An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

merchant is composed of four different

branches, which, though they may sometimes be all carried on by

the same person, are, in their own nature, four separate and

distinct trades. These are, first, the trade of the inland

dealer; secondly, that of the merchant-importer for home

consumption ; thirdly, that of the merchant-exporter of home

produce for foreign consumption ; and, fourthly, that of the

merchant-carrier, or of the importer of corn, in order to export

it again.

 

I. The interest of the inland dealer, and that of the great body

of the people, how opposite soever they may at first appear, are,

even in years of the greatest scarcity, exactly the same. It is

his interest to raise the price of his corn as high as the real

scarcity of the season requires, and it can never be his interest

to raise it higher. By raising the price, he discourages the

consumption, and puts every body more or less, but particularly

the inferior ranks of people, upon thrift and good management If,

by raising it too high, he discourages the consumption so much

that the supply of the season is likely to go beyond the

consumption of the season, and to last for some time after the

next crop begins to come in, he runs the hazard, not only of

losing a considerable part of his corn by natural causes, but of

being obliged to sell what remains of it for much less than what

he might have had for it several months before. If, by not

raising the price high enough, he discourages the consumption so

little, that the supply of the season is likely to fall short of

the consumption of the season, he not only loses a part of the

profit which he might otherwise have made, but he exposes the

people to suffer before the end of the season, instead of the

hardships of a dearth, the dreadful horrors of a famine. It is

the interest of the people that their daily, weekly, and monthly

consumption should be proportioned as exactly as possible to the

supply of the season. The interest of the inland corn dealer is

the same. By supplying them, as nearly as he can judge, in this

proportion, he is likely to sell all his corn for the highest

price, and with the greatest profit ; and his knowledge of the

state of the crop, and of his daily, weekly, and monthly sales,

enables him to judge, with more or less accuracy, how far they

really are supplied in this manner. Without intending the

interest of the people, he is necessarily led, by a regard to his

own interest, to treat them, even in years of scarcity, pretty

much in the same manner as the prudent master of a vessel is

sometimes obliged to treat his crew. When he foresees that

provisions are likaly to run short, he puts them upon short

allowance. Though from excess of caution he should sometimes do

this without any real necessity, yet all the inconveniencies

which his crew can thereby suffer are inconsiderable, in

comparison of the danger, misery, and ruin, to which they might

sometimes be exposed by a less provident conduct. Though, from

excess of avarice, in the same manner, the inland corn merchant

should sometimes raise the price of his corn somewhat higher than

the scarcity of the season requires, yet all the inconveniencies

which the people can suffer from this conduct, which effectually

secures them from a famine in the end of the season, are

inconsiderable, in comparison of what they might have been

exposed to by a more liberal way of dealing in the beginning of

it the corn merchant himself is likely to suffer the most by this

excess of avarice; not only from the indignation which it

generally excites against him, but, though he should escape the

effects of this indignation, from the quantity of corn which it

necessarily leaves upon his hands in the end of the season, and

which, if the next season happens to prove favourable, he must

always sell for a much lower price than he might otherwise have

had.

 

Were it possible, indeed, for one great company of merchants to

possess themselves of the whole crop of an extensive country, it

might perhaps be their interest to deal with it, as the Dutch are

said to do with the spiceries of the Moluccas, to destroy or

throw away a considerable part of it, in order to keep up the

price of the rest. But it is scarce possible, even by the

violence of law, to establish such an extensive monopoly with

regard to corn ; and wherever the law leaves the trade free, it

is of all commodities the least liable to be engrossed or

monopolized by the forced a few large capitals, which buy up the

greater part of it. Not only its value far exceeds what the

capitals of a few private men are capable of purchasing; but,

supposing they were capable of purchasing it, the manner in which

it is produced renders this purchase altogether impracticable.

As, in every civilized country, it is the commodity of which the

annual consumption is the greatest ; so a greater quantity of

industry is annually employed in pruducing corn than in producing

any other commodity. When it first comes from the ground, too, it

is necessarily divided among a greater number of owners than any

other commodity ; and these owners can never be collected into

one place, like a number of independent manufacturers, but are

necessarily scattered through all the different corners of the

country. These first owners either immediately supply the

consumers in their own neighbourhood, or they supply other inland

dealers, who supply those consumers. The inland dealers in corn,

therefore, including both the farmer and the baker, are

necessarily more numerous than the dealers in any other commodity

; and their dispersed situation renders it altogether impossible

for them to enter into any general combination. If, in a year of

scarcity, therefore, any of them should find that he had a good

deal more corn upon hand than, at the current price, he could

hope to dispose of before the end of the season, he would never

think of keeping up this price to his own loss, and to the sole

benefit of his rivals and competitors, but would immediately

lower it, in order to get rid of his corn before the new crop

began to come in. The same motives, the same interests, which

would thus regulate the conduct of any one dealer, would regulate

that of every other, and oblige them all in general to sell their

corn at the price which, according to the best of their judgment,

was most suitable to the scarcity or plenty of the season.

 

Whoever examines, with attention, the history of the dearths and

famines which have afflicted any part of Europe during either the

course of the present or that of the two preceding centuries, of

several of which we have pretty exact accounts, will find, I

believe, that a dearth never has arisen from any combination

among the inland dealers in corn, nor from any other cause but a

real scarcity, occasioned sometimes, perhaps, and in some

particular places, by the waste of war, but in by far the

greatest number of cases by the fault of the seasons; and that a

famine has never arisen from any other cause but the violence of

government attempting, by improper means, to remedy the

inconveniencies of a dearth.

 

In an extensive corn country, between all the different parts of

which there is a free commerce and communication, the scarcity

occasioned by the most unfavourable seasons can never be so great

as to produce a famine ; and the scantiest crop, if managed with

frugality and economy, will maintain, through the year, the same

number of people that are commonly fed in a more affluent manner

by one of moderate plenty. The seasons most unfavourable to the

crop are those of excessive drought or excessive rain. But as

corn grows equally upon high and low lands, upon grounds that are

disposed to be too wet, and upon those that are disposed to be

too dry, either the drought or the rain, which is hurtful to one

part of the country, is favourable to another ; and though, both

in the wet and in the dry season, the crop is a good deal less

than in one more properly tempered ; yet, in both, what is lost

in one part of the country is in some measure compensated by what

is gained in the other. In rice countries, where the crop not

only requires a very moist soil, but where, in a certain period

of its growing, it must be laid under water, the effects of a

drought are much more dismal. Even in such countries, however,

the drought is, perhaps, scarce ever so universal as necessarily

to occasion a famine, if the government would allow a free trade.

The drought in Bengal, a few years ago, might probably have

occasioned a very great dearth. Some improper regulations, some

injudicious restraints, imposed by the servants of the East India

Company upon the rice trade, contributed, perhaps, to turn that

dearth into a famine.

 

When the government, in order to remedy the inconveniencies of a

dearth, orders all the dealers to sell their corn at what it

supposes a reasonable price, it either hinders them from bringing

it to market, which may sometimes produce a famine even in the

beginning of the season ; or, if they bring it thither, it

enables the people, and thereby encourages them to consume it so

fast as must necessarily produce a famine before the end of the

season. The unlimited, unrestrained freedom of the corn trade, as

it is the only effectual preventive of the miseries of a famine,

so it is the best palliative of the inconveniencies of a dearth;

for the inconveniencies of a real scarcity cannot be remedied ;

they can only be palliated. No trade deserves more the full

protection of the law, and no trade requires it so much ; because

no trade is so much exposed to popular odium.

 

In years of scarcity, the inferior ranks of people impute their

distress to the avarice of the corn merchant, who becomes the

object of their hatred and indignation. Instead of making profit

upon such occasions, therefore, he is often in danger of being

utterly ruined, and of having his magazines plundered and

destroyed by their violence. It is in years of scarcity, however,

when prices are high, that the corn merchant expects to make his

principal profit. He is generally in contract with some farmers

to furnish him, for a certain number of years, with a certain

quantity of corn, at a certain price. This contract price is

settled according to what is supposed to be the moderate and

reasonable, that is, the ordinary or average price, which, before

the late years of scarcity, was commonly about 28s. for the

quarter of wheat, and for that of other grain in proportion. In

years of scarcity, therefore, the corn merchant buys a great part

of his corn for the ordinary price, and sells it for a much

higher. That this extraordinary profit, however, is no more than

sufficient to put his trade upon a fair level with other trades,

and to compensate the many losses which he sustains upon other

occasions, both from the perishable nature of the commodity

itself, and from the frequent and unforeseen fluctuations of its

price, seems evident enough, from this single circumstance, that

great fortunes are as seldom made in this as in any other trade.

The popular odium, however, which attends it in years of

scarcity, the only years in which it can be very profitable,

renders people of character and fortune