OF CREDIT IN TRADE, AND HOW A TRADESMAN OUGHT TO VALUE AND IMPROVE IT:
HOW EASILY LOST, AND HOW HARD IT IS TO BE RECOVERED
Credit is, or ought to be, the tradesman's _mistress_; but I must tell
him too, he must not think of ever casting her off, for if once he loses
her, she hardly ever returns; and yet she has one quality, in which she
differs from most of the ladies who go by that name--if you court her,
she is gone; if you manage so wisely as to make her believe you really
do not want her, she follows and courts you. But, by the way, no
tradesman can be in so good circumstances as to say he does not want,
that is, does not stand in need of credit.
Credit, next to real stock, is the foundation, the life and soul, of
business in a private tradesman; it is his prosperity; it is his support
in the substance of his whole trade; even in public matters, it is the
strengh and fund of a nation. We felt, in the late wars, the consequence
of both the extremes--namely, of wanting and of enjoying a complete fund
of credit.
Credit makes war, and makes peace; raises armies, fits out navies,
fights battles, besieges towns; and, in a word, it is more justly called
the sinews of war than the money itself,[42] because it can do all these
things without money--nay, it will bring in money to be subservient,
though it be independent.
Credit makes the soldier fight without pay, the armies march without
provisions, and it makes tradesmen keep open shop without stock. The
force of credit is not to be described by words; it is an impregnable
fortification, either for a nation, or for a single man in business; and
he that has credit is invulnerable, whether he has money or no; nay, it
will make money, and, which is yet more, it will make money without an
intrinsic, without the _materia medica_ (as the doctors have it); it
adds a value, and supports whatever value it adds, to the meanest
substance; it makes paper pass for money, and fills the Exchequer and
the banks with as many millions as it pleases, upon demand. As I said
in last chapter, it increases commerce; so, I may add, it makes trade,
and makes the whole kingdom trade for many millions more than the
national specie can amount to.
It may be true, as some allege, that we cannot drive a trade for more
goods than we have to trade with, but then it is as true, that it is by
the help of credit that we can increase the quantity, and that more
goods are made to trade with than would otherwise be; more goods are
brought to market than they could otherwise sell; and even in the last
consumption, how many thousands of families wear out their clothes
before they pay for them, and eat their dinner upon tick with the
butcher! Nay, how many thousands who could not buy any clothes, if they
were to pay for them in ready money, yet buy them at a venture upon
their credit, and pay for them as they can!
Trade is anticipated by credit, and it grows by the anticipation; for
men often buy clothes before they pay for them, because they want
clothes before they can spare the money; and these are so many in
number, that really they add a great stroke to the bulk of our inland
trade. How many families have we in England that live upon credit, even
to the tune of two or three years' rent of their revenue, before it
comes in!--so that they must be said to _eat the calf in the cow's
belly_. This encroachment they make upon the stock in trade; and even
this very article may state the case: I doubt not but at this time the
land owes to the trade some millions sterling; that is to say, the
gentlemen owe to the tradesmen so much money, which, at long run, the
rents of their lands must pay.
The tradesmen having, then, trusted the landed men with so much, where
must they have it but by giving credit also to one another? Trusting
their goods and money into trade, one launching out into the hands of
another, and forbearing payment till the lands make it good out of their
produce, that is to say, out of their rents.
The trade is not limited; the produce of lands may be and is restrained.
Trade cannot exceed the bounds of the goods it can sell; but while trade
can increase its stock of cash by credit, it can increase its stock of
goods for sale, and then it has nothing to do but to find a market to
sell at; and this we have done in all parts of the world, still by the
force of our stocks being so increased.
Thus, credit raising stock at home, that stock enables us to give credit
abroad; and thus the quantity of goods which we make, and which is
infinitely increased at home, enables us to find or force a vent abroad.
This is apparent, our home trade having so far increased our
manufacture, that England may be said to be able almost to clothe the
whole world; and in our carrying on the foreign trade wholly upon the
English stocks, giving credit to almost all the nations of the world;
for it is evident, our stocks lie at this time upon credit in the
warehouses of the merchants in Spain and Portugal, Holland and Germany,
Italy and Turkey; nay, in New Spain and Brazil.
The exceeding quantity of goods thus raised in England cannot be
supposed to be the mere product of the solid wealth and stocks of the
English people; we do not pretend to it; the joining those stocks to the
value of goods, always appearing in England in the hands of the
manufacturers, tradesmen, and merchants, and to the wealth which appears
in shipping, in stock upon land, and in the current coin of the nation,
would amount to such a prodigy of stock, as not all Europe could pretend
to.
But all this is owing to the prodigious thing called credit, the extent
of which in the British trade is as hard to be valued, as the benefit of
it to England is really not to be described. It must be likewise said,
to the honour of our English tradesman, that they understand how to
manage the credit they both give and take, better than any other
tradesmen in the world; indeed, they have a greater opportunity to
improve it, and make use of it, and therefore may be supposed to be more
ready in making the best of their credit, than any other nations are.
Hence it is that we frequently find tradesmen carrying on a prodigious
trade with but a middling stock of their own, the rest being all managed
by the force of their credit; for example, I have known a man in a
private warehouse in London trade for forty thousand pounds a-year
sterling, and carry on such a return for many years together, and not
have one thousand pounds' stock of his own, or not more--all the rest
has been carried on upon credit, being the stocks of other men running
continually through his hands; and this is not practised now and then,
as a great rarity, but is very frequent in trade, and may be seen every
day, as what in its degree runs through the whole body of the tradesmen
in England.[43]
Every tradesman both gives and takes credit, and the new mode of setting
it up over their shop and warehouse doors, in capital letters, _No trust
by retail_, is a presumption in trade; and though it may have been
attempted in some trades, was never yet brought to any perfection; and
most of those trades, who were the forwardest to set it up, have been
obliged to take it down again, or act contrary to it in their business,
or see some very good customers go away from them to other shops, who,
though they have not brought money with them, have yet good foundations
to make any tradesmen trust them, and who do at proper times make
payments punctual enough.
On the contrary, instead of giving no trust by retail, we see very
considerable families who buy nothing but on trust; even bread, beer,
butter, cheese, beef, and mutton, wine, groceries, &c, being the things
which even with the meanest families are generally sold for ready money.
Thus I have known a family, whose revenue has been some thousands
a-year, pay their butcher, and baker, and grocer, and cheesemonger, by a
hundred pounds at a time, and be generally a hundred more in each of
their debts, and yet the tradesmen have thought it well worth while to
trust them, and their pay has in the end been very honest and good.
This is what I say brings land so much in debt to trade, and obliges the
tradesman to take credit of one another; and yet they do not lose by it
neither, for the tradesmen find it in the price, and they take care to
make such families pay warmly for the credit, in the rate of their
goods; nor can it be expected it should be otherwise, for unless the
profit answered it, the tradesman could not afford to be so long without
his money.
This credit takes its beginning in our manufactures, even at the very
first of the operation, for the master manufacturer himself begins it.
Take a country clothier, or bay-maker, or what other maker of goods you
please, provided he be one that puts out the goods to the making; it is
true that the poor spinners and weavers cannot trust; the first spin for
their bread, and the last not only weave for their bread, but they have
several workmen and boys under them, who are very poor, and if they
should want their pay on Saturday night, must want their dinner on
Sunday; and perhaps would be in danger of starving with their families,
by the next Saturday.
But though the clothier cannot have credit for spinning and weaving, he
buys his wool at the stapler's or fellmonger's, and he gets two or three
months' credit for that; he buys his oil and soap of the country
shopkeeper, or has it sent down from his factor at London, and he gets
longer credit for that, and the like of all other things; so that a
clothier of any considerable business, when he comes to die, shall
appear to be £4000 or £5000 in debt.
But, then, look into his books, and you shall find his factor at
Blackwell Hall, who sells his cloths, or the warehouse-keeper who sells
his duroys and druggets, or both together, have £2000 worth of goods in
hand left unsold, and has trusted out to drapers, and mercers, and
merchants, to the value of £4000 more; and look into his workhouse at
home, namely, his wool-lofts, his combing-shop, his yarn-chamber, and
the like, and there you will find it--in wool unspun, and in yarn spun,
and in wool at the spinners', and in yarn at and in the looms at the
weavers'; in rape-oil, gallipoli oil, and perhaps soap, &c, in his
warehouses, and in cloths at the fulling-mill, and in his rowing-shops,
finished and unfinished, £4000 worth of goods more; so that, though this
clothier owed £5000 at his death, he has nevertheless died in good
circumstances, and has £5000 estate clear to go among his children, all
his debts paid and discharged. However, it is evident, that at the very
beginning of this manufacturer's trade, his £5000 stock is made £10,000,
by the help of his credit, and he trades for three times as much in the
year; so that £5000 stock makes £10,000 stock and credit, and that
together makes £30,000 a-year returned in trade.
When you come from him to the warehouse-keeper in London, there you
double and treble upon it, to an unknown degree; for the London
wholesale man shall at his death appear to have credit among the country
clothiers for £10,000 or £15,000, nay, to £20,000, and yet have kept up
an unspotted credit all his days.
When he is dead, and his executors or widow come to look into things,
they are frightened with the very appearance of such a weight of debts,
and begin to doubt how his estate will come out at the end of it. But
when they come to cast up his books and his warehouse, they find,
In debts abroad, perhaps £30,000
In goods in his warehouse £12,000
So that, in a word, the man has died immensely rich; that is to say,
worth between £20,000 and £30,000, only that, having been a long
standard in trade, and having a large stock, he drove a very great
business, perhaps to the tune of £60,000 or £70,000 a-year; so that, of
all the £30,000 owing, there may be very little of it delivered above
four to six months, and the debtors being many of them considerable
merchants, and good paymasters, there is no difficulty in getting in
money enough to clear all his own debts; and the widow and children
being left well, are not in such haste for the rest but that it comes in
time enough to make them easy; and at length it all comes in, or with
but a little loss.
As it is thus in great things, it is the same in proportion with small;
so that in all the trade of England, you may reckon two-thirds of it
carried on upon credit; in which reckoning I suppose I speak much within
compass, for in some trades there is four parts of five carried on so,
and in some more.
All these things serve to show the infinite value of which credit is to
the tradesman, as well as to trade itself; and it is for this reason I
have closed my instructions with this part of the discourse. Credit is
the choicest jewel the tradesman is trusted with; it is better than
money many ways; if a man has £10,000 in money, he may certainly trade
for £10,000, and if he has no credit, he cannot trade for a shilling
more.
But how often have we seen men, by the mere strength of their credit,
trade for ten thousand pounds a-year, and have not one groat of real
stock of their own left in the world! Nay, I can say it of my own
knowledge, that I have known a tradesman trade for ten thousand pounds
a-year, and carry it on with full credit to the last gasp, then die, and
break both at once; that is to say, die unsuspected, and yet, when his
estate has been cast up, appear to be five thousand pounds worse than
nothing in the world: how he kept up his credit, and made good his
payments so long, is indeed the mystery, and makes good what I said
before, namely, that as none trade so much upon credit in the world, so
none know so well how to improve and manage credit to their real
advantage, as the English tradesmen do; and we have many examples of it,
among our bankers especially, of which I have not room to enter at this
time into the discourse, though it would afford a great many diverting
particulars.[44]
I have mentioned on several occasions in this work, how nice and how
dainty a dame this credit is, how soon she is affronted and disobliged,
and how hard to be recovered, when once distasted and fled; particularly
in the story of the tradesman who told his friends in a public
coffee-house that he was broke, and should shut up his shop the next
day. I have hinted how chary we ought to be of one another's credit, and
that we should take care as much of our neighbour tradesman's credit as
we would of his life, or as we would of firing his house, and,
consequently, the whole street.
Let me close all with a word to the tradesman himself, that if it be so
valuable to him, and his friends should be all so chary of injuring his
reputation, certainly he should be very chary of it himself. The
tradesman that is not as tender of his credit as he is of his eyes, or
of his wife and children, neither deserves credit, nor will long be
master of it.
As credit is a coy mistress, and will not easily be courted, so she is a
mighty nice touchy lady, and is soon affronted; if she is ill used, she
flies at once, and it is a very doubtful thing whether ever you gain her
favour again.
Some may ask me here, 'How comes it to pass, since she is so nice and
touchy a lady, that so many clowns court and carry her, and so many
fools keep her so long?' My answer is, that those clowns have yet good
breeding enough to treat her civilly; he must be a fool indeed that will
give way to have his credit injured, and sit still and be quiet-that
will not bustle and use his utmost industry to vindicate his own
reputation, and preserve his credit.
But the main question for a tradesman in this case, and which I have not
spoken of yet, is, 'What is the man to do to preserve his credit? What
are the methods that a young tradesman is to take, to gain a good share
of credit in his beginning, and to preserve and maintain it when it is
gained?'[45]
Every tradesman's credit is supposed to be good at first. He that begins
without credit, is an unhappy wretch of a tradesman indeed, and may be
said to be broke even before he sets up; for what can a man do, who by
any misfortune in his conduct during his apprenticeship, or by some ill
character upon him so early, begins with a blast upon his credit? My
advice to such a young man would be, not to set up at all; or if he did,
to stay for some time, till by some better behaviour, either as a
journeyman, or as an assistant in some other man's shop or warehouse, he
had recovered himself; or else to go and set up in some other place or
town remote from that where he has been bred; for he must have a great
assurance that can flatter himself to set up, and believe he shall
recover a lost reputation.
But take a young tradesman as setting up with the ordinary stock, that
is to say, a negative character, namely, that he has done nothing to
hurt his character, nothing to prejudice his behaviour, and to give
people a suspicion of him: what, then, is the first principle on which
to build a tradesman's reputation? and what is it he is to do?
The answer is short. Two things raise credit in trade, and, I may say,
they are the only things required; there are some necessary addenda, but
these are the fundamentals.
1. Industry. 2. Honesty.
I have dwelt upon the first; the last I have but a few words to say to,
but they will be very significant; indeed, that head requires no
comment, no explanations or enlargements: nothing can support credit, be
it public or private, but honesty; a punctual dealing, a general probity
in every transaction. He that once breaks through his honesty, violates
his credit--once denominate a man a knave, and you need not forbid any
man to trust him.
Even in the public it appears to be the same thing. Let any man view the
public credit in its present flourishing circumstances, and compare it
with the latter end of the years of King Charles II. after the Exchequer
had been shut up, parliamentary appropriations misapplied, and, in a
word, the public faith broken; who would lend? Seven or eight per cent,
was given for anticipations in King William's time, though no new fraud
had been offered, only because the old debts were unpaid; and how hard
was it to get any one to lend money at all!
But, after by a long series of just and punctual dealing, the Parliament
making good all the deficient funds, and paying even those debts for
which no provision was made, and the like, how is the credit restored,
the public faith made sacred again, and how money flows into the
Exchequer without calling for, and that at three or four per cent.
interest, even from foreign countries as well as from our own people!
They that have credit can never want money; and this credit is to be
raised by no other method, whether by private tradesmen, or public
bodies of men, by nations and governments, but by a general probity and
an honest punctual dealing.
The reason of this case is as plain as the assertion; the cause is in
itself; no man lends his money but with an expectation of receiving it
again with the interest. If the borrower pays it punctually without
hesitations and defalcations, without difficulties, and, above all,
without compulsion, what is the consequence?--he is called an honest
man, he has the reputation of a punctual fair dealer. And what
then?--why, then, he may borrow again whenever he will, he may take up
money and goods, or anything, upon his bare words, or note; when another
man must give bondsmen, or _mainprize_, that is, a pawn or pledge for
security, and hardly be trusted to neither. This is credit.
It is not the quality of the person would give credit to his dealing;
not kings, princes, emperors, it is all one; nay, a private shopkeeper
shall borrow money much easier than a prince, if the credit of the
tradesman has the reputation of being an honest man. Not the crown
itself can give credit to the head that wears it, if once he that wears
it comes but to mortgage his honour in the matter of payment of money.
Who would have lent King Charles II. fifty pounds on the credit of his
word or bond, after the shutting up the Exchequer? The royal word was
made a jest of, and the character of the king was esteemed a fluttering
trifle, which no man would venture upon, much less venture his money
upon.
In King William's time the case was much the same at first; though the
king had not broken his credit then with any man, yet how did they break
their faith with the whole world, by the deficiency of the funds, the
giving high and ruinous interest to men almost as greedy as vultures,
the causing the government to pay great and extravagant rates for what
they bought, and great premiums for what they borrowed--these were the
injuries to the public for want of credit; nor was it in the power of
the whole nation to remedy it; on the contrary, they made it still grow
worse and worse, till, as above, the parliament recovered it. And how
was it done? Not but by the same method a private person must do the
same, namely, by doing justly, and fairly, and honestly, by every body.
Thus credit began to revive, and to enlarge itself again; and usury,
which had, as it were, eaten up mankind in business, declined, and so
things came to their right way again.
The case is the same with a tradesman; if he shuffles in payment,
bargains at one time, and pays at another, breaks his word and his
honour in the road of his business, he is gone; no man will take his
bills, no man will trust him.
The conclusion is open and clear: the tradesman cannot be too careful of
his credit, he cannot buy it too dear, or be too careful to preserve it:
it is in vain to maintain it by false and loose doing business; by
breaking faith, refusing to perform agreements, and such shuffling
things as those; the greatest monarch in Europe could not so preserve
his credit.
Nothing but probity will support credit; just, and fair, and honourable
dealings give credit, and nothing but the same just, and fair, and
honourable dealings will preserve it.
FOOTNOTES:
[42] [How strikingly was this proved in the last war, when the British
government obtained credit for no less than six hundred millions to
conduct warlike operations, and by these means was ultimately
victorious.]
[43] [The author's praises of credit must be received with caution. If
his descriptions of the credit system of his own day are true, an
improvement has since taken place, as business neither is nor can be now
carried on to such an extent upon credit--a circumstance that redounds
to the advantage of all parties.]
[44] [Defoe speaks of such cases as if there were something laudable in
them, whereas it is obviously for the interest of all honest traders,
that no such men should be allowed to carry on business.]
[45] [Defoe almost appears in this place to lay capital out of the
question, and to represent credit as all in all. Credit is a matter of
great consequence; but we must not attempt to carry on business by its
means alone. It should only be considered as an aid to capital. Those
who, without capital, endeavour to set up in business by means of
credit, or, when capital is exhausted, attempt to struggle on by means
of credit alone, will, in general, only have a life of anxiety and
dispeace for their pains.]