The Wealth of Nations Adam Smith (best novels to read for beginners txt) 📖

The actual strangeness is simply the result of Smith’s negative attitude⁠—of his belief that past and present regulations were for the most part purely mischievous.

The two items, cleanliness and security, he managed to dismiss very shortly: “the proper method of carrying dirt from the streets, and the execution of justice, so far as it regards regulations for preventing crimes or the method of keeping a city guard, though useful, are too mean to be considered in a general discourse of this kind.”22 He only offered the observation that the establishment of arts and commerce brings about independency and so is the best police for preventing crimes. It gives the common people better wages, and “in consequence of this a general probity of manners takes place through the whole country. Nobody will be so mad as to expose himself upon the highway, when he can make better bread in an honest and industrious manner.”23

He then came to “cheapness or plenty, or, which is the same thing, the most proper way of securing wealth and abundance.” He began this part of the subject by considering the “natural wants of mankind which are to be supplied,”24 a subject which has since acquired the title of “consumption” in economic treatises. Then he showed that opulence arises from division of labour, and why this is so, or how the division of labour “occasions a multiplication of the product,”25 and why it must be proportioned to the extent of commerce. “Thus,” he said, “the division of labour is the great cause of the increase of public opulence, which is always proportioned to the industry of the people, and not to the quantity of gold and silver as is foolishly imagined.” “Having thus shown what gives occasion to public opulence,” he said he would go on to consider:⁠—

“First, what circumstances regulate the price of commodities:

“Secondly, money in two different views, first as the measure of value and then as the instrument of commerce:

“Thirdly, the history of commerce, in which shall be taken notice of the causes of the slow progress of opulence, both in ancient and modern times, which causes shall be shown either to affect agriculture or arts and manufactures:

“Lastly, the effects of a commercial spirit, on the government, temper, and manners of a people, whether good or bad, and the proper remedies.”26

Under the first of these heads he treated of natural and market price and of differences of wages, and showed “that whatever police tends to raise the market price above the natural, tends to diminish public opulence.”27 Among such pernicious regulations he enumerated taxes upon necessaries, monopolies, and exclusive privileges of corporations. Regulations which bring market price below natural price he regarded as equally pernicious, and therefore he condemned the corn bounty, which attracted into agriculture stock which would have been better employed in some other trade. “It is by far the best police to leave things to their natural course.”28

Under the second head he explained the reasons for the use of money as a common standard and its consequential use as the instrument of commerce. He showed why gold and silver were commonly chosen and why coinage was introduced, and proceeded to explain the evils of tampering with the currency, and the difficulty of keeping gold and silver money in circulation at the same time. Money being a dead stock, banks and paper credit, which enable money to be dispensed with and sent abroad, are beneficial. The money sent abroad will “bring home materials for food, clothes, and lodging,” and, “whatever commodities are imported, just so much is added to the opulence of the country.”29 It is “a bad police to restrain” banks.30 Mun, “a London merchant,” affirmed “that as England is drained of its money it must go to ruin.”31 “Mr. Gee, likewise a merchant,” endeavoured to “show that England would soon be ruined by trade with foreign countries,” and that “in almost all our commercial dealings with other nations we are losers.”32 Mr. Hume had shown the absurdity of these and other such doctrines, though even he had not kept quite clear of “the notion that public opulence consists in money.”33 Money is not consumable, and “the consumptibility, if we may use the word, of goods, is the great cause of human industry.”34

The absurd opinion that riches consist in money had given rise to “many prejudicial errors in practice,”35 such as the prohibition of the exportation of coin and attempts to secure a favourable balance of trade. There will always be plenty of money if things are left to their free course, and no prohibition of exportation will be effectual. The desire to secure a favourable balance of trade has led to “most pernicious regulations,”36 such as the restrictions on trade with France.

“The absurdity of these regulations will appear on the least reflection. 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 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.”37

These jealousies and prohibitions were most hurtful to the richest nations, and it would benefit France and England especially, if “all national prejudices were rooted out and a free and uninterrupted commerce established.”38 No nation was ever ruined by this balance of trade. All political writers since the time of Charles II had been prophesying “that in a few years we would be reduced