Philip 2nd

When Philip 2nd became master of Portugal, and forbade all intercourse between his new subjects and the Dutch, whom he detested, what was the consequence?

The Dutch, who before resorted to Lisbon for the manufactures of India, of which they took off an immense quantity, finding this avenue closed against their industry, went straight to India for what they wanted, and, in the end, drove out the Portuguese from that quarter; and, what was meant as the deadly blow of inveterate hatred, turned out the main source of their aggrandizement. “Commerce,” says Fenelon, “is like the native springs of the rock, which often cease to flow altogether, if it be attempted to alter their course.” 164

But, even in this point of view, the exclusive system is pregnant with injustice. It is impossible that every class of production should profit by the exclusive system, supposing it to be universal, which, in point of fact, it never is in practice, though possibly it may be in law or intention.

Some articles can never, from the nature of things, be derived from abroad; fresh fish, for instance, or horned cattle; as to them, therefore, import duties would be inoperative in raising the price.

The same may be said of masons and carpenters’ work, and of the numberless callings necessarily carried on within the community; as those of shopmen, clerks, carriers, retail dealers, and many others. The producers of immaterial products, public functionaries, and fundholders, lie under the same disability. These classes can none of them be invested with a monopoly by means of import duties, though they are subjected to the hardship of many monopolies granted in that way to other classes of producers. 162

Such are the principal evils of impediments thrown in the way of import, which are carried to the extreme point by absolute prohibition. There have, indeed, been instances of nations that have thriven under such a system; but then it was, because the causes of national prosperity were more powerful than the causes of national impoverishment. Nations resemble the human frame, which contains a vital principle, that incessantly labours to repair the inroads of excess and dissipation upon its health and constitution.

Nature is active in closing the wounds and healing the bruises inflicted by our own awkwardness and intemperance. In like manner, states maintain themselves, nay, often increase in prosperity, in spite of the infinite injuries of every description, which friends as well as enemies inflict upon them. And it is worth remarking, that the most industrious nations are those, which are the most subjected to such outrage, because none others could survive them.

Besides, the profits of monopoly are not equitably divided amongst the different classes even of those that concur in the production of the commodity, which is the subject of monopoly. If the master-adventurers, whether in agriculture, manufacture, or commerce, have the consumers at their mercy, their labourers and subordinate productive agents are still more exposed to their extortion, for reasons that will be explained in Book II. So that these latter classes participate in the loss with consumers at large, but get no share of the unnatural gains of their superiors. Prohibitory measures, besides affecting the pockets of the consumers, often subject them to severe privations.

The cry is then “our system must be the true one, for the national prosperity is advancing.” Whereas, were we to take an enlarged view of the circumstances, that, for the last three centuries, have combined to develop the power and faculties of man; to survey with the eye of intelligence the progress of navigation and discovery, of invention in every branch of art and science; to take account of the variety of useful animals and vegetables that have been transplanted from one hemisphere to the other, and to give a due attention to the vast augmentation and increased scope both of science and of its practical applications, that we are daily witnesses of, we could not resist the conviction, that our actual prosperity is nothing to what it might have been; that it is engaged in a perpetual struggle against the obstacles and impediments thrown into its way; and that, even in those parts of the world where mankind is deemed the most enlightened, a great part of their time and exertions are occupied in destroying instead of multiplying their resources, in despoiling instead of assisting each other; and all for want of correct knowledge and information respecting their real interests. 165 tion had well-nigh achieved.

The frontier duties between Holland, Belgium, part of Germany, Italy, and France, were demolished; and those of the other powers, with the exception of England, were far from oppressive. We may form some estimate of the benefit thence resulting to commerce, from the discontent and stagnation that have ensued upon the establishment of the present system of lining the frontier of each state with a triple guard of douaniers. All the continental states so guarded have, indeed, preserved their former means of production; but that production has been made less advantageous.

France has gained prodigiously by the suppression of the provincial barriers and custom-houses, consequent upon her political revolution. Europe had, in like manner, gained by the partial removal of the international barriers between its different political states; and the world at large would derive similar benefit from the demolition of those, which insulate, as it were, the various communities, into which the human race is divided.

But, to return to the subject, we have just been examining, the nature of the injury that a community suffers by difficul- ties thrown in the way of the introduction of foreign commodities. The mischief occasioned to the country that pro- duces the prohibited article, is of the same kind and description; it is prevented from turning its capital and industry to the best account. But it is not to be supposed that the foreign nation can by this means be utterly ruined and stripped of all resource, as Napoleon seemed to imagine, when he excluded the products of Britain from the markets of the continent. To say nothing of the impossibility of effecting a complete and actual blockade of a whole country, opposed as it must be by the universal motive of self-interest, the utmost effect of it can only be to drive its production into a different channel.

A nation is always competent to the purchase and consumption of the whole of its own products, for products are always bought with other products. Do you think it possible to prevent England from producing value to the amount of a mil- lion, by preventing her export of woollens to that amount?

You are much mistaken if you do. England will employ the same capital and the same manual labour in the preparation of ardent spirits, by the distillation of grain or other domestic products, that were before occupied in the manufacture of woollens for the French market, and she will then no longer bring her woollens to be bartered for French brandies. A country, in one way or other, direct or indirect, always consumes the values it produces, and can consume nothing more. If it cannot exchange its products with its neighbours, it is compelled to produce values of such kinds only as it can consume at home. This is the utmost effect of prohibitions; both parties are worse provided, and neither is at all the richer.

The exclusive system has very serious evils such as smuggling.

Smith admits of two circumstances, that, in his opinion, will justify a government in resorting to import-duties= —1. When a particular branch of industry is necessary to the public security, and the external supply cannot be safely reckoned upon.

On this account a government may very wisely prohibit the import of gun-powder, if such prohibition be necessary to set the powder-mills at home in activity; for it is better to pay somewhat dear for so essential an article, than to run the risk of being unprovided in the hour of need. 166 2. Where a similar commodity of home produce is already saddled with a duty. The foreign article, if wholly exempt from duty, would in this case have an actual privilege; so that a duty imposed has not the effect of destroying, but of restoring the natural equilibrium and relative position of the different branches of production.

It is impossible to find any reasonable ground for exempting the production of values by the channel of external commerce from the same pressure of taxation that weighs upon the production effected in those of agricul- ture and manufacture.

Taxation is an evi and should be reduced to the lowest possible degree. But when once a given amount of taxation is admitted to be necessary, it is but common justice to lay it equally on all 3 branches of industry. The error I wish to expose to reprobation is the notion that taxes of this kind are favourable to Napoleon, doubtless, occasioned much injury, both to England and to the continent, by cramping their mutual relations of commerce as far as he possibly could. But, on the other hand, he did the continent of Europe the involuntary service of facilitating the communication between its different parts, by the universality of dominion, which his ambi-

production. A tax can never be favourable to the public welfare, except by the good use that is made of its proceeds. gland has done in relation to Portugal. In such case, it is mere exaction and spoliation. 168

These points should never be lost sight of in the framing of commercial treaties, which are really good for nothing but to protect industry and capital, diverted into improper channels by the blunders of legislation. These it would be far wiser to remedy than to perpetuate. The healthy state of industry and wealth is the state of absolute liberty, in which each interest is left to take care of itself.

The only useful protection authority can afford them is that against fraud or violence.

Taxes and restrictive measures never can be a benefit= they are at the best a necessary evil; to suppose them useful to the subjects at large, is to mistake the foundation of national prosperity, and to set at naught the principles of political economy. Again, I would observe, that the offer of peculiar advantages by one nation to another, in the way of a treaty of commerce, if not an act of hostility, is at least one of extreme odium in the eyes of other nations.

For the concession to one can only be rendered effectual by refusal to others.

Hence the germ of discord and of war, with all its mischiefs. It is infinitely more simple, and I hope to have shown, more profitable also, to treat all nations as friends, and impose no higher duties on the introduction of their products, than what are necessary to place them on the same footing as those of domestic growth.

Yet, notwithstanding all the mischiefs resulting from the exclusion of foreign products, which I have been depicting, it would be an act of unquestionable rashness suddenly to change even so ruinous a policy.

Disease is not to be eradicated in a moment; it requires nursing and management to dispense even national benefits. Monopolies are an abuse, but an abuse in which enormous capital is vested, and numberless industrious agents employed, which deserve to be treated with consideration; for this mass of capital and industry cannot all at once find a more advantageous channel of national produc- tion.

Perhaps the cure of all the partial distresses that must follow the downfall of that colossal monster in politics, the exclusive system, would be as much as the talent of any single statesman could accomplish; vet when one considers calmly the wrongs it entails when it is established, and the distresses consequent upon its overthrow, we are insensibly led to the reflection, that, if it be so difficult to set shackled industry at liberty again, with what caution ought we not to receive any proposition for enslaving her!

Import duties and prohibitions have often been resorted to as a means of retaliation: ‘Your government throws impediments in the way of the introduction of our national products= are not we, then, justified in equally impeding the introduction of yours?” This is the favourite plea, and the basis of most commercial treaties; but people mistake their object= granting that nations have a right to do one another as much mischief as possible, which, by the way, I can hardly admit; I am not here disputing their rights, but discussing their interests.

Undoubtedly, a nation that excludes you from all commercial intercourse with her, does you an injury; — robs you, as far as in her lies, of the benefits of external commerce; if, therefore, by the dread of retaliation, you can induce her to abandon her exclusive measures, there is no question about the expediency of such retaliation, as a matter of mere policy.

But it must not be forgotten that retaliation hurts yourself as well as your rival; that it operates, not defensively against her selfish measures, but offensively against yourself; in the first instance, for the purpose of indirectly attacking her.

The only point in question is this, what degree of vengeance you are animated by, and how much will you consent to throw away upon its gratification. 167 I will not undertake to enumerate all the evils arising from treaties of commerce, or to apply the principles enforced throughout this work to all the clauses and provisions usually contained in them.

Almost every modern treaty of commerce has had for its basis the imaginary advantage and possibility of the liquidation of a favourable balance of trade by an import of specie.

If these turn out to be chimerical, whatever advantage may have resulted from such treaties must be wholly referred to the additional freedom and facility of international communication obtained by them, and not at all to their restrictive clauses or provisoes, unless either of the contracting parties has availed itself of its superior power, to exact conditions savouring of a tributary character; as En-

But governments have not been content with checking the import of foreign products. In the firm conviction, that national prosperity consists in selling without buying, and blind to the utter impossibility of the thing, they have gone beyond the mere imposition of a tax or fine upon purchasing of foreigners, and have in many instances offered rewards in the shape of bounties for selling to them.

This expedient has been employed to an extraordinary degree by the British government, which until recently always evinced the greatest anxiety to enlarge the market for British commercial and manufactured produce. 169 It is obvious, that a merchant, who receives a bounty upon export, can, without personal loss, afford to seal his goods in a foreign market at a lower rate than prime cost. In the pithy language of Smith,

“We cannot force foreigners to buy the goods of our own workmen, as we may our own countrymen; the next best ex- pedient, it has been thought, therefore, is to pay them for buying.”

If a particular commodity, by the time it has reached the French market, costs the English exporter 20 dollars, his trouble, &c. included, and the same commodity could be bought in France at the same or a less rate, there is nothing to give him exclusive possession of the market. But if the British government pays a bounty of 2 dollars upon the export, and thereby enables him to lower his demand from 20 to 18 dollars, he may safely reckon upon a preference. Yet what is this but a free gift of two dollars from the British government to the French consumer?

The merchant has no objection to this mode of dealing; for his profits are the same as if the French consumer paid the full value, or cost price, of the commodity. The British nation is the loser in this transaction, in the ratio of 10 per cent upon the French consumption; and France remits in return a value of but 18 for what has cost $20.

Though bounties ate chargeable, and a dead loss to the gross national wealth, there are cases in which it is politic to incur that loss; 170 as when a particular product is necessary to public security, and must be had at any rate, however extravagant.