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

sometimes by

bounties, sometimes by advantageous treaties of commerce with

foreign states, and sometimes by the establishment of colonies in

distant countries.

 

Drawbacks were given upon two different occasions. When the home

manufactures were subject to any duty or excise, either the whole

or a part of it was frequently drawn back upon their exportation

; and when foreign goods liable to a duty were imported, in order

to be exported again, either the whole or a part of this duty was

sometimes given back upon such exportation.

 

Bounties were given for the encouragemnent, either of some

beginning manufactures, or of such sorts of industry of other

kinds as were supposed to deserve particular favour.

 

By advantageous treaties of commerce, particular privileges were

procured in some foreign state for the goods and merchants of the

country, beyond what were granted to those of other countries.

 

By the establishment of colonies in distant countries, not only

particular privileges, but a monopoly was frequently procured for

the goods and merchants of the country which established them.

 

The two sorts of restraints upon importation above mentioned,

together with these four encouragements to exportation,

constitute the six principal means by which the commercial system

proposes to increase the quantity of gold and silver in any

country, by turning the balance of trade in its favour. I shall

consider each of them in a particular chapter, and, without

taking much farther notice of their supposed tendency to bring

money into the country, I shall examine chiefly what are likely

to be the effects of each of them upon the annual produce of its

industry. According as they tend either to increase or diminish

the value of this annual produce, they must evidently tend either

to increase or diminish the real wealth and revenue of the

country.

 

CHAPTER II.

 

OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH

GOODS AS CAN BE PRODUCED AT HOME.

 

By restraining, either by high duties, or by absolute

prohibitions, the importation of such goods from foreign

countries as can be produced at home, the monopoly of the home

market is more or less secured to the domestic industry employed

in producing them. Thus the prohibition of importing either live

cattle or salt provisions from foreign countries, secures to the

graziers of Great Britain the monopoly of the home market for

butcher’s meat. The high duties upon the importation of corn,

which, in times of moderate plenty, amount to a prohibition, give

a like advantage to the growers of that commodity. The

prohibition of the importation of foreign woollen is equally

favourable to the woollen manufacturers. The silk manufacture,

though altogether employed upon foreign materials, has lately

obtained the same advantage. The linen manufacture has not yet

obtained it, but is making great strides towards it. Many other

sorts of manufactures have, in the same manner obtained in Great

Britain, either altogether, or very nearly, a monopoly against

their countrymen. The variety of goods, of which the importation

into Great Britain is prohibited, either absolutely, or under

certain circumstances, greatly exceeds what can easily be

suspected by those who are not well acquainted with the laws of

the customs.

 

That this monopoly of the home market frequently gives great

encouragement to that particular species of industry which enjoys

it, and frequently turns towards that employment a greater share

of both the labour and stock of the society than would otherwise

have gone to it, cannot be doubted. But whether it tends either

to increase the general industry of the society, or to give it

the most advantageous direction, is not, perhaps, altogether so

evident.

 

The general industry of the society can never exceed what the

capital of the society can employ. As the number of workmen that

can be kept in employment by any particular person must bear a

certain proportion to his capital, so the number of those that

can be continually employed by all the members of a great society

must bear a certain proportion to the whole capital of the

society, and never can exceed that proportion. No regulation of

commerce can increase the quantity of industry in any society

beyond what its capital can maintain. It can only divert a part

of it into a direction into which it might not otherwise have

gone; and it is by no means certain that this artificial

direction is likely to be more advantageous to the society, than

that into which it would have gone of its own accord.

 

Every individual is continually exerting himself to find out the

most advantageous employment for whatever capital he can command.

It is his own advantage, indeed, and not that of the society,

which he has in view. But the study of his own advantage

naturally, or rather necessarily, leads him to prefer that

employment which is most advantageous to the society.

 

First, every individual endeavours to employ his capital as near

home as he can, and consequently as much as he can in the support

of domestic industry, provided always that he can thereby obtain

the ordinary, or not a great deal less than the ordinary profits

of stock.

 

Thus, upon equal, or nearly equal profits, every wholesale

merchant naturally prefers the home trade to the foreign trade of

consumption, and the foreign trade of consumption to the carrying

trade. In the home trade, his capital is never so long out of his

sight as it frequently is in the foreign trade of consumption. He

can know better the character and situation of the persons whom

he trusts; and if he should happen to be deceived, he knows

better the laws of the country from which he must seek redress.

In the carrying trade, the capital of the merchant is, as it

were, divided between two foreign countries, and no part of it is

ever necessarily brought home, or placed under his own immediate

view and command. The capital which an Amsterdam merchant employs

in carrying corn from Koningsberg to Lisbon, and fruit and wine

from Lisbon to Koningsberg, must generally be the one half of it

at Koningsberg, and the other half at Lisbon. No part of it need

ever come to Amsterdam. The natural residence of such a merchant

should either be at Koningsberg or Lisbon ; and it can only be

some very particular circumstances which can make him prefer the

residence of Amsterdam. The uneasiness, however, which he feels

at being separated so far from his capital, generally determines

him to bring part both of the Koningsberg goods which he destines

for the market of Lisbon, and of the Lisbon goods which he

destines for that of Koningsberg, to Amsterdam ; and though this

necessarily subjects him to a double charge of loading and

unloading as well as to the payment of some duties and customs,

yet, for the sake of having some part of his capital always under

his own view and command, he willingly submits to this

extraordinary charge; and it is in this manner that every country

which has any considerable share of the carrying trade, becomes

always the emporium, or general market, for the goods of all the

different countries whose trade it carries on. The merchant, in

order to save a second loading and unloading, endeavours always

to sell in the home market, as much of the goods of all those

different countries as he can; and thus, so far as he can, to

convert his carrying trade into a foreign trade of consumption. A

merchant, in the same manner, who is engaged in the foreign trade

of consumption, when he collects goods for foreign markets, will

always be glad, upon equal or nearly equal profits, to sell as

great a part of them at home as he can. He saves himself the risk

and trouble of exportation, when, so far as he can, he thus

converts his foreign trade of consumption into a home trade. Home

is in this manner the centre, if I may say so, round which the

capitals of the inhabitants of every country are continually

circulating, and towards which they are always tending, though,

by particular causes, they may sometimes be driven off and

repelled from it towards more distant employments. But a capital

employed in the home trade, it has already been shown,

necessarily puts into motion a greater quantity of domestic

industry, and gives revenue and employment to a greater number of

the inhabitants of the country, than an equal capital employed in

the foreign trade of consumption; and one employed in the foreign

trade of consumption has the same advantage over an equal capital

employed in the carrying trade. Upon equal, or only nearly equal

profits, therefore, every individual naturally inclines to employ

his capital in the manner in which it is likely to afford the

greatest support to domestic industry, and to give revenue and

employment to the greatest number of people of his own country.

 

Secondly, every individual who employs his capital in the support

of domestic industry, necessarily endeavours so to direct that

industry, that its produce may be of the greatest possible value.

 

The produce of industry is what it adds to the subject or

materials upon which it is employed. In proportion as the value

of this produce is great or small, so will likewise be the

profits of the employer. But it is only for the sake of profit

that any man employs a capital in the support of industry; and he

will always, therefore, endeavour to employ it in the support of

that industry of which the produce is likely to be of the

greatest value, or to exchange for the greatest quantity either

of money or of other goods.

 

But the annual revenue of every society is always precisely equal

to the exchangeable value of the whole annual produce of its

industry, or rather is precisely the same thing with that

exchangeable value. As every individual, therefore, endeavours as

much as he can, both to employ his capital in the support of

domestic industry, and so to direct that industry that its

produce maybe of the greatest value; every individual necessarily

labours to render the annual revenue of the society as great as

he can. He generally, indeed, neither intends to promote the

public interest, nor knows how much he is promoting it. By

preferring the support of domestic to that of foreign industry,

he intends only his own security ; and by directing that industry

in such a manner as its produce may be of the greatest value, he

intends only his own gain; and he is in this, as in many other

cases, led by an invisible hand to promote an end which was no

part of his intention. Nor is it always the worse for the society

that it was no part of it. By pursuing his own interest, he

frequently promotes that of the society more effectually than

when he really intends to promote it. I have never known much

good done by those who affected to trade for the public good. It

is an affectation, indeed, not very common among merchants, and

very few words need be employed in dissuading them from it.

 

What is the species of domestic industry which his capital can

employ, and of which the produce is likely to be of the greatest

value, every individual, it is evident, can in his local

situation judge much better than any statesman or lawgiver can do

for him. The statesmn, 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, but to no council or senate whatever. and which

would nowhere be so dangerous as in the hands of a man who