivalled in her wines. Other countries
may enjoy great advantages from their situation, mines, rivers,
sea-ports, fishing, timber, and certain productions proper to the
soil. If you abstract from these natural advantages, all nations
are upon an equal footing as to trade. Industry and labour are no
properties attached to place, any more than oeconomy and
sobriety.
    This proposition may be called in question, upon the
principles of M. de Montesquieu, who deduces the origin of many
laws, customs, and even religions, from the influence of climate.
This great man reasoned from fact and from experience, and from
the power and tendency of natural causes, to produce certain
effects, when they are not checked by other circumstances; but in
my method of treating this subject, I do not suppose that these
causes are ever to be allowed to produce their natural and
immediate effects, when such effects would be followed by a
political inconvenience: but I constantly suppose a statesman at
the head of government, who makes every circumstance concur in
promoting the execution of the plan he has laid down.
    First, If a nation then has formed a scheme of being long
great and powerful by trade, she must first apply closely to the
manufacturing every natural produce of the country. For this
purpose a sufficient number of hands must be employed: for if
hands be found wanting, the natural produce will be exported
without receiving any additional value from labour; and the
consequences of this natural advantage will be lost.
    The price of food, and all necessaries for manufacturers,
must be found at an easy rate.
    And, in the last place, if oeconomy and sobriety in the
workmen, and good regulations on the part of the statesman, are
not kept up, the end will not be obtained: for if the
manufacture, when brought to market, do not retain the advantages
which the manufacturer had in the beginning, by employing the
natural produce of the country; it is the same thing as if the
advantage had not existed. I shall illustrate this by an example.
    I shall suppose wool to be better, more plentiful, and
cheaper, in one country than in another, and both to be rivals in
the woollen trade. It is natural that the last should desire to
buy wool of the first, and that the other should desire to keep
it at home, in order to manufacture it. Here then is a natural
advantage which the first country has over the latter, and which
cannot be taken from her. I shall suppose that subsistence is as
cheap in one country as in the other; that is to say, that bread
and every other necessary of life is at the same price. If the
workmen of the first country (by having been the founders of the
cloth manufacture, and by having had, for a long tract of years,
so great a superiority over other nations, as to make them, in a
manner, absolutely dependent upon them for cloths) shall have
raised their prices from time to time; and if, in consequence of
large profits, long enjoyed without rivalship, these profits
shall have been consolidated with the real value, in consequence
of an habitually greater expence in living, which implies an
augmentation of wages; this country may thereby lose all the
advantages it had from the low price and superior quality of its
wool. But if, on the other hand, the workmen in the last country
work less, be less dextrous, pay extravagant prices for wool at
prime cost, and be at great expence in carriage; if manufactures
cannot be carried on successfully, but by public authority, and
if private workmen be crushed with excessive taxes upon their
industry; all the accidental advantages which the last country
had over the first, may come to be more than balanced, and the
first may regain those which nature first had given her. But this
should by no means make the first country rest secure. These
accidental inconveniences found in the rival nation may come to
cease; and therefore her only real security for this branch, will
be the cheapness of the workmanship.
    Secondly, In speaking of a standard price, for goods in the
last chapter, I established a distinction between one regulated
by the height of foreign demand, and another kept as low as the
possibility of supplying the manufacture can admit. This requires
a little explanation.
    It must not here be supposed that a people, from a principle
of public spirit, will ever be engaged to relinquish the profit
of a rise in foreign demand; and as this rise may proceed from
circumstances and events which are entirely hid from the
manufacturers, such revolutions are unavoidable. We must
therefore restrain the generality of our former proposition, and
observe, that the indispensible vibrations of this foreign demand
do no harm; but that the statesman should be constantly on his
guard to prevent the subversion of the balance, or the smallest
consolidation of extraordinary profits with the real value. This
he may accomplish, as has been observed, by multiplying hands in
those branches of exportation, upon which profits have risen.
This will increase the home supply, and frustrate his own people
of extraordinary gains, which would otherwise terminate in a
prejudice to foreign trade.
    A statesman may sometimes, out of a principle of benevolence,
perhaps of natural equity towards the classes of the industrious,
as well as from sound policy, permit extraordinary profits, as an
encouragement to some of the more elegant arts, which serve as an
ornament to a country; which establish a reputation for taste and
refinement in favour of a people, and thereby make strangers
prefer articles of their production, which have no superior merit
but the name of the country they come from: but even these, he
never ought to allow to rise so high in the price as to prove an
encouragement to other nations to establish a successful
rivalship.
    Thirdly, The encouragement recommended to be given to the
domestic consumption of superfluities, as oft as the foreign
demand for them happens to fall so low as to be followed with the
distress of the workmen, requires a little farther explanation.
    If what I laid down in the last chapter with respect to this
encouragement be taken literally, I own it appears an absurd
supposition, because it both implies a degree of public spirit in
those who are in a capacity to purchase the superfluities, no
where to be met with, and at the same time a self-denial, in
discontinuing the demand, so soon as another branch of foreign
trade is opened for the employment of the industrious; one and
the other being equally contrary to the principles upon which we
have founded the whole scheme of our political oeconomy.
    I have elsewhere observed, that were revolutions to happen as
suddenly as I am obliged to represent them, all would go into
confusion.
    What, therefore, is recommended upon such an exigence comes
to this. That when a statesman finds, that the natural taste of
his people does not lead them to profit of the surplus of
commodities which lie upon hand, and which used to be exported,
he should interpose his authority and management in such a way as
to prevent the distress of the workmen, and when, by a sudden
fall in a foreign demand, this distress becomes unavoidable,
without a more powerful interposition, he should then himself
become the purchaser, if others will not; or, by premiums or
bounties on the exportation of the surplus which lies upon hand,
promote the sale of it at any rate, until the supernumerary hands
can be otherwise provided for. And although I allow that the rich
people of a state are not commonly led, from a principle either
of public spirit or self-denial, to concur in such political
operations; yet we cannot deny, that it is in the power of a good
governor, by exposing the political state of certain classes of
the people, to prevail with men of substance to join in schemes
for their relief; and this is all I intend to recommend in
practice. My point of view is to lay down the principles, and I
never recommend them farther than they may be rendered possible
in execution, by preparatory steps, and by properly working on
the spirit of the people.

Chap. 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 oeconomy, until the unwary beginners shall fall
into the inconveniences generally attending upon wealth and ease.
    The second cause of decline it is far more difficult to
remove. The root of it lies deep, and is ingrafted with the
spirit and manners of the whole people, high and low. The lower
classes have contracted a taste for superfluity and expence which
they are enabled to gratify, by working for their own countrymen;
while they despise the branches of foreign trade as low and
unprofitable. The higher classes again depend upon the lower
classes, for the gratification of a thousand little trifling
desires, formed by the taste for dissipation, and supported by
habit, fashion, and a love of expence.
    Here then is a system set on foot, whereby the poor are made
rich, and the rich are made happy, in the enjoyment of a
perpetual variety of every thing, which can remove the
inconveniences to which human nature is exposed. Thus both
parties become interested to support it, and vie with one another
in the ingenuity of contriving new wants; the one from the
immediate satisfaction of removing them; the other from the
profit of furnishing the means, and from the hopes of one day
sharing in them.
    But even for this great evil, the very nature of man points
out a remedy. It is the business of a statesman to lay hold of
it. The remedy flows from the instability of every taste not
founded upon rational desires.
    In every country of luxury, we constantly find certain
classes of workmen in distress, from the change of modes. Were a
statesman upon his guard to employ such as are forced to be idle,
before they betake themselves to new inventions, for the support
of the old plan, or before they contract an abandoned and vicious
habit, he would get them cheap, and might turn their labour both
to the advantage of the state and to the discouragement of
luxury.
    I confess, however, that while a luxurious taste in the rich
subsists, industrious people will always be ready to supply the
instruments of it to the utmost extent; and I also allow, that
such a taste has infinite allurements, especially while youth and
health enable a rich man to in it. Those, however, who are
systematically luxurious, that is, from a formed taste and
confirmed habit, are but few, in comparison of those who become
so from levity, vanity, and the imitation of others. The last are
those who principally support and extend the system; but they are
not the most incorrigible. Were it not for imitation, every age
would seek after, and be satisfied with the gratification of
natural desires. Twenty-five might think of dress, horses,
hunting, dogs, and generous wines: forty, of a plentiful table,
and the pleasures of society: sixty, of coaches, elbow-chairs,
soft carpets, and instruments of ease. But the taste for
imitation blends all ages together. The old fellow delights in
horses and fine clothes; the youth rides in his chariot on
springs, and lolls in an easy chair, large enough to serve him
for a bed. All this proceeds from the superfluity of riches and
taste for imitation, not from the real allurements of ease and
taste for luxury, as every one must feel, who has conversed at
all with the great and rich. Fashion, which I understand here to
be a synonimous term for imitation, leads most people into
superfluous expence, which is so far from being an article of
luxury, that it is frequently a load upon the person who complies
with it. All such branches of expence, it is in the power of a
statesman to cut off, by setting his own example, and that of his
favourites and servants, against the caprice of fashion.
    The levity and changeableness of mankind, as I have said,
will even assist him. A generation of oeconomists is sometimes
found to succeed a generation of spendthrifts; and we now see,
almost over all Europe, a system of sobriety succeeding an
habitual system of drunkenness. Drunkenness, and a multitude of
useless servants, were the luxury of former times.
    Every such revolution may be profited of by an able
statesman, who must set a good example on the one hand, while, on
the other, he must profit of every change of taste, in order to
re-establish the foreign trade of his subjects. An example of
frugality, in the head of a luxurious people, would do finite
harm, were it intended to reform the morals of the rich only,
without indemnifying the poor for the diminution upon
consumption.
    At the same time, therefore, that luxury comes to lose ground
at home, a door must be opened, to serve as an out-let for the
work of those hands which must be thereby made idle; and which,
consequently must fall into distress.
    This is no more than the principle before laid down, in the
fifteenth chapter, reversed: there we said, that when foreign
demand begins to decline, domestic luxury must be made to
increase, in order to soften the shock of the sudden revolution
in favour of the industrious. For the same reason here we say,
that foreign trade must be opened upon every diminution of
domestic luxury.
    How few Princes do we find either frugal or magnificent from
political considerations! And, this being the case, is it not
necessary to lay before them the natural consequences of the one
and the other? And it is still more necessary to point out the
methods to be taken in order to avoid the inconveniences which
may proceed from either.
    Under a prodigal administration, the number of people will
increase. The statesman therefore should keep a watchful eye upon
the supplying of subsistence. Under a frugal reign, numbers will
diminish, if the statesman do not open every channel which may
carry off the superfluous productions of industry. Here is the
reason: a diminution of expence at home, is a diminution of
employment; and this again implies a diminution of people;
because it interrupts the circulation of the subsistence which
made them live; but if foreign trade he made to fill up the void,
the nation will preserve its people, and the savings of the
Prince will be compensated by the balance coming in from
strangers.
    These topics are delivered as hints only; and the
amplification of them might not improperly have a place here; did
I not expect to bring them in to greater advantage, after
examining the principles of taxation, and pointing out those
which direct the application of public money.


Chap. 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 oeconomy, forces me to a frequent repetition of
principles. I have no other rule to judge whether such
repetitions be superfluous, or necessary, but by the tendency
they have to give me a more distinct view of my subject. This is
commonly the case when the same principles are applied to
different combinations of circumstances.
    Almost every thing to be said on the head mentioned in the
title of this chapter, has been already taken notice of; and my
present intention is merely to lay together ideas which appear
scattered, because they have been occasionally brought in by
their relations to other matters.
    The methods of lowering the price of manufactures, so as to
render them exportable, are of two kinds.
    The first, such as proceed from a good administration, and
which bring down prices within the country, in consequence of
natural causes.
    The second, such as operate upon that part only which comes
to be exported in consequence of a proper application of public
money.
    As I have not yet inquired into the methods of providing a
public fund, it would, I think, be contrary to order to examine
in this place the doctrine of premiums for bringing down the
price of manufactures. This operation will come in more naturally
afterwards, and the general distinction here mentioned, is only
introduced by the by, that my readers may retain it and apply it
as we go along.
    The end proposed is to lower the price of manufactures, so
that they may be exported. The first thing therefore to be known,
is the cause from whence it happens, that certain manufactures
cannot be furnished at home so cheap as in other countries; the
second, how to apply the proper remedy for lowering the price of
them.
    The causes of high prices, that is, of prices relatively
higher than they are found to be in other nations, are reducible
to four heads; which I shall lay down in their order, and then
point out the methods of removing them likewise, in their order.
    First, The consolidation of high profits with the real value
of the manufacture. This cause operates in countries where luxury
has gained ground, and where domestic competition has called off
too many of the hands, which were formerly content to serve at a
lower price, and for smaller gains.
    Secondly, The rise in the price of articles of the first
necessity. This cause operates when the progress of industry has
been more rapid than that of agriculture. The progress of
industry, as we have shewn, necessarily implies an augmentation
of useful inhabitants; and as these have commonly wherewithal to
purchase subsistence, the moment their numbers swell above the
proportion of the food produced by agriculture, or above what is
found in the markets of the country, or brought from abroad, they
enter into competition and raise the price of it. Here then let
it be observed, by the by, that what raises the price of
subsistence is the augmentation of the number of useful
inhabitants, that is, of such as are easy in their circumstances.
Let the wretched be ever so many, let abusive procreation go on
ever so far, such inhabitants will have little effect in raising
the price of food, but a very great one in increasing the misery
of their own class. A proof of this is to be met with in many
provinces where the number of poor is very great, and where at
the same time the price of necessaries is very low; whereas no
instance can be found where a number of the industrious being got
together, does not occasion an immediate rise on most of the
articles of subsistence.
    Thirdly, The natural advantages of other countries. This
operates in spite of all the precautions of the most frugal and
laborious people. Let them deprive themselves of every
superfluity; let them be ever so diligent and ingenious; let
every circumstance be improved to the utmost by the statesman for
the establishment of foreign trade; the advantage of climate and
situation may give such a superiority to the people of another
country, as to render a direct competition with them impossible.
    Fourthly, The superior dexterity of other nations in working
up their manufactures, their knowledge in the science of trade,
the promptitude of their payments, the advantage they have in
turning their money to account in the intervals of their own
direct circulation, the superior abilities of their statesman,
the application of their public money, in one word, the
perfection of their political oeconomy.
    Before I enter upon the method of removing these several
inconveniences, I must observe, that as we are at present
treating of the relative height of the price of manufactures, a
competition between nations is constantly implied. It is this
which obliges a statesman to be principally attentive to the rise
of prices. The term competition is relative to, and conveys the
idea of emulation between two parties striving to compass the
same end. I must therefore distinguish between the endeavours
which one nation makes to retain a superiority already got, and
the endeavours which another nation makes in order to acquire it.
The first I shall call a competition to retain; the second, a
competition to acquire.
    The first three heads represent the inconveniences to which
the competitors to retain are liable; and the fourth comprehends
those to which the competitors to acquire are most commonly
exposed.
    Having digested our subject into order, I shall run through
the principles which severally influence the removing of every
inconvenience, whether incident to a nation whose foreign trade
is already well established, or to another naturally calculated
for entering into a competition for the acquisition of it.
    In proposing a remedy for the particular causes of the rise
of prices above mentioned, we must suppose every one entirely
simple, and uncompounded with the others; a thing which in fact
seldom happens. This I do for the sake of distinctness; and the
principal difficulty in practice is to combine the remedies in
proportion to the complication of the disease. I now come to the
first of the four causes of high prices, to wit, consolidated
profits.
    The whole doctrine of these has been abundantly set forth in
the 10th chapter. We there explained the nature of them, shewed
how the subversion of the balance, by a long preponderancy of the
scale of demand, had the effect of consolidating profits in a
country of luxury; and observed, that the reducing them to the
proper standard could never fail of bringing those who had long
enjoyed them, into distress.
    The question now before us is how to reduce them, when
foreign trade cannot otherwise be retained, let the consequences
be ever so hurtful to certain individuals. When the well being of
a nation comes in competition with a temporary inconvenience to
some of the inhabitants, the general good must be preferred to
particular considerations.
    I have observed above, that domestic luxury, by offering high
prices upon certain species of industry, calls off many hands
employed to supply the articles of exportation, upon which
profits are generally very moderate. The first natural and
immediate effect of this, is, to diminish the hands employed in
furnishing the foreign demand; consequently, to diminish the
supply; consequently, to occasion a simple competition on the
side of the strangers, who are the purchasers; consequently, to
augment profits to the furnishers until by the rise and
consolidation of such profits the market is deserted.
    The very progress here laid down, points out the remedy. The
number of hands employed in these particular branches must be
multiplied; and if the luxurious taste and wealth of the country
prevent any one who can do better, from betaking himself to a
species of industry lucrative to the nation, but ungrateful to
those who exercise it, the statesman must collect the children of
the wretched into workhouses, and breed them to this employment,
under the best regulations possible for saving every article of
necessary expence; here likewise may be employed occasionally
those above mentioned, whom the change of modes may have cast out
of employment, until they can be better provided for. This is
also an outlet for foundlings, since many of those who work for
foreign exportation, are justly to be ranked in the lowest
classes of the people; and in the first book we proposed, that
every one brought up at the expence of public charity, should be
thrown in for recruiting these classes, which can with greatest
difficulty support their own numbers by propagation.
    Here let me observe, that although it be true in general,
that the greatest part of exportable manufactures do yield but
very middling profits, from the extension of industry in
different countries, yet sundry exceptions may be found;
especially in nations renowned for their elegance of taste. But
how quickly do we see these lucrative branches of foreign trade
cut off, in consequence of the very inconvenience we here seek a
remedy for. The reason is plain. When strangers demand such
manufactures, they share only in the instruments of foreign
luxury, which bring every where considerable profits to the
manufacturer. These high profits easily establish a rivalship in
favour of the nation to whom they are supplied; because a hint is
sufficient to enable such as exercise a similar profession at
home, to supply their own inhabitants. This being the case, an
able statesman should be constantly attentive to every growing
taste among foreign nations for the inventions of his people; and
so soon as his luxurious workmen have set any one on foot, he may
throw this branch into the hands of the most frugal, in order to
support it, and then give them such encouragement as to prevent
the rivalship of those strangers at least, who are accustomed to
work for larger profits. This is one method of turning a branch
of luxury into an article of foreign trade. Let me illustrate
this by an example.
    What great advantages do not the French reap from the
exportation of their modes? But how quickly do we find their
varnishes, gauzes, ribbands, and colifichets, imitated by other
nations? For no other reason but because of the large, or
consolidated profits enjoyed by the French workmen themselves,
who, fertile in new inventions, and supported by their reputation
for the elegance of their taste in matters of dress, have got
into possession of the right of prescribing to all Europe the
standard of taste in articles of mere superfluity. This however
is no permanent prerogative; and that elegant people, by long
setting the example, and determining the standard of refinement
in some luxurious arts, will at last inspire a similar taste into
their scholars, who will thereby be enabled to supplant them.
Whereas were they careful to supply all their inventions at the
lowest prices possible, they would ever continue to be the only
furnishers.
    The method therefore of reducing consolidated profits,
whether upon articles of exportation, or home consumption, is to
increase the number of hands employed in supplying them; and the
more gradually this change is made to take place, the fewer
inconveniences will result to those who will thereby be forced to
renounce them.
    A country which has an extensive territory, and great
opportunities of extending her agriculture (such as in a former
chapter I supposed the present situation of France to be) may,
under a good administration, find the progress of luxury very
compatible with the prosperity of her foreign trade; because
inhabitants may be multiplied at discretion. But so soon as
subsistence becomes hard to be obtained, this expedient is cut
off. A statesman must then make the best of the inhabitants he
has, luxury must suffer a check; and those who are employed in
supplying home consumption at high prices, must be made to reduce
their consolidated profits, in order to bring the price of their
manufactures within such bounds as to make them vendible in
foreign markets.
    If manufacturers become luxurious in their way of living, it
must proceed from their extraordinary profits. These they may
still continue to have, as long as the produce of their work is
consumed at home. But no merchant will pretend to sell it out of
the country; because, in this case, he will find the labour of
other people who are less luxurious, and consequently work
cheaper, in competition with him.
    To re-establish then the foreign trade, these consolidated
profits must be put an end to, by attacking luxury when
circumstances render an augmentation of people inconvenient, and
prices will fall of course.
    This will occasion great complaints among all sorts of
tradesmen. The cry will be, that trade is ruined, manufacturers
are starving, and the state is undone: but the truth will be,
that manufacturers will, by their labour, begin to enrich their
own nation, at the expence of all those who trade with her,
instead of being enriched at the expence of their own countrymen;
and by a revolution only in the balance of wealth at home.
    It will prove very discouraging to any statesman to attempt a
sudden reform of this abuse of consolidated profits, and to
attack the luxury of his own people. The best way therefore is to
prevent matters from coming to such as pass, as to demand so
dangerous and difficult a remedy.
    There is hardly a possibility of changing the manners of a
people, but by a proper attention to the education of the youth.
All methods, therefore, should be fallen upon to supply
manufactures with new hands; and lest the contagion of example
should get the better of all precautions, the seat of
manufactures might be changed; especially when they are found in
great and populous cities, where living is dear: in this case,
others should be erected in the provinces where living is cheap.
The state must encourage these new undertakings; numbers of
children must be taken in, in order to be bred early to industry
and frugality; this again will encourage people to marry and
propagate, as it will contribute towards discharging them of the
load of a numerous family. If such a plan as this be followed,
how inconsiderable will the number of poor people become in a
little time; and as it will insensibly multiply the useful
inhabitants, out of that youth which recruited and supported the
numbers of the poor, so the taxes appropriated for the relief of
poverty may be then wholly applied, in order to prevent it.
    Laws of naturalization have been often proposed in a nation,
where consolidated profits have occasioned the inconveniences for
which we have here been proposing a remedy. By this expedient
many flatter themselves to draw industrious strangers into the
country, who being accustomed to live more frugally, and upon
less profits, may, by their example and competition, beat down
the price of work among the inhabitants.
    Several circumstances concur to defeat the success of this
scheme. The first is, that consolidated profits are not the only
inconvenience to be removed: there is also a complication of high
prices upon many necessaries. Secondly, as no real change has
been proposed as a concomitant of such naturalization-laws (such
as a regulation for augmenting the supply of subsistence, and
fixing the price of it within proper bounds) these strangers,
who, as such, must be exposed to extraordinary expence, are not
able to subsist, nor consequently to work so cheap as they did at
home. Besides, what can be supposed to be their motive of coming,
if it be not to have higher wages, and to live better?
    Here then is a nation sending for strangers, in order that
they may work cheaper; and strangers flocking into the country in
hopes of selling their work dearer. This is just the case with
two friends who are about making a bargain; the seller imagines
that his friend will not grudge a good price. The buyer, on the
other hand, flatters himself that his friend will sell to him
cheaper than to another. This seldom fails to produce discontent
on both sides.
    Besides, unless the quantity of food be increased, if
strangers are imported to eat part of it, natives must in some
degree starve and if you augment the quantity of food, and keep
it at a little lower price than in neighbouring nations, your own
inhabitants will multiply; the state may take great numbers of
them into their service when young; they soon come to be able to
do something in the manufacturing way; they may be bound for a
number of years, sufficient to indemnify the public for the first
expence; and the encouragement alone of having bread cheaper than
elsewhere, will bring you as many strangers as you incline to
receive, provided a continual supply of food can be procured in
proportion to the increase of the people.
    But I imagine that it is always better for a state to
multiply by means of its own inhabitants, than by that of
strangers; for many reasons which to me appear obvious.
    We come now to the second cause of high prices, to wit, a
rise in the value of the articles of the first necessity, which
we have said proceeds from the progress of industry having
outstripped the progress of agriculture. Let me set this idea in
a clearer light; for here it is expressed in too general terms to
be rightly viewed on all sides.
    The idea of inhabitants being multiplied beyond the
proportion of subsistence, seems to imply that there are too many
already; and the demand for their industry having been the cause
of their multiplication, proves that formerly there were too few.
Add to this, that if, notwithstanding the rise upon the price of
work proceeding from the scarcity of subsistence, the scale of
home demand be found to preponderate, at the expence of foreign
trade, this circumstance proves farther, that however the
inhabitants may be already multiplied above the proportion of
subsistence, their numbers are still too few for what is demanded
of them at home; and for what is required of them towards
promoting the prosperity of their country, in supporting their
trade abroad.
    From this exposition of the matter, the remedy appears
evident: both inhabitants and subsistence must be augmented. The
question comes to be, in what manner, and with what precautions,
must these operations be performed?
    Inhabitants are multiplied by reducing the price of
subsistence to the value, which demand has fixed upon the work of
those who are to consume it. This can in no other way be
accomplished than by augmenting the quantity, by importation from
foreign parts, when the country cannot be made to produce more of
itself.
    Here the interposition of a statesman is absolutely
necessary; since great loss may often be incurred by bringing
down the price of grain in a year of scarcity. Premiums,
therefore, must be given upon importation, until a plan can be
executed for the extending of agriculture; of which in another
place. This must be gone about with the greatest circumspection;
for if grain be thereby made to fall too low, you ruin the landed
interest, and although (as we have said above) all things soon
become balanced in a trading nation, yet sudden and violent
revolutions, such as this must be, are always to be apprehended.
They are ever dangerous; and the spirit of every class of
inhabitants must be kept up.
    By a discredit cast upon any branch of industry, the hands
employed in it may be made to abandon it, to the great detriment
of the whole. This will infallibly happen, when violent
transitions do not proceed from natural causes, as in the example
here before us, namely, when the price of grain is supposed to be
brought down, from the increase of its quantity by importation,
and not by plenty. Because upon the falling of the market by
importation, the poor farmer has nothing to make up for the low
price he gets for his grain; whereas when the fall proceeds from
plenty, he has an additional quantity.
    In years, therefore, of general scarcity, a statesman should
not, by premiums given, reduce the price of grain, but in a
reciprocal proportion to the quantity wanted: that is to say, the
more grain is wanted, the less the price should be diminished.
    It may appear a very extensive project for any government to
undertake to keep down the prices of grain, in years of general
scarcity. I allow it to be politically impossible to keep prices
low, because if all Europe be taken together, the produce of the
whole is one with another consumed by the inhabitants; and in a
year when there is a general scarcity, it would be very hard, if
not impossible, (without having previously established a plan for
this purpose) to make any nation live in plenty while others are
starving. All therefore that is proposed, is to keep the prices
of grain in as just a proportion as possible to the plenty of the
year.
    Now if a government do not interpose, this never can be the
case. I shall suppose the inhabitants of a country to consume, in
a year of moderate plenty, six millions of quarters of grain; if
in a year of scarcity it shall be found, that one million of
quarters, or indeed a far less quantity, be wanting, the five
millions of quarters produced, will rise in their price to
perhaps double the ordinary value, instead of being increased by
one fifth only. But if you examine the case in countries where
trade is not well established, as in some inland provinces on the
continent, it is no extraordinary thing to see grain bearing
three times the price it is worth in ordinary years of plenty,
and yet if in such a year there were wanting six months'
provisions for the inhabitants of a great kingdom, all the rest
of Europe would perhaps hardly be able to keep them from
starving.
    It is the fear of want and not real want, which makes grain
rise to immoderate prices. Now as this extraordinary revolution
in the rise of it, does not proceed from a natural cause, to wit,
the degree of scarcity, but from the avarice and evil designs of
men who hoard it up, it produces as bad consequences to that part
of the inhabitants of a country employed in manufactures, as the
fall of grain would produce to the farmers, in case the prices
should be, by importation, brought below the just proportion of
the quantity produced in the nation.
    Besides the importation of grain, there is another way of
increasing the quantity of subsistence very considerably, in some
countries of Europe. In a year of scarcity, could not the
quantity of food be considerably augmented by a prohibition to
make malt liquors, allowing the importation of wines and
brandies; or indeed without laying any restraint upon the liberty
of the inhabitants as to malt liquors, I am persuaded that the
liberty of importing wines duty free, would, in years of
scarcity, considerably augment the quantity of subsistence.
    This is not a proper place to examine the inconvenience which
might result to the revenue by such a scheme: because we are here
talking of those expedients only which might be fallen upon to
preserve a balance on foreign trade. An exchequer which is filled
at the expence of this, will not continue long in a flourishing
condition.
    These appear to be the most rational temporary expedients to
diminish the price of grain in years of scarcity; we shall
afterwards examine the principles upon which a plan may be laid
down to destroy all precariousness in the price of subsistence.
    Precautions of another kind must be taken in years of plenty;
for high prices occasioned by exportation are as hurtful to the
poor tradesman as if they were occasioned by scarcity. And low
prices occasioned by importation are as hurtful to the poor
husbandman as if his crop had failed him.
    A statesman therefore, should be very attentive to put the
inland trade in grain upon the best footing possible, to prevent
the frauds of merchants, and to promote an equal distribution of
food in all corners of the country. and by the means of
importation and exportation, according to plenty and scarcity, to
regulate a just proportion between the general plenty of the year
in Europe, and the price of subsistence; always observing to keep
it somewhat lower at home, than it can be found in any nation
rival in trade. If this method be well observed, inhabitants will
multiply; and this is a principal step towards reducing the
expence of manufactures; because you increase the number of
hands, and consequently diminish the price of labour.
    Another expedient found to operate most admirable effects in
reducing the price of manufactures (in those countries where
living is rendered dear, by a hurtful competition among the
inhabitants for the subsistence produced) is the invention and
introduction of machines. We have, in a former chapter, answered
the principal objections which have been made against them, in
countries where the numbers of the idle, or triflingly
industrious are so great, that every expedient which can abridge
labour is looked upon by some as a scheme for starving the poor.
There is no solidity in this objection; and if there were, we are
not at present in quest of plans for feeding the poor; but for
accumulating the wealth of a trading nation, by enabling the
industrious to feed themselves at the expence of foreigners. The
introduction of machines is found to reduce prices in a
surprising manner. And if they have the effect of taking bread
from hundreds, formerly employed in performing their simple
operations, they have that also of giving bread to thousands, by
extending numberless branches of ingenuity, which, without the
machines, would have remained circumscribed within very narrow
limits. What progress has not building made within these hundred
years? Who doubts that the convenience of great iron works, and
saw mills, prompts many to build? But this taste has greatly
contributed to increase, not to diminish, the number both of
smiths and carpenters, as well as to extend navigation. I shall
add only in favour of such expedients, that experience shews the
advantage gained by certain machines to be more than enough to
compensate every inconvenience arising from consolidated profits,
and expensive living; and that the first inventors gain thereby a
superiority which nothing but adopting the same invention can
counterbalance.
    The third cause of high prices we have said to be owing to
the natural advantage which neighbouring nations reap from their
climate, soil, or situation.
    Here no rise of prices is implied in the country in question,
they are only supposed to have become relatively high by the
opportunity other nations have had to furnish the same articles
at a lower rate, in consequence of their natural advantages.
    Two expedients may be used, in order to defeat the bad
effects of a competition which cannot be got the better of in the
ordinary way. The first is, to assist the branches in distress
with the public money. The other is patience, and perseverance in
frugality, as has been already observed. A short example of the
first will be sufficient in this place to make the thing fully
understood. I have already said, that I purposely postpone an
ample dissertation upon the principles which influences such
operations.
    Let me suppose a nation which is accustomed to export to the
value of a million sterling of fish every year, to be undersold
in this article by another which has found a fishery on its own
coasts, so abundant as to enable it to undersell the first by 20
per cent. In this case, let the statesman buy up all the fish of
his subjects, and undersell his competitors at every foreign
market, at the loss to himself of perhaps 250,000l. What is the
consequence? That the million he paid for the fish remains at
home, and that 750,000l. comes in from abroad for the prices of
them. How is the 250,000l. to be made up? By a general imposition
upon all the inhabitants. This returns into the public coffers,
and all stands as it was. If this expedient be not followed, what
will be the consequence? That those employed in the fishery will
starve; that the fish taken will either remain upon hand, or be
sold by the proprietors at a great loss; they will be undone, and
the nation for the future will lose the acquisition of 750,000l.
a year.
    To abridge this operation premiums are given upon
exportation, which comes to the same thing, and this is a
refinement on the application of this very principle: but
premiums are often abused. It belongs to the department of the
coercive power of government to put a stop to such abuse. All I
shall say upon the matter is, that if there be a crime called
high treason, which is punished with greater severity than
highway robbery, and assassination, I should be apt (were I a
statesman) to put at the head of this bloody list, every attempt
to defeat the application of public money, for the purposes here
mentioned. The multiplicity of frauds alone discourages a wise
government from proceeding upon this principle, and disappoints
the scheme. If severe punishment can in its turn put a stop to
frauds, I believe it will be thought very well applied.
    While a statesman is thus defending the foreign trade of his
country by an extraordinary operation performed upon the
circulation of its wealth, he must at the same time employ the
second expedient with equal address. He must be attentive to
support sobriety at home, and wait patiently until abuses among
his neighbours shall produce some of the inconveniences we have
already mentioned. So soon as this comes to be the case, he has
gained his point; the premiums then may cease; the public money
may be turned into another channel; or the tax may be suppressed
altogether, according as circumstances may require.
    I need not add, that the more management and discretion be
used in such operations, the less jealousy will be conceived by
other rival nations. And as we are proposing this plan for a
state already in possession of a branch of foreign trade, ready
to be disputed by others, having superior natural advantages, it
is to be presumed that the weight of money, at least is on her
side. This, if rightly employed, will prove an advantage, more
than equal to any thing which can be brought against it; and if
such an operation comes to raise the indignation of her rival, it
will on the other hand, reconcile the favour of every neutral
state, who will find a palpable benefit from the competition, and
will never fail to give their money to those who sell the
cheapest. In a word, no private trader can stand in competition
with a nation's wealth. Premiums are an engine in commerce, which
nothing can resist but a similar operation.
    Hitherto we have been proposing methods for removing the
inconveniences which accompany wealth and superiority, and for
preserving the advantages which result from foreign trade already
established: we must now change sides, and adopt the interest of
those nations who labour under the weight of a heavy competition
with their rich neighbours, versed in commerce, dextrous in every
art and manufacture, and conducted by a statesman of superior
abilities, who sets all engines to work, in order to make the
most of every favourable circumstance.
    It is no easy matter for a state unacquainted with trade and
industry, even to form a distant prospect of rivalship with such
a nation, as long as the abuses attending upon their wealth are
not supposed to have crept in among them. Consequently, it would
be the highest imprudence to attempt, at first setting out, any
thing that could excite their jealousy.
    The first thing to be inquired into is the state of natural
advantages. If any branch of natural produce, such as grain,
cattle, wines, fruits, timber, or the like, are here found of so
great importance to the rival nations, that they will purchase
them with money, not with an exchange of their manufactures, such
branches of trade may be kept open with them. If none such can be
found, the first step is to cut off all communication of trade by
exchange with such a people; and to apply closely to the supply
of every want at home, without having recourse to foreigners.
    So soon as these wants begin to be supplied, and that a
surplus is found, other nations must be sought for, who enjoy
less advantages and trade may be carried on with them in a lower
way. People here must glean before they can expect to reap. But
by gleaning every year they will add to their stock of wealth,
and the more it is made subservient to public uses, the faster it
will increase.
    The beginners will have certain advantages inseparable from
their infant state; to wit, a series of augmentation of all
kinds, of which we have so frequently made mention. If these can
be preserved in an equable progression; if the balance of work
and demand, and that of population and agriculture, can be kept
in a gentle vibration, by alternate augmentations; and if a plan
of oeconomy, equally good with that of the rivals, be set on foot
and pursued; time will bring every natural advantage of climate,
soil, situation, and extent, to work their full effects; and in
the end they will decide the superiority.
    I shall now conclude my chapter, with some observations on
the difference between theory and practice, so far as regards the
present subject.
    In theory, we have considered every one of the causes which
produce high prices, and prevent exportation, as simple and
uncompounded: in practice they are seldom ever so. This
circumstance makes the remedies difficult, and sometimes
dangerous. Difficult, from the complication of the disease;
dangerous, because the remedy against consolidated profits which
is to increase the number of manufacturers, will do infinite
harm, if applied to remove that which proceeds from dear
subsistence, which calls for a supply of food, not of mouths, as
has been said.
    Another great difference between theory and practice occurs
in the fourth case; where we suppose a nation unacquainted with
trade, to set out upon a competition with those who are in
possession of it. When I examine the situation of some countries
of Europe (Spain perhaps) to which the application of these
principles may be made, I find that it is precisely in such
nations, where the other disadvantages of consolidated profits,
and even the high prices of living, are carried to the greatest
height; and that the only thing which keeps one shilling of
specie among them, is the infinite advantage they draw from their
mines, and from the sale of their pure and unmanufactured natural
productions, added to their simplicity of life, occasioned by the
wretchedness of the lower classes, which alone prevents these
also from consuming foreign commodities. Were money in these
countries as equally distributed as in those of trade and
industry, it would quickly be exported. Every one would extend
his consumption of foreign commodities, and the wealth would
disappear. But this is not the case; the rich keep their money in
their coffers; because lending at interest, there, is very wisely
laid under numberless obstructions. The vice, therefore, is not
so much that the lending of money at interest is forbid, as that
the people are not put in a situation to have any pressing
occasion for borrowing it, as a mean of advancing their industry.
Were they taught to supply their own wants, the state might
encourage circulation by loan; but as they run to strangers for
this supply, their money is far better locked up.
    Upon a right use and application of these general principles,
according to the different combinations of circumstances, in a
nation whose principal object is an extensive and profitable
foreign trade, I imagine a statesman may both establish and
preserve, for a very long time, a great superiority in point of
commerce; provided peace can be preserved: for in time of war,
every populous nation, if great and extended, will find such
difficulties in procuring food, and such numbers of hands
gratuitously to maintain, that what formerly made its greatness
will hasten its ruin.

Chap. 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 oeconomy.
    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, Chap.
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.

Chap. 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 oeconomy,
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 synonimous, 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 synonimous 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 synonimous 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.

Chap. 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 oeconomy, 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 oeconomy
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 (chap. 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 oeconomy, 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 oeconomy 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.

Chap. 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 tranquility. 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 oeconomy, 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 oeconomy, 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 oeconomy, 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
oeconomy, 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 oeconomy 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 oeconomy, 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 oeconomy, 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 oeconomy, 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 oeconomy 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.

Chap. 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 their's are superior to her's 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, oeconomical, 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 oeconomy 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.

Chap. 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 oeconomy
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.


Chap. 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.

Chap. 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 chearfully
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.

Chap. 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 oeconomy 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 oeconomy 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.

Chap. 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 oeconomy, 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
oeconomy! 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
indispensible 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.

Chap. 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 oeconomy 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 oeconomy,
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.

Chap. 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.
    Quest. 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, Chap. 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 oeconomising 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, Chap. 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 (Chap. 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 Chap. 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 oeconomy 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, chap. 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.
    Obser. 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.
    Obser. 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.
    Obser. 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 carressed 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.
    Obser. 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 compleat. 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?
    Obser. 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.
    Obser. 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.
    Obser. 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.
    Obser. 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.
    Quest. 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 chearfulness, 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, (chap.
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 spight 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.


NOTES:

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.