CHAPTER V.

Division of Employments among different Countries, or Foreign Commerce.—Wholesale and Retail Dealers.—Influence of improved Means of Communication.—Mode in which Commerce contributes to increase Wealth.—Restrictions on Commerce, for the Promotion of Domestic Industry and National Security.—Influence of these Restrictions.—Moderate Duties on Imports not inconsistent with the Freedom of Trade.—Duties on Exports.

The division of labour is not confined to particular societies, but is of universal application; and may be extended so that the inhabitants of entire provinces, and even nations, may employ themselves to the greatest advantage in certain branches of industry, while they overlook or neglect others for which they have no particular aptitude. The commerce between different districts of the same countries, and between different countries, is founded on this territorial division of labour, as it has been appropriately termed by Colonel Torrens. The different soils, climates, and capacities of production, possessed by the different provinces of an extensive country, fit them for being applied in preference to peculiar varieties of industry. A district which abounds in coal, has an easy access to the ocean, and a considerable command of internal navigation, is the natural seat of manufactures. Wheat and other varieties of grain are the proper products of rich arable soils; and cattle, after being reared in mountainous districts, are most advantageously fattened in meadows and low grounds. It is as little for the general advantage of the inhabitants of different districts, as it would be for that of individuals, to engage indiscriminately in every possible employment. Who can doubt that vastly more manufactured goods, corn, cattle, and fish are produced by the people of Lancashire confining themselves principally to manufactures, those of Kent to agriculture, those of Argyle to the raising of cattle, and those of the Shetland Edition: current; Page: [86] Isles to the catching of fish, than if they respectively endeavoured to supply themselves with these or similar productions, without the intervention of an exchange?

“With the benefits of commerce,” says an eloquent writer, “or a ready exchange of commodities, every individual is enabled to avail himself to the utmost of the peculiar advantage of his place; to work on the peculiar materials with which nature has furnished him; to humour his genius or disposition, and betake himself to the task in which he is peculiarly qualified to succeed. The inhabitant of the mountain may betake himself to the culture of his woods and the manufacture of his timber; the owner of pasture lands may betake himself to the care of his herds; the owner of the clay pit to the manufacture of his pottery; and the husbandman to the culture of his fields or the rearing of his cattle; and any one commodity, however it may form but a small part in the whole accommodations of human life, may, under the facilities of commerce, find a market in which it may be exchanged for what will procure any other part or the whole; so that the owner of the clay-pit, or the industrious potter, without producing any one article immediately fit to supply his own necessities, may obtain the possession of all that he wants. And commerce, in which it appears that commodities are merely exchanged, and nothing produced, is nevertheless in its effects very productive because it ministers an encouragement and facility to every artist in multiplying the productions of his own art; thus adding greatly to the mass of wealth in the world, in being the occasion that much is produced.”1

Commerce, whether it be carried on between the inhabitants of different countries and districts, or between those of the same district, is best conducted by a distinct class of individuals denominated merchants, from that commutatio mercium which forms their business. This class is, for the most Edition: current; Page: [87] part, subdivided into the separate classes of wholesale dealers and retailers. The business of the first principally consists in the conveyance of commodities from places where they are cheap to where they are dear. Speaking generally, they buy at the first hand, or from the producers; but instead of selling directly to the consumers, they most commonly sell to the retailers. The latter keep assortments of the goods that are wanted in the places where they reside, serving them out in such quantities, and at such times, as best suits the convenience of their customers, or of the public. This subdivision is exceedingly beneficial for all parties. It would be difficult for a wholesale merchant to retail the goods he has collected in distant markets; and supposing he were to attempt it, he would have to establish agencies in different parts of the country; so that, besides requiring an additional capital, he would be unable to give that undivided attention to any single department of his business, so indispensable to secure its being conducted with due economy and in the best way. Hence the groundless nature of the objections that have sometimes been made to the intervention of retailers between the wholesale dealers or producers and the consumers. It is essential that goods should be retailed. It would be of little use to bring a cargo of tea to London from China, of tobacco from Virginia, of salt from Liverpool, of beef from Cork, or of coal from the Tyne, without, also, dividing and selling it in such portions as may be suited to the wants of the citizens. And it admits of demonstration that this necessary business will be done best and cheapest by a class distinct from the importers or wholesale dealers.

It is often asserted that the retail dealers make enormous profits, and charge exorbitant prices. But a little reflection must satisfy every reasonable person that neither of these statements can be correct. The retailers have no monopoly of the market. Every one who chooses may open a retail shop; and when such is the case, it would be ludicrous to suppose Edition: current; Page: [88] that where competition is so very keen, and thousands are watching for methods of employing capital with the smallest additional advantage, a large class of traders, enjoying no peculiar privilege and whose business is not difficult to learn, should be generally in the habit of realizing a comparatively large profit. It is true, indeed, that particular tradesmen, who have by means of superior skill, or what, perhaps, is more common, through accident or superior address, obtained a reputation in the fashionable world, often realize immense profits. Such persons are in some measure emancipated from the influence of that competition which beats down the prices and profits of their neighbours to a common level. There is a je ne sais quoi about their shops, which has a powerful attraction for certain classes, and makes them buy the articles in which they deal, even when they might buy them elsewhere better and cheaper. But shopkeepers and customers of this description are but few in number; and the extra profits which the former make are too inconsiderable, when considered as a whole, sensibly to affect the average rate of profit realized by the retail class.

Besides the peculiar description of persons now alluded to, the retailers established in country towns and villages often seem to realize very large profits. But the magnitude of their gains is more apparent than real. Being obliged to attend to their shops, they should sell their goods for such a sum as may yield them, in addition to the wages or remuneration to which they are entitled for their attendance, the customary profits of stock at the time. When a large capital is employed in the business of retailing, a small addition to the price of the goods sold is sufficient to afford wages; but where the business transacted is but small, the addition made to their price on account of wages must be proportionally large; and thus it is that groceries and such like articles are for the most part cheaper in cities than in the country. The discrepancy is not occasioned by the country grocer making large profits, but by his being obliged, in trying to get a return for Edition: current; Page: [89] his trouble in attending his shop, to increase considerably the price of the articles in which he deals.

“Apothecaries’ profit,” says Adam Smith, “is become a byword, denoting something uncommonly extravagant. This great apparent profit, however, is frequently no more than the reasonable wages of labour. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever; and the trust which is reposed in him is of much greater importance. He is the physician of the poor in all cases, and of the rich where the distress or danger is not very great. His reward, therefore, ought to be suitable to his skill and his trust, and it arises generally from the price at which he sells his drugs. But the whole drugs which the best employed apothecary, in a large market-town, will sell in a year, may not, perhaps, cost him above thirty or forty pounds. Though he should sell them, therefore, for three or four hundred, or at a thousand per cent. profit, this may frequently be no more than the reasonable wages of his labour, charged in the only way in which he can charge them, upon the price of his drugs; the greater part of the apparent profit is real wages disguised in the garb of profit.” (“Wealth of Nations,” p. 51.)

It is plain, from these statements, that the formation of a separate mercantile class adds very materially to the facilities and advantages of commerce. Agents and warehouses being established all over the country for the purchase and sale of commodities, agriculturists and manufacturers know beforehand where they may always find a market for what they have to sell, and procure, at the current prices of the day, what they wish to buy. Hence they are able to devote their whole time and energies to their respective businesses; continuity is given to their operations; and the powers of production are augmented to an extent that could hardly have been conceived possible previously to the rise of the mercantile class.

Improved and easy methods of communication powerfully Edition: current; Page: [90] assist in facilitating commerce. A diminution of the expense of conveyance has the same direct influence over prices as a diminution of the expense of production, while its indirect influence is still more powerful. The great workshops (for so we may truly call Manchester, Leeds, Birmingham, Sheffield, Glasgow, Paisley, Dundee, &c.) with which Great Britain is studded, could not exist without improved roads and canals. But these, by enabling the inhabitants of cities and towns to obtain the bulky products of the soil and the mines almost as cheaply as if they lived in the country, give them the means of carrying on their employments on a large scale, of subdividing, combining, and perfecting their various operations; and of conveying their products to the remotest quarters at an extremely small advance of price. Roads and canals are thus productive of a double benefit,—cheapening, at one and the same time, raw produce to the towns, and manufactures to the country. They, also, give a common interest to every part of a widely extended empire; and by promoting the intercourse of the citizens, and exciting a spirit of emulation, impart new life and vigour to society. Nothing, indeed, contributes so much to national advancement and the progress of civilization as the formation of good roads. Where these are wanting, industry is uniformly found to be in the most backward state imaginable, and the arts—save the rudest and most indispensable—are all but unknown. It is now more than four centuries since the Turks took Constantinople (1453), and nothing more is required to enable a true conclusion to be drawn in regard to their barbarism, and incapacity of improvement, than the fact that they have not constructed during that lengthened period, half a dozen miles of road.1

Foreign trade, or the territorial division of labour between different and independent countries, contributes to increase Edition: current; Page: [91] their wealth in the same way that internal trade contributes to increase the wealth of the different districts of the same kingdom. There being a far greater variety in the productive powers of separate, and especially distant, countries than there is in those of the provinces of any single country how extensive soever, it would seem that a free intercourse with the former must be proportionally more advantageous. There are, indeed, myriads of products, some of which are of the greatest utility, that exist only, or can be raised only, in particular countries. Were it not for foreign commerce, we should be wholly destitute of gold bullion, tea, coffee, cotton, silk, spices, and many other equally useful and valuable commodities; at the same time that we should have to pay a greatly increased price for a much larger number of other and hardly less important articles. Providence, by giving different soils, climates, and natural products to different countries, has evidently intended that they should be dependent upon and serviceable to each other.

• “Hîc segetes, illic veniunt felicius uvae:
• Arborei foetus alibi, atque injussa virescunt
• Gramina. Nonne vides, croceos ut Tmolos odores,
• India mittit ebur, molles sua tura Sabaei?
• At Chalybes nudi ferrum, virosaque Pontos
• Castorea, Eliadum palmas Epiros equarum?
• Continuo has leges, aeternaque foedera certis
• Imposuit Natura locis.”

• —Virgil. Georg. lib. I. lin. 54, &c.

Hence, were no artificial obstacles thrown in the way of their intercourse, every people would naturally engage in those employments in which they have a superiority, exchanging a part of their own produce for the productions they could more advantageously obtain from others. Under a free commercial system, labour would be distributed as best suits the genius and capacities of different nations; and the whole world would be brought under the influence of a principle at once the most powerful and the most salutary. And though, owing to the prevalence of short-sighted and selfish views, the benefits resulting from foreign trade have been Edition: current; Page: [92] much diminished, still it would be no easy matter to exaggerate the value and importance of those of which it has been productive. It has made every people acquainted with an immense variety of products of the greatest utility, of which they would otherwise have been ignorant; and while it has given them a host of new tastes and new appetites, it has, at the same time, given them the means, and excited the desire of gratifying them. Under its beneficent influence, nations are indebted to each other, sometimes to those that are most remote, for a large share of their necessaries and most esteemed luxuries. The home-producers being everywhere brought into competition with those of other countries, become aware of their many deficiencies; and as the arts and sciences as well as the products of others are brought home to the doors of every people, the most efficient stimulus is given to industry and invention; and the mass of wealth, or of necessary and useful products, is increased in a ratio that could not otherwise have even been imagined.

The tendency of a commerce embracing different nations, is to weaken and efface distinctions; to compensate the deficiencies of one quarter by the surplus of another; and to raise those that are least favourably situated or least civilized, nearer to the level of those that have the greatest natural and acquired advantages; and by doing this, and making every people to a great extent dependent on others, it forms a powerful principle of union, and binds together the universal society of nations by the powerful ties of mutual interest and reciprocal obligation.

It cannot, indeed, be denied, that mistaken views of commerce, like those so frequently entertained of religion, have been the cause of many wars and of much bloodshed. But the folly of the monopoly system, and the ruinous nature of the contests to which it gave rise, have been made obvious. It has been shown, over and over again, that nothing can be more irrational and absurd, than that dread of the progress of others in wealth and civilization that was once so prevalent; Edition: current; Page: [93] that what is for the advantage of one state is for the advantage of all; and that the true glory and real interest of every people will be more certainly advanced by endeavouring to outstrip their neighbours in the career of science and civilization, than by engaging in schemes of conquest and aggression.

The direct influence of foreign trade in giving increased efficacy to labour, and augmenting national wealth, may be easily illustrated. The superiority of British wool, for example, our command of coal, of skilful workmen, improved machinery, and of all the instruments and means of manufacturing industry, enable us to produce cloth at a much cheaper rate than the Portuguese; while, the soil and climate of Portugal being peculiarly favourable for the cultivation and growth of the vine, she can produce wine incomparably cheaper than it could be produced here. Hence it is obvious, on the one hand, that by confining ourselves to the manufacture of cloth, and exchanging it with the Portuguese for wine, we shall obtain a far larger supply of that desirable beverage than if we attempted to cultivate the vine at home; and, on the other hand, the Portuguese, by exchanging wine for English cloth, will obtain a much greater quantity of the latter, at a much less price than they would do, were they, in contradiction of the wise arrangements of nature, and the obvious dictates of common sense, to withdraw a portion of their capital and industry from the culture of the vine, in which they have so great an advantage, to employ it in the manufacture of cloth, in which the advantage is wholly on the side of others.

This brief statement is enough to expose the sophism of the Economists, who contended, that as full equivalents are always given for whatever is brought from abroad, foreign commerce can add nothing to national wealth. How, they asked, can the wealth of a country be increased by giving equal values for equal values? They admitted that commerce might make a better distribution of the wealth of the world; Edition: current; Page: [94] but as it merely substituted one sort of wealth for another they denied it could make any additions to its amount. At first sight, this sophistical and delusive statement appears sufficiently conclusive; but a few words will suffice to demonstrate its fallacy. Those who suppose that commerce cannot be a means of increasing the wealth of both parties engaged in it, and that if one of them gains anything it must be at the expense of the other, entirely misconceive its nature and objects. It may cost as much to produce the cloth with which the English purchase the wine of Portugal, as it does to produce the latter; and it may even cost more. But then it must be observed, that, in making the exchange, the value of the wine is estimated by its cost in Portugal, which has peculiar facilities for its production, and not by what it would cost to produce it in England were the trade put an end to; while, in like manner, the value of the cloth is estimated by its cost in England, and not by what it would cost were it produced in Portugal. The advantage of the intercourse consists in its enabling each country to obtain commodities, which it could either not produce at all, or if at all, then only at a vast expense, for what it costs to produce them elsewhere under the most favourable circumstances, and at the least cost. In no respect, therefore, can the gain of the one be said to be a loss to the other. Their intercourse is an evident source of mutual advantage. Through its means each is supplied with desirable produce by a less sacrifice than would otherwise be required to obtain it; so that besides being better distributed, the wealth of both parties is largely augmented, by their availing themselves of each other’s peculiar capacities and powers.

The influence of foreign commerce in stimulating industry by multiplying its rewards, should not be overlooked. Were our command of wealth limited to that produced in a particular district or province, we should be less industrious, because we should have fewer motives to prompt our industry. A man might, with comparatively little difficulty, procure Edition: current; Page: [95] sufficient supplies of corn, cloth, and beer; and if the greatest exertions of skill and economy merely procured him additional supplies of these articles, they would soon cease to be made. When, however, a commercial intercourse is established with foreign and remote nations, conveniences and accommodations of all sorts are prodigiously multiplied. In addition to the products of its immediate vicinity, every considerable market is then abundantly supplied with those of all the countries and climates of the world. And there is no fortune so great that its owner can be without a motive to increase it still more, seeing the immeasurable variety of desirable objects it may be employed to obtain. “Le travail de la faim,” as Raynal has well observed, “est toujours borné comme elle; mais le travail de l’ambition croit avec ce vice (vertu?) même.”

We shall not stop to inquire, as many have done, whether the home or foreign trade be most advantageous. It is obvious, indeed, that this is a question which admits of no satisfactory solution. Without some species of home trade it would not be possible to divide and combine employments and emerge from barbarism; and without foreign trade and the innumerable products, arts, and improvements by which it is accompanied, the progress made by society would be comparatively trifling. The former might, perhaps, have raised us to the condition of our ancestors in the days of Richard III.; but we are mainly indebted to the latter for the almost incredible advances we have since made, as well as for those we are yet destined to make.

It would be alike superfluous and inconsistent with the objects and limits of this work to enter on a detailed investigation of the policy of restrictions on commerce. Though in many respects similar, they have, notwithstanding, peculiar differences. It is needless, however, to do more than allude to those that were intended to promote the influx and hinder the efflux of the precious metals. These are universally admitted to have been founded on erroneous principles, and to Edition: current; Page: [96] have had little or no practical influence. They have now, indeed, either fallen into desuetude or been wholly repealed. Hence, the following remarks will be confined to the policy and operation of,—

1. Restrictions intended to promote and protect the wealth and industry of particular countries:

2. Of those whose objects are mainly political, or which are intended to provide for the security of those by whom they are adopted, or to serve as engines of defence or aggression: and

3. Of those imposed for the sake of revenue.

Of these the first class, or the restrictions that have the promotion and protection of industry and opulence for their object, are, perhaps, the most important, and they are the most germane to the matters treated of in this work.

1. If either the whole or any considerable portion of an article in extensive demand be imported, the prevention of its importation will undoubtedly give an immediate advantage to the home producers of the article. It can hardly, however, be necessary to say, that the legislature should have nothing to do with the interests of any one class, unless in the view of rendering them conducive to those of the society. The circumstance of a restriction being advantageous to a greater or smaller number of individuals, is no proof of its expediency. To establish this, it must be shown that it is advantageous, or at least not injurious, to the public,—that it does not sacrifice the interests of the community to those of a favoured few. No system of commercial policy deserves to be preferred to another, unless it be better fitted to advance the well-being of the nation. This is the single and decisive test by which they are to be tried. If trade, when restricted, will promote this well-being better than when it is free and unfettered, it ought to be restricted; but if otherwise, not. Neither freedom nor prohibition is in itself good or bad. The influence which each Edition: current; Page: [97] exercises over the public is the only thing to be attended to. The supply of its wants is the real end and purpose of all industrial undertakings; and the interests of those engaged in them should occupy the attention of government only when it is believed that they may be made, through its interference, more subservient to their legitimate object.

We have already seen how dependent workmen are on the capital which is to feed and maintain them. But no regulation or prohibition can directly add anything to capital. It most frequently, indeed, diverts a portion of it into channels into which it would not otherwise have flowed. This, however, is its only effect; and the question for consideration is—Whether the artificial direction which is thus given to a portion of the national capital, renders it more or less productive than it would have been, had it been left at liberty to seek out channels of employment for itself?

In discussing this question it may be observed, at the outset, that every individual is constantly endeavouring to find out the best method of employing himself and his capital. It is his own advantage, no doubt, which he has in view; but a society being merely a collection of individuals, it is plain that each, in steadily pursuing his own aggrandizement, is following the line of conduct most for the general advantage. Hence, were no particular branches of industry encouraged more than others, those would be preferred which naturally afford the greatest facilities for acquiring wealth. Self-interest is the most powerful spur that can be applied to excite the invention, and to sharpen the ingenuity of man; it gives wisdom to fools and industry to sluggards; and no proposition is more true, than that each man can, in his local situation, judge better what is advantageous and useful for himself than any one else. “The statesman,” says Adam Smith, “who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, Edition: current; Page: [98] but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”1

Since the completion of the great reforms begun by Sir Robert Peel, our conduct as a trading nation has been mainly regulated by the principles that regulate the conduct of individuals in private life; and it is the maxim of every prudent master of a family, not to attempt to make at home what it would cost more to make than to buy. The tailor, as Smith has remarked, does not attempt to make his own shoes, but buys them of a shoemaker; the latter does not attempt to make his own clothes, but employs a tailor; and the farmer makes neither the one nor the other, but obtains them in exchange for corn and cattle. In advanced societies, every man confines himself to a particular business or calling, exchanging the whole or a part of his peculiar products or services for such parts of the products or services of others as he may have occasion for, and they may choose to part with. And it has not yet been shown that that conduct which is universally admitted to be wise and proper in individuals, would be unwise or absurd in the case of a state,—that is, in the case of the individuals inhabiting a particular tract of country!

The repeal of restrictions does not make foreigners supply any portion of the commodities which may be as cheaply produced at home as abroad. Home producers have great advantages on their side. The price of their commodities is not so much enhanced by the expense of conveyance; and they are intimately acquainted with the language, laws, fashions, and credit of those with whom they deal. A foreigner has none of these circumstances in his favour; and, consequently, comes into the home market under disadvantages with which nothing but the greater cheapness of his goods Edition: current; Page: [99] can enable him to contend. But if a Frenchman, or an American, can supply us with an article cheaper than we can raise it, why should we not buy it of him? Why not extend that principle to foreigners that is found to be so advantageous in dealing with our immediate neighbours? Now that our ports are open for the reception of all the commodities of all the commercial nations of the world, none are imported unless the importers conclude it to be for their advantage; that is, unless they bought the articles from foreigners at a less price than they could buy them for from their own countrymen.

When a restriction is laid on the importation of any description of commodities, their price rises, and the home producers of these or similar articles get an immediate advantage; but what they gain in this way is commonly of very limited importance. For, as additional capital is drawn to the business, prices are speedily reduced to the level that barely affords the ordinary rate of profit. This level may be identical with that at which prices previously stood, or it may be higher. If the former should happen to be the case, little, though something, will have been lost, but nothing will have been gained by the restriction. Capital will have been transferred from one employment to another; and while a greater quantity of the products previously imported will be produced at home, there will be a corresponding diminution of the products sent to foreigners in payment of the imports. But, in the vast majority of cases, prices are not the same after a prohibition has been enacted, but are permanently raised; for, if an article may be as cheaply produced at home as abroad, its prohibition would be unnecessary, and would not be thought of. Suppose that the importation of an article for which we paid a million sterling is prohibited, and that it costs a million and a half to raise it at home: the prohibition will, it is plain, have the same effect on the consumers of the article, as if, supposing the trade to have continued free, a peculiar tax of £500,000 Edition: current; Page: [100] a-year had been laid on them. But had such a tax been imposed, its produce would have come into the hands of government, and have formed part of the national income; whereas the increased cost of the article being, under the circumstances supposed, occasioned by an increased difficulty of production, is of no advantage to any one.

It consequently results, even in those rare cases in which it has no tendency to raise prices, that a restrictive regulation is hurtful, by changing the natural distribution of capital, and lessening the foreign demand for industrial produce to the same extent that it increases the home demand. But in that incomparably more numerous class of cases in which restrictions occasion a rise in the price of the articles which they affect, they are still more injurious. Besides varying the natural distribution of capital, and circumscribing foreign trade, they then impose a burden on the consumers for no purpose of general or public utility; they tempt individuals to withdraw from really advantageous businesses, to engage in those that cannot be prosecuted without national loss, and which must be abandoned the moment the prohibition ceases to be enforced; and are thus, in the end, productive of serious injury, even to those whose interests they were intended to promote, as well as to the public.

It has been said, though perhaps without due consideration, that, but for restrictions on importation, several manufactures that furnish employment to a considerable population, would probably never have had any existence amongst us. But, supposing this statement to be admitted, it would not form any valid objection to the principles now laid down. Non omnia recte possumus. Communities, as well as single families, should respect the division of labour. It is for the advantage of every people to engage, in preference, in those branches of industry in which they are superior to others; for it is by this means only that they can fully avail themselves of their peculiar facilities of production, and employ themselves most beneficially.

Edition: current; Page: [101]

It is sometimes contended that, granting the inexpediency of allowing a restrictive policy to get any footing, yet, after it has been established, the return to a free system is always a work of difficulty, and may be injurious to the workpeople by occasioning a decline in the demand for labour. And, in some respects, these statements may be true. But such of the inconveniences referred to as do occur are temporary only, whereas the advantages resulting from the substitution of a free for a restricted commercial system are of a lasting description and benefit all ranks and orders of the community in all time to come. It is further to be observed that no change from a restricted to a free system of trade ever occasions any falling off in the aggregate demand for labour. It may reduce the demand for the hands engaged in certain employments; but, if so, it proportionally increases the demand for them in others. Suppose that, under a restrictive system, an article is wholly produced at home, and that that system being suppressed the article is wholly imported; in such case it is alleged that the hands engaged in its manufacture will be thrown out of employment, and either have to resort to the workhouse or offer to serve at a reduced rate of wages in other businesses. But this is an entire fallacy. There is in such case no diminution of the demand for labour. We get nothing gratis from the foreigner. When increased quantities of articles are imported, equally increased quantities of native produce must be exported to pay for them. The workpeople employed in the production of articles which were prohibited, but which may now be freely imported, might be obliged, when the change took place, to transfer themselves to other employments. That transfer was, however, all the injury these parties would suffer. The total demand for labour is not affected by these changes. If one channel be shut up through their influence, equivalent new ones are sure to be opened, or the old ones to be proportionally enlarged; and most varieties of industrial undertakings have so many things in common, that individuals familiar with one have seldom much difficulty in accommodating themselves to others. Edition: current; Page: [102] Hence, though a nation may, by repealing prohibitions and excessive duties, vary to some extent the species of labour in demand, it will at the same time increase its productiveness without lessening the demand for it, or its remuneration. All commerce, whether carried on between individuals of the same or of different countries, is founded on a fair principle of reciprocity. Buying and selling are in it what action and reaction are in physics, equal and contrary. Those who will not buy from others, render it impossible for others to buy from them. Every sale infers an equal purchase, and every purchase an equal sale. Hence, to prohibit buying is exactly the same thing in effect as to prohibit selling. No merchant ever exports except in the view of importing products of greater value. But he cannot do this, if foreign commodities be excluded. In whatever degree, therefore, an unfettered trade may lead us to receive supplies from other countries, in the same degree it will render them our customers, promote our manufactures, and extend our trade. To suppose that commerce may be too free, is to suppose that the channels into which labour is turned may be too productive, that the objects of demand may be too much multiplied, and their price too much reduced;—it is like supposing that agriculture may be too much improved, and the crops rendered too luxuriant!

It is hardly necessary to add that all changes in the commercial policy of nations should be cautiously introduced. Those who are employed, or have capital employed, in businesses protected by restrictive regulations, should, in the event of its being resolved to repeal the latter, have ample time and every facility for withdrawing from the businesses referred to, or for preparing to withstand the unfettered competition of the foreigner. To this much they are entitled, but this is all they can justly claim. The fact of a departure having been made, on one or more occasions, from the sound principle of the freedom of industry, can never be alleged as a sufficient reason for obstinately persevering in a course of policy which has been ascertained to be inimical to the public Edition: current; Page: [103] interests, or for refusing to embrace the earliest opportunity of reverting to a better system. To act on such a principle would be to perpetuate the worst errors and absurdities, and would be a proceeding inconsistent with all the ends and objects of government.

Happily it is no longer necessary to argue these questions on speculative grounds, or as if there could be any doubt of the result. Experience has impressed its seal on the principles expounded by Adam Smith and acted upon by Sir Robert Peel. The latter knew that exportation would increase in the same proportion as importation; and without troubling himself about the duties laid by foreigners on British produce, he effected the repeal of many prohibitions excluding foreign products from our ports, and a reduction of the oppressive duties that were laid on others. These measures have had a more powerful influence in stimulating our industrial powers and increasing our trade, than any one, however sanguine and farsighted, could have anticipated. The new system has brought all the faculties of the mind, and powers of the body, into full activity. And while the improvements of a century have been crowded into the short space of a dozen or twenty years, we continue, with unimpaired energy, to make new inventions and discoveries. We subjoin, in proof of what has now been stated,

An account of the declared value of the exports of the produce of the United Kingdom since 1842:—

Years.	Declared Value.
1842	£47,381,023
1843	52,279,709
1844	58,584,292
1845	60,111,082
1846	57,786,876
1847	58,842,377
1848	52,849,445
1849	63,596,025
1850	71,359,184
1851	74,488,722
1852	78,076,854
1853	98,933,781
1854	97,184,726
1855	95,688,085
1856	115,890,857
1857	122,155,237
1858	116,608,756
1859	130,411,529
1860	135,891,227
1861	125,102,814
1862	123,992,264
1863	146,489,768

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The principles now established demonstrate the groundless nature of the complaints so frequently made of the prevalence of a taste for foreign commodities. Nothing is got from abroad except as an equivalent for something else; and the individual who uses only Polish wheat, Saxon cloth, and French silks and wine, gives, by occasioning the exportation of an equivalent amount of British produce, precisely the same encouragement to industry here that he would give were he to consume nothing not directly produced amongst us. The Portuguese do not send us a single bottle of port without our sending to them, or to those to whom they are indebted, its worth in cottons, hardware, or some sort of produce; so that whether we use the wine or its equivalent, is, except as a matter of taste, of no consequence whatever.

This statement goes far to settle the disputed question in regard to the influence of absentee expenditure. If an English gentleman, living at home, and using none but foreign articles, gives the same encouragement to industry that he would do were he to use none but British articles, he must, it is obvious, do the same should he go abroad. Whatever he may get from the foreigner when at Paris or Brussels, must be paid for, directly or indirectly, in British articles, quite in the same way as when he is resident in London. And it is not easy to imagine any grounds for pronouncing his expenditure in the latter more beneficial to this country than in the former.1

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2. Restrictions on the commercial intercourse with other countries have not, however, always originated in mistaken notions with respect to the superior importance of the precious metals, or in a desire to advance the interests of the home producers. A considerable number owe their existence to more patriotic though hardly less mistaken views—to the wish to be independent of foreign supplies, to avenge hostile prohibitions by retaliatory measures, and to provide for the public security.

There is something very seductive in the idea of independence; and it is not surprising that a system of policy which promises to place a country in this enviable situation, should enjoy considerable popularity. But national independence rests on other foundations than the miserable machinery of custom-house regulations. The independence of individuals does not depend on their being able directly to supply their wants by the produce of their labour; but it depends indifferently on their ability to do this or to furnish equivalents for the various articles required for their use and accommodation; and we have already seen that those who apply themselves to the callings or occupations for which they have any peculiar fitness, enjoy a greater command over necessaries and conveniencies, through the intervention of an exchange, that is, they are more opulent, and, consequently, more independent than they would be did they directly produce the articles in question. The same is the case with nations. We import tea from China, cotton from America, coffee from Ceylon, timber from the north of Europe, and claret from France; but the fact of our doing this shows that we send commodities to those countries on which they set a higher value. We are not, therefore, in any respect, more dependent on them than Edition: current; Page: [106] they are on us; and if we understand by independence the power to supply our wants without being under any obligation to any other people, we are completely independent. The trade with foreigners, like that with our next neighbours, is bottomed on a principle of mutual convenience: we give and receive equivalents, supply reciprocal wants, and confer reciprocal benefits.

To wish to be wholly unconnected with foreigners, and at the same time to continue as rich and prosperous as ever, is to wish what is contradictory and inconsistent with the nature of things. It is equivalent to wishing that we had the soil and climate of China to produce tea, those of France to produce wine, and those of America to produce cotton. These, and thousands of equally useful and desirable products, can only be obtained through an intercourse with foreigners. We may, no doubt, become independent of this intercourse; but if we do, we must also submit to be independent of the wealth and power to which it has raised us. The individual who prefers swimming across the river is of course independent of the bridges, in the same way that the nation which should prefer poverty and barbarism to wealth and refinement, would be independent of foreign commerce. But this is the independence of the savage. To be independent in the enlarged, and, if we may so speak, civilized sense of the term, that is, to have the greatest command of necessaries and conveniencies, a nation must avail itself of the productive energies of every other people, and deal with them all on fair and equitable principles.

But it must, at the same time, be admitted that nations do not always, nor, perhaps, most commonly, act on the principles most conducive to their real and lasting interests. Temporary and accidental circumstances exercise a powerful influence over their affairs, and they are apt to be swayed by envious and hostile feelings. The superior wealth and power of this or that people being, not unfrequently, ascribed to other than their true causes, tempt their rivals to adopt an erroneous Edition: current; Page: [107] policy. Those, too, who may have experienced the injury arising from the prohibitory enactments of some other power endeavour, in the irritation of the moment, to retaliate by similar prohibitions directed against her commerce. They seldom take time to reflect upon the probable influence of these measures upon themselves, but enact them in the belief that, however injurious to their own interests, they will, at any rate, inflict a much more serious injury on those against whom they are directed.

The commerce with France was, for a lengthened period, all but completely sacrificed to this vindictive spirit. Louis XIV. having espoused the cause of the exiled family of Stuart, the British government and people took fire at the insult, and, in the irritation of the moment, had recourse to every species of hostility. Without reflecting that the blow would recoil upon ourselves, we declared the trade with France “a nuisance;” prohibiting, at the same time, the importation of most descriptions of produce from that country, and imposing high discriminating duties on her wines. The provisions in the Methuen treaty gave permanence to these offensive enactments, which the French were not slow to retaliate. Custom-house regulations were used by both parties as warlike engines: a prohibition on the one side being immediately met by a counter prohibition on the other, until the commerce between the two countries—a commerce which, had it not been violently interfered with, would have afforded a profitable field for the employment of millions upon millions of capital, and of thousands upon thousands of work-people—was all but wholly suppressed.

Mr. Pitt endeavoured, by means of the commercial treaty negotiated with France in 1786, to introduce a more rational system into the trade between the two countries, and to make them mutually beneficial to each other. His efforts were, however, defeated by the Revolutionary war, which, unfortunately, broke out soon after, and revived and imbittered the old hostile feelings and prejudices inherited by Edition: current; Page: [108] both parties. But after the peace of 1815, the animosities and prejudices that grew out of the revolutionary contest having gradually abated, attention was again directed to the injurious operation of the restrictions on the trade between the two countries. The abolition of the discriminating duty on French wine in 1831, was a most important step in the progress to a better state of things; and was followed by a repeal of the prohibition against importing silks, and by a reduction of the duty on brandy and other articles. The beneficial influence of these measures, and the growing popularity of free trade principles, eventually led to the treaty of 1860. This treaty may indeed be said to have gone to the opposite extreme, for it stipulated for the entire exemption of many important French products from our Customs duties, even when these were entirely unobjectionable. But, however erroneous in a financial point of view, this conduct of ours, combined with the reduction of the duties on many British articles imported into France, has given a powerful stimulus to the trade between the two countries.

We would not, however, be understood as meaning, by anything now stated, to lay it down absolutely that retaliatory measures are always injurious to those who have recourse to them. This is their ordinary effect; but their policy depends wholly on circumstances. If there be apparently good grounds for thinking that a prohibition will so distress those against whom it is levelled, as to make them withdraw or materially modify the prohibition or high duty it is intended to avenge, it may be prudent to enact it; for, the recovery of an extensive branch of foreign trade, or its relief from vexatious restraints, may more than countervail the inconvenience which every nation must in the meantime entail upon herself, when she seeks to procure the abolition of a prohibition or restriction by a retaliatory proceeding. But unless there be reasonable grounds for concluding that the repeal or modification of the original prohibition will be brought about by the retaliation, Edition: current; Page: [109] it would be impolitic to embark in any such hostile course. If a prohibition acted only upon others, it would be different; but as we neither sell nor buy, except to promote our own ends, when we prohibit or fetter our intercourse with others, we necessarily injure ourselves, it may be to a greater extent than we injure them. To enact or maintain a prohibition when there is no prospect of its occasioning the repeal or modification of that enacted by the foreigner, is really, therefore, to inflict an injury on ourselves without securing any corresponding advantage. The government of a foreign country does an injury to its subjects by obstinately excluding some of our peculiar products; but is that any reason why our government should do the like?—that it should exclude produce which may be brought from that country cheaper than from anywhere else? To act in this way, is not to retaliate on the foreigner, but on ourselves! It is erecting the blind and ferocious impulses of revenge into maxims of state policy. It is no part of our business to inquire respecting the markets resorted to by others, but to find out and resort to those where we may be supplied at the lowest price with the articles we wish to obtain. We rarely hear of foreigners refusing to sell; and as there can be no selling without an equal buying, by steadily acting on a liberal system ourselves, we shall not only reap an immediate advantage, but will, most probably, lead others, through the influence of our example, to abandon their restrictions.

With respect to what may be called political restrictions, or those imposed for the sake of national security, or the annoyance of some hostile power, we may observe, without undervaluing their occasional importance, that their influence has been much exaggerated. If a single nation had a monopoly of any article necessary to her own defence and well-being, or to the defence or well-being of others, she would be able, by prohibiting its exportation, to provide for her own security, and, at the same time, to inflict a serious injury on Edition: current; Page: [110] her enemies. But there are not many such articles. With the exception of coal, it is doubtful whether we be masters of a single product, the prohibition of the export of which would not be more injurious to ourselves than to any one else. And of the various commodities which we import, there is not one, with perhaps the exception of tea, which, supposing its exportation were prohibited from one country might not be obtained from others, either in the same quarter or elsewhere; and it is doubtful, from the late introduction and successful cultivation of the tea plant in Assam, Cachar, and other eastern countries, whether the inconvenience resulting from the suspension of the tea trade with China, supposing such a thing to happen, would be either so great or so long continued as might be supposed.

It has sometimes been contended by those opposed to political restrictions, that the dangers apprehended from foreigners refusing to sell are quite imaginary, that no prohibition affecting the sale of any important article could be maintained, and that, even supposing it were maintained, the injury thence resulting would seldom be very material. And we are disposed, speaking generally, to concur in this reasoning. But in national affairs it will not do to trust to what may generally happen. We should be secured against improbabilities as well as probabilities. Supposing the independence of the Southern States of America to be established, cotton would be their principal article of export; and it is not very probable, even though we happened to be engaged in a contest with them, that they would seek to injure us by prohibiting the export of cotton. But though an improbable, this is far from being an impossible proceeding; and, despite the sacrifice it would impose on them, it might be their easiest means of annoying us.

That “no nation will ever refuse to sell,” was formerly thought a sufficient answer to those who dwelt on the impolicy and danger of depending for supplies of any necessary article on one or a few markets. But, admitting the inclination to sell, our present experience shows that a nation may not be Edition: current; Page: [111] able to act on that inclination. The Southern States of America are, no doubt, most anxious to supply us with cotton, rice, and other articles. But the blockade of their ports by northern cruisers hinders this from being done, and makes England, France, and other manufacturing countries, sufferers by the contest in which the South is engaged.

Hence it is plain that in commercial policy, as in most other things, there are no absolute principles, and that they must in every case be subordinated to the salus populi. And we shall afterwards show that, consistently with this great end, it may sometimes be expedient to restrain the too great or rapid development of branches of industry, the success of which mainly depends on our dealing with a peculiar people or territory. But, in the vast majority of cases, a policy of this sort would be idle and impertinent. The products of art and industry are, with few exceptions, too widely diffused to be materially affected by the monopoly or hostility of any single state. Though one country should not deal with us, there is in general no cause for alarm; another will be less scrupulous, and will be glad to have the opportunity of supplying us with what we want. There are, however, extraordinary as well as ordinary cases; and these, though comparatively few, are not to be neglected. So long, indeed, as wealth and security go together, interference is to be earnestly deprecated. But if they should ever be separated, and it should be obvious that wealth is being increased while security is being diminished, the legislature should interfere to redress the balance.

3. The foregoing remarks and reasonings apply to the case of duties and restrictions on importation in the view of promoting industry and security at home. But since the spread of more enlarged ideas on these subjects, duties are now commonly imposed on imports, in the view of raising a revenue without any reference to protection. And when such duties are imposed on proper articles, and are Edition: current; Page: [112] confined within moderate limits, they are among the most unexceptionable that can be devised. It would, however, lead us too far from the subjects properly belonging to this work, were we to enter at any length into the various questions connected with the assessment and levy of customs duties. These are matters appropriate to works which treat of taxation, but are out of place in works of this sort. Here it may suffice to observe that taxes laid on imports for the sake of revenue should not be imposed on the raw material of any considerable manufacture, nor generally on articles of which some considerable portion is produced at home; and that they should not be carried to such a height as to give any great encouragement to smuggling. But when these conditions are kept in view, it is doubtful whether there be any less objectionable duties.

It, however, is frequently said that customs duties, though advantageous in some respects, are inconsistent with, and opposed to the grand principle of free trade, and should therefore be unconditionally rejected. But a cuckoo-cry of this sort deserves little attention. When equal and moderate duties are laid on commodities without respect to the countries whence, or the channels through which they come to us, the trade in them is quite as free as it would be were the duties repealed. No one doubts that the trade in corn is, at this moment, perfectly free; and can it be doubted that it would be equally free were the duty of 1s. a quarter with which it is now charged, raised to 3s., 5s., or 7s. a quarter? Such increase might lessen importation, but that would be all. Freedom consists in the absence of whatever is partial, oppressive, or unjust. Trade is quite as free when there are duties on imports and exports, as when there are none, provided these duties be moderate, press equally on all articles and all parties, and involve no preferences. The fair and free competition of horses in a race is not affected by their being all made to carry the same weight. And everybody knows that there is the same keen and close competition in the trades subjected Edition: current; Page: [113] to excise duties that there is in those that are duty free; and that a moderate increase in the cost of an article, whether occasioned by a tax or anything else, uniformly serves to stimulate the exertions of its producers. This objection is, therefore, quite untenable, and was hardly, perhaps, worth notice. When not put forward as mere claptrap, it can only originate in an entire misconception of what is meant by the freedom of trade.

In addition to the efforts that have been so frequently made to bolster up native industry by restricting the importation of articles that might come into competition with those raised at home, it has been attempted to effect the same object by prohibiting the export of the raw material of favoured manufactures. This, however, is a still more violent interference with the freedom of industry; while, if an advantage be conferred on one branch of native industry by a policy of this sort, a corresponding injury must be inflicted on some other branch. We formerly endeavoured to promote the woollen manufacture by prohibiting the exportation of wool; this being, in truth, an attempt to benefit an inferior business, at the expense and injury of agriculture, the most important branch of national industry. And yet this contradictory policy was persevered in for a long series of years, the “runners” or clandestine exporters of wool being subjected even to capital penalties! But it is needless to dwell on such suicidal conduct. It no longer meets with any apologists.

Duties on exports have, however, been sometimes imposed, like those on imports, for the sake of revenue. But though they may occasionally be adopted with advantage, this is but seldom the case.

It may, indeed, appear, on a hasty glance at the subject, as if their general introduction would be highly advantageous; for, being imposed on commodities when exported, and making a part of their price, it is plain they must fall wholly on the foreigners by whom they may be bought; so that, if it were possible for a country to raise a sufficient revenue by taxing Edition: current; Page: [114] exports, such revenue would be wholly derived from others, and it would itself be in the happy predicament of enjoying an entire immunity from taxation. This, however, is a happiness which is not destined to be realized by such means. Were one state to attempt to raise a revenue by taxing exports, others would do the same; and as the imports are uniformly equal to or exceed the exports, what was gained on the one hand by a policy of this sort would as certainly be lost on the other.

When, however, a country has any exclusive or special advantages in the production of one or more descriptions of commodities, duties on their exportation would seem, if cautiously imposed, to be among the best that can be imagined. They must not be carried to such a height as to countervail the peculiar advantages enjoyed in their production, or to diminish materially the demand for them in foreign countries. Supposing, however, that these conditions are kept in view, they seem to be in most respects unobjectionable.

It may be said, perhaps, that there are either none or but very few articles of the kind now referred to. But they are a good deal more numerous than is usually supposed. And in proof of this we may specify the teas of China; the opium of Hindostan; the guano of Peru; the finer wines of France; the sulphur and olive oil of Naples and Sicily; and the coal and iron, and, perhaps, also some of the manufactured goods, of England.

On all these moderate duties have been or might be imposed on their being exported. But without further insisting on matters which are in some respects foreign to our subject, we beg to refer the reader, for a full discussion of the various questions connected therewith, to the “Treatise on Taxation,” by the author of this work.1

Reasonings similar to those now laid before the reader, to show the benefits of commercial freedom, and the impolicy Edition: current; Page: [115] of attempting to promote industry at home by laying restraints on importation, have been repeatedly advanced. The advantages resulting from the freedom of commerce were exhibited, in a very striking point of view, by Sir Dudley North1, above one hundred and seventy years ago; and Richardson,2 Hume, and others, subsequently illustrated and enforced the same doctrines, and showed the mischievous influence of the prohibitive system. But its complete overthrow was reserved for Adam Smith. He examined and refuted the leading arguments in its favour in the most masterly manner, and with an amplitude of illustration that left little to be desired. Such, however, and so powerful, were the prejudices on the side of restrictions, and such the obstacles to the progress of more enlarged and liberal opinions, that, notwithstanding the “Wealth of Nations” has been in general circulation since 1776, it was not till after 1820 that statesmen and merchants practically assented to its doctrines, and began to act upon them. But a new æra has at length arisen—

• “Magnus ab integro sœculorum nascitur ordo.”

The principles of free trade are no longer viewed as barren and unprofitable speculations—as the visions of theorists dreaming in their closets of public happiness never to be realized. They have been sanctioned by the people and parliament of England. Sir Robert Peel was in practice what Adam Smith was Edition: current; Page: [116] in theory. The former vindicated in the senate, and embodied in acts of parliament, those great principles which the latter established in his study. To the glory of being the first to promulgate and demonstrate the wisdom and beneficent influence of commercial freedom, we are also entitled to the high praise of being the first by whom it was carried into effect, and made a part of the national policy. If any remains of the protective system are still to be found in the statute-book, they will, no doubt, be speedily weeded out; at the same time that our example is liberalizing the commercial legislation of the greater number of other countries. The time is not far distant,

• “When, free as seas or wind,
• Unbounded Thames shall flow for all mankind;
• Whole nations enter with each swelling tide,
• And seas but join the regions they divide.”1

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