IN THE GLASGOW CHAIR—THE LECTURES ON JUSTICE AND POLICE
The finding of Adam Smith’s lectures on Justice, Police, Revenue, and
Arms, 133 years at least after their last delivery and 105 years after
the author had had his own folio notes of them destroyed, is not only
one of the curiosities of literature, it is also the most important aid
that has been afforded to the study of Smith’s economic, social, and
juristic ideas since the appearance in 1793 of Dugald Stewart’s
biographical sketch. From 1793 to 1896, hundreds of German students big
with their epoch-making theses “über Smiths Entwicklung,” scores of
Frenchmen eager to prove the superiority of Quesnai and Turgot, and
perhaps half a dozen English critics had whetted their ingenuity on a
brief account of the Glasgow lectures which was supplied to Dugald
Stewart by Adam Smith’s old pupil and friend, John Millar. According to
Millar, Smith’s course, while he occupied the chair of Moral Philosophy
at Glasgow, fell into four parts, the first two of which consisted, as
we have seen, of Natural Theology and Ethics. In the third part he
treated at more length of that branch of morality which relates to
_justice_. Here he followed the plan suggested by Montesquieu,
“endeavouring to trace the gradual progress of jurisprudence, both
public and private, from the rudest to the most refined ages.” This
important branch of his labours he also intended to give to the public,
but he did not live to fulfil his intention.
In the last part of his lectures he examined those political regulations
which are founded not upon _justice_, but _expediency_, and considered
the political institutions relating to commerce, to finance, to
ecclesiastical and military establishments. “What he delivered on these
subjects contained the substance of the work he afterwards published
under the title of _An Inquiry into the Nature and Causes of the Wealth
of Nations_.”
This was all that the world knew of Adam Smith’s lectures on
jurisprudence and political economy, save that at the end of his _Theory
of Moral Sentiments_ he promised “another discourse” dealing with the
general principles of law and government, and with the different
revolutions they have undergone in the different ages and periods of
society, “not only in what concerns justice, but in what concerns
police, revenue, and arms, and whatever else in the subject of law.” On
the first section of his lectures Adam Smith never even promised a book.
He had no ambition to bring the kirk about his ears. The second section
took shape, as we have seen, in the _Theory of Moral Sentiments_, after
the publication of which in 1759 the plan of the lectures underwent a
change, the ethical part being compressed and the economical part
extended. The _Wealth of Nations_ covers the subject of police, revenue,
and arms, and so executes the promise in part. “What remains,” he wrote
in 1790, “the theory of Jurisprudence, which I have long projected, I
have hitherto been hindered from executing.” In the lectures now
discovered and published we have therefore a first draft of the _Wealth
of Nations_ and also a first draft of the projected work on Justice, or
Jurisprudence, “a sort of theory and history of law and government,” as
he called it in a letter of 1785.
How, then, comes it to pass that we possess these legal and economic
lectures just as Smith delivered them to his class at Glasgow, in spite
of Dugald Stewart’s express statement that no part of them had been
preserved “excepting what he himself published in the _Theory of Moral
Sentiments_ and in _The Wealth of Nations_”?
When Smith left Glasgow in 1764 his fame stood high, and probably there
were many note-books containing his lectures floating about in the
college. A good manuscript of useful lectures would pass from one
student to another and might from time to time be found on a bookstall.
In the session of 1762-3, or possibly of the previous year, an
intelligent and attentive student took down Smith’s lectures with
unusual accuracy. At least one copy was taken of it after Smith had left
the University; for the manuscript so happily preserved is dated 1766,
is clear, well written, and free from abbreviations, while some of the
mistakes are evidently misreadings and not mishearings. That this fair
copy was not made by the student who took the original notes is further
shown, says the editor, “by the fact that, though the original
note-taker must have been able and intelligent, the transcription is
evidently the work of a person who often did not understand what he was
writing.”
The manuscript consists of 192 leaves octavo size, bound in calf, with
the signature of “J. A. Maconochie, 1811,” on the front cover. This
Maconochie, or perhaps his father Allan, the first Lord Meadowbank, who
was appointed professor of Public Law at Edinburgh in 1779, must have
picked up the book, and it has remained in the possession of the family
ever since. In 1876 Mr. Charles C. Maconochie rescued it from a
garret-room, and in 1895 happened to mention it to Mr. Edwin Cannan, who
thereupon undertook the task of editing it for the press—a task which he
has performed to perfection. One result of this lucky discovery is to
dispose of the legend that Adam Smith was little more than a borrower
from the French school, a mere reflector of the Reflexions of Turgot. By
examining the lectures we shall inform ourselves in the political wisdom
which Adam Smith used to teach his fortunate class at Glasgow long years
before he met Quesnai or Turgot, and longer still before the Reflexions
began to appear in the _Éphémérides du Citoyen_.
“Jurisprudence” was the title Adam Smith gave to this course of
lectures, and he divided it under four heads: Justice, Police, Revenue,
and Arms, taken in the order named. Natural Jurisprudence, he begins, is
the science that inquires into the general principles which ought to be
the foundation of the laws of all nations. It is, he says elsewhere in
his _Theory of Moral Sentiments_, “of all sciences by far the most
important, but hitherto perhaps the least cultivated.” Grotius’s
treatise on the Laws of War and Peace—“a sort of casuistical book for
sovereigns and states”—was still, he thought, the most complete work on
this subject. After Grotius came Hobbes, who, from an utter abhorrence
of ecclesiasticism and bigotry, sought to establish a system of morals
by which men’s consciences might be subjected to the civil power. Then
after a few words on Puffendorf and Cocceii, Adam Smith explained his
own classification as follows:—
“Jurisprudence is the theory of the general principles of law and
government. The four great objects of law are justice, police,
revenue, and arms.
“The object of justice is the security from injury, and it is the
foundation of civil government.
“The objects of police are the cheapness of commodities, public
security and cleanliness, if the two last were not too minute for a
lecture of this kind. Under this head we will consider the opulence of
a state.
“For defraying the expenses of government, some fund must be raised.
Hence the origin of revenue.... In general, whatever revenue can be
raised most insensibly from the people ought to be preferred; and in
the sequel it is proposed to be shown, how far the laws of Britain and
of other European nations are calculated for this purpose.
“As the best police cannot give security unless the government can
defend themselves from foreign attacks, the fourth thing appointed by
law is for this purpose; and under this head will be shown the
different species of arms, the constitution of standing armies,
militias, etc.
“After these will be considered the laws of nations.”
Having thus divided his whole course, Adam Smith proceeded further in an
introductory lecture to subdivide his first part, Justice. The end of
justice is to secure from injury; and a man may be injured as a member
of a state, as a private individual (in his body, reputation, or
property), or as a member of a family. Adam Smith therefore treats of
justice under the three heads of Public Jurisprudence, Domestic Law, and
Private Law. Many of his juristic ideas are evidently derived from
Grotius, Locke, Montesquieu, Hutcheson, and Hume; but the effect
produced is that of a powerful and original thinker in close touch with
the best minds of his day, who draws his illustrations freely and easily
alike from ancient and modern history. He finds that men were induced to
enter civil society by two principles, authority and utility, that is to
say, by the instinct of obedience and the instinct of self-preservation.
“In a monarchy the principle of authority prevails, and in a democracy
that of utility. In Britain, which is a mixed government, the factions
formed some time ago, under the names of Whig and Tory, were
influenced by these principles; the former submitted to government on
account of its utility and the advantages they derived from it, while
the latter pretended that it was of divine institution, and to offend
against it was equally criminal, as for a child to rebel against its
parent. Men in general follow these principles according to their
natural dispositions. In a man of a bold, daring, and bustling turn
the principle of utility is predominant, and a peaceable, easy turn of
mind usually is pleased with a tame submission to superiority.”
In the same chair Hutcheson had taught that society is founded on an
original contract. Adam Smith discards the theory for various reasons:—
“In the first place, the doctrine of an original contract is peculiar
to Great Britain, yet government takes place where it was never
thought of, which is even the case with the greater part of people in
this country. Ask a common porter or day-labourer why he obeys the
civil magistrate, he will tell you that it is right to do so, that he
sees others do it, that he would be punished if he refused to do it,
or perhaps it is a sin against God not to do it. But you never hear
him mention a contract as the foundation of his obedience.”
Smith was as fond as his master Aristotle of testing fine-spun theories
by the coarse wear of daily life. He loved to march an army of
common-folk through the cobwebs of political philosophy. A second
objection was that, although a government may be entrusted to certain
persons on certain conditions, the contract cannot bind their posterity.
“It may indeed be said that by remaining in the country you tacitly
consent to the contract, and are bound by it. But how can you avoid
staying in it? You were not consulted whether you should be born in it
or not. And how can you get out of it? Most people know no other
language nor country, are poor, and obliged to stay not far from the
place where they were born, to labour for a subsistence. They cannot
therefore be said to give any consent to a contract, though they may
have the strongest sense of obedience.”
In a remarkable book on _English Government_ (1803), John Millar
expresses his indebtedness to the “ingenious and profound author of the
_Wealth of Nations_.” “I am happy,” he says, “to acknowledge the
obligations I feel myself under to this illustrious philosopher by
having at an early period of life had the benefit of hearing his
lectures on the History of Civil Society, and of enjoying his unreserved
conversation on the same subject.”[15] And this indeed was the spacious
topic which occupied most of the course on public jurisprudence. Nations
of hunters and fishers, he began, had properly no government at all.
They lived according to the laws of nature. Then he came to the
patriarchs of the Old Testament and of the Homeric age, and compared the
growth of republican government in Greece, Rome, and modern Italy. How
liberty was lost is the next theme. The students were reminded of Cæsar
and Cromwell, of the contrast between Western and Oriental despotisms,
of the improvements in law which have often been introduced by military
conquerors. They were then led to see by the history of the fall of the
Roman Empire how “military monarchy came to share that fated dissolution
that awaits every state and constitution.” After describing the fall of
the Roman Empire, Smith gave an account of the origin of the modern
governments of Europe.
Smith had Burke’s “salutary prejudice.” Despite a private partiality for
republican institutions, he saw, like Montesquieu, in our constitution
“a happy mixture of all the different forms of government properly
restrained, and a perfect security to liberty and property.” The Commons
in a great measure manage all public affairs, as no money-bill can take
its rise except in that House. The judges are quite independent of the
king. The Habeas Corpus Act and the methods of election are further
securities of liberty. Lastly, “the law of England, always the friend of
liberty, deserves praise in no instance more than in the careful
provision of impartial juries.”
The first division of Justice concludes with an excellent description of
the struggle between the English nation and King James II., who “on
account of his encroachments on the body politic was with all justice
and equity in the world opposed and rejected.”
In the second division of Justice, called Domestic Law, he examined the
legal relations that had subsisted at different times and in different
countries between husband and wife, parent and child, master and
servant, guardian and ward. The treatment is concise without being dry.
Philosophy corrects curiosity; humanity peeps through law, and humour
spices humanity. We come upon his favourite proposition that “love,
which was formerly a ridiculous passion,” has become “grave and
respectable,” the proof being that love now influences all public
entertainments, whereas no ancient tragedy turned upon it. He counters
Montesquieu’s statement that at Bantam, in the East Indies, there are
ten women born for one man, by a broad doctrine: If the laws of nature
are the same everywhere, the laws of gravity and attraction the same;
why not the laws of generation? He reminds his class that slavery is
still “almost universal”; for a small part of Western Europe is “the
only portion of the globe that is free from it.” Upon the evils of
slavery he spoke as strongly as he wrote before in the _Theory of Moral
Sentiments_ or afterwards in the _Wealth of Nations_ (Book I. chap.
viii.). It is almost needless, he says, to prove that slavery is a bad
institution. “A free man keeps as his own whatever is above his rent,
and therefore has a motive to industry. Our colonies would be much
better cultivated by free men.” That slavery is a disadvantage appears,
he adds, from the state of colliers and salters in Scotland. These poor
wretches indeed, whom he must have seen daily in Kirkcaldy (where
Pennant noticed them with indignation thirty years afterwards), had some
privileges which slaves had not. Their property after maintenance was
their own, and they could only be sold with their work. They were
allowed to marry and to choose their religion, and their wages were half
a crown a day, as compared with the sixpence or eightpence earned by the
ordinary day-labourers in the neighbourhood. Nevertheless “colliers
often leave our coal-works” and run away to Newcastle, preferring
liberty on tenpence or a shilling a day to slavery on half a crown.
The third division (nearly fifty pages in all), on Private Law,
summarises the Roman law of property, and compares the usages of
Scotland and England. Smith had evidently consulted many law reports and
statutes as well as some of the standard authorities in both kingdoms,
such as Lord Kames’s _Law Tracts_, Dalrymple’s _Feudal Property_,
Bacon’s _New Abridgment of the Law_, and Hawkins’s _Pleas of the Crown_.
Smith was wonderfully free from legal obsessions. He condemned the
excessive punishments of his time, and explained that they were founded
not upon regard to public utility, but upon the spectator’s resentment
against the offender and his sympathy with the injured party. The
English laws of real property he regarded as unnatural and mischievous.
He had mastered the theory of entail without being fascinated by it.
“Upon the whole, nothing can be more absurd than perpetual entails.
Piety to the dead can only take place when their memory is fresh in the
minds of men; a power to dispose of estates for ever is manifestly
absurd. The earth and the fulness of it belongs to every generation, and
the preceding one can have no right to bind it up from posterity; such
extension of property is quite unnatural.”
A similar but less pithy condemnation appears in the _Wealth of
Nations_, and was one of the passages which led Cobden to declare
shortly before his death that if he were a young man he would take Adam
Smith in hand, and preach free trade in land as he had formerly preached
free trade in corn.
Having considered “man as a member of a state, as a member of a family,
and as a man,” Smith turned to Police, which is “the second general
division of Jurisprudence.” At that time the word “police” was only
half-way on its voyage from Greece. It “properly signified the policy of
civil government, but now it only means the regulation of the inferior
parts of government, viz. cleanliness, security, and cheapness or
plenty.” “Cleanliness,” ninety years before the first Public Health Act,
was only “the proper method of carrying dirt from the street,” while the
term “security” exactly corresponded with police in the modern sense,
being defined by Adam Smith as “the execution of justice, so far as it
regards regulations for preventing crimes or the method of keeping a
city guard.”
But cleanliness and security, “though useful,” were “too mean to be
considered in a general discourse” of the kind which Adam Smith was
delivering. Accordingly, after briefly comparing the amount of crime
then prevalent in Paris, London, Edinburgh, and Glasgow—a comparison
favourable to Glasgow and London—and inferring that the establishment of
commerce and manufactures is the best police for preventing crimes, he
passes to the consideration of cheapness or plenty—“or, which is the
same thing, the most proper way of procuring wealth and abundance.” Then
follows in a hundred pages what Mr. Cannan has well called a rough draft
of the _Wealth of Nations_, containing (with some noteworthy exceptions)
the main arguments and many of the illustrations which appeared a dozen
or more years later in the book. By the student who would trace the
growth of an idea and the history of a theory the value of the report
can hardly be exaggerated. In Mr. Cannan’s words, “it enables us to
follow the gradual construction of the work from its very foundation,
and to distinguish positively between what the original genius of its
author created out of British materials on the one hand, and French
materials on the other.”
When we consider that this course of political economy was necessarily
brief, and could not possibly contain all the arguments and
illustrations he had already hammered out in the great workshop of his
mind, we are inclined to wonder not that the lectures, when compared
with the full body of doctrine, show many gaps, but rather that they
correspond so closely with the final treatise evolved after twelve or
fourteen years more of meditation, study, and travel. When we reach the
crowning year of Adam Smith’s life with its laureate wreath we shall
have something to say upon later accretions, such as his colonial
policy, his view of expenditure, and that intensely practical theory of
taxation which taught so many wholesome lessons to contemporary and
succeeding statesmen. Oddly enough, the lecturer began by supplying the
very thing his critics have missed in the _Wealth of Nations_—a theory
of consumption. He had therefore, if we combine the lectures with the
treatise, mapped out in his mind the entire scope of economic science in
its natural order. First there is the demand that leads to productive
labour, the desire which is satisfied by and therefore induces toil.
Then comes his central theme, the division of labour and the subsidiary
topic of its distribution (almost ignored in the lectures), with an
appendix on revenue or taxation.
Looking now only at the lectures, we find that of the hundred pages into
which this first discourse on the _Wealth of Nations_ falls, eighty, or
four-fifths, are concerned with “cheapness or plenty,” in other words,
with “the most proper way of procuring wealth or abundance.” Cheapness
is synonymous with plenty, as dearness is synonymous with dearth. Water
is only cheap because it is plentiful, diamonds are costly only because
they are scarce. If we wish to find wherein opulence consists, we must
first consider what are the natural wants of mankind which are to be
supplied; “and if we differ from common opinions, we shall at least give
the reasons for our nonconformity.” So he sets about his task with a
theory of consumption simple, intelligible, and adequate. Food, clothes,
and lodgings are the threefold necessities of animal life. But most
animals find these wants sufficiently provided by nature. Man alone has
so delicate a constitution that no object is produced to his liking. So
he improves his food by cookery, and protects himself by fire, clothes,
and huts from the inclemency of the weather.
But as man’s physical delicacy requires much more provision than that of
any other animal, so does the same, or rather the much greater, delicacy
of his mind. Such is the nicety of his taste, that the very colour of an
object hurts or pleases. He is tired by uniformity, and loves variety
and change. The Indians gladly barter gems for the cheap toys of Europe.
Thus besides the threefold necessities of life a multitude of wants and
demands spring up to which agriculture, manufactures, arts, commerce,
and navigation are subservient; while the establishment of law and
government, “the highest effort of human prudence and wisdom,” enables
the different arts to flourish in peace and security.
Thus Smith arrives at the point from which the _Wealth of Nations_ was
to start. In an uncivilised nation, where labour is undivided, the
natural wants of mankind are provided for. But as civilisation advances
with the division of labour, the provision becomes more liberal, so that
“a common day-labourer in Britain has more luxury in his way of living
than an Indian sovereign.” The labourer’s comfort, indeed, is nothing to
that of the noble. Yet a European prince does not so far exceed a
commoner as the latter does the chief of a savage nation. “In a savage
nation,” he added, with a prophetic glance at Marx, “every one enjoys
the whole fruit of his own labour.” It is therefore the Division of
Labour that increases the opulence of a country. This is the kernel of
political economy, the inner keep round which this great architect of a
new science has built a fortress strong enough to protect society and to
preserve the fruit of men’s toil from the well-meaning unwisdom of their
governments. Not that Smith was insensible to the hardness of economic
laws, to the cruel inequalities of industry:—
“In a civilised society,” he reminds his class, “though there is a
division of labour, there is no equal division, for there are a good
many who work none at all. The division of opulence is not according
to the work. The opulence of the merchant is greater than that of all
his clerks, though he works less; and they again have six times more
than an equal number of artisans who are more employed. The artisan
who works at his ease within-doors has far more than the poor labourer
who trudges up and down without intermission. Thus, he who, as it
were, bears the burden of society, has the fewest advantages.”
Division of labour multiplies the product of labour and so creates
opulence. He takes a pin manufactory as an illustration. If one man made
all the parts of a pin it would take him a year, and the pin would cost
at least six pounds. By dividing the process of manufacture into
eighteen operations, each man employed can make 2000 pins a day. When
labour is thus divided, a much larger surplus is left over and above the
labourer’s maintenance, and of this surplus the labourer will get a
share. “The commodity becomes far cheaper and the labour dearer.” The
less the labour that can procure abundance, the greater the opulence of
society. But coin is not a safe criterion of wages. Twopence in China
will buy more than five shillings in the sugar colonies. By dividing
labour you increase dexterity. A boy nailmaker will easily make 2000
good nails while a country smith unaccustomed to the job is making 400
bad ones. You also save time; for time is always lost in going from one
kind of work to another. “When a person has been reading, he must rest a
little while before he begin to write”; and a country weaver with a
small farm will saunter as he goes from the loom to the plough. By
fixing each man to an operation the product is sure to be increased.
Again, the quantity of work done is much augmented by the invention of
machinery. Two men and three horses can do more with a plough than
twenty men with spades. The miller and his servant will do more with the
water-mill than a dozen men with the hand-mill. Horse-power and
water-power had been brought to the assistance of man by philosophic
invention; and even fire had been called in to aid him by the mechanical
and chemical discoverers. The lecturer was doubtless thinking of his
colleague Joseph Black, and of James Watt, who was at this time working
within the precincts of Glasgow College, and was just developing what
Smith calls “the philosopher’s invention of the fire machine.”
Smith puts forward a queer idea—and he stood to it in the _Wealth of
Nations_—that what gives occasion to the division of labour is not a
perception of the advantage to be gained thereby, but a direct
propensity in human nature for one man to barter with another. This love
of barter is one of those natural instincts which distinguish us from
animals. The division of labour and the material wealth of society are
greatly perfected by improvements of communication which extend markets;
for division of labour must always be proportioned to extent of
commerce. “If ten people only want a certain commodity, the manufacture
of it will never be so divided as if a thousand wanted it.” But where
communications are bad the cost of transit hinders the distribution of
goods. If roads are “deep” or infested with robbers, the progress of
commerce is stopped. “Since the mending of roads in England forty or
fifty years ago, its opulence has increased extremely.” Water carriage
also effectively promotes public opulence; for five or six men will
convey three hundred tons by water more quickly than a hundred men with
a hundred wagons and six hundred horses can take the same weight by
land.[16]
A distinction is drawn between the natural and market price of
commodities. A man has the natural price of his labour when he has
enough to maintain him during its continuance, to defray the cost of his
education, and to compensate the risk of failure or of premature death.
When a man can get this natural price he will have sufficient
encouragement and will produce in proportion to the demand. The market
is regulated by the momentary demand for a thing, by its abundance or
scarcity. When a thing is very scarce the price depends upon the fortune
of the bidders. “As in an auction, if two persons have an equal fondness
for a book, he whose fortune is the largest will carry it.” The
conclusion drawn from these and other arguments is that whatever
“police” (_i.e._ policy) tends to raise the market price above the
natural, tends also to diminish public opulence. The cheaper the
conveniences of life, the greater is the purchasing power of the poor
and the happier will a society be. Any policy which raises and keeps the
market price of goods above their natural price, and so raises the
national, as it were, above the international price, diminishes the
nation’s opulence. This impoverishing policy took various forms, which
admitted of a triple classification:—
1. Taxes on industry and necessities.
2. Monopolies.
3. Exclusive privileges of corporations, and combinations, like those
of bakers and brewers, which kept the price of bread and beer above
the natural level.
Further, as taxes or regulations which raise the market price above the
natural price diminish public opulence, so do bounties like those upon
corn and coarse linen, which depress the market price below the natural
price. A bounty stimulates the production of a particular commodity, and
makes it cheaper for foreigners at the expense of the public at home.
Another serious objection to the system is that people are diverted from
other employments, and thus “what may be called the natural balance of
industry” is disturbed. “Upon the whole, therefore, it is by far the
best police to leave things to their natural course and allow no
bounties nor impose taxes on commodities.”
In a subsequent lecture he arrived at the same conclusion by an analysis
of the true nature of money. At that time money was almost universally
identified with wealth. Though Hume had exposed the fallacy ten years
before, his essay had not affected national policy.[17] Treaties of
commerce were always based upon the theory of the balance of trade,
which again rested on the notion that if a country’s exports could be
made to exceed its imports, it would receive the balance in gold and so
become wealthy. By way of refuting this strange dogma of the
mercantilists, Smith used a very felicitous illustration. He compared
money to the highroads of a country “which bear neither corn nor grass
themselves but circulate all the corn and grass in the country.” If we
could save some of the ground taken up by highways without diminishing
the facilities of carriage and communication, we should add to the
wealth of the country; and the case would be the same if by such a
device as paper-money we could reduce the stock of coin required without
impairing its efficiency as a medium of exchange. For the ground saved
could be cultivated, and the money saved could be sent abroad in
exchange for useful commodities. Thus the nation would be enriched; for
its opulence “does not consist in the quantity of coin, but in the
abundance of commodities which are necessary for life.”
In deference to the mercantilists the government had prohibited the
exportation of coin, “which prohibition has been extremely hurtful to
the commerce of the country,” for every unnecessary accumulation of
money is a dead stock. The same idea that wealth consists in money had
also led to fiscal discrimination against France and in favour of Spain
and Portugal. Why was this policy absurd? The reason, said Smith, will
appear on the least reflection, and he thereupon put to the students in
a few telling sentences those elementary truths about the nature of
foreign trade which seem too simple even to have been discovered, yet
are still sometimes but imperfectly applied by the most enlightened
statesmen, and have not always been apprehended by trained economists:—
“All commerce that is carried on betwixt any two countries must
necessarily be advantageous to both. The very intention of commerce is
to exchange your own commodities for others which you think will be
more convenient for you. When two men trade between themselves it is
undoubtedly for the advantage of both. The one has perhaps more of one
species of commodities than he has occasion for, he therefore
exchanges a certain quantity of it with the other, for another
commodity that will be more useful to him. The other agrees to the
bargain on the same account, and in this manner the mutual commerce is
advantageous to both. The case is exactly the same betwixt any two
nations. The goods which the English merchants want to import from
France are certainly more valuable to them than what they give for
them. Our very desire to purchase them shows that we have more use for
them than either the money or the commodities which we give for them.
It may be said, indeed, that money lasts for ever, but that claret and
cambrics are soon consumed. This is true. But what is the intention of
industry if it be not to produce those things which are capable of
being used, and are conducive to the convenience and comfort of human
life?”
In short, imports are just as advantageous as exports, and one is the
necessary complement of the other. All jealousies and wars between
nations are extremely bad for commerce. If preferential trade is to be
established at all, it should be with France, a much richer and more
populous country than Spain, and also our nearest neighbour. “It were
happy both for this country and France that all national prejudices were
rooted out and a free and uninterrupted commerce established.” Foreign
trade, if wisely and prudently carried on, can never impoverish a
country.
“The poverty of a nation proceeds from much the same causes with those
which render an individual poor. When a man consumes more than he
gains by his industry, he must impoverish himself unless he has some
other way of subsistence. In the same manner, if a nation consume more
than it produces, poverty is inevitable; if its annual produce be
ninety millions and its annual consumption an hundred, then it spends,
eats and drinks, tears, wears, ten millions more than it produces, and
its stock of opulence must gradually go to nothing.”
He proceeds to uproot that hardy perennial of fiscal culture—the opinion
that no expenditure at home can be injurious to public opulence. Let us
suppose, he says, that my father leaves me a thousand pounds’ worth of
the necessaries and conveniences of life. “I get a number of idle folks
around me, and eat, drink, tear and wear till the whole is consumed. By
this I not only reduce myself to want, but certainly rob the public
stock of a thousand pounds, as it is spent and nothing produced for it.”
In the same way money spent on war is wasted wherever the war is waged
and wherever the money employed in preparations is laid out. Finally, he
sums up for free imports in language that could not be strengthened:—
“From the above considerations it appears that Britain should by all
means be made a free port, that there should be no interruptions of
any kind made to foreign trade, that if it were possible to defray the
expenses of government by any other method, all duties, customs, and
excise should be abolished, and that free commerce and liberty of
exchange should be allowed with all nations, and for all things.”
Holding, then, that all taxes upon exports and imports, as well as all
excise duties,[18] hinder commerce, discourage manufactures, and hamper
the division of labour, Smith was inclined in his rather meagre
treatment of taxation to favour direct imposts. He was not one of those
who think that taxation is the royal road to prosperity, and insist that
the only way to save the nation is by picking its pocket. On the
contrary, believing that the best method of raising revenue is to save
it, he introduced taxation as one of the causes that retard the growth
of opulence. But as the thriftiest government has some expenses, and
therefore some taxes, an economist was bound to weigh the merits and
demerits of each. Though in comparison with the corresponding chapters
in the _Wealth of Nations_ his paragraphs on taxation seem raw, the
doctrine is already far in advance of Hume’s. He dwells on the immense
advantage of the land-tax, which only cost the government about eight or
ten thousand pounds to collect, over the customs and excise, which
produce such immense sums, but “are almost eaten up by the legions of
officers that are employed in collecting them.” Another advantage of the
land-tax over taxes on consumption was that it did not raise prices; and
it was better than a tax on capital or income (“stock or money”), in
that, land being visible property, the sum required could be assessed
without very arbitrary proceedings. “It is a hardship upon a man in
trade to oblige him to show his books, which is the only way we can know
how much he is worth. It is a breach of liberty, and may be productive
of very bad consequences by ruining his credit.” Yet Smith was far from
being a single taxer. “If on account of this difficulty you were to tax
land, and neither tax money nor stock, you would do a piece of very
great injustice.”
The only advantage to taxpayers of taxes on commodities is that they are
paid in small sums at a time, whereas taxes on possessions are paid in
large lump sums. But to the government there is the all-important fact
that they are paid insensibly and are not so much murmured against.
“When we buy a pound of tea we do not reflect that the most part of the
price is a duty paid to the government, and therefore pay it
contentedly, as though it were only the natural price of the commodity.
In the same manner, when an additional tax is laid upon beer, the price
of it must be raised, but the mob do not directly vent their malice
against the government, who are the proper objects of it, but upon the
brewers, as they confound the tax price with the natural one.”
In Holland the consumer first paid the price to the merchant and then
(separately) the tax to the excise officer. “We in reality do the very
same thing, but as we do not feel it immediately we imagine it all one
price, and never reflect that we might drink port wine below sixpence a
bottle were it not for the duty.” His general objection to duties on
imports is that they divert capital and industry into unnatural
channels, while the effects of export duties are still more pernicious
in confining consumption and diminishing industry. Uztariz, a well-known
Spanish writer of that day, had observed in his book on commerce:—
“I have found ministers and others, both in their conversation and
writings, maintain the erroneous maxim that high duties are to be laid
upon commodities exported, because foreigners pay them; and, on the
contrary, very moderate ones on such as are imported, because his
majesty’s subjects are at the charge of them.”[19] This policy, says
Smith, is one great cause of the poverty of Spain. Yet the Spaniards
were wiser than some moderns who have sought to persuade the public that
both export and import duties are paid by the foreigner.
Apart from their extraordinary power and originality as contributions to
a new science, we are struck in these lectures by two qualities, freedom
from prejudice, with the accompanying desire for reformation, and a
tolerance of things that are tolerable. Even when he is exposing the
absurdities of the Mercantile System, and the evils of the scheme of
taxation which it had produced in England, he readily concedes that
things might have been far worse, and is glad to confess that upon the
whole “the English are the best financiers in Europe, and their taxes
are levied with more propriety than those of any country whatever.”
Elsewhere, indeed, he shows that the fiscal system of Holland was in
some important respects superior; and in the _Wealth of Nations_ his
language cooled:—“Our state is not perfect, but it is as good or better
than that of most of our neighbours.”
Yet neither tolerance, nor patriotic bias, nor the improbability of
reform prevented him from criticising bad institutions. He saw how evil
was the system of unpaid magistracies which Bentham burned and Gneist
adored. He saw how advantageous was the famous excise scheme which
ruined Walpole. He objected to large farms and entailed estates, and was
not afraid to declare that a thousand acres ought to be purchased as
easily as a thousand yards of cloth. He laughed at the notion, still
strangely prevalent, that agriculture is injured by manufactures. “It is
always a sign,” he says, “that the country is improving, when men go to
town. There are no parts of the country so well inhabited nor so well
cultivated as those which lie in the neighbourhood of populous cities.”
He described how Philip IV. went to the plough himself to set the
fashion, and did everything for the farmers except bringing them a good
market; how he conferred the titles of nobility upon several farmers,
and very absurdly endeavoured to oppress manufacturers with heavy taxes
in order to force them to the country.
Smith concluded his discourse upon Cheapness or Plenty with a few
remarks on the influence of commerce on manners; and having thus laid
the foundations of a new science, a true system of political economy, he
went on to “Arms” (Part IV.), and treated of Militias, Discipline, and
Standing Armies. His course ended with a survey (Part V.) of the Laws of
Nations. The rules, he remarks, which nations ought to observe, or do
observe, with one another cannot be stated with precision. It is true
that the rules of property and of justice are pretty uniform in the
civilised world. But with regard to international law, what Grotius had
said was still true. It was hard to mention a single regulation that had
been established with the common consent of all nations and was observed
as such at all times. Smith, as usual, sought for the reason, and as
usual found it. “This must necessarily be the case; for where there is
no supreme legislative power nor judge to settle differences we may
always expect uncertainty and irregularity.”
The pope, indeed, as the common father of Christendom, had introduced
more humanity into warfare; but except for this hint Smith seems to have
made no proposal for filling up the blank. We can only imagine how one
who so loved peace and hated war would have rejoiced to see nations
moving slowly but surely towards the idea of an international judge, and
learning that, as the Duel is not the last word of civilisation in
individual quarrels, so the Battle is not the last or the best trial of
disputes between nations.