From this antient 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 entred 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 was in use to impose taxes upon their confederate

cities, in order to maintain their own common people, and Xenophon’s

intention in this discourse was, not to lay down a plan to make them

maintain themselves by industry, but to improve 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 that 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 flattered 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 o£ 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 of 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 antient and modern oeconomy

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.

Combining, therefore, all these circumstances, 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 antients.

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

antient 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.

So 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, raise profits above the physical-necessary, the

industrious never can become rich; and if they are 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 consume 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 that

species of industry which we call _labour_. We are not therefore to

ascribe the taste for employment 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.

No body, 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 means of taxes, a part of the circulating

equivalent which they gave for it? When once he is enriched by these

contributions, he comes to be in the same situation with antient

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 inspire, by his

example, 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 said above, 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 occasion for money

to improve a country. All the magnificent buildings which ornament

Italy, are a much more proper representation of a scanty subsistence,

than of the gold and silver found 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 publick 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 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 carried 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 oeconomy 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 him, 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

dependencies, which tie the members together, there is less danger of

introducing restraints; because the advantages which people find, from a

well ordered society, make them put up the better with the

inconveniencies of supporting and improving it. It is an universal

principle, that instruction must be given with gentleness. A young horse

is to be caressed when the saddle is first put upon his back: any thing

that appears harsh, let it be ever so useful or necessary, must be

suspended 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 oeconomy, 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 husbandmen 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 oeconomy 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 proposes that every one who

chooses to work at those 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 overtake the cultivations 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 antient 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 that 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 might be misinterpreted. It will therefore

be proper to make some apology, which no body 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 its intention. 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 in

place 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 away any thing 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 work? 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 means of giving bread to the

poor, 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 only marks the different division of property, or

taste of expence. Every undertaking marks a particular interest. Palaces

are a representation of rich individuals; snug boxes, in the

neighbourhood of cities, represent small but easy fortunes; hutts 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, 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 antient

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 conveniency with which

every body is lodged, than formerly; but only because riches are more

equally divided, from the operations of industry above-described.

OBSER. 8. From this we may gather, 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 his reviews, of

the flambeaus and wax lights at his entertainments, may be of as great

use to posterity, as the shadow of the pyramid, which is the only

visible effect produced 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 useful, in so far as it is ornamental,

inspires noble 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 question of choice here. All 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 connexion 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.

1. 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.

2. 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 advantages 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, by destroying the exclusive privilege of the company to

trade in certain countries, is forbid for the sake of the public good.

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. Those 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 all buying

at the same price, no one can undersell another; and the competition

between them 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 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 an

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, in place of permitting the original proprietors to augment

their stock with borrowed money; and thus the fund of the company 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 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 only protects it for the

public good.

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 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, who, 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 only to be done by competition) the statesman

himself may interpose an extraordinary operation. He may support high

profits to the company, upon all articles of luxury consumed at home, in

favour of keeping down the prices of such goods as are either for

exportation or manufacture.

This can only be done when he has companies 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 tarif 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, is 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 is found hurtful to the English

company in her outward sales, may not the government of that nation lend

a hand towards raising the profits of the company, upon tea, china, and

japan wares, which are articles of superfluity consumed by the rich, 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 laid

under contribution in order to support that evil!

Companies, we have said, owe their beginning 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 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 a 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 center 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[O].

Footnote O:

This was writ before the society of Jesuits was suppressed in France.

Companies ought to be permitted, consistently with these principles.

Their mercantile interests alone ought to be united, in so far as union

is required to carry on their undertaking with reasonable profits; but

beyond this, every subaltern 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 any private person

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 might 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 society becomes able to engross the whole, or a considerable part of

such a manufacture, they destroy their competitors; and by forming a

single interest, in the purchase of the materials requisite, and in the

sale of their manufactures, they profit in the first case, by reducing

the gains of their subaltern assistants 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. He may 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

whom they might be apt to oppress under his protection.

In establishing companies for manufactures, it is a good expedient to

employ, in such undertakings, none 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, 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, in place 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 be at the great expence requisite; 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 enterprize, 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 becomes 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 would never have suffered any check.

------------------------------------------------------------------------

CHAP. XXXI.

_Recapitulation of the Second Book._

Having paved the way in the first book, for a particular inquiry into

the principles of modern political oeconomy; in the introduction to

this, I shew that the ruling principle of the science, in all ages, has

been to proceed upon the supposition that every one will act, in what

regards the public, from a motive of private interest; and that the only

public spirited sentiment any statesman has a right to exact of his

subjects, is their strict obedience to the laws. The union of every

private interest makes the common good: this it is the duty of a

statesman to promote; this consequently ought to be the motive of all

his actions; because the goodness of an action depends on the conformity

between the motive and the duty of the agent. We can, therefore, no more

subject the actions of a statesman to the laws of private morality, than

we can judge of the dispensations of providence by what _we_ think right

and wrong[P].

Footnote P:

From the want of attending duly to this distinction, some have been

led into the blasphemy of imputing evil to the Supreme Being. There is

no such thing as evil in the universe; all is good, all is absolutely

perfect. The most flagitious actions tend to universal good: even

these, in one respect, may be called the actions of God, as all that

is done is done by him; but with respect to the _motive_ which God had

in doing them, it is pure in the most sublime degree; the action is

impious and wicked, with respect only to the agent; and his wickedness

does not proceed from the action itself, but from the want of

conformity between his duty and his motive in acting. Now if the

punishment of such a transgression (which is also considered as the

action of the Supreme Being) enters into the system of general good,

is it not a monstrous folly to call it unjust? We know the duties of

man, we know the duties of governors, but we know not the duties of

God, if we may be allowed to make use of so very improper an

expression, and it is for this reason only, that we cannot judge of

the goodness of his providence. We must therefore take it for granted;

and this is one object of what divines call _faith_, the belief of

things not seen, when the disbelief of them would imply an absurdity.

_CHAP._ I. In treating the principles of any science, many things must

be blended together, at first, which in themselves are very different.

In the first book I considered multiplication and agriculture as the

same subject; in the second, trade and industry are represented as

mutually depending on one another. To point out this relation, I give a

definition of the one and the other, by which it appears, that to

constitute trade, there must be a consumer, a manufacturer, and a

merchant. To constitute their industry, there must be freedom in the

industrious. His motive to work must be in order to procure for himself,

by the means of trade, an equivalent, with which he may purchase every

necessary, and remain with something over, as the reward of his

diligence. Consequently, industry differs from labour, which may be

forced, and which draws no other recompence, commonly, than bare

subsistence. Here I take occasion to shew the hurtful effects of slavery

on the progress of industry; from which I conclude, that its progress

was in a great measure prevented by the subordination of classes under

the feudal government; and that the dissolution of that system

established it. Whether trade be the cause of industry, or industry the

cause of trade, is a question of little importance, but the principle

upon which both depend is a taste for superfluity in those who have an

equivalent to give; this taste is what produces _demand_, and this again

is the main spring of the whole operation.

_CHAP._ II. We have substituted throughout this book, the term _demand_,

to express the idea we conveyed in the last by that of _wants_; and

since the subject becomes more complex, and that we have many more

relations to take in, I must make a recapitulation of all the different

acceptations of this term _demand_.

_Demand_, in the first place, is always relative to _merchandize_; it is

the buyer who demands; the seller offers to sale. 2. It is said to be

_reciprocal_, when there is a double operation, that is, when the seller

in the first, becomes the buyer in the second case; and then, taking the

two operations in one view, we call those _demanders_ who have paid the

highest price. 3. Demand is _simple_, or _compound_; _simple_, when

there is no competition among the buyers; _compound_, when there is. 4.

It is _great_ or _small_, according to the _quantity_ demanded. And 5.

_high_ or _low_, according to the _price_ offered. The nature of a

_gradual_ increase of demand, is to encourage industry, by augmenting

the supply; that of a _sudden_ increase, is to make prices rise. This

principle has not every where the same efficacy in producing these

varieties: it is checked in its operations between merchants, who seek

their profit; and it is accelerated among private people, who seek for

subsistence, necessaries, or luxurious gratifications.

_CHAP._ III. I come next to deduce the origin of trade and industry,

which I discover from the principles of the first book, where bartering

of necessaries was understood to be trade; and I find that the progress

of this is owing to the progress of multiplication and agriculture. When

a people arrive at a moral impossibility of increasing in numbers, there

is a stop put to the progress of barter. This grows into trade, by the

introduction of a new want (money) which is the universal object of

desire to all men. While the desires of man are regulated by their

physical wants, they are circumscribed within certain limits. So soon as

they form to themselves others of a political nature, then all bounds

are broken down. The difficulty of adapting wants to wants, naturally

introduces money, which is an adequate equivalent for every thing. This

constitutes sale, which is a refinement on barter. Trade is only a step

farther; it is a double sale, the merchant buys, not for himself, but

for others. A merchant is a machine of a complex nature. Do you want, he

supplies you; have you any superfluities, he relieves you of them; do

you want some of the universal equivalent money, he gives it you, by

creating in you a credit in proportion to your circumstances. The

introduction of so useful a machine, prompts every one to wish for the

power of using it; and this is the reason why mankind extend their

labour beyond the mere supply of their physical wants.

Trade therefore abridges the tedious operations of sale and barter, and

brings to light many things highly important for individuals, who live

by relieving the wants of others, to know. It marks the standard of

_demand_, which is, in a manner, the voice of the statesman, conducting

the operations of industry towards the relief of wants; and directing

the circulation of subsistence towards the habitations of the

necessitous.

_CHAP._ IV. The consequence of this, is to determine the value of

commodities, and to mark the difference between _prime cost_ and

_selling prices_. The first depends upon the time employed, the expence

of the workman, and the value of the materials. The second is the sum of

these, added to the profit upon alienation. It is of consequence to

distinguish exactly between these two constituent parts of price, the

cost and the profit: the first is invariable after the first

determination, but the second is constantly increasing, either from

delay in selling off, or by the multiplicity of alienations; and the

more exactly every circumstance with regard to the whole analysis of

manufactures is examined, the easier it is for a statesman to correct

every vice or abuse which tends to carry prices beyond the proper

standard.

_CHAP._ V. Nothing tends to introduce an advantageous foreign trade more

than low and determined prices. In the first place, it draws strangers

to market. This we call _passive commerce_. Secondly, it gives merchants

an opportunity to distribute the productions of their country with

greater advantage among other nations, which is what we call _active

foreign trade_. In this chapter, I trace the effects of the last

species. I shew how merchants profit at first of the ignorance of their

correspondents; how they engage them to become luxurious; how the

competition between themselves, when profits are high, make them betray

one another; and how the most ignorant savages are taught to take

advantage of the discovery; how this intercourse tends to unite the most

distant nations, as well as to improve them; and how naturally their

mutual interest leads them to endeavour to become serviceable to one

another.

_CHAP._ VI. I next endeavour to shew the effects of trade upon those

nations who are passive in the operation. Here I take an opportunity of

bringing in a connexion between the principles of trade, and those of

agriculture, and I shew on what occasions passive trade may tend to

advance the cultivation of lands, and when it cannot. Upon this, I build

a principle, that when passive trade implies an augmentation of the

domestic consumption of subsistence, in order to carry it on, then will

agriculture be advanced by it, and not otherwise; and as the first is

commonly the case, from this I conclude, that trade naturally has the

effect of increasing the numbers of mankind in every country where it is

established. I next trace the consequences of a growing taste for

superfluity, among nations living in simplicity; and I shew how

naturally it tends to promote industry among the lower classes,

providing they be free; or to make them more laborious, supposing them

to be slaves: from which I conclude, that where the advancement of

refinement requires the head, that is, the ingenuity and invention of

man, those who are free have the advantage; and where it requires hands,

that is to say labour, that the advantage is on the side of the slaves:

slavery, for example, might have made Holland; but liberty alone could

have made the Dutch.

_CHAP._ VII. Having given a rough idea of trade in general, I come to a

more accurate examination of the principles which a statesman must keep

in view, in order to carry it to perfection, by rendring it a means of

promoting ease and affluence at home, as well as power and superiority

abroad. As a private person becomes easy in his circumstances in

proportion to his industry, and so rises above the level of his fellows,

in like manner, does an industrious nation become wealthy, and acquires

a superiority over all her less industrious neighbours.

The principle which set trade on foot we have shewn to be _demand_, what

supports it and carries it to its perfection is _competition_. These

terms are often confounded, or at least so blended together as to

produce ideas incorrect, dark, and often contradictory: for this reason

I have judged an analysis of them necessary, comparing them together,

and pointing out their relations, differences, and coincidences.

_Demand_ and _competition_ are both relative to buying and selling; but

_demand_ can only be applied to _buying_, and _competition_ may be

applied to _either_.

_Demand_ marks an inclination to have, _competition_ an emulation to

obtain a preference.

_Demand_ can exist without _competition_, but _competition_ must

constantly imply _demand_.

_Demand_ is called _simple_, when there appears only one interest on the

side of the buyers.

_Competition_ is called _simple_, when it takes place on one side of the

contract only, or when the emulation is at least much stronger on one

side than on the other.

_Demand_ is called _compound_, when more interests than one are found

among those who desire to buy.

_Competition_ is called _compound_, when an emulation is found to

prevail on both sides of the contract at once.

_Simple competition_ raises prices; _double competition_ restrains them

to the adequate value of the merchandize.

While _double competition_ prevails, the balance of work and demand

stands even, under a gentle vibration; _simple competition_ destroys and

overturns it.

The objects of _competition_ frequently determine its force. Merchants

buy in order to sell; consequently, their _competition_ is in proportion

to their views of profit. Hungry people buy to eat, and their

_competition_ is in proportion to their funds. The luxurious buy to

gratify their desires, their _competition_ is in proportion to these.

Strong _competition_ on one side, makes it diminish on the other; and

when it becomes so strong as effectually to unite the interests on one

side of the contract, then it becomes absolutely _simple_; this totally

overturns the balance, and must in a short time destroy the divided

interest.

_CHAP._ VIII. I next examine the relative terms of _expence_, _profit_

and _loss_. The relations they bear, are often not expressed, which

involves those who use them in ambiguities proper to be avoided. I

therefore call expence _national_, when the national stock is diminished

by it, in favour of other states; it is _public_, when the money

proceeding from a national contribution is expended by the state within

the country; and _private expence_ is the laying out of money belonging

to private people or private interests: this has no other effect than to

promote domestic circulation. I farther distinguish between what we call

_spending_, and what is called _advancing of money_; the first marks an

intention to consume; the second marks a view to a subsequent

alienation.

Profit is either _positive_, _relative_, or _compound_.

_Positive_, when some body gains and no body loses; _relative_, when

some body gains exactly what is lost by another; and _compound_, when

the gain of one implies a loss to another, but not equal to the full

value of the gain. The same distinction may be applied to loss.

_CHAP._ IX. Having laid down the fundamental principles which influence

the operations of trade and industry, I take a view of their political

consequences, and of the effects resulting to a state, which has begun

to subject her political oeconomy to the interests of commerce; and such

a state I call a _trading nation_.

The first consequence is an augmentation of demand for the work of the

people; because they begin now to supply strangers. If this augmentation

is sudden, it will _raise_ demand; if it be gradual, it will _increase_

it. If prices rise upon one extensive branch of industry, they must rise

upon all; because a competition for hands must take place: the farmer

looks out for servants, and must dispute them with the loom; and the

first must draw back his additional expence upon the sale of his

articles of the first necessity. Upon this revolution, wo to those who

cannot increase their fund of subsistence in proportion to the

augmentation of their expence! Nothing is so agreeable as the gradual

rise of profits upon industry, and nothing so melancholy as the stop,

which is the necessary consequence of all augmentations. When prices

rise high, the market is deserted, and other nations profit of this

circumstance to obtain a preference. From hence I conclude, that the

_rise_ of demand is the forerunner of decay in trade; and the

_augmentation_ of it, the true foundation of lasting opulence. But as an

augmentation of supply may imply an augmentation of inhabitants, the

statesman must constantly keep subsistence in an easy proportion to the

demand for it: on this the whole depends. Plentiful subsistence is the

infallible means of keeping prices low; and sudden and violent

revolutions in the value of it, must ruin industry, in spite of a

combination of every other favourable circumstance. The reason is plain:

that article alone, comprehends two thirds of the whole expence of all

the lower classes, and their gains must be in proportion to their

expence; but as the gains of those who work for exportation are fixed,

in a trading nation, by the effects of foreign competition, if their

subsistence is not kept at an equal standard, they must live

precariously, or in a perpetual vicissitude between plenty and want.

From this may be gathered the infinite importance of distinguishing, in

every trading nation, where the prices of subsistence are liable to

great and sudden variations, these who supply strangers from those who

supply their countrymen. As also the inconceivable advantage which would

result from such a police upon grain, as might keep the price of it

within determined limits.

_CHAP._ X. This doctrine leads me naturally to consider the proportions

between _demand_ and _supply_, and for the better conveying my ideas, I

have considered them as two quantities suspended in the scales of a

political balance, which I call that _of work and demand_; preferring

the word _work_ to that of _supply_, because it is the interests of the

workmen which chiefly come under our consideration.

When the _work_ is proportioned to the _demand_, the balance vibrates

under the influence of double competition; trade and industry flourish:

but as the operation of natural causes must destroy this equilibrium,

the hand of a statesman becomes constantly necessary to preserve it.

After representing the different ways in which the balance comes to be

subverted (by the _positive_ or _relative_ preponderancy of either

scale) I point out the consequences of this neglect in the statesman’s

administration. If the scale of _work_ should preponderate, that is, if

there be more work than demand, either the workmen enter into a hurtful

competition, which reduces their profit below the proper standard and

makes them starve; or a part of the goods lie upon their hands, to the

discouragement of industry. If the scale of demand should preponderate,

then either prices will rise and profits consolidate, which prepares the

way for establishing foreign rivalship, or the demand will immediately

cease, which marks a check given to the growth of industry.

Every subversion, therefore, of this balance, implies one of four

inconveniencies, either the industrious starve one another; or a part of

their work provided lies upon hand; or their profits rise and

consolidate; or a part of the demand made, is not answered by them.

These I call the immediate effects of the subversion of this balance. I

next point out the farther consequences which they draw along with them,

when the statesman is not on his guard to prevent them.

A statesman must be constantly attentive, and so soon as he perceives a

too frequent tendency in any one of the scales to preponderate, he ought

gently to load the opposite scale, but never except in cases of the

greatest necessity, take any thing out of the heavy one. Thus when the

scale of demand is found to preponderate, he ought to give encouragement

to the establishment of new undertakings, for augmenting the supply, and

for preserving prices at their former standard: when the scale of work

is on the preponderating hand, then every expedient for increasing

exportation must be employed, in order to prevent profits from falling

below the price of subsistence.

_CHAP._ XI. I next examine how this equal balance comes at last to be

destroyed.

_1mo._ The constant increase of work implies an augmentation of numbers,

and consequently of food; but the quantity of food depends on the extent

and fertility of the soil: so soon therefore as the soil refuses to give

more food, it must be sought for from abroad, and when the expence of

procuring it rises above a certain standard, subsistence becomes dear;

this raises the prices, the market is deserted, and the scale of work is

made to preponderate, until the industrious enter into a hurtful

competition and starve one another: here the application of public money

becomes necessary.

_2do._ When an idle people, abundantly fed, betake themselves to

industry, they can afford, for a while, manufactures at the cheapest

rate; because they do not _live_ by their industry, but _amuse

themselves_ with it. Hence the cheapness of all sorts of country work,

in former times, and of Nuns work in those we live in. But when the

lands become purged of superfluous mouths, and when those purged off

come to be obliged to live by their industry alone, then prices rise,

and the market is deserted.

_3tio._ When a statesman imprudently imposes taxes, in such a way as to

oblige strangers to refund that part paid by the industrious who supply

them; this also raises prices, and the market is deserted. Thus the

operation of natural causes must bring every augmentation to a stop,

unless the hand of a statesman be employed to check their immediate bad

effects. When subsistence becomes scarce, and the improvement of lands

too expensive, he must make the public contribute towards the

improvement of the soil: when the price of subsistence still rises, from

farther augmentations, he must keep it down with public money: and when

this operation becomes too extensive, he must content himself with

effectuating a diminution of price upon that part of subsistence which

is consumed by those who supply foreign markets.

_CHAP._ XII. Domestic vices alone are not sufficient to undo a trading

nation; she must have rivals who are able to profit of them.

While her balance of _work_ and _demand_ is made to vibrate by alternate

_augmentations_, she marches on triumphant, and has nothing to fear:

when these come to a stop, she must learn how to stand still, by the

help of alternate _augmentations_ and _diminutions_, until the abuses in

other nations shall enable her again to vibrate by _augmentations_. But

so soon as a preponderancy of the scale of work is rectified, by

retrenching the number of the industrious, and that the vibrations of

the balance are carried on by alternate _diminutions_, in favour of

supporting high profits upon industry, then all goes to wreck, and

foreign nations, in spite of every disadvantage attending new

undertakings, establish a successful rivalship: they take the bread out

of the mouths of those who formerly served them; and profiting of the

advantages formerly enjoyed by the traders, they make their own balance

vibrate by augmentations, which sink the trade of the others by slow

degrees, until it becomes extinct.

_CHAP._ XIII. The rivalship between nations, leads me to inquire how far

the form of their government may be favourable or unfavourable to the

competition between them. Here I am led into a digression concerning the

origin of power and subordination among men, so far as it is rational

and consistent with natural equity; and I conclude, that all

_subordination_ between man and man, in whatever relation they stand to

one another, ought to be in proportion to their _mutual dependence_. The

degrees of which are as various as the shades of a colour. I divide them

however into four. 1. That of slaves upon their masters. 2. That of

children upon their parents. 3. That of labourers upon the proprietors

of lands. 4. That of the free hands, employed in trades and

manufactures, upon their customers. And ascending a moment beyond my

sphere, I say, that the subordination of subjects to their sovereigns,

in all free governments, extends no farther than to a punctual obedience

to the laws. I then proceed to an examination of former principles, and

from a confrontation of the politics of our ancestors with the modern

system, I conclude, that the great political impediment to the progress

of trade and industry, proceeds more from an arbitrary, irregular, and

undetermined subordination between classes, and between individuals,

than from differences in the regular and established form of their

government, legislation, and execution or administration of the supreme

authority. While laws only govern, it is of the less importance who

makes them, or who puts them in execution.

_CHAP._ XIV. In this chapter I endeavour to amuse my reader with an

application of our principles to the political oeconomy of the

Lacedemonian commonwealth, where I shew, that trade and industry are not

essential to security and happiness. By making an analysis of Lycurgus’s

plan, I shew that its perfection was entirely owing to the simplicity of

the institution.

_CHAP._ XV. I come next to the application of general principles to

particular modifications of trade.

The balance of work and demand promotes the _foreign_ and _domestic_

interests of a nation, equally. The _first_, by advancing her power and

superiority abroad; the _last_, by keeping every one employed and

subsisted at home. These interests are influenced by principles entirely

different; and this opens a new combination highly proper to be attended

to.

In the first book, we considered the consumers and suppliers as members

of the same society, and as having their interests blended together; but

the moment that a question about foreign trade arises, they become

entirely separated. Every country appears to be put under the direction

of a particular statesman, and these must play against one another as if

they were playing at chess. He who governs the consumers, must use his

utmost endeavours to teach his people how to supply themselves. He who

is at the head of the suppliers, must do what _he_ can to render the

efforts of the other ineffectual, by selling cheap, and by making it the

immediate interest of the subjects of his rival to employ the suppliers

preferably to his own countrymen. Here then are two plans, opposite and

contrary, to be executed; and we endeavour to point out the principles

which ought to influence the conduct of the respective undertakers, in

every stage of their prosperity or decline. We lay down the methods of

improving every favourable circumstance, so as to advance the end

proposed, and shew how to season every unavoidable inconvenience with

the best palliatives, when a perfect remedy becomes impracticable.

_CHAP._ XVI. In this chapter I continue the thread of my reasoning, in

order to draw the attention of my readers to the difference between the

principles of _foreign_ and _domestic_ commerce; and setting the latter

apart for a subsequent examination, I enter upon an inquiry into the

difference between those branches of foreign trade which make nations

depend on one another _necessarily_, and those where the dependence is

only _contingent_. The first may be reckoned upon, but the last being of

a precarious nature, the preservation of them ought to be the particular

care of the statesman.

The method to be followed for this purpose, is, to keep the price of

every article of exportation at a standard, proportioned to the

possibility of furnishing it; and never to allow it to rise higher, let

the foreign demand afford ever so favourable an opportunity. The danger

to be avoided, is not the high profits, but the _consolidation_ of them;

this consideration, therefore, must direct the statesman’s conduct in

this particular. On the other hand, he must take care that the great

classes of the industrious, who supply foreign demand, and who, from

political considerations, are reduced to the _minimum_ of profits, be

not by an accidental diminution of that foreign demand reduced below

this necessary standard: he therefore must supply the want of foreign

demand, by procuring a sale, in one way or other, for whatever part of

this industry is found to lie upon hand; and if loss be incurred in this

operation, it is better that it should fall on the whole community, who

may be able to bear it, than on a single class, who must be crushed

under the burthen.

_CHAP._ XVII. When manufacturers are found without employment, the first

thing to be done is to inquire minutely into the cause of it. It may

proceed from a rise in the price of subsistence, from a diminution of

demand from abroad, or from new establishments of manufactures at home;

for each of which the proper remedy must be applied. The complaints of

manufacturers are not the infallible sign of a decaying trade; they

complain most when their exorbitant profits are cut off. The complaints

of the real sufferers, those who lose _the necessary_, are feeble, and

seldom extend farther than the sphere of their own misery. The true

symptoms of a decaying trade, is to be sought for in the mansions of the

rich, where foreign consumption makes its first appearance. A statesman

will judge of the decay of _that_ trade _which supports and enriches the

people_, more certainly from the _ease_ of the industrious classes, than

from their _distress_. Foreign nations will willingly give _bread_ to

those who serve them, but very seldom _any thing more_; and from hence I

conclude, that the more manufacturers are at their ease, the more a

statesman ought to be upon his guard to prevent this temporary advantage

from bringing on both national poverty and private distress.

When home consumption begins to be supplied from abroad, and when

foreigners desert the market, or refuse our merchandize when we carry it

to them, then we have an infallible proof of declining commerce;

although the increase of home demand may immediately relieve every

industrious person made idle, and even furnish them with better

employment than ever, in supplying the luxury of their countrymen.

A statesman ought to be provided with remedies against every disease.

When luxury is on the road of rooting out foreign trade, let him lie

upon the catch to pick up every workman made idle from the caprice of

fashions, in order to give him useful employment: he may set his own

example in opposition to that of the more luxurious, and in proportion

as he gains ground upon them, he must open every channel to carry off

the manufactures of those he has set to work for the re-establishment of

foreign trade. If, on the other hand, he himself be of a luxurious

disposition, and that he inclines to encourage it, he ought to take care

that the example of dissipation he gives, may not have the effect of

diminishing the hands employed for supplying both home consumption and

foreign demand. This is accomplished by preserving a plentiful

subsistence in the country, and by keeping down the prices of every

species of manufacture, by gradually augmenting the hands employed, in

proportion to the augmentation of demand; thus his luxury will increase

his numbers, without hurting his foreign trade: the great art,

therefore, is to adapt administration to circumstances, and to regulate

it according to invariable principles.

_CHAP._ XVIII. But as a statesman is not always the architect of that

oeconomy by which his people must be governed, he should know how to

remove inconveniencies as well as to prevent them; because he is

answerable, in a great measure, for the consequences of the faults of

those who have gone before him. Thus when his predecessors have allowed

the operation of natural causes to raise prices, and to destroy foreign

trade, he must descend into the most minute analysis of every

circumstance relating to industry, in order to pluck up by the root the

real cause of such augmentations. Mistaken remedies, applied in a

disease not rightly understood, produce frequently the most fatal

consequences.

If a statesman, for instance, should apply the remedy against

_consolidated profits_, by multiplying the hands employed in a

manufacture, at a time when high prices proceed only from the dearness

of living, by this simple mistake he will ruin all: those who really

gain no more than a physical-necessary, will then enter into a hurtful

competition, and starve one another. But if instead of multiplying hands

he augments subsistence, prices will fall; and then by keeping hands

rightly proportioned to demand, they will naturally and gradually come

down to the lowest standard; and exportation will go on prosperously.

I consider _consolidated profits_, and _high prices of subsistence_, as

vices in a state, within the compass of a statesman’s care to redress.

But there is a third cause of high prices, (that is relatively high,

when compared with those in other countries) which will equally ruin

foreign trade, in spite of all precautions.

This happens when other nations have learned to profit of their superior

natural advantages. I have shewn how vices at home enable foreigners to

become our rivals; but without this assistance, every nation well

governed, will be able to profit of its own natural superiority, in

spite of the best management on the other side. The only remedy in such

a case, is, for the nation whose trade begins to decline, in consequence

of the natural superiority of other nations, to adhere closely to her

_frugality_; to leave no stone unturned to inspire a luxurious taste in

her rivals; and to wait with patience until the unwary beginners shall,

from that cause, fall into the inconveniencies of dear living, and

consolidated profits. Besides this expedient, there are others which

depend on a judicious application of public money: an irresistible

engine in trade, capable of ruining the commerce of any other nation,

(not supporting it by similar operations) and of carrying on

exportation, in spite of great natural disadvantages. But these

principles are reserved for the fifth book, when we come to treat of the

application of taxes.

Having pointed out the methods of preserving a foreign trade already

established, I next examine how those nations which have been

contributing inadvertently to the exaltation of others more industrious,

by carrying on with them a trade hurtful to themselves, may put a stop

to the exhausting of their own treasures; may learn to supply themselves

with every thing necessary; and may be taught to profit of their own

natural advantages, so as to become the rivals of those who have perhaps

reduced them to poverty; and even to recover, not only their former

rank, but to lay the foundation of a political oeconomy capable of

raising them to the level of the most flourishing states.

I conclude my chapter, by calling for the attention of my reader to the

wide difference there is between _theory_, where all the vices to be

corrected appear clear and uncompounded; and _practice_, where they are

often difficult to be discovered, and so complicated with one another,

that it is hardly possible to apply any remedy which will not be

productive of very great inconveniencies. Were the remedies for abuse as

easily applied as theory seems to suggest, they would quickly be

corrected every where.

Let theorists, therefore, beware of trusting to their science, when in

matters of administration, they either advise those who are disposed

blindly to follow them; or when they undertake to meddle in it

themselves. An old practitioner feels difficulties which he cannot

reduce to principles, nor render intelligible to every body; and the

theorist who boldly undertakes to remedy every evil, and who foresees

none on the opposite side, will most probably miscarry, and then give a

very rational account for his ill success. A good theorist, therefore,

may be excellent in deliberation, but without a long and confirmed

practice, he will ever make a blundering statesman in practice.

_CHAP._ XIX. Having treated of the fundamental principles of _trade_ and

_industry_; having explained the doctrine of _demand_ and _competition_;

the theory of _prices_, with the causes of their _rise_ and _fall_; the

difference between _prime cost_ and _profits_; the _consolidation_ of

these; and the effects of such _consolidation_ in any branch of

manufacture; I set my subject in a new light, and present it to my

readers under a more extended view. Having, as I may say, studied the

map of every province, we are now to look at that of the whole country.

Here the principal rivers and cities are marked; but all brooks,

villages, &c. are suppressed. This is no more than a short

recapitulation of what has been gone through already. Trade, considered

in this view, divides itself into three districts, or into three stages

of life, as it were, _infancy_, _manhood_, and _old age_.

During the _infancy_ of trade, the statesman should lay the foundation

of _industry_. He ought to multiply wants, encourage the supply of them;

in short, pursue the principles of the first book, with this addition,

that he must exclude all importation of foreign work. While luxury tends

only to banish idleness, to give bread to those who are in want, and to

advance dexterity, it is productive of the best effects.

When a people have fairly taken a laborious turn, when sloth is

despised, and dexterity carried to perfection, then the statesman must

endeavour to remove the incumbrances which must have proceeded from the

execution of the first part of his plan. The scaffolding must be taken

away when the fabric is compleated. These incumbrances are high prices,

at which he has been obliged to wink, while he was inspiring a taste for

industry in the advancement of agriculture and of manufactures; but now

that he intends to supply foreign markets, he must multiply hands; set

them in competition; bring down the price both of subsistence and work;

and when the luxury of his people render this difficult, he must attack

the manners of the rich, and give a check to the domestic consumption of

superfluity, in order to have the more hands for the supply of

strangers.

The last stage of trade is by far the most brilliant; when, upon the

extinction of foreign trade, the wealth acquired comes to circulate at

home. The variety of new principles which arise upon this revolution,

makes the subject of what remains to be examined in the succeeding

chapters.

_CHAP._ XX. Before I enter upon the principles of inland commerce, I

prepare the way, by a short dissertation upon the term luxury. I

endeavour to analyse the word to the bottom, to discover, and to range

in order, every idea which can be conveyed by it. In this way I

vindicate the definition I have given of it (which is the consumption of

superfluity) and shew that luxury, as I recommend it, is free from the

imputation either of being vicious or abusive.

I distinguish, therefore, between _luxury_, _sensuality_, and _excess_,

three terms often confounded, but conveying very different ideas. A

person may consume great quantities of superfluity from a principle of

ostentation, or even with a political view to encourage industry; him I

call _luxurious_. _Sensuality_ may be indulged in a cottage, as well as

in a palace; and excess is purely relative to circumstances. _Luxury_,

therefore, as well as _sensuality_, or any other passion, may be carried

to _excess_, and so become vicious. Now _excess_ in consumption is

vicious in proportion as it affects our _moral_, _physical_, _domestic_,

or _political_ interests; that is to say, our _mind_, our _body_, our

_private fortune_, or the _state_. When the consumption we make, does no

harm in any of these respects, it may be called moderate and free from

vice.

Our _moral_ and _physical_ interests are hurt by excess, in _eating_,

_drinking_, _love_, and _ease_, or indolence; according as these

gratifications do respectively affect the _mind_, or the _body_, or

both.

Our _domestic_ interest frequently obliges us to call that _excess_,

which nature hardly finds _sufficient_; and, on other occasions, both

mind and body go to destruction, by _excesses_ which have contributed to

amass the greatest fortunes.

The most direct _political_ inconvenience of excessive luxury, is, the

loss of foreign trade. The more indirect follow as consequences of those

already described; because they may render those employed in the service

of the state, negligent and unfit, rapacious and corrupt, but these

evils are more properly the _direct_ effects of the imperfections of the

mind, than consequences resulting _naturally_ from excess in the

consumption of superfluity. They ought, therefore, to be considered as

secondary effects, since they may proceed from avarice as well as

prodigality. The correcting of political vices resembles the weeding a

bed of tender flowers, the roots are all blended together, and the

leaves are almost alike. It is proper, therefore, to have both the

discernment and dexterity of a good gardner for such an operation.

_CHAP._ XXI. From _luxury_ I pass to the _physical-necessary_, which I

define from the consumption implied by it: a man has his

physical-necessary when _he is fed, clothed, and protected from harm_.

But as these enjoyments, we find, do by no means satisfy his desires, I

am led to establish another _necessary_ which I call _political_. This I

measure also by the consumption implied by it, to wit, that which is

suitable to the _rank_ of the person.

_Rank_ again is determined by the _common opinion of men_, and this

_opinion_ is founded upon circumstances, which relate to the _birth_,

_education_, or _habits_ of the person. When common opinion has placed

any one in a certain rank, he becomes entitled to enjoy certain articles

of _physical-superfluity_, which enter into the composition of his

_political-necessary_: thus, such as are raised above the level of the

very lowest class of inhabitants, are entitled to have a Sunday’s dress;

the farmer has a better coat than a labouring servant; the priest of the

parish must have a gown; the magistrate of a little town must have

ruffles, perhaps silk stockings; a provost a velvet coat, and a lord

mayor a state coach; these and such like articles constitute what I call

the _political-necessary_.

A man’s rank sometimes obliges him to certain articles of expence, which

may possibly affect even his _physical-necessary_. How frequently do we

see people cover their shoulders, at the expence of their belly. The

competition between the desires of our _mind_, and those which proceed

from our _animal oeconomy_ is so strong, that it is frequently hard to

determine, whether the incapacity to supply our _physical wants_,

proceeds from our having too far gratified our other desires, or from

real poverty.

The lowest classes of a people, in a country of trade, must be

restrained to their physical-necessary; but this restraint must be

brought about, not by _oppression_, but by the effects of _competition_

alone. While this is supported among people of the same class, it has

the effect to reduce them all to the _physical-necessary_, and when it

reduces them lower it is a vice, and ought to be checked. A peculiar

ingenuity in some workmen of the same class, will raise them above this

level; and the more they can raise themselves above competition, the

greater will their gains be. By becoming masters in any art, they share

the profits of those whom they employ; and thus rise in rank and

fortune, provided their frugality concur with every other natural or

acquired advantage. It is therefore a principle, _to encourage

competition universally, until it has had the effect to reduce people of

industry to the physical-necessary, and to prevent it ever from bringing

them lower_: from this results the necessity of applying every expedient

for relieving certain classes of the load of their children, if you

incline they should breed; and of preventing taxes and other burthens

from affecting them unequally.

_CHAP._ XXII. I now come to treat directly of inland commerce, as taking

place upon the extinction of foreign trade, when all attempts to recover

it are found to be vain. In such a situation, a wealthy nation is not to

consider itself as undone: an able statesman must know how to make his

people happy in every situation. It is an universal principle of

conduct, private and political, to look forward, and to improve the

present from the experience of the past. One great inconvenience

resulting from a foreign trade _already lost_, is, that there is no

farther question of making any new acquisition of wealth, or of

replacing one farthing of what at any time may be sent out of the

country. But the greatest inconveniencies are felt in the losing such a

trade: these are numberless, when an able statesman is not at hand to

prevent them.

That I may point them out in order, I make a short recapitulation of our

principles: the slightest hint is sufficient to shew their force; and

when my reader is sensible of a repetition, which he finds superfluous,

let him reflect that this very circumstance is proof of their exactness.

In this science we must use our principles as a carpenter uses his

foot-rule; there is nothing new to him in this instrument; but still he

must have it in his hand, to be able to know any thing, with accuracy,

concerning his work.

In this chapter I throw in a short dissertation upon the difference

between antient and modern luxury. Their natures and effects are briefly

insisted on. I point out the resemblance between the luxury of modern

times, and that of the few great trading cities of antiquity; such as

Tyre and Carthage; and I shew in what respect it differed from that

luxury which proved the downfall of the empires of Asia and Rome.

When empires were once formed, they were ruined by luxury, and preserved

by means of their wars: because these made their wealth circulate.

When the trading states took a military turn, and became ambitious of

conquest, their ruin soon followed: because war destroyed the industry

which made their greatness.

The cause of difference I find to proceed from this; that in the

_monarchy_, the riches from which the luxury sprung was the effect of

rapine; in the _other_, the effect of industry. The first gave no

equivalent for their wealth; the others did. Where no equivalent is

given in the acquisition, all proportion is lost in the dissipation. The

luxury of the robbers was monstrous and violent: that of the merchants,

systematical and proportional. The luxury of the monarchies brought on

neglect in public affairs: in the cities, it was this neglect which

destroyed their luxury. The luxury of the monarchies had nothing to

recommend it, but the gratification of the passions: the luxury of the

others produced no harm, but from this very circumstance. From the

contrast I have drawn, I establish the difference between antient and

modern luxury. The first was violent; the last is systematical, and can

be supported by industry and liberty only. A farther consequence is,

that as rapine is incompatible with industry, so is arbitrary power:

consequently, those absolute princes who establish industry in their

country, in order to taste of the sweets of luxury and wealth, put

insensibly a bridle in the mouths of their successors, who must, from

this consideration alone, submit their government to a regular system of

laws and political œconomy.

This is a better scheme for limiting the arbitrary power of Princes than

all the rebellions that ever were contrived. Confusion establishes

arbitrary power, and order destroys it.

_CHAP._ XXIII. When a nation, which has long dealt and 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 total

stop to it, and to remain as she is, rather than to persist habitually

in a practice, which, by a change of circumstances, must have effects

very opposite to those advantages which it produced formerly. Such a

stop may be brought about by the means of duties and prohibitions, which

a statesman can lay on importations, so soon as he perceives that they

begin to preponderate with respect to the _exportations_ of his own

country.

I illustrate this principle by an examination of those which influence

the establishment of incorporated cities and boroughs. I shew how these

may be considered as so many states, which domestic luxury, taxes, and

the high price of living, have put out of a capacity to support a

competition with strangers (that is with the open country) which here

represents the rest of the world. I shew the reasonableness of such

exclusive privileges, in favour of those who share the burthens peculiar

to the community, in so far only as regards the supply of their own

consumption; and I point out, by what methods any discouragements to

industry may be prevented, as often as that industry has for its object

the supplying the wants of those who are not included in the

corporation.

From the long and constant practice of raising _taxes_ within

incorporated cities, I conclude, that _taxes_ are a very natural

consequence of luxury, and of the loss of foreign trade; and as Princes

have taken the hint from the cities, to extend them universally, it is

no wonder to see foreign trade put an end to, in consequence of such

injudicious extensions.

_CHAP._ XXIV. I next proceed to the methods proper to be used, in the

delicate operation of so great a revolution as that of degrading a

people from their right of being considered as a trading nation.

If a statesman keeps a watchful eye over every article of importation;

and examines minutely, the use every article imported is put to; he will

easily discern, when it is proper to encourage, when to restrain, and

when to prohibit.

In this examination, however, every relation must be taken in: because

the importation of a foreign commodity affects many different interests,

some within, some without the nation; some directly, others only

consequentially. Nothing is so complex as the interests of trade. The

importation of a commodity may first advance the interest of those at

home, who furnish the commodities exported, of which the importation is

the return. The importation may be useful for the advancement of

manufactures, providing it consist in matter fit for them; yet if the

whole manufacture produced from it be for home-consumption, the national

interest will, on the whole, be hurt by the importation. The importation

of wines and brandies is a great saving upon subsistence, in northern

countries, where liquors distilled from grain are made to supply the

place of them. These and many other relations must be examined, before a

statesman can pass sentence upon an article of importation. The inquiry

made, and accounts balanced on both sides, every hurtful article of

importation should be cut off; and when this is done, if the consequence

should prove a general stop to exportation, then is foreign trade

decently interred, without any violent revolution; because the statesman

is supposed to have proceeded gradually, and to have been all the while

labouring to increase consumption at home, in proportion as the

industrious have been forced to lie idle by the other operations.

When foreign trade is at an end, the number of inhabitants must be

reduced to the proportion of home-subsistence, in case their former

prosperity had carried them beyond it. The nation’s wealth must be kept

entire, and made to circulate, so as to provide subsistence and

employment for every body.

_CHAP._ XXV. Let a nation be reduced ever so low in point of foreign

commerce, she will always find a demand from abroad for the

superfluities of her natural productions; which, if rightly conducted,

will prove a means of advancing her national wealth.

If the exportation of subsistence should go forward, while many are

found in want at home, a restraint laid upon exportation will not

redress the inconvenience; because the wretched will still remain so,

unless they are assisted and put in a capacity to dispute the

subsistence of their own country with foreign nations. The principal

cause of this phenomenon is the preponderancy of the scale of work at

home. When home-demand does not fill up the void, of which we have

spoken, a vicious competition takes place among those who work for a

physical-necessary; the price of their labour falls below the general

standard of subsistence _abroad_; their portion is exported, and they

are forced to starve.

A statesman, therefore, at the head of a luxurious people, must

endeavour to keep his balance even; and if a subversion is necessary, it

is far better it should happen by the preponderancy of the scale of

demand. Here is my reason for preferring this alternative.

All subversions are bad, and are attended with bad consequences. If the

scale of work preponderates, the industrious will starve, their

subsistence will be exported; the nation gains by the balance, but

appears in a manner to sell her inhabitants. If the scale of demand

preponderates, luxury must increase, but the poor are fed at the expence

of the rich, and the national stock of wealth stands as it was. Upon the

cessation, therefore, of foreign trade, you must either lose your

people, or encourage luxury.

The statesman having regulated the concerns of his outward commerce,

must apply more closely than ever to his domestic concerns. I reduce the

principal objects of his attention to three. 1. To regulate the progress

of luxury according to the hands ready to supply the demand for it. 2.

To circumscribe the bounds of it, that is, the multiplication of his

people, to the proportion of the extent and fertility of the soil. And

in the last place, to distribute his people into classes, according as

circumstances (of which he is not master) may demand.

Here I point out the reasons why the progress of luxury does less hurt

to a great kingdom than to a small state. Why sumptuary laws are good in

an imperial town of Germany, and why they would be hurtful in London or

Paris. Why the establishment of a standing army, _in a country fully

peopled_ and rich, should be accompanied with endeavours to diminish

luxury, in order to prevent too great a preponderancy of the scale of

demand, and the rising of prices, which would cut off the hopes of

recovering a foreign trade.

Having briefly gone through the objects of the statesman’s concern, I

come to examine the natural consequences of this revolution upon the

spirit, government, and manners of a people, who from industrious and

frugal are become luxurious and polite.

The traders withdraw their stocks as trade decays, and lend it out at

home to landed men, who thereby are enabled to become luxurious. This

indemnifies the industrious for the loss of foreign demand. When the

money, formerly employed in order to gain more, begins to circulate at

home, for providing superfluities, and augmenting domestic consumption,

the country appears daily to be growing more opulent; tradesmen and

manufacturers, who were formerly confined to a physical-necessary, are

now easy in their circumstances; they increase their consumption; this

accelerates circulation; an air of plenty and ease spreads over the face

of the country; and the very consequences of their decline, are

construed as invincible proofs of their growing prosperity.

Riches may be considered by a statesman in three different lights; as a

mine when they are locked up; as an object of trade when they are

employed in order to gain more; or as an object of luxury, and fund for

taxation, when they are spent in the gratification of our political

wants.

The general cast of mind and disposition of the inhabitants of every

country (in so far as regards money) may, I think, be reduced to one or

other of these three modifications. It is the business of a statesman to

work upon the spirit of his people, so as to model their taste of

expence by insensible degrees, and to bring it to be analogous to that

principle which is most conducive to national prosperity. Hoarding in

private people, can hardly ever be advantageous to a state; when the

state hoards, the case is very different, as shall be shewn. While money

is employed to gain more, it never can procure to the proprietor, either

power or authority; but when, in the last case, it is employed for the

gratification of our desires, in the hands of the ambitious, it acquires

power; consequently, may rival that influence which no person ought to

enjoy, but he who is at the head of the state. This is the mother of

faction, and the root from which all hurtful parties spring. It is by

such means that governments (be they good or bad) are brought into

anarchy. Private wealth corrupted, and at last destroyed the excellence

of the Roman commonwealth: and private wealth alone established the

liberty of Holland upon the ruins of Spanish tyranny. So soon therefore

as the inhabitants of a country begin to employ their riches to gratify

their inclinations, at the same time should a statesman begin to make

himself rich, in order to preserve that superiority which is essential

to _him_ who sits at the head of every principle of action. And whenever

this lies beyond his reach, the power he had will soon disappear; and

the government will take a new form.

A statesman acquires wealth by imposing taxes upon his people: rapine is

the tax of the despote; capitation, land tax, and others which affect

persons, are those of the monarch; excises upon consumption are imposed

by limited governments. The first lay all flat, the second affect

growing wealth, the last accelerate dissipation. I conclude my chapter

with some little historical illustrations concerning the power and

influence of great men in a state, under different circumstances.

_CHAP._ XXVI. I next consider the nature of what I call the _balance of

wealth_. The more circulation there is in a country, the more this

object becomes important. While the greatest part of a nation’s coin was

locked up; or while it circulated by rapine and extortion, the effects

discovered in modern times, where it circulates by industry, and as an

adequate equivalent for services, were hardly perceived.

The specie, or circulating coin of a country, must be considered as a

part of the national patrimony. This is constantly changing hands in a

country of industry, and he who is proprietor of any part of it, is in

so far a proprietor of the public stock.

With this species of property, every other may be acquired. When it is

given as the price of land, such an exchange produces no alteration in

the respective situation of the parties. An estate in land is neither

better or worse than another in coin of the same value. If I purchase an

annuity, or pay off my debts with the coin I have in my pocket, neither

I or the person with whom I transact, make any change of situation in

point of wealth.

But if I lay out my coin for consumable commodities for my own use, then

so soon as any part of what I buy is consumed, I become poorer: for this

operation annihilates, in a manner, as to me, the coin I had. This I

call a vibration in the balance of wealth; I grow poorer, and he who

produced the consumable commodity for my use, is so far richer: the

balance, therefore, is turned against me, in his favour.

As many people, therefore, live by producing consumable commodities, one

use of coin is to render inconsumable, as it were, that part of them

which is superfluous to our own consumption. By this operation the

superfluity passes into other hands who consume it, and the coin which

the industrious receive in return purchases a supply for all their

wants, in proportion as they choose to relieve them.

The vibration of the balance of wealth, therefore, is no more than the

changes which are daily taking place, as to the relative proportion of

riches between the individuals of a state: and as this vibration can

only be produced when the coin any one possesses comes to disappear,

without his retaining the possession of any real equivalent which he can

alienate for the same value; it follows, that the balance is constantly

turning in favour of those who either sell their effects, their service,

or their work; and this balance they retain, in proportion as their

gains exceed their own consumption. On the other hand, the balance is

constantly turning against the idle consumers; because they are supposed

to produce nothing; consequently, the whole of their consumption goes in

diminution of their wealth.

Hitherto the question has only been about the balance of moveable

wealth, that is coin; but the introduction of this, together with a

taste for superfluity, has the effect of melting down _solid property_

into what I call _symbolical money_.

When once this refinement upon the use of money takes place, we see

houses, lands, jurisdictions, provinces, principalities, crowns,

scepters and empires, thrown into circulation by means of the symbolical

money called bank notes, transfer in bank stock, accounts, bonds,

mortgages, alienations of domain, mortgage of taxes, and cessions made

in definitive treaties.

As frugality and industry are in our days capable of amassing the

greatest fortunes in solid property, so is dissipation, by the means of

symbolical money, as certain an expedient for the annihilation of them.

From this I conclude, that dissipation implies frugality, and frugality

dissipation. In every country of great circulation, they balance and

destroy one another; and since there is no such thing as equality of

fortune to be preserved without proscribing alienation, that is

circulation, the next best expedient for making people equal, I think,

is to enrich them by turns.

I conclude my chapter by inquiring into the effects of national debts

upon the vibration of this balance; and I conclude, from the principles

laid down, that with respect to the collective interests of the state,

that is, between the state itself, the creditors, and the people, there

is no vibration of wealth produced by loans to the public. But that

according as the money borrowed is spent in the country or abroad, in so

far the balance is either made to vibrate between individuals at home,

or to turn against the state in favour of foreign nations.

_CHAP._ XXVII. I next endeavour to shew how necessary a thing it is for

a statesman to acquire a thorough knowledge of the nature and effects of

circulation. By this he is able to judge, when the coin _circulating_ in

the country is sufficient for carrying on alienation; and when it is

not, he is taught how to augment the quantity of it, either by drawing

it from the repositories as oft as he finds the inhabitants disposed to

lock it up; or by substituting symbolical or paper money in place of it,

when the metals are really wanting.

Here I observe, that the _circulating_ or _current_ money of any nation

is constantly in proportion to the taste of dissipation in the rich, and

application to industry in the poor.

When the dissipation of the rich, tends to call off the industrious from

supplying the branches of exportation, then the statesman, in place of

facilitating the melting down of solid property in favour of domestic

circulation, by the easy introduction of symbolical money, should render

this operation more difficult, permitting the lands to be loaded by

entails, substitutions, trusts, settlements, and other inventions which

may hurt the credit of young people, such as retarding the term of

coming to full age, and others of a like nature.

On the other hand, while lands remain ill cultivated; while the numerous

classes remain idle and poor; and while much money is found locked up,

the very opposite administration is expedient: Every method then must be

employed to facilitate and establish the credit of those who have solid

property; such as the introduction of loans upon interest; the breaking

entails upon estates; the facilitating the sale of them, in favour of

the liquidation of all claims competent to the industrious, against the

proprietors, even declaring the cause of creditors the favourable side

in all ambiguous law-suits; and, last of all, allowing arrestment of the

person for moveable debts, which is supporting the interest of creditors

as far, I think, as is possible, in any free nation. Every regulation

becomes, in short, expedient, which can favour the industrious,

accelerate circulation, and establish a credit to every one in

proportion to his worth.

The more money becomes necessary for carrying on consumption, the more

it is easy to levy taxes; the use of which is to advance the public

good, by drawing from the rich, a fund sufficient to employ both the

_deserving_, and the _poor_, in the service of the state; or to correct

the bad consequences of domestic luxury as to foreign trade, by

providing a fund for the payment of bounties upon exportation.

In imposing taxes, a statesman should attend to the nature of those

branches of circulation where the balance is made to vibrate, in order

to distinguish them from those where no vibration is implied. When a man

buys an estate, it would be absurd to make him pay a tax of _cent. per

cent._ though you may safely make him pay at that rate, when he buys a

pint of gin, or a pound of chocolate.

In taxes, again, upon consumption, a particular attention is to be had,

not to confound those which are paid by people who consume to gratify

their desires, with those which are paid by such as consume in order to

produce; that is to say, those which affect the rich, with those which

affect the industrious.

Farther, a statesman must see with perspicuity how far the imposition of

taxes may influence the prices of exportable goods; and in so far as

prices are influenced by them, they must be refunded with interest, and

even when that is not sufficient to support the foreign competition,

premiums or bounties are to be thrown in, at the expence of new

impositions upon domestic consumption.

As all augmentations must at last come to a stop, so must these

expedients for the support of foreign trade against the influence of

domestic abuse; but when trade comes to a stop, taxes may be increased;

because the considerations in favour of exportation are removed. The

statesman then must change his plan, and make use of the power and

influence he acquires by an opulent exchequer, to root out the abuses

which have dried up the spring from which his country used to receive a

continual augmentation of wealth.

I conclude my chapter with this reflection: That under a wise

administration, every vice in a state carries a proper antidote along

with it.

If luxury extinguishes foreign trade it gives birth to taxation; and

money in the hands of a good statesman is an irresistible engine for

correcting every abuse.

In treating of taxes, I frequently look no farther than my pen, when I

raise my head and look about, I find the politics of my closet very

different from those of the century in which I live. I agree that the

difference is striking; but still reason is reason, and there is no

impossibility in the supposition of its becoming practice.

_CHAP._ XXVIII. Prices imply alienation for money, and frequent and

familiar alienations only can fix a standard.

The price of articles of the first necessity regulate, in a great

measure, the price of every thing else. Now the frequent and familiar

alienation of such articles implies industry, and a numerous class of

free hands; because these only are the buyers. No alienation is implied

in the consumption of necessaries, by those whose occupation it is to

produce them for themselves. Did every one, therefore, supply himself

with necessaries, there would be no alienation of them; consequently, no

price fixed. From hence it follows, that the price of necessaries

depends on the occupations of a people, and not on the quantity of their

specie.

The standard price of _subsistence_ is in the compound proportion of the

number of those who are obliged to buy, and of the demand found for

their labour. Subsistence never can rise above the level of the

faculties of the numerous classes of a people; because so soon as a

price rises above the faculties of the buyer, his demand is withdrawn;

and when the demand of a numerous class is withdrawn, subsistence is

found in too great plenty for the rich, to bear a high price.

The more equal, therefore, the faculties of the industrious populace of

any country are, the less distress will follow upon scarcity, and those

only, whose means cannot reach that standard price, run any risk of

starving.

The faculties, therefore, of the _physical-necessarians_ (as we have

taken the liberty to call them) will, in countries of industry,

determine the standard value of subsistence; and the value, _in money_,

which they receive for their work, will determine the standard of those

faculties; consequently, the price of subsistence must rise and fall

according to the number of workmen, and demand for their work: that is

to say, the price of subsistence must be in the compound proportion

above mentioned.

Here I am led into an examination of the opinion of Messrs. De

Montesquieu and Hume, who think that the price of every thing depends

upon the _quantity of specie_ in the country, which they consider as the

representation of _every thing vendible_; as if these two quantities,

the _commodities_, and the _specie_, were divided into aliquot parts,

exactly proportioned to one another. I do my endeavour to investigate

the meaning of these propositions, in order to shew in what respect they

lead to error, in place of throwing light upon an intricate question:

and then I propose another doctrine, which is, that nothing can

determine the value of a vendible commodity, any where, _but the

complicated operations of demand and competition_, which however

frequently _influenced_ by wealth, yet never can be _regulated_ by it.

_CHAP._ XXIX. In this chapter I follow the succession of Mr. Hume’s

ideas, in his political discourses; and as he is led from his principles

to believe, that there is no such thing as a wrong balance of trade

against a nation, but on the contrary thinks that the nature of money

resembles that of a fluid, which tends every where to a level: In

pursuing the consequences of our former reasoning, I shew, that nothing

is so easy, or more common than a right or a wrong balance of trade; and

I observe, that what we mean by a balance, is not the bringing the fluid

to a level, but either the accumulating or raising it in some countries,

by the means of national industry and frugality, which is a right

balance; or the depressing it in others, by national luxury and

dissipation, which is a wrong one. Thus the general doctrine of the

_level_ can only take place, on the supposition that all nations are

equally frugal and industrious; or rather, that they have an equal

mixture of these and their opposite qualities, together with a

reciprocal trade entirely laid open. When the ideas of different people

are fairly exposed, every question comes to be resolved without

disputation: vices in reasoning seldom take place but when terms are not

rightly understood.

_CHAP._ XXX. As the intention of this inquiry is not to treat of

population, agriculture, trade, industry, &c. as particular subjects,

but as objects influencing the political œconomy of modern states, my

end is answered, so soon as I find the general principles relating to

each sufficiently deduced and ranged under general heads. The use,

therefore, of a chapter of miscellaneous questions and observations, is

to serve as an exercise on what is gone before; to introduce, without a

direct connection, questions analogous to the subject of the book, or to

give a further extension to such as I have treated, in the course of the

chapters, with too much brevity.

In the first and second questions, I endeavour to shew, that the

quantity of coin in any country, is no sufficient rule for judging of

the state of her foreign trade; because money may be acquired and

expended by operations nowise mercantile. A nation, may borrow from

foreigners more than the amount of the balance against her: she may pay

away, in subsidies, and foreign wars, sums greatly beyond the value of a

right balance on her trade. She may call in her specie, and trade with

it abroad, while paper is made to circulate in its place at home: or she

may lock it up in banks, where it never may appear. In short, the riches

of a trading nation may resemble those of a trading man; who may be

immensely rich, with very little specie in his possession.

On the other hand, the riches of a prodigal nation may resemble those of

a prodigal man; who may be full of money, borrowed from all hands, upon

the credit of a large fund of solid property.

The third question concerns the effects of riches in those countries

where trade and industry are little known. Under such circumstances,

coin must be locked up, or virtue will go to wreck. Why? Because, if

coin circulate where there is no industry, it must circulate for no

adequate equivalent in work or service; that is, for the gratification

of the passions, or in monstrous prodigality. Experience demonstrated

the truth of this principle. While the Greek Monarchs of Asia and Ægypt

remained in possession of their vast treasures, virtue and simplicity

stood their ground; when those riches were thrown into circulation,

under the first Roman Emperors, we see the horrible consequences which

ensued. What could produce such monsters, except a taste of dissipation,

without rational objects to discharge their wealth upon? All the money

in the universe, thrown into the hands of an extravagant modern Prince,

would not affect his morals; the taste of luxury would soon discharge

him of it; and the consequence would be, to enrich those who gratified

his desires, and that nearly in proportion to their service. But in

antient times, the violence of government stopped the progress of

industry: the consequence of which was, that the few productions of it

were sold for the most exorbitant prices, and the wealth accumulated by

private people commonly occasioned their destruction; because rapine was

the only expedient Princes had fallen upon to draw back money into their

coffers.

Comparing the antient with our modern œconomy, I find both are

curious and entertaining. A contrast often makes us reflect upon

circumstances which otherwise might escape our observation.

In the fourth and fifth questions, I apply the principles we have laid

down, in order to discover why the establishment of trade and industry

has naturally given rise to an established system of taxation, and

regular standing armies.

This leads me to compare circumstances relative to the œconomy of

Europe some centuries ago, when taxes were almost unknown, with the

present times, when they are becoming daily more familiar; and I shew

that they are, in a great part, paid in lieu of the personal service to

which the subjects were formerly bound, and by the means of which states

were supported; and if they are extended beyond this proportion, it is

in consequence of a new circulation opened between the state and those

who serve it: so that the effect of taxes, spent within a country well

governed, is to draw money gratuitously from those who have a

superfluity of it, in order to bestow it upon those who are willing and

capable to advance the service of the state; that is, in other words, to

oblige private people to lay out their money for the service of their

country.

From the same principles, and from a very succinct historical deduction

of the facts relating to the state of the militia of Europe, from the

time of the Romans, I endeavour to shew, that standing armies in our

days are become necessary, while Princes have the rage of making war;

because, without keeping up such bodies of men in time of peace, the

call of the luxurious would provide employment for them, which they

would not choose to quit, when the will of their sovereign might command

their attendance.

These questions lead me to inquire into the method of estimating the

relative power of different states in making war.

Here I reduce power to the two principles of men and money; the men at

the command of a state, are those who have a poor and precarious living,

or at least a worse condition than that which the state can offer for

their military service; consequently, the more a people are usefully

employed, the less they are calculated for filling armies. From hence it

is that luxury is said to render a nation effeminate: a true

proposition, when rightly understood, relatively to the industrious, not

to the luxurious classes of the people.

The annual revenue of a state is in proportion to the circulation;

because it is at the time of circulation only that national

contributions can be levied with the fewest inconveniencies. Money which

does not circulate is of no use to the proprietors, and consequently can

be of no utility to the state.

Credit is in proportion to the capacity of paying the interest of money

borrowed.

Having abundantly insisted on the advantages of industry in providing

for the poor, I now come to consider its permanent effects, after the

first end has been accomplished. If a thousand pounds are bestowed upon

making a fire-work, a number of people are thereby employed, and gain a

temporary livelihood. If the same sum is bestowed for making a canal for

watering the fields of a province, a like number of people may reap the

same benefit, and hitherto accounts stand even: but the fire-work played

off, what remains, but the smoke and stink of the powder? Whereas the

consequence of the canal is a perpetual fertility to a formerly barren

soil. Here I enter again into an examination and confrontation of

antient and modern oeconomy. I shew that the magnificence of the

antients had not the same tendency to destroy simplicity, as the luxury

of modern times has; because they owed their magnificence to the slavery

of the inferior classes of people, who got no return for their labour

farther than bare subsistence. Whereas modern magnificence depends upon

industry; which draws after it such a retribution in money, as soon

enables those who at first contributed to the luxury of others, to call

for the like services from an inferior class, who are entering on the

course which the more wealthy abandon.

I conclude this chapter with an inquiry into the principles which ought

to regulate the establishment of trading companies. Those principles

relate to the _advantages_ and _disadvantages_ which severally attend

them. The principal advantage in common to all, proceeds from the union

of private stocks; consequently, the statesman ought to protect

companies so far only as this union promotes the end for which they were

instituted: but whenever he finds that the strength of united stocks is

made use of to oppress the unincorporated industrious, he ought to take

these under his protection, by providing an outlet for _their_ industry,

by which he will frustrate any attempt of turning that into a monopoly,

which was intended only to extend trade and industry.

The second advantage is peculiar to such companies as trade to foreign

parts under exclusive privileges. By these a state reaps the benefit of

keeping prices low in foreign markets; because the company is freed from

the competition of their own countrymen. But the inconvenience resulting

in consequence of this, is, that as the company _buys_, so they also

_sell_ without competition. The method, therefore, of preventing the bad

consequence of this, is, for the state constantly to be at the great

expence of every such settlement in favour of foreign trade; and to

grant the exclusive privilege in favour of commerce in general, and not

in the common way, as an indemnification to particular people for the

expence of making the settlement, or from other political

considerations. When an exclusive privilege is granted upon such

principles, the state may retain a power of inspection into all their

affairs, and may open the doors of the company to new subscribers, in

proportion to the demand for the trade, in place of allowing the company

to swell their stock with borrowed money. By such means frauds are

prevented; a foundation is laid for several mercantile operations, which

advance the prosperity of the state, without hurting the company; and

jealousy is taken away, by preventing the too close connection between

the members of it, when few in number, from degenerating into an

oppressive and scandalous monopoly.

END OF THE SECOND BOOK.

[Illustration]

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AN

INQUIRY

INTO THE

PRINCIPLES OF POLITICAL OECONOMY.

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