A Commentary and Review of Montesquieu's "Spirit of Laws"
Of Laws in Relation to Commerce, Considered in Its Nature and Different Forms.
Of Laws in Relation to Commerce, Considered with Reference to the Revolutions It Has Undergone.
Merchants are the agents of certain exchanges; money is the instrument employed to effect it; but this is not commerce, which really consists in simple exchanges. Commerce is society itself.... it is an attribute of man.... it is the source of all human good.... its principal use is in stimulating industry... it is thus it has civilized the world: it weakens the spirit of devastation. The pretended balance of commerce is illusive and trifling.
In the same way that I have combined my view of the four books on climate, I here unite these two on commerce; but I must confess, that I scarcely know how to begin the discussion of subjects, which are not treated of in the books before me, but suddenly broken off: neither can I discover their connection in themselves, nor can I discover in one the elements of the other, which would have been the case had they been well explained and connected. This calls to my mind the expressions of a man of fine understanding, who said.... my father, my eldest brother, and myself, have three different ways of working; my father breaks the threads and easily ties them again; my brother breaks them also, but he does not tie them again; I endeavor not to break them, for I should never be certain of being able to tie them well.
I take Montesquieu to be like the father, who though he breaks them, never loses the thread of his ideas, although the connection is not always seen; but I, in order not to be like the elder brother, must endeavor to act like the second: I shall therefore advance sufficiently into the subject, to discover some point from whence to start, and to which I may refer every thing that arises as I proceed.
A very erroneous idea is generally formed of commerce, because it is too much circumscribed by the limits assigned to it. It is nearly subjected to the same misconceptions as what are called figures of rhetoric; we notice them only when we hear an oration or a studied discourse, so that on those occasions they appear to be great and peculiar inventions, and we never perceive that they are so natural to us, that we constantly employ them in the most ordinary discourse, without being even conscious that we do so. In like manner, we perceive commerce only in transactions with merchants, who make a sort of occult science and a particular trade of it; and even then we only see the operations of the money produced by or employed in it, but which really is not its true object; we do not appear conscious of continually and incessantly conducting a traffic ourselves; nor that the whole concerns of commerce are susceptible of being carried on without not only money, but without merchants; for merchants by profession are no more than the agents or a particular commerce, and money the instrument with which the agency is conducted. But these transactions do not properly constitute commerce, which essentially consists in exchange; all exchanges are acts of commerce, and the whole of human life is occupied by a series of exchanges and reciprocal services. We should all be very unhappy if it were otherwise, for we should in such a case be each reduced to our individual powers, without being able to derive benefit from the aid of others. By considering commerce in this point of view, which is the true one, we shall perceive therein what we never before observed; we shall discover that it is not only the foundation and basis of society, but that it is in effect the fabric itself; for society is nothing more than a continual exchange of mutual succours, which occasion the concurrence of the powers of all for the more effectual gratification of the wants of each.
It is therefore ridiculous to doubt of commerce being a good, and yet more ridiculous to believe that it can ever be an absolute evil, or only be useful to one of the parties concerned in it. To man, it must be at all times useful, to be enabled to procure that which he is in want of, by the means of some other thing; this faculty can never be an evil in itself; and when two men reciprocally and freely part with a thing which they esteem less, to receive another thing which they esteem more, since they desire it, and prefer it, it is possible that both may find their advantage in the exchange; and in this commerce consists. It is true, that one of them may make what we call a bad bargain, and the other a good bargain; that is to say, that the one does not receive for what he parts with, as much as he wishes to procure, and that the other receives more than he expected. It may also happen, that one or both of them, are wrong in desiring the things they have procured; but such cases are rare, and do not constitute the essence of commerce; they are accidents caused by certain circumstances, which we shall examine in the sequel, and of which we shall notice the effects. It is no less true, that in every transaction of commerce, that is, every free exchange, both the contracting parties have been satisfied; without which they would not have contracted, and consequently, this exchange, in itself, is beneficial to both.
If I do not mistake, Smith was the first who remarked, that man alone exchanges, in the manner properly so termed.*25 This is true, for we perceive certain animals performing labor which tends to a common use, and which appears to be to a certain extent, a work of concert; we perceive them contend, nay fight with each other, for the possession of what they desire, and fawn to obtain it; but they never exchange. The reason is, I believe, that they have no idea of property, sufficiently exact to believe that they can have any right to that which they do not actually possess, nor a language sufficiently formed to be enabled to make engagements; and these two inconveniencies, originate from their incapacity to sufficiently abstract their ideas, to generalize or express them, separately or in detail, under the form of a proposition; whence it results, that the ideas of which they are susceptible, are all particular, confounded with their attributes, and manifest themselves simultaneously, and as it were, by interrogatories, which can explain nothing explicitly. Man, on the contrary, endowed with all those means of which they are destitute, is naturally disposed to make use thereof, to make conventions with his fellow men. But whatever may be the cause, it is certain that he exchanges, and other animals do not, and therefore they cannot constitute society, for commerce is society itself, as labor is wealth.
It is Smith, likewise, who has perceived this second truth, that our faculties were our only original property. The employment of our faculties, is our only primitive wealth. It leads him to a third truth, which is also very important; namely, that this wealth is augmented incalculably, by means of the division of labor. That is to say, as each one of us applies more particularly to a single kind of industry, it is performed with more speed, becomes more perfect and productive, in a word it encreases the means of our enjoyment to a very great extent.
Thus, when we are on a good, well made, even road, we travel with more celerity and ease at the same time. But Smith has gone yet farther, he has observed that the distribution of labor, so very desirable and important, only becomes possible by exchanges, and in proportion to their number and facility; for as long as each individual cannot profit by the labors of others, he must himself provide for all his wants, and consequently exercise all trades. When exchanges afterwards commence, a single trade will not suffice for the maintenance of a man; he is still obliged to exercise several; this is the case with many descriptions of workmen, remote from cities; but when at length commerce becomes more perfect and more active, not only a single trade, but frequently the least part of a trade, is sufficient to occupy a man altogether, because he can always dispose of the products of his work, though very considerable and of a single kind. Sufficient attention has never been paid to this last observation of Smith; it is nevertheless admirable; and he has therein discovered the principal utility of commerce, which should never be lost sight of, and which should always and in all cases be considered as its most essential property and greatest advantage. Let us for a moment occupy ourselves therewith, and since commerce is the subject which at present engages our attention, let us remark, that at the moment exchange commences society also begins, and with it the probability that each one will exclusively devote himself to the kind of occupation in which he thinks he may be most likely to succeed, and that this will be as much the effect of natural disposition, as of the circumstances in which he is placed.
In the beginning commerce is carried on directly, that is the exchange is made between two persons without the mediation of a third; every man who desires to buy any thing is obliged to look for a person who has it to sell; and in a word, whoever has any thing to exchange, must himself take the trouble of finding a person with whom he can make it. But it is very soon discovered that by the division of labor which commerce so powerfully promotes, a class of men is formed, whose only business is to save this trouble to those who have exchanges to make, and thus facilitating such dealings. These men are known under the general name of traders. They soon divide themselves into merchants, factors, agents, dealers, retailers, commission brokers, and other auxiliaries of commerce, who all co-operate to a common end, by fulfilling different functions. Let us consider them all in one view, which will be sufficient for our purpose.
Traders are always ready to buy, when any one is desirous of selling; and to sell, when anyone is desirous of buying: they send into one place the goods of another, and reciprocally, so that by their care each one has within reach all that he desires, and what he could not often procure but with great trouble and time. Their labor is then useful; since it is useful, it should procure them an adequate recompense, which it easily does: we should rather sell cheaper at home; than be obliged to sell at a distance: we prefer buying near us, to going very far for what we want. Merchants then, buy cheap and sell dear, which is their mode of assuring a recompense: their profits may be less, according as communications are secure or easy, their expences and risks less; when there are few merchants, they demand a greater profit; when there are many, they content themselves with less, in order to obtain a preference from purchasers: in this, they act like all other persons, engaged in industrious pursuits; whatever their profit may be, it is certainly taken from those who buy: but to pay this profit, is to the buyers of less importance than the trouble which it spares him, or the time which he saves; so that in general, even buyers gain by this kind of sacrifice: the proof of this fact is, that they always prefer making use of the services of the sellers; their existence is, therefore, useful to society.
In explaining the usefulness of traders, I am led to explain the usefulness of money; for it serves commerce as an instrument, precisely as the traders serve it as agents. Commerce may be carried on, without this instrument, and without these agents; but they very much facilitate its operations. Money, or the metal of which it is made, is an article of merchandize, as well as any other, proper for different purposes; having, like all the rest, its natural or intrinsic value, which is the value of the labor necessary to extract it from the earth, and form it; and its pecuniary value, which is that of the things offered to procure it, as we have explained in our observations on the thirteenth book: but this merchandize, has the peculiar quality.... that it is invariable in its physical and artificial properties, so that it may be preserved without fear of loss or damage: that it is all of the same quality when pure; so that it may always be compared with itself without any uncertainty as to its value; that it is susceptible of very multiplied, just, and uniform divisions; so that it is easily accommodated to the divisions of all other articles, from the most precious to the most trivial; from the smallest to the greatest quantity. These are the advantages to be obtained by adopting it as a common term of comparison of all values; it has consequently been adopted: when once adopted, it cannot frequently fluctuate or change its value, as other merchandize do, by being too much sought for at one time, and not at all at another. It can only change its value by small degrees, and with time, according; as it is a little more or less scarce. This is also another very great advantage gained thereby, so that a person possessed of a thing which he does not want to retain, is no longer obliged to wait until he meets with the thing he desires to barter it for; if he can get money for it, he will take it, because he is sure, with this money, to procure all that he desires, particularly when there are merchants who have every thing to sell. Besides, money does not constitute the whole of one riches, nor such dealings the whole of our exchanges; the one is no more than a tool, and the others are workmen, who facilitate the business of commerce, but are not themselves to be mistaken for commerce. Only such a number of these tools and workmen is required as may be necessary for conducting commercial transactions. When there is more money in a country, than is requisite for circulation, it should be expended or converted into useful utensils: when there are too many merchants for the business that can be done, they should either expatriate themselves, or turn to some productive occupation.
The properties of commerce being well understood, as well as the functions of merchants, it is easy to perceive, that if traders are not indispensible, because commerce can take place to a certain extent without them, yet they are very useful since they very much facilitate it; but it does not at first appear so easy to decide whether their work is really productive, or if they merit being placed among the productive class; for some writers, who have acknowleged no other real production, than the labor which procured the first materials, and who in consequence have refused the character of producers to those who employ the rude materials, that is mechanics, have also refused the title to those who transport them, that is merchants: this, however, is an error, altogether arising from a misconception of the meaning of the word productive.
Mr. Say, as we have already stated, has dissipated all disputes about these words by a single and very just observation, that we can never create even a single atom of matter, that we only produce changes; and that what we call producing, is only giving a greater degree of utility as respects us to what already exists: it may be also said, and with as much truth, of our mental productions, that they are only transformations of impressions which we receive by our senses, that they compose all the knowlege that exists, of which we form all our ideas, and upon which we regulate our actions, deduce all the truths which we perceive, and form all the combinations we imagine.
In effect not to leave the physical path, men who obtain from the earth and waters by the labors of hunting, fishing, mining, quarrying, and cultivating all the raw materials which we make use of only by their labor, are indebted to commerce for rendering the animals, minerals, vegetables, useful to us. The metal is of more value than the mining, a rich harvest is of more value than the seed and manure producing it; an animal taken or killed is more likely to be of use to us than one which flies away, and a tame animal more than a wild one; these first workmen, therefore, have been useful, they have been productive of utility, and this is the only manner of being productive.
After them come other workmen, the mechanics, who form various articles out of these materials; if the metal be worth more than the mining, an axe or a spade is worth more than the metal of which they are made; if flax be worth more than the seed from which it has been produced, the linen into which it is converted is more valuable than the flax, and the cloth more than the fleece, flour more than the wheat, and bread more than the flour. These new workmen then are producers, as well as the others, and in the same manner. This is so true that they frequently cannot be distinguished from each other. I should like to know whether the person who from salt-water produces salt, is a farmer or an artisan; or why the man who kills deer should rather belong to the agricultural class, than he who dresses the skin and makes gloves of it; as well as to know what is produced by the ploughman, the sower of the seed, the reaper, or one of those laborers who has made ditches necessary to render the field productive.
But it is not sufficient that the materials have received their last form, for me to be enabled to make use of them, they must be near me. It is of little consequence to me that there is sugar in the West Indies, porcelain in China, coffee in Arabia; it requires to be brought to me; and this is the business of the merchants. They are also producers of utility, and this utility is so great, that without it the others would vanish. This is so evident, that in places where a thing is very abundant it has no value, but it soon acquires a great value when transported to those places where there is no commodity of that kind. We must then either acknowlege that we do not understand what we have here said, or confess that the merchants are producers as well as others, and acknowlege, that all labor is productive which produces property greater in value than the amount of the expences employed in procuring it. This is the only rational manner of understanding the word production. See book XIII.
It is true, that by the operations of the industry, inaccurately called agricultural, the materials oftener change their nature; manufacturing industry generally changing only the form; yet this is not true of chemical arts, they almost all change the nature of the materials more or less; commercial industry only changes their place. But what is it if this last be as useful as the first? If it be a last form given to it by art, and necessary to give value to all the others, and if this last form be so fruitful that it produces an encrease of value far superior to its first cost.
It may be said that this encrease of value, does not always take place, and that the merchandize is frequently lost or spoiled, or arrives in a wrong season; and that then the labors of commerce produce nothing: but it is the same with agriculture and manufactures, when not well conducted or injured by accident. It may also be said, that commerce often furnishes us with useless objects of consumption, which it would have been happy for us not to have known; that we take a liking to them; that we ruin ourselves to procure them; and that it impoverishes instead of enriching us: but it is the same also, of agriculture and the arts: if I convert a large field into a garden of roses, if I employ a great many men in cultivating and gathering them, and a great many men also in distilling them; and that from this there results only the temporary gratification of some females, who perfume themselves therewith, and expend considerable sums by means of which works of great utility and permanence might have been performed, there is certainly a great loss of wealth; but the loss is not in the production, but in the consumption: if this essence of roses had been exported, many things of the first necessity might have been had in return. In all cases, there is a complete similitude between the labor of the trader, and that of the farmer or the manufacturer: the one is not more or less essentially productive than the other; all through want of success are subject to loss; all by success, produce encrease of enjoyment if we consume, and encrease of wealth if we do not. It is of little consequence what name is given to the traders, provided that such a name does not lead to false conclusions, and that the nature of commerce be well understood, of which traders are only the agents. I believe we have explained the subject with sufficient precision to be enabled to establish some certain principles, and determine on the different questions which may arise from such general and constant views. Let us return to our author, and examine some of his opinions.
Montesquieu, who has spared himself the trouble we have taken, can perceive in commerce only the relations of nations among themselves, and their manner of influencing one another. He does not say a word of the commerce that is carried on in the interior of a country; and he appears to suppose, that it would be useless and of no effect, nor meriting any consideration, if it did not furnish the means of making profit on strangers. In this particular, he thinks like many other writers, and like many persons of consideration, too much admired in the world: however, even in this narrow view, internal commerce demands all our attention; and is in all cases, and at all times, by much the most important, particularly for a great nation; in effect, so long as there is no exchange among the persons of the same district, they are all strangers to each other, and are always miserable.... whereas, by mutual traffic, they very much augment their power and their enjoyments. So likewise, in a large country, if each of its sub-divisions becomes insulated and without intercourse with the others adjoining, they are all in a state of privation and forced inaction.... whereas, by forming connexions among them, each one profits by the industry of all; each finds employment, and discovers his own resources. Let us take some very large, well known country.... for example, France: suppose the French nation alone existing in the world, or surrounded by impassable deserts. Some parts of its territory are very productive in grain; other parts more humid, are better adapted to pasturage; others, formed of dry declevities are proper only for the cultivation of the vine; others again, and more mountainous, are productive of timber only. If each of these parts should be reduced to depend on itself alone, what would be the result? It is evident that the part productive of grain, may support a great many people; for at least it possesses wherewith to satisfy the first want, nourishment; but this is not the only want, clothes and lodging are also required. These people would then be obliged to sacrifice a great deal of this good land, to producing timber, to pasture, to raise bad grapes; and of which land, a smaller quantity would have been sufficient to procure, by means of exchange, that which they wanted, and the remaining part would have nourished a great many other men. Consequently, these people would not, under such circumstances, be so numerous, as if they had commerce; and after all, they would still be in want of many other things. This is still more applicable to those who inhabit the districts adapted to the cultivation of the vine: these, if possessed of industry, would only make wine for their own use, having no place whereat to sell it: they would exhaust themselves in unproductive labor, in order to raise some inferior grain along detached parts of their dry hills, not knowing where to buy any, and they would be in want of every thing else: the population, though composed of cultivators, would be miserable and few in number. In marshy meadow districts, too wet for wheat or barley, too cold for rice, their condition would be still worse: tillage must necessarily be renounced, and pasturage alone attended to; nor must they raise more animals than they themselves can consume. The only means of subsisting in woodland is hunting, in proportion and inasmuch as wild animals are to be met with, without even thinking of preserving the skins, for of what use would they be? This would be the state of such a country as France if all communication between its different parts were cut off: one part would become savage, and the other badly provided for.
Suppose this communication, instead of being thus restrained, to be active and easy, but still without any intercourse with foreign nations, then the productions proper for each district would no longer be circumscribed for want of vent; the necessity of attending to unproductive local concerns, would cease with the opportunities of exchange; and the necessity of providing, whether well or ill, for all our own wants, would no longer operate as a loss of half the value of time. The district of rich land will produce more grain than is wanted, and will be enabled to send some to the part planted with vineyards, which will produce a sufficiency of wine to sell; both will supply the country adapted to pasture, where the cattle will multiply in proportion to the demand, and the men in proportion to the subsistence which this demand procures for them; and these three districts united, will transport subsistence to the inhabitants of the most rugged mountains, who will furnish them with wool and metals. Flax and hemp will multiply in the north, and yield linen to furnish the south, which will encrease the manufactures of silk and oil to pay them in return: the local advantages will be turned to profit, a district covered with flints will furnish flint stones to all the rest who do not possess them and are in want of them, and its inhabitants will subsist by this exchange: another rocky district will furnish grindstones for several countries; a small sandy district will produce madder for all the dye-houses: some fields of earth of a certain argilaceous quality will supply clay for all the potteries: the inhabitants of the sea coast need not set bounds to their fisheries, since they can salt their fish and find purchasers in all the contiguous countries; it will be the same with sea salt, and the alkali of marine plants: gums and resins from the trees that produce them, will be in demand; new and active industry will every where be perceived, not only for the exchange of goods, but also by the communication of information; for if no country produces all, no country can invent all; when what is known in one place is communicated, it soon becomes general; it is more easy to learn, or even to improve or perfect, than to invent; besides it is commerce that inspires the desire of invention; it is even its great extent which renders industrious occupations necessary and possible.
However, these new arts engage a number of men, who do no more than live by their labor, because the labor of their neighbor is become more productive, and enables him to pay for them. Apply this to the country of France, which we have been just exhibiting in subdivided circumstances; and behold it now covered with a numerous population, well provided for, and consequently become happy and rich, without having derived any profit from strangers. All this is due to the best employment of those advantages which are peculiar to each district, and of the faculties of each individual. It should be observed also, that whether the country be rich or poor in gold or silver, or if it possess none, yet these effects will be produced without them; or if there should be money and the precious metals are scarce, then a very small quantity will be sufficient to pay for a great deal of merchandize; but if there be much of the metals, then a greater quantity will be required for articles of the same quality, and this is all the difference; in both cases circulation will go on in the same manner; such are the principles of internal commerce.
It is acknowleged, that I have taken for my example a country very extensive, and much favored by nature; but the same causes produce the same effects in all countries, in proportion to their extent and natural advantages; excepting however such as are absolutely incapable of producing articles of the first necessity in sufficient quantity: for these unquestionably foreign commerce is indispensible, in order to render it habitable, since by foreign commerce alone it can be furnished with subsistence: they are in the same predicament as the mountaineers, or inhabitants of the marshy parts of France, whom we have just spoken of, indebted for their population to the intercourse with districts that are fertile; but to all other countries foreign commerce is only accessory.
I do not, however, undertake to deny the utility of foreign commerce; what we have said shews us even that it is of the greatest advantage: indeed since it appears that interior commerce produces so much good by animating industry; and that industry is excited only by the possibility which commerce holds forth for the disposal of the products of labor, or as we have before observed, because it enlarges the extent of the market for the productions of every part of the country, so it is certain that external commerce very much enlarges the market and augments industry and production. Even France, though perhaps more capable than any other country on the European continent, taken altogether, of dispensing with foreign commerce, would be deprived of many enjoyments if it did not obtain goods from the four sections of the globe; and many of its manufactures at present, even the most necessary, indispensibly require raw materials which are imported from the extremities of the earth. It may be even said that certain provinces, though constituting a part of the same body politic, have often less facility of communication among themselves than with certain foreign countries; so that it is more easy to send the Bordeaux wines to England, the cloths of Languedoc to Turkey, those of Sedan to Germany, than to many parts of France, and reciprocally: many things may be had with more facility from foreign countries than from our own; it would then be very foolish to deprive ourselves of foreign commerce since it also promotes and rewards industry: what we have just said of internal commerce, points out to us how estimable its property of exciting industry is. What must we then think of those who do not take this advantage into consideration, and who pay no attention to internal commerce, the most profitable and useful of all; and who only perceive in external commerce a means of fleecing foreign nations of a few dollars? We may say without hesitation, that they have not the least idea of the manner in which the riches of nations are formed and distributed: it must be acknowleged that this is the condition of Montesquieu notwithstanding all his information.
After a few vague sentences on the moral effects of commerce, which we shall notice farther on, he immediately divides commerce into two kinds; the commerce of luxury and of economy; and faithful to his system of deducing everything from three or four forms of government which he has judged proper to distinguish, he says that one of these kinds of commerce is more suitable for monarchies, the other for republics.... and he perceives a great deal of reason for its being so. The truth is, that there never was, and never will be, a commerce of luxury. Whoever speaks of luxury, expresses the idea of consumption, and even consumption to excess. Commerce, commercial industry, constitute parts of the means of production. These two things have nothing in common, if by commerce of luxury is understood, that some expend what others gain. To gain is one thing, to eat is another quite different.*26
If the commerce of luxury implies the commerce of objects of luxury, nothing can prevent the Dutch from importing porcelain from China, shawls from Cashmire, diamonds from Golconda, though French or German courtiers may be foolish enough to buy them. In all cases, Mr. Say is very right when he asserts, all this signifies absolutely nothing. The same may be said of the reasoning by which Montesquieu undertakes to prove that a commerce always disadvantageous, may be useful, or that the power granted to merchants to do what they please, would be the destruction of commerce; or that the acquisition of nobility for money, very much encourages merchants; or that the mines of Germany and Hungary encrease the cultivation of land, while those of Mexico and Peru destroy it; and other paradoxes of the same nature. From all this, we must again conclude, with Mr. Say, that when an author, speaking of these things, forms to himself so indistinct an idea of their true nature, if by chance he should stumble on an useful truth, or if he should happen to give good advice.... it is very lucky. Let us then, endeavor to complete the explanation of the effects of external commerce: thus far it has never been sufficiently done; and if we succeed, it will not be by chance, but by deductions the most rigorous: this knowledge conducts us to many useful truths, too little known.
We have seen, that as commerce between man and man alone constitutes society, and is the first cause of all industry and convenience, so that of one district with another.... province with province.... in the interior of the same country, gives new life to their industry, and produces an encrease of comfort, population, and means: and that eternal commerce augments all the advantages that internal commerce gives rise to, and contributes to set a value on all the gifts of nature, by rendering the labor of man more fruitful and productive.*27 This is the greatest advantage of external commerce, and though truly incalculable, it may, however, be represented by numbers giving an approximate idea thereof. Let us imagine twenty men working separately, without assisting each other: they will perform the labor of twenty, and if we suppose them all equal in capacity, their enjoyment will be as one; if they unite and assist one another, they will perform the work of forty, and perhaps of eighty, and consequently their enjoyments will be as four; if they profit by this advantage, of the leisure it procures them, of the intelligence it enables them to acquire, for discovering new resources, and inventing new means for procuring new raw materials, they may produce as one hundred and sixty, or as three hundred and twenty; and enjoy as eight or sixteen; and their industry will indefinitely become more perfect, for it is impossible to set any limits to it: they may, if very intelligent, or very much favored by nature, go so far as to produce in the proportion of a thousand, or even two thousand, and consequently each to enjoy as fifty or an hundred, if the fruits of their labor be equally distributed; or to support one hundred or two hundred, where there were only twenty, and yet to enjoy as ten instead of one; and all this without having gained any thing from foreigners.
These estimates are not exaggerated, they are even short of the truth: there is more than this difference between the self dependence of the savage state, and society formed and improved by the invention of exchange; particularly if this society be well organized to prevent inequality, or at least that inequality should take place as little as possible; and that a surplus of means above immediate wants, do not become useless or injurious. (See the subject of luxury, book VII.) The greatest advantage of external commerce.... we cannot too often repeat, is certainly to contribute to this happy phenomenon, which has scarcely ever occupied our attention, and which we have been always ready to sacrifice to temporary and sordid gain, or the appearance of the least profit to be made by foreigners. I say the appearance, not thereby intending to intimate that this profit is always deceitful.... into this we shall look.... I only maintain, that it is improperly the sole object of most politicians, and which is nothing in comparison with the advantages which commerce affords in creating society, and exciting industry; advantages which particularly belong to internal commerce, and to which external commerce contributes.... and that in my opinion constitutes its greatest merit. Besides, a very extravagant importance has been attached to the direct profits which a nation may make on foreign nations, by means of its commerce with them; it is proper to examine this profit more clearly and in detail, in order to discover in what it consists, and how far it may be ascertained.
External commerce may be profitable, or rather the merchants engaged therein may directly augment the mass of national riches by the profits they make on foreigners with whom they traffic, and this effect they may produce in several different ways.
In the first place, they may be only the transporters and agents of foreigners; under this supposition they are rather artisans than merchants: in this quality they receive a compensation; they live on this compensation even if their country produces nothing; it is so much riches they import; if they consume it for their subsistence, it simply maintains in the country a certain portion of population which would not have existed there without it: if they do not use the whole of it, and if they practise some economy, so much as this economy yields is added to the permanent mass of national wealth.
Secondly, they may buy in a foreign country, goods that are there cheap, and sell them in another, where they are dear: the difference is sufficient to pay the subsistence of those they employ, and their own.... in a word, all their expences, and leaving them a profit; this profit either in money or goods, and even all the parts of their expences gained from another nation, is a collection of means which they have added to those of their country, since it is all paid by foreigners. If this mass of means be not altogether consumed annually, what remains is so much added to the stock of national riches:.... this second case is the carrying trade.
Thirdly, merchants take such of their goods as are low priced in all the great markets of Europe, and all civilized nations, and send them to a great distance, bringing back into their country other goods which have a great value among all those nations. The difference in this case, more than covers the expence; from this expence, if paid to foreigners, a benefit results: this is done, when glass beads and other toys, are exchanged with savages for gold dust, ivory, furs, and other valuable things: certainly the mass of the wealth of society, which the merchants belong to, has been augmented. It is not necessary to be sure of this, that the goods imported be consumed in society, or re-exported, wasted, or a profit made thereon; this is another question, it is that of consumption, and opposite to that of production. These riches may again be lost, but they have been acquired, and this is all that is necessary in this place to be considered.
Fourthly, merchants may import from foreign parts, raw materials, cause them to be manufactured in their own country, and return them with profit to the same country in which the materials were produced, or to others; this is what the French merchants do, when they import hides from Spain, which they return tanned, and wool, which they return in cloth. The profits which they obtain, and the expences of all their agents, is an advantage to their country; for the sole object of the commerce being to furnish foreigners, all the industry that is put in motion by them, is exclusively paid by them: the artists they employ, are actually in the pay of those foreigners; and so are the waggonners and seamen who are employed in transporting the goods. This kind of commerce is what most enriches a nation, but it must be remarked, that this effect is produced less by the merchant, than by the industry he stimulates and sets in motion; for the public prosperity is at all times, under whatever forms, and in all respects, that which is most useful to a society of men.
Finally, the fifth kind of external commerce, is that which consists in exporting all the produce and merchandize for which there is no consumption nor demand in the country, and which without this commerce there would have been no advantage in producing, and which certainly would not have been produced; and to import all such things as are absolutely wanted, and which cannot be procured at home but at a much dearer rate; this is the commerce that takes place most generally among nations; the others of which we have been speaking are only particular cases; and the external commerce of almost all nations is of this kind; it is this which powerfully succors internal commerce, by extending the market, and which aids it in attaining the important end of augmenting the means of industry, unfolding the faculties of the people, and exciting their activity; and it procures for them all the enjoyments which industry looks to for its compensation. This object is so great, and this interest so superior, that it absorbs all others; while among the advantages of this commerce, the profit of the merchants who act only as agents, cannot be taken into the account, it is relatively insignificant.
This profit must, however, be obtained; to invite merchants to undergo the trouble, and if it were not obtained, it would be a proof that their services were neither useful nor agreeable, and that their operations being without an object, would consequently cease. This profit then, is acquired, but in the first place, it is necessarily taken from those of the nation, and it is impossible to determine the part they contribute to the sacrifice which the agents of exchange require from those who exchange. It is indeed necessarily shared by the foreign merchants with whom those of the country correspond, and it is very probable, that in general, each respectively gain what the buyers and sellers of their several countries sacrifice. We must again observe, that this profit is trifling, compared with the other advantages of such transactions, and the immense mass of riches which they put in motion, or collect; and I may affirm, contrary to the common opinion, that such profit merits no attention, on the part of the political enquirer. This commerce therefore, should not be considered as more useful, or the most considerable among those which directly augment the accumulation of national wealth, precisely because it is that which augments it most indirectly.
These are, I believe, the principal kinds of foreign commerce: the classification is not very rigorous, nor should too much importance be attached to such a circumstance; it has the inconvenience of every classification, that rational beings can with difficulty adapt themselves to the general and abstract manner of considering them. There is not, perhaps, a single commercial operation really and effectively existing, that strictly can be ranged in one of these live classes exclusively, or which in some of its parts does not belong to others. However, this analysis of the most remarkable effects of foreign commerce, throws some light upon its nature and opens the way to the enquiry concerning the balance of trade.
It will be admitted that these terms balance of trade, have not always a very clear meaning; and perhaps if those who make use of them, would examine the subject with attention, they may discover that they have no meaning. However, without examining deeply into the cause of the fact, or the manner in which it takes place, or the possibility of its taking place; when we think a nation sends more value to a foreign country than it receives therefrom, it is generally said that the balance is against it; and in the contrary case, it is said to be in its favor: this is what is understood by that balance of commerce, which we are desirous of having on our side.
But in the first place, it is evident, that in order to render the idea of a balance not wholly chimerical, the word value, should not be confined to the mere representation of money, or even precious metals; for gold and silver are far from being our only riches, or even the principal part of our riches; and it is very plain, that when I give five hundred dollars in money, and receive six hundred in merchandize, that I gain an hundred dollars: which shews that a nation may gain a great deal from another, to which it sends more money than it receives from it. This reason alone, if there were not many others, would suffice to prove, that the course of exchange, from which so many rash calculations are drawn, is a very insignificant index of the state of the balance; for at most, it can only indicate that more money is sent in one direction than another; and yet it does this, in a very uncertain manner: now to decide on this appearance, is to judge the whole by a part... and a part not well known.
Secondly: it is no less evident, even admitting the double supposition, that a civilized nation can receive from another more or less value than it delivers in return, and that it can be known; to judge of the balance for or against the first nation, at least all the branches of its external commerce should be taken into consideration, and no decision passed upon the mere examination of a part; for it may be that this nation loses with one only to gain more considerably with another; a dear piece of goods is bought in one place only to sell at another for a higher price, in order to procure other articles that are cheap; it is therefore the aggregate of the trade, and that only by which we can judge, if an accurate judgment can possibly be formed.
But to judge of any thing we must know what it is, and we cannot know what this balance is nearly, or even distantly: let us then at first take the quantity of merchandize, which is the easiest circumstance to ascertain. How rigorous so ever the regulations of the custom houses in many countries may be, there is no government that can flatter itself with knowing exactly by those it employs, the quantity of all the merchandize that passes into or out of the country: the products of contraband are always considerable and impossible to be ascertained: the invoices of merchandize which pass in a more lawful manner, are never strictly true: those which pay no duty on import or export.... and these generally amount to a great deal.... if recorded at all, are recorded negligently; so that we are yet far from our object, even in respect to the quantity, which is nevertheless the object least difficult to be ascertained.
The quality of merchandize is yet more difficult to be discovered, although its influence on the question of the value is of greater moment than quantity or number. Our riches are so multiplied and diversified, there is so much variety in the productions of nature and art, that the difference is often as one to an hundred, or one to a thousand, between the value of things nearly of the same kind, which go into the composition of merchandize imported or exported, and pass under the same general denomination; add to which that it is always the most precious articles that are thus disguised or totally concealed; because generally their bulk is not so great as articles of less value: it is therefore impossible to obtain even an approximation of the real value of merchandize, either imported or exported by commerce, and it is absolutely improper to place any dependance on general estimates or extracts from official records, which are unavoidably imperfect and incomplete.
But this is not all: when the quantity, quality, and consequently the value, of the merchandize imported and exported in the course of a year, is exactly known, we shall yet have to learn how much has been expended by all the merchants in the country during the same year, in effecting these transactions; that is to say, what they have expended in clerks, agents, ships, their naval equipments, provisions, stores, pay of seamen, and waggoners; in short all the expences incurred from the first purchase, to the arrival at the place of destination, and the expences there: in a word the whole amount of their expenditures should be known.
These expences, it will be perceived, are all sums paid for labor, and with which those who obtain it, may pay for the production of useful things, and thereby augment the sum of national wealth. These sums should then be deducted from the value of imported wealth also. Now these last particulars are still more difficult to ascertain than the others; there are no means, no elements upon which a probable estimate can be made; for even those who are most interested seldom know it themselves, or when they do, are not able to tell whether the expences should be placed to the account of the exports or the imports.... which properly rests to the credit of his own country, which to the foreign nation.... they are absorbed in the general circulation: here then is another important discovery.
We might also except with reason, to the valuations affixed to merchandize at the custom houses: it is not here they were bought, nor is it here they will be sold or consumed; yet those are the only places at which their real value can be known or proved. Many articles have been or may be damaged before or even after the custom house price is fixed; others acquire value when they reach their place of destination, or only by the effect of time, which by improving their quality renders them more desirable: here are new sources of uncertainty.
If under such deficiencies of accurate knowlege, any one can persuade himself, that he knows something about this celebrated balance of trade, he must be some conceited calculator. But there is yet a great deal more, if we only knew it: if we only suppose, that it can be ascertained with accuracy, that in the course of one or several years, there has been in reality imported an amount of value superior to that which has been sent out of the country, to what would it tend? In the first place, this difference could not be considerable, for it can only definitely consist in the gain of the merchants of the country, employed in foreign commerce. Now, this is very small in almost every country, compared with the total mass; it can be an important object in small states only, where the greatest part of the population subsists by the carrying trade: secondly, nothing can be inferred as to the encrease or diminution of national riches, for if this nation, supposed to have imported more than it exports during a certain time, consume all that it has imported it is really impoverished to the value of all it has exported, of which there remains nothing, although it has gained in exchange; and if on the contrary, a great quantity has been stored up, or what amounts to the same thing, if it has constructed great useful and durable works, it may have encreased the sum of its means; that is to say, it may, as by a canal, or road, have augmented its funds and enriched itself, though at the same time, it may have suffered some external losses.
Let us then conclude with Smith, that there is no true balance, but that between production and consumption of all kinds; this is the true measure of subsistence and amelioration; it is this, that by a slow progress too often crossed, has gradually conducted the different tribes of men from their primitive misery to a more happy condition; this it is, thanks to the activity and intelligence of men and the energy of their faculties, which would every where and at all times favor the interests and happiness of society, if those who govern societies did not put them astray and continually misdirect them. The state of this balance is, therefore, not easy to determine by direct estimates; the accounts of a nation should be drawn up at two given periods, and we should be enabled to place therein not only its wealth and debts, but also the truths and errors by which it is influenced, the good or bad sentiments which prevail and characterize it, the beneficial or pernicious habits to which it is addicted, and the good or bad institutions it has formed within itself. We already perceive, that it is impossible to draw up such an account. Yet the effects of such a statement duly weighed, would give a balance which must be evident to the accurate and rational observer; and after all, this is the only real balance, whatever it may be; that of commerce is deceptive, or a mere trifle, fit enough for some subaltern deceiver or deceived, to figure in the eyes of some ignorant or prejudiced superior, or to impose upon the too general mass of uninformed men.
There is, however, a precious and certain result to be obtained, even from very imperfect statements of importation and exportation. First, we must allow ourselves to be convinced that the one is nearly equal to the other; and that the small difference which may accidentally exist between them, supposing we could ascertain it, is of little importance: but afterwards, when we perceive that both are very considerable, in relation to the number of men of which the nation is composed, it is evident that this nation is possessed of great resources and great riches, and consequently each of its members is possessed of a great deal of enjoyment, if the wealth be well distributed among them; for they have devised the means of procuring all that they have exported; and all that they have imported, is so much the means of enjoyment, which they may indulge without impoverishing themselves, provided they do not give their capital away in exchange. So that when we perceive the value of those exportations and importations gradually and constantly encreasing in a country, during a certain number of years, it may with certainty be concluded, either that the number of its inhabitants is augmented, or that each of them has become very wealthy, if too great an inequality has not been produced by artificial means among them; or that the two progressions of wealth and population have existed at the same time, which is generally their natural course. In the opposite case, contrary results must take place: we can perceive that in the accumulation of the circulating wealth which I have spoken of, we are not to comprehend those simple transportations which are only set in motion by means of commerce, as they no more than indicate the extent of such commerce, and not the amount of production. With this precaution our conclusions are sure, as well as the consequences that may be drawn from them. This is nearly all that the accounts of the custom houses can inform us; but this fact is important, and they point it out to us with sufficient accuracy, without rendering it necessary for us to examine them very minutely.
Such are the principal reflections which have been suggested to me by the two books of the Spirit of Laws, upon which we have been occupied. It would perhaps be proper here to make a few remarks on the moral effects of commerce; but it is too extensive a subject, should we enter into the details; and if we only consider the leading points, it is easy to perceive that commerce, that is exchange, being in truth society itself, it is the only bond among men; the source of all their moral sentiments; and the first and most powerful cause of the improvement of their mutual sensibility and reciprocal benevolence: we owe to it all that we are possessed of, good or amiable; it commences by uniting all the men of the same tribe; it afterwards unites those societies with each other, and finishes by connecting all parts of the universe: it excites, extends, and propagates information, as well as reciprocal intercourse: it is the author of all social good: undoubtedly war arises out of it, as do also lawsuits, and for which we must thank the false views of pretended adepts, who are its most pernicious enemies: but it is no less true, that the more the spirit of commerce encreases, the more that of devastation diminishes, and that the least quarrelsome are those who are possessed of the peaceable means of accomplishing lawful pursuits, and who are possessed of wealth liable to be lost. The pretended avidity with which commerce, properly so called, is said to inspire those who are engaged in it, is a vague reproach, which may be considered as belonging to the most insipid and insignificant declamation. Avidity consists in taking the goods of others by force or deceit, as in the two noble trades of conquerors and courtiers; but merchants, like all other industrious persons, seek only for reward in their talents, by means of free agreements entered into with good faith and guaranteed by the laws. Application, probity, moderation, are necessary, for them to succeed; and consequently they contract the best moral habits. If the continual occupation of gain, renders them at times a little too eager for their interest, it may be said, we wish they had something more liberal and tender in their disposition; but perfection cannot be expected of men, taken collectively: a people modelled in general on such as those we have just mentioned, would be the most virtuous of all others. The want of a well regulated social order, is the most fatal enemy of man.... wherever there is order, there is happiness.... I love and admire those who do good; for if every one were only to avoid doing evil, we should soon see a change in the human condition: the industrious man is degraded by fatal customs; yet he does more good to humanity, often even without knowing it, than the most humane idler, with all his zeal. I shall say no more on this part of the subject, the chapter is already too long.
May it be permitted me to add, that if internal commerce be always a benefit, external commerce in itself, and left to itself, never can be an evil. Undoubtedly, if, with an intention to furnish an article of consumption more abundantly to foreign merchants who demand them, a government should limit or prohibit the production of another article useful or necessary for the well being of the inhabitants, which has taken place in Russia and elsewhere, it would then be better to have no foreign intercourse. But we must not confound the errors of policy with commerce, this is not the error of commerce but of the government. In Poland, where a small number of men are the only proprietors, not merely of all the land, but of all the persons cultivating it, when the proprietors collect the grain these persons have exhausted themselves in producing, to sell it to foreigners and receive in return objects of luxury which they consume, the whole people are thereby necessarily rendered miserable. It would be better for the cultivator if the magnates could not sell their grain. They would perhaps endeavor to nourish men therewith, whom they would by little and little seek to have instructed in fabricating at least a part of the things they require; but even this cannot be attributed to commerce; indeed it may be urged in this case, that by the slow and inevitable effect of impoverishing the prodigal by offering them enjoyments, and of enlightening the miserable people, by causing men more civilized to go among them, it necessarily tends to bring about an order of things less detestable: the same remarks may be applied to the absurd and ruinous wars too often carried on to preserve the dominion and exclusive monopoly of distant colonies. But even this is not to be attributed to commerce, but to the fondness of men for dominion, and the madness of avidity; or as the celebrated Mirabeau has said of forced paper money, and may be said of many other things.... it is one of the orgies of deleterious authority.
This is, I think, a part of what our author should have said with all that eloquence and profoundness of views, of which he was so much a master, instead of urging so many and such erroneous and insignificant things, which he has suffered to escape from him, among many other things which are admirable. But let us follow him to other objects.
Notes for this chapter
See the admirable chapter 2, of the first book of the treatise of wealth. I regret, in remarking this fact, that he has not more exactly examined the cause. The author of the theory of moral sentiments, should not have considered as useless, a scrutiny of the operations of intelligence: his success and his faults, should alike contribute to make him think the contrary.
We have already said, book VII.... that there is no luxury on the part of a Jeweller who expends a great deal in precious stones; it is on those who ornament themselves with these trinkets, that the luxury falls.
Let it not be forgotten, that productive labor, is that of which the value is greater than the things consumed by those occupied in the labor. The labor of soldiers, governors, lawyers, physicians, may be called useful, but not productive, because they produce nothing, since there remains nothing. That of a farmer or manufacturer, who expends ten thousand dollars, and produces only five thousand, is likewise not productive, and would not be useful, unless by way of experiment.
End of Notes
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